Document:

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                                                                   EXHIBIT 10.27

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT ("Security Agreement"), dated as of the 26th
day of May, 1998, is made by TMBR/Sharp Drilling, Inc., a Texas corporation,
with its principal offices at 4607 West Industrial Blvd., Midland, Texas 79703,
in favor of Norwest Bank Texas, N.A., a national banking association with
banking quarters at 500 West Texas Ave., Suite 400, Midland, Texas 79701.

         WHEREAS, TMBR/Sharp Drilling, Inc. and Norwest Bank Texas, N.A.
executed that certain First Amended and Restated Loan Agreement dated of even
date herewith (which, together with all amendments and supplements thereto, is
herein called the "Loan Agreement") pursuant to which Norwest Bank Texas, N.A.
agreed, subject to certain terms and conditions therein stated, to make loans to
TMBR/Sharp Drilling, Inc. as provided in the Loan Agreement; and

         WHEREAS, Norwest Bank Texas, N.A. has conditioned its obligations under
the Loan Agreement upon the execution and delivery by TMBR/Sharp Drilling, Inc.
of this Security Agreement, and TMBR/Sharp Drilling, Inc., Inc. has agreed to
make and deliver this Security Agreement.

         NOW, THEREFORE, (i) in compliance with the terms and conditions of the
Loan Agreement, (ii) for and in consideration of the premises and the agreements
herein contained, and (iii) for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, TMBR/Sharp Drilling,
Inc. and Norwest Bank Texas, N.A. agree as follows:

SECTION 1. DEFINITIONS

         Unless otherwise defined herein, terms which are defined in the Loan
Agreement and used herein are so used as so defined; and the following terms
shall have the following meanings:

         (a) "Accounts" means all accounts receivable, book debts, notes,
drafts, instruments, documents, acceptances and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to Debtor
(including under any tradenames, styles or division thereof) whether arising out
of goods sold or leased by it or services rendered by it or from any other
transaction, whether or not the same involve the sale of goods or performance of
services by Debtor (including, without limitation, any such obligation which
would be characterized as an account, general intangible or chattel paper under
the UCC) and all of Debtor's rights in, to and under all purchase orders now
owned or hereafter received or acquired by it for goods or services, and all of
Debtor's rights to any goods represented by any of the foregoing (including
returned or repossessed goods and unpaid seller's rights) and all moneys due or
to become due to Debtor under all contracts for the sale of goods and/or the
performance of services by it (whether or not yet earned by performance) or in
connection with any other transaction, now in existence or hereafter arising,
including, without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and guarantees of any
kind given by any person with respect to any of the foregoing.

         (b) "Chattel Paper" has the meaning assigned in Section 9-105 of the
UCC.

         (c) "Contracts" means the contracts between any person and Debtor, as
the same may from time to time be amended, supplemented or otherwise modified,
including, without limitation, (i) all rights of Debtor to receive moneys due
and to become due to it thereunder or in connection therewith, (ii) all rights
of Debtor to damages arising out of, or from, breach or default in respect
thereof and (iii) all rights of Debtor to perform and to exercise all remedies
thereunder.

         (d) "Debtor" is TMBR/Sharp Drilling, Inc., a Texas corporation.

         (e) "Documents" has the meaning assigned in Section 9-105 of the UCC.

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         (f) "Equipment" means the drilling rigs, drill pipe and equipment
described on Exhibit A attached hereto, and all other machinery, drill pipe and
equipment, now owned or hereafter acquired by Debtor or in which Debtor now has
or hereafter may acquire any right, title or interest and any and all additions,
substitutions and replacements thereof, wherever located, together with all
attachments, components, parts, equipment and accessories installed therein or
affixed thereto, and all other equipment as defined in Section 9-109(2) of the
UCC.

         (g) "General Intangibles" has the meaning assigned in Section 9-106 of
the UCC.

         (h) "Instrument" has the meaning assigned in Section 9-105 of the UCC.

         (i) "Inventory" means at any time all inventory of raw materials, work
in process, finished goods and merchandise then owned by Debtor and held for
sale, lease or other disposition or consumption in the ordinary course of
business of the Debtor.

         (j) "Obligation" means the Note and all other present and future
indebtedness, obligations and liabilities, and all renewals, rearrangements and
extensions thereof, or any part thereof, now or hereafter owed to Secured Party
by Debtor arising from, by virtue of, or pursuant to the Loan Agreement or any
other Loan Document, or otherwise, together with all interest accruing thereon
and costs, expenses, and attorneys' fees incurred in the enforcement or
collection thereof, whether such indebtedness, obligations and liabilities are
direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several,
or joint and several or were, prior to acquisition thereof by Secured Party,
owed to some other person.

         (k) "Proceeds" means all "proceeds" as such term is defined in Section
9-306(a) of the UCC and, in any event, shall mean and include, but not be
limited to, the following at any time whatsoever arising or receivable: (i)
whatever is received upon any collection, exchange, sale or other disposition of
any of the Collateral, and any property into which any of the Collateral is
converted, whether cash or non-cash proceeds, (ii) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to Debtor from time to time
with respect to any of the Collateral, and (iii) any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of Governmental
Authority).

         (l) "Secured Party" is Norwest Bank Texas, N.A., a national banking
association.

         (m) "UCC" means the Uniform Commercial Code as from time to time in
effect in the State of Texas.

SECTION 2. GRANT OF SECURITY INTEREST

         As collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligation, the Debtor hereby grants to the Secured Party a
security interest and Lien in all of the following property now owned or at any
time hereafter acquired by the Debtor or in which the Debtor now has or at any
time in the future may acquire any right, title or interest (collectively, the
"Collateral"):

                  (i)      all Accounts;

                  (ii)     all Chattel Paper;

                  (iii)    all Contracts;

                  (iv)     all Documents;

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                  (v)      all Equipment;

                  (vi)     all General Intangibles;

                  (vii)    all Instruments;

                  (viii)   all Inventory;

                  (ix)     all Proceeds; and

                  (x)      all present and future increases, combinations,
                           reclassifications, improvements and products of,
                           accessions, attachments, and other additions to, and
                           substitutes and replacements for all or any part of
                           the foregoing.

SECTION 3. DEBTOR'S REPRESENTATIONS AND WARRANTIES

         The Debtor hereby represents and warrants that:

         (a) Title; No Other Liens. Except for the Lien granted to the Secured
Party for the benefit of the Secured Party pursuant to this Security Agreement
and the other Liens permitted to exist on the Collateral pursuant to the Loan
Agreement, the Debtor owns each item of the Collateral free and clear of any and
all Liens or claims of others. No security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on file
or of record in any public office, except (i) such as may have been filed in
favor of the Secured Party, for the benefit of the Secured Party, and (ii) such
as may have been filed by third parties to perfect Liens permitted by the Loan
Agreement.

         (b) Perfected First Priority Liens. The Liens granted pursuant to this
Security Agreement constitute perfected Liens on the Collateral in favor of the
Secured Party, which are prior to all other Liens on the Collateral created by
the Debtor and in existence on the date hereof and which are enforceable as such
against all creditors of and purchasers from the Debtor and against any owner or
purchaser of the real property where any of the Equipment is located and any
present or future creditor obtaining a Lien on such real property.

         (c) Accounts. The amount represented by the Debtor to the Secured Party
from time to time as owing by each account debtor or by all account debtors in
respect of the Accounts will at such time be the correct amount actually owing
by such account debtor or debtors thereunder. No amount payable to the Debtor
under or in connection with any Account is evidenced by any Instrument or
Chattel Paper which has not been delivered to the Secured Party. Debtor's
Accounts arose in the ordinary course of Debtor's business from the performance
of services that Debtor has fully and satisfactorily performed or from the sale
or lease of goods in which Debtor had sole and complete ownership. No such
Account is subject to discount, counterclaim or defense (other than discount for
prompt payment as shown on the invoices).

         (d) Use and Protection of Collateral. The Collateral will be used for
business purposes only.

         (e) Debtor's Address and Location of Collateral. Debtor's chief
executive office/chief place of business is located at 4607 West Industrial
Blvd., Midland, Texas 79703. The Collateral will remain in Debtor's possession
or control at all times (at Debtor's risk of loss) and will be kept at the
locations described on Exhibit B hereto, except that the drilling rigs and
related equipment will from time to time be at various well location sites
throughout the States of Texas and New Mexico and may be "stacked" from time to
time at locations other than as described on Exhibit B. Debtor will, upon
request by the Secured Party, furnish schedules showing the location of all of
the Debtor's drilling rigs at such times and as often as the Secured Party shall
request.

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         (f) Governmental Obligors. None of the obligors on any Accounts, and
none of the parties to any Contracts, is a Governmental Authority.

         (g) Consents. No consent of any party (other than the Debtor) to any
Contract or any obligor in respect of any Account is required, or purports to be
required, in connection with the execution, delivery and performance of this
Security Agreement. Each Account and each Contract is in full force and effect
and constitutes a valid and legally enforceable obligation of the obligor in
respect thereof or parties thereto, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditor's rights generally. No consent or authorization of,
filing with or other act by or in respect of any Governmental Authority is
required in connection with the execution, delivery, performance, validity or
enforceability of any of the Accounts or Contracts by any party thereto other
than those which have been duly obtained, made or performed, are in full force
and effect and do not subject the scope of any such Account or Contract to any
material adverse limitation, either specific or general in nature. Neither the
Debtor nor (to the best knowledge of the Debtor) any other party to any Account
or Contract is in default or is likely to become in default in the performance
or observance of any of the terms thereof. The Debtor has fully performed all
its obligations under each Contract. The right, title and interest of the Debtor
in, to and under each Account or Contract are not subject to any defense,
offset, counterclaim, or claim which would materially adversely affect the value
of such Account or Contract as Collateral, nor have any of the foregoing been
asserted or alleged against the Debtor as to any of the foregoing. Upon request
by the Secured Party, Debtor will deliver to the Secured Party a complete and
correct copy of each Contract, including all amendments, supplements and other
modifications thereto. No account payable to the Debtor under or in connection
with any Account or Contract is evidenced by any Instrument which has not been
delivered to the Secured Party.

         (h) Power and Authority; Authorization. The Debtor has the power and
authority and the legal right to execute and deliver, to perform its obligations
under, and to grant the Liens on the Collateral pursuant to, this Security
Agreement and has taken all necessary corporate and other action to authorize
its execution, delivery and performance of, and grant of the Liens on the
Collateral pursuant to, this Security Agreement.

         (i) Enforceability. This Security Agreement constitutes a legal, valid
and binding obligation of the Debtor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.

         (j) No Conflict. The execution, delivery and performance of this
Security Agreement will not violate or constitute a default under (i) any
provision of any agreement to which Debtor is a party or by which any of its
assets may be bound or subject to, or (ii) the articles of incorporation or
by-laws of the Debtor, and (iii) will not result in the creation or imposition
of any Lien on any of the properties or revenues of the Debtor except as
contemplated hereby.

