-----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, ME5s+NWsFlWGBjUDcTB/3T/0OIFDPsCZ17mFI1vENtB5ML5cWUG0t0cVD4Qf/ZEr Ee/iYv2JLpfnChHlLJyRww== 0000950134-96-003621.txt : 19960723 0000950134-96-003621.hdr.sgml : 19960723 ACCESSION NUMBER: 0000950134-96-003621 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960719 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRINITY INDUSTRIES INC CENTRAL INDEX KEY: 0000099780 STANDARD INDUSTRIAL CLASSIFICATION: RAILROAD EQUIPMENT [3743] IRS NUMBER: 750225040 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 333-08321 FILM NUMBER: 96596920 BUSINESS ADDRESS: STREET 1: 2525 STEMMONS FREEWAY CITY: DALLAS STATE: TX ZIP: 75207-2401 BUSINESS PHONE: 2146314420 FORMER COMPANY: FORMER CONFORMED NAME: TRINITY STEEL CO INC DATE OF NAME CHANGE: 19720407 POS AM 1 POST EFFECTIVE AMENDMENT NO.1 TO FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1996 REGISTRATION NO. [333-08321] ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- TRINITY INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3743 75-0225040 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
2525 STEMMONS FREEWAY DALLAS, TEXAS 75207 (214) 631-4420 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) F. DEAN PHELPS VICE PRESIDENT TRINITY INDUSTRIES, INC. 2525 STEMMONS FREEWAY DALLAS, TEXAS 75207 (214) 631-4420 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES OF ALL COMMUNICATIONS TO: CHARLES C. REEDER, ESQ. THEODORE J. KOZLOFF, ESQ. LOCKE PURNELL RAIN HARRELL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (A PROFESSIONAL CORPORATION) 919 THIRD AVENUE 2200 ROSS AVENUE, SUITE 2200 NEW YORK, NEW YORK 10022 DALLAS, TEXAS 75201-6776 (212) 735-3500 (214) 740-8522 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective and all other conditions to the merger described in the enclosed Proxy Statement/Prospectus have been satisfied or waived. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] 2 CALCULATION OF REGISTRATION FEE
===================================================================================================== PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES AGGREGATE AMOUNT OF TO BE REGISTERED (1) OFFERING PRICE (2) REGISTRATION FEE (3) - ----------------------------------------------------------------------------------------------------- Common Stock, $1.00 par value (including the attached Preferred Share Purchase Rights) $41,748,808 $5,779 =====================================================================================================
(1) This Registration Statement relates to (i) the shares of common stock, par value $1.00 per share ("Trinity Common Stock"), of the Registrant issuable to holders of common stock, par value $.01 per share ("Transcisco Common Stock"), of Transcisco Industries, Inc. ("Transcisco") pursuant to the merger described in the enclosed Proxy Statement/Prospectus (the "Merger") and (ii) the Trinity Preferred Share Purchase Rights that will be attached to and represented by the certificates issued for the Trinity Common Stock (which Preferred Share Purchase Rights have no market value independent of the Trinity Common Stock to which they are attached). In the Merger, each share of Transcisco Common Stock issued and outstanding immediately prior to the effective time of the Merger will be converted into, exchanged for, and represent the right to receive 0.1884 of a share of Trinity Common Stock. (2) Calculated pursuant to Rule 457(f) based on the number of shares of Transcisco Common Stock outstanding as of July 15, 1996, using a value of $5.875 per share (the average of the high and low sales prices reported on the American Stock Exchange on July 15, 1996). (3) Pursuant to Rule 457(b), the registration fee has been reduced by the $8,616 paid on July 3, 1996 upon the filing with the Securities and Exchange Commission, pursuant to the Securities Exchange Act of 1934, as amended, of Transcisco's preliminary proxy materials with respect to the proposed Merger. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. ================================================================================ 3 CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K, SHOWING THE LOCATION IN THE PROXY STATEMENT/PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4.
S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS ----------------------------- -------------------------------------- A. INFORMATION ABOUT THE TRANSACTION. 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus . . . . . . . . . Outside Front Cover Page of Proxy Statement/Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus . . . . . . . . . . . . . . . . . . . Available Information; Incorporation of Certain Documents by Reference; Table of Contents 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information . . . . . . . . . . . . . . Summary; Selected Historical Financial Data of Trinity; Selected Historical Financial Data of Transcisco; Selected Per Share and Other Data; Risk Factors 4. Terms of the Transaction . . . . . . . . . . . . . Summary; The Proposed Merger; Description of Trinity Capital Stock; Comparison of Stockholder Rights 5. Pro Forma Financial Information . . . . . . . . . . * 6. Material Contacts with the Company Being Acquired . . . . . . . . . . . . . . . . . . . . Summary; The Proposed Merger 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters . . . . . . . . . . . . . . . . . . * 8. Interests of Named Experts and Counsel . . . . . . Legal Matters; Experts 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities . * B. INFORMATION ABOUT THE REGISTRANT. 10. Information With Respect to S-3 Registrants . . . . * 11. Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . * 12. Information With Respect to S-2 or S-3 Registrants . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by Reference; Certain Information Regarding Trinity and Trinity Y; Selected Historical Financial Data of Trinity
4
S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS ----------------------------- --------------------------------------- 13. Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by Reference 14. Information With Respect to Registrants Other Than S-3 or S-2 Registrants . . . . . . . . . . . . * C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED. 15. Information With Respect to S-3 Companies . . . . . . * 16. Information With Respect to S-2 or S-3 Companies . . . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by Reference; Certain Information Regarding Transcisco; Selected Historical Financial Data of Transcisco 17. Information With Respect to Companies Other Than S-2 or S-3 Companies . . . . . . . . . . . . . * D. VOTING AND MANAGEMENT INFORMATION. 18. Information if Proxies, Consents or Authorizations Are to be Solicited . . . . . . . . . . . . . . . . Cover Page of Proxy Statement/Prospectus; Incorporation of Certain Documents by Reference; Summary; The Meeting; The Proposed Merger 19. Information if Proxies, Consents or Authorizations Are Not to be Solicited, or in an Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . *
- -------------------- *Omitted because not required, inapplicable or answer is negative. 5 TRANSCISCO INDUSTRIES, INC. 601 CALIFORNIA STREET, SUITE 1301 SAN FRANCISCO, CA 94108 July 19, 1996 Dear Fellow Stockholder: You are cordially invited to attend the 1996 Annual Meeting of Stockholders of Transcisco Industries, Inc., a Delaware corporation ("Transcisco"), to be held at the Financial District Holiday Inn, 750 Kearny Street, San Francisco, California, at 12:00 p.m., local time, on September 3, 1996, and any adjournment or postponement thereof (the "Meeting"). A Notice of the Meeting, a proxy card, and a Proxy Statement/Prospectus containing information about the matters to be acted upon are enclosed. All holders of outstanding shares of Transcisco's common stock, par value $.01 per share ("Transcisco Common Stock"), as of the close of business on July 15, 1996 (the "Record Date") are entitled to notice of and to vote at the Meeting. At the Meeting, Transcisco's stockholders will be asked to consider and vote upon a proposal to approve and adopt an Agreement and Plan of Merger, dated as of June 17, 1996 (the "Merger Agreement"), by and among Transcisco, Trinity Industries, Inc., a Delaware corporation ("Trinity"), and Trinity Y, Inc., a Delaware corporation and a wholly-owned subsidiary of Trinity ("Trinity Y"). Pursuant to the Merger Agreement, Trinity Y would be merged (the "Merger") with and into Transcisco, which will continue in existence as a wholly-owned subsidiary of Trinity. In the Merger, and as more fully described in the accompanying Proxy Statement/Prospectus and in the Merger Agreement included as an annex thereto, each share of Transcisco Common Stock outstanding prior to the effective time of the Merger will be converted into, exchanged for, and represent the right to receive 0.1884 (the "Exchange Ratio") of a share of the common stock (together with the attached Trinity Preferred Share Purchase Rights), par value $1.00 per share ("Trinity Common Stock"), of Trinity. No fractional shares of Trinity Common Stock will be issued in the Merger, and each record holder of Transcisco Common Stock who would otherwise be entitled to receive a fraction of a share of Trinity Common Stock will be entitled to receive a cash payment in lieu thereof. TRANSCISCO'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. The Board reached this decision after careful consideration of a number of factors, including the opinion of Schroder Wertheim & Co. Incorporated ("Schroder Wertheim"), Transcisco's financial advisor, to the effect that the Exchange Ratio is fair to Transcisco stockholders from a financial point of view. The full opinion of Schroder Wertheim, dated as of July 18, 1996, is included as Annex B to the accompanying Proxy Statement/Prospectus, and stockholders are urged to read the opinion in its entirety. 6 At the Meeting, Transcisco's stockholders will also be asked to (i) elect two Class I directors to hold office until the consummation of the Merger, or if the Merger is not consummated, until the due election and qualification of such directors' successors; (ii) approve an increase in the number of shares of Transcisco Common Stock issuable under Transcisco's Amended and Restated (1994) Stock Option Plan; (iii) ratify the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997; and (iv) transact such other business as may properly come before the Meeting. Transcisco's Board of Directors recommends a vote FOR election of its nominees as directors, a vote FOR the approval of an increase in the number of shares issuable under Transcisco's Amended and Restated (1994) Stock Option Plan, and a vote FOR the ratification of the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997. The accompanying Proxy Statement/Prospectus provides a detailed description of the proposed Merger, as well as the other items of business scheduled for the Meeting. We urge you to read and consider it carefully. A Letter of Transmittal which you can use to exchange your Transcisco Common Stock is being mailed to holders of record of Transcisco Common Stock with the accompanying Proxy Statement/Prospectus. In view of the importance of the actions to be taken at the Meeting, we urge you to read the enclosed material carefully and to complete, sign, and date the enclosed proxy card and return it promptly in the enclosed prepaid envelope, whether or not you plan to attend the Meeting. If you attend the Meeting, you may vote your shares personally whether or not you have previously submitted a proxy. Your prompt cooperation will be greatly appreciated. Sincerely yours, EUGENE M. ARMSTRONG STEVEN L. PEASE Chairman of the Board of Directors President and Chief Executive Officer YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY. FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER. 7 TRANSCISCO INDUSTRIES, INC. 601 CALIFORNIA STREET, SUITE 1301 SAN FRANCISCO, CA 94108 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 3, 1996 To The Stockholders of Transcisco Industries, Inc.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Transcisco Industries, Inc., a Delaware corporation ("Transcisco"), will be held on September 3, 1996, at 12:00 p.m., local time, at the Financial District Holiday Inn, 750 Kearny Street, San Francisco, California, and any adjournments or postponements thereof (the "Meeting"), for the following purposes: 1. To consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as of June 17, 1996 (the "Merger Agreement"), by and among Transcisco, Trinity Industries, Inc., a Delaware corporation ("Trinity"), and Trinity Y, Inc., a Delaware corporation and a wholly-owned subsidiary of Trinity ("Trinity Y"). Pursuant to the Merger Agreement, Trinity Y would be merged (the "Merger") with and into Transcisco, which will continue in existence as a wholly-owned subsidiary of Trinity. In the Merger, and as more fully described in the accompanying Proxy Statement/Prospectus and in the Merger Agreement included as an annex thereto, each share of Transcisco common stock, par value $.01 per share ("Transcisco Common Stock"), outstanding prior to the effective time of the Merger will be converted into, exchanged for, and represent the right to receive 0.1884 of a share of the common stock (together with the attached Trinity Preferred Share Purchase Rights), par value $1.00 per share, of Trinity ("Trinity Common Stock"). No fractional shares of Trinity Common Stock will be issued in the Merger, and each holder of Transcisco Common Stock who would otherwise be entitled to receive a fraction of a share of Trinity Common Stock will be entitled to receive a cash payment in lieu thereof; 2. To elect two Class I directors to hold office until the consummation of the Merger, or if the Merger is not consummated, until such directors' successors are duly elected and qualified; 3. To approve an increase in the number of shares of Transcisco Common Stock issuable under Transcisco's Amended and Restated (1994) Stock Option Plan; 4. To ratify the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997; and 5. To transact such other business as may properly come before the Meeting. Only holders of record of shares of Transcisco Common Stock as of the close of business on July 15, 1996 are entitled to notice of and to vote at the Meeting. The list of Transcisco stockholders entitled to vote at the Meeting will be available for examination during the ten days prior to the Meeting at the principal executive offices of Transcisco, 601 California Street, Suite 1301, San Francisco, California 94108. 8 Under the Delaware General Corporation Law, holders of Transcisco Common Stock who object to the Merger will not be entitled to dissenters' rights. By Order of the Board of Directors GREGORY S. SAUNDERS Secretary July 19, 1996 9 TRANSCISCO INDUSTRIES, INC. PROXY STATEMENT ----------------- TRINITY INDUSTRIES, INC. PROSPECTUS ----------------- This Proxy Statement and Prospectus ("Proxy Statement/Prospectus") relates to the proposed merger (the "Merger") of Trinity Y, Inc., a Delaware corporation ("Trinity Y") and a wholly-owned subsidiary of Trinity Industries, Inc., a Delaware corporation ("Trinity"), with and into Transcisco Industries, Inc. ("Transcisco"), a Delaware corporation, pursuant to an Agreement and Plan of Merger, dated as of June 17, 1996 (the "Merger Agreement"), by and among Transcisco, Trinity and Trinity Y. In the Merger, Trinity Y would be merged with and into Transcisco, which will continue in existence as a wholly-owned subsidiary of Trinity, and each share of Transcisco's common stock, par value $.01 per share ("Transcisco Common Stock"), outstanding prior to the Merger, will be converted into, exchanged for, and represent the right to receive 0.1884 (the "Exchange Ratio") of a share of the common stock (together with the attached Trinity Preferred Share Purchase Rights), par value $1.00 per share ("Trinity Common Stock"), of Trinity. No fractional shares of Trinity Common Stock will be issued in the Merger, and each record holder of Transcisco Common Stock who would otherwise be entitled to receive a fraction of a share of Trinity Common Stock will be entitled to receive a cash payment in lieu thereof. On July 15, 1996, the most recent practicable date prior to the printing of this Proxy Statement/Prospectus, the closing price of Trinity Common Stock as reported on the New York Stock Exchange (the "NYSE") Composite Tape was $32.125 per share and the closing price of Transcisco Common Stock reported on the American Stock Exchange (the "AMEX") Composite Tape was $5.750 per share. This Proxy Statement/Prospectus constitutes both the proxy statement of Transcisco relating to the solicitation of proxies by its Board of Directors for use at the annual meeting of Transcisco stockholders to be held on September 3, 1996 (the "Meeting") and the prospectus of Trinity included as part of a Registration Statement filed with the Securities and Exchange Commission (the "Commission") with respect to the shares of Trinity Common Stock issuable in the Merger to holders of Transcisco Common Stock. A Letter of Transmittal with which Transcisco stockholders can send their shares of Transcisco Common Stock to the Exchange Agent is enclosed with this Proxy Statement/Prospectus. This Proxy Statement/Prospectus and the accompanying form of proxy are first being sent to Transcisco stockholders on or about July 19, 1996. IN REVIEWING THIS PROXY STATEMENT/PROSPECTUS, TRANSCISCO STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE HEADING "RISK FACTORS." THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JULY 19, 1996. 10 NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TRINITY OR TRANSCISCO. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF TRINITY OR TRANSCISCO SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS. HOWEVER, IF ANY MATERIAL CHANGE OCCURS DURING THE PERIOD THAT THIS PROXY STATEMENT/PROSPECTUS IS REQUIRED TO BE DELIVERED, THIS PROXY STATEMENT/PROSPECTUS WILL BE AMENDED AND SUPPLEMENTED ACCORDINGLY. ALL INFORMATION REGARDING TRINITY AND ITS SUBSIDIARIES IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY TRINITY, AND ALL INFORMATION REGARDING TRANSCISCO AND ITS SUBSIDIARIES IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY TRANSCISCO. AVAILABLE INFORMATION Trinity and Transcisco are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith each files reports, proxy statements, and other information with the Commission. Copies of such reports, proxy statements, and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Additionally, copies of reports, proxy statements, and other information filed with the Commission electronically by each of Trinity and Transcisco may be inspected by accessing the Commission's Internet site at http://www.sec.gov. Certain of the materials filed by Trinity may also be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005, and materials filed by Transcisco may be inspected at the offices of the AMEX, 86 Trinity Place, New York, New York 10006. Trinity has filed with the Commission a Registration Statement on Form S-4 (together with any amendments or supplements thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Trinity Common Stock to be issued pursuant to the Merger Agreement. This Proxy Statement/Prospectus does not contain all the information set forth in the Registration Statement, certain portions of which have been omitted pursuant to the rules and regulations of the Commission. Such additional information may be obtained from the Commission's principal office in Washington, D.C. Statements contained in this Proxy Statement/Prospectus as to the contents of any contract or other document referred to herein are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. 2 11 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission by Trinity (File No. 1-6903) pursuant to the Exchange Act are incorporated by reference in this Proxy Statement/Prospectus: (1) Annual Report on Form 10-K for the fiscal year ended March 31, 1996; provided that only the following sections of Trinity's 1996 Annual Report to Stockholders, incorporated by reference in the Annual Report on Form 10-K, are incorporated by reference in this Proxy Statement/Prospectus: "Corporate Profile" (page 3), "Financial Summary" (page 15), "Management's Discussion and Analysis of Financial Condition" (pages 16-17), "Division Officers" (page 30), "Report of Independent Auditors" (page 29) and financial statements and supplementary data (pages 18-29). Portions of Trinity's 1996 Annual Report to Stockholders not enumerated above are not hereby incorporated. A copy of Trinity's Annual Report on Form 10-K appears as Annex C to this Proxy Statement/Prospectus. (2) Proxy Statement for Trinity's 1996 Annual Meeting of Stockholders; provided that only the following portions of such Proxy Statement are incorporated by reference in this Proxy Statement/Prospectus: "Voting Securities and Stockholders" (page 2), "Election of Directors" (pages 3-4), and "Executive Compensation and Other Matters" (page 6). Portions of the Proxy Statement for Trinity's 1996 Annual Meeting of Stockholders not enumerated above are not hereby incorporated. (3) Current Report on Form 8-K, dated June 29, 1996. (4) All other documents filed by Trinity subsequent to the filing of this Proxy Statement/Prospectus pursuant to Section 13(a) or 15(d) of the Exchange Act and prior to the date of the final adjournment of the Meeting. The following documents filed with the Commission by Transcisco (File No. 1-9051) pursuant to the Exchange Act are incorporated by reference in this Proxy Statement/Prospectus: (1) Annual Report on Form 10-K for the fiscal year ended March 31, 1996. A copy of Transcisco's Annual Report on Form 10-K (without exhibits thereto) appears as Annex D to this Proxy Statement/Prospectus. (2) All other documents filed by Transcisco subsequent to the filing of this Proxy Statement/Prospectus pursuant to Section 13(a) or 15(d) of the Exchange Act and prior to the date of the final adjournment of the Meeting. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Proxy Statement/Prospectus to the extent that a statement contained herein or in any other subsequently filed document, which also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Proxy Statement/Prospectus. This Proxy Statement/Prospectus incorporates by reference documents relating to Trinity and Transcisco which are not presented herein or delivered herewith. These documents (not including exhibits to such documents other than exhibits specifically incorporated by reference into such documents) are available without charge to any person including any beneficial owner, to whom this Proxy Statement/Prospectus is delivered, upon written or oral request of such person. Requests for such documents relating to Trinity should be directed to Trinity, P.O. Box 568887, Dallas, Texas 75356-8887, Attention: F. Dean Phelps; telephone number (214) 631-4420, and documents relating to Transcisco should be directed to Transcisco, 601 California Street, Suite 1301, San Francisco, California 94108, Attention: Gregory S. Saunders, telephone number (415) 477-9703. To assure timely delivery of such documents, requests for such documents should be made no later than August 26, 1996. 3 12 TABLE OF CONTENTS
Page Page ---- ---- AVAILABLE INFORMATION . . . . . . . . . . . . . . 2 Indemnification of Transcisco's INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . 3 Directors and Officers . . . . . . . 33 SUMMARY OF PROXY STATEMENT/ PROSPECTUS . . . . . 6 Employment Agreements . . . . . . . . . 33 The Companies . . . . . . . . . . . . . . . . 6 Other Matters . . . . . . . . . . . . . 34 The Meeting . . . . . . . . . . . . . . . . . 7 Plans for Transcisco after the Merger . . . 34 The Proposed Merger . . . . . . . . . . . . . 8 The Merger Agreement . . . . . . . . . . . . 34 MARKET PRICE DATA AND DIVIDENDS . . . . . . . . . 14 The Merger . . . . . . . . . . . . . . . 34 SELECTED HISTORICAL FINANCIAL DATA OF TRINITY . . 15 Conversion of Shares of Transcisco SELECTED HISTORICAL FINANCIAL DATA OF TRANSCISCO 16 Common Stock . . . . . . . . . . . . . . 34 RISK FACTORS . . . . . . . . . . . . . . . . . . 18 Treatment of Transcisco's Options . . . 35 Risks Associated with Railcar Segment . . . 18 Directors and Officers . . . . . . . . . 35 Risks Associated with Marine Products Charter and Bylaws . . . . . . . . . . . 35 Segment . . . . . . . . . . . . . . . . 18 Representations and Warranties . . . . . 35 Risks Associated with Construction Products Covenants of Transcisco, Trinity, and Segment . . . . . . . . . . . . . . . . 18 Trinity Y . . . . . . . . . . . . . 35 Environmental Matters . . . . . . . . . . . 19 Conditions to the Merger . . . . . . . . 37 Competition . . . . . . . . . . . . . . . . 19 Termination . . . . . . . . . . . . . . 37 INTRODUCTION . . . . . . . . . . . . . . . . . . 20 Termination Fee . . . . . . . . . . . . 38 CERTAIN INFORMATION REGARDING TRINITY AND Accounting Treatment . . . . . . . . . . . . 38 TRINITY Y . . . . . . . . . . . . . . . . . 21 Regulatory Filings and Approvals . . . . . . 38 General . . . . . . . . . . . . . . . . . . 21 Antitrust . . . . . . . . . . . . . . . 38 Recent Developments . . . . . . . . . . . . 21 State Anti-Takeover Statutes . . . . . . . . 39 CERTAIN INFORMATION REGARDING TRANSCISCO . . . . 21 Certain Federal Income Tax Consequences of General . . . . . . . . . . . . . . . . . . 21 the Merger . . . . . . . . . . . . . . . 39 Recent Developments . . . . . . . . . . . . . 21 THE MEETING . . . . . . . . . . . . . . . . . . . 22 Restrictions on Sales of Shares by General . . . . . . . . . . . . . . . . . . 22 Affiliates . . . . . . . . . . . . . . . 40 Record Date . . . . . . . . . . . . . . . . 22 Stock Exchange Listing . . . . . . . . . . . 40 Quorum . . . . . . . . . . . . . . . . . . . 22 Dissenters' Rights . . . . . . . . . . . . . 40 Votes Required; Voting Rights . . . . . . . 22 IPTION OF TRINITY CAPITAL STOCK . . . . . . 40 Dissenters' Rights . . . . . . . . . . . . . 23 General . . . . . . . . . . . . . . . . . . 40 Solicitation of Proxies . . . . . . . . . . 23 Trinity Common Stock . . . . . . . . . . . . 40 THE PROPOSED MERGER . . . . . . . . . . . . . . . 24 DESCRIPTION OF TRINITY CAPITAL STOCK . .. . . . . 41 General . . . . . . . . . . . . . . . . . . 24 Delaware Anti-Takeover Law and Certain Anti- Closing; Effective Time . . . . . . . . . . 24 Takeover Provisions . . . . . . . . . . 41 Conversion of Shares; Fractional Shares . . 24 Trinity Rights Plan . . . . . . . . . . 41 Exchange of Certificates . . . . . . . . . . 25 Trinity Preferred Stock . . . . . . . . 41 Background of the Merger . . . . . . . . . . 25 Advance Notice of Director Nominations . 41 Recommendation of the Transcisco Board and Delaware Anti-Takeover Statute . . . . . 42 Transcisco's Reasons for the Merger . . 27 Transfer Agent and Registrar . . . . . . . . 42 Projected Financial Information for DESCRIPTION OF TRANSCISCO CAPITAL STOCK Transcisco . . . . . . . . . . . . . . . 27 STOCK . . . . . . . . . . . . . . . . . . . . 42 Opinion of Transcisco's Financial Advisor . 29 General . . . . . . . . . . . . . . . . . . . 42 Analysis of Purchase Price Premiums to Transcisco Common Stock . . . . . . . . . . . . . 42 Market Price . . . . . . . . . . . . 30 Transcisco Preferred Stock. . . . . . . . . . 42 Trinity Common Stock Price Analysis . . 30 Delaware Anti-Takeover Law and Certain Valuation of Transcisco . . . . . . . . 31 Anti-Takeover Provisions . . . . . . . . 43 Transcisco Rail Services . . . . . . . . 31 Transcisco Stockholder Rights Plan . . . 43 Transcisco Leasing Company . . . . . . . 31 Transcisco Preferred Stock . . . . . . . 43 Transcisco Trading Company . . . . . . . 32 Classified Board of Directors . . . . . . 43 Other . . . . . . . . . . . . . . . . . 32 Advance Notice of Director Nominations. . 43 Summary . . . . . . . . . . . . . . . . 32 Delaware Anti-Takeover Statute. . . . . . 44 Trinity's Reasons for the Merger . . . . . . 33 Transfer Agent and Registrar. . . . . . . 44 Interests of Certain Persons in the Merger . 33 COMPARISON OF STOCKHOLDER RIGHTS . . . . . . . . . 44 General . . . . . . . . . . . . . . . . 33
4 13
Authorized Capital Stock . . . . . . . . . . 44 Voting Rights . . . . . . . . . . . . . . . 44 Amendments to Charter and Bylaws . . . . . . 44 Preemptive Rights; Cumulative Voting . . . . 45 Board of Directors . . . . . . . . . . . . . 45 Removal of Directors . . . . . . . . . . . . 45 Newly-Created Directorships and Vacancies . 45 Nomination of Directors . . . . . . . . . . 45 Stockholder Proposals . . . . . . . . . . . 45 Special Meetings of the Stockholders . . . . 46 Stockholder Action by Written Consent . . . 46 Limitation on Director's Liability . . . . . 46 Indemnification . . . . . . . . . . . . . . 46 ELECTION OF DIRECTORS . . . . . . . . . . . . . . 46 Nominees for Election . . . . . . . . . . . 46 Background of Nominees . . . . . . . . . . . 47 BOARD MEETINGS AND COMMITTEES . . . . . . . . . . 47 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS . . . . . . . . . . . . 48 APPROVAL TO INCREASE THE NUMBER OF SHARES ISSUABLE UNDER THE AMENDED AND RESTATED (1994) STOCK OPTION PLAN . . . . . . . . . . . . . 48 General . . . . . . . . . . . . . . . . . . 48 Administration of the Plan . . . . . . . . . 48 Options . . . . . . . . . . . . . . . . . . 49 Adjustments Upon Change in Capitalization . 49 U.S. Federal Income Tax Consequences . . . . 50 Nonstatutory Stock Options . . . . . . . . . 50 Incentive Stock Options . . . . . . . . . . 50 LEGAL MATTERS . . . . . . . . . . . . . . . . . . 51 EXPERTS . . . . . . . . . . . . . . . . . . . . . 51 STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . 51 ANNEX A Agreement and Plan of Merger, dated as of June 17, 1996, by and among Transcisco Industries, Inc., Trinity Industries, Inc. and Trinity Y ANNEX B Opinion of Schroder Wertheim & Co. Incorporated ANNEX C Trinity's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 ANNEX D Transcisco's Annual Report on Form 10-K (without exhibits thereto) for the fiscal year ended March 31, 1996
5 14 SUMMARY OF PROXY STATEMENT/PROSPECTUS The following is a summary of certain information contained elsewhere in this Proxy Statement/Prospectus. It is not, and is not intended to be, complete in itself. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained elsewhere in this Proxy Statement/Prospectus, including the Annexes hereto which are a part of this Proxy Statement/Prospectus. Stockholders are encouraged to read carefully all of the information contained in this Proxy Statement/Prospectus. TRANSCISCO STOCKHOLDERS SHOULD CONSIDER CAREFULLY THE INFORMATION SET FORTH HEREIN UNDER THE HEADING "RISK FACTORS" IN ADDITION TO THE OTHER INFORMATION PRESENTED HEREIN. THE COMPANIES Trinity Industries, Inc. and Trinity Y, Inc. . . Trinity, with headquarters in Dallas, Texas, manu- factures and markets a wide variety of products, principally in six business segments: Railcars, Marine Products, Construction Products, Containers, Metal Components, and Leasing. The principal executive offices of Trinity are located at 2525 Stemmons Freeway, Dallas, Texas 75207, and its telephone number is (214) 631-4420. Trinity Y is a direct, wholly-owned subsidiary of Trinity, organized under the laws of the State of Delaware solely for the purpose of merging with Transcisco. Trinity Y is not engaged in any business operations. The mailing address and telephone number for Trinity Y are the same as those for Trinity. See "CERTAIN INFORMATION REGARDING TRINITY AND TRINITY Y." Transcisco Industries, Inc. . . . . . . . . . . . Transcisco, with headquarters in San Francisco, California, is a holding company whose primary lines of business include (i) nationwide railcar maintenance through Transcisco Rail Services Company, operating ten railcar repair and maintenance facilities across the United States; (ii) specialty railcar leasing and management services through Transcisco Leasing Company, providing innovative railcar leasing and management services for large utilities and Class I railroads; and (iii) Russian rail transportation services through Transcisco Trading Company, a 23.5% shareholder of SFAT, Russia's leading privately-held rail transportation firm. SFAT's 5,500 tankcar fleet is used to transport petroleum and petrochemicals for export. The principal executive offices of Transcisco are located at 601 California Street, Suite 1301, San Francisco, California 94108, and its telephone number is (415) 477-9700. See "CERTAIN INFORMATION REGARDING TRANSCISCO." Trading Markets and Market Price Data . . . . . . Shares of Transcisco Common Stock are listed and traded on the AMEX under the symbol "TNI." Shares of Trinity Common Stock are listed and traded on the NYSE under the symbol "TRN." The closing prices of Transcisco Common Stock and Trinity Common Stock on May 3, 1996, the last full trading day prior to the announcement that Transcisco and Trinity had entered into a letter of intent in contemplation of the Merger, 6 15 were $5.625 per share, as reported by the AMEX Composite Tape, and $34.50 per share, as reported by the NYSE Composite Tape, respectively. The closing prices of Transcisco Common Stock and Trinity Common Stock on June 17, 1996, the last full trading day prior to the announcement that Transcisco and Trinity had entered into the Merger Agreement, were $5.75 per share, as reported by the AMEX Composite Tape, and $35.25 per share, as reported by the NYSE Composite Tape, respectively. On July 15, 1996, the most recent practicable date prior to the printing of this Proxy Statement/Prospectus, the closing price of Transcisco Common Stock, as reported by the AMEX Composite Tape, was $5.75 per share, and the closing price of Trinity Common Stock, as reported by the NYSE Composite Tape, was $32.125 per share. See "MARKET PRICE DATA AND DIVIDENDS." THE MEETING Time, Date and Place . . . . . . . . . . . . . . The Meeting will be held on September 3, 1996, at 12:00 p.m., local time, at the Financial District Holiday Inn, 750 Kearny Street, San Francisco, California. Purpose of the Meeting . . . . . . . . . . . . . Holders of Transcisco Common Stock will be asked to: (i) consider and vote upon a proposal to approve and adopt the Merger Agreement, by and among Transcisco, Trinity, and Trinity Y, pursuant to which Trinity Y will be merged with and into Transcisco, which would continue in existence as a wholly-owned subsidiary of Trinity; (ii) elect two Class I directors to hold office until the consummation of the Merger, or if the Merger is not consummated, until the due election and qualification of such directors' successors; (iii) approve an increase in the number of shares of Transcisco Common Stock issuable under Transcisco's Amended and Restated (1994) Stock Option Plan; (iv) ratify the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997; and (v) transact such other business as may properly come before the Meeting. Record Date . . . . . . . . . . . . . . . . . . . Only stockholders of record of Transcisco Common Stock at the close of business on July 15, 1996 (the "Record Date") are entitled to notice of and to vote at the Meeting. On such date, there were outstanding 5,412,725 shares of Transcisco Common Stock held by 338 holders of record. See "THE MEETING--Record Date." Voting Rights . . . . . . . . . . . . . . . . . . Each share of Transcisco Common Stock is entitled to one vote with respect to each matter properly presented at the Meeting. See "DESCRIPTION OF TRANSCISCO CAPITAL STOCK--Transcisco Common Stock" and "THE MEETING--Votes Required; Voting Rights." 7 16 Quorum; Votes Required . . . . . . . . . . . . . The presence, in person or by proxy, at the Meeting of the holders of a majority of the shares of Transcisco Common Stock outstanding and entitled to vote at the Meeting is necessary to constitute a quorum. The approval of the Merger Agreement requires the affirmative vote of holders of a majority of the outstanding shares of Transcisco Common Stock. The approval of an increase in the number of shares issuable under Transcisco's Amended and Restated (1994) Stock Option Plan and the ratification of the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997 will each require the affirmative vote of the holders of a majority of the shares of Transcisco Common Stock present at the Meeting, in person or by proxy, and entitled to vote. The election of two Class I directors will require a plurality of the votes cast in the election of directors. Security Ownership of Transcisco's Management . . . . . . . . . . . . As of the Record Date, the directors and executive officers of Transcisco (nine persons) owned beneficially an aggregate of 2,116,774 shares of the Transcisco Common Stock (constituting approximately 31.13% of the outstanding shares), of which 1,292,038 shares (constituting approximately 19.0% of the outstanding shares) were deemed beneficially owned as a result of the ownership of options to purchase such shares and which cannot be voted at the Meeting. See "SECURITY OWNERSHIP--Security Ownership of Certain Beneficial Owners, Directors and Management of Transcisco." To the knowledge of Trinity, no executive officer or director of Trinity owns any shares of Transcisco Common Stock. Revocability of Proxy . . . . . . . . . . . . . . Any Transcisco stockholder who executes and returns a proxy may revoke such proxy at any time before it is voted by (i) notifying in writing the corporate secretary (the "Corporate Secretary") of Transcisco at 601 California Street, Suite 1301, San Francisco, California 94108, (ii) granting a subsequent proxy, or (iii) appearing in person and voting at the Meeting. Attendance at the Meeting will not in and of itself constitute revocation of a proxy. THE PROPOSED MERGER General . . . . . . . . . . . . . . . . . . . . . At the Effective Time (as defined below), pursuant to the Merger Agreement, Trinity Y will be merged with and into Transcisco, which will continue in existence as a wholly-owned subsidiary of Trinity (the "Surviving Corporation" as distinguished from Transcisco prior to the Merger). Closing; Effective Time . . . . . . . . . . . . . The Merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the Delaware General Corporation Law (the 8 17 "DGCL") (the "Effective Time"). Such filing will be made on the date of the closing of the Merger (the "Closing" or the "Closing Date"). The Closing will take place as soon as practicable following the approval of the Merger Agreement by the Transcisco stockholders and the satisfaction or waiver of the other conditions to each party's obligation to consummate the Merger. See "THE PROPOSED MERGER--Closing; Effective Time." Conversion of Shares . . . . . . . . . . . . . . In the Merger, each share of Transcisco Common Stock outstanding prior to the Effective Time will be converted into, exchanged for, and represent the right to receive 0.1884 (the "Exchange Ratio") of a share of Trinity Common Stock. Fractional Shares . . . . . . . . . . . . . . . . Fractional shares of Trinity Stock will not be issued in the Merger. Holders of Transcisco Common Stock will be paid cash in lieu of such fractional shares. See "THE PROPOSED MERGER--Fractional Shares." Recommendation of the Transcisco Board of Directors and Transcisco's Reasons for the Merger . . . . . . . . . . . . . . . . . . . . THE BOARD OF DIRECTORS OF TRANSCISCO (THE "TRANSCISCO BOARD") BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF TRANSCISCO AND ITS STOCKHOLDERS AND RECOMMENDS THAT TRANSCISCO STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. The Transcisco Board has unanimously approved the Merger and resolved to recommend that Transcisco stockholders vote for approval and adoption of the Merger Agreement. The Transcisco Board considered many factors in reaching its conclusion to approve the Merger Agreement and to recommend that Transcisco stockholders vote for approval and adoption of the Merger Agreement. See "THE PROPOSED MERGER--Recommendation of the Transcisco Board and Transcisco's Reasons for the Merger." Approval by the Trinity Board and Trinity's Reasons for the Merger . . . . . . . The Board of Directors of Trinity (the "Trinity Board") has unanimously approved the Merger Agreement and the transactions contemplated thereby. The Merger does not require the approval of the Trinity stockholders. See "THE PROPOSED MERGER--Trinity's Reasons for the Merger." Opinion of Transcisco's Financial Advisor . . . . Schroder Wertheim & Co. Incorporated ("Schroder Wertheim") has delivered a written opinion to the Transcisco Board, dated as of June 7, 1996 and as of July 18, 1996, to the effect that the Exchange Ratio provided for by the Merger Agreement is fair, from a financial point of view, to the Transcisco stockholders. Schroder Wertheim's opinion is based on market, economic, 9 18 and other considerations as they existed and could be evaluated as of the date the opinion was delivered. The full opinion of Schroder Wertheim, dated as of July 18, 1996, is included as Annex B to this Proxy Statement/Prospectus, and stockholders are urged to read the opinion in its entirety. See "THE PROPOSED MERGER--Opinion of Transcisco's Financial Advisor." Interests of Certain Persons in the Merger . . . In considering the recommendation of the Transcisco Board with respect to the Merger Agreement, stockholders should be aware that certain members of Transcisco's management and the Transcisco Board have certain interests in the Merger that are in addition to the interests of stockholders of Transcisco generally. See "SECURITY OWNERSHIP--Security Ownership of Certain Beneficial Owners, Directors and Management of Transcisco." The Transcisco Board was aware of these interests and considered them, among other matters, in approving the Merger Agreement. See "THE PROPOSED MERGER--Interests of Certain Persons in the Merger." Conditions to the Merger . . . . . . . . . . . . The respective obligations of Transcisco, Trinity Y, and Trinity to consummate the Merger are subject to a number of conditions, including (i) the approval of the Merger by Transcisco's stockholders; (ii) the absence of any preliminary or permanent injunction prohibiting the consummation of the Merger; (iii) the Registration Statement having become effective and not being the subject of any stop order proceedings; (iv) no action having been taken by any Federal or state governmental agency that would prohibit Trinity or the Surviving Corporation's ownership of Transcisco's business assets, render Transcisco unable to consummate the Merger, or make such consummation illegal; (v) the approval for listing on the NYSE of the Trinity Common Stock issuable in the Merger; (vi) the receipt by Transcisco of an opinion from its counsel to the effect that the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and (vii) the receipt by Transcisco of an opinion from Schroder Wertheim, dated as of the closing date of the Merger, to the effect that the Exchange Ratio is fair to Transcisco's stockholders from a financial point of view. None of the foregoing conditions are irrevocable. Transcisco and Trinity may determine to modify or waive any condition to the consummation of the Merger, provided that no modification or waiver by Transcisco that requires stockholder approval under applicable law, Transcisco's amended and restated certificate of incorporation ("Transcisco Certificate of Incorporation"), or Transcisco's bylaws ("Transcisco 10 19 Bylaws") will occur unless such approval is obtained. In the event a modification or waiver by Transcisco is contemplated that requires stockholder approval under applicable law, a supplement to this Proxy Statement/Prospectus will be distributed to stockholders and proxies will be resolicited. See "THE MEETING--Solicitation of Proxies." By letter dated as of July 15, 1996, Trinity and Transcisco each agreed to waive the covenant (and the condition that such covenant be performed at or prior to the Effective Time) that required each to use reasonable efforts to supply the other with a comfort letter with respect to the financial data contained in this Proxy Statement/Prospectus. Neither Trinity nor Transcisco contemplates waiving or modifying any of the other foregoing conditions. See "THE PROPOSED MERGER--The Merger Agreement--Conditions to the Merger." Other Acquisition Proposals . . . . . . . . . . . The Merger Agreement provides that, prior to the consummation or termination of the Merger Agreement, Transcisco and its subsidiaries and representatives and agents will not initiate, solicit, or encourage (including by way of furnishing information or assistance), or take certain other actions to facilitate, any inquiries or the making of any proposals to purchase or acquire any equity securities or (except in the ordinary course of business) assets of, or merge or combine with, Transcisco or any of its subsidiaries (an "Acquisition Proposal"), or to enter into discussions or negotiate with any person or entity with respect to an Acquisition Proposal or to endorse or obtain an Acquisition Proposal, in each case subject to certain exceptions necessary to comply with the Transcisco Board's fiduciary obligations to the Transcisco stockholders. See "THE PROPOSED MERGER--The Merger Agreement--Other Acquisition Proposals." Termination . . . . . . . . . . . . . . . . . . . The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Closing Date (i) by mutual consent of Transcisco and Trinity; (ii) by Transcisco (a) if a condition to the performance of the Merger Agreement by Transcisco is not fulfilled on or before the time specified for the fulfillment thereof, (b) if any of the representations and warranties of Trinity and Trinity Y that are qualified with respect to materiality are not true and correct in all respects, and the breach of the representation and warranty is not curable or, if curable, is not cured within thirty days after written notice, (c) if any of the representations of Trinity and Trinity Y that are not qualified with respect to materiality are not true and correct in all material respects, and the breach of the representation and warranty is not curable or, if curable, is not cured within thirty days after written notice, (d) if there has been a material breach of any covenants or agreements by 11 20 Trinity or Trinity Y, which breach is not curable or, if curable, is not cured within thirty days after written notice, (e) if any suit, action, or other proceeding is pending or threatened that, in Transcisco's reasonable opinion, materially and adversely affects the prospects of the Merger, (f) if Trinity issues shares in a transaction requiring stockholder approval, or (g) if the Transcisco Board withdraws, modifies, or changes, in a manner adverse to Trinity, its approval or recommendation of the Merger Agreement in order to approve and permit Transcisco to execute an agreement relating to a competing Acquisition Proposal and determines, based on a written opinion of Transcisco's legal counsel, that the failure to take such action would result in a breach of the Transcisco Board's fiduciary duties; (iii) by Trinity and Trinity Y (a) if a condition to the performance of the Merger Agreement by Trinity and Trinity Y is not fulfilled on or before the time specified for the fulfillment thereof, (b) if any of the representations and warranties of Transcisco that are qualified with respect to materiality are not true and correct in all respects, and the breach of the representation and warranty is not curable or, if curable, is not cured within thirty days after written notice, (c) if any of the representations of Transcisco that are not qualified with respect to materiality are not true and correct in all material respects, and the breach of the representation and warranty is not curable or, if curable, is not cured within thirty days after written notice, (d) if there has been a material breach of any covenants or agreements by Transcisco, which breach is not curable or, if curable, is not cured within thirty days after written notice, or (e) if any suit, action, or other proceeding is pending or threatened that, in Trinity's reasonable opinion, materially and adversely affects the prospects of the Merger; or (iv) by either Trinity or Transcisco if (a) the Merger shall not have been consummated on or before September 16, 1996, provided that under certain circumstances such date may be extended to October 15, 1996 or (b) if a court of competent jurisdiction or agency or commission shall have issued an order, decree, or ruling or taken any other action permanently restraining, enjoining, or otherwise prohibiting the transactions contemplated by the Merger Agreement and such order, decree, ruling or other action shall have become final and non- appealable provided certain conditions are satisfied. See "THE PROPOSED MERGER-The Merger Agreement-Termination." Termination Fees . . . . . . . . . . . . . . . . In the event that Transcisco terminates the Merger Agreement to accept a competing Acquisition Proposal, Transcisco would be required to pay Trinity $200,000 on the date of termination of the Merger Agreement. Upon the consummation of the transaction contemplated by a competing Acquisition Proposal, Transcisco would be required 12 21 to make an additional payment to Trinity of $2,028,081. Accounting Treatment . . . . . . . . . . . . . . The Merger will be treated as a purchase by Trinity for accounting and financial reporting purposes. See "THE PROPOSED MERGER--Accounting Treatment." Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code such that, for federal income tax purposes, the Merger will not result in the recognition of gain or loss by Trinity, Trinity Y, Transcisco or the stockholders of Transcisco. Transcisco's obligation to effect the Merger is conditioned on the delivery of an opinion from Skadden, Arps, Slate, Meagher & Flom, special counsel to Transcisco, substantially to the effect that, on the basis of facts, representations, and assumptions set forth in such opinion for federal income tax purposes the Merger constitutes a reorganization within the meaning of Section 368(a) of the Code. Transcisco will not waive the condition requiring the receipt of such an opinion from its counsel. Stockholders are urged to consult their tax advisors as to the tax consequences of the Merger to them under federal, state, local or any other applicable law. See "THE PROPOSED MERGER--Certain Federal Income Tax Consequences of the Merger." Dissenters' Rights . . . . . . . . . . . . . . . Under the DGCL, holders of Transcisco Common Stock will not have dissenters' rights in connection with the Merger. See "THE PROPOSED MERGER--Dissenters' Rights." Comparison of Stockholder Rights . . . . . . . . The rights of Transcisco stockholders are currently governed by the DGCL, the Transcisco Certificate of Incorporation, and the Transcisco Bylaws. Upon consummation of the Merger, Transcisco stockholders who receive Trinity Common Stock in the Merger will become stockholders of Trinity, and their rights will be governed by the DGCL, Trinity's certificate of incorporation (the "Trinity Certificate of Incorporation"), and Trinity's bylaws ("Trinity Bylaws"). For a summary of the material differences between the rights of Transcisco stockholders and the rights of Trinity stockholders, see "COMPARISON OF STOCKHOLDER RIGHTS." 13 22 MARKET PRICE DATA AND DIVIDENDS Trinity Common Stock is listed and traded on the NYSE under the symbol "TRN." Transcisco Common Stock is listed and traded on the AMEX under the symbol "TNI". The table below sets forth, for the quarters indicated, (i) the quarterly per share cash dividends paid to holders of Trinity Common Stock, (ii) the high and low sales prices of Trinity Common Stock as reported by the NYSE Composite Tape, and (iii) the high and low sales prices of Transcisco Common Stock, as reported by the AMEX Composite Tape.
Dividends Declared Per Trinity Price of Price of Trinity Common Transcisco Common Stock Shares Common Stock ---------------- ------ ------------ High Low High Low ---- --- ---- --- Year ended March 31, 1995: First Quarter . . . . . . . . . . . . $40.000 $33.000 $0.17 $1.500 $0.938 Second Quarter . . . . . . . . . . . . $35.750 $30.625 $0.17 $1.500 $0.938 Third Quarter . . . . . . . . . . . . $35.375 $30.375 $0.17 $1.875 $1.000 Fourth Quarter . . . . . . . . . . . . $37.375 $31.375 $0.17 $1.500 $1.000 Year ended March 31, 1996: First Quarter . . . . . . . . . . . . $40.375 $31.750 $0.17 $1.875 $1.000 Second Quarter . . . . . . . . . . . . $36.500 $30.625 $0.17 $3.688 $1.438 Third Quarter . . . . . . . . . . . . $32.750 $28.125 $0.17 $3.500 $2.625 Fourth Quarter . . . . . . . . . . . . $36.000 $30.750 $0.17 $5.750 $3.000 Year ending March 31, 1997: First Quarter . . . . . . . . . . . . $36.250 $32.750 $0.17 $6.250 $4.625 Second Quarter (through July 15, 1996) $34.125 $32.000 $6.188 $5.750
On May 3, 1996, the last full trading day prior to the announcement by Transcisco and Trinity that they had entered into a letter of intent with respect to the possible acquisition of Transcisco by Trinity, the closing prices of Transcisco Common Stock and Trinity Common Stock were $5.625 per share, as reported by the AMEX Composite Tape, and $34.50 per share as reported by the NYSE Composite Tape, respectively. The closing prices of Transcisco Common Stock and Trinity Common Stock on June 17, 1996, the last full trading day prior to the public announcement of the Merger were $5.75 per share, as reported by the AMEX Composite Tape, and $35.25 per share, as reported by the NYSE Composite Tape, respectively. The closing prices of Transcisco Common Stock and Trinity Common Stock on July 15, 1996, the most recent practicable date prior to the printing of this Proxy Statement/Prospectus, were $5.75 per share, as reported by the AMEX Composite Tape, and $32.125 per share, as reported by the NYSE Composite Tape, respectively. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS. Transcisco has not paid cash dividends on Transcisco Common Stock since 1990. Transcisco's senior loan agreement prohibits the payment of dividends without the consent of Transcisco's senior lenders. Transcisco has made no determination whether to declare dividends in the foreseeable future, in the event that the Merger is not consummated. Future payment of dividends on Transcisco Common Stock, in the event that the Merger is not consummated, will depend on earnings, financial condition, capital requirements, and other relevant factors. On July 15, 1996, there were approximately 338 holders of record of Transcisco Common Stock. 14 23 SELECTED HISTORICAL FINANCIAL DATA OF TRINITY The following table presents selected historical financial data of Trinity and its consolidated subsidiaries for the periods indicated. The historical financial data as of and for the five years ended March 31, 1996 were derived from Trinity's audited consolidated financial statements. The data presented below should be read in conjunction with the consolidated financial statements, related notes and other financial information of Trinity included or incorporated by reference in this Proxy Statement/Prospectus.
