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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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or Organization) Identification No.)
601 California Street, San Francisco, CA 94108
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number: (415) 477-9700
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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
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Securities registered pursuant to Section 12(g) of the Act:
None
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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
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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
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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
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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.
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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.
<TABLE>
<CAPTION>
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QUARTER OF FISCAL YEAR QUARTER OF FISCAL YEAR
1996 1995
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Market Prices for 4th 3rd 2nd 1st 4th 3rd 2nd 1st
Common Stock: Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
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</TABLE>
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands, except ratio and per share amounts)
<TABLE>
<CAPTION>
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THREE MONTH
FISCAL YEARS ENDED PERIOD ENDED
MARCH 31 MARCH 31, CALENDAR YEARS ENDED DECEMBER 31
1996 1995 1994 1993 1992 1991
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(restated)
<S> <C> <C> <C> <C> <C> <C>
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 -- -- -- --
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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
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</TABLE>
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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
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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,
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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.
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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:
<TABLE>
<CAPTION>
Term expires
Name Age in fiscal year Current Position
- ---- --- -------------- ----------------
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE> 10
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
<PAGE> 11
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
<TABLE>
<CAPTION>
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 ($)
-------- ------- ---------- ----------- --------- -------------- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
</TABLE>
- --------------------------------------------------------------------------------
* 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 $30,000 to Mr.
Hayes.
OPTIONS.
The following table sets forth certain information with respect to
stock options granted to the Named Executive Officers during the fiscal year
ended March 31, 1996, including hypothetical gains based on assumed rates of
annual compound stock price appreciation:
11
<PAGE> 12
STOCK OPTION GRANTS IN LAST FISCAL YEAR - INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Number of Stock Price Appreciation
Securities % of Total Exercise Expira- (through Expiration Date)(7)
Underlying Options Price tion ----------------------------
Name Options Granted Granted ($/sh) Date(6) 5% Per Year 10% Per Year
---- --------------- ------- ------ ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- --------------------------------------------------------------------------------
(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
<TABLE>
<CAPTION>
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
- ---- ------------ --- ------------- -------------
<S> <C> <C> <C> <C>
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
</TABLE>
- --------------------------------------------------------------------------------
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
<PAGE> 13
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
<PAGE> 14
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
<PAGE> 15
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
<PAGE> 16
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
<TABLE>
<CAPTION>
Number of Percent
Name Shares(2) of Total(3)
---- --------- -----------
<S> <C> <C>
Brian P. Friedman(1) 972,667 14.3%
Steve L. Pease 383,975 5.7%
</TABLE>
- --------------------------------------------------------------------------------
(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
<TABLE>
<CAPTION>
Number of Percent
Name Shares of Total(1)
---- ------ -----------
<S> <C> <C>
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%
</TABLE>
- --------------------------------------------------------------------------------
(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
<PAGE> 17
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
<PAGE> 18
* 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
<PAGE> 19
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
<PAGE> 20
TRANSCISCO INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(ITEM 14 (a) (1) AND (2))
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
----------- --------
<S> <C>
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
</TABLE>
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
<PAGE> 21
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
<PAGE> 22
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED MARCH 31
1996 1995
-------- --------
(restated)
<S> <C> <C>
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
======== ========
- -------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
THREE MONTH
FISCAL YEAR ENDED MARCH 31 PERIOD ENDED YEAR ENDED
1996 1995 MARCH 31, 1994 DEC. 31, 1993
----------- ----------- -------------- -------------
(restated)
<S> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
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)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
TOTAL SHARE-
HOLDERS'
COMMON STOCK RETAINED EQUITY
AND PAID-IN EARNINGS/ (NET
CAPITAL IN (ACCUMULATED TREASURY CAPITAL
EXCESS OF PAR DEFICIT) SHARES DEFICIENCY)
------------- ------------ -------- ------------
<S> <C> <C> <C> <C>
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
======= ======== ======= ========
- -------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTH
FISCAL YEAR ENDED MARCH 31 PERIOD ENDED YEAR ENDED
1996 1995 MAR. 31, 1994 DEC. 31, 1993
------- ------- ------------- -------------
(RESTATED)
<S> <C> <C> <C> <C>
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)
------- -------- ---- -------
</TABLE>
-Continued -
<PAGE> 26
(continued from previous page)
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTH
FISCAL YEAR ENDED MARCH 31 PERIOD ENDED YEAR ENDED
1996 1995 MAR. 31, 1994 DEC. 31, 1993
-------- ------- ------------- -------------
(RESTATED)
<S> <C> <C> <C> <C>
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 $ -- $ -- $ --
======== ======= ======= =======
</TABLE>
26
<PAGE> 27
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:
<TABLE>
<S> <C>
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
</TABLE>
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
<PAGE> 28
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):
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994
---- ----
<S> <C> <C>
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
</TABLE>
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
<PAGE> 29
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):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
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
======= =======
</TABLE>
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
<PAGE> 30
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
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 $ -- $ --
======= ========
</TABLE>
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:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
March 31, 1996 March 31, 1995
----------------- -----------------
<S> <C> <C>
Current:
Federal $189,000 --
State 9,000 --
Total current 198,000 --
Deferred:
Federal -- --
State -- --
-------- ---
Total deferred -- --
-------- ---
$198,000 --
======== ===
</TABLE>
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:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Three Month
Ended Ended Period Ended
March 31, 1996 March 31, 1995 March 31, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
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 -- -- --
=== === ===
</TABLE>
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
<PAGE> 31
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.