         (k) No Consents, etc. No consent or authorization of, filing with, or
other act by or in respect of, any Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor or
Affiliate of the Debtor), is required in connection with the execution,
delivery, performance, validity or enforceability of this Security Agreement.

         (l) No Litigation. Except as disclosed in the Loan Agreement, no
litigation, investigation or proceeding of or before any Governmental Authority
is pending or, to the knowledge of the Debtor, threatened by or against the
Debtor or against any of its properties or revenues.

SECTION 4. DEBTOR'S COVENANTS

         The Debtor covenants and agrees with the Secured Party that, from and
after the date of this Security Agreement until the Obligations are paid in
full:

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         (a) Principal Obligation. Debtor shall pay the Obligation in accordance
with the terms thereof and shall otherwise perform all covenants and agreements
of Debtor contained in the Loan Agreement, this Security Agreement and in all
other Loan Documents.

         (b) Debtor Remains Liable under Accounts and Contracts. Anything herein
to the contrary notwithstanding, the Debtor shall remain liable under each of
the Accounts and Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreements giving rise to each such Account or Contract in
accordance with and pursuant to the terms and provisions of each such Contract
or agreement giving rise to an Account.

         (c) Costs. Debtor shall pay Secured Party on demand every expense
(including reasonable attorney's fees and other legal expenses) incurred or paid
by Secured Party in exercising or protecting its interests, rights, and remedies
under this Security Agreement, plus interest thereon at a rate per annum 2%
above the Base Rate on each such amount commencing on the date notice of such
expenses is given to Debtor by Secured Party until paid by Debtor.

         (d) Further Documentation; Pledge of Instruments. At any time and from
time to time, upon the written request of the Secured Party, and at the sole
expense of the Debtor, the Debtor will promptly and duly execute and deliver
such further instruments and documents and take such further action as the
Secured Party may reasonably request for the purpose of obtaining or preserving
the full benefits of this Security Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Liens created hereby and, if any certificate of
title exists for any of the Collateral, Debtor will cause Secured Party's
interest to be properly noted thereon. The Debtor also hereby authorizes the
Secured Party to file any such financing or continuation statement without the
signature of the Debtor to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Security Agreement shall be
sufficient as a financing statement for filing in any jurisdiction.

         If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument, such Instrument shall be
immediately delivered to the Secured Party, duly endorsed in a manner
satisfactory to the Secured Party, to be held as Collateral pursuant to this
Security Agreement.

         (e) Indemnification. The Debtor agrees to pay, and to save the Secured
Party harmless from, any and all liabilities, costs and expenses (including,
without limitation, legal fees and expenses) (i) with respect to, or resulting
from, any delay in paying, any and all excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral, (ii)
with respect to, or resulting from, any delay in complying with any law
applicable to any of the Collateral or (iii) in connection with any of the
transactions contemplated by this Security Agreement. In any suit, proceeding or
action brought by the Secured Party under any Account or Contract for any sum
owing thereunder, or to enforce any provisions of any Account or Contract, the
Debtor will save, indemnify and keep the Secured Party harmless from and against
all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction or liability whatsoever of the account
debtor or obligor thereunder, arising out of a breach by the Debtor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or obligor or
its successors from the Debtor.

         (f) Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Accounts and Contracts. The Debtor will mark its
books and records pertaining to the Collateral to evidence this Security
Agreement and the security interests granted hereby. For the further security of
the Secured Party, the Secured Party shall have a security interest in all of
the Debtor's books and records pertaining to the Collateral, and the Debtor
shall turn over any such books and records to the

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Secured Party or to its representatives during normal business hours at the
request of the Secured Party.

         (g) Right of Inspection. The Secured Party shall at all times have full
and free access during normal business hours to all the books, correspondence
and records of the Debtor, and the Secured Party and its representatives may
examine the same, take extracts therefrom and make photocopies thereof, and the
Debtor agrees to render to the Secured Party, at the Debtor's cost and expense,
such clerical and other assistance as may be reasonably requested with regard
thereto. The Secured Party and its representatives shall at all times also have
the right to enter into and upon any premises where any of the Inventory is
located for the purpose of inspecting the same, observing its use or otherwise
protecting its interests therein.

         (h) Compliance with Laws, etc. The Debtor will comply in all material
respects with all Requirements of Law applicable to the Collateral or any part
thereof or to the operation of the Debtor's businesses; provided, however, that
the Debtor may contest any Requirement of Law in any reasonable manner which
shall not, in the sole opinion of the Secured Party, adversely affect the
Secured Party's rights or the priority of its Liens on the Collateral.

         (i) Compliance with Terms of Contracts, etc. The Debtor will perform
and comply in all material respects with all its obligations under the Contracts
and all its other Contractual Obligations relating to the Collateral.

         (j) Payment of Obligations. The Debtor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if (i) the validity thereof is being contested in good faith
by appropriate proceedings, (ii) such proceedings do not involve any material
danger of the sale, forfeiture or loss of any of the Collateral or any interest
therein and (iii) such charge is adequately reserved against on the Debtor's
books in accordance with generally accepted accounting principles.

         (k) Limitation on Liens on Collateral. The Debtor will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any Lien or claim on or to the
Collateral, other than the Liens created hereby and other than as permitted
pursuant to the Loan Agreement, and will defend the right, title and interest of
the Secured Party in and to any of the Collateral against the claims and demands
of all persons whomsoever.

         (l) Limitations on Dispositions of Collateral. The Debtor will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so except to the extent permitted in the Loan Agreement.

         (m) Limitations on Modifications, Waivers, Extensions of Contracts and
Agreements Giving Rise to Accounts. The Debtor will not (i) amend, modify,
terminate or waive any provision of any Contract or any agreement giving rise to
an Account in any manner which could reasonably be expected to materially
adversely affect the value of such Contract or Account as Collateral, (ii) fail
to exercise promptly and diligently each and every material right which it may
have under each Contract and each agreement giving rise to an Account (other
than any right of termination) or (iii) fail to deliver to the Secured Party a
copy of each material demand, notice or document received by it relating in any
way to any Contract or any agreement giving rise to an Account.

         (n) Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of business as generally conducted by the
Debtor over a period of time, the Debtor will not grant any extension of the
time of payment of any of the Accounts, compromise, compound or settle the same
for less than the full amount thereof, release, wholly or partially, any person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon.

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         (o) Maintenance of Equipment. The Debtor will maintain each item of
Equipment in good operating condition, ordinary wear and tear and immaterial
impairments of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose.

         (p) Maintenance of Insurance. The Debtor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory against loss by fire, explosion, theft and such other casualties as
may be reasonably satisfactory to the Secured Party and (ii) insuring the Debtor
and the Secured Party against liability for personal injury and property damage
relating to such Inventory, such policies to be in such form and amounts and
having such coverage as may be reasonably satisfactory to the Secured Party,
with losses payable to the Debtor and the Secured Party as its interests may
appear. All such insurance shall (i) contain a breach of warranty clause in
favor of the Secured Party, (ii) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Secured Party of written notice
thereof, (iii) name the Secured Party as insured party and (iv) be reasonably
satisfactory in all other respects to the Secured Party. The Debtor shall
deliver to the Secured Party a report of a reputable insurance broker or agent
with respect to such insurance during a month specified by the Secured Party in
its discretion in each calendar year and such supplemental reports with respect
thereto as the Secured Party may from time to time reasonably request. Secured
Party may apply any Proceeds of such insurance that it may receive in payment on
account of any Obligation secured by this Security Agreement, whether due or
not. Notwithstanding anything in this Section 4(p) to the contrary, Debtor may,
but shall not be required to, maintain insurance covering its drilling rigs.

         (q) Further Identification of Collateral. The Debtor will furnish to
the Secured Party from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Secured Party may reasonably request, all in reasonable
detail.

         (r) Notices. The Debtor will advise the Secured Party promptly, in
reasonable detail, at its address set forth in the Loan Agreement, (i) of any
Lien (other than Liens created hereby or permitted under the Loan Agreement) on,
or claim asserted against, any of the Collateral and (ii) of the occurrence of
any other event which could reasonably be expected to have a material adverse
effect on the aggregate value of the Collateral or on the Liens created
hereunder.

         (s) Changes in Locations, Name. etc. The Debtor will not (i) change the
location of its chief executive office/chief place of business from that
specified in Section 3, (ii) permit any of the Collateral to be kept at a
location other than those listed on Exhibit B hereto or (iii) change its name,
identity or corporate structure to such an extent that any financing statement
filed by the Secured Party in connection with this Security Agreement would
become misleading.

         (t) Vehicles. The Debtor will maintain each of its vehicles in good
operating condition, ordinary wear and tear and immaterial impairments of value
and damage by the elements excepted, and will provide all maintenance, service
and repairs necessary for such purpose. No vehicle shall be removed from the
state which has issued the certificate of title therefor for a period in excess
of 30 days. Within 30 days after written request by the Secured Party, Debtor
shall take all such action and execute and deliver to the Secured Party all such
documents, certificates, agreements or other instruments as may be necessary and
effective to grant and convey to the Secured Party Liens on such of the Debtor's
vehicles as Secured Party shall request and all certificates of title indicating
the Secured Party's Lien on the vehicle covered by such certificate, and any
other necessary documentation, shall be filed in each office in each
jurisdiction which the Secured Party shall deem advisable to perfect its Liens
on the vehicles.

SECTION 5. PERFORMANCE BY SECURED PARTY OF DEBTOR'S AGREEMENTS

         If the Debtor fails to perform or comply with any of the agreements
contained herein and the Secured Party, as provided for by the terms of this
Security Agreement, shall itself perform or

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comply, or otherwise cause performance or compliance, with such agreement, the
expenses of the Secured Party incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum 2% above the Base
Rate, shall be payable by the Debtor to the Secured Party on demand and shall
constitute Obligations secured hereby.

