<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996
REGISTRATION NO. 333-15481
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRANS-LUX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-1394750
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------
110 RICHARDS AVENUE
NORWALK, CONNECTICUT 06856-5090
(203) 853-4321
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
HOWARD S. MODLIN, ESQ.
WEISMAN CELLER SPETT & MODLIN, P.C.,
445 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 371-5400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
PAUL JACOBS, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
(212) 318-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11 (a)(1)
of this form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
======================================================================================================================
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED(1) BE REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
% Convertible Subordinated Notes due
2006..................................... $31,625,000 100% $31,625,000 $9,583.34(4)
- ----------------------------------------------------------------------------------------------------------------------
Common Stock, par value $1.00 per share.... (3) -- -- (5)
======================================================================================================================
</TABLE>
(1) Includes an additional $4,125,000 principal amount of the Notes subject to
the over-allotment option granted to the Underwriter.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933.
(3) Represents such indeterminate number of shares of Common Stock as shall be
issuable upon conversion of the Notes.
(4) $8,712.12 of which has previously been paid.
(5) Pursuant to Rule 457(i), no registration fee is required.
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION DECEMBER 9, 1996
$27,500,000
LOGO LOGO
% CONVERTIBLE SUBORDINATED NOTES DUE 2006
------------------------
The Notes offered hereby (the "Offering") will be convertible into Common
Stock, $1.00 par value per share (the "Common Stock"), of Trans-Lux Corporation
("Trans-Lux" or the "Company") at any time after 60 days following the date of
initial issuance thereof and prior to maturity, unless previously redeemed, at a
conversion price of $ per share, subject to adjustment under certain
conditions. See "Description of Notes -- Conversion Rights" for a description of
events which may cause an adjustment to the conversion price. The Common Stock
of the Company is traded on the American Stock Exchange (the "AMEX") under the
symbol "TLX." On December 6, 1996, the last reported sale price of the Common
Stock on the AMEX was $11 7/8 per share. See "Price Range of Common Stock and
Dividend Policy."
Interest on the Notes is payable on June 1 and December 1 of each year,
commencing June 1, 1997. The Notes are redeemable, in whole or in part, at the
option of the Company at any time on or after December 1, 1999, at the
redemption prices set forth herein, plus accrued interest, if any, to the
redemption date. If a Repurchase Event (as defined herein) occurs, each Holder
of the Notes will have the right, subject to certain conditions and
restrictions, to require the Company to repurchase all outstanding Notes, in
whole or in part, owned by such holder at 100% of their principal amount plus
accrued interest, if any, to the date of repurchase. The Notes are subordinated
to all existing and future Senior Indebtedness (as defined herein) of the
Company and will be effectively subordinated to all indebtedness and other
liabilities of the Company's subsidiaries. At September 30, 1996, the Company
had approximately $23.2 million of outstanding Senior Indebtedness and the
Company's subsidiaries had indebtedness and other liabilities of approximately
$4.8 million. The Indenture governing the Notes does not restrict the ability of
the Company to incur additional indebtedness, including Senior Indebtedness. See
"Description of Notes" for a more complete discussion of the Indenture's
provisions.
Application has been made for inclusion of the Notes on the AMEX upon
notice of issuance.
SEE "RISK FACTORS" ON PAGES 7 TO 10 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
==============================================================================================
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------
Per Note................................. $ $ $
- -----------------------------------------------------------------------------------------------
Total(4)................................. $ $ $
===============================================================================================
</TABLE>
(1) Plus accrued interest, if any, from the date of initial issuance.
(2) See "Underwriting" for information concerning indemnification of the
Underwriter and other matters.
(3) Before deducting expenses payable by the Company, estimated to be $400,000.
(4) The Company has granted the Underwriter a 30-day over-allotment option to
purchase up to an additional $4,125,000 of the Notes on the same terms and
conditions set forth above. If the Underwriter exercises this option in
full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The Notes offered by this Prospectus are offered by the Underwriter,
subject to prior sale, when, as and if delivered to and accepted by it and
subject to certain conditions. It is expected that delivery of certificates
representing the Notes will be made at the office of Southcoast Capital
Corporation, 277 Park Avenue, New York, New York, on or about ,
1996.
------------------------
SOUTHCOAST CAPITAL
CORPORATION
The date of this Prospectus is , 1996.
<PAGE> 3
TRANS-LUX
TRANS-LUX IS A SUPPLIER OF
LARGE-SCALE, MULTI-COLOR
ELECTRONIC INFORMATION DISPLAYS
FOR INDOOR AND OUTDOOR USE.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AND THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
TRANS-LUX DISPLAYS ARE USED PRIMARILY
IN REAL-TIME APPLICATIONS FOR THE
FINANCIAL, BANKING, GAMING,
CORPORATE, SPORTS AND
TRANSPORTATION MARKETS.
<TABLE>
<S> <C>
FINANCIAL
Tricolor DataWalls(@) supply traders at Midland Walwyn The Chicago Mercantile Exchange has added to the
Capital in Toronto with real-time financial data. number of Trans-Lux
panoramic display panels
on its trading floor.
PictureWall(TM) displays, like this one in the Internationally, emerging
reception area of Chase Manhattan Bank's world exchanges call on Trans-Lux to
headquarters, combine real-time design and install sophisticated
market data and colorful graphics. and reliable displays.
GAMING
Trans-Lux's bright, easy-to-read displays are used in Foxwoods Resort and Casino
casinos such as Bally's new Race and Sports Book. selected Trans-Lux for its new Race Book.
THEATRE
At Sony Theaters, Trans-Lux lobby displays are tied into the ticketing
system to announce screening times and inform moviegoers when a show is sold out.
</TABLE>
[The above captions refer to examples of Trans-Lux's electronic displays]
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated herein by reference. Except as otherwise noted, all information in
this Prospectus assumes no exercise of the Underwriter's over-allotment option.
THE COMPANY
The Company is a manufacturer, distributor, and servicer of large-scale,
real-time electronic information displays for both indoor and outdoor use. These
display systems utilize light emitting diode ("LED") and light bulb technologies
to display real-time information entered by the user or via a third party
information supplier. The Company provides high quality, reliable display
products configured to suit its customers' needs, and offers extensive on-site
service and maintenance coverage. The Company's display products include data,
graphics, and picture displays for stock and commodity exchanges, financial
institutions, airports, casinos, sports venues, convention centers, corporate,
theatres, retail, and numerous other applications. In addition to the core
display business, the Company also operates a small chain of motion picture
theatres in the southwestern U.S. In 1995, the Company derived approximately 89%
of its revenue from its indoor and outdoor information display business.
The Company's high performance electronic information displays are used to
communicate messages and information in a variety of indoor and outdoor
applications. The Company's product line encompasses a wide range of
state-of-the-art electronic displays in various shape, size and color
configurations. Most of the Company's display products include hardware
components and sophisticated software. In both the indoor and outdoor markets,
the Company adapts basic product types and technologies for specific use in
various niche market applications. The Company also operates a direct service
network throughout the U.S. and Canada which performs on-site service and
maintenance for its customers, further distinguishing the Company from many of
its competitors.
In the indoor market, the Company's high performance electronic displays
are used to communicate messages in the financial, gaming, transportation,
entertainment and retail industries, among others. In the financial industry,
the Company's products display news and market information, interest rates,
up-to-the-second stock and commodity prices, and other financial product
information for stock and commodity exchanges, brokerage firms, banks, mutual
fund companies, and other financial institutions. In the gaming industry, the
Company's products transmit racing and pari-mutuel betting odds and results,
sports scores, statistics, slot machine jackpots and other wagering information.
In the transportation industry, the Company's products are used to display
arrival and departure information and gate and baggage claim information for
airports and other transportation facilities. While the securities and
commodities industries continue to represent a significant portion of the
Company's customer base, the Company has a strong presence in the gaming
industry through its race and sports book displays and also markets its displays
to such users as banks, corporations, transportation facilities, the military,
racetracks, restaurants, pharmacies, theatres, hotels and convention centers. In
the indoor display market the Company's customers include the American Stock
Exchange, Charles Schwab & Co. Incorporated, the Chicago Board of Trade
("CBOT"), the Chicago Mercantile Exchange ("CME"), Goldman Sachs & Co., Kaiser
Permanente, Merrill Lynch Pierce Fenner & Smith, Inc., MGM Grand, Inc., Mirage
Resorts, Inc., the New York Mercantile Exchange, Inc., the New York Stock
Exchange, Inc. and Sony Theaters Management Corporation.
Over the past four years, the Company has utilized its strong position in
the indoor display market combined with several acquisitions to establish a
growing presence in the outdoor display market. Trans-Lux outdoor displays are
installed in amusement parks, entertainment facilities, professional and college
sports stadiums, military installations, bridges and other roadway
installations, automobile dealerships, banks and other financial institutions.
In the outdoor display market the Company's customers include Auburn University,
Pontiac Silverdome, Resorts International, Six Flags Over Georgia, 3 Com Park,
and Twin City Federal Financial Corp.
3
<PAGE> 6
The Company has made three acquisitions over the past four years in order
to establish and enhance its presence in the outdoor market. In August 1992,
after first managing the portfolio for approximately 15 months, the Company
acquired a portfolio of outdoor electric and electronic equipment displays from
American Electronic Displays, L.P. In August 1993, the Company expanded its
presence in the outdoor display market by acquiring a portfolio of outdoor
lease, maintenance and other contracts from Indicator Maintenance Corporation.
In January 1995, the Company acquired all of the capital stock of Integrated
Systems Engineering, Inc. ("ISE"), a manufacturer of outdoor electronic
displays.
The Company's principal executive offices are located at 110 Richards
Avenue, Norwalk, Connecticut 06856-5090. The Company's telephone number is (203)
853-4321.
THE OFFERING
Securities Offered........ $27.5 million aggregate principal amount of %
Convertible Subordinated Notes due 2006 (the
"Notes").
Interest Payment Dates.... June 1 and December 1, commencing June 1, 1997.
Maturity.................. December 1, 2006.
Conversion................ The Notes are convertible into the Company's Common
Stock at any time after 60 days following the date of
initial issuance thereof and prior to maturity,
unless previously redeemed, at a conversion price of
$ per share, subject to adjustment under
certain conditions.
Redemption at Option of
Company................. The Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after
December 1, 1999, at the redemption prices (expressed
as a percentage of the principal amount) set forth
below for the 12-month period beginning December 1 of
the years indicated:
<TABLE>
<S> <C>
1999......................................... %
2000......................................... %
2001......................................... %
2002......................................... %
2003......................................... %
2004......................................... %
</TABLE>
thereafter and at maturity at 100% of principal,
together in the case of any such redemption with
accrued interest to the redemption date.
Repurchase at Option of
Holders................. If a Repurchase Event occurs, each Holder of the
Notes will have the right, subject to certain
conditions and restrictions, to require the Company
to repurchase all outstanding Notes, in whole or in
part, owned by such holder at 100% of their principal
amount plus accrued interest, if any, to the date of
repurchase. If a Repurchase Event were to occur,
there is no assurance that the Company would have
sufficient funds to pay the repurchase price for all
the Notes tendered by the Holders thereof. The
Company's ability to make such payments may be
limited by its leverage and the terms of its then
existing borrowing and other agreements. See
"Description of Notes -- Repurchase at Option of
Holders Upon a Repurchase Event" for a more complete
discussion of the rights of Holders of the Notes upon
the occurrence of a Repurchase Event.
Subordination............. The Notes are subordinated to all existing and future
Senior Indebtedness of the Company and will be
effectively subordinated to all indebtedness and
other liabilities of the Company's subsidiaries. At
September 30, 1996, the Company had approximately
$23.2 million of outstanding Senior Indebted-
4
<PAGE> 7
ness and the Company's subsidiaries had indebtedness
and other liabilities of approximately $4.8 million.
The Indenture governing the Notes does not restrict
the ability of the Company to incur additional
indebtedness, including Senior Indebtedness.
Use of Proceeds........... The Proceeds of the Offering will be used to finance
the Company's expansion program and for general
corporate purposes, including the repayment of
certain outstanding indebtedness. See "Use of
Proceeds."
Listing................... Application has been made for inclusion of the Notes
on the AMEX upon notice of issuance and the Notes
will be listed under the symbol "TLX.N." The Common
Stock is listed on the AMEX under the symbol "TLX."
RISK FACTORS
For a discussion of certain material factors that should be considered by
prospective purchasers of the Notes, see "Risk Factors."
5
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary data below has been derived from the audited financial
statements, the unaudited financial statements and other records of the Company.
The following summary data should be read in conjunction with the financial
statements of the Company and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues...................... $22,133 $24,130 $35,799 $33,742 $37,791 $28,881 $32,871
Operating expenses.................. 14,127 15,299 21,554 19,413 22,406 16,914 20,165
Gross profit from operations........ 8,006 8,831 14,245 14,329 15,385 11,967 12,706
General and administrative
expenses.......................... 7,151 7,384 10,202 11,023 11,494 9,210 9,442
Interest expense, net............... 570 893 2,380(1) 1,242(2) 2,144 1,565 1,669
Income before income taxes.......... 542 741 1,663(1) 2,064(2) 1,839 1,262 1,498
Provision for income taxes.......... 280 469 1,174(1) 750(2) 773 530 629
Net income.......................... 262 272 489(1) 1,314(2) 1,066 732 869
OTHER DATA:
EBITDA(3) $ 5,201 $ 6,670 $10,385 $ 9,819 $10,884 $ 7,961 $ 8,444
Ratio of earnings to fixed
charges(4)........................ 1.4 1.5 1.6 2.3 1.8 1.7 1.7
Net rental equipment................ $13,550 $29,995 $29,039 $29,653 $30,778 $30,142 $32,594
Net book value per share(5)......... $ 14.59 $ 15.35 $ 15.60 $ 16.29 $ 17.08 $ 16.85 $ 17.39
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1996
---------------------
AS
ACTUAL ADJUSTED(6)
------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 54 $14,906
Total assets......................................................... 63,045 79,421
Long-term debt, including current portion............................ 29,084 45,573
Stockholders' equity................................................. 22,308 22,242
</TABLE>
- ---------------
(1) 1993 reflects the impact of an assessment of income taxes and related
interest expense incurred resulting from a prior year state income tax audit
of approximately $600,000.
(2) 1994 reflects the positive impact of a settlement of approximately $360,000
related to the 1993 assessment described in footnote No. 1 above.
(3) EBITDA is defined as income before effect of changes of accounting plus
interest, income taxes, depreciation and amortization. EBITDA is presented
here because it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness. However, EBITDA should not be
considered as an alternative to net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity. The Company's measure of EBITDA may
not be comparable to similarly titled measures reported by other companies.
(Unaudited)
(4) Earnings used in computing the ratio of earnings to fixed charges consist of
income before income taxes, fixed charges and extraordinary items. Fixed
charges consist of interest expense, including amounts capitalized, and that
portion of rent expense which management deems to be attributable to
interest costs.(Unaudited)
(5) Unaudited
(6) Adjusted to reflect the sale of $27,500,000 of the Notes offered by the
Company hereby, the receipt of the estimated net proceeds therefrom and the
repayment of certain outstanding indebtedness. See "Use of Proceeds" and
"Capitalization."
6
<PAGE> 9
RISK FACTORS
LEVERAGE
As of September 30, 1996, as adjusted for the issuance of the Notes and the
application of the proceeds therefrom the Company's total long-term debt
(including current portion) would have been $45.6 million. The Company expects
it will incur indebtedness in addition to the Notes in connection with the
implementation of its growth strategy. The Indenture governing the Notes does
not restrict the ability of the Company or its subsidiaries to incur additional
indebtedness, including Senior Indebtedness. Additional indebtedness of the
Company may rank senior or pari passu with the Notes in certain circumstances,
while additional indebtedness of the Company's subsidiaries will rank
effectively senior to the Notes. See "Description of Notes." The Company's
ability to satisfy its obligations will be dependent upon its future
performance, which is subject to prevailing economic conditions and financial,
business and other factors, including factors beyond the Company's control.
There can be no assurance that the Company's operating cash flows will be
sufficient to meet its debt service requirements or to repay the Notes at
maturity or that the Company will be able to refinance the Notes or other
indebtedness at maturity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
SUBORDINATION
The Notes will be unsecured subordinated obligations of the Company and
will be subordinated in right of payment to all present and future Senior
Indebtedness and other liabilities of the Company and will be effectively
subordinated to all indebtedness and other liabilities of the Company's
subsidiaries. In the event of bankruptcy, liquidation or reorganization of the
Company, the assets of the Company will be available to pay obligations on the
Notes only after all Senior Indebtedness has been paid in full, and there may
not be sufficient assets remaining to pay amounts due on any or all of the Notes
then outstanding. The Holders of any indebtedness of the Company's subsidiaries
will be entitled to payment of the indebtedness from the assets of the
subsidiaries prior to the holders of any general unsecured obligations of the
Company, including the Notes. At September 30, 1996, the Company had
approximately $23.2 million of outstanding Senior Indebtedness and the Company's
subsidiaries had indebtedness and other liabilities of approximately $4.8
million. In the event of a payment default with respect to Senior Indebtedness,
no payments may be made on account of the Notes until such default no longer
exists with respect to Senior Indebtedness of the Company. See "Description of
Notes" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
RISKS RELATED TO A REPURCHASE EVENT
Upon the occurrence of a Repurchase Event, each Holder of the Notes may
require the Company to repurchase all or a portion of such Holder's Notes. If a
Repurchase Event were to occur, there can be no assurance that the Company would
have sufficient financial resources, or would be able to arrange financing, to
pay the repurchase price for all the Notes tendered by Holders thereof. In
addition, the occurrence of certain Repurchase Events would constitute an event
of default under certain of the Company's current debt agreements, and the
Company's repurchase of the Notes as a result of the occurrence of a Repurchase
Event may be prohibited or limited by, or create an event of default under, the
terms of future agreements relating to borrowings of the Company, including
agreements relating to Senior Indebtedness. In the event a Repurchase Event
occurs at a time when the Company is prohibited from purchasing the Notes, the
Company could seek the consent of its lenders to purchase the Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from purchasing the Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a further default under certain
of the Company's existing debt agreements and may constitute a default under the
terms of other indebtedness that the Company may incur from time to time. In
such circumstances, the subordination provisions in the Indenture would prohibit
payments to the Holders of the Notes. See "Description of Notes -- Repurchase at
Option of Holders Upon a Repurchase Event."
7
<PAGE> 10
RELIANCE ON KEY SUPPLIERS
The Company designs certain of its materials to match components furnished
by suppliers. If such suppliers were unable or unwilling to provide the Company
with those components, the Company would have to obtain replacement sources. In
particular, the Company purchases almost all of the LED module blocks used in
its electronic displays from a single supplier. The Company does not have a
long-term supply contract with this supplier. A change in suppliers of either
LED module blocks or certain other components may result in engineering design
changes, as well as delays in obtaining such replacement components. The
Company's inability to obtain sufficient quantities of certain components as
required, or to develop alternative sources at acceptable prices and within a
reasonable time, could result in delays or reductions in product shipments which
could have a materially adverse effect on the business and results of operations
of the Company.
COMPETITION
The Company's electronic information displays compete with a number of
companies, both larger and smaller than itself, and with products based on
different forms of technology. In addition, there are several companies whose
current products utilize similar technology and who possess the resources to
develop competitive and more sophisticated products in the future. The Company's
success is somewhat dependent upon its ability to anticipate technological
changes in the industry and to successfully identify, obtain, develop and market
new products that satisfy evolving industry requirements. There can be no
assurance that competitors will not market new products which have perceived
advantages over the Company's products or which, because of pricing strategies,
render the products currently sold by the Company less marketable or otherwise
adversely affect the Company's operating margins. The Company's motion picture
theatres are subject to varying degrees of competition in the geographic areas
in which they operate. In some areas, theatres operated by national circuits
compete with the Company's theatres. The Company's theatres also face
competition from all other forms of entertainment competing for the public's
leisure time and disposable income.
NATURE OF LEASING AND MAINTENANCE REVENUES
The Company derives a substantial percentage of its revenues from the
leasing of its electronic information display products, generally pursuant to
leases which have an average term of less than three years. Consequently, the
Company's future success is at least partly dependent on its ability to obtain
the renewal of existing leases or to enter into new leases as existing leases
expire. The Company also derives a significant percentage of its revenues from
maintenance agreements relating to its display products. The average term of
such agreements is generally three to five years. A portion of the maintenance
agreements are cancellable upon 30 days notice. There can be no assurance that
the Company will be successful in obtaining renewal of existing leases or
maintenance agreements, obtaining replacement leases or realizing the value of
assets currently under leases that are not renewed.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its Chairman, Mr. Richard Brandt, and President
and Chief Executive Officer, Mr. Victor Liss, play a significant role in the
success of the Company and the loss of the services of either could have an
adverse effect on the Company. There can be no assurance that the Company would
be able to find a suitable replacement for either Mr. Brandt or Mr. Liss. The
Company has an employment agreement with Mr. Brandt which expires in 2002 and an
employment agreement with Mr. Liss which, if not extended, expires in December
1997. The Company believes that in addition to the above referenced key
personnel, there is a core group of executives which also plays a significant
role in the success of the Company. See "Executive Compensation and Transactions
with Management -- Employment Agreements."
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS AND CONTROL BY EXISTING STOCKHOLDERS
The Company's Restated Certificate of Incorporation contains certain
provisions that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire
control of the Company. Such provisions could limit the price that certain
investors might be willing
8
<PAGE> 11
to pay in the future for shares of the Company's Common Stock, thus making it
less likely that a stockholder will receive a premium on any sale of shares.
Under the Company's Restated Certificate of Incorporation, the Company has two
classes of common stock outstanding, Common Stock and Class B Stock, each with
its own rights and preferences. Each share of Class B Stock receives ten votes
per share on all matters submitted to a vote of the stockholders versus the one
vote received for each share of Common Stock. The Class B Stock is entitled to
vote separately as a class on any proposal for the merger, consolidation and
certain other significant transactions. See "Description of Capital
Stock -- Common Stock" and "Class B Stock." Moreover, the Company's Board of
Directors is divided into three classes, each of which serves for a staggered
three-year term, making it more difficult for a third party to gain control of
the Company's Board. The Company has also adopted a provision for its Restated
Certificate of Incorporation which requires a four-fifths vote on any merger,
consolidation or sale of assets with or to an "Interested Person" or "Acquiring
Person."
Additionally, the Company is authorized to issue 500,000 shares of
Preferred Stock containing such rights, preferences, privileges and restrictions
as may be fixed by the Company's Board of Directors which may adversely affect
the voting power or other rights of the holders of Common Stock or delay, defer
or prevent a change in control of the Company, or discourage bids for the Common
Stock at a premium over its market price or otherwise adversely affect the
market price of the Common Stock. See "Description of Capital Stock -- Preferred
Stock." The Board of Directors of the Company is also authorized to issue
4,000,000 shares of Class A Stock which is identical to the Common Stock but is
non-voting and is entitled to a 10% higher dividend than the Common Stock. See
"Description of Capital Stock -- Class A Stock."
Twelve stockholders, who are executive officers and/or directors of the
Company beneficially own approximately 71.5% of the Company's outstanding Class
B Stock, 17.8% of all classes and 54.3% of the voting power. As a result, these
stockholders collectively will continue to have the ability to elect all of the
Company's directors and to veto major transactions for which a stockholder vote
is required under Delaware law, including mergers, consolidations and certain
other significant transactions. These stockholders could also block tender
offers for the Company's Common Stock that could give stockholders of the
Company the opportunity to realize a premium over the then prevailing market
price for their shares of Common Stock.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes are a new issue of securities for which there is currently no
public market. Although application has been made to have the Notes approved for
inclusion on the AMEX, there is no assurance as to the liquidity of the market
for the Notes that may develop, the ability of the holders to sell their Notes
or the prices at which holders of the Notes would be able to sell their Notes.
If a market for the Notes does develop, the Notes may trade at a discount from
their initial public offering price, depending on prevailing interest rates, the
market for similar securities, the performance of the Company, the market price
of the Company's Common Stock and other factors. There is no assurance that an
active trading market will develop or be maintained for the Notes. See
"Underwriting."
LIMITED TRADING VOLUME AND VOLATILITY OF STOCK PRICE
The Company's Common Stock is not widely held and the volume of trading has
been low and sporadic. Accordingly, the Common Stock is subject to increased
price volatility and reduced liquidity. There can be no assurance a more active
trading market for the Common Stock will develop, or be sustained if it does
develop. The limited public float of the Company's Common Stock could cause the
market price for the Common Stock to fluctuate substantially. In addition, stock
markets have experienced wide price and volume fluctuations in recent periods
and these fluctuations often have been unrelated to the operating performance of
the specific companies affected. Any of these factors could adversely affect the
market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock in the public market following the Offering by
current stockholders of the Company could adversely affect the market price for
the Common Stock. Upon expiration of lock-up
9
<PAGE> 12
agreements with the Underwriter 90 days after the date of this Prospectus, or
earlier upon the written consent of Southcoast Capital Corporation ("Southcoast
Capital"), 225,590 shares of Common Stock (including Class B Stock if converted
into equal amounts of Common Stock) may be sold in the public market by
executive officers and directors, subject to the limitations contained in Rule
144 under the Securities Act of 1933, as amended. Following the Offering, sales
of substantial amounts of the shares of Common Stock in the public market, or
even the potential for such sales, could adversely affect the prevailing market
price of the Common Stock.
10
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company (after deducting underwriting discounts and
estimated offering expenses) from the sale of the Notes offered hereby are
estimated to be approximately $25.9 million ($29.8 million if the Underwriter's
over-allotment option is exercised in full). The Company will repay
approximately $6.2 million of debt currently outstanding under its revolving
credit facility which currently bears interest at the effective rate of 7.49%
and has a final maturity of June 2003 and will call and retire approximately
$4.8 million of the Company's 9% Convertible Subordinated Debentures. The
Company will call these Debentures within 45 days of the completion of the
Offering. The remaining net proceeds will be used to finance the expansion of
the Company's leased equipment base, fund product development and marketing
efforts aimed at expanding the Company's position in both the indoor and outdoor
information display markets and for general working capital purposes. The
Company may also use a portion of the net proceeds for acquisitions; however no
agreement with respect to any such acquisition currently exists and the Company
is not currently involved in any negotiations with respect to any acquisitions.
The Company may also use a portion of the net proceeds for the development of
additional theatres. Pending use of the net proceeds for the above purposes, the
Company intends to invest such funds in U.S. government securities or other
investment-grade securities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the AMEX under the symbol "TLX." The
following table sets forth the high and low closing sales prices of the Common
Stock for the periods indicated, as reported on the AMEX.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
--------------------------------------------------------------------- ---- ---
<S> <C> <C>
1994
First Quarter...................................................... $ 9 5/8 $ 8 3/8
Second Quarter..................................................... 10 8 3/4
Third Quarter...................................................... 10 1/8 7 5/8
Fourth Quarter..................................................... 9 3/8 7 1/4
1995
First Quarter...................................................... $10 $ 8 7/8
Second Quarter..................................................... 9 1/8 7 15/16
Third Quarter...................................................... 9 1/4 7 13/16
Fourth Quarter..................................................... 9 8
1996
First Quarter...................................................... $ 9 5/8 $ 8 1/8
Second Quarter..................................................... 16 1/2 8 5/8
Third Quarter...................................................... 14 7/8 10 1/2
Fourth Quarter (through December 6, 1996).......................... 13 3/4 11 7/8
</TABLE>
On December 6, 1996, the last reported sale price for the Common Stock on
the AMEX was $11 7/8 per share. As of September 30, 1996, there were 965,002 and
298,882 shares of Common Stock and Class B Stock outstanding and 847 and 68
holders of Common Stock and Class B Stock, respectively.
Commencing with the fourth quarter of 1993, the Company's dividend policy
has been to pay a regular quarterly dividend of $.035 per share on the Common
Stock and $.0315 per share on the Class B Stock. The declaration or payment by
the Company of dividends, if any, on its Common Stock and Class B Stock in the
future is subject to the discretion of the Board of Directors and will depend on
the Company's earnings, financial condition, capital requirements and other
relevant factors. The Company's present credit facility restricts the payment of
dividends to no more than an aggregate $750,000 per year. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
11
<PAGE> 14
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1996, and as adjusted to give effect to (i) the
consummation of the Offering of the Notes and (ii) the application of the net
proceeds therefrom as described in "Use of Proceeds" (assuming no exercise of
the Underwriter's over-allotment option). This information should be read in
conjunction with Selected Financial Data and the related notes and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
--------------------------------
ACTUAL AS ADJUSTED(1)
-------- -------------------
(UNAUDITED, DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt and current portion of long-term debt............ $ 1,814 $ 1,814
======== ========
Long-term debt:
Revolving credit facility(2)................................... $ 6,200 $ --
Notes payable.................................................. 15,202 15,202
9% Convertible subordinated debentures(3)...................... 4,811 --
9 1/2% Subordinated debentures................................. 1,057 1,057
% Convertible subordinated notes............................. -- 27,500
-------- --------
Total long-term debt...................................... $ 27,270 $ 43,759
-------- --------
Stockholders' equity:
Preferred, $1.00 par value; 500,000 shares authorized; no
shares issued and outstanding............................... -- --
Common, $1.00 par value; 4,000,000 shares authorized; 2,441,523
shares issued and outstanding(4)(6)......................... $ 2,441 $ 2,441
Class B, $1.00 par value; 2,000,000 shares authorized; 298,882
shares issued and outstanding(5)(6)......................... 299 299
Additional paid-in capital..................................... 13,828 13,828
Retained earnings(3)........................................... 17,626 17,560
Other.......................................................... (65) (65)
Less: 1,481,252 treasury shares at cost..................... (11,821) (11,821)
-------- --------
Total stockholders' equity................................ 22,308 22,242
-------- --------
Total capitalization................................... $ 49,578 $ 66,001
======== ========
</TABLE>
- ---------------
(1) Adjusted to reflect the sale of $27,500,000 of the Notes offered by the
Company hereby, the receipt of the estimated net proceeds therefrom and the
repayment of certain outstanding indebtedness. See "Use of Proceeds."
(2) The Company has a revolving credit facility with First Union Bank of
Connecticut ("First Union Bank") pursuant to which it may borrow up to $7.0
million from time to time, available through June 1998, at which time, at
the option of the Company, amounts outstanding are converted to a five year
term note with a final maturity of June 2003. The revolving credit facility
bears a variable rate of interest of LIBOR plus 200 basis points. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(3) The Company will record a charge in the first quarter of 1997 to its
earnings of approximately $113,000 ($66,000 net of tax) for the unamortized
portion of its financing costs.
(4) Excludes 78,594 shares of Common Stock issuable upon exercise of stock
options outstanding at September 30, 1996 at exercise prices ranging from
$6.31 to $9.69 per share and 378,819 shares upon conversion of the Company's
9% Convertible Subordinated Debentures due 2005 at $12.70 per share.
(5) Class B Stock has greater voting power. See "Description of Capital Stock."
(6) Subsequent to September 30, 1996, a certificate of amendment was filed to
the Company's Restated Certificate of Incorporation increasing the
authorized shares of Common Stock to 5,500,000 shares, decreasing the
authorized shares of Class B Stock to 1,000,000 shares and authorizing
4,000,000 shares of a new non-voting Class A Stock. See "Description of
Capital Stock."
