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, 1999
-----------------
Commission file number 1-2257
------
TRANS-LUX CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-1394750
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
-------------------------------------------
(203) 853-4321
--------------
(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
- - ------------------------------- -----------------------------------------
Common Stock, $1.00 par value 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
--- ---
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. [ X ]
CONTINUED
<PAGE>
TRANS-LUX CORPORATION
1999 Form 10-K Cover Page Continued
As of the close of business on March 27, 2000, there were outstanding, 964,759
shares of the Registrant's Common Stock and 296,005 shares of its Class B Stock.
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 27, 2000 (based on the last sale price on the American Stock Exchange
as of such date) was $6,245,520. (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.)
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held May 31, 2000 (the "Proxy Statement") are incorporated
by reference into Part III, Items 10-13 of this Form 10-K to the extent stated
herein.
<PAGE>
TRANS-LUX CORPORATION
1999 Form 10-K Annual Report
Table of Contents
PART I
Page
ITEM 1. Business 1
ITEM 2. Properties 7
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders 8
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 8
ITEM 6. Selected Financial Data 9
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
ITEM 8. Financial Statements and Supplementary Data 14
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 25
PART III
ITEM 10. Directors and Executive Officers of the Registrant 25
ITEM 11. Executive Compensation 26
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 26
ITEM 13. Certain Relationships and Related Transactions 26
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 26
Signatures 29
<PAGE>
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, the term "Company" as used herein
refers to Trans-Lux Corporation and its subsidiaries. The Company is a
manufacturer, distributor, and marketer 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. The Company's display
products include data, graphics, and video displays for stock and commodity
exchanges, financial institutions, sports venues, casinos, convention centers,
corporate, government, theatres, retail, airports, and numerous other
applications. In addition to its core display business, the Company also owns
and operates a chain of motion picture theatres in the western Mountain States
and owns 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
which the Company serves, 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 parts of
Canada and Australia which performs on-site service and maintenance for its
customers and others.
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 it serves. This
approach ensures product flexibility, reliability, ease of service and minimum
spare parts requirements.
The Company's electronic information display market is 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, energy companies, insurance companies and mutual fund companies;
by sports venues; educational institutions; outdoor advertising companies; by
corporate and government communication centers; by retail outlets; by casinos,
race tracks and other gaming establishments; in airports, train stations, bus
terminals, and other transportation facilities; on highways and major
thoroughfares; by movie theatres; by health maintenance organizations, and in
various other applications.
The Indoor Market: The indoor electronic display market is currently
dominated by three categories of users: financial, government and corporate,
and gaming. The financial market segment, which includes trading floors,
exchanges, brokerage firms, banks, mutual fund companies and energy companies,
has long been a user of electronic information displays due to the need for
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
continue to install electronic ticker displays for both customers and brokers;
1
<PAGE>
they have also installed other larger displays to post major headline news
events in their brokerage offices to enable their sales force to stay up-to-date
on events affecting general market conditions and specific stocks. The changing
regulatory environment in the financial marketplace has resulted in the influx
of banks and other financial institutions into the brokerage business and the
need for these institutions to use information displays to advertise product
offerings to consumers.
The government and private market segment 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,
visitor centers inbound/outbound telemarketing centers and for employee
communications. Electronic displays have found acceptance in applications for
the healthcare industry such as outpatient pharmacies; military hospitals and
HMOs 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, promote concession sales and use the
Company's Rear WindowTM system for the hearing-impaired. Information displays
are consistently used in airports, bus terminals and train stations to post
arrival and departure, gate and baggage claim information, all of which help to
guide passengers through these facilities.
The gaming market segment includes casinos and Indian gaming establishments.
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.
Indoor equipment generally has a lead-time of 30 to 120 days depending on the
size and type of equipment ordered and material availability.
The Outdoor Market: The outdoor electronic display market is even more
diverse than the indoor market. Displays are being used by sports stadiums,
banks and other financial institutions, gas stations, highway departments,
educational institutions and outdoor advertisers attempting to capture the
attention of passers-by. The Company has utilized its strong position in the
indoor market combined with several acquisitions to enhance its presence in the
outdoor display market. The Company's acquisition in May 1997 of the catalog
and custom scoreboard sign business of Fairtron Corporation (Fairtron), was in
the outdoor display market. Outdoor displays are installed in amusement parks,
entertainment facilities, high schools, major and minor league parks,
professional and college sports stadiums, military installations, bridges and
other roadway installations, automobile dealerships, banks and other financial
institutions. Outdoor equipment generally has a lead-time of 10 to 120 days
depending on the size and type of equipment ordered and material availability.
Sales Order Backlog (excluding leases): The amount of sales order backlog at
December 31, 1999 was approximately $4.3 million compared with the December 31,
1998 sales order backlog of $3.4 million. The December 31, 1999 backlog will be
recognized in 2000. These amounts do not include new lease orders or renewals
of existing lease agreements presently in-house.
2
<PAGE>
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. The Company continually
examines and tests new display technologies and develops enhancements to its
existing products in order to meet the 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; new monochrome and tricolor ticker
displays utilizing improved LED display technology, curved and flexible
displays; higher speed processors for faster data access and improved update
speed; integration of blue LED's to provide full color text graphics and video
displays; wireless controlled displays and a new graphics interface to display
more data in higher resolutions.
The Company developed a full color LED video display for the outdoor market
which has application particularly in the sports market where enhancing the
presentation of live action is of central importance. To drive the video
display, the Company developed the ProLineTM controller which is Windows 32-bit
software based. The Company also developed a wireless scoreboard controller, an
LED scoreboard and a bar-digit scoreboard for its Trans-Lux/Fair-PlayTM catalog
business.
The Company's Display ConnectionTM, is an electronic display system that uses
the Internet to blend Dow Jones Newswires market data, business news headlines,
and sports headlines and statistics with consumer messages to make indoor and
outdoor displays more effective at focusing customers' attention. This product
is designed for banks, brokerages, hotels, airports, exhibition halls, casinos,
retail stores, schools, and other venues where high traffic and conditions for
immediate customer action are both present. Display Connection is compatible
with the Company's VisionWriterTM displays and message centers, as well as most
outdoor displays.
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 demanded by its customers.
The Company maintains a staff of 52 people who are responsible for product
development and support. The engineering and product enhancement and
development efforts are supplemented by outside independent engineering
consulting organizations and colleges where required. Engineering, product
enhancement and development amounted to $4,280,000, $3,603,000 and $2,819,000 in
1999, 1998 and 1997, respectively.
MARKETING AND DISTRIBUTION
- - --------------------------
The Company markets its indoor and outdoor electronic information display
products primarily through its 41 direct sales representatives, 7 telemarketers
and a network of independent dealers and distributors. The Company divides its
domestic sales and marketing efforts into two categories, renewal of existing
3
<PAGE>
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 ongoing relationships with its customers to discuss lease
renewals and upgrades. 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 in order to obtain lease renewal and upgrades.
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 exhibiting at approximately 49 domestic and international trade shows
annually. In the outdoor market, the Company supplements these efforts by using
a network of independent dealers and distributors who market and sell its
products.
Internationally, the Company uses a combination of internal sales people and
independent distributors to market its products in Europe, South and Central
America, Asia, Canada and Australia. The Company currently has assembly
operations, service centers and sales offices in New South Wales, Australia and
Mississauga, Canada. The Company has existing relationships with approximately
22 independent distributors worldwide covering Europe, South and Central
America, Canada, Asia and Australia. International sales have represented less
than 10% of total revenues in the past three years, but the Company believes
that it is well positioned for expansion.
Headquartered in Norwalk, Connecticut, the Company has major sales and
service offices in New York; Chicago; Las Vegas; Norcross, Georgia; Torrance,
California; Mississauga, Canada; Logan, Utah; Des Moines, Iowa; and New South
Wales, Australia, as well as approximately 66 satellite offices in the United
States and Canada.
The Company's equipment is both leased and sold. A significant portion of
the electronic information display revenues are from equipment rentals with
current lease terms ranging from 30 days to ten years.
The Company's revenues in 1999, 1998 and 1997 did not include any single
customer that accounted for more than 10% of total revenues.
MANUFACTURING AND OPERATIONS
- - ----------------------------
The Company's production facilities are located in Norwalk, Connecticut;
Logan, Utah; Des Moines, Iowa; Mississauga, 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. The Company is constructing a new
55,000 square foot outdoor display facility in Logan, Utah, which is expected to
be completed in the Spring of 2000.
All product lines are design engineered by the Company and controlled
throughout the manufacturing process. The Company has the ability to produce
printed circuit board fabrications, very large sheet metal fabrications, plastic
molded parts, cable assemblies, and surface mount and through-hole designed
assemblies. The Company produces more than 80,000 board assemblies annually
which are tested with the latest state of the art automated testing equipment.
Additional board assembly capacity is increased through outsourcing. The
4
<PAGE>
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 flexibility in mind, enabling the Company
to customize its displays to meet different applications with a minimum of
lead-time. The Company's automated planning and purchasing department further
enables it to secure 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.
The Company is ISO-9001 registered by Underwriters Laboratories for its
Norwalk plant facility. The Company's products are also third-party certified
as complying with applicable safety, electromagnetic emissions and
susceptibility requirements world wide. The Company believes these distinctions
in its industry gives it a competitive advantage in the global marketplace.
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 and sells in the United States, Canada and Australia.
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 market
segments 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 rental and maintenance base and other types
of customer owned equipment. 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 Norcross,
Georgia, which performs 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
5
<PAGE>
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, size and unusual height of displays.
COMPETITION
- - -----------
The Company's offer of short and long-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, commodity, sports and race book gaming displays
in the United States, as well as one of the largest outdoor electronic display
and 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 one area,
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 63 screens in 14 locations in the western
Mountain States. In 1997, the Company acquired the Gaslight Twin Cinema in
Durango, Colorado, and the Lake Dillon Cinema four-plex in Dillon, Colorado; in
1998, the Company expanded its Storyteller theatre in Taos, New Mexico to a
seven-plex; in 1999, the Company acquired a single and a four-plex theatre in
Laramie Wyoming, constructed a six-plex theatre in Espanola, New Mexico and a
six-plex theatre in Dillon, Colorado; and in 2000, the Company constructed an
eight-plex theatre in Los Lunas, New Mexico and has construction in progress on
a six-plex theatre in Green Valley, Arizona. The Company also has a twelve-plex
theatre in Loveland, Colorado which is a 50% owned joint venture partnership.
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. Commencing in the
first quarter of 2000, the Company opened a booking office to book films for its
owned theatres and other theatres.
INTELLECTUAL PROPERTY
- - ---------------------
The Company owns or licenses a number of patents and holds a number of
trademarks for its display equipment and theatrical enterprises and considers
such patents, trademarks and licenses important to its business.
6
<PAGE>
EMPLOYEES
- - ---------
The Company has approximately 765 employees as of February 29, 2000, of which
approximately 500 employees support the Company's electronic 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, which is occupied by the Company and is used for
administration, sales, engineering, production and assembly of its indoor
display products. Approximately 14,000 square feet of the building is currently
leased to others.
In addition, the Company owns facilities in:
Torrance, California
Norcross, Georgia
Des Moines, Iowa
Logan, Utah
Mississauga, Canada.
Theatre Properties in :
Sahuarita, Arizona
Dillon, Colorado
Durango, Colorado
Espanola, New Mexico
Los Lunas, New Mexico
Santa Fe, New Mexico
Taos, New Mexico.
The Company also leases 9 premises throughout North America and in
Australia
for use as sales, service and/or administrative operations, and leases 9 theatre
locations. The aggregate rental expense was $601,000, $585,000 and $456,000 for
1999, 1998 and 1997, respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. During June 1999, a jury in the state of New
Mexico awarded a former employee of the Company $15,000 in damages for lost
wages and emotional distress and $393,000 in punitive damages on a retaliatory
discharge claim. The Company denied the charges on the basis that the
termination was proper and is appealing such verdict. The Company believes it
has made adequate provisions during 1999 to cover such matters. In January
2000, a second former employee of the Company commenced a retaliatory discharge
action seeking compensatory and punitive damages in an unspecified amount. The
7
<PAGE>
Company has denied such allegations and asserted defenses including that the
former employee resigned following her failure to timely report to work.
Certain of the amounts are subject to insurance recoveries.
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 759 holders of record of its Common Stock
and approximately 69 holders of record of its Class B Stock as of
March 27, 2000.
(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 1999. Management and the Board of Directors will continue to
review payment of the quarterly cash dividends.
(d) The range of Common Stock prices on the American Stock Exchange are set
forth in the following table:
High Low
---- ---
1999
First Quarter $11 1/8 $ 8 1/2
Second Quarter 9 1/4 7 3/4
Third Quarter 8 1/4 5 7/8
Fourth Quarter 8 1/4 6 1/2
1998
First Quarter $16 $13 5/8
Second Quarter 14 12 1/8
Third Quarter 12 15/16 8 5/8
Fourth Quarter 10 5 1/2
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(a) The following table sets forth selected consolidated financial data with
respect to the Company for the five years ended December 31, 1999, which
were derived from the audited consolidated financial statements of the
Company and should be read in conjunction with them.