SECTION 6. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT

         (a) Attorney-in-Fact. Debtor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Secured Party's discretion,
for the purpose of carrying out the terms of this Security Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement, and, without limiting the generality of the foregoing,
the Debtor hereby gives the Secured Party the power and right, on behalf of the
Debtor, without notice to or assent by the Debtor, to do the following:

                  (1) in the case of any Account, at any time when the authority
         of the Debtor to collect the Accounts has been curtailed or terminated
         pursuant to the first sentence of Section 9(c) hereof, or in the case
         of any other Collateral, at any time when any Event of Default shall
         have occurred and is continuing, in the name of the Debtor or its own
         name, or otherwise, to take possession of and indorse and collect any
         checks, drafts, notes, acceptances or other instruments for the payment
         of moneys due under, or with respect to, any Collateral and to file any
         claim or to take any other action or proceeding in any court of law or
         equity or otherwise deemed appropriate by the Secured Party for the
         purpose of collecting any and all such moneys due or with respect to
         such Collateral whenever payable;

                  (2) to pay or discharge taxes and Liens levied or placed on or
         threatened against the Collateral, to effect any repairs or any
         insurance called for by the terms of this Security Agreement and to pay
         all or any part of the premiums therefore and the costs thereof; and

                  (3) upon the occurrence and during the continuance of any
         Event of Default, (a) to direct any party liable for any payment under
         any of the Collateral to make payment of any and all moneys due or to
         become due thereunder directly to the Secured Party or as the Secured
         Party shall direct; (b) to ask or demand for, collect, receive payment
         of and receipt for, any and all moneys, claims and other amounts due or
         to become due at any time in respect of or arising out of any
         Collateral; (c) to sign and indorse any invoices, freight or express
         bills, bills of lading, storage or warehouse receipts, drafts against
         debtors, assignments, verifications, notices and other documents in
         connection with any of the Collateral; (d) to commence and prosecute
         any suits, actions or proceedings at law or in equity in any court of
         competent jurisdiction to collect the Collateral or any thereof and to
         enforce any other right in respect of any Collateral; (e) to defend any
         suit, action or proceeding brought against the Debtor with respect to
         any Collateral; (f) to settle, compromise or adjust any suit, action or
         proceeding described in the preceding clause and, in connection
         therewith, to give such discharges or releases as the Secured Party may
         deem appropriate; and (g) generally, to sell, transfer, pledge and make
         any agreement with respect to or otherwise deal with any of the
         Collateral as fully and completely as though the Secured Party were the
         absolute owner thereof for all purposes, and to do , at the Secured
         Party's option and the Debtor's expense, at any time, or from time to
         time, all acts and things which the Secured Party deems necessary to
         protect, preserve or realize upon the Collateral and the Liens of the
         Secured Party thereon and to effect the intent of this Security
         Agreement, all as fully and effectively as the Debtor might do.

                  The Debtor hereby ratifies all that said attorneys shall
         lawfully do or cause to be done by virtue hereof. This power of
         attorney is a power coupled with an interest and shall be irrevocable.

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         (b) Other Powers. The Debtor also authorizes the Secured Party, at any
time and from time to time, to execute, in connection with the sale provided for
in Sections 6(a) and 9(d), any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.

SECTION 7. PROCEEDS

         In addition to the rights of the Secured Party specified in Section 9
with respect to payments of Accounts, it is agreed that if an Event of Default
shall occur and be continuing (i) all Proceeds received by the Debtor consisting
of cash, checks and other near-cash items shall be held by the Debtor, in trust
for the Secured Party, segregated from other funds of the Debtor, and shall,
forthwith upon receipt by the Debtor, be turned over to the Secured Party in the
exact form received by the Debtor (duly indorsed by the Debtor to the Secured
Party), and (ii) any and all such Proceeds received by the Secured Party
(whether from the Debtor or otherwise) may, in the sole discretion of the
Secured Party, be held by the Secured Party for the Secured Party as collateral
security for, and/or then or at any time thereafter may be applied by the
Secured Party against, the Obligations (whether matured or unmatured), such
application to be in such order as the Secured Party shall elect. Any balance of
such Proceeds remaining after the Obligations shall have been paid in full shall
be paid over to the Debtor or to whomsoever may be lawfully entitled to receive
the same.

SECTION 8. EVENTS OF DEFAULT

         If any one or more of the following shall occur and shall not have been
remedied in the period, if any, provided for, an "Event of Default" shall be
deemed to have occurred hereunder and with respect to all of the Obligation,
unless waived in writing by Secured Party:

                  (a) default shall be made in the payment when due of any
         installment of principal or interest on the Note or any other
         Obligation; or

                  (b) any representation or warranty made by the Debtor herein,
         or by the Debtor or any other Person in the Loan Agreement, or in any
         other Loan Document furnished to the Secured Party pursuant to or under
         this Security Agreement, the Loan Agreement or any other Loan Document,
         proves to have been incorrect in any material respect as of the date
         when made or deemed made and shall continue unremedied for a period of
         30 days after the earlier of (i) the Debtor becoming aware of such
         default or (ii) the Secured Party giving notice thereof to the Debtor;
         or

                  (c) default shall be made by the Debtor in the due observance
         or performance of any of the covenants or agreements contained in
         Articles 4 and 5 of the Loan Agreement, and in the case of default
         under Article 4 thereof, such default continues unremedied for a period
         of 30 days after the earlier of (i) the Debtor becoming aware of such
         default or (ii) the Secured Party giving notice thereof to the Debtor;
         or

                  (d) default is made in the due observance or performance by
         Debtor of any covenant, condition or agreement contained in this
         Security Agreement or in any other Security Instrument, and such
         default continues unremedied beyond the expiration of any applicable
         grace period which may be expressly allowed under this Security
         Agreement or any such other Security Instrument; or

                  (e) an involuntary case or other proceeding shall be commenced
         against Debtor which seeks liquidation, reorganization or other relief
         with respect to it or its debts or other liabilities under any
         bankruptcy, insolvency or other similar law now or hereafter in effect
         or seeking the appointment of a trustee, receiver, liquidator,
         custodian or other similar official of it or any substantial part of
         its property, and such involuntary case or other proceeding shall
         remain undismissed

                                       -9-

<PAGE>

         or unstayed for a period of 60 days; or an order for relief against
         Debtor shall be entered in any such case under the Federal Bankruptcy
         Code; or

                  (f) Debtor shall commence a voluntary case or other proceeding
         seeking liquidation, reorganization or other relief with respect to
         itself or its debts or other liabilities under any bankruptcy,
         insolvency or other similar law now or hereafter in effect or seeking
         the appointment of a trustee, receiver, liquidator, custodian or other
         similar official of it or any substantial part of its property, or
         shall consent to any such relief or to the appointment of or taking
         possession by any such official in an involuntary case or other
         proceeding commenced against it, or shall make a general assignment for
         the benefit of creditors, or shall fail generally to, or shall admit in
         writing its inability to pay its debts generally as they become due, or
         shall take any corporate action to authorize or effect any of the
         foregoing; or

                  (g) Debtor discontinues its usual business; or

                  (h) Debtor shall default in any payment of principal of or
         interest on any Indebtedness (other than to the Secured Party) in
         excess of $250,000.00 in outstanding principal amount beyond any period
         of grace provided with respect thereto, or in the performance of any
         other agreement, term or condition contained in any agreement or
         instrument under or by which any such Indebtedness is created,
         evidenced or secured if the effect of such default is to cause such
         obligation to become due before its stated maturity or to permit the
         holder(s) of such obligation or the trustee(s) under any such agreement
         or instrument to cause such obligation to become due prior to its
         stated maturity, whether or not such default or failure to perform
         should be waived by the holder(s) of such obligation or such
         trustee(s); or

                  (i) Debtor shall fail within 30 days after date of entry to
         pay, bond or otherwise discharge any judgment or order for the payment
         of money in excess of $250,000.00 that is not otherwise being satisfied
         in accordance with its terms and is not stayed on appeal or otherwise
         being appropriately contested in good faith; or

                  (j) any Security Instrument, including this Security
         Agreement, after delivery thereof shall for any reason cease to be in
         full force and effect and valid, binding and enforceable in accordance
         with its terms, or cease to create a valid and perfected Lien of the
         priority required thereby or hereby on any of the Collateral purported
         to be covered thereby or hereby, or Debtor or any other Person who may
         have granted or purported to grant such Lien shall so state in writing;
         or

                  (k) the occurrence of any change or event which has a Material
         Adverse Effect.

SECTION 9. SECURED PARTY'S RIGHTS, REMEDIES AND POWERS

         (a) Analysis of Accounts. The Secured Party shall have the right to
make test verifications of the Accounts in any manner and through any medium
that it reasonably considers advisable, and the Debtor shall furnish all such
assistance and information as the Secured Party may require in connection
therewith. At any time and from time to time, upon the Secured Party's request
and at the expense of the Debtor, the Debtor shall cause independent public
accountants or others satisfactory to the Secured Party to furnish to the
Secured Party reports showing reconciliations, aging and test verifications of,
and trial balances for, the Accounts.

         (b) Notice to Account Debtors and Contracting Parties. The Secured
Party may at any time, and upon the request of the Secured Party at any time,
the Debtor shall, notify account debtors of the Accounts and parties to the
Contracts that the Accounts and the Contracts have been assigned to the Secured
Party and that payments in respect thereof shall be made directly

                                      -10-

<PAGE>

to the Secured Party. The Secured Party may in its own name or in the name of
others communicate with account debtors on the Accounts and parties to the
Contracts to verify with them to its satisfaction the existence, amount and
terms of any Accounts or Contracts.

         (c) Collections on Accounts and Contracts. The Secured Party hereby
authorizes the Debtor to collect the Accounts and Contracts, subject to the
Secured Party's direction and control, and the Secured Party may curtail or
terminate said authority at any time. If required by the Secured Party at any
time, any payments of Accounts and Contracts, when collected by the Debtor,
shall be forthwith (and, in any event, within two Business Days) deposited by
the Debtor in the exact form received, duly indorsed by the Debtor to the
Secured Party if required, in a special collateral account maintained by the
Secured Party, subject to withdrawal by the Secured Party for the account of the
Secured Party only, as provided in this Security Agreement, and, until so turned
over, shall be held by the Debtor in trust for the Secured Party, segregated
from other funds of the Debtor. All Proceeds while held by the Secured Party (or
by the Debtor in trust for the Secured Party) shall continue to be collateral
security for all of the Obligations and shall not constitute payment thereof
until applied as provided in this Security Agreement. At such intervals as may
be agreed upon by the Debtor and the Secured Party, or, if an Event of Default
shall have occurred and be continuing, at any time at the Secured Party's
election, the Secured Party shall apply all or any part of the funds on deposit
in said special collateral account on account of the Obligations in such order
as the Secured Party may elect, and any part of such funds which the Secured
Party elects not so to apply and deems not required as collateral security for
the Obligations shall be paid over from time to time by the Secured Party to the
Debtor or to whomsoever may be lawfully entitled to receive the same. At the
Secured Party's request, the Debtor shall deliver to the Secured Party all
original and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Accounts and Contracts, including, without
limitation, all original orders, invoices and shipping receipts.

         (d) Remedies; Acceleration of Maturity of Obligation; Repossession and
Sale of Collateral. At any time after an Event of Default occurs, Secured Party
may declare every Obligation immediately due and payable and may exercise, in
addition to all other rights and remedies granted to it in this Security
Agreement, the Loan Agreement and in any of the other Loan Documents securing,
evidencing or relating to the Obligation, all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, the
Secured Party, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Debtor or any other person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and conditions
as Secured Party may deem advisable and at such prices as Secured Party may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity or redemption in the Debtor, which right or equity is hereby waived or
released. The Debtor further agrees, at the Secured Party's request, to assemble
the Collateral and make it available to the Secured Party at places which the
Secured Party shall reasonably select, whether at the Debtor's premises or
elsewhere. The Secured Party shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in

                                      -11-

<PAGE>

whole or in part of the Obligations, in such order as the Secured Party may
elect, and only after such application and after the payment by the Secured
Party of any other amount required by any provision of law, need the Secured
Party account for the surplus, if any, to the Debtor. To the extent permitted by
applicable law, the Debtor waives all claims, damages and demands it may acquire
against the Secured Party arising out of the exercise by it of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Debtor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Secured Party to collect
such deficiency.