12
<PAGE> 15
SELECTED FINANCIAL DATA
The following selected financial data of the Company at and for each of the
five years ended December 31, 1995 except for Other Data, are derived from and
are qualified by reference to the Company's financial statements, some of which
are presented herein. The selected financial data for the nine months ended
September 30, 1995 and 1996 and the balance sheet data as of September 30, 1995
and 1996 are derived from unaudited financial statements of the Company which in
management's opinion include all adjustments (consisting only of normal
recurring adjustments) necessary for the fair presentation of the information
set forth therein. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. This data should be read in conjunction with
the financial statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Equipment rentals and maintenance....... $10,494 $13,307 $20,824 $21,652 $21,205 $16,509 $16,273
Equipment sales......................... 2,949 4,040 11,806 8,498 12,364 9,174 13,276
Theatre receipts and other.............. 8,690 6,783 3,169 3,592 4,222 3,198 3,322
------- ------- ------- ------- ------- ------- -------
Total revenues.................... 22,133 24,130 35,799 33,742 37,791 28,881 32,871
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Cost of equipment rentals and
maintenance........................... 5,360 7,069 11,249 11,929 11,358 8,700 8,883
Cost of equipment sales................. 1,587 2,273 7,648 4,620 7,863 5,752 8,753
Cost of theatre receipts and other...... 7,180 5,957 2,657 2,864 3,185 2,462 2,529
------- ------- ------- ------- ------- ------- -------
Total operating expenses.......... 14,127 15,299 21,554 19,413 22,406 16,914 20,165
------- ------- ------- ------- ------- ------- -------
Gross profit from operations.............. 8,006 8,831 14,245 14,329 15,385 11,967 12,706
General and administrative expenses....... 7,151 7,384 10,202 11,023 11,494 9,210 9,442
------- ------- ------- ------- ------- ------- -------
855 1,447 4,043 3,306 3,891 2,757 3,264
Interest expense, net..................... 570 893 2,380(1) 1,242(2) 2,144 1,565 1,669
Other income.............................. 257 187 -- -- 92 70 (97)
------- ------- ------- ------- ------- ------- -------
Income before income taxes................ 542 741 1,663(1) 2,064(2) 1,839 1,262 1,498
------- ------- ------- ------- ------- ------- -------
Provision for income taxes:
Current................................. 95 97 231 407 576 501 521
Deferred................................ 185 372 943 343 197 29 108
------- ------- ------- ------- ------- ------- -------
280 469 1,174(1) 750(2) 773 530 629
------- ------- ------- ------- ------- ------- -------
Net income................................ $ 262 $ 272 $ 489(1) $ 1,314(2) $ 1,066 $ 732 $ 869
======= ======= ======= ======= ======= ======= =======
PER SHARE DATA:
Earnings per share:
Primary................................. $ 0.20 $ 0.22 $ 0.39(1) $ 1.04(2) $ 0.85 $ 0.58 $ 0.68
Fully diluted........................... (3) (3) (3) 0.94(2) 0.81 (3) 0.64
Average common and common equivalent
shares outstanding:
Primary................................. 1,305 1,249 1,249 1,260 1,259 1,258 1,283
Fully diluted........................... (3) (3) (3) 1,943 1,643 (3) 1,674
PRO FORMA PER SHARE DATA(4):
Earnings per share:
Primary................................. $ 0.08 $ 0.23
Fully diluted........................... (3) (3)
Average common and common equivalent
shares outstanding:
Primary................................. 1,259 1,283
Fully diluted........................... 3,223 3,256
OTHER DATA:
EBITDA(5)............................... $ 5,201 $ 6,670 $10,385 $ 9,819 $10,884 $ 7,961 $ 8,444
Ratio of earnings to fixed charges(6)... 1.4 1.5 1.6 2.3 1.8 1.7 1.7
Net rental equipment.................... $13,550 $29,995 $29,039 $29,653 $30,778 $30,142 $32,594
Net book value per share(7)............. $ 14.59 $ 15.35 $ 15.60 $ 16.29 $ 17.08 $ 16.85 $ 17.39
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 1,592 $ 1,180 $ 1,128 $ 2,335 $ 665 $ 4,925 $ 54
Total assets............................ 35,647 50,826 52,138 53,307 57,460 58,453 63,045
Long-term debt, including current
portion............................... 11,648 23,497 23,293 22,353 24,299 24,644 29,084
Retained earnings....................... 15,412 14,514 14,850 15,993 16,888 16,597 17,626
Stockholders' equity.................... 20,062 19,169 19,484 20,524 21,499 21,202 22,308
</TABLE>
(Footnotes provided on the following page.)
13
<PAGE> 16
- ---------------
(1) 1993 reflects the impact of an assessment of income taxes and related
interest expense incurred resulting from a prior year state income tax audit
of approximately $600,000.
(2) 1994 reflects the positive impact of a settlement of approximately $360,000
related to the 1993 assessment described in footnote No. 1 above.
(3) Not dilutive.
(4) The pro forma earnings per share data assume that the Offering was
consummated at January 1, 1995, with the Notes bearing interest at the
annual rate of 6.75%, an assumed conversion price of $14.00, and the
application of the proceeds therefrom as described in "Use of Proceeds."
Assuming the remaining net proceeds after repayment of debt earned interest
at an annual rate of 5.0%, the pro forma primary earnings per share for the
year ended December 31, 1995 would have been $0.55, the pro forma earnings
per share for the nine months ended September 30, 1996 would have been $0.53
and $0.48 for primary and fully diluted, respectively. (Unaudited)
(5) EBITDA is defined as income before effect of changes of accounting plus
interest, income taxes, depreciation and amortization. EBITDA is presented
here because it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness. However, EBITDA should not be
considered as an alternative to net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity. The Company's measure of EBITDA may
not be comparable to similarly titled measures reported by other companies.
(Unaudited)
(6) Earnings used in computing the ratio of earnings to fixed charges consist of
income before income taxes, fixed charges and extraordinary items. Fixed
charges consist of interest expense, including amounts capitalized, and that
portion of rent expense which management deems to be attributable to
interest costs. (Unaudited)
(7) Unaudited.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto included elsewhere in
this Prospectus. This Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors" as well as those discussed below and elsewhere in
this Prospectus.
GENERAL
The Company is a manufacturer, distributor, and servicer of large-scale,
real-time electronic information displays for both indoor and outdoor use. These
display systems utilize LED and light bulb technologies to display real-time
information entered by the user or via a third party information supplier. The
Company provides high quality, reliable display products configured to suit its
customers' needs, and offers extensive on-site service and maintenance coverage.
The Company's display products include data, graphics, and picture displays for
stock and commodity exchanges, financial institutions, airports, casinos, sports
venues, convention centers, corporate, theatres, retail and numerous other
applications. In addition to the core display business, the Company also
operates a small chain of motion picture theatres in the southwestern U.S. In
1995, the Company derived approximately 89% of its revenue from its indoor and
outdoor information display business.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995.
The Company's total revenues for the nine months ended September 30, 1996
increased 13.8% to $32.9 million versus $28.9 million for the same period in the
previous year. Revenues from equipment rentals and maintenance decreased from
$16.5 million in 1995 to $16.3 million in 1996, or 1.4%, primarily due to the
expected decline in revenues from the outdoor lease and maintenance bases
previously acquired, although the decline is at a slower rate than originally
anticipated. This decline in revenues was partially offset by an increase in new
indoor and outdoor display rentals and maintenance contracts. Revenues from
equipment sales increased 44.7% or $4.1 million in 1996, primarily due to
increased sales of outdoor displays as a result of the acquisition of ISE in
January 1995 and certain significant sales which are being recognized on the
percentage of completion basis. Revenues from theatre receipts and other
increased by $124,000 or 3.9% in 1996, primarily attributable to increased
concession sales at the theatres.
Cost of equipment rentals and maintenance increased by $183,000 or 2.1%,
primarily due to operating expenses of the indoor displays. The cost of
equipment rentals and maintenance represented 54.6% of related revenues in 1996
compared to 52.7% in 1995. Cost of equipment sales increased by $3.0 million to
$8.8 million in 1996 or 52.2%, primarily due to increased sales of outdoor
displays and certain significant indoor display equipment sales, which due to
the size of the orders have lower gross profit margins. Due to the nature of the
outdoor display market, the Company anticipates the gross profit margin to
decline somewhat as it enters new industry segments of the outdoor market. The
Company does not anticipate the gross profit margin on future significant indoor
display equipment sales to decline. The cost of equipment sales represented
65.9% of related revenues in 1996 compared to 62.7% in 1995. The cost of theatre
receipts and other increased $67,000 or 2.7%, which was proportional to the
increase in theatre revenues. The cost of theatre receipts and other represented
76.1% and 77.0% of related revenues in 1996 and 1995, respectively.
General and administrative expenses increased by $232,000 or 2.5%,
primarily due to expanded sales efforts and increased payroll and benefits
costs, partially offset by the favorable adjustment of previously accrued
expenses.
Interest income decreased by $29,000, primarily attributable to reduced
investments. Interest expense increased by $75,000, primarily due to increased
bank borrowing for general corporate purposes on the revolving credit line.
15
<PAGE> 18
Other expense of $97,000 in 1996 relates to the loss incurred by the
theatre joint venture, MetroLux Theatres, which includes start up costs. Other
income of $70,000 in 1995 was largely due to the sale of a theatre property in
New Mexico.
The effective tax rate at September 30, 1996 and 1995 was 42.0%.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The Company's total revenues for the year ended 1995 increased by 12.0% to
$37.8 million in 1995 from $33.7 million in 1994. In January 1995, the Company
acquired all the capital stock of ISE, a manufacturer of outdoor electronic
displays. Operating results for 1995 include a full twelve months from this
acquisition. Revenues from equipment rentals and maintenance decreased $447,000
or 2.1% during 1995, primarily due to the expected decline in revenues from the
two acquisitions of outdoor lease and maintenance base portfolios from $11.7
million in 1994 to $10.8 million in 1995. Revenues from equipment sales
increased 45.5% during 1995. The increase was largely attributable to the
revenues generated from the acquisition of ISE, which contributed $3.6 million
in revenues during 1995. Revenues from theatre receipts and other increased
$630,000 during 1995, primarily due to the inclusion of a full year of
operations at the five-plex theatre in Durango, Colorado which opened in
mid-1994.
Cost of equipment rentals and maintenance, which includes field service
expenses, plant repair costs and depreciation, decreased $571,000 or 4.8% during
1995, to 53.6% of related revenues from 55.1% in 1994. The decrease is primarily
attributable to a reduction in field service expenses. The cost of equipment
sales as a percentage of related revenue represented 63.6% in 1995 and 54.4% in
1994. The increase in costs is primarily due to the expected lower profit
margins generated by ISE. The cost of theatre receipts and other, which includes
film rental expenses increased $321,000 or 11.2% during 1995, primarily due to a
full year of operations at the five-plex theatre in Durango, Colorado which
opened in mid-1994. Cost of theatre receipts and other represented 75.4% of
related revenues in 1995 and 79.7% in 1994.
General and administrative expenses increased $471,000 or 4.3% from $11.0
million in 1994 to $11.5 million in 1995 primarily due to the acquisition of
ISE. General and administrative expenses decreased as a percentage of revenue to
30.4% in 1995, compared to 32.7% in 1994, primarily as a result of economies of
scale.
Interest income decreased $57,000 during 1995, primarily attributable to
reduced investments which were utilized for acquisitions. Interest expense
increased by $845,000 during 1995, primarily as a result of the additional debt
incurred relative to the acquisition of ISE, in addition to the lower interest
expense recorded in 1994 as a result of a settlement of a 1993 assessment of
interest resulting from a 1986 state income tax audit. The other income of
$92,000 in 1995 is largely due to the sale of a theatre property in New Mexico.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
The Company's total revenues for the year ended 1994 decreased by 5.7% to
$33.7 million from $35.8 million in 1993. Revenues from equipment rentals and
maintenance increased $828,000 or 4.0% during 1994. The revenue from the
acquisition of the lease base portfolio of outdoor displays and maintenance
contracts which occurred in August 1993 contributed a full year of revenues.
Revenues from equipment sales decreased $3.3 million or 28.0% during 1994,
primarily because 1993 included a $4.3 million sale to the CME, the largest sale
in the Company's history. Revenues from theatre receipts and other increased by
$423,000 in 1994, primarily due to the opening of the theatre in Durango,
Colorado in mid-1994.
Cost of equipment rentals and maintenance increased $680,000 or 6.0% during
1994, to 55.1% of related revenue from 54.0% in 1993. The increase is primarily
attributable to a full year of field service expenses relating to the August
1993 acquisition. The cost of equipment sales decreased $3.0 million or 39.6% in
1994 and represented 54.4% of related revenue compared to 64.8% in 1993,
primarily due to the sale to the CME in 1993, which due to the size of the order
had a lower gross profit margin. The cost of theatre receipts and other
increased $207,000 or 7.8% during 1994. Cost of theatre receipts and other
represented 79.7% of related
16
<PAGE> 19
revenue in 1994 compared to 83.8% in 1993, primarily due to lower film rental
costs and the opening of the theatre in Durango, Colorado in mid-1994.
General and administrative expenses increased by $821,000 or 8.0% during
1994, partially due to the additional expenses incurred in order to maintain the
outdoor lease and maintenance base acquired in August 1993. General and
administrative expenses increased as a percentage of revenue to 32.7% in 1994
compared to 28.5% in 1993, which increase was caused by the overall decrease in
1994 total revenues from the 1993 level, which included the sale to the CME.
Interest income decreased $19,000 during 1994. Interest expense decreased
$1.2 million during 1994. The decrease was primarily due to the settlement of a
1993 assessment of interest resulting from a 1986 state income tax audit, which
when assessed in 1993 increased interest expense for that year.
INCOME TAXES
The effective tax rate was 42.0% in 1996 and 1995, 36.3% in 1994 and 70.6%
in 1993. The increase in the effective tax rate for 1995 was due to a settlement
of a 1986 state income tax audit in 1994, which lowered the effective tax rate
in 1994 and when assessed in 1993 increased the effective tax rate for that
year.
ACCOUNTING STANDARDS
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of " in the first quarter of 1996. In
accordance with the standard, the Company evaluates the carrying value of its
long-lived assets and identifiable intangibles, including goodwill, when events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The adoption of the standard did not have any effect on the
Company's consolidated financial position or results of operations.
The Company also adopted the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" in the
first quarter of 1996. As provided for in the standard, the Company continues to
apply Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued
to Employees" and related interpretations for employee stock compensation
measurement and will disclose the required pro forma information in the 1996
Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations and bank borrowings.
The Company believes that cash generated from operations together with the
anticipated net proceeds of the Offering will be sufficient to fund its
anticipated further cash requirements.
Cash and cash equivalents decreased by $1.7 million in 1995 compared to an
increase of $1.2 million in 1994 and a decrease of $52,000 in 1993. The decrease
in 1995 is primarily attributable to cash utilized to acquire ISE, repayment of
its long-term debt and an investment in a theatre joint venture. This was offset
by an increase of $1.1 million in deferred revenue and deposits, primarily due
to prepayments of annual billings not yet recorded as revenue. During the nine
months ended September 30, 1996, the Company's cash and cash equivalents
decreased by $611,000, primarily attributable to cash utilized for investment in
rental equipment, an increase in accounts receivable which is attributable to
the timing of large equipment sales, unbilled receivables and a decrease in
deferred revenue and deposits which was primarily due to the timing of recording
the revenues versus billings and the loan to the theatre joint venture, MetroLux
Theatres. The decrease in cash and cash equivalents in 1995 was largely
attributable to the cash utilized to acquire ISE, repayment of long-term debt
and the investment in MetroLux Theatres. Inventories, prepaids and intangibles
increased during 1995 primarily due to the acquisition of ISE. Although
receivables increased both at December 31, 1995 and September 30, 1996, the
Company continues to experience a favorable collection cycle on its trade
receivables.
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<PAGE> 20
The Company entered into a Credit Agreement in August 1995 restructuring
$15.6 million of indebtedness and a $4.0 million revolving credit facility with
First Union Bank. The revolving credit facility was increased to $7.0 million
during 1996 and was extended until June 1998. The revolving credit facility was
subsequently supplemented by a $3.0 million revolving facility available to the
Company at the discretion of First Union Bank, which expires January 1997. The
restructuring extended the terms at a variable rate of interest of LIBOR plus
175 basis points. Simultaneously, the Company entered into an interest rate swap
for three years at a fixed rate of 7.86% for $15.6 million of notional value to
mitigate the risk of the variable interest rate. The loans provide for certain
covenants such as net worth, capital expenditures, fixed charge coverage ratio
and debt to worth ratio. The Company is a guarantor of a $3 million term loan to
MetroLux Theatres, the theatre joint venture. The owner of the non-related
general partner of the joint venture has guaranteed their pro rata portion of
the indebtedness to the Company.
RESULTS OF OPERATIONS
The following table sets forth unaudited quarterly financial data:
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- --------------------------------------------------------- -------- ------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996
Revenues................................................. $10,033 $10,591 $ 12,247
Gross profit............................................. 3,969 4,080 4,579
Income before income taxes............................... 427 467 604
Net income............................................... 248 271 350
Earnings per share:
Primary................................................ $ 0.20 $ 0.21 $ 0.27
Fully diluted.......................................... 0.19 0.20 0.25
1995
Revenues................................................. $ 9,379 $ 9,861 $ 9,641 $ 8,910
Gross profit............................................. 3,913 4,078 3,976 3,418
Income before income taxes............................... 340 390 532 577
Net income............................................... 197 226 309 334
Earnings per share:
Primary................................................ $ 0.16 $ 0.18 $ 0.24 $ 0.27
Fully diluted.......................................... (1 ) (1) 0.23 0.24
1994
Revenues................................................. $ 8,343 $ 8,006 $ 8,765 $ 8,628
Gross profit............................................. 3,424 3,485 3,534 3,886
Income before income taxes............................... 677 (2) 375 437 575
Net income............................................... 554 (2) 216 241 303
Earnings per share:
Primary................................................ $ 0.44 (2) $ 0.17 $ 0.19 $ 0.24
Fully diluted.......................................... 0.34 (2) 0.17 0.18 0.23
</TABLE>
- ---------------
(1) Not dilutive.
(2) The first quarter of 1994 reflects the positive impact of a settlement of a
1993 assessment of income taxes and related interest expense incurred
resulting from a 1986 state income tax audit of approximately $360,000,
$0.29 primary earnings per share and $0.18 fully diluted earnings per share.
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<PAGE> 21
The following table sets forth unaudited selected financial data stated as
a percentage of the Company's total revenues:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, LATEST TWELVE
--------------------------- MONTHS ENDING
1993 1994 1995 SEPTEMBER 30, 1996
------ ----- ------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals and maintenance.............. 58.2% 64.2% 56.1% 50.2%
Equipment sales................................ 33.0 25.2 32.7 39.4
Theatre receipts and other..................... 8.8 10.6 11.2 10.4
------ ------ ------ ------
Total revenues......................... 100.0 100.0 100.0 100.0
------ ------ ------ ------
Operating expenses:
Cost of equipment rentals and maintenance...... 31.4 35.3 30.1 27.6
Cost of equipment sales........................ 21.4 13.7 20.8 26.0
Cost of theatre receipts and other............. 7.4 8.5 8.4 7.8
------ ------ ------ ------
Total operating expenses............... 60.2 57.5 59.3 61.4
Income before income taxes....................... 4.6 6.1 4.9 5.0
Net income....................................... 1.4 3.9 2.8 2.9
</TABLE>
The following table sets forth the gross profit of each of the Company's
three revenue categories as a percentage of the revenue generated by that
category.
<TABLE>
<S> <C> <C> <C> <C>
Gross margin analysis:
Equipment rentals and maintenance.............. 46.0% 44.9% 46.4% 45.0%
Equipment sales................................ 35.2 45.6 36.4 34.0
Theatre receipts and other..................... 16.2 20.3 24.6 25.2
------ ----- ------ ------
Total gross margin..................... 39.8 42.5 40.7 38.6
</TABLE>
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<PAGE> 22
BUSINESS
GENERAL
The Company is a manufacturer, distributor, and servicer of large-scale,
real-time electronic information displays for both indoor and outdoor use. These
display systems utilize LED and light bulb technologies to display real-time
information entered by the user or via a third party information supplier. The
Company provides high quality, reliable display products configured to suit its
customers' needs, and offers extensive on-site service and maintenance coverage.
The Company's display products include data, graphics, and picture displays for
stock and commodity exchanges, financial institutions, airports, casinos, sports
venues, convention centers, corporate, theatres, retail, and numerous other
applications. In addition to the core display business, the Company also
operates a small chain of motion picture theatres in the southwestern U.S. In
1995, the Company derived approximately 90% of its revenue from its indoor and
outdoor information display business.
The Company is a Delaware corporation founded in 1920 as a developer of
display products. The Company sold its first large scale moving display product
in 1923, based on proprietary rear screen projection technology. The Company's
development of rear screen projection technology also led it into the theatre
business which at one time represented a significant portion of its revenues.
Over the years, the Company has focused on the development and examination of
new technologies in the information display industry. In the late 1960s, the
Company developed and marketed its first electromechanical display units. These
products were actively marketed until 1983 when the Company introduced its first
LED-based display systems.
The Company's high performance electronic information displays are used to
communicate messages and information in a variety of indoor and outdoor
applications. The Company's product line encompasses a wide range of
state-of-the-art electronic displays in various shape, size and color
configurations. Most of the Company's display products include hardware
components and sophisticated software. In both the indoor and outdoor markets,
the Company adapts basic product types and technologies for specific use in
various niche market applications. The Company also operates a direct service
network throughout the U.S. and Canada which performs on-site service and
maintenance for its customers, further distinguishing the Company from many of
its competitors.
In the indoor market, the Company's high performance electronic displays
are used to communicate messages in the financial, gaming, transportation,
entertainment and retail industries, among others. In the financial industry,
the Company's products display news and market information, interest rates,
up-to-the-second stock and commodity prices, and other financial product
information for stock and commodity exchanges, brokerage firms, banks, mutual
fund companies, and other financial institutions. In the gaming industry, the
Company's products transmit racing and pari-mutuel betting odds and results,
sports scores, statistics, slot machine jackpots and other wagering information.
In the transportation industry, the Company's products are used to display
arrival and departure information and gate and baggage claim information for
airports and other transportation facilities. While the securities and
commodities industries continue to represent a significant portion of the
Company's customer base, the Company has a strong presence in the gaming
industry through its race and sports book displays and also markets its displays
to such users as banks, corporations, transportation facilities, the military,
racetracks, restaurants, pharmacies, theatres, hotels and convention centers. In
the indoor display market, the Company's customers include the American Stock
Exchange, Charles Schwab & Co. Incorporated, the CBOT, the CME, Goldman Sachs &
Co., Kaiser Permanente, Merrill Lynch Pierce Fenner & Smith, Inc., MGM Grand,
Inc., Mirage Resorts, Inc., the New York Mercantile Exchange, Inc., the New York
Stock Exchange, Inc. and Sony Theaters Management Corporation.
Over the past four years, the Company has utilized its strong position in
the indoor display market combined with several acquisitions to establish a
growing presence in the outdoor display market. Trans-Lux outdoor displays are
installed in amusement parks, entertainment facilities, professional and college
sports stadiums, military installations, bridges and other roadway
installations, automobile dealerships, banks and other financial institutions.
In the outdoor display market, the Company's customers include Auburn
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<PAGE> 23
University, Pontiac Silverdome, Resorts International, Six Flags Over Georgia, 3
Com Park and Twin City Federal Financial Corp.
The Company has made three acquisitions over the past four years in order
to establish and enhance its presence in the outdoor market. In August 1992,
after first managing the portfolio for approximately 15 months, the Company
acquired a portfolio of outdoor electric and electronic equipment displays from
American Electronic Displays, L.P. In August 1993, the Company expanded its
presence in the outdoor display market by acquiring a portfolio of outdoor
lease, maintenance and other contracts from Indicator Maintenance Corporation.
In January 1995, the Company acquired all of the capital stock of ISE, a
manufacturer of outdoor electronic displays.
ELECTRONIC INFORMATION DISPLAY MARKET
Accessing information in a timely and efficient manner has become
increasingly important over the past two decades and has been driven by
technological improvements in both the telecommunications and computer
industries. Today, access to either specific information or general news events
is critical in many aspects of business. As demand for various information
displays has spread into an increasingly diverse number of applications, an
equally diverse number of display products has emerged, leaving the industry
highly fragmented with no single company or group of companies having a dominant
share of the entire industry.
The electronic information display market can be broken down into two
distinct markets: the indoor market and the outdoor market. Electronic
information displays are used by financial institutions, including brokerage
firms, banks, saving and loans, insurance companies and mutual fund companies;
by retail outlets; by casinos, race tracks and other gaming establishments; by
outdoor advertising companies; in airports, train stations and bus terminals,
and other transportation facilities; on highways and major thoroughfares; and by
movie theatres, and in various other applications. The industry is expected to
continue to expand as additional applications are added and current applications
are increasingly implemented by businesses attempting to increase information
flow to current and potential customers.
The Indoor Market: The indoor electronic display market is currently
dominated by three categories of users: financial, gaming and corporate. The
financial market segment, including trading floors, exchanges, brokerage firms
and mutual fund companies, has long been a user of electronic information
displays due to the need for the real-time dissemination of data. The major
stock and commodity exchanges depend on reliable information displays to post
stock and commodity prices, trading volumes, interest rates and other financial
information. Brokerage firms have increasingly installed electronic ticker
displays for both customers and brokers, and in the last few years have
installed larger displays to post major headline news events in their brokerage
offices to enable their sales force to stay up-to-date on the events affecting
general market conditions and specific stocks. The changing regulatory
environment in the financial marketplace has also resulted in the influx of
banks and other financial institutions into the brokerage business and has
resulted in these institutions increasingly using information displays to
advertise product offerings to consumers.
The proliferation of gaming establishments including casinos, Indian gaming
establishments, and off-track betting parlors, has resulted in the rapid
expansion of electronic information displays in the gaming industry. These
establishments generally use large information displays to post odds for race
and sporting events and to display timely information such as results, track
conditions, jockey weights and scratches. Casinos also use electronic displays
throughout their facilities to advertise to and attract gaming patrons. This
includes using electronic displays in conjunction with slot machines to attract
customer attention to potential payoffs and thus increase customer play.
The corporate market includes applications found in major corporations,
public utilities and government agencies for the display of real-time, critical
data in command/control centers, data centers, help desks, inbound/outbound
telemarketing centers and for employee communications. Electronic displays have
found acceptance in applications for the healthcare industry such as out-patient
pharmacies, military hospitals and HMOs which desire to automatically post
patient names when prescriptions are ready for pick up. Theatres use electronic
displays to post current box office and ticket information, directional
information and to
21
<PAGE> 24
promote concession sales. Information displays are consistently used in
airports, bus terminals and train stations to post arrival and departure
information and gate and baggage claim information, which helps to guide
passengers through these facilities.
The Outdoor Market: The outdoor electronic display market is even more
diverse than the indoor market with displays being used by banks and other
financial institutions, gas stations, highway departments, sports stadiums and
outdoor advertisers attempting to capture the attention of passers-by. In
addition to traditional uses of outdoor electronic displays, the Company
believes the outdoor market represents a growth opportunity for participants in
the indoor electronic information display industry. The entire "out-of-home"
advertising category, such as traditional billboards and roadside displays, has
expanded to include displays in shopping centers and malls, airports, stadiums,
movie theatres and supermarkets. While most existing outdoor advertisers do not
currently utilize either LED or light bulb generated messages, the Company
believes a growing number of outdoor advertising mediums are beginning to turn
to these higher-end technologies in order to enhance visibility, recognition and
impression on the viewer, and to expand the capabilities of the display, which
therefore represents a potential growth opportunity for participants in the
electronics information display industry.
COMPANY STRATEGY
The Company's strategy is to leverage its position in the U.S. indoor
electronic information display market to expand market share in the global
indoor and outdoor display markets. Trans-Lux has a proven track record for
providing high quality, innovative information display products in the indoor
market. The Company supplies many of the electronic information displays to the
financial services industry and to the race and sports book segment of the
gaming industry, and has a significant presence in the corporate and
transportation markets. The Company offers its customers the option of either
leasing or purchasing its display products and believes this provides a
competitive advantage over most of its competitors who primarily offer their
products for sale only. In addition, the Company plans to expand the scope of
its service force to include the maintenance of other companies' display
products and related electronic equipment. The Company believes that by
providing high quality, reliable electronic displays configured to suit their
customers' needs, combined with offering extensive on-site service and
maintenance coverage and the opportunity to purchase or lease display products,
it will be able to continue to expand its market share in the indoor and outdoor
display markets.
In the indoor market, the Company's growth strategy centers around
increased marketing efforts, expanded sales coverage and continued product
developments aimed at capitalizing on the Company's presence in its current
market segments and expanding into new market segments. Because of the Company's
expertise in and close association with certain market segments, such as the
financial services industry, it is able to anticipate requirements for new
products, product enhancements and new technologies before its competitors. The
Company has increased its engineering staff to accommodate the development of
new products and enhancements, and will continue to do so as needed. The Company
also plans to continue to penetrate new market segments such as call centers,
motion picture theatres, outpatient pharmacies and military hospitals through
increased direct marketing and sales efforts. Additionally, the Company expects
its new progressive meter and controller systems to provide expanded
opportunities within the gaming industry. The Company will continue its strategy
of developing partnerships with key data suppliers and software vendors in its
various market niches, both to add value to the access of the data and to
increase product exposure via third party distribution channels.
The Company's acquisitions in the outdoor market will be enhanced through
focused marketing efforts and expansion of the sales force. The Company will
continue to increase its presence in the outdoor market by identifying target
segments in which to become a leading supplier. The Company has identified and
commenced market development in key outdoor market segments such as sports
stadiums and arenas, convention centers, theme parks, shopping malls, automobile
dealerships, theatres and highway/transportation applications.
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<PAGE> 25
The Company expects that its recently completed and planned product
developments will enhance its outdoor product line and allow it to penetrate new
market segments. The capability of displaying live video, offering lower power
consumption and other competitive advantages, provides an attractive product
offering to targeted market segments and paves the way for entry into the
broader advertising market. Development of a 16 shades of gray outdoor display
system will enable the Company to capitalize on the growth of its basic message
center business across all market segments, which will appeal to customers who
want to utilize animation without the added cost of full color.
Internationally, the Company anticipates growth in the financial exchange
markets, penetration of the international gaming markets for its meter and
controller product line and entry into advertising/media applications and other
outdoor applications. The Company is currently in the process of expanding its
distributor network in key foreign markets.
INFORMATION DISPLAY PRODUCTS
The Company's high performance electronic information displays are used to
communicate messages and information in a variety of indoor and outdoor
applications. The Company's product line encompasses a wide range of
state-of-the-art electronic displays in various shape, size and color
configurations. Most of the Company's display products include hardware
components and sophisticated software. In both the indoor and outdoor markets,
the Company adapts basic product types and technologies for specific use in
various niche market applications. The Company also operates a direct service
network throughout the U.S. and Canada which performs on-site service and
maintenance for its customers, further distinguishing the Company from many of
its competitors.
The Company employs a modular engineering design strategy, allowing basic
"building blocks" of electronic modules to be easily combined and configured in
order to meet the broad application requirements of the markets the Company
serves. This approach ensures maximum product flexibility, reliability, ease of
service and minimum spare parts requirements.
Listed below are the Company's major product technologies and a brief
description of their features and primary market applications:
INDOOR MARKET
LED Jet(@): A two line scrolling LED text display which is widely used in
financial exchanges, brokerage firms and retail investment centers to post
last-sale information on stock trades directly from various exchange
sources.