<TABLE>
<CAPTION>
Years Ended 1999 1998 1997 1996 1995
- - ----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
In thousands, except per share data
Revenues $ 62,818 $63,778 $53,363 $45,285 $37,791
Net income 788 1,699 1,510 1,250 1,066
Earnings per share:
Basic $ 0.61 $ 1.32 $ 1.18 $ 0.99 $ 0.85
Diluted 0.61 0.85 0.80 0.89 0.79
Cash dividends per share:
Common stock $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.14
Class B stock 0.126 0.126 0.126 0.126 0.126
Average common shares outstanding 1,286 1,290 1,281 1,258 1,250
Total assets $112,448 $91,146 $88,978 $84,031 $57,460
Long-term debt 65,952 49,523 49,452 48,112 22,495
Stockholders' equity 26,013 25,851 24,332 22,662 21,499
</TABLE>
9
<PAGE>
(b) The following table sets forth quarterly financial data for the years ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Quarter Ended (unaudited) March 31 June 30 September 30 December 31 (1)
In thousands, except per share data
1999
<S> <C> <C> <C> <C>
Revenues $13,485 $16,003 $17,569 $15,761
Gross profit 4,977 6,027 6,230 5,555
Income before income taxes 69 359 694 110
Net income 38 198 381 171
Earnings per share:
Basic $ 0.03 $ 0.15 $ 0.30 $ 0.13
Diluted (2) 0.03 0.15 0.21 0.13
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
1998
Revenues $15,956 $15,877 $16,739 $15,206
Gross profit 5,862 5,877 6,034 6,394
Income before income taxes 627 661 813 927
Net income 345 364 446 544
Earnings per share:
Basic $ 0.27 $ 0.28 $ 0.35 $ 0.42
Diluted 0.19 0.19 0.22 0.25
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) During the fourth quarter of 1999, the Company adjusted certain research and development
expenses resulting in a decrease of approximately $78,000 to net income in the quarter. During
the fourth quarter of 1998 the Company adjusted certain standard manufacturing cost estimates to
year-to-date actual costs resulting in an increase of approximately $77,000 to net income in the
quarter.
(2) Diluted earnings per share is computed independently for each of the periods presented.
Accordingly, the sum of the quarterly diluted earnings per share amounts do not
equal the total for the year.
</FN>
</TABLE>
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
1999 Compared to 1998
The Company's total revenues for the year ended December 31, 1999 decreased 1.5%
to $62.8 million from $63.8 million for the year ended December 31, 1998.
Revenues from equipment rentals and maintenance increased slightly to $23.5
million in 1999 from $23.2 million in 1998 or 1.3%. Of this increase, indoor
display rental and maintenance increased $1.0 million in 1999 or 7.2%, which was
offset by the $0.7 million or 8.0% continued, expected revenue decline in the
outdoor rental and maintenance bases previously acquired. Revenues from
equipment sales decreased to $31.3 million in 1999 from $33.9 million in 1998 or
7.6%. The decrease was in the indoor display segment, as 1998 indoor display
revenues included a multi-million dollar order from a major exchange, which did
not recur this year. Revenues from outdoor displays increased $1.0 million in
1999 or 4.5% from 1998, primarily in the outdoor sports division. Revenues from
theatre receipts and other increased $1.3 million or 19.5% in 1999. The
increase is primarily from the revenues from two newly constructed six-plex
theatres in Dillon, Colorado and Espanola, New Mexico and the acquisition of two
theatres in Wyoming in 1999.
Gross profit as a percentage of revenues was 36.3% in 1999 compared to 37.9%
in 1998. The decrease in the gross profit percentage was anticipated as the
Company attempts to increase its market share in the outdoor display market, and
expand its theatre operations, which is at a lower gross profit than the display
division. Due to the competitive nature of the outdoor display market, the
Company anticipates the gross profit margin to continue to decline somewhat as
it attempts to increase its market share in certain industry segments of this
market. Cost of equipment rentals and maintenance includes field service
expenses, plant repair costs, maintenance and depreciation. The indoor display
cost of equipment rental and maintenance increased 4.6%, principally due to
increased depreciation expense. The outdoor display cost of equipment rental
and maintenance increased 7.6%, principally due to competitive market
conditions. The cost of equipment rentals and maintenance represented 56.9% of
related revenues in 1999 compared to 54.4% in 1998. Cost of equipment sales
decreased $1.4 million or 6.7%. The indoor display cost of equipment sales
decreased 35.4%, primarily due to a large sale in 1998 which did not recur in
1999. The outdoor display cost of equipment sales increased 4.2%, principally
due to a receivables settlement with a customer. The cost of equipment sales
represented 64.5% of related revenues in 1999 compared to 63.8% in 1998. Cost
of theatre receipts and other, which includes film rental costs, increased $1.1
million or 20.2%, mainly as a result of the expansion of the theatre operations.
The cost of theatre receipts and other represented 80.6% of related revenues in
1999 compared to 80.1% in 1998.
Total general and administrative expenses increased slightly to $18.3
million in 1999 from $18.0 million in 1998. Corporate general and
administrative expenses decreased 3.3%, primarily due to the positive impact of
the effect of foreign currency exchange rates and reduced administrative
expenses, offset by the special litigation charge of $408,000 on a retaliatory
discharge claim (See Note 15). The indoor display general and administrative
expenses decreased 7.4%, primarily due to reduced sales overhead expenses. The
outdoor display general and administrative expenses increased 19.5%, primarily
due to expanded sales and marketing efforts. The entertainment and real estate
general and administrative expenses remained level.
Net interest expense increased $207,000, which is primarily attributable to
the increase in long-term debt for theatre expansion. Other income primarily
relates to the equity in earnings of the joint venture, MetroLux Theatres,
repurchase of $1,135,000 par value of the Company's 7-1/2% Convertible
Subordinated Notes, (the "Notes") and the earned income portion of municipal
forgivable loans.
11
<PAGE>
The effective tax rate was 36.0% in 1999 and 43.9% in 1998. The decrease in
the effective tax rate for 1999 was largely due to utilization of foreign tax
net operating losses by the international subsidiaries.
1998 Compared to 1997
The Company's total revenues for the year ended December 31, 1998 increased
19.5% to $63.8 million from $53.4 million for the year ended December 31, 1997.
Revenues from equipment rentals and maintenance decreased slightly to $23.2
million in 1998 from $23.5 million in 1997 or 1.2%. Indoor display rental and
maintenance increased 6.9%, this increase was more than offset by the 11.9%
continued, expected decrease from the outdoor lease and maintenance bases
previously acquired. Revenues from equipment sales increased to $33.9 million
in 1998 from $24.4 million in 1997 or 38.6%. Indoor display sales increased
42.6%, primarily due to an increase in the volume of sales. Outdoor display
sales increased 36.5%, primarily attributable to the acquisition of the catalog
and custom scoreboard sign business of Fairtron Corporation in May 1997 and
increased sales of other outdoor products. Revenues from theatre receipts and
other increased $1.3 million or 23.5% in 1998. This increase is primarily
attributable to the acquisitions of the Lake Dillon Cinema in September 1997,
the Gaslight Cinema in March 1997, the expansion of the Taos Storyteller Cinema
from a four-plex to a seven-plex in February 1998, and increased concession
sales.
Gross profit as a percentage of revenues was 37.9% in 1998 compared to 40.8%
in 1997. The indoor display cost of equipment rental and maintenance increased
13.4%, principally due to increased depreciation expense. The outdoor display
cost of equipment rental and maintenance decreased slightly. The cost of
equipment rentals and maintenance represented 54.4% of related revenues in 1998
compared to 50.7% in 1997. Cost of equipment sales increased $6.1 million or
39.6%. The indoor display cost of equipment sales increased 37.7%, primarily
due to an increase in the volume of sales. During the fourth quarter of 1998,
the Company adjusted certain indoor standard manufacturing cost estimates to
year-to-date actual costs resulting in an increase of approximately $77,000 to
net income in the quarter. The outdoor display cost of equipment sales
increased 40.3%, principally due to the Fairtron acquisition and an increase in
sales of other outdoor products. The cost of equipment sales represented 63.8%
of related revenues in 1998 compared to 63.3% in 1997. Cost of theatre receipts
and other increased $1.2 million or 29.0%, mainly as a result of the expansion
of the theatre operations. The cost of theatre receipts and other represented
80.1% of related revenues in 1998 compared to 76.7% in 1997.
Total general and administrative expenses increased $2.0 million or 12.3%.
The indoor display general and administrative expenses increased 3.4%, primarily
due to expanded sales and marketing efforts. The outdoor display general and
administrative expenses increased 16.5%, primarily due to the Fairtron
acquisition. The entertainment and real estate general and administrative
expenses increased slightly. Corporate general and administrative expenses
increased 18.2%, primarily due to increased administrative support.
Interest income decreased $545,000, primarily attributable to the
utilization of investments to acquire rental equipment and construct new
theatres. Interest expense decreased $255,000, primarily due to a charge in
1997 of approximately $113,000 for the unamortized portion of the financing
costs pertaining to the redemption of the 9% Convertible Subordinated Debentures
(the "9% Debentures"). Other income relates to the equity in earnings of the
joint venture, MetroLux Theatres and gains on sales of securities.
The effective tax rate was 43.9% in 1998 and 47.0% in 1997. The decrease in
the effective tax rate for 1998 was largely due to reduced foreign tax losses in
1998 compared to 1997.
Accounting Standards
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) effective January 1, 2001. The standard requires
companies to recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on the use
of the derivative and whether it qualifies for hedge accounting. The Company
does not expect the adoption of SFAS 133 to have a material impact on its
consolidated financial statements.
12
<PAGE>
Liquidity and Capital Resources
The Company has a $15.0 million revolving credit facility available until June
2002. At December 31, 1999, $8.8 million was outstanding, leaving $5.8 million
of additional borrowing capacity under this facility. The interest rate is
LIBOR plus 2.0%, (7.8225% at December 31, 1999). The Company has the option to
convert the outstanding balance into a four-year term loan. The revolving
credit facility also requires an annual facility fee on the total commitment of
.375%.
During 1999, the Company entered into $10.1 million of real estate
construction loans and mortgages, principally to fund the construction of
theatre expansion projects. At December 31, 1999, the interest rates ranged
from 7.75% to 8.65%.
Also during 1999, the Company entered into loan agreements with the City of
Logan, Cache County, Utah to issue $4.8 million of a combination of Tax-Exempt
and Taxable Revenue Bonds to finance the construction of a new 55,000 square
foot outdoor display facility in Logan, Utah. At December 31, 1999, the
interest rates were 5.5% and 6.75%, respectively, plus a 1.25% letter of credit
fee.
The Company is currently authorized by the Board of Directors to repurchase
up to $400,000 of its Common Stock. A total of 31,636 shares of Common Stock at
a cost of $226,000 were repurchased during 1999.
During 1999, the Company also repurchased $1,135,000 face value of its Notes
at an average price of $85.80, resulting in a gain of $69,000 (net of tax).
The Company believes that cash generated from operations together with cash
and cash equivalents on hand and the availability under the revolving credit
facility will be sufficient to fund its anticipated near term cash requirements.
The Company has two term loans under its amended bank Credit Agreement for a
total of $8.7 million of indebtedness at a rate of interest at LIBOR plus 1.75%.
The Company has two interest rate swap agreements in place, with a notional
value equal to the amount of the two term loans and with corresponding maturity
terms, which have the effect of converting the interest rate on such term loans
to a fixed average annual rates of 7.82% and 7.88% through July 2002. The
Credit Agreement contains certain financial covenants with which the Company
must comply, absent a waiver by the bank, on a continuing basis, with which the
Company is in compliance and expects to remain in compliance.
In late 1996, the Company issued $27.5 million of the Notes. On January 14,
1997, the Underwriter exercised their overallotment option, bringing the total
amount outstanding to $31.6 million. In February 1997, the Company called all
the outstanding 9% Debentures for redemption.
Cash and cash equivalents increased $2.4 million in 1999 compared to a
decrease of $0.5 million in 1998. The increase in 1999 is primarily
attributable to an increase in accounts payable and accruals, offset somewhat by
an increase in trade receivables and inventories, primarily due to the increase
of sales and related cost of sales in the outdoor sports division. The decrease
in 1998 was primarily attributable to investments in rental equipment and
construction of theatres. The Company continues to experience a favorable
collection cycle on its trade receivables.
Year 2000 Update
The Company did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, the Company does not expect any significant
impact to its ongoing business as a result of the Year 2000 issue, but if any
problems do occur, they are likely to be minor and correctable. In addition,
the Company could still be negatively impacted if its customers or suppliers are
adversely affected by the Year 2000 issue. The Company is not aware of any
significant Year 2000 problems that have arisen for its customers or suppliers.
The Company expended approximately $350,000 on Year 2000 readiness efforts
over a period of two years. The efforts included replacing certain hardware and
replacing or modifying non-compliant software, as well as identifying and
remediating Year 2000 problems.
Safe Harbor Statement under the Private Securities Reform Act of 1995
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 through competition,
introduction of competing products by others, pressure on prices from
competition or purchasers of the Company's products, and interest rate and
foreign exchange fluctuations.