         (e) Right of Setoff. In addition to the security interest and Lien
herein described, Debtor expressly recognizes and grants Secured Party upon the
occurrence of an Event of Default the right of setoff with respect to any money,
checks, certificates of deposit or instruments deposited with Secured Party,
whether in general or special deposits, which right may be exercised
concurrently with or separately from any and all other rights of Secured Party
against Debtor.

SECTION 10. LIMITATIONS ON SECURED PARTY'S DUTIES AND OBLIGATIONS

         (a) Limitations on Secured Party's Obligations Under Accounts and
Contracts. The Secured Party shall not have any obligation or liability under
any Account (or any agreement giving rise thereto) or Contract by reason of or
arising out of this Security Agreement or the receipt by the Secured Party of
any payment relating to such Account or Contract pursuant hereto, nor shall the
Secured Party be obligated in any manner to perform any of the obligations of
the Debtor thereof under or pursuant to any Account (or any agreement giving
rise thereto) or under or pursuant to any Contract, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto) or under any Contract, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.

         (b) Limitation on Duties Regarding Preservation of Collateral. The
Secured Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to use reasonable care. Neither the Secured Party nor any
of its directors, officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Debtor or otherwise.

         (c) No Duty on the Part of Secured Party. The powers conferred on the
Secured Party under this Security Agreement are solely to protect the interests
of the Secured Party in the Collateral and shall not impose any duty upon the
Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Debtor or its officers,
directors, employees, stockholders or agents for any act or failure to act
hereunder, except for its own gross negligence or willful misconduct.

SECTION 11. GENERAL PROVISIONS

         (a) Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.

                                      -12-

<PAGE>

         (b) Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         (c) Additional Definitions. The term "Debtor" as used in this Security
Agreement is to be construed as singular or plural to correspond with the number
of persons executing this instrument as Debtor. The pronouns used in this
instrument are in the masculine gender but shall be construed as feminine or
neuter as occasion may require. "Secured Party" and "Debtor" as used in this
instrument include the heirs, executors or administrators, successors,
representatives, receivers, trustees, custodians, and assigns of those parties.

         (d) Captions. The section and paragraph headings appearing in this
instrument were inserted for convenience only and are not to be given any
substantive meaning or significance in construing this Security Agreement.

         (e) Waivers and Amendments; Successors and Assigns. None of the terms
or provisions of this Security Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Debtor and the
Secured Party, provided that any provision of this Security Agreement may be
waived by the Secured Party in a written letter or agreement executed by the
Secured Party or by telex or facsimile transmission from the Secured Party. This
Security Agreement shall be binding upon the successors and assigns of the
Debtor and shall inure to the benefit of the Secured Party and its successors
and assigns.

         (f) No Waiver; Cumulative Remedies. The Secured Party shall not by any
act (except by a written instrument pursuant to Section 11(e) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Secured Party, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Secured Party
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.

         (g) GOVERNING LAW. THE LAW GOVERNING THIS SECURED TRANSACTION SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF TEXAS;
PROVIDED, HOWEVER, THAT THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ANY OF
THE COLLATERAL SITUATED IN ANY OTHER STATE MAY BE GOVERNED BY THE LAWS OF SUCH
OTHER STATE.

         (h) Renewal, Extension or Rearrangement. All provisions of this
Security Agreement and of any other Loan Document relating to the Note or other
Obligations shall apply with equal force and effect to each and all promissory
notes hereafter executed which in whole or in part represent a renewal,
extension for any period, increase or rearrangement of any part of the
Obligation originally represented by the Note or any part of such other
Obligation.

         (i) Assignment. Secured Party may from time to time assign this
Security Agreement, Secured Party's rights under this Security Agreement, or all
or any of the Obligation. In any such case, the assignee will be entitled to all
rights, privileges, and remedies granted in this Security

                                      -13-
<PAGE>

Agreement to Secured Party, and Debtor will not assert against the assignee any
claims or defenses Debtor may have against Secured Party (except those granted
in this Security Agreement).

         (j) Notices. Notices hereunder may be given by mail, by telex or by
facsimile transmission, addressed or transmitted to the person to which it is
being given at such person's address or transmission number set forth in this
Security Agreement and shall be effective (a) in the case of mail, two days
after deposit in the postal system, first class postage pre-paid and (b) in the
case of telex or facsimile notices, when sent. The Debtor may change its address
and transmission number by written notice to the Secured Party, and the Secured
Party may change its address and transmission number by written notice to the
Debtor.

         (k) Prior Security Agreements. This Security Agreement amends and
restates in its entirety, and renews, extends and carries forward the Liens and
security interests created by, the Security Agreement, dated as of January 16,
1996, executed and delivered by the Debtor to the Secured Party in connection
with the Prior Notes.

         EXECUTED the date first above written, in Midland County, Texas.

                                   SECURED PARTY

                                   NORWEST BANK TEXAS, N.A.

                                   By: /s/ Mark D. McKinney
                                       ---------------------------------------
                                       Mark D. McKinney, Senior Vice President

                                   Facsimile Transmission Number for
                                   Notice:  (915) 688-8679

                                   DEBTOR

                                   TMBR/SHARP DRILLING, INC.

                                   By: /s/ Thomas C. Brown
                                       ---------------------------------------
                                       Thomas C. Brown, Chairman of the
                                       Board of Directors and Chief
                                       Executive Officer

                                   Facsimile Transmission Number for
                                   Notice: (915) 699-5828

                                      -14-

<PAGE>

                                   EXHIBIT "A"
                              TO SECURITY AGREEMENT

  [This Exhibit A consists of 28 pages of drilling rigs and related equipment]

                                      -15-

<PAGE>

                                   EXHIBIT "B"
                              TO SECURITY AGREEMENT

                             LOCATIONS OF COLLATERAL

Headquarters and Midland Yard:

         4607 West Industrial Blvd.
         Midland, Texas  79703

Other Yard Locations:

         8700 Sprague
         Odessa, Texas  79764

                                      -16-

<PAGE>

                   RENEWAL AND EXTENSION OF SECURITY AGREEMENT

         This Renewal and Extension of Security Agreement, dated as of the 26th
day of June, 2000, is made by TMBR/Sharp Drilling, Inc., a Texas corporation,
("TMBR/Sharp") with its principal offices at 4607 West Industrial Blvd.,
Midland, Texas 79703, in favor of Wells Fargo Bank Texas, N.A., a national
banking association, (the "Bank") (formerly Norwest Bank Texas, N.A.), with
banking quarters at 500 West Texas Avenue, Suite 400, Midland, Texas 79701.

         WHEREAS, TMBR/Sharp and the Bank have executed that certain Second
Amended and Restated Loan Agreement dated June 26, 2000, (which, together with
all amendments and supplements thereto, is herein called the "Loan Agreement")
pursuant to which the Bank agreed, subject to certain terms and conditions
therein stated, to make loans to TMBR/Sharp as provided in the Loan Agreement;
and

         WHEREAS, TMBR/Sharp and Norwest Bank Texas, N.A. previously executed a
Security Agreement dated May 26, 1998, (the "Security Agreement") covering
accounts, chattel paper, contracts, documents, equipment, general intangibles,
instruments, inventory, proceeds, and increases, which served as collateral for
prior loans from Norwest Bank Texas, N.A. to TMBR/Sharp Drilling, Inc.

         WHEREAS, the Bank has conditioned its obligations under the Loan
Agreement upon the execution and delivery by TMBR/Sharp of this Renewal and
Extension of Security Agreement which renews and extends the Security Agreement
dated May 26, 1998, and TMBR/Sharp has agreed to make and deliver this Renewal
and Extension of Security Agreement.

         NOW THEREFORE, (i) in compliance with the terms and conditions of the
Loan Agreement, (ii) for and in consideration of the premises and the agreements
herein contained, and (iii) for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, TMBR/Sharp and the Bank
agree as follows:

         1.       The beneficiary of the Security Agreement shall be Wells Fargo
                  Bank Texas, N.A., which was formerly Norwest Bank Texas, N.A.

         2.       All collateral under the Security Agreement continues to be
                  owned by TMBR/Sharp Drilling, Inc., and continues to be
                  pledged to the Bank to secure TMBR/Sharp's indebtedness to the
                  Bank.

         3.       Should the Bank require it, TMBR/Sharp will execute any
                  additional documents needed evidencing the renewal and
                  extension of the security interest of the Bank in the
                  collateral pledged under the Security Agreement.

         4.       All provisions of the Security Agreement dated May 26, 1998,
                  not modified hereby, shall remain in full force and effect as
                  security for the Promissory Note executed by TMBR/Sharp dated
                  June 26, 2000, as well as for any renewals or extensions of
                  said Note, or any additional loans to TMBR/Sharp by the Bank.

         Signed this 13th day of July, 2000, to be effective June 26, 2000.

                                       TMBR/SHARP DRILLING, INC.

                                       By: /s/ Thomas C. Brown
                                           -------------------------------
                                           Thomas C. Brown, Chairman of the
                                           Board of Directors and Chief
                                           Executive Officer

                                       WELLS FARGO BANK TEXAS, N.A.

                                       By: /s/ Dale S. Gravelle
                                           ------------------------------------
                                           Dale S. Gravelle, Vice President

                                      -17-<PAGE>
                                                                    EXHIBIT 4.12

                           CERTIFICATE OF DESIGNATIONS

                                       OF

                 SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK

                                       OF

                            TRINITY INDUSTRIES, INC.

                                   ----------

                         Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware

                                   ----------

         The undersigned authorized officer of Trinity Industries, Inc., a
Delaware corporation (the "Corporation"), on behalf of the Corporation, does
hereby certify that the Board of Directors of the Corporation (the "Board of
Directors"), at a duly called meeting, granted and conferred to a special
committee of the Board of Directors (the "Pricing Committee") all requisite
authority to create a series of preferred stock of the Corporation and designate
the number of shares and voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof. The Pricing Committee,
pursuant to a duly executed written consent, duly adopted the following
resolution and such resolution has not been modified and is in full force and
effect:

         RESOLVED that, pursuant to the authority vested in the Pricing
Committee by the Board of Directors in accordance with the provisions of the
Certificate of Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), a series of preferred stock of the Corporation is hereby
created and the designation and number of shares thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations and restrictions
thereof, are as set forth below in this Certificate of Designations:

1.       Certain Definitions.

                  Unless the context otherwise requires, the terms defined in
this Section 1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).

                  "Additional Shares of Common Stock" has the meaning set forth
in Section 5(g) below.

                  "Aggregate Consideration Received" has the meaning set forth
in Section 5(g) below.

<PAGE>

                  "Beneficial Owner" has the meaning assigned to such term in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as that term is used in Section
13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether or not such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a
corresponding meaning.

                  "Board of Directors" has the meaning set forth in the preamble
above.

                  "Business Day" means a day other than a Saturday or Sunday or
a day on which commercial banks in the City of New York are authorized or
obligated by law or executive order to close.