LED News Jet(TM): A multi-line scrolling LED text display which interfaces
directly to real-time news services and information services. The News Jet
is used to provide up-to-the-second critical news to the floor traders in
financial exchanges, brokerage firms and retail investment centers.
DataWall(@): A high speed, line- and character-addressable LED text display
which is used in applications that require the posting of frequently
changing tabular information, such as indices, stocks, bonds, foreign
exchange and news in the financial markets; race and sports odds and
results in the gaming market; and arrival and departure information in the
transportation market.
PictureWall(TM): A full-matrix, tricolor LED display that, via custom
software, displays any text and/or graphic images that can be shown on a
computer monitor. Typical uses for this product include real-time financial
data, graphs and charts for exchanges and brokerage firms, and
computer-generated data for corporate command centers.
OUTDOOR MARKET
Time & Temperature Displays: Alternating or full-view models used primarily
by banks to build corporate identity and generate public awareness.
Message Center Displays: Scrolling message ranging in size from one to
three lines used by shopping malls, automobile dealerships and other retail
outlets to promote products and services, generate public awareness and
inform customers.
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<PAGE> 26
Graphic Displays and Score Boards: Fully populated displays accommodating
graphics, animation and video used by stadiums, arenas, convention centers,
casinos and other entertainment venues to welcome fans, promote events and
advertise products and sponsors. Also used in scoreboards, in conjunction
with Message Centers and scoring displays, to show instant replays and
animated advertising.
MARKETING AND DISTRIBUTION
The Company markets its indoor and outdoor electronic information display
products primarily through its direct sales force and telemarketers which as of
September 30, 1996 consisted of 30 direct sales representatives and 8
telemarketers. The Company divides its domestic sales and marketing efforts into
two categories: (i) renewal of existing product leases and product upgrades; and
(ii) the sale or lease of display products to new customers. In the indoor
market for leased equipment, the Company attempts to maintain an ongoing
relationship with its customers to discuss lease renewals. In the outdoor
market, sales personnel contact existing and potential customers to discuss the
customer's usage or requirements for display equipment. The Company also uses
primarily telemarketing personnel to maintain communication with its installed
base of lease equipment customers contacting them prior to the expiration of
existing leases in order to discuss lease renewal.
The Company uses a number of different techniques in order to attract new
customers, including direct marketing efforts by its sales force to known or
potential users of information displays, advertising in industry publications,
and placing exhibits at approximately 20 domestic and international trade shows
annually. In the outdoor market, the Company supplements these efforts by using
a network of independent distributors who market and sell the products of
several manufacturers. The Company intends to use a portion of the proceeds from
the Offering to expand its marketing and sales efforts.
Internationally, the Company uses a combination of internal sales people
and independent distributors to market its products in Europe, South America,
Asia and Australia. The Company currently has manufacturing operations, service
centers and sales offices in New South Wales, Australia and Ontario, Canada. The
Company has existing relationships with approximately 30 independent
distributors worldwide covering Europe, South America, Asia and Australia.
Historically, international sales have represented less than 15% of the
Company's revenues but the Company believes that it is positioned to expand its
international sales and that such sales will represent an increasing percentage
of the Company's revenues in the future.
Headquartered in Norwalk, Connecticut, the Company has major sales and
service offices in New York, Chicago, Las Vegas, Torrance, California, Ontario,
Canada, Logan, Utah and New South Wales, Australia, as well as 58 satellite
offices in the U.S. and Canada.
SERVICE AND SUPPORT
The Company emphasizes the quality and reliability of its products and the
ability of its field service personnel to provide timely and expert service to
the Company's installed base. The Company believes that the quality and
timeliness of its on-site service personnel are important components in the
Company's success. The Company provides turnkey installation and support for the
products it leases or sells in the U.S., Canada and Australia as part of the
installation. The Company provides training to end users and provides ongoing
support to users who have questions regarding operating procedures, equipment
problems or other issues. The Company provides service to customers who lease
equipment and offers installation and service to those who purchase equipment.
In the markets the Company's distributors cover, the distributors offer support
for the products they sell.
Personnel based in regional and satellite service locations throughout the
U.S., Canada and Australia provide high quality and timely on-site service for
the installed equipment base. Purchasers or lessees of the Company's larger
products, such as financial exchanges, casinos and sports facilities, often
retain the Company to provide on-site service through the deployment of a
service technician who is on-site daily or for the scheduled sporting event. The
Company also maintains a National Technical Services Center in the Atlanta,
Georgia area which performs off-site equipment repairs and dispatches service
technicians on a nationwide basis. The Company's field service is augmented by
various outdoor service companies in the U.S., Canada and overseas. From time to
time the Company uses various third party service agents to install, service
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<PAGE> 27
and/or assist in the service of outdoor displays for reasons that include
geographic area and unusual height of displays.
ENGINEERING AND PRODUCT DEVELOPMENT
The Company's ability to compete and operate successfully depends upon,
among other factors, its ability to anticipate and respond to the changing
technological and product needs of its customers. As such, the Company
continually examines and tests new display technologies and develops
enhancements to its existing products in order to meet the current and
anticipated future needs of its customers. Product enhancement work continues in
both the indoor and outdoor areas.
Development of new indoor products includes progressive meter and
controller systems for use in the gaming industry; smaller character displays to
post more information in a comparably sized area; higher speed processors for
faster data access and improved update speed; integration of blue LEDs to
provide full color text and graphics displays; a new graphics interface to
display more data in higher resolutions; and tricolor news displays providing
the ability to color-code and identify "hot" stories.
New outdoor product plans include the development of the Spectra Lens
System(TM) which will enable the Company to capitalize on full color, full
matrix indoor applications, particularly in the sports market. Complete
development of the 16 shades of gray Spectra Lens System should encourage the
growth of the Company's message center business in all market segments. This
product will be targeted to customers who want an animated display at a lower
cost than full color. The Company is also currently developing full color LED
displays which will have application particularly in the gaming market where
entertainment value is important to marketing properties and in the sports
market where enhancing the presentation of live action is of central importance.
As part of its ongoing development efforts, the Company seeks to package
certain products for specific market segments as well as to continually track
emerging technologies that can enhance its products. Future technologies under
consideration are trending toward full color, live video, and digital input. The
Company is currently focused on certain technologies which incorporate these
features and which are expected to provide a choice of products for the custom
applications the Company's customers demand.
The Company maintains a staff of 32 people who are responsible for product
development and support in indoor and outdoor markets. The engineering and
product enhancement and development efforts are supplemented by outside
independent engineering consulting organizations where required. Engineering,
product enhancement and development amounted to $1,315,000, $1,497,000 and
$2,139,000 in 1993, 1994 and 1995, respectively.
MANUFACTURING AND OPERATIONS
The Company's production facilities are located in Norwalk, Connecticut,
Logan, Utah, Ontario, Canada and New South Wales, Australia and consist
principally of the manufacturing, assembly and testing of display units, and
related components. The Company performs most subassembly and all final assembly
of its products. Equipment orders generally have a lead time of 30 to 90 days
depending on the size and type of the equipment, and material availability.
All product lines are design engineered by the Company, and controlled
throughout the manufacturing process. The Company has the ability to produce
printed circuit board fabrications, very large sheet metal fabrications, plastic
molded parts, cable assemblies, and surface mount and through hole designed
assemblies. The Company produces more than 100,000 board assemblies annually
which are tested with the latest state of the art automated test equipment. The
Company's production of many of the subassemblies and all of the final
assemblies gives the Company the control needed for on-time delivery to its
customers.
The Company also has the ability to rapidly modify its product lines. The
Company's displays are designed with versatility in mind, enabling the Company
to customize its displays to meet different application with a minimum of lead
time. The Company's automated planning and purchasing department further enables
it to secure raw materials in a timely fashion without maintaining excessive
inventories. The Company also
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<PAGE> 28
partners with large distributors via volume purchase agreements, giving it the
benefit of a third party stocking its components ready for delivery on demand.
The Company designs certain of its materials to match components furnished by
suppliers. If such suppliers were unable to provide the Company with those
components, the Company would have to contract with other suppliers to obtain
replacement sources. Such replacement might result in engineering design
changes, as well as delays in obtaining such replacement components. The Company
does not acquire a material amount of purchases directly from foreign suppliers,
but components are manufactured by foreign sources. See "Risk
Factors -- Reliance on Key Suppliers."
BACKLOG
The amount of sales order backlog was approximately $2.2 million and $2.6
million at September 30, 1995 and 1996, respectively. The September 30, 1996
backlog will be recognized throughout 1996 and 1997. These amounts do not
include leases or renewals of leases currently in effect.
COMPETITION
The Company supplies many of the large-scale electronic display products to
the financial services industry and the race and sports book segment of the
gaming industry in the U.S. The Company's offer of short-term leases to
customers and its nationwide sales, service and installation capabilities are
major competitive advantages in the display business.
The Company competes with a number of competitors, both larger and smaller
than itself, and with products based on different forms of technology. In
addition, there are several companies whose current products utilize similar
technology and who possess the resources necessary to develop competitive and
more sophisticated products in the future.
In the indoor market, competitors vary according to market segment. In the
financial market, major competitors include Daktronics, Inc., Sunrise Systems,
Inc., Display Solutions, Inc. and Ferranti Packard Electronics Ltd. Additional
competitors include Grandwell Industries Inc., Gamma Technologies, Inc. IGG
Systems Inc. (exchanges only), and Adaptive Micro Systems, Inc. In some
corporate market applications the Company competes with other technologies (such
as video monitors); in others, Adaptive Micro Systems is a competitor. In the
race and sports book segment of the gaming market, competitors include
Daktronics and Display Solutions. In the progressive meter and controller
segment, the dominant vendor is Mikohn Gaming Corporation; other competitors
include Casino Data Systems, Daktronics, INFAX, Inc., and AEG Corporation
compete in the transportation market.
In the outdoor market, key competitors with direct sales capabilities are
Daktronics, White Way Sign, Fairtron Corporation and Display Solutions. Other
competitors include local sign companies that distribute other manufacturers'
equipment and have limited resources.
Internationally, competitors vary according to market and region. Primary
competitors include Daktronics, IGG and Giantek Technology Corp. (Taiwan). There
are also numerous local and regional competitors.
The Company's motion picture theatres are subject to varying degrees of
competition in the geographic areas in which they operate. In some areas,
theatres operated by national circuits compete with the Company's theatres. The
Company's theatres also face competition from all other forms of entertainment
competing for the public's leisure time and disposable income.
THEATRE OPERATIONS
The Company currently operates 29 screens in eight locations in the
southwestern U.S. This includes a twelve-plex theatre in Loveland, Colorado
which was built in late 1995 through a 50% owned joint venture. The Company's
theatre revenues are generated from box office admissions, theatre concessions,
theatre rentals and other sales. Theatre revenues are generally seasonal and
coincide with the release dates of major films during the summer and holiday
seasons. In 1995, the Company derived approximately 10% of its revenues from
theatre operations.
26
<PAGE> 29
PROPERTIES
The Company's headquarters and principal executive offices are located at
110 Richards Avenue, Norwalk, Connecticut. The Company owns the 102,000 square
foot facility located at such site, which it also uses for engineering,
production and assembly of its indoor displays and outdoor LED display products.
The Company owns facilities in Ontario, Canada, Torrance, California and
Logan, Utah which it uses for administration, sales and service. The Ontario,
Canada and Logan, Utah sites are also used as production and assembly
facilities. In addition, the Company owns a facility in Norcross, Georgia which
it uses as its National Technical Services Center from which it dispatches the
Company's service technicians on a nationwide basis. The Company also leases ten
premises throughout North America and in Australia for use as sales, service
and/or administrative operations. Additionally, the Company owns the buildings
and land in Santa Fe, New Mexico, Taos, New Mexico, and Durango, Colorado which
house theatre operations.
REGULATION
In the U.S. and other countries, various laws and regulations restrict the
installation of outdoor signs and information displays. These regulations may
impose greater restriction on information displays due to alleged concerns over
aesthetics or driver safety if a display is located near a road or highway.
The Company's products are tested to safety standards developed by
Underwriters Laboratories and Edison Testing Laboratories in the U.S. as well as
similar standards in other countries. The Company designs and produces its
products in accordance with these standards. The Company's printed circuit board
manufacturing operations must also meet various safety related rules and
regulations. The Company believes it is in compliance with all applicable
governmental laws and regulations.
INTELLECTUAL PROPERTY
The Company owns or licenses a number of patents and holds a number of
trademarks for its communications equipment and theatrical enterprises and
considers such patents, trademarks and licenses important to its business.
LITIGATION
The Company is not involved in any litigation other than in the ordinary
course of business, none of which would materially adversely affect the
financial position, results of operations or cash flows of the Company in the
event of an adverse judgment.
EMPLOYEES
The Company has approximately 564 employees as of September 30, 1996, of
which 431 employees are related to the Company's electronics display business.
Less than 1% of the employees are unionized. The Company believes its employee
relations are good.
27
<PAGE> 30
MANAGEMENT
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ----------------------------------- --- ------------------------------------------------
<S> <C> <C>
Richard Brandt..................... 69 Chairman of the Board and Director
Victor Liss........................ 59 Vice Chairman of the Board, President, Chief
Executive Officer and Director
Michael R. Mulcahy................. 48 Executive Vice President
Frank N. Daniels................... 58 Senior Vice President
Karl P. Hirschauer................. 51 Senior Vice President
Thomas F. Mahoney.................. 49 Senior Vice President
Angela D. Toppi.................... 41 Senior Vice President, Treasurer, Secretary and
Chief Financial Officer
Steven Baruch...................... 58 Director
Jean Firstenberg................... 60 Director
Allan Fromme....................... 81 Director
Robert Greenes..................... 75 Director
Gene Jankowski..................... 62 Director
Howard S. Modlin................... 65 Director
</TABLE>
Richard Brandt has been a director of the Company since 1954, Chairman of
the Board since 1973, President from 1962 to 1980 and Chief Executive Officer
from 1974 to 1992. He has been an employee of the Company for over 45 years. He
is a director of Presidential Realty Corporation, a real estate company, Vice
Chairman and a trustee of the College of Santa Fe, Chairman Emeritus and a
trustee of the American Film Institute ("AFI") and a trustee of American Theatre
Wing. Mr. Brandt is the brother-in-law of Dr. Allan Fromme.
Victor Liss has been a director of the Company since 1988 and an executive
officer since 1968. He has been Chief Executive Officer of the Company since
December 1992, and Co-Chief Executive Officer between March 1992 and December
1992, responsible for overall operations of the Company, including corporate
direction, long range planning and business development. He has been an employee
for over 28 years. He is a director of Blue Cross & Blue Shield of Connecticut,
Inc., and a trustee of Norwalk Hospital and Norwalk Community Technical College
Foundation, Inc.
Michael R. Mulcahy was elected Executive Vice President of the Company in
charge of sales, marketing and engineering operations in May 1995. He was Senior
Vice President between December 1993 and May 1995, and a Vice President between
1989 and December 1993. He has been an employee of the Company for over 29
years.
Frank N. Daniels was elected Senior Vice President of the Company in charge
of field service and human resources in December 1993 and has been an executive
officer since 1984. He has been an employee of the Company for over 33 years.
Karl P. Hirschauer was elected Senior Vice President of the Company in
charge of engineering and product development in December 1993 and was a Vice
President in charge of engineering between 1984 and December 1993. He has been
an employee of the Company for over 16 years.
Thomas F. Mahoney was elected Senior Vice President of the Company in
charge of sales in June 1996. He was a Vice President between 1994 and June 1996
in charge of financial sales and an Assistant Vice President in sales from 1988
to 1994. He has been an employee of the Company for over 29 years.
Angela D. Toppi was elected Senior Vice President of the Company in charge
of finance in September 1995. Ms. Toppi has served as Secretary since July 1992,
Chief Financial Officer since March 1992 and Treasurer since 1988. She has been
an employee of the Company for over 10 years.
Steven Baruch has been a director of the Company since 1994. During the
past five years he has been Executive Vice President of Presidential Realty
Corporation, a real estate company. He has been a producer
28
<PAGE> 31
of various theatrical productions, among them Driving Miss Daisy, Angels in
America, Love Letters and the Broadway revivals of Damn Yankees, Smokey Joe's
Cafe and A Funny Thing Happened on the Way to the Forum.
Jean Firstenberg has been a director of the Company since 1989 and is
Chairperson of its Audit Committee. She is currently Chief Executive Officer of
the AFI, has been a director of AFI since 1980 and is a trustee of Boston
University.
Dr. Allan Fromme has been a director of the Company since 1958. He is a
consultant to the Company and Chairman of its Executive Committee. Dr. Fromme is
a psychologist and author.
Robert Greenes has been a director of the Company since 1971 and is Vice
Chairman of its Executive Committee. During the past five years he has been
President of Petroconsult, Inc., a petroleum consulting company and President of
East Coast Energy Council. He previously was President and Chief Executive
Officer of Public Fuel Service Inc., a fuel marketing and distribution company.
Gene Jankowski has been a director of the Company since 1994. He has been
Chairman of Jankowski Communications System, Inc., a broadcast consulting
company, since 1990. He previously was President and Chairman of the CBS
Broadcast Group. He is an Adjunct Professor of Telecommunications for Michigan
State University, Chairman Emeritus of the AFI, director of The Advertising
Educational Foundation and the Silvermine Art Center and advisor to the World
Press Freedom Foundation.
Howard S. Modlin has been a director of the Company since 1975 and is
Chairman of its Compensation Committee. He is an attorney and member of the firm
Weisman Celler Spett & Modlin, P.C. which provides legal services to the
Company. He is a director of Fedders Corporation and General DataComm
Industries, Inc.
The executive officers are elected annually at the meeting of the Board
following the annual meeting of stockholders to serve until their successors are
elected. However, provisions in employment agreements provide for such election
throughout the term of such respective agreements.
The Board of Directors is divided into three classes with the term of
office of one of the classes of directors expiring each year and with each class
being elected for a three-year term. The term of each of Messrs. Baruch and
Fromme expires in 1997, the term of each of Messrs. Brandt, Jankowski and Liss
and Ms. Firstenberg expires in 1998 and the term of each of Messrs. Greenes and
Modlin expires in 1999.
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<PAGE> 32
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth all cash and non-cash
compensation paid or awarded for the fiscal years ended December 31, 1995, 1994
and 1993 to the Company's four most highly compensated executive officers and
the Chairman of the Board whose compensation exceeded $100,000 for the fiscal
year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
-------------------------------------- COMPENSATION
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) GRANTED COMPENSATION($)(1)
- -------------------------- ---- --------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Richard Brandt............ 1995 -- 78,618 368,146 -- 57,549
Chairman of the Board, 1994 -- 73,491 363,380 -- 116,535
former Chief and Co-Chief 1993 -- 57,694 349,242 12,500 96,615
Executive Officer(2)
Victor Liss............... 1995 228,037 106,230 -- 5,000 1,888
Chief Executive Officer, 1994 196,915 133,753 -- 10,000 1,888
President and Vice
Chairman 1993 168,244 67,694 -- 10,000 1,958
Michael R. Mulcahy........ 1995 166,593 21,458 -- 1,500 --
Executive Vice President, 1994 130,261 28,124 -- 3,500 --
former Senior Vice
President 1993 129,689 -- -- 500 --
and Vice President of
Sales
Karl P. Hirschauer........ 1995 98,654 5,000 -- 1,000 --
Senior Vice President, 1994 91,212 6,719 -- 1,000 --
former Vice President 1993 91,859 -- -- 500 --
of Engineering
</TABLE>
- ---------------
(1) There are no restricted stock awards, stock appreciation rights or deferred
long-term incentive payouts. The amounts reflected for Mr. Liss are payments
by the Company for split dollar life insurance premiums.
(2) The bonuses and other annual compensation for Mr. Brandt constituted
consulting fees and other payments under a prior agreement with the Company
which was superseded on August 16, 1996 by a new employment agreement.
RETIREMENT PLAN AND SUPPLEMENTAL RETIREMENT BENEFITS
There was a cash contribution of $98,816 for the individuals listed in the
Summary Compensation Table and all other eligible employees to the Company's
retirement plan for 1995. The amounts set forth for All Other Compensation
include $96,615, $116,535 and $57,549 paid to Mr. Brandt for tax equalization
payments in 1993, 1994 and 1995, respectively, under a former consulting
agreement primarily resulting from limitations placed on the Plan by the
Internal Revenue Code. Under the supplemental retirement arrangement with Mr.
Liss, $15,000, $95,475 and $43,723 was accrued but not paid in 1993, 1994 and
1995, respectively.
The Company's retirement plan covers all salaried employees over age 21
with at least one year of service who are not covered by a collective bargaining
agreement to which the Company is a party. The following table presents
estimated retirement benefits payable at normal retirement date, which normally
is age 65. The amounts shown include estimated Social Security benefits which
would be deducted in calculating benefits payable under such Plan.
30
<PAGE> 33
<TABLE>
<CAPTION>
FINAL AVERAGE SALARY ESTIMATED ANNUAL RETIREMENT BENEFITS
FOR HIGHEST FIVE OF BASED ON CREDITED SERVICE YEARS
THE TEN YEARS -------------------------------------------------
PRECEDING RETIREMENT 10 20 30 35 40
--------------------------------------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000............................... $15,000 $30,000 $45,000 $ 52,500 $ 60,000
125,000............................... 18,750 37,500 56,250 65,625 75,000
150,000............................... 22,500 45,000 67,500 78,750 90,000
200,000(1)............................ 30,000 60,000 90,000 105,000 120,000(2)
</TABLE>
As of January 1, 1996, Messrs. Liss, Mulcahy and Hirschauer had 27, 28 and
16 years of credited service, respectively.
- ---------------
(1) $235,840 is the legislated annual cap on compensation for 1993 and $150,000
is the limit for subsequent years.
(2) Maximum legislated annual benefits payable from qualified pension plan.
CERTAIN TRANSACTIONS
During the year 1995, $265,000 in fees for legal services rendered were
paid by the Company to the law firm of which Mr. Modlin, a director of the
Company, is a member.
A subsidiary of the Company loaned an aggregate of $290,385 during the
years 1989 through 1996 (and has agreed to loan an additional $30,000) to Dr.
Fromme, Chairman of the Executive Committee, to fully pay the premiums on a
$500,000 life insurance policy on his life. The Company has received an
assignment of the policy as collateral for their repayment to the extent the
proceeds of the policy are in excess of $200,000. The loans plus accrued
interest are repayable solely from the proceeds of the policy.
Messrs. Matthew Brandt and Thomas Brandt (sons and nephews of Messrs. R.
Brandt and Dr. Fromme, respectively) are Vice Presidents of the Company, and
each is employed by the Company at annual compensation level of approximately
$87,500.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. R. Brandt, Liss, Mulcahy
and Hirschauer expiring on December 31, 2002, December 31, 1997, May 31, 1998
and December 31, 1996, respectively. The agreements provide for annual
compensation of $356,762 (subject to cost of living adjustments) for Mr. Brandt,
$205,000 in 1996 and $215,000 in 1997 for Mr. Liss, $145,000 through May 1997
and $155,000 through May 1998 for Mr. Mulcahy, and $100,000 in 1996 for Mr.
Hirschauer. Each agreement contains graduated bonus provisions based on the
Company's defined pre-tax consolidated earnings, not to exceed $125,000,
$150,000, $30,000 and $20,000 in the case of Messrs. R. Brandt, Liss, Mulcahy
and Hirschauer, respectively. Each agreement also contains varying disability,
death, and, other than Mr. Hirschauer, insurance benefits. In the case of
Messrs. R. Brandt and Liss, each of their agreements provide for profit
participations of 1 1/2% of the Company's defined pre-tax consolidated earnings.
Mr. Mulcahy's agreement also provides for sales override commissions and
severance benefits. Messrs. Brandt and Liss have the right to cancel their
agreements if, among other things, in the case of Mr. Liss, the Company fails to
renegotiate the terms of his agreement (which negotiations are in process) and
elect him to his present positions and, in the case of Mr. Brandt, the Company
fails to elect him to his present position in which case he has the right to
receive the payments for the balance of the term of his agreement, including
certain lump sum payments thereof. The foregoing is a summary of the agreements
and reference is made to the agreements, each of which has been filed with the
Securities and Exchange Commission for the full terms thereof.
STOCK OPTION PLANS
The Company has two incentive stock option plans adopted by the
stockholders in 1992 and 1995 which provide for the grant of incentive stock
options to purchase Common Stock (and/or Class A Stock under the 1995 Plan) at
fair market value (or 110% of fair market value if the optionee owns more than
10% of the
31
<PAGE> 34
Company's outstanding voting securities) on the date of grant. Options
outstanding are exercisable during the period one to ten years after the date of
grant and 500 and 76,200 shares remain available for issuance under the 1992 and
1995 Plans, respectively. The following two tables set forth certain information
with respect to (i) the number of options granted to named executive officers in
fiscal 1995 and (ii) the aggregate number and value of options exercisable by
the named executive officers at December 31, 1995. Except for Mr. Mulcahy, no
other named executive officer exercised any options in fiscal 1995. In 1996, Mr.
Liss exercised options to purchase 6,906 shares.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
% OF REALIZABLE VALUE
TOTAL AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK PRICE
SECURITIES TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ------------------
NAME GRANTED(#) YEAR PER SHARE($) DATE 5% ($) 10% ($)
- -------------------------- ---------- --------- ------------ ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Victor Liss............... 5,000 18.4% 8.125 07/26/05 26,000 65,000
Michael R. Mulcahy........ 1,500 5.5% 8.125 07/26/05 8,000 19,000
Karl P. Hirschauer........ 1,000 3.7% 8.125 07/26/05 5,000 13,000
</TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTION EXERCISES OPTIONS AT OPTIONS AT
------------------------------ FISCAL YEAR END FISCAL YEAR END($)
SHARES --------------- ------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---------------------------------- ------------- ------------ --------------- ------------------
<S> <C> <C> <C> <C>
Richard Brandt.................... -- -- 12,500/-- 6,250/--
Victor Liss....................... -- -- 28,000/5,000 17,875/--
Michael R. Mulcahy................ 2,000 2,063 4,000/1,500 --/--
Karl P. Hirschauer................ -- -- 2,000/1,000 844/--
</TABLE>
- ---------------
(1) Market value of underlying securities at fiscal year end, minus the exercise
price.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 1995, the Board of Directors had five meetings. All directors
attended 75% or more of such meetings and of committees of which they were
members. Non-employee directors receive an annual fee of $3,500 and $950 for
each meeting of the Board attended, while employee directors receive an annual
fee of $2,200 and $450 for each meeting attended.
The members of the Executive Committee of the Board of Directors are
Messrs. R. Brandt, Greenes, Liss, Modlin and Dr. Fromme. The Executive Committee
is authorized to exercise the powers of the Board of Directors during the
intervals between the meetings of the Board and is from time to time delegated
certain authorizations by the Board in matters pertaining to the Company. The
Executive Committee did not hold any formal meetings in 1995. Members of said
Committee receive a fee of $300 for each meeting of the Committee they attend.
Dr. Fromme receives an annual fee of $12,000 as Chairman of the Executive
Committee and for other consulting services. Mr. Greenes receives an annual fee
of $6,000 as Vice Chairman of the Executive Committee and for other consulting
services.
The members of the Compensation Committee of the Board of Directors are
Messrs. Modlin, Greenes and Jankowski and Ms. Firstenberg. The Compensation
Committee reviews compensation and other benefits.
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<PAGE> 35
The Compensation Committee had two meetings in 1995. Members of said Committee
receive a fee of $300 for each meeting of the Committee they attend and the
Chairman, Mr. Modlin, receives an annual fee of $2,500.
The members of the Audit Committee of the Board of Directors are Ms.
Firstenberg and Messrs. Baruch, Greenes and Modlin. The Audit Committee reviews
the audit function and material aspects thereof with the Company's independent
auditors. Such Committee had two meetings in 1995. Members of the Audit
Committee receive a fee of $300 for each meeting which they attend and the
Chairperson, Ms. Firstenberg, receives an annual fee of $2,500.
On June 20, 1989, the Board of Directors established a Non-Employee
Director Stock Option Plan as amended, which covers a maximum of 30,000 shares
for grant. Options are for a period of six years from the date of the grant, are
granted at fair market value on the date of the grant, may be exercised at any
time after one year from the date of the grant while a director and are based on
years of service, with a minimum of 500 stock options for each director, an
additional 500 based on five or more years of service, another 500 based on ten
or more years of service and an additional 1,000 based on twenty or more years
of service. Additional options are granted upon the expiration or exercise of
any such option which is no earlier than four years after the date of the grant,
in an amount equal to such exercised or expired options.
33
<PAGE> 36
DESCRIPTION OF NOTES
The Notes offered hereby are to be issued under an Indenture, to be dated
as of December , 1996, between the Company and Continental Stock Transfer &
Trust Company, as Trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summary of certain provisions of the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture, including the definitions therein of
certain terms. Wherever a particular Section, Article or defined term is
referred to, such Section, Article or defined term refers to the Indenture and
is incorporated herein by reference.
GENERAL
The Notes will be unsecured subordinated obligations of the Company, will
be limited to an aggregate principal amount of $27,500,000 (subject to increase
in the event of the exercise of the Underwriter's over-allotment option) and
will mature on December 1, 2006. The Notes will bear interest at the rate per
annum shown on the front cover of this Prospectus from the date of initial
issuance, or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually on June 1 and December 1 of
each year, commencing June 1, 1997, to the Person in whose name the Notes (or
any predecessor Notes) are registered at the close of business on the Regular
Record Date for such interest, which shall be May 15 or November 15 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Interest on the Notes will be paid on the basis of a 360-day year of
twelve 30-day months, based on actual days elapsed. (Section 2.04 and 6.01)
Principal of, and premium, if any, and interest on the Notes will be
payable, and the transfer of Notes will be registerable, at the office or agency
of the Company maintained for such purposes in the Borough of Manhattan, the
City of New York. In addition, payment of interest may, at the option of the
Company, be made by check mailed to the address of the Person entitled thereto
as it appears in the Note Register. (Sections 2.03, 6.01 and 6.02)
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiples thereof. (Section 3.2) No
service charge will be made for any registration of transfer or exchange of the
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. The Company is not
required (i) to issue, register the transfer of or exchange any Note during a
period beginning at the opening of business 15 days before the day fixed for any
redemption and ending at the close of business on such Redemption Date or (ii)
to register the transfer of or exchange any Notes for redemption in whole or in
part, except the unredeemed portion of the Notes being redeemed in part.
(Section 2.07)
All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium, if any, and interest on any Note which
remains unclaimed for two years after such principal, premium or interest
becomes due and payable may be repaid to the Company. Thereafter, the Holder of
such Note may, as an unsecured general creditor, look only to the Company for
payment thereof. (Section 13.04)
The Indenture does not contain any provisions that would provide protection
to Holders of the Notes against a sudden and dramatic decline in the credit
quality of the Company resulting from any takeover, recapitalization or similar
restructuring, except as described below under "Repurchase at Option of Holders
Upon a Repurchase Event."
CONVERSION RIGHTS
The Notes will be convertible into the Common Stock of the Company at any
time after 60 days following the date of initial issuance thereof and up to and
including the maturity date (subject to prior redemption by the Company on not
less than 30 nor more than 60 days' notice) of the principal amount thereof,
initially at the Conversion Price stated on the cover page of this Prospectus
(subject to adjustment as described below). The right to convert the Notes
called for redemption or delivered for repurchase will terminate at the close of
business on the last Trading Day prior to the Redemption Date or the Repurchase
34
<PAGE> 37
Date, unless the Company defaults in making the payment due upon redemption or
repurchase. (Section 5.01) For information as to notices of redemption, see
"Optional Redemption."
