<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1996
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Commission file number 1-2257
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TRANS-LUX CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 13-1394750
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
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(203) 853-4321
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(Address, zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $1.00 par value American Stock Exchange
9% Convertible Subordinated
Debentures due 2005 American Stock Exchange
7 1/2% Convertible Subordinated
Notes due 2006 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K.[ ]
CONTINUED
<PAGE>
TRANS-LUX CORPORATION
1996 10-K Cover Page Continued
The aggregate market value of the Registrant's Common and Class B Stock (based
upon the closing price on the American Stock Exchange) held by non-affiliates
on March 25, 1997 (based on the last sale price on the American Stock Exchange
as of such date) was $12,792,493. (The value of a share of Common Stock is
used as the value for a share of Class B Stock, as there is no established
market for Class B Stock which is convertible into Common Stock on a
share-for-share basis.)
As of the close of business on March 25, 1997, there were outstanding, 984,140
shares of the Registrant's Common Stock and 298,640 shares of its Class B
Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
The Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held May 22, 1997 (the "Proxy Statement") is incorporated
by reference in Part III, Items 10-13 of this Form 10-K to the extent stated
herein. Except with respect to information specifically incorporated by
reference in this Form 10-K, the Proxy Statement is not deemed to be filed as
a part hereof.
<PAGE>
TRANS-LUX CORPORATION
1996 Form 10-K Annual Report
Table of Contents
PART I
Page
ITEM 1. Business 1
ITEM 2. Properties 6
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders 7
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters 7
ITEM 6. Selected Financial Data 8
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
ITEM 8. Financial Statements and Supplementary Data 12
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 24
PART III
ITEM 10. Directors and Executive Officers of the Registrant 24
ITEM 11. Executive Compensation 25
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 25
ITEM 13. Certain Relationships and Related Transactions 25
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 25
Signatures 29
<PAGE>
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, the term "Company" as used herein
means Trans-Lux Corporation and its subsidiaries. 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 chain of motion picture theatres in the southwestern
United States and real estate used for both corporate and income-producing
purposes.
ELECTRONIC 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 United States and Canada which performs on-site
service and maintenance for its customers.
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.
The Company's 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 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.
<PAGE>
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 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.
Equipment orders generally have a lead time of 30 to 90 days depending on the
type of equipment ordered and material availability.
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. Over
the past four years, the Company has utilized its strong position in the
indoor 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.
The equipment generally has a lead time of 30 to 60 days depending on the type
of equipment ordered and material availability.
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.
International: The Company feels it is well positioned for expansion as
the globalization of the world economy continues. It is now active in Europe,
Latin America, South America, Australia and Asia. International installations
are in geographic locations which include South America, Europe and Asia. 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.
Foreign revenues were less than 10% of consolidated revenues in 1996 and 1995
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and were approximately 15% in 1994.
Applications for the display products in the international marketplace
currently include stock and commodity exchanges and trading rooms, OTB
facilities, private clubs, banks, transportation facilities and casinos. The
equipment generally has lead times of 30 to 90 days depending on the type of
equipment ordered and material availability.
Sales Order Backlog (not including leases): The amount of sales order
backlog was approximately $4.2 million and $5.9 million at December 31, 1996
and 1995, respectively. The December 31, 1996 backlog will be recognized
throughout 1997. These amounts do not include leases or renewals of leases
presently in- house.
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.
Development of new outdoor products includes the Spectra Lens System(TM)
which enables the Company to capitalize on full color, full matrix indoor
applications, particularly in the sports market and the 16 shades of gray
Spectra Lens System. 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 34 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 $2,439,000, $2,139,000 and
$1,497,000 in 1996, 1995 and 1994, respectively.
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<PAGE>
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 December 31, 1996 consisted of 34 direct sales representatives and 8
telemarketers. The Company divides its domestic sales and marketing efforts
into two categories, renewal of existing product leases and product upgrades,
and 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.
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.
Headquartered in Norwalk, Connecticut, the Company has major sales and
service offices in New York, Chicago, Las Vegas, Norcross, Georgia, Torrance,
California, Ontario, Canada, Logan, Utah and New South Wales, Australia, as
well as 60 satellite offices in the United States and Canada.
The Company's equipment is both leased and sold. A majority of the
electronic information display business revenues are from equipment rentals
with current lease terms ranging from 30 days to ten years.
The Company's revenues in 1996, 1995 and 1994 did not include any single
customer that accounted for more than 10% of revenues.
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,
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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 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 believes it maintains
suitable inventory and has contracts providing for delivery of sufficient
quantities of such components to meet its needs. The Company also believes
there presently are other qualified vendors of these components. The Company
does not acquire a material amount of purchases directly from foreign
suppliers, but certain components are manufactured by foreign sources.
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 United States, 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
United States, 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 United
States, Canada and overseas. From time to time the Company uses various third
party service agents to install, service and/or assist in the service of
outdoor displays for reasons that include geographic area and unusual height
of displays.
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
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gaming industry in the United States. 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 believes that it is the largest supplier of large-scale stock and
commodity and gaming displays in the United States, as well as one of the
largest outdoor electronic signage service organizations in the country.
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.
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 31 screens in nine locations in the
southwestern United States. 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. The Company is not currently operating any multimedia
entertainment venues, but continues to stay abreast of innovations in this
area of technology and continues to investigate new opportunities.
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.
EMPLOYEES
The Company has approximately 530 employees as of February 28, 1997, of
which 417 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.
ITEM 2. 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, of which approximately 14,000
square feet is currently leased to others. The balance of the building is
occupied by the Company and is also used for engineering, production and
assembly of its indoor displays and outdoor LED display products.
The Company owns facilities in Ontario, Canada, Torrance, California and
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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.
The Company leases seven premises for sales and service operations, leases
five locations with motion picture operations and an office for its theatre
operations. In addition, the Company also leases land in Lebanon,
Pennsylvania on which it has a motion picture theatre building, which is
subleased to a third party. The aggregate rental expense was $296,000,
$238,000 and $267,000 for 1996, 1995 and 1994, respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business, certain of which claims are reimburseable to the
Company from the Company's insurance carriers. In the opinion of management,
the amount of ultimate liability with respect to these actions, after
considering the related insurance reimbursements, will not have a material
adverse affect on the consolidated financial statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The Company's Common Stock is traded on the American Stock Exchange
under the symbol "TLX." Sales prices are set forth in (d) below.
(b) The Company had approximately 831 holders of record of its Common Stock
and approximately 67 holders of record of its Class B Stock as of March
25, 1997.
(c) The Board of Directors approved four quarterly cash dividends of $0.035
per share for Common Stock and $0.0315 per share for Class B Stock
during 1996. Management and the Board of Directors will continue to
review payment of the quarterly cash dividends.
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(d) The range of Common Share prices on the American Stock Exchange are set
forth in the following table:
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
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 13 3/4 10 7/8
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
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
(a) The following table sets forth selected consolidated financial data
with respect to the Company for the years ended December 31, 1996,
1995, 1994, 1993 and 1992 which were derived from the audited
consolidated financial statements of the Company and should be read in
conjunction with them.
<TABLE>
<CAPTION>
Years Ended 1996 1995 1994 1993 1992
----------- ---- ---- ---- ---- ----
(dollars in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $45,285 $37,791 $33,742 $35,799 $24,130
Net income 1,250 1,066 1,314 (1) 489 (2) 272
Earnings per share:
Primary $0.97 $0.85 $1.04 (1) $0.39 (2) $0.22
Fully diluted $0.90 $0.81 $0.94 (1) * *
Cash dividends per share:
Common stock $0.14 $0.14 $0.14 $0.125 $0.12
Class B stock $0.126 $0.126 $0.126 $0.1125 $0.108
Shares outstanding at year end 1,264 1,254 1,248 1,248 1,250
Total assets $84,031 $57,460 $53,307 $52,138 $50,826
Long-term debt 48,112 22,495 19,693 21,156 20,723
Stockholders' equity 22,662 21,499 20,524 19,484 19,169
<FN>
(1) 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 (see note 2 below).
(2) 1993 reflects the impact of the assessment of income taxes and related
interest expense incurred resulting from a 1986 state income tax audit of
approximately $600,000.
* not dilutive
</TABLE>
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(b) The following table sets forth quarterly financial data for the years
ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
(Unaudited)
Quarter Ended March 31 June 30 September 30 December 31 (1)
------------- -------- ------- ------------ -----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1996
Revenues $10,033 $10,591 $12,247 $12,414
Gross profit 3,969 4,080 4,579 5,152
Income before income taxes 427 467 604 705
Net income 248 271 350 381
Earnings per share:
Primary $ 0.20 $ 0.21 $ 0.27 $ 0.29
Fully diluted $ 0.19 $ 0.20 $ 0.25 $ 0.26
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315 $0.0315 $0.0315
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 * * $ 0.23 $ 0.24
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315 $0.0315 $0.0315
__________
<FN>
(1) Fourth quarter 1996 includes a favorable billing adjustment and a favorable adjustment to previously accrued expenses.
* not dilutive
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
The Company's total revenues for the year ended December 31, 1996 increased
19.8% to $45.3 million from $37.8 million for the year ended December 31,
1995. Revenues from equipment rentals and maintenance increased to $22.2
million in 1996 from $21.2 million in 1995 or 4.5%, primarily due to
additional indoor equipment rentals and favorable billing adjustments, offset
by the expected decline from the outdoor lease and maintenance bases
previously acquired. Revenues from equipment sales increased $6.4 million or
51.6% in 1996, primarily due to increased sales of indoor displays, which
included certain significant sales which are being recognized on the
percentage of completion basis and increased sales of outdoor displays as a
result of the acquisition of ISE in January 1995. Revenues from theatre
receipts and other increased $160,000 or 3.8% in 1996, primarily attributable
to increased concession sales at the theatres.
Gross profit as a percentage of revenues was 39.3% in 1996 compared to
40.7% in 1995. Cost of equipment rentals and maintenance, which includes
field service expenses, plant repair costs and depreciation, increased
$807,000 or 7.1%, primarily due to operating expenses of the indoor displays.
The cost of equipment rentals and maintenance represented 54.9% of related
revenues in 1996 compared to 53.6% in 1995. Cost of equipment sales increased
$4.1 million or 52.5%, primarily due to certain significant indoor display
equipment sales, which due to the size of the orders had lower gross profit
margins and increased sales of outdoor displays. During 1996, the gross
profit margin was benefited by the allocation of certain fixed overhead costs
over larger production volume. Due to the nature of the outdoor display
market, the Company anticipates the gross profit margin to decline somewhat as
it enters and increases its market share in new industry segments of the
outdoor market. The cost of equipment sales represented 64.0% of related
revenues in 1996 compared to 63.6% in 1995. Cost of theatre receipts and
other, which includes film rental expenses, increased $164,000 or 5.1%. The
cost of theatre receipts and other represented 76.4% of related revenues in
1996 compared to 75.4% in 1995.
General and administrative expenses increased $1.7 million or 14.7%,
primarily due to expanded sales and marketing efforts and increased payroll
and benefits, partially offset by a favorable adjustment of previously accrued
expenses. General and administrative expenses decreased as a percentage of
revenues to 29.1% in 1996 compared to 30.4% in 1995.
Interest income increased $25,000, primarily attributable to increased
investments. Interest expense increased $121,000, primarily due to increased
bank borrowing for general corporate purposes on the revolving credit
facility. Other expense in 1996 relates to the operations of the theatre
joint venture, MetroLux Theatres, which includes start up costs. Other income
in 1995 was largely due to the sale of a theatre property in New Mexico.
The effective tax rate was 43.2% in 1996 and 42.0% in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
The Company's total revenues for the year ended December 31, 1995 increased
12.0% to $37.8 million in 1995 from $33.7 million for the year ended December
31, 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 $3.9 million or 45.5% in 1995.
The increase was largely attributable to the revenues generated from the
acquisition of ISE, which contributed $3.6 million in revenues in 1995.
Revenues from theatre receipts and other increased $630,000 in 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.
Gross profit as a percentage of revenues was 40.7% in 1995 compared to
42.5% in 1994. Cost of equipment rentals and maintenance decreased $571,000
or 4.8% in 1995, primarily due to a reduction in field service expenses. The
cost of equipment rentals and maintenance represented 53.6% of related
revenues in 1995 compared to 55.1% in 1994. Cost of equipment sales increased
$3.2 million or 70.2% in 1995, primarily due to the acquisition of ISE. The
cost of equipment sales represented 63.6% of related revenues in 1995 and 54.4%
in 1994. The increase in costs is primarily due to the expected lower profit
margins generated by ISE. Cost of theatre receipts and other increased
$321,000 or 11.2% in 1995, primarily due to a full year of operations at the
five-plex theatre in Durango, Colorado which opened in mid-1994. The 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%, primarily
due to the acquisition of ISE. General and administrative expenses decreased
as a percentage of revenues to 30.4% in 1995, compared to 32.7% in 1994,
primarily as a result of economies of scale.
Interest income decreased $57,000 in 1995, primarily attributable to
reduced investments which were utilized for acquisitions. Interest expense
increased $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 prior year
assessment of interest resulting from a 1986 state income tax audit. Other
income in 1995 was largely due to the sale of a theatre property in New
Mexico.
The effective tax rate was 42.0% in 1995 and 36.3% in 1994. 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.
-10-
<PAGE>
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 " on January 1, 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 an 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" on
January 1, 1996. As provided for in the standard, the Company elected to
continue to apply Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related Interpretations for employee stock
compensation measurement. See Note 15 - Stock Option Plans.
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" in the fourth quarter of 1997. The
standard specifies the computation, presentation and disclosure requirements
for earnings per share. As required by the standard, the Company will restate
all prior period earnings per share data presented. The adoption of the new
standard is not expected to have a material effect on the Company's financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity and capital
resources has been cash flow from operations and bank borrowings. During
1996, the Company issued $27.5 million of 7 1/2% convertible subordinated
notes due 2006. On January 14, 1997, the Underwriters exercised their
over-allotment option, bringing the total amount outstanding to $31.625
million.
The Company believes that cash generated from operations together with the
net proceeds of the issuance of the 7 1/2% convertible subordinated notes will
be sufficient to fund its anticipated future cash requirements. The net
proceeds from the Notes were used, in part, to pay down certain of the
Company's debt, which included prepayment of the 1997 principal amounts due
under the credit facility, payment of the balance outstanding under the
revolving credit facility and to call and retire the 9% convertible
subordinated debentures.
Cash and cash equivalents increased by $18.6 million in 1996 compared to a
decrease of $1.7 million in 1995. At December 31, 1996, cash and cash
equivalents consists primarily of investment-grade overnight repurchase
agreements. The increase in 1996 was primarily due to the net proceeds of the
issuance of the 7 1/2% convertible subordinated notes. 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. Although
receivables increased at December 31, 1996 compared to December 31, 1995, the
Company continues to experience a favorable collection cycle on its trade
receivables. At December 31, 1996, the Company had unbilled receivables
relating to certain significant contracts being recognized on the percentage
of completion basis.
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 accessible through June 1998, which is fully available at
December 31, 1996. During 1996, the revolving credit facility was
supplemented by $3.0 million, which was available to the Company at the
discretion of the bank, which expired January 31, 1997. The revolving credit
facility has subsequently been reduced to $5.0 million as of January 31, 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
agreement relating to the Company's credit facility contains certain financial
covenants with which the Company must comply, absent a waiver by the bank, on
a continuing basis. The Company is a guarantor of a $3.0 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.
The Company is currently evaluating its previously established estimates of
useful lives for its indoor and outdoor display rental equipment. Current and
historical experience indicate the actual useful lives of such rental
equipment may be in excess of those previously estimated.
On March 3, 1997, the Company announced it had signed a letter of intent to
acquire certain assets, including the sign catalog business and custom sign
business from Fairtron Corporation of Des Moines, Iowa. Closing of the
transaction is subject to negotiation and execution of definitive binding
agreements and due diligence by the Company.
.............................................................................
The Company may, from time to time, provide estimates as to future
performance. These forward looking statements will be estimates, and may or
may not be realized by the Company. The Company undertakes no duty to update
such forward looking statements. Many factors could cause actual results to
differ from these forward looking statements, including loss of market share
through competition, introduction of competing products by others, pressure on
prices from competition or purchasers of the Company's products, interest rate
and foreign exchange fluctuations.
-11-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary financial
information are set forth below:
<TABLE>
<CAPTION>
Consolidated Statements of Income
Years Ended December 31 1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Equipment rentals and maintenance $22,162,000 $21,205,000 $21,652,000
Equipment sales 18,741,000 12,364,000 8,498,000
Theatre receipts and other 4,382,000 4,222,000 3,592,000
------------------------------------------
Total revenues 45,285,000 37,791,000 33,742,000
------------------------------------------
Operating expenses:
Cost of equipment rentals and maintenance 12,165,000 11,358,000 11,929,000
Cost of equipment sales 11,991,000 7,863,000 4,620,000
Cost of theatre receipts and other 3,349,000 3,185,000 2,864,000
------------------------------------------
Total operating expenses 27,505,000 22,406,000 19,413,000
------------------------------------------
Gross profit from operations 17,780,000 15,385,000 14,329,000
General and administrative expenses 13,184,000 11,494,000 11,023,000
------------------------------------------
4,596,000 3,891,000 3,306,000
Interest income 172,000 147,000 204,000
Interest expense (2,412,000) (2,291,000) (1,446,000)
Other income (expense) (153,000) 92,000 ---
------------------------------------------
Income before income taxes 2,203,000 1,839,000 2,064,000
------------------------------------------
Provision for income taxes:
Current 518,000 576,000 407,000
Deferred 435,000 197,000 343,000
------------------------------------------
953,000 773,000 750,000
------------------------------------------
Net income $ 1,250,000 $ 1,066,000 $ 1,314,000
------------------------------------------
Earnings per share:
Primary $0.97 $0.85 $1.04
Fully diluted $0.90 $0.81 $0.94
------------------------------------------
Average common and common equivalent shares outstanding:
Primary 1,284,000 1,259,000 1,260,000
Fully diluted 1,697,000 1,643,000 1,943,000
- - ---------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31 1996 1995
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $19,274,000 $ 665,000
Available-for-sale securities 600,000 576,000
Receivables 4,173,000 2,403,000
Unbilled receivables 2,401,000 ---
Inventories 1,775,000 1,900,000
Prepaids and other current assets 348,000 466,000
--------------------------
Total current assets 28,571,000 6,010,000
--------------------------
Rental equipment 52,417,000 47,043,000
Less accumulated depreciation 18,465,000 16,265,000
--------------------------
33,952,000 30,778,000
--------------------------
Property, plant and equipment 21,655,000 20,913,000
Less accumulated depreciation and amortization 6,973,000 5,921,000
--------------------------
14,682,000 14,992,000
Prepaids, intangibles and other 4,772,000 4,081,000
Maintenance contracts, net 1,270,000 1,599,000
Note receivable, joint venture (excludes $94,000 current portion) 784,000 ---
--------------------------
$84,031,000 $57,460,000
- - -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals $ 6,174,000 $ 4,804,000
Income taxes payable 105,000 136,000
Short-term borrowings --- 500,000
Current portion of long-term debt 203,000 1,804,000
--------------------------
Total current liabilities 6,482,000 7,244,000
--------------------------
Long-term debt:
9% convertible subordinated debentures due 2005 4,811,000 4,874,000
9 1/2% subordinated debentures due 2012 1,057,000 1,057,000
7 1/2% convertible subordinated notes due 2006 27,500,000 ---
Notes payable 14,744,000 16,564,000
--------------------------
48,112,000 22,495,000
Deferred revenue and deposits 3,029,000 2,621,000
Deferred income taxes 3,745,000 3,600,000
Minority interest 1,000 1,000
--------------------------
Stockholders' equity:
Capital stock
Preferred - $1 par value - 500,000 shares authorized
Common - $1 par value - 5,500,000 shares authorized
2,441,765 shares issued in 1996 and 2,436,268 in 1995 2,442,000 2,436,000
Class B - $1 par value - 1,000,000 shares authorized
298,640 shares issued in 1996 and 304,137 in 1995 298,000 304,000
Class A - $1 par value - 3,000,000 shares authorized
Additional paid-in capital 13,818,000 13,806,000
Retained earnings 17,964,000 16,888,000
Other (58,000) (71,000)
--------------------------
34,464,000 33,363,000
Less treasury stock - at cost - 1,476,552 shares in 1996 and 1,488,837 in 1995
(excludes additional 298,640 shares held in 1996 and 304,137 in 1995
for conversion of Class B stock) 11,802,000 11,864,000
--------------------------
Total stockholders' equity 22,662,000 21,499,000
--------------------------
$84,031,000 $57,460,000
- - -----------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Years Ended December 31 1996 1995 1994
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 1,250,000 $1,066,000 $ 1,314,000
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,104,000 6,901,000 6,513,000
Net loss of joint venture 153,000 --- ---
Deferred income taxes 134,000 475,000 (188,000)
Current deferred taxes --- 192,000 230,000
Minority interest --- (20,000) 20,000
Changes in operating assets and liabilities:
Receivables (1,770,000) (595,000) 1,062,000
Unbilled receivables (2,401,000) --- ---
Inventories 125,000 (361,000) (3,000)
Prepaids and other current assets 212,000 (309,000) 42,000
Prepaids, intangibles and other (1,526,000) (78,000) (85,000)
Accounts payable and accruals 1,370,000 (1,675,000) 370,000
Income taxes payable (31,000) (62,000) (48,000)
Deferred revenue and deposits 58,000 1,071,000 1,002,000
--------------------------------------
Net cash provided by operating activities 4,678,000 6,605,000 10,229,000
--------------------------------------
Cash flows from investing activities
Purchases of rental equipment (8,156,000) (5,932,000) (5,276,000)
Purchases of property, plant and equipment (1,102,000) (1,749,000) (3,187,000)
Payments for an acquisition --- (3,178,000) ---
Proceeds from acquisition note receivable --- 658,000 ---
Sale of assets --- 221,000 52,000
Proceeds from (investment in) joint venture 364,000 (480,000) (12,000)
Loan to joint venture (941,000) --- ---
Purchases of securities --- (494,000) (3,470,000)
Proceeds from sale of securities --- 1,582,000 3,978,000
--------------------------------------
Net cash (used in) investing activities (9,835,000) (9,372,000) (7,915,000)
--------------------------------------
Cash flows from financing activities
Proceeds from long-term debt 27,850,000 4,379,000 4,308,000
Repayment of long-term debt (3,421,000) (3,655,000) (2,163,000)
Proceeds from short-term borrowings --- 500,000 ---
Repayment of 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 12,000 45,000 ---
Purchase of treasury stock (1,000) (1,000) (1,000)
Cash dividends (174,000) (171,000) (171,000)
--------------------------------------
Net cash provided by (used in) financing activities 23,766,000 1,097,000 (1,107,000)
--------------------------------------
Net increase (decrease) in cash and cash equivalents 18,609,000 (1,670,000) 1,207,000
Cash and cash equivalents at beginning of year 665,000 2,335,000 1,128,000
--------------------------------------
Cash and cash equivalents at end of year $19,274,000 $ 665,000 $ 2,335,000
- - -----------------------------------------------------------------------------------------------------------------------------
Interest paid $ 2,171,000 $1,851,000 $ 2,135,000
Interest received 180,000 176,000 214,000
Income taxes paid 749,000 661,000 756,000
- - -----------------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-14-
<PAGE>
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. At December 31, 1996, cash equivalents include approximately
$18.9 million investment-grade overnight repurchase agreements at a yield
of 6.8% per annum.
Available-for-sale securities: Available-for-sale securities consists of
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 lives or term of
the leases. 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 long-term
equipment sales contracts, which require more than three months to
complete, using the percentage of completion method. At December 31, 1996,
the Company recorded unbilled receivables representing amounts due under
these long-term equipment sales contracts which have not yet been billed to
the customer. Income is recognized based on the percentage of incurred
costs to the estimated total costs. Revenue on equipment sales other than
long-term equipment sales contracts are recognized upon shipment. Theatre
receipts and other revenues are recognized at the time service is provided.
Taxes on income: The Company computes income taxes using the asset and
liability method, under which deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax
basis of the assets and liabilities.
Earnings per share: Primary earnings per share of Common and Class B
shares are based on the weighted average Common and Class B shares and
common equivalent shares outstanding during the period. Common equivalents
consist of options to purchase common stock, and their impact on earnings
per share is measured by application of the "treasury stock" method. Fully
diluted earnings per share assumes conversion of dilutive convertible
debentures, convertible notes and the assumed exercise of all common
equivalent shares. The Company will adopt the provisions of Statement of
Financial Accounting Standards No. 128 "Earnings per Share" in the fourth
quarter of 1997. The standard specifies the computation, presentation and
disclosure requirements for earnings per share. As required by the
standard, the Company will restate all prior period earnings per share data
presented. The adoption of the new standard is not expected to have a
material effect on the Company's financial statements.
Long-lived assets: 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" on January
1, 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 an effect on the Company's consolidated financial
position or results of operations.
Stock-based compensation: The Company adopted the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") on January 1 1996. As provided for in
the standard, the Company elected to continue to apply Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations for employee stock compensation measurement. See Note 15 -
Stock Option Plans.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the 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.
Reclassifications: Certain reclassifications of prior years' amounts
have been made to conform to the current year's presentation.
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 $58,000 and $71,000 were made to equity to
reflect the net unrealized losses on available-for-sale securities as of
December 31, 1996 and 1995, respectively.
-15-
<PAGE>
Available-for-sale securities consist of the following as of December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
Fair Unrealized Fair Unrealized
Value Loss Value Loss
- - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity securities $600,000 $58,000 $576,000 $71,000
- - ---------------------------------------------------------------------------
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
- - --------------------------------------------------------------------------
<S> <C> <C>
Raw materials and spare parts $1,074,000 $1,191,000
Work-in-process 186,000 181,000
Finished goods 515,000 528,000
----------------------
$1,775,000 $1,900,000
- - --------------------------------------------------------------------------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
- - --------------------------------------------------------------------------
<S> <C> <C>
Land, buildings and improvements $14,856,000 $14,767,000
Machinery, fixtures and equipment 5,760,000 5,129,000
Leaseholds and improvements 1,039,000 1,017,000
------------------------
$21,655,000 $20,913,000
- - --------------------------------------------------------------------------
</TABLE>
Land, buildings and equipment having a net book value of $12,020,000 and
$12,292,000 at December 31, 1996 and 1995, respectively, were pledged as
collateral under borrowing agreements.
5. PREPAIDS, INTANGIBLES AND OTHER
Prepaids, intangibles and other consist of the following:
<TABLE>
<CAPTION>
1996 1995
- - --------------------------------------------------------------------------
<S> <C> <C>
Prepaids and other $ 719,000 $1,005,000
Deferred debenture and note costs 1,836,000 206,000
Deferred financing costs 395,000 480,000
Acquisition costs 91,000 96,000
Deposits and advances 76,000 68,000
Patents 259,000 323,000
Goodwill and noncompete agreement 890,000 1,105,000
Investment in joint ventures 73,000 506,000
Long-term portion of officers' and
employees' loans 433,000 292,000
-------------------------
$4,772,000 $4,081,000
- - --------------------------------------------------------------------------
</TABLE>
Deferred debenture and note costs represents costs attributable to the
7 1/2% convertible subordinated notes, 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 $692,000 and $670,000 at December 31,
1996 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 $502,000 and $349,000 at December 31, 1996 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 $59,000 and $53,000 at December 31,
1996 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 are net of accumulated amortization of
$128,000 and $64,000 at December 31, 1996 and 1995, respectively. Goodwill
and noncompete agreement are costs attributable to the purchase costs
associated with the acquisition of ISE in January 1995. See Note 7 --
Acquisition. Goodwill is being amortized over 20 years on a straight line
basis, and is net of accumulated amortization of $72,000 and $35,000 at
December 31, 1996 and 1995, respectively. 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 $196,000 and $96,000
at December 31, 1996 and 1995, respectively. 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. These contracts are being amortized over
their economic lives of eight to 15 years, on an accelerated method, which
contemplates contract expiration, fall out and non-renewals and are net of
accumulated amortization of $1,378,000 and $1,049,000 at December 31, 1996
and 1995, respectively.