(IN MILLIONS, EXCEPT FOR PERCENT AND PER SHARE DATA) YEAR ENDED MARCH 31 ---------------------------------------------------- 1996 1995 1994 1993 1992 Revenues . . . . . . . . . . . . . . . . . . . . $ 2,496.0 2,314.9 1,784.9 1,540.0 1,273.3 Operating Profit . . . . . . . . . . . . . . . . $ 201.2 157.5 116.6 74.6 43.4 Interest expense, net (excluding Trinity's leasing subsidiary) . . . . . . . . . . . . . . $ 14.8 11.4 4.0 3.3 6.4 Income before income taxes and cumulative effect of change in accounting for income taxes . . . $ 186.3 147.5 114.2 72.1 39.7 Provision for income taxes . . . . . . . . . . . $ 72.5 58.4 45.9 27.1 15.4 Effective tax rate . . . . . . . . . . . . . . . % 38.9 39.6 40.2 37.6 38.8 Income before cumulative effect of change in accounting for income taxes . . . . . . . . . . $ 113.8 89.1 68.3 45.0 24.3 Cumulative effect as of April 1, 1993 of change in accounting for income taxes . . . . . . . . $ - - 7.9 - - Net income . . . . . . . . . . . . . . . . . . . $ 113.8 89.1 76.2 45.0 24.3 Total assets . . . . . . . . . . . . . . . . . . $ 1,455.8 1,420.0 1,306.8 1,089.1 1,021.2 Long-term debt . . . . . . . . . . . . . . . . . $ 206.4 242.9 277.9 293.2 357.3 Stockholders' equity . . . . . . . . . . . . . . $ 746.0 641.2 570.5 507.3 379.0 Stock data (1) Weighted average number of common and common equivalent shares outstanding . . . . . . . . $ 41.9 40.5 40.3 35.4 34.2 Income per common and common equivalent share before cumulative effect of change in accounting for income taxes . . . . . . . . . $ 2.72 2.20 1.69 1.27 0.71 Cumulative effect of change in accounting for income taxes . . . . . . . . . . . . . . . . . $ - - 0.20 - - Net income per common and common equivalent share . . . . . . . . . . . . . . . . . . . . $ 2.72 2.20 1.89 1.27 0.71 Dividends per share (2) . . . . . . . . . . . . $ 0.68 0.68 0.64 0.53 0.53 Book value per share . . . . . . . . . . . . . $ 17.93 15.95 14.37 12.95 11.13
- --------------- (1) On August 31, 1993, Trinity distributed a three-for-two stock split in the form of a stock dividend. Accordingly, in the above table, share and per share information has been restated to give effect to the stock split. (2) In fiscal 1994, dividends per share were restated to $0.13 in the first quarter and then increased to $0.17 for the last three quarters. 15 24 SELECTED HISTORICAL FINANCIAL DATA OF TRANSCISCO The following table presents selected historical financial data of Transcisco and its consolidated subsidiaries for the periods indicated. The historical financial data as of and for the two fiscal years ended March 31, 1996, as of and for the three-month period ended March 31, 1994 and as of and for the three calendar years ended December 31, 1993 were derived from Transcisco's audited consolidated financial statements. The data presented below should be read in conjunction with the consolidated financial statements, related notes, and other financial information of Transcisco included or incorporated by reference in this Proxy Statement/Prospectus. (IN THOUSANDS, EXCEPT RATIO AND PER SHARE AMOUNTS)
THREE MONTH FISCAL YEARS ENDED PERIOD ENDED MARCH 31 MARCH 31, CALENDAR YEARS ENDED DECEMBER 31 1996 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ ------------ (restated) Results of Operations: Revenues $42,630 $34,579 $ 7,221 $32,513 $31,833 $29,715 Income (loss) from continuing operations before equity in earnings of affiliated companies, asset writedown, reorganization items, income tax, extraordinary gain and cumulative effect of accounting change 3,874 571 (341) 674 1,622 (3,975) Equity in earnings (loss) of affiliated companies 5,975 2,019 -- -- (3,641) 1,134 Asset write-down (3,000) -- -- -- -- -- Reorganization items -- -- -- (4,086) (2,613) (4,278) Income tax (provision) benefit (198) -- -- -- -- 818 ------- ------- ------ -------- -------- -------- Income (loss) from continuing operations 6,651 2,590 (341) (3,412) (4,632) (6,301) Discontinued operations, net of income tax -- -- -- (1,381) (4,146) (16,518) ------- ------- ------ -------- -------- -------- Net income (loss) before extraordinary gain and accounting change 6,651 2,590 (341) (4,793) (8,778) (22,819) Extraordinary gain 6,058 -- -- 13,929 -- -- Cumulative effect of change to the equity method of accounting 7,590 ------- ------- ------ -------- -------- -------- Net income (loss) $12,709 $10,180 $ (341) $ 9,136 $ (8,778) $(22,819) ======= ======= ====== ======== ======== ======== Per share data: Net income (loss) - continuing operations $ 1.09 $ 0.49 (0.06) $ (0.73) $ (1.05) $ (1.43) Net loss - discontinued operations -- -- -- (0.29) (0.94) (3.75) Extraordinary gain 1.00 -- -- 2.97 -- -- Accounting change -- 1.44 -- -- -- -- ------- ------- ------ -------- -------- -------- Net income (loss) per share $ 2.09 $ 1.93 $(0.06) $ 1.95 $ (1.99) $ (5.18) ======= ======= ====== ======== ======== ======== Dividends per share -- -- -- -- -- -- Book value per share $ 4.23 $ 2.43 $ 0.49 $ 0.62 (1.54) $ 0.45 Average shares outstanding 6,085 5,284 5,423 4,690 4,410 4,403
16 25 Financial Position: Current assets $12,147 $11,471 8,993 $ 8,919 14,319 $ 18,002 Total assets $44,046 $40,137 30,499 $ 30,564 45,693 $ 54,170 Long-term debt $ 3,561 $13,415 17,998 $ 18,683 $ 36 $ 72 Shareholders' equity (deficit) $25,760 $12,844 2,649 $ 2,916 (6,810) $ 1,968 Ratio of current assets to current liabilities 1.35 1.16 1.00 1.05 1.50 2.20 Debt to equity ratio 0.14 1.04 7.24 6.71 -- 18.10
17 26 RISK FACTORS In addition to the other information contained in this Proxy Statement/Prospectus, the stockholders of Transcisco should consider the following risk factors in deciding whether to approve the Merger. RISKS ASSOCIATED WITH RAILCAR SEGMENT Revenues derived from the manufacture and sale of railcars, principally tank cars and freight cars, accounted for approximately 50%, 50% and 41% of Trinity's revenues in fiscal years 1996, 1995 and 1994, respectively. Annual production of railcars on an industry-wide basis has widely fluctuated over the past two decades. The period from 1980 - 1988 was negatively impacted by production overcapacity, the United States embargo on the exportation of grain to the Soviet Union and changes in the tax laws regarding investment tax credit and depreciation methods and lives. Since that time, however, the overall use of railroads for freight transportation has increased industry overcapacity has been reduced and a large number of railcars have reached or neared the end of their useful economic lives. These factors, coupled with relatively strong general economic conditions, have resulted in increased railcar production industry-wide. There can be no assurance, however, that such factors and economic conditions will remain favorable or that significant fluctuations in such factors and conditions will not occur that may have a material adverse affect on the results of operations and financial condition of Trinity. Trinity markets to three broad categories of customers - railroads, leasing companies, and end users, other than railroads, of railcars who are shippers. Many times the economic factors and conditions motivating one category of customers to acquire railcars may not equally motivate one or both of the other categories of customers to acquire railcars. This factor contributes to the limited predictability of railcar order flows. As a result, there can be no assurance that Trinity would not be adversely affected by a temporary shortage of railcar orders. In addition, due to the large size of railcar orders, and variations in the mix of car types ordered, the number and type of railcars produced in any given quarter (as well as the size of Trinity's railcar orders) may fluctuate greatly and, consequently, Trinity's quarterly revenues and income from operations may vary substantially. Trinity's revenues and income from the railcar segment are also subject to the effects of the capital budgeting patterns of its railcar customers. RISKS ASSOCIATED WITH MARINE PRODUCTS SEGMENT The shipbuilding industry is a highly competitive industry. In general, during the 1990's, the U.S. shipbuilding industry has been characterized by substantial excess capacity because of the significant decline in U.S. Navy shipbuilding spending and the difficulties experienced by U.S. shipbuilders in competing successfully for international commercial projects against foreign shipyards, many of which are heavily subsidized by their governments. As a result of these factors, competition by U.S. shipbuilders for domestic commercial projects has remained intense. Such competition has resulted in substantial pressure on pricing, and operating contracts for the construction of vessels are usually awarded on a competitive bid basis. Although Trinity believes customers consider, among other things, the availability and technical capabilities of equipment and personnel, efficiency, condition of equipment, safety record and reputation, price competition is currently a primary factor in determining which qualified shipbuilder is awarded a contract. On June 25, 1996, Trinity announced that its Board of Directors approved an initial public offering of all the common stock of a newly incorporated company that will acquire the assets and liabilities of a portion of Trinity's Marine Products segment. The newly formed company, Halter Marine Group, Inc. ("Halter"), will engage in the business of constructing and repairing ocean-going marine vessels. Halter filed a registration statement on Form S-1 with the Commission on June 27, 1996. The offering of the common stock would be effected only pursuant to a prospectus included in a registration statement which has been declared effective by the Commission. RISKS ASSOCIATED WITH CONSTRUCTION PRODUCTS SEGMENT Demand for Trinity's construction products is directly related to activity in the construction industry and general economic conditions. Various economic factors beyond Trinity's control affect the markets for its construction products, including the level of new residential, commercial and infrastructure construction activity, which is in turn affected by movement in interest rates, the availability of short- and long-term financing and the availability of public funds for infrastructure projects. 18 27 ENVIRONMENTAL MATTERS Trinity's subsidiaries are subject to comprehensive and frequently changing federal, state and local environmental laws and regulations, including those governing emissions of air pollutants, discharges of wastewater and storm waters, and the disposal of non-hazardous and hazardous waste. Trinity anticipates that it may incur additional costs in the future to comply with currently existing laws and regulations, new regulatory requirements arising from recently enacted statutes, particularly those relating to the Clean Air Act Amendments of 1990, and any new statutory requirements. COMPETITION Trinity faces competition in each of its segments and has numerous competitors, and some competitors in certain segments are larger and have greater financial resources than Trinity. There can be no assurance that Trinity will be able to continue to compete successfully in its markets. Because Trinity competes, in part, on the technical advantages and cost of its products, significant technical advances by competitors or the achievement by such competitors of improved operating efficiencies that enable them to reduce prices could reduce Trinity's competitive advantage and, thereby, adversely affect Trinity's business and financial results. 19 28 INTRODUCTION This Proxy Statement/Prospectus is being furnished to stockholders of Transcisco in connection with the solicitation of proxies for use at the Meeting to be held on September 3, 1996, at 12:00 p.m., local time, at the Financial District Holiday Inn, 750 Kearny Street, San Francisco, California, and at any adjournment or postponement thereof. At the Meeting, Transcisco's stockholders will be asked to consider and vote upon a proposal to approve and adopt the Merger Agreement by and among Transcisco, Trinity and Trinity Y. Pursuant to the Merger Agreement, Trinity Y would be merged with and into Transcisco, which would continue in existence as a wholly-owned subsidiary of Trinity. In the Merger, and as more fully described in this Proxy Statement/Prospectus and in the Merger Agreement included as Annex A hereto, each share of Transcisco Common Stock outstanding prior to the effective time of the Merger will be converted into, exchanged for, and represent the right to receive 0.1884 of a share of Trinity Common Stock. THE TRANSCISCO BOARD HAS APPROVED THE MERGER AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. The Transcisco Board reached this decision after careful consideration of a number of factors, including the opinion of Schroder Wertheim, Transcisco's financial advisor, to the effect that the Exchange Ratio is fair to Transcisco stockholders from a financial point of view. The full opinion of Schroder Wertheim, dated as of the date of this Proxy Statement/Prospectus, is included as Annex B to this Proxy Statement/Prospectus, and stockholders are urged to read the opinion in its entirety. At the Meeting, Transcisco's stockholders will also be asked to: (i) elect two Class I directors to hold office until the consummation of the Merger, or if the Merger is not consummated, until the due election and qualification of such directors' successors; (ii) approve an increase in the number of shares of Transcisco Common Stock issuable under Transcisco's Amended and Restated (1994) Stock Option Plan; (iii) ratify the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997; and (iv) transact such other business as may properly come before the Meeting. The Transcisco Board recommends a vote FOR election of its nominees as directors, a vote FOR the approval of an increase in the number of shares of Transcisco Common Stock issuable under Transcisco's Amended and Restated (1994) Stock Option Plan, and a vote FOR the ratification of the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997. This Proxy Statement/Prospectus also constitutes the prospectus of Trinity with respect to the shares of Trinity Common Stock to be issued pursuant to the Merger Agreement. All information contained or incorporated by reference herein concerning Transcisco has been furnished by Transcisco, and all information contained or incorporated by reference herein concerning Trinity has been furnished by Trinity. This Proxy Statement/Prospectus is first being mailed to Transcisco's stockholders on or about July 19, 1996. 20 29 CERTAIN INFORMATION REGARDING TRINITY AND TRINITY Y GENERAL Trinity was originally incorporated under the laws of the State of Texas in 1933. On March 27, 1987, it became a Delaware corporation by merger into a wholly-owned subsidiary of the same name. Its mailing address is P.O. Box 568887, Dallas, Texas 75356-8887; its principal executive offices are located at 2525 Stemmons Freeway, Dallas, Texas 75207, and its telephone number at such address is (214) 631-4420. Trinity Y is a direct, wholly-owned subsidiary of Trinity. Trinity Y was organized under the laws of the State of Delaware on June 5, 1996 solely for the purpose of merging with and into Transcisco. Trinity Y is not engaged in any business operations. The mailing address and telephone number of Trinity Y are the same as those of Trinity. Trinity is engaged in the manufacture, marketing and leasing of a variety of products consisting principally of (i) "Railcars" (i.e., railroad freight cars), principally tank cars, hopper cars, gondola cars and intermodal cars and miscellaneous other freight cars; (ii) "Marine Products" such as boats, barges and various offshore service vessels for ocean and inland waterway service and military vessels for the United States Government and, to a limited extent, various size vessels for international transportation companies; (iii) "Construction Products" such as highway guardrail and highway and railway bridges, power plants, mills, etc., highway safety products, passenger loading bridges and conveyor systems for airports and other people and baggage conveyance requirements, ready mix concrete production and distribution, and providing raw materials to owners, contractors and sub-contractors for use in the building and foundation industry; (iv) "Containers" such as (a) extremely large, heavy pressure vessels and other heavy welded products, including industrial silencers, desalinators, evaporators, and gas processing systems, (b) pressure and non- pressure containers for the storage and transportation of liquefied gases, brewery products and other liquid and dry products, and (c) heat transfer equipment for the chemical, petroleum and petrochemical industries; (v) "Metal Components" such as weld fittings (tees, elbows, reducers, caps, flanges, etc.,) used in pressure piping systems and container heads (the ends of pressure and non-pressure containers) for use internally and by other manufacturers of containers; and (vi) "Leasing" of its manufactured railcars and barges to various industries. Further information concerning Trinity is included in Annex C to this Proxy Statement/Prospectus and is incorporated by reference herein as and only to the extent set forth on page 3 hereof. RECENT DEVELOPMENTS On June 25, 1996, Trinity announced that its Board of Directors approved an initial public offering of all of the common stock of a newly incorporated company that will acquire the assets and liabilities of a portion of Trinity's Marine Products segment. The newly-formed company, Halter Marine Group, Inc. ("Halter"), will engage in the business of constructing and repairing ocean-going marine vessels. Halter filed a registration statement on Form S-1 with the Commission on June 27, 1996. The offering of Halter's common stock would be effected only pursuant to a prospectus included in a registration statement declared effective by the Commission. On July 15, 1996, Trinity announced a 23 percent increase in net income for the first quarter of fiscal 1997 over the first quarter of fiscal 1996. For the first quarter ended June 30, 1996, Trinity reported record net income of $33.8 million, or 80 cents per share, on revenues of $662.5 million. This compares to net income of $27.5 million, or 66 cents per share, on revenues of $604.7 million in the first quarter of the previous fiscal year. CERTAIN INFORMATION REGARDING TRANSCISCO GENERAL Transcisco was incorporated in California in 1972 under the name PLM Group. It was reincorporated in Delaware in 1985 as PLM Companies, Inc. In 1988, its name was changed to Transcisco Industries, Inc. Transcisco is an international rail services firm whose primary lines of business include (i) nationwide railcar maintenance through Transcisco Rail Services; (ii) specialty railcar leasing management, maintenance, and intermediary services through Transcisco Leasing Company; and (iii) Russian rail transportation services through Transcisco Trading Company. The principal executive offices of Transcisco are located at 601 California Street, Suite 1301, San Francisco, California 94108, and its telephone number is (415) 477-9700. Further information concerning Transcisco is included in Annex D to this Proxy Statement/Prospectus and is incorporated by reference herein as and only to the extent set forth on page 3 hereof. RECENT DEVELOPMENTS On July 17, 1996, Transcisco announced a 34% increase in earnings for the first quarter ended June 30, 1996 versus the same period last year. For the first fiscal quarter ended June 30, 1996, Transcisco's net income was $2 million, or $0.30 per share, on revenues of $10.3 million. For the comparable period last year, net income was $1.49 million, or $0.27 per share, on revenues of $10.8 million. 21 30 THE MEETING GENERAL This Proxy Statement/Prospectus is being furnished to stockholders of Transcisco in connection with the solicitation of proxies for use at the Meeting to be held on September 3, 1996, at 12:00 p.m., local time, at the Financial District Holiday Inn, 750 Kearny Street, San Francisco, California, and at any adjournment or postponement thereof. At the Meeting, the holders of Transcisco Common Stock as of the record date will be asked to (i) approve the Merger Agreement by and among Transcisco, Trinity, and Trinity Y; (ii) approve an increase in the number of shares of Transcisco Common Stock issuable under Transcisco's Amended and Restated (1994) Stock Option Plan; (iii) elect two Class I directors; (iv) ratify the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997; and (v) consider any other matters that may be properly presented at the Meeting. RECORD DATE The Transcisco Board has fixed the close of business on July 15, 1996 as the record date (the "Record Date") for the determination of holders of Transcisco Common Stock entitled to notice of the Meeting. Only holders of Transcisco Common Stock as of the Record Date will be entitled to vote at the Meeting. On the Record Date, there were 5,412,725 shares outstanding of Transcisco Common Stock. QUORUM The presence, in person or by proxy, at the Meeting of the holders of a majority of the shares of Transcisco Common Stock outstanding and entitled to vote at the Meeting will be necessary to constitute a quorum. Abstentions and broker non-votes will be counted towards the presence of a quorum. VOTES REQUIRED; VOTING RIGHTS The approval of the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Transcisco Common Stock. The approval of an increase in the number of shares issuable under Transcisco's Amended and Restated (1994) Stock Option Plan and the ratification of the selection of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ending March 31, 1997 will each require the affirmative vote of the holders of a majority of the shares of Transcisco Common Stock present at the Meeting, in person or by proxy, and entitled to vote. The election of the two Class I directors will require a plurality of the votes cast in the election of directors. No approval of the Merger Agreement by the stockholders of Trinity is required. If fewer shares of Transcisco Common Stock are voted in favor of the Merger than the number required for approval, it is expected that the Meeting will be postponed or adjourned for the purpose of allowing additional time for soliciting and obtaining additional proxies or votes. If a motion to adjourn the meeting is presented for the purpose of allowing additional time to solicit proxies, stockholders providing proxies that are not voted against the Merger will be deemed to have conferred discretionary authority to vote for such adjournment, and shares voted against the Merger will be voted against a motion to adjourn such meeting. See "--Solicitation of Proxies." Brokers who hold shares in "street name" have the authority to vote on certain matters when they do not receive instructions from beneficial owners. However, this authority does not extend to voting on the Merger Agreement or the increase in the number of shares issuable under Transcisco's Amended and Restated (1994) Stock Option Plan. Accordingly, brokers who do not receive instructions will not be entitled to vote on the Merger Agreement or the increase in the number of shares issuable under Transcisco's Amended and Restated (1994) Stock Option Plan. In tabulating the votes on the Merger, abstentions and broker non-votes will be counted and will have the same effect as a vote against the Merger. In tabulating the votes on the increase in the number of shares issuable under Transcisco's Amended and Restated (1994) Stock Option Plan, abstentions will be counted and will have the same effect as a vote against the proposal to increase the number of shares issuable under Transcisco's Amended and Restated (1994) Stock Option Plan; broker non-votes will be disregarded and will have no effect on the outcome of the vote. In tabulating the votes on the selection of Ernst & Young LLP as Transcisco's auditors for the fiscal year ending March 31, 1997, abstentions and broker non-votes will be counted and will have the same effect as a vote against such matters. In tabulating 22 31 the vote on the election of directors, broker non-votes will be disregarded and will have no effect on the outcome of the vote. As of the Record Date, the directors and executive officers of Transcisco (nine persons) owned beneficially an aggregate of 2,116,774 shares of Transcisco Common Stock (constituting approximately 31.13% of the outstanding shares) of which 1,292,038 shares (constituting approximately 19.0% of the outstanding shares) were deemed beneficially owned as a result of the ownership of options to purchase such shares. Shares of Transcisco Common Stock issued after the Record Date (including shares issued pursuant to the exercise of options) cannot be voted at the Meeting. See "SECURITY OWNERSHIP--Security Ownership of Certain Beneficial Owners, Directors and Management of Transcisco." To the knowledge of Trinity, no executive officer or director of Trinity owns any shares of Transcisco Common Stock. Except as set forth below and based solely on review of filings made pursuant to the Exchange Act and information provided to Transcisco by certain directors, officers, and shareholders previously holding 5% or more of the outstanding shares of Transcisco Common Stock, no individual owned more than 5% of Transcisco Common Stock as of the Record Date. At the Record Date, Steven L. Pease, Transcisco's President and Chief Executive Officer, beneficially owned 383,975 shares of Transcisco Common Stock (constituting approximately 5.65% of the outstanding shares) of which 36,977 shares (constituting approximately 0.54% of the outstanding shares) were deemed beneficially owned as a result of the ownership of options to purchase such shares and which cannot be voted at the Meeting. At the Record Date, Furman Selz SBIC, L.P. beneficially owned 972,667 shares of Transcisco Common Stock (constituting approximately 14.3% of the outstanding shares) of which 972,667 shares (constituting approximately 14.3% of the outstanding shares) were deemed beneficially owned as a result of the ownership of options to purchase such shares and which cannot be voted at the Meeting. Brian P. Friedman, a director of Transcisco, is an executive vice president of Furman Selz LLC and the President of Furman Selz Investments LLC, both affiliates of Furman Selz SBIC, L.P. DISSENTERS' RIGHTS Under the DGCL, holders of Transcisco Common Stock do not have dissenters' rights in connection with the Merger. SOLICITATION OF PROXIES If a stockholder attends the Meeting, he or she may vote by ballot. However, many of Transcisco's stockholders may be unable to attend the Meeting. Therefore, the Transcisco Board is soliciting proxies so that each holder of Transcisco Common Stock on the Record Date will have the opportunity to vote on the proposals to be considered at the Meeting on which each is entitled to vote. When a proxy is returned properly signed and dated, the shares represented thereby will be voted in accordance with the instructions on the proxy. If a stockholder does not return a signed proxy or vote in person at the Meeting, his or her shares will not be voted. Stockholders are urged to mark the boxes on the proxy to indicate how their shares are to be voted. If a holder of Transcisco Common Stock returns a signed proxy but does not indicate how his or her shares are to be voted, the shares represented by the proxy will be voted (i) for the approval and adoption of the Merger Agreement, (ii) for the election of the Transcisco Board's nominees for election as directors, (iii) for the approval of an increase in the number of shares of Transcisco Common Stock issuable under Transcisco's Amended and Restated (1994) Stock Option Plan, and (iv) for ratification of Ernst & Young LLP as Transcisco's independent auditors for the fiscal year ended March 31, 1997. The Transcisco Board does not know of any matters other than those described in the notice of the Meeting that are to come before the Meeting. If any other matters are brought before the Meeting, including, among other things, a motion to adjourn or postpone the Meeting to another time or place for the purpose of, among other things, permitting dissemination of information regarding material developments relating to the Merger or soliciting additional proxies in favor of the proposal to adopt and approve the Merger Agreement, one or more of the persons named on the proxy card will vote the shares represented by such proxy upon such matters as determined in their best judgment and consistent with the voting rights of such shares as provided by the Transcisco Bylaws and the DGCL; provided, however, that no proxy that is voted against the proposal to approve and adopt the Merger Agreement will be voted in favor of any adjournment 23 32 or postponement for the purpose of soliciting additional proxies. At any subsequent reconvening of the Meeting, all proxies will be voted in the same manner as such proxies would have been voted at the original convening of the Meeting, except for proxies that have been effectively revoked or withdrawn prior to such reconvened meeting. See "--Votes Required; Voting Rights." Any Transcisco stockholder who executes and returns a proxy may revoke such proxy at any time before it is voted by (i) notifying in writing the Corporate Secretary of Transcisco at 601 California Street, Suite 1301, San Francisco, California 94108, (ii) granting a subsequent proxy, or (iii) appearing in person and voting at the Meeting. Additional proxy cards are available from the Corporate Secretary. Attendance at the Meeting will not in and of itself constitute revocation of a proxy. In addition to solicitation by use of the mails, proxies may be solicited by directors, officers, and employees of Transcisco in person or by telephone, telegram or other means of communications. Such directors, officers, and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. Arrangements will be made with custodians, nominees and fiduciaries for the forwarding of proxy solicitation materials to beneficial owners of shares held of record by such custodians, nominees and fiduciaries, and Transcisco will reimburse such custodians, nominees and fiduciaries for reasonable expenses incurred in connection therewith. Transcisco has retained Skinner & Co., Inc., a proxy solicitation firm, to assist with soliciting and tabulating proxies for the Meeting at an estimated expense of approximately $3,000, plus reasonable out-of-pocket expenses. Transcisco will bear all costs and expenses of this solicitation other than expenses incurred in connection with the printing and mailing of this Proxy Statement/Prospectus, which will be borne by Trinity. TRANSCISCO STOCKHOLDERS SHOULD NOT SEND IN ANY SHARE CERTIFICATES WITH THEIR PROXY CARDS. PROXY CARDS SHOULD BE SENT TO SKINNER & CO., INC., 660 MARKET STREET, SUITE 204, SAN FRANCISCO, CALIFORNIA 94104. SHARE CERTIFICATES SHOULD BE SENT WITH THE ENCLOSED LETTER OF TRANSMITTAL TO THE BANK OF NEW YORK, AS EXCHANGE AGENT, TENDER & EXCHANGE DEPARTMENT, P.O. BOX 11248, CHURCH STREET STATION, NEW YORK, NEW YORK 10286-1248. APPROPRIATE ENVELOPES ARE ENCLOSED FOR THIS PURPOSE. THE PROPOSED MERGER GENERAL The following is a brief summary of certain aspects of the Merger. This summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is included in this Proxy Statement/Prospectus as Annex A and is incorporated herein by reference. A description of the relative rights, privileges, and preferences of Transcisco Common Stock on the one hand, and Trinity Common Stock, on the other, including certain material differences between the rights of holders of such stock, is set forth under "DESCRIPTION OF TRINITY CAPITAL STOCK", "DESCRIPTION OF TRANSCISCO CAPITAL STOCK," and "COMPARISON OF STOCKHOLDER RIGHTS." CLOSING; EFFECTIVE TIME The closing of the transactions contemplated by the Merger Agreement (the "Closing") will take place as promptly as practicable following the Meeting and after the last of the regulatory approvals and other conditions set forth in the Merger Agreement are satisfied or waived. The Merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the DGCL (the "Effective Time"). Such filings will be made as soon as practicable after the Closing. The Closing will take place as soon as practicable following the approval of the Merger Agreement by Transcisco stockholders and the satisfaction or waiver of the other conditions to each party's obligation to consummate the Merger. CONVERSION OF SHARES; FRACTIONAL SHARES Each share of Transcisco Common Stock outstanding prior to the Effective Time will be converted into, exchanged for and represent the right to receive 0.1884 of a share of Trinity Common Stock. No fractional shares of Trinity Common Stock will be issued in the Merger, and such fractional shares will not entitle the owners thereof to any rights of a holder of Trinity Common Stock. Instead, each record holder of Transcisco Common Stock who would otherwise have been entitled to receive a fraction of a share of Trinity Common Stock upon surrender of certificates representing Transcisco Common Stock for exchange will, upon 24 33 surrender of Transcisco Common Stock certificates, be entitled to receive a cash payment (without interest) equal to the product of such fraction multiplied by the "Average Price" of a share of Trinity Common Stock. For purposes of the foregoing, the "Average Price" of a share of Trinity Common Stock will be the average of the closing sales prices thereof as reported on the NYSE Composite Tape over the ten trading days including and ending on the second trading day preceding the closing date of the Merger. EXCHANGE OF CERTIFICATES Upon surrender of each certificate representing shares of Transcisco Common Stock, the Exchange Agent will issue to the holder of such certificate, as soon as practicable after the Effective Time, his or her shares of Trinity Common Stock (and cash in lieu of fractional shares) and such certificate representing shares of Transcisco Common Stock will thereafter be cancelled. Until so surrendered and exchanged, each such certificate that prior to the Effective Time represented shares of Transcisco Common Stock will represent solely the right to receive shares of Trinity Common Stock pursuant to the Merger Agreement (and cash in lieu of fractional shares). After the Effective Time, there will be no transfers on the stock transfer books of the Surviving Corporation of any shares of Transcisco Common Stock. If, after the Effective Time, certificates formerly representing shares of Transcisco Common Stock are presented to the Surviving Corporation or the Exchange Agent, they will be cancelled and (subject to applicable abandoned property, escheat and similar laws) exchanged for Trinity Common Stock (and cash in lieu of fractional shares), as provided above. No dividends or other distributions declared or made after the Effective Time with respect to shares of Trinity Stock will be paid to the holder of any unsurrendered certificate with respect to the shares of Trinity Stock such holder is entitled to receive, and no cash payment in lieu of fractional shares will be paid, until the holder of such certificate surrenders such certificate in accordance with the provisions of the Merger Agreement. At the Effective Time, all shares of Transcisco Common Stock that are owned by Transcisco as treasury stock and any shares of Transcisco Common Stock owned by Trinity, Trinity Y, or any other direct or indirect subsidiary of Trinity will be cancelled and retired and will cease to exist, and no payment or other consideration will be made in respect thereof. BACKGROUND OF THE MERGER In early 1995, Transcisco received two proposals, described below, which were each subject to a number of conditions, concerning the possible acquisition of Transcisco. On March 30, 1995, Trinity proposed (the "Trinity Proposal"), a transaction in which Transcisco's stockholders would receive a cash payment of $1.75 for each of their shares of Transcisco common stock. On April 11, 1995, Johnstown America Industries, Inc. ("JA") proposed acquiring Transcisco for $1.50 (which was later raised to $1.75) per share in cash (the "JA Proposal" and together with the Trinity Proposal, the "Early 1995 Proposals"). JA publicly announced its interest in Transcisco on April 20, 1995. Transcisco had previously retained Schroder Wertheim, pursuant to an engagement letter dated April 13, 1995, to act as Transcisco's exclusive financial advisor regarding the Early 1995 Proposals and to prepare a business valuation of Transcisco. Based on Schroder Wertheim's valuation assessment of the Early 1995 Proposals, as well as other factors, the Transcisco Board decided not to pursue either of the Early 1995 Proposals. On May 24, 1995, Trinity indicated that it was interested in pursuing a stock-for-stock transaction in which it would issue 335,000 shares of Trinity Common Stock having an aggregate value of $13.0 million based on Trinity's $38.75 per share price at the time, which was equivalent to approximately $2.25 per share of Transcisco Common Stock, in exchange for all of the issued and outstanding shares of Transcisco Common Stock. After a review of this proposal by Transcisco and Schroder Wertheim, and based on the analyses performed and the conclusions reached in evaluating the Early 1995 Proposals, the Transcisco Board declined to pursue this proposal. On July 20, 1995, Trinity proposed a transaction in which it would pay $17.0 million (approximately $2.87 per share of Transcisco Common Stock) in cash in exchange for all the issued and outstanding shares of Transcisco Common Stock. After a review of this proposal by Transcisco and Schroder Wertheim, and based on the analyses performed and the conclusions reached in evaluating the Early 1995 Proposals, the Transcisco Board declined to pursue this proposal. 25 34 In February and March of 1996, Transcisco began discussions with a number of parties, including Trinity, regarding the potential acquisition of Transcisco. At this time, Schroder Wertheim and Transcisco executed a new engagement letter dated March 19, 1996 granting Schroder Wertheim the exclusive right to serve as Transcisco's financial advisor in connection with any sale of Transcisco and authorizing Schroder Wertheim to initiate contact with potential acquirors. Schroder Wertheim and the management of Transcisco identified twenty-two companies in the rail equipment manufacturing and transportation equipment leasing industries, including Trinity, for whom Schroder Wertheim and Transcisco management believed Transcisco might represent an attractive acquisition candidate. The Transcisco Board placed no restrictions on Schroder Wertheim or management concerning prospective acquirors or types of transactions that might be reviewed. Schroder Wertheim and/or Transcisco's management contacted each of the twenty-two parties to assess their interest in a potential transaction involving Transcisco. Prospective acquirors were advised that the Transcisco Board had made no determination as to whether to proceed with such a transaction. Five of the parties expressed an interest in a possible transaction involving Transcisco. Each of these five companies executed a confidentiality agreement pursuant to which each agreed to keep confidential certain information concerning Transcisco. Following execution of the confidentiality agreements in March and April 1996, each of the five parties received a confidential offering memorandum regarding Transcisco, following which they were invited to submit written, non-binding indications of interest to acquire Transcisco. On May 3, 1996, the Transcisco Board met with representatives of Schroder Wertheim and Transcisco's legal advisors to review (i) the results of the contacts with prospective acquirors discussed above and (ii) developments in the negotiations with Trinity. At this meeting, the Transcisco Board authorized management to undertake further negotiations with Trinity subject to certain parameters. During the weekend of May 4 and May 5, 1996, the managements of Transcisco and Trinity held numerous meetings by telephone in which various terms of a letter of intent were negotiated. On May 5, 1996, the Transcisco Board met by telephone and authorized Transcisco's management to enter into a letter of intent to merge Transcisco with Trinity in a stock-for-stock transaction in which holders of Transcisco's common stock would receive 0.1884 of a share of Trinity common stock for each share of Transcisco common stock held. This fixed Exchange Ratio translated into the equivalent of $6.50 per Transcisco share based on the closing market price of Trinity's common stock of $34.50 on Friday, May 3, 1996. On May 6, 1996, Transcisco issued a press release announcing its intent to merge with Trinity. During the period from May 6 to June 17, 1996, Transcisco management and its legal advisors held multiple meetings with Trinity management, in person and by telephone, for the purposes of (i) conducting a due diligence review of the business and financial affairs of Trinity, (ii) permitting Trinity to conduct a due diligence review of the business and financial affairs of Transcisco, and (iii) negotiating the terms of the Merger Agreement. On May 9, 1996, Transcisco's management and representatives of Schroder Wertheim met with representatives of Trinity at Trinity's corporate headquarters for the purpose of conducting a due diligence review of the business and financial affairs of Trinity. On June 7, 1996, the Transcisco Board met by telephone with its legal advisors and representatives of Schroder Wertheim and reviewed the status of the negotiations with Trinity with respect to the terms of the Merger Agreement. During this meeting, Schroder Wertheim's representatives reviewed the history of the proposed transaction, including the discussions with potential acquirors and the indications of interest received therefrom and responded to questions from members of the Transcisco Board. At the meeting, Schroder Wertheim delivered a written opinion to the effect that, in its opinion, as of June 7, 1996, the Exchange Ratio provided for by the Merger Agreement was fair, from a financial point of view, to the stockholders of Transcisco. Negotiations with Trinity were largely completed by June 13, 1996, and on such date the Transcisco Board met by telephone with its legal advisors and representatives of Schroder Wertheim to again review the proposed transaction with Trinity. Schroder Wertheim reiterated its opinion that the Exchange Ratio provided for by the Merger Agreement was fair, from a financial point of view, to the stockholders of Transcisco. Following this discussion, and after concluding that Trinity's acquisition proposal was the most attractive of the proposals it had received, given the proposed Exchange Ratio, Trinity's financial condition, the transaction structure proposed by Trinity, the tax consequences of such structure, and the compatibility of the business and operating strategies of both companies, the Transcisco Board approved the Merger Agreement. The Merger Agreement was executed by Transcisco, Trinity, and Trinity Y on June 17, 1996. Immediately following the execution of the Merger Agreement, Transcisco and Trinity issued press releases announcing the execution of the Merger Agreement. 26 35 RECOMMENDATION OF THE TRANSCISCO BOARD AND TRANSCISCO'S REASONS FOR THE MERGER The Transcisco Board has determined that the Merger is fair to and in the best interests of Transcisco and its stockholders. At a meeting held on June 13, 1996, the Transcisco Board unanimously approved the Merger Agreement and resolved to recommend that the stockholders of Transcisco vote for approval and adoption of the Merger Agreement. In reaching its conclusion to approve the Merger Agreement and to recommend that stockholders vote for approval and adoption of the Merger Agreement, the Transcisco Board considered many factors including, but not limited to, the following: (i) the recognition by Transcisco's management of the difficulties and risks inherent in attempting to enhance stockholder value over the long-term through internal processes; (ii) Trinity's business, assets, management, competitive position, and prospects, which the Transcisco Board believes, on a combined basis with those of Transcisco, would represent a good strategic fit between the two companies; (iii) the financial condition and results of operations of each of Transcisco and Trinity, on an historical basis, before giving effect to the Merger; (iv) historical market prices and trading information with respect to each of Transcisco Common Stock and Trinity Common Stock; (v) the treatment of the Merger as a "tax-free reorganization" for federal income tax purposes (see "--Certain Federal Income Tax Consequences of the Merger"); (vi) the potential synergies to be realized by the combined operations of Transcisco and Trinity, which are expected to have a favorable result on the long-term value of Trinity as well as enhance the competitive position of the combined entity; (vii) the regulatory approvals required to consummate the Merger (see "--Regulatory Filings and Approvals") and the prospects for receiving all such approvals; (viii) the opinion and analysis of Schroder Wertheim described under "--Opinion of Transcisco's Financial Advisor"; and (ix) the compatibility of the business and operating strategies of both companies. These factors were considered collectively by the Transcisco Board, without giving specific weight to any particular factor, in connection with its assessment of the strategic and operational benefits and risks of the Merger as well as the range of value of each of Transcisco and Trinity on a stand-alone basis and the potential value of the combined entity. Based on this analysis, the Transcisco Board concluded that (i) the Exchange Ratio was within the range of fair value to holders of Transcisco Common Stock and (ii) the Merger would result in an increase in long-term value for Transcisco's stockholders due to the strategic and operational benefits and synergies described above. The Transcisco Board recommends that Transcisco stockholders vote "FOR" the approval and adoption of the Merger Agreement. PROJECTED FINANCIAL INFORMATION FOR TRANSCISCO In the course of its discussions with Schroder Wertheim and Trinity, Transcisco provided Schroder Wertheim and Trinity with certain business and financial information that Transcisco believes was not publicly available. Such information included, among other things, certain financial projections prepared by Transcisco's management for business planning and evaluation purposes. 27 36 Set forth below is a summary of such projections.
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA) FISCAL YEARS ENDED MARCH 31, --------------------------------------------------------------------------- 1997 1998 1999 2000 2001 Revenue (1) . . . . . . . . . $ 45,594 49,611 54,582 59,845 65,400 Operating costs and expenses . . . . . . . . . . $ 35,137 38,118 41,796 45,817 50,160 Selling, general, and administrative expenses (2) . . . . . . . . . . . . . $ 6,546 6,568 6,866 7,234 7,692 Operating income . . . . . . $ 3,911 4,925 5,920 6,794 7,548 Interest income (expense) (3) $ (307) (148) 109 424 808 Equity in earnings of SFAT $ 6,300 7,560 9,072 10,886 13,064 (4) . . . . . . . . . . . . . Provision for income taxes $ 113 134 161 189 215 (5) . . . . . . . . . . . . . Net income (6) . . . . . . . $ 9,791 12,203 14,940 17,915 21,205 Net income per share . . . . $ 1.47 1.84 2.25 2.70 3.19
- -------------------------- (1) Assumes, among other things, that Transcisco's revenue base will grow at a rate of 9% to 10% per year, that inflation will remain within the range of 3% to 4% per year, that Transcisco's growth will be internally generated, that Transcisco Leasing Company will place 1,000 railcars per year under long- term maintenance and management contracts, that all maintenance and management contracts to which TLC is a party will be renewed on comparable terms, and that capital expenditures will be approximately $1 million per year. (2) Assumes that Transcisco is not a party to any material litigation, that the action brought against a former director of Transcisco by Great American Insurance Company is settled without any adverse consequences for Transcisco, and that Transcisco does not become the subject of any governmental action, which may have an adverse affect. (3) Assumes no material changes in Transcisco's capital structure. (4) Assumes that there are no unfavorable changes in Russia's political or economic situation, that SFAT's earnings grow at a rate of 20% per year, that Transcisco continues to be able to recognize its earnings in SFAT under the equity accounting method, that the licensing fee of $1.5 million per year from SFAT will not be impaired, and that SFAT does not undertake a public offering. (5) Assumes that Transcisco is subject only to the alternative minimum tax and does not pay taxes at the corporate rate. (6) Assumes that Transcisco's management remains unchanged. There can be no assurance that the foregoing assumptions will be realized. The above projections are forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. They were not prepared with a view to public disclosure or compliance with the published guidelines of the Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections. The projections were prepared exclusively for use by Transcisco's management. They are included in this Proxy Statement/Prospectus only because they were provided to Schroder Wertheim and, on a limited basis, to Trinity. 28 37 Transcisco assumes no responsibility for the accuracy of the projections. Projections of future performance are inherently subject to uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of Transcisco or any other company preparing projections. Transcisco's actual performance could differ materially from the projections because of, among other things, (i) a change in general economic conditions, (ii) a change in tax laws affecting the leasing of railcars, (iii) a change in federal, state, or local environmental laws and regulations, (iv) a change in Transcisco's competitive position, and (v) a change in Transcisco's management. Transcisco does not anticipate that it will, and it disclaims any obligation to, furnish updated projections, cause such information to be included in documents required to be filed with the Commission, or otherwise make such information public. Ernst & Young LLP, Transcisco's independent auditors, and SFAT's independent auditors did not examine, compile, or perform any procedures with respect to the projections. Accordingly, each of Ernst & Young LLP and SFAT's independent auditors makes no representations whatsoever regarding such projections, expresses no opinion regarding such projections and assumes no responsibility for such projections. TRANSCISCO STOCKHOLDERS ARE CAUTIONED NOT TO RELY ON THE PROJECTIONS IN DETERMINING WHETHER TO VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. OPINION OF TRANSCISCO'S FINANCIAL ADVISOR Transcisco retained Schroder Wertheim to act as its exclusive financial advisor and to provide certain investment banking advice and services in connection with the Merger, including rendering its opinion as to whether the Exchange Ratio to be received in the Merger by the holders of Transcisco's common stock is fair, from a financial point of view, to such holders. Transcisco retained Schroder Wertheim to act as Transcisco's financial advisor in connection with the Merger and related matters based upon Schroder Wertheim's expertise in mergers and acquisitions, knowledge of the rail equipment and leasing industries, and familiarity with Transcisco. At the June 7, 1996 meeting of the Transcisco Board, representatives of Schroder Wertheim reviewed the proposed transaction with Trinity and rendered its written opinion to the Transcisco Board that, as of such date, based upon the facts and circumstances as they existed at the time, and subject to certain assumptions, factors and limitations set forth in such opinion, the Exchange Ratio provided for by the Merger Agreement was fair, from a financial point of view, to Transcisco's stockholders. At the June 13, 1996 meeting of the Transcisco Board, Schroder Wertheim advised the Transcisco Board that nothing had come to Schroder Wertheim's attention since June 7, 1996 that would cause it to believe that the Exchange Ratio was not still fair, from a financial point of view, to Transcisco's stockholders. Schroder Wertheim also has delivered a written opinion, dated as of July 18, 1996, that based upon the facts and circumstances as they existed at the time, and subject to assumptions, factors and limitations set forth in such opinion, the Exchange Ratio to be received by the holders of Transcisco's common stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. No limitations were imposed by the Transcisco Board upon Schroder Wertheim with respect to the investigations made or procedures followed by it in rendering its opinions. The procedures followed and the analyses performed by Schroder Wertheim in connection with its opinion, dated as of July 18, 1996, were substantially similar to those procedures followed and analyses performed by Schroder Wertheim in connection with its opinion, dated as of June 7, 1996, which are summarized below. The full text of Schroder Wertheim's written opinion, dated as of July 18, 1996 (the "Schroder Wertheim Opinion"), which sets forth, among other things, the assumptions made, matters considered and limitations on the review undertaken, is attached as Annex B to this Proxy Statement/Prospectus and is incorporated herein by reference. Transcisco stockholders are urged to read the Schroder Wertheim Opinion in its entirety. Schroder Wertheim's June 7th opinion was rendered to the Transcisco Board for its consideration in determining whether to approve the Merger Agreement and stockholders should be aware that the Schroder Wertheim Opinion does not constitute a recommendation to Transcisco's shareholders to vote in favor of the Merger at the Meeting. In arriving at this opinion, Schroder Wertheim (i) reviewed certain publicly available business and financial information relating to Transcisco and Trinity, (ii) reviewed certain other information, including 29 38 financial forecasts provided to Schroder Wertheim by Transcisco, (iii) met with the managements of Transcisco and Trinity to discuss the business, prospects, and strategic and financial plans of Transcisco and Trinity, respectively, (iv) compared certain financial and stock market information for Transcisco with similar information for other publicly held companies in businesses similar to those of Transcisco, (v) reviewed the financial terms of certain recent business combinations which Schroder Wertheim deemed comparable in whole or in part, and (vi) performed such other financial studies, analyses, inquiries and investigations, and considered such other factors, including the terms of the Merger Agreement, as it deemed appropriate. In connection with its review, Schroder Wertheim did not independently verify any of the foregoing information and relied on such information being complete and accurate in all material respects. In addition, Schroder Wertheim did not make an independent evaluation or appraisal of the assets of Transcisco. In making its determination that the Exchange Ratio to be received by the holders of Transcisco's common stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, Schroder Wertheim was not asked to take into account any offers that might be made by third parties to acquire Transcisco or any interest therein. With respect to financial forecasts of Transcisco used for purposes of Schroder Wertheim's analysis, Schroder Wertheim was advised by Transcisco's management that such forecasts reflect the best currently available estimates and judgments of Transcisco's management as to the future financial performance of Transcisco. Schroder Wertheim also assumed that the strategic and financial plans of Transcisco will be implemented as scheduled. The Schroder Wertheim opinion was necessarily based on economic, market, and other conditions and the information available to it as of the date hereof. In arriving at its opinion, Schroder Wertheim performed a variety of financial analyses. A summary of Schroder Wertheim's material analyses is set forth below. Such summary does not purport to be a complete description of all the analyses performed by Schroder Wertheim. The preparation of a fairness opinion is a complex process that involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances, which is not necessarily susceptible to partial analysis or summary description. Schroder Wertheim believes that its analyses must be considered as a whole and that selecting portions of its analyses or portions of the factors considered by it, without considering all analyses and factors, could create an incomplete view of the evaluation process underlying its opinion. In performing its analyses, Schroder Wertheim made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of Transcisco. Any estimates contained in Schroder Wertheim's analyses are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Additionally, estimates of the value of business and securities do not purport to be appraisals or necessarily reflect the prices at which businesses or securities may be sold. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty. ANALYSIS OF PURCHASE PRICE PREMIUMS TO MARKET PRICE Schroder Wertheim compared the per share value represented by the Exchange Ratio (equal to $6.50 per Transcisco share based on the $34.50 per share closing price of Trinity stock on May 3, 1996, the business day prior to the public announcement of the Merger and herein referred to as the "Merger Value") to various market closing prices of Transcisco's common stock prior to the announcement of the Merger. The Merger Value represents premiums of 30%, 37%, 28%, 63%, and 100% to the closing prices of Transcisco's common stock one day, one week, one month, three months and six months prior to the announcement of the Merger. Schroder Wertheim also reviewed the premiums paid in friendly acquisitions of U.S. public companies from 1992 to the date of this Proxy Statement/Prospectus. In 212 friendly acquisitions of U.S. public manufacturing companies during that period, the purchase prices paid represented average premiums of 29%, 33% and 39% over the closing prices of the acquired companies' common stock one day, one week and one month prior to the announcement of the transactions. In 235 friendly acquisitions of U.S. public companies during that period valued at between $20 million and $100 million, the purchase prices paid represented average premiums of 38%, 42% and 48% over the closing prices of the acquired companies' common stock one day, one week and one month prior to the announcement of the transactions. TRINITY COMMON STOCK PRICE ANALYSIS Schroder Wertheim reviewed certain financial and non-financial information and performed certain analyses relating to Trinity. These analyses included (i) a review of Trinity's stock price and trading volume activity from January 1, 1991 through June 6, 1996, (ii) a review of Trinity's multiples of (a) enterprise value to revenues, operating cash flow and operating income, and (b) equity value to net income, using actual results for the fiscal year ended March 31, 1996 and projected results for the fiscal year ending March 31, 1997, based 30 39 on brokerage firm equity research analyst's estimates, and (iii) the pro forma effect of the Merger on Trinity's projected net income for fiscal 1997 and 1998. During the 52-week period ended June 6, 1996, Trinity's share price ranged from a low of $28.25 to a high of $36.125, averaged $32.81, and closed at $34.875 on June 6, 1996. In its review of Trinity's trading multiples, Schroder Wertheim observed that the Trinity Common Stock traded at multiples of (i) enterprise value to (a) fiscal 1996 revenue, operating cash flow and operating income of 0.7x, 7.1x and 9.2x, respectively, and (b) fiscal 1997 projected revenue, operating cash flow and operating income of 0.7x, 6.0x and 7.5x, respectively, and (ii) equity value to (a) fiscal 1996 net income of 12.9x, and (b) fiscal 1997 projected net income of 11.4x. Schroder Wertheim further noted that Trinity had a dividend yield of 1.9%. VALUATION OF TRANSCISCO Schroder Wertheim's valuation of Transcisco was based on a valuation of its three subsidiaries: Transcisco Rail Services ("TRS"), Transcisco Leasing Company ("TLC"), and Transcisco Trading Company ("TTC"). TRANSCISCO RAIL SERVICES The valuation of TRS was based on three valuation methodologies: a comparable companies analysis, a comparable acquisitions analysis, and a discounted cash flow ("DCF") analysis. In performing the comparable companies analysis, Schroder Wertheim examined the historical financial results and market statistics (including multiples of sales, operating cash flow, operating income and net income) of ABC Rail, Atchison Casting, Greenbrier, Harmon, JA, Trinity, Union Switch & Signal, and Westinghouse Air Brake, all of which Schroder Wertheim considered to be reasonably comparable to TRS. The comparable companies analysis implied a pre-tax reference range of $9 million to $11 million. In performing the comparable acquisitions analysis, Schroder Wertheim reviewed certain operating statistics and purchase price information (including multiples of sales, operating cash flow, operating income and net income) for acquisitions of companies considered by Schroder Wertheim to be reasonably comparable to TRS. Schroder Wertheim's comparable acquisitions analysis implied a pre-tax reference range of $8.0 million to $10.0 million. Schroder Wertheim's DCF analysis was based on forecasts provided by Transcisco management. Schroder Wertheim was advised by Transcisco's management that such forecasts reflect the best currently available estimates and judgments of the management of Transcisco as to the future financial performance of TRS. Schroder Wertheim estimated the present value of the future streams of unleveraged after-tax cash flows that TRS could produce through the fiscal year ending March 31, 2001. Schroder Wertheim estimated the terminal value for TRS at the end of the five year forecast period by applying a multiple of 6.5x to TRS's terminal year operating cash flow. The cash flow streams and the terminal value were then discounted to present values using discount rates ranging from 15% to 17%. These multiples and discount rates were based on the manner in which comparable companies are valued and an estimated industry weighted average cost of capital, adjusted for certain risk factors specific to TRS, including (i) its recent operating difficulties, (ii) its limited size relative to the comparable companies, (iii) the highly competitive nature of its industry and the limited ability of TRS to differentiate itself, and (iv) its low margins relative to the comparable companies. The DCF analysis implied a pre-tax reference range of $12.8 million to $13.9 million. On the basis of the valuation methodologies described above, Schroder Wertheim developed an overall pre-tax reference range for TRS of $9.0 million to $11.0 million. TRANSCISCO LEASING COMPANY Schroder Wertheim's valuation of TLC was based on the same three valuation methodologies described above. The comparable companies considered by Schroder Wertheim were GATX, Interpool, Rollins Truck Leasing, Ryder Systems, and XTRA, all of which Schroder Wertheim considered to be reasonably comparable to TLC. The comparable companies analysis implied a pre-tax reference range of $18.5 million to $20.5 million. Schroder Wertheim's comparable acquisitions analysis implied a pre-tax reference range of $13.5 million to $15.5 million. Schroder Wertheim's DCF analysis was based on forecasts provided by Transcisco management. Schroder Wertheim estimated the terminal value for TLC at the end of the five year forecast period by applying a multiple of 5.25x to TLC's terminal year operating cash flow. The cash flow streams and the terminal value were then discounted to present values using discount rates ranging from 15% to 17%. These multiples and discount rates were based on the manner in which comparable companies are valued and an estimated industry weighted average cost of capital, adjusted for certain risk factors specific to TLC, including (i) its early stage of development and the historical irregularity of its profitability, (ii) its limited size relative to the comparable companies, (iii) the risks inherent in a business that is highly dependent on one key manager, (iv) its irregular revenue and earnings stream, the result of its "one-off" transactions, (v) its low margins relative to the comparable companies, and (vi) its deferred maintenance liability of $2.9 million of March 31, 1996, representing cash received by TLC for railcar maintenance not yet performed. The 31 40 DCF analysis implied a pre-tax reference range of $23.1 million to $24.7 million. On the basis of the valuation methodologies described above, Schroder Wertheim developed an overall pre-tax reference range for TLC of $15.0 million to $17.0 million. TRANSCISCO TRADING COMPANY Schroder Wertheim's valuation of TTC was based on the valuation of TTC's two primary assets: (i) its 23.5% ownership interest in SFAT; and (ii) a royalty and licensing fee stream of $1.5 million per year through 2001 relating to a patented tank car heating technology, licensed primarily to SFAT. Schroder Wertheim valued SFAT based on the valuation placed on SFAT by the European Bank for Reconstruction and Development, which agreed to purchase 10% of SFAT's outstanding shares for $12 million in April, 1996, implying a value for all of SFAT's shares of $120 million. Schroder Wertheim discounted this valuation by approximately 20% to 40%, based on (i) the lack of liquidity for TTC's shares in SFAT; (ii) the near absence of current cash flow from TTC's investment in SFAT; (iii) TTC's minority investor status in SFAT, resulting in a lack of control over the management of SFAT; and (iv) the high degree of ongoing political and economic uncertainty in Russia. This analysis implied a pre-tax reference range of $15.0 million to $20.0 million for TTC's SFAT shares. Schroder Wertheim's valuation of TTC's royalty and licensing fee stream was based on revenues of $1.5 million per year, reduced by TTC's annual general and administrative expenses. The resulting cash flows were then discounted to present values using a discount rate of 20% to account for the risk factors discussed above. This analysis implied a pre-tax valuation of $2.5 million. On the basis of the valuation analyses described above, Schroder Wertheim developed an overall pre-tax reference range for TTC of $17.5 million to $22.5 million. OTHER Schroder Wertheim considered the following other factors in its valuation of Transcisco. Transcisco had a net operating loss carryforward at March 31, 1996, preliminarily estimated by Transcisco to be approximately $17 million and subsequently restated to approximately $11.3 million ("NOL"), which Schroder Wertheim valued at $1.0 million due to limitations, arising under the Code, on the use of the NOL following the Merger. The Code limits the use of the NOL in any one year to an amount significantly less than its current balance. However, these limitations would not be expected to preclude the full utilization of the NOL prior to its expiration in years 2004 through 2008. In addition, discussions with Transcisco's management indicated that approximately $500,000 of Transcisco's current $1.6 million of annual corporate overhead expenses would likely be ongoing costs following the Merger. Schroder Wertheim subtracted $3.0 million ($500,000 per year capitalized at a multiple of 6.0x) from its valuation of Transcisco to account for these corporate overhead expenses for which no provision was made in the analysis of TRS, TLC, and TTC. SUMMARY Based on these segment valuations and after taking into account the other factors discussed above, Schroder Wertheim estimated an overall pre-tax enterprise reference range for Transcisco of $39.5 million to $48.5 million. In order to calculate a pre-tax equity reference range for Transcisco, Schroder Wertheim first subtracted from the pre-tax enterprise reference range Transcisco's debt balance as of March 31, 1996 of $3.9 million, and then added Transcisco's cash balance as of March 31, 1996 of $5.1 million, which includes approximately $2.4 million from the exercise of options and warrants representing approximately 1.6 million shares of Transcisco common stock exercisable at an average price of $1.53 per share. These adjustments resulted in a pre-tax equity reference range of $40.7 million to $49.7 million. This equity reference range resulted in an implied reference range per share of Transcisco common stock of approximately $5.95 to $7.25. Schroder Wertheim is an internationally recognized investment banking firm engaged in the valuation of businesses and their securities in connection with mergers and acquisitions and for other purposes. Schroder Wertheim was selected as financial advisor to the Transcisco Board based on such expertise as well as its familiarity with Transcisco. Schroder Wertheim has provided investment banking services to Transcisco in connection with the Early 1995 Proposals, and Transcisco's adoption of a stockholders' rights plan in September 1995, for which it received customary fees. Pursuant to the terms of the engagement letter, dated March 19, 1996, between Transcisco and Schroder Wertheim, Transcisco agreed to pay Schroder Wertheim a fee of $150,000 upon delivery of its initial opinion, which fee is payable without regard to the conclusions set forth in such opinion. Schroder Wertheim will not be paid additional fees in connection with any additional opinions relating to the Merger. Transcisco also agreed to pay Schroder Wertheim an additional fee of $950,000 upon consummation of the Merger as compensation for financial advisory services. In addition, Transcisco has agreed to reimburse Schroder 32 41 Wertheim for its reasonable out-of-pocket expenses incurred in connection with rendering financial and advisory services, including fees and disbursements of its legal counsel. Transcisco also agreed to indemnify Schroder Wertheim against certain liabilities relating to, or arising out of, its engagement. TRINITY'S REASONS FOR THE MERGER The Trinity Board has unanimously approved the Merger Agreement and the transactions contemplated thereby. In reaching its conclusion to approve the Merger Agreement, the Trinity Board determined that the Merger is consistent with and in furtherance of the long-term business strategy of Trinity. Transcisco Rail Services Company's ten railcar repair and maintenance facilities make it one of the largest independent railcar maintenance organizations in the United States. Trinity's existing fleet of railcars, together with more than 15,000 privately owned railcars under maintenance contracts with Transcisco Rail Services Company, and 11,283 railcars covered by Transcisco Leasing Company contracts for maintenance, management and leasing services strengthens Trinity's leadership position in the railcar industry in this country. Also, through Transcisco Trading Company's 23.5% interest in SFAT, Trinity will enter the Russian tankcar market as an owner of a full service transportation management company that owns and manages more than 5,500 railroad tankcars used to export petroleum and petrochemicals. The Trinity Board believes that the acquisition of Transcisco will be an excellent strategic fit with Trinity's existing businesses. See "-Plans for Transcisco After the Merger." INTERESTS OF CERTAIN PERSONS IN THE MERGER GENERAL Certain directors and executive officers of Transcisco have interests in the Merger that are in addition to the interests of Transcisco and its stockholders generally. See "SECURITY OWNERSHIP--Security Ownership of Certain Beneficial Owners, Directors and Management of Transcisco." The Transcisco Board was aware of these interests and considered them, among other matters, in approving the Merger Agreement. INDEMNIFICATION OF TRANSCISCO'S DIRECTORS AND OFFICERS The Merger Agreement provides that Transcisco, as the surviving corporation (the "Surviving Corporation") in the Merger, will indemnify the directors and officers of Transcisco, to the extent such indemnification was available prior to the Merger pursuant to (i) the DGCL; (ii) the Transcisco Certificate of Incorporation; (iii) the Transcisco Bylaws; (iv) similar organizational documents of any of Transcisco's subsidiaries; or (v) pursuant to the terms of any indemnification agreements entered into between Transcisco and any of Transcisco's directors or officers with respect to matters occurring prior to the Effective Time, and to continue for not less than six years from the Effective Time the current directors' and officers' liability insurance maintained by Transcisco, or the equivalent thereof, with respect to matters occurring prior to the Effective Time. EMPLOYMENT AGREEMENTS Under the terms of an agreement, dated January 3, 1995, and amended as of March 1, 1996 (the "Consulting Agreement"), by and among Mr. Steven L. Pease, Transcisco and Deucalion Securities, Inc. (of which Mr. Pease is also the Chief Executive Officer), upon a change in control of Transcisco, Mr. Pease would be entitled to receive an immediate advance of one-year's base salary. The balance of the payments due thereunder would be paid as earned. Additionally, Mr. Pease's options would immediately vest. In connection with the Merger, Mr. Pease has entered into an agreement with Transcisco, pursuant to which (i) the Consulting Agreement would be terminated, (ii) Mr. Pease would receive on the Closing Date one year's base salary and a bonus payment equal to $20,000 per month from March 31, 1996 to the Closing Date, and (iii) Mr. Pease's options would vest on the Closing Date. Under the terms of an Employment Agreement, dated April 13, 1995, between Mr. Robert A. Jahnke and Transcisco Rail Services Company, upon a change in control of Transcisco, Mr. Jahnke would be entitled to receive a severance payment equal to one year's salary. Additionally, his options would immediately vest. Additional information relating to executive compensation and various benefit arrangements of Transcisco are set forth in, and incorporated by reference to, Transcisco's Annual Report on Form 10-K (without exhibits thereto), a copy of which is annexed hereto as Annex D. 33 42 OTHER MATTERS To provide an incentive for Transcisco employees to contribute to the continued success of Transcisco during the period beginning on April 1, 1996 and ending on a date to be determined, which will be a reasonable period following the Closing Date (the "Transition Period"), individual arrangements have been made for payments to certain employees of Transcisco who remain in Transcisco's employ during the Transition Period. The total of all such payments is expected to be approximately $450,000 in the aggregate. Transcisco also intends to distribute discretionary bonuses to selected employees who remain in Transcisco's employ during the Transition Period, which payments are expected to be approximately $190,000 in the aggregate, of which Transcisco will provide $90,000. Mr. Pease has advised the Transcisco Board that he intends to set aside up to $100,000 of his personal funds for the purpose of funding such payments. As noted earlier, Mr. Friedman, a director nominated for re-election at the Meeting, is an executive vice president of Furman Selz LLC, which is an affiliate of Furman Selz SBIC, L.P. Furman Selz SBIC, L.P. is a holder of Transcisco's Series A Senior Subordinated Notes (the "Notes") in the principal amount of $1,450,000. The Notes, which were issued in August 1995, mature in 2000 and bear interest at a rate of 10% through July 31, 1997 and 12% thereafter. Trinity has advised Transcisco and Mr. Friedman that it intends to cause Transcisco to prepay the entire principal amount of the Notes immediately after the Effective Time. PLANS FOR TRANSCISCO AFTER THE MERGER Based on its current knowledge of Transcisco, Trinity has no present plans or proposals which relate or would result in a sale or transfer to an unaffiliated party of a material amount of assets involving Transcisco or any of its subsidiaries. Trinity is continuing its review of Transcisco and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel, and Trinity reserves the right, subject to the terms and conditions of the Merger Agreement, to effect any such plans and proposals in connection therewith. THE MERGER AGREEMENT The following is a summary of the material provisions of the Merger Agreement not summarized elsewhere in this Proxy Statement/Prospectus. A copy of the Merger Agreement is attached as Annex A to this Proxy Statement/Prospectus and is incorporated herein by reference. The following summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement. THE MERGER The Merger Agreement provides that, as soon as practicable following the approval of the Merger Agreement by Transcisco's stockholders and the satisfaction or waiver of the other conditions to each party's obligation to consummate the Merger, Trinity Y will be merged with and into Transcisco in accordance with the DGCL, the separate corporate existence of Trinity Y will cease, and Transcisco will continue as the Surviving Corporation in the Merger. CONVERSION OF SHARES OF TRANSCISCO COMMON STOCK Each share of Transcisco Common Stock outstanding prior to the Effective Time will be converted into, exchanged for and represent the right to receive 0.1884 of a share of Trinity Common Stock. No fractional shares of Trinity Common Stock will be issued in the merger, and each record holder of Transcisco Common Stock who would otherwise be entitled to receive a fraction of a share of Trinity Common Stock would be entitled to receive a cash payment in lieu thereof. In the event that prior to the Effective Time, Trinity declares a stock split (including a reverse split) of Trinity Common Stock, or a dividend payable in Trinity Common Stock, or any other distribution of securities or special cash dividends (other than Trinity's regular quarterly dividends) with respect to Trinity Common Stock (including, without limitation, a recapitalization, reclassification, merger, consideration, reorganization or similar transaction) then the Merger Agreement provides that the Exchange Ratio will be appropriately adjusted to reflect such stock split, dividend or other distribution of securities. 