The Conversion Price will be subject to adjustment in certain events,
including (i) dividends (and other distributions) payable in Common Stock or any
class of capital stock of the Company, (ii) the issuance to all holders of
Common Stock of rights, warrants or options entitling them to subscribe for or
purchase Common Stock at less than the current market price, (iii) subdivisions
or combinations of Common Stock, (iv) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, cash or other assets
(including securities, but excluding those dividends, rights, warrants, options
and distributions referred to above and excluding dividends and distributions
paid exclusively in cash), (v) distributions consisting exclusively of cash
(excluding any cash portion of distributions referred to in (iv) above or cash
distribution upon a merger or consolidation to which the second succeeding
paragraph applies) to all holders of Common Stock in an aggregate amount that,
combined together with (a) all other such all-cash distributions made within the
preceding 12 months in respect to which no adjustment has been made and (b) any
cash and the fair market value of other consideration paid or payable in respect
of any tender offers by the Company for Common Stock concluding within the
preceding 12 months in respect of which no adjustment has been made, exceeds
12.5% of the Company's market capitalization (defined as being the product of
the current market price of the Common Stock times the number of shares of
Common Stock then outstanding) on the record date for such distribution, and
(vi) the purchase of Common Stock pursuant to a tender offer made by the Company
or any of its subsidiaries which involves an aggregate consideration that
together with (a) any cash and the fair market value of any other consideration
paid or payable in any other tender offer by the Company or any of its
subsidiaries of Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (b) the aggregate amount of any such all-cash distributions referred to in
(v) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 12.5% of the Company's market capitalization on the expiration of
such tender offer. No adjustment in the Conversion Price shall be required
unless such adjustment (plus any adjustments not previously made) would require
an increase or decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this sentence are not required to be made
shall be carried forward and then taken into account in any subsequent
adjustment. (Section 5.04)
In addition to the foregoing adjustments, the Company will be permitted to
make such reduction in the Conversion Price as it considers to be advisable in
order that any event treated for Federal income tax purposes as a dividend or
distribution of stock or stock rights will not be taxable to the holders of the
Common Stock. (Section 5.04)
Subject to the rights of Holders of the Notes described below under the
"Repurchase at Option of Holders Upon a Repurchase Event," in case of certain
consolidations or mergers to which the Company is a party or the transfer of
substantially all of the assets of the Company, each Note then outstanding
would, without the consent of any Holders of the Notes, become convertible only
into the kind and amount of securities, cash and other property receivable upon
the consolidation, merger or transfer by a holder of the number of shares of
Common Stock into which such Note might have been converted immediately prior to
such consolidation, merger or transfer (assuming such holder of Common Stock
failed to exercise any rights of election and received per share the kind and
amount received per share by a plurality of non-electing shares). (Section 5.10)
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon market price.
(Section 5.03) Notes surrendered for conversion during the period from the close
of business on any Regular Record Date next preceding any Interest Payment Date
to the opening of business on such Interest Payment Date (except the Notes
called for redemption on a Redemption Date within such period) must be
accompanied by payment of an amount equal to the interest thereon which the
registered Holder is to receive. In the case of any Note that has been converted
after any Regular Record Date but on or before the next Interest Payment Date,
interest whose stated maturity is on such Interest Payment Date will be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
will be paid to the Holder of such Note on such Regular Record Date. Except as
described
35
<PAGE> 38
above, no interest on converted Notes will be payable by the Company on any
Interest Payment Date subsequent to the date of conversion. No other payment or
adjustment for interest or dividends will be made upon conversion. (Section
5.02)
If at any time the Company makes a distribution of property to its
stockholders that would be taxable to such stockholders as a dividend for
Federal income tax purposes (e.g., distributions of evidence of indebtedness or
assets of the Company, but generally not stock dividends or rights to subscribe
for Common Stock) and, pursuant to the antidilution provisions of the Indenture,
the Conversion Price of the Notes is reduced, such reduction may be deemed to be
the payment of a taxable dividend to Holders of the Notes. Holders of the Notes
could, therefore, have taxable income as a result of an event pursuant to which
they receive no cash or property that could be used to pay the related income
tax.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Notes will, to the extent set forth in the Indenture, be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness. Upon any
payment or dissolution of assets to creditors upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, marshaling
of assets or any bankruptcy, insolvency or similar proceedings of the Company,
the holders of all Senior Indebtedness will be first entitled to receive payment
in full of all amounts due or to become due thereon before the Holders of the
Notes will be entitled to receive any payment in respect of the principal of or
premium, if any, or interest on the Notes. No payment or distribution of any
assets of the Company shall be made on account of principal of and premium, if
any, or interest on the Notes, in the event and during the continuation of (i)
any default in the payment of principal of or premium, if any, or interest on
any Senior Indebtedness beyond any applicable grace period with respect thereto
or (ii) any other event of default with respect to any Senior Indebtedness
permitting the holders of such Senior Indebtedness (or a trustee or other
representative on behalf of the holders thereof) to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise have
become due and payable, upon written notice thereof to the Company and the
Trustee by any holders of Senior Indebtedness (or a trustee or other
representative on behalf of the holders thereof) (the "Default Notice"), unless
and until such event of default shall have been cured or waived or ceased to
exist and such acceleration shall have been rescinded or annulled; provided such
payments may not be prevented under clause (ii) above for more than 179 days
after an applicable Default Notice has been received by the Trustee unless the
Senior Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety, in which case no such payment may be
made until such acceleration has been rescinded or annulled or such Senior
Indebtedness has been paid in full. No event of default which existed or was
continuing on the date of any Default Notice may be made the basis for the
giving of a second Default Notice and only one such Default Notice may be given
in any 365-day period. (Article Four)
By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Indebtedness or of the Notes may
recover less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the Holders of the Notes.
"Senior Indebtedness" means, with respect to the Company, any of the
following (without duplication): (i) (a) any liability or obligation of the
Company for borrowed money (including, without limitation, the payment of
principal of and premium, if any, or interest, fees, penalties, expenses,
collection expenses, and other obligations in respect thereof, and, to the
extent permitted by applicable law, interest accruing after the filing of a
petition initiating any proceeding under the Bankruptcy Code whether or not
allowed as a claim in such proceeding), whether or not evidenced by bonds,
debentures, notes or other written instruments, and any other liability or
obligation evidenced by notes, bonds, debentures or similar instruments (other
than the Notes) whether or not contingent and whether outstanding on the date of
execution of the Indenture or thereafter created, incurred or assumed, (b) any
deferred payment obligation of the Company for the payment of the purchase price
of property or assets evidenced by a note or similar instrument (excluding any
obligation for trade payables or constituting the deferred purchase price of
property or assets which is not evidenced by a note or similar instrument and
which is unsecured), (c) any obligation of the Company for the payment of rent
or other amounts under a lease of property or assets which obligation is
required to be classified and
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<PAGE> 39
accounted for as a capitalized lease on the balance sheet of the Company under
generally accepted accounting principles, (d) all obligations of the Company
under interest rate and currency swaps, floors, caps, or similar arrangements
intended to fix interest rate obligations or currency fluctuation risks, (e) all
obligations of the Company evidenced by a letter of credit or any reimbursement
obligation of the Company in respect of a letter of credit, (f) all obligations
of others secured by a lien to which any of the properties or assets of the
Company are subject (including, without limitation, leasehold interests and any
intangible property rights), whether or not the obligations secured thereby have
been assumed by the Company or shall otherwise be the Company's legal obligation
and (g) all obligations of others of the kinds described in the preceding
clauses (a), (b), (c), (d) or (e) assumed by or guaranteed by the Company and
the obligations of the Company under guarantees of any such obligations; and
(ii) any amendments, renewals, extensions, deferrals, modifications, refinancing
and refunding of any of the foregoing. "Senior Indebtedness" shall not include:
(i) indebtedness that by the terms of the instrument or instruments by which
such indebtedness was created or incurred expressly provides that it (a) is
junior in right of payment to the Notes or (b) ranks pari passu, in right of
payment with the Notes, (ii) any repurchase, redemption or other obligation in
respect of Disqualified Capital Stock, (iii) any indebtedness of the Company to
any Subsidiary or to any Affiliate of the Company or any of the Subsidiaries,
(iv) any indebtedness incurred in connection with the purchase of goods, assets,
materials or services in the ordinary course of business or representing amounts
recorded as accounts payable, trade payables (which are unsecured) or other
current liabilities of the Company (other than for borrowed money) on the books
of the Company (other than the current portion of any long-term indebtedness of
the Company that but for this clause (iv) would constitute Senior Indebtedness),
(v) any indebtedness of or amount owed by the Company to employees for services
rendered to the Company, (vi) any liability for Federal, state, local or other
taxes owing or owed by the Company and (vii) the Company's 9 1/2% Subordinated
Debentures due 2012 and 9% Convertible Subordinated Debentures due 2005.
(Section 1.01)
The Notes will be effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's subsidiaries. Any right of the Company to receive assets of any
such subsidiary upon the liquidation or reorganization of any such subsidiary
(and the consequent right of the Holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of that subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
The Indenture does not prohibit or limit the incurrence of additional
Senior Indebtedness. At September 30, 1996 , the Company's Senior Indebtedness
aggregated approximately $23.2 million, excluding accrued interest and the
Company's subsidiaries had indebtedness and other liabilities of approximately
$4.8 million. The Company expects from time to time to incur additional
indebtedness, including Senior Indebtedness. See Note 9 of "Notes to
Consolidated Financial Statements" for a more detailed description of the
Company's outstanding indebtedness. The Company's 9% Convertible Subordinated
Debentures due 2005 and 9 1/2% Subordinated Debentures due 2012 are not Senior
Indebtedness.
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<PAGE> 40
OPTIONAL REDEMPTION
The Notes are redeemable at the Company's option, in whole or from time to
time in part, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of the Notes to be redeemed at such Holder's address appearing in the
Note Register, on any date on or after December 1, 1999 and prior to maturity.
The Redemption Prices (expressed as a percentage of the principal amount)
are as follows for the 12-month period beginning December 1 of the years
indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
----------
<S> <C>
1999...................................................... %
2000......................................................
2001......................................................
2002......................................................
2003......................................................
2004......................................................
</TABLE>
thereafter and at maturity at 100% of principal, together in the case of any
such redemption with accrued interest to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
No sinking fund is provided for the Notes.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(i) failure to pay principal of or premium, if any, on any Note when
due, whether or not such payment is prohibited by the subordination
provisions of the Indenture;
(ii) failure to pay any interest on any Note when due, continued for
30 days, whether or not such payment is prohibited by the subordination
provisions of the Indenture;
(iii) default in the payment of the Repurchase Price in respect of any
Note on the Repurchase Date therefor, whether or not such payment is
prohibited by the subordination provisions of the Indenture;
(iv) failure to perform or breach of any other covenant of the Company
in the Indenture, which continues for 60 days after written notice as
provided in the Indenture; and
(v) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary. (Section 7.01)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 8.01) Subject
to the Trustee being offered reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by the Trustee, the Holders of
a majority in aggregate principal amount of the Outstanding Notes will have the
right by written instruction to the Trustee, to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. (Section 7.05)
If an Event of Default shall occur and be continuing, either the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Notes may accelerate the maturity of all Notes; provided, however,
that after such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of the
Outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal, have been cured or waived as provided in the Indenture. (Section
7.02) For information as to waiver of defaults, see "Modification and Waiver"
below.
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<PAGE> 41
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless (i) such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default and unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request to the Trustee
to institute proceedings, (ii) such Holder has offered to the Trustee reasonable
indemnity, (iii) the Trustee for 60 days after receipt of such notice has failed
to institute any such proceeding and (iv) no direction inconsistent with such
request shall have been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding Notes. (Section
7.06) However, such limitations do not apply to a suit instituted by a Holder of
a Note for enforcement of (a) payment of the principal of and premium, if any,
or interest on such Note on or after the respective due dates expressed in such
Note, (b) the right to require repurchase of such Note or (c) the right to
convert such Note in accordance with the Indenture. (Section 7.07)
The Indenture provides that the Company will deliver to the Trustee, within
95 days after the end of each fiscal year, an officers' certificate, stating as
to each signer thereof that he or she is familiar with the affairs of the
Company and whether or not to his or her knowledge the Company is in default in
the performance and observance of any of the Company's obligations under the
Indenture and if the Company shall be in default, specifying all such defaults
of which he or she has knowledge and the nature and status thereof. (Section
6.04)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Notes under
the Indenture, may consolidate with or merge into any other Person or convey,
transfer or lease its assets substantially as an entirety to any Person,
provided that (i) the successor is a Person organized under the laws of any
domestic jurisdiction; (ii) the successor Person, if other than the Company,
assumes the Company's obligations on the Notes and under the Indenture; (iii)
after giving effect to the transaction no Event of Default, and no event after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing; and (iv) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, complies with this covenant and that all conditions precedent herein
provided for relating to such transaction have been complied with. (Section
12.01)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of 66 2/3% in aggregate
principal amount of the Outstanding Notes; provided, however, that no such
modification or amendment may, without consent of the Holder of each Outstanding
Note affected thereby, (i) change the stated maturity of the principal of, or
any installment of interest on any Note; (ii) reduce the principal amount of, or
the premium or interest on any Note; (iii) change the place of payment where, or
currency in which, any Note or any premium or interest thereof is payable; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Note; (v) adversely affect the right to convert the Notes; (vi)
adversely affect the right to cause the Company to repurchase the Notes; (vii)
modify the subordination provisions in a manner adverse to the Holders of the
Notes; (viii) reduce the above-stated percentage of Outstanding Notes necessary
to modify or amend the Indenture; or (ix) reduce the percentage of aggregate
principal amount of Outstanding Notes necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults. (Section
11.02)
The Holders of a majority in aggregate principal amount of Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. (Section 7.04) The Holders of a majority in aggregate principal
amount of the Outstanding Notes may waive any past default or right under the
Indenture, except (i) a default in payment of principal, premium or interest,
(ii) the right of a Holder to redeem or convert the Note or (iii) with respect
to any covenant or provision of the Indenture that requires the consent of the
Holder of each Outstanding Note affected. (Section 7.04)
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<PAGE> 42
REPURCHASE AT OPTION OF HOLDERS UPON A REPURCHASE EVENT
The Indenture provides that if a Repurchase Event occurs after initial
issuance of the Notes, each Holder of the Notes shall have the right (which
right may not be waived by the Board of Directors or the Trustee) at the
Holder's option, to require the Company to repurchase all of such Holder's
Notes, or any portion thereof that is an integral multiple of $1,000, on the
date (the "Repurchase Date") that is 45 calendar days after the date of the
Company Notice (as defined below), for cash at a price equal to 100% of the
principal amount of such Notes to be repurchased (the "Repurchase Price"),
together with accrued interest to the Repurchase Date. (Section 6.09)
Within 30 calendar days after the occurrence of a Repurchase Event, the
Company is obligated to mail all Holders of record of the Notes a notice (the
"Company Notice") of the occurrence of such Repurchase Event and of the
repurchase right arising thereof. The Company must deliver a copy of the Company
Notice to the Trustee. To exercise the repurchase right, the Holder of such Note
must deliver on or before the fifth day preceding the Repurchase Date
irrevocable written notice to the Trustee of the Holder's exercise of such right
(except that the right of the Holders to convert such Notes shall continue until
the close of business on the last Trading Day preceding the Repurchase Date),
together with the Notes with respect to which the right is being exercised, duly
endorsed for transfer to the Company. (Section 6.09)
A Repurchase Event will be deemed to have occurred at such time after
initial issuance of the Notes if:
(i) any Person (including any syndicate or group deemed to be a
"Person" under Section 13(d)(3)of the Exchange Act), other than the
Company, any subsidiary of the Company, any existing Person (including
directly or indirectly, the immediate family of any such Person) who
currently beneficially owns shares of capital stock with 50% or more of the
voting power as described below, or any current or future employee or
director benefit plan of the Company or any subsidiary of the Company or
any entity holding capital stock of the Company for or pursuant to the
terms of such plan, or an underwriter engaged in a firm commitment
underwriting in connection with a public offering of capital stock of the
Company, is or becomes the beneficial owner, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of
transactions of shares of capital stock of the Company entitling such
Person to exercise 50% or more of the total voting power of all shares of
capital stock of the Company entitled to vote generally in the election of
directors;
(ii) the Company sells or transfers all or substantially all of the
assets of the Company to another Person;
(iii) there occurs any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company (other than a merger (a) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock, (b) which is effected solely to change the
jurisdiction of incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares of Common
Stock solely into shares of Common Stock, or (c) a transaction in which the
stockholders of the Company immediately prior to such transaction owned,
directly or indirectly, immediately following such transaction, at least a
majority of the combined voting power of the outstanding voting stock of
the Company resulting from the transaction, such stock to be owned by such
stockholders in substantially the same proportion as their ownership of the
voting stock of the Company immediately prior to such transaction);
(iv) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the 24-month period immediately preceding such change
(together with any other director whose election by the Board of Directors
of the Company or whose nomination for election by the stockholders of the
Company was approved by a vote of at least a majority of the directors then
in office either who were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office; or
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<PAGE> 43
(v) the Common Stock of the Company is the subject of a "Rule 13e-3
transaction" as defined under the Exchange Act.
provided, however, that a Repurchase Event shall not be deemed to have occurred
if the closing price per share of the Common Stock for any five Trading Days
within the period of ten consecutive Trading Days ending immediately before a
Repurchase Event shall equal or exceed 110% of the Conversion Price of such
Notes in effect on each such Trading Day. A "beneficial owner" shall be
determined in accordance with Rule 13d-3 promulgated by the Commission under the
Exchange Act, as in effect on the date of execution of the Indenture. (Sections
1.01 and 6.09)
The right to require the Company to repurchase the Notes as a result of the
occurrence of a Repurchase Event could create an event of default under Senior
Indebtedness as a result of which any repurchase could, absent a waiver, be
blocked by the subordination provisions of the Notes. See "Subordination" above.
Failure of the Company to repurchase the Notes when required would result in an
Event of Default with respect to the Notes whether or not such repurchase is
permitted by the subordination provisions. The Company's ability to pay cash to
the Holders of Notes upon a repurchase may be limited by certain financial
covenants contained in the Company's credit agreement.
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of any
issuer tender offer and may apply in the event that the repurchase option
becomes available to the Holders of the Notes. The Company will comply with this
rule to the extent applicable at that time. (Section 6.09)
The repurchase feature of the Notes may in certain circumstances make more
difficult or discourage a takeover of the Company and the removal of incumbent
management. The foregoing provisions would not necessarily afford Holders of the
Notes protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders.
Except as described above with respect to a Repurchase Event, the Indenture
does not contain provisions permitting the Holders of the Notes to require the
Company to repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. Subject to the limitation on mergers
and consolidations described above, the Company, its management or its
subsidiaries could, in the future, enter into certain transactions, including
refinancing, certain recapitalizations, acquisitions, the sale of all or
substantially all of its assets, the liquidation of the Company or similar
transactions, that would not constitute a Repurchase Event under the Indenture,
but that would increase the amount of Senior Indebtedness (or any other
indebtedness) outstanding at such time or substantially reduce or eliminate the
Company's assets. There are no restrictions in the Indenture on the creation of
Senior Indebtedness (or any other indebtedness) and, under certain
circumstances, the incurrence of significant amounts of additional indebtedness
could have an adverse effect on the Company's ability to service its
indebtedness, including the Notes.
If a Repurchase Event were to occur, there is no assurance that the Company
would have sufficient funds to repurchase all Notes tendered by the Holders
thereof or to make any principal, premium, if any, or interest payments
otherwise required by the Notes. At September 30, 1996, the Company had
outstanding approximately $21.4 million principal amount of indebtedness under
its existing credit agreement which could be accelerated upon the occurrence of
certain change of control events.
As noted above, one of the events that constitutes a Repurchase Event under
the Indenture is a sale or other transfer of all or substantially all of the
assets of the Company. The Indenture will be governed by New York law, and the
definition under New York law of "substantially all" of the assets of a
corporation varies according to the facts and circumstances of the transaction.
Accordingly, if the Company were to engage in a transaction in which it disposed
of less than all of its assets, a question of interpretation could arise as to
whether such disposition was of "substantially all" of its assets and whether
the transaction was a Repurchase Event.
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<PAGE> 44
SATISFACTION AND DISCHARGE
The Company may, subject to certain conditions, discharge its obligations
under the Indenture while the Notes remain outstanding if (i) all outstanding
Notes will become due and payable at their scheduled maturity within one year or
(ii) all outstanding Notes are scheduled for redemption within one year, and, in
either case, the Company has deposited with the Trustee an amount sufficient to
pay and discharge all outstanding Notes on the date of their scheduled maturity
or the scheduled date of redemption. (Section 13.01)
REPORTS
In addition to complying with any applicable legal requirements, the
Company will deliver to the Holders of record, and to any beneficial owners so
requesting, annual reports containing audited consolidated financial statements
with a report thereon by the Company's independent public accountants. (Section
8.06)
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
Continental Stock Transfer & Trust Company is the Trustee under the
Indenture. A successor Trustee may be appointed in accordance with the terms of
the Indenture.
The Trustee's duties are set forth in the Trust Indenture Act, as amended
(the "Trust Indenture Act"), and in the Indenture. The Trust Indenture Act
imposes certain limitations on the right of the Trustee, in the event it becomes
a creditor of the Company, to obtain payment of claims in certain cases, or to
realize on certain property received in respect to any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
provided, however, it if acquires any conflicting interest within the meaning of
Section 310 of the Trust Indenture Act, it must generally either eliminate such
conflict or resign.
Prior to an Event of Default, the Trustee is responsible to perform only
such duties as are specifically set out in the Indenture. In case an Event of
Default shall occur (and shall not be cured), the Trust Indenture Act required
that the Trustee use the degree of care of a prudent person in the conduct of
its own affairs in the exercise of its powers. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the Holders of Notes, unless they
shall have offered to the Trustee reasonable security or indemnity. (Section
8.01)
The holders of a majority in principal amount of all outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy or power available to the Trustee, provided that such
direction does not conflict with any rule of law or with the Indenture, is not
prejudicial to the rights of another Holder or the Trustee, and does not involve
the Trustee in personal liability. (Sections 7.05 and 8.01)
The Trustee is also the trustee for the Company's 9% Convertible
Subordinated Debentures due 2005 and 9 1/2% Subordinated Debentures due 2012.
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<PAGE> 45
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The shares of Common Stock are entitled to one vote per share on all
matters submitted to stockholders. The holders of Common Stock are entitled to
vote separately as a class (as are the shares of Class B Stock) on all matters
requiring an amendment to the Company's Certificate of Incorporation, as well as
on mergers, consolidations and certain other significant transactions for which
stockholder approval is required under Delaware law. Holders of the Common Stock
do not have preemptive rights or cumulative voting rights.
Dividends on the Common Stock will be paid if, and when declared. The
Common Stock is entitled to cash dividends which are 11.1% higher per share than
the cash dividends which may be paid on the Class B Stock. Except as otherwise
set forth herein the Common Stock and the Class B Stock rank equally. Stock
dividends on and stock splits of Common Stock will only be payable or made in
shares of Common Stock.
In the event of liquidation the Common Stock is entitled to receive the
entire net assets of the Company remaining after payment of all debts and other
claims of creditors and after the holders of each series of Preferred Stock, if
any, have been paid the preferred liquidating distribution on their shares, if
any, as fixed by the Board of Directors of the Company. The Common Stock is not
convertible into shares of any other equity security of the Company.
The Common Stock is freely transferable. As of September 30, 1996, there
were 847 holders of record of Common Stock.
CLASS B STOCK
The shares of Class B Stock are entitled to ten votes per share on all
matters submitted to stockholders. They are entitled to vote separately as a
class (as are the shares of Common Stock) on all matters requiring an amendment
to the Company's Certificate of Incorporation, as well as on mergers,
consolidations and certain other significant transactions for which stockholder
approval is required under Delaware law. Holders of the Class B Stock do not
have preemptive rights or cumulative voting rights.
Dividends on the Class B Stock will be paid only as and when dividends on
the Common Stock are declared and paid. The Class B Stock is entitled to cash
dividends which are 10% lower per share than the cash dividends which may be
paid on the Common Stock. Except as otherwise set forth herein the Common Stock
and the Class B Stock rank equally. Stock dividends on and stock splits of Class
B Stock will only be payable or made in shares of Class B Stock.
In the event of liquidation or insolvency, each share of Class B Stock will
be entitled, through conversion into Common Stock, to share ratably with the
Common Stock in the assets remaining after payment of all debts and other claims
of creditors, subject to the rights of any Preferred Stock which may be issued
in the future.
Holders of Class B Stock may elect at any time to convert any or all of
such shares into shares of Common Stock on a share-for-share basis. In the event
that the number of outstanding shares of Class B Stock falls below 5% of the
aggregate number of issued and outstanding shares of Common Stock and Class B
Stock, or the Board of Directors and a majority of the outstanding shares of
Class B Stock approve the conversion of all of the Class B Stock into Common
Stock, then immediately upon the occurrence of either event, the shares of the
Class B Stock will automatically be converted into shares of Common Stock. In
the event of such conversion, certificates formerly representing outstanding
shares of Class B Stock will thereafter be deemed to represent a like number of
shares of Common Stock.
The Class B Stock is not transferable except to certain family members and
related entities. As of September 30, 1996 there were 68 holders of Class B
Stock.
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<PAGE> 46
CLASS A STOCK
Each share of Class A Stock has no voting rights except as otherwise
required by law. Under the Delaware General Corporation Law, holders of Class A
Stock are entitled to vote on proposals to increase or decrease the number of
authorized shares of Class A Stock, change the par value of the Class A Stock or
to alter or change the powers, preferences or special rights of the shares of
Class A Stock which may affect them adversely.
Each outstanding share of Class A Stock is entitled to receive such
dividends and other distributions in cash, stock or property as may be declared
by the Board of Directors of the Company, provided that, if at any time a cash
dividend is paid on the Common Stock, a cash dividend will also be paid on the
Class A Stock in an amount 10% higher than the amount per share paid on the
Common Stock and 22.2% higher than that paid on the Class B Stock. In no event
shall dividends and other distributions be paid on any of the Common Stock,
Class A Stock or Class B Stock unless the other such classes of stock also
receive dividends subject to the above provisions for the requirement of the
respective higher cash dividends for Class A Stock and Common Stock. Dividends
or other distributions payable in shares of stock shall be made to holders of
Class A Stock in shares of Class A Stock. The Board can authorize a distribution
of Class A Stock proportionately to holders of Common Stock, Class A Stock and
Class B Stock. In no event will either Common Stock, Class A Stock or Class B
Stock be split, divided or combined unless the others are also proportionately
split, divided or combined.
The Class A Stock will convert into Common Stock only at such time as all
of the Class B Stock is converted to Common Stock in accordance with the terms
of the Certificate of Incorporation. The Certificate of Incorporation provides
that if the number of shares of Class B Stock falls below 5% of the aggregate
number of outstanding shares of Common Stock and Class B Stock, or if the Board
of Directors and a majority of the outstanding shares of Class B Stock approve,
the outstanding shares of Class B Stock will be converted into Common Stock.
Consistent with the terms of the Common Stock and Class B Stock, the Class
A Stock does not carry any preemptive rights enabling a holder to subscribe for
or receive shares of any class of stock of the Company or any other securities
convertible into shares of any class of stock of the Company.
The Class A Stock is entitled to receive the same consideration per share
as the Common Stock and Class B Stock in the event of any liquidation,
dissolution or winding-up of the Company.
Each holder of Class A Stock is entitled to receive the same per share
consideration as the per share consideration, if any, received by any holder of
the Common Stock and Class B Stock in a merger or consolidation of the Company.
SPECIAL VOTING REQUIREMENTS
The Company's Certificate of Incorporation, as presently in effect,
contains a required four-fifths vote on mergers, consolidations or a sale of
substantially all of the Company's assets with an "Interested Person," i.e. a
holder of 10% or more of its common stock, unless such transaction is first
approved by the Company's Board of Directors. It also contains a "fair price"
provision requiring all stockholders to receive equal treatment in the event of
a takeover which may be coercive. Such provision may not be amended except by a
four-fifths vote of the stockholders and may be considered to have the effect of
discouraging tender offers, takeover attempts, acquisitions or business
combinations involving the Company. Such provision also requires that business
combinations involving the Company and certain "Acquiring Persons" (i.e., a
person or entity which directly or indirectly owns or controls at least 5% of
the voting stock of the Company) be approved by the holders of four-fifths of
the Company's outstanding shares entitled to vote (excluding shares held by the
Acquiring Person) unless such business combination either (1) has been
authorized by the Board of Directors prior to the time that the Acquiring Person
involved in such business combination became an Acquiring Person, or (2) will
result in the receipt by the other stockholders of a specified minimum amount
and form of payment for their shares.
44
<PAGE> 47
PREFERRED STOCK
Preferred stock may be issued in one or more series from time to time by
action of the Board of Directors. The shares of any series of Preferred Stock
may be convertible into Common Stock, may have priority over the Common Stock,
Class B Stock and Class A Stock in the payment of dividends and as to the
distribution of assets in the event of liquidation, dissolution or winding-up of
the Company and may have preferential or other voting rights, in each case, to
the extent, if any, determined by the Board of Directors of the Company at the
time it creates the series of Preferred Stock. There currently are no shares of
Preferred Stock outstanding.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation whose stock is listed on a national securities exchange or held of
record by more than 2,000 stockholders, and an "interested stockholder" are
prohibited for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation or bylaws not to be governed by the Delaware
anti-takeover law (the Company has not made such an election), (ii) the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee stock plans in which the
employees do not have a right to determine confidentially whether to tender or
vote stock held by the plan), or (iv) the business combination was approved by
the board of directors of the corporation and ratified by 66 2/3% of the voting
stock which the interested stockholder did not own. The three year prohibition
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an interested
stockholder, transactions with an interested stockholder involving the assets or
stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who becomes
the beneficial owner of 15% or more of a Delaware corporation's voting stock.
The Delaware anti-takeover law could have the effect of delaying, deferring or
preventing a change in control of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, relating to prohibited dividends or
distributions or the repurchase or redemption of stock, or (iv) for any
transaction from which the director derives an improper personal benefit. The
provision does not apply to claims against a director for violations of certain
laws, including federal securities law. If the Delaware General Corporation Law
is amended to authorize the further elimination or limitation of directors'
liability, then the liability of directors of the Company shall automatically be
limited to the fullest extent provided by law. The Company's By-laws also
contain provisions to indemnify the directors, officers, employees or other
agents to the fullest extent permitted by the Delaware General Corporation Law.
In addition, the Company has entered into indemnification agreements with its
current directors and executive officers. These provisions and agreements may
have the practical effect in certain cases of eliminating the ability of
stockholders to collect monetary damages from directors. The Company believes
that these contractual agreements and the provisions in its Certificate of
Incorporation and By-laws are necessary to attract and retain qualified persons
as directors and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the Common Stock of the Company is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
10004.
45
<PAGE> 48
UNDERWRITING
The Underwriter, Southcoast Capital, has agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company
$27,500,000 principal amount of the Notes. The Underwriting Agreement provides
that the obligations of the Underwriter to pay for and accept delivery of the
Notes are subject to certain conditions precedent, and that the Underwriter is
committed to purchase all of the Notes if it purchase any of the Notes.