13
<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
In thousands, except per share data Years ended December 31 1999 1998 1997
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Equipment rentals and maintenance $23,490 $23,181 $23,472
Equipment sales 31,273 33,858 24,434
Theatre receipts and other 8,055 6,739 5,457
--------------------------------------
Total revenues 62,818 63,778 53,363
--------------------------------------
Operating expenses:
Cost of equipment rentals and maintenance 13,366 12,602 11,906
Cost of equipment sales 20,171 21,609 15,478
Cost of theatre receipts and other 6,492 5,400 4,187
--------------------------------------
Total operating expenses 40,029 39,611 31,571
--------------------------------------
Gross profit from operations 22,789 24,167 21,792
General and administrative expenses 18,341 17,993 16,023
--------------------------------------
4,448 6,174 5,769
Interest income 592 646 1,191
Interest expense (4,251) (4,098) (4,353)
Other income 443 306 240
--------------------------------------
Income before income taxes 1,232 3,028 2,847
--------------------------------------
Provision for income taxes:
Current 470 799 164
Deferred (26) 530 1,173
--------------------------------------
444 1,329 1,337
--------------------------------------
Net income $ 788 $ 1,699 $ 1,510
======================================
Earnings per share:
Basic $ 0.61 $ 1.32 $ 1.18
Diluted 0.61 0.85 0.80
--------------------------------------
Average common shares outstanding:
Basic 1,286 1,290 1,281
Diluted 1,288 3,554 3,617
---------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
In thousands, except share data December 31 1999 1998
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,651 $ 1,298
Available-for-sale securities 3,666 4,914
Receivables, less allowance of $501 and $574 9,064 7,287
Inventories 6,146 5,381
Prepaids and other 890 734
-----------------------
Total current assets 23,417 19,614
-----------------------
Equipment on rental 75,200 70,654
Less accumulated depreciation 31,487 28,289
-----------------------
43,713 42,365
-----------------------
Property, plant and equipment 44,411 30,816
Less accumulated depreciation and amortization 8,832 8,433
-----------------------
35,579 22,383
Other assets 6,449 6,784
Construction funds 3,290 ----
-----------------------
$112,448 $91,146
-------------------------------------------------------------------------------------------=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,688 $ 1,703
Accrued liabilities 5,093 4,739
Current portion of long-term debt 2,381 258
-----------------------
Total current liabilities 12,162 6,700
-----------------------
Long-term debt:
7 1/2% convertible subordinated notes due 2006 30,490 31,625
9 1/2% subordinated debentures due 2012 1,057 1,057
Notes payable 34,405 16,841
-----------------------
65,952 49,523
Deferred revenue, deposits and other 3,715 4,254
Deferred income taxes 4,606 4,818
-----------------------
Commitments and contingencies
Stockholders' equity:
Capital stock
Common - $1 par value - 5,500,000 shares authorized
2,444,400 shares issued in 1999 and 2,443,119 in 1998 2,444 2,443
Class B - $1 par value - 1,000,000 shares authorized
296,005 shares issued in 1999 and 297,286 in 1998 296 297
Additional paid-in-capital 13,901 13,901
Retained earnings 21,434 20,821
Accumulated other comprehensive income (loss) (225) ----
-----------------------
37,850 37,462
Less treasury stock - at cost - 1,479,672 shares in 1999 and 1,448,016 in 1998
(excludes additional 296,005 shares held in 1999 and 297,286 in 1998
for conversion of Class B stock) 11,837 11,611
-----------------------
Total stockholders' equity 26,013 25,851
-----------------------
$112,448 $91,146
-------------------------------------------------------------------------------------------=======================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands Years ended December 31 1999 1998 1997
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 788 $ 1,699 $ 1,510
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,682 7,862 7,076
Net income of joint venture (185) (183) (47)
Deferred income taxes (126) 108 956
Gain on sale of securities 3 (87) (193)
Gain on repurchase of Company's 7 1/2% convertible subordinated notes (108) ---- ----
Changes in operating assets and liabilities:
Receivables (1,777) (454) (579)
Inventories (765) (737) (786)
Prepaids and other assets (519) 622 1,071
Accounts payable and accruals 2,257 (348) (2,508)
Deferred revenue, deposits and other (539) 599 121
--------------------------------------
Net cash provided by operating activities 7,711 9,081 6,621
--------------------------------------
Cash flows from investing activities
Equipment manufactured for rental (7,373) (7,802) (10,500)
Purchases of property, plant and equipment (12,992) (5,160) (2,012)
Increase in construction funds (3,290) ---- ----
Payments for acquisitions (net) (1,163) ---- (2,283)
Proceeds from joint venture 94 94 94
Purchases of securities ---- ---- (18,343)
Proceeds from sale of securities 1,054 3,322 11,007
--------------------------------------
Net cash used in investing activities (23,670) (9,546) (22,037)
--------------------------------------
Cash flows from financing activities
Proceeds from long-term debt 20,671 1,876 7,325
Repayment of long-term debt (984) (1,805) (4,600)
Repurchase of Company's 7 1/2% convertible subordinated notes (974) ---- ----
Redemption of Company's 9% convertible subordinated debentures ---- ---- (4,573)
Proceeds from exercise of stock options ---- 24 10
Purchase of treasury stock (226) ---- ----
Cash dividends (175) (175) (177)
--------------------------------------
Net cash provided by (used in) financing activities 18,312 (80) (2,015)
--------------------------------------
Net increase (decrease) in cash and cash equivalents 2,353 (545) (17,431)
Cash and cash equivalents at beginning of year 1,298 1,843 19,274
--------------------------------------
Cash and cash equivalents at end of year $ 3,651 $ 1,298 $ 1,843
---------------------------------------------------------------------------------------------------------------------------
Interest paid $ 4,185 $ 3,674 $ 4,115
Interest received 617 733 1,016
Income taxes paid 1,003 519 694
---------------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Additional Other
In thousands, except share data Common Stock Class B Paid-in Treasury Retained Comprehensive
For the three years ended December 31, 1999 Shares Amount Shares Amount Capital Stock Earnings Income
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 2,441,765 $2,442 298,640 $298 $13,818 $(11,802) $17,964 $ (58)
Net income --- --- --- --- --- --- 1,510 ---
Cash dividends --- --- --- --- --- --- (177) ---
Other comprehensive income:
Unrealized foreign currency translation --- --- --- --- --- --- --- 23
Unrealized holding gain --- --- --- --- --- --- --- 64
Conversion of 9% convertible
subordinated debentures --- --- --- --- 89 151 --- ---
Exercise of stock options --- --- --- --- (3) 13 --- ---
Class B conversion to common stock 1,000 1 (1,000) (1) --- --- --- ---
-----------------------------------------------------------------------------------
Balance December 31, 1997 2,442,765 2,443 297,640 297 13,904 (11,638) 19,297 29
Net income --- --- --- --- --- --- 1,699 ---
Cash dividends --- --- --- --- --- --- (175) ---
Other comprehensive income (loss):
Unrealized foreign currency translation --- --- --- --- --- --- --- 49
Unrealized holding loss --- --- --- --- --- --- --- (78)
Exercise of stock options --- --- --- --- (3) 27 --- ---
Class B conversion to common stock 354 --- (354) --- --- --- --- ---
-----------------------------------------------------------------------------------
Balance December 31, 1998 2,443,119 2,443 297,286 297 13,901 (11,611) 20,821 0
Net income --- --- --- --- --- --- 788 ---
Cash dividends --- --- --- --- --- --- (175) ---
Other comprehensive income (loss):
Unrealized foreign currency translation --- --- --- --- --- --- --- (142)
Unrealized holding loss --- --- --- --- --- --- --- (83)
Common stock acquired (31,656 shares) --- --- --- --- --- (226) --- ---
Class B conversion to common stock 1,281 1 (1,281) (1) --- --- --- ---
-----------------------------------------------------------------------------------
Balance December 31, 1999 2,444,400 $2,444 296,005 $296 $13,901 $(11,837) $21,434 $(225)
================================================================================================================================
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands Years ended December 31 1999 1998 1997
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 788 $1,699 $1,510
Other comprehensive income / (loss), net of tax:
Unrealized foreign currency translation (142) 49 23
Unrealized holding gain / (loss) on securities (83) (78) 64
-----------------------------------
Total other comprehensive income / (loss) (225) (29) 87
Comprehensive income $ 563 $1,670 $1,597
------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
17
<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). The investment in a 50% owned joint venture partnership, MetroLux
Theatres, is reflected under the equity method and is recorded as a component of
other income in the Consolidated Statements of Income.
Cash equivalents: The Company considers all highly liquid investments
with a maturity of three months or less, when purchased, to be cash equivalents.
Available-for-sale securities: Available-for-sale securities consist
of common and preferred stock holdings and corporate debt securities and are
stated at fair value.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market value.
Equipment on rental and property, plant and equipment: Equipment on
rental and property, plant and equipment 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 lease. The estimated useful lives are
as follows:
- - ------------------------------------------------------------
Equipment on rental 5 to 15 years
Buildings and improvements 10 to 45 years
Machinery, fixtures and equipment 4 to 15 years
Leaseholds and improvements 2 to 17 years
- - ------------------------------------------------------------
When equipment on rental and property, plant and equipment are fully
depreciated, retired or otherwise disposed of, the cost and accumulated
depreciation are eliminated from the accounts.
Goodwill and intangibles: Goodwill and intangible assets are amortized
on a straight line basis, using the following useful lives: Goodwill over 20
years; non-compete agreements over their contractual terms of five and seven
years; deferred financing costs over the life of the related debt; and patents
and other intangibles over 14 to 30 years.
Maintenance contracts: Purchased maintenance contracts are stated at
cost and are being amortized over their economic lives of eight to 15 years
using an accelerated method which contemplates contract expiration, fall-out,
and non-renewal.
Impairment of long-lived assets: The Company evaluates long-lived
assets, including intangible assets and goodwill, for possible impairment when
events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. In making such an evaluation, the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition to measure whether the asset is recoverable.
Revenue recognition: Rental revenue from leasing of equipment and
revenue from maintenance contracts are recognized as they accrue during the term
of the respective agreements. The Company recognizes revenues on long-term
equipment sales contracts, which require more than three months to complete,
using the percentage of completion method. The Company records 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.
Revenues on equipment sales, other than long-term equipment sales contracts, are
recognized upon shipment. Theatre receipts and other revenues are recognized at
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.
Foreign currency: The functional currency of the Company's non-U.S.
business operations is the applicable local currency. The assets and
liabilities of such operations are translated into U.S. dollars at the year-
end rate of exchange, and the income and cash flow statements are converted at
the average annual rate of exchange. The resulting translation adjustment is
recorded as a separate component of stockholders' equity. Gains and losses
related to the settling of transactions not denominated in the functional
currency are recorded as a component of general and administrative expenses in
the Consolidated Statements of Income.
Derivative financial instruments: The Company has limited involvement
with derivative financial instruments and does not use them for trading
purposes; they are only used to manage well-defined interest rate risks. From
time to time the Company enters into interest rate swap agreements to reduce
exposure to interest fluctuations. The net gain or loss from the exchange of
interest rate payments is included in interest expense in the Consolidated
Statements of Income and in interest paid in the Consolidated Statements of Cash
Flows.
Accounting pronouncement: The Company will adopt the provisions of
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133) effective January 1, 2001. The
standard requires companies to recognize all derivatives as either assets or
liabilities and measure those instruments at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. The Company does not expect the adoption of SFAS 133 to have a
material impact on its consolidated financial statements.
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.
18
<PAGE>
2. Available-for-Sale Securities
Available-for-sale securities are carried at estimated fair values and the
unrealized holding gains and losses are excluded from earnings and are reported
net of income taxes in a separate component of stockholders' equity until
realized. Adjustments of $105,000 and $53,000 (before reclassification
adjustment for realized gains and losses) were made to equity to reflect the net
unrealized losses on available-for-sale securities as of December 31, 1999 and
1998, respectively. The Company realized gains /(losses) on the sales of
available-for-sale securities of ($3,000) in 1999 and $88,000 in 1998.
<TABLE>
<CAPTION>
Available-for-sale securities consist of the following:
1999 1998
- - ------------------------------------------------------------------------------
Fair Unrealized Fair Unrealized
In thousands Value Gains/(Losses) Value Gains/(Losses)
------------------------------------------------
<S> <C> <C> <C> <C>
Equity securities $ 473 $(232) $ 609 $(95)
Corporate debt securities-
maturities of up to 5 years 3,193 (45) 4,305 10
----- ----- ----- ----
$3,666 $(277) $4,914 $(85)
- - ------------------------------------------------------------------------------
</TABLE>
3. Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
In thousands 1999 1998
- - ----------------------------------------------------------------
<S> <C> <C>
Raw materials and spare parts $3,532 $3,230
Work-in-progress 1,459 1,218
Finished goods 1,155 933
----- -----
$6,146 $5,381
- - ----------------------------------------------------------------
</TABLE>
4. Property, Plant and Equipment
<TABLE>
<CAPTION>
Property, plant and equipment consist of the following:
In thousands 1999 1998
- - ----------------------------------------------------------------
<S> <C> <C>
Land, buildings and improvements $27,437 $18,335
Machinery, fixtures and equipment 13,133 9,558
Leaseholds and improvements 3,841 2,923
------ ------
$44,411 $30,816
- - ----------------------------------------------------------------
</TABLE>
Land, buildings and equipment having a net book value of $20.5 million and $7.4
million at December 31, 1999 and 1998, respectively, were pledged as collateral
under mortgage agreements.