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
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
====== =========
</TABLE>
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
<PAGE> 32
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
<PAGE> 33
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
<PAGE> 34
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:
<TABLE>
<CAPTION>
SHARES UNDER
OPTION EXERCISE
PLAN PER SHARE
------------ ---------
<S> <C> <C>
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
========
</TABLE>
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
<PAGE> 35
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
<PAGE> 36
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:
<TABLE>
<S> <C>
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
===========
</TABLE>
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
<PAGE> 37
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
<PAGE> 38
INDEX TO EXHIBITS
TRANSCISCO INDUSTRIES, INC.
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
- ----------- --------
<S> <C> <C>
3.1 Joint Plan of Reorganization. *
3.2 Amended and Restated Certificate of Incorporation of Transcisco Industries, Inc. *
3.3 Amended and Restated By-Laws of Transcisco Industries, Inc. *
4.1 Form of Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of Transcisco Industries, Inc. 44
10.1 Lease agreement for 601 California Street. *
10.2 Transcisco Industries, Inc., Amended and Restated (1994) Stock Option Plan
(including implementing agreement: Transcisco Industries, Inc.,
Stock Option Agreement). *
10.3 Plan and Agreement of Reorganization. *
10.4 Employment Agreement between TRS and Mr. Jahnke, dated April 13, 1995. *
10.6 Transcisco Industries, Inc. Directors' (1994) Stock Option Plan. *
10.7 Employment Agreement as amended, dated May 1, 1995 between
Mr. William F. Bryant and Transcisco Leasing Company. *
10.8 Agreement between Deucalion Securities, Inc., and Steven L. Pease and
the Company dated January 3, 1995. *
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. 41
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. *
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. *
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. *
10.13 The Shareholder Rights Plan by and between the Company and
First Interstate Bank of California, as rights agent, dated
September 5, 1995. *
10.14 Letter Agreement by and between the Company and Mark C.
</TABLE>
38
<PAGE> 39
<TABLE>
<S> <C> <C>
Hungerford dated July 1, 1995. *
10.15 Agreement and Plan of Merger among Trinity Industries, Inc., Trinity Y, Inc.,
and the Company dated June 17, 1996. 54
10.17 The Company's Stock Purchase Plan. *
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. 135
21.1 List of Subsidiaries of the Company. *
23.1 Consent of Independent Auditors regarding the Company's consolidated
financial statements included in this Annual Report on Form 10-K. 40
27.0 Financial Data Schedule. 155
99.1 JSC SFAT Consolidated Financial Statements for the years
ended December 31, 1995 and 1994, with Independent
Auditors' Report thereon. 137
</TABLE>
* = incorporated by reference
39
<PAGE> 1
EXHIBIT 4.1
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
of
TRANSCISCO INDUSTRIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officers of Transcisco Industries, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors on August 31, 1995 adopted the following resolution creating
a series of 100,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Amended
and Restated Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 100,000.
<PAGE> 2
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the last day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $0.01 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after August 31, 1995 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in Paragraph (A) above
immediately after it declares a dividend or distribution on
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<PAGE> 3
the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$0.01 per share on the Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than thirty (30) days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
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<PAGE> 4
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
until such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend period on
all shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock (including
holders of the Series A Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at
a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual
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<PAGE> 5
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that such voting right shall not be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the
holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the holders
of Preferred Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as a class, to
elect Directors to fill such vacancies, if any, in the Board of Directors
as may then exist up to two (2) Directors or, if such right is exercised at
an annual meeting, to elect two (2) Directors. If the number which may be
so elected at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of the Preferred
Stock shall have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of Directors
shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the President,
a Vice-President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such notice to him
or her at his or her last address as the same appears on the books of the
Corporation. Such meeting shall be called
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<PAGE> 6
for a time not earlier than twenty (20) days and not later than sixty (60)
days after such order or request, or in default of the calling of such
meeting within sixty (60) days after such order or request, such meeting
may be called on similar notice by any stockholder or stockholders owning
in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding. Notwithstanding the provisions of
this Paragraph (C)(iii), no such special meeting shall be called during the
period within sixty (60) days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in Paragraph (C)(ii) of this Section 3)
be filled by vote of a majority of the remaining Directors theretofore
elected by the holders of the class of stock which elected the Director
whose office shall have become vacant. References in this Paragraph (C) to
Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of Directors shall be
such number as may be provided for in the Amended and Restated Certificate
of Incorporation or By-laws of the Corporation irrespective of any increase
made pursuant to the provisions of Paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner
provided by law
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<PAGE> 7
or in the Amended and Restated Certificate of Incorporation or By-laws of
the Corporation). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be filled
by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 hereof are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem,
7
<PAGE> 8
purchase or otherwise acquire shares of any such parity stock in exchange
for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Pre-
8
<PAGE> 9
ferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received an amount equal to $12,000 per
share of Series A Junior Participating Preferred Stock, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series A
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity (either as to dividends or upon liquidation, dissolution
or winding up) with the Series A Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller
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<PAGE> 10
number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. Amendment. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority or more of
the
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<PAGE> 11
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
Section 10. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 12th day
of September 1995.