7. ACQUISITION
During January 1995, the Company acquired all 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.
-16-
<PAGE>
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.
<TABLE>
<CAPTION>
Unaudited 1994
- - --------------------------------------------------------------------
<S> <C>
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>
8. TAXES ON INCOME
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Years ended December 31 1996 1995 1994
- - --------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $349,000 $490,000 $229,000
State 169,000 86,000 150,000
Foreign --- --- 28,000
--------------------------------------
518,000 576,000 407,000
Deferred:
Federal 386,000 157,000 311,000
State 49,000 40,000 ---
Foreign --- --- 32,000
--------------------------------------
435,000 197,000 343,000
--------------------------------------
Total income tax expense $953,000 $773,000 $750,000
- - -------------------------------------------------------------------
</TABLE>
1994 includes the favorable state tax settlement, which assessment was
recorded in a prior year.
Income taxes provided differed from the expected federal statutory rate
of 34% as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 6.5 4.5 8.1
Benefit of NOL --- --- (6.4)
Other 2.7 3.5 0.6
----------------------------
Effective income tax rate 43.2% 42.0% 36.3%
- - --------------------------------------------------------------------------
</TABLE>
The tax effect of temporary differences giving rise to the Company's
deferred tax provision are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization $502,000 $ 49,000 $180,000
Pension actuarial gain (92,000) (14,000) (30,000)
Supplemental retirement plan (21,000) (15,000) (143,000)
State income taxes 32,000 27,000 478,000
Impact of NOL ___ 191,000 61,000
AMT credit --- (25,000) (235,000)
Other 14,000 (16,000) 32,000
-------------------------------
Net deferred tax provision $435,000 $197,000 $343,000
- - --------------------------------------------------------------------------
</TABLE>
The tax effects of the items comprising the net deferred tax asset
and liability at December 31, 1996 and 1995 in the Company's
statement of financial position are as follows:
<TABLE>
<CAPTION>
1996 1995
- - --------------------------------------------------------------------------
<S> <C> <C>
Long-term liability
Deferred tax asset:
Operating loss carryforwards $ 120,000 $ 175,000
Excess financial reporting
depreciation and
amortization over tax
depreciation and amortization 442,000 331,000
Acquisition costs not deducted
for tax purposes 84,000 84,000
Net pension cost not deducted
for tax purposes 161,000 52,000
Supplemental retirement plan costs
not deducted for tax purposes 86,000 61,000
Tax credit carryforwards 477,000 397,000
Unrealized holding losses not
deducted for tax purposes 47,000 58,000
Bad debt expense not deducted
for tax purposes 33,000 37,000
Valuation allowance (224,000) (232,000)
---------------------
1,226,000 963,000
---------------------
Deferred tax liability:
Excess tax depreciation over
financial reporting depreciation 3,888,000 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 33,000 31,000
State income taxes 238,000 392,000
---------------------
4,971,000 4,563,000
---------------------
Net deferred tax liability $3,745,000 $3,600,000
- - --------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
The valuation allowance changed by $8,000 and $170,000 for the year ended
December 31, 1996 and 1995, respectively. The valuation allowance has been
established for the amount of deferred tax assets which management
estimates will more likely than not expire unused.
9. ACCOUNTS PAYABLE AND ACCRUALS
Accounts payable and accruals consist of the following:
<TABLE>
<CAPTION>
1996 1995
- - --------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $2,317,000 $1,730,000
Interest payable 603,000 368,000
Taxes payable 596,000 518,000
Accruals 2,658,000 2,188,000
---------------------
$6,174,000 $4,804,000
- - --------------------------------------------------------------------------
</TABLE>
10. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
- - --------------------------------------------------------------------------
<S> <C> <C>
7 1/2% convertible subordinated
notes due 2006 $27,500,000 $ ----
9% convertible subordinated
debentures due 2005 4,811,000 4,874,000
9 1/2% subordinated debentures
due 2012 1,057,000 1,057,000
Term loans -- bank, secured, due in
quarterly installments through 2002 11,944,000 15,177,000
Loan payable -- CDA, due in monthly
installments through 2002 at 5.0% 448,000 517,000
Real estate mortgages -- secured, due
in monthly and quarterly
installments through 2015 2,502,000 2,597,000
Capital lease obligation -- secured,
due in monthly installments
through 1999 at 9.5% 53,000 77,000
-----------------------
48,315,000 24,299,000
Less portion due within one year 203,000 1,804,000
-----------------------
$48,112,000 $22,495,000
- - --------------------------------------------------------------------------
</TABLE>
Payments of long-term debt due for the next five years are:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
- - --------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$203,000 $2,658,000 $1,792,000 $2,695,000 $1,718,000
- - --------------------------------------------------------------------------
</TABLE>
The Company issued $27.5 million of 7 1/2% convertible subordinated notes due
2006 (the "Notes") on December 19, 1996. Interest is payable semiannually on
June 1 and December 1 of each year. The Notes are convertible into Common
Stock of the Company at any time after 60 days following the date of initial
issuance thereof and prior to maturity, at a conversion price of $14.013. The
Notes are redeemable, in whole or in part, at the option of the Company, at
any time on or after December 1, 2001 at declining premiums. The Indenture
agreement relating to the Notes contains certain financial covenants with
which the Company must comply on a continuing basis, which among others
includes a limitation on the incurrence of indebtedness of five times EBITDA
plus $5.0 million. On January 14, 1997, the Underwriters exercised their
over-allotment option, bringing the total amount outstanding to $31.625
million.
During 1985, the Company issued $15.0 million of 9% convertible
subordinated debentures due 2005. The debentures are redeemable at the option
of the Company at par. 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. During 1994, the Company called for
redemption of approximately 39% of the outstanding debentures at 101.125% and
redeemed $3.1 million. The debentures were convertible into shares of the
Company's Common Stock at a conversion price of $12.70 per share. The Company
gave Notice of Redemption to redeem all of the outstanding debentures
effective February 27, 1997, and will record a charge of $113,000 ($66,000 net
of tax) for the unamortized portion of its financing costs in 1997.
During 1994, the Company issued $1.1 million of 9 1/2% subordinated
debentures due 2012. The debentures are redeemable at the option of the
Company at declining premiums after December 1, 1999. An annual sinking
fund requirement of $105,700 is to commence December 1, 2009.
The Company entered into a Credit Agreement with First Union Bank of
Connecticut in August 1995 restructuring $15.6 million of indebtedness and
a $4.0 million revolving credit facility. The restructuring extended the
term to an average of 11 years at a variable rate of interest of LIBOR plus
175 basis points (7.375% at December 31, 1996). 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. The
agreement relating to the Company's credit facility contains certain
financial covenants with which the Company must comply, absent a waiver by
the bank, on a continuing basis, which among others includes (1) the
Company must maintain a fixed charge coverage ratio of 1.05 to 1.0, and (2)
cash dividends may not exceed $750,000 in any year. At December 31, 1996,
the Company had outstanding two interest rate swap agreements with a
commercial bank, having a notional value of $11.9 million. The resulting
gain or loss on the swaps is included in interest expense. The agreements
-18-
<PAGE>
effectively change the Company's interest rate exposure on its $6.8 million
floating rate installment note due quarterly through October 2002 to a
fixed rate of 7.86% and its $5.1 million 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, 1996
was $143,000. 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 $4.0 million revolving credit facility was increased to $7.0 million
during 1996, is at a variable rate of interest of LIBOR plus 200 basis
points (7.5% at December 31, 1996) and is available until June 1998. At
December 31, 1996, the Company had $7.0 million available under such
agreement, but has been reduced to $5.0 million as of January 31, 1997. In
the third quarter of 1996, the revolving credit facility was supplemented
by a $3.0 million revolving facility available to the Company at the
discretion of the bank, which expired January 31, 1997.
The Company has a first mortgage on a four-plex theatre in Taos, New
Mexico at an interest rate of prime plus 1% (9.25% at December 31, 1996)
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% (9% at December 31, 1996) with a balloon payment of
$920,000 in 2000.
The fair value of the 7 1/2% convertible subordinated notes, the 9%
convertible subordinated debentures and the 9 1/2% subordinated debentures
are $27,500,000, $4,907,000 and $959,000, respectively, at December 31,
1996. The fair value of the remaining long-term debt approximates the
carrying value.
The theatrical joint venture, MetroLux Theatres, has a $3.0 million
first mortgage on 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
pro rata portion of the indebtedness to the Company.
11. STOCKHOLDERS' EQUITY
Changes in capital stock, additional paid-in capital, treasury stock and
retained earnings and other for the three years ended December 31, 1996 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, 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
Net income --- --- --- --- --- --- 1,250,000
Cash dividends --- --- --- --- --- --- (174,000)
9% debentures conversion --- --- --- --- 23,000 40,000 ---
Unrealized holding gain --- --- --- --- --- --- 13,000
Exercise of stock options --- --- --- --- (11,000) 23,000 ---
Common stock acquired (81 shares) --- --- --- --- --- (1,000) ---
Class B conversion to common stock 5,497 6,000 (5,497) (6,000) --- --- ---
-------------------------------------------------------------------------------------------
Balance December 31, 1996 2,441,765 $2,442,000 298,640 $298,000 $13,818,000 $(11,802,000) $17,906,000
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
During 1996, the Board of Directors declared four quarterly cash
dividends of $0.035 per share on the Company's Common Stock and $0.0315 per
share on the Company's Class B Stock, which were paid in April, July and
October 1996 and January 1997. 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 has 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 the authorized shares of Common Stock to 5.5
million and Class B Stock to 1 million was filed during 1996. No specific
issuance of Class A Stock is presently contemplated.
At December 31, 1996, shares of Common Stock were reserved for as follows:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
<S> <C>
Conversion of 7 1/2% convertible subordinated notes 1,962,000
Conversion of 9% convertible subordinated debentures 777,000
Stock options 85,000
- - ----------------------------------------------------------------------------
</TABLE>
12. LEASES
The Company occupies theatre and other premises under operating leases
expiring at varying dates through 2007. 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, 1996:
<TABLE>
<CAPTION>
Capital Operating
Year Lease Leases
- - -------------------------------------------------------------------------
<S> <C> <C>
1997 $30,000 $ 297,000
1998 30,000 238,000
1999 7,000 197,000
2000 --- 159,000
2001 --- 130,000
Thereafter --- 602,000
-----------------------
Total future minimum lease payments $67,000 $1,623,000
Amount representing interest 14,000 ----------
------
Present value of net minimum
lease payments 53,000
Current portion 24,000
------
Long-term portion $29,000
- - -------------------------------------------------------------------------
</TABLE>
Total rent expense for all operating leases amounted to $296,000,
$238,000, and $267,000 in 1996, 1995 and 1994, respectively. At December
31, 1996, sublease income of $55,000 is to be received on non-cancelable
leases through 1997.
13. ENGINEERING DEVELOPMENT
Engineering development expense was $204,000, $172,000 and $238,000 for
1996, 1995 and 1994, respectively.
14. 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.
The funded status of the plan at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
- - -----------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets $4,389,000 $4,172,000
Actuarial present value of benefits for ----------------------
service rendered to date:
Accumulated benefits based on salaries
to date, including vested benefits
of $3,377,000 and $2,879,000 for
1996 and 1995, respectively 3,482,000 2,985,000
Additional benefits based on
estimated future salary levels 1,396,000 1,286,000
----------------------
Projected benefit obligation (PBO) 4,878,000 4,271,000
----------------------
Plan assets less than PBO (489,000) (99,000)
Unrecognized prior service cost 20,000 22,000
Unrecognized net loss from past
experience different from
that assumed 1,033,000 952,000
Unrecognized net asset on
January 1, 1985 being recognized
over 13.38 years (52,000) (92,000)
----------------------
Prepaid pension cost $ 512,000 $ 783,000
- - -----------------------------------------------------------------------
</TABLE>
The following items are components of the net pension cost for 1996:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------
<S> <C>
Present value of benefits earned during the period $355,000
Interest cost on projected benefit obligation 318,000
Actual return on plan assets (257,000)
Net amortization and deferral (146,000)
-------
Net pension cost $270,000
- - ----------------------------------------------------------------------
</TABLE>
Plan assets are invested in insurance company funds and $99,000 in the
Company's 9 1/2% subordinated debentures. The weighted average discount
rate used in determining the actuarial present value of the PBO was 7.5% in
1996 and 1995. The rate of increase in future compensation levels used in
determining the actuarial present value of the PBO was 4.0% in 1996 and
1995. The expected long-term rate of return on assets was 9.5 % in 1996
and 1995.
-20-
<PAGE>
The Company provides supplemental retirement benefits for the Chief
Executive Officer, during 1996, the Company accrued $63,000 for such
benefits. At December 31, 1996 and 1995, respectively, the total liability
accrued was $216,000 and $153,000.
The Company's pension and supplemental pension costs for the years ended
December 31, 1996, 1995 and 1994 were $353,000, $183,000 and $226,000,
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 the provisions of Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." The standard requires the accrual of estimated
costs of benefits to former or inactive employees after employment but
before retirement. The Company did not accrue any additional liability for
such benefits during 1996.
15. STOCK OPTION PLANS
The Company has five stock option plans. The 1995 Stock Option Plan and
the 1992 Stock Option Plan reserved 100,000 and 50,000 shares of Common
Stock, respectively, 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. The
Non-Employee Director Stock Option Plan reserved 30,000 shares of Common
Stock for grant. The Non-Statutory Stock Option Plan Agreement reserved
12,500 shares of Common Stock for grant to the Chairman of the Board.
Changes in the stock option plans are as follows:
<TABLE>
<CAPTION>
Weighted
Number of Shares Average
--------------------------------- Exercise
Authorized Granted Available Price
- - ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1993 101,900 80,500 21,400 $ 7.36
Terminated (3,500) (8,000) 4,500 7.47
Granted --- 17,000 (17,000) 8.77
-------------------------------------------
Balance December 31, 1994 98,400 89,500 8,900 7.62
Additional authorized shares 50,000 --- 50,000 ---
Terminated (19,700) (25,200) 5,500 7.54
Granted --- 28,200 (28,200) 8.14
Exercised (5,000) (5,000) --- 7.23
-------------------------------------------
Balance December 31, 1995 123,700 87,500 36,200 7.83
Additional authorized shares 65,000 --- 65,000 ---
Terminated --- (1,500) 1,500 8.56
Granted --- 7,000 (7,000) 12.63
Exercised (8,406) (8,406) --- 6.71
-------------------------------------------
Balance December 31, 1996 180,294 84,594 95,700 $ 8.33
- - ----------------------------------------------------------------------------
</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
time of grant. No option may be exercised prior to one year after date of
grant. Exercise periods are for ten years from date of 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.
During 1996, an additional 50,000 shares were authorized under the 1995
Stock Option Plan. At December 31, 1996, under the 1995 Plan, options for
22,800 shares (granted in 1995) with an exercise price of $8.125 per share
were outstanding, all of which were exercisable. No shares were exercised
during 1996 and 1995. During 1996, options for 1,000 shares expired. At
December 31, 1996, under the 1992 Plan, options for 40,794 shares (granted
in 1995, 1994, 1993 and 1992) with exercise prices ranging from $6.3125 to
$9.6875 per share were outstanding, all of which were exercisable. During
1996, options for 7,406 shares (granted in 1992) with an exercise price of
$6.3125 per share were exercised, and options for 500 shares expired.
During 1995, options for 1,300 shares (granted in 1992) with an exercise
price of $6.3125 per share were exercised and options for 1,000 shares
expired. During 1994, options for 4,500 shares expired, no options were
exercised.
Under Stock Option Plan II, option prices must be at least 100% of the
market value of the Common Stock at time of grant. Exercise periods are for
six years from date of 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 had terminated. During 1995, options for 2,200 shares
(granted in 1989) with an exercise price of $7.625 per share were exercised.
During 1994, options for 3,500 shares expired, no options were exercised.
Under the Non-Employee Director Stock Option Plan, options must be at
least 100% of the market value of the Common Stock at time of grant.
No option may be exercised prior to one year after date of grant and the
optionee must be a director of the Company at time of exercise, except in
certain cases as permitted by the Compensation Committee. Exercise periods
are for six years from date of grant and options terminate at a stipulated
period of time after an optionee ceases to be a director. At December 31,
1996, options for 8,500 shares (granted in 1996, 1995 and 1994) with exercise
prices ranging from $8.625 to $12.625 per share were outstanding, 1,500
options were exercisable. During 1996, options for 1,000 shares (granted in
1994) with an exercise price of $9.6875 per share were exercised. During
1995, an option for 1,500 shares (granted in 1989) with an option price of
$7.4375 per share was exercised. During 1995, options for 4,500 shares
expired. No options were exercised during 1994.
Under the Non-Statutory Stock Option Agreement, the option must be at
least 100% of the market value of the Common Stock at time of grant. The
exercise period is for ten years from date of grant. At December 31, 1996, 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
1996, 1995 and 1994.
-21-
<PAGE>
The following tables summarize information about stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Range of Weighted Average Weighted
Exercise Number Remaining Average
Prices Outstanding Contractual Life Exercise Price
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
$6.31 -- $ 7.56 30,994 4 $ 7.19
7.57 -- 8.63 37,200 8 8.14
8.64 -- 9.69 9,400 7 9.60
9.70 -- 12.63 7,000 6 12.63
-------------------------------------------------
84,594 6 $ 8.33
- - ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Range of Number Weighted Average
Exercise Prices Exercisable Exercise Price
- - ---------------------------------------------------------------------
<S> <C> <C>
$6.31 -- $ 7.56 30,994 $ 7.19
7.57 -- 8.63 37,200 8.14
8.64 -- 9.69 9,400 9.60
9.70 -- 12.63 0 12.63
--------------------------------------
77,594 $ 7.94
- - ---------------------------------------------------------------------
</TABLE>
The estimated fair value of options granted during 1996 and 1995 were $4.15
and $2.67 per share, respectively. The Company applies Accounting Principles
Board Opinion No. 25 and related Interpretations in accounting for its stock
option plans. Accordingly, no compensation cost has been recognized for its
stock option plans. Had compensation cost for the Company's stock option
plans been determined based on the fair value at option grant dates for awards
in accordance with accounting provisions of SFAS 123, the Company's net income
and earnings per share for the years ended December 31, 1996 and 1995 would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Net income applicable to common shareholders 1996 1995
- - ------------------------------------------------------------------------
<S> <C> <C>
Primary:
As reported $1,250,000 $1,066,000
Pro forma 1,223,000 1,047,000
- - ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Net income per common and common equivalent share
- - ------------------------------------------------------------------------
<S> <C> <C>
Primary:
As reported $0.97 $0.85
Pro forma 0.95 0.83
Fully diluted:
As reported 0.90 0.81
Pro forma 0.88 0.80
- - ------------------------------------------------------------------------
</TABLE>
The fair value of options granted under the Company's stock option plans
during 1996 and 1995 was estimated on dates of grant using the binomial
options-pricing model with the following weighted-average assumptions used:
dividend yield of approximately 1.2%, expected volatility of approximately
35%, risk free interest rate of approximately 6%, and expected lives of
options granted of approximately four years. The effects of applying SFAS 123
in this pro forma disclosure are not indicative of future pro forma effects.
SFAS 123 does not apply to awards prior to 1995, and additional awards in
future years are anticipated.
16. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with certain executive officers
which expire at various dates through December 2002. The aggregate
commitment for future salaries at December 31, 1996, excluding bonuses, is
approximately $4,513,000.
During 1996, the Company received a $350,000 grant from the State of
Connecticut Department of Economic Development. This grant will be forgiven
under certain circumstances, which includes attainment of predetermined
employment levels within the state and maintaining business operations within
the state for a specified period of time.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business, certain of which claims are reimburseable
to the Company from the Company's insurance carriers. In the opinion of
management, the amount of ultimate liability with respect to these actions,
after considering the related insurance reimbursements, will not have a
material adverse affect on the consolidated financial statements of the
Company.
On March 3, 1997, the Company announced it had signed a letter of intent
to acquire certain assets, including the sign catalog business and custom
sign business from Fairtron Corporation of Des Moines, Iowa. Closing of
the transaction is subject to negotiation and execution of definitive
binding agreements and due diligence by the Company.
17. 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.
Information about the Company's operations in its two business segments
for the three years ended December 31, 1996 is as follows:
-22-
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Communications $40,903,000 $33,569,000 $30,150,000
Entertainment
and real estate 4,382,000 4,222,000 3,592,000
--------------------------------------------
$45,285,000 $37,791,000 $33,742,000
Operating income
Communications $10,125,000 $ 9,500,000 $ 8,881,000
Entertainment
and real estate 335,000 548,000 204,000
--------------------------------------------
10,460,000 10,048,000 9,085,000
Other income --- 92,000 ---
General and
administrative
expenses (6,017,000) (6,157,000) (5,779,000)
Interest expense -- net (2,240,000) (2,144,000) (1,242,000)
--------------------------------------------
Income before taxes $ 2,203,000 $ 1,839,000 $ 2,064,000
--------------------------------------------
Assets
Communications $58,096,000 $49,565,000 $42,684,000
Entertainment
and real estate 6,061,000 6,654,000 6,685,000
--------------------------------------------
Total identifiable assets 64,157,000 56,219,000 49,369,000
Cash and available-
for-sale securities 19,874,000 1,241,000 3,938,000
--------------------------------------------
$84,031,000 $57,460,000 $53,307,000
--------------------------------------------
Depreciation and
amortization
Communications $ 6,620,000 $ 6,403,000 $ 5,951,000
Entertainment
and real estate 327,000 301,000 264,000
General corporate 157,000 197,000 298,000
--------------------------------------------
$ 7,104,000 $ 6,901,000 $ 6,513,000
--------------------------------------------
Capital expenditures
Communications $ 9,157,000 $ 7,461,000 $ 6,240,000
Entertainment
and real estate 101,000 220,000 2,223,000
--------------------------------------------
$ 9,258,000 $ 7,681,000 $ 8,463,000
- - ----------------------------------------------------------------------------
</TABLE>
General and administrative expenses consist of general corporate expenses
not deemed to be operating expenses and have therefore not been allocated.
No single customer accounted for 10% or more of total revenues in 1996,
1995 or 1994. Foreign revenues were less than 10% of revenues in 1996 and
1995 and were approximately 15% in 1994.
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,
1996 and 1995 and the related consolidated statements of income
and cash flows for each of the three years in the period ended
December 31, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsi-
bility 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 beleive 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, 1996 and 1995
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
February 28, 1997
-23-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this Item with respect to directors, is
incorporated herein by reference to the Section entitled "Election of
Directors" in the Company's Proxy Statement.
(b) The following executive officers were elected by the Board of Directors
for the ensuing year and until their respective successors are elected.
Name Office Age
------------------ ----------------------------- ---
Richard Brandt Chairman of the Board 69
Victor Liss Vice Chairman of the Board 60
President, Chief Executive
Officer and Director
Michael R. Mulcahy Executive Vice President 48
Frank N. Daniels Senior Vice President 59
Karl P. Hirschauer Senior Vice President 51
Thomas F. Mahoney Senior Vice President 49
Angela D. Toppi Senior Vice President, Treasurer 41
Secretary and Chief Financial
Officer
Messrs. Brandt, Liss and Daniels have been associated in an executive
capacity with the Company for more than five years.
Mr. Mulcahy was elected Executive Vice President in charge of sales,
marketing and engineering operations on May 18, 1995 and has been employed by
the Company since 1967. Mr. Mulcahy served as Senior Vice President in
charge of sales between December 8, 1993 and May 18, 1995 and as Vice
President in sales between 1989 and December 8, 1993.
Mr. Hirschauer was elected Senior Vice President in charge of engineering
and product development on December 8, 1993 and has been employed by the
Company since 1980. Mr. Hirschauer served as Vice President in charge of
engineering between 1984 and December 8, 1993.
-24-
<PAGE>
Mr. Mahoney was elected Senior Vice President in charge of sales on July
1, 1996 and has been employed by the Company since 1967. Mr. Mahoney served
as Assistant Vice President in sales between December 1, 1994 and June 30,
1996.
Ms. Toppi was elected Senior Vice President in charge of finance on
September 29, 1995. Ms. Toppi has served as Secretary of the Company since
July 23, 1992, Chief Financial Officer since March 19, 1992 and Treasurer
since 1988.
(c) The information required by Item 405 of Regulation S-K is incorporated
herein by reference to the Section entitled "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" in the Company's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the Section entitled "Executive Compensation and Transactions with
Management" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated herein by reference
to the Section entitled "Security Ownership of Certain Beneficial Owners,
Directors and Executive Officers" in the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference
to the Section entitled "Executive Compensation and Transactions with
Management" in the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Consolidated Statements of Income for the Years Ended December 31,
1996, 1995 and 1994.
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994.
-25-
<PAGE>
Notes to Consolidated Financial Statements.
Independent Auditors' Report
Individual financial statements for two 50% owned entities accounted for by
the equity method, have been omitted because they do not constitute
significant subsidiaries.
(2) Schedules: None
(3) Exhibits included herein:
3(a) Form of Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 of
Registration No. 333-15481).
(b) By-Laws of the Registrant (incorporated by reference Exhibit
3.2 of Registration No. 333-15481).
4(a) Indenture dated as of December 1, 1994 (form of said
indenture is incorporated by reference to Exhibit 6 of
Schedule 13E-4 Amendment No. 2 dated December 23, 1994).
(b) Indenture dated as of December 1, 1996 (form of said
indenture is incorporated by reference to Exhibit 4.2 of
Registration No. 333-15481).
10.1 Form of Indemnity Agreement -- Directors (form of said
agreement is incorporated by reference to Exhibit 10.1 of
Registration No. 333-15481).
10.2 Form of Indemnity Agreement -- Officers (form of said
agreement is incorporated by reference to Exhibit 10.2 of
Registration No. 333-15481).
10.3 Amended and Restated Pension Plan dated August 14, 1996,
included herein.
10.4(a) 1989 Non-Employee Director Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.2 of Form 10-Q for
the quarter ended September 30, 1996).
(b) 1992 Stock Option Plan (incorporated by reference to Proxy
Statement dated April 3, 1992).
(c) Richard Brandt Stock Option Agreement dated January 1, 1993
(incorporated by reference to Exhibit 10(d) of Form 10-K for
the year ended December 31, 1992).
(d) 1995 Stock Option Plan, as amended (incorporated by reference
to Proxy Statement dated April 22, 1996).
10.5 Credit Agreement with First Fidelity Bank dated as of August
28, 1995 (incorporated by reference to Exhibit 10 of Form
10-Q for the quarter ended September 30, 1995). First
Amendment Agreement (incorporated by reference to Exhibit
10(a) of Form 10-Q for the quarter ended June 30, 1996).
Letter Amendment dated August 12, 1996 (incorporated by
reference to Exhibit 10(b) of Form 10-Q for the quarter ended
June 30, 1996). Second Amendment Agreement (incorporated by
reference to Exhibit 10.1 of Form 10-Q for the quarter ended
September 30, 1996).
-26-
<PAGE>
10.6 Employment Agreement with Richard Brandt dated August 16,
1996 (incorporated by reference to Exhibit 10.3 in
Registration No. 333-15481).
10.7 Employment Agreement with Victor Liss dated as of January 1,
1997, included herewith.
10.8 Employment Agreement with Michael R. Mulcahy dated as of
June 1, 1994 (incorporated by reference to Exhibit 28(d) of
Form 10-Q for the quarter ended September 30, 1994).
Amendment No. One to Employment Agreement dated June 1, 1995
(incorporated by reference to Exhibit 28(a) of Form 10-Q for
the quarter ended June 30, 1995).
10.9 Employment Agreement with Frank Daniels dated as of January
1, 1997, included herewith.