5. Other Assets
<TABLE>
<CAPTION>
Other assets consist of the following:
In thousands 1999 1998
- - -------------------------------------------------------------------------------
<S> <C> <C>
Deferred financing costs, net of
accumulated amortization of $957 - 1999
and $729 - 1998 $1,861 $1,828
Goodwill and noncompete agreements,
net of accumulated amortization of $834 -
1999 and $630 - 1998 1,473 1,667
Investment in and loans to joint ventures 964 899
Prepaids, including pension asset 781 850
Maintenance contracts, net of accumulated
amortization of $1,980 - 1999
and $1,827 - 1998 645 798
Patents and other intangibles, net of
accumulated amortization of $386 - 1999
and $320 - 1998 152 218
Deposits and other 573 524
----- -----
$6,449 $6,784
- - -------------------------------------------------------------------------------
</TABLE>
Deferred financing costs relate to issuance of the 7-1/2% convertible
subordinated notes, the 9-1/2% subordinated debentures, and other financing
agreements.
Goodwill and noncompete agreements relate to the acquisition of
Integrated Systems Engineering, Inc. and Fairtron.
The loan to the joint venture, MetroLux Theatres, had a balance of
$596,000 and $690,000 at December 31, 1999 and 1998, respectively, of which
$94,000 was classified as current at both dates.
Maintenance contracts represent the present value of acquired
agreements to service outdoor display equipment.
6. Acquisition
On May 1, 1997, the Company acquired the catalog and custom scoreboard sign
business segment of Fairtron Corporation "Fairtron", an Iowa corporation. The
results of operations have been included in the Company's consolidated financial
statements since the date of acquisition.
The pro forma data presented below gives effect to the acquisition as if
the acquisition had occurred on January 1, 1997. Such pro forma data should be
read in conjunction with the Company's consolidated financial statements, and
does not purport to represent what the Company's results of operations would
have been if the acquisition had actually occurred on January 1, 1997.
In thousands, except per share data 1997
- - ------------------------------------------------------------
Unaudited
Revenues $57,816
Net income $ 1,560
Earnings per share-basic $ 1.22
Earnings per share-diluted $ 0.81
- - ------------------------------------------------------------
7. Taxes on Income
<TABLE>
<CAPTION>
The components of income tax expense are as follows:
In thousands 1999 1998 1997
- - ----------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $277 $ 637 $ (1)
State and local 64 144 165
Foreign 129 18 -
----------------------------------
470 799 164
Deferred:
Federal (157) 304 1,094
State and local 131 226 79
----------------------------------
(26) 530 1,173
----------------------------------
Total income tax expense $444 $1,329 $1,337
- - ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Income taxes provided differed from the expected federal statutory rate of
34% as follows:
1999 1998 1997
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 10.4 8.1 5.7
Foreign losses / (income) (12.8) - 6.0
Other 4.4 1.8 1.3
----------------------------
Effective income tax rate 36.0% 43.9% 47.0%
- - -----------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
In thousands 1999 1998
- - ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax asset:
Tax credit carryforwards $ 2,469 $2,143
Operating loss carryforwards 1,852 616
Depreciation and amortization 404 446
Net pension cost 247 204
Litigation 176 -
Other 695 591
Valuation allowance (219) (202)
---------------------
5,624 3,798
Deferred tax liability:
Depreciation 9,213 7,637
Gain on purchase of
Company's 9% debentures 439 439
Net pension benefit 373 373
Other 205 167
---------------------
10,230 8,616
---------------------
Net deferred tax liability $ 4,606 $4,818
- - --------------------------------------------------------------------
</TABLE>
Tax credit carryforwards primarily relate to federal alternative minimum taxes
paid by the Company which may be carried forward indefinitely. Operating tax
loss carryforwards primarily relate to federal net operating loss carryforwards
of approximately $4.3 million which begin to expire in 2019.
A valuation allowance has been established for the amount of deferred tax assets
related to certain net operating loss carryforwards which management estimates
will more likely than not expire unused.
8. Accrued Liabilities
<TABLE>
<CAPTION>
Accrued liabilities consist of the following:
In thousands 1999 1998
- - --------------------------------------------------------------------
<S> <C> <C>
Compensation and employee benefits $1,298 $1,613
Taxes payable 999 1,149
Interest payable 617 487
Other 2,179 1,490
--------------------
$5,093 $4,739
- - --------------------------------------------------------------------
</TABLE>
9. Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consist of the following:
In thousands 1999 1998
- - ------------------------------------------------------------------------------
<S> <C> <C>
7-1/2% convertible subordinated notes due 2006 $30,490 $31,625
9-1/2% subordinated debentures due 2012 1,057 1,057
Term loans - bank, secured due in quarterly installments
through 2005 8,712 8,712
Revolving credit facility - bank, secured 8,750 3,400
Real estate mortgages - secured, due in monthly
installments through 2020 9,478 4,506
Loan payable - IRB, due in annual installments through
2014 4,825 -
Construction loans - secured 4,326 -
Loan payable - CEBA, secured due in monthly installments
through 2006 at 0.0% 336 -
Loan payable - CDA, secured due in monthly installments
through 2002 at 5.0% 219 299
Capital lease obligations - secured, due in monthly
installments through 2004 at 5.3% 140 182
-------------------
68,333 49,781
Less portion due within one year 2,381 258
-------------------
Long-term debt $65,952 $49,523
- - ------------------------------------------------------------------------------
</TABLE>
Payments of long-term debt due for the next five years are:
In thousands 2000 2001 2002 2003 2004
- - --------------------------------------------------------------------
$2,381 $2,463 $2,756 $3,601 $3,637
- - --------------------------------------------------------------------
The 7-1/2% convertible subordinated notes (the "Notes") are due in 2006.
Interest is payable semiannually. The Notes are convertible into Common Stock
of the Company at a conversion price of $14.013 per share. The Notes may be
redeemed by the Company, in whole or in part, at any time on or after December
1, 2001 at declining premiums. The related Indenture agreement contains certain
financial covenants which include limitations on the Company's ability to incur
indebtedness of five times EBITDA plus $5.0 million. During 1999, the Company
repurchased $1,135,000 face value of its Notes at an average price of $85.80.
The Company recognized $69,000 of income (net of tax), $0.05 per share, basic
and diluted.
The 9-1/2% subordinated debentures (the "Debentures") are due in annual
sinking fund payments of $105,700, beginning in 2009 with the remainder due in
2012. Interest is payable semiannually. The Debentures may be redeemed by the
Company, in whole or in part, at any time on or after December 1, 1999 at
declining premiums.
The Company has a bank Credit Agreement, which was amended subsequent to
year end, which provides for both term loans and a $15 million revolving credit
facility which is available until June 2002. The Company has provided the bank
with a security interest in substantially all assets of its display business.
At December 31, 1999, under the term loans, $5.7 million and $3.0 million were
outstanding, under the revolving credit facility, $8.8 million was outstanding
leaving $5.8 million in borrowing capacity under this facility. The Credit
Agreement contains certain financial covenants including a defined debt service
coverage ratio of 1.75 to 1.0, a defined debt to cash flow ratio of 3.5 to 1.0
and a limitation on cash dividends. The term loans bear interest at LIBOR plus
1.75%. At December 31, 1999 there were two interest rate swap agreements in
place, with a notional value equal to the amount of the two term loans and with
corresponding maturity terms, which have the effect of converting the interest
rate on such term loans to a fixed average annual rate of 7.86% through July
2002. At December 31, 1999, the gain to the Company to terminate the interest
rate swap agreements was $79,000. Payments on the $3.0 million term loan are
due in even quarterly installments through July 2002, payments on the $5.7
million term loan are due in even quarterly installments through July 2005 and a
final maturity of $2.7 million in August 2005.
The borrowings under the revolving credit facility can be converted to a
four-year term loan under the Credit Agreement. Upon conversion to a term loan,
the revolving credit borrowings would be repayable in even quarterly
installments until maturity. Interest is computed at LIBOR plus 2.0% (7.8225%
at December 31, 1999).
The Company has mortgages on certain of its facilities, which are
payable in monthly installments, the last of which extends to 2020. Depending
upon the mortgage, the interest rate is either fixed, floating or adjustable.
At December 31, 1999, such interest rates ranged from 7.75% to 8.65%.
20
<PAGE>
On June 3, 1999 as part of a loan agreement entered into with the City of
Logan, Cache County, Utah, the Company financed $4.8 million of a combination of
Tax-Exempt and Taxable Revenue Bonds ("Bonds") for the construction of a new
55,000 square foot outdoor display facility in Logan, Utah. The Bonds are
secured by an irrevocable letter of credit issued by a bank. At the direction
of the Company, the Bonds may be redeemed in whole or in part prior to maturity
date. The Bonds were issued with a variable interest rate based upon a Weekly
Rate (as determined by a Remarketing Agent) which is the minimum rate necessary
for the Remarketing Agent to sell the Bonds on the effective date of such Weekly
Rate at a price equal to 100% of the Bonds' principal amount without regard to
accrued interest. The Company may from time to time change the method of
determining the interest rate to a daily, weekly, commercial paper or long-term
interest rate. At December 31, 1999, the interest rates on the Bonds were 5.50%
and 6.75%, respectively, plus a 1.25% letter of credit fee.
The Company has construction loans for certain of its theatre properties
being constructed, which do not require monthly principal installments and
mature in 2000. Certain of the loans will convert into mortgages with a final
maturity in 2020. Depending on the loan, the interest rate is either fixed or
floating. At December 31, 1999, such interest rates ranged from 7.75% to 8.65%.
During 1999, the Company incurred interest costs of $4.6 million of which
$0.4 million was capitalized during construction of qualified assets. At
December 31, 1999, the fair value of the Notes and the Debentures was $26.2
million and $1.0 million, respectively. The fair value of the remaining
long-term debt approximates the carrying value.
10. Stockholders' Equity
During 1999, 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 1999 and
January 2000. 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.
The Company has 3.0 million shares of authorized and unissued capital
stock designated as Class A Stock, $1.00 par value. Such shares would have no
voting rights except as required by law and would receive a 10% higher dividend
than the Common Stock. The Company also has 0.5 million shares of authorized
and unissued capital stock designated as Preferred Stock, $1.00 par value.
During 1999, the Board of Directors authorized the repurchase, from time
to time, of up to $400,000 in shares of the Company's Common Stock. As of
December 31, 1999, under this program, the Company had purchased 31,656 shares
at a cost of $226,000.
During 1998, the stockholders approved an increase in the authorized
shares of Common Stock to 11.0 million and Class A Stock to 6.0 million. A
Certificate of Amendment increasing the authorized shares will be filed when
deemed necessary.
Shares of Common Stock reserved for future issuance in connection with
convertible securities and stock option plans were 2.3 million at both December
31, 1999 and 1998.
11. Engineering Development
Engineering development expense was $535,000, $352,000 and $322,000 for 1999,
1998 and 1997, respectively.
12. Pension Plan
All eligible salaried employees of Trans-Lux Corporation and certain of its
subsidiaries are covered by a non-contributory defined benefit pension plan.
Pension benefits vest after five years of service and are based on years of
service and final average salary. The Company's general funding policy is to
contribute amounts sufficient to satisfy regulatory funding standards. At
December 31, 1999, plan assets consist principally of insurance company funds,
mutual funds and $92,000 in the Company's 9-1/2% subordinated debentures.
<TABLE>
<CAPTION>
The funded status of the plan as of December 31, 1999 and 1998 is as
follows:
In thousands 1999 1998
- - -----------------------------------------------------------------------------
<S> <C> <C>
Change in projected benefit obligation
- - --------------------------------------
Projected benefit obligation at beginning of year $6,625 $ 5,740
Service cost 565 535
Interest cost 446 401
Actuarial (gain)/loss (657) 273
Benefits paid (541) (324)
------ ------
Projected benefit obligation at end of year $6,438 $ 6,625
------ ------
Change in plan assets
- - ---------------------
Fair value of plan assets at beginning of year $5,320 $ 4,612
Actual return on plan assets 752 475
Company contributions 457 557
Benefits paid (541) (324)
------ ------
Fair value of plan assets at end of year $5,988 $ 5,320
------ ------
Funded status (underfunded)
- - ---------------------------
Funded status $ (450) $(1,305)
Unrecognized net actuarial (gain)/loss 732 1,693
Unrecognized prior service cost 13 15
------ ------
Prepaid benefit cost $ 295 $ 403
------ ------
Weighted-average assumptions as of December 31
- - ----------------------------------------------
Discount rate 7.75% 6.75%
Expected return on plan assets 9.50% 9.50%
Rate of compensation increase 4.50% 4.00%
- - ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
The following items are components of the net periodic pension cost for the
three years ended December 31, 1999:
In thousands 1999 1998 1997
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 565 $ 535 $ 371
Interest cost 446 401 365
Expected return on plan assets (536) (481) (429)
Amortization of prior service cost 2 2 2
Amortization of transition asset - (12) (40)
Amortization of net actuarial loss 88 59 36
--- --- ---
Net periodic pension cost - funded plan $ 565 $ 504 $ 305
- - -----------------------------------------------------------------------------
</TABLE>
In addition, the Company provides unfunded supplemental retirement benefits for
the Chief Executive Officer. The Company accrued $97,000, $97,000 and $62,000
for 1999, 1998 and 1997, respectively, for such benefits. The total liability
accrued was $472,000, $375,000 and $278,000 at December 31, 1999, 1998 and 1997,
respectively.