TRANSCISCO INDUSTRIES, INC.
/s/ Steven L. Pease
------------------------------------
Name: Steven L. Pease
Title: President and Chief
Executive Officer
Attest:
/s/ Gregory S. Saunders
- ----------------------------
Assistant Secretary
11
<PAGE> 1
EXHIBIT 10.9
AMENDMENT TO CONSULTING AGREEMENT
This agreement entered into on this 1st day of March, 1996 is an
amendment to that Consulting Agreement (the "Agreement") dated January 3, 1995
between Transcisco Industries, Inc., a Delaware corporation (the "Company"), and
Deucalion Securities, Inc. ("Deucalion"). Capitalized terms used herein and not
defined herein have the same meaning as such terms have in the Agreement.
WITNESSETH:
WHEREAS the parties hereto desire to amend the Agreement in certain
respects;
NOW THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Section 3 of the Agreement is amended in its entirety to read as
follows:
3. TERM. The employment of Mr. Pease and Deucalion by the Company pursuant
to this Agreement shall terminate on March 31, 1998.
2. Notwithstanding any provision to the contrary in the Agreement, the
Bonus payable to Deucalion with respect to the Company's fiscal year ended March
31, 1996 shall be $330,000.
3. In addition to the Options previously granted to Mr. Pease, within
30 days from the date hereof the Company shall grant to Mr. Pease options to
purchase an additional 150,000 shares of Common Stock of the Company ("Shares")
at $4.50 per share. Such options shall expire ten years from the date of grant.
Options to purchase 2,500 of such Shares shall be exercisable on the first of
the month next following the date of this Agreement, and options to purchase an
additional 2,500 Shares shall become exercisable on the first day of each of the
next 59 calendar months.
4. In the event of a Change in Control, all of the options granted
pursuant to paragraph 2 hereof shall immediately vest and become exercisable,
and Mr. Pease shall have 365 days from the date of such Change in control to
exercise all or any part of such options.
5. The Company will maintain the effectiveness of an S-8 registration
statement (or its equivalent) relating to the Shares issued pursuant to the
options granted to Mr. Pease pursuant to paragraph 2 above.
6. Section 6 (b) (1) of the Agreement is amended by replacing the
figure "200%" in the last line thereof with the figure "100%."
<PAGE> 2
7. Section 9 (a) of the Agreement (including Section 9 (a) (1))
relating to the Company's unilateral right to terminate the Agreement, is
deleted and shall have no further force or effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first set forth above.
TRANSCISCO INDUSTRIES, INC.
By: _____________________________
Eugene M. Armstrong, Chairman
By: _____________________________
DEUCALION SECURITIES, INC.
Steven L. Pease, President
<PAGE> 1
Exhibit 10.15
AGREEMENT AND PLAN OF MERGER
dated
June 17, 1996
among
TRINITY INDUSTRIES, INC.,
TRINITY Y, INC.
and
TRANSCISCO INDUSTRIES, INC.
<PAGE> 2
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
<PAGE> 3
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 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
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<PAGE> 4
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.
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<PAGE> 5
(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
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
-4-
<PAGE> 6
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)
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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 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
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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
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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.
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
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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
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<PAGE> 11
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 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, cancella tions, 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.
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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
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(collectively, the "Company SEC Reports"). As of the respective dates the
Company SEC Reports were filed or, 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;
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<PAGE> 14
(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
(h) entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs (a)-(g) above.
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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
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(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 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)).
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(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
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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 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)
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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.
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(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.
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
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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,
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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;
(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. SectionSection 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
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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
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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, 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
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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
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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
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.
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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.
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(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.
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
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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.
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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 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
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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
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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.
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
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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
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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 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;
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(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
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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;
(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
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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
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<PAGE> 38
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;
(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
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<PAGE> 39
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
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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 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
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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
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<PAGE> 42
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;
(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
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<PAGE> 43
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 en large 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:
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(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") 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
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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
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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.
(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
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<PAGE> 47
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
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<PAGE> 48
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 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.
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<PAGE> 49
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
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<PAGE> 50
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.
(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:
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(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
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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 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
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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
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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.
(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;
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(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).
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
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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
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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 repre
sentations, warranties or covenants set forth in this Agreement, and the party
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
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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.
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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,
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(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
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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 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
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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.
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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.
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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
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<PAGE> 65
EXHIBIT A
TO
AGREEMENT AND PLAN OF MERGER
FORM OF COMPANY'S TAX CERTIFICATE
(See attached form of tax certificate)
A-1
<PAGE> 66
[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
- --------
1/ Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings specified in the Merger Agreement.
A-2
<PAGE> 67
Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 3
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 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
A-3
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Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 4
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
A-4
<PAGE> 69
Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 5
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.
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.