The Underwriter has advised the Company that it proposes initially to offer
the Notes to the public on the terms set forth on the cover page of this
Prospectus. The Underwriter may allow selected dealers a concession of not more
than % of the principal amount of the Notes, and the Underwriter may allow,
and such dealers may reallow, a discount of not more than % of the principal
amount of the Notes to other dealers. The public offering price and the
concession and discount to dealers may be changed by the Underwriter after the
initial public offering of the Notes. The Notes are offered subject to receipt
and acceptance by the Underwriter, and to certain other conditions, including
the right to reject orders in whole or in part.
The Company has granted the Underwriter an option for 30 days to purchase
up to an additional $4,125,000 principal amount of the Notes solely to cover
over-allotments, if any, at the same price per Note as the initial principal
amount of the Notes to be purchased by the Underwriter.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities, including civil liabilities under the
Securities Act of 1933, as amended (the "Securities Act"), or will contribute to
payments the Underwriter may be required to make in respect thereof.
The Notes are a new issue of securities for which there is currently no
public market. Application has been made to have the Notes approved for
inclusion on the AMEX. However, no assurance can be given as to the liquidity of
or trading market for the Notes.
Directors and executive officers of the Company, who in the aggregate own
approximately 288,590 shares (including options to purchase shares) of Common
Stock (including Class B Stock if converted into equal amounts of Common Stock),
have agreed not to offer for sale, sell, distribute or otherwise dispose of any
shares of Common Stock, or any securities convertible into or warrants to
purchase shares of Common Stock, now owed or hereafter acquired for a period of
90 days after the date of this Prospectus without prior written consent of
Southcoast Capital.
46
<PAGE> 49
LEGAL MATTERS
The legality of the Notes and the Common Stock offered hereby and certain
other legal matters will be passed upon for the Company by Weisman Celler Spett
& Modlin, P.C., New York, New York. Certain legal matters in connection with the
offering contemplated hereby will be passed upon for the Underwriter by
Fulbright & Jaworski L.L.P., New York, New York. As of June 30, 1996, members of
the firm of Weisman Celler Spett & Modlin, P.C. beneficially owned 2,812 shares
of the Class B Stock of the Company. Howard S. Modlin, a member of such firm, is
a director of the Company.
EXPERTS
The financial statements as of December 31, 1995 and 1994 and for each of
the three years in the period ended December 31, 1995 of the Company included
and incorporated by reference in this Prospectus from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
included and incorporated by reference herein, and have been so included and
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 the ("Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices located at Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates by writing the Public Reference Section of the Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company at http://www.sec.gov. The Common Stock is
listed on the AMEX and reports, proxy statements and other information
concerning the Company can be inspected at such Exchange's office located at 86
Trinity Place, New York, New York 10006.
This Prospectus forms a part of a registration statement on Form S-2
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933 (the "Securities Act") with respect to the Notes offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto can be inspected and copied at the public
reference facilities and regional offices referred to above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 1-2257), are hereby
incorporated by reference in and made a part of this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, (filed April 1, 1996).
47
<PAGE> 50
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996, and September 30, 1996 (filed May 14,
1996, August 14, 1996, and November 12, 1996 respectively).
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, upon the written or oral request of any such person, a copy of any
of or all the documents referred to above which have been or may be incorporated
in this Prospectus by reference, other than exhibits to such documents which are
not specifically incorporated by reference into such documents. Requests for
such copies should be directed to Angela Toppi, Chief Financial Officer,
Trans-Lux Corporation, 110 Richards Avenue, Norwalk, Connecticut 06856-5090,
telephone number (203) 853-4321.
48
<PAGE> 51
TRANS-LUX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995.......................... F-3
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and
1995................................................................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995................................................................................ F-5
Notes to Consolidated Financial Statements............................................ F-6
Consolidated Balance Sheets as of December 31, 1995 and September 30, 1996
(Unaudited)......................................................................... F-20
Consolidated Statements of Income for the nine months ended September 30, 1995 and
1996 (Unaudited).................................................................... F-21
Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and
1996
(Unaudited)......................................................................... F-22
Notes to Consolidated Financial Statements (Unaudited)................................ F-23
</TABLE>
F-1
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Trans-Lux Corporation:
We have audited the accompanying consolidated balance sheets of Trans-Lux
Corporation and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Stamford, Connecticut
February 28, 1996
F-2
<PAGE> 53
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 2,335,000 $ 665,000
Available-for-sale securities........................................... 1,603,000 576,000
Receivables............................................................. 1,403,000 2,403,000
Inventories............................................................. 517,000 1,900,000
Prepaids and other current assets....................................... 104,000 466,000
Current deferred taxes.................................................. 192,000 --
----------- -----------
Total current assets............................................... 6,154,000 6,010,000
----------- -----------
Rental equipment.......................................................... 43,807,000 47,043,000
Less accumulated depreciation........................................... 14,154,000 16,265,000
----------- -----------
29,653,000 30,778,000
----------- -----------
Property, plant and equipment............................................. 18,313,000 20,913,000
Less accumulated depreciation and amortization.......................... 5,070,000 5,921,000
----------- -----------
13,243,000 14,992,000
Prepaids, intangibles and other........................................... 2,295,000 4,081,000
Maintenance contracts, net................................................ 1,962,000 1,599,000
----------- -----------
$53,307,000 $57,460,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals........................................... $ 5,379,000 $ 4,804,000
Income taxes payable.................................................... 198,000 136,000
Short-term borrowings................................................... -- 500,000
Current portion of long-term debt....................................... 2,660,000 1,804,000
----------- -----------
Total current liabilities.......................................... 8,237,000 7,244,000
----------- -----------
Long-term debt:
9% convertible subordinated debentures due 2005......................... 4,874,000 4,874,000
9 1/2% subordinated debentures due 2012................................. 1,057,000 1,057,000
Notes payable........................................................... 13,762,000 16,564,000
----------- -----------
19,693,000 22,495,000
Deferred revenue and deposits............................................. 1,550,000 2,621,000
Deferred income taxes..................................................... 3,282,000 3,600,000
Minority interest......................................................... 21,000 1,000
----------- -----------
Stockholders' equity:
Capital stock
Preferred -- $1 par value -- 500,000 shares authorized..................
Common -- $1 par value -- 4,000,000 shares authorized
2,435,046 shares issued in 1994 and 2,436,268 in 1995................. 2,435,000 2,436,000
Class B -- $1 par value -- 2,000,000 shares authorized
305,359 shares issued in 1994 and 304,137 in 1995..................... 305,000 304,000
Additional paid-in capital.............................................. 13,809,000 13,806,000
Retained earnings....................................................... 15,993,000 16,888,000
Other................................................................... (107,000) (71,000)
----------- -----------
32,435,000 33,363,000
Less treasury stock -- at cost -- 1,492,581 shares in 1994 and 1,488,837
in 1995 (excludes additional 305,359 shares held in 1994 and 304,137 in
1995 for conversion of Class B stock)................................... 11,911,000 11,864,000
----------- -----------
Total stockholders' equity......................................... 20,524,000 21,499,000
----------- -----------
$53,307,000 $57,460,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 54
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
GROSS REVENUES:
Equipment rentals and maintenance................. $20,824,000 $21,652,000 $21,205,000
Equipment sales................................... 11,806,000 8,498,000 12,364,000
Theatre receipts and other........................ 3,169,000 3,592,000 4,222,000
----------- ----------- -----------
35,799,000 33,742,000 37,791,000
----------- ----------- -----------
OPERATING EXPENSES:
Cost of equipment rentals and maintenance......... 11,249,000 11,929,000 11,358,000
Cost of equipment sales........................... 7,648,000 4,620,000 7,863,000
Cost of theatre receipts and other................ 2,657,000 2,864,000 3,185,000
----------- ----------- -----------
21,554,000 19,413,000 22,406,000
----------- ----------- -----------
GROSS PROFIT FROM OPERATIONS........................ 14,245,000 14,329,000 15,385,000
General and administrative expenses................. 10,202,000 11,023,000 11,494,000
----------- ----------- -----------
4,043,000 3,306,000 3,891,000
Interest income..................................... 223,000 204,000 147,000
Interest expense.................................... (2,603,000) (1,446,000) (2,291,000)
Other income........................................ -- -- 92,000
----------- ----------- -----------
INCOME BEFORE INCOME TAXES.......................... 1,663,000 2,064,000 1,839,000
----------- ----------- -----------
Provision for income taxes:
Current........................................... 231,000 407,000 576,000
Deferred.......................................... 943,000 343,000 197,000
----------- ----------- -----------
1,174,000 750,000 773,000
----------- ----------- -----------
NET INCOME.......................................... $ 489,000 $ 1,314,000 $ 1,066,000
=========== =========== ===========
Earnings per share:
Primary........................................... $ 0.39 $ 1.04 $ 0.85
Fully diluted..................................... * $ 0.94 $ 0.81
Average common and common equivalent shares
outstanding:
Primary........................................... 1,249,000 1,260,000 1,259,000
Fully diluted..................................... -- 1,943,000 1,643,000
</TABLE>
- ---------------
* not dilutive
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 55
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 489,000 $ 1,314,000 $ 1,066,000
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 6,342,000 6,513,000 6,901,000
Deferred income taxes............................. 1,022,000 (188,000) 475,000
Current deferred taxes............................ (31,000) 230,000 192,000
Minority interest................................. -- 20,000 (20,000)
Changes in operating assets and liabilities:
Receivables.................................... 454,000 1,062,000 (595,000)
Inventories.................................... 73,000 (3,000) (361,000)
Prepaids and other current assets.............. 226,000 42,000 (309,000)
Prepaids, intangibles and other................ (256,000) (85,000) (78,000)
Accounts payable and accruals.................. 1,409,000 370,000 (1,675,000)
Income taxes payable........................... 96,000 (48,000) (62,000)
Deferred revenue and deposits.................. (2,315,000) 1,002,000 1,071,000
----------- ----------- -----------
Net cash provided by operating activities.... 7,509,000 10,229,000 6,605,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment....................... (2,972,000) (5,276,000) (5,932,000)
Purchases of property, plant and equipment.......... (915,000) (3,187,000) (1,749,000)
Payments for acquisitions........................... (3,274,000) -- (3,178,000)
Proceeds from acquisition note receivable........... -- -- 658,000
Sale of assets...................................... -- 52,000 221,000
Investment in joint venture......................... -- (12,000) (480,000)
Purchases of securities............................. (1,110,000) (3,470,000) (494,000)
Proceeds from sales of securities................... 1,088,000 3,978,000 1,582,000
----------- ----------- -----------
Net cash (used in) investing activities...... (7,183,000) (7,915,000) (9,372,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt........................ 2,400,000 4,308,000 4,379,000
Repayment of long-term debt......................... (2,604,000) (2,163,000) (3,655,000)
Proceeds from short-term borrowings................. -- -- 500,000
Redemption of Company's 9% convertible subordinated
debentures........................................ -- (3,080,000) --
Proceeds from exercise of stock options and stock
award............................................. -- -- 45,000
Purchase of treasury stock.......................... (21,000) (1,000) (1,000)
Cash dividends...................................... (153,000) (171,000) (171,000)
----------- ----------- -----------
Net cash provided by (used in) financing
activities................................ (378,000) (1,107,000) 1,097,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... (52,000) 1,207,000 (1,670,000)
Cash and cash equivalents at beginning of year...... 1,180,000 1,128,000 2,335,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR............ $ 1,128,000 $ 2,335,000 $ 665,000
=========== =========== ===========
Interest paid....................................... $ 1,767,000 $ 2,135,000 $ 1,851,000
Interest received................................... 228,000 214,000 176,000
Income taxes paid................................... 140,000 756,000 661,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation: The consolidated financial statements include
the accounts of Trans-Lux Corporation and its majority-owned subsidiaries (the
"Company"). Investment in a 50% owned joint venture, MetroLux Theatres, is
reflected under the equity method.
Cash equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Available-for-sale securities: Available-for-sale securities consists of
U.S. Treasury Notes and common and preferred stock holdings and are stated at
fair value.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market value.
Rental equipment and property, plant and equipment: These assets are
stated at cost and are being depreciated over their respective useful lives
using straight line or 150% declining balance methods. Leaseholds and
improvements are amortized over the lesser of the useful life or term of the
lease. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Rental equipment...................................................... 5 to 15 years
Buildings and improvements............................................ 10 to 45 years
Machinery, fixtures and theatre equipment............................. 4 to 15 years
Leaseholds and improvements........................................... 2 to 12 years
</TABLE>
When rental equipment and property, plant and equipment are fully
depreciated, retired or otherwise disposed of, the cost and accumulated
depreciation are eliminated from the accounts.
Maintenance contracts: These assets are stated at cost and are being
amortized over their economic lives of eight to 15 years using an accelerated
method.
Revenue recognition: Rental income from leasing of equipment and revenue
from maintenance contracts are recognized as they accrue during the term of the
respective agreement. The Company recognizes revenues on certain significant
equipment sales contracts using the percentage of completion method. Income is
recognized based on the percentage of incurred costs to the estimated total
costs. Revenue on other equipment sales are recognized upon shipment. Theatre
receipts and other revenues are recognized at the time service is provided.
Taxes on income: Effective January 1, 1993 the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under
this Standard, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse.
Earnings per share: Primary earnings per share of Common and Class B
shares are based on the weighted average number of Common and Class B shares and
common stock equivalents outstanding computed by the "treasury stock" method.
Fully diluted earnings per share assumes conversion of dilutive convertible
debentures and the assumed exercise of all common stock equivalents.
Long-lived assets: The Company will adopt the provisions of Statement of
Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" in the first quarter of
1996. The anticipated effect of adopting this new standard is not expected to
have a material effect on the Company's consolidated financial position or
results of operations.
Stock-based compensation: The Company will adopt the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123) in the first quarter of 1996. The Company, as provided
for in FAS 123, will continue to apply Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" for employees stock compensation
measurement, and
F-6
<PAGE> 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
will disclose the required pro forma effect on net income and earnings per share
based on the fair value of the equity instruments awarded.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made to prior years' amounts to conform
to the current year's format.
2. AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are carried at estimated fair values and the
unrealized holding losses are excluded from earnings and are reported net of
income taxes in a separate component of stockholders' equity until realized.
Adjustments of $107,000 and $71,000 were made to equity to reflect the net
unrealized losses on available-for-sale securities as of December 31, 1994 and
1995, respectively.
Available-for-sale securities consist of the following as of December 31,
1994 and 1995.
<TABLE>
<CAPTION>
1994 1995
----------------------- -----------------------
FAIR UNREALIZED FAIR UNREALIZED
VALUE LOSS VALUE LOSS
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Equity securities..................... $ 610,000 $104,000 $576,000 $ 71,000
U.S. Treasury securities.............. 993,000 3,000 -- --
-------- ------- ---------- --------
$1,603,000 $107,000 $576,000 $ 71,000
======== ======= ========== ========
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Raw materials and spare parts................................ $498,000 $1,191,000
Work-in-process.............................................. -- 181,000
Finished goods............................................... 19,000 528,000
---------- --------
$517,000 $1,900,000
========== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Land, buildings and improvements.......................... $13,521,000 $14,767,000
Machinery, fixtures and equipment......................... 3,785,000 5,129,000
Leaseholds and improvements............................... 1,007,000 1,017,000
----------- -----------
$18,313,000 $20,913,000
=========== ===========
</TABLE>
Land, buildings and equipment having a net book value of $8,049,000 and
$12,292,000 at December 31, 1994 and 1995, respectively, were pledged as
collateral under borrowing agreements.
F-7
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PREPAIDS, INTANGIBLES AND OTHER
Prepaids, intangibles and other consists of the following:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Prepaids and other.......................................... $1,145,000 $1,005,000
Deferred debenture expense.................................. 168,000 206,000
Deferred financing costs.................................... 287,000 480,000
Acquisition costs........................................... 100,000 96,000
Deposits and advances....................................... 89,000 68,000
Long-term note receivable................................... 218,000 --
Patents..................................................... -- 323,000
Goodwill and noncompete agreement........................... -- 1,105,000
Investment in joint ventures................................ 38,000 506,000
Long-term portion of officers' and employees' loans......... 250,000 292,000
---------- ----------
$2,295,000 $4,081,000
========== ==========
</TABLE>
Deferred debenture expense represents costs attributable to the 9%
convertible subordinated debenture issue and the 9 1/2% subordinated debenture
issue being amortized over the respective lives of the issues on a straight line
basis, and are net of accumulated amortization of $652,000 and $670,000, at
December 31, 1994 and 1995, respectively. Deferred financing costs represent
costs attributable to financing agreements being amortized over the lives of the
agreements on a straight line basis, and are net of accumulated amortization of
$182,000 and $349,000 at December 31, 1994 and 1995, respectively. Acquisition
costs represent the purchase price attributable to intangibles being amortized
over 30 years on a straight line basis, and are net of accumulated amortization
of $49,000 and $53,000 at December 31, 1994 and 1995, respectively. Patents
represent costs attributable to engineering and design costs of outdoor products
being amortized over 14 years on a straight line basis, and is net of
accumulated amortization of $64,000 at December 31, 1995. Goodwill and
noncompete agreement costs are attributable to the purchase costs associated
with the acquisition of ISE in January 1995. (See Note 7 -- Acquisitions.)
Goodwill is being amortized over 20 years on a straight line basis, and is net
of accumulated amortization of $35,000 at December 31, 1995. The noncompete
agreement is being amortized over five years on a straight line basis, the term
of the agreement, and is net of accumulated amortization of $96,000 at December
31, 1995. Impairment of intangibles and their associated useful lives are
evaluated quarterly based on recoverability of unamortized balances from
expected future cash flows on an undiscounted basis. The investment in joint
ventures is primarily an investment in MetroLux Theatres, a 12-plex theatre
located in Loveland, Colorado.
6. MAINTENANCE CONTRACTS
Maintenance contracts represent the present value of contracts the Company
has with customers to service their outdoor display equipment, which were
acquired during 1993. (See Note 7 -- Acquisitions.) These contracts are being
amortized over 15 years, on an accelerated method, which contemplates contract
expiration, fall out and non-renewals and are net of accumulated amortization of
$686,000 and $1,049,000, at December 31, 1994 and 1995, respectively.
7. ACQUISITIONS
During January 1995, the Company acquired all of the capital stock of
Integrated Systems Engineering, Inc. (ISE), which manufactures outdoor
electronic signs, for a cash purchase price of approximately $2.7 million plus
payment of noncompete and consulting fees. The payments for the acquisition are
shown in the Consolidated Statements of Cash Flows net of $1.9 million of
liabilities assumed.
F-8
<PAGE> 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition has been accounted for using the purchase method of
accounting. The purchase price has been allocated on the basis of the fair value
of the assets acquired and liabilities assumed. Assets include land, building,
machinery and equipment, accounts receivable, inventory and patents. The excess
of the purchase price over the fair value of the net assets acquired has been
recorded as goodwill. Pro forma results of operations as if the acquisition had
occurred as of January 1, 1995 are not presented, as the amounts are not
materially different from those presented.
The following pro forma financial information should be read in conjunction
with the Company's consolidated financial statements. The pro forma information
does not purport to represent what the Company's results of operations or
financial position would have been if the acquisition, in fact, had occurred on
January 1, 1994, or to project the Company's results of operations or financial
position for any future period or at any future date. The results of operations
have been included in the Company's consolidated financial statements since the
date of acquisition. The pro forma consolidated balance sheet is not presented
as the transaction is already reflected in the Company's consolidated balance
sheet at December 31, 1995.
<TABLE>
<CAPTION>
1994
-----------
UNAUDITED
<S> <C>
Gross revenues.......................................................... $38,284,000
-----------
Gross profit from operations............................................ $17,046,000
-----------
Net income.............................................................. $ 1,439,000
-----------
Earnings per share -- primary........................................... $1.14
-----
Earnings per share -- fully diluted..................................... $1.00
-----
</TABLE>
During 1993 the Company, through its subsidiary Trans-Lux Sign Corporation,
purchased certain assets and liabilities of Indicator Maintenance Corporation
for an aggregate cash price of approximately $3.2 million. The assets acquired
included a portfolio of leased outdoor electronic signs, a maintenance base and
other contracts.
The acquisition has been accounted for using the purchase method of
accounting. The purchase price has been allocated on the basis of the fair value
of the assets which approximates the acquisition cost.
The following pro forma financial information should be read in conjunction
with the Company's consolidated financial statements. The pro forma information
does not purport to represent what the Company's results of operations or
financial position would have been if the acquisition, in fact, had occurred on
January 1, 1993, or to project the Company's results of operations or financial
position for any future period or at any future date. The results of operations
have been included in the Company's consolidated financial statements since the
date of acquisition.
<TABLE>
<CAPTION>
1993
-----------
UNAUDITED
<S> <C>
Gross revenues.......................................................... $39,035,000
-----------
Gross profit from operations............................................ $14,752,000
-----------
Net income.............................................................. $ 505,000
-----------
Earnings per share...................................................... $0.40
-----
</TABLE>
F-9
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. TAXES ON INCOME
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
---------- -------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ 76,000 $229,000 $490,000
State........................................... 155,000 150,000 86,000
Foreign......................................... -- 28,000 --
-------- -------- ----------
231,000 407,000 576,000
-------- -------- ----------
Deferred:
Federal......................................... 391,000 311,000 157,000
State........................................... 552,000 -- 40,000
Foreign......................................... -- 32,000 --
-------- -------- ----------
943,000 343,000 197,000
-------- -------- ----------
Total income tax expense.......................... $1,174,000 $750,000 $773,000
======== ======== ==========
</TABLE>
1994 includes the favorable state tax settlement, which assessment was
recorded in 1993.
Income taxes provided differed from the expected federal statutory rate of
34% as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.............................. 34.0% 34.0% 34.0%
State income taxes, net of federal benefit..................... 28.1 8.1 4.5
Benefit of NOL................................................. 7.3 (6.4) --
Other.......................................................... 1.2 0.6 3.5
---- ---- ----
Effective income tax rate................................. 70.6% 36.3% 42.0%
==== ==== ====
</TABLE>
The tax effect of temporary differences giving rise to the Company's
deferred tax provision are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- --------- --------
<S> <C> <C> <C>
Depreciation and amortization..................... $(96,000) $ 180,000 $ 49,000
Pension actuarial gain............................ 20,000 (30,000) (14,000)
Supplemental retirement plan...................... 7,000 (143,000) (15,000)
State income taxes................................ 211,000 478,000 27,000
Impact of NOL..................................... 801,000 61,000 191,000
AMT credit........................................ -- (235,000) (25,000)
Other............................................. -- 32,000 (16,000)
--------- --------- --------
Net deferred tax provision................... $943,000 $ 343,000 $197,000
========= ========= ========
</TABLE>
F-10
<PAGE> 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of the items comprising the net deferred tax asset and
liability at December 31, 1994 and 1995 in the Company's statement of financial
position are as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Current asset
Deferred tax asset:
Operating loss carryforwards........................... $ 192,000 --
Valuation allowance.................................... -- --
---------- ----------
Net deferred tax asset............................ 192,000 --
========== ==========
Long-term liability
Deferred tax asset:
Operating loss carryforwards........................... $ 82,000 $ 175,000
Excess financial reporting depreciation and
amortization over tax depreciation and
amortization......................................... 259,000 331,000
Acquisition costs not deducted for tax purposes........ 84,000 84,000
Net pension cost not deducted for tax purposes......... 36,000 52,000
Supplemental retirement plan costs not deducted for tax
purposes............................................. 44,000 61,000
Tax credit carryforwards............................... 337,000 397,000
Unrealized holding losses not deducted for tax
purposes............................................. 87,000 58,000
Bad debt expense not deducted for tax purposes......... -- 37,000
Valuation allowance.................................... (402,000) (232,000)
---------- ----------
527,000 963,000
---------- ----------
Deferred tax liability:
Excess tax depreciation over financial reporting
depreciation......................................... 2,715,000 3,328,000
Gain on purchases of Company's 9% debentures not
reported for tax purposes............................ 439,000 439,000
Net pension benefit not reported for tax purposes...... 373,000 373,000
Foreign exchange gain not reported for tax purposes.... 32,000 31,000
State income taxes..................................... 250,000 392,000
---------- ----------
3,809,000 4,563,000
---------- ----------
Net deferred tax liability........................ $3,282,000 $3,600,000
========== ==========
</TABLE>
The valuation allowance changed by $170,000 for the year ended December 31,
1995. The valuation allowance has been established for the amount of deferred
tax assets which management estimates will more likely than not expire unused.
F-11
<PAGE> 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
9% convertible subordinated debentures due 2005........... $ 4,874,000 $ 4,874,000
9 1/2% subordinated debentures due 2012................... 1,057,000 1,057,000
Loan and security agreement -- bank, secured, due in
quarterly installments through 1998..................... 9,855,000 --
Line of credit and security agreement -- bank, secured.... 2,989,000 --
Note payable -- banks, secured, due in monthly
installments through 1998............................... 538,000 --
IRB note payable -- banks, secured, due in quarterly
installments through 1997............................... 733,000 --
Term loans -- bank, secured, due in quarterly installments
through 2002............................................ -- 15,177,000
Loan payable -- CDA, due in monthly installments through
2002 at 5.0%............................................ -- 517,000
Real estate mortgages -- secured, due in monthly and
quarterly installments through 2015..................... 2,206,000 2,597,000
Capital lease obligation, -- secured, due in monthly
installments through 1999 at 9.5%....................... 101,000 77,000
-----------
22,353,000 24,299,000
Less portion due within one year.......................... 2,660,000 1,804,000
-----------
$19,693,000 $22,495,000
===========
</TABLE>
Payments of long-term debt due for the next five years are:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$1,804,000 $1,817,000 $2,660,000 $1,792,000 $2,696,000
</TABLE>
During 1985, the Company issued $15 million of 9% convertible subordinated
debentures due 2005. These debentures are redeemable at the option of the
Company at declining premiums. An annual sinking fund requirement of $1,125,000
was to commence December 1, 1995; however, at its option, the Company is
depositing with the Trustee debentures that have been repurchased and receive a
credit against such required payments. The debentures are redeemable at the
option of the Company at par. The debentures are currently convertible into
shares of the Company's Common Stock at a conversion price of $12.70 per share.
During 1994, the Company made an Offer to Exchange $1,000 principal amount
of its new 9 1/2% subordinated debentures due 2012 ("New Debentures") for each
$1,000 principal amount of its 9% convertible subordinated debentures due 2005
("Old Debentures"). The New Debentures pay an interest rate of 9 1/2%, mature in
2012, are not callable until 1999 and are not convertible into Common Stock. The
Company accepted $1,057,000 of Old Debentures in exchange for $1,057,000 of New
Debentures. The New Debentures are redeemable at the option of the Company at
declining premiums. An annual sinking fund requirement of $105,700 will commence
December 1, 2009. Simultaneously with the Offer to Exchange, the Company called
for redemption of approximately 39% of the Old Debentures at 101.125% on
December 1, 1994 and redeemed $3,080,000 of the Old Debentures. The Company
entered into a Line of Credit and Security Agreement for $3,000,000 to finance
such redemption. The line of credit was converted to a five-year term note on
January 27, 1995 with an interest rate of 9.04% through January 27, 1998 and at
prime plus 1/2% thereafter. This loan was part of the restructuring in August
1995.
The Company entered into a Credit Agreement with First Union Bank of
Connecticut (formerly known as First Fidelity Bank) in August 1995 restructuring
its indebtedness of $15,581,000 and a $4,000,000 line
F-12
<PAGE> 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of credit. The restructuring extends the terms to an average of 11 years at a
variable rate of interest of LIBOR plus 175 basis points (7.688% at December 31,
1995). Simultaneously, the Company entered into interest rate swap agreements to
reduce the impact of changes in interest rates on its floating rate long-term
debt. At December 31, 1995, the Company had outstanding two interest rate swap
agreements with a commercial bank, having a notional value of $15,177,000. The
resulting gain or loss on the swaps is included in interest expense. The
agreements effectively change the Company's interest rate exposure on its
$7,867,000 floating rate installment note due quarterly through October 2002 to
a fixed rate of 7.86% and its $7,310,000 floating rate installment note due
quarterly through July 2002 to a fixed rate of 7.86%. The notional value of the
interest rate swap agreements are reduced quarterly with the installment
payments on the notes and mature July 1, 1998. The aggregate cost to terminate
the interest rate swap agreements at December 31, 1995 was $389,000. The Company
is subject to credit loss in the event of nonperformance by other parties to the
interest rate swap agreements. However, the Company does not anticipate
nonperformance by the counterparties.
The $4 million line of credit is at a variable rate of interest of LIBOR
plus 200 basis points (7.867% at December 31, 1995) and is available until June
1997. At December 31, 1995, the Company had $3.5 million available under such
agreement.
The Company has a first mortgage on a four-plex theatre in Taos, New Mexico
at an interest rate of prime plus 1% (9.5% at December 31, 1995) with a balloon
payment of $837,000 in 1998 and a first mortgage on a five-plex theatre in
Durango, Colorado at an interest rate of prime plus 1%, capped at 9% with a
balloon payment of $920,000 in 2000.
The fair value of the 9% convertible subordinated debentures and the 9 1/2%
subordinated debentures are $5,166,000 and $1,046,000, respectively at December
31, 1995. The fair value of the remaining long-term debt approximates the
carrying value.
The theatrical joint venture, MetroLux Theatres, entered into an agreement
to borrow $3,000,000 for the land and construction of the 12-plex theatre
located in Loveland, Colorado. The Company is the guarantor of the entire
indebtedness. However, the owner of the non-related general partner of the joint
venture has guaranteed their prorata portion of the indebtedness to the Company.
F-13
<PAGE> 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. STOCKHOLDERS' EQUITY
Changes in capital stock, additional paid-in capital, treasury stock and
retained earnings for the three years ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
COMMON STOCK CLASS B ADDITIONAL RETAINED
---------------------- ------------------ PAID-IN TREASURY EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK AND OTHER
--------- ---------- ------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31,
1992.................... 2,420,201 $2,420,000 319,811 $320,000 $13,804,000 $(11,889,000) $14,514,000
Net income................ -- -- -- -- -- -- 489,000
Cash dividends............ -- -- -- -- -- -- (153,000)
Common stock acquired
(2,311 shares).......... -- -- -- -- -- (21,000) --
Class B conversion to
common stock............ 13,264 13,000 (13,264) (13,000) -- -- --
--------- ---------- ------- -------- ----------- ------------ -----------
Balance December 31,
1993.................... 2,433,465 2,433,000 306,547 307,000 13,804,000 (11,910,000) 14,850,000
Net income................ -- -- -- -- -- -- 1,314,000
Cash dividends............ -- -- -- -- -- -- (171,000)
9% debentures
conversion.............. 393 1,000 -- -- 5,000 -- --
Unrealized holding
losses.................. -- -- -- -- -- -- (107,000)
Common stock acquired (131
shares)................. -- -- -- -- -- (1,000) --
Class B conversion to
common stock............ 1,188 1,000 (1,188) (2,000) -- -- --
--------- ---------- ------- -------- ----------- ------------ -----------
Balance December 31,
1994.................... 2,435,046 2,435,000 305,359 305,000 13,809,000 (11,911,000) 15,886,000
Net income................ -- -- -- -- -- -- 1,066,000
Cash dividends............ -- -- -- -- -- -- (171,000)
Unrealized holding gain... -- -- -- -- -- -- 36,000
Exercise of stock
options................. -- -- -- -- (4,000) 40,000 --
Common stock acquired
(56 shares)............. -- -- -- -- -- (1,000) --
Common stock award........ -- -- -- -- 1,000 8,000 --
Class B conversion to
common stock............ 1,222 1,000 (1,222) (1,000) -- -- --
--------- ---------- ------- -------- ----------- ------------ -----------
Balance December 31,
1995.................... 2,436,268 $2,436,000 304,137 $304,000 $13,806,000 $(11,864,000) $16,817,000
========= ========== ======= ======== =========== ============ ===========
</TABLE>
During 1995, the Board of Directors declared four quarterly cash dividends
of $.035 per share on the Company's Common Stock and $.0315 per share on the
Company's Class B Stock, which were paid in April, July and October 1995 and
January 1996. During 1993 the Board authorized an increase of 17% in the
quarterly cash dividends to its current level. Each share of Class B Stock is
convertible at any time into one share of Common Stock and has ten votes per
share, as compared to Common Stock which has one vote per share but receives a
higher dividend.