The Company does not offer any postretirement benefits other than the
pension and the supplemental retirement benefits described herein.
21
<PAGE>
13. Stock Option Plans
The Company has three 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 grant to key employees. The Non-Employee Director Stock
Option Plan reserved 30,000 shares of Common Stock for grant.
<TABLE>
<CAPTION>
Changes in the stock option plans are as follows:
Weighted
Number of Shares Average
Authorized Granted Available Exercise Price
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1996 180,294 85,594 94,700 $ 8.33
Granted - 27,600 (27,600) 11.26
Exercised (6,644) (6,644) - 7.33
----------------------------------------------------
Balance December 31, 1997 173,650 106,550 67,100 9.14
Terminated (12,500) (13,400) 900 7.54
Granted - 1,000 (1,000) 13.00
Exercised (8,341) (8,341) - 7.57
----------------------------------------------------
Balance December 31, 1998 152,809 85,809 67,000 9.58
Terminated (300) (1,300) 1,000 7.71
Granted - 44,000 (44,000) 8.83
----------------------------------------------------
Balance December 31, 1999 152,509 128,509 24,000 $ 9.35
- - --------------------------------------------------------------------------------
</TABLE>
Under the 1995 and 1992 Stock Option Plans, 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. At December 31, 1999, under the 1995 Plan, options
for 85,739 shares (granted in 1999, 1998, 1997 and 1995) with exercise prices
ranging from $8.125 to $15.1875 per share were outstanding, 48,739 shares of
which were exercisable. During 1999, options for 42,500 shares were granted at
exercise prices ranging from $8.80 to $9.00 per share, no options were exercised
and options for 1,000 shares expired. During 1998, options for 4,411 shares
(granted in 1995) with an exercise price of $8.125 per share were exercised, and
options for 900 shares expired. During 1997, options for 27,100 shares were
granted at exercise prices ranging from $11.0625 to $15.1875 per share, and
options for 1,350 shares (granted in 1995) with an exercise price of $8.125 per
share were exercised.
At December 31, 1999, under the 1992 Plan, options for 31,270 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
1999, no options were exercised, and options for 300 shares expired. During
1998, options for 3,930 shares (granted in 1993 and 1992) with exercise prices
ranging from $6.3125 to $7.5625 per share were exercised. During 1997, options
for 5,294 shares (granted in 1993 and 1992) with exercise prices ranging from
$6.3125 to $7.5625 per share were exercised.
Under the Non-Employee Director 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 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 terminate at a stipulated period of time after an
optionee ceases to be a director. At December 31, 1999, options for 11,500
shares (granted in 1999, 1998, 1997, 1996, 1995, and 1994) with exercise prices
ranging from $8.00 to $13.00 per share were outstanding, 10,000 shares of which
were exercisable. During 1999, options for 1,500 shares were granted at an
exercise price of $8.00 per share, and no options were exercised. During 1998,
options for 1,000 shares were granted at an exercise price of $13.00 per share,
and no options were exercised. During 1997, options for 500 shares were granted
at an exercise price of $12.00 per share, and no options were exercised.
The following tables summarize information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Weighted Average
Range of Number Remaining Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
$ 6.31 - $ 7.56 8,970 3.2 $ 6.86
7.57 - 8.63 32,039 5.2 8.13
8.64 - 9.69 51,900 5.6 8.99
9.70 - 12.63 33,500 6.1 11.41
12.64 - 15.19 2,100 6.2 14.15
-------------------------------------------------------
128,509 5.5 $ 9.35
- - ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Range of Number Weighted Average
Exercise Prices Excercisable Exercise Price
- - -------------------------------------------------------------
<S> <C> <C>
$ 6.31 - $ 7.56 8,970 $ 6.86
7.57 - 8.63 30,539 8.14
8.64 - 9.69 21,900 9.26
9.70 - 12.63 26,500 11.51
12.64 - 15.19 2,100 14.15
-------------------------------------
90,009 $ 9.42
- - -------------------------------------------------------------
</TABLE>
The estimated fair value of options granted during 1999, 1998 and 1997 was
$3.93, $5.24, and $3.64 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 the accounting provisions of Statement of Financial
Accounting Standards No. 123 (SFAS 123), the Company's net income and earnings
per share for the years ended December 31, 1999, 1998 and 1997 would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
In thousands, except per share data 1999 1998 1997
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income applicable to common shareholders
Basic:
As reported $788 $1,699 $1,510
Pro forma 737 1,676 1,477
- - ------------------------------------------------------------------------------
Net income per common and common equivalent share
Basic:
As reported $0.61 $ 1.32 $ 1.18
Pro forma 0.56 1.30 1.15
Diluted:
As reported 0.61 0.85 0.80
Pro forma 0.56 0.84 0.79
- - ------------------------------------------------------------------------------
</TABLE>
The fair value of options granted under the Company's stock option plans during
1999, 1998 and 1997 was estimated on dates of grant using the binomial
options-pricing model with the following weighted-average assumptions used:
dividend yield of approximately 1.77% in 1999, 1.24% in 1998, and 1.05% in 1997,
expected volatility of approximately 37% in 1999, 38% in 1998, and 33% in 1997,
risk free interest rate of approximately 6.48% in 1999, 5.1% in 1998 and 6.0% in
22
<PAGE>
1997, and expected lives of option grants of approximately four years in 1999,
1998 and 1997. The effects of applying SFAS 123 in this pro forma disclosure
are not indicative of future pro forma effects, and additional awards in future
years are anticipated.
14. Earnings per Share
The following table represents the computation of basic and diluted earnings per
common share for the three years ended December 31, 1999:
<TABLE>
<CAPTION>
In thousands, except per share data 1999 1998 1997
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic earnings per share computation:
Net income $ 788 $1,699 $1,510
---------------------------------
Weighted average common
shares outstanding 1,286 1,290 1,281
---------------------------------
Basic earnings per common share $ 0.61 $ 1.32 1.18
---------------------------------
Diluted earnings per share computation:
Net income $ 788 $1,699 $1,510
Add: After tax interest expense
applicable to convertible debt (1) - 1,411 1,447
Add: After tax changes to income
applicable to assumed conversion - (98) (78)
---------------------------------
Adjusted net income $ 788 $3,012 $2,879
---------------------------------
Weighted average common
shares outstanding 1,286 1,290 1,281
Assumes exercise of options reduced
by the number of shares which could
have been purchased with the proceeds
from exercise of such options (2) 2 7 30
Assumes conversion of 9% convertible
subordinated debentures - - 59
Assumes conversion of 7-1/2%
convertible subordinated notes (1) - 2,257 2,247
---------------------------------
Total weighted average shares 1,288 3,554 3,617
---------------------------------
Diluted earnings per common share $ 0.61 $ 0.85 $ 0.80
- - ------------------------------------------------------------------------------
<FN>
(1) The incremental shares from the assumed conversion of the Company's 7-1/2%
convertible subordinated notes are not included in the 1999 diluted earnings
per share calculation, as the effect is antidilutive.
(2) Options to purchase 89 shares of common stock with exercise prices ranging
from $8.625 to $15.1875 per share were outstanding at December 31, 1999, but
were not included in the 1999 diluted earnings per share calculation because
the options exercise price was greater than the average market price of the
common share.
</FN>
</TABLE>
15. Commitments and Contingencies
Contingencies: The Company has employment agreements with certain executive
officers which expire at various dates through December 2007. At December 31,
1999, the aggregate commitment for future salaries, excluding bonuses, was
approximately $5.3 million.
During 1999, the Company received $400,000 structured as forgivable loans
from the State of Iowa, City of Des Moines and Polk County which are classified
as deferred revenue, deposits and other in the Consolidated Balance Sheet. The
loans will be forgiven on a pro-rata basis when predetermined employment levels
are attained.
During 1996, the Company received a $350,000 grant from the State of
Connecticut Department of Economic Development which are classified as deferred
revenue, deposits and other in the Consolidated Balance Sheet. 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. During June 1999, a jury in the state of New
Mexico awarded a former employee of the Company $15,000 in damages for lost
wages and emotional distress and $393,000 in punitive damages on a retaliatory
discharge claim. The Company denied the charges on the basis that the
termination was proper and is appealing such verdict. The Company believes it
has made adequate provisions during 1999 to cover such matters. In January
2000, a second former employee of the Company commenced a retaliatory discharge
action seeking compensatory and punitive damages in an unspecified amount. The
Company has denied such allegations and asserted defenses including that the
former employee resigned following her failure to timely report to work.
Certain of the amounts are subject to insurance recoveries.
Operating leases: Theatre and other premises are occupied under operating
leases that expire at varying dates through 2044. Certain of these leases
provide for the payment of real estate taxes and other occupancy costs. Future
minimum lease payments due under operating leases at December 31, 1999 are as
follows: $685,000 - 2000, $541,000 - 2001, $487,000 - 2002, $492,000 - 2003,
$474,000 - 2004, $4,263,000 - thereafter. Rent expense was $601,000, $585,000,
and $456,000 in the years ended December 31, 1999, 1998 and 1997, respectively.
Guarantees: The Company has guaranteed a $2.6 million mortgage loan
obtained by its joint venture, MetroLux Theatres. The Company has received a
guarantee from the unrelated general partner of MetroLux Theatres for their
pro-rata share of the indebtedness.
16. Business Segment Data
Operating segments are based on the Company's business components about which
separate financial information is available, and is evaluated regularly by the
Company's chief operating decision maker, in deciding how to allocate resources
and in assessing performance.
The Company evaluates segment performance and allocates resources based
upon operating income. The Company's operations have been classified into three
reportable business segments. The Display Division comprises two operating
segments, indoor display and outdoor display. Both design, produce, lease, sell
and service large-scale, multi-color, real-time electronic information displays.
Both operating segments are conducted on a global basis, primarily through
operations in the U.S. The Company also has operations in Canada and Australia.
The indoor display and outdoor display segments are differentiated primarily by
the customers they serve. The Entertainment and Real Estate Division owns and
operates a chain of motion picture theatres in the western Mountain States and
owns real estate used for both corporate and income-producing purposes in the
U.S. and Canada. The accounting policies applied to segment information are
the same as those described in the summary of significant accounting policies.
23
<PAGE>
Segment operating income is shown after general and administrative expenses
directly associated with the segment and includes the operating results of the
joint venture activities. Corporate items relate to resources and costs which
are not directly identifiable with a segment. There are no intersegment sales.
Information about the Company's operations in its three business segments for
the three years ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
In thousands 1999 1998 1997
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Indoor display $ 23,419 $25,983 $21,557
Outdoor display 31,344 31,056 26,349
Entertainment and real estate 8,055 6,739 5,457
---------------------------------
Total revenues $ 62,818 $63,778 $53,363
---------------------------------
Operating income:
Indoor display $ 7,331 $ 7,650 $ 5,794
Outdoor display 2,252 4,078 4,539
Entertainment and real estate 1,027 811 711
---------------------------------
Total operating income 10,610 12,539 11,044
Other income 258 123 193
Corporate general and administrative expenses (5,977) (6,182) (5,228)
Interest expense - net (3,659) (3,452) (3,162)
---------------------------------
Income before income taxes $ 1,232 $ 3,028 $ 2,847
---------------------------------
Assets:
Indoor display $ 42,283 $40,719
Outdoor display 36,956 30,502
Entertainment and real estate 24,931 12,704
--------------------
Total identifiable assets 104,170 83,925
General corporate 8,278 7,221
--------------------
Total assets $112,448 $91,146
--------------------
Depreciation and amortization:
Indoor display $ 4,853 $ 4,238 $ 3,464
Outdoor display 2,581 2,459 2,344
Entertainment and real estate 594 475 380
General corporate 654 690 888
---------------------------------
Total depreciation and amortization $ 8,682 $ 7,862 $ 7,076
---------------------------------
Capital expenditures:
Indoor display $ 5,820 $ 6,847 $ 9,215
Outdoor display 4,147 1,798 2,061
Entertainment and real estate 10,101 3,920 1,039
General corporate 297 397 197
---------------------------------
Total capital expenditures $ 20,365 $12,962 $12,512
- - ------------------------------------------------------------------------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
DELOITTE & TOUCHE
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, 1999 and 1998 and the related
consolidated statements of income, comprehensive income, cash flows and
stockholders' equity for each of the three years in the period ended December
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 1999 and 1998 and the results of their operations,
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with accounting principles generally accepted in the
United States of America.