A-5
<PAGE> 70
Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 6
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-6
<PAGE> 71
EXHIBIT B
TO
AGREEMENT AND PLAN OF MERGER
FORM OF TRINITY'S TAX CERTIFICATE
(See attached form of tax certificate)
B-1
<PAGE> 72
[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/ Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings specified in the Merger Agreement.
B-2
<PAGE> 73
Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 3
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").
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.
B-3
<PAGE> 74
Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 4
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.
B-4
<PAGE> 75
Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 5
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.
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.
B-5
<PAGE> 76
Skadden, Arps, Slate
Meagher & Flom
[CLOSING DATE]
Page 6
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.
TRINITY INDUSTRIES, INC.
By:
------------------------------------
Print Name:
------------------------------------
Print Title:
------------------------------------
B-6
<PAGE> 77
EXHIBIT C
TO
AGREEMENT AND PLAN OF MERGER
FORM OF AFFILIATE LETTER
(See attached form of affiliate letter)
C-1
<PAGE> 78
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:
I. I shall not make any sale, transfer, or other disposition of
the Trinity Stock in violation of the Act or the Rules and Regulations.
A. 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.
B. I have been advised that the issuance of the Trinity Stock to me
pursuant to the Merger has been registered with the
C-2
<PAGE> 79
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.
C. 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.
D. 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 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."
E. 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
C-3
<PAGE> 80
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
C-4
<PAGE> 81
Trinity Industries, Inc.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
C-5
<PAGE> 1
EXHIBIT 10.18
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of June 17, 1996, to the Rights Agreement, dated as
of September 5, 1995 (the "Agreement"), between Transcisco Industries, Inc., a
Delaware corporation (the "Company"), and First Interstate Bank of California, a
California banking corporation (now known as Wells Fargo Bank National
Association) (the "Rights Agent").
WHEREAS, the Company and the Rights Agent entered into the Rights
Agreement specifying the terms of the Rights (as defined therein); and
WHEREAS, the Company and the Rights Agent desire to amend the Rights
Agreement in accordance with Section 26 of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth in the Rights Agreement and this Amendment, the parties
hereby agree as follows:
1. Section 1(a) is amended by adding the following at the end of
said Section:
; provided, however, that none of Trinity Industries, Inc., a Delaware
corporation ("Trinity"), Trinity Y, Inc., a Delaware corporation and a
wholly-owned subsidiary of Trinity (the "Subsidiary"), and their
Affiliates shall be deemed to be an Acquiring Person solely by virtue
of (x) the execution of the Agreement and Plan of Merger, dated as of
June 13, 1996 (the "Merger Agreement," which term shall include any
amendments thereto) by and among the Company, Trinity and Subsidiary,
or (y) the consummation of any of the transactions contemplated
thereby, including, without limitation, the public or other
announcement of the merger provided for by the Merger Agreement (the
"Merger") or the consummation of the Merger.
2. Section 1(m) is amended by adding the following at the end of
said Section:
<PAGE> 2
; provided, however, that the public announcement of (x) the Merger or
(y) that Trinity, Subsidiary or any of their Affiliates has become the
beneficial owner of 5% or more of the shares of Common Stock as a
result of the consummation of the Merger, shall not constitute a Stock
Acquisition Date.
3. Section 1(o) is amended by adding the following at
the end of said Section:
Notwithstanding anything to the contrary contained in this Agreement,
the Merger shall not constitute a Triggering Event or an event
described in 11(a)(ii) or Section 13.
4. The phrase in Section 11(a)(ii) that presently
reads,
"unless the event causing the 5% threshold to be crossed is a
transaction set forth in Section 13(a) hereof or is an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock"
is amended in its entirety to read as follows:
"unless the event causing the 5% threshold to be crossed is the Merger,
a transaction set forth in Section 13(a) hereof or is an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock"
5. The last sentence of Section 13(d) is amended in its entirety
to read as follows::
Upon consummation of any such transaction contemplated by this Section
13(d) or the Merger, all Rights hereunder shall expire.
6. The term "Agreement" as used in the Rights Agreement shall be
used to refer to the Rights Agreement as amended hereby.
2
<PAGE> 3
7. The foregoing amendment shall be effective as of June 17, 1996, and
except as set forth herein, the Rights Agreement shall remain in full force and
effect and shall be otherwise unaffected hereby.
8. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed this 17th day of June 1996.
TRANSISCO INDUSTRIES, INC.
By: /s/ Steven L. Pease
----------------------
Name: Steven L. Pease
Title: President and Chief
Executive Officer
WELLS FARGO BANK NATIONAL
ASSOCIATION (FORMERLY FIRST
INTERSTATE BANK OF CALIFORNIA)
By: /s/ Patricia Dedrick
-----------------------
Name: Patricia Dedrick
Title: Assistant Vice President
3
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Transcisco Industries, Inc.
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-65173 and Form S-8 No. 33-58389) of Transcisco Industries, Inc.
and in the related Prospectuses of our report dated May 10, 1996, except Note
11, as to which the date is June 17, 1996, with respect to the consolidated
financial statements of Transcisco Industries, Inc. included in this Annual
Report (Form 10-K) for the year ended March 31, 1996.