                  "Cash Dividends" has the meaning set forth in Section 3(b)
below.

                  "Certificate of Incorporation" has the meaning set forth in
the preamble above.

                  "Change of Control" means the occurrence of any of the
following:

                           (1) the direct or indirect sale, transfer, conveyance
                  or other disposition (other than by way of merger,
                  consolidation or transfer of the Corporation's Voting Stock),
                  in one or a series of related transactions, of all or
                  substantially all of the properties or assets of the
                  Corporation and its Subsidiaries, taken as a whole, to any
                  Person other than the Corporation or a wholly-owned Subsidiary
                  of the Corporation; or

                           (2) the consummation of an acquisition of the
                  Corporation by another Person by means of any transaction or
                  series of related transactions (including, without limitation,
                  any reorganization, merger or consolidation other than one
                  effected for the purpose of reincorporating the Corporation)
                  that results in such Person becoming the Beneficial Owner,
                  directly or indirectly, of 50% or more of the Voting Stock of
                  the Corporation, measured by voting power rather than number
                  of shares.

                  "Common Equity" means all shares now or hereafter authorized
of any class of common stock of the Corporation, including the Common Stock, and
any other stock of the Corporation, howsoever designated, authorized after the
Initial Issue Date, which has the right (subject always to prior rights of any
class or series of preferred stock) to participate in the distribution of the
assets and earnings of the Corporation without limit as to per share amount.

                  "Common Stock" means the common stock, $1.00 par value per
share, of the Corporation.

                  "Conversion Date" has meaning set forth in Section 5(b) below.

                  "Conversion Price" shall initially mean $22.46 and thereafter
shall be subject to adjustment from time to time pursuant to the terms of
Section 5 below.

                                       2
<PAGE>

                  "Convertible Preferred Stock" has the meaning set forth in
Section 2 below.

                  "Convertible Securities" has the meaning set forth in Section
5(g) below.

                  "Corporation" has the meaning set forth in the preamble above.

                  "Current Market Price" means, for a share of Common Stock on
any date, the average of Quoted Prices for the ten (10) consecutive Trading Days
ending on the first Business Day prior to such date (if the first Business Day
prior to such date is a Trading Day, or if not, then on the last Trading Day
prior to the first Business Day), appropriately adjusted to take into account
the occurrence, during the period commencing on the first of the Trading Days
during the ten (10) Trading Day period and ending on such date, of any event
that would result in an adjustment to the Conversion Price of the Convertible
Preferred Stock.

                  "Dividend Payment Date" has the meaning set forth in Section
3(c) below.

                  "Dividend Period" means the period from, and including, the
Initial Issue Date to, but not including, the first Dividend Payment Date and
thereafter, each semi-annual period from, and including, each Dividend Payment
Date to, but not including, the next Dividend Payment Date.

                  "Dividend Rate" means four and one half percent (4.5%) per
annum of Liquidation Preference.

                  "Effective Price" has the meaning set forth in Section 5(g)
below.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of Convertible Preferred Stock
are outstanding) to the holders of Common Stock of (i) cash, other than where
such cash dividend or distribution is an ordinary or regular quarterly cash
dividend and/or (ii) any shares of capital stock of the Corporation (other than
shares of Common Stock), other securities of the Corporation, evidences of
indebtedness of the Corporation or any other person, or any other property
(including shares of any Subsidiary of the Corporation) or any combination
thereof.

                  "Fair Value" means the fair value determined in good faith by
the Board of Directors and reflected in a formal resolution thereof.

                  "Initial Issue Date" means the date that shares of Convertible
Preferred Stock are first issued by the Corporation.

                  "Junior Stock" means, for the purposes of Section 3 below,
Common Equity, the Series A Junior Preferred Stock and any class or series of
stock of the Corporation which is not entitled to receive any dividends in any
Dividend Period unless all dividends required to have been paid or declared and
set apart for payment on the Convertible Preferred Stock and any other Parity
Stock shall have been so paid or declared and set apart for payment, and for
purposes of Section 4 below, shall mean Common Equity, the Series A Junior
Preferred Stock and any class

                                       3
<PAGE>

or series of stock of the Corporation which is not entitled to receive any
assets upon liquidation, dissolution or winding up of the affairs of the
Corporation until the Convertible Preferred Stock and any other Parity Stock
shall have received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.

                  "Liquidation Event" shall mean a voluntary or involuntary
liquidation, dissolution or other winding up of the affairs of the Corporation
(in connection with the bankruptcy or insolvency of the Corporation or
otherwise). A Liquidation Event shall also include a Change of Control if the
holders of a majority of the then outstanding Convertible Preferred Stock
designate such Change of Control as a Liquidation Event in a written notice
delivered to the Corporation prior to or immediately after such Change of
Control.

                  "Liquidation Preference" shall mean $100,000 per share of
Convertible Preferred Stock.

                  "Mandatory Conversion Date" has the meaning set forth in
Section 6(b) below.

                  "Mandatory Conversion Notice" has the meaning set forth in
Section 6(b) below.

                  "Mandatory Conversion Target Price" has the meaning set forth
in section 6(a) below.

                  "New Shares" has the meaning set forth in Section 13(a) below.

                  "Parity Stock" shall mean, for purposes of Section 4 below,
any class or series of stock of the Corporation authorized after the Initial
Issue Date which is entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of the Corporation on a parity with the Convertible
Preferred Stock without preference or priority of one over the other.

                  "Person" means any individual, corporation, association,
partnership, joint venture, limited liability company, trust, estate or other
entity.

                  "PIK Dividends" has the meaning set forth in Section 3(b)
below.

                  "Pricing Change" has the meaning set forth in Section 5(g)
below.

                  "Pricing Committee" has the meaning set forth in the preamble.

                  "Quoted Price" means, for any Trading Day, the price
determined as follows: (i) if the Common Stock is listed on the New York Stock
Exchange, the daily volume weighted average price of the Common Stock on the New
York Stock Exchange as reported by Bloomberg Financial L.P. (based on a Trading
Day from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time); (ii) if the
foregoing does not apply, the daily volume weighted average price of the Common
Stock on any trading market where the Common Stock is listed or traded as
reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
Eastern Time to 4:00 p.m. Eastern Time); (iii) if the foregoing does not apply,
the daily volume weighted average price of the Common Stock on a national
exchange or in the over-the-counter market on the electronic bulletin board for
the Common Stock; or (iv) if the foregoing does not apply, the most recent bid

                                       4
<PAGE>

price per share of Common Stock as reported in the "pink sheets" by the National
Quotation Bureau, Inc., in each case, for such Trading Day. If the Quoted Price
cannot be calculated for the Common Stock on any of the foregoing bases, the
Quoted Price of the Common Stock shall be the fair market value as determined by
the Board of Directors in good faith and reflected in a formal resolution.

                  "Redemption Date" means the fifth anniversary of the Initial
Issue Date.

                  "Redemption Price" means a price per share equal to the
Liquidation Preference per share, plus an amount equal to all cumulative
dividends accrued and unpaid on such share to the Redemption Date.

                  "Redemption Market Price" means the product of (i) 0.9,
multiplied by (ii) the average of the Quoted Prices of the Common Stock for the
thirty (30) consecutive Trading Days ending on the first Business Day prior to
the Redemption Date (if the first Business Day prior to the Redemption Date is a
Trading Day, or if not, then on the last Trading Day prior to the first Business
Day), appropriately adjusted to take into account the occurrence, during the
period commencing on the first of the Trading Days during the thirty (30)
Trading Day period and ending on the Redemption Date, of any event that would
result in an adjustment to the Conversion Price of the Convertible Preferred
Stock.

                  "Rights or Options" has the meaning set forth in Section 5(g)
below.

                  "Series A Junior Preferred Stock" means the Series A Junior
Participating Preferred Stock, no par value, of the Corporation.

                  "Subsidiary" means, with respect to any specified Person:

                           (1) any corporation, association or other business
                  entity of which more than 50% of the total voting power of
                  shares of Voting Stock entitled (without regard to the
                  occurrence of any contingency) to vote in the election of
                  directors, managers or trustees thereof is at the time owned
                  or controlled, directly or indirectly, by such Person or one
                  or more of the other Subsidiaries of that Person (or a
                  combination thereof); and

                           (2) any partnership (a) the sole general partner or
                  the managing general partner of which is such Person or a
                  Subsidiary of such Person or (b) the only general partners of
                  which are such Person or one or more Subsidiaries of such
                  Person (or any combination thereof).

                  "Target Price" means, as of any date, the lesser of (i) the
product of (A) 0.88 multiplied by (B) the Current Market Price for such date and
(ii) the product of (A) 0.88 multiplied by (B) the Quoted Price for the first
Business Day prior to such date (if the first Business Day is a Trading Day, or
if not, then on the last Trading Day prior to the first Business Day).

                  "Trading Day" means, with respect to any security, (i) if the
applicable security is traded on the New York Stock Exchange, any day on which
the New York Stock Exchange is

                                       5
<PAGE>

open for business and a Quoted Price may be ascertained or (ii) if the
applicable security is not traded on the New York Stock Exchange, any day on
which any market in which the applicable security is primarily then traded and
in which a Quoted Price may be ascertained is open for business.

                  "Voting Stock" means, as of any date, the capital stock of the
Corporation that is at the time entitled to vote in the election of the Board of
Directors.

2. Number of Shares and Designations. Six Hundred (600) shares of the preferred
stock, no par value, of the Corporation are hereby constituted as a series of
the preferred stock designated as Series B Redeemable Convertible Preferred
Stock (the "Convertible Preferred Stock").

3. Dividends.

                  (a) The record holders of Convertible Preferred Stock shall be
entitled to receive dividends payable by the Corporation at the Dividend Rate.
Such dividends shall be cumulative from the Initial Issue Date and shall be
payable cumulatively in arrears, as to each share of Convertible Preferred
Stock, when, as and if declared by the Board of Directors out of funds legally
available therefor, on every successive Dividend Payment Date (defined below)
and upon conversion or redemption of such share.

                  (b) Dividends on the Convertible Preferred Stock shall be
paid, at the Corporation's option and in its sole discretion, (i) in fully paid
and nonassessable shares of Common Stock (such dividends paid in kind being
herein called "PIK Dividends") or (ii) in cash (such dividends being referred to
as the "Cash Dividends"). PIK Dividends shall be paid by delivering to each
record holder of Convertible Preferred Stock a number of shares of Common Stock
determined by dividing (x) the total aggregate dollar amount of dividends
accrued and unpaid with respect to shares of Convertible Preferred Stock owned
by such record holder on the record date for the applicable Dividend Payment
Period (rounded to the nearest whole cent) by (y) the Current Market Price on
the applicable Dividend Payment Date. The Corporation shall not issue fractional
shares of Common Stock to which holders may become entitled pursuant to this
subparagraph, but in lieu thereof, the Corporation shall deliver its check in an
amount equal to the applicable fractional amount as computed in accordance with
Section 5(c). The Cash Dividends shall be payable when, as and if declared by
the Board of Directors, out of funds legally available for the payment of
dividends.