10.10 Employment Agreement with Karl Hirschauer dated as of January
1, 1997, included herewith.
10.11 Employment Agreement with Thomas F. Mahoney dated as of June
1, 1996 (incorporated by reference to Exhibit 28(a) of Form
10-Q for the quarter ended June 30, 1996).
10.12 Employment Agreement with Angela Toppi dated as of January 1,
1997, included herewith.
10.13 Asset Purchase Agreement between Trans-Lux Consulting
Corporation and American Electronic Displays, L.P. dated
July 9, 1992 (incorporated by reference to Form 8-K filed
July 13, 1992). Amendment to Asset Purchase Agreement dated
as of August 21, 1992 (incorporated by reference to Form 8-K
filed August 28, 1992). Bankruptcy Court order approving
sale (incorporated by reference to Form 8-K filed August 28,
1992).
10.14 Asset Purchase Agreement between Trans-Lux Sign Corporation
and Indicator Maintenance Corporation dated August 4, 1993
(incorporated by reference to Exhibit 28(b) of Form 10-Q for
the quarter ended September 30, 1993).
10.15 Agreement between Trans-Lux ISE Corporation and the
Stockholders of Integrated Systems Engineering, Inc. dated
as of January 17, 1995 (incorporated by reference to Exhibit
28(a) of Form 8-K filed January 23, 1995).
-27-
<PAGE>
10.16 Agreement with Nottingham Partners, Deerfield Partners,
Jonathan P. Schwartz and Nathaniel B. Guild dated April 4,
1991 (incorporated by reference to Exhibit 28(a) of Form 8-K
filed April 9, 1991).
10.17 Agreement with Baupost Group, Inc. and Baupost Partners
dated April 4, 1991 (incorporated by reference to Exhibit
28(b) of Form 8-K filed April 9, 1991).
11 Computation of Earnings Per Share filed herewith.
21 List of Subsidiaries filed herewith.
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
-28-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized:
TRANS-LUX CORPORATION
by /s/ Angela D. Toppi
-------------------------
Angela D. Toppi
Senior Vice President and
Chief Financial Officer
by /s/ Robert A. Carroll
-------------------------
Robert A. Carroll
Controller and Chief Accounting Officer
Dated: March 31, 1997
-29-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
/s/ Richard Brandt March 31, 1997
- - --------------------------------------
Richard Brandt, Chairman of the Board
/s/ Victor Liss March 31, 1997
- - -------------------------------------
Victor Liss, Vice Chairman of the
Board, President and Chief Executive
Officer
/s/ Steven Baruch March 31, 1997
- - --------------------------------------
Steven Baruch, Director
/s/ Jean Firstenberg March 31, 1997
- - --------------------------------------
Jean Firstenberg, Director
/s/ Allan Fromme March 31, 1997
- - --------------------------------------
Allan Fromme, PhD, Director
/s/ Robert Greenes March 31, 1997
- - --------------------------------------
Robert Greenes, Director
/s/ Eugene Jankowski March 31, 1997
- - --------------------------------------
Eugene Jankowski, Director
/s/ Howard S. Modlin March 31, 1997
- - --------------------------------------
Howard S. Modlin, Director
<PAGE> EX-10.3
RETIREMENT PENSION PLAN
FOR EMPLOYEES OF
TRANS-LUX CORPORATION
AND
CERTAIN OF ITS SUBSIDIARIES
AND/OR AFFILIATES
Effective January 1, 1945
As Amended and
Restated Effective
August 14, 1996
(Most recent determination letter
dated March 17, 1994)
<PAGE>
PREAMBLE
Pursuant to a resolution of the Board of Directors of each of the
participating corporations (defined in Section I as the "Company"), the
Retirement Pension Plan for the benefit of the eligible employees of each
participating corporation was adopted effective as of January 1, 1945.
The Plan was amended and restated in its entirety effective as of January
1, 1976. The Plan was again amended and restated effective January 1,
1985 to conform to the applicable provisions of the Tax Equity Act of
1984, the Retirement Equity Act of 1984 and, furthermore, to incorporate
amendments generally effective January 1, 1984 with respect to the Tax
Equity and Fiscal Responsibility Act. The Plan is hereby further amended
and restated for the primary purpose of conformance to the Tax Reform Act
of 1986 and other applicable legislation and to incorporate amendments
made to the Plan since the last restatement. The Plan as amended and
restated shall apply to Employees who have one Hour of Service on and
after January 1, 1989 (or at any later or earlier date which is
specifically stated herein). The rights of those Employees who have
retired, died or terminated employment shall be governed by the Plan in
existence on the date of retirement, death, or termination of employment
and shall not be changed by virtue of this Plan as amended or restated
unless specifically provided for herein.
<PAGE>
INDEX
INTRODUCTION...................................................(i)
SECTION I: DEFINITIONS...................................1-20
SECTION II: ELIGIBILITY..................................21-23
SECTION III: RETIREMENT DATES............................24-26
SECTION IV: RETIREMENT BENEFITS.........................27-39
SECTION V: NORMAL FORM OF BENEFIT AT RETIREMENT.........40-43
SECTION VI: OPTIONAL FORM OF BENEFITS....................44-48
SECTION VII: DEATH BENEFITS..............................49-53
SECTION VIII: CONTRIBUTIONS................................54-55
SECTION IX: TERMINATION OF SERVICE.......................56-60
SECTION X: DISABILITY...................................61-62
SECTION XI: TIME OF COMMENCEMENT OF PAYMENT..............63-70
SECTION XII: REEMPLOYMENT.................................71-72
SECTION XIII: LIMITATION OF ASSIGNMENT.....................73-74
SECTION XIV: LIMITATION OF RIGHTS OF EMPLOYEE................75
SECTION XV: AMENDMENT TO OR TERMINATION OF THE PLAN......76-81
SECTION XVI: GOVERNMENTAL RESTRICTIONS...................82-88
SECTION XVII: ADMINISTRATION OF THE PLAN...................89-95
SECTION XVIII: TRUST AGREEMENT................................96
SECTION XIX: TOP HEAVY PROVISIONS........................97-105
SECTION XX: MISCELLANEOUS..............................106-108
APPENDIX A: OPTION FACTORS............................109-111
<PAGE>
INTRODUCTION
The Retirement Plan for Employees of Trans-Lux Corporation is amended and
restated effective January 1, 1989 (unless such earlier date is specified
herein).
The Plan as amended and restated shall apply to employees who perform one
Hour of Service on and after January 1, 1989. The terms and conditions of the
Plan for employees who have retired, died or have terminated prior to January
1, 1989 shall be governed by the Plan in existence on the date of such
retirement, death or termination unless specifically provided otherwise
herein.
i
<PAGE>
SECTION I
DEFINITIONS
The following words and phrases shall be defined as stated below, unless a
different meaning is clearly indicated by the context.
1.1 "Accrued Benefit" means the annual amount of a Member's retirement
benefit under the normal form of payment provided in Section 5.2
hereof and payable as of the Member's Normal Retirement Date or as of
the date the Member otherwise ceases to be an Employee, whichever is
applicable. A Member's Accrued Benefit shall be computed in
accordance with Section 4.1 hereof based on the Member's Salary at the
time of computation and his expected years of Credited Service at the
date of calculation. A Member's Accrued Benefit shall not be reduced
on account of any increase in the Member's age or service.
1.2 "Act" means the Employee Retirement Income Security Act of 1974 and
any amendments thereto.
1.3 "Actuarial Equivalent," when used with reference to any form of
benefit, means a form of benefit which has the same value as the
referenced benefit, based on the actuarial factors set forth in
Appendix A hereof.
1.4 "Actuary" means a person who is enrolled by the Joint Board for the
Enrollment of Actuaries established under the Act and engaged by the
Pension Committee on behalf of the Members.
1
1.5 "Adjustment Factor" means the cost-of-living adjustment factor
prescribed by the Secretary of the Treasury under Section 415(d) of
the Code for Plan Years beginning after December 31, 1987, applied to
such items and in such manner as the Secretary shall prescribe.
1.6 "Affiliated Employer" shall mean the Company and any corporation which
is a member of a controlled group of corporations (as defined in
Section 414(b) of the Code) which includes the Company; any trade or
business (whether or not incorporated) which is under common control
(as defined in Section 414(c) of the Code) with the Company; any
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code)
which includes the Company; and any other entity required to be
aggregated with the Company pursuant to regulations under Section
414(o) of the Code.
1.7 "Approved Leave of Absence" means an unpaid leave of absence granted
by the Company for such reason as the Pension Committee may determine
by rules applied in a non-discriminatory manner to persons in similar
circumstances.
1.8 "Beneficiary" means any person (including a Contingent Annuitant),
designated by the Member to receive any death benefits which may be
2
<PAGE>
payable under the Plan in the event of the Member's death. Such
Beneficiary designation is subject to the spousal consent requirements
of Section 5.1.
1.9 "Board" means the Board of Directors of Trans-Lux Corporation.
1.10 "Code" means the Internal Revenue Code of 1986 as now in effect
or as hereafter amended. All citations to sections of the Code are
to such sections as they may from time to time be amended or
renumbered.
1.11 "Company" means Trans-Lux Corporation and any subsidiary or
Affiliated Employer as shall adopt the Plan by resolution of their
respective Boards of Directors under the terms and conditions set
forth by the Board.
1.12 "Contingent Annuitant" means a person designated by a Member, who has
elected a Joint and Survivorship Annuity option under Section 6.1(b)
hereof, to receive any death benefit payable under such option.
Designation of a Contingent Annuitant is subject to the spousal
consent requirements of Section 5.1.
1.13 "Credited Service" means for an Employee who first completes an Hour
of Service after January 1, 1986, the years of service rendered by an
Employee to the Company commencing on the first of the month
coincident with or next following the completion of one Year of
Eligibility Service and ending on his Deferred, Normal, or Earlier
3
<PAGE>
Retirement Date, date of death, or other termination of employment.
In the year of a Member's Deferred, Normal or Earlier Retirement
Date, date of death or other termination of employment, such Member
shall accrue Credited Service at the rate of 1/12th of a year for
each month during which he is credited with at least one Hour of
Service for the performance of duties.
For an Employee who first performs an Hour of Service prior to
January 1, 1986, Credited Service shall begin on the earlier of a)
January 1st nearest to the completion of one Year of Eligibility
Service or b) the first of the month coincident with or next
following the completion of one Year of Eligibility Service.
Notwithstanding anything in this Section 1.13 to the contrary, all
periods of service in the uniformed services of the United States (as
defined in Section 4303(13) and 4303(16) of the Uniformed Services
Employment and Reemployment Rights Act of 1994) shall be included in
the Employee's Credited Service if he returns to employment with the
Company or an Affiliated Employer having applied to return while his
reemployment rights were protected by law.
4
<PAGE>
1.14 "Employee" means any person employed on a salaried basis, including
an officer or director who is otherwise regularly employed in the
service of the Company, who received earnings from the Company other
than a pension, severance pay, retainer, or fee under contract. The
term "Employee" shall include leased employees (as defined in Section
414(n) (2) of the Code) for purposes of Section 410 of the Code but
such employees shall not be eligible for participation in the Plan.
"Employee" does not include any person covered by a collective
bargaining agreement, to which the Company is a party unless such
agreement specifically provides for participation in the Plan.
"Employee" may, however, include the employee of another company
whose assets the Company may acquire and the Board admits to
membership in the Plan on such terms and conditions as it may in its
discretion decide, provided that it shall act in a uniform and
non-discriminatory manner.
Effective as of January 1, 1996, `Employee' shall also include
salaried employees of Integrated Systems Engineering, Inc., as well
as full-time salaried employees of the theater executive office and
theater managers.
5
<PAGE>
The Chairman of the Board shall not be eligible to participate in
the Plan and immediately upon his election as Chairman shall cease to
be a member of the Plan.
1.15 "Final Average Salary" means the average of a Member's Salaries
during the 60 highest months within the final 120 months of service
preceding his Normal, Deferred or Earlier Retirement Date (whichever
is applicable), death, or other severance of employment; provided,
however, that if such Member has less than 60 months of Salaries as
of the applicable date, his average salary for the actual period of
service prior to such applicable date shall be used.
1.16 "Highly Compensated Employee" means:
(a) with respect to any Plan Year for which an election is not made
under paragraph (b) below, any employee of the Company or an
Affiliated Employer (whether or not eligible for membership in
the Plan) who satisfies the criteria of subparagraph (i), (ii),
or (iii):
(i) During the look-back year the employee:
(A) received statutory compensation in excess of $75,000
multiplied by the adjustment factor;
6
<PAGE>
(B) received statutory compensation in excess of $50,000
multiplied by the adjustment factor and was among the
highest 20 percent of employees for that year when ranked
by statutory compensation paid for that year excluding,
for purposes of determining the number of such employees,
such employees as the Company may determine on a
consistent basis pursuant to Section 414(q)(8) of the
Code; or
(C) was at any time an officer of the Company or an
Affiliated Employer and received statutory compensation
greater than 50 percent of the dollar limitation on
maximum benefits under Section 415(b)(1)(A) of the Code
for such Plan Year. The number of officers is limited to
50 (or, if lesser, the greater of three employees or 10
percent of employees excluding those employees who may be
excluded in determining the top paid group). If no
officer has statutory compensation in excess of 50
7
<PAGE>
percent of the dollar limitation on maximum benefits
under Section 415(b)(1)(A) of the code, the highest paid
officer is treated as a Highly Compensated Employee.
(ii) During the determination year, the employee satisfies the
criteria under (A), (B), or (C) of (i) above and is one of
the 100 highest paid employees of the Company or an
Affiliated Employer.
(iii) During the determination year or the look-back year the
employee was at any time a 5-percent owner of the Company or
an Affiliated Employer.
(iv) To the extent permitted under regulations, the Company may
elect to determine the status of Highly Compensated Employees
under this paragraph (a) on a current calendar year basis.
(v) Notwithstanding the foregoing, employees who are nonresident
aliens and who receive no earned income from the Company or
an Affiliated Employer which constitutes income from sources
8
<PAGE>
within the United States shall be disregarded for all
purposes of this Section.
The provisions of this paragraph shall be further subject to such
additional requirements as shall be described in Section 414(q)
of the Code and its applicable regulations, which shall override
any aspects of this paragraph inconsistent therewith.
(b) Notwithstanding the foregoing, for each Plan Year the Company may
elect to determine the status of Highly Compensated Employees
under the simplified snapshot method described in IRS Revenue
Procedure 93-42. With respect to any Plan Year for which such an
election is made, the term "Highly Compensated Employee" shall
mean any employee who satisfies the criteria of paragraph (a)
above when determined on the basis of the snapshot population and
the snapshot day (as defined below) or who:
(i) terminated employment prior to the snapshot day and was a
Highly Compensated Employee in the prior year; or
(ii) became employed subsequent to the snapshot day or terminated
employment prior to the snapshot day and (A) is a 5-percent
9
<PAGE>
owner, (B) has compensation for the Plan Year greater than or
equal to the projected compensation of any employee who is
treated as a Highly Compensated Employee on the snapshot day
(except for employees who are Highly Compensated Employees
solely because they are 5-percent owners or officers), or (C)
is an officer and has compensation greater than or equal to
the projected compensation of any other officer who is a
Highly Compensated Employee on the snapshot day solely
because that person is an officer.
The provisions of this paragraph (b) shall be further subject to
such additional requirements as shall be described in Section
414(q) of the Code, and its applicable regulations, which are not
inconsistent with the foregoing provisions of this paragraph (b).
(c) For purposes of this Section 1.16, the following terms shall have
the following meanings:
(i) the `determination year' shall mean the Plan Year and the
`look-back year' means the 12- month period immediately
10
<PAGE>
preceding the determination year.
(ii) `snapshot day' shall mean December 31.
(iii) `snapshot population' means all employees of the Company
and Affiliated Employers on the snapshot day; and
(iv) `statutory compensation' means the wages, salaries, and
other amounts paid in respect of any employee for service
actually rendered to the Company or an Affiliated Employer,
including by way of example, overtime, bonuses, and
commissions, but excluding deferred compensation, stock
plans, and other distributions which receive special tax
benefits under the Code. Any employee's statutory
compensation shall be determined prior to any reduction
under a cash or deferred arrangement which meets the
requirements of Section 401(k) of the Code or any
reductions pursuant to a cafeteria plan under Section 125
of the Code.
1.17 "Hour of Service" means:
11
<PAGE>
(a) each hour for which an Employee is paid or entitled to payment
for the performance of duties for an Affiliated Employer;
(b) each hour for which an Employee is paid or entitled to payment by
an Affiliated Employer prior to his termination of employment
with the Affiliated Employer, up to a maximum of 501 hours for
any single continuous period on account of a period of time
during which no duties are performed due to vacation, holiday,
illness, incapacity, (including disability), layoff, jury duty,
military duty, or leave of absence. Notwithstanding the
preceding sentence, the Employee will not be credited with the
Hours of Service if no duties are performed and payment is made
or due under a plan maintained solely for the purpose of
complying with the applicable workers compensation or
unemployment compensation or disability insurance laws and Hours
of Service will not be credited for payment which solely
reimburses an Employee for medical or medically related expenses
incurred by the Employee;
(c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Affiliated
12
<PAGE>
Employer, provided, however, that no more than 501 Hours of
Service will be credited for payments of back pay to the extent
that such back pay is awarded or agreed to for a period during
which an Employee did not or would not have performed duties.
Hours of Service shall be computed and credited in accordance
with paragraphs (b) and (c) of Section 2530.200b-2 of the
Department of Labor Regulations which are herein incorporated by
reference. Such hours of Service shall be credited under either
subparagraphs (a), (b), and (c) of this definition 1.16.
Hours of Service shall include all periods of an Employee's service
in the services of the United States (as defined in Sections 4303(13)
and 4303(16) of the Uniformed Services Employment and Reemployment
Rights Act of 1994) if the Employee returns to employment with the
Company or an Affiliated Company having applied to return while his
reemployment rights were protected by law.
1.18 "Member" means any Employee participating in the Plan in accordance
with Section II hereof.
13
<PAGE>
1.19 "One Year Break in Service" means a Plan Year during which an
Employee or Member shall not have accumulated more than 500 Hours of
Service.
For Plan Years commencing on or after January 1, 1985, solely for
purposes of determining whether a Break in Service has occurred, an
Employee will be granted Hours of Service, which otherwise would
normally not have been credited up to a maximum of 501 Hours of
Service for absences due to pregnancy, birth or adoption of a child
or caring for a child following birth or adoption, provided the
Employee furnishes the Pension Committee with such timely information
as the Committee shall require that such absence from service is the
result of the reasons specified under this paragraph. For purposes
of the preceding sentence, Hours of Service shall be credited in the
Year of Eligibility Service or year of Vesting Service (whichever is
applicable) in which such absence occurs if such crediting of Hours
of Service would prevent a Break in Service. In each other case,
such Hours of Service will be credited in the subsequent Year of
Eligibility Service or year of Vesting Service. Commencing August 5,
1993, solely for the purpose of determining whether a Break in
Service has occurred, an Employee will be granted hours of Service
for a period of leave on or after such date granted pursuant to the
14
<PAGE>
Family and Medical Leave Act of 1993 and its regulations for the
birth, adoption, or placement of a child, to care for a spouse or an
immediate family member with a serious illness, or for the employee's
own illness.
Effective October 13, 1996, a Break in Service shall not be
deemed to have occurred if the Employee is absent because of service
in the uniformed services of the United States (as defined in
Sections 4303(13) and 4303(16) of the Uniformed Services Employment
and Reemployment Rights Act of 1994) and he returns to employment
with the Company or an Affiliated Employer having applied to return
while his reemployment rights were protected by law.
1.20 "Pension Committee" means the committee which shall direct the
general administration of the Plan in accordance with Section XVII
hereof.
1.21 "Plan" means the Retirement Pension Plan for Employees of Trans-Lux
Corporation and certain of its subsidiaries and affiliates.
1.22 "Plan Year" means the consecutive 12-month period commencing on
January 1 of each year.
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1.23 "Qualified Domestic Relations Order" means a judgement, decree, or
order which relates to the provision of child support, alimony
payments, or marital property rights of a Spouse, former spouse,
child or other dependent of a Member made pursuant to a State
domestic relations order. Such Qualified Domestic Relations Order
must specify the name and address of the Member and alternate payee,
the amount or percentage (or a determination thereof) of the Member's
benefit to be paid to the alternate payee, the number of payments (or
periods) to which the order applies and that the order applies to the
Plan.
1.24 "Qualified Joint and Survivor Annuity" means the benefit payable at
retirement for the life of the Member with payments continuing after
his death to, and for the life of, his Spouse in an amount equal to
half of the amount of the benefits payable during the joint lives of
the Member and his Spouse and which is the Actuarial Equivalent of a
benefit payable for the life of the Member.
1.25 "PBGC" means the Pension Benefit Guaranty Corporation.
1.26 "Reemployment Commencement Date" means the date on which an Employee
completes his first Hour of Service following his last One Year Break
in Service.
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1.27 "Retirement Commencement Date" means the first day of the first
period for which a Member's retirement benefits are paid as an
annuity or in any other form, regardless of the actual date of
payment.
1.28 "Retirement Date" means a Member's Normal, Earlier or Deferred
Retirement Date as set forth in Section III.
1.29 "Salary" means the basic compensation, excluding overtime, bonuses,
and commissions, paid to an Employee of the Company. Salary shall
also include amounts elected by the Employee and deferred through a
salary reduction feature of a qualified profit sharing plan meeting
the requirements of Code Section 401(k). Effective January 1, 1989,
Salary for any purpose under the Plan shall be limited to $200,000 in
any Plan Year multiplied by the Adjustment Factor, for Plan Years
beginning in 1990, and each Plan Year thereafter.
In determining Salary of a Member for purposes of this
limitation, the rules of section 414(q)(6) shall apply, except that
in applying such rules, the term "family" shall include only the
Spouse of the Member and any lineal descendants of the Member who
have not attained age 19 before the close of the calendar year. If,
as a result of the application of such rules, the adjusted $200,000
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limitation is exceeded, then the limitation shall be pro-rated among
the affected individual's Salary determined under this section prior
to the application of the limitation.
Salary for any prior Plan Year that is taken into account in
determining benefits in a current Plan Year shall be subject to the
applicable Salary limitation of the prior Plan Year. For this
purpose, Salary for Plan Years beginning before January 1, 1990,
shall be deemed to be limited to $200,000.
Notwithstanding the above, effective for years beginning on and
after January 1, 1994, the Salary taken into account under the Plan
shall not exceed $150,000 as adjusted by the Adjustment Factor in
$10,000 increments rounded down to the nearest $10,000 in accordance
with Code Sections 401(a)(17) and 415(d). The limitation of this
paragraph shall not operate so as to reduce a Member's Accrued
Benefit to an amount which is less than such Member's Accrued Benefit
determined on December 31, 1993 without regard to this provision and,
further provided that a Member's Salary earned prior to January l,
l994 shall continue to be adjusted in accordance with this Section
1.28 as if the $200,000 limitation, and any adjustments thereto,
continued to apply.
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Solely to the extent it does not violate the provisions of
Section 415 of the Code or any other provision of applicable law, the
salary to be used for determining the Accrued Benefit earned by such
an Employee during his years in the uniformed services of the United
States shall be the salary the Employee would have received but for
his service in the uniformed services of the United States or, if the
Pension Committee determines that such rate cannot be determined with
reasonable certainty, the Employee's average rate of compensation
during the 12-month period (or his entire period of employment, if
less) immediately preceding the Employee's service in the uniformed
services of the United States.
1.30 "Spouse" means the legally married husband or wife of a Member. In
certain circumstances the Committee shall determine the designation
of a Spouse.
1.31 "Social Security Covered Compensation" means, for a Plan Year, the
average (without indexing) of the taxable wage bases in effect for
each calendar year during the 35-year period ending on the last day
of the calendar year in which the Member attains Social Security
Retirement Age. In determining a Member's covered compensation for a
Plan Year, the taxable wage base for the current Plan Year and any
subsequent Plan Year shall be assumed to be the same as the taxable
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wage base in effect as of the beginning of the Plan Year for which
the determination is being made. A Member's covered compensation for
a Plan Year after the 35-year period is the Member's covered
compensation for the Plan Year during which the Member attained
Social Security Retirement Age. A Member's covered compensation
before the 35-year period is the taxable wage base in effect as of
the beginning of the Plan Year. A Member's covered compensation
shall automatically be adjusted for each Plan Year.
1.32 "Social Security Retirement Age" means the age used as the retirement
age for the Member under Section 216(l) of the Social Security Act,
except that such section shall be applied without regard to the age
increase factor, and as if the early retirement age under Section
216(i)(2) of such Act were age 62.
1.33 "Terminated Vested Participant" means a Member who has terminated
employment with an Affiliated Employer for reasons other than death
or retirement, at any time after he has attained a non-forfeitable
interest in his Accrued Benefit in accordance with Section 9.2 or
Section 9.3, whichever is applicable.
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1.34 "Trust Agreement" means the agreement providing for the Trust Fund.
1.35 "Trustee" means the trustee under the Trust Agreement or any
successor trustee.
1.36 "Trust Fund" or "Fund" means the fund established under a Trust
Agreement by contributions made by the Company.
1.37 "Vesting Service" means the period of service of an Employee with an
Affiliated Employer, as determined under Section 9.4 hereof,
recognized for purposes of determining eligibility for a
nonforfeitable benefit under Section IX of the Plan.
1.38 "Year of Eligibility Service" means the completion of 1,000 Hours of
Service in an eligibility computation period. The eligibility
computation period is the 12 consecutive month period commencing on
the date the Employee first performs an Hour of Service for an
Affiliated Employer and each anniversary thereof.
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SECTION II
ELIGIBILITY
2.1 Each Member of the Plan as of December 31, 1975 shall continue to be a
Member of the Plan on January 1, 1976.
2.2 Each Employee on and after January 1, 1976 and prior to January 1,
1985 shall become a Member on the January 1 nearest the date on which
he completes one Year of Eligibility Service and attains age 25.
2.3 Each other Employee on and after January 1, 1985, shall become a
Member on the January 1 nearest the date on which he completes one
Year of Eligibility Service and attains age 21.
2.4 A Member, who ceases to be an Employee, due to his becoming covered
under another pension or retirement plan established pursuant to a
collective bargaining agreement to which the Company is a party, will
be deemed to continue as a Member of this Plan with respect to his
Accrued Benefit as of the date of such coverage. No Credited Service
shall be earned during the period of such coverage. Upon becoming
once again an Employee, he shall resume Plan participation as of the
date he again becomes an Employee. If such a Member receives credit
for service under a plan established pursuant to such collective
bargaining agreement, which service is also Credited Service under
this Plan, his Accrued Benefit based on such Credited Service under
22
<PAGE>
this Plan shall be reduced by the Actuarial Equivalent of the benefit
for such service under such other plan.
2.5 An Employee who incurs a One Year Break in Service prior to January 1,
1985 and who is not entitled to a nonforfeitable benefit pursuant to
Section 9.2 shall be admitted or readmitted to membership on his
Reemployment Commencement Date and prior Years of Eligibility Service
shall be restored on such date provided that the number of consecutive
One Year Breaks in Service does not equal or exceed his aggregate
Years of Eligibility Service accrued prior to such One Year Break in
Service and is not disregarded as a result of a previous One Year
Break in Service, and further provided that, the Employee has
satisfied the minimum age and service requirements of this Plan.
An Employee who (i) is not entitled to a nonforfeitable benefit
pursuant to Sections 3.1, 9.2, or 9.3 and (ii) incurs a One Year Break
in Service on or after January 1, 1985, shall be admitted or
readmitted to membership on his Reemployment Commencement Date
provided such Employee has met the minimum age and service
requirements of this Section II. Prior Years of Eligibility Service,
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not previously disregarded as a result of a previous One Year Break in
Service, shall be restored as of the Reemployment Commencement Date
provided the consecutive number of One Year Breaks in Service does not
equal or exceed the greater of:
(a) the aggregate number of Years of Eligibility Service
completed prior to the One Year Break in Service; or
(b) 5 years.