34 43 TREATMENT OF TRANSCISCO'S OPTIONS The Merger Agreement provides that, at the Effective Time, each outstanding option to purchase Transcisco Common Stock (a "Transcisco Stock Option") granted under any Transcisco stock option plan (a "Transcisco Stock Plan") or pursuant to certain stock option agreements, whether vested or unvested, will be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Transcisco Stock Option, the same whole number of shares of Trinity Common Stock (being rounded upward to the nearest whole share) as the holder of such Transcisco Stock Option would have been entitled to receive pursuant to the Merger had such holder exercised such option in full immediately prior to the Effective Time (not taking into account whether or not such option was in fact exercisable), and shall have an exercise price per share equal to such Transcisco Stock Option's exercise price per share divided by the Exchange Ratio (the option price per share, as so determined being rounded to the nearest full cent). From and after the Effective Time, Trinity will honor all Transcisco Stock Options and will comply with the terms of all Transcisco Stock Options. DIRECTORS AND OFFICERS Pursuant to the Merger Agreement, the directors and officers of Trinity Y at the Effective Time will be the directors and officers, respectively, of the Surviving Corporation following the Merger. CHARTER AND BYLAWS Pursuant to the Merger Agreement, the certificate of incorporation and bylaws of Trinity Y in effect at the Effective Time will be the certificate of incorporation and bylaws, respectively, of the Surviving Corporation following the Merger until thereafter amended as provided by law and by the certificate of incorporation of the Surviving Corporation. REPRESENTATIONS AND WARRANTIES The Merger Agreement contains various customary representations and warranties of each of Transcisco and Trinity as to (i) corporate status, (ii) corporate authorization, (iii) governmental authorizations and consents, (iv) no contraventions or defaults of charter documents or agreements, (v) enforceability of the Merger Agreement, (vi) capitalization, (vii) financial statements, (viii) the accuracy of documents and reports filed with the Commission, (ix) the absence of certain changes, (x) the absence of litigation, (xi) taxes, (xii) no brokers being entitled to fees in connection with the Merger other than as disclosed, (xiii) the accuracy of the information provided for inclusion in this Proxy Statement/Prospectus and the Registration Statement, and (xiv) full disclosure. Transcisco has also made representations and warranties as to (i) title to property, (ii) retirement and other employee plans and matters relating to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (iii) permits, (iv) patents and trademarks, (v) environmental matters, (vi) contracts to which Transcisco or its subsidiaries is a party or by which any of them is bound, and (vii) labor relations and other employee matters. Trinity has also made representations and warranties as to (i) the absence of ownership by Trinity of Transcisco Common Stock and (ii) its reliance upon its independent investigation of Transcisco and the representations and warranties contained in the Merger Agreement. The respective representations and warranties of each of Transcisco and Trinity will terminate at the Effective Time, other than the representation and warranty of Trinity that it has conducted its own independent review of Transcisco and has relied solely upon its own investigation and analysis and the representations and warranties contained in the Merger Agreement. COVENANTS OF TRANSCISCO, TRINITY, AND TRINITY Y Pursuant to the Merger Agreement, Transcisco has agreed that it will (i) carry on its businesses in the ordinary and customary course consistent with past practice, use reasonable efforts to preserve intact its business, properties, and assets, and use reasonable efforts to keep available the services of its present employees and to preserve its relationships with customers, suppliers, and others having business dealing with it; (ii) afford reasonable access to Trinity and its representatives during the period prior to the Closing Date or the earlier termination of the Merger Agreement; (iii) promptly advise Trinity of any event that is or is 35 44 reasonably likely to cause Transcisco to experience a material adverse effect on Transcisco's business, results of operations, or financial condition; and (iv) use all reasonable efforts to cause Ernst & Young LLP to deliver to Trinity a comfort letter dated as of the date of this Proxy Statement/Prospectus with respect to such financial data of Transcisco as is contained herein. In addition, Transcisco has agreed that it will not (i) adopt or propose any change in the Transcisco Certificate of Incorporation or the Transcisco Bylaws, except a change that would not have an adverse effect on the transactions contemplated by the Merger Agreement; (ii) merge or consolidate with any person or acquire, except in the ordinary course of business, a material amount of assets of any other person; (iii) issue any shares of capital stock or other securities (except pursuant to warrants, options and other rights outstanding on June 17, 1996) or any options, warrants or other rights to acquire the same; (iv) redeem, purchase, or otherwise acquire any of its capital stock; (v) declare, set aside, or pay any dividend or make any other distribution with respect to any shares of its capital stock; (vi) enter into any purchase order with affiliates of Transcisco or outside the ordinary course of business; (vii) enter into any sales order with affiliates of Transcisco or reasonably likely to create a loss to Transcisco in excess of $100,000; or (viii) take, or omit to take, any action that would make any representation or warranty of Transcisco inaccurate or would result in a condition to the obligation of Transcisco to consummate the Merger to not be satisfied. Transcisco has also agreed that it will not initiate, solicit, or encourage any inquiries or the making or implementation of any Acquisition Proposal or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal. Notwithstanding the foregoing, the Transcisco Board is not prohibited from (i) furnishing information to, or entering into discussions or negotiations with, any person in connection with an unsolicited bona fide proposal in writing by such person to acquire Transcisco pursuant to a merger, consolidation, share exchange, business combination, or other similar transaction, or to acquire a substantial portion of the assets of Transcisco or any of Transcisco's subsidiaries, if, and only to the extent that (a) the Transcisco Board, after consultation with and based upon the advice of independent legal counsel, determines in good faith that such action is necessary for the Transcisco Board to comply with its fiduciary duties to the Transcisco's stockholders and (b) prior to furnishing such information to, or entering into discussions or negotiations with, such person or entity, Transcisco provides written notice to Trinity to the effect that it is furnishing information to, or entering into discussions or negotiations with, such person and (ii) complying with Rule 14e-2 of the Exchange Act with regard to an Acquisition Proposal. Pursuant to the Merger Agreement, Trinity and Trinity Y have agreed that (i) Trinity will as promptly as practicable prepare and submit to the NYSE a listing application covering the shares of Trinity Common Stock to be issued in connection with the Merger and will use all reasonable efforts to obtain, prior to the Effective Time, approval for this listing of such shares, subject to the official notice of issuance; (ii) all rights to indemnification existing in favor of the present or former directors, officers, employees, fiduciaries, and agents of Transcisco or its subsidiaries (the "Indemnified Parties") as provided in the Transcisco Certificate of Incorporation or the Transcisco Bylaws or similar organizational documents of any of its subsidiaries as in effect as of the date of the Merger Agreement or pursuant to any indemnification agreements between any of the Indemnified Parties and Transcisco with respect to matters occurring prior to the Effective Time will survive the Merger and will continue in full force and effect for the maximum term permitted by law, and will be enforceable by the Indemnified Parties against the Surviving Corporation; (iii) Trinity will use reasonable efforts to cause to be maintained in effect for not less than six years from the Effective Time the current policies of directors' and officers' liability insurance maintained by Transcisco (provided that Trinity may substitute therefor policies of equivalent coverage) with respect to matters occurring prior to the Effective Time; (iv) Trinity will promptly advise Transcisco of any event that is or is reasonably likely to cause Trinity to experience a material adverse effect on Trinity's business, results of operations, or financial condition; and (v) Trinity will use all reasonable efforts to cause Ernst & Young LLP to deliver to Transcisco a comfort letter dated as of the date of this Proxy Statement/Prospectus with respect to such financial data of Trinity as is contained herein. In addition, Trinity has agreed that it will not (i) adopt or propose any change in the Trinity Certificate of Incorporation or the Trinity Bylaws, except a change that would not have an adverse effect on the transactions contemplated by the Merger Agreement; (ii) merge or consolidate with any person or, except in the ordinary course of business, acquire a material amount of assets of any other person, if such merger, consolidation or acquisition could reasonably be expected to have a material adverse effect on the ability of Trinity and Transcisco to consummate the transactions contemplated by the Merger Agreement; (iii) issue any shares of Trinity Common Stock in connection with any transaction requiring stockholder approval unless Trinity first notifies Transcisco in writing of such transaction (upon receipt of such notice Transcisco would have the right to abandon the Merger and terminate the Merger Agreement at any time prior to 5:30 p.m. on the tenth trading day following the receipt of Trinity's notice); (iv) purchase or acquire any shares of Transcisco Common Stock; or (v) take, or omit to take, any action that would make any representation or warranty of Trinity inaccurate or would result in a condition to the obligation of Trinity to consummate the Merger to not be satisfied. 36 45 CONDITIONS TO THE MERGER The Merger Agreement provides that the obligation of the parties to effect the Merger is subject to the satisfaction or waiver on or prior to the Effective Time of each of the following conditions: (i) the Merger Agreement and the Merger shall have been approved and adopted by the requisite vote of Transcisco stockholders, (ii) the waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have expired or been terminated and no action shall have been taken by any Federal or State governmental agency that would prohibit Trinity or the Surviving Corporation's ownership of Transcisco's business assets, render Transcisco unable to consummate the Merger or make such consummation illegal, (iii) no statute, rule, regulation, executive order, decree, ruling or preliminary or permanent injunction shall have been enacted, entered, promulgated, or enforced by any federal or state court or governmental authority having jurisdiction that prohibits, restrains, enjoins, or restricts the consummation of the Merger, (iv) since June 17, 1996 there shall not have been any change nor any event that has or is reasonably likely to have a material adverse effect on Transcisco or Trinity (other than as a result of a change in conditions, including economic or political developments, applicable to the industries in which each operates), (v) the Registration Statement shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order, and (vi) the shares of Trinity Common Stock issuable in the Merger shall have been authorized for listing on the NYSE. The obligation of Transcisco to effect the Merger is subject to the satisfaction or waiver on or prior to the Effective Time of the following additional conditions: (i) both Trinity and Trinity Y shall have performed all obligations, covenants, and conditions contained in the Merger Agreement required to be performed or complied with by them at or prior to the Effective Time (in all material respects with regard to obligations, covenants, and conditions that are not otherwise qualified with a materiality standard), (ii) all representations and warranties of Trinity and Trinity Y contained in the Merger Agreement shall be true and correct (in all material respects with regard to representations and warranties that are not otherwise qualified with a materiality standard), (iii) Transcisco shall have received a certificate from the president or a vice president of each of Trinity and Trinity Y to the effect that the conditions in clauses (i) and (ii) above have been satisfied, (iv) Transcisco shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom, special counsel to Transcisco, to the effect that the Merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and (v) Transcisco shall have received an opinion from Schroder Wertheim to the effect that the Exchange ratio provided for in the Merger is fair to Transcisco's stockholders from a financial point of view. The obligations of Trinity and Trinity Y to effect the Merger are subject to the satisfaction or waiver on or prior to the Effective Time of the following additional conditions: (i) Transcisco shall have performed all obligations, covenants, and conditions contained in the Merger Agreement required to be performed or complied with by it at or prior to the Effective Time (in all material respects with regard to obligations, covenants, and conditions that are not otherwise qualified with a materiality standard), (ii) all representations and warranties of Transcisco contained in the Merger Agreement shall be true and correct (in all material respects with regard to representations and warranties that are not otherwise qualified with a materiality standard), (iii) Trinity and Trinity Y shall have received a certificate from Transcisco signed by Transcisco's president and principal financial officer to the effect that the conditions in clauses (i) and (ii) above have been satisfied, and (iv) Transcisco's unaudited interim financial statements at June 30, 1996 shall reflect stockholders' equity of at least $25,600,000, provided that Transcisco's unaudited financial statements at July 30, 1996 shall be utilized for purposes of measuring stockholders' equity if the Closing occurs after August 20, 1996. By letter dated as of July 15, 1996, Trinity and Transcisco each agreed to waive the covenant (and the condition that such covenant be performed at or prior to the Effective Time) that required each to use reasonable efforts to supply the other with a comfort letter with respect to the financial data contained in this Proxy Statement/Prospectus. TERMINATION The Merger Agreement provides that it may be terminated and the Merger abandoned at any time prior to the Effective Time, (i) by mutual consent of Transcisco and Trinity; (ii) by Transcisco (a) if a condition to the performance of the Merger Agreement by Transcisco is not fulfilled on or before the time specified for the fulfillment thereof, (b) if any of the representations and warranties of Trinity and Trinity Y that are qualified with respect to materiality are not true and correct in all respects, and the breach of the representation and warranty is not curable or, if curable, is not cured within thirty days after written notice, (c) if any of the representations and warranties of Trinity and Trinity Y that are not so qualified are not true 37 46 and correct in all material respects, and the breach of the representation and warranty is not curable or, if curable, is not cured within thirty days after written notice, or (d) if there has been a material breach of any covenants or agreements by Trinity or Trinity Y, and the breach is not curable or, if curable, is not cured within thirty days after written notice, (e) if any suit, action or other proceeding is pending or threatened that, in Transcisco's reasonable opinion, materially and adversely affects the prospects of the Merger, (f) if Trinity issues shares in a transaction requiring stockholder approval, or (g) if the Transcisco Board withdraws, modifies, or changes, in a manner adverse to Trinity, its approval or recommendation of the Merger Agreement in order to approve and permit Transcisco to execute an agreement relating to an Acquisition Proposal and determines, based on a written opinion of Transcisco's legal counsel, that the failure to take such action would result in a breach of the Transcisco Board's fiduciary duties; (iii) by Trinity and Trinity Y (a) if a condition to the performance of the Merger Agreement by Trinity and Trinity Y is not fulfilled on or before the time specified for the fulfillment thereof, (b) if any of the representations and warranties of Transcisco that are qualified with respect to materiality are not true and correct in all respects, which breach is not curable or, if curable, is not cured within thirty days after written notice, (c) if any of the representations and warranties of Transcisco that are not so qualified are not true and correct in all material respects, and the breach of the representation and warranty is not curable or, if curable, is not cured within thirty days after written notice, (d) if there has been a material breach of any covenants or agreements by Transcisco, which breach is not curable or, if curable, is not cured within thirty days after written notice, or (e) if any suit, action or other proceeding is pending or threatened that, in Trinity's reasonable opinion, materially and adversely affects the prospects of the Merger; or (iv) by either Trinity or Transcisco if (a) the Merger shall not have been consummated on or before September 16, 1996, provided that under certain circumstances such date may be extended to October 15, 1996 or (b) if a court of competent jurisdiction or agency or commission shall have issued an order, decree, or ruling or taken any other action permanently restraining, enjoining, or otherwise prohibiting the transactions contemplated by the Merger Agreement and such order, decree, ruling or other action shall have become final and non-appealable provided certain conditions are satisfied. TERMINATION FEE In the event that Transcisco terminates the Merger Agreement to accept a competing Acquisition Proposal, Transcisco would be required to pay Trinity $200,000 on the date of termination of the Merger Agreement. Upon the consummation of the transaction contemplated by a competing Acquisition Proposal, Transcisco would be required to make an additional payment to Trinity of $2,028,081. ACCOUNTING TREATMENT The Merger will be accounted for under the purchase method of accounting in accordance with generally accepted accounting principles, whereby the purchase price will be allocated based on the fair value of the assets acquired and the liabilities assumed. Such allocations will be based upon valuations that have not been finalized. The excess, if any, of such purchase price over the amounts so allocated will be allocated to goodwill. REGULATORY FILINGS AND APPROVALS The regulatory filings and approvals described below must be made before the Merger can be effected and may take a significant period of time to obtain. Although Transcisco and Trinity believe that such approvals will be obtained, there can be no assurance that this will be the case or that such approvals will be obtained in a timely manner or that such approvals will not be conditioned temporarily or otherwise encumbered. ANTITRUST The Merger is subject to the expiration or termination of the 30-day waiting period under the HSR Act and no action having been instituted by the Department of Justice ("DOJ") or the Federal Trade Commission ("FTC") that is not withdrawn or terminated prior to the Effective Time. The HSR Act, and the rules and regulations thereunder, provide that certain merger transactions (including the Merger) may not be consummated until required information and materials have been furnished to the DOJ and the FTC and certain waiting periods have expired or been terminated. Transcisco and Trinity made their respective filings with the DOJ and the FTC on June 25, 1996, and received notice of early termination of the waiting period on July 8, 1996. The DOJ and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Merger. Notwithstanding the expiration of the HSR waiting period, any time before or after the 38 47 Effective Time, the FTC, the DOJ or others can take action under the antitrust laws, including seeking to enjoin the consummation of the Merger or seeking the divestiture by Trinity of all or any part of the stock or assets of Transcisco. There can be no assurances that a challenge to the Merger on antitrust grounds will not be made, or if such a challenge is made, that it would not be successful. STATE ANTI-TAKEOVER STATUTES Section 203 of the DGCL prohibits business combination transactions involving a Delaware corporation (such as Transcisco) and an "interested stockholder" (defined generally as any person that directly or indirectly beneficially owns 15% or more of the outstanding voting stock of the subject corporation) for three years following the date such person became an interested stockholder, unless special requirements are met or certain exceptions apply, including that prior to such date the board of directors of the subject corporation approved either the business combination or the transactions that resulted in such person becoming an interested stockholder. The Transcisco Board has approved the Merger Agreement for purposes of Section 203, and, accordingly, the provisions of Section 203 are not applicable to the Merger. See "DESCRIPTION OF TRANSCISCO CAPITAL STOCK--Delaware Anti-Takeover Law and Certain Charter Provisions." Transcisco, directly or through subsidiaries, conducts business in a number of other states throughout the United States, some of which have also enacted anti-takeover laws. Transcisco and Trinity do not know whether any of these laws, by their terms, apply to the Merger and have not attempted to comply with any such laws. Should any person seek to apply any such state anti-takeover laws, Transcisco and Trinity will take such action as then appears appropriate, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state anti-takeover statutes is applicable to the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Merger, Transcisco and Trinity might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, Transcisco and Trinity might be delayed in, or prevented from, consummating the Merger. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER The following is a discussion of the material federal income tax consequences of the Merger under existing federal income tax law, which is subject to change, possibly retroactively. This discussion assumes that stockholders hold Transcisco Common Stock as capital assets as of the effective date of the Merger. This discussion does not address all aspects of federal income taxation that may be relevant to particular stockholders in light of their personal circumstances, such as holders whose stock was acquired pursuant to the exercise of an employee stock option or otherwise as compensation, and to stockholders who are subject to special treatment under the federal income tax laws (for example, financial institutions, insurance companies, tax-exempt organizations, broker-dealers, and foreign persons). Further, it does not discuss any aspects of state, local, foreign or other tax law. The obligation of Transcisco to consummate the Merger is conditioned upon the receipt by Transcisco of an opinion from Skadden, Arps, Slate, Meagher & Flom, substantially to the effect that, on the basis of facts, representations and assumptions at the Effective Time set forth in such opinion, the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and Transcisco, Trinity and Trinity Y will each be a "party to a reorganization" within the meaning of Section 368(b) of the Code and, accordingly, (i) no gain or loss will be recognized by Transcisco, Trinity or Trinity Y by reason of the Merger; (ii) a stockholder who receives, pursuant to the Merger, Trinity Common Stock in exchange for Transcisco Common Stock will not recognize gain or loss upon such exchange (except to the extent cash is received in lieu of fractional shares); (iii) the aggregate tax basis of the Trinity Common Stock received by the stockholder will be the same as the aggregate tax basis of the Transcisco Common Stock surrendered in exchange therefor pursuant to the Merger (adjusted with respect to fractional shares); (iv) the holding period of the Trinity Common Stock will include the holding period of the Transcisco Common Stock surrendered in exchange therefor pursuant to the Merger; and (v) a stockholder who receives cash in lieu of fractional shares will be treated as having received such fractional shares pursuant to the Merger and then as having exchanged such fractional shares for cash in a redemption by Trinity, and the amount of any capital gain or loss attributable to such deemed redemption of fractional shares will be equal to the difference between the cash received in lieu of fractional shares and the ratable portion of the tax basis of the Transcisco Common Stock surrendered that is allocated to such fractional shares. Transcisco will not waive the condition requiring the receipt of such an opinion from its counsel. See "--The Merger Agreement--Conditions to the Merger." 39 48 EACH STOCKHOLDER IS ENCOURAGED TO CONSULT HIS OR HER OWN TAX ADVISORS AS TO PARTICULAR FACTS AND CIRCUMSTANCES THAT MAY BE UNIQUE TO SUCH STOCKHOLDER AND ALSO AS TO ANY ESTATE, GIFT, STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES ARISING OUT OF THE MERGER. RESTRICTIONS ON SALES OF SHARES BY AFFILIATES The shares of Trinity Common Stock issuable in connection with the Merger have been registered under the Securities Act. Such shares will be freely transferable under the Securities Act, except for shares issued to any person who may be deemed to be an affiliate, as such term is defined under the Securities Act for purposes of Rule 145 (an "Affiliate"), of Transcisco or Trinity at the time of the Meeting. Affiliates may not sell their shares of Trinity Common Stock acquired in connection with the Merger except pursuant to (i) an effective Registration Statement under the Securities Act covering such shares, (ii) the conditions contemplated by paragraph (d) of Rule 145, or (iii) any other applicable exemption from the registration requirements of the Securities Act. Persons who may be deemed to be Affiliates of Transcisco or Trinity generally include individuals or entities that may be deemed to control, be controlled by or be under common control with Transcisco or Trinity, and may include officers, directors and principal stockholders of Transcisco or Trinity. STOCK EXCHANGE LISTING The obligations of the parties to the Merger Agreement to consummate the Merger are subject to the shares of Trinity Common Stock to be issued in connection with the Merger being authorized for listing on the NYSE. No assurance can be given that such shares will in fact be so listed. See "--The Merger Agreement--Conditions to the Merger." DISSENTERS' RIGHTS Under the DCGL, holders of Transcisco Common Stock do not have dissenters' rights in connection with the Merger. See "The Meeting." DESCRIPTION OF TRINITY CAPITAL STOCK GENERAL The authorized capital stock of Trinity consists of 100,000,000 shares of Trinity Common Stock and 1,500,000 shares of preferred stock, par value $1.00 per share (the "Trinity Preferred Stock"). As of July 15, 1996, 41,625,217 shares of Trinity Common Stock and no shares of shares of Trinity Preferred Stock were issued and outstanding. The following summaries of the terms of Trinity Common Stock and Trinity Preferred Stock do not purport to be complete and are qualified in their entirety by reference to the Trinity Certificate of Incorporation, the Trinity Bylaws, and the DGCL. Shares of Trinity Common Stock are fully-paid and nonassessable. The holders of Trinity Common Stock have one vote per share with respect to all matters submitted to a vote of the Trinity stockholders. However, they do not have any cumulative voting, preemptive, or redemption rights. Trinity Common Stock is listed and traded on the NYSE under the symbol "TRN." For a discussion of the material differences between the rights of holders of Transcisco Common Stock and the rights of holders of Trinity Common Stock, see "COMPARISON OF STOCKHOLDER RIGHTS." TRINITY COMMON STOCK Subject to the prior rights and preferences of holders of Trinity Preferred Stock, holders of Trinity Common Stock are entitled to receive dividends when, as, and if declared by the Trinity Board out of any funds legally available therefor. In the event of any liquidation, dissolution, or winding up of the affairs of Trinity, the holders of Trinity Common Stock will be entitled to share pro rata in the assets, if any, of Trinity after payment has been made in full to the holders of Trinity Preferred Stock. 40 49 TRINITY PREFERRED STOCK The Trinity Certificate of Incorporation authorizes the Trinity Board to issue, from time to time and without further stockholder action, one or more series of Trinity Preferred Stock and to fix the relative rights and preferences of the shares, including dividend rights, liquidation preferences, redemption rights, and conversion privileges. Because of its broad discretion with respect to the creation and issuance of new series of Trinity Preferred Stock without stockholder approval, the Trinity Board could adversely affect the voting power of the holders of Trinity Common Stock. The holders of Trinity Preferred Stock have the same voting rights as the holders of Trinity Common Stock. So long as any shares of Trinity Preferred Stock are outstanding, in no event shall any dividend be paid or declared unless all dividends on the Trinity Preferred Stock for all past dividend periods shall have been paid or declared and a sum sufficient for the payment thereof set apart and the full dividend thereon for the then current dividend period shall have been paid or declared. In the event of any liquidation, dissolution, or winding-up of the affairs of Trinity, the holders of Trinity Preferred Stock are entitled to be paid before any distribution or payment is made to the holders of Trinity Common Stock. DELAWARE ANTI-TAKEOVER LAW AND CERTAIN ANTI-TAKEOVER PROVISIONS Certain provisions of the DGCL, the Trinity Certificate of Incorporation, the Trinity Bylaws, and the Trinity Rights Plans may have the effect of delaying, making more difficult, or preventing a change in control or acquisition of Trinity by means of a tender offer, a proxy contest, or otherwise. These provisions, as summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of Trinity first to negotiate with Trinity. Trinity believes that the benefits derived from requiring the proponent of an unfriendly or unsolicited proposal to negotiate with Trinity outweigh the disadvantages of discouraging such proposals because, among other things, negotiations with respect to such proposals could result in an improvement of their terms. TRINITY RIGHTS PLAN Pursuant to the Trinity Rights Plan, Trinity paid a dividend distribution of one purchase right for each outstanding share of Trinity Common Stock. Each right entitles the stockholder to purchase from Trinity one one- hundredth of a share of Series A Junior Participating Preferred Stock at an exercise price of $175. The rights are not exercisable or detachable from Trinity Common Stock until ten business days after a person acquires beneficial ownership of 20% or more of Trinity Common Stock or unless a person or group commences a tender or exchange offer upon consummation of which such person or group would beneficially own 20% or more of Trinity Common Stock. If any person becomes a beneficial owner of 20% or more of Trinity Common Stock other than pursuant to an offer for all shares determined by certain directors to be fair to Trinity stockholders and otherwise in the best interests of both Trinity and its stockholders, each right not owned by that person or related parties enables its holder to purchase, at the right's then current exercise price, shares of Trinity Common Stock having a calculated value of twice the right's exercise price. The rights, which are subject to adjustment, may be redeemed by Trinity at a price of one cent per right at any time prior to their expiration on April 27, 1999 or the time at which they become exercisable. TRINITY PREFERRED STOCK As described above, the Trinity Board is authorized to provide for the issuance of shares of Trinity Preferred Stock in one or more series and to fix the relative rights, and preferences of the shares, including dividend rights, liquidation preferences, and redemption rights. Although the Trinity Board has no present intention of doing so, it could issue a series of Trinity Preferred Stock that could, depending on its terms, either impede or facilitate the consummation of a merger, tender offer, or other takeover attempt. ADVANCE NOTICE OF DIRECTOR NOMINATIONS The Trinity Bylaws provide that nominations of persons for election as directors can be made only at an annual meeting (i) by or at the direction of the Trinity Board, (ii) by a nominating committee or person 41 50 appointed by the Trinity Board, or (iii) by a Trinity stockholder entitled to vote for the election of directors at the meeting who has complied with the advance notice procedures set forth in the Trinity Bylaws. DELAWARE ANTI-TAKEOVER STATUTE Section 203 of the DGCL prohibits business combination transactions involving a Delaware corporation and an "interested stockholder" (defined generally as any person that directly or indirectly beneficially owns 15 percent or more of the outstanding voting stock of the subject corporation) for three years following the date such person became an interested stockholder, unless certain requirements are met or certain exceptions apply, including that prior to such date the board of directors of the subject corporation approved either the business combination or the transactions that resulted in such person becoming an interested stockholder. TRANSFER AGENT AND REGISTRAR The Bank of New York is the transfer agent, registrar, and dividend disbursing agent for Trinity Common Stock. Its address is 10 Barclay Street, New York, New York 10286, and its telephone number is (800) 524-4458. DESCRIPTION OF TRANSCISCO CAPITAL STOCK GENERAL The following summaries of the terms of Transcisco Common Stock and Transcisco Preferred Stock do not purport to be complete and are qualified in their entirety by reference to the Transcisco Certificate of Incorporation, the Transcisco Bylaws, and the DGCL. For information as to how to obtain the Transcisco Certificate of Incorporation and the Transcisco Bylaws, see "AVAILABLE INFORMATION." Shares of Transcisco Common Stock are fully-paid and nonassessable. The holders of Transcisco Common Stock do not have any cumulative voting, pre-emptive, subscription, redemption or sinking fund rights. Transcisco Common Stock is listed and traded on the AMEX under the symbol "TNI." For a discussion of the material differences between the rights of holders of Transcisco Common Stock and the rights of holders of Trinity Common Stock, see "COMPARISON OF STOCKHOLDER RIGHTS." The authorized capital stock of Transcisco presently consists of 15,000,000 shares of Transcisco Common Stock and 1,000,000 shares of preferred stock, par value $0.01 per share (the "Transcisco Preferred Stock"). There were 5,412,725 shares of Transcisco Common Stock outstanding as of the Record Date. No shares of Transcisco Preferred Stock were outstanding as of the Record Date. TRANSCISCO COMMON STOCK Subject to preferences that may be applicable to any then outstanding Transcisco Preferred Stock, holders of Transcisco Common Stock are entitled to receive ratably such cash dividends when, if, and as may be declared by the Transcisco Board out of funds legally available therefor. In the event of any liquidation, dissolution or winding-up of Transcisco, the holders of Transcisco Common Stock will be entitled to share pro rata in the net assets of Transcisco remaining, if any, after payment or provision for payment in respect of the debts and other liabilities of Transcisco and subject to liquidation preferences that may be applicable to any then outstanding Transcisco Preferred Stock. TRANSCISCO PREFERRED STOCK The Transcisco Certificate of Incorporation authorizes the Transcisco Board to issue, from time to time and without further stockholder action, one or more series of Transcisco Preferred Stock and to fix the relative rights and preferences of the shares, including voting powers, dividend rights, liquidation preferences, redemption rights, and conversion privileges. Because of its broad discretion with respect to the creation and issuance of new series of Transcisco Preferred Stock without stockholder approval, the Transcisco Board could adversely affect the voting power of the holders of Transcisco Common Stock. Except with respect to the relative rights, preferences and limitations that may be fixed by the Transcisco Board, pursuant to the Transcisco Certificate of Incorporation, all shares of Transcisco Preferred Stock are to be identical. 42 51 Dividends on Transcisco Preferred Stock are to be declared and paid or set apart for payment before any dividends can be declared and paid or set apart for payment on Transcisco Common Stock with respect to the same period. Dividends on Transcisco Preferred Stock are cumulative only if and to the extent determined by the resolution of the Transcisco Board creating such preferred stock. In the event of any liquidation, dissolution, or winding-up of the affairs of Transcisco, the holders of Transcisco Preferred Stock shall have preference and priority over the holders of Transcisco Common Stock for the payment of the amount to which each outstanding series of Transcisco Preferred Stock may be entitled in accordance with the terms and rights thereof and each holder of Transcisco Preferred Stock would be entitled to be paid in full such amount, or have a sum sufficient for the payment in full set aside before any payments can be made to the holders of Transcisco Common Stock. DELAWARE ANTI-TAKEOVER LAW AND CERTAIN ANTI-TAKEOVER PROVISIONS Certain provisions of the DGCL, the Transcisco Certificate of Incorporation, the Transcisco Bylaws, and the Transcisco Stockholder Rights Plans (as defined herein) may have the effect of delaying, making more difficult or preventing a change in control or acquisition of Transcisco by means of a tender offer, a proxy contest, or otherwise. These provisions, as summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of Transcisco first to negotiate with Transcisco. Transcisco believes that the benefits derived from requiring the proponent of an unfriendly or unsolicited proposal to negotiate with Transcisco outweigh the disadvantages of discouraging such proposals because, among other things, negotiations with respect to such proposals could result in an improvement of their terms. TRANSCISCO STOCKHOLDER RIGHTS PLAN On September 5, 1995, Transcisco adopted a stockholder rights plan (the "Transcisco Rights Plan"), pursuant to which each holder of Transcisco Common Stock was issued a right (the "Transcisco Rights") to purchase Series A Junior Preferred Participating Stock (the "Transcisco Series A Preferred") at an exercise price of $12.00 per share. In accordance with the Rights Agreement, dated as of September 5, 1995 (the "Transcisco Rights Agreement"), by and among Transcisco and First Interstate Bank of California (now known as Wells Fargo National Bank), as Rights Agent, following public announcement that a person or group has acquired Transcisco, or is making a tender or exchange offer for, 5% of more of the outstanding shares of Transcisco Common Stock, the Transcisco Rights would become exercisable to purchase the number of shares of Transcisco Series A Preferred having a value equal to ten times the exercise price. In the event that Transcisco engaged in a merger or business combination with the acquiror or tender offeror, the Transcisco Rights would become exercisable for shares of common stock in the acquiring entity having a value equal to ten times the exercise price of the Transcisco Rights. On June 17, 1996, prior to the execution of the Merger Agreement, the Transcisco Rights Agreement was amended to provide, among other things, that the Merger would not be deemed a "triggering event" as such term is defined in the Transcisco Rights Agreement. Accordingly, no Transcisco Rights are exercisable as a result of the Merger and, following the consummation of the Merger, the Transcisco Rights will expire. TRANSCISCO PREFERRED STOCK As described above, the Transcisco Board is authorized to provide for the issuance of shares of Transcisco Preferred Stock in one or more series and to fix the relative rights, and preferences of the shares, including voting powers, dividend rights, liquidation preferences, redemption rights, and conversion privileges. Although the Transcisco Board has no present intention of doing so, it could issue a series of Transcisco Preferred Stock that could, depending on its terms, either impede or facilitate the consummation of a merger, tender offer or other takeover attempt. CLASSIFIED BOARD OF DIRECTORS The Transcisco Bylaws provide for the classification of the Transcisco Board into three classes serving staggered three-year terms. ADVANCE NOTICE OF DIRECTOR NOMINATIONS The Transcisco Bylaws provide that with respect to annual meetings of stockholders, nominations of persons for election to the Transcisco Board may be made only by a nominating committee appointed by the 43 52 Transcisco Board or by a stockholder entitled to vote in the election of directors generally, who has complied with the advance notice procedures set forth in the Transcisco Bylaws. DELAWARE ANTI-TAKEOVER STATUTE Section 203 of the DGCL prohibits business combination transactions involving a Delaware corporation (such as Transcisco) and an "interested stockholder" (defined generally as any person that directly or indirectly beneficially owns 15% or more of the outstanding voting stock of the subject corporation) for three years following the date such person became an interested stockholder, unless special requirements are met or certain exceptions apply, including that prior to such date the board of directors of the subject corporation approved either the business combination or the transactions which resulted in such person becoming an interested stockholder. The Transcisco Board has approved the Merger Agreement for purposes of Section 203, and, accordingly, the provisions of Section 203 are not applicable to the Merger. TRANSFER AGENT AND REGISTRAR Wells Fargo National Bank is the transfer agent and registrar for Transcisco Common Stock. Its address is 345 California Street, Eighth Floor, San Francisco, California, 94104, and its telephone number is (415) 773-7802. COMPARISON OF STOCKHOLDER RIGHTS Transcisco and Trinity are both organized under the laws of the State of Delaware. Any differences, therefore, between the rights of the Transcisco stockholders and the rights of the Trinity stockholders arise solely from differences between each corporation's certificate of incorporation and bylaws. The following summary sets forth certain material differences between the rights of the Transcisco stockholders and the rights of the Trinity stockholders. The summary does not purport to be a complete description of the differences between the rights of the Transcisco stockholders and the rights of the Trinity stockholders and is qualified in its entirety by reference to Transcisco's Certificate of Incorporation, Bylaws, and Rights Plan and to Trinity's Certificate of Incorporation, Bylaws, and Rights Plan. The Trinity Certificate of Incorporation and the Trinity Bylaws are filed as exhibits to the Registration Statement of which this Proxy Statement/Prospectus forms a part. AUTHORIZED CAPITAL STOCK The authorized capital stock of Transcisco consists of 15,000,000 shares of Transcisco Common Stock and 1,000,000 shares of Transcisco Preferred Stock. As of July 15, 1996, there were 5,412,725 shares of Transcisco Common Stock and no shares of Transcisco Preferred Stock issued and outstanding. The authorized capital stock of Trinity consists of 100,000,000 shares of Trinity Common Stock and 1,500,000 shares of Trinity Preferred Stock. As of July 15, 1996, there were 41,625,217 shares of Trinity Common Stock and no shares of Trinity Preferred Stock issued and outstanding. VOTING RIGHTS The holders of Transcisco Common Stock have one vote per share with respect to all matters submitted to a vote of the Transcisco stockholders. Likewise, the holders of Trinity Common Stock have one vote per share with respect to all matters submitted to a vote of the Trinity stockholders. AMENDMENTS TO CHARTER AND BYLAWS Any alteration, amendment, or repeal of the Transcisco Certificate of Incorporation must be approved by the affirmative vote of the holders of 66-2/3% of the outstanding shares of Transcisco Common Stock. Any alteration, amendment, or repeal of the Transcisco Bylaws must be approved by either the affirmative vote of the holders of 66-2/3% of the outstanding shares of Transcisco Common Stock or a majority of the Transcisco Board, including a majority of the independent directors on the Transcisco Board. Neither the Trinity Certificate of Incorporation nor the Trinity Bylaws specifies the approvals necessary for amending Trinity's Certificate of Incorporation. Therefore, under the DGCL, any amendment to the Trinity Certificate of Incorporation must be approved by a majority of the outstanding shares of Trinity Common Stock. Any alteration, amendment or repeal of the Trinity Bylaws must be approved by the affirmative vote of a majority of the Trinity Board or by a unanimous written consent of the Trinity Board. 44 53 PREEMPTIVE RIGHTS; CUMULATIVE VOTING Neither the Transcisco stockholders nor the Trinity stockholders have preemptive rights with respect to unissued shares of capital stock. Moreover, cumulative voting is not authorized under either the Transcisco Certificate of Incorporation or the Trinity Certificate of Incorporation. BOARD OF DIRECTORS The Transcisco Board is divided into three classes and consists of five directors who serve for three-year terms. The number of directors on the Transcisco Board is subject to change by action of the Transcisco Board but cannot be less than five nor more than nine. The Trinity Board is not classified and consists of nine directors who serve for one-year terms. The number of directors on the Trinity Board is subject to change by action of the Trinity Board but cannot be less than five nor more than twelve. REMOVAL OF DIRECTORS The Transcisco Certificate of Incorporation does not specify the circumstances under which a director may be removed from the Transcisco Board. Therefore, under the DGCL, directors of Transcisco may be removed only for cause and then only by the holders majority of the outstanding shares of Transcisco Common Stock. Under the Trinity Bylaws, any director may be removed at any time, with or without cause, by the holders of a majority of the shares entitled to vote at any meeting of stockholders called for the purpose of removing any such director. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES Under the Transcisco Bylaws, vacancies and newly-created directorships are required to be filled by the Transcisco Board acting through a nominating committee. Under the Trinity Bylaws, any vacancy occurring on the Trinity Board may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum; newly-created directorships are required to be filled by the affirmative vote of a majority of the directors though less than a quorum. NOMINATION OF DIRECTORS The Transcisco Bylaws provide that nominations for the election of directors shall be made by a nominating committee appointed by the Transcisco Board or by a stockholder entitled to vote in the election of directors generally who delivers written notice of such nomination to the secretary of Transcisco not later than (i) with respect to an election to be held at an annual meeting, sixty days in advance of the proxy statement released to stockholders in connection with the previous year's annual meeting and (ii) with respect to an election to be held at a special meeting, at least fifteen days before the date that the proxy statement in connection with such meeting is to be mailed. The proposing stockholder's notice shall set forth, among other things, (i) the name and address of the proposing stockholder and of the person to be nominated and (ii) a representation that the stockholder is a holder of record and intends to appear in person or by proxy at the meeting to nominate the person specified in the notice. Under the Trinity Bylaws, nominations of persons for election as directors of the corporation must be made at an annual meeting (i) by or at the direction of the Trinity Board, (ii) by a nominating committee or person appointed by the Trinity Board, or (iii) by a Trinity stockholder entitled to vote for the election of directors at the meeting who delivers notice of such nomination to the secretary of Trinity not less than fifty days nor more than seventy-five days before the date of the meeting, provided, however, that in the event that less than sixty-five days' notice of the date of the meeting is given, notice by the stockholder to be timely must be received not later than the close of business on the fifteenth day following the day on which such notice of the date of the meeting was made. STOCKHOLDER PROPOSALS The Transcisco Bylaws contain no advance notice requirements relating to stockholder proposals for business to be conducted at a stockholders' meeting. Under the Trinity Bylaws, in order for a Trinity stockholder to have a proposal considered at an annual meeting of stockholders, the stockholder must deliver notice of such proposal to the secretary of Trinity not less than fifty days nor more than seventy-five days before the date of the meeting, provided, however, that in the event that less than sixty-five days' notice of the date of the meeting is given, notice by the stockholder to be timely must be received not later than the close of business on the fifteenth day following the day on which such notice of the date of the meeting was made. The proposing stockholder's notice shall set forth with respect to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual 45 54 meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the corporation that are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. SPECIAL MEETINGS OF THE STOCKHOLDERS Under the Transcisco Bylaws, a special meeting of the stockholders may be called by either (i) the Transcisco Board or (ii) any two of the following individuals: the chairman, the president, any vice president, and the secretary. Under the Trinity Bylaws, a special meeting of the stockholders may be called by the chief executive officer or the Trinity Board. STOCKHOLDER ACTION BY WRITTEN CONSENT Under the Transcisco Bylaws, no action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting. The Trinity Certificate of Incorporation does not state whether stockholder action may be taken without a meeting. Therefore, under the DGCL, any action that may be taken at a meeting of Trinity stockholders may be taken without a meeting of stockholders if a written consent setting forth the action to be taken is signed by the holders of not less than the minimum number of votes that would be necessary to take such action at a meeting of stockholders. LIMITATION ON DIRECTOR'S LIABILITY Both the Transcisco Certificate of Incorporation and the Trinity Certificate of Incorporation provide that a director has no liability for breach of a fiduciary duty, except for liability (i) for any breach of the duty of loyalty, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law, (iii) for any transaction from which the director derived an improper personal benefit, or (iv) under Section 174 of the DGCL, which concerns unlawful dividend payments and unlawful stock purchases and redemptions. INDEMNIFICATION The Transcisco Bylaws provide that Transcisco will indemnify to the fullest extent authorized by Delaware law any person who was or is made a party to, or is threatened to be made a party to, any action, suit, or proceeding (whether civil, criminal, administrative, or investigative) by reason of the fact that he or she is or was a director, officer, or employee of Transcisco or is or was serving at the request of Transcisco as a director, officer, or employee of another corporation, whether the basis of such action, suit, or proceeding is alleged action in an official capacity as a director, officer, or employee or in any other capacity while serving as a director, officer, or employee, against all expenses, liabilities, and losses reasonably incurred or suffered by such person. Under the DGCL, Transcisco is permitted to indemnify a person only if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Transcisco, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The Trinity Bylaws provide that Trinity will indemnify any person who was or is a party to, or is threatened to be made a party to, any action, suit, or proceeding (whether civil, criminal, administrative, or investigative) by reason of the fact that he or she is or was a director, officer, employee, or agent of Trinity or is or was serving at the request of Trinity as a director, officer, employee, or agent of another corporation, or by reason of any action alleged to have been taken or omitted in such capacity, against all costs, charges, expenses, judgments, and amounts paid in settlement actually and reasonably incurred by such person or on such person's behalf if such person acted in good faith and in a manner reasonably believed by such person to be in or not opposed to the best interests of Trinity, and with respect to any criminal action or proceeding, had no reasonable cause to believe that the conduct was unlawful. ELECTION OF DIRECTORS NOMINEES FOR ELECTION At the Meeting, the stockholders of Transcisco will elect two Class I directors to hold office until the consummation of the Merger, or if the Merger is not consummated, until such directors' successors are duly elected and qualified. The Transcisco Board is divided into three classes serving staggered three-year terms; the term of one class of directors expires each year. The term of the Class I directors expires at the Meeting. The nominees of the Transcisco Board for election as Class I directors are Brian P. Friedman and Ottokarl 46 55 F. Finsterwalder, who are currently Class I directors. The election of these two directors will require the affirmative vote of the holders of a plurality of the shares of Transcisco Common Stock present at the Meeting, in person or by proxy, and entitled to vote. Unless contrary instructions are given, the shares represented by the enclosed proxy will be voted FOR the election of Brian P. Friedman and Ottokarl F. Finsterwalder. If any nominee at the time of election is unable or unwilling to serve or is otherwise unavailable for election, and as a result, another person is nominated, the person named in the enclosed proxy or their substitutes will have discretion and authority to vote for or refrain from voting for the other nominees in accordance with their best judgment. It is not expected that any nominee will be unable or will decline to serve. The Merger Agreement provides that immediately after the Effective Time, the Board of Directors of Transcisco, the surviving corporation in the Merger, will consist solely of the directors of Trinity Y immediately prior to the Effective Time. BACKGROUND OF NOMINEES Brian P. Friedman was appointed to the Transcisco Board on August 31, 1995. Mr. Friedman is President of Furman Selz Investments LLC and has been an Executive Vice President of Furman Selz LLC for more than the past five years. Mr. Friedman serves on the board of directors of the Coast Distribution System and a number of private companies. Pursuant to a Note and Warrant Purchase Agreement between Transcisco, certain of its subsidiaries, Furman Selz SBIC, L.P. (an affiliate of Furman Selz Investments LLC and Furman Selz LLC) and James Dowling, dated as of August 1, 1995 (the "Note and Warrant Purchase Agreement"), Furman Selz SBIC, L.P. has the right to appoint one director to the Transcisco Board during such time as amounts remain outstanding under the Note and Warrant Purchase Agreement. Mr. Friedman has been nominated pursuant to this provision. Ottokarl F. Finsterwalder was elected to the Transcisco Board in September 1990. Mr. Finsterwalder was an attorney with Shearman & Sterling until 1970. From 1970-1975, he was a director of Hill, Samuel & Co. Ltd., a merchant bank located in London. Since 1975, Mr. Finsterwalder has served as executive vice president in charge of international operations for Creditanstalt-Bankverein in Vienna. In July 1985, he was appointed to the board of managing directors of Creditanstalt-Bankverein. Mr. Finsterwalder is also a director of several organizations, including, Banco Interfinanzas S.A., Buenos Aires, Eckes AG Frankfurt, Global Bond Plus Ltd., London, Banco BBA-Creditanstalt S.A., Sao Paulo, and Energy International, London. BOARD MEETINGS AND COMMITTEES The Transcisco Board held eight meetings during fiscal 1996. The Audit Committee consists of Messrs. Greenwood and Finsterwalder. The Audit Committee held three meetings during fiscal 1996. The Audit Committee reviews the financial statements and the internal financial reporting system and controls of Transcisco with Transcisco's management and independent auditors, recommends resolutions for any dispute between Transcisco's management and its auditors, and reviews other matters relating to the relationship of Transcisco with its auditors. The Compensation Committee consists of Messrs. Armstrong and Finsterwalder. The Compensation Committee held three meetings during fiscal 1996. The Compensation Committee makes recommendations to the Transcisco Board regarding Transcisco's executive compensation policies. The Independent Committee, consisting of Messrs. Friedman and Greenwood, was formed to administer the Amended and Restated (1994) Stock Option Plan as well as special compensation matters for directors. The Independent Committee held one meeting in fiscal 1996, during which it granted 25,000 options to Mr. Finsterwalder in recognition of his efforts regarding a $42 million financing package for SFAT, a Russian rail transportation company in which Transcisco holds a 23.5% ownership interest. The Nominating Committee consists of Messrs. Armstrong and Finsterwalder. This committee reviews potential candidates for nomination to the board. The Nominating Committee held two meetings during fiscal 1996. The Nominating Committee will consider nominees to the Board of Directors recommended by security holders upon submission of the names of such nominees and such other information as requested by the Nominating Committee in accordance with the Transcisco Bylaws. 47 56 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS The Transcisco Board has selected Ernst & Young LLP to act as independent auditors for Transcisco and to audit the financial statements of Transcisco for the fiscal year ending March 31, 1997. Ernst & Young LLP has been Transcisco's independent auditors for more than ten years and has advised Transcisco that Ernst & Young LLP does not have any direct or indirect financial interest in Transcisco or any of its subsidiaries, nor has such firm had any such interest in connection with Transcisco during the past five years other than in its capacity as Transcisco's auditors. A representative of Ernst and Young LLP is expected to be present at the Meeting and will have an opportunity to make a statement if he desires to do so and will be available to respond to appropriate questions from Transcisco's stockholders. The Transcisco Board recommends that Transcisco's stockholders vote FOR ratification of the selection of Ernst & Young LLP to serve as Transcisco's independent auditors for the fiscal year ending March 31, 1997. APPROVAL TO INCREASE THE NUMBER OF SHARES ISSUABLE UNDER THE AMENDED AND RESTATED (1994) STOCK OPTION PLAN GENERAL Transcisco's Amended and Restated (1994) Stock Option Plan was adopted in its original form in 1983, and was subsequently amended by stockholder approval in 1989 and 1995. The Transcisco Board has determined that it is advisable to amend and restate Transcisco's Amended and Restated (1994) Stock Option Plan such that it (i) provides for the issuance of up to an additional 1,000,000 shares of Transcisco Common Stock if the Merger is not approved at the Meeting and up to an additional 220,000 shares in the event that the Merger is approved at the Meeting, and (ii) increases the number of options issuable to any single employee in any 36-month period from 400,000 to 450,000. As amended and restated, the name of Transcisco's Amended and Restated (1994) Stock Option Plan will be changed to the Amended and Restated (1996) Stock Option Plan. As of July 15, 1996, the market value of Transcisco Common Stock subject to options under the Amended and Restated (1994) Stock Option Plan, as measured by the closing price of Transcisco Common Stock reported by the AMEX Composite Tape, was $5.750 per share. The proposed increase in the number of shares of Transcisco Common Stock issuable under the Amended and Restated (1994) Stock Option Plan is designed to attract, retain and reward qualified employees, and to provide incentives to such employees by offering them an opportunity to obtain a proprietary interest in Transcisco. The Amended and Restated (1994) Stock Option Plan provides for grants of options to purchase shares of Transcisco Common Stock. ADMINISTRATION OF THE PLAN The Amended and Restated (1994) Stock Option Plan, as amended, is administered by an independent committee of the Transcisco Board (the "Independent Committee"), which consists of two non-employee directors appointed (and removable) from time to time by the Transcisco Board. No person is eligible to serve on the Independent Committee unless he is then a "disinterested person" within the meaning of paragraph (d)(3) of Rule 16b-3 under the Exchange Act ("Rule 16b-3"). Options may not be granted pursuant to the Amended and Restated (1994) Stock Option Plan, as amended, to any member of the Independent Committee during the term of his membership on the Independent Committee. The Independent Committee is responsible for deciding option awards issued under the Amended and Restated (1994) Stock Option Plan and adopting such rules for the administration and interpretation of the Amended and Restated (1994) Stock Option Plan as are consistent therewith and may interpret, amend, or revoke any such rules. The Transcisco Board may at any time exercise any and all rights and duties of the Independent Committee under the Amended and Restated (1994) Stock Option Plan except with respect to matters which under Rule 16b-3 or Section 162(m) (or any regulations or rules issued thereunder) are required to be determined in the absolute discretion of the Independent Committee. Any employee of Transcisco, any parent corporation of Transcisco, or any subsidiary is eligible to be granted options under the Amended and Restated (1994) Stock Option Plan. Awards may be granted under the Amended and Restated (1994) Stock Option Plan through December 31, 2004, unless it is earlier terminated by the Transcisco Board. There are approximately 35 employees who currently participate in the Amended and Restated (1994) Stock Option Plan. The Independent Committee has the absolute discretion to determine (i) which employees should be granted awards under the Amended and Restated (1994) Stock 48 57 Option Plan, (ii) subject to the limits set forth in the 1994 Stock Option Plan, the number of shares to be subject to such awards, and whether options are to be incentive stock options or nonstatutory options; and (iii) the terms and conditions of such awards. Subject to Section 162(m) of the Code and Rule 16b-3, the Independent Committee may delegate certain powers relating to the granting of awards as it deems appropriate to executive officers of Transcisco. As amended, the Amended and Restated (1994) Stock Option Plan prohibits the issuance thereunder of options to purchase more than 450,000 shares of Transcisco to any single employee in a 36-month period. OPTIONS The Amended and Restated (1994) Stock Option Plan allows for the grant of incentive and nonstatutory options. Options granted before termination of the Amended and Restated (1994) Stock Option Plan will remain outstanding in accordance with their respective terms after termination of the Amended and Restated (1994) Stock Option Plan. Because grants under the Amended and Restated (1994) Stock Option Plan are made in the sole discretion of the Independent Committee, except as set forth below, it is not possible to determine the number of options that will be granted this year or that would have been granted last year had the Amended and Restated (1994) Stock Option Plan then been amended and restated to increase the number of shares of Transcisco Common Stock issuable thereunder. The following table shows options previously granted that will be deemed granted under the Amended and Restated (1994) Stock Option Plan if the amendment pursuant to this proposal is adopted.