ERNST & YOUNG LLP
San Francisco, California
June 24, 1996
40
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 2,695
<SECURITIES> 0
<RECEIVABLES> 6,377
<ALLOWANCES> 0
<INVENTORY> 2,501
<CURRENT-ASSETS> 12,147
<PP&E> 14,606
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,046
<CURRENT-LIABILITIES> 8,992
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 25,707
<TOTAL-LIABILITY-AND-EQUITY> 44,046
<SALES> 42,630
<TOTAL-REVENUES> 42,630
<CGS> 31,718
<TOTAL-COSTS> 31,718
<OTHER-EXPENSES> 9,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 954
<INCOME-PRETAX> 6,849
<INCOME-TAX> 198
<INCOME-CONTINUING> 6,651
<DISCONTINUED> 0
<EXTRAORDINARY> 6,058
<CHANGES> 0
<NET-INCOME> 12,709
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99.1
"JSC SFAT"
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
WITH INDEPENDENT AUDITORS' REPORT THEREON
<PAGE> 2
CORPORATE INFORMATION
BOARD MEMBERS MARTYNCHUK, ANATOLY V.
KUZIN, VLADIMIR I.
PEASE, STEVEN L.
ZABLOTSKY, ALEKSANDR G.
HAPPONEN, PERTTI
SECRETARY HELLEVIG, JON
AUDITORS KPMG
PRINCIPAL BANKERS INKOMBANK
INTERNATIONAL MOSCOW BANK
ZHELDORBANK
BANK OF CYPRUS, LTD.
BARCLAYS BANK PLC
LEGAL ADVISORS LATHAM & WATKINS, ATTORNEY AT LAW
MILBANK, TWEED, HADLEY & McCLOY
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
CLOSED JOINT STOCK COMPANY SFAT
We have audited the accompanying consolidated balance sheets of the Closed Joint
Stock Company, SFAT as of December 31, 1995, and 1994, and the related
consolidated statements of income and cash flows for the years then ended on
pages 4 to 14. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with International Standards on Accounting.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated 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 our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Closed Joint Stock
Company, SFAT as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
International Accounting Standards.
Moscow, Russia
May 24, 1996
<PAGE> 4
JSC SFAT
Consolidated Balance Sheets
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,447,718 $ 11,513,081
Trade receivables (note 2) 41,203,681 20,342,138
Prepaid expenses 6,938,571 2,025,335
Investments 73,910 --
Other assets (note 3) 5,408,989 4,153,697
------------ ------------
Total current assets 57,072,869 38,034,251
Long-term investments 475,747 --
Property, plant and equipment net (note 5) 79,048,745 65,414,031
------------ ------------
136,597,361 103,448,282
============ ============
LIABILITIES and SHAREHOLDERS EQUITY
Current Liabilities:
Accounts payable and accrued expenses 43,900,582 34,469,511
Advances received from customers 933,199 1,984,706
Current potion of long-term debt (note 7) 1,500,000 2,704,341
Other current liabilities (note 6) 5,176,204 2,003,448
------------ ------------
Total current liabilities 51,509,985 41,162,006
Long-term debt (note 7) 1,050,000 4,100,000
------------ ------------
Total liabilities 52,559,985 45,262,006
Minority interest SFAT Ryazan (note 4) 4,211,976 4,271,276
Shareholders' Equity
Contributed capital (note 8) 2,554,563 2,554,563
Restricted retained earnings (note 9) 16,595,668 16,595,668
Retained earnings 61,058,750 34,764,769
------------ ------------
Total retained earnings 77,654,418 51,360,437
Treasury shares held (383,581) --
------------ ------------
Total Shareholders' Equity 79,825,400 53,915,000
------------ ------------
$136,597,361 $103,448,282
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
JSC SFAT
Consolidated Statements of Income
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenue (note 12) $ 81,982,328 $ 27,337,069
Costs and expenses 25,296,401 --
Railcar production 7,518,360 2,908,477
Operations and support 5,425,305 4,452,799
Depreciation 14,040,907 7,535,269
General, selling and administration ------------ ------------
Total costs and expenses 52,280,973 14,896,545
------------ ------------
Operating income 29,701,355 12,440,524
Other income (expenses): 775,144 116,693
Interest income 697,113 758,570
Other income (254,245) (328,059)
Interest expense (529,606) (148,055)
Other expenses (1,406,569) (2,896,400)
Foreign currency exchange loss ------------ ------------
Income before profit tax 28,983,192 9,943,273
Taxation (note 11) (2,406,753) (1,018,773)
------------ ------------
Net income after tax 26,576,439 8,924,500
Minority interest in net profit of SFAT Ryazan 17,542 --
------------ ------------
Consolidated net income after tax and minority interest 26,593,981 8,924,500
============ ============
Retained earnings at beginning of year 51,360,437 42,735,937
Dividends paid -- (153,000)
proposed (note 16) (300,000) (147,000)
Consolidated net income 26,593,981 8,924,500
------------ ------------
Retained earnings at end of year $ 77,654,418 $ 51,360,437
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
JSC SFAT
Consolidated Statements of Cash Flows
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Consolidated net income $ 26,593,981 $ 8,924,500
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,425,305 4,452,799
Changes in assets and liabilities:
Increase in trade receivables (20,861,543) (15,951,850)
Increase in prepaid expenses/other assets (6,168,528) (2,599,230)
Increase in accounts payable and accrued expenses 9,431,071 31,711,314
Increase/(Decrease) in other liabilities 3,052,756 (1,307,921)
------------ ------------
Net cash provided by operating activities 17,473,042 25,229,612
------------ ------------
Cash flows from investing activities
Investments (549,657)
Capital expenditures (19,060,019) (18,413,816)
------------ ------------