For purposes of this section 2.5 a One Year Break in Service is a Year
of Eligibility Service in which an Employee shall not have accumulated
more than 500 Hours of Service.
An Employee entitled to a nonforfeitable benefit shall be restored
to membership upon his Reemployment Commencement Date.
Any other Employee, upon reemployment, shall be considered a new
Employee and shall be required to satisfy the minimum age and service
requirements of this Section II without regard to service prior to a
One Year Break in Service or employment termination.
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SECTION III
RETIREMENT DATES
3.1 Normal Retirement Date
The Normal Retirement Date for a Member who has completed one Hour of
Service on or after January 1, 1988 shall be the first day of the
month coinciding with or next following his Normal Retirement Age
which shall be the later of his 65th birthday or the fifth anniversary
of the date on which he became a Plan Member.
A Member shall be fully (100%) vested in his Accrued Benefit upon
attainment of Normal Retirement Age.
3.2 Earlier Retirement Date
Any Member who was such on December 31, 1982, may elect an Earlier
Retirement Date which may be the first day of any month not more than
ten years prior to his Normal Retirement Date. Any Member who became
a Member on or after January 1, 1983, may elect an Earlier Retirement
Date which may be the first day of any month which is not more than
ten years prior to the Member's Normal Retirement Date, provided that
such Member has completed ten years of Credited Service on the Earlier
Retirement Date. Effective January 1, 1988, a Member may elect an
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Earlier Retirement Date which shall be the first day of any month
following the attainment of age 55 and completion of 10 Years of
Credited Service.
3.3 Deferred Retirement Date
A Member who continues employment after Normal Retirement Date may
elect to commence payments under the Plan on the first day of any
month on or after the attainment of his Normal Retirement Date or
defer commencement of payment until the earlier of the first of the
month following termination of employment or the April 1 following the
calendar year of his attainment of age 70-1/2. In the event a benefit
commences under this Section 3.3 prior to the Member's actual
retirement date, the benefit accrued under Section 4.1 at the end of
each Plan Year, beginning on and after the date in which the
Participant attains Normal Retirement Date, shall be reduced by the
Actuarial Equivalent of the benefit payments received in such Plan
Year. In no event shall the reduction provided in the preceding
sentence reduce additional accrual in any Plan Year below zero.
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SECTION IV
RETIREMENT BENEFITS
4.1 At Normal or Deferred Retirement Date
Effective on and after January 1, 1989, solely for Members who have
completed an Hour of Service on or after such date, the annual amount
of retirement benefit commencing on or after Normal Retirement shall
be equal to: (i) 1% of Final Average Salary plus (ii) .5% of Final
Average Salary in excess of Social Security Covered Compensation,
multiplied by years (or fractions thereof) of Credited Service.
Notwithstanding the above, in determining the amount of a Member's
retirement benefit under this paragraph,
(a) Such benefit shall not be less than the benefit the Member
would have been entitled to receive under (b) or (c) of this
Section 4.1 determined on the date so specified;
(b) Effective on and after January 1, 1983, and prior to January
1, 1989, for Members who had not attained Normal Retirement Date
as of January 1, 1983, the annual amount of retirement benefit
commencing at Normal Retirement Date to such Member who retires on
or after Normal Retirement Date shall be equal to (i) 1-1/2% of
27
<PAGE>
Final Average Salary determined on December 31, 1988, and without
regard to the annual limitation on Salary for years prior to
January 1, 1990, (as defined in Section 1.28), (ii) less 1-1/4%
for Primary Social Security Benefit, multiplied by the years (and
fractions thereof) of his Credited Service determined on December
31, 1988.
For purposes of this subsection (b), Primary Social Security
Benefit means an amount equal to the annual old-age primary
insurance benefit under the Social Security Act in effect at the
Member's Social Security Retirement Age or other date of
termination of his employment with the Company, if earlier;
provided, however, that if a Member (i) elects to retire on an
Earlier Retirement Date prior to his Social Security Retirement
Age, or (ii) his employment by the Company is otherwise terminated
prior to his Social Security Retirement Age, his Primary Social
Security Benefit shall be determined by projecting to Social
Security Retirement Age his annual Compensation as of this Early
Retirement Date or the date of his last employment, as the case
may be, assuming that there shall be no change in the social
28
<PAGE>
security wage base or social security benefit schedule caused by
the automatic provision with respect to the cost of living under
the Social Security Act.
The amount of Primary Social Security Benefit shall be
estimated based on actual salary in all years for which records
are available while an Employee of the Company, and a salary
discount assumption applied to Annual Earnings in the year of the
last recorded salary and each year prior thereto until age 22,
which shall be a level percentage of 6% per year. In the event
that within 180 days, beginning on the date which is the later of
the date the Member separates from service or the date the Member
is notified of the benefit amount, the Member supplies accurate
documentation of the Member's actual salary history as determined
by the Social Security Administration, the benefit to which the
Member is entitled shall be adjusted based on any differences
which shall occur.
(c) The benefit of a Member, who was such on December 31, 1982,
shall not be less than the Accrued Benefit to which he was
entitled under the provisions of the Plan as in effect on December
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31, 1982. The benefit payable under the form of payment elected
by such a Member shall not be less than benefit payable under the
same form of payment based on the Accrued Benefit as of December
31, 1982.
(d) On and after May 11, 1981, solely for purposes of determining
the annual amount of retirement benefit commencing at Normal
Retirement Date for a Member who was a member in the Pension Plan
for Employees of Canadian Trans-Lux Corporation Limited (the
"Canadian Plan"), the Normal Retirement Benefit shall be
determined in accordance with this Section 4.1 based on years of
Credited Service while a Member of the Plan and Credited Service
while a member of the Canadian Plan, but only if such service
under the Canadian Plan would qualify as Credited Service under
the Plan if such service were performed while a Member of the
Plan, reduced by the amount of benefit such individual is entitled
to receive under the Canadian Plan. Such reduction shall not
reduce the amount such Member is entitled to receive under this
Plan to an amount less than zero.
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(e) On and after January 1, 1996, solely for purposes of
determining the annual amount of retirement benefit commencing at
Normal Retirement Date for a Member who was an employee of
Integrated Systems Engineering, Inc., as well as full-time
salaried employees of the theatre executive office and theatre
managers, the Normal Retirement Date shall be determined in
accordance with this Section 4.1 based on years of Credited
Service completed after January 1, 1996.
4.2 At Earlier Retirement Date
The annual retirement benefit, commencing at Earlier Retirement Date
to a Member who retires on an Earlier Retirement Date, shall be equal
to the Actuarial Equivalent (as set forth in Appendix A) of the
Accrued Benefit he would have received commencing at Normal Retirement
Date, as computed in accordance with Section 4.1 hereof.
Notwithstanding the foregoing, a Participant may elect to defer the
commencement of benefits until the date the Member would have attained
Normal Retirement Date, in which case the benefit shall equal the
Member's Accrued Benefit.
4.3 Maximum Benefits
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<PAGE>
Anything to the contrary notwithstanding, effective January 1, 1987, a
benefit computed under this Section IV shall be subject to the
following:
(a) When expressed as an annual benefit, a benefit shall not
exceed the lesser of (1) $90,000 multiplied by the Adjustment
Factor, (the "Dollar Limitation"), or (2) 100% of the Member's
average annual compensation as defined in Section 1.415-2(d)(1)(i)
of the Income Tax regulations during the three consecutive
calendar years when the total compensation paid to him was the
highest (the "Compensation Limitation"), subject to the following:
(i) The maximum shall apply to the benefit payable to the
Member as a life annuity as described in Section 5.2, or
either as a Qualified Joint and Survivor Annuity benefit
described in Section 5.1 or pursuant to an option
described in Section 6.1 where the Spouse is the
Contingent Annuitant and having the effect of a Qualified
Joint and Survivor Annuity as defined in Code Section
401(a)(11), but if the benefit is payable in a form other
than as described above, the maximum shall apply to the
32
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benefit computed as a life annuity which is the Actuarial
Equivalent of such benefit. The Actuarial Equivalent
shall be calculated using the Plan's factors for
computing optional benefits, or if less, using factors
calculated from the IRS Mortality Table, if applicable,
and either the IRS Interest Rate if the benefit is
subject to the provisions of Section 417(e)(3) of the
Code or 5 percent otherwise.
(ii) If benefits begin prior to the Member's Social Security
Retirement Age the Dollar Limitation applicable to such
benefit shall be adjusted so that it is the Actuarial
Equivalent of an annual benefit of $90,000 multiplied by
the Adjustment Factor beginning at Social Security
Retirement Age. The adjustment provided for in the
preceding sentence shall be made in such manner as the
Secretary of the Treasury may prescribe which is
consistent with the reduction for old-age insurance
benefits commencing before the Social Security Retirement
Age under the Social Security Act. The Actuarial
33
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Equivalent shall be determined on the basis of the Plan's
early retirement reduction factors, or if less, on the
basis of the IRS Mortality Table, if applicable, and
either the IRS Interest Rate if the benefit is subject to
the provisions of Section 417(e)(3) of the Code or 5
percent otherwise.
(iii) If benefits begin after the Member's Social Security
Retirement Age, the maximum Dollar Limitation shall be
the Actuarial Equivalent of the Dollar Limitation
beginning at Social Security Retirement Age multiplied by
the Adjustment Factor as provided by the Secretary of the
Treasury, based on the lesser of the interest rate
assumption under the Plan or 5%. If benefits begin after
the Member's Social Security Retirement Age, the maximum
Dollar Limitation shall be the Actuarial Equivalent of
the Dollar Limitation beginning at Social Security
Retirement Age multiplied by the Adjustment Factor as
provided by the Secretary of the Treasury, based on the
IRS Mortality Table, if applicable, and an interest rate
of 5 percent.
(iv) In determining the Actuarial Equivalent of the Dollar
Limitation for purposes of subsection (i) or (ii) the
interest assumption shall not be less than the greater of
5% or the rate specified in the Plan. For purposes of
adjusting any benefit under subsection (i), (ii), or
34
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(iii), no adjustment shall be taken into account before
the year for which the adjustment first takes effect.
(v) If the Member has completed less than 10 years of
Credited Service, the Member's Accrued Benefit shall not
exceed the Dollar Limitation, multiplied by a fraction,
of which the numerator is his years (or part thereof) of
Credited Service and the denominator is 10. If a Member
has completed less than 10 years of Vesting Service with
an Employer, the Compensation Limitation shall be
adjusted by multiplying such amounts by a fraction, the
numerator of which is the Member's years of Vesting
Service (or part thereof) and the denominator of which is
10. In no event shall the restrictions contained in this
section (v) reduce the limitations provided under Code
Section 415(b)(1) and (4) to an amount which is less than
1/10 of the applicable limitation determined without
regard to this Section (v). To the extent provided by
the Secretary of the Treasury, this subsection (v) shall
be applied separately with respect to each change in the
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benefit structure of the Plan.
(vi) If the Current Accrued Benefit of a Member who is a
Member on January 1, 1987 exceeds the benefit limitations
under Section 415(b) as in effect on January 1, 1987,
then, for purposes of Code Section 415(b) the Dollar
Limitation with respect to such Member shall be equal to
the Member's Current Accrued Benefit. For purpose of
this Section (vi) Current Accrued benefit shall mean a
Member's Accrued Benefit under the Plan, determined as if
the Member had separated from service as of December 31,
1986, when expressed as an annual benefit within the
meaning of Code Section 415(b)(2). In determining the
amount of the Member's Accrued Benefit the following
shall be disregarded:
(A) any change in the terms and conditions of the Plan
after May 5, 1986; and
(B) any cost-of-living adjustment occurring after May 5,
1986.
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(vii) For all purposes of this Plan, the maximum Dollar
Limitation of $90,000 shall be automatically increased by
the Adjustment Factor but not before the year in which
the adjustment first takes effect. As a result of such
an adjustment, unless prohibited by the Plan or the Code,
a benefit which had been limited by the provisions of
this Section in a previous Plan Year may be increased
with respect to future payments to the lesser of the
adjusted Dollar Limitation amount or the amount of
benefit which would have been payable under this Plan
without regard to the provisions of this Section 4.3.
(viii) The limitations of this Section 4.3 shall be deemed
not to be exceeded if the amount of the Member's total
annual benefit payable under the Plan does not exceed
$10,000 for the current calendar year or any other prior
year and the Company or Affiliated Employer has not, at
any time, maintained a defined contribution plan in which
the Member participated.
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Notwithstanding the foregoing, the otherwise permissible annual
benefits for any Member under this Plan may be further reduced to the
extent necessary, as determined by the Pension Committee, to prevent
disqualification of the Plan under Section 415 of the Code, which
imposes the following additional limitations on the benefits payable
to Members who also may be participating in another tax qualified
pension, profit sharing savings or stock bonus plan of the Affiliated
Employer. If an individual is a participant at any time in both a
defined bene- fit plan and a defined contribution plan maintained by
the Affiliated Employer, the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any Plan Year may not
exceed 1.0.
The defined benefit plan fraction for any Plan Year is a fraction,
the numerator of which is the Member's projected annual benefit under
the Plan (determined at the close of the Plan Year) and the
denominator of which is the lesser of (a) 1.25 multiplied by the
Dollar Limitation in effect for that Plan Year or (b) 1.4 multiplied
by the Compensation Limitation. The defined contribution plan
fraction for any Plan Year is a fraction, the numerator of which is
the sum of the annual additions to the Member's accounts under Section
415(c) of the Code to the Member's account for such Plan Year and the
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denominator for any Plan Year is the lesser of (a) 1.25 multiplied by
the Dollar Limitation in effect for such Plan Year under Code Section
415(c)(1)(A) or (b) 1.4 multiplied by 25% of the Member's total annual
compensation for such Plan Year under Section 415(c)(1)(B) of the
Code.
For purposes of the above limitation, all defined benefit plans of
the Employer, whether or not terminated, are to be treated as one
defined contribution plan. The extent to which the benefit payable
under this Plan shall be reduced as compared with the extent to which
the annual benefit under any other defined benefit plans or defined
contributions plans shall be reduced in order to achieve compliance
with the limitations of Section 415 of the Code shall be determined by
the Pension Committee in such a manner so as to maximize the aggregate
benefits payable to such Member. If such reduction is under this
Plan, the Committee shall advise affected Members of any additional
limitation on their annual benefits required by this paragraph.
The above limitations are intended to comply with the provisions
of Section 415 of the Code so that the maximum benefits provided by
the plans of the Company shall be exactly equal to the maximum amounts
39
<PAGE>
allowed under Section 415 of the Code and regulations thereunder. If
there is any discrepancy between the provisions of this Section 4.3
and the provisions of Section 415 of the Code and regulations
thereunder, such discrepancy shall be resolved in such a way as to
give full effect to the provisions of Section 415 of the Code.
40
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SECTION V
NORMAL FORM OF BENEFIT AT RETIREMENT
5.1 Subject to the provisions of Section 11.2, effective on and after
August 23, 1984, the normal form of payment of retirement benefits for
a Member who is married on his Retirement Commencement Date shall be
the Qualified Joint and Survivor Annuity. No sooner than 30 days nor
later than 90 days prior to a Member Retirement Commencement Date, the
Committee shall provide the Member with written explanation of (a) the
terms and conditions of the Qualified Joint and Survivor Annuity, (b)
the Member's right to revoke and reelect the Qualified Joint and
Survivor Annuity, (c) the rights of the Member's Spouse to consent to
any revocation of the Qualified Joint and Survivor Annuity and, (d)
effective on and after August 22, 1988, a general description of the
eligibility conditions and other material features of any optional
form of benefit and sufficient additional information to explain the
relative values of the optional forms of benefit under the Plan. An
election to waive the Qualified Joint and Survivor Annuity must be
made within the 90-day period commencing prior to the Member's
Retirement Commencement Date. An election to waive the Qualified
41
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Joint and Survivor Annuity shall only be effective if the Member's
Spouse consents in writing to such election. Spousal consent must
acknowledge the effect of such election, specify the alternate form of
payment selected, designate the alternate beneficiary who is eligible
to receive the benefits under the Plan, if any, and be witnessed by a
Plan representative or a notary public. If such Member effectively
elects not to receive his retirement benefits in the form of a
Qualified Joint and Survivor Annuity, then the Member may elect to
receive payment of such retirement benefit in the form of a life
annuity as provided in Section 5.2 below, or in any optional form of
payment provided in Section 6.1. A Spouse's consent to waive any
benefits hereunder shall only be effective with respect to such
Spouse. An alternate beneficiary or form of payment consented to by a
Spouse in lieu of the form of benefit payable under this Section 5.1
42
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may not be changed unless such change is to the Qualified Joint and
Survivor Annuity or the Spouse again consents in writing to such
change. In the event a Spouse is legally incompetent to give consent,
the legal guardian of the Spouse may give consent.
Former Members of the Plan who completed one Hour of Service after
September 1, 1974, and separated from service prior to January 1,
1976, and who have not commenced benefits under this Plan, as of
August 23, 1984, may elect or revoke the Qualified Joint and Survivor
Annuity according to the provisions of the Plan in effect on August
22, 1984.
5.2 Subject to the provisions of Section 11.2, if a Member has no Spouse,
his Spouse cannot be located, the Member is legally separated from or
has been abandoned by said Spouse (within the meaning of local law)
and the Member has a court order to such effect, or the Member is
otherwise exempt from the requirements of Section 5.1 pursuant to
regulations issued by the Secretary of the Treasury, the normal form
of payment of his retirement benefits shall be a monthly life annuity
terminating with the last payment preceding his death. A Member who
43
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meets the requirements of this Section 5.2 shall be eligible to reject
the normal form of payment and elect an optional form of benefit in
the same manner and within the same time period prescribed in Section
5.1, except that spousal consent shall not be required.
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SECTION VI
OPTIONAL FORM OF BENEFITS
6.1 In lieu of normal form of payment provided under Section 5.1 or
Section 5.2 (provided a Member who is married to a Spouse has obtained
his Spouse's consent as required by Section 5.1), a Member may elect
an optional form of benefit described in this Section 6.1. Any
optional form shall be the Actuarial Equivalent of the normal form
provided in Section 5.2.
(a) Ten Year Certain and Life: An actuarially reduced monthly
life annuity payable to the Member at his Retirement Commencement
Date and terminating with the last payment preceding his death,
provided that not less than 120 monthly payments shall be made to
him and his Beneficiary.
(b) Joint and Survivorship Annuity: An actuarially reduced
monthly life annuity payable to the Member at his Retirement
Commencement Date and providing for the continuation of such
reduced retirement benefit in an amount equal to 100%, 66-2/3% or
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50% of such reduced retirement benefit, to the Contingent
Annuitant for as long as the Contingent Annuitant lives. Under
this option, the amount of reduction in the retirement benefit
depends upon the age of the Member and the Contingent Annuitant at
the date the benefit is to commence and the amount of the
continuing payment elected as stated in Appendix A.
(c) Social Security Offset: A Member who retires prior to his
Social Security Retirement Age may elect a retirement benefit,
which is the Actuarial Equivalent of the retirement benefit such
Member would receive as if Social Security Benefits had commenced
as of his date of retirement, so that at the time such Member's
old-age benefit under Title II of the Social Security Act actually
becomes payable, he will receive a reduced amount from the Plan,
and the amount of benefits such Member shall receive both before
and after such Social Security benefit commences shall be
approximately equal.
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(d) Lump Sum Option: A Member may elect a lump sum form of
payment, which is the Actuarial Equivalent determined in
accordance with Section 11.2(b) and Appendix A of the retirement
benefit otherwise payable to him. Distributions of lump sum
amounts shall be permitted at any date which is prior to the
Member's Normal Retirement Date only upon the consent of the
Member if such Lump Sum amount exceeds $3500 as determined under
Section 11.2(b). Payment of a lump sum amount under this section
(d) shall represent a complete discharge of the Plan's liability
to such Member.
6.2 The optional benefits, as provided in Section 6.1, are subject to the
following limitations and restrictions:
With respect to all optional retirement benefits provided
hereunder, the Member may elect any one of the options at least 90
days prior to Deferred, Normal or Earlier Retirement Date and shall be
effective on the Participant's Deferred, Normal or Earlier Retirement
Date, by written notice delivered to the Pension Committee and shall
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be effective on the date of the Retirement Commencement Date.
No optional form under Section 6.1 of the Plan shall be payable
over a period exceeding one of the following:
(a) the life of a Member or the joint lives of a Member and his
Spouse, or designated Beneficiary, as the case may be; or
(b) the life expectancy of the Member or joint life expectancy of
a Member, his Spouse or designated Beneficiary, as the case
may be. Life expectancy shall be determined according to
Code regulation 1.72-9.
Any payments to a Contingent Annuitant or Beneficiary, who is not the
Spouse of the Member, shall be subject to the limitation that the
present value of payments to the Member, calculated as of the
appropriate retirement date, must exceed 50% of the then present value
of the total payments to be made to the Member and his Beneficiary.
6.3 Prior to the distribution of any benefit payable hereunder, if the
present value of such benefit is in excess of $3500, then such benefit
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shall not be distributed before the Member's Normal Retirement Date
unless the Member and, if applicable, the Member's Spouse, consent in
writing thereto, except that if such benefit is payable as a Qualified
Joint and Survivor Annuity and is immediately distributable, written
consent to the distribution shall not be required.
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SECTION VII
DEATH BENEFITS
7.1 Pre-Retirement Spouse's Benefit
(a) If a Member dies in the active service of the Employer after
having satisfied the requirements for Earlier Retirement Date, but
prior to his Normal Retirement Date, and is survived by a Spouse,
such Spouse shall be entitled to receive a monthly benefit for
life commencing on the first day of the month following the date
of death of the Member except that if the present value (as
determined under Section 11.2) of the benefit payable to the
Spouse is $3500 or less, such amount shall be payable under
Section 11.2. The annual amount of such benefit shall be the
greater of the benefit provided in Section (b) or, on and after
August 23, 1984, the benefit provided in Section (c).
(b) If the surviving Spouse is not more than five years younger than
the deceased Member, the benefit shall be 50% of the deceased
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Member's Accrued Benefit, computed as if such Member had retired
on the day before he died.
If the surviving Spouse is more than five years younger than
the deceased Member, the benefit shall be computed as in the
preceding paragraph and such amount shall be reduced by (i) and,
if applicable, (ii) below:
(i) 1% for each full year in excess of five years up to a maximum
of twenty-five years that the Spouse is younger than the
Member; and
(ii) 2% for each full year in excess of twenty- five years that
the Spouse is younger than the Member.
(c) Effective on and after August 23, 1984, in the event of the death
of a Member with a Spouse, who is entitled to receive benefits in
accordance with Section 9.2 or 9.3 (whichever is applicable) and
who has not commenced benefits under the Plan, a survivor annuity
shall be payable to his Spouse for such Spouse's lifetime, with
monthly payments commencing on the first day of the month
coincident with or next following the later of (i) the date of the
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Member's death, or (ii) the date the Member would have attained
age 55 if he had completed 10 Years of Credited Service as of his
date of death, unless the Spouse elects to defer such payment
until the date the Member would have attained Normal Retirement
Date, or in any other case, the date the Member would have
attained age 65. Notwithstanding the preceding sentence, if the
present value (determined under Section 11.2) of the survivor
annuity is less than $3500 then the benefit shall automatically be
distributed in a single cash payment as provided under Section
11.2. The survivor annuity shall be equal to Member's Accrued
Benefit payable as a Qualified Joint and Survivor Annuity
determined as follows:
(i) In the case of a Member who has attained Earliest
Retirement Age as of his death, such Qualified Joint and
Survivor Annuity shall be determined as if the Member
had retired on the date of death and Section 4.2 of the
Plan applied.
(ii) In the case of a Member who had not attained Earliest
Retirement Age as of his date of death, such Qualified
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Joint and Survivor Annuity shall be determined as if the
Member had:
(A) separated from service on his date of death or
termination of employment whichever is earlier; and
(B) survived until Earliest Retirement Age and Section
4.2 of the Plan applied, and;
(C) died on the day following his Earliest Retirement
Age.
For the purposes of this section, "Earliest Retirement Age" shall mean
age 55 if a Member had completed 10 Years of Credited Service as of
his date of death or separation from service, whichever occurs first,
or in any other case, age 65.
A former Member who has one Hour of Service on and after January
1, 1976, who has separated from service prior to August 23, 1984, and
who has a vested benefit in accordance with Section 9.2 as of his date
of termination, shall have this Section 7.1(c) apply upon the occasion
of his death provided such former Member had not commenced payment of
his vested benefit under the Plan as of August 23, 1984.
(d) Applicable Provisions on Death - If either (i) a Spouse's benefit
shall have become payable under the provisions of Section 7.1(b)
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or (c) or (ii) the benefit shall have become effective under the
provisions of Section V or Section VI, the death benefit, if any,
shall be that provided by such applicable section.
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SECTION VIII
CONTRIBUTIONS
8.1 The Company, in accordance with the requirements of Code Section 412,
shall make contributions to the Trustee as are actuarially necessary
to provide the retirement benefits under the Plan. Contributions
shall be made conditioned upon their deductibility under Code Section
404. Any contribution which is made under this Section 8.1 which is
determined by an Actuary to be non-deductible under Code Section 404
shall be returned to the Employer within the next following one-year
period, provided the Actuary certifies to the non-deductibility of
such contribution under Section 404 of the Code. No contributions
will be required of Members.
8.2 The Company reserves the right to reduce, suspend, or discontinue its
contributions for any reason at any time, provided that it shall be
impossible, at any time prior to the satisfaction of all liabilities
with respect to all Members, Spouses, Contingent Annuitants, and
Beneficiaries under the Plan, for any part of the Trust Fund to revert
to the Company, or to be used for, or diverted to, any purpose other
than their exclusive benefit. Any assets remaining in the Trust upon
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a Plan termination or a discontinuance of contributions to the Plan,
after satisfaction of liabilities with respect to all Members,
Spouses, Contingent Annuitants and Beneficiaries under the Plan, shall
revert to the Company.
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SECTION IX
TERMINATION OF SERVICE
9.1 Before 10 Years of Vesting Service
(a) A Member whose service with the Company is terminated prior to
January 1, 1989, for reasons other than total and permanent
disability and before his Normal or Earlier Retirement Date and
before completing at least 10 years of Vesting Service shall not
be entitled to any benefits under the Plan.
(b) Any forfeitures arising as a result of this Section 9.1 shall be
used to reduce the Company's cost under the Plan.
9.2 With 10 or More Years of Vesting Service
(a) A Member, whose service with the Company is terminated after
December 31, 1975, but before January 1, 1989, and before his
Normal or Earlier Retirement Date, having completed at least 10
years of Vesting Service, shall be entitled to his Accrued Benefit
as of his date of such termination with benefits commencing at his
Normal Retirement Date.
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(b) A Member, who is entitled to a retirement benefit under
subparagraph (a) above, may elect to receive his retirement
benefit commencing at an Earlier Retirement Date which shall be
the first day of any specified month subsequent to the date of his
election. In such event,the retirement benefit then payable shall
be equal to the Actuarial Equivalent of the Accrued Benefit which
he was entitled to receive at his Normal Retirement Date.
9.3 Provisions effective on and after January 1, 1989
(a) A Member whose service with the Employer is terminated for reasons
other than total and permanent disability and before his Normal or
Earlier Retirement Date and before completing at least 5 years of
Vesting Service shall not be entitled to any benefits under the
Plan. Any forfeitures arising as a result of this Section (a)
shall be used to reduce the Company's cost under the Plan.
(b) A Member, whose service with the Employer is terminated before his
Normal or Earlier Retirement Date, having completed at least 5
years of Vesting Service shall be entitled to his Accrued Benefit
as of the date of such termination with benefits commencing at his
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Normal Retirement Date.