Name and Position Dollar Value No. of Options - ----------------- ------------ -------------- Non-Executive Director Group $0 6,000 Non-Executive Employee Group $0 65,000
Options under the Amended and Restated (1994) Stock Option Plan are exercisable in installments in such amounts (which may be cumulative) as the Independent Committee shall provide in the terms of each stock option agreement. The exercisability of options may be accelerated in the event of a change of control of Transcisco. Subject to the following, the expiration date, maximum number of shares purchasable, conditions to exercise and other provisions of individual stock option agreements are established by the Independent Committee at the time of grant. The term of any incentive stock option may not exceed ten years. No portion of an option which is unexercisable upon the termination of employment for any reason may thereafter become exercisable. Generally, options which are exercisable at the time an optionee's employment with Transcisco or its subsidiaries is terminated expire ninety days following such termination. However, options may be exercised until the expiration of one year after termination of employment due to an optionee's death, disability or retirement. The exercise prices of options are fixed by the Independent Committee, but with respect to incentive stock options may not be less than 100% of the fair market value of Transcisco Common Stock on the date of grant. To exercise an option, the optionee must deliver to Transcisco a written notice of exercise and full payment for the shares. The consideration to be paid for the shares of Transcisco Common Stock to be issued upon exercise of an option, including the method of payment, shall be determined by the Independent Committee (and, in the case of an Incentive Stock option, shall be determined at the time of grant) and may consist entirely of any of the following: (i) cash, (ii) certified or cashier's check, (iii) promissory note, (iv) subject to certain limitations, other shares of Transcisco Common Stock. Options may be transferred only by will or by the laws of descent and distribution and during a participant's lifetime are exercisable only by the participant. ADJUSTMENTS UPON CHANGE IN CAPITALIZATION In the event that there is any change in the number of outstanding shares of Transcisco Common Stock or of the capital structure of Transcisco by reason of a recapitalization, reclassification, reorganization, stock split, reverse stock split, combination of shares, stock dividend or similar transaction, the number of shares available under the Amended and Restated (1994) Stock Option Plan decreased proportionately, as the case may be, and the number of shares of Transcisco Common Stock deliverable in connection with any option granted will be increased or decreased proportionately, as the case may be, without change in the aggregate 49 58 purchase price (where applicable). If Transcisco is merged or consolidated with another corporation and Transcisco is not the surviving corporation, or in case the property or stock of Transcisco is acquired by another corporation, or upon separation, reorganization, or liquidation of Transcisco, the Transcisco Board or the board of directors of any corporation assuming the obligations of Transcisco hereunder, will, as to outstanding options, either (a) make appropriate provisions for the protection of any such outstanding options by the assumption or substitution on an equitable basis of appropriate stock of Transcisco or of the merged, consolidated, or otherwise reorganized corporation which will be issuable in respect to the shares of Transcisco Common Stock, provided that in the case of Incentive Stock Options, such assumption or substitution will comply with Section 424(a) of the Code, or (b) upon written notice to the participant, provide that the option must be exercised within thirty (30) days of the date of such notice or it will be terminated. In any such case, the Independent Committee may, in its discretion, advance the lapse of vesting periods, waiting periods, and exercise dates. U.S. FEDERAL INCOME TAX CONSEQUENCES The following discussion is a general summary of the material U.S. Federal income tax consequences to U.S. participants in the Amended and Restated (1994) Stock Option Plan. The discussion is based on the Code, regulations thereunder and rulings and decisions now in effect, all of which are subject to change. The summary does not discuss all aspects of federal income taxation that may be relevant to a particular participant in light of such participant's personal investment circumstances. NONSTATUTORY STOCK OPTIONS Holders of nonstatutory options do not realize income as a result of the grant of the options, but normally realize ordinary income upon exercise of the option to the extent that the fair market value of the shares on the date of exercise of the option exceed the aggregate option exercise price paid. Subject to Section 162(m) of the Code, Transcisco (or other employer corporation) is entitled to a deduction in the same amount at the time of exercise of the option. Transcisco (or other employer corporation) is generally required to withhold taxes on the ordinary income realized by an optionee upon the exercise of a nonstatutory option. An optionee's basis for the stock for the purposes of determining the optionee's gain or loss on subsequent disposition of the shares generally will be the fair market value of the stock on the date of exercise of the option. INCENTIVE STOCK OPTIONS Holders of Incentive Stock Options will not recognize taxable income upon either the grant of the option or its exercise; however, generally the amount by which the fair market value of the shares at the time of exercise exceeds the option price will be included in the holder's alternative minimum taxable income upon exercise unless the stock acquired is not transferable or is subject to a substantial risk of forfeiture, in which case no amount is included in alternative minimum taxable income until the stock is transferable or there is no longer a substantial risk of forfeiture. If an incentive stock option is disposed of in the same year it is exercised, and the amount realized is less than the stock's fair market value at the time of exercise, the amount includable in alternative minimum taxable income does not exceed the amount realized on the sale or exchange of the stock, less the taxpayer's basis in such stock. Upon the sale or other taxable disposition of the shares, the holder will recognize the difference between the amount realized and the option exercise price if disposition of the shares takes place after at least (i) two years from the date of grant of the option and (ii) one year from the date of transfer of the shares to the optionee upon exercise. If the shares are sold or otherwise disposed of before the end of the one-year or two-year periods, the difference between the option exercise price and the fair market value of the shares on the date on which the option is exercised will be taxed as ordinary income. The balance of the gain, if any, will be taxable as capital gain. If the shares are disposed of before the expiration of the one-year or two-year periods and the amount realized is less than the fair market value of the shares at the date of exercise, the employee's ordinary income is limited to the amount realized less the option exercise price paid. Subject to Section 162(m) of the Code, Transcisco (or other employer corporation) will be entitled to a tax deduction in regard to an incentive stock option only to the extent the optionee has ordinary income upon sale or other disposition of the shares received upon exercise of the option. The tax consequences resulting from the exercise of an option through delivery of already-owned shares of Transcisco Common Stock are not completely certain. In published rulings, the Internal Revenue Service has taken the position that (i) to the extent an equivalent value of shares is acquired upon such exercise, an optionee will recognize no gain and the optionee's basis in the shares acquired upon such exercise will be equal to the optionee's basis in the surrendered shares, and (ii) that any additional shares acquired 50 59 upon such exercise will be compensation to the optionee taxable under the rules described above (as if no amount had been paid for such shares) and that the optionee's basis in any such additional shares will be their then fair market value. The Transcisco Board recommends that stockholders vote FOR the increase in the number of shares of Transcisco Common Stock issuable under the Amended and Restated (1994) Stock Option Plan. LEGAL MATTERS The legality of the Trinity Common Stock to be issued in the Merger will be passed upon for Trinity by Locke Purnell Rain Harrell (A Professional Corporation), counsel to Trinity. Skadden, Arps, Slate, Meagher & Flom, special counsel to Transcisco, will render an opinion with respect to certain federal income tax consequences of the Merger. See "THE PROPOSED MERGER--Certain Federal Income Tax Consequences of the Merger." EXPERTS The consolidated financial statements of Transcisco and its subsidiaries, appearing in Transcisco's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon incorporated herein by reference elsewhere herein which, as to the fiscal years ended March 31, 1996 and 1995, are based insofar as it relates to data included for SFAT (a Russian joint stock company in which Transcisco has a 23.5% ownership interest), on the reports of KPMG Moscow, Russia, independent auditors whose reports for SFAT's years ended December 31, 1995 and 1994 have been furnished to Ernst & Young LLP. The consolidated financial statements of SFAT for the fiscal years ended December 31, 1995 and 1994, prepared in accordance with International Accounting Standards, were audited by KPMG Moscow, Russia, independent auditors, as set forth in their report thereon incorporated herein by reference. The consolidated financial statements referred to above are incorporated by reference herein in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. Representatives of Ernst & Young LLP are expected to be present at the Meeting, where they will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. The consolidated financial statements and schedule of Trinity and its subsidiaries, appearing in or incorporated by reference in Trinity's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon incorporated by reference elsewhere herein. Such consolidated financial statements and schedule are incorporated by reference herein in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. STOCKHOLDER PROPOSALS Proposals by Transcisco stockholders which such stockholders intend to present at Transcisco's 1997 (which will be held in fiscal year 1997) Annual Meeting of Stockholders (which will not be eligible for presentation if the Merger has been consummated) must be received by Transcisco no later than March 21, 1997 so that they may be considered for inclusion in the proxy statement and form of proxy relating to that meeting. 51 60 ANNEX A [CONFORMED COPY] ================================================================================ AGREEMENT AND PLAN OF MERGER AMONG TRINITY INDUSTRIES, INC., TRINITY Y, INC. AND TRANSCISCO INDUSTRIES, INC. dated as of June 17, 1996 ================================================================================ 61 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 THE MERGER SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2 Conversion of Shares of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.3 Payment and Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.4 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 2 THE SURVIVING CORPORATION SECTION 2.1 Name and Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.2 Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.3 Governmental Authorization; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.4 Non-contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.6 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.8 Company SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.10 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3.14 Permits; Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 3.15 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 3.16 Patents, Trademarks, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 3.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 3.18 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 3.19 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.21 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.22 Unfilled Purchase Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.23 Unfilled Sales Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.24 Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 3.25 Accuracy and Completeness of Representations and Warranties; Incorporation by Reference . . 14
A-i 62 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TRINITY AND SUBSIDIARY SECTION 4.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4.2 Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4.3 Governmental Authorization; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 4.4 Non-contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 4.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 4.6 Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 4.7 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.8 Registration Statement; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.9 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.10 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 4.12 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 4.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 4.14 Accuracy and Completeness of Representations and Warranties . . . . . . . . . . . . . . . . 17 SECTION 4.15 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 4.16 Investigation by Trinity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 5 COVENANTS OF THE COMPANY, TRINITY AND SUBSIDIARY SECTION 5.1 Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 5.2 Covenants of Trinity and Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 5.3 Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 6 CONDITIONS TO CLOSING SECTION 6.1 Conditions to Obligations of Trinity and Subsidiary to Proceed with the Merger . . . . . . 25 SECTION 6.2 Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE 7 TERMINATION SECTION 7.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 7.2 Termination by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 7.3 Termination by Trinity and Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 7.4 Termination by Either Trinity or the Company . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 7.5 Effect of Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 7.6 Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
A-ii 63 ARTICLE 8 MISCELLANEOUS SECTION 8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 8.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 8.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 8.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 8.5 Counterparts: Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.6 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.7 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.8 Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.11 Severability; Validity; Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.12 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 8.13 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 EXHIBIT A Form of Company's Tax Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 EXHIBIT B Form of Trinity's Tax Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1 EXHIBIT C Form of Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
A-iii 64 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, is entered into this 17th day of June, 1996, among TRANSCISCO INDUSTRIES, INC., a Delaware corporation (the "Company"), TRINITY INDUSTRIES, INC., a Delaware corporation ("Trinity"), and TRINITY Y, INC., a Delaware corporation and a wholly-owned subsidiary of Trinity ("Subsidiary"). WITNESSETH: WHEREAS, the Boards of Directors of the Company, Subsidiary and Trinity have determined that it is in their respective best interests for Subsidiary to merge with and into the Company upon the terms and subject to the conditions set forth herein in order for the Company to become a wholly-owned subsidiary of Trinity. WHEREAS, in furtherance of such acquisition, the Boards of Directors of the Company, Subsidiary and Trinity have approved the merger of Subsidiary with and into the Company in accordance with Delaware law and upon the terms and subject to the conditions set forth herein. WHEREAS, it is the intention of the parties that this transaction qualify as a tax-free reorganization pursuant to Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), so that the shares of common stock of Trinity received by the Stockholders (as hereinafter defined) shall not be immediately taxable to the Stockholders upon receipt. WHEREAS, it is the intent of the parties that there shall be a continuity of interest and a continuity of business enterprise with respect to the acquisition by Trinity of the Company in the subject merger transaction. NOW, THEREFORE, the parties hereto agree as follows: 1. THE MERGER 1.1 The Merger. (a) Subject to the terms and conditions of this Agreement, on the Closing Date (as defined in Section 1.4 hereof), Subsidiary shall be merged (the "Merger") with and into the Company in accordance with Delaware law, whereupon the separate existence of Subsidiary shall cease and the Company shall continue as the surviving corporation (the Company thus being sometimes hereinafter referred to as the "Surviving Corporation") under the name of Transcisco Industries, Inc. as set forth in Section 2 hereof. (b) On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger ("Certificate of Merger") with the Secretary of State of the State of Delaware in such form as required by, and executed in accordance with the relevant provisions of, Delaware law, and the parties hereto shall make all other filings or recordings required by any applicable law in connection with the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware (the "Effective Time"). (c) At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities and duties of Subsidiary shall become the debts, liabilities and duties of the Surviving Corporation. 1.2 Conversion of Shares of Stock. The manner and basis of converting each share of Subsidiary common stock into a share of the Surviving Corporation's common stock and of converting each issued and 65 outstanding share of common stock, $.01 par value, of the Company (the "Company Stock") into a right to receive shares of voting common stock, $1.00 par value, of Trinity (the "Trinity Stock") shall be as follows: (a) Each share of Subsidiary common stock which is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any act on the part of the holder thereof, be converted into one (1) fully paid and nonassessable share of voting common stock of the Surviving Corporation. (b) Each share of Company Stock which is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of any of the Company's stockholders (individually, a "Stockholder", and, collectively, the "Stockholders"), be converted into and become a right to receive eighteen hundred and eighty-four ten-thousandths (.1884) (the "Exchange Ratio") of one (1) share of Trinity Stock (with cash paid to any Stockholder entitled to a fractional share of Trinity Stock), all of which shall be issued and distributed in accordance with Section 1.3 hereof. In the event that subsequent to the date of this Agreement but prior to the Effective Time, Trinity shall have declared a stock split (including a reverse split) of Trinity Stock or a dividend payable in Trinity Stock, or any other distribution of securities or special cash dividends (which specifically excludes Trinity's regular quarterly dividends) with respect to Trinity Stock (including, without limitation, such a distribution made in connection with a recapitalization, reclassification, merger, consolidation, reorganization or similar transaction) then the Exchange Ratio shall be appropriately adjusted to reflect such stock split, dividend or other distribution of securities. (c) (i) At the Effective Time, each outstanding option to purchase Company Stock (a "Stock Option") granted under any Company stock option plan (a "Company Stock Plan") or pursuant to an agreement identified on Schedule 3.6 of the Disclosure Schedule (as defined in Section 3.1 hereof), whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Stock Option, the same whole number of shares of Trinity Stock (being rounded upward to the nearest whole share) as the holder of such Stock Option would have been entitled to receive pursuant to the Merger had such holder exercised such option in full immediately prior to the Effective Time (not taking into account whether or not such option was in fact exercisable), and shall have an exercise price per share equal to such Stock Option's exercise price per share divided by the Exchange Ratio (the option price per share, as so determined, being rounded to the nearest full cent). In the case of any Stock Option to which Section 421 of the Code applies by reason of its qualification under any of Sections 422-423 of the Code ("Qualified Stock Options"), the option price, the number of shares purchasable pursuant to such option and the terms and conditions of such option shall comply with Section 424(a) of the Code. (ii) As soon as practicable after the Effective Time, Trinity shall deliver to each holder of an outstanding Stock Option an appropriate notice setting forth such holder's rights pursuant hereto and such Stock Option shall continue in effect on the same terms and conditions (including further antidilution provisions and subject to the adjustments required by this Section 1.2(c) after giving effect to the Merger). Trinity shall comply with the terms of all such Stock Options and ensure, to the extent required by, and subject to the provisions of, any such Company Stock Plan, that Stock Options which qualified as Qualified Stock Options prior to the Effective Time continue to qualify as Qualified Stock Options after the Effective Time. Trinity shall take all corporate actions necessary to reserve for issuance a sufficient number of shares of Trinity Stock for delivery pursuant to the terms set forth in this Section 1.2(c). 1.3 Payment and Arrangements. (a) In accordance with Section 1.2(b) above and as soon as practicable following the mailing of the Proxy Statement (as defined in Section 3.24 hereof), but in no event later than ten (10) business days prior to the meeting of the Stockholders required by Section 5.3(b) hereof, The Bank of New York, or the entity then serving as Registrar and Transfer Agent of Trinity's common stock, as the exchange agent for -2- 66 the Merger (the "Exchange Agent"), shall mail or otherwise provide to each Stockholder a notice and transmittal form for effecting an exchange of such Stockholder's Company stock certificates (the "Company Certificates") for certificates representing Trinity Stock. Upon surrender to the Exchange Agent of (A) his or her Company Certificates (in compliance with applicable instructions), and (B) a duly executed transmittal form, each holder of such Company Certificates shall be entitled to receive in exchange therefor a certificate or certificates representing such Stockholder's Trinity Stock. Company Certificates so surrendered shall be canceled and, until satisfaction of (A) and (B) above, risk of loss and title to any Company Certificate shall not pass to the Exchange Agent. In the event of any transfer of Company Stock that is not registered on the stock transfer records of the Company, certificates representing Trinity Stock shall be issued, substantially as provided above but to the transferee, if all documents required to evidence and effect such transfer are also presented to the Exchange Agent, and by payment of all applicable stock transfer taxes. Trinity Stock into which Company Stock shall be converted in the Merger shall be deemed to have been issued as of the Effective Time. Until surrendered and exchanged, each outstanding Company Certificate shall be deemed for all corporate purposes (subject to the dividend, distribution and transfer limitations provided for in Section 1.3(b), 1.3(c) and 1.3(d) below), to represent the number of shares of Trinity Stock for which such Company Certificate shall have been converted. (b) No dividends or other distributions, if any, payable to holders of record of Trinity Stock after the Effective Time shall be distributed to Stockholders holding outstanding Company Certificates; provided, however, that, upon surrender and exchange of such outstanding Company Certificates, such surrendering Stockholder shall be entitled to receive from Trinity, without interest thereon, any dividends or distributions which shall have become payable or distributable with respect to such Trinity Stock between the Effective Time and the time of the surrender of the Company Certificate. (c) With respect to each outstanding Company Certificate not surrendered and exchanged for Trinity Stock certificates, the holder of such Company Certificate shall look as a general creditor only to Trinity for payment and delivery of dividends or distributions, as the case may be, withheld pursuant to Section 1.3(b) above. Notwithstanding the foregoing, none of Trinity, Subsidiary, the Company, the Surviving Corporation, the Exchange Agent or any other party shall be liable to any Stockholder or any other person or entity for any Trinity Stock or dividends or distributions thereon delivered to a public official pursuant to escheat laws, if applicable. (d) Except as provided expressly in Section 1.3(a) above, after the Effective Time, no transfer of Company Stock outstanding prior to the Effective Time shall be made on the stock transfer books of the Surviving Corporation and no sale or transfer of Trinity Stock shall be made or recognized by the Exchange Agent with respect to any shares of Trinity Stock held for a Stockholder who has failed to surrender and exchange his or her Company Certificate. With respect to Company Certificates surrendered for exchange by any person constituting an Affiliate (as defined in Section 5.3(d) hereof), Trinity reserves the right to affix the following legend on the Trinity Stock certificate issued to any Affiliate: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED BY A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933." (e) No fractional shares of Trinity Stock shall be issued pursuant hereto. In lieu of the issuance of any fractional share of Trinity Stock pursuant to Section 1.2(b), cash adjustments will be paid to holders in respect of any fractional share of Trinity Stock that would otherwise be issuable, and the amount of such -3- 67 cash adjustment shall be equal to such fractional proportion of the "Average Price" of a share of Trinity Stock. The "Average Price" of a share of Trinity Stock shall be the average of the closing sales prices thereof as reported on the NYSE (as defined in Section 3.3(a) hereof) Composite Tape (as reported by The Wall Street Journal or, if not reported thereby, by another authoritative source) over the ten (10) trading days including and ending on the second trading day preceding the Closing Date. (f) All Trinity Stock issued upon and in accordance with the surrender and exchange provisions hereinabove shall be deemed to have been issued in full satisfaction of all rights pertaining to such exchanged Company Stock. 1.4 The Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated herein (the "Closing") shall occur as soon as practicable, at a mutually agreeable time and date not later than five (5) business days after the later of the date of the meeting of the Stockholders as required by Section 5.3(b) hereof and the satisfaction or waiver of the conditions to the parties' obligation to effect the Merger at the offices of Trinity Industries, Inc., 2525 Stemmons Freeway, Dallas, Texas, or such other time, date or place as the parties may otherwise agree (the "Closing Date"). At or prior to the Closing: (a) The Company will deliver to Trinity and Subsidiary: (i) a copy of the corporate actions taken by the Company with respect to the authorization, execution, delivery and performance of this Agreement and the consummation of the Merger, each duly certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; (ii) a duplicate original of the Certificate of Merger to be filed with the Secretary of State of the State of Delaware in connection with the transaction as executed by the Company; and (iii) executed originals or copies of any and all consents, approvals, waivers and/or acknowledgments required in order (a) for the Company to consummate the Merger or (b) to permit the Surviving Corporation to continue to carry on the business of the Company substantially in the manner now conducted. (b) Trinity and Subsidiary will deliver to the Company: (i) a duplicate original of the Certificate of Merger to be filed with the Secretary of State of the State of Delaware in connection with the transaction as executed by Subsidiary; and (ii) a copy of the corporate actions taken by Trinity and Subsidiary with respect to the authorization, execution, delivery and performance of this Agreement and the consummation of the Merger, each duly certified as of the Closing Date by the Secretary or an Assistant Secretary of Trinity or Subsidiary, as appropriate. Trinity shall cause to be filed with the Secretary of State of the State of Delaware a fully executed duplicate original of the Certificate of Merger as promptly as practical after the Closing and the Merger shall be effective upon such filing. 2. THE SURVIVING CORPORATION 2.1 Name and Certificate of Incorporation. The corporation surviving the Merger shall be the Company, and the certificate of incorporation of Subsidiary in effect on the Closing Date shall be the certificate of incorporation of the Surviving Corporation. -4- 68 2.2 Bylaws. The Bylaws of Subsidiary in effect on the Closing Date shall be the Bylaws of the Surviving Corporation. 2.3 Directors and Officers. From and after the Closing Date, until successors are duly elected or appointed in accordance with applicable law, the directors of Subsidiary on the Closing Date shall be the directors of the Surviving Corporation and the officers of Subsidiary on the Closing Date shall be the officers of the Surviving Corporation. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Trinity and Subsidiary that: 3.1 Corporate Status. The Company and each of its subsidiaries is a corporation organized, validly existing and in good standing under the laws of the state of its incorporation and has all corporate powers required to carry on its business as now conducted. The Company and each of its subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not individually or in the aggregate have a material adverse effect on the business, assets, liabilities, results of operations or financial condition of the Company and its subsidiaries, taken as a whole ("Company Material Adverse Effect"). The Company has heretofore made available or delivered to Trinity true and complete copies of the Certificate or Articles of Incorporation and Bylaws for the Company and each of its subsidiaries, as currently in effect. The Company and each of its subsidiaries is not in violation or breach of, or default under (and no event has occurred which with notice or the lapse of time or both would constitute a violation or breach of, or default under) any term, condition or provision of its Certificate or Articles of Incorporation, as the case may be, or Bylaws, which such violation, breach or default creates a Company Material Adverse Effect. Except as disclosed in Schedule 3.1 of the schedules delivered by the Company to Trinity and Subsidiary (all schedules referred to in, or delivered pursuant to, this Agreement shall be collectively referred to as the "Disclosure Schedule"), the Company has no subsidiaries and does not, directly or indirectly, own or have the power to vote, or to exercise a controlling influence with respect to, any securities of any class of any person, the holders of which class are entitled to vote for the election of directors (or persons serving similar functions) of such person. 3.2 Corporate Authorization. The Company has full corporate power and authority to execute and deliver this Agreement and, subject to the approval of this Agreement by the Stockholders, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Company's Board of Directors and no other corporate proceedings (other than the approval of this Agreement by the Stockholders as contemplated by Section 5.3(b) hereof) on the part of the Company are necessary to authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated herein. 3.3 Governmental Authorization; Consents. (a) The execution, delivery and performance by the Company of this Agreement and the consummation of the Merger by the Company require no action by or in respect of, or filing with, any governmental body, agency, official or authority except for filings with or approvals by (i) the Securities and Exchange Commission (the "Commission"), (ii) the New York Stock Exchange ("NYSE") and the American Stock Exchange ("AMEX"), (iii) the Federal Trade Commission ("FTC"), (iv) the United States Department of Justice ("DOJ"), (v) appropriate state officials in jurisdictions where blue sky or similar securities law clearance is required, and (vi) the Secretary of State of the State of Delaware, and except where the lack of such action or filing would not individually or in the aggregate have a Company Material Adverse Effect. (b) Except as disclosed in Schedule 3.3 of the Disclosure Schedule and except for the approval of the Stockholders, no consent, approval, waiver or other action by any person not a party to -5- 69 this Agreement under any material contract, agreement, indenture, lease, instrument or other document to which the Company or any of its subsidiaries is a party or by which any of them are bound is required or necessary for the execution, delivery and performance of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby. 3.4 Non-contravention. Except as disclosed in Schedule 3.4 of the Disclosure Schedule and except in the case of clauses (ii) and (iii) for contraventions, defaults, terminations, cancellations, accelerations, creations or impositions that would not individually or in the aggregate have a Company Material Adverse Effect, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not (i) materially contravene or constitute a material default under the Certificate of Incorporation or Bylaws of the Company, (ii) contravene or constitute a default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Company or any of its subsidiaries or to a loss of any benefit to which the Company or any of its subsidiaries are entitled, or (iii) result in the creation or imposition of any Lien on any asset of the Company or any of its subsidiaries. For purposes of this Agreement, "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, restriction on transfer or encumbrance of any kind in respect of such asset. 3.5 Binding Effect. Assuming the due execution and delivery of this Agreement by Trinity and Subsidiary but subject to its approval by the Stockholders as contemplated by Section 5.3(b) hereof and the filings with or approvals by the governmental bodies, agencies, officials or authorities described in Section 3.3 hereof, this Agreement constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. 3.6 Capitalization. The authorized capital stock of the Company consists of (i) fifteen million (15,000,000) common shares, $.01 par value, of which five million two hundred sixty-nine thousand six hundred fourteen (5,269,614) shares were issued and outstanding on June 1, 1996 and (ii) one million (1,000,000) preferred shares, $.01 par value, of which none are issued and outstanding on the date hereof. The Company owns all of the issued and outstanding shares of capital stock of each of its subsidiaries. All outstanding shares of capital stock of the Company and each of its subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable. Except as disclosed in Schedule 3.6 of the Disclosure Schedule, there are no plans, agreements or other arrangements pursuant to which any options, warrants or other rights to acquire shares of capital stock from the Company or any of its subsidiaries are outstanding. Except as disclosed in Schedule 3.6 of the Disclosure Schedule, other than the shares of capital stock of the Company described above and the shares of capital stock of the Company's subsidiaries owned by the Company, there are outstanding (i) no shares of capital stock or other voting securities of the Company or any of its subsidiaries, (ii) no securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or any of its subsidiaries, and (iii) no phantom stock, options or other rights to acquire from the Company or any of its subsidiaries, and no obligation of the Company or any of its subsidiaries to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company or any of its subsidiaries. 3.7 Financial Statements. The Company has delivered to Trinity the Company's audited financial statements for the years ended December 31, 1992 and 1993, the three-month period ended March 31, 1994, and the years ended March 31, 1995 and 1996 (the "Financial Statements"). The Financial Statements have been prepared from the books and records of the Company in accordance with generally accepted accounting principles consistently applied (except as may be indicated therein or in the notes thereto), and fairly present in all material respects the financial condition of the Company as at their respective dates and the results of its operations for the periods covered thereby. 3.8 Company SEC Reports. The Company has delivered or made available to Trinity true and complete copies of each registration statement, report and proxy or information statement (including exhibits and any amendments thereto) filed by the Company with the Commission since January 1, 1993 through the date hereof (collectively, the "Company SEC Reports"). As of the respective dates the Company SEC Reports were filed or, -6- 70 if any such Company SEC Reports were amended, as of the date such amendment was filed, each of the Company SEC Reports (i) complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.9 Absence of Certain Changes. Except as disclosed in Schedule 3.9 of the Disclosure Schedule, or as otherwise set forth in the Financial Statements, the Company SEC Reports or as contemplated by this Agreement, since March 31, 1996, the Company and each of its subsidiaries has not: (a) incurred any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, except (i) obligations and liabilities incurred in the ordinary course of business and consistent with its prior practice, (ii) obligations or liabilities, in any one case or in the aggregate, which have not had a Company Material Adverse Effect and (iii) obligations and liabilities incurred pursuant to, or contemplated by, this Agreement; (b) mortgaged or pledged any of its property, business or assets, tangible or intangible; (c) sold, transferred, leased to others or otherwise disposed of any of its assets, except for transactions in the ordinary course of business and transactions not individually in excess of One Hundred Thousand Dollars ($100,000), or canceled or compromised any debt or Claim (as defined in Section 3.11 hereof) (other than accounts receivable compromised in the ordinary course of business consistent with its prior practice and debts or Claims not individually in excess of One Hundred Thousand Dollars ($100,000)), or waived or released any right, except for such rights the loss of which, in any one case or the aggregate, have not had, or are not reasonably likely to have, a Company Material Adverse Effect; (d) received any notice or threat of termination of any contract, lease or other agreement or suffered any damage, destruction or loss (not covered by insurance) which, in any case or in the aggregate, has had, or is reasonably likely to have, a Company Material Adverse Effect; (e) paid any dividends, paid any compensation other than in the ordinary course of the Company's business, or made any change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, or paid or agreed or orally promised to pay, conditionally or otherwise, any bonus, extra compensation, pension or severance or vacation pay, to any current or former stockholder, director, officer, employee, salesman, distributor or agent, except for (i) increases in the ordinary course of business consistent with past practice in the compensation of employees who are not directors or officers, (ii) bonuses and other remuneration accrued as of or prior to March 31, 1996 and (iii) payments pursuant to an agreement identified on Schedule 3.9 of the Disclosure Schedule; (f) suffered any change, event or condition which, in any case or in the aggregate, has had, or is reasonably likely to have, a Company Material Adverse Effect (other than as a result of change in conditions, including economic or political developments, applicable to the industries in which the Company operates) (for purposes of this Agreement, the results of any elections in Russia or in any country formerly part of the Soviet Union shall not be considered in determining whether there has been, or is reasonably likely to be, a Company Material Adverse Effect); (g) issued any shares of capital stock or voting securities of the Company, any phantom stock, options or other rights to acquire from the Company any capital stock, voting securities convertible into or exchangeable for capital stock or voting securities of the Company (except pursuant to warrants, options and other rights outstanding on the date hereof in accordance with the terms of such agreements as of the date hereof); or -7- 71 (h) entered into any agreement or made any commitment to take any of the types of action described in subparagraphs (a)-(g) above. 3.10 Properties. Except as disclosed in the Company SEC Reports or the Financial Statements, the Company or a subsidiary of the Company owns all of the tangible assets, real and personal, reflected in the Financial Statements as being owned by the Company or a subsidiary (except such property as has been disposed of in the ordinary course of business) free and clear of any Liens (as defined in Section 3.4 hereof) except for Liens that do not individually exceed One Hundred Thousand Dollars ($100,000), and the Company or a subsidiary of the Company has good and marketable title to, or in the case of leased property has valid leasehold interests in, all such properties and assets. Each of the Company and its subsidiaries owns, has valid leasehold interests in or valid contractual rights to use, all of the material tangible assets used by, or necessary for the conduct of, its business. 3.11 Litigation. Except as set forth in Schedule 3.11 of the Disclosure Schedule, the Financial Statements or the Company SEC Reports (and except as provided in Section 3.17, which shall govern environmental matters exclusively), (i) there is no claim, action, suit, investigation, inquiry, review or proceeding ("Claim") pending, or, to the best knowledge of the Company, threatened against the Company, any of its subsidiaries or any of their properties or assets involving a Claim in excess of One Hundred Thousand Dollars ($100,000) not covered by insurance and (ii) the Company does not know of any unasserted Claims involving a Claim in excess of One Hundred Thousand Dollars ($100,000). Except as set forth in Schedule 3.11 of the Disclosure Schedule, the Company does not know of any pending or current judgment, order, writ, injunction or decree of any governmental, administrative or judicial authority in which the Company or any of its subsidiaries is a named party involving in excess of One Hundred Thousand Dollars ($100,000). 3.12 Taxes. Each of the Company and its subsidiaries (i) has timely filed all tax returns, reports and declarations (for purposes of this Section 3.12, "returns") required to be filed by such Company or subsidiary under applicable federal, state, local or foreign tax laws, for tax years ended prior to the date of this Agreement or requests for extensions have been timely filed, except where the failure to file such returns or requests would not be reasonably likely to have a Company Material Adverse Effect, and any such request shall have been granted and not expired and, except as disclosed in Section 3.12 of the Disclosure Schedule, all such returns are complete and accurate in all material respects and (ii) has paid all taxes and governmental charges (including, without limitation, any interest and penalties (hereinafter, collectively "taxes") shown to be due and payable on such returns other than such taxes as are being contested in good faith, except where the failure to so pay such taxes would not have a Company Material Adverse Effect. Except as set forth in Schedule 3.12 of the Disclosure Schedule, (i) neither the Company nor any of its subsidiaries have been notified that any returns are currently under audit by the Internal Revenue Service or any foreign, state or local tax agency, (ii) neither the Company nor any of its subsidiaries have made any agreements for the extension or waiver of the statute of limitations for the assessment or payment of any federal, foreign, state or local taxes, (iii) no deficiency, assessment or other formal claim for any material taxes has been asserted or made against the Company or its subsidiaries that has not been fully paid or finally settled, except where such claim would not have a Company Material Adverse Effect and (iv) no action or proceeding for the assessment or collection of any taxes are pending against the Company or its subsidiaries. All taxes and other assessments which the Company or its subsidiaries is or has been required by law to withhold or to collect have been duly withheld or collected, and have been timely paid over to the proper governmental authority or are properly held by the Company or its subsidiaries for such payment, except where failure to so withhold or to collect would not have a Company Material Adverse Effect. Except as set forth in Schedule 3.12 of the Disclosure Schedule, the Company does not have knowledge of any fact or issue of law that is likely to result in a payment by the Company of federal income taxes, penalties and interest in excess of Two Hundred Fifty Thousand Dollars ($250,000) for the tax year ended December 31, 1985. 3.13 ERISA. (a) Schedule 3.13 of the Disclosure Schedule sets forth (i) the name of each Plan (as defined in paragraph (l) of this Section 3.13) and indicates any Plan that is a "multiemployer plan," as defined in ERISA Section 4001, (ii) the name of any other employee benefit plan as defined in Section 3(3) of ERISA with respect to which the Company or any Group Member (as defined in such paragraph (l)) is a "Party -8- 72 in Interest," as defined in Section 3(14) of ERISA, and (iii) the name of any other Employee Benefit Arrangement (as defined in such paragraph (l)). (b) Each of the Company, each Group Member, and each Plan is in compliance in all material respects with the provisions of ERISA and the Code insofar as ERISA and the Code are applicable to such Plans. Each Plan intended to be qualified under Section 401(a) of the Code has been determined to be so qualified by the IRS and nothing has occurred since the date of the last such determination which resulted or is likely to result in the revocation of such determination. (c) Except as disclosed in Schedule 3.13, there has not occurred with respect to any Plan any "Prohibited Transaction," as defined in either Section 406 of ERISA or Section 4975 of the Code, which has had, or may reasonably be expected to have, a material adverse effect on the business, operations, properties, condition (financial or otherwise), assets, liabilities, or prospects of the Company or of any Group Member. (d) Except as disclosed in Schedule 3.13, there has not occurred with respect to any Plan any "Reportable Event," as defined in Section 4043 of ERISA, for which the thirty-day notice requirements has not been waived under applicable PBGC requirements and which has had, or may reasonably be expected to have, a material adverse effect on the business, operations, properties, condition (financial or otherwise), assets, liabilities, or prospects of the Company or of any Group Member. No Plan has applied for or obtained a waiver from the IRS of any minimum funding requirement under Section 412 of the Code. (e) (i) No Plan has been terminated, and no withdrawal from any "multiemployer plan," as defined in Section 4001 of ERISA, has occurred since the inception of any Plan under circumstances that have given rise to, or would give rise to, any actual or potential liability to the PBGC or any other person (excluding liabilities to participants for benefits payable in the normal course of events pursuant to any such termination or withdrawal); (ii) no event or condition exists which presents a meaningful risk of termination of any Plan by the PBGC; and (iii) there is no actual or potential liability to the PBGC or any other person (other than any liability for unpaid benefits) reasonably expected by the Company or any Group Member to be incurred with respect to any Plan, including, but not limited to, any liability for premium payments, for any accumulated funding deficiency as defined in Section 302 of ERISA or for any minimum funding contribution under Section 302 of ERISA. (f) As of March 31, 1996 the then current value of the assets of any Plan which is a defined benefit pension plan maintained by the Company was at least equal to the then current value (as defined in Section 4062(b)(1)(A) of ERISA) of all accrued benefits (as defined in Section 3 of ERISA) under such Plan. As of the date of this Agreement, there has been no material change in either the value of such assets or the value of such benefits (except for increases in such benefits attributable to new Plan participants and regular salary increases). (g) Except as disclosed in Schedule 3.13, no Lien imposed under Section 412(n) of the Code exists in favor of any Plan upon any property belonging to a Group Member. (h) The Company has previously delivered or made available to Trinity true and correct copies of each Plan and each Employee Benefit Arrangement, together with, if applicable, true and correct copies of the annual reports and actuarial reports for the preceding two plan years filed with respect to each such Plan and Employee Benefit Arrangement, summary plan descriptions and other communications to employees relating to each such Plan and Employee Benefit Arrangement, any related trust or third-party funding vehicle documents and related financial statements, and all letters from the IRS, if any, confirming the tax-exempt status or qualification under Section 401(a) of the Code of any Plan. There are no Plans or Employee Benefit Arrangements other than those listed in the Disclosure Schedule. (i) Neither (a) the Company, or any director, officer, employee, or agent of the Company or its subsidiaries, has, with respect to any Plan, nor (b) any Plan or trust created thereunder or trustee -9- 73 or administrator thereof has, engaged in any conduct that would result in any penalties under Section 502(i) of ERISA or any liability under Section 409 of ERISA for breach of fiduciary duty which has had, or is reasonably likely to have, a Company Material Adverse Effect. Except as disclosed in Schedule 3.13, no material civil or criminal action or Claim (other than uncontested Claims for benefits) is pending or, to the Company's knowledge, threatened with respect to any Plan. (j) Each Plan or Employee Benefit Arrangement maintained by the Company specifically provides that it may be terminated at any time by its sponsoring employer (subject, in the case of any Plan which is subject to Title IV of ERISA, to the provisions of Section 4041 of ERISA), and there are no circumstances or conditions that exist prior to the Merger that would prevent the applicability of those provisions. Each Plan or Employee Benefit Arrangement can be terminated or amended unilaterally by the Company on not more than 90 days' notice, and none of the Company, any Group Member, or any director, officer, or employee of any of the foregoing has taken any action that would commit the Company to continue any Plan or Employee Benefit Arrangement or any benefit thereunder for any present or former employee of the Company or that would prevent the Company from changing or terminating any such benefit or Plan. (k) The Company does not now have in effect, and has not previously had in effect, any welfare benefit plan, commitment, understanding, or arrangement providing for medical or death benefits (whether insured or uninsured) with respect to current or former employees beyond their date of retirement or other termination of service (other than coverage mandated by Section 4980B of the Code and Section 601 of ERISA, the cost of which is fully paid by the former employee or his or her dependents). (l) For purposes of this Section 3.13, the following terms used herein shall have the meanings set forth below: (i) "Code" means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. (ii) "Employee Benefit Arrangement" means any plan, agreement, or arrangement which is not an employee benefit plan within the meaning of Section 3(3) of ERISA but which provides benefits to one or more of the officers or other employees of the Company, such as a bonus, incentive, stock purchase, or stock appreciation rights plan, or any employment or consulting agreement. (iii) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (iv) "Group Member" means any member of any "affiliated service group," as defined in Section 414(m) of the Code, that includes any of the Company, any member of any "controlled group of corporations," as defined by Section 1563 of the Code, that includes the Company, or any member of any group of "trades or businesses under common control," as defined in Section 414(c) of the Code, that includes the Company. (v) "IRS" means the Internal Revenue Service. (vi) "PBGC" means the Pension Benefit Guaranty Corporation. (vii) "Plan" means at any time any employee benefit plan as defined in Section 3(3) of ERISA (i) which is either (1) maintained by the Company or any Group Member or (2) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and (ii) to which any of the Company or any Group Member is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. -10- 74 3.14 Permits; Compliance With Laws. Except as provided in Section 3.17, which shall govern environmental matters exclusively, the Company and each subsidiary has obtained all permits, licenses, operating certificates, orders or approvals of any federal, state, local or foreign governmental or regulatory agency which are material to the conduct of the business of the Company and its subsidiaries as presently conducted (hereinafter collectively, "Permits"), all of which permits are in full force and effect. No material violations have been recorded in respect of the Permits, nor has any threat of revocation been received with respect thereto. Except as provided in Section 3.17, which shall govern environmental matters exclusively, the business of the Company and each of its subsidiaries has been and is being conducted in compliance in all material respects with all applicable statutes, codes, ordinances, orders, rules and regulations relating to its properties, assets and business and the operation and conduct thereof (including, without limitation, all laws and regulations relating to compensation, employment and occupational safety) except where such noncompliance would not have a Company Material Adverse Effect and no assertion of a material violation of any such statute, code, ordinance, order, rule or regulation which is reasonably likely to involve a payment, in any one case, by the Company or any of its subsidiaries in excess of One Hundred Thousand Dollars ($100,000) has been received or, to the best knowledge of the Company, is threatened, and no reasonable basis for any such assertion exists to the best knowledge of the Company. To the best knowledge of the Company, the consummation of this Agreement will not require the transfer, modification or amendment of any such Permits. 3.15 Finders' Fees. Except for Schroder Wertheim & Co. Incorporated, the arrangements with which have been disclosed in writing to Trinity prior to the date hereof, there is no investment banker, broker, finder or other similar intermediary which has been retained by or is authorized to act on behalf of, the Company who might be entitled to any fee or commission from the Company upon consummation of the transactions contemplated by this Agreement. 3.16 Patents, Trademarks, Etc. Schedule 3.16 of the Disclosure Schedule sets forth a complete and accurate list of all trademarks, patents, copyrights, service marks, applications therefor, logos, trade names and software owned or utilized by the Company or any of its subsidiaries and material to the business of the Company and its subsidiaries taken as a whole (the "Technology", which such term includes, without limitation, all rights of any of the Company and its subsidiaries in and to any intellectual property relating in any way to the use, manufacture or marketing of goods or services embodying the Uni-Temp heating technology). Except as set forth in Schedule 3.16 of the Disclosure Schedule, the Company or a subsidiary owns, or has valid, binding and enforceable rights to use, all of the Technology in each case free and clear of any material Lien and subject to no known interference and without any known conflict with the rights of others which materially and adversely affects the operations of the Company and its subsidiaries as presently conducted. Except as set forth in Schedule 3.16 of the Disclosure Schedule, the Technology owned by or licensed to the Company or a subsidiary, and any licenses or other agreements relating thereto, is sufficient to carry on the operation of the business of the Company and its subsidiaries substantially in the manner presently conducted. The Company and each of its subsidiaries has not infringed, misappropriated, misused or been charged with, or, to the best knowledge of the Company and each of its subsidiaries, been threatened or charged with, and the Company and each of its subsidiaries has not received any notice with respect to, any material infringement, misappropriation or misuse of any Technology owned or claimed by another. Except as disclosed in Schedule 3.16 of the Disclosure Schedule, the Company and each of its subsidiaries have not granted any outstanding licenses or other rights to such Technology, or obligated itself to grant licenses or such other rights, and the parties to any such license or other arrangements described in Schedule 3.16 are no more than Three Hundred Thousand Dollars ($300,000) in arrears on all payments thereunder. 3.17 Environmental Matters. Except as set forth in Schedule 3.17 of the Disclosure Schedule, to the knowledge of the Company: (a) the Company and each of its subsidiaries is in compliance with all federal, state, and local laws governing pollution or the protection of human health or the environment ("Environmental Laws"), except in each case where noncompliance with Environmental Laws would not reasonably be expected to have a Company Material Adverse Effect; -11- 75 (b) none of the Company's or its subsidiaries' properties or facilities that are used for the business of the Company or any of the subsidiaries is a treatment, storage or disposal ("TSD") facility, as defined in and regulated under the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.; (c) neither the Company nor any of the subsidiaries has received any written notice, pursuant to which it is reasonably likely that the Company or any subsidiary would have to pay an amount in excess of One Hundred Thousand Dollars ($100,000), that remains pending or outstanding with respect to the business of, or any property now or formerly owned or leased by, the Company or any subsidiary from any governmental entity or third party alleging that the Company or any subsidiary is not in material compliance with any Environmental Law; (d) there has been no release of a Hazardous Substance, as that term is defined in the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Sections 9601 et seq., or petroleum products (except with respect to any such release which would not reasonably be expected to have a Company Material Adverse Effect), in excess of a reportable quantity on any real property now or formerly owned or leased by the Company or any subsidiary during such time, with respect to the Company's or any subsidiary's formerly owned or leased properties, used for the business of the Company or any subsidiary, and neither the Company nor any subsidiary has received any notice of actual or potential liability for any such release, which would reasonably be expected to have a Company Material Adverse Effect, pursuant to applicable Environmental Laws for Hazardous Substances sent to off-site locations from any real property now or formerly owned or leased by the Company or any subsidiary during such time as such property was used for the business of the Company or any subsidiary; (e) there is no response or remediation or other similar corrective action, or related investigation, by the Company or any subsidiary pursuant to any Environmental Law or under the direction of any governmental authority currently being performed or that has been performed at any real property now or formerly owned or leased by the Company or any subsidiary for the business of the Company during the last three (3) years in connection with Hazardous Substances that would reasonably be expected to have a Company Material Adverse Effect; and (f) there are no underground storage tanks at any real property owned or leased by the Company or any subsidiary that is used for the business of the Company or any subsidiary. 3.18 Contracts. Schedule 3.18 of the Disclosure Schedule sets forth all of the following contracts, arrangements and other agreements (for purposes of this Section 3.18 "contracts") on the date hereof to which the Company or any of its subsidiaries is a party or by which the Company, any of its subsidiaries or their assets or properties are bound or subject: (a) contracts not otherwise set forth in the Disclosure Schedule for which the aggregate amount or value of services to be performed for or by, or funds or other property transferred or to be transferred to or by, a party to such contract exceeds One Hundred Thousand Dollars ($100,000); (b) contracts involving either (i) an indemnification by the Company or any of its subsidiaries that could result in payments in excess of One Hundred Thousand Dollars ($100,000) or (ii) a guarantee of the performance of a third party by the Company or any of its subsidiaries that could result in payments in excess of One Hundred Thousand Dollars ($100,000); and (c) contracts involving ownership of an interest in a general partnership, joint venture, limited liability partnership, limited partnership, limited liability corporation, business trust or other non- corporate entity. There have been delivered or made available to Trinity true and complete copies of all such contracts set forth in Schedule 3.18 of the Disclosure Schedule. All of such contracts are in full force and effect and the Company and each of its subsidiaries is not in material default under any of them, nor is, to the best knowledge of the Company, -12- 76 any other party to any such contract in material default thereunder, nor does, to the best knowledge of the Company, any condition exist that with notice or lapse of time or both would constitute a material default thereunder by the Company or any of its subsidiaries. Except as disclosed in Schedule 3.18 of the Disclosure Schedule, no approval or consent of any person is needed in order that any material contracts to which the Company is a party or by or to which the Company, any of its subsidiaries or their assets or properties are bound or subject shall continue in full force and effect following the consummation of the Merger. 3.19 Liabilities. To the best knowledge of the Company (and except as provided in Section 3.17, which shall govern environmental matters exclusively), the Company and each of its subsidiaries does not have and is not subject to any direct or indirect indebtedness, liability, Claim, loss, damage, deficiency, obligation or responsibility, accrued, absolute, contingent or otherwise, whether or not of a kind required by generally accepted accounting principles to be set forth in a financial statement (for purposes of this Section 3.19, "Liabilities") , which arose, existed or was incurred on or prior to the Closing Date, other than (i) Liabilities fully and adequately reflected, disclosed or reserved against in the Financial Statements or the Unaudited Interim Financial Statements (as defined in Section 5.1(m) hereof), (ii) Liabilities disclosed in the Disclosure Schedule, (iii) Liabilities disclosed in the Company SEC Reports and (iv) Liabilities that individually or in the aggregate are not reasonably likely to result in a Company Material Adverse Effect. To the best of the knowledge of the Company, there is no intercorporate indebtedness existing between Trinity and the Company or between Subsidiary and the Company that was issued or acquired at a discount or that will be settled at a discount. 3.20 Insurance. The Company and each of its subsidiaries carries insurance with respect to its properties, assets and business as is appropriate in the Company's reasonable business judgment considering the character and nature of the business of the Company or such subsidiary or as may be required pursuant to any material franchise, license, agreement or permit to which the Company or such subsidiary is a party. Schedule 3.20 of the Disclosure Schedule lists each such policy in full force and effect on the date hereof and with respect to which the Company and each of its subsidiaries has not received notice of cancellation by policy number, policy issuer, type of coverage, policy limits and deductible amounts, if any. To the best knowledge of Steven L. Pease and Gregory S. Saunders, no insurance policy providing coverage in excess of One Hundred Thousand Dollars ($100,000) has been cancelled by the insurer during the three (3) year period ending on the date of this Agreement. 3.21 Employee Relations. Except as set forth in Schedule 3.21 of the Disclosure Schedule, no employee of the Company or any of its subsidiaries is represented by any union or other collective bargaining unit; no petition for an election as to representation of any group of employees by a union or other collective bargaining unit has been filed and remains pending with respect to the Company or any subsidiary thereof; and there is no collective bargaining agreement between the Company or any of its subsidiaries and any of their employees or any representatives of any of their employees. In addition, except as disclosed in Schedule 3.21 of the Disclosure Schedule, there are currently no disputes, grievances, charges, complaints or proceedings involving the employees of the Company, any of its subsidiaries or its collective bargaining representatives (excluding matters encountered in the day-to-day administration of any collective bargaining agreement) that are reasonably likely to have a Company Material Adverse Effect and at no time during the past five (5) years has the Company or any of its subsidiaries suffered any strikes (including wildcat strikes), lockouts or general work stoppages which have caused a cessation of operations nor has the Company or any of its subsidiaries, during such five (5) year period, been the subject of any orders to show cause or notices barring any of its employment practices. 3.22 Unfilled Purchase Orders. As of the date hereof, no unfilled purchase orders of the Company and each of its subsidiaries (i) are with persons, corporations or other entities that are affiliates of the Company, a subsidiary of the Company or with any organization or entity in which any Stockholder owns an interest in the profits or capital of five percent (5%) or more and (ii) are entered into outside the ordinary course of the business of the Company and its subsidiaries as currently conducted. 3.23 Unfilled Sales Orders. Except as set forth in Schedule 3.23 of the Disclosure Schedule, as of the date hereof, no unfilled sales orders of the Company and its subsidiaries are (i) with persons, corporations or other entities that are affiliates of the Company or any of its subsidiaries, or with any organization or entity of which any Stockholder owns an interest in the profits or capital of five percent (5%) or more and (ii) to the best knowledge -13- 77 of the Company reasonably likely to create, in any one case, a loss (calculated as aggregate direct costs associated with the performance of the unfilled sales order in excess of aggregate revenues associated with such unfilled sales order as determined from the books and records of the Company consistent with past practice) in excess of One Hundred Thousand Dollars ($100,000). 