During 1995, the stockholders approved 3 million shares of a new class of
capital stock designated Class A Stock, $1.00 par value. The stock will have no
voting rights except as required by law and will receive a 10% higher dividend
than the Common Stock. A Certificate of Amendment authorizing the Class A shares
and adjusting authorized shares of Common Stock to 5.5 million and Class B Stock
to 1 million will be filed prior to the first issuance of Class A Stock. No
specific issuance of Class A Stock is presently contemplated.
At December 31, 1995, shares of Common Stock were reserved for:
<TABLE>
<S> <C>
Conversion of 9% convertible subordinated debentures....................... 782,000
Stock options.............................................................. 124,000
</TABLE>
F-14
<PAGE> 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. LEASES
The Company occupies theatre and other premises under operating leases
expiring at varying dates through 2006. Certain of the leases provide for the
payment of real estate taxes and other occupancy costs. In addition, the Company
has a long-term lease for a telephone system, which is classified as a capital
lease.
The following is a summary of future minimum lease payments due under
capital and operating leases at December 31, 1995:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASE LEASES
-------------------------------------------------------------- ------- ----------
<S> <C> <C>
1996.......................................................... $30,000 $ 248,000
1997.......................................................... 30,000 188,000
1998.......................................................... 30,000 160,000
1999.......................................................... 7,000 129,000
2000.......................................................... -- 107,000
Thereafter.................................................... -- 668,000
------- ----------
Total future minimum lease payments........................... $97,000 $1,500,000
==========
Amount representing interest.................................. 20,000
-------
Present value of net minimum lease payments................... 77,000
Current portion............................................... 24,000
-------
Long-term portion............................................. $53,000
=======
</TABLE>
Total rent expense for all operating leases amounted to $308,000, $267,000,
and $238,000 in 1993, 1994 and 1995, respectively. At December 31, 1995,
sublease income of $110,000 is to be received on non-cancelable leases through
2000.
12. ENGINEERING DEVELOPMENT EXPENSE
Engineering development expense was $108,000, $238,000 and $172,000 for
1993, 1994 and 1995, respectively.
13. PENSION PLAN
All eligible salaried employees of Trans-Lux Corporation and certain of its
subsidiaries are covered by a non-contributory pension plan. Pension benefits
vest after five years of service and are based on years of service and final
average salary. The Company's funding policy is to contribute annually an amount
that can be deducted for Federal income tax purposes. Contributions are intended
to provide not only for benefits based on service to date, but also for those
benefits expected to be earned in the future.
F-15
<PAGE> 66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the plan at December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Fair value of plan assets, invested in insurance company
funds..................................................... $3,893,000 $4,172,000
---------- ----------
Actuarial present value of benefits for service rendered to
date:
Accumulated benefits based on salaries to date, including
vested benefits of $1,902,000 and $2,879,000 for 1994
and 1995, respectively................................. 1,998,000 2,985,000
Additional benefits based on estimated future salary
levels................................................. 1,016,000 1,286,000
---------- ----------
Projected benefit obligation (PBO).......................... 3,014,000 4,271,000
---------- ----------
Plan assets (less than) in excess of PBO.................... 879,000 (99,000)
Unrecognized prior service cost............................. 24,000 22,000
Unrecognized net loss from past experience different from
that assumed.............................................. 53,000 952,000
Unrecognized net asset on January 1, 1985 being recognized
over 13.38 years.......................................... (132,000) (92,000)
---------- ----------
Prepaid pension cost........................................ $ 824,000 $ 783,000
========== ==========
</TABLE>
The following items are components of the net pension cost for 1995:
<TABLE>
<S> <C>
Present value of benefits earned during the period........................ $273,000
Interest cost on projected benefit obligation............................. 278,000
Actual return on plan assets.............................................. (372,000)
Net amortization and deferral............................................. (38,000)
--------
Net pension cost.......................................................... $141,000
========
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the PBO was 8.5% in 1994 and 7.5% in 1995. The rate of increase
in future compensation levels used in determining the actuarial present value of
the PBO was 4.25% in 1994 and 4.0% in 1995. The expected long-term rate of
return on assets was 9.5 percent for 1994 and 1995.
The Company provides supplemental retirement benefits for the Chief
Executive Officer, during 1995, the Company accrued $43,000 for such benefits.
At December 31, 1994 and 1995, respectively, the total liability accrued was
$110,000 and $153,000.
The Company's pension and supplemental pension costs for the years ended
December 31, 1993, 1994 and 1995 were $241,000, $226,000 and $183,000,
respectively.
The Company does not offer any postretirement benefits other than the
pension and the supplemental retirement benefits described herein.
As of January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This statement requires the accrual of
estimated costs of benefits to former or inactive employees after employment but
before retirement. The adoption of this standard did not have a material effect
on the Company's consolidated financial statements. The Company did not accrue
any liability for such benefits during 1995.
14. STOCK OPTION PLANS
The Company has five stock option plans. The 1995 Stock Option Plan and the
1992 Stock Option Plan each reserved 50,000 shares of Common Stock for issue to
key employees. Stock Option Plan II terminated, and accordingly, additional
shares cannot be granted under such plan, which originally reserved 50,000
shares of Common Stock (before giving effect for stock dividends). The
Non-Employee Director Stock Option Plan
F-16
<PAGE> 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reserved 15,000 shares of Common Stock for grant. The Non-Statutory Stock Option
Plan Agreement reserved 12,500 shares of Common Stock for issue to the Chairman
of the Board.
Changes in the stock option plans are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------------------------
AUTHORIZED GRANTED AVAILABLE
---------- ------- ---------
<S> <C> <C> <C>
Balance December 31, 1992............................ 111,900 95,100 16,800
Additional authorized shares......................... 12,500 -- 12,500
Terminated........................................... (22,500) (42,500) 20,000
Granted.............................................. -- 27,900 (27,900)
------- ------- ------
Balance December 31, 1993............................ 101,900 80,500 21,400
Terminated........................................... (3,500) (8,000) 4,500
Granted.............................................. -- 17,000 (17,000)
------- ------- ------
Balance December 31, 1994............................ 98,400 89,500 8,900
Additional authorized shares......................... 50,000 -- 50,000
Terminated........................................... (19,700) (25,200) 5,500
Granted.............................................. -- 28,200 (28,200)
Exercised............................................ (5,000) (5,000) --
------- ------- ------
Balance December 31, 1995............................ 123,700 87,500 36,200
======= ======= ======
</TABLE>
Under the 1995 Stock Option Plan and the 1992 Stock Option Plan, option
prices must be at least 100% of the market value of the Common Stock at the time
of the grant. Exercise periods are for ten years from date of the grant (five
years if the optionee owns more than 10% of the voting power) and terminate at a
stipulated period of time after an employee's termination of employment. At
December 31, 1995, under the 1995 Plan, options for 23,800 shares (granted in
1995) with an exercise price of $8.125 per share were outstanding. No shares
were exercisable or were exercised during 1995. At December 31, 1995, under the
1992 Plan, options for 48,700 shares (granted in 1992, 1993, 1994 and 1995) with
exercise prices ranging from $6.3125 to $9.6875 per share were outstanding, of
which 45,300 shares were exercisable. Options for 1,300 shares (granted in 1992)
with an exercise price of $6.3125 per share were exercised in 1995. During 1995,
options for 1,000 shares expired. No options were exercised during 1993 and
1994.
Under Stock Option Plan II, option prices must be at least 100% of the
market value of the Common Stock at the time of the grant. Exercise periods are
for six years from date of the grant (five years if the optionee owns more than
10% of the voting power) and terminate at a stipulated period of time after an
employee's termination of employment. At December 31, 1995, all 19,700 options
under the plan have terminated. Options for 2,200 shares (granted in 1989) with
an exercise price of $7.625 per share were exercised in 1995. No options were
exercised during 1993 and 1994.
Under the Non-Employee Director Stock Option Plan, options must be at least
100% of the market value of the Common Stock at the time of the grant. No option
may be exercised prior to one year after the date of the grant and the optionee
must be a director of the Company at the time of exercise, except in certain
cases as permitted by the Compensation Committee. Exercise periods are for six
years from date of the grant and options terminate at a stipulated period of
time after an optionee ceases to be a director. At December 31, 1995, options
for 2,500 shares (granted in 1994 and 1995) with exercise prices ranging from
$8.625 to $9.6875 per share were outstanding, all of which were exercisable.
During 1995, options for 1,500 shares (granted in 1989) with an option price of
$7.4375 per share were exercised. During 1995, options for 4,500 shares expired.
No options were exercised during 1993 and 1994.
Under the Non-Statutory Stock Option Agreement, the option must be at least
100% of the market value of the Common Stock at the time of the grant. The
exercise period is for ten years from the date of the grant.
F-17
<PAGE> 68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, an option for 12,500 shares (granted in 1993) with an
exercise price of $7.50 per share was outstanding, which is exercisable. No
options were exercised during 1993, 1994 and 1995.
15. COMMITMENTS AND CONTINGENCIES
The Company has employment/consulting agreements with certain current and
former executive officers which expire at various dates through December 2002.
The aggregate commitment for future salaries/consulting fees at December 31,
1995, excluding bonuses, is approximately $3,404,000.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not have a material
adverse affect on the consolidated financial statements of the Company.
16. BUSINESS SEGMENT DATA
The Company's operations have been classified into two business segments.
The Communications Division designs, produces, leases, sells and services
large-scale, multi-color, real-time electronic information displays for both
indoor and outdoor use. The Entertainment and Real Estate Division owns a chain
of motion picture theatres in the Southwestern United States and owns real
estate used for both corporate and income-producing purposes in the United
States and Canada.
F-18
<PAGE> 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information about the Company's operations in its two business segments for
the three years ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
GROSS REVENUE
Communications.................................... $32,630,000 $30,150,000 $33,569,000
Entertainment and real estate..................... 3,169,000 3,592,000 4,222,000
------------ ------------ ------------
$35,799,000 $33,742,000 $37,791,000
============ ============ ============
OPERATING INCOME
Communications.................................... $ 9,431,000 $ 8,881,000 $ 9,500,000
Entertainment and real estate..................... 142,000 204,000 548,000
------------ ------------ ------------
9,573,000 9,085,000 10,048,000
Other income........................................ -- -- 92,000
General and administrative expenses................. (5,530,000) (5,779,000) (6,157,000)
Interest expense -- net............................. (2,380,000) (1,242,000) (2,144,000)
------------ ------------ ------------
Income before taxes................................. $ 1,663,000 $ 2,064,000 $ 1,839,000
============ ============ ============
ASSETS
Communications.................................... $43,743,000 $42,684,000 $49,565,000
Entertainment and real estate..................... 4,955,000 6,685,000 6,654,000
------------ ------------ ------------
Total identifiable assets........................... 48,698,000 49,369,000 56,219,000
Cash and available-for-sale securities.............. 3,440,000 3,938,000 1,241,000
------------ ------------ ------------
$52,138,000 $53,307,000 $57,460,000
============ ============ ============
DEPRECIATION AND AMORTIZATION
Communications.................................... $ 5,988,000 $ 5,951,000 $ 6,403,000
Entertainment and real estate..................... 215,000 264,000 301,000
General corporate................................. 139,000 298,000 197,000
------------ ------------ ------------
$ 6,342,000 $ 6,513,000 $ 6,901,000
============ ============ ============
CAPITAL EXPENDITURES
Communications.................................... $ 3,768,000 $ 6,240,000 $ 7,461,000
Entertainment and real estate..................... 119,000 2,223,000 220,000
------------ ------------ ------------
$ 3,887,000 $ 8,463,000 $ 7,681,000
============ ============ ============
</TABLE>
No single customer accounted for 10% or more of total revenues in 1994 and
1995. During 1993, the Company recorded revenues of approximately $4.3 million
from a single customer.
Foreign revenues were less than 10% of consolidated revenue in 1993 and
1995 and were approximately 15% in 1994.
17. ACCOUNTS PAYABLE AND ACCRUALS
Accounts payable and accruals includes $1,361,000 and $1,730,000 for
accounts payable, $135,000 and $368,000 for accrued interest payable, and
$466,000 and $518,000 for taxes payable for 1994 and 1995, respectively.
F-19
<PAGE> 70
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER
31,
1995
----------- SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 665,000 $ 54,000
Available-for-sale securities.......................................... 576,000 586,000
Receivables............................................................ 2,403,000 5,434,000
Unbilled receivables................................................... -- 1,632,000
Inventories............................................................ 1,900,000 1,778,000
Prepaids and other current assets...................................... 466,000 332,000
----------- -----------
Total current assets................................................. 6,010,000 9,816,000
----------- -----------
Rental equipment....................................................... 47,043,000 52,574,000
Less accumulated depreciation........................................ 16,265,000 19,980,000
----------- -----------
30,778,000 32,594,000
----------- -----------
Property, plant and equipment.......................................... 20,913,000 21,795,000
Less accumulated depreciation and amortization....................... 5,921,000 6,960,000
----------- -----------
14,992,000 14,835,000
Prepaids, intangibles and other........................................ 4,081,000 3,640,000
Maintenance contracts, net............................................. 1,599,000 1,352,000
Note receivable, MetroLux Theatres (excludes $94,000 current
portion).............................................................. -- 808,000
----------- -----------
$57,460,000 $63,045,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals.......................................... $ 4,804,000 $ 6,436,000
Income taxes payable................................................... 136,000 55,000
Short-term borrowings.................................................. 500,000 --
Current portion of long-term debt...................................... 1,804,000 1,184,000
----------- -----------
Total current liabilities............................................ 7,244,000 8,305,000
----------- -----------
Long-term debt:
9% convertible subordinated debentures due 2005...................... 4,874,000 4,811,000
9 1/2% subordinated debentures due 2012.............................. 1,057,000 1,057,000
Notes payable........................................................ 16,564,000 21,402,000
----------- -----------
22,495,000 27,270,000
Deferred revenue and deposits.......................................... 2,621,000 1,513,000
Deferred income taxes.................................................. 3,600,000 3,648,000
Minority interest...................................................... 1,000 1,000
----------- -----------
Stockholders' equity:
Capital stock
Preferred -- $1 par value -- 500,000 shares authorized............
Common -- $1 par value -- 4,000,000 shares authorized
2,436,268 shares issued in 1995 and 2,441,523 in 1996........... 2,436,000 2,441,000
Class B -- $1 par value -- 2,000,000 shares authorized
304,137 shares issued in 1995 and 298,882 in 1996............... 304,000 299,000
Additional paid-in capital........................................... 13,806,000 13,828,000
Retained earnings.................................................... 16,888,000 17,626,000
Other................................................................ (71,000) (65,000)
----------- -----------
33,363,000 34,129,000
Less treasury stock -- at cost -- 1,488,837 shares in 1995 and
1,481,258 in 1996 (excludes additional 304,137 shares held in 1995 and
298,882 in 1996 for conversion of Class B stock)...................... 11,864,000 11,821,000
----------- -----------
Total stockholders' equity........................................ 21,499,000 22,308,000
----------- -----------
$57,460,000 $63,045,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE> 71
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
-----------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Equipment rentals and maintenance............................. $16,509,000 $16,273,000
Equipment sales............................................... 9,174,000 13,276,000
Theatre receipts and other.................................... 3,198,000 3,322,000
----------- -----------
Total revenues............................................. 28,881,000 32,871,000
----------- -----------
OPERATING EXPENSES:
Cost of equipment rentals and maintenance..................... 8,700,000 8,883,000
Cost of equipment sales....................................... 5,752,000 8,753,000
Cost of theatre receipts and other............................ 2,462,000 2,529,000
----------- -----------
Total operating expenses................................... 16,914,000 20,165,000
----------- -----------
GROSS PROFIT FROM OPERATIONS.................................... 11,967,000 12,706,000
General and administrative expenses............................. 9,210,000 9,442,000
----------- -----------
2,757,000 3,264,000
----------- -----------
Interest income................................................. 124,000 95,000
Interest expense................................................ (1,689,000) (1,764,000)
Other income (expense).......................................... 70,000 (97,000)
----------- -----------
INCOME BEFORE INCOME TAXES...................................... 1,262,000 1,498,000
----------- -----------
Provision for income taxes:
Current....................................................... 501,000 521,000
Deferred...................................................... 29,000 108,000
----------- -----------
530,000 629,000
----------- -----------
NET INCOME...................................................... $ 732,000 $ 869,000
=========== ===========
Earnings per share:
Primary....................................................... $ 0.58 $ 0.68
Fully diluted................................................. * $ 0.64
Average common and common equivalent shares outstanding:
Primary....................................................... 1,258,000 1,283,000
Fully diluted................................................. * 1,674,000
Cash dividends per share:
Common stock.................................................. $ 0.105 $ 0.105
Class B stock................................................. $ 0.0945 $ 0.0945
</TABLE>
- ---------------
* not dilutive
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE> 72
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
-----------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................... $ 732,000 $ 869,000
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 5,134,000 5,277,000
Net loss of joint venture.................................. -- 97,000
Deferred income taxes...................................... 531,000 44,000
Minority interest.......................................... (8,000) --
Changes in operating assets and liabilities:
Receivables.............................................. (1,386,000) (3,031,000)
Unbilled receivables..................................... -- (1,632,000)
Inventories.............................................. (307,000) 122,000
Prepaids and other current assets........................ (113,000) 228,000
Prepaids, intangibles and other.......................... (82,000) (239,000)
Accounts payable and accruals............................ 117,000 1,632,000
Income taxes payable..................................... 87,000 (81,000)
Deferred revenue and deposits............................ (796,000) (1,108,000)
----------- -----------
Net cash provided by operating activities............. 3,909,000 2,178,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment................................... (4,112,000) (5,531,000)
Purchases of property, plant and equipment...................... (1,389,000) (882,000)
Payments for an acquisition..................................... (3,178,000) --
Proceeds from acquisition note receivable....................... 658,000 --
Sale of assets.................................................. 209,000 --
Investment in joint venture..................................... (1,304,000) 345,000
Loan to joint venture........................................... -- (941,000)
Purchases of securities......................................... (494,000) --
Proceeds from sales of securities............................... 1,582,000 --
----------- -----------
Net cash (used in) investing activities............... (8,028,000) (7,009,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt.................................... 4,275,000 5,700,000
Repayment of long-term debt..................................... (3,206,000) (1,352,000)
Proceeds from short-term borrowings............................. 1,300,000 --
Proceeds from exercise of stock options......................... 36,000 4,000
Purchase of treasury stock...................................... (1,000) (1,000)
Cash dividends.................................................. (128,000) (131,000)
----------- -----------
Net cash provided by financing activities............. 2,276,000 4,220,000
----------- -----------
Net (decrease) in cash and cash equivalents..................... (1,843,000) (611,000)
Cash and cash equivalents at beginning of year.................. 2,335,000 665,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................... $ 492,000 $ 54,000
=========== ===========
Interest paid................................................... $ 1,366,000 $ 1,452,000
Interest received............................................... 132,000 101,000
Income taxes paid............................................... 376,000 542,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE> 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Financial information included herein is unaudited, however, such
information reflects all adjustments which are, in the opinion of management,
necessary for the fair presentation of the consolidated financial statements for
the interim periods. The results for the interim periods are not necessarily
indicative of the results to be expected for the full year. Certain
reclassifications have been made to prior year's amounts to conform to the
current year's format. It is suggested that the September 30, 1995 and 1996
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of " in the first quarter of 1996. In
accordance with the standard, the Company evaluates the carrying value of its
long-lived assets and identifiable intangibles, including goodwill, when events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The adoption of the standard did not have any effect on the
Company's consolidated financial position or results of operations.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" in the first
quarter of 1996. As provided for in the standard, the Company continues to apply
Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations for employee stock compensation
measurement and will disclose the required pro forma information in the 1996
Form 10-K.
2. ACCOUNTING FOR INCOME TAXES
The effective tax rate at September 30, 1996 was 42%. There was no change
in the valuation allowance during the nine months ended September 30, 1996.
3. PREPAIDS, INTANGIBLES AND OTHER
Prepaid, intangibles and other consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1995 1996
------------ ------------
<S> <C> <C>
Prepaids and other..................................... $1,005,000 $1,048,000
Deferred debenture expense............................. 206,000 193,000
Deferred financing costs............................... 480,000 421,000
Acquisition costs...................................... 96,000 92,000
Deposits and advances.................................. 68,000 76,000
Patents................................................ 323,000 275,000
Goodwill and noncompete agreement...................... 1,105,000 1,003,000
Investment in joint venture............................ 506,000 128,000
Long-term portion of officers' and employees' loans.... 292,000 404,000
---------- ----------
$4,081,000 $3,640,000
========== ==========
</TABLE>
4. ACCOUNTS PAYABLE AND ACCRUALS
Accounts payable and accruals includes $1,730,000 and $2,415,000 for
accounts payable, $368,000 and $569,000 for accrued interest payable, and
$518,000 and $632,000 for taxes payable at December 31, 1995 and September 30,
1996, respectively.
F-23
<PAGE> 74
TRANS-LUX DISPLAYS ARE USED PRIMARILY
IN REAL-TIME APPLICATIONS FOR THE
FINANCIAL, BANKING, GAMING,
CORPORATE, SPORTS AND
TRANSPORTATION MARKETS.
<TABLE>
<S> <C>
OUTDOOR
Trans-Lux's recent acquisitions have given the Company Trans-Lux's outdoor displays are used in a wide array
a growing presence in the outdoor market, such as this of applications including college and professional
outdoor display for the Luxor Hotel and Casino in Las stadiums.
Vegas.
SPORTS TRANSPORTATION
Trans-Lux's complete line of sports displays Travelers depend on clear, easy-to- read Trans-Lux
incorporate up-to-the-second information, video displays for arrival, departure and other timely
replays and information.
full-color animation enhancing the experience for
players and fans at athletic events.
CORPORATE
Trans-Lux network management display systems are used
to track the status of data communications networks.
</TABLE>
TRANS-LUX
[The above captions refer to examples of Trans-Lux's electronic displays]
<PAGE> 75
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 11
Price Range of Common Stock and
Dividend Policy..................... 11
Capitalization........................ 12
Selected Financial Data............... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 20
Management............................ 28
Executive Compensation and
Transactions with Management........ 30
Description of Notes.................. 34
Description of Capital Stock.......... 43
Underwriting.......................... 46
Legal Matters......................... 47
Experts............................... 47
Available Information................. 47
Incorporation of Certain Documents by
Reference........................... 47
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$27,500,000
LOGO
LOGO
% CONVERTIBLE
SUBORDINATED NOTES
DUE 2006
------------------------
PROSPECTUS
------------------------
SOUTHCOAST CAPITAL
CORPORATION
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than underwriting
discounts) to be incurred payable by the registrant in connection with the
issuance and distribution of the shares registered hereby. Other than the SEC
registration fee and the NASD filing fee, such expenses are estimates.
<TABLE>
<S> <C>
SEC registration fee...................................................... $ 9,583
NASD filing fee........................................................... 3,750
AMEX listing fee.......................................................... 5,000
Printing costs (excluding notes).......................................... 110,000
Accounting fees and expenses.............................................. 45,000
Blue Sky fees and expenses................................................ 6,000
Legal fees and expenses................................................... 150,000
Miscellaneous expenses.................................................... 70,667
--------
Total................................................................... $400,000
========
</TABLE>
- ---------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no cause to believe his conduct was unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that the corporation may purchase and
maintain insurance on behalf of a director or officer of the corporation against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under such Section 145.
The Company's By-laws provide that the Company shall indemnify certain
persons, including officers, directors, employees and agents, to the fullest
extent permitted by Section 145 of the General Corporation
II-1
<PAGE> 77
Law of the State of Delaware. The Company has also entered into indemnification
agreements with its current directors and executive officers. Reference is made
to the By-laws and Indemnification Agreement filed with the Commission. The
Company's directors and officers are insured against losses arising from any
claim against them as such for wrongful acts or omissions, subject to certain
limitations.
Under Section 9 of the Underwriting Agreement, the Underwriter is
obligated, under certain circumstances, to indemnify officers, directors and
controlling persons of the Company against certain liabilities, including
liabilities under the Securities Act. Reference is made to the form of
Underwriting Agreement filed as Exhibit 1 hereto.
Under an insurance policy with The Chubb Group of Companies, the directors
and certain officers of the Company are indemnified against certain losses
arising from certain claims which may be made against such persons, by reason of
their being such directors or officers.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1 Form of Underwriting Agreement.
3.1 Form of Restated Certificate of Incorporation of the Company.*
3.2 By-laws of the Company.*
4.1 Specimen Common Stock Certificate.*
4.2 Form of Indenture.*
5 Opinion of Weisman Celler Spett & Modlin, P.C.*
10.1 Form of Indemnity Agreement -- Directors.*
10.2 Form of Indemnity Agreement -- Officers.*
10.3 Employment Agreement, dated as of August 16, 1996 between the Company and Richard
Brandt.*
11 Statement of Computation of Earnings Per Share.
12 Statement of Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Weisman Celler Spett & Modlin, P.C. (contained in Exhibit 5).*
24 Powers of Attorney.*
25 Statement of Eligibility of Trustee.*
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15, the
II-2
<PAGE> 78
Registrant has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a registration
statement in reliance upon Rule 430A and contained in the form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
For purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 9th day of
December, 1996.
TRANS-LUX CORPORATION
By: /s/ VICTOR LISS
-----------------------------
Victor Liss
Vice Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
* Chairman of the Board December 9, 1996
- -------------------------------------
Richard Brandt
Vice Chairman of the Board, December 9, 1996
/s/ VICTOR LISS President and Chief Executive
- ------------------------------------- Officer
Victor Liss
/s/ ANGELA D. TOPPI Senior Vice President and Chief December 9, 1996
- ------------------------------------- Financial Officer
Angela D. Toppi
* Chief Accounting Officer December 9, 1996
- -------------------------------------
Robert A. Carroll
* Director December 9, 1996
- -------------------------------------
Steven Baruch
* Director December 9, 1996
- -------------------------------------
Jean Firstenberg
* Director December 9, 1996
- -------------------------------------
Allan Fromme, PhD
* Director December 9, 1996
- -------------------------------------
Robert Greenes
* Director December 9, 1996
- -------------------------------------
Gene Jankowski
* Director December 9, 1996
- -------------------------------------
Howard S. Modlin
* By /s/ VICTOR LISS
- -------------------------------------
as Attorney in Fact
</TABLE>
II-4
<PAGE> 80
TRANS-LUX CORPORATION
EXHIBIT INDEX
Certain of the exhibits to this registration statement are hereby
incorporated by reference, as specified below, to other documents filed with the
Commission. Exhibit designations below correspond to the numbers assigned to
exhibit classifications in Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTIONS PAGE NOS.
- ------- --------------------------------------------------------------------------- ----------
<S> <C> <C>
1 Form of Underwriting Agreement.............................................
3.1 Form of Restated Certificate of Incorporation of the Company*..............
3.2 By-laws of the Company*....................................................
4.1 Specimen Common Stock Certificate*.........................................
4.2 Form of Indenture*.........................................................
5 Opinion of Weisman Celler Spett & Modlin, P.C.*............................
10.1 Form of Indemnity Agreement -- Directors*..................................
10.2 Form of Indemnity Agreement -- Officers*...................................
10.3 Employment Agreement, dated as of August 16, 1996 between the Company and
Richard Brandt*............................................................
11 Statement of Computation of Earnings Per Share.............................
12 Statement of Computation of Ratio of Earnings to Fixed Charges.............
23.1 Consent of Deloitte & Touche LLP...........................................
23.2 Consent of Weisman Celler Spett & Modlin, P.C. (contained in Exhibit 5)*...
24 Powers of Attorney*........................................................
25 Statement of Eligibility of Trustee*.......................................
</TABLE>
- ---------------
* Previously filed.
II-5
<PAGE> 1
Exhibit 1
$27,500,000
_____% Convertible Subordinated Notes due 2006
TRANS-LUX CORPORATION
UNDERWRITING AGREEMENT
New York, New York
___________, 1996
Southcoast Capital Corporation
277 Park Avenue
New York, New York 10172
The undersigned, Trans-Lux Corporation (the "Company"), a
Delaware corporation, hereby confirms its agreement with Southcoast Capital
Corporation.
Section 1. Underwriter. The term "Underwriter," as used
herein, will mean and refer to Southcoast Capital Corporation.
Section 2. Securities Offered. Subject to the
terms and conditions hereof, the Company proposes to issue and sell to the
Underwriter and the Underwriter proposes to purchase from the Company,
$27,500,000 aggregate principal amount of _____% Convertible Subordinated Notes
due 2006 of the Company ("Notes") pursuant to an indenture (the "Indenture") to
be dated on or about December __, 1996 between the Company and Continental
Stock Transfer & Trust Company as trustee (the "Trustee"). The $27,500,000
aggregate principal amount of Notes to be sold by the Company are herein
referred to as the "Firm Securities." In addition, the Company proposes to
grant to the Underwriter the option to purchase from the Company up to an
additional $4,125,000 aggregate principal amount of Notes (the "Option
Securities") solely for the purpose of covering over-allotments, if any, in
connection with the sale of the Firm Securities. The Firm Securities and the
Option Securities are referred to herein collectively as the "Securities."
<PAGE> 2
Section 3. Representations and Warranties. The Company
represents and warrants to the Underwriter that:
(i) A registration statement (File No. 333-15481) on
Form S-2, relating to the Securities and the shares of the
Company's common stock, $1.00 par value per share (the "Common
Stock") into which the Securities are convertible (the
"Conversion Shares), including a preliminary prospectus, has
been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), and has been filed by
the Company with the Commission and the Company is entitled
under the Rules and Regulations to file such registration
statement on Form S-2 and has made all required electronic
filings under Regulation S-T, including all financial data
schedules required to be filed pursuant to Item 601(c) of
Regulation S-K. One or more amendments to such registration
statement, including in each case a revised preliminary
prospectus, have been so prepared and filed. If such
registration statement has not become effective as of the
execution and delivery of this Agreement, and the filing of a
further amendment (the "Final Amendment") to such registration
statement is necessary to permit such registration statement
to become effective, such amendment will promptly be filed by
the Company with the Commission. If such registration
statement has become effective and any post-effective
amendment has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent such
amendment has been declared effective by the Commission. If
such registration statement has become effective, a final
prospectus (the "Rule 430A Prospectus") containing information
permitted to be omitted at the time of effectiveness by Rule
430A of the Rules and Regulations will promptly be filed by
the Company pursuant to Rule 424(b) of the Rules and
Regulations. The term "preliminary prospectus" as used herein
means any preliminary prospectus (as referred to in Rule 430
of the Rules and Regulations) with respect to the Securities
included at any time as part of such registration statement or
filed with the Commission pursuant to Rule 424(a) of the Rules
and Regulations; such registration statement as amended at the
time that it becomes or became effective, or, if applicable,
as amended at the time the most recent post-effective
amendment to such registration statement filed with the
Commission prior to the execution and delivery of this
Agreement became effective, including financial statements and
all exhibits (whether filed or incorporated by reference) and
information deemed to be a part thereof at such time pursuant
to Rule 430A of the Rules and Regulations is herein called the
"Registration Statement;" the term "Prospectus" shall mean (x)
if the Company relies on Rule 434 under the Act, the Term
Sheet (as defined below) relating to the Shares that is first
filed pursuant to Rule
-2-
<PAGE> 3
424(b)(7) under the Act, together with the preliminary
prospectus identified therein that the Term Sheet supplements,
or (y) if the Company does not rely on Rule 434 under the Act,
the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to
be filed pursuant to Rule 424(b) under the Act, the prospectus
included in the Registration Statement at the time it becomes
effective. "Term Sheet" shall mean any term sheet that
satisfies the requirements of Rule 434 under the Act. The
date on which the Registration Statement becomes effective is
hereinafter called the "Effective Date." Any reference herein
to any Preliminary Prospectus or the Prospectus or the
Registration Statement shall be deemed to include any
information incorporated by reference therein pursuant to Item
12 of Form S-2 under the Act, as of the date of such
Preliminary Prospectus, the Prospectus or the Registration
Statement, as the case may be.