(c) A Member, who is entitled to a retirement benefit under
subparagraph (b) above, may elect to receive his retirement
benefit commencing at an Earlier Retirement Date provided the
Member has satisfied the provisions of Section 3.2, which shall be
the first day of any specified month subsequent to the date of his
election. In such event, the retirement benefit then payable
shall be equal to the Actuarial Equivalent of the Accrued Benefit
which he was entitled to receive at his Normal Retirement Date.
9.4 Vesting service
(a) Service Prior to January 1, 1976
Vesting Service for Plan Years beginning prior to January 1, 1976,
shall be equal to the continuous service recognized under the
provisions of the Plan as in effect prior to January 1, 1976.
(b) Service on and after January 1, 1976
The computation period for the determination of Vesting Service on
and after January 1, 1976 shall be the Plan Year. An Employee
shall accrue one year of Vesting Service for each Plan Year in
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which he completed 1,000 Hours of Service. If an Employee has a
One Year Break in Service (commencing on or after January 1, 1976)
and is later reemployed, his period of Vesting Service prior to
his Reemployment Commencement Date shall be restored, provided
such Employee completes a Year of Eligibility Service and further
provided that, if such Employee was not vested in accordance with
Section 9.2(a) or 9.3(b) at the time his One Year Break in Service
commenced, the period of his Vesting Service prior to such
occurrence shall not be taken into account if the number of
consecutive One Year Breaks in Service equals or exceeds the
greater of a) his aggregate years of Vesting Service accrued
before such One Year Break in Service, or b) on and after January
1, 1985, five years.
(c) An employee who became a Member on or after January 1, 1985, shall
not accrue Vesting Service for services rendered prior to the Plan
Year in which the Employee's 18th birthday occurs.
(d) Solely for determining the nonforfeitability of any benefit
under the Plan, former Members who terminated employment with the
Company for immediate employment with a Gulf & Western entity
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(hereinafter called the "Corporation") because of the sale of
certain subsidiaries and divisions to the Corporation on July 25,
1986, shall continue to accrue Vesting Service under this Plan for
so long as they are employed by the Corporation provided such
service conforms to the requirements of Vesting Service set forth
in Section 1.36 as if such Vesting Service was performed for the
Company, and further provided that the Corporation provides such
timely information as may be required to determine Vesting Service
with respect to such former Members.
The above paragraph shall not be construed as establishing or
continuing any contract of employment between the Company and
former Members.
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SECTION X
DISABILITY
10.1 In the event a Member is determined by the Pension Committee to be
totally and permanently disabled according to Section 10.2 and has
attained age 45 and completed at least 15 years of Vesting Service,
he shall be entitled to a disability benefit as defined in Section
10.3.
10.2 The Pension Committee shall base its determination of total and
permanent disability on the medical opinion of a committee of doctors
chosen by the Pension Committee.
10.3 The disability benefit shall be equal to the Member's Accrued Benefit
at the date of disability. Such benefit shall be reduced for
immediate payment according to the Actuarial Equivalent early
retirement factors of the Plan. However, if an Employee is below age
55, the Actuarial Equivalent reduction factor used for immediate
payment will not be less than the factor that would be used as if the
Employee was age 55.
10.4 Disability benefits shall be payable in the same manner and form as
set forth in Section V, unless the Member, and if applicable, the
Member's Spouse, consent in accordance with Section 5.1 to receive an
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optional form of benefit under Section VI.
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SECTION XI
TIME OF COMMENCEMENT OF PAYMENT
11.1 Commencement of Payment
Unless a Member elects otherwise, the payment to him of his
retirement benefit shall begin not later than the 60th day after the
close of the Plan Year in which occurs the later of:
(a) the Member's Normal Retirement Date, or
(b) the fifth anniversary of the Member's participation in the Plan,
or
(c) the date the Member terminates his service with the Company.
In no event, however, shall a retirement benefit becoming payable
under this Plan commence later than the April 1 following the
calendar year in which the Member attains age 70-1/2.
If the amount of the retirement benefit cannot be ascertained or
if the Committee after diligent search cannot locate the Member
within the time limits set forth above, a retroactive payment of such
retirement benefit shall be made no later than 60 days after the
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earliest date on which such amount can be ascertained or the date on
which the Member is located, whichever is applicable.
11.2 Payment of Lump Sum Benefits
(a) Payment of Small Benefits
Effective January 1, 1989 and notwithstanding any other
provisions of the Plan, if the present value of the benefit
payable to the Member (or the Spouse or other designated
Beneficiary) is not in excess of $3,500 determined in the Plan
Year in which such Member retires, dies or terminates employment
with the Employer, then such Member (Spouse or other designated
Beneficiary) shall receive as of the date of his retirement,
termination or death a lump sum distribution equal to the present
value of such vested benefit. For purposes of determining
whether the present value of the vested benefit exceeds $3,500,
and the amount of such distribution payable to the Member, the
present value shall be calculated as provided in subsection (b)
below.
(b) For purposes of determining the present value and the amount of a
lump sum payment of the Member's vested benefit under Section
6.1(d) or 11.2(a), the Interest Rate shall be the IRS Interest
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Rate determined under Appendix A.
11.3 No portion of the Member's Accrued Benefit may commence to be
distributed under the Plan prior to the Member's Normal Retirement
Date unless:
(a) the Member and such Member's Spouse, if applicable, consents in
writing to such distribution within the 90- day period prior to
the Retirement Commencement Date; or
(b) the benefit is provided in accordance with Section 5.1 or 5.2.
Notwithstanding the foregoing, no consent shall be required if
the Member's Accrued Benefit determined in accordance with
Section 11.2 is less than $3,500.
Except as provided in the following sentence, if the Member's Accrued
Benefit exceeds $3,500, an election by the Member to receive an
earlier distribution made pursuant to paragraph (a) shall not be
valid unless the written election is made (i) after the Member has
received the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations and (ii) within a reasonable time before the
effective date of the commencement of the distribution as prescribed
by said regulations. If a distribution is one to which Sections
401(a)(17) and 417 of the Code do not apply, such distribution may
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commence less than 30 days after the notice required under Section
1.411(a-11(c) of the Income Tax Regulations is given, provided that:
(i) the Pension Committee clearly informs the Member that he has
a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a
distribution (and if applicable, a particular distribution
option), and
(ii) the Member, after receiving the notice, affirmatively elects
a distribution.
If the distribution is one to which Sections 401(a)(11) and 417 of
the Code do apply, a Member may, after receiving the notice described
in this Section, affirmatively elect to have his or her benefit
commence sooner than 30 days following his or her receipt of the
notice, provided all of the following requirements are met:
(i) the Pension Committee clearly informs the Member that he has
a period of at least 30 days after receiving the notice to
decide when to have his benefit begin, and if applicable, to
choose a particular optional form of payment;
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(ii) the Member affirmatively elects a date for benefits to
begin, and if applicable, an optional form of payment after
receiving the notice;
(iii) the Member is permitted to revoke his election until the
later of his required beginning date or seven days following
the day he received the notice;
(iv) the Member's required beginning date is after the date the
notice is provided; and
(v) payment does not commence less than seven days following the
day after the notice is received by the Member.
11.4 Distribution Requirements
All distributions shall be determined and made in accordance with
regulations (including proposed regulations) under Code Section
401(a)(9) and the minimum distribution incidental benefit requirement
of Section 1.401(a)(9) of the regulations.
The provisions of this Section 11.4 shall supercede any other
provision of the Plan.
(a) If the Member dies after distribution of his or her interest has
begun, the remaining portion of such interest, if any, will
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continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Member's death.
(b) If the Member dies before distribution of his or her interest
begins, distribution of the Member's entire interest shall be
completed by December 31 of the calendar year containing the
fifth anniversary of the Member's death except to the extent that
an election is made to receive distributions in accordance with
(i) or (ii) below:
(i) if any portion of a Member's interest is payable to (or for
the benefit of) a designated Beneficiary, such portion shall
be distributed (in accordance with regulations) over the life
of such designated Beneficiary (or over a period not
extending beyond the life expectancy of such Beneficiary),
beginning no later than one year after the date of the
Member's death or such later date as the Secretary of the
Treasury may, by regulation prescribe; or
(ii) if the designated Beneficiary is the surviving Spouse of the
Member, the date distributions are required to begin under
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(i) above shall not be earlier than the later (A) the end of
the calendar year following the calendar year in which the
Member died or (B) the end of the calendar year in which the
Member would have attained age 70-1/2.
(c) If the surviving Spouse dies before distribution to such Spouse,
the provisions of subsection (b), with the exception of paragraph
(ii) therein, shall be applied as if the surviving Spouse were
the Member.
(d) For purposes of this Section, the life expectancy of a Member and
the Member's Spouse (other than in the case of a life annuity)
may be redetermined but not more frequently than annually.
(e) Under regulations prescribed by the Secretary of the Treasury for
purposes of this Section, any amount paid to a minor child shall
be treated as if it had been paid to the surviving Spouse if such
amount will become payable to the surviving Spouse upon such
child attaining the age of majority.
11.5 Direct Rollover Distribution In the event a distribution is made
under Section 6.l(d) or the mandatory cash out provisions contained
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in Section ll.2 for benefits less than $3,500, the Member may, at any
time prior to the Retirement Commencement Date, elect to rollover
such distribution to an individual retirement account as defined in
Code Section 408(a) an individual retirement annuity under Code
Section 408(b) or a defined contribution plan qualified under Code
Section 401(a) (hereinafter collectively known as "recipient plan")
subject to the following terms and conditions:
(a) The Pension Committee within a reasonable period prior to the
time the election is required to be made under this Section 11.5,
furnishes a written explanation to the Member of the consequences
of making or not making the election.
(b) the Member shall be required to represent to the Pension
Committee that any recipient plan is (or is intended to be)
eligible as an individual retirement plan under Code Section
408(a) an individual retirement annuity under 408(b) or a
qualified defined contribution plan under Code Section 401(a) and
provide any other reasonable information the Pension Committee
shall require (including the name, address and account numbers
with respect to a recipient plan);
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(c) a Member failing to elect the rollover option under this Section
ll.5 prior to a Retirement Commencement Date shall be deemed not
to have elected a rollover option;
(d) the Pension Committee may adopt any reasonable procedures to
accomplish the direct rollover, as a trustee to trustee transfer,
including distribution in the form of a restricted check payable
to a fund or a trustee for the benefit of the Member;
(e) amounts eligible for direct rollover may be distributed to a
maximum of three recipient plans;
(f) a Member shall be permitted to divide a distribution in the form
of a percentage or dollar amount to be rolled over to a recipient
plan and the remainder to be received currently by the Member;
(g) a surviving Spouse, or a Spouse or former Spouse in compliance
with a qualified domestic relations order, shall have the same
rights as a Member under this Section ll.5, except that rollovers
shall not be permitted to any recipient plan which is a qualified
plan under Code Section 401(a).
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Amounts required to be distributed pursuant to Section ll.l shall not
be eligible for the direct rollover option set forth in this Section
ll.5.
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SECTION XII
REEMPLOYMENT
12.1 If any retired Member is reemployed by the Company prior to his
Normal Retirement Date, his retirement benefit payments, if any,
shall cease; any election of an optional benefit in effect thereunder
shall become void and the provisions of Section 5.1 hereof shall
again become effective. Any Credited Service to which he was
entitled when he retired shall be restored to him, and upon
subsequent retirement, his retirement benefits shall be redetermined
based on his Salary and Credited Service before and after the period
of prior retirement reduced by the Actuarial Equivalent of the
benefits previously received, if any. Such reduction shall not
reduce the benefit payable to the Member to an amount which is less
than the benefit payable to the Member prior to the Member's
reemployment.
12.2 If any Member, who received or is receiving a disability benefit
under Section X hereof, is reemployed by the Company prior to his
Normal Retirement Date, any disability benefit payments he was
receiving shall cease and the provisions of Section 5.1 hereof shall
again become effective. Any Vesting Service and Credited Service to
which he was entitled when he became disabled shall be restored to
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him, and upon subsequent retirement or termination of service his
benefit shall be redetermined based on his Salary and Credited
Service before and after his disability, reduced by the Actuarial
Equivalent of the benefits previously received, if any.
12.3 If a former Member who terminated service after he had earned a
vested interest under Section 9.2(a) or Section 9.3(b) is reemployed
he shall thereupon again become a Member of the Plan. Any Credited
Service to which he was entitled shall be restored to him and upon
subsequent retirement or termination of service his benefit shall be
based on his Salary and Credited Service before and after his initial
termination of service reduced by the Actuarial Equivalent of the
benefits previously received, if any.
12.4 If a former Employee who terminated service in accordance with
Section 9.1 or Section 9.3(a) is reemployed, his entitlement to
membership and his prior Vesting Service shall be determined as
provided in Section 2.5 and 9.4(a) and (b). Any Credited Service
recognized for the period of Vesting Service restored pursuant to
said Section shall also be restored to him.
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SECTION XIII
LIMITATION OF ASSIGNMENT
The benefits payable hereunder to any Member, Spouse, Beneficiary, or
Contingent Annuitant, if any, shall not be assigned, commuted,
anticipated, alienated, sold, transferred, pledged, encumbered or charged,
and shall not be subject by attachment or otherwise to the claims of any
creditors of the Member, Spouse, Beneficiary or Contingent Annuitant.
Notwithstanding the above, the Committee shall direct the Trustees to
comply with a Qualified Domestic Relations Order provided such order does
not require a form of benefit not otherwise provided under the Plan, or
require increased benefits, or require the payment of benefits to an
Alternate Payee (as described below) which are required to be paid to
another Alternate Payee under a previous Qualified Domestic Relations
Order. Payments in compliance with a Qualified Domestic Relations Order
may commence, in the case of a Member who has not separated from service
no earlier than the first day of the month coincident with or next
following the date the Member attains "Earliest Retirement Age" as defined
in Section 414(p) of the Code, based on the Actuarial Equivalent of the
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Member's Accrued Benefit on the date payments are to begin.
For purposes of this Section an Alternate Payee shall mean a Spouse,
former Spouse, child or dependent of the Member who is recognized by a
domestic relations order as having the right to receive all or a portion
of, the benefits payable under the Plan to the Member.
The Pension Committee shall notify each Member and any Alternate Payee
of its receipt of any domestic relations order, the Plan procedures for
determining the qualified statute of such order, and the procedures for
the administration of such distributions.
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SECTION XIV
LIMITATION OF RIGHTS OF THE EMPLOYEE
This Plan is a voluntary program on the part of the Company and shall not
be deemed to constitute a contract between an Employer and any Member or
to be a consideration for, or inducement of, employment for any Employee
or Member. Nothing contained in the Plan shall be deemed to give a) a
Member the right to be retained in the service of an Employer or to
interfere with the right of an Employer to discharge or retire the Member,
or b) any Member, Spouse, or Beneficiary any right or claim to any payment
under the Plan, except as such payment may be provided for under the terms
of the Plan and then only to the extent that assets are available in the
hands of the Trustee for the making of such payment.
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SECTION XV
AMENDMENT TO OR TERMINATION OF THE PLAN
15.1 Amendment
(a) The Board reserves the right to amend the Plan at any time to any
extent that it may, in its sole and complete discretion, deem
advisable, including any amendment deemed necessary to ensure
initial qualification or continued qualification of the Plan
under the Code or any other applicable Federal or State laws.
(b) No such amendment shall increase the duties or responsibilities
of the Trustee without its written consent thereto.
(c) No such amendment shall have the effect of diverting any part of
the principal or income of the Trust Fund for purposes other than
the exclusive benefit of its Members and their Spouses,
Contingent Annuitants and any other designated Beneficiaries,
prior to the satisfaction of all liabilities under the Plan.
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(d) Except to the maximum extent permitted or required by the Code or
any other applicable section of the law and the regulations
issued thereunder, no amendment or modification shall be made
which would:
(i) retroactively impair any rights to any benefit under the Plan
which any Member, Beneficiary, Spouse or other eligible
survivor would otherwise have been entitled to as of the date
of such amendment,
(ii) permit the elimination or reduction of a subsidy or an early
retirement benefit (as defined in Code regulations) prior to
the effective date of such amendment, or
(iii) permit the elimination of an optional form of benefit with
respect to benefits attributable to Vesting Service prior to
the effective date of such amendment. In the case of a
retirement type subsidy, this subsection (iii) shall apply
only with respect to a Member who satisfies (either prior to
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or subsequent to the effective date of the amendment)
preamendment conditions for such subsidy. The foregoing
shall not operate to limit the application of an amendment
described in Code Section 412(c)(8).
15.2 Termination
The Company reserves the right to terminate the Plan in whole or in
part at any time by action of its Board of Directors. Upon complete
or partial termination of the Plan, the nonforfeitable benefits of
each Member (or, in the event of a partial termination, each Member
affected by such partial termination) shall become nonforfeitable as
of the date of such termination. In the event of such termination,
after providing for the expenses of the Plan, the assets of the Plan
applicable to Members affected by such termination shall be used and
applied for the satisfaction of all liabilities under the Plan in the
manner prescribed by Section 4044 of the Act (or corresponding
provision of any subsequent applicable law in effect at the time).
The Pension Committee may direct that benefits may be provided by the
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purchase of annuities, by continuing the Fund in existence and making
provision thereunder for the payment of retirement benefits or by
immediate distribution from the Fund. If, upon satisfaction of all
benefit liabilities under the Plan with respect to Members, former
Members, their Spouses and Beneficiaries, there is a balance
remaining in the Fund, such balance shall be returned to the Company.
15.3 Amendment Following Change in Control
Notwithstanding the provisions of Subsection 15.1(a), the Board of
Directors shall have the right to amend or terminate the Plan at any
time; provided, however, that for a period of three years following a
"change in control" (as such term is defined in Section 15.4), the
provisions of the Plan may not be amended if any amendment would
adversely affect the rights, expectancies or benefits of any Member,
Spouse or other designated Beneficiary provided by the Plan as in
effect immediately prior to the Change in Control.
15.4 Termination Following Change in Control
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Notwithstanding the preceding provisions of this Section or any other
provision of this Plan, in the event this Plan is terminated within
three years following a "change in control" (as hereinafter defined),
the assets of the Plan shall be applied in accordance with the
preceding provisions of this Section 15.2 to satisfy all liabilities
to retired Members, Members, Spouses, Contingent Annuitants and
Beneficiaries. If, after satisfaction of such liabilities, there are
assets remaining in the Plan, such assets shall be applied on a pro
rata basis to increase the benefits to Members who are in active
service of the Company on the date of such termination; provided,
however, that if any portion of an allocation of such assets, when
added to any other payments to any individual who is a "disqualified
individual," as such term is defined in Section 280G(c) of the Code,
would result in the imposition of an excise tax pursuant to Section
4999 of the Code (as determined by the Trustee), then such allocation
shall be reduced until either no portion of the allocation would
result in the imposition of such excise tax or such allocation is
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reduced to zero. For purposes hereof, a "change in control" shall
mean:
(a) the acquisition by any corporation, person, or business
entity of more than 20% of the then outstanding voting stock
of the Company, other than through a transaction consented to
by the Board of Directors of the Company prior to such
acquisition of more than 20% of such then outstanding voting
stock, and which consent of the Board of Directors of the
Company is contained in a resolution of such Board adopted on
a date which is both prior to such acquisition and subsequent
to January 1, 1986, or
(b) the purchase of shares of voting stock of the Company
pursuant to a tender offer or exchange offer which is opposed
by a majority of the members then serving on the Company's
Board of Directors. Notwithstanding, the provisions of
Section 15.1(a) hereof, the foregoing provisions of this
paragraph may not be amended, following a "change in
control", without the written consent of a majority, in both
number and interest, of the Members who are in active service
with the Company on the date of such amendment.
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SECTION XVI
GOVERNMENTAL RESTRICTIONS
16.1 The allocation of annual contributions is subject to the following
limitations:
(a) Effective for Plan Year beginning before January 1, 1992, if,
within the 10-year period following any amendment increasing the
benefits to be provided by Company contributions, or the Plan is
terminated, and benefits become payable to an Employee who is one
of the 25 highest paid employees, the value of the retirement
benefits provided by Company contributions under the Plan with
respect to such Employee whose anticipated full annual retirement
benefit attributable to Company contributions, based on his
salary on that date, would be more than $1,500, shall not exceed
such Employee's Restricted Benefit, which shall be the greatest
of:
(i) $20,000; or
(ii) The value of the retirement benefits provided by Company
contributions which would have applied with respect to such
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Employee had all the provisions of the Plan in effect immediately
prior to the date of amendment been continued without change up
to the date the Plan is terminated or benefits become payable to
such Employee, or
(iii) The sum of:
(A) the Company contributions which would have been made
to provide the benefit for such Employee under the
Plan had the Plan been terminated on the day before
the effective date of such amendment, plus
(B) 1-2/3% of the first $50,000 of the Employee's
Compensation multiplied by the number of months from
the effective date of such amendment to the date the
Plan is terminated or benefits become payable to
such Employee.
(iv) An amount equal to the Actuarial Equivalent, as of the
date of Plan termination or the date such benefit becomes
payable, if earlier, of a monthly benefit of $2,250.00,
payable in the form of a life annuity at age 65. Such
dollar amount shall be subject to adjustment in accordance
with Pension Benefit Guaranty Corporation Regulations
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pursuant to ERISA Section 4022. If, however, such Member
owns more than 10% of either the voting stock or all stock
of the Employer, the limitation under this subsection (iv)
shall not exceed the present value of benefits guaranteed
for such Member under ERISA Section 4022 as of the Plan
termination date, or, if the Plan has not been terminated,
as of the date the benefit commences, but calculated as if
the Plan had been terminated as of such date. For
purposes of this subparagraph, Actuarial Equivalent shall
be determined in accordance with PBGC regulations pursuant
to Section 4022 of ERISA.
(A) If the Plan is terminated within 10 years after any
amendment increasing benefits, or benefits become
payable during the 10-year period, no Employee
described in sub-section (a) above shall receive any
benefits in excess of his Restricted Benefit.
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(B) Any terminated or retired member subject to the
foregoing restrictions shall receive the unrestricted
portion of his retirement benefit in accordance with
Section IV, V, or VI as appropriate, and the Trustee
shall continue to hold in trust the balance of his
benefits until the restrictions permit the remaining
benefits to be paid.
(C) The restrictions shall not apply to any death benefits
payable pursuant to Section VII or to any retirement
benefit which, in the form of a life annuity, provides
monthly payments to the Member not exceeding $125.
(D) The foregoing restrictions shall not, in the event of
a termination of the Plan, prevent the payment of
benefits in a manner which does not discriminate in
favor of Members who are officers or shareholders of
the Employer, or are highly compensated.
(E) If the Plan is terminated within 10 years after any
amendment increases benefits, any funds not paid to an
Employee described in subsection (a) above as a result
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of this provision shall be used proportionately to
provide additional benefits for all other Members,
Spouses, and Beneficiaries to the extent of their
Accrued Benefits. If the funds so recovered exceed
the amount necessary to provide the Accrued Benefits
to the date in question for such Members, Spouses, and
Beneficiaries, the excess shall be applied for the
benefit of the Members so restricted.
16.2 The foregoing restrictions of section 16.1 shall not apply to a
Member who agrees to repay, should the Plan be terminated before the
tenth anniversary of the amendment increasing benefits, any part of
the benefits which, except for this Section 16.2, would not have been
paid. The agreement shall be in writing, signed by the Member and
the Pension Committee, and shall be secured by the deposit, with a
depository acceptable to the Administrator, of property having a fair
market value equal to 125 percent of the amount which would be
repayable if the Plan had terminated on the date of the first
distribution to the Member. Further, the Member shall agree to
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deposit additional property to bring the value of the total property
deposited up to 125 percent of the repayable amount if the fair
market value of the property originally deposited falls below 110
percent of that amount. The deposited property shall be released as
security and returned to the Member if and to the extent that the
restrictions shall no longer apply to his benefits, as long as the
remaining property always equals 125 percent of the Member's
remaining obligation under this Section 16.2.
16.3 Effective for Plan Years beginning on or after January 1, 1992, the
annual payment to any of the 25 highest paid Highly Compensated
Employees, or Highly Compensated Former Employees (under Code Section
414(q) ), shall be restricted to an amount equal to the payments
which would have been made to such individual as a single life
annuity which is the Actuarial Equivalent of such individual's
Accrued Benefit and any other "benefit" to which such individual is
entitled.
The provisions of this Section 16.3 shall not apply if:
(a) after payment of the "benefits" to an individual described
above, the value of Plan assets equals or exceeds 110% of the
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value of current liabilities as defined in Section 412(l)(7); or
(b) the value of "benefits" for such an individual is less than
1% of the value of current liabilities.
For purposes of this section, "benefit" includes loans in excess of
the amount set forth in Section 72(p)(2)(A) of the Code, any periodic
income, any withdrawal values payable to a living Employee and any
death benefit not provided for by insurance on the Employee's life.
The value of benefits paid under this Section 16.3 may not exceed
the amount described in Code Section 411(a)(11)(A).
16.4 In the event of the termination of the Plan, the benefit of any
highly compensated employee or highly compensated former employee (as
such terms are defined in Code Section 414(q) ) shall be limited to a
benefit which is nondiscriminatory under Code Section 401(a)(4).
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SECTION XVII
ADMINISTRATION OF THE PLAN
17.1 The general administration of the Plan shall be placed in a Pension
Committee consisting of not less than three nor more than nine
persons who shall be appointed, from time to time, by the Board to
serve at the pleasure of said Board. The members of the Pension
Committee shall collectively be the Plan Administrator and Named
Fiduciary, as such terms are defined under the Act.
17.2 Any person appointed as a member of the Pension Committee shall
signify his acceptance in writing to the Board. Any member of the
Pension Committee may resign by delivering his written resignation to
the Board and such resignation shall become effective upon delivery
or any later date specified therein.
17.3 The members of the Pension Committee will serve without compensation
for services as such, but the Company on an equitable basis shall pay
or reimburse the Pension Committee for all expenses reasonably
incurred by the Pension Committee and shall indemnify the Pension
Committee and each member thereof against all loss, liability and
expense occasioned by any act or omission to act taken or determined
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upon by it, or him, except any such act or omission which is due to
willful misconduct, fraud or lack of good faith.
17.4 A majority of the members of the Pension Committee, at the time in
office, may do any act which this Plan authorizes or requires the
Pension Committee to do, and the action of such majority of the
members expressed from time to time by a vote at a meeting, or in
writing without a meeting, shall constitute the action of the Pension
Committee and shall have the same effect for all the members at the
time in office. The Pension Committee may, by a writing signed by a
majority of its members, delegate to any one member of the Pension
Committee the authority to give certified notice in writing of any
action taken by the Pension Committee and may assign specific duties
and responsibilities to one or more of its members.
17.5 Subject to the limitations of the Plan, the Pension Committee shall
establish rules for the administration of the Plan and the
transaction of its business. The determination of the Pension
Committee as to any questions involving the general administration of
the Plan or the proper interpretation of any of its provisions shall
be conclusive.
17.6 The Pension Committee's determination, as to which Employees are
eligible to be Members and of a Member's period of Credited Service
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and Salary, shall be conclusive. Any discretionary actions to be
taken under this Plan by the Pension Committee with respect to the
classification of Members or benefits shall be uniform in their
nature and applicable to all Members similarly situated and shall be
taken with care, skill, prudence and diligence that a prudent man
acting in a like capacity under circumstances similar to those then
prevailing would use. The Pension Committee shall have complete and
discretionary authority to determine eligibility for benefits, the
amount of benefits and to otherwise interpret and administer the
provisions of the Plan. The Pension Committee may appoint
accountants, attorneys, Actuaries or other agents as it may deem
necessary or advisable in order to properly administer and implement
the Plan, and may delegate to such appointees appropriate ministerial
duties consistent with their background and experience, to the extent
that such duties are properly delegable under the Act. The Pension
Committee shall not be liable for any act or omission of such
accountant, attorney, Actuary, or other agent in carrying out their
delegated responsibilities provided that the Pension Committee does
not fail to conduct itself in the manner described above with respect
to such designation of agents and allocation of duties, and provided
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further, that the Pension Committee does not
(i) knowingly participate in or knowingly undertake to conceal an
act or omission of such agent, knowing that such act or
omission is inconsistent with the requirements of the Plan
and of the Act, or
(ii) through a failure to comply with the prudent action
described above enable such agent to commit such an improper
act or omission, or
(iii) have knowledge of such improper act or omission on the part
of such agent, and yet fail to make reasonable efforts under
the circumstances to remedy such improper act or omission.