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
February 29, 2000
24
<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 72
Victor Liss Vice Chairman of the Board, 63
President and Chief Executive
Officer
Michael R. Mulcahy Executive Vice President 51
Matthew Brandt Senior Vice President 36
Thomas Brandt Senior Vice President 36
Karl P. Hirschauer Senior Vice President 54
Thomas F. Mahoney Senior Vice President 52
Al L. Miller Senior Vice President 54
Angela D. Toppi Senior Vice President, Treasurer, 44
Secretary and Chief Financial Officer
Messrs. R. Brandt, Liss, Mulcahy, Hirschauer and Ms. Toppi have been
associated in an executive capacity with the Company for more than five years.
Messrs. M. Brandt and T. Brandt were elected Senior Vice Presidents
in charge of theatre operations on September 27, 1997 and have been employed
since 1985. They each served as Vice Presidents in charge of theatre operations
between May 22, 1991 and September 27, 1997.
Mr. Mahoney was elected Senior Vice President in charge of sales on
June 1, 1996 and has been employed by the Company since 1967. Mr. Mahoney
served as Assistant Vice President of sales between December 1, 1994 and June 1,
1996.
25
<PAGE>
Mr. Miller was elected Senior Vice President in charge of manufacturing
and materials on September 27, 1997, on February 1, 2000, field service
operations was added to his area of responsibility. Mr. Miller has been
employed by the Company since 1995. Mr. Miller served as Vice President in
charge of manufacturing and materials between March 13, 1995 and September 27,
1997. Mr. Miller was self-employed as a consultant between 1994 and 1995.
(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, 1999, 1998 and 1997.
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Comprehensive Income for the Years
Ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
Individual financial statements for a 50% owned entity accounted for by
the equity method, has been omitted because it does not constitute a
significant subsidiary.
26
<PAGE>
(2) Financial Statement Schedules: None
(3) Exhibits:
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 to 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
(incorporated by reference to Exhibit 10.3 of Form 10-K for the
year ended December 31, 1996).
10.4(a) 1989 Non-Employee Director Stock Option Plan, as amended,
included herewith.
(b) 1992 Stock Option Plan (incorporated by reference to Proxy
Statement dated April 3, 1992).
(c) 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(d) of Form
10-Q for the quarter ended September 30, 1995.) Fourth
Amendment Agreement dated as of December 19, 1997 (incorporated
by reference to Exhibit 10.5 of Form 10-K for the year ended
December 31, 1997). Sixth Amendment Agreement dated as of
November 5, 1998, (incorporated by reference to Exhibit 10.5 of
Form 10-K for the year ended December 31, 1998). Seventh
Amendment Agreement dated as of March 31, 1999 (incorporated by
reference to Exhibit 10 of Form 10-Q for the quarter ended
March 31, 1999). Eighth Amendment Agreement dated as of June
3, 1999 (incorporated by reference to Exhibit 10 of Form 10-Q
for the quarter ended June 30, 1999). Ninth Amendment
Agreement dated as of December 31, 1999, included herewith.
10.6 Employment Agreement with Richard Brandt dated as of September
11, 1998 (incorporated by reference to Exhibit 10(a) of Form
10-Q for the quarter ended September 30, 1998).
27
<PAGE>
10.7 Employment Agreement with Victor Liss dated as of January 1,
1997 (incorporated by reference to Exhibit 10.7 of Form 10-K
for the year ended December 31, 1996). Amendment to Employment
Agreement with Victor Liss dated as of September 23, 1999,
included herewith.
10.8 Employment Agreement with Michael R. Mulcahy dated as of June
1, 1998 (incorporated by reference to Exhibit 10(b) of Form
10-Q for the quarter ended September 30, 1998).
10.10 Employment Agreement with Karl Hirschauer dated as of January
1, 2000, included herewith.
10.11 Employment Agreement with Thomas F. Mahoney dated as of June
1, 1998 (incorporated by reference to Exhibit 10 of Form 10-Q
for the quarter ended June 30, 1998).
10.12 Employment Agreement with Al Miller dated as of January 1, 1999
(incorporated by reference to Exhibit 10.12 of Form 10-K for
the year ended December 31, 1998). Amendment to Employment
Agreement with Al Miller dated as of January 1, 2000, included
herewith.
10.13 Employment Agreement with Angela Toppi dated as of January 1,
2000, included herewith.
10.14 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).
10.15 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).
10.16 Agreement between Trans-Lux Midwest Corporation and Fairtron
Corporation dated as of April 30, 1997 (incorporated by
reference to Exhibit 10(a) of Form 8-K filed May 15, 1997).
21 List of Subsidiaries, included herewith.
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only and
not filed.
(c) 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 P. Bosworth
-------------------------
Robert P. Bosworth
Vice President and
Chief Accounting Officer
Dated: March 28, 2000
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 28, 2000
- - -------------------------------------
Richard Brandt, Chairman of the Board
/s/ Victor Liss March 28, 2000
- - -------------------------------------
Victor Liss, Vice Chairman of the
Board, President and Chief Executive
Officer
/s/ Steven Baruch March 28, 2000
- - -------------------------------------
Steven Baruch, Director
/s/ Howard M. Brenner March 28, 2000
- - -------------------------------------
Howard M. Brenner, Director
/s/ Jean Firstenberg March 28, 2000
- - -------------------------------------
Jean Firstenberg, Director
/s/ Allan Fromme March 28, 2000
- - -------------------------------------
Allan Fromme, PhD, Director
/s/ Robert Greenes March 28, 2000
- - -------------------------------------
Robert Greenes, Director
/s/ Gene F. Jankowski March 28, 2000
- - -------------------------------------
Gene F. Jankowski, Director
/s/ Howard S. Modlin March 28, 2000
- - -------------------------------------
Howard S. Modlin, Director
30
<PAGE>
Exhibit 10.4(a)
TRANS-LUX CORPORATION
1989 Non-Employee Director Stock Option Plan
(As Amended at the Board of Directors Meeting
held December 9, 1999.)
1. Purpose: The purpose of this Plan is to enable the Corporation to
attract and keep non-employee persons of requisite business experience to serve
on the Board of Directors of the Corporation by offering them an opportunity to
participate in the growth and development of the Corporation through stock
ownership, and to thereby provide additional incentive for them to promote the
success of the business.
2. Stock Subject to the Plan: The shares of stock to be offered
pursuant to this Plan shall be shares of the Corporation's authorized common
capital stock, and may be unissued shares or reacquired shares. The aggregate
number of shares which may be delivered upon exercise of all options granted
under the Plan shall not be more than 30,000 shares, subject to adjustment as
provided in the Plan. Shares subject to but not delivered under any option
terminating or expiring for any reason prior to the exercise thereof by the
optionee in full shall be deemed available for options thereafter granted during
the continuance of the Plan.
3. Administration of the Plan: The Compensation Committee of the
Board of Directors (hereinafter called "Committee"), subject to the provisions
of the Plan, shall have plenary authority in its sole discretion to interpret
the Plan; and to prescribe, amend, and rescind rules and regulations relating to
it.
4. Non-Employee Directors to Whom Options May be Granted: Subject to
the terms and conditions set forth herein, the Corporation:
(a) hereby grants to each Non-Employee Director who is a member
of the Board on the Effective Date of this Plan, options to purchase shares
based on the following schedule of Years of Service (as of the Effective Date)
which each such person has served as a member of the Board.
Years of Service No. of Options (Cumulative)
---------------- --------------
Less than 5 500
5 or more 1,000
10 or more 1,500
20 or more 2,500
(b) shall grant to each Non-Employee Director who receives an
option hereunder an option to purchase additional shares based on the following
schedule of Years of Service which each such person has served as a member of
the Board after the Effective Date.
Years of Service No. of Options (Non-Cumulative)
---------------- --------------
5th full year 500
10th full year 500
20th full year 1,000
(c) shall grant to each Non-Employee Director who is hereafter
elected to the Board an option to purchase 500 shares on the date of election to
the Board. Such persons shall also be entitled to the grant of options in
accordance with (b) above.
For purposes hereof, Year of Service shall mean a calendar year or
aggregate portions thereof during which a Director is a Non-Employee Director.
A Non-Employee Director shall mean a person who is or becomes a Director of the
Corporation and is not an employee of the Corporation.
(d) shall grant to each Non-Employee Director additional
options to purchase additional shares in an amount equal to (i) the number of
options granted under Section 4(a) (x) which have previously expired, on the
effective date of this amendment to the Plan, or (y) which hereafter expire, on
the date of expiration of such option, and (ii) which were heretofore exercised
or hereafter are exercised, on the later to occur of (x) four (4) years from the
date of grant, (y) the date of exercise of such exercised option or (z) the
effective date of this amendment to the Plan.
5. Option Price: The purchase price of the shares of common stock
which shall be covered by each option shall be 100% of the fair market value of
such shares as of the date of the granting of the option. Such fair market
value shall be deemed to be the mean of the high and low prices of the common
stock of this Corporation as quoted on a national securities exchange(s) on the
day on which the option shall be granted and such option by its terms shall not
be exercisable after the expiration of six (6) years from the date such option
is granted.
6. Duration of Options: The duration of each option shall be not more
than six (6) years from the date of the granting thereof, but may be for a
lesser term as shall be fixed by the Board of Directors, but shall be subject to
earlier termination as hereinafter provided.
7. Exercise of Options: An option when and after it becomes
exercisable may be exercised at any time, or from time to time during its term
as to any part of or all of the shares which shall be optioned, provided,
however, that:
(a) an option may not be exercised as to less than 100 shares
at any one time (or the remaining shares then purchasable under the option if
the same be less than 100 shares);
(b) the purchase price of the shares as to which an option
shall be exercised shall be paid in full in cash and/or by delivery of common
stock of the Corporation valued at the fair market value of such common stock as
determined in paragraph 5 on the date of exercise;
(c) each option shall be subject to the following additional
conditions precedent and restrictions thereon with respect to its exercise:
(i) Each Non-Employee Director to whom an option is
granted under the Plan must remain as a Director of the Corporation for one year
from the date the option is granted or such shorter period as permitted by the
Committee before he shall have the right to exercise any part thereof.
Thereafter all or any part of the shares covered by each option may be purchased
at any time or from time to time during the option period, provided, however,
that no option may be exercised unless the optionee is at the time of such
exercise a Director of the Corporation.
(ii) No option shall be transferable by an optionee
otherwise than by Will or by the laws of descent and distribution and is
exercisable during optionee's lifetime only by the optionee.
(iii) Each optionee shall agree that optionee will
purchase the optioned shares for investment and not with any present intention
to resell the shares.
(iv) No shares acquired on exercise of options may in
any event be sold or otherwise disposed of for value within six (6) months of
the date of grant of the options whether or not the shares are registered under
the Securities Act of l933 except on a sale to the Corporation in accordance
with Rule l6b-3(d) and (e).
8. Limitations on Participation:
(a) If an optionee shall cease to be a Director of the
Corporation for any reason (other than death or disability), he may, but only
within the 90 days next succeeding such cessation of directorship, exercise his
option to the extent that he was entitled to exercise it at the date of such
cessation, unless he was removed for cause by the stockholders. If an optionee
shall be removed for cause, his option shall terminate on the date of such
removal and he shall forfeit any and all rights which may have accrued prior
thereto. All options to the extent not exercisable on the date of cessation of
directorship shall be forfeited.
(b) In the event of death of an optionee while a Director of
the Corporation, the option theretofore granted to him shall be exercisable only
within nine months next following the date of his death by the person or persons
to whom the optionee's rights under the option shall pass by the optionee's Will
or the laws of descent and distribution, or within six months after the date of
the appointment of an administrator or executor of the estate of such optionee,
whichever date shall sooner occur, and then only if and to the extent that he
was entitled to exercise it at the date of his death, provided, however, that he
shall be deemed to be so entitled even if such death shall have taken place
prior to the expiration of one year from the date of the granting of the option,
anything in this Plan to the contrary notwithstanding.
(c) In the event that an optionee becomes permanently and
totally disabled and resigns as a Director, the optionee may, but only within
one year next succeeding the day of the commencement of such disability,
exercise his option to the extent that he was entitled to exercise his option,
but in no event after the expiration of the option. For this purpose, an
optionee shall be considered permanently and totally disabled if he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve months. An optionee shall not be considered to be
permanently and totally disabled unless he furnishes proof of the existence
thereof in such form and manner, and at such times, as the Committee may
require. The Committee's determination of whether the optionee is permanently
and totally disabled shall be final and absolute, and shall not be subject to
question by the optionee, a representative of the optionee, or the Corporation.
9. Adjustments Upon Changes in Capitalization: In the event of changes
in the outstanding common stock of the Corporation by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations, or liquidations, the number
and class of shares available under the Plan and the aggregate and the maximum
number of shares as to which options may be granted to any Non-Employee Director
shall be correspondingly adjusted by the Committee. No adjustment shall be made
in the minimum number of shares which may be purchased at any time.