                  (c) Dividends on shares of Convertible Preferred Stock shall
accrue and be cumulative from and including the Initial Issue Date to and
including the date on which such shares shall have been converted into Common
Stock or redeemed. Such dividends shall accrue whether or not there shall be (at
the time such dividend becomes payable or at any other time) profits, surplus or
other funds of the Corporation legally available for the payment of dividends,
and whether or not the Board of Directors declares them. Dividends shall be
payable semi-annually in arrears on July 1 and January 1 of each year (each, a
"Dividend Payment Date"), commencing on January 1, 2004. If any Dividend Payment
Date occurs on a day that is not a Business Day, any accrued dividends otherwise
payable on such Dividend Payment Date shall be paid on the next succeeding
Business Day. The amount of dividends payable on Convertible Preferred Stock for
each full Dividend Period shall be computed by dividing by two (2), the annual
dividend at the

                                       6
<PAGE>

Dividend Rate. Dividends shall be paid to the holders of record of the
Convertible Preferred Stock as their names shall appear on the share register of
the Corporation on the record date for such dividend. The term "record date" as
used herein with respect to the payment of dividends means, with respect to the
dividends payable on January 1 and July 1 of each year, December 16 and June 16
of each year, respectively, or such other record date, not more than sixty (60)
and not less than ten (10) days preceding the applicable Dividend Payment Date,
as shall be fixed by the Board of Directors. Dividends payable in any Dividend
Period which is less than a full Dividend Period in length will be computed on
the basis of a three hundred sixty (360) day year consisting of twelve (12)
thirty-day months. For any Dividend Period in which accrued dividends are not
paid in full on the Dividend Payment Date first succeeding the end of such
Dividend Period, then on such Dividend Payment Date such accrued and unpaid
dividends shall be added to the Liquidation Preference of the Convertible
Preferred Stock (only for the purposes of calculating future dividend payments
and not for the purposes of any other term or provision of this Certificate of
Designations), effective at the beginning of the Dividend Period succeeding the
Dividend Period as to which such dividends were not paid, until such accrued and
unpaid dividends have been paid in full. Dividends on account of arrears for any
past Dividend Periods may be declared and paid at any time to holders of record
on the record date therefor.

                  (d) Unless all dividends to which the holders of Convertible
Preferred Stock shall have been entitled for all previous Dividend Periods shall
have been paid or declared and a sum of money or PIK Dividends, as applicable
(as provided in Section 3(b)), sufficient for the payment thereof has been set
apart, the Corporation shall not declare, pay or set apart for payment on any
Junior Stock any dividends whatsoever, whether in cash, stock, property or
otherwise (other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Stock other than Common Stock, together with cash in lieu
of fractional shares), nor shall the Corporation make any distribution on any
Junior Stock, nor shall any Junior Stock be purchased, redeemed, retired or
otherwise acquired by the Corporation or any of its Subsidiaries nor shall any
monies be paid or made available for a sinking fund for the purchase or
redemption of any Junior Stock.

4. Distributions Upon Liquidation, Dissolution or Winding Up.

                  (a) In the event of any Liquidation Event, before any payment
or distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of Junior Stock, the holders of
Convertible Preferred Stock shall be entitled to be paid out of the assets of
the Corporation in cash or property at its fair market value, as determined by
the Board of Directors in good faith and reflected in a formal resolution, an
amount per share equal to the Liquidation Preference plus an amount equal to all
dividends accrued and unpaid thereon to the date of such Liquidation Event. Upon
payment in full of the Liquidation Preference and all accrued and unpaid
dividends to which each holder of shares of Convertible Preferred Stock is
entitled, each holder of shares of Convertible Preferred Stock shall not be
entitled to any further participation in any distribution of assets by the
Corporation.

                  (b) If, upon any such Liquidation Event, the assets of the
Corporation legally available for distribution to the holders of Convertible
Preferred Stock and holders of any Parity Stock shall be insufficient to permit
the payment in full of the Liquidation Preference per share plus an amount equal
to all dividends accrued and unpaid on the Convertible Preferred Stock and the
full

                                       7
<PAGE>

liquidating payments on all Parity Stock, then such assets of the Corporation
shall be ratably distributed among the holders of Convertible Preferred Stock
and of any Parity Stock in proportion to the full amounts to which they would
otherwise be entitled if all amounts payable thereon were paid in full.

                  (c) Written notice of any Liquidation Event, stating the
payment date or dates when and the place where the amounts distributable in such
circumstances shall be payable, shall be given by first class mail, postage
prepaid, not less than 30 days prior to any payment date stated therein, to the
holders of record of the shares of Convertible Preferred Stock at their address
as the same shall appear in the records of the Corporation.

5. Conversion Rights of Holders.

                  (a) A holder of shares of Convertible Preferred Stock shall
have the right, at such holder's option, to convert all or any portion of its
shares of Convertible Preferred Stock into Common Stock at any time before the
close of business on the Business Day preceding the Redemption Date. For the
purposes of conversion, each share of Convertible Preferred Stock shall be
valued at the Liquidation Preference plus all accrued and unpaid dividends on
such share through the Conversion Date, which shall be divided by the Conversion
Price in effect on the Conversion Date to determine the number of shares
issuable upon conversion. No other payment or adjustment for dividends shall be
made upon such conversion, and upon such conversion all unpaid dividends with
respect to such converted stock shall be deemed paid in full without regard to
any record holder at any record date for such unpaid dividends. Immediately
following such conversion, the rights of the holders of converted Convertible
Preferred Stock shall cease and the persons entitled to receive the Common Stock
upon the conversion of Convertible Preferred Stock shall be treated for all
purposes as having become the owners of such Common Stock.

                  (b) To convert Convertible Preferred Stock, a holder must (i)
surrender the certificate or certificates evidencing the shares of Convertible
Preferred Stock to be converted, duly endorsed at the principal office of the
Corporation or transfer agent for the Convertible Preferred Stock, if any, (ii)
notify the Corporation at such office that such holder elects to convert
Convertible Preferred Stock, and the number of shares such holder wishes to
convert, (iii) state in writing the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be issued, and
(iv) pay any transfer or similar tax if required (provided, however, that no
such payment shall be required if the Common Stock issuable upon conversion is
to be issued in the name of the converting holder of Convertible Preferred
Stock). In the case of lost or destroyed certificates evidencing ownership of
shares of Convertible Preferred Stock to be surrendered for conversion, the
holder shall submit such proof of loss or destruction and, if requested by the
Corporation, an appropriate indemnity, reasonably required by the Corporation.
In the event that a holder fails to notify the Corporation of the number of
shares of Convertible Preferred Stock which such holder wishes to convert, such
holder shall be deemed to have elected to convert all shares represented by the
certificate or certificates surrendered for conversion. The date on which the
holder satisfies all those requirements is the "Conversion Date." As soon as
practicable after the Conversion Date, the Corporation shall deliver or shall
deliver through its transfer agent a certificate for the number of full shares
of Common Stock issuable upon the conversion, a check for any fractional share
and a new certificate representing the unconverted portion, if any, of the
shares of Convertible Preferred Stock represented by the certificate or
certificates surrendered for conversion.

                                       8
<PAGE>

The person in whose name the Common Stock certificate is registered shall be
treated as the stockholder of record on and after the Conversion Date until such
time as record ownership is transferred. All shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock shall be fully paid and
nonassessable.

                  (c) If a holder of Convertible Preferred Stock converts more
than one share at a time the number of full shares of Common Stock issuable upon
conversion shall be based on the total number of all shares of Convertible
Preferred Stock converted. The Corporation shall not issue a fractional share of
Common Stock upon conversion of Convertible Preferred Stock. Instead, the
Corporation shall deliver a check for an amount equal to the value of the
fractional share. The value of a fraction of a share is determined by
multiplying the Current Market Price of the Common Stock as of the Conversion
Date by the fraction, rounded to the nearest cent.

                  (d) A holder delivering Convertible Preferred Stock for
conversion will not be required to pay any taxes or duties in respect of the
issue or delivery of Common Stock on conversion but will be required to pay any
tax or duty that may be payable in respect of any transfer involved in the issue
or delivery of the shares of Common Stock. Certificates representing shares of
Common Stock will not be issued or delivered unless all taxes and duties, if
any, payable by the holder have been paid.

                  (e) The Corporation has reserved and shall continue to reserve
out of its authorized but unissued Common Stock and/or its Common Stock held in
treasury enough shares of Common Stock to permit the conversion of the
Convertible Preferred Stock in full. All shares of Common Stock which may be
issued upon conversion of Convertible Preferred Stock shall be fully paid and
nonassessable. The Corporation will comply with all securities laws regulating
the offer and delivery of shares of Common Stock upon conversion of Convertible
Preferred Stock and will list such shares on the principal United States
securities exchange on which the Common Stock is then listed.

                  (f) If the Corporation, after the Initial Issue Date:

                           (i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;

                           (ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;

                           (iii) combines its outstanding shares of Common Stock
into a smaller number of shares; or

                           (iv) issues by reclassification of its Common Stock
any shares of its capital stock;

then the Conversion Price (as in effect immediately prior to such action) shall
be proportionately adjusted so that the holder of Convertible Preferred Stock
thereafter converted may receive for the same aggregate Conversion Price the
aggregate number and kind of shares of capital stock of the Corporation that
such holder would have owned immediately following such action if such holder
had converted Convertible Preferred Stock immediately prior to such action. The
adjustment shall

                                       9
<PAGE>

become effective immediately after the record date in the case of dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If, after an adjustment referred to
in clauses (i) through (iv) above, a holder of Convertible Preferred Stock upon
conversion of it may receive shares of two or more classes of capital stock of
the Corporation, the Corporation shall determine the allocation of the
Conversion Price between the classes of capital stock. After such allocation,
the conversion rights and the Conversion Price with respect to each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Section 5(f).

                  (g) If, at any time or from time to time after the Initial
Issue Date, the Corporation issues or sells, or is deemed by the provisions of
this Section 5(g) to have issued or sold, Additional Shares of Common Stock,
otherwise than in connection with a transaction described in Section 5(f), for
an Effective Price that is less than the Target Price (without regard to any
adjustments to the Conversion Price as a result of such issue or sale) for the
date of such issue or sale, then, and in each such case, the Conversion Price
shall be reduced, as of the close of business on the date of such issue or sale,
to the price obtained by multiplying such Conversion Price by a fraction:

                           (i) The numerator of which shall be the sum of (A)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale of Additional Shares of Common Stock plus (B) the quotient of (x) the
Aggregate Consideration Received (as hereinafter defined) by the Corporation for
the total number of Additional Shares of Common Stock so issued or sold (or
deemed so issued or sold), divided by (y) by the Target Price (without regard to
any adjustments to the Conversion Price as a result of such issue or sale) for
the date of such issue or sale; and

                           (ii) The denominator of which shall be the sum of (A)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale plus (B) the number of Additional Shares of Common Stock so issued or
sold (or deemed so issued or sold).