17.7 The Pension Committee shall keep in convenient form such data as may
be necessary for actuarial valuations with respect to the operation
and administration of the Plan and may
(a) adopt standards for use in all actuarial calculations
required in connection with the Plan;
(b) establish the rate of contribution required to maintain the
Plan; and
(c) advise the Company of the rate so established.
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The Pension Committee shall submit annually to the Board a report
showing, in reasonable summary, the financial condition of the Trust
Fund and giving a brief account of the operations of the Plan for the
past year, and any further information which the Board may require.
17.8 The members of the Pension Committee, and the Company and its
officers and directors shall be entitled to rely upon all tables,
valuations, certificates and reports made by any Actuary or
accountant so selected, and upon all opinions given by any legal
counsel so selected, and the members of the Pension Committee shall
be fully protected with respect to any actions taken or suffered by
them in good faith in reliance upon such Actuary, accountant, or
counsel, and all action so taken or suffered shall be conclusive upon
each of them and upon all Members, retired Members, Spouses,
Contingent Annuitants and Beneficiaries.
17.9 The Pension Committee shall make all reports and give all notices
with respect to the Plan and the administration thereof which may be
required under the provisions of the Code or of the Act and the
regulations promulgated thereunder.
17.10 Denial of Claims Procedure
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Any application for benefits by a Member, his Spouse, or other
designated Beneficiary, submitted to the Pension Committee on
appropriate form shall constitute a claim. In any instance where
such claim is denied in whole or in part by the Pension Committee,
their decision shall be submitted in writing to the Member, Spouse,
or Beneficiary, within 90 days following receipt of such claim,
unless special circumstances require additional time, which may be up
to an additional 90 days provided the claimant is notified within the
initial 90-day period, setting forth the following:
(a) basis for denial of claim;
(b) plan provision on which denial is based;
(c) description of any additional information required of the
Member, his Spouse, or other Beneficiary; and
(d) an explanation of the procedures for reviewing claims under
the Plan.
Upon receipt of denial of a claim by the Member, Spouse, Contingent
Annuitant, or Beneficiary, an appeal requesting further review may be
submitted to the Pension Committee within 60 days following receipt
of such denial. Upon receipt of a request for review, the Pension
Committee will meet and render a decision within 60 days following
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the receipt of an appeal unless special circumstances exist which may
permit an extension of time, in which case a decision shall be made
as soon as possible after the 60-day period, but may in no event be
extended beyond 120 days following receipt of appeal. The Pension
Committee's ultimate decision shall be submitted to the Member,
Spouse, or Beneficiary in writing, setting forth all specific
information on which such decisions have been based.
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SECTION XVIII
TRUST AGREEMENT
18.1 As a part of this Plan the Company has entered into a Trust Agreement
under which the Trustee shall receive the contribution of the Company
under this Plan to the Trust Fund on behalf of the Members and shall
hold, invest and distribute such fund in accordance with the terms
and provisions of the Plan and the Trust Agreement.
18.2 The Company intends that this shall be a permanent Plan for the
exclusive benefit of its Members and expects to contribute to the
Trust Fund the amounts which will provide in full the benefits
payable under the Plan. The Company may rely upon the estimates made
by the Pension Committee of the amount of contributions needed to
fund the Plan in accordance with the requirements of Section 412 of
the Code. Neither the Company, the Pension Committee, nor the
Trustee shall be liable under the Plan if the Trust Fund should be
insufficient to provide for the payment of such benefits. Such
benefits are to be payable from the Trust Fund only and to the extent
that such Trust Fund shall suffice therefore.
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SECTION XIX
TOP HEAVY PROVISIONS
19.1 Definitions
The following words and phrases in this Section XIX shall have the
following meanings, unless the context clearly indicates otherwise.
(a) Key Employee - Members, retired and former Members, Spouses,
Beneficiaries and Contingent Annuitants who during the
current Plan Year or any of the four preceding Plan Years are
considered "Key Employees" under Code Section 416(i) and
regulations issued thereunder.
(b) Participant - A Member or former Member of a plan included
within the aggregation group set forth in Section 19.2. On
and after January 1, 1985, the term "Participant" shall not
include an individual who has not performed services for the
Company within a five- year period ending on a Determination
Date.
(c) Determination Date - December 31, 1983, and each subsequent
December 31st thereafter.
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(d) Top Heavy Year - Any Plan Year in which the Plan is
determined to be Top Heavy under subsection 19.2.
(e) Effective Date - January 1, 1984.
19.2 Top-Heavy Plan Defined
(a) Plan Aggregation
All defined benefit plans and defined contribution plans
maintained by the Company or an Affiliated Employer shall be
aggregated (Aggregate Group of Plans) for purposes of this
Section 19.2 as if all Employees included in the Aggregate Group
were Employees of the Company. The Required Aggregation Group of
the Company includes each plan of the Aggregate Group in which a
Key Employee participates and each other plan of the Company
which enables any plan in which a Key Employee participates to
meet the requirements of Section 401(a)(4) or 410 of the Code.
The Permissive Aggregation Group shall consist of plans of the
Aggregate Group that are in a Required Aggregation Group plus one
or more plans that are not part of a Required Aggregation Group,
but that satisfy the requirements of Sections 401(a)(4) and 410
of the Code when considered together with a Required Aggregation
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Group. The Company shall determine on each Determination Date as
to whether the Required Aggregation Group or Permissive
Aggregation Group is to be applied to Top Heavy determination.
(b) Determination of Top Heavy
This Plan shall be a Top Heavy Plan with respect to any Plan Year
starting on or after the Effective Date of this Section XIX only
if on the Determination Date applicable to such Plan Year the sum
of:
(i) The present value of Accrued Benefits for Key Employees,
as determined under the provisions of this Section
applicable to Defined Benefit Plans for all such plans
included within the Required Aggregation Group or the
Permissive Aggregation Group, and
(ii) The aggregate of the account balances of Key Employees
(as adjusted under the provisions of this Article
applicable to Defined Contribution Plans), under all such
plans included within the Required Aggregation Group or
the Permissive Aggregation Group; exceeds 60% of a
similar sum determined for all Participants in such
Required or Permissive Aggregation Groups.
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(c) Adjustments to the Present Value of Accrued Benefits for Defined
Benefit Plans
For any defined benefit plan included within the Required or
Permissive Aggregation Group, the present value of Accrued
Benefits of any Participant shall be increased to reflect any
distribution from the Plan with respect to such Participant
during the five-year period ending on the Determination Date.
Solely for purposes of determining if the Plan, or any other
plan included in a Required Aggregation Group of which this Plan
is a part, is top heavy (within the meaning of Section 416(g) of
the Code) the Accrued Benefit of an Employee other than a Key
Employee shall be determined under the method, if any, that
uniformly applies for accrual purposes under all Plans maintained
by the Employer, or if there is no such method, as if such
benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional accrual rate of Code Section
411(1)(c).
(d) Adjustment to the Value of Account Balance for Defined
Contribution Plans
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For any defined contribution plan included within the
Aggregate Group, the total Account Balances shall be increased to
reflect the value of any distributions made to a Participant by
the Plan during the five-year period ending on the Determination
Date and reduced to eliminate the value of any rollover
contributions included in such participant's Account Balances
made after December 31, 1983, provided such rollover contribution
is initiated by the Participant and not made from an Aggregate
Group Plan. In addition, Account Balances of participants shall
be reduced by the portion of such balances attributable to
qualified voluntary employee contributions made pursuant to
Section 219 of the Internal Revenue Code.
(e) Adjustment for Prior Key Employees
Employee in prior Plan Years who is not a Key Employee with
respect to a current Plan Year shall be excluded entirely in
computing the percentage in Section 19.2.
(f) Present value of Accrued Benefits for Defined Benefit Plans shall
be determined, for the purposes of Section 19.2(2)(a), according
to the 1984 - UP Mortality Table and a 7-1/2% interest rate.
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19.3 Restrictions
For any Top Heavy Plan Year, the following provisions will apply.
Minimum Contribution
(a) Notwithstanding the provisions of Section 4.1, for each
non-Key Employee covered under this Plan and a defined
contribution plan, if the Company maintains a defined
contribution plan and, if minimum benefits as defined by Code
Section 416(c) and subsequent IRS regulations are provided such
that the requirements of Code Section 416(f) are satisfied for
such Plan Year, then no minimum benefits will be provided under
this Plan for that Plan Year.
(b) If the conditions under paragraph (a) above are not met with
respect to any Plan Year during which the Plan is a Top Heavy
Plan, the Accrued Benefit, derived from Company contributions, of
a Member who is not a Key Employee shall not be less than 2% of
such Member's Average Compensation multiplied by his Years of
Service (not to exceed ten years).
(c) For purposes of this Section, the following definitions are
applicable:
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(i) Years of Service shall be the Member's Years of Vesting
Service, except that the following Years of Vesting
Service shall be disregarded:
(A) Any Plan Year during which the Plan was not a Top
Heavy Plan; and
(B) Any Plan Year beginning before 1984.
(ii) Average Compensation shall be the Member's Compensation
from the Company during that period of five consecutive
Top Heavy Plan Years (or actual Top Heavy Plan Years, if
less than five) which produce the highest average.
(iii) Accrued Benefit shall be an annual benefit payable in
the form of a single life annuity (with no ancillary
benefits) and beginning at Normal Retirement Date.
(d) Limitation on Compensation
(i) For any Top Heavy Plan Year, Salary shall be limited to
the first $200,000 of an Employee's Salary.
(ii) The $200,000 limitation shall be subject to automatic
annual adjustment effective January 1st of each year in
recognition of cost of living increases in accordance
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with promulgations of the Secretary of the Treasury under
Section 416(d) (2) of the Code.
(e) Impact on Maximum Benefits
For any Top Heavy Plan Year, Section 4.3 shall be read by
substituting "1.00" for "1.25" wherever it appears therein.
Notwithstanding the above, the substitution shall not have the
effect of reducing any benefit prior to (i) the Effective Date of
this Section or (ii) prior to the Plan Year in which the Plan
first becomes Top Heavy.
19.4 Vesting
An active Member in a Top Heavy Plan shall have a nonforfeitable
interest in his Accrued Benefit derived from Company contributions as
provided under the following schedule:
Years of Nonforfeitable
Vesting Service Percentage
--------------- --------------
Less than 2 0%
2 20%
3 40%
4 60%
5 or more 100%
Accrued Benefit, for the purposes of this subsection, shall include
that portion of Accrued Benefits which the Member earned during all
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prior Plan Years, whether or not the Plan was a Top Heavy Plan during
such prior Plan Years.
If the Plan ceases to be a Top Heavy Plan, Section 9.2(a) shall
again apply, provided that any portion of the Accrued Benefit that
was nonforfeitable before the Plan ceased to be a Top Heavy Plan
shall remain nonforfeitable and any Member who has five or more Years
of Vesting Service, or effective January 1, 1989, three or more years
of Vesting Service, may elect to remain subject to the vesting
schedule of this section.
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SECTION XX
MISCELLANEOUS
20.1 Effect of Plan Merger
In the event of a merger or consolidation of the Plan with any other
plan or a transfer of assets or liabilities of the Plan to any other
plan or a transfer of assets or liabilities of any other plan to the
Plan, each Member (if the Plan or the plan to which assets or
liabilities have been transferred then terminated) shall be entitled
to receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would have
been entitled to receive immediately before the merger, consolidation
or transfer if the Plan or the plan from which the transfer to the
Plan was made had been terminated. No transfer of assets or
liabilities shall be made from the Plan to another plan which does
not have a provision similar to this Section 20.1.
Notwithstanding the preceding provisions of Section 20.1 or any other
provision of this Plan, in the event of any such merger,
consolidation or transfer of assets or liabilities which is effected
within three years following a "change in control" (as defined in
Section 15.4), the accrued benefit of each Member who is in active
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service of the Company on the date of such merger, consolidation or
transfer of assets or liabilities, other than any person who is a
"disqualified individual," as such term is defined in Section 280G(c)
of the Code, shall be increased in accordance with the provisions of
Section 15.2 such that any excess, as of the date of any such
transaction, of the fair market value of the assets of the Plan over
the present value of accrued benefits hereunder (determined as if the
Plan had terminated immediately prior to such transaction) is
exhausted. Notwithstanding the provisions of Section 15.1(a) hereof,
the foregoing provisions of this paragraph may not be amended,
following a "change in control", without the written consent of a
majority, in both number and interest, of the Members who are in
active service with the Company on the date of such amendment.
20.2 Construction
This Plan shall be administered, construed and enforced according to
the Act and, to the extent not preempted by the Act, the laws of the
State of New York.
The foregoing constitutes the Retirement Pension Plan, as
amended, restated and adopted by Trans-Lux Corporation for its
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employees and the employees of its designated subsidiaries, effective
January 1, 1994.
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APPENDIX A
Option Factors
The following option factors shall be used in determining actuarial
equivalency:
(a) IRS Interest Rate means the lesser of (i) the annual rate of
interest on 30-year Treasury Securities as specified by the
Commissioner for the second full calendar month preceding the
applicable Stability Period or (ii) the average of the annual
interest rates on 30- year Treasury Securities as specified by the
Commissioner of Internal Revenue for the six month period ending
three full calendar months prior to the Retirement Commencement
date, rounded to the nearest 1/4 percent. However, the for the
period beginning on January 1, 1996 and ending on December 31,
1996, the interest rate under (I) above, determined as of the 60th
day prior to the Retirement Commencement date, shall be used
instead if it would produce a greater benefit. IRS Mortality Rate
means the mortality table prescribed by the Secretary of the
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Treasury under Section 417(e)(3)(A)(ii)(I) of the Code as in
effect on the first day of the applicable Stability Period.
Stability Period means the calendar year in which the Retirement
Commencement Date for a distribution occurs.
(b) Early Retirement Factors are based on the following table (factors
are interpolated to reflect an employee's attained age expressed
in years and completed months).
AGE EARLY RETIREMENT FACTOR
--- -----------------------
65 1.00
64 .94
63 .88
62 .82
61 .76
60 .70
59 .67
58 .64
57 .61
56 .58
55 .55
(c) Qualified Joint and Survivor Annuity and 50% Joint and Survivor
Factor is .85: plus (minus) an additional 1% for each full year
in excess of five years up to a maximum of twenty-five years that
the contingent annuitant is older (younger) than the annuitant.
For each full year in excess of twenty-five years that the Spouse
is younger than the annuitant, there is a 2% per year reduction.
The maximum 50% Joint and Survivor factor is 90% regardless of the
ages of the annuitant and Spouse. The minimum 50% Joint and
Survivor factor is dependent on the ages of the annuitant and the
113
<PAGE>
Spouse. The ages of the annuitant and the spouse shall be based
on attained age expressed in years and completed months.
(d) 100% Joint and Survivor Factor is .75: plus (minus) an additional
1% for each full year in excess of five years up to a maximum of
twenty-five years that the Spouse is older (younger) than the
annuitant. For each full year in excess of 25 years that the
Spouse is younger than the annuitant, there is a 2% per year
reduction. The maximum 100% Joint and Survivor Factor is 80%
regardless of the ages of the annuitant and the Spouse. The
minimum 100% Joint and Survivor Factor is completely dependent on
the ages of the annuitant and the Spouse. The ages of the
annuitant and the Spouse shall be based on attained age expressed
in years and completed months.
(e) Ten Year Certain Option Faction is 90%.
(f) Social Security Leveling option and all other options approved by
the Pension Committee (except (a) - (e) above) are based on:
Interest - 6 1/2% compounded annually
Mortality - UP 1984 Table
114
<PAGE>
EX-10.7
AGREEMENT made as of the 27th of December, 1996 effective January l,
l997 by and between TRANS-LUX CORPORATION, a Delaware corporation having an
office at 110 Richards Avenue, Norwalk, Connecticut 06856-5090 (hereinafter
called "Employer"), and VICTOR LISS, residing at 112 Buckboard Lane,
Fairfield, Connecticut 06430 (hereinafter called "Employee").
W I T N E S S E T H:
1. Employer hereby employs Employee, and Employee hereby accepts
employment, upon the terms and conditions hereinafter set forth.
2. The term ("Term") of the Agreement shall be the period commencing
on January l, l997 and terminating April l, 2002. Commencing on and after
January l, 2000, Employee may terminate the Term of this Agreement prior to
April l, 2002 on no less than six (6) months prior written notice to Employer
in which event the Term will end on the such earlier date fixed in said notice
("Early Termination Date"). In the event of such earlier termination of the
Term, the Employer and the Employee shall discuss a continuing relationship
after the Early Termination Date on a consulting basis, but neither Employer
or Employee shall be under any obligation to agree to any such consulting
<PAGE>
relationship or to enter into a consulting agreement of any kind, each of
Employer and Employee retaining the absolute right in its or his respective
sole discretion not to enter into any such consulting arrangement or
agreement.
In the event that Employee remains or continues in the employ of
Employer after the Term, such employment, in the absence of a further written
agreement, shall be on an at-will basis, terminable by either party hereto on
thirty (30) days' notice to the other.
3. Employee shall be employed in an executive capacity of Employer
(and such of its affiliates, divisions and subsidiaries as Employer shall
designate) and shall perform such services as Employee was rendering to
Employer immediately prior to execution of this Agreement (the "Services").
The Services and additional services to be rendered by Employee hereunder
shall be those services appropriate for an executive rendering the Services
provided such services are of the same type, nature, scope, authority,
responsibility and dignity as the Services. Employer agrees that during the
Term of this Agreement, Employee's principal office of employment shall be
within a fifty mile radius of Norwalk, Connecticut or in the Borough of
Manhattan, New York City. Employer shall use its best efforts to cause
Employee to be elected and continue to be elected Vice Chairman of the Board,
President, Chief Executive Officer, a member of the Executive Committee and a
-2-
<PAGE>
Director of Employer during the Term of this Agreement. The precise services
of Employee may be designated or assigned from time to time at the direction
of the Board of Directors or the Chairman of the Board and all of the services
to be rendered hereunder by Employee shall at all times be subject to the
control, direction and supervision of the Chairman of the Board and the Board
of Directors of Employer, to which Employee does hereby agree to be bound. If
elected Vice Chairman of the Board, President, Chief Executive Officer, and/or
a member of the Executive Committee and a Director, Employee agrees to accept
such positions. Employee shall devote his entire time, attention and energies
during usual business hours (subject to Employer's policy with respect to
holidays and illnesses for comparable executives of Employer) to the business
and affairs of Employer, its affiliates, divisions and subsidiaries as
Employer shall from time to time direct. Employee further agrees during the
Term of this Agreement to serve as an officer or director of any affiliate or
subsidiary of Employer as Employer may request, and if Employee serves as such
officer or a director he will do so without additional compensation, other
than director's fees or honoraria, if any.
During the Term of this Agreement and during any subsequent employment
of Employee by Employer, Employee shall use his best efforts, skills and
abilities in the performance of his services hereunder and to promote the
interests of Employer, its affiliates, divisions and subsidiaries. Employee
shall not, during the Term and during any subsequent employment of Employee by
-3-
<PAGE>
Employer, be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage,
but this shall not be construed as preventing Employee from serving as a
director of another corporation for which Employee may receive fees or
honoraria or investing his assets in such form or manner as will not require
any services on the part of Employee in the operation of the affairs of the
companies in which such investments are made, provided, however, that Employee
shall not, either directly or indirectly, be a director of or make any
investments in any company or companies which are engaged in businesses
competitive with those conducted by Employer or by any of its subsidiaries or
affiliates except where such investments are in stock of a company listed on a
national securities exchange, and such stock of Employee does not exceed five
percent (5%) of the outstanding shares of stock of such listed company.
Employee shall not at any time, during or after the Term of this Agreement,
divulge, furnish or make accessible to any third person or organization any
confidential information concerning Employer or any of its subsidiaries or
affiliates or the businesses of any of the foregoing including, without
limitation, confidential methods of operations and organization, confidential
sources of supply, customer lists and confidential financial information.
4. (a) For all services rendered by Employee during the Term of this
Agreement, Employer shall pay Employee a salary at the rate of TWO HUNDRED
-4-
<PAGE>
THIRTY THOUSAND DOLLARS ($230,000) per annum during the period January 1, 1997
to December 31, 1997, which annual salary rate shall be increased at the
annual rate of $l0,000 on January l of each year thereafter during the Term.
Such salary shall be payable weekly, or monthly, or in accordance with the
payroll practices of Employer for its executives. The Employee shall also be
entitled to all rights and benefits for which he shall be eligible under any
stock option plan, bonus, participation or extra compensation plans, pensions,
group insurance or other benefits which Employer presently provides, or may
provide for him and for its employees generally. Employee shall also be
entitled to receive annually, at Employer's expense a complete medical
examination, including eyes (to the extent not covered by Employer's
insurance), not to exceed $l,500 per year. This Agreement shall not be deemed
abrogated or terminated if Employer, in its discretion, shall determine to
increase the compensation of Employee for any period of time,or if the
Employee shall accept such increase. In addition to the group insurance set
forth above, Employer also agrees to provide Employee with life insurance
during the Term of this Agreement in the amount of $75,000, plus an additional
$290,000 in life insurance at the approximate cost as currently published by
the American Institute of Certified Public Accountants Insurance Trust
("Trust"), provided Employee is insurable at standard rates, and to reimburse
Employee for the cost of long term disability insurance providing coverage of
$5,000 monthly at the approximate cost as currently published by such Trust.
-5-
<PAGE>
(b) Employer may make appropriate deductions from the said
payments required to be made in this paragraph 4 to Employee to comply with
all governmental withholding requirements.
(c) If, during the Term of this Agreement and if the Employee is
still in the employ of Employer, Employee shall be prevented from performing
or be unable to perform, or fail to perform, his duties by reason of illness
or any other incapacity for (4) consecutive months (excluding normal vacation
time) during the Term hereof, Employer agrees to pay Employee during the
duration thereof thereafter during the Term (and thereafter, if applicable, to
satisfy the thirty-six (36) month minimum hereinafter set forth) for the
duration of such incapacity, but in no event less than thirty-six (36) months
(subject to the last sentence of this Section), 50% of the base salary which
Employee would otherwise have been entitled to receive if not for the illness
or other incapacity. In the event of Employee's disability, Employee shall
not be entitled to a Bonus for any such year unless Employee has performed his
duties for at least six (6) full months during such calendar year. If during
the Term Employee recovers from such illness or other incapacity and is able
to perform his duties, then Employee shall be reinstated to his full time
employment hereunder for the remainder of the Term.
(d) As additional compensation, Employer shall pay to Employee a
bonus ("Bonus") for each calendar year during the Term in an amount equal to
-6-
<PAGE>
the highest percentage of Employer's pre-tax consolidated income (after
deducting minority interests, if any) calculated in accordance with the
following table:
If Annual Pre-Tax Bonus Percent from
Consolidated Income falls between: the first dollar
--------------------------------- ------------------
$250,000- 999,999 3 l/2%
$l,000,000-l,999,999 4 l/2%
$2,000,000-2,999,999 5%
$3,000,000-3,999,999 5% + $25,000
$4,000,000 maximum 5% + $50,000 (Total)
No Bonus shall be payable for Annual Pre-Tax Consolidated Income in
excess of $4,000,000 and the maximum Bonus payable for any year during the
Term is $250,000.
Such pre-tax consolidated income shall be fixed and determined by
the independent certified public accountants regularly employed by Employer.
Such independent certified public accountants, in ascertaining such pre-tax
consolidated income shall apply all accounting practices and procedures
heretofore applied by Employer's independent certified public accountants in
arriving at such annual pre-tax consolidated income as disclosed in Employer's
annual statement for that year of profit and loss released to its
stockholders. The determination by such independent certified public
accountants shall be final, absolute and controlling upon the parties.
Payment of such amount, if any is due, shall be made for each year by Employer
to Employee within thirty (30) days after which such accountant shall have
-7-
<PAGE>
furnished such statement to Employer disclosing Employer's pre-tax
consolidated income for each of the years during the Term. Employer
undertakes to use reasonable efforts to cause said accountants to prepare and
furnish such statements within one hundred thirty (130) days from the close of
each such calendar year and to cause said independent certified public
accountants, concommitantly with delivery of such statement by accountants to
it, to deliver a copy of such statement to Employee. The Employer shall not
have any liability to Employee arising out of any delays with respect to the
foregoing.
Notwithstanding the provisions of this Section 4(d), there shall
be excluded from the calculation of pre-tax consolidated income during the
Term of this Agreement (i) the amount by which (x) any item or items of
unusual or extraordinary gain in the aggregate exceeds 20% of the Employer's
net book value as at the end of the immediate preceding calendar year or (y)
any item of unusual or extraordinary loss in the aggregate exceeds 20% of the
Employer's net book value as at the end of the immediate preceding calendar
year, in each case in (x) and (y) above as determined in accordance with
generally accepted accounting principles and items of gain and loss shall not
be netted against each other for purpose of the above 20% calculation, (ii)
any effect of FASB l09 or similar promulgation, or (iii) any direct effect on
pre-tax consolidated income of write-offs in excess of $l00,000 of existing
prepaid financing costs prior to the normal amortization schedule of such
financings.
-8-
<PAGE>
Provided Employee is not in default of the Agreement, the Board
may, in any event, even if any of the aforesaid pre-tax consolidated income
levels are not exceeded, grant the Employee the aforesaid Bonus or any portion
thereof for such year based on his performance. If the pre-tax consolidated
income of Employer for any calendar year exceeds $4,250,000, the Board of
Directors of Employer shall review the foregoing Bonus provision for such
calendar year but nothing herein shall require or otherwise obligate the Board
of Directors to change such provision or to grant Employee an additional Bonus
for such calendar year.
Employee may defer payment of any Bonus for any year, for up to
ten (l0) years, by written notice to Employer prior to the commencement of any
such year, such notice to set forth the number of years any such payments are
to be deferred.
(e) Notwithstanding anything to the contrary contained herein, if
Employee terminates his employment prior to the end of any calendar year, or
if Employer terminates Employee's employment with cause prior to the end of
any such calendar year, no Bonus shall be paid for such calendar year.
(f) In the event Employee dies during the Term of this Agreement,
while the Employee is still in the employ of Employer, Employer shall pay to
Employee's widow or his surviving issue per stirpes and not per capita, as the
-9-
<PAGE>
case may be, (i) for the balance of the Term of the Agreement (but in no event
less than thirty-six (36) months nor more than forty-two (42) months even if
the period extends beyond the present Term of this Agreement), annual death
benefits payable weekly in an amount equal to 50% of Employee's then annual
base salary rate, plus (ii) the Bonus for prior year if not previously paid,
and (iii) fifty percent (50%) of the Bonus, if any, for the year in which
Employee dies as determined in accordance with Section 4(d) of this Agreement.
(g) Employer hereby grants Employee effective as of January l,
l997 pursuant to Employer's l995 Stock Option Plan ("Plan"), the option
("Option") to purchase 25,000 shares of common stock, par value $l per share,
of Employer ("Common Stock") at a price per share equal to the fair market
value of Common Stock of Employer on the date thereof in accordance with
paragraph 5 of the Plan and upon the other terms and conditions set forth in
the form of the option agreement annexed hereto as Exhibit A. Such option
agreement shall be executed by Employee as of January l, l997.