3.24 Registration Statement; Proxy Statement. None of the information supplied by the Company for inclusion in (i) the S-4 Registration Statement (as defined in Section 5.3(a) hereof) or (ii) the proxy statement to be distributed in connection with the meeting of the Stockholders to vote upon this Agreement and the Merger (the "Proxy Statement") will, in the case of the Proxy Statement or any amendments thereof or supplements thereto, at the time of such meeting of the Stockholders, or, in the case of the S-4 Registration Statement, at the time it becomes effective and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.25 Accuracy and Completeness of Representations and Warranties; Incorporation by Reference. No representation or warranty made by the Company in this Agreement, in any exhibit referenced herein or in any schedule referenced herein, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading. There is no fact known to the Company which could reasonably be expected to have a Company Material Adverse Effect which has not been set forth in the Company SEC Reports, in this Agreement, in the Disclosure Schedule or in any exhibit referenced herein. For purposes of this Agreement, the Disclosure Schedule shall include and be deemed to incorporate any amendment or supplement thereto as provided for in Section 5.1(f) hereof. Each schedule referenced herein and contained in the Disclosure Schedule is incorporated herein by reference to the same extent and as fully as copied herein in full. 4. REPRESENTATIONS AND WARRANTIES OF TRINITY AND SUBSIDIARY Trinity and Subsidiary, jointly and severally, represent and warrant to the Company that: 4.1 Corporate Status. (a) Each of Trinity and Subsidiary is a corporation organized, validly existing and in good standing under the laws of the State of Delaware, and each has all corporate powers required to carry on its business as now conducted and to execute and deliver this Agreement. Each of Trinity and Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not individually or in the aggregate have a material adverse effect on the business, assets, liabilities, results of operations or financial condition of Trinity and Subsidiary, taken as a whole ("Trinity Material Adverse Effect"). Trinity has heretofore delivered to the Company true and complete copies of the Certificate of Incorporation and Bylaws, as currently in effect, of each of Trinity and Subsidiary. (b) Each subsidiary of Trinity, other than Subsidiary (collectively, the "Trinity Subsidiaries"), is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority and all necessary government approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority or necessary governmental approvals would not individually or in the aggregate have a Trinity Material Adverse Effect. Each Trinity subsidiary is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not individually or in the aggregate have a Trinity Material Adverse Effect. -14- 78 4.2 Corporate Authorization. Each of Trinity and Subsidiary has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of Trinity and Subsidiary and by Trinity as the sole stockholder of Subsidiary, and no other corporate proceedings on the part of Trinity and Subsidiary or their respective stockholders are necessary to authorize the execution and delivery of this Agreement or to consummate the transactions contemplated herein. 4.3 Governmental Authorization; Consents. (a) The execution, delivery and performance by Trinity and Subsidiary of this Agreement and the consummation by Trinity and Subsidiary of the Merger require no action by or in respect of, or filing with, any governmental body, agency, official or authority, except for filings with or approvals by (i) the Commission, (ii) the NYSE and the AMEX, (iii) the FTC, (iv) the DOJ, (v) appropriate state officials in jurisdictions where blue sky or similar securities law clearance is required, and (vi) the Secretary of State of the State of Delaware, and except where the lack of such action or filing would not individually or in the aggregate have a Trinity Material Adverse Effect. (b) No consent, approval, waiver or other action by any person not a party to this Agreement under any contract, agreement, indenture, lease, instrument or other document to which Trinity or Subsidiary is a party or by which they are bound is required or necessary for the execution, delivery and performance of this Agreement by Trinity or Subsidiary or the consummation by Trinity or Subsidiary of the transactions contemplated hereby, except where the failure to obtain such consent, approval, waiver or other action would not individually or in the aggregate have a Trinity Material Adverse Effect. 4.4 Non-contravention. The execution, delivery and performance by Trinity and Subsidiary of this Agreement and the consummation by Trinity and Subsidiary of the transactions contemplated hereby do not and will not (i) materially contravene or constitute a material default under the Certificate of Incorporation or Bylaws of Trinity or Subsidiary, (ii) contravene or constitute a default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of Trinity or any subsidiary or to a loss of any benefit to which Trinity or any subsidiary is entitled, or (iii) result in the creation or imposition of any Lien on any asset of Trinity or any subsidiary, except in the case of clauses (ii) and (iii) for contraventions, defaults, terminations, cancellations, accelerations, creations or impositions which would not individually or in the aggregate have a Trinity Material Adverse Effect. 4.5 Binding Effect. Assuming the due execution and delivery of this Agreement by the Company but subject to its approval by the Stockholders as contemplated by Section 5.3(b) hereof and the filings with or approvals by the governmental bodies, agencies, officials or authorities described in Section 4.3 hereof, this Agreement constitutes a legal, valid and binding agreement of each of Trinity and Subsidiary enforceable against Trinity and Subsidiary in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. 4.6 Reports and Financial Statements. Trinity has previously furnished the Company with true and complete copies of Trinity's (i) Annual Reports on Form 10-K for each of its three (3) fiscal years ending March 31, 1993, 1994 and 1995, respectively, as filed with the Commission, (ii) Trinity's Quarterly Reports on Form 10-Q for each of the first three (3) quarters ending December 31, 1995, as filed with the Commission, (iii) Trinity's most current reports on Form 8-K, as filed with the Commission, and (iv) any other relevant public information reasonably requested by the Company prior to the date hereof. Trinity agrees to continue to provide the Company with any such public information filed with the Commission or reasonably requested by the Company subsequent to the date hereof and prior to the Closing Date. As of their respective dates, such reports and statements (i) complied in all material respects with all applicable requirements of the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder and (ii) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial -15- 79 statements of Trinity included in such reports and separately furnished to the Company by Trinity were prepared in accordance with generally accepted accounting principles consistently applied (except as may be indicated therein or in the notes thereto), and fairly present in all material respects the financial condition of Trinity as of their respective dates and the results of its operations for the periods covered thereby. 4.7 Finders' Fees. There is no investment banker, broker, finder or other similar intermediary which has been retained by, or is authorized to act on behalf of, Trinity or Subsidiary who might be entitled to any fee or commission from Trinity, Subsidiary or the Company upon consummation of the transactions contemplated by this Agreement. 4.8 Registration Statement; Proxy Statement. On the date that the S-4 Registration Statement is declared effective by the Commission, and on the date any post-effective amendment to the S-4 Registration Statement shall become effective, the S-4 Registration Statement and any amendment thereto will comply, in all material respects, with any applicable provisions of the Securities Act, the Exchange Act and the rules and regulations of the Commission thereunder, except with regard to statements of fact, and omissions thereof, made by the Company and the financial information of the Company. None of the information supplied by Trinity or Subsidiary for inclusion in (i) the S-4 Registration Statement or (ii) the Proxy Statement will, in the case of the Proxy Statement or any amendments thereof or supplements thereto, at the time of the meeting of the Stockholders to be held in connection with this Agreement and the Merger, or, in the case of the S-4 Registration Statement, at the time it becomes effective and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.9 Capitalization. (a) The authorized capital stock of Trinity consists of (i) one hundred million (100,000,000) common shares, $1.00 par value, of which forty-one million six hundred twelve thousand sixty-two (41,612,062) shares of Trinity Stock were issued and outstanding on June 1, 1996 and (ii) one million five hundred thousand (1,500,000) preferred shares, no par value, of which none are issued and outstanding on the date hereof. All of the issued and outstanding shares of capital stock of Trinity are validly issued, fully paid and nonassessable and free of preemptive rights. At the Effective Time, Trinity will have a sufficient number of authorized but unissued and/or treasury shares of Trinity Stock available for issuance to the Stockholders in accordance with this Agreement. The shares of Trinity Stock to be issued pursuant to this Agreement will, when so delivered, be (i) duly and validly issued, fully paid and nonassessable, (ii) issued pursuant to an effective registration statement under the Securities Act and (iii) authorized for listing on the NYSE upon official notice of issuance. Except for Trinity's stock option and employee stock purchase plans (the "Trinity Stock Option Plans") and the rights attributable to Trinity's Stockholder's Rights Plan (as described in the annual financial statements of Trinity), as of the date hereof, there are no plans, agreements or other arrangements pursuant to which any options, warrants or other rights to acquire shares of capital stock from Trinity are outstanding that would materially affect the capitalization of Trinity or the ability of Trinity to consummate the transactions contemplated by this Agreement. Except for the Trinity Stock Option Plans, the shares of Trinity described above and other shares, securities, options or rights that would not materially affect the capitalization of Trinity, there are outstanding (i) no shares of capital stock or other voting securities of Trinity, (ii) no securities of Trinity convertible into or exchangeable for shares of capital stock or voting securities of Trinity, and (iii) no phantom stock, options or other rights to acquire from Trinity, and no obligation of Trinity to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Trinity. (b) The authorized capital stock of Subsidiary consists of ten thousand (10,000) shares of common stock, $1.00 par value ("Subsidiary Common Stock"). As of the date hereof, one thousand (1,000) shares of Subsidiary Common Stock are validly issued and outstanding, fully paid and nonassessable, free and clear of all Liens. Trinity owns, beneficially and of record, all the issued and outstanding shares of Subsidiary Common Stock. Trinity has taken all actions as may be required in its capacity as the sole stockholder of Subsidiary to approve the Merger. -16- 80 4.10 Absence of Certain Changes. Except as disclosed in Trinity's filings with the Commission prior to the date of this Agreement or as contemplated by this Agreement, since March 31, 1996, there has not been any Trinity Material Adverse Effect (other than as a result of changes in conditions, including economic or political developments, applicable to the industries in which Trinity operates) and Trinity has in all material respects conducted its business in the ordinary course except as disclosed in a June 7, 1996 press release of Trinity. 4.11 Litigation. Except as disclosed in Trinity's filings with the Commission, there is no suit, action, proceeding or investigation (whether at law or equity, before or by any federal, state or foreign court, tribunal, commission, board, agency or instrumentality, or before any arbitrator) pending or, to the best knowledge of Trinity, threatened against Trinity which is required to be disclosed in accordance with the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder, nor is there any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator outstanding against Trinity which is required to be disclosed in accordance with the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder. 4.12 No Default. Trinity is not in violation or breach of, or default under (and no event has occurred which with notice or the lapse of time or both would constitute a violation or breach of, or default under) any term, condition or provision of (a) its Certificate of Incorporation, as the case may be, or Bylaws, which such violation, breach or default creates a Trinity Material Adverse Effect, (b) any note, bond, mortgage, deed of trust, security interest, indenture, license, agreement, plan, contract, lease, commitment or other instrument or obligation to which Trinity is a party or by which it or any of its properties or assets may be bound or affected, (c) any order, writ, injunction, decree, statute, rule or regulation applicable to Trinity or any of its properties or assets, or (d) any permit, license, governmental authorization, consent or approval necessary for Trinity to conduct its businesses as currently conducted, except in the case of clauses (b), (c) and (d) above for violations, breaches or defaults which would not individually or in the aggregate have a Trinity Material Adverse Effect. 4.13 Taxes. Trinity (i) has timely filed all federal, state, local and foreign tax returns, reports and declarations required to be filed by it for tax years ended prior to the date of this Agreement or requests for extensions have been timely filed, except where the failure to file such returns or requests would not be reasonably likely to have a Trinity Material Adverse Effect, and any such request shall have been granted and not expired and all such returns are complete in all material respects, (ii) has paid all taxes shown to be due and payable on such returns other than such taxes as are being contested by Trinity in good faith, except where the failure to so pay such taxes would not have a Trinity Material Adverse Effect, (iii) has properly accrued in all material respects all taxes for such periods subsequent to the periods covered by such returns and (iv) has not received notice, oral or written, that a deficiency, assessment or other formal claim for any taxes has been asserted or made against Trinity that has not been fully paid or finally settled except for claims which would not reasonably be expected to have a Trinity Material Adverse Effect. 4.14 Accuracy and Completeness of Representations and Warranties. No representation or warranty made by Trinity or Subsidiary in this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in the light of the circumstances in which they are made, not misleading. There is no fact known to Trinity which is likely to have a Trinity Material Adverse Effect which has not been set forth in Trinity's filings with the Commission or in this Agreement or in any exhibit referenced herein. 4.15 Ownership. Trinity does not own, nor has it owned during the past five years, any of the stock of the Company. 4.16 Investigation by Trinity. Trinity has conducted its own independent review and analysis of the businesses, assets, condition, operations and prospects of the Company and acknowledges that Trinity has been provided access to the properties, premises and records of the Company for this purpose. In entering into this Agreement, Trinity has relied solely upon its own investigation and analysis, and the specific representations, warranties and covenants and conditions contained herein, and Trinity acknowledges that none of the Company's directors, officers, employees, affiliates, agents or representatives makes any representation or warranty, either -17- 81 express or implied, as to the accuracy or completeness of any of the information provided or made available to Trinity or its agents or representatives prior to the execution of this Agreement. 5. COVENANTS OF THE COMPANY, TRINITY AND SUBSIDIARY 5.1 Covenants of the Company. From the date hereof and continuing until the Closing, the Company agrees, except as otherwise set forth in this Agreement or to the extent that Trinity shall otherwise consent in writing, that: (a) the Company and each of its subsidiaries will carry on its businesses in the ordinary and customary course, consistent with past practice, will make reasonable efforts to preserve and protect its business, properties and assets and will make reasonable efforts to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers and others having business dealings with it in order to preserve its goodwill and business; (b) the Company and each of its subsidiaries will make reasonable efforts to comply promptly with all requirements that federal or state law may impose on it with respect to the Merger and promptly cooperate with and furnish information to Trinity in connection with any such requirements imposed upon Trinity or on Subsidiary in connection with the Merger; (c) the Company and each of its subsidiaries will make reasonable efforts to obtain (and cooperate with Trinity in preparing, filing and obtaining), at the earliest practicable date and prior to the Closing Date, any consent, authorization or approval of, or any exemption by, any governmental authority or agency, or other third party, required to be obtained or made by the Company or a subsidiary (or by Trinity) in connection with the Merger or the taking of any action necessary to the transactions contemplated hereby or thereby; (d) subject to the terms of Section 5.3(g) hereof, the Company will afford to Trinity and to Trinity's accountants, counsel and other representatives, reasonable access, during normal business hours during the period prior to the Closing Date or the earlier termination of this Agreement, to all of the business, operations, facilities, personnel, properties, books, contracts, commitments and records of the Company and each subsidiary and, during such period, the Company shall furnish as promptly as practicable to Trinity all other information concerning the business, properties and personnel of the Company and each subsidiary as Trinity may reasonably request, provided that no investigation pursuant to this Section 5.1(d) shall affect any representations or warranties made herein by the Company or the conditions to the obligations of the Company to consummate the Merger; (e) the Company will (i) promptly advise Trinity orally and in writing of any change in the business, results of operations, financial condition, assets, liabilities or prospects of the Company or a subsidiary that is or is reasonably likely to cause a Company Material Adverse Effect and (ii) promptly advise Trinity if, at any time before the S-4 Registration Statement becomes effective, the S-4 Registration Statement, as it relates to the Company or a subsidiary, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading, and, in such event, the Company will promptly provide Trinity with the information needed to correct such misstatement or omission; (f) the Company, acting reasonably and in good faith, will supplement or amend the Disclosure Schedule hereto to reflect changes in facts occurring after the date hereof which, if existing on the date of this Agreement, would have been required to be set forth or described in the Disclosure Schedule; -18- 82 (g) promptly after its filing with the Commission, the Company shall furnish Trinity with a true and complete copy of the Company's Annual Report on Form 10-K for its fiscal year ending March 31, 1996, as filed with the Commission, along with a copy of the most recent audited financial statements referenced therein; (h) subject to the confidentiality provisions of this Agreement, (i) the Company shall make available to Trinity access to all records and information in the Company's possession concerning Hazardous Substances currently used, stored, generated, treated, or disposed of by the Company or any subsidiary, all environmental or safety studies conducted by or on behalf of the Company and all reports, correspondence, or filings to governmental environmental agencies with jurisdiction over the Company or any subsidiary concerning the compliance of the Company's or any subsidiary's properties that are used for the business of the Company or any subsidiary or the operation of such properties, to the extent such properties are currently owned or operated by the Company or any subsidiary, with applicable Environmental Laws, and (ii) Trinity may undertake at its sole cost and expense any environmental investigations of the properties or businesses of the Company or any subsidiary, provided however, that Trinity shall confer with the Company regarding the nature, scope and scheduling of any such investigations, shall comply with any and all conditions as the Company may reasonably impose thereon, and shall not contact any governmental authorities or agencies, or conduct any subsurface, sampling or other intrusive or invasive testing or investigation, without the prior written consent of the Company, which consent shall not be unreasonably withheld for any such matter requested by Trinity that could reasonably result in a Company Material Adverse Effect. Trinity shall promptly provide the Company with copies of any report (draft or final), study, test data or other documentation, other than working notes, prepared in connection with Trinity's investigation and, in the event that this Agreement terminates prior to the Closing, Trinity shall promptly deliver to the Company all originals and copies of any and all documents, other than working notes, prepared, generated or received in connection with or pursuant to the investigation, and all associated materials, including but not limited to reports (draft or final), data, analyses and findings concerning the investigation, compliance or condition of or relating to the properties or business of the Company or any subsidiary, and Trinity shall destroy any working notes not provided pursuant to this provision. Trinity shall keep, and shall cause its agents, representatives and any consultants to keep, confidential all information and materials provided or made available to, or generated by or on behalf of, Trinity pursuant to this provision; (i) the Company agrees to take all steps or cooperate with Trinity, as appropriate, in taking all steps reasonably necessary to (a) transfer, amend, or modify at Closing all Permits required for the property of the Company or any subsidiary that are used for the business of the Company or any subsidiary under applicable Environmental Laws, and (b) make or facilitate the filing and, as appropriate, obtain approval of the submissions to any governmental authority regarding the environmental condition, investigation, remediation or cleanup of any of the Company's properties that are used for the business of the Company or any subsidiary required under any applicable state law in order to transfer such properties under this Agreement or consummate this Agreement; (j) the Company shall use all reasonable efforts to cause Ernst & Young LLP, the Company's independent accountants, to deliver to Trinity a letter dated as of the date of the Proxy Statement and addressed to Trinity, in form and substance reasonably satisfactory to Trinity, in connection with the procedures undertaken by them with respect to the financial statements and other financial information of the Company and any subsidiary of the Company contained in the S-4 Registration Statement and the other matters contemplated by AICPA Statement No. 72 and customarily included in comfort letters relating to transactions similar to the Merger; (k) the Company shall not, and shall not permit any subsidiary of the Company to: (i) adopt or propose any change in its Certificate of Incorporation or Bylaws, except a change that would not have any adverse effect on the transactions contemplated by this Agreement; -19- 83 (ii) merge or consolidate with any other person or acquire, except in the ordinary course of business, a material amount of assets of any other person; (iii) issue any shares of capital stock or other securities (except pursuant to warrants, options and other rights outstanding on the date hereof in accordance with the terms of such agreements as of the date hereof) or any options, warrants or other rights to acquire the same; (iv) redeem, purchase or otherwise acquire, or propose to redeem, purchase or acquire, any of its capital stock or other ownership interests; (v) declare, set aside or pay any dividend or make any other distribution or payment with respect to any shares of its capital stock or other ownership interests; (vi) enter into any purchase order (a) with persons, corporations or other entities that are affiliates of the Company, a subsidiary of the Company or with any organization or entity in which any Stockholder owns an interest in the profits or capital of five percent (5%) or more or (b) outside the ordinary course of the business of the Company and its subsidiaries as currently conducted; (vii) enter into any sales order (a) with persons, corporations or other entities that are affiliates of the Company, a subsidiary of the Company or with any organization or entity in which any Stockholder owns an interest in the profits or capital of five percent (5%) or more or (b) reasonably likely to create, in any one case, a loss (calculated as aggregate direct costs associated with the performance of the unfilled sales order in excess of aggregate revenues associated with such unfilled sales order as determined from the books and records of the Company consistent with past practice) in excess of One Hundred Thousand Dollars ($100,000); (viii) except to the extent necessary to comply with the requirements of applicable laws and regulations (a) take, or agree to commit to take, any action that would make any representation and warranty of the Company hereunder inaccurate, in any material respect, at, or as of any time prior to, the Effective Time, (b) omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate, in any material respect, at any such time, provided however that the Company shall be permitted to take or omit to take such action which (without any uncertainty) can be cured, and in fact is cured, at or prior to the Effective Time, or (c) take, or agree to commit to take, any action that would result in, or is reasonably likely to result in, any of the conditions of the Merger set forth in Section 6 hereof not being satisfied; (l) the Company shall (i) not, and it shall direct and use its reasonable efforts to cause its officers, directors, employees, agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by it or any of its subsidiaries) to not, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any Acquisition Proposal (as defined in Section 7.2 hereof) or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal, (ii) immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing, and take the necessary steps to inform the individuals or entities referred to above of the obligations undertaken in this Section 5.1(l) and (iii) notify Trinity immediately if any such inquiries or proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with, it; provided, however, that nothing contained in this Section 5.1(l) shall prohibit the Board of Directors of the Company from (a) furnishing information to or entering into discussions or negotiations with, any person or entity that makes an unsolicited bona fide proposal to acquire the Company pursuant to a merger, consolidation, share exchange, purchase of a substantial portion of assets, business combination or other similar transaction, if, and only to the extent that, (1) the Board of Directors of the Company determines in good faith that such action is required for -20- 84 the Board of Directors to comply with its fiduciary duties to stockholders imposed by law, (2) prior to furnishing such information to, or entering into discussions or negotiations with, such person or entity, the Company provides written notice to Trinity to the effect that it is furnishing information to, or entering into discussions or negotiations with, such person or entity, and (3) subject to any confidentiality agreement with such person or entity (which the Company determined in good faith was required to be executed in order for its Board of Directors to comply with fiduciary duties to stockholders imposed by law), the Company keeps Trinity informed of the status (not the terms) of any such discussions or negotiations; and (b) to the extent applicable, complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal; provided that nothing in this Section 5.1(l) shall (1) permit the Company to terminate this Agreement (except as specifically provided in Section 7 hereof), (2) permit the Company to enter into any agreement with respect to an Acquisition Proposal during the term of this Agreement (it being agreed that during the term of this Agreement, the Company shall not enter into any agreement with any person that provides for, or in any way facilitates, an Acquisition Proposal (other than a confidentiality agreement in customary form)), or (3) affect any other obligation of the Company under this Agreement; and (m) the Company shall deliver to Trinity all subsequent unaudited interim quarterly and monthly financial statements of the Company from March 31, 1996 through and including the Closing Date (the "Unaudited Interim Financial Statement") (the quarterly Unaudited Interim Financial Statements shall be prepared from the books and records of the Company in accordance with generally accepted accounting principles consistently applied, except as may be indicated therein or in the notes thereto, and fairly present in all material respects the financial condition of the Company as of their respective dates and the results of its operation for the periods covered thereby, subject to normal year-end audit adjustments which are not expected to be material in amount or effect; and the monthly Unaudited Interim Financial Statements shall be prepared from the books and records of the Company consistent with past practices). 5.2 Covenants of Trinity and Subsidiary. From the date hereof and continuing until the Closing Date, Trinity and Subsidiary each agree, except as otherwise set forth in this Agreement or to the extent that the Company shall otherwise consent in writing, that: (a) Trinity and Subsidiary will use their respective reasonable efforts to comply promptly with all requirements which federal or state law may impose on them with respect to the Merger and will promptly cooperate with and furnish information to the Company in connection with any such requirements imposed upon the Company in connection with the Merger; (b) Trinity and Subsidiary will use their respective reasonable efforts to obtain (and to cooperate with the Company in preparing, filing and obtaining) at the earliest practicable date and prior to the Closing Date, any consent, authorization or approval of, or any exemption by, any governmental authority or agency, or other third party, required to be obtained or made by Trinity or Subsidiary (or by the Company) in connection with the Merger or the taking of any action necessary to the transactions contemplated hereby or thereby; (c) Trinity will (i) promptly advise the Company of any news release prepared by it or Form 8-K actually filed and will cause to be filed any required Form 8-K with the Commission in respect of the business, results of operations, financial condition, assets, liabilities or prospects of Trinity and (ii) promptly advise the Company if, at any time before the S-4 Registration Statement becomes effective or at any time prior to the Company's distribution of the Proxy Statement, either the S-4 Registration Statement or the Proxy Statement, as the same relates to Trinity and Subsidiary, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and, in such event or in the event Trinity receives supplemental information from the Company pursuant to Section 5.1(e) hereof, Trinity will prepare a supplement or amendment to the S-4 Registration Statement which corrects any misstatements or omissions contained therein and furnish to the Company such number of copies of such supplements or amendments as may be required for distribution to the Stockholders; -21- 85 (d) Trinity agrees that it will not discuss the transaction contemplated herein with any customer, supplier or creditor of the Company without first consulting with the Company and obtaining the consent of the Company; (e) promptly after its filing with the Commission, Trinity shall furnish the Company with a true and complete copy of Trinity's Annual Report on Form 10-K for its fiscal year ending March 31, 1996, as filed with the Commission, along with a copy of the most recent audited financial statements referenced therein; (f) Trinity shall as promptly as practicable prepare and submit to the NYSE a listing application covering the shares of Trinity Stock to be issued in connection with the Merger and this Agreement, and shall use all reasonable efforts to obtain, prior to the Effective Time, approval for the listing of such shares, subject to official notice of issuance; (g) Trinity agrees that all rights to indemnification existing in favor of the present or former directors, officers, employees, fiduciaries and agents of the Company or any of the subsidiaries of the Company (collectively, the "Indemnified Parties") as provided in the Company's Certificate of Incorporation or Bylaws or the certificate or articles of incorporation, bylaws or similar organizational documents of any of the subsidiaries of the Company as in effect as of the date hereof or pursuant to the terms of any indemnification agreements entered into between the Company and any of the Indemnified Parties with respect to matters occurring prior to the Effective Time shall survive the Merger and shall continue in full force and effect (without modification or amendment, except as required by applicable law or except to make changes permitted by law that would enlarge the Indemnified Parties' right of indemnification) to the fullest extent permitted therein and for the maximum term permitted by law, and shall be enforceable by the Indemnified Parties against the Surviving Corporation or subsidiary thereof, as appropriate. At the Closing, the Surviving Corporation shall expressly assume by written instrument such obligations as are set forth in the Company's Certificate of Incorporation or Bylaws that require assumption by virtue of the Surviving Corporation having a Certificate of Incorporation and Bylaws different from that of the Company. Trinity shall use its best efforts to cause to be maintained in effect for not less than six years from the Effective Time the current policies of the directors' and officers' liability insurance maintained by the Company (provided that Trinity may substitute therefor policies of at least equivalent coverage containing terms and conditions which are no less advantageous) with respect to matters occurring prior to the Effective Time (the provisions of this Section 5.2(g) shall survive the consummation of the Merger and expressly are intended to benefit each of the Indemnified Parties); (h) Trinity shall use all reasonable efforts to cause Ernst & Young LLP, Trinity's independent accountants, to deliver to the Company a letter dated as of the date of the Proxy Statement and addressed to the Company, in form and substance reasonably satisfactory to the Company, in connection with the procedures undertaken by them with respect to the financial statements and other financial information of Trinity contained in the S-4 Registration Statement and the other matters contemplated by AICPA Statement No. 72 and customarily included in comfort letters relating to transactions similar to the Merger; (i) Trinity shall not, and shall not permit any subsidiary of Trinity to: (i) adopt or propose any change in its Certificate of Incorporation or Bylaws that would have any adverse effect on the transactions contemplated by this Agreement or that would amend or modify the terms or provisions of the capital stock of Trinity; (ii) merge or consolidate with any other person or (except in the ordinary course of business) acquire a material amount of assets of any other person, if such merger, consolidation or acquisition could reasonably be expected to have a material adverse effect on the ability of Trinity or the Company to consummate the transactions contemplated by this Agreement; (iii) issue any shares of Trinity Stock in connection with any transaction requiring stockholder approval unless Trinity first notifies the Company in writing (an "Issuance Notice") -22- 86 of such transaction and provides the Company with the same information as provided to the stockholders of Trinity; thereafter, the Company shall have the right, by giving written notice to Trinity at any time prior to 5:30 p.m., New York City time, on the tenth trading day following receipt of the Issuance Notice, to abandon the Merger and terminate this Agreement; (iv) purchase or otherwise acquire any shares of Company Stock; and (v) except to the extent necessary to comply with the requirements of applicable laws and regulations (a) take, or agree or commit to take, any action that would make any representation and warranty of Trinity hereunder inaccurate, in any material respect, at, or as of any time prior to, the Effective Time, (b) omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate, in any material respect, at any such time, provided however that Trinity shall be permitted to take or omit to take such action which (without any uncertainty) can be cured, and in fact is cured, at or prior to the Effective Time or (c) take, or agree or commit to take, any action that would result in, or is reasonably likely to result in, any of the conditions of the Merger set forth in Section 6 hereof not being satisfied; and (j) Trinity will promptly advise the Company orally and in writing of any change in the business, results of operations, financial condition, assets, liabilities or prospects of Trinity or any subsidiary that is, or is reasonably likely to cause, a Trinity Material Adverse Effect. 5.3 Additional Covenants. (a) Registration Statement. Trinity shall prepare and file at the appropriate time with the Commission a Registration Statement on Form S-4 with respect to the Trinity Stock issuable pursuant to the Merger (the "S-4 Registration Statement"), which S-4 Registration Statement shall include the Proxy Statement, and shall use all reasonable efforts to have the S-4 Registration Statement declared effective and to maintain such effectiveness until all of the shares covered by the S-4 Registration Statement have been distributed. Trinity shall promptly amend or supplement the S-4 Registration Statement to the extent necessary in order to make the statements therein not misleading or to correct any misstatements which have become false or misleading. Trinity shall cooperate with the Company to have the Proxy Statement approved by the Commission under the Exchange Act. If at any time prior to the Effective Time, Trinity becomes knowledgeable of any event or circumstance relating to Trinity or its officers or directors which should be set forth in an amendment to the S-4 Registration Statement or a supplement to the Proxy Statement, Trinity shall promptly inform the Company and shall promptly file such amendment to the S-4 Registration Statement. If at any time prior to the Effective Time, the Company becomes knowledgeable of any event or circumstance relating to the Company or its officers or directors which should be set forth in an amendment to the S-4 Registration Statement or a supplement to the Proxy Statement, the Company shall promptly inform Trinity. All documents that Trinity is responsible for filing with the Commission in connection with the transactions contemplated hereby will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations thereunder. All documents that the Company is responsible for filing with the Commission in connection with the transactions contemplated hereby will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations thereunder. Trinity shall also take any reasonable action required to be taken under any applicable state blue sky or securities laws in connection with the issuance of the Trinity Stock to be issued as set forth in this Agreement, and the Company shall furnish all information concerning the Company and the Stockholders as may be requested in connection with the issuance of the Trinity Stock to be issued as set forth in this Agreement and shall cooperate with Trinity in the preparation and filing of the S-4 Registration Statement. The Company authorizes Trinity to utilize in the S-4 Registration Statement the information relating to the Company contained in the Proxy Statement. -23- 87 (b) Approval of the Stockholders. The Company shall cause a meeting of the Stockholders to be duly called and held as soon as practicable following effectiveness of the S-4 Registration Statement (and allowing a reasonable period of time to solicit proxies for the purpose of approving the Merger, this Agreement and all actions contemplated hereby which require the approval of the Stockholders). The Company will, through its Board of Directors, recommend to the Stockholders, to the extent that such recommendation is consistent with its fiduciary duties, approval of the transactions contemplated by this Agreement. In connection with the meeting of the Stockholders, the Company and Trinity will cooperate in the preparation of a Proxy Statement relating to the transactions covered by this Agreement. The Company will advise Trinity at least 24 hours prior to the mailing of the Proxy Statement to the Stockholders. (c) Tax Treatment of Merger. It is the intent of the parties to this Agreement that the Merger be treated for federal income tax purposes as a tax-free reorganization pursuant to Section 368(a) of the Code and this Agreement shall constitute a "Plan of Reorganization" for purposes of the Code, and the parties agree (i) not to take any actions which would prevent the Merger from qualifying as such a reorganization, (ii) to report the transactions under this Agreement consistent with such treatment and (iii) to take no positions that are contrary thereto unless otherwise required by law. (d) Agreements by Affiliates. The Company shall deliver to Trinity a letter identifying all persons who are, at the time the Merger is submitted to a vote of the Stockholders, affiliates of the Company for purposes of Rule 145 of the Securities Act ("Affiliates"). Trinity agrees that at all times relevant to a possible sale of shares of the Trinity Stock by an Affiliate that it will satisfy the current public information requirements set forth in paragraph (c) of Rule 144 under the Securities Act (or any rule or regulation promulgated in substitution or replacement of said paragraph (c)). The Company shall use reasonable efforts to cause each person who is identified above as an Affiliate to deliver to Trinity on or prior to the Closing Date an Affiliate Letter substantially in the form attached hereto as Exhibit C. (e) Additional Assurances. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger and this Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals and effecting all necessary registrations and filings. Specifically, the Company and Trinity will cooperate with each other in preparing and filing the S-4 Registration Statement and the Proxy Statement and in responding to any comments of the staff of the Commission thereon, and will furnish to the other for inclusion therein all such information relating to it as the other party or its counsel shall reasonably request. (f) Closing Conditions. The Company, Trinity and Subsidiary will use their respective reasonable efforts to cause the conditions set forth in Section 6 hereof to occur on or before the Closing Date. (g) Confidentiality. In recognition of the confidential nature of certain of the information that will be provided by the Company to Trinity, and by Trinity to the Company, each of the Company, Trinity and Subsidiary agrees to retain in confidence, and to require its respective directors, officers, employees, consultants, professional representatives and agents (collectively, its "Representatives") to retain in confidence, all information transmitted or disclosed to it in connection with the Merger, and further agrees that it will not use for its own benefit and will not use or disclose to any third party, or permit the use or disclosure to any third party of, any information so obtained or revealed, except that a party hereto may disclose such information to those of its Representatives who need such information for the proper performance of their assigned duties with respect to the consummation of the transactions contemplated hereby. In making such information available to its Representatives, the applicable party shall take any and all precautions reasonably necessary to ensure that its Representatives use the information only as permitted hereby. Notwithstanding anything to the contrary in the foregoing provisions, such information may be disclosed (a) in the S-4 Registration Statement and the Proxy Statement, provided that the party -24- 88 that is the source of the information consents, which consent shall not be unreasonably withheld, (b) where it is necessary by applicable law to be disclosed to any regulatory authorities or governmental agencies (including, but not limited to, the Commission), (c) if it is required by court order or decree, (d) if it is ascertainable or obtained from public or published information, (e) if it is received from a third party not known to the recipient to be under an obligation to keep such information confidential, or (f) if the recipient can demonstrate by written documents that such information was in its possession prior to disclosure thereof in connection with this Agreement. If a party shall be required to make disclosure of any such information by operation of law, such party shall use all reasonable efforts to give the other parties prior notice of the making of such disclosure. In the event that the Merger shall not occur, each party shall immediately deliver, or cause to be delivered, to the party providing such information (without retaining any copies thereof) any and all documents, work papers and other materials obtained from the Company, Trinity or Subsidiary, as the case may be, that contain or are derived from confidential information of the Company, Trinity or Subsidiary. 6. CONDITIONS TO CLOSING 6.1 Conditions to Obligations of Trinity and Subsidiary to Proceed with the Merger. Notwithstanding any other provision of this Agreement, each of the following shall be a condition to the obligation of Trinity and Subsidiary to consummate the Merger: (a) Continued Accuracy of Representations and Warranties. All representations and warranties of the Company contained herein (supplemented or amended as provided in Section 5.1(f) hereof) shall be true and correct at and as of the Closing Date (in all material respects with regard to representations and warranties that are not otherwise qualified with a materiality standard) with the same effect as though such representations and warranties were made at and as of such time, except that insofar as any of such representations and warranties relate solely to a particular date or period, in which case they shall be true and correct in all respects on the Closing Date (in all material respects with regard to representations and warranties that are not otherwise qualified with a materiality standard) with respect to such date or period; and the Company shall have performed and complied with all obligations, covenants and conditions required by this Agreement to have been performed or complied with by it prior to or on the Closing Date (in all material respects with regard to obligations, covenants and conditions that are not otherwise qualified with a materiality standard). (b) Certificate. Trinity shall have received a certificate from the Company dated as of the Closing Date and signed by its President and its principal financial officer certifying as to the fulfillment of the conditions set forth in the preceding paragraph (a) insofar as such conditions relate to the representations, warranties, obligations, covenants and conditions applicable to the Company. (c) Litigation. No preliminary or permanent injunction or other order by any federal or state court which prevents the consummation of the Merger shall have been issued and shall remain in effect and there shall not have been instituted or be pending any action or proceeding by any United States federal or state government or governmental agency or instrumentality (i) challenging or seeking to restrain or prohibit the consummation of the Merger or seeking material damages in connection with the Merger or (ii) seeking to prohibit Trinity's or the Surviving Corporation's ownership or operation of all or a material portion of Trinity's or the Company's business or assets. (d) Governmental Action. There shall not have been any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger by any United States federal or state government or governmental agency or instrumentality or court which would (i) prohibit Trinity's or the Surviving Corporation's ownership or operation of all or a material portion of the Company's business or assets, (ii) render Trinity or Subsidiary unable to consummate the Merger, or (iii) make such consummation illegal. -25- 89 (e) Material Adverse Change. Since the date hereof, there shall not have been any change (including any change disclosed in any supplement or amendment to any Schedule as provided for in Section 5.1(f) hereof) nor any event which has resulted or would result, so far as can be reasonably foreseen, in a change that has or is reasonably likely to have a Company Material Adverse Effect (other than as a result of change in conditions, including economic or political developments, applicable to the industries in which the Company operates). (f) Stockholder Approval. The Merger and this Agreement shall have been validly approved by the requisite vote of the Stockholders. (g) Certificate of Merger. The Delaware Certificate of Merger shall have been executed by the duly authorized officer(s) of the Company. (h) S-4 Registration Statement. The S-4 Registration Statement shall have become effective and no stop order suspending such effectiveness or proceedings for that purpose shall have been issued and remain in effect. (i) The Company's Documents. Trinity shall have received the following documents from the Company, all of which shall be in form and substance reasonably acceptable to Trinity: (i) certificate of the Secretary of State of the State of Delaware certifying the Certificate of Incorporation of the Company and all amendments thereof, dated not more than ten (10) days prior to the Closing Date; (ii) certificate of the Secretary or an Assistant Secretary of the Company dated as of the Closing Date certifying the Bylaws of the Company as then in effect; (iii) certificate of incumbency dated as of the Closing Date executed by the Secretary or an Assistant Secretary of the Company indicating the current officers and directors of the Company; (iv) certificate of good standing of the Company dated not more than ten (10) days prior to the Closing Date from the Secretary of State of the State of Delaware and a certificate of good standing as a foreign corporation dated not more than thirty (30) days prior to the Closing Date from the Secretary of State of each other state where the character of the property owned or leased by the Company or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not individually or in the aggregate have a Company Material Adverse Effect; and (v) certificate executed by the President and Chief Financial Officer of the Company substantially in the form attached hereto as Exhibit A. (j) Consents. Trinity shall have received copies of consents of all third parties necessary for the Company to execute, deliver and perform this Agreement and consummate the Merger. (k) HSR Filing. All applicable waiting periods under the HSR Act shall have expired. (l) Stock Options, etc. Trinity shall have received a certificate from the Company, dated as of the Closing Date, signed by its President and its principal financial officer certifying that, at and after the Closing Date, except for Stock Options granted under a Company Stock Plan or pursuant to an agreement identified on Schedule 3.6 of the Disclosure Schedule, there shall not exist any subscriptions, options, warrants, calls, conversion rights or other agreements, Claims or commitments of any nature whatsoever obligating the Company or any subsidiary of the Company to issue, transfer, deliver or sell, or to cause to be issued, transferred, delivered or sold, any shares of the capital stock of the Company -26- 90 or any subsidiary of the Company or obligating the Company or any subsidiary of the Company to grant, extend or enter into any of the foregoing. (m) Listing of Trinity Stock. The shares of Trinity Stock issuable to the Stockholders pursuant to this Agreement shall have been authorized for listing on the NYSE. (n) Minimum Stockholders' Equity. The Unaudited Interim Financial Statements of the Company at June 30, 1996 reflect "Stockholders' Equity" of at least Twenty-five Million Six Hundred Thousand Dollars ($25,600,000), provided that the Unaudited Interim Financial Statements of the Company at July 31, 1996 shall be utilized for purposes of the measurement of Stockholders' Equity if the Closing occurs after August 20, 1996. 6.2 Conditions to Obligations of the Company. Notwithstanding any other provisions of this Agreement, each of the following shall be a condition to the obligation of the Company to consummate the Merger: (a) Continued Accuracy of Representations and Warranties. All representations and warranties of Trinity and Subsidiary contained herein shall be true and correct at and as of the Closing Date (in all material respects with regard to representations and warranties that are not otherwise qualified with a materiality standard) with the same effect as though such representations and warranties were made at and as of such time, except that insofar as any of such representations and warranties relate solely to a particular date or period, in which case they shall be true and correct in all respects on the Closing Date (in all material respects with regard to representations and warranties that are not otherwise qualified with a materiality standard) with respect to such date or period; and Trinity and Subsidiary shall have performed and complied with all obligations, covenants and conditions required by this Agreement to have been performed or complied with by them prior to or on the Closing Date (in all material respects with regard to obligations, covenants and conditions that are not otherwise qualified with a materiality standard). (b) Certificate. Trinity and Subsidiary each shall have delivered a certificate dated as of the Closing Date and signed by the President or a Vice President of each of Trinity and Subsidiary respectively certifying as to the fulfillment of the conditions set forth in the preceding paragraph (a) insofar as such conditions relate to the representations, warranties, obligations, covenants and conditions applicable to Trinity or Subsidiary, as appropriate. (c) Tax Opinion. The Company shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom, special counsel to the Company, in form and substance reasonably satisfactory to the Company, dated as of the Effective Time, substantially to the effect that, on the basis of certain facts, representations, and assumptions set forth in such opinion that are consistent with the state of facts existing at the Effective Time, the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. In rendering the opinion described in the preceding sentence, such counsel may require and rely upon representations contained in certificates of officers of Trinity, Subsidiary, the Company and others. (d) Opinion of Financial Advisor. The Company shall have received written opinions from Schroder Wertheim & Co. Incorporated, dated on or about the date of the Proxy Statement and the Closing Date, to the effect that the consideration to be received by the Stockholders pursuant to the Merger is fair to such Stockholders from a financial point of view. (e) Litigation. No preliminary or permanent injunction or other order by any federal or state court which prevents the consummation of the Merger shall have been issued and shall remain in effect and there shall not have been instituted or be pending any action or proceeding by any United States federal or state government or governmental agency or instrumentality (i) challenging or seeking to restrain or prohibit the consummation of the Merger or seeking material damages in connection with the Merger or (ii) seeking to prohibit Trinity's or the Surviving Corporation's ownership or operation of all or a material portion of Trinity's or the Company's business or assets. -27- 91 (f) Governmental Action. There shall not have been any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger by any United States federal or state government or governmental agency or instrumentality or court which would (i) prohibit Trinity's or the Surviving Corporation's ownership or operation of all or a material portion of Trinity or the Company's business assets, (ii) render the Company unable to consummate the Merger, or (iii) make such consummation illegal. (g) Stockholder Approval. The Merger and this Agreement shall have been validly approved by the requisite vote of the Stockholders. (h) Certificate of Merger. The Delaware Certificate of Merger shall have been executed by the duly authorized officer(s) of Subsidiary. (i) S-4 Registration Statement. The S-4 Registration Statement shall have become effective and no stop order suspending such effectiveness or proceedings for that purpose shall have been issued and remain in effect. (j) Trinity and Subsidiary Documents. The Company shall have received the following documents from Trinity and Subsidiary, all of which shall be in form and substance reasonably acceptable to the Company: (i) certificate of incumbency dated as of the Closing Date executed by the Secretary or an Assistant Secretary of Trinity indicating the current officers and directors of Trinity and Subsidiary; (ii) certificate of good standing for Trinity and Subsidiary from the Secretary of State of the State of Delaware, each dated not more than ten (10) days prior to the Closing Date; (iii) a copy of the effectiveness order with respect to the S-4 Registration Statement as filed by Trinity; (iv) a copy of the official notice from the NYSE confirming that the shares of Trinity Stock issuable in the Merger have been approved for listing on the NYSE; (v) instrument of assumption from Subsidiary to the extent required by the second sentence of Section 5.2(g) of this Agreement; and (vi) certificate executed by a Vice President of Trinity substantially in the form attached hereto as Exhibit B. (k) HSR Filing. All applicable waiting periods under the HSR Act shall have expired. (l) Listing of Trinity Stock. The shares of Trinity Stock issuable to the Stockholders pursuant to this Agreement shall have been authorized for listing on the NYSE. (m) Material Adverse Change. Since the date hereof, there shall not have been any change nor any event which has resulted or would result, so far as can be reasonably foreseen, in a change that has or is reasonably likely to have a Trinity Material Adverse Effect (other than as a result of changes in conditions, including economic or political developments, applicable to the industries in which Trinity operates). -28- 92 7. TERMINATION 7.1 Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Closing Date, whether before or after approval by the Stockholders, by mutual consent, in writing, of the Company and Trinity. 7.2 Termination by the Company. The Company may terminate this Agreement by written notice to Trinity and Subsidiary at any time prior to the Closing Date, whether before or after approval by the Stockholders, if (i) a condition to the performance of the Company under Section 6.2 hereof shall not be fulfilled on or before the time specified for the fulfillment thereof, (ii) the representations and warranties of Trinity and Subsidiary which are qualified with respect to materiality are not true and correct in all respects, or if the representations and warranties of Trinity and Subsidiary that are not so qualified are not true and correct in all material respects, or there has been a material breach of any of the covenants or agreements set forth in this Agreement on the part of Trinity or Subsidiary, but only if such breach of representation or warranty or breach of covenant is not curable or, if curable, is not cured within thirty (30) days after written notice of such breach is given by the Company to Trinity, (iii) any suit, action or other proceeding shall be pending or threatened that, in the Company's reasonable opinion, materially and adversely affects the prospects of the Merger, (iv) Trinity issues shares in a transaction requiring stockholder approval or (v) the Board of Directors of the Company has (a) withdrawn, or modified or changed in a manner adverse to Trinity or Subsidiary its approval or recommendation of this Agreement or the Merger in order to approve and permit the Company to execute a definitive agreement relating to an Acquisition Proposal, and (b) determined, based on a written opinion of outside legal counsel to the Company, that the failure to take such action as set forth in the preceding clause would result in a breach of the Board of Directors' fiduciary duties under applicable law, provided, however, that the Board of Directors of the Company shall have been advised in such written opinion of outside counsel that notwithstanding a binding commitment to consummate an agreement of the nature of this Agreement entered into in the proper exercise of their applicable fiduciary duties, such fiduciary duties would also require the directors to terminate this Agreement as a result of such Acquisition Proposal. The term "Acquisition Proposal" as used herein means any proposal to purchase or acquire any equity securities or (except in the ordinary course of business) assets of, or merge or combine with, the Company or any of its subsidiaries. 7.3 Termination by Trinity and Subsidiary. Trinity and Subsidiary may terminate this Agreement by written notice to the Company at any time prior to the Closing Date if (i) a condition to the performance of Trinity and Subsidiary under Section 6.1 hereof shall not be fulfilled on or before the time specified for the fulfillment thereof, (ii) the representations and warranties of the Company which are qualified with respect to materiality are not true and correct in all respects, or if the representations and warranties of the Company that are not so qualified are not true and correct in all material respects, or there has been a material breach of any of the covenants or agreements set forth in this Agreement on the part of the Company, but only if such breach of representation or warranty or breach of covenant is not curable or, if curable, is not cured within thirty (30) days after written notice of such breach is given by either Trinity or Subsidiary to the Company, or (iii) any suit, action or other proceeding shall be pending or threatened that, in Trinity's reasonable opinion, materially and adversely affects the prospects of the Merger. 7.4 Termination by Either Trinity or the Company. This Agreement may be terminated and the Merger may be abandoned by either Trinity or the Company if (a) the Merger shall not have been consummated before September 16, 1996; provided, however, that this Agreement may be extended by written notice of either Trinity or the Company to a date not later than October 15, 1996, if the Merger shall not have been consummated as a direct result of the conditions in Section 6.1(c), 6.1(d), 6.1(k), 6.2(e), 6.2(f), 6.2(g) or 6.2(k) hereof not having been satisfied by such date or (b) a United States federal or state court of competent jurisdiction or United States federal or state governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable; provided, that the party seeking to terminate this Agreement pursuant to clause (a) shall not be in material violation of any of its representations, warranties or covenants set forth in this Agreement, and the party -29- 93 seeking to terminate this Agreement pursuant to clause (b) shall have used all reasonable efforts to remove such injunction, order or decree. 7.5 Effect of Termination and Abandonment. In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Section 7, written notice thereof shall as promptly as practicable be given to the other parties to this Agreement and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein: (i) there shall be no liability or obligation on the part of Trinity, any subsidiary of Trinity, the Company or any subsidiary of the Company or their respective officers and directors, and all obligations of the parties shall terminate, except for the obligations of the parties pursuant to this Section 7.5, except for the provisions of Sections 3.15, 4.7, 5.3(g), 8.2, 8.3, 8.4, 8.6, 8.10 and 8.11 hereof and except that a party who is in material breach of its representations, warranties, covenants or agreements set forth in this Agreement shall be liable for damages occasioned by such breach, including, without limitation, any expenses incurred by the other party in connection with this Agreement and the transactions contemplated hereby, and (ii) all filings, applications and other submissions made pursuant to the transactions contemplated by this Agreement shall, to the extent practicable, be withdrawn from the agency or person to which made. In the event that any person shall have made an Acquisition Proposal for the Company and thereafter this Agreement is terminated by the Company (other than pursuant to the breach of this Agreement by Trinity), then the Company shall pay Trinity a fee equal to Two Million Two Hundred Twenty-eight Thousand Eighty-one Dollars ($2,228,081), which amount shall be payable by wire transfer of same day funds of Two Hundred Thousand Dollars ($200,000) on the date of such termination with the balance due on the date that the transaction contemplated by an Acquisition Proposal is consummated. The Company acknowledges that the agreements contained in this Section 7.5 are an integral part of the transactions contemplated in this Agreement, and that, without these agreements, Trinity and Subsidiary would not enter into this Agreement; accordingly, if the Company fails to promptly pay the amount due pursuant to this Section 7.5, and, in order to obtain such payment, Trinity or Subsidiary commences a suit which results in a judgment against the Company for the fee set forth in this Section 7.5, the Company shall pay to Trinity its costs and expenses (including attorneys' fees) in connection with such suit, together with interest on the amount of the fee at the rate of 12% per annum. In the event Trinity has received the fee payable under Section 7.5 hereof, it shall not (i) assert or pursue in any manner, directly or indirectly, any Claim or cause of action based in whole or in part upon alleged tortious or other interference with rights under this Agreement against any entity or person submitting an Acquisition Proposal or (ii) assert or pursue in any manner, directly or indirectly, any Claim or cause of action against the Company or any of its officers or directors based in whole or in part upon its or their receipt, consideration, recommendation, or approval of an Acquisition Proposal or the Company's exercise of its right of termination. 