                  For the purpose of making any adjustment required under this
Section 5(g):

                  "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation, whether or not subsequently reacquired
or retired by the Corporation, other than (i) shares of Common Stock issued or
issuable upon conversion of Convertible Preferred Stock, and (ii) shares of
Common Stock issuable upon conversion of Convertible Securities outstanding as
of the Initial Issue Date, upon exercise of Rights or Options outstanding on the
Initial Issue Date or upon exercise of Rights or Options described in the
proviso to the definition of Rights or Options.

                  The "Aggregate Consideration Received" by the Corporation for
any issue or sale (or deemed issue or sale) of securities shall (A) to the
extent it consists of cash, be computed at the amount of cash received by the
Corporation in connection with such issuance or sale; (B) to the extent it
consists of property other than cash, be the Fair Value of that property; (C) if
Additional Shares of Common Stock, Convertible Securities or Rights or Options
to purchase either Additional Shares of Common Stock or Convertible Securities
are issued or sold together

                                       10
<PAGE>

with other stock or securities or other assets of the Corporation for a
consideration which covers both, be the Fair Value of the portion of the
consideration so received that may be reasonably determined in good faith by the
Board of Directors to be allocable to such Additional Shares of Common Stock,
Convertible Securities or Rights or Options; and (D) if Additional Shares of
Common Stock are issued or sold in a public offering or private placement, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting therefrom any discounts, commissions or placement fees payable by the
Corporation to any underwriter or placement agent in connection with the
issuance and sale thereof.

                  "Convertible Securities" shall mean stock or other securities
convertible into or exchangeable for shares of Common Stock.

                  The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the Aggregate Consideration
Received, or deemed to have been received, by the Corporation under this Section
5(g), for the issue of such Additional Shares of Common Stock by the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold, by the Corporation under this Section 5(g).

                  "Rights or Options" shall mean warrants, options or other
rights to purchase or acquire shares of Common Stock or Convertible Securities,
provided that the definition of "Rights or Options" shall not include such
warrants, options or other rights issued or granted to officers, directors,
consultants or employees of the Corporation pursuant any equity incentive plan
or agreement approved by the Board of Directors, including, but not limited to,
(i) Trinity Industries, Inc., Stock Option Plan with Stock Appreciation Rights;
(ii) Trinity Industries, Inc. 1998 Stock Option and Incentive Plan; (iii)
Trinity Industries, Inc. 1998 Stock Option and Incentive Plan, as amended; (iv)
1989 Stock Option Plan with Stock Appreciation Rights; (v) Profit Sharing Plan
for Employees of Trinity Industries, Inc. and Certain Affiliates as Restated
Effective April 1, 1999; (vi) Supplemental Profit Sharing Plan for Employees of
Trinity Industries, Inc. and Certain Affiliates; (vii) Transcisco Industries,
Inc. Amended and Restated (1994) Stock Option Plan; (viii) Transcisco
Industries, Inc. Directors' Stock Option Plan; (ix) Transcisco Industries, Inc.
Stock Purchase Plan; and (x) Rights Agreement dated March 11, 1999, as amended
by Amendment No. 1 dated August 12, 2001 and Amendment No. 2 dated October 26,
2001.

                  For the purpose of making any adjustment to the Conversion
Price required under this Section 5(g), if after the Initial Issue Date, the
Corporation issues or sells any Rights or Options or Convertible Securities and
if the Effective Price of the shares of Common Stock issuable upon exercise of
such Rights or Options and/or the conversion or exchange of Convertible
Securities (computed without reference to any additional or similar protective
or antidilution clauses) is less than the Target Price, then the Corporation
shall be deemed to have issued, at the time of the issuance of such Rights or
Options or Convertible Securities, that number of Additional Shares of Common
Stock that is equal to the maximum number of shares of Common Stock issuable
upon exercise or conversion of such Rights or Options or Convertible Securities
upon their issuance and to have received, as the Aggregate Consideration
Received for the issuance of such securities, an amount equal to the total
amount of the consideration, if any, received by the Corporation for the
issuance of such Rights or Options or Convertible Securities, plus, in the case
of such Rights or Options, the minimum amounts of consideration, if any,

                                       11
<PAGE>

payable to the Corporation upon the exercise in full of such Rights or Options,
plus, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion or exchange thereof; provided that (i) if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, then the Corporation shall be deemed to have
received the minimum amounts of consideration without reference to such clauses,
and (ii) if the minimum amount of consideration payable to the Corporation upon
the exercise of Rights or Options or the conversion or exchange of Convertible
Securities is reduced over time or upon the occurrence or non-occurrence of
specified events other than by reason of antidilution or similar protective
adjustments, then the Effective Price shall be recalculated using the figure to
which such minimum amount of consideration is reduced. On any change (a "Pricing
Change") in the number of shares of Common Stock deliverable upon exercise of
any Rights or Options or the conversion or exchange of any Convertible
Securities or any change in the consideration to be received by the Corporation
upon such exercise, conversion or exchange, including, but not limited to, a
change resulting from the antidilution provisions thereof, the Conversion Price
as then in effect shall forthwith be readjusted to such Conversion Price as
would have been obtained had the unexercised portion of such Rights or Options
or Convertible Securities been originally issued with the exercise or conversion
price in effect following such Pricing Change. On the expiration or cancellation
of any Rights or Options that are unexercised, or the termination of the right
to convert or exchange any such Convertible Securities, if the Conversion Price
shall have been adjusted upon the issuance thereof, the Conversion Price shall
forthwith be readjusted to such Conversion Price as would have been obtained had
an adjustment been made upon the issuance of such Rights or Options or such
Convertible Securities on the basis of the issuance of only the number of shares
of Common Stock actually issued upon the exercise of such Rights or Options or
upon the conversion or exchange of such Convertible Securities. No adjustment of
the Conversion Price shall be made as a result of the actual issuance of shares
of Common Stock on the exercise of any such Rights or Options or the conversion
or exchange of any such Convertible Securities.

                  (h) If the Corporation at any time after the Initial Issue
Date fixes a record date for an Extraordinary Distribution to the holders of its
outstanding Common Stock, whether by way of dividend, spin-off or otherwise,
then, at the option of the Corporation in its sole discretion, either:

                           (i) the Corporation will make adequate provision so
that each share of Convertible Preferred Stock outstanding on the first day that
the Common Stock trades ex-distribution shall have the right to receive, only
upon conversion of such share of Convertible Preferred Stock and in addition to
any shares of Common Stock issuable upon conversion thereof, the Extraordinary
Distribution to which such share of Convertible Preferred Stock would have been
entitled as if such share of Convertible Preferred Stock was converted into
Common Stock immediately prior to the record date for the Extraordinary
Distribution; or

                           (ii) the Conversion Price in effect immediately
before the close of business on the day that the Common Stock trades
ex-distribution will be adjusted by multiplying (A) the Conversion Price by (B)
a fraction, the numerator of which will be the Quoted Price on the Trading Day
immediately before the day that the Common Stock trades ex-distribution and the
denominator of which will be the sum of (x) the Quoted Price on the Trading

                                       12
<PAGE>

Day immediately before the day that the Common Stock trades ex-distribution,
plus (y) the Fair Value of the Extraordinary Distribution distributed to each
share of Common Stock.

                  (i) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Conversion Price. Any adjustments which by reason of this Section 5(i) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 5 shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may be.

                  (j) The Corporation shall take no action that would cause any
adjustment under this Section 5 that would reduce the Conversion Price below the
par value of the Common Stock.

                  (k) Whenever the Conversion Price is adjusted, the Corporation
shall promptly mail to holders of Convertible Preferred Stock, first class,
postage prepaid, a notice of the adjustment and a certificate from the
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it.

                  (l) The Corporation from time to time may, by a vote of
two-thirds of the Board of Directors, reduce the Conversion Price then in effect
by any amount for any period of time if the period is at least twenty (20)
Business Days and if the reduction is irrevocable during the period, but in no
event may the Conversion Price be less than the par value of a share of Common
Stock. Whenever the Conversion Price is so reduced, the Corporation shall mail
to holders of Convertible Preferred Stock a notice of the reduction. The
Corporation shall mail the notice first class, postage prepaid, at least 20 days
before the date the reduction in the Conversion Price is to take effect. The
notice shall state the reduced Conversion Price and the period it will be in
effect. A Conversion Price reduced pursuant to this Section 5(l) is subject to
any further changes or adjustments required by Section 5(f), Section 5(g) and
Section 5(h) above.

                  (m) All shares of Convertible Preferred Stock converted
pursuant to this Section 5 shall be retired and shall be restored to the status
of authorized and unissued shares of preferred stock, without designation as to
series and may thereafter be reissued as shares of any series of preferred stock
other than Convertible Preferred Stock.

                  (n) Notwithstanding anything contained in this Certificate of
Designations to the contrary, there shall be no adjustment of the Conversion
Price in the case of the issuance of any securities of the Corporation in a
reorganization, acquisition or other similar transaction except as specifically
set forth in this Section 5 or Section 13. If any action or transaction would
require adjustment of the Conversion Price pursuant to one or more sections of
this Certificate of Designations, only one adjustment shall be made and such
adjustment shall be the amount of adjustment that has the highest absolute
value.

6. Mandatory Conversion.

                  (a) The Corporation shall have the right, at its option and in
its sole discretion, to cause all, but not less than all, of the then
outstanding shares of the Convertible Preferred Stock to be automatically
converted into shares of Common Stock, with any resulting fractional shares of
Common Stock to be settled in accordance with Section 5(c). For the purposes of
conversion, each share of Convertible Preferred Stock shall be valued at the
Liquidation Preference plus all accrued

                                       13
<PAGE>

and unpaid dividends on such share through the Mandatory Conversion Date, which
shall be divided by the Conversion Price in effect on the Mandatory Conversion
Date to determine the number of shares issuable upon conversion. No other
payment or adjustment for dividends shall be made upon such conversion, and upon
such conversion all unpaid dividends with respect to such converted stock shall
be deemed paid in full without regard to any record holder at any record date
for such unpaid dividends. The Corporation may exercise its right to cause a
mandatory conversion pursuant to this Section 6 only if the Quoted Price of a
share of the Common Stock equals or exceeds the applicable Mandatory Conversion
Target Price for each of the ten (10) consecutive Trading Days ending on the
last Trading Day prior to the date of the Mandatory Conversion Notice.
"Mandatory Conversion Target Price" means, for each of the Trading Days in such
ten (10) consecutive Trading Day period, the product of (x) the Conversion Price
in effect for such Trading Day, multiplied by (y) two (2).

                  (b) To exercise the mandatory conversion right described in
Section 6(a), the Corporation shall furnish notice of the Corporation's
intention to mandatorily convert the outstanding shares of the Convertible
Preferred Stock (the "Mandatory Conversion Notice") by first class mail to each
holder thereof, not later than the tenth (10th) day prior to the date on which
the mandatory conversion would occur (the "Mandatory Conversion Date"). The
Mandatory Conversion Date will be a date selected by the Corporation and will be
at least ten (10) days but no more than twenty-five (25) days after mailing of
the notice described in this Section 6(b) to the holders.