(ii) When the Registration Statement becomes
effective, and at all subsequent times to and including the
Closing Time (hereinafter defined), and at the Option Exercise
Time (hereinafter defined), or for such longer period as the
Prospectus may be required to be delivered in connection with
sales of the Notes by the Underwriter or a dealer, the
Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto;
provided, that no amendment or supplement to the Registration
Statement or the Prospectus shall be made without prior
consultation with you, and to which you shall reasonably
object), will comply with the requirements of the Act and the
Rules and Regulations in all material respects, will not
contain an untrue statement of a material fact and will not
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided however, that the representations and
warranties in this subsection (ii) do not apply to statements
or omissions in the Registration Statement or the Prospectus
based upon and made in conformity with written information
furnished to the Company by the Underwriter specifically for
inclusion therein.
(iii) The documents incorporated by reference in the
Preliminary Prospectus and the Prospectus pursuant to Item 12
of Form S-2 under the Act, when they were filed with the
Commission, conformed in all material respects to the
requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations of
the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
since January 1, 1996, the Company has timely filed all
documents with the
-3-
<PAGE> 4
Commission which were required to be filed under the Exchange
Act and the rules and regulations of the Commission thereunder
on or prior to the date hereof.
(iv) The Commission has not issued an order
preventing or suspending the use of any preliminary prospectus
with respect to the Securities and has not instituted or, to
the Company's knowledge, threatened to institute any
proceedings with respect to such an order. Each preliminary
prospectus, when filed with the Commission, conformed in all
material respects with the requirements of the Act and the
Rules and Regulations and, as of its date, did not include any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; provided however, that the representations and
warranties in this sentence do not apply to statements or
omissions in each such preliminary prospectus based upon and
made in conformity with written information furnished to the
Company by the Underwriter specifically for inclusion therein.
(v) The Company is, and at the Closing Time, and at
the Option Exercise Time will be, a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Company's
subsidiaries (collectively, the "Subsidiaries" and
individually, a "Subsidiary") is listed in Exhibit 21 to the
Company's Report on Form 10-K for the year ended December 31,
1995 and, at the Closing Time and at each Option Exercise
Time, each Subsidiary, including each Significant Subsidiary
(as defined in Rule 1-02(w) under Regulation S-X), is and will
be, a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation. The Company owns, free and clear of all
mortgages, pledges, liens, security interests, conditional
sale agreements, charges, encumbrances and restrictions of
every nature, the outstanding shares of the capital stock of
each Subsidiary, with the exception of Trans-Lux Pty Ltd., as
to which the Company owns 75% of that Company's outstanding
common stock, and all of such shares have been duly and
validly authorized and issued and are fully paid and
non-assessable. Each of the Company and the Subsidiaries has,
and at the Closing Time and at each Option Exercise Time will
have, the corporate power and authority and all necessary
approvals, orders, licenses, certificates, permits and other
governmental authorizations to conduct all of the activities
conducted by it, to own or lease all of the assets owned or
leased by it and to conduct its business as described in the
Registration Statement and the Prospectus except where the
failure to have any such approval, order, license,
certificate, permit or governmental authorization will not
have a material adverse effect on the condition (financial or
otherwise), business, business prospects, assets or results of
operations of the Company and its Subsidiaries, taken as a
-4-
<PAGE> 5
whole (a "Material Adverse Effect"); and is, and at the
Closing Time and at the Option Exercise Time will be, duly
licensed or qualified to do business and in good standing as a
foreign corporation in all jurisdictions in which the nature
of the activities conducted by it and/or the character of the
assets owned and leased by it makes such license or
qualification necessary, except where the failure to be so
licensed or qualified will not have a Material Adverse Effect.
Except for the shares of the stock of each Subsidiary owned by
the Company and except for the Company's 50% ownership
interests in each of MetroLux Theatres and Mossgood
Theatre-Saunders Realty, both joint ventures, neither the
Company nor any Subsidiary owns, and at the Closing Time and
at the Option Exercise Time neither the Company nor any
Subsidiary will own, any shares of stock or any other
securities of any corporation or have any equity interest in
any firm, partnership, association or other entity. A
complete and correct copy of the Certificate of Incorporation
and by-laws of the Company, the charter documents of each
Subsidiary, and the by-laws of each Subsidiary, as currently
in effect, have been delivered to you and no changes therein
will be made subsequent to the date hereof and prior to the
Closing Time or the Option Exercise Time. A complete and
correct copy of all joint venture and or partnership
agreements to which the Company or any Subsidiary is party
have been delivered to you and no changes therein will be made
subsequent to the date hereof and prior to the Closing Time or
Option Exercise Time.
(vi) The Company is, and at the Closing Time and at
the Option Exercise Time will be, authorized to issue only
5,500,000 shares of Common Stock, 1,000,000 shares of the
Company's Class B Common Stock, $1.00 par value per share (the
"Class B Common Stock"), 4,000,000 shares of the Company's
Class A Common Stock, $1.00 par value per share (the "Class A
Common Stock") and 500,000 shares of the Company's Preferred
Stock, $1.00 par value per share (the "Preferred Stock"). All
of the Company's issued and outstanding shares of capital
stock have been duly authorized, validly issued and are fully
paid and nonassessable, and the Common Stock and the
capitalization of the Company conform to the descriptions
thereof and the statements made with respect thereto in the
Registration Statement and the Prospectus as of the date set
forth therein. There are no outstanding securities
convertible into or exchangeable for, and no outstanding
options, warrants or other rights to purchase, any shares of
the capital stock of the Company, nor any agreements or
commitments to issue any of the same, except as described in
the Registration Statement and the Prospectus, and there are
no preemptive or other rights to subscribe for or to purchase,
and no restrictions upon the voting or transfer of, any shares
of outstanding capital stock of the Company pursuant to the
Company's Certificate of Incorporation or by-laws or any
agreement or other instrument to which the Company is a party.
All offers and sales of the Company's capital
-5-
<PAGE> 6
stock by the Company during the 36-month period prior to the
date hereof were at all relevant times duly registered or
exempt from the registration requirements of the Act, and were
duly registered or the subject of an available exemption from
the registration requirements of the applicable state
securities or blue sky laws.
(vii) The financial statements of the Company
(including the footnotes thereto) filed with and as part of
the Registration Statement and the Prospectus present fairly
the financial position of the Company as of the respective
dates thereof and the statements of income, statement of
shareholders' equity and statements of cash flow of the
Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles
applied on a basis consistent with prior periods. Deloitte &
Touche LLP (the "Company's accountants"), who have reported on
such financial statements, are independent accountants with
respect to the Company as required by the Act and the Rules
and Regulations. Other than as presented in the Registration
Statement and the Prospectus, no other financial statements
are required to be included in the Registration Statement and
the Prospectus.
(viii) To the extent such items contain financial data
from the Company's financial statements, the financial
information and data set forth in the Prospectus under
"Prospectus Summary, "Risk Factors," "Use of Proceeds," "Price
Range of Common Stock and Dividend Policy," "Capitalization,"
"Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business," "Management," "Executive Compensation and
Transactions with Management," "Description of Notes" and
"Description of Capital Stock" are fairly presented and
prepared on a basis consistent with the financial statements
of the Company.
(ix) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus and prior to the Closing Time and to each Option
Exercise Time, except as set forth in the Registration
Statement and the Prospectus, (A) neither the Company nor any
Subsidiary has incurred or will have incurred any material
liabilities or obligations, direct or contingent, or entered
into any material transactions not in the ordinary course of
business; (B) there has been no adverse change with respect to
the inventory or rental equipment owned by the Company or any
Subsidiary which will have a Material Adverse Effect; (C) the
Company has not paid or declared nor will pay or declare any
dividends or other distributions on its capital stock other
than the Company's regular quarterly dividend as set forth in
the Prospectus under the heading "Price Range of Common Stock
and Dividend Policy"; and (D) except as contemplated by
Section 3(vi) hereof, there has not been and will not have
been any change in the capitalization of the Company or any
-6-
<PAGE> 7
Significant Subsidiary or any Material Adverse Effect in the
business, business prospects, financial condition, assets or
results of operations of the Company and its Subsidiaries,
taken as a whole, arising for any reason whatsoever.
(x) Except as set forth in the Registration
Statement, there are no actions, suits or proceedings at law
or in equity pending, or to the knowledge of the Company,
threatened, against the Company or any Subsidiary, any of
their respective assets or any of their respective officers or
directors, before or by any federal, state, county or local
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, not covered by
insurance wherein an unfavorable ruling, decision or finding
is reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary is involved in any
labor dispute nor, to the knowledge of the Company, is any
such dispute threatened, which dispute would have a Material
Adverse Effect.
(xi) Each of the Company and the Significant
Subsidiaries has, and at the Closing Time and at each Option
Exercise Time will have, complied in all material respects
with all laws, regulations and orders applicable to it or its
business, the violation of which would have a Material Adverse
Effect. Each of the Company and the Significant Subsidiaries
has, and at the Closing Time and at each Option Exercise Time
will have, in all material respects performed all of the
obligations required to be performed by it, and is not, and at
the Closing Time and at each Option Exercise Time will not be,
in default under (there being no existing state of facts which
with notice or lapse of time or both would constitute a
default under) any indenture, mortgage, deed of trust, voting
trust agreement, loan agreement, letter of credit agreement,
bond, debenture, note agreement or other evidence of
indebtedness, contract or other agreement to which it is a
party or by which it is bound, except defaults which would not
have a Material Adverse Effect, and, to the knowledge of the
Company, no other party under any such material agreement or
instrument to which the Company or any Subsidiary is a party
is in default in any material respect thereunder.
(xii) The Company (i) keeps books, records and
accounts that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Company and its Subsidiaries and (ii) maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance
with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles in the United States and to maintain
accountability for assets, and (C) the recorded accountability
for assets is compared with the existing assets at
-7-
<PAGE> 8
reasonable intervals and appropriate action is taken with
respect to any differences.
(xiii) Neither the Company nor any Significant
Subsidiary is in violation of its respective Certificate of
Incorporation, Memorandum and Articles of Association or its
charter, or its by-laws, as the case may be.
(xiv) The Securities to be issued and sold by the
Company to the Underwriter hereunder have been duly and
validly authorized and, when issued and delivered against
payment therefor as provided herein, will constitute legal,
valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms except as
such enforceability may be limited by the laws of bankruptcy,
insolvency, reorganization, moratorium or creditors' rights,
generally, or by general principles of equity; the Securities
will be entitled to the benefits of the Indenture; the
Indenture has been duly authorized and, when duly executed and
delivered by the Company and the Trustee, will constitute a
legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms;
and the Securities have been approved for listing, subject to
official notice of issuance, on the American Stock Exchange
(the "AMEX"); the Securities and the Indenture conform, and
when the Registration Statement becomes effective and at the
Closing Time and at each Option Exercise Time will conform, to
all statements with regard thereto contained in the
Registration Statement and the Prospectus.
(xv) The Conversion Shares have been duly and validly
authorized and reserved for issuance, and such shares, when
issued and delivered in accordance with the provisions of the
Securities and the Indenture, will be duly and validly issued,
fully paid and non-assessable, and, if issued on the date
hereof, would conform to the description of the Common Stock
contained in the Prospectus; and the Conversion Shares have
been approved for listing, subject to official notice of
issuance, on the AMEX.
(xvi) This Agreement and the Indenture have been duly
authorized, executed and delivered by the Company and each
constitutes a valid and binding agreement of the Company
enforceable in accordance with its terms except as such
enforceability may be limited by the laws of bankruptcy,
insolvency, reorganization, moratorium or creditors' rights,
generally, or by general principles of equity and except as
enforceability of those provisions of this Agreement relating
to indemnity and contribution may be limited by the federal
securities laws and principles of public policy; the
performance of, and compliance with all the terms of, this
Agreement and the Indenture and the consummation of the
transactions contemplated herein and therein will not conflict
with or result in a material breach or violation of any of the
terms and provisions
-8-
<PAGE> 9
of, or constitute a material default under (there being no
existing state of events to the knowledge of the Company which
with notice or lapse of time or both would constitute a
default) or result (or with the giving of notice or lapse of
time or both would result) in the creation or imposition of
any lien, charge, or encumbrance upon the assets or properties
of the Company or any Subsidiary, pursuant to any indenture,
mortgage, deed of trust, voting trust agreement, loan
agreement, letter of credit agreement, bond, debenture, note
agreement or other evidence of indebtedness, contract or other
agreement to which the Company or any Subsidiary is a party or
by which the Company or any Subsidiary, or under the
certificate of incorporation or by-laws of the Company or any
Subsidiary or under any statute or under any order, rule or
regulation applicable to the Company or any Subsidiary or
their respective businesses or properties or of any court or
other governmental body except where such breach or violation
would not have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole; and no consent, approval,
authorization or order of any court or governmental agency or
body is required for the consummation by the Company of the
transactions on its part contemplated in this Agreement or the
Indenture, except such as may be required under the Act, the
rules and regulations of the NASD, the AMEX or under state
securities or blue sky laws.
(xvii) Each of the Company and the Subsidiaries has
good and marketable title to or valid leasehold interests in
all material properties and assets owned by it ("good and
marketable" title shall mean fee simple title with respect to
real property not the subject of a leasehold interest), free
and clear of all liens, charges, encumbrances or restrictions,
except such as are described in or referred to in the
Prospectus or do not materially interfere with or impair the
business of the Company and its Subsidiaries, taken as a
whole. Each of the Company and the Subsidiaries has valid,
subsisting and enforceable leases for the properties described
in the Prospectus as leased by it, with such exceptions as are
not material and do not interfere with the use made, and
proposed to be made, of such properties by it.
(xviii) There is no document or contract of a character
required to be described in the Prospectus or to be filed as
an exhibit to the Registration Statement which is not
described or filed as required; and no statement,
representation, warranty or covenant made by the Company in
this Agreement or in any certificate or document required by
this Agreement to be delivered to you contains, when made, or
as of the Closing Time or any Option Exercise Time will
contain any untrue statement of a material fact, or omitted to
state a material fact required to be stated therein or
necessary to make any statement therein, in light of the
circumstances when made, not misleading.
-9-
<PAGE> 10
(xix) Each of the Company and the Subsidiaries has
sufficient trademarks, trade names, registered service marks,
patents, patent applications, patent rights, licenses,
permits, copyright protection and governmental or other
authorizations of a similar nature currently required for the
conduct of its business (collectively, "Rights"), except where
the failure to have or obtain a Right would not result in a
Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole, and each of the Company and the Subsidiaries
is in all material respects complying therewith, and the
products and services, and the marks associated therewith,
used by the Company and each Subsidiary do not, to the best of
its knowledge, violate or infringe any trademarks, trade
names, registered service marks, patents, patent rights,
licenses, permits or copyrights held or owned by any other
party except as otherwise disclosed in the Prospectus.
Neither the Company nor any Subsidiary has received any notice
of violation or infringement of or conflict with asserted
rights of others with respect to any Rights owned or used by
the Company or any Subsidiary except for a claim by
Daktronics, Inc. that it is not violating the Company's
Rights. Other than as disclosed in the Prospectus, the
expiration of any such Right would not result in a Material
Adverse Effect.
(xx) The Company intends to apply its proceeds from the
sale of the Shares for the purposes set forth in the
Prospectus under "Use of Proceeds."
(xxi) The Company is not conducting, and does not
presently intend to conduct its business in a manner in which
it would become, an "investment company" as defined in Section
3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(xxii) No holder of any securities of the Company has
the right to require registration of the Common Stock or other
securities of the Company because of the filing or
effectiveness of the Registration Statement.
(xxiii) Neither the Company nor any of its officers or
directors or affiliates (as defined in the Rules and
Regulations) has taken or will take, directly or indirectly,
any unlawful action designed to stabilize or manipulate the
price of any security of the Company, or which has constituted
or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of
the Company, to facilitate the sale or resale of any of the
Company's Securities.
(xxiv) The Company has not, and at the Closing Time and
at each Option Exercise Time will not have, incurred any
liability for finder's or brokerage fees or agent's
commissions in connection with the offer and
-10-
<PAGE> 11
sale of the Securities, this Agreement or the transactions
hereby contemplated, except for the Underwriter's discounts
and commissions provided for in this Agreement.
(xxv) The Company and each Significant Subsidiary have
filed all foreign, U.S., state and local income and franchise
tax returns required to be filed through the date hereof and
have paid all taxes due thereon (except where the failure to
do so could not have a Material Adverse Effect), and no tax
deficiency has been, nor does the Company have any knowledge
of any tax deficiency which might be, asserted against the
Company or any Subsidiary which could have a Material Adverse
Effect.
Section 4. (a) Purchase, Sale and Delivery of the Firm
Securities; Closing Time. (i) On the basis of the representations, warranties
and covenants contained in this Agreement, and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter an aggregate of $27,500,000 principal amount of Firm Securities,
and the Underwriter agrees to purchase from the Company, at a purchase price of
____% of the principal amount thereof, plus accrued interest, if any, from the
date of issuance to the Closing Time, the principal amount of Firm Securities.
(ii) Delivery of the Firm Securities shall be made to the
Underwriter at its offices at 277 Park Avenue, New York, New York, or such
other location in the New York metropolitan area as you shall advise the
Company by at least two full business days' notice in writing, against payment
by you of the purchase price therefor to the Company by wire transfer in
immediately available funds to the Company of the amount of such purchase
price, at 10:00 A.M., New York City Time, on December __, 1996, or on such other
time and business day (Saturdays, Sundays and legal holidays in the City or
State of New York not being considered business days for the purposes of this
Agreement), as shall be agreed to by the Company and you but not later than the
seventh calendar day (or the business day next following such seventh calendar
day if such seventh calendar day shall not be a business day) following the date
of this Agreement as you shall determine and advise the Company by at least two
full business days' notice in writing, which time and date are herein called the
"Closing Time." Delivery of the Firm Securities shall be made in registered form
in such name or names and in such denominations as you shall request by at least
two full business days' notice in writing. The cost of original issue tax
stamps and transfer stamps, if any, in connection with the issuance and delivery
or sale of the Firm Securities by the Company to the Underwriter shall be borne
by the Company. The Company will pay and save the Underwriter or its nominees,
and any subsequent holder of the Firm Securities, harmless from any and all
liabilities with respect to or resulting from any failure or delay in paying
federal or state stamp and other transfer taxes, if any, which may be payable or
determined to be payable in connection with the sale by the Company to the
Underwriter of the Firm Securities or any portion thereof.
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<PAGE> 12
(b) Purchase, Sale and Delivery of the Option Securities.
(i) The Company hereby grants to the Underwriter an option (the "Option") to
purchase from the Company up to $4,125,000 aggregate principal amount of Option
Securities at the same purchase price as the Firm Securities are being sold by
the Company as stated in paragraph (a) of this Section 4; plus accrued
interest, if any, from the date of issuance to the Option Exercise Time (as
hereinafter defined); provided however, that the Option may be exercised only
for the purpose of covering any over-allotments which may be made by the
Underwriter in connection with the distribution and sale of the Firm
Securities.
(ii) The Option is exercisable by you in whole or in part at
any time or times on or before 12:00 noon, New York City time, on the day prior
to the Closing Time, and at any time or times thereafter during the period
ending 30 days after the date of the Prospectus (or if such 30th day shall be a
Saturday, Sunday or holiday, on the next business day thereafter when the New
York Stock Exchange is open for trading), in each case by giving notice to the
Company in the manner provided in Section 11 hereof, setting forth the number
of Option Securities as to which the Option is being exercised, the name or
names in which the certificates for the Option Securities are to be registered,
the denominations of such certificates and the date of delivery of such Option
Securities, which date shall not be less than two nor more than seven business
days after such notice.
(iii) Upon each exercise of the Option, the Company shall
sell to the Underwriter the aggregate number of Option Securities specified in
the notice exercising the Option and the Underwriter, on the basis of the
representations and warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to be delivered to
you, but subject to the terms and conditions of this Agreement, shall purchase
from the Company the aggregate number of Option Securities specified in such
notice.
(iv) Delivery of the Option Securities with respect to which
the Option shall have been exercised shall be made to the Underwriter at its
offices at 277 Park Avenue, New York, New York, or such other location in the
New York metropolitan area as you shall determine and advise the Company,
against payment by you, of the purchase price therefor to the Company by wire
transfer in immediately available funds to the Company in the amount of such
purchase price, at 10:00 A.M., New York City Time, on the date designated in the
notice given by you as above provided for, unless some other place, time and
date is mutually agreed upon (such time and date being herein called an "Option
Exercise Time"). The cost of original issue tax stamps or transfer stamps, if
any, in connection with each issuance and delivery of the Option Securities by
the Company to the Underwriter shall be borne by the Company. The Company will
pay and save the Underwriter or its nominees, and any subsequent holder of
Option Securities, harmless from any and all liabilities with respect to or
resulting from any failure or delay in paying federal and state stamp taxes, if
any, which may be payable or determined to
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<PAGE> 13
be payable as a result of the sale by the Company to the Underwriter of the
Option Securities or any portion thereof.
(v) The Company will make the certificates for the Option
Securities to be purchased at each Option Exercise Time available to you for
examination at your offices at 277 Park Avenue, New York, New York, or such
other place as you shall request, not later than 2:00 P.M., New York City Time,
on the business day next preceding each Option Exercise Time.
(vi) The obligation of the Underwriter to purchase and pay
for Option Securities at each Option Exercise Time shall be subject to
compliance as of such date with all the conditions specified in Section 8
hereof and the delivery to you of opinions, certificates and letters, each
dated the respective Option Exercise Time, substantially similar in scope to
those specified in Section 8 hereof, and to the absence of any occurrence
referred to in Section 10 hereof.
Section 5. Registration Statement and Prospectus. (a) The
Company will deliver to you, without charge, four fully signed copies of the
Registration Statement and of each amendment thereto, including all financial
statements and exhibits, and the number of conformed copies of the Registration
Statement and of each amendment thereto, including all financial statements,
but excluding exhibits, as you may reasonably request.
(b) The Company has delivered to you, and each of the
Selected Dealers (as hereinafter defined), without charge, as many copies as
you have reasonably requested of each preliminary prospectus heretofore filed
with the Commission and will deliver to you and to each Selected Dealer,
without charge, on the Effective Date, and thereafter from time to time during
the period in which the Prospectus is required by law to be delivered in
connection with sales of Securities, as many copies of the Prospectus (and, in
the event of any amendment of or supplement to the Prospectus, of such amended
or supplemented Prospectus) as you may reasonably request.
(c) The Company has authorized you to use, and make available
for use by prospective dealers, the Preliminary Prospectuses, and authorizes
you, all dealers (the "Selected Dealers") selected by you in connection with
the distribution of the Shares and all dealers to whom any of such Securities
may be sold by you or by any Selected Dealer, to use the Prospectus, as from
time to time amended or supplemented, in connection with the sale of the
Securities in accordance with the applicable provisions of the Act, the
applicable Rules and Regulations and applicable state law until completion of
the public offering of the Securities and for such longer period as you may
request if the Prospectus is required to be delivered in connection with sales
of the Securities by you or a dealer.
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<PAGE> 14
Section 6. Covenants. The Company covenants and agrees with
the Underwriter that:
(i) After the execution and delivery of this Agreement,
the Company will not, at any time, whether before or after the
Effective Date, file any amendment of or supplement to the
Registration Statement or the Prospectus of which you shall
not previously have been advised and furnished with a copy, or
to which you or Fulbright & Jaworski L.L.P. ("counsel for the
Underwriter") shall not have reasonably approved, or which is
not in compliance with the Act or the Rules and Regulations.
(ii) If the Registration Statement has not become
effective, the Company will promptly file the Final Amendment
with the Commission and will use its best efforts to cause the
Registration Statement to become effective as promptly as
possible. If the Registration Statement has become effective,
the Company will file the Rule 430A Prospectus or other
Prospectus with the Commission as promptly as practicable, but
in no event later than that permitted by Rule 424(b). The
Company will promptly advise you (A) when the Registration
Statement, or any post effective amendment thereto, shall have
become effective, or any amendments or supplements to the
Prospectus shall have been filed with the Commission, (B) of
any request by the Commission or any state or other regulatory
body for any amendment or supplement of the Registration
Statement or the Prospectus or for additional information and
the nature and substance thereof, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or
prohibiting the offer or sale of any of the Securities or of
the initiation of any proceedings for such purpose, (D) of any
receipt by the Company of any notification with respect to the
suspension of qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (E) of the happening of any
event during the period in which the Prospectus is to be used
in conjunction with the offer or sale of Securities which
makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or which
requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements
therein not misleading in light of the circumstances when
made. The Company will use its best efforts (in the case of
orders by the Commission) or its reasonable best efforts (in
the case of orders by any state or other regulatory body) to
prevent the issuance of any stop order or any order preventing
or suspending the use of the Registration Statement or
Prospectus and, if such order is issued, to obtain the
withdrawal thereof as promptly as possible.
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<PAGE> 15
(iii) The Company will prepare and file with the
Commission, upon your request, any such amendments of or
supplements to the Registration Statement or the Prospectus,
in form and substance reasonably satisfactory to Weisman
Celler Spett & Modlin, P.C. ("counsel for the Company"), as in
the opinion of counsel for the Underwriter may be necessary or
advisable in connection with the distribution of the
Securities which, or the terms upon which, the Securities may
be offered by you, and will use its best efforts to cause the
same to become effective as promptly as possible.
(iv) The Company will comply with the Act and the Rules
and Regulations, and the Exchange Act and the rules and
regulations thereunder, so as to permit the continuance of
sales of the Securities by you or any selected dealer under
the Act and the Exchange Act for so long as a Prospectus is
required to be delivered under the Act. If at any time when a
prospectus is required to be delivered under the Act an event
shall have occurred as a result of which it is necessary to
amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading or to make the
Prospectus comply with the Act, the Company will notify you
promptly thereof and will, subject to the provisions of
Section 6(a)(i) hereof, furnish to you an amendment or
supplement which will correct such statement in accordance
with the requirements of Section 9 of the Act.
(v) The Company will comply with all of the provisions of
any undertakings contained in the Registration Statement.
(vi) The Company will use its reasonable best efforts to
qualify or register the Shares for sale under the blue sky
laws of such jurisdictions as you shall request, to make such
applications, file such documents and furnish such information
as may be required for such purpose and to comply with such
laws so as to continue such qualification in effect so long as
required for the purposes of the distribution of the
Securities; provided however, that the Company shall not be
required to qualify as a foreign corporation in any
jurisdiction, subject itself to general taxation or to file a
consent to service of process in any jurisdiction in any
action other than one arising out of the offering or sale of
the Securities.
(vii) The Company will make generally available to its
security holders and to the Underwriter as soon as
practicable, but not later than 45 days after the end of the
12-month period beginning at the end of the fiscal quarter of
the Company during which the Effective Date occurs (or 95
days, if such 12-month period coincides with the Company's
fiscal year), an earnings statement of the Company, which will
be in reasonable detail, but need not be audited, and will
cover a period of twelve months commencing after the Effective
Date. Such earnings statement shall
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<PAGE> 16
comply with the requirements of Section 11(a) of the Act or
Rule 158 of the Rules and Regulations. During the period of
five years commencing on the Effective Date, the Company will
furnish to its shareholders a copy of its annual report. The
Company will make available to its shareholders upon their
request copies of the Company's Form 10-K.
(viii) Prior to the later to occur of the termination
of the Option and the Option Exercise Time, except as required
by law, the Company will not issue, directly or indirectly,
without your prior consent not to be unreasonably or untimely
withheld and that of your counsel, any press release or other
communication or hold any press conference with respect to the
Company or its activities or the offering of the Securities.
(ix) During the 90 days following the date hereof,
the Company will not, without the prior written consent of
Southcoast Capital Corporation, sell, contract to sell or
otherwise dispose of any securities except (i) as contemplated
in the Prospectus and (ii) except for the Securities and (iii)
except pursuant to options granted under the Company's Stock
Option Plans or exercises of such options and the Company has
caused each of its executive officers and directors to deliver
to you on or before the date of this Agreement an agreement,
satisfactory in form and substance to you and counsel for the
Underwriter, whereby each agrees, for a period of 90 days
after the date of this Agreement, not to publicly offer,
pledge, sell or contract to sell, transfer or otherwise
dispose of any securities of the Company, directly or
indirectly, without your prior written consent.
Section 7. Expenses. The Company will pay and bear all
costs, fees, taxes and expenses incident to the performance of the obligations
of the Company under this Agreement, including, but not limited to: (a) the
costs incident to the issuance, sale and delivery to the Underwriter of the
Securities; (b) the costs incident to the preparation, printing and filing
under the Act of each Preliminary Prospectus, the Prospectus, the Registration
Statement (including the costs of the Form T-1) and any amendments or
supplements thereof and exhibits thereto; (c) the costs of distributing the
Registration Statement and any post-effective amendments thereto; (d) the costs
of printing and distributing to the Underwriter and any Selected Dealer copies
of any Preliminary Prospectus, the Prospectus, the Registration Statement and
any amendment or supplement to the Prospectus or Registration Statement
required by this Agreement or the Act; (e) the costs of preparation, printing,
mailing, delivery, filing and distribution of preliminary and final blue sky
memoranda, Underwriters' Questionnaires and Powers of Attorney, letters to
prospective Underwriters, the Agreement Among Underwriters, the Selling
Agreement, if any, this Agreement and all documents related thereto; (f) the
filing fees of the Commission; (g) the costs of qualification or registration
of the Securities in the jurisdictions referred to in subsection (vi) of
Section 6 hereof, including the reasonable legal fees and expenses of counsel
for the Underwriter in connection therewith, and all filing fees in connection
therewith; (h) the cost of preparation, including the reasonable legal fees and
actual
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<PAGE> 17
out-of-pocket expenses of counsel for the Underwriter in connection therewith,
of all filings with the NASD and all filing fees in connection therewith; (i)
fees and expenses of counsel for the Company, the Company's accountants and the
Company's consultants; (j) fees in connection with the listing of the
Securities and Conversion Shares on the AMEX; and (k) all other costs and
expenses incurred or to be incurred by the Company in connection with the
transactions contemplated by this Agreement, including trustee's fees and
applicable transfer taxes, and the retention of Deloitte & Touche LLP.