7.6 Extension. At any time prior to the Closing Date, the parties hereto (Trinity and Subsidiary being considered one party for purposes of this Section 7.6) may (i) extend the time for the performance of any of the obligations or other acts of the other party hereto, (ii) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered by the other party pursuant hereto, or (iii) waive compliance by the other party with any of the representations, warranties, covenants and conditions contained herein. Any agreement on the part of any party hereto to any such extension or waiver shall be valid if set forth in an instrument in writing signed on behalf of such party. 8. MISCELLANEOUS 8.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be given, -30- 94 (a) if to Trinity or Subsidiary, to: Trinity Industries, Inc. 2525 Stemmons Freeway Dallas, Texas 75207 Attention: Mr. F. Dean Phelps, Vice President Fax: (214) 589-8824 with a copy to: Charles C. Reeder, Esq. Locke Purnell Rain Harrell (A Professional Corporation) 2200 Ross Avenue, Suite 2200 Dallas, Texas 75201 Fax: (214) 740-8800 (b) if to the Company, to: Transcisco Industries, Inc. 601 California Street, Suite 1301 San Francisco, California 94108 Attention: Steven L. Pease, Chief Executive Officer Fax: (415) 788-0583 with a copy to: Theodore J. Kozloff, Esq. Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, NY 10022 Fax: (212) 735-2000 or such other address as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective if given by any other means, when delivered or transmitted via confirmed fax to the address specified in this Section. 8.2 Expenses. Except as set forth in Section 7.5 hereof, all costs and expenses related to the preparation, negotiation and performance of this Agreement (i) incurred by Trinity or Subsidiary shall be paid by Trinity, and (ii) incurred by the Company shall be paid by the Company. In no event will Trinity or Subsidiary pay any expenses of any Stockholder. 8.3 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided that neither the Company, Subsidiary nor Trinity may assign, delegate or otherwise transfer any of its respective rights or obligations under this Agreement without the written consent of the others. 8.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the rules of conflict of laws of such or any other jurisdiction. Each of the Company, Trinity and Subsidiary hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware and the United States of America located in the State of Delaware (the "Delaware Courts") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agreed not to commence any litigation relating thereto except in such courts), waives any -31- 95 objection to the laying of venue of any such litigation in the Delaware Courts and agreed not to plead or claim that such litigation brought in any Delaware Court has been brought in an inconvenient forum. 8.5 Counterparts: Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 8.6 Integration. This Agreement and those agreements referred to herein embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants, or undertakings other than those expressly set forth or referred to herein or therein. This Agreement and those agreements referred to herein supersede all prior agreements and the understandings between the parties with respect to such subject matter. 8.7 Amendment; Waiver. No waiver and no modification or amendment of any provision of this Agreement shall be effective unless specifically made in writing and duly signed by the parties to be bound thereby. Waiver by the party of any breach of or failure to comply with any of the provisions of this Agreement by any other party shall not be construed as, or constitute, a continuing waiver of, or a waiver of any other breach of, or failure to comply with, any other provision of this Agreement. 8.8 Nonsurvival of Representations and Warranties. No representations or warranties in this Agreement or in any instrument delivered pursuant to this Agreement, other than the representation and warranty contained in Section 4.16 hereof, shall survive beyond the Effective Time. This Section 8.8 shall not limit any covenant or agreement after the Effective Time. 8.9 Further Assurances. The parties hereto agree that each will execute and deliver to the other any and all documents in addition to those expressly provided for herein that may be necessary to carry out the provisions of this Agreement, whether before, at or after the Closing. 8.10 Publicity. Each of the parties hereto agrees that it will not issue any press release or otherwise make any public statement or respond to any press inquiry with respect to this Agreement or the transactions contemplated hereby without the prior approval of the other party (which approval will not be unreasonably withheld), except as may be required by applicable law. If a public statement is required by law, the disclosing party will use all reasonable efforts to give other party prior written notice of the disclosure to be made. 8.11 Severability; Validity; Parties in Interest. If any provision of this Agreement, or the application thereof to any person or circumstance or in any jurisdiction is held invalid or unenforceable, the remainder of this Agreement, and the application of such provision to other persons or circumstances or in any other jurisdictions, shall not be affected thereby, and to such end, the provisions of this Agreement are agreed to be severable. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. Nothing in this Agreement, express or implied, is intended to confer upon any person not a party to this Agreement any rights or remedies of any nature whatsoever under or by reason of this Agreement. 8.12 Enforcement of Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any Delaware Court, this being in addition to any other remedy to which they may be entitled at law or in equity. 8.13 Certain Definitions. "To the knowledge", "to the best knowledge" or any similar phrase referring to the knowledge or awareness of a party shall be deemed to refer to the knowledge of (i) with regard to the Company and its subsidiaries, Steven L. Pease, Gregory S. Saunders, William F. Bryant, George A. Tedesco or Robert A. Jahnke and (ii) with regard to Trinity and Subsidiary, W. Ray Wallace, Timothy R. Wallace, John T. Sanford, F. Dean Phelps or John M. Lee. -32- 96 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. TRINITY INDUSTRIES, INC. By: /s/ John T. Sanford --------------------------------- John T. Sanford Senior Vice President TRINITY Y, INC. By: /s/ John T. Sanford --------------------------------- John T. Sanford Senior Vice President TRANSCISCO INDUSTRIES, INC. By: /s/ Steven L. Pease --------------------------------- Steven L. Pease Chief Executive Officer -33- 97 EXHIBIT A [TRANSCISCO INDUSTRIES, INC. LETTERHEAD] [CLOSING DATE] Skadden, Arps, Slate Meagher & Flom 919 Third Avenue New York, New York 10022 Ladies and Gentlemen: The undersigned, a duly authorized officer of Transcisco Industries, Inc., a Delaware corporation (the "Company") and acting as such, in connection with the opinion to be delivered by Skadden, Arps, Slate, Meagher & Flom pursuant to Section 6.2(c) of the Agreement and Plan of Merger dated June 17, 1996 (the "Merger Agreement")1 among Trinity Industries, Inc., a Delaware corporation ("Trinity"), Trinity Y, Inc., a Delaware corporation ("Subsidiary") and a wholly-owned subsidiary of Trinity, and the Company, and recognizing that you will rely on this certificate in delivering said opinion, and that Trinity may rely on this certificate for the purpose of determining the treatment of the contemplated merger (the "Merger") and filing returns required under federal, state, local or foreign tax laws, hereby certifies that, to the best knowledge and belief of the executive officers of the Company ("Company Management"), after due inquiry and investigation, the facts relating to the Merger of Subsidiary with and into the Company pursuant to the Merger Agreement, which facts are described in the Proxy Statement relating to the Merger and the S-4 Registration Statement relating to the Merger, insofar as such facts pertain to the Company, are true, correct and complete in all material respects and, insofar as such facts pertain to Trinity or Subsidiary, Company Management has no reason to believe that such facts are not true, correct and complete in all material respects. The undersigned further certifies, to the best knowledge and belief of Company Management, after due inquiry and investigation, as follows: 1. The ratio for the exchange of shares of Company Stock for Trinity Stock in the Merger was negotiated through arm's length bargaining. Schroder Wertheim & Co. Incorporated ("Schroder") delivered to the board of directors of the Company its written opinion dated June 13, 1996 that as of that date the Exchange Ratio was fair, from a financial point of view, to the Stockholders. This written opinion was reaffirmed by Schroder in letters dated [DATE] and [DATE]. Based on the arm's length negotiations and the fairness opinion of Schroder, the Company believes the fair market value of the shares of Trinity Stock to be received by each Stockholder (plus the cash, if any, to be received by such Stockholder in lieu of a fractional share of Trinity Stock) will be approximately equal to the fair market value of the Company Stock surrendered by such Stockholder in exchange therefor pursuant to the Merger as determined as of the date of the Merger Agreement. 2. Company Management knows of no plan or intention on the part of the holders of Company Stock to sell, exchange or otherwise dispose of a number of shares of Trinity stock received in the Merger, except for certain dispositions of shares of Trinity Stock having a value, as of the Effective Time, of no more than 20 percent of the value of all the Company Stock outstanding immediately preceding the Effective Time. For purposes of this representation, Company Stock to be exchanged for cash in lieu of fractional shares of Trinity Stock will be treated - ---------------------------------- 1 Unless otherwise defined herein, all capitalized terms used herein shall have the meanings specified in the Merger Agreement. A-1 98 Skadden, Arps, Slate Meagher & Flom [CLOSING DATE] Page 2 as outstanding immediately preceding the Effective Time. Moreover, Company Stock and shares of Trinity Stock held by the Company Stockholders and sold, redeemed or otherwise disposed of prior or subsequent to the Merger in connection with any overall plan of which the Merger is a part have been considered in making this representation. 3. Following the Merger, the Company will hold at least 90 percent of the fair market value of the net assets and at least 70 percent of the fair market value of the gross assets held by it immediately prior to the transfer. For purposes of this representation, amounts paid by the Company (a) for reorganization expenses incurred in connection with or in contemplation of the Merger, (b) as redemptions and distributions in anticipation of or as part of the plan of reorganization of the Company, and (c) to repay indebtedness of the Company or any of its subsidiaries (except to the extent that any such repayment is funded through indebtedness incurred by the Company or any of its subsidiaries) shall be treated as assets held by the Company immediately prior to the Effective Time. 4. In the Merger, Company Stock representing control of the Company, as defined in Section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code"), will be exchanged solely for shares of Trinity Stock. No shares of Company Stock will be exchanged for cash or other property originating with Trinity (except for cash, if any, paid in lieu of fractional shares of Trinity Stock). 5. The Company and its Stockholders have paid, or will pay, only their respective expenses incurred in connection with the Merger, except as provided in Section 7.5 of the Merger Agreement with respect to amounts payable on termination of the Merger Agreement and the abandonment of the Merger. 6. There is not, and has never been, any intercorporate indebtedness existing between Trinity and any of its affiliates, on the one hand, and the Company and any of its affiliates, on the other hand, or between Subsidiary and any of its affiliates, on the one hand, and the Company and any of its affiliates, on the other hand, that was issued, acquired or settled at a discount. 7. The payment of cash in lieu of fractional shares of Trinity Stock pursuant to the Merger will be solely for the purpose of avoiding the expense and inconvenience to Trinity of issuing fractional shares and will not represent separately bargained-for consideration. 8. The total cash consideration that will be paid in the Merger to the holders of Company Stock in lieu of issuing fractional shares of Trinity Stock will not exceed one percent of the total consideration that will be delivered in the Merger to the holders of Company Stock in exchange for their Company Stock. 9. The Company will not have outstanding any warrants, options, convertible securities or any other type of right pursuant to which any person could acquire shares of capital stock of the Company that, if exercised or converted, would affect Trinity's acquisition or retention of control of the Company within the meaning of Section 368(c) of the Code. 10. Following the Merger the Company will continue its "historic business" or use a significant portion of its "historic business assets" in a business (as such terms are used in Treas. Reg. Section 1.368-1(d)). 11. The Company is not under the jurisdiction of any court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. 12. At the Effective Time, the fair market value of the assets of the Company will exceed the sum of its liabilities, plus (without duplication) the amount of liabilities, if any, to which the assets are subject. A-2 99 Skadden, Arps, Slate Meagher & Flom [CLOSING DATE] Page 3 13. None of the compensation received by any Stockholder-employee of the Company with respect to periods ending on or prior to the Effective Time will be separate consideration for, or allocable to, any of their Company Stock. Furthermore, none of the shares of Trinity Stock received by any Stockholder-employee of the Company in exchange for Company Stock will be separate consideration for, or allocable to, any employment or consulting agreement or similar arrangement. 14. The compensation paid to any Stockholder-employee of the Company with respect to periods ending on or prior to the Effective Time will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arms-length for similar services. 15. No liabilities of the Company guaranteed by Company Stockholders or liabilities of the Company's Stockholders will be assumed by Trinity, nor will any of the stock of the Surviving Corporation, immediately after the Merger, be subject to any liabilities that may have encumbered Company Stock immediately prior to the Merger. 16. The Company is not an investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code. We will promptly and timely notify Skadden, Arps, Slate, Meagher & Flom if we believe or have reason to believe that (i) any of the facts described herein or in the Proxy Statement and S-4 Registration Statement or (ii) any of the representations, information or covenants contained in this certificate, are untrue, incorrect or incomplete in any material respect. TRANSCISCO INDUSTRIES, INC. By: ______________________________ Print Name: ______________________________ Print Title:______________________________ A-3 100 EXHIBIT B [TRINITY INDUSTRIES, INC. LETTERHEAD] [CLOSING DATE] Skadden, Arps, Slate Meagher & Flom 919 Third Avenue New York, New York 10022 Ladies and Gentlemen: The undersigned, a duly authorized officer of Trinity Industries, Inc., a Delaware corporation ("Trinity") and acting as such, in connection with the opinion to be delivered by Skadden, Arps, Slate, Meagher & Flom pursuant to Section 6.2(c) of the Agreement and Plan of Merger dated June 17, 1996 (the "Merger Agreement")1 among Trinity, Trinity Y, Inc., a Delaware corporation ("Subsidiary") and a wholly-owned subsidiary of Trinity, and Transcisco Industries, Inc., a Delaware corporation (the "Company"), and recognizing that you will rely on this certificate in delivering said opinion, hereby certifies that, to the best knowledge and belief of the executive officers of Trinity ("Trinity Management"), after due inquiry and investigation, the facts relating to the Merger of Subsidiary with and into the Company pursuant to the Merger Agreement, which facts are described in the Proxy Statement relating to the Merger and the S-4 Registration Statement relating to the Merger, insofar as such facts pertain to Trinity or Subsidiary, are true, correct and complete in all material respects and, insofar as such facts pertain to the Company, Trinity Management has no reason to believe that such facts are not true, correct and complete in all material respects. The undersigned further certifies, to the best knowledge and belief of Trinity Management, after due inquiry and investigation, as follows: 1. The ratio for the exchange of shares of Company Stock for Trinity Stock in the Merger was negotiated through arm's length bargaining. Schroder Wertheim & Co. Incorporated ("Schroder") delivered to the board of directors of the Company its written opinion dated June 13, 1996 that as of that date the Exchange Ratio was fair, from a financial point of view, to the Stockholders. This written opinion was reaffirmed by Schroder in letters dated [DATE] and [DATE]. Based on the arm's length negotiations and the fairness opinion of Schroder, Trinity believes the fair market value of the shares of Trinity Stock to be received by each Stockholder (plus the cash, if any, to be received by such Stockholder in lieu of a fractional share of Trinity Stock) will be approximately equal to the fair market value of the Company Stock surrendered by such Stockholder in exchange therefor pursuant to the Merger as determined as of the date of the Merger Agreement. 2. Following the Merger, the Company will hold at least 90 percent of the fair market value of Subsidiary's net assets and at least 70 percent of the fair market value of Subsidiary's gross assets held immediately prior to the Effective Time. 3. Immediately prior to the Merger, Trinity will be in control of Subsidiary within the meaning of Section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code"). - ---------------------------------- 1 Unless otherwise defined herein, all capitalized terms used herein shall have the meanings specified in the Merger Agreement. B-1 101 Skadden, Arps, Slate Meagher & Flom [CLOSING DATE] Page 2 4. Trinity has no plan or intention to cause the Company to issue additional shares of its stock that would result in Trinity losing control of the Company within the meaning of Section 368(c) of the Code. 5. Neither Trinity nor any of its affiliates (i) is under any obligation to, or has entered into any agreement to make any extraordinary distribution in respect of such shares of Trinity Stock or (ii) has any plan or intention to reacquire any shares of Trinity Stock to be issued in the Merger. Any open market purchases by Trinity of its stock will be motivated solely by business considerations independent of the Merger transaction. 6. Neither Trinity, nor any corporation affiliated with Trinity, has any plan or intention to liquidate the Company, to merge the Company or any subsidiary of the Company with or into another entity, to sell or otherwise dispose of any shares of capital stock of the Company or any subsidiary of the Company (except for transfers described in Section 368(a)(2)(C) of the Code at the time of transfer) or to cause the Company or any subsidiary of the Company to sell or otherwise dispose of in any manner any of its assets held prior to the Merger or any of the assets acquired from Subsidiary, except for dispositions made in the ordinary course of business, transfers by the Company or any of its subsidiaries of assets to a corporation controlled by the Company or such subsidiary within the meaning of Section 368(c) of the Code at the time of transfer or sales, mergers or other dispositions that would not, individually or in the aggregate, cause the Company and its subsidiaries taken as a whole, following the Merger, to fail to hold at least 90 percent of the fair market value of its net assets and at least 70 percent of the fair market value of its gross assets held immediately prior to the Effective Time (determined by treating the items set forth in clauses (a), (b) and (c) of paragraph 3 of the Company Tax Certificate as assets of the Company immediately prior to the Effective Time). 7. Subsidiary has no liabilities to be assumed by the Company, and will not transfer to the Company any assets subject to liabilities, in the Merger. 8. Following the Merger, Trinity will cause the Company to continue its "historic business" or to use a "significant portion" of its "historic business assets" in a business (as such terms are used in Treas. Reg. Section 1.368-1(d)). 9. Trinity has paid, or will pay, the expenses of only Trinity and Subsidiary incurred in connection with the Merger, except as provided in Section 7.5 of the Merger Agreement with respect to amounts payable on termination of the Merger Agreement and the abandonment of the Merger. 10. There is not, and has never been, any indebtedness existing between Trinity and any of its affiliates, on the one hand, and the Company and any of its affiliates, on the other hand, or between Subsidiary and any of its affiliates, on the one hand, and the Company and any of its affiliates, on the other hand, that was issued, acquired or settled at a discount. 11. Neither Trinity nor any of its affiliates owns beneficially or of record, nor has any of them have owned during the past five years, any capital stock or securities of the Company or any options or instruments giving the holder thereof the right to acquire any capital stock or securities of the Company. 12. The payment of cash in lieu of fractional shares of Trinity Stock pursuant to the Merger will be solely for the purpose of avoiding the expense and inconvenience to Trinity of issuing fractional shares and will not represent separately bargained-for consideration. 13. The total cash consideration that will be paid in the Merger to the holders of Company Stock in lieu of issuing fractional shares of Trinity Stock will not exceed one percent of the total consideration that will be delivered in the Merger to the holders of Company Stock in exchange for their Company Stock. B-2 102 Skadden, Arps, Slate Meagher & Flom [CLOSING DATE] Page 3 14. None of the compensation to be received by any Stockholder-employee of the Company with respect to periods beginning after the Effective Time will be separate consideration for, or allocable to, any of his Company Stock. Further, none of the shares of Trinity Stock to be received by any Stockholder-employee of the Company in exchange for Company Stock will be separate consideration for, or allocable to, any employment agreement or arrangement. 15. The compensation paid to any Stockholder-employee of the Company with respect to periods beginning after the Effective Time will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm's length for similar services. 16. Trinity is not an investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code. 17. Subsidiary ia a recently formed corporation having no assets or liabilities other than assets transferred to it pursuant to the Merger, and Subsidiary has been created and maintained solely for purposes of effecting the Merger. We will promptly and timely notify Skadden, Arps, Slate, Meagher & Flom if we believe or have reason to believe that (i) any of the facts described herein or in the Proxy Statement and S-4 Registration Statement or (ii) any of the representations, information or covenants contained in this certificate, are untrue, incorrect or incomplete in any material respect. TRANSCISCO INDUSTRIES, INC. By: ______________________________ Print Name: ______________________________ Print Title:______________________________ B-3 103 EXHIBIT C Trinity Industries, Inc. 2525 Stemmons Freeway Dallas, Texas 75207-2401 Ladies and Gentlemen: I have been advised that as of the date of this letter I may be deemed to be an "affiliate" of Transcisco Industries, Inc., a Delaware corporation (the "Company"), as the term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger, dated June 17, 1996 (the "Agreement") , among the Company, Trinity Industries, Inc., a Delaware corporation ("Trinity"), and Trinity Y, Inc., a Delaware corporation and a wholly-owned subsidiary of Trinity ("Merger Sub"), Merger Sub will be merged with and into the Company (the "Merger"). As a result of the Merger, I will receive shares of common stock, par value $1.00 per share, of Trinity (the "Trinity Stock") in exchange for shares owned by me of common stock, par value $.01 per share, of the Company. I represent, warrant, and covenant to Trinity that in the event I receive any Trinity Stock as a result of the Merger: A. I shall not make any sale, transfer, or other disposition of the Trinity Stock in violation of the Act or the Rules and Regulations. B. I have carefully read this letter and the Agreement and discussed the requirements of such documents and other applicable limitations upon my ability to sell, transfer, or otherwise dispose of the Trinity Stock to the extent I felt necessary, with my counsel or counsel for the Company. C. I have been advised that the issuance of the Trinity Stock to me pursuant to the Merger has been registered with the Commission under the Act on a Registration Statement on Form S-4. However, I have also been advised that, since at the time the Merger was submitted for a vote of the stockholders of the Company, I may be deemed to have been an affiliate of the Company and the distribution by me of the Trinity Stock has not been registered under the Act, I may not sell, transfer or otherwise dispose of the Trinity Stock issued to me in the Merger unless (i) such sale, transfer, or other disposition has been registered under the Act, (ii) such sale, transfer, or other disposition is made in conformity with Rule 145 promulgated by the Commission under the Act, or (iii) in the opinion of counsel reasonably acceptable to Trinity, or a "no action" letter obtained by the undersigned from the staff of the Commission, such sale, transfer, or other disposition is otherwise exempt from registration under the Act. D. I understand that Trinity is under no obligation to register the sale, transfer, or other disposition of the Trinity Stock by me or on my behalf under the Act or to take any other action necessary in order to make compliance with an exemption from such registration available. E. I also understand that stop transfer instructions will be given to Trinity's transfer agent with respect to the Trinity Stock and that there will be placed on the certificates for the Trinity Stock issued to me, or any substitutions therefor, a legend stating in substance: "THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN C-1 104 ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED [_____________] BETWEEN THE REGISTERED HOLDER HEREOF AND TRINITY INDUSTRIES, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF TRINITY INDUSTRIES, INC." F. I also understand that unless the transfer by me of my Trinity Stock has been registered under the Act or is a sale made in conformity with the provisions of Rule 145, Trinity reserves the right to put the following legend on the certificates issued to my transferee: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933." It is understood and agreed that the legends set forth in paragraphs E and F above shall be removed by delivery of substitute certificates without such legend if such legend is not required for purposes of the Act or the Agreement. It is also understood and agreed that such legends and the stop orders referred to above will be removed if (i) two years shall have elapsed from the date the undersigned acquired the Trinity Stock received in the Merger and the provisions of Rule 145(d) (2) are then available to the undersigned, (ii) three years shall have elapsed from the date the undersigned acquired the Trinity Stock received in the Merger and the provisions of Rule 145(d) (3) are then applicable to the undersigned, or (iii) Trinity has received either an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to Trinity, or a "no action" letter obtained by the undersigned from the staff of the Commission, to the effect that the restrictions imposed by Rule 145 under the Act no longer apply to the undersigned. Execution of this letter should not be considered an admission on my part that I am an "affiliate" of the Company as described in the first paragraph of this letter or as a waiver of any rights I may have to object to any claim that I am such an affiliate on or after the date of this letter. Very truly yours, ------------------------------------------ Name: Accepted this day of ---- , 1996 by - --------------------------- Trinity Industries, Inc. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- C-2 105 ANNEX B OPINION OF TRANSCISCO'S FINANCIAL ADVISOR July 18, 1996 The Board of Directors Transcisco Industries, Inc. 601 California Street, Suite 1301 San Francisco, CA 94108 Members of the Board: We understand that Transcisco Industries, Inc., a Delaware corporation ("Transcisco" or the "Company") is contemplating a merger with Trinity Industries, Inc. ("Trinity") (the "Transaction") pursuant to which, among other things, Transcisco's common stockholders would receive 0.1884 shares of Trinity common stock for each of the issued and outstanding shares of common stock of Transcisco (the "Exchange Ratio"). In connection with our review described herein, the Company has furnished us with a draft Agreement and Plan of Merger (the "Draft Merger Agreement") to be entered into by the Company, Trinity Y, Inc. and Trinity setting forth the terms of the Transaction. In accordance with the terms of the engagement letter dated as of March 19, 1996, you have requested that Schroder Wertheim & Co. Incorporated ("Schroder Wertheim") render an opinion, as investment bankers, as to the fairness, form a financial point of view, of the Exchange ratio to be received by the Company's common stockholders in the Transaction (the "Opinion"). The Opinion shall be used by the Company solely in connection with its Board of Director's consideration of the Transaction. The Company will not furnish the Opinion or any other material prepared by Schroder Wertheim to any other person or persons or use or refer to the Opinion or this letter for any other purposes without Schroder Wertheim's prior written approval; provided, however, that the Company may publish the Opinion in its entirety in any proxy statement or similar documents distributed to its stockholders in connection with the Transaction. Schroder Wertheim, as part of its investment banking business, is continually engaged in the valuation of business and their securities in connection with mergers and acquisition, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Schroder Wertheim has acted as financial advisor to the Company in its negotiations with Trinity and will receive a fee for such services. In connection with the Opinion set forth herein, we have, among other things: i. reviewed the Draft Merger Agreement; ii. reviewed the recent published financial statements of the Company, including those set forth in its Forms 10-K (for the fiscal years ended December 31, 1993 and March 31, 1995 and 1996), Annual Reports (1995 and 1996), and its filings on Form 8-K since June 30, 1994; iii. reviewed the earnings release issued by Transcisco on July 17, 1996, relating to Transcisco's performance in the quarter ended June 30, 1996; iv. reviewed historical and interim financial results of the Company's Transcisco Rail Services, Transcisco Leasing Company and Transcisco Trading Company subsidiaries (together, the "Subsidiaries") as prepared by the management of the Company and the Subsidiaries; 106 The Board of Directors Transcisco Industries, Inc. July 18, 1996 Page 2 v. reviewed forecasts and projections of the Subsidiaries prepared by the management of the Company and the Subsidiaries for the fiscal years ending March 31, 1997 through 2001; vi. had discussions with the management of the Company and the Subsidiaries regarding the businesses, operations and prospects of the Subsidiaries; vii. reviewed the recent published financial statements of Trinity, including those set forth in its Form 10-K (for fiscal years ended March 31, 1995 and 1996), and Annual Reports (1995 and 1996); viii. reviewed the earnings released issued by Trinity on July 15, 1996, relating to Trinity's performance in the quarter ended June 30, 1996; ix. had discussions with the management of Trinity regarding its businesses, operations and prospects; x. performed a relative contribution analysis; xi. advised the Company regarding prior proposed transactions involving the Company during the period from April 1995 to the date hereof; and initiated contact with a significant number of potential acquirors as to their interest in the company from March 19, 1996 to the date hereof; xii. reviewed news articles on the Company, the railcar equipment and leasing industries and the Russian transportation industry; xiii. reviewed Wall Street research reports and news articles relating to Trinity; xiv. performed various valuation analyses, as we deemed appropriate, of the Company and the Subsidiaries using generally accepted analytical methodologies, including (i) the application of the public trading multiples of comparable companies to the financial results of the Subsidiaries; (ii) the application of the comparative merger and acquisition multiples to the financial results of the Subsidiaries; and (iii) discounting the projected cash flows of the Company's operations; xv. reviewed the historical trading prices and volumes of the common stock of Transcisco and Trinity; and xvi. performed such other financial studies, analyses, inquiries and investigations as we deemed appropriate. In rendering the Opinion, we have relied upon the accuracy and completeness of all information supplied or otherwise made available to us by the managements of Transcisco, the Subsidiaries, and Trinity, or obtained by us from other sources, and we have not assumed any responsibility for independently verifying such information, undertaken an independent appraisal of the assets or liabilities (contingent or otherwise) or Transcisco or Trinity, or been furnished with any such appraisals. With respect to financial forecasts for the Company and the Subsidiaries, we have been advised by the management of the Company and the Subsidiaries, and we have assumed, without independent investigation, that they have been reasonably prepared and reflect the best currently available estimates and judgment as to the expected future financial performance of the Company and the Subsidiaries. Our opinion, as set forth herein, relates to the relative values of Transcisco and Trinity. We are not expressing any opinion as to what the value of the Trinity common stock actually will be when issued to Transcisco's common stockholders pursuant to the 107 The Board of Directors Transcisco Industries, Inc. July 18, 1996 Page 3 Transaction or the price at which Trinity common stock will trade or otherwise be transferable subsequent to the Transaction. The Opinion is necessarily based upon financial, economic, market and other conditions as they exist, and the information made available to us, as of the date hereof. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the Opinion which may come or be brought to our attention after the date of the Opinion. Our Opinion is directed to the Board of Directors of Transcisco and does not constitute a recommendation to any Transcisco common stockholder as to how such stockholders should vote regarding the Transaction. The Opinion relates solely to the question of the fairness, from a financial point of view, to Transcisco's common stockholders of the Exchange Ratio. Further, we express no opinion herein as to the structure, terms or effect of any other aspect of the Transaction. Based upon and subject to the foregoing, we are of the opinion, as investment bankers, that as of the date hereof, the Exchange Ratio is fair, from a financial point of view, to the Company's common stockholders. Very truly yours, SCHRODER WERTHEIM & CO. INCORPORATED 108 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 10-K -------------------- (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-6903 TRINITY INDUSTRIES, INC. ( Exact name of registrant as specified in its charter) DELAWARE 75-0225040 ( State of Incorporation) (I.R.S. Employer Identification No.) 2525 STEMMONS FREEWAY DALLAS, TEXAS 75207-2401 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 589-8592 Securities Registered Pursuant to Section 12(b) of the Act
Name of each exchange Title of each class on which registered ------------------- ------------------- COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
Securities Registered Pursuant to Section 12(g) of the Act: None -------------------- 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 AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes [X] No [ ] 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 REGISTRANTS 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 voting stock held by nonaffiliates of the Registrant is $1,413,996,430 as of May 31, 1996. 41,612,062 ( Number of Shares of common stock outstanding as of May 31, 1996) ================================================================================ (Continued on reverse side) 109 (Continued from cover page) DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1996 Annual Report to Stockholders for the fiscal year ended March 31, 1996 are incorporated by reference into Parts I, II, and IV hereof and portions of the Registrant's definitive Proxy Statement for the 1996 Annual Meeting of Stockholders to be held July 17, 1996 are incorporated by reference into Part III hereof. 110 PART I Item 1. Business GENERAL DEVELOPMENT OF BUSINESS. Trinity Industries, Inc. (the "Registrant") was originally incorporated under the laws of the State of Texas in 1933. On March 27, 1987, Trinity became a Delaware corporation by merger into a wholly-owned subsidiary of the same name. NARRATIVE DESCRIPTION OF BUSINESS AND FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. The Registrant is engaged in the manufacture, marketing, and leasing of a wide variety of products consisting principally of (1) "Railcars" (i.e. railroad freight cars), principally tank cars, hopper cars, gondola cars, intermodal cars and miscellaneous other freight cars; (2) "Marine Products" such as boats, barges and various offshore service vessels for ocean and inland waterway service and military vessels for the United States Government and, to a limited extent, various size vessels for international ocean transportation companies; (3) "Construction Products" such as highway guardrail and highway and railway bridges, power plants, mills, etc, highway safety products, passenger loading bridges and conveyor systems for airports and other people and baggage conveyance requirements, ready-mix concrete production and aggregates including distribution, and providing raw material to owners, contractors and sub-contractors for use in the building and foundation industry; (4) "Containers" such as (a) extremely large, heavy pressure vessels and other heavy welded products including industrial silencers, desalinators, evaporators, and gas processing systems, (b) pressure and non-pressure containers for the storage and transportation of liquefied gases, brewery products and other liquid and dry products, and (c) heat transfer equipment for the chemical, petroleum and petrochemical industries; (5) "Metal Components" such as weld fittings (tees, elbows, reducers, caps, flanges, etc.) used in pressure piping systems and container heads (the ends of pressure and non-pressure containers) for use internally and by other manufacturers of containers; and (6) "Leasing" of Registrant manufactured railcars and barges to various industries. Various financial information concerning the Registrant's industry segments for each of the last three fiscal years is included in the Registrant's 1996 Annual Report to Stockholders on page 22 under the heading "Segment Information", and such section is incorporated herein by reference. RAILCARS. The Registrant manufactures railroad freight cars, principally pressure and non-pressure tank cars, hopper cars, intermodal cars and gondola cars used for transporting a wide variety of liquids, gases and dry cargo. Tank cars transport products such as liquefied petroleum gas, liquid fertilizer, sulfur, sulfuric acids and corn syrup. Covered hopper cars carry cargo such as grain, dry fertilizer, plastic pellets and cement. Open-top hoppers haul coal, and top-loading gondola cars transport a variety of heavy bulk commodities such as scrap metals, finished flat steel products, machinery and lumber. Intermodal cars transport various products which have been loaded in containers to minimize shipping costs. MARINE PRODUCTS. The Registrant manufactures a variety of marine products pursuant to customer orders. It produces various types of vessels for offshore service including supply, crew, fishing and other types of boats. The Registrant is currently constructing various military vessels for both the United States Army and Navy. The Registrant produces river hopper barges which are used to carry coal, grain and miscellaneous commodities. The purchasers of the Registrant's marine products include inland waterway marine operators, offshore oil and gas drillers and operators, international ocean transportation companies, barge transport companies and domestic and foreign governmental authorities. 1 111 CONSTRUCTION PRODUCTS. The construction products manufactured by the Registrant include beams, girders, columns, highway guard rail and highway safety devices and related barrier products, ready-mix concrete and aggregates, passenger loading bridges, and baggage handling systems. These products are used in the bridge, highway construction and building industries and airports. Some of the sales of beams, girders and columns are to general contractors and subcontractors on highway construction projects. Generally, customers for highway guardrail and highway safety devices are highway departments or subcontractors on highway projects. Passenger loading bridges and conveyor systems are generally sold to contractors, airports, or airlines as part of airport terminal equipment. Ready-mix concrete and aggregates are used in the building and foundation industry, and customers include primarily owners, contractors and sub-contractors. CONTAINERS. The Registrant is engaged in manufacturing metal containers consisting of extremely large, heavy pressure vessels and other heavy welded products, including industrial silencers, desalinators, evaporators, and gas processing systems for the storage and transportation of liquefied petroleum ("LP") gas and anhydrous ammonia fertilizer. Pressure LP gas containers are utilized at industrial plants, utilities, small businesses and in suburban and rural areas for residential heating and cooking needs. Fertilizer containers are manufactured for highway and rail transport, bulk storage, farm storage and the application and distribution of anhydrous ammonia. The Registrant also makes heat transfer equipment for the chemical, petroleum and petrochemical industries and a complete line of custom vessels, standard steam jacketed kettles, mix cookers, and custom-fabricated cooking vessels for the food, meat, dairy, pharmaceutical, cosmetic and chemical industries. METAL COMPONENTS. The metal components manufactured by the Registrant are made from ferrous and non-ferrous metals and their alloys and consist principally of butt weld type fittings, flanges and pressure and non-pressure container heads. The weld fittings include caps, elbows, return bends, concentric and eccentric reducers, full and reducing outlet tees, and a full line of pipe flanges, all of which are pressure rated. The Registrant manufactures and stocks, in standard, extra-heavy and double-extra-heavy weights and in various diameters, weld caps, tees, reducers, elbows, return bends, flanges and also manufactures to customer specifications. The basic raw materials for weld fittings and flanges are carbon steel, stainless steel, aluminum, chrome-moly and other metal tubing or seamless pipe and forgings. The Registrant sells its weld fittings and flanges to distributors and to other manufacturers of weld fittings. Container heads manufactured by the Registrant are pressed metal components used in the further manufacture of a finished product. Since the manufacture of container heads requires a substantial investment in heavy equipment and dies, many other manufacturers order container heads from the Registrant. Container heads are manufactured in various shapes and may be pressure rated or non-pressure, depending on the intended use in further manufacture. Other pressed shapes are also hot-or cold-formed to customer requirements. LEASING. The company has one wholly-owned leasing subsidiary, Trinity Industries Leasing Company ("TILC"), which was incorporated in 1979. TILC is engaged in leasing specialized types of railcars, consisting of both tank cars and hopper cars, to industrial companies in the petroleum, chemical, grain, food processing, fertilizer and other industries which supply cars to the railroads. At March 31, 1996, TILC had under lease 8,283 railcars. During fiscal year 1995, TILC divested its inventory of river hopper barges previously held for lease. The barges were operated under an agreement which provided for management of the barges. The barges were generally used for movement of commodities on the inland waterway system, primarily the Mississippi and Missouri Rivers. 2 112 Substantially all equipment leased by TILC was purchased from the Registrant at prices comparable to the prices for equipment sold by the Registrant to third parties. As of March 31, 1996, TILC had equipment on lease or available for lease purchased from the Registrant at a cost of $391.5 million. Generally, TILC purchases the equipment to be leased only after a lessee has committed to lease such equipment. The volume of equipment purchased and leased by TILC depends upon a number of factors, including the demand for equipment manufactured by the Registrant, the cost and availability of funds to finance the purchase of equipment, the Registrant's decision to solicit orders for the purchase or lease of equipment and factors which may affect the decision of the Registrant's customers as to whether to purchase or lease equipment. Although the Registrant is not contractually obligated to offer to TILC equipment proposed to be leased by the Registrant's customers, it is the Registrant's intention to effect all such leasing transactions through TILC. Similarly, while TILC is not contractually obligated to purchase from the Registrant any equipment proposed to be leased, TILC intends to purchase and lease all equipment which the Registrant's customers desire to lease when the lease rentals and other terms of the proposed lease are satisfactory to TILC, subject to the availability and cost of funds to finance the acquisition of the equipment. MARKETING, RAW MATERIALS, EMPLOYEES AND COMPETITION. As of March 31, 1996, the Registrant operated in the continental United States and Mexico. The Registrant sells substantially all of its products through its own salesmen operating from offices in Montgomery, Alabama; Elizabethtown and Paducah, Kentucky; Shreveport, Louisiana; Flint, Michigan; St. Louis, Missouri; Gulfport, Mississippi; Asheville, North Carolina; Cincinnati and Girard, Ohio; Beaumont, Dallas/Ft. Worth, Houston and Navasota, Texas; Centerville, Utah; and Mexico. Independent sales representatives are also used to a limited extent. The Registrant markets railcars, containers and metal components throughout the United States. Except in the case of weld fittings, guardrail, and standard size LP gas containers, the Registrant's products are ordinarily fabricated to the customer's specifications pursuant to a purchase order. The principal materials used by the Registrant are steel plate, structural steel shapes and steel forgings. There are numerous domestic and foreign sources of such steel and most other materials used by the Registrant. The Registrant currently has approximately 16,300 employees, of which approximately 15,000 are production employees and 1,300 are administrative, sales, supervisory and office employees. There are numerous companies located throughout the United States that are engaged in the business of manufacturing various railcars and containers of the types manufactured by the Registrant, and these industries are highly competitive. Companies manufacturing products which compete with the Registrant's construction products consist of numerous other structural fabricators and ready-mix concrete producers, most of which are smaller than the Registrant. Small shipyards located on inland waterways and medium to large size shipyards located on or near ports on navigable waterways produce marine products which compete with those manufactured by the Registrant. Both domestic and foreign manufacturers of metal components, some of which are larger than the Registrant, compete with the Registrant. A number of well-established companies actively compete with TILC in the business of owning and leasing railcars, as well as banks, investment partnerships and other financial and commercial institutions. 3 113 RECENT DEVELOPMENTS. Information concerning the Registrant's business acquisitions are included in the Registrant's 1996 Annual Report to Stockholders under the heading "Business Acquisitions," (pages 23 through 24) and such section is incorporated herein by reference. On June 25, 1996, the Board of Directors of the Registrant approved an initial public offering of one hundred percent (100%) of the common stock of a newly incorporated company which will acquire the assets and liabilities of a portion of the Registrant's Marine Products segment. The newly formed company will engage in the business of constructing and repairing ocean-going marine vessels. Completion of the offering is subject to registration of the offering with the Securities and Exchange Commission. OTHER MATTERS. The Registrant is not materially affected by federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, the Registrant has not suffered any material shortages with respect to obtaining sufficient energy supplies to operate its various plant facilities or its transportation vehicles. Future limitations on the availability or consumption of petroleum products (particularly natural gas for plant operations and diesel fuel for vehicles) could have an adverse effect upon the Registrant's ability to conduct its business. The likelihood of such an occurrence or its duration, and its ultimate effect on the Registrant's operations, cannot be reasonably predicted at this time. ITEM 2. PROPERTIES. The Registrant's principal executive offices are located in a ten story office building containing approximately 107,000 sq. ft. and a connected adjacent building containing approximately 66,000 sq. ft., each owned by the Registrant, in Dallas, Texas. The following table sets forth certain salient facts with respect to each of the operating plant properties owned and/or leased by the Registrant at March 31, 1996:
Registrant's Uses of Approx. Interest in Premises Bldg. Area Expiration Annual Plant Location Property (1) (Sq Ft.) Date Rentals -------------- ----------- -------- ---------- ---------- ------- Ackerman, MS Fee (e) 92,000 - - Ashland City, TN Fee (b) 92,000 - - Asheville, NC Lease (a) 94,000 06/30/99 $198,000 Beaumont, TX Fee (a) 431,000 - - Belpre, OH Fee (c) 42,000 - - Bessemer, AL Fee (a) 1,183,000 - - Brusly, LA Fee (b) 148,000 - - Butler, PA Fee (a) 386,000 - - Butler, PA Lease (a) 30,000 12/31/02 $ 67,000 Caruthersville, MO Fee (b) 266,000 - - Caruthersville, MO Fee (b) 40,000 03/01/99 $ 72,000 Cedartown, GA Fee (d) 143,000 - - Centerville, UT Fee (c) 63,000 - - Cincinnati, OH Fee (d,e) 203,000 - - Dallas, TX (2 plants) Fee (a) 447,000 - - Denton, TX Fee (a) 117,000 - - Elizabethtown, KY Fee (c) 40,000 - -
4 114
Registrant's Uses of Approx. Interest in Premises Bldg. Area Expiration Annual Plant Location Property (1) (Sq Ft.) Date Rentals -------------- ----------- -------- ---------- ---------- ------- Elkhart, IN Fee (e) 108,000 - - Enid, OK Fee (e) 73,000 - - Flat Rock, NC Lease (a) 8,000 01/31/98 $ 64,000 Ft. Worth, TX (6 plants) Fee (a,c,d) 650,000 - - Girard, OH (2 plants) Fee (c) 326,000 - - Greenville, PA Fee (a) 752,000 - - Gulfport, MS Fee (b) 438,000 - - Harvey, LA Lease (b) 34,000 03/26/01 $ 86,000 Houston, TX (3 plants) Fee (b,c,d) 587,000 - - Huehuetoca, MX Fee (a,d) 264,000 - - Johnstown, PA Fee (a) 148,000 - - Lima, OH Fee (c) 72,000 - - Lockport, LA Fee (b) 43,000 - - Longview, TX (4 plants) Fee (a,d) 631,000 - - Longview, TX Lease (a) 57,000 10/31/00 $ 35,000 Madisonville, LA Fee (b) 137,000 - - McKees Rocks, PA Fee (a) 462,000 - - Monclova, MX Fee (a,d) 81,000 - - Montgomery, AL Fee (c) 310,000 - - Moss Point, MS (2 plants) Fee (b) 73,000 - - Mt. Orab, OH Fee (a) 183,000 - - Nashville, TN Fee (b) 261,000 - - Navasota, TX Fee (e) 170,000 - - New Orleans, LA Lease (2) (b) 254,000 12/31/16 $ 42,000 New Orleans, LA Lease (b) 94,000 12/31/16 $ 53,000 Oklahoma City, OK Fee (a,d) 260,000 - - Orange, TX Fee (d) 735,000 - - Paducah, KY Fee (b) 49,000 - - Panama City, FL Fee (b) 41,000 - - Paris, TN Fee (a) 21,000 - - Pascagoula, MS Fee (b) 40,000 - - Pine Bluff, AR Fee (d) 56,000 - - Quincy, IL Fee (d) 95,000 - - Rocky Mount, NC Fee (d) 53,000 - - Saginaw, TX (2 plants) Fee (a) 291,000 - - San Antonio, TX Fee (c) 224,000 - - Sand Springs, OK Fee (e) 184,000 - - Shreveport, LA Lease (a,d) 691,000 11/30/42 $ 12,000 Tulsa, OK Fee (a,d) 121,000 - - Vallejo, MX Fee (d) 54,000 - - Vidor, TX Fee (a) 126,000 - - West Memphis, AR Fee (e) 77,000 - -
(1) (a) Manufacture of Railcars (b) Manufacture of Marine Products (c) Manufacture of Construction Products (d) Manufacture of Containers (e) Manufacture of Metal Components (2) The lease may be canceled by either party after 12/31/96. 5 115 All machinery and equipment and the buildings occupied by the Registrant are maintained in good condition. The Registrant estimates that its plant facilities were utilized during the fiscal year at an average of approximately 70 percent of present productive capacity for railcars, 65 percent for Marine Products, 75 percent for Construction Products, 65 percent for Containers, and 80 percent for Metal Components. ITEM 3. LEGAL PROCEEDINGS. See page 28 of the Registrant's 1996 Annual Report to Stockholders which is incorporated herein by reference for a discussion of legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the fourth quarter of fiscal year 1996. ___________________ PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Market for the Registrant's common stock and related stockholder matters are incorporated herein by reference from the information contained on page 3 under the caption "Corporate Profile" and on page 15 under the caption "Financial Summary" of the Registrant's 1996 Annual Report to Stockholders. ITEM 6. SELECTED FINANCIAL DATA. Selected financial data is incorporated herein by reference from the information contained on page 15 under the caption "Financial Summary" of the Registrant's 1996 Annual Report to Stockholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's discussion and analysis of financial condition and results of operations are incorporated herein by reference from the Registrant's 1996 Annual Report to Stockholders, pages 16 through 17. Other persons, who are not executive officers of the Registrant, are listed on page 30 under the caption "Division Officers" of the Annual Report to Stockholders, and such caption is hereby incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Financial statements of the Registrant at March 31, 1996 and 1995 and for each of the three years in the period ended March 31, 1996 and the auditor's report thereon, and the Registrant's unaudited quarterly financial data for the two year period ended March 31, 1996, are incorporated by reference from the Registrant's 1996 Annual Report to Stockholders, pages 18 through 29. 6 116 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. No disclosure required. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information concerning the directors and executive officers of the Registrant is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1996, page 3, under the caption "Election of Directors". EXECUTIVE OFFICERS OF THE REGISTRANT.* The following table sets forth the names and ages of all executive officers of the Registrant, the nature of any family relationship between them, all positions and offices with the Registrant presently held by them, the year each person first became an officer and the term of each person's office:
Officer Term Name(1)(2)(3) Age Office Since Expires(4) - ------------------- --- ------------------------ ------- ---------- W. Ray Wallace 73 Chairman, President & 1958 July 1996 Chief Executive Officer Ralph A. Banks, Jr. 72 Senior Vice President 1962 July 1996 Richard G. Brown 72 Senior Vice President 1979 July 1996 John T. Sanford 44 Senior Vice President 1993 July 1996 Timothy R. Wallace 42 Director & Group 1993 July 1996 Vice President John Dane III 45 Group Vice President 1993 July 1996 Mark W. Stiles 47 Group Vice President 1993 July 1996 Jack L. Cunningham, Jr. 51 Vice President 1982 July 1996 John M. Lee 35 Vice President 1994 July 1996 R. A. Martin 61 Vice President 1974 July 1996 Tim L. Oglesby 38 Vice President 1995 July 1996 F. Dean Phelps, Jr. 52 Vice President 1979 July 1996 Joseph F. Piriano 59 Vice President 1992 July 1996 Linda S. Sickels 45 Vice President 1995 July 1996 Neil O. Shoop 52 Treasurer 1985 July 1996 William J. Goodwin 48 Controller 1986 July 1996 J.J. French, Jr. 65 Secretary 1970 July 1996
* This data is furnished as additional information pursuant to instructions to Item 401 to Regulation S-K and in lieu of inclusion in the Registrant's Proxy Statement. (1) W. Ray Wallace, Chairman, President & Chief Executive Officer, is the father of Timothy R. Wallace, a Director and Group Vice President of the Registrant. (2) Mr. Stiles joined the Registrant in 1991 upon the acquisition by the Registrant of Transit Mix Concrete Company. For at least five years prior thereto, Mr. Stiles was Executive Vice President and General Manager of Transit Mix. Mr. Piriano was Director of Purchasing for the Registrant for 7 117 at least the last five years. Mr. Lee joined the Registrant in 1994. For at least five years prior thereto, Mr. Lee was a manager for a national public accounting firm. Mr. Oglesby joined the Registrant in 1993. For at least five years prior thereto, Mr. Oglesby was a software manager for a national defense contractor. Ms. Sickels joined the Registrant in 1992. Prior to that, Ms. Sickels was in government relations for a state utility company. All of the other above-mentioned executive officers, except Mr. French, have been in the full-time employ of the Registrant or its subsidiaries for more than five years. Although the titles of certain such officers have changed during the past five years, all have performed essentially the same duties during such period of time. (3) Mr. French, an attorney, is President of Joe French & Associates, a Professional Corporation, since April, 1993. For at least five years prior thereto, Mr. French was employed by Locke Purnell Rain Harrell, a Professional Corporation. (4) It is anticipated that all of such officers will be reelected at the Annual Meeting of the Board of Directors to be held on July 17, 1996. ITEM 11. EXECUTIVE COMPENSATION. Information on executive compensation is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1996, page 6 under the caption "Executive Compensation and Other Matters". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1996, page 2, under the caption "Voting Securities and Stockholders", and page 3, under the caption "Election of Directors". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information concerning certain relationships and related transactions is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1996, pages 3 through 4, under the caption "Election of Directors". 8 118 ______________________ PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1&2. Financial statements and financial statement schedules. The financial statements and schedules listed in the accompanying indices to financial statements and financial statement schedules are filed as part of this Annual Report Form 10-K. 3. Exhibits. The exhibits listed on the accompanying index to exhibits are filed as part of this Annual Report Form 10-K. (b) Reports on Form 8-K No Form 8-K was filed during the fourth quarter of fiscal 1996. 9 119 TRINITY INDUSTRIES, INC. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FOR INCLUSION IN ANNUAL REPORT FORM 10-K YEAR ENDED MARCH 31, 1996 10 120 Trinity Industries, Inc. Index to Financial Statements and Financial Statement Schedules (Item 14 (a))
REFERENCE ------------------------- 1996 Annual Form Report to 10-K Stockholders (Page) (Page) ------ ------------ Consolidated balance sheet at March 31, 1996 and 1995 . . . . . . . . . . - 19 For each of the three years in the period ended March 31, 1996: Consolidated income statement . . . . . . - 18 Consolidated statement of cash flows. . . - 20 Consolidated statement of stockholders' equity. . . . . . . . . . - 21 Notes to consolidated financial statements. . . . . . . . . . . . . . . - 21 Supplemental information: Supplementary unaudited quarterly data . . - 29 Consolidated financial statement schedule for each of the three years in the period ended March 31, 1996: II - Allowance for doubtful accounts . 13 - Other financial information: Weighted average interest rate on short-term borrowings . . . . . . . . . . 13 -
All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements, including the notes thereto. The consolidated financial statements and supplementary information listed in the above index which are included in the 1996 Annual Report to Stockholders are hereby incorporated by reference. 11 121 EXHIBIT (23) Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Trinity Industries, Inc. of our report dated May 9, 1996, included in the 1996 Annual Report to Stockholders of Trinity Industries, Inc. Our audits also included the financial statement schedule of Trinity Industries, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in Post-Effective Amendment No. 3 to the Registration Statement (Form S-8, No. 2-64813), Post-Effective amendment No. 1 to the Registration Statement (Form S-8, No. 33-10937), Post-Effective Amendment No. 1 to the Registration Statement (Form S-3, No. 33-12526), Amendment No. 1 to the Registration Statement (Form S-3, No. 33-57338), Registration Statement (Form S-8, No. 33-35514), Registration Statement (Form S-8, No. 33-73026), Post-Effective Amendment No. 1 to the Registration Statement (Form S-4, No. 33-51709) of Trinity Industries, Inc. and in the related Prospectuses of our report dated May 9, 1996, with respect to the consolidated financial statements and schedules of Trinity Industries, Inc. included or incorporated by reference in this Annual Report (Form 10-K) for the year ended March 31, 1996. ERNST & YOUNG LLP Dallas, Texas June 25, 1996 12 122 SCHEDULE II Trinity Industries, Inc. Allowance for Doubtful Accounts Year Ended March 31, 1996, 1995 and 1994 (in millions)
Additions Balance at charged to Accounts Balance beginning costs and charged at end of year expenses off of year ---------- ---------- -------- -------- Year Ended March 31, 1996 $ 0.8 $ 0.8 $ 0.5 $ 1.1 ====== ====== ====== ====== Year Ended March 31, 1995 $ 1.0 $ 0.3 $ 0.5 $ 0.8 ====== ====== ====== ====== Year Ended March 31, 1994 $ 1.2 $ 0.3 $ 0.5 $ 1.0 ====== ====== ====== ======
___________________________ Trinity Industries, Inc. Other Financial Information Short-Term Borrowings The weighted average interest rate on short-term borrowings outstanding as of March 31, 1996, 1995, and 1994 is 6.04%, 5.28%, and 3.57%, respectively. 13 123 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. Trinity Industries, Inc. By /s/ F. Dean Phelps, Jr. - ------------------------ ------------------------------- Registrant F. Dean Phelps, Jr. Vice President June 26, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of the Registrant and in the capacities and on the dates indicated: Directors: Principal Executive Officer: /s/ David W. Biegler /s/ W. Ray Wallace - ------------------------- ------------------------------ David W. Biegler W. Ray Wallace Director President and Chairman June 26, 1996 June 26, 1996 - ------------------------- Barry J. Galt Principal Financial Officer: Director /s/ John T. Sanford June 26, 1996 ------------------------------ John T. Sanford Senior Vice President /s/ Clifford J. Grum June 26, 1996 - ------------------------- Clifford J. Grum Director June 26, 1996 Principal Accounting Officer: /s/ F. Dean Phelps, Jr. /s/ Dean P. Guerin ------------------------------ - ------------------------- F. Dean Phelps, Jr. Dean P. Guerin Vice President Director June 26, 1996 June 26, 1996 /s/ Jess T. Hay - ------------------------- Jess T. Hay Director June 26, 1996 /s/ Edmund M. Hoffman - ------------------------- Edmund M. Hoffman Director June 26, 1996 /s/ Ray J. Pulley - ------------------------- Ray J. Pulley Director June 26, 1996 - ------------------------- Timothy R. Wallace Director June 26, 1996 14 124 Trinity Industries, Inc. Index to Exhibits (Item 14(a))
NO. DESCRIPTION PAGE - ----- ----------------------------------------------- ------ (3.1) Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.A to Registration Statement No. 33-10937 filed April 8, 1987). * (3.2) By-Laws of Registrant (incorporated by reference to Exhibit 3.2 to Form 10-K filed June 16, 1992). * (4.1) Specimen Common Stock Certificate of Registrant (incorporated by reference to Exhibit 3B to Registration Statement No. 33-10937 filed April 8, 1987). * (10.1) Fixed Charges Coverage Agreement dated as of January 15, 1980, between Registrant and Trinity Industries Leasing Company (incorporated by reference to Exhibit 10.1 to Registration Statement No. 2-70378 filed January 29, 1981). * (10.2) Tax Allocation Agreement dated as of January 22, 1980 between Registrant and its subsidiaries (including Trinity Industries Leasing Company) (incorporated by reference to Exhibit 10.2 to Registration Statement No. 2-70378 filed January 29, 1981). * (10.3) Form of Executive Severance Agreement entered into between the Registrant and all executive officers of the Registrant (other than Mr. French) (incorporated by reference to Exhibit 10.3 to Form 10-K filed June 19, 1989). * (10.4) Trinity Industries, Inc., Stock Option Plan With Stock Appreciation Rights (incorporated by reference to Registration Statement No. 2-64813 filed July 5, 1979, as amended by Post-Effective Amendment No. 1 dated July 1, 1980, Post-Effective Amendment No.2 dated August 31, 1984, and Post-Effective Amendment No. 3 dated July 13, 1990). * (10.5) Directors' Retirement Plan adopted December 11, 1986 ( incorporated by reference to Exhibit 10.6 to Form 10-K filed June 14, 1990). * (10.6) 1989 Stock Option Plan with Stock Appreciation Rights (incorporated by reference to Registration Statement No. 33-35514 filed June 20, 1990) * (10.7) Supplemental Retirement Benefit Plan for W. Ray Wallace, effective July 18, 1990 (incorporated by reference to Exhibit 10.8 to Form 10-K filed June 13, 1991). * (10.8) 1993 Stock Option and Incentive Plan (incorporated by reference to Registration Statement No. 33-73026 filed December 15, 1993) *
15 125 Trinity Industries, Inc. Index to Exhibits -- (Continued) (Item 14(a))
NO. DESCRIPTION PAGE - ----- ----------------------------------------------- ------ (10.9) Pension Plan A for Salaried Employees of Trinity Industries, Inc. and Certain Affiliates dated August 20, 1985, as amended by Amendment No. 1 dated May 27, 1986, Amendment No. 2 dated December 30, 1986, Amendment No. 3 dated December 12, 1986, Amendment No. 4 dated March 31, 1987, Amendment No. 5 dated March 31, 1987, Amendment No. 6 dated December 4, 1987, Amendment No. 7 dated July 26, 1988, Amendment No. 8 dated July 28, 1988, Amendment No. 9 dated March 15, 1989, Amendment No. 10 dated March 31, 1989, and Amendment No. 11 dated July 14, 1989 (incorporated by reference to Exhibit 10.9 to Form 10-K filed June 13, 1991). * (10.10) Supplemental Profit Sharing Plan for Employees of Trinity Industries Inc. and Certain Affiliates dated June 30, 1990, as amended by Amendment No. 1 dated June 13, 1991. Supplemental Profit Sharing Trust for Employees of Trinity Industries, Inc. and Certain Affiliates dated June 30, 1990, as amended by Amendment No. 1 dated June 13, 1991 (incorporated by reference to Exhibit 10.10 to Form 10-K filed June 13, 1991). * (13) Annual Report to Stockholders. * (21) Listing of subsidiaries of the Registrant. 17 (23) Consent of Independent Auditors. 12 (27) Financial Data Schedules. (99.1) Annual Report on Form 11-K for employee stock purchase, savings and similar plans filed pursuant to Rule 15d-21.