                  (c) In addition to any information required by applicable law
or regulation, the notice of a mandatory conversion described in Section 6(b)
shall state, as appropriate: (i) the Mandatory Conversion Date; (ii) the number
of shares of Common Stock to be issued upon conversion of each share of the
Convertible Preferred Stock; (iii) the number of shares of the Convertible
Preferred Stock to be converted; and (iv) that dividends on the shares of the
Convertible Preferred Stock to be converted will cease to be payable on the
Mandatory Conversion Date.

                  (d) On the Mandatory Conversion Date, dividends will cease to
be payable on the Convertible Preferred Stock, and all rights of any holder with
respect to the shares of the Convertible Preferred Stock, including the rights,
if any, to receive distributions of the Corporation's assets (including, but not
limited to, the Liquidation Preference) or notices from the Corporation, will
terminate, except only for the rights of any such holder to (i) receive physical
certificates (if applicable) for the number of whole shares of Common Stock into
which such holder's shares of the Convertible Preferred Stock have been
converted and cash in lieu of any fractional share, and (ii) exercise the rights
to which it is entitled as a holder of Common Stock into which such holder's
shares of the Convertible Preferred Stock have been mandatorily converted.

7. Mandatory Redemption by the Corporation.

                  (a) On the Redemption Date, the Corporation will be obligated,
subject to having legally available funds, to redeem all outstanding shares of
Convertible Preferred Stock at the Redemption Price. No other payment or
adjustment for dividends shall be made upon such redemption, and upon such
redemption all unpaid dividends with respect to such redeemed stock shall be
deemed paid in full without regard to any record holder at any record date for
such unpaid dividends.

                                       14
<PAGE>

                  (b) The Corporation may, at its option and in its sole
discretion, elect to pay the Redemption Price in cash or in shares of Common
Stock with each such share valued at the Redemption Market Price, or in any
combination of cash or shares of Common Stock.

         The Corporation's right to redeem Convertible Preferred Stock, in whole
or in part, with shares of Common Stock is subject to the following conditions
(which conditions are for the sole benefit of the holders of Convertible
Preferred Stock and may be waived by the holders of a majority of the then
outstanding shares of Convertible Preferred Stock in their sole discretion):

                           (i) such shares shall be duly authorized, validly
issued, fully paid and nonassessable; and

                           (ii) the Corporation shall have listed such shares of
Common Stock on the principal United States securities exchange on which the
Common Stock is then listed.

         If such conditions (which conditions the Corporation shall use its
reasonable best efforts to satisfy) are not so satisfied with respect to a
holder prior to the close of business on the Redemption Date, the Corporation
will pay the Redemption Price of such holder's shares of Convertible Preferred
Stock entirely in cash unless the Corporation does not have funds legally
available or the Corporation's credit facilities or other contractual
obligations prohibit it from paying the Redemption Price in cash. The
Corporation may not change the form or components or percentages of components
of consideration to be paid for the shares of Convertible Preferred Stock once
the Corporation has given any notice that it is required to give to holders of
the Convertible Preferred Stock, except as described in the first sentence of
this Section.

         The Corporation shall provide notice to the holders of the Convertible
Preferred Stock reasonably promptly upon the determination of the actual number
of shares of Common Stock deliverable upon any redemption of the Convertible
Preferred Stock.

                  (c) Payment of the Redemption Price for Convertible Preferred
Stock is conditioned upon book-entry transfer of or physical delivery of the
certificates representing the Convertible Preferred Stock, together with
necessary endorsements, to the Corporation's transfer agent at any time after
delivery of the notice of redemption. Payment of the Redemption Price for the
Convertible Preferred Stock will be made promptly following the later of five
(5) Business Days following the Redemption Date and the time of book-entry
transfer of or physical delivery of certificates representing the Convertible
Preferred Stock.

                  (d) If the transfer agent holds money or securities sufficient
to pay the Redemption Price of Convertible Preferred Stock on the Business Day
following the Redemption Date in accordance with the terms of this Certificate
of Designations, then, immediately after the Redemption Date, the Convertible
Preferred Stock will cease to be outstanding, whether or not book-entry transfer
is made or certificates representing the Convertible Preferred Stock are
delivered to the transfer agent. At such time, all rights of a holder as a
holder of Convertible Preferred Stock shall terminate, other than the right to
receive the Redemption Price upon delivery of the certificates representing the
Convertible Preferred Stock.

                                       15
<PAGE>

8. Voting Rights.

                  In addition to any voting rights provided by law, the holders
of shares of Convertible Preferred Stock shall have the following voting rights:

                  (a) So long as any shares of the Convertible Preferred Stock
remain outstanding, each share of Convertible Preferred Stock shall entitle the
holder thereof to vote on all matters voted on by holders of Common Stock,
voting together with the Common Stock as a single class (together with all other
classes and series of stock of the Corporation that are entitled to vote as a
single class with the Common Stock) at all meetings of the stockholders of the
Corporation, or by written consent of the minimum number of shares required to
take such action pursuant to Section 228 of the Delaware General Corporation
Law. In any vote with respect to which the Convertible Preferred Stock shall
vote with the holders of Common Stock as a single class together with all other
classes and series of stock of the Corporation that are entitled to vote as a
single class with the Common Stock, each share of Convertible Preferred Stock
shall entitle the holder thereof to cast the number of votes equal to the number
of votes which could be cast in such vote by a holder of the number of shares of
Common Stock into which such share of Convertible Preferred Stock is convertible
on the record date of such vote. Such voting right of the holders of the
Convertible Preferred Stock may be exercised at any annual meeting of
stockholders, any special meeting of stockholders, or by written consent of the
minimum number of shares required to take such action pursuant to Section 228 of
the Delaware General Corporation Law.

                  (b) On any matter on which the holders of Convertible
Preferred Stock are entitled by law or under the Certificate of Incorporation to
vote separately as a class, each such holder shall be entitled to one vote for
each share held, and such matter shall be determined by a majority of the votes
cast unless the General Corporation Law of the State of Delaware or this
Certificate of Designations requires approval by a higher percentage.

                  (c) The Corporation will not, without the affirmative vote or
consent of the holders of at least two-thirds (2/3) of the issued and
outstanding shares of Convertible Preferred Stock voting together as a separate
class:

                           (i) amend, modify, alter, repeal or waive the
                  application of (including by way of merger, consolidation,
                  combination or otherwise) any provision of this Certificate of
                  Designations, the Certificate of Incorporation or by-laws of
                  the Corporation or any of its Subsidiaries in any manner that
                  adversely affects the powers, rights, preferences or
                  privileges of the holders of the Convertible Preferred Stock
                  or enter into any agreement or take any other corporate action
                  (or permit any of its Subsidiaries to enter into any agreement
                  or take any corporate action) which would in any way amend,
                  modify, alter, repeal or waive the powers, rights, preferences
                  or privileges of the Convertible Preferred Stock; or

                           (ii) increase or decrease the authorized shares of
                  Convertible Preferred Stock.

                                       16
<PAGE>

9. Headings of Subdivisions. The headings of the various subdivisions hereof are
for convenience of reference only and shall not affect the interpretation of any
of the provisions hereof.

10. Severability of Provisions. If any voting powers, preferences and relative,
participating, optional and other special rights of the Convertible Preferred
Stock and qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of the Convertible Preferred Stock and any
qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of the Convertible Preferred
Stock or qualifications, limitations and restrictions thereof shall,
nevertheless, remain in full force and effect, and no voting powers, preferences
and relative, participating, optional or other special rights of the Convertible
Preferred Stock or qualifications, limitations and restrictions thereof herein
set forth shall be deemed dependent upon any other such voting powers,
preferences and relative, participating, optional or other special rights of
Convertible Preferred Stock or qualifications, limitations and restrictions
thereof unless so expressed herein.

11. Record Holders. The Corporation and the transfer agent for the Convertible
Preferred Stock may deem and treat the record holder of any shares of
Convertible Preferred Stock as the true and lawful owner thereof for all
purposes, and neither the Corporation nor the transfer agent shall be affected
by any notice to the contrary.

12. Notice. Except as may otherwise be provided for herein, all notices referred
to herein shall be in writing, and all notices hereunder shall be deemed to have
been given upon receipt, in the case of a notice of conversion given to the
Corporation as contemplated in Section 5(b) hereof, or, in all other cases, upon
the earlier of receipt of such notice or three Business Days after the mailing
of such notice if sent by registered mail (unless first-class mail shall be
specifically permitted for such notice under the terms of this Certificate of
Designations) with postage prepaid, addressed: if to the Corporation, to its
offices at 2525 Stemmons Freeway, Dallas, Texas 75207, Attention: Secretary or
to an agent of the Corporation designated as permitted by this Certificate, or,
if to any holder of the Convertible Preferred Stock, to such holder at the
address of such holder of the Convertible Preferred Stock as listed in the stock
record books of the Corporation (which may include the records of any transfer
agent for the Convertible Preferred Stock); or to such other address as the
Corporation or holder, as the case may be, shall have designated by notice
similarly given.

13. Merger or Consolidation.

                  (a) In connection with a merger or consolidation in which the
Corporation is not the surviving corporation (other than any Liquidation Event),
(i) the shares of Convertible Preferred Stock shall become shares of the
surviving corporation or other entity resulting from such merger or
consolidation (the "New Shares") with powers, preferences and relative
participating, optional or other special rights and qualifications, limitations
and restrictions similar to those of the Convertible Preferred Stock immediately
prior to such merger or consolidation, with such modifications as may be deemed
appropriate by the Board of Directors or the board of directors of the surviving
entity, so long as, the economic value of the New Shares is substantially
equivalent to or higher than, in the good faith opinion of the Board of
Directors or the board of directors of the surviving entity, the

                                       17
<PAGE>

value of the shares of Convertible Preferred Stock immediately prior to such
merger or consolidation and (ii) the New Shares shall be convertible into, in
lieu of the shares of Common Stock otherwise issuable upon conversion of
Convertible Preferred Stock, such shares of stock, securities and/or other
property as would have been issued or payable in such merger or consolidation in
exchange for the number of shares of Common Stock that would have been issuable
immediately prior to such merger or consolidation upon conversion of the
Convertible Preferred Stock replaced by such New Shares.

                  (b) The provisions of Section 13(a) shall be inapplicable in
the event that the Convertible Preferred Stock (i) is converted under Section 5
prior to or simultaneously with the closing of the merger or consolidation
referred to in paragraph (a) above, (ii) is subject to mandatory conversion
under Section 6 or (iii) is subject to redemption under Section 7.

                                    * * * * *

                                       18
<PAGE>

         IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be duly executed by its duly authorized officer this 24th day of
June, 2003.

                                        TRINITY INDUSTRIES, INC.

                                        By: /s/ TIMOTHY R. WALLACE
                                           -------------------------------------
                                           Timothy R. Wallace
                                           Chairman, President and Chief
                                           Executive Officer

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