(h) In addition, Employer agrees to pay to Employee and his
beneficiaries ("Beneficiaries") as additional supplemental retirement benefits
("ASRB"), an amount so that the aggregate retirement benefits payable to
-10-
<PAGE>
Employee and Beneficiaries under the Trans-Lux Corporation Pension Plan
("Plan") plus such ASRB will equal the amount which would have been payable to
Employee and Beneficiaries under the Plan but for (i) the limitations on the
maximum annual benefits imposed by Section 4l5 of the Internal Revenue Code of
l986 ("IRC"), (ii) the limitations on the amount of annual compensation which
may be taken into account under Section 40l(a)(l7) of the IRC, and (iii) any
further limitations in benefits under the Plan resulting from statutory
changes or from modifications in the Plan required by statutory changes after
December 3l, l996. It is understood that the purpose of this paragraph is
that (a) Employee and Beneficiaries shall receive as a result of the ASRB
payment the full benefit which would otherwise have been payable from the Plan
had no Plan or statutory restrictions been imposed by law and (b) that any
additional taxes payable by Employee on any ASRB payment as a result of such
Plan or statutory restrictions shall be paid to Employee by Employer grossed
up in such a manner as to offset the effect of Employee's state and federal
income taxes on such payments. The ASRB payable pursuant to this paragraph
shall be paid to the same parties and at the same time that the payments under
the Plan are paid, provided, however, that Employee may defer receipt of any
ASRB payments attributable to services rendered in any year, for up to ten
(l0) years, by written notice to Employer prior to the commencement of any
such year, such notice to set forth the number of years any such payments are
to be deferred. The obligations of Employer payable pursuant to this
subparagraph (h) are intended to be unfunded for income tax purposes and shall
not constitute a trust fund, escrow amount, amount set apart, or other account
credited with funds for the benefit of Employee or his beneficiaries.
-11-
<PAGE>
Employer further agrees to reimburse Employee the premium for the purchase of
a so-called executive edge policy insuring ASRB payments at any time during
the Term of this Agreement at a one time cost to the Employer not to exceed
$l0,000.
(i) If this Agreement terminates without renewal and if Employee
thereafter voluntarily leaves the employ of Employer or is terminated without
cause prior to age 65, Employer shall provide at Employer's expense, medical
insurance coverage for Employee and his wife to Employee's age 65 or his
death, whichever first occurs, at least at the same levels as in effect on
date of retirement except to the extent such coverage is changed for all
Employer's senior executives, provided, however, to the extent Employee has
other medical coverage, such other coverage shall be deemed primary and
applicable before Employee exercises any rights hereunder.
5. During the Term of this Agreement, Employer will reimburse Employee
for traveling or other out-of-pocket expenses and disbursements incurred by
Employee with Employer's approval in furtherance of the businesses of Employer,
its affiliates, divisions or subsidiaries, upon presentation of such reasonable
supporting information as Employer may from time to time request.
6. Employee shall be entitled to a vacation of not less than six (6)
weeks per annum during the Term.
-12-
<PAGE>
7. Both parties recognize that the services to be rendered by
Employee pursuant to this Agreement are extraordinary and unique. During the
Term of this Agreement, during any subsequent employment of Employee by
Employer, during any retention of Employee as a consultant by Employer and so
long as Employee is a director of Employer, and for a period of two (2) years
after the latest termination of all employment, retention as a consultant
and/or as a director of the Employer, Employee shall not, directly or
indirectly, enter into the employ of or render any services to any person,
partnership, association or corporation engaged in a business or businesses in
any way, directly or indirectly, competitive to those now or hereafter engaged
in by Employer or by any of its subsidiaries during the Term of this Agreement
and during any subsequent employment or retention as a consultant of Employee
by Employer or service by Employee as a director of Employer, and Employee
shall not engage in any such business, directly or indirectly on his own
account, and, except as permitted by paragraph 3 of this Agreement, Employee
shall not become interested in any such business, directly or indirectly, as
an individual, partner, shareholder, director, officer, principal, agent,
employee, trustee, consultant, or in any other relationship or capacity. In
consideration of the execution of this employment agreement by the Employer,
the Employee further agrees in addition to his agreements herein contained, to
execute simultaneously herewith, the agreement covering certain aspects of
employment, protecting confidentiality and prohibiting unfair competition, in
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<PAGE>
the form annexed hereto as Exhibit B. Employer shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement and/or the agreement in form of Exhibit B, or to enjoin
Employee from any breach of this Agreement and/or the agreement in the form of
Exhibit B, but nothing herein contained shall be construed to prevent Employer
from pursuing such other remedies as Employer may elect to invoke. If there
is a conflict between the terms of this Agreement and Exhibit B, the most
restrictive provision shall prevail.
8. In the event any provision of paragraph 7 of this Agreement shall
be held invalid or unenforceable by reason of the geographic or business scope
or the duration thereof, such invalidity or unenforceability shall attach only
to such provision and shall not affect or render invalid or unenforceable any
other provision of this Agreement, and this Agreement shall be construed as if
the geographic or business scope or the duration of such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
9. Employee shall have the right to cancel and terminate this
Agreement (i) on l80 days prior written notice if Employee is not elected Vice
Chairman of the Board, President, Chief Executive Officer, or a member of the
Board and the Executive Committee, or if Richard Brandt no longer is Chairman
of the Board of Employer and his successor is not acceptable to Employee; and
-14-
<PAGE>
(ii) on 75 days prior written notice if there has been a "Change in Control of
Employer", as hereafter defined. Upon such termination becoming effective
pursuant to such notice by Employee, Employer and Employee shall be released
from all further liability and obligations provided for in this Agreement,
except that (x) Employer shall pay to Employee his Bonus for the prior
calendar year as and to the extent provided for in Section 4(d); and (y) in
the event such termination by Employee is by reason of a Change in Control of
Employer as provided in Section 9(ii), Employee shall be paid the salary
payable under Section 4(a) and Bonus payable under Section 4(d) in each case
which otherwise would have been payable for the balance of the Term in the
same manner, at the same times and in the same amounts as provided in said
Section 4(a). In the event of Employee's death after such termination, any
amounts still payable to Employee by reason of such termination shall be paid
to his widow if she shall survive him, or if she shall predecease him, to his
surviving issue, per stirpes and not per capita. Each notice under Section
9(i) or 9(ii) above must be given within 60 days of the occurrence of the
applicable event or be deemed waived. To the extent any such payments made
pursuant to Section 9(y) above are deemed to be an "excess parachute payment"
under Section 280G of the Internal Revenue Code of l986, as amended (the
"Code") and are subject to tax pursuant to Section 4999 of the Code, such
payments shall be grossed up in such a manner as to offset the effect of such
excise tax on such payments.
-15-
<PAGE>
For purposes of this Section 9, the phrase "Change in Control of
Employer" shall be deemed to have occurred if (i) any "person" (as such term
is used in Sections l3(d) and l4(d)(2) of the Securities Exchange Act of l934)
hereafter becomes the beneficial owner, directly or indirectly, of securities
of Employer, representing 25% or more of the combined voting power of the
Employer's then outstanding securities (other than members of Richard Brandt's
family, directly or indirectly through trusts or otherwise, with respect to
securities presently owned by Richard Brandt); and (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of Employer cease for any reason to
constitute at least a majority thereof, unless either Richard Brandt or
Employee shall have approved such change in the majority.
10. The waiver by Employer of a breach of any provision of this
Agreement by Employee shall not operate or be construed as a waiver of any
subsequent breach by Employee.
11. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and sent by United States certified or
registered mail, return receipt requested, to his address as stated on
Employer's records, in the case of Employee, or to the office of Trans-Lux
Corporation, attention of the Chairman of the Board, 110 Richards Avenue,
Norwalk, Connecticut 06856-5090, in the case of Employer, or such other
address as designated in writing by the parties.
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<PAGE>
12. During the Term of this Agreement, if Employer shall at any time
be consolidated or merged into any other corporation, or if substantially all
of the assets of Employer are transferred to any other corporation, the
provisions of this Agreement (other than the provisions requiring Employer to
use its best efforts to cause Employee to be elected Vice Chairman of the
Board, President, Chief Executive Officer, a member of the Executive Committee
and a Director of Employer) shall be binding upon and inure to the benefit of
the corporation resulting in such merger, or to which such assets shall have
been transferred, and this provision shall apply in the event of any
subsequent merger, consolidation or transfer except for any such event
resulting in a Change in Control for which Employee gives notice of
termination as provided in Section 9(ii).
13. This Agreement shall be construed in accordance with the laws of
the State of New York.
14. This instrument contains the entire agreement between the parties
and supersedes as of January 1, 1997 the employment agreement between the
parties hereto made as of January l, l993 as amended, except for the
applicable Bonus and Profit Participation for the year l996. It may not be
changed, modified, extended or renewed orally except by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, discharge or extension is sought.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on the
day and year above written.
TRANS-LUX CORPORATION
By: /s/ Richard Brandt
--------------------------------
Chairman of the Board
/s/ Victor Liss
--------------------------------
Victor Liss
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<PAGE>
EX-10.9
AGREEMENT made as of the 27th day of December l996 effective January
l, 1997 by and between TRANS-LUX CORPORATION, a Delaware corporation having an
office at 110 Richards Avenue, Norwalk, Connecticut 06856-5090 (hereinafter
called "Employer"), and FRANK DANIELS residing at 18 Woodcrest Road, Seymour,
Connecticut 06483 (hereinafter called, "Employee").
W I T N E S S E T H:
1. Employer hereby employs Employee, and Employee hereby accepts
employment, upon the terms and conditions hereinafter set forth.
2. (a) The term ("Term") of the Agreement shall be the period
commencing on January l, l997 and terminating December 3l, 1999.
(b) In the event that Employee remains or continues in the employ
of Employer after the Term, such employment, in the absence of a further
written agreement, shall be on an at-will basis, terminable by either party
hereto on thirty (30) days' notice to the other and, upon the 30th day
following such notice the employment of Employee shall terminate.
<PAGE>
(c) Upon expiration of the Term of this Agreement, neither party
shall have any further obligations or liabilities to the other except as
otherwise specifically provided in this Agreement.
3. Employee shall be employed in an executive capacity of Employer
(and such of its affiliates, divisions and subsidiaries as Employer shall
designate). Employer shall use its best efforts to cause Employee to be
elected and continue to be elected a Senior Vice President of Employer during
the Term of this Agreement. The precise services of Employee may be
designated or assigned from time to time at the direction of the Board of
Directors, the Chairman of the Board, the Vice-Chairman of the Board,
President or Executive Vice President, and all of the services to be rendered
hereunder by Employee shall at all times be subject to the control, direction
and supervision of the Board of Directors of Employer, to which Employee does
hereby agree to be bound. Employee shall devote his entire time, attention
and energies during usual business hours (subject to Employer's policy with
respect to holidays and illnesses for comparable executives of Employer) to
the business and affairs of Employer, its affiliates, divisions and
subsidiaries as Employer shall from time to time direct. Employee further
agrees during the Term of this Agreement to serve as an officer or director of
Employer or of any affiliate or subsidiary of Employer as Employer may
request, and if Employee serves as such officer or a director he will do so
without additional compensation, other than director's fees or honoraria, if
any.
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<PAGE>
During the Term of this Agreement and during any subsequent employment
of Employee by Employer, Employee shall use his best efforts, skills and
abilities in the performance of his services hereunder and to promote the
interests of Employer, its affiliates, divisions and subsidiaries. Employee
shall not, during the Term and during any subsequent employment of Employee by
Employer, be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage.
The foregoing shall not be construed as preventing Employee from investing his
assets in such form or manner as will not require any services on the part of
Employee in the operation of the affairs of the companies in which such
investments are made, provided, however, that Employee shall not, either
directly or indirectly, be a director of or make any investments in any
company or companies which are engaged in businesses competitive with those
conducted by Employer or by any of its subsidiaries or affiliates except where
such investments are in stock of a company listed on a national securities
exchange, and such stock of Employee does not exceed one percent (1%) of the
outstanding shares of stock of such listed company. Employee shall not at any
time during or after the Term of this Agreement use (except on behalf of
Employer), divulge, furnish or make accessible to any third person or
organization any confidential information concerning Employer or any of its
subsidiaries or affiliates or the businesses of any of the foregoing
including, without limitation, confidential methods of operations and
organization, confidential sources of supply, identity of employees, customer
lists and confidential financial information.
-3-
<PAGE>
4. (a) For all services rendered by Employee during the Term of this
Agreement, Employer shall pay Employee a salary at the rate of NINETY-SIX
THOUSAND DOLLARS ($96,000) per annum during the period January l, 1997 to
December 31, 1997; at the rate of ONE HUNDRED TWO THOUSAND DOLLARS ($l02,000)
per annum during the period January 1, 1998 to December 31, 1998 and at the
rate of ONE HUNDRED EIGHT THOUSAND DOLLARS ($l08,000) per annum during the
period January 1, 1999 to December 31, 1999. Such salary shall be payable
weekly, or monthly, or in accordance with the payroll practices of Employer
for its executives. The Employee shall also be entitled to all rights and
benefits for which he shall be eligible under any stock option plan, bonus,
participation or extra compensation plans, pensions, group insurance or other
benefits which Employer presently provides, or may provide for him and for its
employees generally. This Agreement shall not be deemed abrogated or
terminated if Employer, in its discretion, shall determine to increase the
compensation of Employee for any period of time, or if the Employee shall
accept such increase.
All payments under this Agreement are in United States dollars unless
otherwise specified.
(b) Employer may make appropriate deductions from the said
payments required to be made in this Section 4 to Employee to comply with all
governmental withholding requirements.
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<PAGE>
(c) If, during the Term of this Agreement and if the Employee is
still in the employ of Employer, Employee shall be prevented from performing
or be unable to perform, or fail to perform, his duties by reason of illness
or any other incapacity for (4) consecutive months (excluding normal vacation
time) during the Term hereof, Employer agrees to pay Employee thereafter
during the Term for the duration of such incapacity 35% of the base salary
which Employee would otherwise have been entitled to receive if not for the
illness or other incapacity.
(d) The Board upon the recommendation of the Compensation
Committee of the Board shall consider no later than May 31, l998, l999, and
2000, respectively (provided there is no delay in obtaining the financial
statements as provided below, but in no event later than 45 days following
receipt thereof) the grant of a bonus ("Bonus") to Employee based on
Employee's performance for the immediately preceding fiscal year.
Notwithstanding the foregoing, Employer shall pay Employee the highest Bonus
applicable for any of the fiscal years ending December 31, l997, l998, and
l999 only, in the event Employer's pre-tax consolidated earnings for such year
determined in accordance with Section 4(d) exceed the respective amounts
hereinafter set forth. The Bonuses shall not exceed $20,000 for any year.
-5-
<PAGE>
If Pre-Tax Consolidated
Earnings Exceed For Annual Non-Cumulative Level of
l997, l998 and l999 Bonus Payable
- - ----------------------- ------------------------------
$ 250,000 $ 625.00
375,000 937.50
500,000 1,250.00
625,000 1,562.50
750,000 1,875.50
875,000 2,187.50
l,000,000 2,500.00
1,125,000 2,812.50
l,250,000 3,125.00
1,375,000 3,437.50
1,500,000 3,750.00
1,625,000 4,062.50
1,750,000 4,375.00
1,875,000 4,687.50
2,000,000 5,000.00
2,125,000 5,312.50
2,250,000 5,625.00
2,375,000 5,937.50
2,500,000 6,250.00
2,625,000 6,562.50
2,750,000 6,875.00
2,875,000 7,187.50
3,000,000** 7,500.00
4,000,000** 10,000.00
5,000,000** 12,500.00
6,000,000** 15,000.00
7,000,000** 17,500.00
8,000,000** 20,000.00 (Maximum)
-------------
** For each incremental level of $l25,000 between $3,000,000
and $8,000,000 not listed, there is an additional Bonus of $3l2.50
There shall be excluded from the calculation of pre-tax
consolidated earnings during the Term of this Agreement the amount by which
(x) any item or items of unusual or extraordinary gain in the aggregate
exceeds 20% of the Employer's net book value as at the end of the immediate
-6-
<PAGE>
preceding fiscal year or (y) any item of unusual or extraordinary loss in the
aggregate exceeds 20% of the Employer's net book value as at the end of the
immediate preceding fiscal year, in each case in (x) and (y) above as
determined in accordance with generally accepted accounting principles and
items of gain and loss shall not be netted against each other for purpose of
the above 20% calculation.
Provided Employee is not in default of the Agreement, the Board
may, in any event, even if any of the aforesaid pre-tax consolidated earnings
levels are not exceeded, grant the Employee the aforesaid Bonus or any portion
thereof for such year based on his performance.
Notwithstanding anything to the contrary contained herein, if
Employee is not in the employ of Employer at the end of any aforesaid 1997,
l998 or 1999 fiscal year, no Bonus shall be paid for such fiscal year. In the
event of Employee's death on or after January 1 of 1998, l999 or 2000, any
Bonus to which he is otherwise entitled for the prior fiscal year shall be
paid to his widow if she shall survive him or if she shall predecease him to
his surviving issue per stirpes and not per capita.
Such pre-tax consolidated earnings shall be fixed and determined
by the independent certified public accountants regularly employed by
Employer. Such independent certified public accountants, in ascertaining such
pre-tax consolidated earnings, shall apply all accounting practices and
procedures heretofore applied by Employer's independent certified public
-7-
<PAGE>
accountants in arriving at such annual pre-tax consolidated earnings as
disclosed in Employer's annual statement for that year of profit and loss
released to its stockholders. The determination by such independent certified
public accountants shall be final, absolute and controlling upon the parties.
Payment of such amount, if any is due, shall be made for each year by Employer
to Employee within sixty (60) days after which such accountant shall have
furnished such statement to Employer disclosing Employer's pre-tax
consolidated earnings for each of the years 1997, l998, and l999. Employer
undertakes to use reasonable efforts to cause said accountants to prepare and
furnish such statements within one hundred thirty (130) days from the close of
each such fiscal year and to cause said independent certified public
accountants, concomitantly with delivery of such statement by accountants to
it, to deliver a copy of such statement to Employee. The Employer shall not
have any liability to Employee arising out of any delays with respect to the
foregoing.
(e) In the event Employee dies during the Term of this Agreement
while the Employee is still in the Employ of Employer, Employer shall pay to
Employee's widow or his surviving issue, as the case may be, for the balance
of the Term of the Agreement, or eighteen (18) months, whichever is less,
annual death benefits payable weekly or in accordance with Employer's payroll
practices in an amount equal to 35% of Employee's then annual base salary
rate.
-8-
<PAGE>
5. During the Term of this Agreement, Employer will reimburse
Employee for traveling or other out-of-pocket expenses and disbursements
incurred by Employee with Employer's approval in furtherance of the businesses
of Employer, its affiliates, divisions or subsidiaries, upon presentation of
such supporting information as Employer may from time to time request.
6. During the Term of this Agreement, Employee shall be entitled to a
vacation during the usual vacation period of Employer in accordance with such
vacation schedules as Employer may prescribe.
7. Both parties recognize that the services to be rendered by
Employee pursuant to this Agreement are extraordinary and unique. During the
Term of this Agreement, and during any subsequent employment of Employee by
Employer, Employee shall not, directly or indirectly, enter into the employ of
or render any services to any person, partnership, association or corporation
engaged in a business or businesses in anyway, directly or indirectly,
competitive to those now or hereafter engaged in by Employer or by any of its
subsidiaries during the Term of this Agreement and during any subsequent
employment of Employee by Employer and Employee shall not engage in any such
business, directly or indirectly on his own account and, except as permitted
by paragraph 3 of this Agreement, Employee shall not become interested in any
such business, directly or indirectly, as an individual, partner, shareholder,
director, officer, principal, agent, employee, trustee, consultant, or in any
other relationship or capacity. For a period of two (2) years following
-9-
<PAGE>
termination of employment for any reason, Employee shall not directly or
indirectly (i) engage or otherwise be involved in the recruitment or
employment of any Employer employee or, (ii) solicit or render any service
directly or indirectly to any other person or entity with regard to soliciting
any customer of the Employer during the two (2) year period prior to
termination of employment with respect to products or services competitive
with products or services of Employer. Employee shall at no time during or
after employment disclose to any person, other than Employer, or otherwise use
any information of or regarding Employer except on behalf of Employer, nor
communicate, publish, or otherwise transmit, in any manner whatsoever, untrue
information or negative, competitive, personal or other information or
comments regarding Employer. In addition, Employee agrees that all lists,
materials, books, files, reports, correspondence, records and other documents
and information ("Employer Materials") used, prepared or made available to
Employee, shall be and shall remain the property of Employer. Upon the
termination of employment of Employee or the expiration of this Agreement,
whichever is earlier, all Employer Materials shall be immediately returned to
Trans-Lux Corporation, and Employee shall not make or retain any copies
thereof, nor disclose or otherwise use any information relating to said
Employer Materials to any other party. As used herein the term Employer shall
include Employer, Employer's subsidiaries and affiliates, and any individuals
employed or formerly employed by any of them. Employer shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
-10-
<PAGE>
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement, or to enjoin Employee from any breach of this Agreement, but
nothing herein contained shall be construed to prevent Employer from pursuing
such other remedies as Employer may elect to invoke. In addition to the
obligations of the Employee contained in this Agreement, Employee agrees to be
bound by the provisions contained in Exhibit A to this Agreement.
8. In the event any provision of paragraph 7 of this Agreement shall
be held invalid or unenforceable by reason of the geographic or business scope
or the duration thereof, such invalidity or unenforceability shall attach only
to such provision and shall not affect or render invalid or unenforceable any
other provision of this Agreement, and this Agreement shall be construed as if
the geographic or business scope or the duration of such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
9. The waiver by Employer of a breach of any provision of this
Agreement by Employee shall not operate or be construed as a waiver of any
subsequent breach by Employee.
10. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and served personally or sent by United
States certified or registered mail, return receipt requested, or overnight
courier such as Federal Express or Airborne to his address as stated on
Employer's records, in the case of Employee, or to the office of Trans-Lux
Corporation, attention of the Chairman or Vice Chairman of the Board, 110
Richards Avenue, Norwalk, Connecticut 06856-5090, in the case of Employer, or
such other address as designated in writing by the parties.
-11-
<PAGE>
11. This Agreement shall be construed in accordance with the laws of
the State of New York.
12. This instrument contains the entire agreement between the parties
and supersedes as of January l, l997 the Employment Agreement between the
parties dated July l, l994, except for any Bonus for l996 payable in l997 in
accordance with paragraph 4(d)of such agreement. It may not be changed,
modified, extended or renewed orally except by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification,
discharge or extension is sought.
IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year above written.
TRANS-LUX CORPORATION
By: /s/ Michael R. Mulcahy
-------------------------------
Executive Vice President
/s/ Frank Daniels
-------------------------------
Frank Daniels
-12-
<PAGE>
EX-10.10
AGREEMENT made as of the 27th day of December l996 effective January
l, l997 by and between TRANS-LUX CORPORATION, a Delaware corporation having an
office at 110 Richards Avenue, Norwalk, Connecticut 06856-5090 (hereinafter
called "Employer"), and KARL HIRSCHAUER residing at 11 Lorna Lane, Tallman, NY
10982 (hereinafter called, "Employee").
W I T N E S S E T H:
1. Employer hereby employs Employee, and Employee hereby accepts
employment, upon the terms and conditions hereinafter set forth.
2. (a) The term ("Term") of the Agreement shall be the period
commencing on January l, l997 and terminating December 3l, 1999.
(b) In the event that Employee remains or continues in the employ of
Employer after the Term, such employment, in the absence of a further written
agreement, shall be on an at-will basis, terminable by either party hereto on
thirty (30) days' notice to the other and, upon the 30th day following such
notice the employment of Employee shall terminate.
<PAGE>
(c) Upon expiration of the Term of this Agreement, neither party shall
have any further obligations or liabilities to the other except as otherwise
specifically provided in this Agreement.
3. Employee shall be employed in an executive and/or engineering
capacity of Employer (and such of its affiliates, divisions and subsidiaries
as Employer shall designate). Employer shall use its best efforts to cause
Employee to be elected and continue to be elected a Senior Vice President of
Employer during the Term of this Agreement. The precise services of Employee
may be designated or assigned from time to time at the direction of the Board
of Directors, the Chairman of the Board, or the Vice-Chairman of the Board,
President or Executive Vice President, and all of the services to be rendered
hereunder by Employee shall at all times be subject to the control, direction
and supervision of the Board of Directors of Employer, to which Employee does
hereby agree to be bound. Employee shall devote his entire time, attention
and energies during usual business hours (subject to Employer's policy with
respect to holidays and illnesses for comparable executives of Employer) to
the business and affairs of Employer, its affiliates, divisions and
subsidiaries as Employer shall from time to time direct. Employee further
agrees during the Term of this Agreement to serve as an officer or director of
Employer or of any affiliate or subsidiary of Employer as Employer may
request, and if Employee serves as such officer or a director he will do so
without additional compensation, other than director's fees or honoraria, if
any.
-2-
<PAGE>
During the Term of this Agreement and during any subsequent employment
of Employee by Employer, Employee shall use his best efforts, skills and
abilities in the performance of his services hereunder and to promote the
interests of Employer, its affiliates, divisions and subsidiaries. Employee
shall not, during the Term and during any subsequent employment of Employee by
Employer, be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage.
The foregoing shall not be construed as preventing Employee from investing his
assets in such form or manner as will not require any services on the part of
Employee in the operation of the affairs of the companies in which such
investments are made, provided, however, that Employee shall not, either
directly or indirectly, be a director of or make any investments in any
company or companies which are engaged in businesses competitive with those
conducted by Employer or by any of its subsidiaries or affiliates except where
such investments are in stock of a company listed on a national securities
exchange, and such stock of Employee does not exceed one percent (1%) of the
outstanding shares of stock of such listed company. Employee shall not at any
time during or after the Term of this Agreement use (except on behalf of
Employer) divulge, furnish or make accessible to any third person or
organization any confidential information concerning Employer or any of its
subsidiaries or affiliates or the businesses of any of the foregoing
including, without limitation, inventions, confidential methods of operations
and organization, confidential sources of supply, identity of employees,
customer lists and confidential financial information.
-3-
<PAGE>
4. (a) For all services rendered by Employee during the Term of this
Agreement, Employer shall pay Employee a salary at the rate of ONE HUNDRED
EIGHT THOUSAND DOLLARS ($l08,000) per annum during the period January l, 1997
to December 31, 1997; at the rate of ONE HUNDRED FOURTEEN THOUSAND DOLLARS
($ll4,000) per annum during the period January 1, 1998 to December 31, 1998
and at the rate of ONE HUNDRED TWENTY THOUSAND DOLLARS ($l20,000) per annum
during the period January 1, 1999 to December 31, 1999. Such salary shall be
payable weekly, or monthly, or in accordance with the payroll practices of
Employer for its executives. The Employee shall also be entitled to all
rights and benefits for which he shall be eligible under any stock option
plan, bonus, participation or extra compensation plans, pensions, group
insurance or other benefits which Employer presently provides, or may provide
for him and for its employees generally. This Agreement shall not be deemed
abrogated or terminated if Employer, in its discretion, shall determine to
increase the compensation of Employee for any period of time, or if the
Employee shall accept such increase.
All payments under this Agreement are in United States dollars unless
otherwise specified.
(b) Employer may make appropriate deductions from the said payments
required to be made in this Section 4 to Employee to comply with all
governmental withholding requirements.
-4-
<PAGE>
(c) If, during the Term of this Agreement and if the Employee is still
in the employ of Employer, Employee shall be prevented from performing or be
unable to perform, or fail to perform, his duties by reason of illness or any
other incapacity for (4) consecutive months (excluding normal vacation time)
during the Term hereof, Employer agrees to pay Employee thereafter during the
Term for the duration of such incapacity 35% of the base salary which Employee
would otherwise have been entitled to receive if not for the illness or other
incapacity.