Net cash (used in) investing activities (19,609,676) (18,413,816)
Cash flows from financing activities
Increase/(Decrease) in minority interest (59,300) 1,210,598
Decrease in advances received from customers (1,051,507) (100,519)
Repayment of long-term debt (4,254,341) (1,945,659)
Treasury shares held (383,581) --
Dividends paid (180,000) (153,000)
------------ ------------
Net cash used in financing activities (5,928,729) (988,580)
------------ ------------
Net increase/(decrease) in cash (8,065,363) 5,827,216
Cash and cash equivalents at beginning of period 11,513,081 5,685,865
------------ ------------
Cash and cash equivalents at end of period $ 3,447,718 $ 11,513,081
============ ============
Supplementary information
Taxes paid 2,312,890 1,607,581
Interest paid 246,016 285,541
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
The Closed Joint Stock Company (SFAT or the Company) core
business are tariff assessment and collection, railcar
production, the provision of rail and marine transport services
and tankcar repair and paint services. Rail transportation is
mainly for viscous and solidified commodities, including oil and
chemicals, vegetable oil, liquid soaps, and other similar
products. Marine transportation is predominately oil products and
is conducted through its subsidiary, "Transpetro Volga." SFAT
operates in the Russian Federation, Finland, Estonia, Latvia,
Lithuania, Poland and several Western European counties. SFAT
also operates railcar tracking information services. Non-core
business includes provision of vehicles for rental and
horticulture. These activities are immaterial to the financial
results of the entity.
(b) LEGAL STRUCTURE
SFAT re-registered from a joint venture to a closed joint stock
company in May 1995. This re-registration was to comply with
recent company legislation. SFAT is incorporated and registered
as a Russian legal entity. The 1994 consolidated financial
statements were produced under the old name "SFAT LIMITED." They
are the same entity.
(c) ACCOUNTS PREPARATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are prepared in accordance
with the historical cost convention. The financial statements
include the financial statements of
<PAGE> 8
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
SFAT its three wholly-owned subsidiaries, Sovfinamtrans, Finland
(SFAT Finland). Sovfinamtrans Estonia (SFAT Estonia), Transfat
and its subsidiary SFAT Ryazan (51%). The SFAT Estonia group
includes SFAT Estonia and its subsidiary Transwag which is
registered in Cyprus. All significant intercompany balances and
transactions have been eliminated in consolidation. Tariff
revenue is shown net of tariff payments, however, tariff
receivables and payables are shown gross due to SFAT's liability
to the Ministry of Railways.
(d) CASH AND CASH EQUIVALENTS
Cash consists primarily of bank deposits denominated in US
dollars. For purposes of the statements of cash flows and balance
sheets, the Company considers all investments with an original
maturity of three months or less to be cash equivalents.
(e) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost less
accumulated depreciation. Equipment acquired in Russia roubles,
prior to 1992, was denominated in Russian roubles and has been
translated using the official exchange rate which differed from
market exchange rates. Because of government control of currency
exchange rates prior to 1992, there are no reliable market rates
for the acquisitions for this time period.
The useful economic lives of the fixed assets was reviewed in
1995, and depreciation rates were changed to reflect the revised
lives. Excluding work in progress, depreciation on plant and
equipment is calculated on the straight line method over the
useful lives of the assets as follows:
<PAGE> 9
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
Land and Building 2-5% 1.2%
Equipment for Leasing 8% 6.4%
Automobiles 20% 14.3%
Other Fixed Assets 10 to 30% 10 to 30%
</TABLE>
(f) INVENTORY
Inventory is stated at the lower of cost or net realisable value.
Inventory is composed predominately of materials and spare parts.
(g) TRANSLATION TO REPORTING CURRENCY
The Company's functional and reporting currency is the US dollar
(US) as virtually all service revenues are billed and collect in
US dollars. The Company uses the temporal method of translating
transactions and balances denominated in a currency other than
the reporting currency. Under this method:
(i) monetary items are translated at the relevant exchange
rates prevailing at the balance sheet dates;
(ii) non-monetary items are translated at historic exchange
rates; and
(iii) revenue and expense (other than depreciation and
amortization) are translated at official rates of exchange
at the time the transaction occurs.
<PAGE> 10
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(2) TRADE RECEIVABLES
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
Trade receivables 40,246,263 20,612,966
Amounts due from related companies 1,068,605 -
Bad debt provision (111,187) (270,828)
------------ -----------
Total 41,203,681 20,342,138
============ ===========
</TABLE>
PRINCIPAL RECEIVABLES
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
Telf AG 8,473,944 1,532,985
IPCO 3,277,781 -
LUKoil 3,202,281 -
Novoil 3,130,978 1,528,782
Other 22,161,279 17,551,199
---------- ----------
Total 40,246,263 20,612,966
========== ==========
</TABLE>
All trade receivables are due within a year. The bad debt provision is
based on the payment records of the debtor and the assessed potential
and probable risk of default.