NOTICE: Exhibits 13, 27, and 99.1 have been omitted from the reproduction of this Form 10-K. A copy of the Exhibits will be furnished upon written request to F. Dean Phelps, Vice President, Trinity Industries, Inc., P.O. Box 568887, Dallas, Texas 75356-8887. The Registrant may impose a reasonable fee for its expenses in connection with providing the above-referenced Exhibits. -------------------- 16 126 EXHIBIT 21 Trinity Industries, Inc. Listing of Subsidiaries of the Registrant The Registrant has no parent. At March 31, 1996, the operating subsidiaries of the Registrant were:
Percentage of Organized voting securities under the owned by the Name of subsidiary laws of Registrant - ------------------------------------ ----------- ----------------- Beaird Industries, Inc. Delaware 100% Beaird Industries, Inc. of Orange Delaware 100% Flo-Bend, Inc. Delaware 100% Gulf Coast Fabrication, Inc. Mississippi 100% Helmsdale Limited Isle of Man 100% Platzer Shipyard, Inc. Delaware 100% Standard Forged Products, Inc. Delaware 100% Stearns Airport Equipment Co., Inc. Delaware 100% Syntechnics, Inc. Delaware 100% Syro, Inc. Ohio 100% Transit Mix Concrete & Materials Company Delaware 100% Transit Mix Concrete & Materials Company of Louisiana Louisiana 100% Trinity Casteel, Inc. Delaware 100% Trinity Gulf Repair, Inc. Delaware 100% Trinity Industries Leasing Company Delaware 100% Trinity Industries Transportation, Inc. Texas 100% Trinity Marine Baton Rouge, Inc. Delaware 100% Trinity Marine Caruthersville, Inc. Delaware 100% Trinity Marine Gulfport, Inc. Nevada 100% Trinity Marine Nashville, Inc. Delaware 100% Trinity Marine Panama City, Inc. Delaware 100% Trinity Marine Pascagoula, Inc. Delaware 100% Trinity Marine Port Allen, Inc. Delaware 100% Trinity Materials, Inc. Delaware 100% Trinity Mobile Railcar Repair, Inc. Delaware 100%
17 127 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 fiscal year ended MARCH 31, 1996 Commission file number 1-9051 [LOGO] TRANSCISCO INDUSTRIES, INC. --------------------------- (Exact name of registrant as specified in its charter) Delaware 94-2989345 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or Organization) Identification No.) 601 California Street, San Francisco, CA 94108 - ---------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number: (415) 477-9700 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of Each Class: Name of Each Exchange on which registered: Common Stock American Stock Exchange ------------ ----------------------- Securities registered pursuant to Section 12(g) of the Act: None ---- Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X ; No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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. / / Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No --- --- Aggregate market value of voting stock held by non-affiliates of the registrant, based on the closing price reported by the American Stock Exchange Composite Tape on June 24, 1996: $32,276,386 Number of common shares, $.01 par value, outstanding at June 24, 1996: 6,064,004, including 794,390 Treasury Shares. Documents incorporated by reference: None 128 PART I ITEM 1. BUSINESS. OVERVIEW. Transcisco Industries, Inc. ("the Registrant" or "the Company") was incorporated in California in 1972 under the name PLM Group. It was reincorporated in Delaware in 1985 as PLM Companies, Inc. In 1988, its name was changed to Transcisco Industries, Inc. The Company is an international rail services firm whose primary lines of business include: (1) nationwide railcar maintenance through Transcisco Rail Services; (2) specialty railcar leasing, management, maintenance and intermediary services through Transcisco Leasing Company; and, (3) Russian rail transportation services through Transcisco Trading Company. TRANSCISCO RAIL SERVICES COMPANY. Transcisco Rail Services Company ("TRS") operates 10 railcar repair and maintenance facilities from Georgia to Montana and is one of the largest independent railcar maintenance organizations in the United States, with more than 15,000 privately owned railcars under maintenance contracts. TRS's full-service network of six major maintenance facilities are located at: Alliance, Nebraska; Miles City, Montana; Waycross, Georgia; Sioux City, Iowa; Bill, Wyoming; and Rock Springs, Wyoming. In addition, TRS operates four "mobile" or "mini" shops, which perform repairs and maintenance, generally at customers' plant sites. TRS's marketing offices are in Chicago and its administrative offices are in San Francisco. TRANSCISCO LEASING COMPANY. Transcisco Leasing Company ("TLC"), formed in August 1990, acts as an intermediary in the railcar leasing, management and maintenance market, drawing on Transcisco's established leadership position in coal and other railcar leasing and maintenance. TLC arranges large railcar transactions and manages groups of railcars on a full-service basis, including fleet administration, lease financing, marketing and maintenance. TLC's primary revenue base consists of maintenance fees earned under long term railcar maintenance agreements with major railroads and utilities. TLC's objective is to expand the railcar fleet under its management through further development of select railcar market niches. In seeking this objective, TLC will continue its efforts to offer innovative products and services to fulfill customer needs. At March 31, 1996, TLC had 11,283 railcars covered by contracts for maintenance, management and leasing services. The term of TLC's contracts range from 1 to 20 years. TRANSCISCO TRADING COMPANY. Transcisco Trading Company ("TTC") was formed in 1989 to help organize and serve as a shareholder in SFAT (formerly "SovFinAmTrans"), Russia's leading private rail transportation firm. Initially Russia's first railcar leasing company, SFAT has become a full service transportation management company which owns and manages more than 5,500 railroad tankcars used to export petroleum and petrochemicals. SFAT's shareholders include the Russian Ministry of Rails (47.1%), the former Russian Ministry of Petrochemicals (29.4%), and TTC (23.5%). In May 1996, SFAT entered into a $42 million financing agreement with the European Bank for Reconstruction and Development ("EBRD"). Under the terms of the financing, EBRD will invest $12 million in cash in return for a 10% equity stake in SFAT. In addition, EBRD has arranged for a syndicate of international financial institutions to purchase $30 million of senior debt in SFAT. As of May 31, 1996, the debt and equity funding was not complete. Closing of the financing will occur upon completion of necessary government approvals, which is expected to occur by early Fall. Upon closing of the equity funding, Transcisco's 2 129 ownership interest will drop to approximately 21%. The proceeds of the $42 million financing will be used by SFAT to fund the construction of 1,500 new tank cars. All of the new cars will be equipped with Transcisco's proprietary Uni-Temp heating system, a patented technology which significantly expedites the unloading of liquid commodities, hence increasing the utilization rate of the tank cars. The Uni-Temp system is already in use on 1,500 of SFAT's 5,500 tank car fleet. TTC earns Uni-Temp license and servicing fees from SFAT at the rate of approximately $1.5 million per year. Since its creation in 1989, SFAT's profits have increased each year. For SFAT's fiscal year ended December 1995, the company reported revenues of approximately $82 million and net income of approximately $26.6 million. SFAT's customer base includes major Russian oil refineries and petrochemical companies, as well as western petroleum and petrochemical trading companies. SFAT's full service transportation services include freight forwarding, computerized tracking, railcar maintenance, assembly and inland waterway movement. In addition, SFAT manages the billing and collection of certain railroad freight tariffs for the Russian Ministry of Railways. SFAT has operations in Finland, Estonia, Russia, Cyprus and Gibraltar. MARKETING, CUSTOMERS AND COMPETITION. TRS performs maintenance on all types of railcars. The majority of this business is with long-standing customers, primarily Fortune 500 companies. Competition within the railcar maintenance industry varies by region and by type of railcar. About 250 repair and maintenance facilities are owned by about 130 companies. Location, price, quality, turnaround time, and service levels are primary competitive factors. TRS believes it is one of the largest independent companies offering maintenance, repair, and cleaning services for privately-owned railcars. TLC's services include fleet administration, railcar marketing, lease financing, and maintenance. TLC sells primarily to utilities, major railroads, other shippers, and financial institutions. Currently, TLC has management contracts and leases with approximately 20 companies, covering approximately 11,000 railcars. Although various other companies offer elements of TLC's line of services, the Company believes TLC's combination of services and expertise is unique within the railroad industry. Fleet management expertise, equipment knowledge, market intelligence and price are important factors in the development and continuing profitability of TLC's business. TTC believes that its proprietary Uni-Temp railcar heating technology has substantial operating advantages over competing alternatives. Among its principal applications is in tankcars hauling petroleum and petrochemicals in Russia. SFAT utilizes the technology to enable customers faster delivery of petroleum products. EMPLOYEES. At March 31, 1996, the Company had 323 full-time and part-time employees. None of the employees are subject to collective bargaining arrangements. The Company believes employee relations are good, and it has never experienced a work stoppage. RECENT DEVELOPMENTS. On June 17, 1996, the Company entered into an Agreement and Plan of Merger (the "Agreement") with Trinity Industries, Inc. ("Trinity"). Under terms of the Agreement, and subject to certain approvals, a wholly-owned subsidiary of Trinity will merge with Transcisco through the exchange of shares of common stock of Trinity for 100 percent of the issued and outstanding shares of common stock of Transcisco. The Agreement provides that each share of Transcisco's outstanding common stock will be exchanged on a tax free basis for .1884 of a share of Trinity's common stock. Based on the June 14, 1996 closing price of $35 per share of Trinity's stock, the transaction would have a value of approximately $47.6 million. The stock exchange ratio is fixed. The consummation of the proposed merger is subject, among other conditions, to registration with the Securities and Exchange Commission of the stock of Trinity to be issued in the transaction, approval of the definitive agreement by the shareholders of Transcisco, expiration of the waiting period prescribed under the Hart-Scott-Rodino Antitrust Improvements Act, and all necessary regulatory approvals. 3 130 ITEM 2. PROPERTY. The Company's executive offices are located in a 7,000 square foot leased premises at 601 California Street in San Francisco, California. The Company operates railcar repair facilities throughout the United States as described in Item 1, and believes its facilities are adequate for its present level of business. Of the six facilities described in Item 1, two are subject to a land lease (Bill, Wyoming and Sioux City, Iowa). ITEM 3. LEGAL PROCEEDINGS. On or about September 15, 1995, Great American Insurance Company ("Great American") filed an action (the "Action") in the Superior Court of the State of California in and for the County of Marin against Mark Hungerford, a former Chairman, Director, and Chief Executive Officer of the Company. The action purports to set forth three causes of action for declaratory relief, and prays for judgment in the amount of $2,675,000 (plus interest as provided by law) against Mr. Hungerford. According to the complaint, the Action purports to arise out of a certain payment made by Great American on behalf of Mr. Hungerford in connection with the partial settlement of certain litigation, captioned Daniels v. PLM International, Inc., et al., to which Mr. Hungerford, and others including the Company, previously were parties. The Daniels litigation has been settled, and the state and federal complaints have been dismissed with prejudice. The complaint in the Action also seeks a declaration that two endorsements each barred coverage under a Directors' and Officers' Policy issued by Great American to the directors and officers of the Company. The complaint in the Action also seeks a declaration that no coverage is afforded under that policy for the director and officer defendants in the Daniels litigation in their capacities as directors or officers of PLM International, Inc. Prior to the commencement of the Action in the Marin County Superior Court, the United States District Court for the Northern District of California ruled, on a summary judgment motion in a declaratory relief action, that neither of the endorsements relied upon by Great American precluded coverage under the particular Directors' and Officers' Policy issued by Great American. The Court of Appeals for the Ninth Circuit reversed and remanded that decision, directing that it be dismissed on grounds which did not address the coverage issues under the two endorsements. Great American thereafter filed the Action in Marin County Superior Court. Mr. Hungerford may attempt to seek reimbursement from the Company for any sums paid in connection with defense or settlement of the claim, subject to certain terms and conditions in an indemnification agreement with the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is currently traded on the American Stock Exchange ("AMEX") under the symbol TNI. The following table sets forth the high and low closing sales prices per share of the Common Stock as reported on the AMEX for the periods indicated. No dividends have been paid since 1990. The Company's senior loan agreement prohibits payment of dividends without the consent of its senior lenders. The Company has made no determination whether to declare dividends in the foreseeable future. The closing price of the Company's Common Stock, on June 24, 1996, as reported in the Wall Street Journal was $6.125 per share. As of June 24, 1996, there were approximately 1,200 record holders of the Company's Common Stock.
- ------------------------------------------------------------------------------------ QUARTER OF FISCAL YEAR QUARTER OF FISCAL YEAR 1996 1995 ----------------------------- ------------------------------ Market Prices for 4th 3rd 2nd 1st 4th 3rd 2nd 1st Common Stock: Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. ------ ------ ------ ------ ------ ------ ------ ------ Common Stock High $5.750 $3.500 $3.688 $1.875 $1.750 $1.500 $1.500 $2.250 Low $3.000 $2.625 $1.438 $1.000 $1.063 $1.000 $0.938 $1.063 - ------------------------------------------------------------------------------------
4 131 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA. FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA (In thousands, except ratio and per share amounts)
- -------------------------------------------------------------------------------------------------------------- THREE MONTH FISCAL YEARS ENDED PERIOD ENDED MARCH 31 MARCH 31, CALENDAR YEARS ENDED DECEMBER 31 1996 1995 1994 1993 1992 1991 -------- ------- -------- -------- -------- -------- (restated) Results of Operations: Revenues $ 42,630 $34,579 $ 7,221 $ 32,513 $ 31,833 $ 29,715 Income (loss) from continuing operations before reorganization items, income tax equity in earnings of affiliated companies, asset write-down, extraordinary gain and cumula- tive effect of accounting change 3,874 571 (341) 674 1,622 (3,975) Equity in earnings (loss) of affiliated companies 5,975 2,019 -- -- (3,641) 1,823 Asset write-down (3,000) -- -- -- -- -- (Loss) income from continuing operations 6,651 2,590 (341) (3,412) (4,632) (6,301) Discontinued operations, net of income tax -- -- -- (1,381) (4,146) (16,518) Net gain (loss) before extraordinary gain and accounting change 6,651 2,590 (341) (4,793) (8,778) (22,819) Extraordinary gain 6,058 -- -- 13,929 -- -- Cumulative effect of change to the equity method of accounting -- 7,590 -- -- -- -- -------- ------- -------- -------- -------- -------- Net income (loss) $ 12,709 $10,180 $ (341) $ 9,136 $ (8,778) $(22,819) ======== ======= ======== ======== ======== ======== Per common Share: Primary Net (loss) income - continuing operations $ 1.09 $ 0.49 $ (0.06) $ (0.73) $ (1.05) $ (1.43) Net loss - discontinued operations -- -- -- (0.29) (0.94) (3.75) Extraordinary gain 1.00 -- -- 2.97 -- -- Accounting change -- 1.44 -- -- -- -- -------- ------- -------- -------- -------- -------- Net income (loss) per share $ 2.09 $ 1.93 $ (0.06) $ 1.95 $ (1.99) $ (5.18) ======== ======= ======== ======== ======== ======== Financial Position: Current assets $ 12,147 $11,471 $ 8,993 $ 8,919 $ 14,319 $ 18,002 Total assets $ 44,046 $40,137 $ 30,499 $ 30,564 $ 45,693 $ 54,170 Long-term debt $ 3,561 $13,415 $ 17,998 $ 18,683 $ 36 $ 72 Shareholders' equity (deficit) $ 25,760 $12,844 $ 2,649 $ 2,916 $ (6,810) $ 1,968 Ratio of current assets to current liabilities 1.35 1.16 1.00 1.05 1.50 2.20 Debt to equity ratio 0.14 1.04 7.24 6.71 -- 18.10 - --------------------------------------------------------------------------------------------------------------
5 132 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. On April 14, 1994, the Board of Directors voted to change the Company's fiscal year end from December 31, to March 31. In the following discussion, "1996" refers to the Company's fiscal 1996 year, (the twelve months ending March 31, 1996); "1995" refers to the Company's fiscal 1995 year, (the twelve months ending March 31, 1995) "1993" refers to the fiscal (and calendar year) ending December 31, 1993. For the three month period, January 1 to March 31, 1994, results of operations are presented where appropriate. For a discussion and comparison of this three-month period in relation to the same period of 1993, the reader is referred to the Company's Form 10-Q for the quarterly period ended March 31, 1994. COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1996 AND 1995 REVENUES. Revenue for the Company during the fiscal year ended March 31, 1996 increased to $42.6 million from $34.6 million in fiscal 1995. The increase in revenue was primarily a result of growth in TLC's railcar fleet under management, which grew to 11,283 railcars from 6,182 railcars at March 31, 1995. The Company's revenue growth was also the result of the purchase and resale of 1,036 railcars, which contributed $3.1 million in revenues. TLC's growth in revenue was offset by lower revenues at TRS, which declined as a result of lower program repair work and the closure of two of its six mobile repair operations. OPERATIONS AND SUPPORT EXPENSES. For the fiscal year ended March 31, 1996, operations and support expenses increased to $31.7 million from $27.7 million in fiscal 1995. This increase was primarily a result of higher maintenance expenses arising from growth in TLC's managed railcar fleet. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the fiscal year ended March 31, 1996, selling, general and administrative expenses increased to $6.1 million from $4.8 million in the same period of 1995. This increase was caused by higher personnel and marketing costs incurred to facilitate growth in revenue, primarily at TLC. ASSET WRITE-DOWN. In 1995, the Financial Accounting Standards Board issued a Statement of Financial Accounting Standards, No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be Disposed of." SFAS 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the undiscounted cash flows attributed to such assets. The Company adopted the provisions of SFAS 121 as of October 1, 1995. In connection with the refinancing of the Company's debt, the Company evaluated the ongoing value of its property and equipment. Based on this evaluation, the Company determined in December 1995 that assets at one facility with a carrying value of approximately $5.5 million were impaired and such assets were written down by $3 million to their fair value. Fair value was estimated based upon property and equipment appraisals. EQUITY IN THE EARNINGS OF SFAT. Equity in earnings of SFAT represents the Company's share of earnings in SFAT, of which Transcisco Trading Company (a wholly owned subsidiary of the Company) had a 23.5% ownership interest as of March 31, 1996. For the year ended March 31, 1996, equity in earnings of SFAT were $5.98 million, versus $2 million for the same period of 1995. The increase in earnings is attributable to growth in the volume of goods transported by SFAT, as well 6 133 as expanded volumes of collection of certain transportation tariffs by SFAT on behalf of the Russian Ministry of Railways. Please refer to note 1 to the Consolidated Financial Statements for a further description of the Company's equity in the earnings of SFAT. NET INCOME. Net income for the fiscal year ended March 31, 1996 was $12.7 million, or $2.09 per share. Approximately $6.1 million, or $1.00 per share, of net income was a result of an extraordinary gain on the debt refinancing completed in August 1995. In fiscal 1996, income before the extraordinary gain was approximately $6.7 million or $1.09 per share. In fiscal 1995, net earnings were $10.2 million, or $1.93 per share. Fiscal 1995 net earnings reflect a $7.6 million cumulative effect from the Company's change to the equity method of accounting for SFAT. In addition, the 1995 earnings were restated to reflect $2 million of equity in SFAT's fiscal 1994 net income (see note 1 to the Consolidated Financial Statements). The $4.2 million increase in fiscal 1996 income (before the extraordinary gain) was a result of several factors. First, TLC's purchase and resale of 1,036 railcars increased net earnings by $2.7 million. Second, growth in TLC's managed railcar fleet boosted sales and earnings. Third, the Company's share of SFAT's income increased approximately $4 million over 1995 as a result of SFAT's continued success providing Russian rail transportation services. The increase in income was offset by a $3 million asset write-down (see note 3 of the Consolidated Financial Statements) and a $400,000 charge related to operating changes made at TRS to more efficiently manage small dollar value inventory. COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1995 AND DECEMBER 31, 1993 REVENUES. Revenue for the Company during the fiscal year ended March 31, 1995 increased to $34.6 million from $32.5 million in fiscal 1993. The increase in revenue was primarily a result of growth in TLC's railcar fleet under management, which grew to 6,182 railcars from 2,544 railcars at December 31, 1993. OPERATIONS AND SUPPORT EXPENSES. For the fiscal year ended March 31, 1995, operations and support expenses increased to $27.7 million from $27 million in fiscal 1993. This increase was primarily a result of higher maintenance expenses arising from growth in TLC's managed railcar fleet. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the fiscal year ended March 31, 1995, selling, general and administrative expenses decreased to $4.8 million from $4.9 million in 1993. This decrease was a result of the Company's cost cutting measures implemented during its Chapter 11 proceedings. Such cost cutting measures included consolidation of offices and of employee job functions. EQUITY IN THE EARNINGS OF SFAT. Equity in earnings of SFAT represents the Company's share of earnings in SFAT, of which Transcisco Trading Company (a wholly owned subsidiary of the Company) had a 23.5% ownership interest as of March 31, 1995, and a 20% ownership as of December 31, 1993. Equity in the earnings of SFAT for the year ended March 31, 1995 were $2 million. As of April 1, 1994, the Company recorded a cumulative effect of the resumption of equity accounting of $7.6 million. The Company is unable to determine comparable data for the year ended December 31, 7 134 1993. Refer to note 1 to the Consolidated Financial Statements for a further description of the Company's equity in the earnings of SFAT. NET INCOME. Net income for the fiscal year ended March 31, 1995 was $10.2 million, or $1.93 per share. Approximately $7.6 million, or $1.44 per share, of net income was attributable to a cumulative effect from the change in accounting for SFAT. In addition, approximately $2 million, or $0.38 per share, of net income was a result of the Company's equity in the fiscal 1994 earnings of SFAT. In fiscal 1993, net earnings were $9.1 million, or $1.95 per share. Net income in 1993 included approximately $14 million, or $2.97 per share, from an extraordinary gain recognized in connection with forgiveness of debt in the Company's Chapter 11 proceedings. Excluding equity in the earnings of SFAT and the cumulative effect of the change in accounting, the Company's net income was $571,000 in 1995. In 1993 - -- excluding the extraordinary gain -- the Company recorded losses of $4.8 million. Fiscal 1995's $5.4 million increase in net income before equity in the earnings of SFAT, the cumulative accounting change, and extraordinary items was primarily a result of certain charges taken in 1993. These charges included $5.6 million in bankruptcy-related costs and adjustments to claims. LIQUIDITY AND CAPITAL RESOURCES On August 1, 1995, the Company refinanced substantially all of its long-term debt. Financing for the transaction was provided by Transamerica Business Credit Corporation, ("Transamerica") and Furman Selz SBIC, L.P. ("Furman Selz"). Transamerica provided a $10 million asset-based credit facility, while Furman Selz purchased a $3 million subordinated note (Furman Selz also purchased warrants to acquire 1 million shares of the Company's common stock at $1.50 per share). The proceeds from these loans and approximately $3 million of the Company's available cash were used to repurchase approximately $15 million of the Company's Class F debt (including accrued interest) for a cash payment of $8.4 million and other consideration, resulting in an approximate $6 million extraordinary gain. The Company also used $1.7 million of proceeds from the refinancing to retire all of its short-term revolving line of credit held by Congress Financial Corporation. The ratio of current assets to current liabilities was 1.35 to 1.0 at March 31, 1996 compared to 1.16 to 1.00 at March 31, 1995. Working capital increased by $1.5 million as a result of cash flow from operations. This increase was also due to the refinancing. The Company's cash flow from operations was $9,465,000 for the year ended March 31, 1996, compared to $367,000 for the year ended March 31, 1995. The growth in operating cash flow resulted from higher earnings and increases in certain liabilities, including increases in the Company's deferred maintenance liability due to the timing of customer prepayments and actual maintenance costs. Cash flow from financing activities was a deficit of $6,942,000 for the year ended March 31, 1996, compared to a positive cash flow of $1,094,000 for the year ended March 31, 1995. The reduction in cash flow from financing activities was due to the Company's refinancing. The Company's cash requirements were satisfied primarily through cash on hand, operating earnings and revolving loans (in addition to a term loan and subordinated note used to fund the refinancing). There were no outstanding borrowings under the Company's revolving loan at March 31, 1996. Based upon the Company's level of inventory and accounts receivable, coupled with the revolving loan's eligibility requirements, the net availability of funds under the facility increased to approximately $1.5 million as of March 31, 1996. Management believes its present cash balance, availability of working capital from the loan facility, and attainment of projected cash flow should be sufficient to meet the Company's working capital requirements for at least the next 12 months. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See Item 14 for financial statement information. 8 135 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. GENERAL. The following table shows the directors and executive officers of the Company, their respective ages, and their current positions:
Term expires Name Age in fiscal year Current Position - ---- --- -------------- ---------------- Eugene M. Armstrong 78 1997 Chairman of the Board William F. Bryant 57 -- President, Transcisco Leasing Company Brian J. Comstock 34 -- Vice President, Sales & Marketing, TRS Ottokarl F. Finsterwalder 60 1996 Director Brian P. Friedman 40 1996 Director William E. Greenwood 58 1998 Director Paul G. Hayes 58 -- Vice President, Engineering, TRS Robert A. Jahnke 52 -- President, Transcisco Rail Services Steven L. Pease 52 1997 President and CEO of the Company; Director Gregory S. Saunders 33 -- Vice President, Controller of the Company George A. Tedesco 73 1998 President, Transcisco Trading Company, Director
Eugene M. Armstrong was elected to the Board of Directors in February 1985, and was appointed President and Chief Executive Officer of the Company in July 1991. Mr. Armstrong resigned as President and became Chairman of the Board in January 1993. From 1969 to his retirement in August 1983, Mr. Armstrong held a number of executive positions with Morrison-Knudsen, Inc. (MK), a construction company, including director of MK, President of two MK-owned short line railroads and all of its railroad operations, and as President, Chairman of the Board and director of H.K. Ferguson Co., director and Executive Vice President of Industrial, Mining and Manufacturing Operations and Manager of the Missile and Space Division of Morrison-Knudsen, Inc. William F. Bryant was appointed President of Transcisco Leasing Company in August, 1990 when the Board of Directors decided the Company should re-enter the rail equipment leasing business. From 1985 to 1990, Mr. Bryant was Senior Vice President, Marketing and Sales for U.S. Leasing International, Inc. Prior to this, Mr. Bryant held senior marketing positions in the rail industry with BRAE Corporation and PLM, Inc., where he was President of PLM Railcar Services, Inc. from 1974 to 1979. Brian J. Comstock became Vice President of Sales and Marketing of Transcisco Rail Services Company, a subsidiary of the Company in February 1995. From 1986 through 1995, Mr. Comstock served as Regional Director of Sales overseeing Central and Northwestern U.S. markets. Previously, Mr. Comstock held management positions in operations. Mr. Comstock is a member of the Association of American Railroads and the Car Department Officers Association. Ottokarl F. Finsterwalder was elected to the Board of Directors in September, 1990. Mr. Finsterwalder was an attorney with Shearman & Sterling until 1970. From 1970 to 1975, he was a director of Hill Samuel & Co., Ltd., a merchant bank located in London. Since 1975, Mr. Finsterwalder has served as Executive Vice President in charge of international operations of Creditanstalt-Bankverein in Vienna. In July, 1985, he was appointed to the Board of Managing Directors of Creditanstalt-Bankverein. Mr. Finsterwalder is also a director of several companies, including Banco Interfinanzas S.A., Buenos Aires, Eckes AG, Frankfurt, Global bond Plus, Ltd., London, Banco BBA-Crediantstalt S.A., Sao Paulo, and Energy International, London. 9 136 Brian P. Friedman was appointed to the Board of Directors on August 31, 1995, pursuant to the Note and Warrant Purchase Agreement dated August 1, 1995, which provides Furman Selz SBIC, L.P. the right to designate one director to serve on the Company's board of directors. Mr. Friedman is President of Furman Selz Investments LLC and has been an Executive Vice President of Furman Selz LLC for more than the past five years. Mr. Friedman serves on the board of directors of the Coast Distribution System and on the board of a number of private companies. William E. Greenwood was elected to Board of Directors on January 20, 1995. Mr. Greenwood is currently president of the Zephyr Group, a Fort Worth, Texas based company. For thirty years, Mr. Greenwood served in various capacities at Burlington Northern Railroad Company (BN), one of the largest railroads in the United States. Mr. Greenwood's most recent position was Chief Operating Officer of BN (1990-1994). He resigned from that post in June, 1994. Prior to this position, he served as Executive Vice President-Marketing & Sales for BN (1985-1990) and Vice President-Intermodal Transportation (1981-1984). Previously, he served in numerous executive positions with BN. Mr. Greenwood serves on the boards of Mark VII, Inc. and Ameritruck Distribution System Corp. Paul G. Hayes became Vice President, Engineering of Transcisco Rail Services Company, a subsidiary of the Company, in November 1987. Mr. Hayes has spent the past 28 years in the rail industry after 5 years in aerospace engineering. Previous positions include Director of Engineering, Director Research and Development, Director of Quality Control while at Richmond Tank Car Company, and Chief Product Engineer at ACF Industries, Incorporated. Robert A. Jahnke became President of Transcisco Rail Services Company, a subsidiary of Company in April 1995. Mr. Jahnke was previously Senior Vice President, Operations of Chicago and Northwestern Transportation Company, where his entire career of 29 years resulted in major contributions in areas of operations, equipment management, and finance. Steven L. Pease, Chairman, Chief Executive Officer and President of Deucalion Securities, Inc., became President and Chief Executive Officer of Transcisco Industries, Inc. for the third time in his career in January of 1995. Mr. Pease had earlier rejoined the Board of Directors in December 1992. Mr. Pease brings with him considerable expertise in the rail services industry, having served as the former President and Chief Executive Officer of PLM Companies, Inc. (the predecessor company of Transcisco Industries and PLM International) from 1981 through 1987, and having served on the Board of Directors from 1981 through 1989. Mr. Pease was also a member of the PLM International Inc., Board of Directors from 1988 through 1989. Mr. Pease served as Chief Executive Officer of Transcisco Industries from January 1993 to March 1994, in the process leading the Company from its bankruptcy. Mr. Pease is a graduate of the Harvard Business School. Gregory S. Saunders became Vice President, Controller of the Company in May 1995. Previously, Mr. Saunders was Manager of Business Development for the Company from 1990 to 1995. In this position Mr. Saunders served in various financial and project management capacities. From 1985 through 1988, Mr. Saunders served in various financial management capacities for the Company's predecessor (PLM Companies, Inc.), including the position of Manager of Accounting of Financial Analysis. Prior to 1985, Mr. Saunders held finance and system analytical positions at American Express Company and Control Data Systems, Inc. Mr. Saunders is a graduate of the Harvard Business School. George A. Tedesco has twenty-one years of continuous service with the Company (including its predecessor companies) and was appointed president of TTC in 1992. Prior to that, Mr. Tedesco was the senior vice president of marketing and sales of the Company. Mr. Tedesco played a key role in creating the Company's successful Russian affiliate, SFAT, and has extensive experience doing business in Russia. Mr. Tedesco was elected to the Company's board of directors in January 1995. Mr. Tedesco has been employed in various executive positions since he joined the Company's predecessor in 1975. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership of Common Stock with the SEC and the 10 137 American Stock Exchange using Form 3, 4, or 5. Officers, directors and greater-than-ten-pecent holders are required to furnish the Company with copies of all such forms which they file. Except for one delinquent filing each of Form 4 by Messrs. Pease, Jahnke and Saunders, the Company believes that during fiscal 1996 all filing requirements applicable to the Company's officers, directors, greater-than-ten-percent beneficial owners, and other persons subject to Section 16 of the Exchange Act were complied with based solely on the Company's review of the filings by such persons and written representations from certain persons that no filing on Form 4 or 5 was required. ITEM 11. EXECUTIVE COMPENSATION. GENERAL. The following table sets forth, for each of the Company's last three fiscal years, the compensation awarded to, earned by, or paid to the chief executive officer and each of the four most highly compensated executive officers of the Company other than the chief executive officer (together, the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
Long-Term Compensation ---------------------------------- Annual Compensation Restricted LTIP All other Name & Principal Fiscal ---------------------- Stock Options Payouts Compen- Position Year(1) Salary ($) Bonus($)(7) Awards(6) (# of Shares)* ($) sation ($) -------- ------- ---------- ----------- --------- -------------- --- ---------- STEVEN L. PEASE(2) 1996 226,667 330,000 -- 150,000 -- -- President & Chief 1995 87,521 -- -- 300,000 -- -- Executive Officer 1994 43,750 -- -- -- -- -- WILLIAM F. BRYANT 1996 172,802 447,000 -- -- -- 8,600(3) President, 1995 172,308 135,500 -- -- -- 4,800 Transcisco Leasing Co. 1994 43,750 -- -- -- -- 4,800 GEORGE A. TEDESCO 1996 174,060 100,000 -- 170,000(4) -- -- (5) President, 1995 148,260 -- -- -- -- -- Transcisco Trading Co. 1994 37,644 -- -- -- -- -- ROBERT A. JAHNKE 1996 175,000 -- -- 60,000 -- 62,500(8) President, Transcisco 1995 -- -- -- -- -- -- Rail Services Co. 1994 -- -- -- -- -- -- PAUL G. HAYES 1996 103,500 4,500 -- -- -- 7,500 Vice President, Engineering 1995 102,896 6,000 -- -- -- 7,500 Transcisco Rail Services Co. 1994 23,160 -- -- -- -- 1,875(9)
- -------------------------------------------------------------------------------- * No SARs were issued (1) The fiscal period 1994 refers to the three month period ended March 31, 1994, pursuant to the Company's transition to a March 31 fiscal year beginning with the twelve months ended March 31, 1995. (2) Amounts paid to Deucalion Securities, an affiliate of Mr. Pease. (3) Includes $3,800 in life insurance premiums paid by the Company and a $4,800 per annum automobile allowance. Years 1994-1995 include only the automobile allowance. (4) Mr. Tedesco was granted 170,000 options at $0.22 per share in partial settlement of Mr. Tedesco's Class F deferred compensation claim. (5) Mr. Tedesco was a Class F claimant in connection with a terminated deferred compensation agreement and received common stock options, a note cash, and the waiving of the exercise price and vesting period on 60,000 options in consideration for his claim. (6) None of the Named Executive Officers hold restricted stock pursuant to the issuance of Restricted Stock Award(s). (7) Bonus amounts reflect sums earned in each respective year, but paid in following year. (8) Amount reflects value of 250,000 stock purchase rights issued to Mr. Jahnke. Value was calculated as difference between exercise price and market value of common stock on the date the stock purchase agreement was signed. (9) Amount reflects debt forgiveness on a loan of approximately $30,000 to Mr. Hayes. OPTIONS. The following table sets forth certain information with respect to stock options granted to the Named Executive Officers during the fiscal year ended March 31, 1996, including hypothetical gains based on assumed rates of annual compound stock price appreciation: 11 138 STOCK OPTION GRANTS IN LAST FISCAL YEAR - INDIVIDUAL GRANTS
Potential Realizable Value at Assumed Annual Rates of Number of Stock Price Appreciation Securities % of Total Exercise Expira- (through Expiration Date)(7) Underlying Options Price tion ---------------------------- Name Options Granted Granted ($/sh) Date(6) 5% Per Year 10% Per Year ---- --------------- ------- ------ ------- ----------- ------------ William F. Bryant(1) -- -- $ 0.50 3-31-2003 $ 18,867 $ 47,812 Paul G. Hayes(2) -- -- $ 0.50 3-31-2003 $ 566 $ 1,434 Robert A. Jahnke(3) 60,000 14.2% $ 1.4375 4-15-2005 $160,368 $ 406,404 Steven L. Pease(4) 150,000 35.5% $ 4.50 2-1-2006 $405,637 $1,027,964 George A. Tedesco(5) 170,000 40.3% $ 0.22 7-31-2005 $ 54,242 $ 137,460
- -------------------------------------------------------------------------------- (1) Mr. Bryant was not granted options in fiscal 1996. Exercise price, expiration date, and realizable values refer to 60,000 options granted March 31, 1993. (2) Mr. Hayes was not granted options in fiscal 1996. Exercise price, expiration date, and realizable values refer to 1,800 options granted March 31, 1993. (3) Options were granted effective April 1995 pursuant to the Company's Amended and Restated (1994) Stock Option Plan (the "1994 Stock Option Plan"). Mr. Jahnke's options vest over a three year period in even monthly amounts. The 1994 Stock Option plan is administered by the independent directors. (4) Options were granted effective March 1996: (i) pursuant to the Company's 1994 Stock Option Plan, if the amendment to such plan is adopted by the stockholders of the Company at the 1996 annual meeting, or (ii) outside of such plan if the amendment is not adopted. Mr. Pease's options vest over a five year period in even monthly amounts. (5) Options were granted effective July 1995 as partial compensation for a deferred compensation Class F bankruptcy claim. (6) Subject to earlier termination in certain events related to termination of employment. (7) Represents assumed rates of stock price appreciation in accordance with the Commission's rules. Actual gains, if any, on stock options exercises are dependent on the future market price of the Company's Common Stock. Computation based on actual option term and annual compounding, computed as the product of: (a) the difference between: (i) the product of the per share market price at the effective date of grant and the sum of 1 plus the adjusted stock price appreciation rate (5% - 62.8%, 10% - 159.4%) and (ii) the per share exercise price of the option and (b) the number of securities underlying the grant at fiscal year end. AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Number of Securities Value of Underlying Unexercised Unexercised in-the-money Options at Options Fiscal Year End at Fiscal Year-End Shares Value (#) end ($) Acquired on Realized Exercisable/ Exercisable/ Name Exercise (#) ($) Unexercisable Unexercisable - ---- ------------ --- ------------- ------------- William F. Bryant -- -- 48,771/11,229 219,470/50,531 Paul G. Hayes 2,600 5,217 425/1,375 1,913/6,188 Robert A. Jahnke -- -- 19,180/40,820 68,329/145,421 Steven L. Pease -- -- 121,585/328,415 432,843/1,169,157 George A. Tedesco -- -- 170,000/0 812,600/0
- -------------------------------------------------------------------------------- DIRECTOR COMPENSATION. Each non-employee director of the Company receives a fee of $2,000 per month. In addition, directors are reimbursed reasonable and customary expenses incurred for attendance at meetings, including, but not limited to, air fare and hotel accommodations. Directors are also awarded additional compensation in connection with extraordinary contributions to the Company. During fiscal 1996, Mr. Finsterwalder was awarded special compensation in the form of options to purchase 25,000 shares of Common Stock, which will be issuable under the Company's Stock Purchase Plan, as amended.. The options carry an exercise price of $4.50 per share and are exercisable immediately. EMPLOYMENT CONTRACTS. In January 1995, the Company entered into a consulting agreement (the "Consulting Agreement") with Deucalion Securities, of which Mr. Pease is CEO. The Consulting Agreement was amended in March 1996. The Agreement is identical to an earlier agreement executed between the Company and its former CEO, Mr. Phil Kantz. The Agreement, as amended, terminates on March 31, 1998, through which period of time Mr. Pease is to receive his base salary, which was increased to $240,000 per year in accordance with the Consulting Agreement (such increase occurring upon the refinancing of the Company on August 1, 1995). The Consulting Agreement also establishes 12 139 incentive compensation for Mr. Pease in terms of performance of the Company relative to its goals outlined in the Company's Chapter 11 bankruptcy plan, including a bonus for exceeding earnings and cash flow projections. In addition, the Agreement grants to Mr. Pease 300,000 options pursuant to the Company's Amended and Restated (1994) Stock Option Plan. The exercise price of the options was set at the market price of the stock on the day of granting, which was $1.4375 per share. The options vest over a three year term, ending January 1998. The Agreement states that, upon a change of control (as defined in the Consulting Agreement), Mr. Pease's options will immediately vest. The Consulting Agreement was amended to include a 1996 bonus award of $330,000 in cash and options to purchase 150,000 shares of the Company's Commons Stock at $4.50 per share. The bonus was awarded as a result of Mr. Pease's achievement of specific earnings and cash flow targets as outlined in the Consulting Agreement. In 1993, the Company entered into an employment agreement (the "1993 Bryant Agreement") with Mr. William F. Bryant, President of Transcisco Leasing Company (TLC). The 1993 Bryant Agreement supersedes the previous employment agreement with Mr. Bryant dated July 9, 1990. The term of the 1993 Bryant Agreement is five years ending June 30, 1998. Pursuant to the 1993 Bryant Agreement, Mr. Bryant's employment may be terminated for cause only. Mr. Bryant's base salary was set at $175,000 per annum; the board of directors of TLC may increase the base salary if it determines an adjustment is equitable and in the best interests of the Company. The 1993 Bryant Agreement includes incentive compensation, allowing Mr. Bryant and the management employees of TLC to share up to 10% of the pretax earnings of Transcisco Leasing Company. The 1993 Bryant Agreement also includes customary healthcare and other benefits. In the event of a merger, acquisition, or change of control of TLC, the 1993 Bryant Agreement shall become binding on the successor entity or the controlling person. In 1995 the Company signed a letter agreement (the "Jahnke Letter") with Mr. Robert A. Jahnke, President of Transcisco Rail Services Company (TRS). Pursuant to the Jahnke Letter, Mr. Jahnke's employment may be terminated for cause only. Mr. Jahnke's base salary was set at $175,000 per annum; the board of directors of TRS may increase the base salary if it determines an adjustment is equitable and in the best interests of the Company. The Jahnke Letter includes incentive compensation, allowing Mr. Jahnke to receive a bonus up to 100% of his base salary for exceeding certain financial targets. In addition, the Jahnke Letter provided for the grant of 60,000 options, vesting over three years and exercisable at $1.4375 per share. The options vest immediately upon a change in control. The Jahnke Letter also awarded 250,000 stock purchase rights (the "Purchase Rights") issuable under the Company's Stock Purchase Plan. The Purchase Rights carried an exercise price of $1.00 per share and were exercisable immediately. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During the period ended March 31, 1996, no executive officer of the Company served (i) as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Company's compensation committee (the "Company Compensation Committee"); (ii) as a director of another entity, one of whose executive officers served on the Company Compensation Committee; or (iii) as a member of the compensation committee (or other board committee performing equivalent functions, or in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Company's board of directors. No member of the Company Compensation Committee (i) was, during the period ended March 31, 1996, an officer or employee of the Company or any of its subsidiaries; (ii) was formerly an officer of the Company or any of its subsidiaries; or (iii) had any relationship requiring disclosure by the Company under any paragraph of Item 404 of Regulation S-K. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. For the fiscal year 1996, the Company Compensation Committee consisted of Messrs. Armstrong and Finsterwalder, neither of whom currently is an employee of the Company. As part of its duties, the Company Compensation Committee reviews compensation levels of executive officers, evaluates performance of management 13 140 and administers the 1994 Stock Option Plan. The Company Compensation Committee is assisted by the Company's human resources personnel and the Company's independent auditor, Ernst & Young LLP, which supplies the Company Compensation Committee with statistical data and other executive compensation information to permit the Company Compensation Committee to compare the Company's compensation policies against compensation levels nationwide and against programs of other companies of similar size in the Company's industry and geographic area. The companies included in the salary comparisons are generally not the same as the companies included in the index in the stock performance graph included hereafter. The Company Compensation Committee believes that the Company's most direct competitors for executive talent in the San Francisco Bay Area are not necessarily the same companies to which the Company would be compared for stock performance purposes. The Company's executive compensation programs are designed to attract and retain executives who will contribute to the Company's long-term success, to reward executives for achieving the Company's short- and long-term strategic goals, to link executive compensation and shareholder interest through equity-based plans, and to recognize individual contributions to the Company's performance. It is the Company Compensation Committee's belief that none of the Company's executive officers will be affected by the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended, which limits the deductibility of certain executive compensation during fiscal 1996. Therefore, the Committee has not adopted a policy as to compliance with the requirements of Section 162(m). The Company Compensation Committee has established Mr. Pease's base salary in reference to that provided to Mr. Pease's predecessor and in reference to mean total compensation for area companies. Base salaries for executive officers other than the Company's chief executive officer are set at approximately the mean total cash compensation level of referenced surveys. For the executive officers of the Company, compensation consists of three principal elements: base salary, annual bonus, and stock options. Base Salary. The base salaries of executive officers are initially determined by evaluating the responsibilities of the position held and the experience and performance of the individual, with reference to the competitive marketplace for executive talent, including a comparison to base salaries for comparable positions based on data contained in the surveys discussed above. Executive officer base salaries are targeted toward the mean total compensation established by such surveys in order to attract and retain executives who, in the Company's belief, are best able to meet the unique challenges facing the Company. The Company Compensation Committee reviews executive salaries annually and adjusts them as appropriate to reflect changes in market conditions and individual performance and responsibilities. Bonus Program. The bonus program emphasizes the Company's belief that executive compensation should be closely tied to the Company's profitability. The Company's bonus program also acknowledges company and, indirectly, individual performance. Bonuses can be paid only if the Company exceeds specific goals established for the fiscal year. The bonus program is intended to bring the executives' base salary plus bonus compensation above the mean total compensation levels established by referenced surveys when all company and individual performance criteria are met. Stock Options. Under the 1994 Stock Option Plan, stock options may be granted to executive officers and other key employees of the Company. Upon joining the Company, an individual's initial option grant is based on the individual's responsibilities and position and upon information provided in referenced surveys. The size of any annual stock option awards thereafter is based primarily on a qualitative assessment of an individual's performance and the individual's responsibilities and position with the Company, as well as on the individual's present outstanding options. Options are designed to align the interests of executive officers with those of the Company's shareholders. All incentive stock options are granted with an exercise price equal to the fair market value of the Company Common Stock on the date of grant and generally vest over four years. This approach is designed to encourage the creation of shareholder value over the long term since no benefit is realized from the stock option grant unless the price of the Company Common Stock rises over a number of years. 14 141 Other elements of executive compensation include participation in a company-wide medical and insurance benefits plan and the ability to defer compensation pursuant to a 401(k) plan. The Company makes 50% matching contributions to the 401(k) plan, up to $1,000 per employee per year. The Company Compensation Committee established the salary and bonus compensation levels for Mr. Pease, President and CEO of the Company, in reference to a Consulting Agreement (the "Consulting Agreement") between the Company, Mr. Pease and Deucalion Securities, a firm of which Mr. Pease is CEO. The Consulting Agreement was amended March 1, 1996 and is substantially the same agreement executed with the Company's predecessor President and CEO. The salary and bonus levels specified in the Consulting Agreement were established based upon reference to compensation surveys of area companies of similar size. The Consulting Agreement, as amended, provides for Mr. Pease to be paid a salary of $240,000 per year through the expiration date of the Consulting Agreement, which is March 31, 1998.. The Consulting Agreement also provides for a fiscal 1996 bonus of $330,000 in cash and 150,000 options. The options were issued on March 1, 1996, carry an exercise price of $4.50 per share, and vest immediately upon a change in control, as defined in the Consulting Agreement). The 1996 fiscal year bonus was based upon a formula outlined in the Consulting Agreement which provides for a bonus of up to two times Mr. Pease's salary in the event the Company meets or exceeds certain cash flow and earnings targets. The Company exceeded the specified targets. PERFORMANCE GRAPH The following graph sets forth the Company's total five (5) year cumulative shareholder return as compared to the Russell 2000 index ("Russell 2000"), the Standard & Poors Mid-Capitalization Index ("S&P Mid-Cap"), and the S&P Transportation Index ("S&P Transportation"). The Company believes the Russell 2000, which encompasses the shareholder returns of small public companies, is the most representative index for purposes of comparing the Company's total shareholder return. Total shareholder return assumes $100 invested at the beginning of the period in the common stock of the Company and the stocks represented in the S&P Mid-Cap, S&P Transportation, and Russell 2000 indices. Total return also assumes reinvestment of dividends; the Company has paid no dividends on the Company's Common Stock since 1990. Historical stock price performance should not be relied upon as indicative of future stock price performance. [GRAPHIC] 15 142 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following tables sets forth, as of June 1, 1996, the most recent practicable date, for purposes of Item 12, prior to the filing of this report on Form 10-K, certain information with respect to (i) persons who, to the best knowledge of the Company, was the beneficial owner of more than five percent of the outstanding shares of Company Common Stock, the Company's only class of voting security, and (ii) the number of shares of Company Common Stock beneficially owned by each current director, the Named Executive Officers, and by all current directors and executive officers as a group: (A) Security Ownership of Certain Beneficial Owners
Number of Percent Name Shares(2) of Total(3) ---- --------- ----------- Brian P. Friedman(1) 972,667 14.3% Steve L. Pease 383,975 5.7%
- -------------------------------------------------------------------------------- (1) Includes 6,000 shares issuable upon exercise of options and 966,667 shares issuable upon exercise of a warrant purchased by Furman Selz SBIC, L.P., of which Mr. Friedman is an officer of the general partner. (2) Shares include 978,667 and 186,940 shares issuable upon exercise of warrants or options within 60 days of the date of this proxy to Furman Selz and Mr. Pease, respectively. Amount does not include 263,060 of additional shares issuable pursuant to options upon a change in control of the Company. (3) Based upon 5,269,614 shares outstanding plus 1,530,241 shares issuable within 60 days from the date of this Annual Report on Form 10-K to directors, officers and employees under option and warrant agreements. Amount does not include an additional 295,492 shares issuable pursuant to options upon change in control of the Company. (B) Security Ownership of Directors and Management
Number of Percent Name Shares of Total(1) ---- ------ ----------- Eugene M. Armstrong 80,500 1.2% William F. Bryant(2) 89,232 1.3% Dr. Ottokarl F. Finsterwalder(3) 40,000 ** Brian F. Friedman(4) 972,667 14.3% William E. Greenwood(5) 6,000 ** Paul G. Hayes(6) 998 ** Robert A. Jahnke(7) 277,568 4.1% Steven L. Pease(8) 383,975 5.7% George A. Tedesco(9) 265,834 3.9% All directors & officers as a group (9 persons)(10) 2,116,774 31.1%