10. Effectiveness of the Plan: The Plan shall become effective on such
date as the Board of Directors shall determine, but only after:
(a) if not previously listed, the shares of the common stock
reserved for the Plan shall have been duly listed, upon official notice of
issuance, upon the national exchange whereon they are traded and registered
under the Securities Exchange Act of 1934, as amended; and
(b) the Board of Directors shall have been advised by counsel
that all applicable legal requirements have been complied with.
Notwithstanding the foregoing, if all conditions are satisfied or inapplicable,
the Effective Date for purposes of paragraph 4 shall be the date of adoption by
the Board of Directors.
11. Time of Granting Options: Whenever a director is eligible under
paragraph 4 for the receipt of an option, the Corporation shall forthwith send
notice thereof to the designee. The date of eligibility shall be the date of
granting the option to such participant for all purposes of this Plan. The
notice shall be in the form of a Grant approved by the Board of Directors of
this Corporation.
12. Termination and Amendment of the Plan: The Plan shall terminate on
December 31, 2009, and an option shall not be granted under the Plan after that
date. The Board of Directors may at any time, or from time to time, modify or
amend the Plan including the form of option agreement, in such respects as it
shall deem advisable in order that options shall conform to any change in the
law, or in any other respects.
By Order of the Board of Directors
TRANS-LUX CORPORATION
<PAGE>
Exhibit 10.5
NINTH AMENDMENT AGREEMENT
-------------------------
AGREEMENT, made as of December 31, 1999, among TRANS-LUX CORPORATION, a
Delaware corporation, TRANS-LUX DISPLAY CORPORATION, a Delaware corporation,
TRANS-LUX MONTEZUMA CORPORATION, a New Mexico corporation, INTEGRATED SYSTEMS
ENGINEERING, INC., a Utah corporation, and FIRST UNION NATIONAL BANK, a national
banking association.
Background
----------
A. Capitalized terms not otherwise defined shall have the meanings
ascribed to them in the Credit Agreement dated as of August 28, 1995, among
Trans-Lux Corporation, Trans-Lux Consulting Corporation, Trans-Lux Sign
Corporation, Trans-Lux Montezuma Corporation, Integrated Systems Engineering,
Inc., and First Fidelity Bank of Connecticut (predecessor in interest to First
Union National Bank) (as amended, modified or supplemented from time to time,
the "Credit Agreement").
B. The Borrowers have requested that the Lender, among other things,
(i) extend from June 30, 2001 to June 30, 2002, the Loan C Commitment
Termination Date and revise the amortization schedule with respect to Loan C,
(ii) provide for a sub-limit of $2,500,000 under Loan C to allow for the
issuance of letters of credit, (iii) extend from August 27, 2004 to August 27,
2005 the Term Loan Maturity Date, and revise the amortization schedule with
respect to Loan A, and (iv) modify certain of the financial covenants contained
in the Credit Agreement.
C. The Lender has agreed to the requests of the Borrowers subject to
the terms and conditions of this Agreement.
Agreement
---------
In consideration of the foregoing Background, which is incorporated by
reference, the parties, intending to be legally bound, agree as follows:
1. Modifications to Credit Agreement. All of the terms and
provisions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect except as follows:
(a) The following is added as Section 1.15 of the Credit
Agreement:
1.15 Letters of Credit.
-----------------
(a) Issuance. Upon and subject to the terms and
conditions hereof, Lender agrees to incur, upon the request of TLX
and for TLX's account, Letter of Credit Obligations by issuing
Letters of Credit for TLX's account; provided, that the aggregate
amount of all Letter of Credit Obligations at any one time
outstanding (whether or not then due and payable) shall not exceed
$2,500,000 (the "L/C Sublimit"). The expiration date of (x) any
Documentary Credit shall not be later than 180 days after the date
of issuance thereof and (y) any Standby Letter of Credit shall not
be later than 12 months after the date of issuance thereof and, in
any event, Lender shall be under no obligation to incur Letter of
Credit Obligations in respect of any Letter of Credit having an
expiry date that is later than the Loan C Commitment Termination
Date.
(b) Advances Automatic. If Lender shall make any
payment on or pursuant to any Letter of Credit Obligation, TLX shall
pay such amount to Lender no later than one day after Lender's
payment, provided, however, that in the event a Default or Event of
Default exists at the time of Lender's payment, such payment shall
then be deemed automatically to constitute a borrowing under Loan C
under Section 1.01 of the Credit Agreement, notwithstanding TLX's
failure to satisfy the conditions precedent set forth in Section 2.
(c) Cash Collateral.
---------------
(i) If TLX is required to provide cash
collateral for any Letter of Credit Obligation pursuant to Article 8
of the Credit Agreement prior to the Loan C Commitment Termination
Date, TLX will pay to Lender cash or cash equivalents acceptable to
Lender ("Cash Equivalents") in an amount equal to 105% of the L/C
Sublimit then available to be drawn under all Letters of Credit
outstanding for the benefit of TLX. Such funds or Cash Equivalents
shall be held by Lender in a cash collateral account (the "Cash
Collateral Account") maintained at Lender and which shall be in the
name of TLX, and shall be pledged and subject to the control of
Lender in a manner satisfactory to Lender. TLX agrees to execute
and deliver to Lender such documentation with respect to the Cash
Collateral Account as Lender may request, and TLX hereby pledges
and grants to Lender a security interest in all such funds and Cash
Equivalents and all interest and dividends thereon and the proceeds
thereof held in the Cash Collateral Account from time to time, as
security for the payment of all amounts due in respect of the Letter
of Credit Obligations, whether or not then due. The Credit
Agreement shall constitute a security agreement under applicable
law.
(ii) If any Reimbursement Obligation, whether
or not then due and payable shall for any reason be outstanding on
the Loan C Commitment Termination Date, TLX shall either (A) provide
cash collateral in the manner described above, (B) cause all such
Letters of Credit to be canceled and returned, or (C) deliver a
stand-by letter (or letters) of credit in guaranty or back-up of
such Letter of Credit Obligations, which stand-by letter (or
letters) of credit shall be of like tenor and duration as, and in an
amount equal to 105% of the aggregate maximum amount then available
to be drawn under, the Letters of Credit to which such outstanding
Reimbursement Obligations relate and shall be issued by a Person,
and be subject to such terms and conditions as are satisfactory to
Lender in its sole discretion.
(iii) From time to time after cash is
deposited in the Cash Collateral Account, whether before or after
the Loan C Commitment Termination Date, Lender may apply such funds
or Cash Equivalents then held in the Cash Collateral Account to the
payment of any Reimbursement Obligation amounts, in such order as
Lender may elect, as shall be or shall become due and payable by TLX
to Lender with respect to such Reimbursement Obligations and, once
all Reimbursement Obligations have been satisfied, to any other
outstanding Obligations as and when such become due and payable.
(iv) Neither TLX nor any Person claiming on
behalf of or through TLX shall have any right to withdraw any cash
held in the Cash Collateral Account, except that, upon the
termination of all Reimbursement Obligations and the payment of all
amounts payable by TLX to Lender in respect thereof, any funds
remaining in the Cash Collateral Account shall be applied to other
Obligations when due and owing and upon payment in full of such
Obligations, any remaining amount shall be paid to TLX or as
otherwise required by law.
(v) Lender agrees to deposit any funds or
Cash Equivalents deposited in the Cash Collateral Account in an
interest-bearing account within five Business Days of receipt from
TLX, and interest and earnings thereon, if any, shall be the
property of TLX, and TLX hereby pledges and grants to Lender a
security interest in all such funds and Cash Equivalents and all
interest and dividends thereon and the proceeds thereof, in such
account(s) from time to time, as security for the payment of all
amounts due in respect of the Letter of Credit Obligations, whether
or not then due. This Agreement shall constitute a security
agreement under applicable law.
(d) Fees and Expenses. TLX agrees to pay to
Lender, as compensation to Lender for Letter of Credit Obligations
incurred hereunder, (i) all costs and expenses incurred by Lender on
account of such Letter of Credit Obligations, and (ii) the
Applicable Letter of Credit Fee. TLX shall pay such costs, expenses
and fees to Lender upon the issuance of each Letter of Credit. In
addition TLX shall pay to Lender, on demand, such fees (including
per annum fees), charges and expenses of Lender in respect of the
issuance, negotiation, acceptance, amendment, transfer and payment
of such Letters of Credit or otherwise payable pursuant to the
application and related documentation under which each Letter of
Credit is issued.
(e) Requests for Issuance of Letters of Credit.
TLX shall give Lender at least two (2) Business Days prior written
notice requesting the issuance of any Letter of Credit, specifying
the date such Letter of Credit is to be issued, identifying the
beneficiary and describing the nature of the transactions proposed
to be supported thereby. The notice shall be accompanied by the
form of the Letter of Credit (which shall be acceptable to Lender).
Notwithstanding anything contained herein to the contrary, the
Letter of Credit application by TLX and approvals by Lender may be
made and transmitted pursuant to electronic codes and security
measures mutually agreed upon and established between TLX and
Lender.
(f) Obligations Absolute. TLX's
Obligations to Lender with respect to any Letter of Credit or
Reimbursement Obligations shall be evidenced by Lender's records
and, in the absence of manifest error, shall be absolute,
unconditional and irrevocable, without necessity of presentment,
demand, protest or other formalities. Such obligations of TLX shall
be strictly in accordance with the terms hereof under all
circumstances including the following:
(i) any lack of validity or enforceability
of any Letter of Credit, the Credit Agreement, the other Loan
Documents or any other agreement;
(ii) the existence of any claim, set-off,
defense or other right which TLX or any of its Affiliates may at any
time have against a beneficiary or any transferee of any Letter of
Credit (or any Persons or entities for whom any such transferee may
be acting), Lender, or any other Person, whether in connection with
the Credit Agreement, the Letter of Credit, the transactions
contemplated herein or therein or any unrelated transaction
(including any underlying transaction between TLX or any of its
Affiliates and the beneficiary for which the Letter of Credit was
procured);
(iii) any draft, demand, certificate or any
other document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) payment by Lender (except as otherwise
expressly provided in paragraph (g)(ii)(C) below or for Lender's
gross negligence or willful misconduct) under any Letter of Credit
against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of
Credit or such guaranty;
(v) any other circumstance or happening
whatsoever, which is similar to any of the foregoing; or
(vi) the fact that a Default or an Event of
Default shall have occurred and be continuing.
(g) Indemnification; Nature of Lender's Duties.
(i) In addition to amounts payable as
elsewhere provided in the Credit Agreement, TLX hereby agrees to pay
and to protect, indemnify, and save Lender harmless from and against
any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees) which
Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or guaranty
thereof, or (B) the failure of Lender to honor a demand for payment
under any Letter of Credit or guaranty thereof as a result of any
act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority, in
each case other than to the extent solely as a result of the gross
negligence or willful misconduct of Lender (as finally determined by
a court of competent jurisdiction).
(ii) As between Lender and TLX, TLX assumes
all risks of acts, omissions or misuse of each Letter of Credit by
the beneficiary or issuer thereof and, in connection therewith,
Lender shall not be responsible (A) for the validity, sufficiency,
genuineness or legal effect of any document submitted in connection
with any drawing under any Letter of Credit even if it should in
fact prove in any respect to be invalid, insufficient, inaccurate,
untrue, fraudulent or forged, (B) for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer
or assign any Letter of Credit or any rights or benefits
thereunder or any proceeds thereof, in whole or in part, even if it
should prove to be invalid or ineffective for any reason, (C) for
the failure of any issuer or beneficiary of any Letter of Credit to
comply fully with the terms thereof, including the conditions
required in order to effect or pay a drawing thereunder, (D) for any
errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, telecopy, telex or otherwise, (E)
for any loss or delay in transmission or otherwise of any document
or draft required in order to make a drawing under any Letter of
Credit, or (F) for any consequences arising from causes beyond the
control of Lender.
(h) Increased Costs.
(i) If any law, treaty, order, directive,
rule or regulation adopted, issued or becoming effective after the
Closing Date or any change in any law or regulation or in the
interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof (in
any case, whether or not having the force of law) or compliance by
Lender with respect thereto from that in effect as of the Closing
Date shall either (A) impose, modify or deem applicable any reserve,
special deposit or similar requirement against Letters of Credit
issued by Lender or (B) impose on Lender any other condition
regarding Letters of Credit or participation therein, and the result
of any event referred to in the preceding clause (A) or (B) shall be
to increase the cost to Lender of issuing or maintaining Letters of
Credit then, upon demand by Lender, TLX shall promptly pay to
Lender, additional amounts which shall be sufficient to compensate
Lender for such increased cost. A certificate as to such increased
cost, and amount and computation thereof in reasonable detail,
incurred by Lender as a result of any event mentioned in clause (A)
or (B) above, shall be submitted by Lender to TLX and shall be
conclusive and binding for all purposes, absent manifest error.