(3) OTHER ASSETS
Other assets consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
VAT recoverable 3,226,757 2,793,589
Inventory 840,354 295,068
Other 1,341,878 1,065,040
--------- ---------
Total 5,408,989 4,153,697
========= =========
</TABLE>
<PAGE> 11
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(4) RYAZAN PAINT AND REPAIR FACILITY (SFAT RYAZAN)
SFAT owns 51% of the SFAT Ryazan joint venture, the assets,
liabilities, and results of the joint venture have been
consolidated with SFAT. The Ryazan facility was established in 1993
as a joint venture with the Ryazan oil refinery and became fully
operational in 1994.
The Ryazan paint factory has recorded total contributions of
$8,916,584 of which $4,645,308 was contributed by SFAT and
$4,271,276 was contributed by the Ryazan Oil Refinery. The minority
interest in SFAT Ryazan in 1995 decreased due to losses from 1994.
SFAT has included in land and building and other equipment, assets
with a cost of $5,520,301 which will be used in phase two of the
Ryazan project. This work is ongoing and will increase the
production capacity of the factory. Phase two will allow assembly
of the railcars to be completed in the facility.
See Note 14 for Ryazan's profits in 1995.
(5) PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
LAND AND EQUIPMENT OTHER
BUILDINGS FOR LEASING AUTOMOBILES EQUIPMENT TOTAL
--------- ----------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
Cost
$ $ $ $ $
Opening balance 7,974,030 61,159,129 502,356 6,732,068 76,357,583
Additions 6,930,160 5,388,476 395,455 6,433,763 19.147,854
Disposals (21,470) (57,730) (5,100) (47,326) (131,626)
Transfers 148,744 - - (148,744) -
---------- ---------- ------- ---------- ----------
Closing balance 15,301,464 66,489,875 892,711 12,969,761 95,383,811
========== ========== ======= ========== ==========
</TABLE>
<PAGE> 12
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION
LAND AND EQUIPMENT OTHER
BUILDINGS FOR LEASING AUTOMOBILES EQUIPMENT TOTAL
--------- ----------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
Opening balance 79,995 10,133,490 176,280 563,787 10,953,552
Charge for one year 188,219 4,646,028 88,834 502,224 5,425,305
Disposals (2,691) (13,382) (122) (27,586) (43,791)
Transfers 4,462 - - (4,462) -
---------- ---------- ------- ---------- ----------
Closing balance 269,985 14,766,136 264,992 1,033,953 16,335,066
========== ========== ======= ========== ==========
NET BALANCE 1995 14,761,479 51,723,739 627,719 11,935,808 79,048,745
NET BALANCE 1994 7,894,035 51,025,639 326,076 6,168,281 65,414,031
</TABLE>
Included in land and buildings is work in progress of $5,929,631. In
other equipment work in progress is 7,029,979 (1994: $1,646,434). This
relates mainly to construction projects and parts and equipment to be
used in the production of railcars and is not depreciated.
(6) OTHER CURRENT LIABILITIES
Other current liabilities consists of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
$ $
Dividends 567,000 447,000
Repairs and maintenance 1,372,554 1,173,244
Taxation 2,494,001 197,960
Other 742,649 185,244
--------- ---------
Total 5,176,294 2,003,448
========= =========
</TABLE>
<PAGE> 13
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(6) OTHER CURRENT LIABILITIES
Other current liabilities consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
Dividends 567,000 447,000
Repairs and maintenance 1,372,554 1,173,244
Taxation 2,494,001 197,960
Other 742,649 185,244
--------- ---------
Total 5,176,294 2,003,448
========= =========
</TABLE>
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
Postipankki Ltd. interest variable
based on Libor plus 1% and
payable $750,000 semi-annually,
secured on real estate 2,250,000 3,750,000
Saratov long-term advance, no
interest, principal repayable by
July 2001 unsecured - 1,937,269
Ufimsky long-term advance, no
interest, principal repayable by
July 1998, unsecured 300,000 1,117,072
Less: Current portion (1,500,000) (2,704,341)
--------- ---------
Total 1,050,000 4,100,000
========= =========
</TABLE>
<PAGE> 14
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
With the exception of the loan from Postipankki Ltd., long-term
debt represents long-term advances received from customer. The
loan from Postipankki Ltd. represents a commercial loan.
(8) CONTRIBUTED CAPITAL
The following represents the shareholders and contributed
capital:
<TABLE>
<CAPTION>
HOLDING US AT
31 DECEMBER 1995 1994
------------- ---- ----
<S> <C> <C> <C>
$ $
Ministry of Railways
of the Russian
Federation 40% 1,021,638 1,021,638
Neftek Holdings 25% 638,525 638,525
Transcisco Trading
Company 20% 510,819 510,819
Treasury Shares 15% 383,581 383,581
--------- ---------
Total 2,554,563 2,554,563
========= =========
</TABLE>
All capital contributions were made in Russian roubles. The US
equivalent is based on the official exchange rate at the time of
the contribution. Because of government control of currency
exchange rates in 1989, there is no reliable market exchange rate
for the translation of the capital contributions. The shares are
all ordinary shares and have equal voting rights. Treasury shares
have been deducted from equity in 1995. contribution.