Section 8. Conditions of the Underwriter's Obligations. The
Underwriter's obligations hereunder to purchase and pay for the Securities are
subject (as of the date hereof, the Closing Time and each Option Exercise Time)
to the accuracy of and compliance with the representations and warranties of
the Company herein (in all material respects to the extent not otherwise
qualified by materiality) and in each certificate and document contemplated
under this Agreement to be delivered, to the accuracy of the statements of the
Company, and of the officers of the Company made pursuant to the provisions
hereof (in all material respects to the extent not otherwise qualified by
materiality), to the performance, in all material respects, by the Company of
its covenants and agreements hereunder and under each such certificate and
document, and to the following additional conditions:
(a) (i) The Registration Statement shall have
become effective not later than 5:00 P.M., New York City Time, on the date of
this Agreement, or at such later time or on such later date as you may agree to
in writing; (ii) if required, the Prospectus shall have been filed with the
Commission pursuant to Rule 424(b)(1) or (4) of the Rules and Regulations
within the applicable time period prescribed for such filing thereunder and in
accordance with the provisions of Section 6(ii) hereof; (iii) at or prior to
the Closing Time, no stop order suspending the effectiveness of the
Registration Statement or the qualification or registration of the Securities
under the blue sky laws of any jurisdiction (whether or not a jurisdiction
which you shall have specified) shall have been issued and no proceeding for
that purpose shall have been initiated or shall be threatened or contemplated
by the Commission or the authorities of any such jurisdiction; (iv) any request
for additional information on the part of the Commission or any such
authorities shall have been complied with to the satisfaction of the Commission
or such authorities; (v) the NASD, upon review of the terms of the public
offering of Shares, shall not have objected to such offering, such terms, or
the Underwriter's participation in the same; and (vi) after the date hereof, no
amendment or supplement to the Registration Statement or the Prospectus shall
have been filed without your prior consent.
(b) You shall not have advised the Company that the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto contains an untrue statement of a material fact, or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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<PAGE> 18
(c) Between the time of the execution and delivery
of this Agreement and the Closing Time, there shall be no actions, suits or
proceedings at law or in equity pending, or to the knowledge of the Company,
threatened against the Company or any Subsidiary, any of their respective
assets or any of their respective officers or directors before or by any
federal, state, county or local commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, wherein an unfavorable
ruling, decision or finding would have a Material Adverse Effect.
(d) Each of the representations and warranties of
the Company contained herein and in each certificate and document contemplated
under this Agreement to be delivered shall be true and correct in all material
respects at the Closing Time as if made at the Closing Time, and all covenants
and agreements contained herein, and in each such certificate and document, to
be performed on the part of the Company and all conditions contained herein and
in each such certificate and document to be fulfilled or complied with by the
Company or prior to the Closing Time shall have been duly performed, fulfilled
or complied with in all material respects.
(e) At the Closing Weisman Celler Spett & Modlin,
P.C., counsel for the Company, shall furnish to you an opinion, in form and
substance satisfactory to you, dated as of the date of its delivery, to the
effect that:
(i) Each of the Company and the Significant
Subsidiaries is a duly incorporated and validly existing corporation in
good standing under the laws of its jurisdiction of incorporation with
full power and authority (corporate and other) to own or lease its
properties and to conduct its business as described in the Prospectus,
and is duly qualified to do business as a foreign corporation and is in
good standing in the jurisdictions listed in Schedule A to this Opinion
except as listed on Schedule A. To the best knowledge of such counsel,
there are no pending or threatened proceedings by any governmental
authority alleging that the conduct of the Company's or any Significant
Subsidiary's business requires such qualification (except for those
jurisdictions in which the failure to so qualify can be cured without
having a Material Adverse Effect). To the knowledge of such counsel,
no proceeding has been instituted by any governmental authority for the
dissolution of the Company or any Significant Subsidiary;
(ii) The Company has authorized capital stock as
set forth in the Prospectus; the securities of the Company conform in
all material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock and Class B Common
Stock have been duly authorized and validly issued by the Company, are
fully paid and nonassessable, and are free of any preemptive or other
rights to subscribe for any of the Securities or Conversion Shares;
(iii) The Securities to be issued and sold by the
Company to the Underwriter hereunder have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided herein,
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<PAGE> 19
will constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of creditors'
rights and the availability of remedies (regardless of whether such
enforceability is considered in a proceeding in equity or at law); the
Securities will be entitled to the benefits of the Indenture; the
Securities and the Indenture conform in all material respects to the
descriptions thereof in the Prospectus; and the Securities and
Conversion Shares have been approved for listing, subject to official
notice of issuance, on the AMEX;
(iv) The Conversion Shares have been duly and
validly authorized and reserved for issuance, and such shares, when
issued and delivered in accordance with the provisions of the
Securities and the Indenture, will be duly and validly issued, fully
paid and non-assessable, and, if issued on the date hereof, would
conform to the description of the Common Stock contained in the
Prospectus;
(v) To the best knowledge of such counsel, there
is not pending or threatened against the Company any action, suit,
proceeding or investigation before or by any court or governmental
body required to be disclosed in the Prospectus which is not
disclosed;
(vi) The Company has full legal right, power and
authority to enter into this Agreement and the Indenture and to
consummate the transactions provided for herein and this Agreement and
the Indenture have been duly authorized, executed and delivered by the
Company, and each of this Agreement and the Indenture, assuming due
authorization, execution and delivery by each other party hereto, is a
legal, valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as (A) such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and the
availability of remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and (B) rights to
indemnity and contribution may be limited by federal or state
securities laws and the public policy underlying such laws. None of
the Company's execution or delivery of this Agreement or the
Indenture, its performance thereof or its consummation of the
transactions contemplated therein conflicts or will conflict with or
results or will result in any breach or violation of any of the terms
or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon, any
property or assets of the Company or any Subsidiary pursuant to the
terms of their respective Certificate of Incorporation, by-laws or
other governing document except as would not
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<PAGE> 20
have a Material Adverse Effect, the terms of any indenture, mortgage,
deed of trust, voting trust agreement, shareholder's agreement, note
agreement or other agreement known to such counsel to which the
Company or any Subsidiary is a party or by which any of them is or may
be bound except as would not have a Material Adverse Effect; or any
judgment, decree or order, known to such counsel, of any government,
arbitrator, court, regulatory body or other governmental body except
as would not have a Material Adverse Effect; and no consent, approval,
authorization or order of any court, regulatory body or other
governmental body has been or is required for the Company's
performance of this Agreement or the Indenture, or the consummation of
the transactions contemplated therein in connection with the purchase
and distribution by the Underwriter of the Securities sold by the
Company, except such as have been obtained under the Act or may be
required under state securities or blue sky laws;
(vii) Issuances of Common Stock by the Company
during the 36-month period prior to the date of this Agreement were
either registered under the Act or exempt from registration under the
Act and complied in all respects with the provisions of all applicable
U.S. federal and state securities laws. No holder of any securities of
the Company has the right to require registration of the Common Stock
or other securities of the Company because of the filing or
effectiveness of the Registration Statement.
(viii) (A) The Registration Statement has been
declared effective under the Act; any required filing of the
Prospectus pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); (B) to the best
knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement or any amendment thereto has been
issued, and no proceedings for that purpose have been instituted or
are pending or, are threatened under the Act; (C) the Registration
Statement (and the Form T-1 filed as an exhibit to the Registration
Statement) originally filed with respect to the Securities and each
amendment thereto and the Prospectus and, if any, each amendment and
supplement thereto (except for the financial statements, schedules and
other financial data included therein, as to which such counsel need
not express any opinion), complied as to form in all material respects
with the requirements of the Act and the Rules and Regulations and the
Trust Indenture Act of 1939; the documents incorporated by reference
in the Prospectus (other than the financial statements and related
schedules and other financial or statistical data included therein or
omitted therefrom, as to which such counsel need express no opinion,
and except to the extent that any statement therein is modified or
superseded in the Prospectus), as of the dates they were filed with
the Commission, conform in all material respects to the
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<PAGE> 21
requirements of the Exchange Act and the rules and regulations
thereunder; the Company is entitled under the Rules and Regulations to
file such registration statement on Form S-2 and to the best knowledge
of such counsel based upon the Company's representation to such
counsel to such effect, has made all required electronic filings under
Regulation S-T; the Indenture has been duly qualified under the Trust
Indenture Act;
(ix) Since January 1, 1996, the Company has timely
filed all documents with the Commission which were required to be
filed under the Exchange Act and the rules and regulations of the
Commission thereunder on or prior to the date hereof.
(x) To the knowledge of such counsel, there is no
action, suit, proceeding or investigation, governmental or otherwise,
pending or threatened to which the Company is a party, that seeks to
restrain, enjoin, prevent the consummation of or otherwise change the
issuance of the Securities or the execution and delivery of this
Agreement or any of the other transactions contemplated hereby, or
that questions the legality or validity of any of such transactions or
that seeks to recover damages or obtain other relief in connection
with any of such transactions, or that, if adversely determined, would
materially and adversely affect the ability of the Company to perform
its obligations under this Agreement;
(xi) The Company is not now, and upon consummation
of the offering of the Securities, the Company will not be an
"investment company" required to register under the Investment Company
Act of 1940, as amended;
(xii) The Indenture has been qualified under the
Trust Indenture Act of 1939;
(xiii) The statements set forth in the Registration
Statement and the Prospectus under the captions "Prospectus Summary,"
"Risk Factors," "Capitalization," "Business," "Management," "Executive
Compensation and Transactions with Management" "Executive Compensation
and Transactions with Management," "Description of Notes" and
"Description of Capital Stock," insofar as such statements summarize
or describe agreements of the Company or its subsidiaries, the
Indenture, the Notes and the capital stock of the Company, as the case
may be, fairly present the information required with respect to such
items; and
(xiv) To the knowledge of such counsel, there are
no contracts or documents which are required by the Act to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement which are not
described in the Registration
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<PAGE> 22
Statement or the Prospectus or filed as exhibits to the Registration
Statement as required by the Act and the Rules and Regulations.
In addition, such counsel shall state that in the course of
the preparation of the Registration Statement and the Prospectus, such counsel
has participated in conferences with officers and representatives of the
Company and with the Company's independent public accountants, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Registration Statement and the
Prospectus and nothing has come to such counsel's attention that causes such
counsel to believe that either the Registration Statement as of the date it is
declared effective and as of the Closing Time or the Prospectus as of the date
thereof and as of the Closing Time contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading (it
being understood that such counsel need not express any opinion with respect to
the financial statements, schedules and other financial data included in the
Registration Statement or the Prospectus). In rendering any such opinion, such
counsel may rely, as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Company and public
officials.
References to the Registration Statement and the Prospectus in
this paragraph (e) shall include any amendment or supplement thereto at the
date of such opinion.
(f) Fulbright & Jaworski L.L.P., counsel to the
Underwriter, shall have furnished to you their written opinion or opinions,
dated the Closing Time, in form and substance satisfactory to you, with respect
to the incorporation of the Company, the validity of the Securities, the
Registration Statement, the prospectus and other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters.
(g) Concurrently with the execution and delivery of
this Agreement and at the Closing Time, the Company's accountants shall have
furnished to you a letter, dated as of the date of its delivery, addressed to
you and in form and substance satisfactory to you, to the effect that:
(i) Such accountants are independent certified
public accountants with respect to the Company as required by the Act
and the Rules and Regulations.
(ii) Insofar as reported on by them, in their
opinion, the financial statements of the Company included in the
Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the published rules and regulations thereunder.
-22-
<PAGE> 23
(iii) On the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted
auditing standards) for a review of interim financial statements as
specified by the American Institute of Certified Public Accountants
and described in SAS No. 71. with respect to the unaudited interim
financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus and the latest available
unaudited interim financial statements of the Company, if more recent
than that appearing in the Registration Statement and Prospectus,
inquiries of officers of the Company responsible for financial and
accounting matters as to the transactions and events subsequent to the
date of the latest audited financial statements of the Company, and a
reading of the minutes of meetings of the shareholders, the Board of
Directors of the Company and any committees of the Board of Directors,
as set forth in the minute books of the Company, nothing has come
their attention which, in their judgment, would indicate that (A)
during the period from the date of the latest financial statements of
the Company appearing in the Registration Statement and Prospectus to
a specified date not more than three business days prior to the date
of such letter, there have been any decreases in net current assets or
net assets as compared with amounts shown in such financial statements
or decreases in net sales or decreases [increases] in total or per
share net income compared with the corresponding period in the
preceding year or any change in the capitalization or long-term debt
of the Company, except in all cases as set forth in or contemplated by
the Registration Statement and the Prospectus, and (B) the unaudited
interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus, do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Regulations or are not fairly presented in conformity
with generally accepted accounting principles and practices on a basis
substantially consistent with the audited financial statements
included in the Registration Statement or the Prospectus.
(iv) They have compared specific dollar amounts,
numbers of shares, numerical data, percentages of revenues and
earnings, and other financial information pertaining to the Company
set forth in the Prospectus (with respect to all dollar amounts,
numbers of shares, percentages and other financial information
contained in the Prospectus, to the extent that such amounts, numbers,
percentages and information may be derived from the general accounting
records of the Company, and excluding any questions requiring an
interpretation by legal counsel) with the results obtained from the
application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in
the letter, and found them to be in agreement.
(v) in addition to the examination referred to in
their reports included in the Registration Statement and the
Prospectus and the limited procedures referred to in clause (iii)
above, they have carried out certain
-23-
<PAGE> 24
specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information specified by
the Underwriter, which are derived from the general accounting records
of the Company and its subsidiaries which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, (a) the Registration
Statement, (b) the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (including the information from the Company's
1996 Proxy Statement incorporated by reference therein), and (c) the
Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, June 30, 1996 and September 30, 1996, and have compared such
amounts and financial information with the accounting records of the
Company and its subsidiaries, and have found them to be in agreement
and have proved the mathematical accuracy of certain specified
percentages.
(h) At the Closing Time, there shall be furnished to
you, on behalf of the Company, an accurate certificate, dated the date of its
delivery, signed by each of the chief executive officer and the chief financial
officer of the Company, in form and substance reasonably satisfactory to you,
to the effect that:
(i) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, neither the Registration Statement nor
the Prospectus contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; (B) in the
case of a certificate delivered after the date of this Agreement,
since the Effective Date, no event has occurred of which he or she has
knowledge and which was required by the Act or the Rules and
Regulations to be set forth in a supplement to or amendment of the
Prospectus but which has not been so set forth; and (C) since the
dates as of which and the periods for which information is given in
the Registration Statement and the Prospectus, there has not been to
his or her knowledge any Material Adverse Effect (financial or
otherwise), in the condition or business prospects of the Company from
that set forth in the Registration Statement and the Prospectus, other
than changes which the Registration Statement and the Prospectus
specifically disclose have occurred or may occur subsequent to the
Effective Date.
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for
such purpose have been commenced or are, to the knowledge of each
signer of such certificate, threatened by the Commission.
(iii) No stop order suspending the qualification or
registration of any of the Securities under the blue sky laws of any
jurisdiction (whether or not a jurisdiction you shall have specified)
has been issued, and no proceedings for such purpose have been
commenced
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<PAGE> 25
or are, to the knowledge of each signer of such certificate,
threatened by any jurisdiction.
(iv) The conditions, separately set forth in such
certificate, contained in subsections (a), (c) and (k) of this Section
8 have been complied with.
(v) There has been no breach of any of the terms
or provisions of the agreements referred to in Section 6(ix) hereof.
(vi) Each of the representations and warranties of
the Company contained in this Agreement and in each certificate and
document contemplated under this Agreement to be delivered to you was,
when originally made and is, at the time such certificate is dated,
true and correct in all material respects.
(vii) Each of the covenants required herein to be
performed by the Company on or prior to the date of such certificate
has been duly performed in all material respects and each condition
herein required to be complied with by the Company on or prior to the
date of such certificate has been duly, timely and fully complied with
by the Company.
(i) The Company shall have furnished to you such
certificates, in addition to those specifically mentioned herein, as you may
have reasonably requested in a timely manner as to the fulfillment of the
conditions concurrent and precedent to your obligations hereunder.
(j) Except as contemplated by the Registration
Statement and the Prospectus, since the date hereof, there shall not have been
any change in the capitalization of the Company or any change constituting a
Material Adverse Effect in the business, business prospects, financial
condition or results of operations of the Company or in the value of the assets
of the Company, or any material change, without your consent, in the conduct of
the business of the Company, arising for any reason whatsoever which makes it
impracticable or inadvisable to proceed with the Offering.
(k) Each of the agreements referred to in Section
6(ix) hereof shall have been delivered to you and there shall have been no
breach of any such agreement.
(l) All corporate proceedings and other legal
matters relating to the sale and transfer of the Shares, this Agreement, the
Registration Statement, the Prospectus and other related matters shall be
reasonably satisfactory in all material respects to counsel for the Underwriter
who shall have furnished to you at the Closing Time such opinion, in form and
substance reasonably satisfactory to you, with respect to the sufficiency of
the aforementioned corporate proceedings and other legal matters as you may
reasonably require; and the Company shall have furnished to such counsel
-25-
<PAGE> 26
such records and documents as such counsel may have reasonably requested in a
timely manner for the purpose of enabling them to pass upon such matters.
(m) The Securities and the Conversion Shares
shall be authorized for listing on the AMEX.
All of the opinions, letters, evidence and certificates
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel for the Underwriter. You reserve the right
to waive any condition hereinabove set forth. Each opinion, certificate,
letter or other document required to be delivered at the Closing Time shall
also be required to be delivered at each Option Exercise Time.
Section 9. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless the Underwriter and each person who controls the
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and each and all of them, from and against any and all losses,
claims, damages, liabilities or actions, joint or several (including any
investigation, legal or other expense incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), to which the Underwriter or any of them may become subject under the
Act, the Exchange Act or otherwise but only insofar as such losses, claims,
damages, liabilities or actions arise out of, or are based upon, (i) any untrue
statement or alleged untrue statement made by the Company in Section 3 of this
Agreement, (ii) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement thereto or in any application or
other document executed by the Company based upon written information furnished
by or on behalf of the Company filed in any jurisdiction in order to register
or qualify the Securities under the securities laws thereof or filed with the
Commission, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
or provided however, that (i) the indemnity agreement contained in this
subsection (a) shall not extend to the Underwriter in respect of any such
losses, claims, damages, liabilities or actions arising out of, or based upon,
any such untrue statement or alleged untrue statement or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information furnished in writing to the Company by the Underwriter specifically
for use in connection with the preparation of the Registration Statement, any
preliminary prospectus or the Prospectus or any such amendment or supplement
thereto, or any application or other document filed in any jurisdiction in
order to register or qualify the Securities. Notwithstanding the foregoing,
the Company shall not be obligated to indemnify the Underwriter and its
controlling persons in respect of any such statement or omission contained in
any preliminary prospectus which was corrected in the Prospectus to the extent
that the Underwriter failed to deliver such Prospectus.
-26-
<PAGE> 27
(b) The Underwriter agrees to indemnify and hold harmless the
Company, its directors, the officers of the Company who shall have signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
to the same extent as the foregoing indemnity from the Company to the
Underwriter, but in each case to the extent, and only to the extent, that any
statement in or omission from or alleged omission from the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment or
supplement thereto was made in reliance upon information furnished in writing
to the Company by the Underwriter specifically for use in connection with the
preparation of the Registration Statement, any preliminary prospectus or the
Prospectus or any such amendment or supplement thereto.
(c) If any action is brought against a person entitled to
indemnification pursuant to the foregoing subsections (a) or (b) (an
"indemnified party") in respect of which indemnity may be sought against a
person granting indemnification (an "indemnifying party") pursuant to such
subsections, such indemnified party shall promptly notify such indemnifying
party in writing of the commencement thereof; but the omission to so notify the
indemnifying party of any such action shall not release the indemnifying party
from any liability it may have to such indemnified party otherwise than on
account of the indemnity agreement contained in subsection (a) or (b) of this
Section 9 except to the extent that such failure results in the forfeiture of
substantial rights or defenses. In case any such action is brought against an
indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party against which a claim is to be made will be
entitled to participate therein at its own expense and, to the extent that it
may wish, to assume at its own expense the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided however, that (i)
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based upon advice of counsel that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party shall have the
right to select separate counsel to assume such legal defenses and otherwise to
participate in the defense of such action on behalf of such indemnified party
or parties; and (ii) in any event, the indemnified party shall be entitled to
have counsel chosen by such indemnified party, at such indemnified party's
expense, participate in, but not conduct, the defense. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with proviso (i) of the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel); (ii)
the indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action; or (iii) the
-27-
<PAGE> 28
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. An indemnifying party shall
not be liable for any settlement of any action or proceeding effected without
its prior written consent.
(d) In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in subsection
(a) or (b) of this Section 9 is unavailable in accordance with its terms, the
Company, and, subject to the limitations set forth below, the Underwriter shall
contribute to the aggregate losses, claims, damages and liabilities, of the
nature contemplated by said indemnity agreement, incurred by the Company and
the Underwriter, in such proportions as are applicable to reflect the relative
benefits received by the Company on the one hand, and the Underwriter, on the
other hand, from the offering of the Securities; provided however, that if such
allocation is not permitted by applicable law or if the indemnified party
failed to give the notice required under subsection (c) of this Section 9, then
the relative fault of the Company, on the one hand, and the Underwriter, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages and liabilities and other relevant equitable
considerations will be considered together with such relative benefits. The
relative benefits received by the Company, on the one hand, and the
Underwriter, on the other hand, shall be deemed to be in such proportion as the
total proceeds from the offering of the Securities (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company bear to the total underwriting discount received by the Underwriter, in
each case as set forth in the table on the cover page of the Prospectus and in
the notes thereto. The relative fault of the Company, on the one hand, and of
the Underwriter, on the other, shall be determined by reference to, among other
things, whether in the case of an untrue statement or alleged untrue statement
of a material fact or the omission or alleged omission to state a material
fact, such statement or omission relates to information supplied by the
Company, on the one hand, or by the Underwriter, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro-rata allocation or by
any other method of allocation that does not take account of the equitable
considerations referred to in this subsection (d). The amount paid or payable
by the indemnified party as a result of the losses, claims, damages or
liabilities referred to above in this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending against or appearing as a
third-party witness in any such action or claim. Notwithstanding the provisions
of this subsection (d), (i) the Underwriter shall not be required to contribute
any amount in excess of the amount by which the total price at which the
Securities purchased by it were offered to the public exceeds the amount of any
damages which the Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission; and
(ii) no person guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the Act shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. For purposes of this
subsection (d), each person, if any, who
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<PAGE> 29
controls the Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act shall have the same rights to contribution as the
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Company.
(e) The respective indemnity and contribution agreements by
the Underwriter and the Company contained in subsections (a), (b), (c) and (d)
of this Section 9, and the respective covenants, representations and warranties
of the Company set forth in Sections 2, 3, 4, 5, 6, and 7 hereof, shall remain
operative and in full force and effect regardless of (i) any investigation made
by the Underwriter, on its behalf or by or on behalf of any person who controls
the Underwriter, the Company or any controlling person of the Company, or any
director or officer of the Company; or (ii) acceptance of any of the
Securities; and shall survive the delivery of the Securities, and any successor
of the Underwriter or the Company, or of any person who controls the
Underwriter or the Company, as the case may be, shall be entitled to the
benefit of such respective indemnity and contribution agreements. The
respective indemnity and contribution agreements by the Underwriter and the
Company contained in subsections (a), (b), (c) and (d) of this Section 9 shall
be in addition to any liability which the Underwriter and the Company may
otherwise have.
Section 10. Termination. This Agreement (except for the
provisions of Sections 6(i) and 9 hereof) may be terminated by you by notifying
the Company at any time:
(a) at or prior to the Closing Time if any of the
conditions specified in Section 8 hereof shall not have been fulfilled when and
as required by this Agreement to be fulfilled or if any of the covenants,
representations or warranties contained herein or in any certificate or
document contemplated under this Agreement to be delivered to you shall not
have been satisfied or fulfilled, in all material respects, within the
respective times herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by you in
writing; or
(b) at or prior to the Closing Time if any one or
more of the following shall have occurred or have been established between the
time of your execution of this Agreement and the Closing Time and in your
judgment the same has made or makes it inadvisable or impracticable for you
generally to proceed with the offering, sale, delivery, or collection of
payment for, the Securities pursuant to the public offering contemplated by
this Agreement: (i) a general suspension of, or a general limitation on prices
for, trading in securities on the New York Stock Exchange, the AMEX or the
Nasdaq National Market; (iii) a material adverse change in general market or
domestic economic conditions, from such conditions on the date hereof having an
effect on U.S. financial markets that in the judgment of the Underwriter makes
it impracticable or inadvisable to proceed with the Offering; (iv) a
declaration
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<PAGE> 30
of a banking moratorium by Federal or New York State authorities; (v) any
outbreak of major hostilities or declaration by the United States of any
national or international calamity; or (vi) there is a Material Adverse Effect
as a result of any material adverse change or any material adverse development
involving a prospective change not contemplated in the Registration Statement
or affecting particularly the business or properties of the Company and the
Subsidiaries taken as a whole.
Section 11. Notices. Except as otherwise expressly provided
in this Agreement, whenever advice or a notice, objection, designation, request
or report is given or is required by the provisions of this Agreement to be
given, such advice, notice, objection, designation, request or report shall be
in writing and shall be delivered by first-class mail, postage prepaid,
nationally recognized courier or by telecopy, (a) if to the Company, addressed
to it and delivered to 110 Richards Avenue, Norwalk, Connecticut 06856-5090,
Attention: Victor Liss, President, with a copy to Weisman Celler Spett &
Modlin, P.C., 445 Park Avenue, New York, New York 10022, Attention: Howard S.
Modlin, Esq.; and (b) if to the Underwriter, addressed to Southcoast Capital
Corporation, and delivered at 277 Park Avenue, New York, New York 10172,
Attention: David Boris, with a copy to Fulbright & Jaworski L.L.P., 666 Fifth
Avenue, New York, New York 10103, Attention: Paul Jacobs, Esq.; or at such
other address or telecopier number as a party hereto may give notice in
accordance herewith.
Section 12. Miscellaneous. (a) This Agreement is made
solely for the benefit of the Underwriter and the Company, the Company's
directors, the Company's officers who shall have signed the Registration
Statement and any controlling person referred to in Section 9 hereof, and their
respective successors and assigns, and no other person, partnership,
association or corporation shall acquire or have any right under or by virtue
of this Agreement. The term "successor" or the term "successors and assigns" as
used in this Agreement shall not include any buyer, as such, of any of the
Securities from the Underwriter.
(b) The information in the Prospectus under the section
"Underwriting" with respect to the amounts of the selling concession and
reallowance, and the last paragraph of the outside front cover page of the
Prospectus shall constitute the only information furnished in writing by or on
behalf of the Underwriter for use in connection with the preparation of the
Registration Statement as originally filed or in any amendment thereto, any
preliminary prospectus or the Prospectus as the case may be.
(c) This Agreement shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company and
you relating to the sale of any of the Securities.
(d) No change, amendment or supplement to, or waiver of, this
Agreement or any term, provision or condition contained herein, shall be valid
or of any effect unless in writing and signed by the party against whom such is
asserted.
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<PAGE> 31
(e) This Agreement shall be governed by and construed in
accordance with the law of the State of New York applicable to contracts made
and to be performed therein without giving effect to the principles of
conflicts of law thereof. If any action or proceeding shall be brought by the
Underwriter or the Company in order to enforce any right or remedy under this
Agreement, the Company and the Underwriter each hereby consent to and submit
to, the jurisdiction of the courts of the State of New York and of any federal
court sitting in the Borough of Manhattan, City of New York. The Company and
the Underwriter each agree that process in any such action or proceeding may be
served in the manner provided by New York law for service on foreign persons,
as appropriate.
(f) This Agreement may be signed in two counterparts with the
same effect as if the signatures to each counterpart were upon a single
instrument, and all such counterparts together shall be deemed an original of
this Agreement.
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
TRANS-LUX CORPORATION
By:
---------------------------
Name:
Title:
Accepted as of the date
first above written
SOUTHCOAST CAPITAL CORPORATION
By:
--------------------------
Name:
Title:
-31-
<PAGE> 1
EXHIBIT 11
TRANS-LUX CORPORATION & SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE TWELVE FOR THE TWELVE FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
Primary:
- --------
Net income $1,314,000 $1,066,000 $ 869,000
========== ========== ==========
Average common shares outstanding 1,247,000 1,250,000 1,256,000
Assumes exercise of options reduced by the number
of shares which could have been purchased with
the proceeds from exercise of such options 13,000 9,000 27,000
---------- ---------- ----------
Average common and common equivalent shares
outstanding 1,260,000 1,259,000 1,283,000
========== ========== ==========
Primary earnings per share $ 1.04 $ 0.85 $ 0.68
========== ========== ==========
Fully Diluted:
- --------------
Net income $1,314,000 $1,066,000 $ 869,000
Add after tax interest expense applicable to
9% convertible subordinated debentures 511,000 262,000 195,000
---------- ---------- ----------
Adjusted net income $1,825,000 $1,328,000 $1,064,000
========== ========== ==========
Average common shares outstanding 1,247,000 1,250,000 1,256,000
Assumes exercise of options reduced by the number
of shares which could have been purchased with
the proceeds from exercise of such options 14,000 9,000 36,000
Assumes conversion of 9% convertible subordinated
debentures 682,000 384,000 382,000
---------- ---------- ----------
Average common and common equivalent shares
outstanding 1,943,000 1,643,000 1,674,000
========== ========== ==========
Fully diluted earnings per share $ 0.94 $ 0.81 $ 0.64
========== ========== ==========
</TABLE>
Fully diluted earnings per share are not presented for the twelve
months ended December 31, 1993 and for the nine months ended September 30,
1995 as the effect was not dilutive.
<PAGE> 1
EXHIBIT 12
TRANS-LUX CORPORATION & SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------ ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIO) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations
before provision for income taxes
per statement of income............. $ 542 $ 741 $1,663(1) $2,064(2) $1,839 $1,262 $1,498
Add:
Interest on indebtedness............ 1,106 1,245 2,512(1) 1,293(2) 2,107 1,556 1,796
Amortization of debt expense........ 58 53 91 153 184 133 98
Interest portion of rent
expense(3)....................... 101 96 102 88 79 57 106
------ ------ ------ ------ ------ ------ ------
Income as adjusted.......... $1,807 $2,135 $4,368 $3,598 $4,209 $3,008 $3,498
====== ====== ====== ====== ====== ====== ======
Fixed charges:
Interest on indebtedness............ $1,106 $1,245 $2,512(1) $1,293(2) $2,107 $1,556 1,796
Amortization of debt expense........ 58 53 91 153 184 133 98
Capitalized interest................ -- 49 -- 40 -- -- --
Interest portion of rent
expense(3)....................... 101 96 102 88 79 57 106
------ ------ ------ ------ ------ ------ ------
Fixed charges............... $1,265 $1,443 $2,705 $1,574 $2,370 $1,746 2,000
====== ====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges.... 1.4 1.5 1.6 2.3 1.8 1.7 1.7
</TABLE>
- ---------------
(1) 1993 reflects the impact of an assessment of related interest expense
incurred resulting from a prior year state income tax audit.
(2) 1994 reflects the positive impact of a settlement related to the 1993
assessment described in footnote No. 1 above.
(3) The interest portion of rent expense is assumed to be one-third of rent
expense.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration
Statement No. 333-15481 of Trans-Lux Corporation of our report dated February
28, 1996, included in the Annual Report on Form 10-K of Trans-Lux Corporation
for the year ended December 31, 1995, and to the use of our report dated
February 28, 1996, appearing in the Prospectus, which is part of this
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
December 9, 1996