(d) The Board upon the recommendation of the Compensation Committee of
the Board shall consider no later than May 31, l998, l999, and 2000,
respectively (provided there is no delay in obtaining the financial statements
as provided below, but in no event later than 45 days following receipt
thereof) the grant of a bonus ("Bonus") to Employee based on Employee's
performance for the immediately preceding fiscal year. Notwithstanding the
foregoing, Employer shall pay Employee the highest Bonus applicable for any of
the fiscal years ending December 31, l997, l998, and l999 only, in the event
Employer's pre-tax consolidated earnings for such year determined in
accordance with Section 4(d) exceed the respective amounts hereinafter set
forth. The Bonuses shall not exceed $20,000 for any year.
-5-
<PAGE>
If Pre-Tax Consolidated
Earnings Exceed For Annual Non-Cumulative Level
l997, l998 and l999 of Bonus Payable
- - ----------------------- ---------------------------
$ 250,000 $ 625.00
375,000 937.50
500,000 1,250.00
625,000 1,562.50
750,000 1,875.50
875,000 2,187.50
l,000,000 2,500.00
1,125,000 2,812.50
l,250,000 3,125.00
1,375,000 3,437.50
1,500,000 3,750.00
1,625,000 4,062.50
1,750,000 4,375.00
1,875,000 4,687.50
2,000,000 5,000.00
2,125,000 5,312.50
2,250,000 5,625.00
2,375,000 5,937.50
2,500,000 6,250.00
2,625,000 6,562.50
2,750,000 6,875.00
2,875,000 7,187.50
3,000,000 ** 7,500.00
4,000,000 ** 10,000.00
5,000,000 ** 12,500.00
6,000,000 ** 15,000.00
7,000,000 ** 17,500.00
8,000,000 ** 20,000.00 (Maximum)
-----------
** For each incremental level of $l25,000 between $3,000,000
and $8,000,000 not listed, there is an additional Bonus of $3l2.50
There shall be excluded from the calculation of pre-tax consolidated
earnings during the Term of this Agreement the amount by which (x) any item or
items of unusual or extraordinary gain in the aggregate exceeds 20% of the
-6-
<PAGE>
Employer's net book value as at the end of the immediate preceding fiscal year
or (y) any item of unusual or extraordinary loss in the aggregate exceeds 20%
of the Employer's net book value as at the end of the immediate preceding
fiscal year, in each case in (x) and (y) above as determined in accordance
with generally accepted accounting principles and items of gain and loss shall
not be netted against each other for purpose of the above 20% calculation.
Provided Employee is not in default of the Agreement, the Board may,
in any event, even if any of the aforesaid pre-tax consolidated earnings
levels are not exceeded, grant the Employee the aforesaid Bonus or any portion
thereof for such year based on his performance.
Notwithstanding anything to the contrary contained herein, if Employee
is not in the employ of Employer at the end of any aforesaid 1997, l998 or
1999 fiscal year, no Bonus shall be paid for such fiscal year. In the event
of Employee's death on or after January 1 of 1998, l999 or 2000, any Bonus to
which he is otherwise entitled for the prior fiscal year shall be paid to his
widow if she shall survive him or if she shall predecease him to his surviving
issue per stirpes and not per capita.
Such pre-tax consolidated earnings shall be fixed and determined by
the independent certified public accountants regularly employed by Employer.
Such independent certified public accountants, in ascertaining such pre-tax
consolidated earnings, shall apply all accounting practices and procedures
-7-
<PAGE>
heretofore applied by Employer's independent certified public accountants in
arriving at such annual pre-tax consolidated earnings as disclosed in
Employer's annual statement for that year of profit and loss released to its
stockholders. The determination by such independent certified public
accountants shall be final, absolute and controlling upon the parties.
Payment of such amount, if any is due, shall be made for each year by Employer
to Employee within sixty (60) days after which such accountant shall have
furnished such statement to Employer disclosing Employer's pre-tax
consolidated earnings for each of the years 1997, l998, and l999. Employer
undertakes to use reasonable efforts to cause said accountants to prepare and
furnish such statements within one hundred thirty (130) days from the close of
each such fiscal year and to cause said independent certified public
accountants, concomitantly with delivery of such statement by accountants to
it, to deliver a copy of such statement to Employee. The Employer shall not
have any liability to Employee arising out of any delays with respect to the
foregoing.
(e) In the event Employee dies during the Term of this Agreement while
the Employee is still in the Employ of Employer, Employer shall pay to
Employee's widow or his surviving issue, as the case may be, for the balance
of the Term of the Agreement, or eighteen (18) months, whichever is less,
-8-
<PAGE>
annual death benefits payable weekly or in accordance with Employer's payroll
practices in an amount equal to 35% of Employee's then annual base salary
rate.
5. During the Term of this Agreement, Employer will reimburse
Employee for traveling or other out-of-pocket expenses and disbursements
incurred by Employee with Employer's approval in furtherance of the businesses
of Employer, its affiliates, divisions or subsidiaries, upon presentation of
such supporting information as Employer may from time to time request.
6. During the Term of this Agreement, Employee shall be entitled to a
vacation during the usual vacation period of Employer in accordance with such
vacation schedules as Employer may prescribe.
7. Both parties recognize that the services to be rendered by
Employee pursuant to this Agreement are extraordinary and unique. During the
Term of this Agreement, and during any subsequent employment of Employee by
Employer, Employee shall not, directly or indirectly, enter into the employ of
or render any services to any person, partnership, association or corporation
engaged in a business or businesses in anyway, directly or indirectly,
competitive to those now or hereafter engaged in by Employer or by any of its
subsidiaries during the Term of this Agreement and during any subsequent
-9-
<PAGE>
employment of Employee by Employer and Employee shall not engage in any such
business, directly or indirectly on his own account and, except as permitted
by paragraph 3 of this Agreement, Employee shall not become interested in any
such business, directly or indirectly, as an individual, partner, shareholder,
director, officer, principal, agent, employee, trustee, consultant, or in any
other relationship or capacity. For a period of two (2) years following
termination of employment for any reason, Employee shall not directly or
indirectly (i) engage or otherwise be involved in the recruitment or
employment of any Employer employee or (ii) solicit or render any service
directly or indirectly to any other person or entity with regard to soliciting
any customer of the Employer during the two (2) year period prior to
termination of employment with respect to products or services competitive
with products or services of Employer. Employee shall at no time during or
after employment disclose to any person, other than Employer, or otherwise use
any information of or regarding Employer except on behalf of Employer, nor
communicate, publish, or otherwise transmit, in any manner whatsoever, untrue
information or negative, competitive, personal or other information or
comments regarding Employer. In addition, Employee agrees that all lists,
materials, books, files, reports, correspondence, records and other documents
and information ("Employer Materials") used, prepared or made available to
Employee, shall be and shall remain the property of Employer. Upon the
termination of employment of Employee or the expiration of this Agreement,
-10-
<PAGE>
whichever is earlier, all Employer Materials shall be immediately returned to
Trans-Lux Corporation, and Employee shall not make or retain any copies
thereof, nor disclose or otherwise use any information relating to said
Employer Materials to any other party. As used herein the term Employer shall
include Employer, Employer's subsidiaries and affiliates, and any individuals
employed or formerly employed by any of them. Employer shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement, or to enjoin Employee from any breach of this Agreement, but
nothing herein contained shall be construed to prevent Employer from pursuing
such other remedies as Employer may elect to invoke. In addition to the
obligations of the Employee contained in this Agreement, Employee agrees to be
bound by the provisions contained in Exhibits A and B to this Agreement.
8. In the event any provision of paragraph 7 of this Agreement shall
be held invalid or unenforceable by reason of the geographic or business scope
or the duration thereof, such invalidity or unenforceability shall attach only
to such provision and shall not affect or render invalid or unenforceable any
other provision of this Agreement, and this Agreement shall be construed as if
the geographic or business scope or the duration of such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
-11-
<PAGE>
9. The waiver by Employer of a breach of any provision of this
Agreement by Employee shall not operate or be construed as a waiver of any
subsequent breach by Employee.
10. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and served personally or sent by United
States certified or registered mail, return receipt requested, or overnight
courier such as Federal Express or Airborne to his address as stated on
Employer's records, in the case of Employee, or to the office of Trans-Lux
Corporation, attention of the Chairman or Vice Chairman of the Board, 110
Richards Avenue, Norwalk, Connecticut 06856-5090, in the case of Employer, or
such other address as designated in writing by the parties.
11. This Agreement shall be construed in accordance with the laws of
the State of New York.
12. This instrument contains the entire agreement between the parties
and supersedes as of January l, l997 the Employment Agreement between the
parties dated July l, l994, except for any Bonus for l996 payable in l997 in
accordance with paragraph 4(d) of such agreement. It may not be changed,
modified, extended or renewed orally except by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification,
discharge or extension is sought.
-12-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on the
day and year above written.
TRANS-LUX CORPORATION
By: /s/ Michael R. Mulcahy
------------------------------
Executive Vice President
/s/ Karl Hirschauer
-------------------------------
Karl Hirschauer
-13-
<PAGE>
EX-10.12
AGREEMENT made as of the lst day of January, l997 by and between
TRANS-LUX CORPORATION, a Delaware corporation having an office at l10
Richards Avenue, Norwalk, Connecticut 06856-5090 (hereinafter called
"Employer"), and ANGELA TOPPI residing at l05 Cedar Lane, Ridgefield,
Connecticut 06877 (hereinafter called, "Employee").
W I T N E S S E T H:
l. Employer hereby employs Employee, and Employee hereby accepts
employment, upon the terms and conditions hereinafter set forth.
2. (a) The term ("Term") of the Agreement shall be the period
commencing on January l, l997 and terminating December 3l, l999.
(b) In the event that Employee remains or continues in the employ
of Employer after the Term, such employment, in the absence of a further
written agreement, shall be on an at-will basis, terminable by either party
hereto on thirty (30) days' notice to the other and, upon the 30th day
following such notice the employment of Employee shall terminate.
(c) Upon expiration of the Term of this Agreement, neither party
shall have any further obligations or liabilities to the other except as
otherwise specifically provided in this Agreement.
<PAGE>
3. Employee shall be employed in an executive capacity of Employer
(and such of its affiliates, divisions and subsidiaries as Employer shall
designate). Employer shall use its best efforts to cause Employee to be
elected and continue to be elected a Senior Vice President of Employer during
the Term of this Agreement. The precise services of Employee may be
designated or assigned from time to time at the direction of the Board of
Directors, the Chairman of the Board, the Vice Chairman of the Board,
President or Executive Vice President, and all of the services to be rendered
hereunder by Employee shall at all times be subject to the control, direction
and supervision of the Board of Directors of Employer, to which Employee does
hereby agree to be bound. Employee shall devote her entire time, attention
and energies during usual business hours (subject to Employer's policy with
respect to holidays and illnesses for comparable executives of Employer) to
the business and affairs of Employer, its affiliates, divisions and
subsidiaries as Employer shall from time to time direct. Employee further
agrees during the Term of this Agreement to serve as an officer or director of
Employer or of any affiliate or subsidiary of Employer as Employer may
request, and if Employee serves as such officer or a director she will do so
without additional compensation, other than director's fees or honoraria, if
any.
During the Term of this Agreement and during any subsequent employment
of Employee by Employer, Employee shall use her best efforts, skills and
2
<PAGE>
abilities in the performance of her services hereunder and to promote the
interests of Employer, its affiliates, divisions and subsidiaries. Employee
shall not, during the Term and during any subsequent employment of Employee by
Employer, be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage.
The foregoing shall not be construed as preventing Employee from investing her
assets in such form or manner as will not require any services on the part of
Employee in the operation of the affairs of the companies in which such
investments are made, provided, however, that Employee shall not, either
directly or indirectly, be a director of or make any investments in any
company or companies which are engaged in businesses competitive with those
conducted by Employer or by any of its subsidiaries or affiliates except where
such investments are in stock of a company listed on a national securities
exchange, and such stock of Employee does not exceed one percent (l%) of the
outstanding shares of stock of such listed company. Employee shall not at any
<PAGE>
time during or after the Term of this Agreement use (except on behalf of
Employer), divulge, furnish or make accessible to any third person or
organization any confidential information concerning Employer or any of its
subsidiaries or affiliates or the businesses of any of the foregoing
including, without limitation, confidential methods of operations and
organization, confidential sources of supply, identity of employees, customer
lists and confidential financial information.
4. (a) For all services rendered by Employee during the Term of this
Agreement, Employer shall pay Employee a salary at the rate of ONE HUNDRED ONE
3
<PAGE>
THOUSAND DOLLARS ($l0l,000) per annum during the period January l, l997 to
December 3l, l997; at the rate of ONE HUNDRED SIX THOUSAND DOLLARS ($106,000)
per annum during the period January l, l998 to December 3l, l998 and at the
rate of ONE HUNDRED TWELVE THOUSAND DOLLARS ($ll2,000) per annum during the
period January l, l999 to December 3l, l999. Such salary shall be payable
weekly, or monthly, or in accordance with the payroll practices of Employer
for its executives. The Employee shall also be entitled to all rights and
benefits for which she shall be eligible under any stock option plan, bonus,
participation or extra compensation plans, pensions, group insurance or other
benefits which Employer presently provides, or may provide for her and for its
employees generally. This Agreement shall not be deemed abrogated or
terminated if Employer, in its discretion, shall determine to increase the
compensation of Employee for any period of time, or if the Employee shall
accept such increase.
All payments under this Agreement are in United States dollars unless
otherwise specified.
(b) Employer may make appropriate deductions from the said
payments required to be made in this Section 4 to Employee to comply with all
governmental withholding requirements.
4
<PAGE>
(c) If, during the Term of this Agreement and if the Employee is
still in the employ of Employer, Employee shall be prevented from performing
or be unable to perform, or fail to perform, her duties by reason of illness
or any other incapacity for (4) consecutive months (excluding normal vacation
time) during the Term hereof, Employer agrees to pay Employee thereafter
during the Term for the duration of such incapacity or l8 months, whichever is
less, 35% of the base salary which Employee would otherwise have been entitled
to receive if not for the illness or other incapacity.
(d) The Board upon the recommendation of the Compensation
Committee of the Board shall consider no later than May 3l, l998, l999, and
2000, respectively (provided there is no delay in obtaining the financial
statements as provided below, but in no event later than 45 days following
receipt thereof) the grant of a bonus ("Bonus") to Employee based on
Employee's performance for the immediately preceding fiscal year.
Notwithstanding the foregoing, Employer shall pay Employee the highest Bonus
applicable for any of the fiscal years ending December 3l, l997, l998, and
l999 only, in the event Employer's pre-tax consolidated earnings for such year
determined in accordance with Section 4(d) exceed the respective amounts
hereinafter set forth. The Bonuses shall not exceed $l0,000 for any year
5
<PAGE>
<TABLE>
<CAPTION>
If Pre-Tax Consolidated
Earnings Exceed for Annual Non-Cumulative Level of
l997, l998 and l999 Bonus Payable
- - ----------------------- -------------
l997 l998 and l999
------ -------------
<C> <C> <C>
$ 250,000 3l2.50 625.00
375,000 468.75 937.50
500,000 625.00 1,250.00
625,000 781.25 1,562.50
750,000 937.50 1,875.50
875,000 1,093.75 2,187.50
1,000,000 1,250.00 2,500.00
1,125,000 1,406.25 2,812.50
1,250,000 1,562.50 3,125.00
1,375,000 1,718.75 3,437.50
1,500,000 1,875.00 3,750.00
1,625,000 2,031.25 4,062.50
1,750,000 2,187.50 4,375.00
1,875,000 2,343.75 4,687.50
2,000,000 2,500.00 5,000.00
2,125,000 2,656.25 5,312.50
2,250,000 2,812.50 5,625.00
2,375,000 2,968.75 5,937.50
2,500,000 3,125.00 6,250.00
2,625,000 3,281.25 6,562.50
2,750,000 3,437.50 6,875.00
2,875,000 3,593.75 7,187.50
3,000,000** 3,750.00 7,500.00
4,000,000** 5,000.00 10,000.00
5,000,000 6,250.00 10,000.00 (maximum)
6,000,000 7,500.00 10,000.00 (maximum)
7,000,000 8,750.00 10,000.00 (maximum)
8,000,000 and up 10,000.00 (maximum) 10,000.00 (maximum)
- - ----------
</TABLE>
** For each incremental level of $125,000 between $3,000,000
and $4,000,000 not listed, there is an additional Bonus
of $ 156.25 for l997 and $3l2.50 for l998 and l999 up to maximum.
There shall be excluded from the calculation of pre-tax
consolidated earnings during the Term of this Agreement the amount by which
(x) any item or items of unusual or extraordinary gain in the aggregate
exceeds 20% of the Employer's net book value as at the end of the immediate
6
<PAGE>
preceding fiscal year or (y) any item of unusual or extraordinary loss in the
aggregate exceeds 20% of the Employer's net book value as at the end of the
immediate preceding fiscal year, in each case in (x) and (y) above as
determined in accordance with generally accepted accounting principles and
items of gain and loss shall not be netted against each other for purpose of
the above 20% calculation.
Provided Employee is not in default of the Agreement, the Board
may, in any event, even if any of the aforesaid pre-tax consolidated earnings
levels are not exceeded, grant the Employee the aforesaid Bonus or any portion
thereof for such year based on her performance.
Notwithstanding anything to the contrary contained herein, if
Employee is not in the employ of Employer at the end of any aforesaid l997,
l998 or l999 fiscal year, no Bonus shall be paid for such fiscal year. In the
event of Employee's death on or after January l of l998, l999 or 2000, any
Bonus to which she is otherwise entitled for the prior fiscal year shall be
paid to her surviving spouse if he shall survive her or if he shall predecease
her to her surviving issue per stirpes and not per capita.
Such pre-tax consolidated earnings shall be fixed and determined
by the independent certified public accountants regularly employed by
Employer. Such independent certified public accountants, in ascertaining such
pre-tax consolidated earnings, shall apply all accounting practices and
7
<PAGE>
procedures heretofore applied by Employer's independent certified public
accountants in arriving at such annual pre-tax consolidated earnings as
disclosed in Employer's annual statement for that year of profit and loss
released to its stockholders. The determination by such independent certified
public accountants shall be final, absolute and controlling upon the parties.
Payment of such amount, if any is due, shall be made for each year by Employer
to Employee within sixty (60) days after which such accountant shall have
furnished such statement to Employer disclosing Employer's pre-tax
consolidated earnings for each of the years l997, l998, and l999. Employer
undertakes to use reasonable efforts to cause said accountants to prepare and
furnish such statements within one hundred thirty (l30) days from the close of
each such fiscal year and to cause said independent certified public
accountants, concommitantly with delivery of such statement by accountants to
it, to deliver a copy of such statement to Employee. The Employer shall not
have any liability to Employee arising out of any delays with respect to the
foregoing.
(e) In the event Employee dies during the Term of this Agreement
while the Employee is still in the employ of Employer, Employer shall pay to
Employee's surviving spouse or her surviving issue, as the case may be, for
the balance of the Term of the Agreement, or eighteen (l8) months, whichever
is less, annual death benefits payable weekly or in accordance with Employer's
payroll practices in an amount equal to 35% of Employee's then annual base
salary rate.
8
<PAGE>
5. During the Term of this Agreement, Employer will reimburse
Employee for traveling or other out-of-pocket expenses and disbursements
incurred by Employee with Employer's approval in furtherance of the businesses
of Employer, its affiliates, divisions or subsidiaries, upon presentation of
such supporting information as Employer may from time to time request.
6. During the Term of this Agreement, Employee shall be entitled to a
vacation during the usual vacation period of Employer in accordance with such
vacation schedules as Employer may prescribe.
7. Both parties recognize that the services to be rendered by
Employee pursuant to this Agreement are extraordinary and unique. During the
Term of this Agreement, and during any subsequent employment of Employee by
Employer, Employee shall not, directly or indirectly, enter into the employ of
or render any services to any person, partnership, association or corporation
engaged in a business or businesses in any way, directly or indirectly,
competitive to those now or hereafter engaged in by Employer or by any of its
subsidiaries during the Term of this Agreement and during any subsequent
employment of Employee by Employer and Employee shall not engage in any such
business, directly or indirectly on her own account and, except as permitted
by paragraph 3 of this Agreement, Employee shall not become interested in any
9
<PAGE>
such business, directly or indirectly, as an individual, partner, shareholder,
director, officer, principal, agent, employee, trustee, consultant, or in any
other relationship or capacity. For a period of two (2) years following
termination of employment for any reason, Employee shall not directly or
indirectly (i) engage or otherwise be involved in the recruitment or
employment of any Employer employee or, (ii) solicit or render any service
directly or indirectly to any other person or entity with regard to soliciting
any customer of the Employer during the two (2) year period prior to
termination of employment with respect to products or services competitive
with products or services of Employer. Employee shall at no time during or
after employment disclose to any person, other than Employer, or otherwise use
any information of or regarding Employer except on behalf of Employer, nor
communicate, publish, or otherwise transmit, in any manner whatsoever, untrue
information or negative, competitive, personal or other information or
comments regarding Employer. In addition, Employee agrees that all lists,
materials, books, files, reports, correspondence, records and other documents
and information ("Employer Materials") used, prepared or made available to
Employee, shall be and shall remain the property of Employer. Upon the
termination of employment of Employee or the expiration of this Agreement,
whichever is earlier, all Employer Materials shall be immediately returned to
Trans-Lux Corporation, and Employee shall not make or retain any copies
thereof, nor disclose or otherwise use any information relating to said
Employer Materials to any other party. As used herein the term Employer shall
include Employer, Employer's subsidiaries and affiliates, and any individuals
employed or formerly employed by any of them. Employer shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
10
<PAGE>
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement, or to enjoin Employee from any breach of this Agreement, but
nothing herein contained shall be construed to prevent Employer from pursuing
such other remedies as Employer may elect to invoke. In addition to the
obligations of the Employee contained in this Agreement, Employee agrees to be
bound by the provisions contained in Exhibit A to this Agreement.
8. In the event any provision of paragraph 7 of this Agreement shall
be held invalid or unenforceable by reason of the geographic or business scope
or the duration thereof, such invalidity or unenforceability shall attach only
to such provision and shall not affect or render invalid or unenforceable any
other provision of this Agreement, and this Agreement shall be construed as if
the geographic or business scope or the duration of such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
9. The waiver by Employer of a breach of any provision of this
Agreement by Employee shall not operate or be construed as a waiver of any
subsequent breach by Employee.
l0. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and served personally or sent by United
States certified or registered mail, return receipt requested, or overnight
courier such as Federal Express or Airborne to her address as stated on
Employer's records, in the case of Employee, or to the office of Trans-Lux
Corporation, attention of the Chairman, Vice Chairman of the Board or
11
<PAGE>
President, ll0 Richards Avenue, Norwalk, Connecticut 06856-5090, in the case
of Employer, or such other address as designated in writing by the parties.
ll. This Agreement shall be construed in accordance with the laws of
the State of New York.
l2. This instrument contains the entire agreement between the
parties. It may not be changed, modified, extended or renewed orally except
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, discharge or extension is sought.
IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year above written.
TRANS-LUX CORPORATION
By: /s/ Victor Liss
------------------------
President
/s/ Angela Toppi
------------------------
Angela Toppi
12
<PAGE>
TRANS-LUX CORPORATION & SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Years Ended December 31 1996 1995 1994
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Primary:
Net income $1,250,000 $1,066,000 $1,314,000
========== ========== ==========
Average common shares outstanding 1,258,163 1,250,444 1,247,555
Assumes exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 25,799 8,433 12,937
---------- ---------- ----------
Average common and common equivalent
shares outstanding 1,283,962 1,258,877 1,260,492
========== ========== ==========
Primary earnings per share $0.97 $0.85 $1.04
========== ========== ==========
Fully diluted:
Net income $1,250,000 $1,066,000 $1,314,000
Add after tax interest expense applicable
to 9% convertible subordinated debentur 254,000 262,000 511,000
Add after tax interest expense applicable
to 7 1/2% convertible subordinated note 20,000 - -
---------- ---------- ----------
Adjusted net income $1,524,000 $1,328,000 $1,825,000
========== ========== ==========
Average common shares outstanding 1,258,163 1,250,444 1,247,555
Assumes exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 25,799 8,433 13,564
Assumes conversion of 9% convertible
subordinated debentures 380,907 383,780 682,198
Assumes conversion of 7 1/2% convertible
subordinated notes 32,173 - -
---------- ---------- ----------
Average common and common equivalent
shares outstanding 1,697,042 1,642,657 1,943,317
========== ========== ==========
Fully diluted earnings per share $0.90 $0.81 $0.94
========== ========== ==========
</TABLE>
<PAGE>
SUBSIDIARIES EXHIBIT 21
as of December 31, 1996
A. Subsidiaries and joint ventures more than 50% owned (included in
consolidated financial statements):
<TABLE>
<CAPTION>
Jurisdiction of Percentage
Name Incorporation Owned
- - ------------------------- ---------------- ------------
<S> <C> <C>
Integrated Systems Engineering, Inc Utah 100%
Saunders Realty Corporation New York 100
Trans-Lux Canada Ltd Canada 100
Trans-Lux Cocteau Corporation (2) New Mexico 100
Trans-Lux Colorado Corporation (2) Colorado 100
Trans-Lux Consulting Corporation Delaware 100
Trans-Lux Durango Corporation (2) Colorado 100
Trans-Lux Experience Corporation New York 100
Trans-Lux High Five Corporation (2) Colorado 100
Trans-Lux Investment Corporation Delaware 100
Trans-Lux Loma Corporation (2) New Mexico 100
Trans-Lux Loveland Corporation (2) Colorado 100
Trans-Lux Montezuma Corporation (2) New Mexico 100
Trans-Lux Multimedia Corporation New York 100
Trans-Lux Pennsylvania Corporation (2) Pennsylvania 100
Trans-Lux Pty Ltd Australia 75
Trans-Lux Seaport Corporation New York 100
Trans-Lux Service Corporation New York 100
Trans-Lux Sign Corporation Delaware 100
Trans-Lux Southwest Corporation (2) New Mexico 100
Trans-Lux Storyteller Corporation (2) New Mexico 100
Trans-Lux Syndicated Programs Corporation New York 100
Trans-Lux Taos Corporation (2) New Mexico 100
Trans-Lux Theatres Corporation (1) Texas 100
<FN>
(1) Wholly-owned subsidiary of Trans-Lux Investment Corporation
(2) Wholly-owned subsidiary of Trans-Lux Theatres Corporation
</TABLE>
B. Other entities (accounted for in the consolidated financial statements
under the equity method):
Mossgood Theatre-Saunders Realty - A joint venture in which Saunders Realty
Corporation, listed in A. above as a wholly-owned subsidiary of the
Registrant, is a 50% venturer. Peggy Crystal Michaelmen and Clement S.
Crystal, own the remaining 50% of the joint venture and are unrelated to
the Registrant.
MetroLux Theatres - A joint venture in which Trans-Lux Loveland
Corporation, listed in A. above as a wholly-owned subsidiary of the
Registrant, is a 50% venturer. Metro Colorado Corporation owns the
remaining 50% of the joint venture and is unrelated to the Registrant.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 19,274
<SECURITIES> 600
<RECEIVABLES> 6,574
<ALLOWANCES> 0
<INVENTORY> 1,775
<CURRENT-ASSETS> 28,571
<PP&E> 74,072
<DEPRECIATION> 25,438
<TOTAL-ASSETS> 84,031
<CURRENT-LIABILITIES> 6,482
<BONDS> 33,368
<COMMON> 2,740
0
0
<OTHER-SE> 19,922
<TOTAL-LIABILITY-AND-EQUITY> 84,031
<SALES> 18,741
<TOTAL-REVENUES> 45,285
<CGS> 11,991
<TOTAL-COSTS> 27,505
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,412
<INCOME-PRETAX> 2,203
<INCOME-TAX> 953
<INCOME-CONTINUING> 1,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,250
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.90
</TABLE>