<PAGE> 15
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Because of government control of currency exchange rates in 1989,
there is no reliable market exchange rate for the translation of
the capital contributions. The shares are all ordinary shares and
have equal voting rights. Treasury shares have been deducted from
equity in 1995.
In 1994, Haka-Stroi Oy, a shareholder with 15% of the company,
filed for bankruptcy under Finnish law and sold its shares to
SFAT. These shares are currently held by Transwag, which is a
subsidiary of the Estonia Group, pending their sale to a third
party, and thus these shares are Treasury Stock of the SFAT Group
at the balance sheet date.
As mentioned in the accounting policies note, the company
re-registered as a joint stock company in 1995. The rouble share
capital was increased but the dollar and percentage ownership
remained unchanged. The ministry of Railways which held the
shares transferred the shares to "Zheldorraschet." The company is
100% owned by the Ministry of Railways and transfer is for
internal ministry purposes only. During the year, VAO
Neftekhimexport transferred its holding in SFAT to Neftek
holdings. Neftek holdings is a private company.
(9) RETAINED EARNINGS
Prior to 1993. a portion of retained earnings was allocated to
both capital and research and development funding. This amount is
presently unavailable for distribution to shareholders. To
release the funds for other purposes, a decision by the board of
directors is required. At December 31, 1995, the Company had in
the fund earnings of $16,595,668, (1994: $16,595,668).
<PAGE> 16
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(10) RELATED PARTY TRANSACTION
Under the terms of a sub-license agreement for certain patented
Uni-Temp technology, SFAT was required to purchase half its
requirements for railcar components incorporating the Uni-Temp
technology from the sub-licensor, subject to minimum quantities.
In exchange for a one-time payment of USD $5,000,000, SFAT
acquired from the sub-licensor the right of the sub-licensor to
require SFAT to purchase minimum quantities.
Transcisco Trading Company provided SFAT services to the value of
$218,886 (1994: $69,786).
A director of SFAT was paid remuneration and consultancy fees to
the value of $107,586 for services provided to the company above
and beyond that of his director position. Two directors of a
subsidiary company were paid similar fees to the value of
$42,000. Two companies, Railcar Specialties Finland, Ltd., and FA
Rail Services provided materials to the cumulate value of
$1,032,813. Mr. Pertti Happoneon is a director of both of these
companies in addition to being a director of Transwag and other
subsidiaries.
The Ministry of Railways charges users a tariff for the usage of
the Russian Federation railway system. SFAT collects certain
tariff's for the Ministry of Railways, who is one or its main
shareholders.
(11) TAXES
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
Profits taxation 2,296,753 1,018,773
Deferred taxation 110,000 -
--------- ---------
Total 2,406,753 1,018,773
========= =========
</TABLE>
<PAGE> 17
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(12) BUSINESS AND CREDIT CONCENTRATIONS
Virtually all of the Company's operations occur in Russian and
the former Soviet Union. The top five customers of the Company
comprise approximately 60% of revenues.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
$ $
Railcar sales 30,749,520
Rail rental 24,679,037 23,545,005
Tariffs 23,918,563 3,267,340
Maine 1,376,000 -
Other 1,259,208 524,724
---------- ----------
Total 81,982,328 27,337,069
========== ==========
</TABLE>
(13) SUBSEQUENT EVENTS
In January 1996, SFAT Finland and SFAT Estonia were sold to the
company Finnish Russian Rail Services for $ 73,910. Effective
control is maintained through an option to buy back these
companies in the purchase agreement. A service agreement has been
signed with Finnish Russian Rail Services whereby 85% of all
profits from these companies are given to the SFAT group.
In April 1996, the Company and the European Bank for
Reconstruction and Development (EBRD) agreed to sell to the EBRD
10% of the share capital for $12,000,000 and to receive a loan
for $30,000,000 for the construction of new railcars.
(14) INVESTMENTS
Significant parent Company investments which are eliminated on
consolidation, and their contribution to group income for the
year ended December 31, 1995 are:
<PAGE> 18
JSC SFAT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF CONTRIBUTION
INVESTMENTS % OWNERSHIP INVESTMENT TO INCOME
----------- ----------- ---------- ------------
<S> <C> <C> <C>
$ $
SFAT Finland 100% 24,000 80,941
SFAT Estonia 100% 50,000 389,650
SFAT Ryazan 51% 4,645,308 35,800
Transfat 100% 17,953,030 (718,726)
Transwag 100% 19,920 25,371,282
</TABLE>
Note that Transwag, a subsidiary of SFAT Estonia, is disclosed
here separately.
(15) EMPLOYEES
At year end 1995, the group had 363 employees. At year end 1994,
the group had 164 employees.
(16) DIVIDENDS
Dividends proposed will be paid in 1996. They have not been paid
at the approval date of the accounts.