- -------------------------------------------------------------------------------- (1) Based upon 5,269,614 shares outstanding plus 1,530,241 shares issuable within 60 days from the date of this Annual Report on Form 10-K to directors, officers and employees under option and warrant agreements. (2) Includes 53,482 shares of the Company Common Stock which may be purchased by Mr. Bryant upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K. (3) Includes 25,000 shares of the Company Common Stock which may be purchased by Mr. Finsterwalder upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K. (4) Includes 6,000 shares issuable exercise of options and 1,000,000 shares issuable upon exercise of warrants issued to Furman Selz SBIC, L.P., of which Mr. Friedman is an officer of the general partner. (5) Includes 6,000 shares of the Company Common Stock which may be purchased by Mr. Greenwood upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K. (6) Includes 998 shares of the Company Common Stock which may be purchased by Mr. Hayes upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K. (7) Includes 27,568 shares of the Company Common Stock which may be purchased by Mr. Jahnke upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K. (8) Includes 176,107 shares of the Company Common Stock which may be purchased by Mr. Pease upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K. (9) Includes 170,000 shares of the Company Common Stock which may be purchased by Mr. Tedesco upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K. (10) Includes 1,431,822 shares of the Company Common Stock which may be purchased by the directors and Named Executive Officers upon exercise of options over the sixty days following the date of this Annual Report on Form 10-K ** = Less than 1% 16 143 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Brian P. Friedman, a director nominated for re-election at the upcoming 1996 Annual Meeting of Stockholders, is an executive vice president of Furman Selz LLC, an affiliate of Furman Selz SBIC, L.P., to which the Company is indebted in the amount of $1,450,000, pursuant to that certain Note and Warrant Purchase Agreement, dated as of August 1, 1995, among the Company, TRS, TLC, TTC, Furman Selz SBIC, L.P., and James Dowling. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) FINANCIAL STATEMENTS AND EXHIBITS: (1) Transcisco Industries, Inc. Consolidated Financial Statements and Report of Independent Auditors: see the Index on page 12 of this Report. (2) Exhibits: 3.1 Joint Plan of Reorganization, incorporated by reference to Form 8-A filed by the Company on August 12, 1993. 3.2 Amended and Restated Certificate of Incorporation of Transcisco Industries, Inc., incorporated by reference to Form 8-A by the Company on August 12, 1993. 3.3 Amended and Restated By-Laws, incorporated by reference to Form 8-A filed by the Company on August 12, 1993. 4.1 Form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of Transcisco Industries, Inc. 10.1 Lease agreement for 601 California Street, incorporated herein by reference to Company's filing of Form 10-K for December 31, 1988, filed with the Securities and Exchange Commission. * 10.2 Transcisco Industries, Inc. Amended and Restated (1994) Stock Option Plan (including implementing agreement: Transcisco Industries, Inc., Stock Option Agreement) incorporated herein by reference to Form S-8 filed April 13, 1995 with the Securities and Exchange Commission. 10.3 Plan and Agreement of Reorganization, incorporated by reference to the Company's Registration Statement on Form S-4 (Reg. No. 33-2236) dated December 23, 1985, filed with the Securities and Exchange Commission. * 10.4 Employment Agreement between TRS and Mr. Robert A. Jahnke, dated April 13, 1995, incorporated herein by reference to the Company's Form 10-K for the fiscal year ended March 31, 1995. * 10.6 Transcisco Industries, Inc. Directors' (1994) Stock Option Plan, incorporated by reference to the Company's Form S-8 filed April 8, 1995 with the Securities and Exchange Commission. * 10.7 Employment Agreement as amended, dated May 1, 1995 between Mr. William F. Bryant and Transcisco Leasing Company, a subsidiary of Company, incorporated herein by reference to the Company's Form 10-K for the fiscal year ended March 31, 1995. * 10.8 Agreement between Deucalion Securities, Inc., and Steven L. Pease and the Company dated January 3, 1995, incorporated herein by reference to the Company's Form 10-K for the fiscal year ended March 31, 1995. 17 144 * 10.9 Amendment dated March 1, 1996 to the Agreement between Deucalion Securities, Inc., and Steven L. Pease and the Company dated January 3, 1995. 10.10 The Note and Warrant Purchase Agreement Among the Company, Transcisco Rail Services Company, Transcisco Leasing Company, and Transcisco Trading Company and Furman Selz S.B.I.C., L.P. and James Dowling dated as of August 1, 1995 is incorporated herein by reference to the Company's Form 8-K filed on October 6, 1995. 10.11 The Registration Rights Agreement by and between the Company, Furman Selz S.B.I.C., L.P., and James Dowling dated August 1, 1995 is incorporated herein by reference to the Company's Form 8-K filed on October 6, 1995. 10.12 The Loan and Security Agreement between the Company, Transcisco Rail Services Company, Transcisco Leasing Company, Transcisco Trading Company, and Transamerica Business Credit Corporation, dated as of July 31, 1995 is incorporated herein by reference to the Company's Form 8-K filed on October 6, 1995. 10.13 The Shareholder Rights Plan by and between the Company and First Interstate Bank of California, as rights agent, dated September 5, 1995, is incorporated herein by reference to the Company's Form 8-A filed on September 15, 1995. 10.14 Letter Agreement by and between the Company and Mark C. Hungerford dated July 1, 1995, incorporated herein by reference to the Form S-3 dated February 7, 1996. 10.15 Agreement and Plan of Merger dated June 17, 1996 among Trinity Industries, Inc., Trinity Y, Inc., and the Company. * 10.17 The Company's Stock Purchase Plan incorporated by reference to the Company's Form S-8 filed April 8, 1995 with the Securities and Exchange Commission. 10.18 Amendment dated June 17, 1996 to the Rights Agreement by and between the Company and Wells Fargo Bank National Association (formerly First Interstate Bank of California), dated September 5, 1995. 21.1 List of subsidiaries of the Company, incorporated herein by reference to the Company's Form 10-K for the fiscal year ended December 31, 1993. 23.1 Consent of Independent Auditors regarding the Company's consolidated financial statements filed as part of this Annual Report on Form 10-K. 27.0 Financial data schedule. 99.1 JSC SFAT Consolidated Financial Statements for the years ended December 31, 1995 and 1994 with Independent Auditors' Report thereon. * Compensatory plans or arrangements required to be filed pursuant to item 14(c) of Form 10-K. (b) REPORT ON FORM 8-K FOR LAST QUARTER OF 1996: No reports on Form 8-K were filed during the last quarter of fiscal 1996. 18 145 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Date: June 24, 1996 Transcisco Industries, Inc. By: /s/ Gregory S. Saunders ------------------------------------ Gregory S. Saunders, Vice President, Controller Know all persons by these presents, that each person whose signature appears below constitutes and appoints Steven L. Pease, and each of them, his attorney-in-fact, with full power of substitution, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same with exhibits thereto and other documents in connection therewith, with the Securities Exchange Commission, hereby satisfying and confirming all that such attorneys-in-fact may do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report had been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ Steven L. Pease President and June 24, 1996 - ----------------------------------- Chief Executive Officer (Steven L. Pease) /s/ Eugene M. Armstrong Chairman of the Board June 24, 1996 - ----------------------------------- (Eugene M. Armstrong) /s/ Dr. Ottokarl F. Finsterwalder Director June 22, 1996 - ----------------------------------- (Dr. Ottokarl F. Finsterwalder) /s/ Brian P. Friedman Director June 24, 1996 - ----------------------------------- (Brian P. Friedman) /s/ William E. Greenwood Director June 25, 1996 - ----------------------------------- (William E. Greenwood) /s/ Gregory S. Saunders Vice President, Controller June 24, 1996 - ----------------------------------- (principal financial and (Gregory S. Saunders) accounting officer) /s/ George A. Tedesco Director June 26, 1996 - ----------------------------------- (George A. Tedesco) 19 146 TRANSCISCO INDUSTRIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (ITEM 14 (a) (1) AND (2))
DESCRIPTION PAGE NO. ----------- -------- Report of Independent Auditors. 22 Consolidated Balance Sheets at March 31, 1996 and 1995. 23 Consolidated Statements of Operations for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993. 24 Consolidated Statements of Shareholders' Equity (net capital deficiency) for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993. 25 Consolidated Statements of Cash Flows for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993. 26 Notes to Consolidated Financial Statements. 28
All schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. 20 147 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Transcisco Industries, Inc. We have audited the accompanying consolidated balance sheets of Transcisco Industries, Inc. (the "Company") as of March 31, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the consolidated financial statements of SFAT (a Russian joint stock corporation in which the Company has a 23.5% ownership interest) for SFAT's fiscal years ended December 31, 1995 and 1994, or for any prior periods. Those statements were audited by other auditors whose report has been furnished to us and, our opinion, insofar as it relates to data included for SFAT, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based upon our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Transcisco Industries, Inc. at March 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994 and for the year ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, as of April 1, 1994, the Company changed its method of accounting for its equity investment in SFAT. ERNST & YOUNG LLP San Francisco, California May 10, 1996, except note 11 as to which the date is June 17, 1996 21 148 TRANSCISCO INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
- ------------------------------------------------------------------------------------------------- FISCAL YEAR ENDED MARCH 31 1996 1995 -------- -------- (restated) ASSETS: Current Assets: Cash and cash equivalents $ 2,695 $ 1,371 Receivables 6,377 6,221 Inventories 2,501 3,460 Other current assets 574 419 -------- -------- Total current assets 12,147 11,471 Property and equipment, net 14,606 17,561 Investment in SFAT 17,214 11,024 Other 79 81 -------- -------- $ 44,046 $ 40,137 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Accounts payable $ 3,743 $ 2,744 Accrued compensation and benefits 1,968 1,202 Unearned revenue 1,505 265 Other current liabilities 1,394 2,351 Borrowings under bank line of credit -- 1,722 Current portion of long-term debt 382 1,563 -------- -------- Total current liabilities 8,992 9,847 Long-term debt 3,561 13,415 Other long-term liabilities 2,861 2,923 Deferred maintenance liability 2,872 1,108 Commitments and contingencies Shareholders' Equity: Preferred Stock, no par value, 1,000,000 shares authorized, none issued -- -- Common Stock, $.01 par value, 15,000,000 shares authorized, issued and outstanding 6,064,004 shares in 1996, and 5,609,961 shares in 1995 53 51 Paid-in capital in excess of par 17,747 17,022 Retained earnings (accumulated deficit) 11,474 (1,235) Less cost of Common shares in Treasury; 794,390 in 1996 and 478,726 in 1995 (3,514) (2,994) -------- -------- Total Shareholders' Equity 25,760 12,844 -------- -------- $ 44,046 $ 40,137 ======== ======== - -------------------------------------------------------------------------------------------------
22 149 TRANSCISCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data)
- --------------------------------------------------------------------------------------------------------------------------- THREE MONTH FISCAL YEAR ENDED MARCH 31 PERIOD ENDED YEAR ENDED 1996 1995 MARCH 31, 1994 DEC. 31, 1993 ----------- ----------- -------------- ------------- (restated) Revenues (primarily maintenance & repair) $ 42,630 $ 34,579 $ 7,221 $ 32,513 Costs and expenses: Operations and support 31,718 27,717 6,087 26,989 General and administrative 6,169 4,792 1,153 4,903 Interest income (85) (189) (78) (383) Interest expense 954 1,688 400 330 ----------- ----------- ----------- ----------- Total costs and expenses 38,756 34,008 7,562 31,839 Income (loss) from continuing operations, before tax, reorganization items, asset write- down, equity in earnings of SFAT, extra- ordinary gain, and cumulative effect of a change in accounting principle 3,874 571 (341) 674 Reorganization items: Bankruptcy administrative costs -- -- -- (2,386) Adjustment to estimated allowed claims -- -- -- (1,700) Asset write-down (3,000) -- -- -- Equity in earnings of SFAT 5,975 2,019 -- -- ----------- ----------- ----------- ----------- Income (loss) from continuing operations before tax 6,849 2,590 (341) (3,412) Provision for income tax (198) -- -- -- ----------- ----------- ----------- ----------- Income (loss) from continuing operations 6,651 2,590 (341) (3,412) Discontinued operations: Loss from discontinued operations -- -- -- (23) Gain (loss) on close-down and disposal of business segment -- -- -- 142 Adjustment to estimated allowed claims -- -- -- (1,500) ----------- ----------- ----------- ----------- Loss from discontinued operations -- -- -- (1,381) Income (loss) before extraordinary gain and cumulative effect of a change in accounting principle 6,651 2,590 (341) (4,793) Extraordinary gain 6,058 -- -- 13,929 Cumulative effect as of April 1, 1994, of changing to the equity method of accounting -- 7,590 -- -- ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ 12,709 $ 10,180 $ (341) $ 9,136 =========== =========== =========== =========== Per share amounts: Continuing operations $ 1.09 $ 0.49 $ (0.06) $ (0.73) Discontinued operations -- -- -- (0.29) Extraordinary gain 1.00 -- -- 2.97 Cumulative effect of accounting change -- 1.44 -- -- ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ 2.09 $ 1.93 $ (0.06) $ 1.95 =========== =========== =========== =========== Weighted average number of shares 6,085,381 5,283,926 5,422,935 4,689,530 - ---------------------------------------------------------------------------------------------------------------------------
23 150 TRANSCISCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) Fiscal Years Ended March 31, 1996 and 1995, the Three Month Period Ended March 31, 1994 and the Year Ended December 31, 1993 (in thousands)
- ------------------------------------------------------------------------------------------------------- TOTAL SHARE- HOLDERS' COMMON STOCK RETAINED EQUITY AND PAID-IN EARNINGS/ (NET CAPITAL IN (ACCUMULATED TREASURY CAPITAL EXCESS OF PAR DEFICIT) SHARES DEFICIENCY) ------------- ------------ -------- ------------ Balance at December 31, 1992 $16,394 $(20,210) $(2,994) $ (6,810) Net income -- 9,136 -- 9,136 Issuance of common stock 590 -- -- 590 ------- -------- ------- -------- Balance at December 31, 1993 16,984 (11,074) (2,994) 2,916 Net loss -- (341) -- (341) Issuance of common stock 74 -- -- 74 ------- -------- ------- -------- Balance at March 31, 1994 17,058 (11,415) (2,994) 2,649 Net income -- 10,180 -- 10,180 Issuance of common stock 15 -- -- 15 ------- -------- ------- -------- Balance at March 31, 1995 (restated) 17,073 (1,235) (2,994) 12,844 Net income -- 12,709 -- 12,709 Issuance of common stock 727 -- -- 727 Treasury shares released from escrow -- -- (520) (520) ------- -------- ------- -------- Balance at March 31, 1996 (restated) $17,800 $ 11,474 $(3,514) $ 25,760 ======= ======== ======= ======== - -------------------------------------------------------------------------------------------------------
24 151 TRANSCISCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
THREE MONTH FISCAL YEAR ENDED MARCH 31 PERIOD ENDED YEAR ENDED 1996 1995 MAR. 31, 1994 DEC. 31, 1993 ------- ------- ------------- ------------- (RESTATED) CASH FLOWS FROM OPERATING ACTIVITIES: Income (loss) from continuing operations before extraordinary gain and cumulative $ 6,651 $ 2,590 $(341) $(3,412) effect of change in accounting principle Adjustments to reconcile loss to net cash (used in) provided by continuing operations: Equity in (earnings) of SFAT, net of dividends (5,915) (2,019) -- -- Reorganization items not requiring cash -- -- 130 1,332 Loss on fixed asset write-downs 3,000 -- -- -- Depreciation and amortization 1,154 1,186 287 1,127 Common stock issued for services 450 15 74 67 Changes in operating assets and liabilities: Accounts receivable (156) (870) (680) 1,909 Inventories 959 (1,059) 22 414 Other current assets (155) 97 82 409 Other assets 2 78 (28) 55 Accounts payable 999 (895) (804) 546 Accrued compensation and benefits 766 370 (139) (348) Deferred maintenance liability 1,764 1,042 (17) (520) Unearned revenue 1,240 -- -- -- Other current liabilities (1,232) (596) 616 (434) Other long-term liabilities (62) 428 -- (299) ------- -------- ---- ------- Net cash (used in) provided by continuing operations 9,465 367 (798) 846 ------- -------- ---- ------- Loss from discontinued operations -- -- -- (1,381) Adjustments to reconcile loss to net cash used in discontinued operations: Accrual for loss on disposal of business segment -- -- -- (150) Liabilities subject to compromise -- -- -- (658) Other, net -- -- -- (586) ------- -------- ---- ------- Net cash used in discontinued operations -- -- -- (2,775) ------- -------- ---- ------- Net cash (used in) provided by operating activities 9,465 367 (798) (1,929) ------- -------- ---- -------
-Continued - 152 (continued from previous page) TRANSCISCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
THREE MONTH FISCAL YEAR ENDED MARCH 31 PERIOD ENDED YEAR ENDED 1996 1995 MAR. 31, 1994 DEC. 31, 1993 -------- ------- ------------- ------------- (RESTATED) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (1,199) (815) (120) (339) Restricted cash -- -- 124 123 Discontinued operations: Capital expenditures, net -- -- -- -- Disposal of equipment -- -- -- 1,580 Restricted cash -- -- -- 600 -------- ------- ------- ------- Net cash provided by (used in) investing activities (1,199) (815) 4 1,964 -------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Class F and other senior debt (11,929) (2,452) (109) (386) Redemption of note receivable -- 2,000 -- -- Borrowings under long-term debt 6,709 341 -- -- Short-term borrowings (repayment) (1,722) 1,205 525 -- -------- ------- ------- ------- Net cash (used in) provided by financing activities (6,942) 1,094 416 (386) -------- ------- ------- ------- Net increase (decrease) in cash and cash equivalents 1,324 646 (378) (351) -------- ------- ------- ------- Cash and cash equivalents at beginning of year 1,371 725 1,103 1,454 -------- ------- ------- ------- Cash and cash equivalents at end of year $ 2,695 $ 1,371 $ 725 $ 1,103 ======== ======= ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION: Treasury shares released from escrow in connection with the debt refinancing $ (520) $ -- $ -- $ -- ======== ======= ======= ======= Common stock issued in connection with the debt refinancing $ 277 $ -- $ -- $ -- ======== ======= ======= =======
26 153 TRANSCISCO INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. BASIS OF PRESENTATION. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. CONCENTRATION OF CREDIT RISK. The Company markets its services throughout the United States. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and such losses have been within management's expectations. Reserves for doubtful accounts were approximately $97,000 at March 31, 1996 and $48,000 at March 31, 1995. INVENTORIES. Inventories, consisting of rail parts, supplies and work in process, are stated at the lower of cost or market. Cost is determined by the last-in, first out (LIFO) method for substantially all inventories. PROPERTY AND EQUIPMENT. Property and equipment are stated at cost. Depreciation of property and equipment is computed primarily using the straight-line method based on the estimated useful lives of the assets. Estimated useful lives used in computing depreciation provisions are as follows: Buildings and improvements 17 to 40 years Equipment and track 3 to 40 years Rolling stock 15 to 20 years Other 3 to 10 years
When properties are retired, or otherwise disposed of, the asset cost and accumulated depreciation are removed from the accounts, and the resulting gain or loss is credited or charged to operations. Normal recurring maintenance and repair costs are expensed as incurred. Major repairs or betterments are capitalized and depreciated over the remaining useful lives of the related assets. PER SHARE DATA. Net income per share data is computed using the weighted average number of shares of outstanding common stock and diluted common stock equivalents from the assumed exercise of stock options and warrants. Net loss per share data is computed using the weighted average number of shares of outstanding common stock and excludes common stock equivalents as their effect would be anti-dilutive. STATEMENTS OF CASH FLOWS. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. For the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993, interest of $623,000, $906,000, $106,000, and $135,000 was paid. For the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993, the Company paid $200,000, $51,000, $17,000, and $36,000 in income taxes related to various federal and state filings. 27 154 INCOME TAXES. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." This statement requires that deferred income taxes be determined using the asset and liability method. EQUITY IN EARNINGS OF SFAT. Equity in earnings of SFAT represents the Company's share of earnings in SFAT, of which Transcisco Trading Company (a wholly owned subsidiary of the Company) has a 23.5% ownership interest as of March 31, 1996. The Company believes SFAT is the largest privately owned railcar transportation company in Russia. Effective April 1, 1994, the Company resumed the equity method of accounting for its SFAT investment in December 1995. The resumption of equity accounting was based upon a number of factors including the Company's continuing ability to influence SFAT's operations and the availability of audited financial data from SFAT. The Company's equity in the earnings of SFAT is presented as a cumulative effect as of April 1, 1994. Beginning with the Company's fiscal year ended March 31, 1995, the Company's equity in earnings of SFAT were restated to reflect the Company's equity in SFAT's earnings one quarter in arrears. Accordingly, the Company's equity in the earnings of SFAT for the fiscal year ended March 31, 1995 reflects SFAT's income through SFAT's fiscal year ended December 31, 1994. Similarly, the Company's equity in the earnings of SFAT for the fiscal year ended March 31, 1996 reflects SFAT's earnings for its fiscal year ended December 31, 1995, net of certain costs incurred. The adoption of a one quarter-in-arrears recognition of equity earnings resulted in the Company not reporting any equity earnings for the three month period ended March 31, 1994. The Company also earns licensing and service fees from SFAT which amounted to (in thousands): $1,500, $1,200, $150, and $1,300 for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994 and the year ended December 31, 1993, respectively. These amounts are included in revenues in the accompanying statement of operations. The Company also received dividends from SFAT which amounted to (in thousands): $60,000, $51,000, $0, and $43,500 for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994 and the year ended December 31, 1993, respectively. Summarized financial information from the audited financial statements of SFAT is presented below (in thousands):
Year Ended December 31 1995 1994 ---- ---- Current assets $ 57,073 $ 38,035 Total assets 136,597 103,448 Current liabilities 51,510 41,162 Total liabilities 52,560 45,262 Shareholders' equity 79,825 53,915 Total revenues 81,982 27,337 Operating income before interest and taxes 29,701 12,441 Net income 26,594 8,925
REVENUE RECOGNITION. The Company recognizes revenue from repair and maintenance services in the period in which such services are performed. Performance of services is deemed to have occurred when a railcar's repairs have been completed and the railcar is made available for customer disposition. For maintenance fees earned under long term contracts, revenues are recognized over the length of the maintenance agreements in accordance with the terms of the agreements. Such agreements generally require customers to pay fees monthly as consideration for maintenance and management services as defined in the contracts. For railcar leases, the Company recognizes revenues over the length of the leases in amounts reflecting contractual lease payments due from lessees. 28 155 USE OF ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. STOCK OPTIONS. The Company accounts for its stock option plan in accordance with provisions of the Accounting Principles Board's Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock Based Compensation." SFAS 123 provides an alternative to APB 25 and is effective for fiscal years beginning after December 15, 1995. The Company expects to continue to account for its employee stock plans in accordance with the provisions of APB 25 with the disclosures required by SFAS 123. Accordingly, the adoption of SFAS 123 is not expected to have any impact on the Company's financial position or results of operations. RECLASSIFICATIONS. Certain prior year balances have been reclassified to conform to the current year's presentation. NOTE 2. PROPERTY AND EQUIPMENT. Property and equipment at March 31, 1996 and 1995 were as follows (in thousands):
1996 1995 ---- ---- Land $ 937 $ 1,078 Building and improvements 8,123 8,852 Rolling stock 677 682 Equipment and track 9,523 13,863 Other 1,112 1,044 ------- ------- 20,732 25,519 Less: Accumulated depreciation (5,766) (7,958) ------- ------- $14,606 $17,561 ======= =======
In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the undiscounted cash flows attributed to such assets. The Company adopted the provisions of SFAS 121 as of October 1, 1995. In connection with the refinancing of the Company's debt, the Company evaluated the ongoing value of its property and equipment. Based on this evaluation, the Company determined that assets at one facility with a carrying value of approximately $5,500,000 were impaired and such assets were written down by $3,000,000 to their fair value. Fair value was estimated based upon property and equipment appraisals. NOTE 3. INCOME TAXES. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows (in thousands): (next page) 29 156
March 31, 1996 March 31, 1995 -------------- -------------- Deferred tax liability: Non-current: Book basis of fixed assets in excess of tax basis $ 3,426 $ (5,162) ------- -------- Total deferred tax liability 3,426 (5,162) Deferred tax asset: Current Difference in reporting bad debt expense and other current assets and liabilities for tax purposes 260 624 Non-current: Net operating loss carryforwards 4,208 11,190 Accrued interest 17 556 Other-net 1,470 682 ------- -------- Total deferred tax asset 5,910 13,052 Net deferred tax asset 2,484 7,890 Valuation allowance (2,484) (7,890) ------- -------- Net deferred tax liability $ -- $ -- ======= ========
The net change in the valuation allowance for the year ended March 31, 1996 was an decrease of $5,406,000 due largely to a decrease in net operating losses as well as other changes in the components of the deferred tax asset and liability. The provision for income taxes is comprised of the following:
Fiscal Year Ended Fiscal Year Ended March 31, 1996 March 31, 1995 ----------------- ----------------- Current: Federal $189,000 -- State 9,000 -- Total current 198,000 -- Deferred: Federal -- -- State -- -- -------- --- Total deferred -- -- -------- --- $198,000 -- ======== ===
A reconciliation between income tax provisions computed at the U.S. federal statutory rate and the effective rate is reflected in the statement of operations:
Fiscal Year Fiscal Year Three Month Ended Ended Period Ended March 31, 1996 March 31, 1995 March 31, 1994 -------------- -------------- -------------- Federal statutory rate 34% 34% 34% State rate, net of federal benefit 7 7 7 Alternative minimum tax rate differential (14) -- -- Benefit from carryforward of net operating losses (27) (41) (41) --- --- --- Effective income tax rates -- -- -- === === ===
The balance sheets as of March 31, 1996 and 1995 reflect liabilities for tax claims. The tax claims are the result of unresolved tax authority audits pertaining to the years 1985 through 1989. The potential liability for the tax 30 157 claims was approximately $200,000 and $660,000 at March 31, 1996 and 1995, respectively. Tax account balances related to the tax claims total $2,040,000 and $2,235,000 as of March 31, 1996 and 1995, respectively, and are included in other long-term liabilities in the accompanying balance sheet. At March 31, 1996 and 1995, the Company had net operating loss carryforwards for federal income tax purposes of approximately $11,600,000 and $30,000,000, respectively. These net operating loss carryforwards expire from 2004 through 2008. The Company's ability to utilize the net operating loss carryforwards may be limited in the event of a 50% or more ownership change within any three year period. No provision for income taxes on $16,703,000 of accumulated undistributed earnings of the Company's investment in a foreign company has been recorded since the earnings are intended to be indefinitely reinvested in that company. Cash paid for income taxes was $197,000 for the fiscal year ended March 31, 1996. NOTE 4. BANK BORROWINGS AND LONG-TERM DEBT (IN THOUSANDS). SUMMARY OF LONG-TERM DEBT.
March 31, 1996 March 31, 1995 -------------- -------------- Secured revolving credit agreement: Transamerica $ -- $ -- Senior term loan: Transamerica 1,985 -- Series A subordinated debt: Furman Selz 1,500 -- Other long-term debt 458 458 Restructured Debt (Note 9) -- 14,520 ------ --------- 3,943 14,978 Less current portion (382) (1,563) ------- --------- LONG-TERM DEBT $3,561 $ 13,415 ====== =========
REFINANCING. On August 1, 1995, the Company refinanced substantially all of its long-term debt. Financing for the transaction was provided by Transamerica Business Credit Corporation, ("Transamerica") and Furman Selz SBIC, L.P. ("Furman Selz"). Transamerica provided a $10 million asset-based credit facility, while Furman Selz purchased a $3 million subordinated note (Furman Selz also purchased warrants to acquire 1 million shares of the Company's common stock at $1.50 per share). The proceeds from these loans and approximately $3 million of the Company's available cash were used to repurchase approximately $15 million of the Company's Class F debt (including accrued interest) for a cash payment of $8.4 million and other consideration, resulting in an approximate $6 million extraordinary gain. The Company also used $1.7 million of proceeds from the refinancing to retire all of its short-term revolving line of credit held by Congress Financial Corporation. SENIOR TERM LOAN. Pursuant to a term loan with Transamerica, principal payments are due in equal monthly installments of $26,000 for 59 months through June 30, 2000, with the balance of the then outstanding principal due July 31, 2000; interest is due monthly in arrears, computed at prime plus 2% (10.25% at March 31, 1996). The loan is secured by substantially all of the Company's property and equipment. The term loan note contains financial covenants, including certain ratios that the Company must satisfy, and certain prepayment fees for payments made before July 31, 1998. 31 158 REVOLVING CREDIT LINE. This credit facility with Transamerica has a limit of $7,835,000, subject to certain reserves and eligibility requirements (available credit facility in March 31, 1996 was $1.5 million). The loan is collateralized by the Company's accounts receivables and inventory (the "collateral base"). The collateral base is computed on a daily basis. Interest is accrued daily based on the amount of loan outstanding, at a rate of prime plus 1.75% (10% as of March 31, 1996), payable in arrears. A fee of 0.25% is assessed on any unused line of credit. A fee of 0.25% of the daily average of loan outstanding during each month is charged to the Company. The term of the credit line is five years (expiring July 31, 2000), when all outstanding balances are due in full. SECURED REAL ESTATE LOAN. Collateral for this loan (through the Wyoming Community Development Center) consists of the real estate, land and buildings of Transcisco Rail Services' Rock Springs, Wyoming facility. The loan is payable in two remaining installments: $100,000 in December 1997 and $200,000 in December 2000. Interest is 6% and is due monthly. SERIES A SENIOR SUBORDINATED NOTES. The notes were issued to Furman Selz S.B.I.C., L.P. and James Dowling. Principal is due in total in 2000. The note bears interest at an annual rate of 10% through July 31, 1997, and 12% thereafter. Interest is payable on July 31, of 1996 and 1997, and January 31 and July 31 of each year thereafter (all prepayments will first be applied to the Series A notes). Half of the interest due on July 31, 1996 and July 31, 1997 is to be deferred and payable on July 31, 1998 and July 31, 1999, respectively. The subordinated debt may be prepaid without penalty upon proper notice. Principal payments on debt are approximately (in thousands): $382 in 1997; $450 in 1998; $338 in 1999; $2,024 in 2000, and $749 thereafter. The Company believes that as of March 31, 1996, the fair value of its long-term debt approximates the carrying value of those obligations. The fair value of the Company's long-term debt is estimated based on quoted market prices for similar issues with the same interest rates that would be available to the Company for similar debt obligations. NOTE 5. LONG-TERM MAINTENANCE, MANAGEMENT AND SUB-LEASE CONTRACTS. The Company has long-term maintenance contracts, including certain cost-per-mile maintenance contracts, with several major customers requiring the Company to provide maintenance services on unit train coal cars, primarily over one to fifteen year periods. Fees are based on a fixed price per railcar-mile traveled, with provisions for adjustments based on a projected frequency of repair and changes in costs of materials and industry labor rates. The Company estimates the cost of providing maintenance under these contracts and accrues these estimates as a Deferred Maintenance Liability and a current period expense. These estimates may differ from actual results and such estimates could be material to the financial statements. The actual amount of future maintenance costs will vary depending on the actual lives of the maintenance components, the proportion of repairs performed by outside railroad maintenance shops, inflation and other factors. Actual costs are deducted from the Deferred Maintenance Liability as incurred. Overhead costs are recognized as incurred. NOTE 6. COMMITMENTS AND CONTINGENCIES. LEASING ARRANGEMENTS. Various production and office facilities and equipment are leased under operating leases ranging from one to ten years, with options to renew at various times. In addition, certain rolling stock is leased on a long-term basis. Rental expenses for operating leases with non-cancelable terms in excess of one year are (in thousands): $2,607 in 32 159 1997; $2,628 in 1998; $2,340 in 1999; $2,414 in 2000, and $2,029 in 2001 and beyond. The Company has certain long-term non-cancelable management and sub-lease agreements related to railcar leasing transactions between 1997 and 2006. Amounts receivable under the terms of these non-cancelable agreements with terms in excess of one year are (in thousands): $2,931 in 1997; $2,935 in 1998; $2,796 in 1999; $2,741 in 2000, and $2,707 in 2001 and beyond. Rent expense during the year ended December 31, 1993, the three month period ended March 31, 1994, the years ended March 31, 1995 and 1996 was (in thousands): $1,998, $492, $1,699, and $3,085, respectively. LITIGATION. On or about September 15, 1995, Great American Insurance Company ("Great American") filed an action (the "Action") in the Superior Court of the State of California in and for the County of Marin against Mark Hungerford, a former Chairman, Director, and Chief Executive Officer of the Company. The action purports to set forth three causes of action for declaratory relief, and seeks judgment in the amount of $2,675,000 (plus interest as provided by law) against Mr. Hungerford. According to the complaint, the Action purports to arise out of a certain payment made by Great American on behalf of Mr. Hungerford in connection with the partial settlement of certain litigation, captioned Daniels v. PLM International, Inc., et al., to which Mr. Hungerford and others, including the Company, previously were parties. The Daniels litigation has been settled, and the state and federal complaints have been dismissed with prejudice. The complaint in the Action also seeks a declaration that two endorsements each barred coverage under a Directors' and Officers' Policy issued by Great American to the directors and officers of the Company. The complaint in the Action also seeks a declaration that no coverage is afforded under that policy for the director and officer defendants in the Daniels litigation in their capacities as directors or officers of PLM International, Inc. Prior to the commencement of the Action in the Marin County Superior Court, the United States District Court for the Northern District of California ruled, on a summary judgment motion in a declaratory relief action, that neither of the endorsements relied upon by Great American precluded coverage under the particular Directors' and Officers' Policy issued by Great American. The Court of Appeals for the Ninth Circuit reversed and remanded that decision, directing that it be dismissed on grounds which did not address the coverage issues under the two endorsements. Great American thereafter filed the Action in Marin County Superior Court. Mr. Hungerford may attempt to seek reimbursement from the Company for any sums paid in connection with defense or settlement of the claim, subject to certain terms and conditions in an indemnification agreement with the Company. NOTE 7. SHAREHOLDERS' EQUITY. COMMON STOCK. On August 11, 1993, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware. Upon the effectiveness of the Amended and Restated Certificate of Incorporation the then outstanding 3,188,369 shares of Class A Common Stock and 1,358,960 shares of Class B Common Stock were converted into one form of stock designated Common Stock. The Amended and Restated Certificate of Incorporation was filed by order of the Bankruptcy Court pursuant to the Plan. During fiscal years 1996, 1995 and 1993, the Company granted 25,000, 60,000 and 165,000 shares of common stock, valued at approximately $50,000, $75,000 and $67,000, respectively, to members of the Board of Directors as compensation for extraordinary services. STOCK OPTIONS. In January 1995, the Company's shareholders approved an Amended and Restated (1994) Stock Option Plan (the "1994 Plan"). The prior stock option plan was adopted in its original form and amended in 1989. The 1994 Plan reserves for the issuance of 750,000 shares of common stock. There were no common shares available for grant at March 31, 1996. 33 160 In January 1995, the Company's Board of Directors also approved an Amended and Restated Directors Stock Option Plan which reserves 100,000 shares of common stock. Common shares available for grant were 88,000 at March 31, 1996. Activity under these stock option plans for the years ended March 31, 1996 and 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993 was as follows:
SHARES UNDER OPTION EXERCISE PLAN PER SHARE ------------ --------- Outstanding, December 31, 1993 393,000 $0.50 to $3.75 Granted 310,000 $1.1875 Exercised (6,600) $0.50 Cancellations (21,500) $0.50 to $0.81 -------- Outstanding, March 31, 1994 674,900 Granted 353,500 $1.188 to $1.50 Exercised (29,875) $0.50 to $1.1875 Cancellations (318,792) $0.50 to $ 1.1875 -------- Outstanding, March 31, 1995 679,733 Granted 117,000 $1.44 to $5.563 Exercised (191,818) $0.50 to $1.1875 Cancellations (30,073) $0.50 to $1.50 -------- Outstanding, March 31, 1996 574,842 ========
STOCK WARRANTS. In connection with the refinancing, Furman Selz purchased warrants to acquire 1 million shares of the Company's common stock at an exercise price of $1.50 per share. The agreement governing the warrants was reached in June 1995, when the Company's stock price was approximately $1.50 per share. Furman Selz paid $30,000 for the warrants, which expire in July 2005. The warrants are subject to certain anti-dilution provisions and may be fully exercised at any time. The warrants may be exercised for cash consideration only. STOCK PURCHASE RIGHTS. In 1995 the Board of Directors approved an employee stock purchase plan (the "Purchase Plan"), which provides for the issuance of stock purchase rights to key employees. The Company has reserved 510,000 shares for issuance under the Purchase Plan. In fiscal 1996, employees were granted 260,000 stock purchase rights under the plan. SHAREHOLDER RIGHTS PLAN. On September 5, 1995, the Company adopted a Shareholder Rights Plan (the "Rights Plan"), pursuant to which each holder of the Company's Common Stock was issued a currently unexercisable right ("Right") to purchase Series A Junior Preferred Participating Stock (the "Preferred Stock") at an exercise price of $12.00 per share. Following public announcement that a person or group has acquired, or is making a tender offer for, 5% or more of the outstanding shares of the Company's Common Stock, the Rights will become exercisable to purchase the number of shares of Preferred Stock having a value equal to ten times the exercise price. In the event that the Company engages in a merger or business combination with the acquirer or tender offeror, the Rights will become exercisable for shares of common stock in the acquiring entity having a value equal to ten times the exercise price of the Right. The Rights would not become exercisable, however, if the Company's Board of Directors approved the acquisition of the common stock, the merger, or the business combination prior to the occurrence thereof. 34 161 NOTE 8. BENEFIT PLAN. Substantially all employees are eligible to participate in the Company's Profit Sharing and Tax Advantage Savings Plan. The Company makes discretionary contributions to the Plan up to a maximum matching contribution of $1,000 for each participant. Contributions charged to operations were $114,653 in the year ended March 31, 1996, $101,000 in the year ended March 31, 1995, $22,000 in the three month period ended March 31, 1994, and $75,000 in the year ended December 31, 1993. NOTE 9. CHAPTER 11 REORGANIZATION PROCEEDINGS. On July 1, 1991, certain holders of Transcisco Industries, Inc.'s (the "Company's") 9% Convertible Senior Subordinated Notes due May 15, 1996, filed an Involuntary Petition for Relief Under Chapter 7 of the United States Bankruptcy Code against the Company in the United States Bankruptcy Court. The petition was in response to the Company's previous announcement that it was delaying the May 15, 1991 interest payment on these Notes. On July 30, 1991, the Company filed a motion (which was granted) to convert the case to voluntary Chapter 11 of the United States Bankruptcy Code. In addition, one of its subsidiaries, Transcisco Tours, Inc., filed a voluntary petition with the United States Bankruptcy Court seeking protection under Chapter 11. The Chapter 11 proceedings did not include any of the Company's other operating subsidiaries: Transcisco Rail Services Company (TRS), Transcisco Leasing Company, Transcisco Trading Company or Transcisco Texan Railway, Inc., (whose operations were subsequently discontinued). The Chapter 11 cases were administered by the Bankruptcy Court, with Transcisco Industries, Inc. and Transcisco Tours, Inc. (the Debtor Companies) managing their businesses as debtors-in-possession subject to the control and supervision of the Bankruptcy Court. The primary cause of the Chapter 11 filings was the outlay required and significant losses incurred in the construction and operation of a luxury "cruise train" operating from the San Francisco Bay Area to Lake Tahoe/Reno, Nevada by Transcisco Tours, Inc. The "cruise train" operated from December 7, 1990 to April 29, 1991. As a result of substantial losses, Union Bank terminated the Company's line of credit, and the Company was unable to satisfy its then current cash flow requirements, all of which prompted the two Chapter 11 cases. Following a hearing on September 3, 1993, the Bankruptcy Court announced its intention to confirm the Joint Plan of Reorganization ("Plan") propounded by the Company, its Official Unsecured Creditors' Committee and its Official Bondholders' Committee. The Findings of Fact and Conclusions of Law Regarding the Joint Plan of Reorganization and the Order Confirming the Joint Plan of Reorganization were entered by the Bankruptcy Court on October 21, 1993 and the Plan became effective on November 3, 1993. In September 1993, Transcisco Tours filed a liquidating Plan of Reorganization. The Disclosure Statement accompanying that Plan was approved by the Bankruptcy Court in October 1993 and confirmed in December 1993. Accordingly, other than liabilities guaranteed by the Company as part of the Plan, the accompanying financial statements do not include the accounts of Transcisco Tours after September 1993. The Plan generally provided that: 1. Tax claims of approximately $1,300,000 (applied against the previously established deferred tax liability) were to be paid in full over a six-year period including 7% interest. 2. The Company transferred 3,367,367 shares of PLM International ("PLMI") common stock and 60% of a $5,000,000 subordinated PLMI promissory note receivable to a court-appointed representative of the holders of the Company's senior subordinated notes ("Bondholders") in full satisfaction of the Bondholders' claims in the Chapter 11 case. The Company retained a 40% interest in the principal and interest paid by PLMI with respect to the foregoing $5 million note. That 40% interest was redeemed by PLMI in October 1994, and the proceeds were paid to the Class F Creditors. 3. In connection with the Plan, the Company had previously settled litigation brought by Shirley B. Daniels against the Company, PLMI and other defendants. Pursuant to the settlement in the Plan, the Company paid the entire $750,000 in full satisfaction over a ten quarter period ended December 31, 1995. 35 162 4. In August 1993, in accordance with the Plan, the Company paid $1.5 million in cash to Amtrak in full satisfaction of its claim of $10,206,000. Amtrak's claim was based upon the Company's alleged breach of a five-year operating and management agreement with Amtrak to operate the Transcisco Tours' cruise train. 5. Eighty percent (80%) of the claims of most remaining unsecured creditors ("Class F" claims) plus monthly interest at prime plus 11/2%, were to be paid over a seven year period ending in December 31, 1999. The aggregate amount of unsecured claims allowed, after the 20% reduction, was approximately $18,270,570. The Company retired all Class F claims in connection with its August 1995 refinancing. In addition, on November 4, 1993, the Company issued 489,976 shares of its common stock (representing 10% of the Company's then outstanding Common Stock) to a Collateral Agent acting on behalf of the unsecured creditors. These shares were to be distributed over a three year period. Upon completion of the refinancing, approximately 175,000 shares were distributed to the Class F claimants. The Company retained approximately 315,000 of shares in treasury. 6. Upon the filing of the amended Certificate of Incorporation on August 11, 1993, each share of the Class A Common Stock (par value $0.01 per share), of the Company and each share of the Class B Common Stock, (par value $0.01 per share), of the Company, then issued and outstanding immediately prior thereto was canceled and changed into one share of the Common Stock, (par value $0.01 per share), of the Company. In connection with the Company's emergence from bankruptcy, the Company recognized a $13,929,000 extraordinary gain in the third quarter of 1993. The gain on early extinguishment of debt is summarized as follows: Extinguished of subordinated debentures $ 7,391,000 20% reduction unsecured creditor claims, less value of 10% of the Company's Common Stock issued ($523,000) 2,232,000 Transcisco Tours unsecured debt 4,306,000 ----------- $13,929,000 ===========
During 1993, the Company also recognized $1,700,000 and $1,500,000 in increases in estimated allowed claims related to continuing and discontinued operations, respectively. The consolidated financial statements for the year ended December 31, 1993 reflect the financial reporting guidance for entities in reorganization as prescribed by the American Institute of Certified Public Accountants' Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." The Consolidated Statements of Operations separately disclose reorganization expenses related to the Chapter 11 proceedings. Interest expense related to pre-petition indebtedness of approximately $3.1 million was not accrued in the financial statements for the year ended December 31, 1993. Such interest was not be paid nor became a secured claim since the Company was operating under Chapter 11 during most of 1993. Of the unaccrued interest, approximately $604,000 from 1993 relates to discontinued operations. From November 3, 1993, until the refinancing in August 1995, interest was accrued on the Class F claims in accordance with generally accepted accounting principles. NOTE 10. SUBORDINATED NOTE RECEIVABLE FROM PLMI. Until the Company's emergence from bankruptcy, the Company had a $5 million subordinated note from PLMI. The note bore interest at 14.75% with interest payable semi-annually. Interest income of approximately $160,000, $73,000, and $371,000 was recorded in the year ended March 31, 1995, the three month period ended March 31, 1994, and the year ended December 31, 1993, respectively. In October 1994, PLMI redeemed the note for 36 163 90% of its face value. In accordance with the Plan of Reorganization, the $1.8 million in redemption proceeds due Transcisco was paid to its Class F Creditors. NOTE 11. SUBSEQUENT EVENTS. On June 17, 1996, the Company entered into an Agreement and Plan of Merger (the "Agreement") with Trinity Industries, Inc. ("Trinity"). Under terms of the Agreement, and subject to certain approvals, a wholly-owned subsidiary of Trinity will merge with Transcisco through the exchange of shares of common stock of Trinity for 100 percent of the issued and outstanding shares of common stock of Transcisco. The Agreement provides that each share of Transcisco's outstanding common stock will be exchanged on a tax free basis for .1884 of a share of Trinity's common stock. Based on the June 14, 1996 closing price of $35 per share of Trinity's stock, the transaction would have a value of approximately $47.6 million. The stock exchange ratio is fixed. The consummation of the proposed merger is subject, among other conditions, to registration with the Securities and Exchange Commission of the stock of Trinity to be issued in the transaction, approval of the definitive agreement by the shareholders of Transcisco, expiration of the waiting period prescribed under the Hart-Scott-Rodino Antitrust Improvements Act, and all necessary regulatory approvals. 37 164 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnity directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (collectively, a "Proceeding"), and other than an action by or in the right of the corporation (a "derivative action"), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal Proceeding, had no reason to believe that their conduct was unlawful. With respect to derivative actions, a standard similar to the foregoing is applicable, except that indemnification only extends to expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit, and court approval is required before there can be any indemnification where the person seeking indemnification has been found to be liable to the corporation. The statute states that it is not to be deemed exclusive of any other rights that may be granted under any bylaw, agreement. vote of stockholders or disinterested directors or otherwise. Under Article VI of the Registrant's Bylaws, the Registrant is to indemnify each person who is or was or has agreed to become a director, officer, employee or agent of the Registrant or is or was serving or has agreed to serve at the request of the Registrant in a similar capacity for another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent authorized or permitted (i) by the Delaware General Corporation Law or by any other applicable law or any amendment thereof or (ii) by the Registrant's Certificate of Incorporation. Article VI of the Registrant's Bylaws further states that the Registrant will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed Proceeding (other than an action by or in the right of the Registrant) by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Registrant, or is or was serving or has agreed to serve at the request of the Registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Registrant, and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Registrant, and, with respect to any criminal Proceeding, had reasonable cause to believe that his conduct was unlawful. The Registrant will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Registrant to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Registrant, or is or was serving or has agreed to serve at the request of the Registrant as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Registrant, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Registrant unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses that the Court of Chancery or such other court shall deem proper. The indemnification described above (unless ordered by a court) shall be paid by the Registrant unless a determination is made (i) by the Registrant's Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such Proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the Registrant's stockholders, that indemnification of the director, officer, employee or agent is not proper in the circumstances because he has not met the applicable standard of conduct set forth above. To the extent that a director, officer, employee or agent of the Registrant has been successful on the merits or otherwise, including, without limitation, the dismissal of an action, without prejudice, in defense of any Proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. II-1 165 Under the Registrant's Bylaws, the Registrant is to advance expenses to indemnitees to the fullest extent authorized or permitted (i) by the Delaware General Corporation Law or by any other applicable law or any amendment thereof or (ii) by the Registrant's Certificate of Incorporation. Article VI of the Registrant's Bylaws provides that costs, charges and expenses (including attorneys' fees) incurred by a person seeking indemnification under Article VI of the Registrant's Bylaws in defending a Proceeding shall be paid by the Registrant in advance of the final disposition of such Proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director or officer in his capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such Proceeding shall be made only upon receipt of an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Registrant. Such costs, charges and expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate, The Board of Directors may, upon approval of such director, officer, employee or agent of the Registrant, authorize the Registrant's counsel to represent such person in any Proceeding, whether or not the Registrant is a party to such Proceeding. The indemnification and advancement of costs, charges and expenses provided by the Registrant's Bylaws shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of costs, charges and expenses may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Registrant, and shall continue as to a person who has ceased to be a director, officer, employee or agent as to actions taken while he was such a director, officer, employee or agent, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. Repeal or modification of Article VI of the Registrant's Bylaws or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer, employee or agent or the obligations of the corporation arising thereunder. Section 102(b) (7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, but excludes specifically liability for any (i) breach of the director's duty of loyalty to the corporation or its stockholders, (ii) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (iii) payments of unlawful dividends or unlawful stock repurchases or redemptions, or (iv) transactions from which the director derived an improper personal benefits. The provision does not limit equitable remedies, such as an injunction or rescission for breach of a director's fiduciary duty of care. The Registrant's Certificate of Incorporation contains a provision eliminating the personal liability of a director from breaches of fiduciary duty, subject to the exceptions described above. The Registrant has entered into Indemnity Agreements with all of its officers and directors that establish contract rights to indemnification substantially similar to the rights to indemnification provided for in the Registrant's Bylaws. The Registrant has in force an officers' and directors' liability insurance policy insuring, up to specified amounts and with specified exceptions, directors, and officers and former directors and officers of the Registrant and its subsidiaries against damages, judgments, settlements and costs for which they are not indemnified by the Registrant that any such persons may become legally obligated to pay on account of claims made against them for any error, misstatement or misleading statement, act or omission, or neglect or breach of duty committed, attempted or allegedly committed or attempted by such persons in the discharge of their duties to the Registrant in their capacities as directors or officers, or any matter claimed against them solely by reason of their serving in such capacities. The officers' and directors' liability insurance policy also insures the Registrant, up to specified amounts and with specified exceptions, against any indemnification payments made by the Registrant to directors and officers and former directors and officers. II-2 166 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (A) EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------ ----------- **2 Agreement and Plan of Merger, dated as of June 17, 1996, by and among the Registrant, Trinity Y, Inc. and Transcisco Industries, Inc. (included as Annex A to the Proxy Statement/Prospectus in Part I of this Registration Statement). 3(a) Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.A to Registration Statement No. 33-10937 filed by the Registrant on April 8, 1987). *3(b) Bylaws of the Registrant. 4(a) Specimen Stock Certificate for Trinity Common Stock (incorporated by reference to Exhibit 3B to Registrant's Registration Statement No. 33-10937 filed with the Commission on April 8, 1987). 4(b) Rights Agreement, dated as of April 11, 1989, by and between the Registrant and NCNB Texas National Bank, as Rights Agent (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A filed with the Commission on May 2, 1989). *5 Opinion and Consent of Locke Purnell Rain Harrell (A Professional Corporation) with respect to the legality of securities to be issued in the Merger. *8(a) Opinion of Skadden, Arps, Slate, Meagher & Flom with respect to certain tax matters. 21 Listing of Subsidiaries of the registrant (incorporated by reference to Exhibit 21 in the Registrant's Annual Report on Form 10-K for its fiscal year ended March 31, 1996). *23(a) Consent of Locke Purnell Rain Harrell (A Professional Corporation) (contained in its opinion in Exhibit 5 above). *23(b) Consent of Skadden, Arps, Slate, Meagher & Flom. *23(c) Consent of Ernst & Young LLP. *23(d) Consent of Schroder Wertheim & Co. Incorporated. *23(e) Consent of KPMG Moscow, Russia. *24 Powers of Attorney (included on the signature page of this Registration Statement). *99(a) Form of Proxy of Transcisco Industries, Inc. (relating to the meeting of stockholders of Transcisco Industries, Inc. described in the Proxy Statement/Prospectus in Part I of this Registration Statement). *99(b) Letter of Transmittal.
* Previously Filed ** Filed Herewith In accordance with paragraph (b)(4)(iii) of Item 601 of Regulation S-K, the Registrant is not filing herewith certain instruments defining the rights of holders of long-term debt of the Registrant because the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of such instruments to the Commission upon request. (B) FINANCIAL STATEMENT SCHEDULES Not Applicable. II-3 167 ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required in Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post- effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (6) That every prospectus (i) that is filed pursuant to the immediately preceding paragraph or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (7) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 20 above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (8) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. II-4 168 (9) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-5 169 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS, STATE OF TEXAS, ON JULY 19, 1996. TRINITY INDUSTRIES, INC. By: /s/ F. DEAN PHELPS* -------------------------------- F. Dean Phelps Vice President POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in their capacities set forth below on July 19, 1996.
SIGNATURE TITLE --------- ----- (a) Principal Executive Officer Chairman, President, Chief /s/ W. RAY WALLACE* Executive Officer and Director ------------------------------ W. RAY WALLACE (b) Principal Financial Officer /s/ JOHN T. SANFORD* Senior Vice President ----------------------------- JOHN T. SANFORD (c) Principal Accounting Officer /s/ F. DEAN PHELPS* Vice President ----------------------------- F. DEAN PHELPS
II-6 170
SIGNATURE TITLE ---------------------------- ----- (d) Other Directors /s/ DAVID W. BIEGLER* Director ---------------------------- DAVID W. BIEGLER /s/ BARRY J. GALT* Director ---------------------------- BARRY J. GALT /s/ CLIFFORD J. GRUM* Director ---------------------------- CLIFFORD J. GRUM /s/ DEAN P. GUERIN* Director ---------------------------- DEAN P. GUERIN /s/ JESS T. HAY* Director ---------------------------- JESS T. HAY /s/ EDMUND M. HOFFMAN* Director ---------------------------- EDMUND M. HOFFMAN /s/ RAY J. PULLEY* Director ---------------------------- RAY J. PULLEY /s/ TIMOTHY R. WALLACE* Director ---------------------------- TIMOTHY R. WALLACE *By /s/ F. DEAN PHELPS ------------------- F. DEAN PHELPS Attorney-In-Fact
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