(ii) If any law, treaty, order, directive,
rule or regulation shall be adopted, issued or become effective
after December 31, 1999, or if there is any change in any law,
treaty, order, directive, rule or regulation from that in effect on
December 31, 1999 or in the interpretation thereof by any
governmental or other regulatory authority charged with the
administration thereof (in any case, whether or not having the force
of law) and including in any event, all risk-based capital
guidelines heretofore adopted by the Comptroller of the Currency,
the Federal Reserve Board or any other banking regulatory agency,
domestic or foreign, to the extent that any provision contained
therein does not have to be complied with as of the date hereof, and
the same shall, or if the compliance by Lender with any guidelines
or request from any central bank or other governmental authority,
shall affect or would affect the amount of capital required or
expected to be maintained by Lender or any affiliate of Lender, and
Lender determines that the amount of such capital is increased by or
based upon the existence of Letters of Credit or participation
therein (or similar contingent obligations), then, upon demand by
Lender, as the case may be, TLX shall pay to Lender from time to
time such additional amounts as may be specified by Lender as
sufficient to compensate it in light of such circumstances, to the
extent that Lender determines such increase in capital to be
allocable to the issuance or maintenance of the Letters of Credit.
A certificate as to such amounts and computation thereof in
reasonable detail shall be submitted to TLX by Lender, and shall be
conclusive and binding for all purposes, absent manifest error.
(b) The number "2.01" is added before the heading "Conditions to
the Funding of the Loans" contained in Section 2 of the Credit Agreement.
(c) The phrase "or issue Letters of Credit" is added after the
word "Loans" in the fourth line of the first paragraph of Section 2.01 of the
Credit Agreement.
(d) The following is added as Section 2.02 of the Credit
Agreement:
2.02 Conditions to Issuance of Letters of Credit.
-------------------------------------------
The following shall be conditions precedent to the issuance
of each Letter of Credit on the date of each such incurrence:
(a) TLX's representations and warranties
contained herein or in any of the Loan Documents shall be true and
correct in all material respects as of the date on which each such
issuance of a Letter of Credit is made, as though incurred on such
date, except to the extent that any such representation or warranty
expressly relates to an earlier date and except for changes therein
permitted or contemplated by the Credit Agreement.
(b) No event shall have occurred and be continuing,
or would result from the issuance of a Letter of Credit which
constitutes a Default.
(c) After giving effect to such Letter of Credit
Obligation, the aggregate of such advances shall not exceed the L/C
Sublimit.
(e) Section 6.03 of the Credit Agreement is deleted and the
following is substituted therefor:
6.03 Indebtedness. Borrowers shall not (and shall
not permit any of their Subsidiaries to) create, incur, assume or
permit to exist any Indebtedness, except (i) the Obligations, (ii)
deferred Taxes, (iii) Capital Lease Obligations permitted under
clause (iv) of Section 6.07 and Indebtedness secured by purchase
money Liens permitted under clause (v) of Section 6.07 in a maximum
aggregate amount outstanding not to exceed $250,000, (iv)
Indebtedness in connection with Permitted Acquisitions, (v)
Subordinated Indebtedness, including the Debentures, owed by any
Borrower as of December 31, 1999, (vi) Indebtedness owed other than
to the Lender, the sole purpose of which shall be to finance the
purchase, construction or lease of movie theaters and multimedia
productions upon reasonable notice to Lender, (vii) other
Indebtedness set forth on Schedule 6.3, (viii) Guaranteed
Indebtedness permitted under Section 6.06 below, (ix) the Los Alamos
Loan and any refinancing thereof provided that such refinancing does
not exceed the outstanding amount of such Loan at the date of such
refinancing, (x) Indebtedness consisting of Iowa Economic
Development Loans in an aggregate principal amount up to $850,000,
and (xi) other Indebtedness not encompassed within the preceding
clauses (i) through (x) in an aggregate amount greater than
$5,000,000.
(f) The following is added as Section 8.02(b) of the Credit
Agreement, and the existing subsection (b) is relettered accordingly:
(b) terminate its obligation to issue Letters of Credit
(whereupon TLX shall be required to cash collateralize outstanding
Letters of Credit as more fully set forth in Section 1.15).
(g) The following definition is added to Annex "A" of the
Credit Agreement following the definition of "Agreement":
"Applicable Letter of Credit Fee" shall mean the following
amount per annum based on Borrowers' attainment of the Senior
Funded Debt to Cash Flow Ratio set forth below based on the most
recent Fiscal Quarter:
Senior Funded Applicable Letter of
Debt/Cash Flow Credit Fee
---------------------------------------------
< 3.00 to 1.00 1.50 %
---------------------------------------------
>/= 3.00 to 1.00 2.00 %
---------------------------------------------
(h) The following definition is added to Annex "A" of the Credit
Agreement following the definition of "Applicable Letter of Credit Fee":
"Applicable Margin" shall mean: (i) with respect to Loan A,
1.75%; (ii) with respect to Loan B, 1.75%; and (iii) with respect to
Loan C, the rate per annum set forth below, corresponding to the
Senior Funded Debt to Cash Flow Ratio, measured quarterly for the
four consecutive Fiscal Quarters then ended, applicable to
Borrowers, on a consolidated basis, according to the most recent
Compliance Certificate delivered by Borrowers to Lender, which rate
shall be set at Level II until the Borrowers have delivered a
Compliance Certificate for the Fiscal Quarter ending December 31,
1999:
Level Senior Funded Applicable Margin
Debt/Cash Flow
--------------------------------------------------------
I < 3.00 to 1.00 2.00 %
--------------------------------------------------------
II >/= 3.00 to 1.00 2.50 %
--------------------------------------------------------
(i) The following definition is added to Annex "A" of the Credit
Agreement following the definition of "Collateral Documents":
"Compliance Certificate" shall mean a certificate, in form
acceptable to Lender, of the chief executive officer, chief
operating officer, president or chief financial officer of Borrowers
stating that to the best of such officer's knowledge, (i) each
Borrower during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition in the
Credit Agreement, this Agreement and the other Loan Documents to be
observed, performed or satisfied by it, and that such officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate, and (ii) in the case of financial
statements referred to in Section 3.04, including calculations and
information demonstrating reasonably detailed compliance with the
requirements of Section 6.11 as of the most recent Fiscal Quarter
then ended.
(j) The following definition is added to Annex "A" of the Credit
Agreement following the definition of "DOL":
"Documentary Credit" shall have the meaning assigned to it in
the UCP.
(k) The following definition is added to Annex "A" of the Credit
Agreement following the definition of "Lender":
"Letter of Credit" shall mean a Documentary Credit or a
Standby Letter of Credit issued for the account of TLX pursuant to
Schedule 1.1, in form and substance satisfactory to Lender.
(l) The following definition is added to Annex "A" of the Credit
Agreement following the definition of "Letter of Credit":
"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Lender at the request of TLX, whether direct
or indirect, contingent or otherwise, due or not due, in connection
with the issuance by Lender with respect to any Letter of Credit
(with the exception of the Logan Letters of Credit).
(m) The definition of "Loan C Commitment Termination Date"
contained in Annex "A" of the Credit Agreement is deleted and the following is
substituted therefor:
"Loan C Commitment Termination Date" shall mean the earliest
of (i) June 30, 2002, (ii) the date of the termination of Loan C
pursuant to Section 8.2, and (iii) the date of the termination of
Loan C in accordance with the provisions of Section (a)(iii)(E) of
Schedule 1.1.
(n) The following definition is added to Annex "A" of the Credit
Agreement after the definition of "Loan Party":
"Logan Letters of Credit" shall mean Irrevocable Letter of
Credit No. SM408991C dated June 3, 1999 in the face amount of
$3,435,079.45 and the Irrevocable Letter of Credit No. SM408992C
dated June 3, 1999 in the face amount of $1,466,630.14, each
established by the Lender for the benefit of the Lender as trustee
under such letters of credit and for the account of TLX and ISE.
(o) The following definition is added to Annex "A" of the Credit
Agreement after the definition of "Long Term Funded Debt":
"Los Alamos Loan" shall mean the construction loan which Los
Alamos National Bank extended to Trans-Lux Four Corners
Corporation having a current outstanding balance of approximately
$2,080,000 which loan matures on May 18, 2000.
(p) The following definition is added to Annex "A" of the Credit
Agreement after the definition of "Reimbursement Agreement":
"Reimbursement Obligations" shall mean, at any time, the sum
of (i) unreimbursed amounts of drawings under Letters of Credit,
(ii) the aggregate maximum amount available for drawings under
outstanding Letters of Credit issued for the account of TLX at such
time, and (iii) the aggregate maximum amount available for drawings
under Letters of Credit requested by TLX, the issuance of which has
been authorized by Lender, but which has not yet been issued.
(q) The following definition is added to Annex "A" of the Credit
Agreement after the definition of "Solvent":
"Standby Letter of Credit" shall have the meaning assigned to
it in the UCP.
(r) The definition of "Term Loan Maturity Date" contained in
Annex "A" of the Credit Agreement is deleted and the following is substituted
therefor:
"Term Loan Maturity Date" shall mean, with respect to Loan A,
August 27, 2005, and with respect to Loan B, July 1, 2002.
(s) The definition of "Total Funded Debt to Cash Flow Ratio"
contained in Annex "A" of the Credit Agreement is deleted.
(t) The following definition is added to Annex "A" of the Credit
Agreement after the definition of "Treasury Rate":
"UCP" shall mean the Uniform Customs and Procedures for
Documentary Credits, 1993 Revision, ICC Publication No. 500.
(u) The following is added as subparagraph (iii)(B) of Schedule
1.1 of the Credit Agreement and the existing subparagraphs (iii)(B)-(E) are
relettered accordingly:
(B) Subject to and in accordance with the terms and conditions
contained herein, TLX shall have the right to request, and Lender
agrees to incur, Letter of Credit Obligations in respect of TLX.
(v) Schedule 1.2 to the Credit Agreement is deleted and
Schedule 1.2 attached hereto is substituted therefor.
(w) Paragraph 3 of Schedule 1.3 of the Credit Agreement is deleted
and the following is substituted therefor:
Loan C: (a) Refinance of all indebtedness outstanding under
the obligation of TLX to Lender having an outstanding principal
balance of $300,000 as evidenced by the Revolving Credit Promissory
Note dated April 9, 1992, (b) issuance of letters of credit in an
amount not to exceed $2,500,000, and (c) general corporate purposes.
(x) Paragraph 1 of Schedule 6.11 of the Credit Agreement is
deleted and the following is substituted therefor:
1. Debt Service Coverage Ratio. TLX, on a consolidated
basis, shall maintain at the end of each Fiscal Quarter for the most
recent 12-month period, a Debt Service Coverage Ratio of not less
than 1.75 to 1.00. For purposes of calculation, the amount of
Current Maturities shall not include any amount outstanding under
Loan C prior to June 30, 2002, but shall include the aggregate of
Capital Lease Obligations.
(y) Paragraph 2 of Schedule 6.11 of the Credit Agreement is deleted
and the phrase "Intentionally Left Blank" is substituted therefor.
(z) Paragraph 3 of Schedule 6.11 of the Credit Agreement is deleted
and the following is substituted therefor:
3. Senior Funded Debt to Cash Flow Ratio. TLX, on a
consolidated basis, shall maintain at the end of each Fiscal Quarter
for the most recent 12-month period, a Senior Funded Debt to Cash
Flow Ratio of not greater than the following for the period
indicated:
Period Ratio
------ -----
Prior to December 31, 2000 3.50 to 1.00
December 31, 2000 through December 30, 2001 3.00 to 1.00
December 31, 2001 through December 30, 2003 2.75 to 1.00
December 31, 2003 and thereafter 2.50 to 1.00
(aa) Paragraph 4 of Schedule 6.11 of the Credit Agreement is
deleted and the following is substituted therefor:
4. Consolidated Tangible Net Worth. TLX shall maintain
at all times Consolidated Tangible Net Worth in an amount not less
than the sum of (i) $21,000,000 and (ii) fifty percent (50%) of
positive net income of TLX, on a consolidated basis, as at each
succeeding Fiscal Year, commencing with the Fiscal Year ending
December 31, 2000.
(bb) Paragraph 6 of Schedule 6.11 of the Credit Agreement is
deleted and the following is substituted therefor:
6. Liquidity Ratio. TLX, on a consolidated basis, shall
maintain at the end of each Fiscal Quarter, a Liquidity Ratio for
the most recent 12 month period, of not less than 2.25 to 1.00.
2. Conditions Precedent. The obligation of the Lender under this
Agreement is subject to the receipt and review, to the satisfaction of the
Lender, of the following:
(a) Amendment Agreement. This Agreement duly executed by
the parties hereto;
(b) Amendment Fee. Payment to the Lender of the Amendment
Fee;
(c) Lender's Expenses. Payment to the Lender of all its out-of-
pocket expenses, including all reasonable fees and disbursements of the Lender's
legal counsel, incurred in connection with the execution, delivery and
performance of this Agreement, to be paid regardless of the final disposition of
this Agreement; and
(d) Other. Such other agreements as the Lender shall require.
3. Waiver. In consideration of the execution and delivery of this
Agreement by Borrowers, the Lender waives compliance by TLX with respect to the
Total Funded Debt to Cash Flow Ratio requirement for the Fiscal Quarters ended
June 30, 1999 as of such date and September 30, 1999 as of such date.
4. Amendment Fee. In consideration of the Lender's execution,
delivery and performance of this Agreement and the First Amendment Agreement
dated the date hereof with respect to the Reimbursement Agreement dated as of
June 3, 1999 between TLX, ISE and Lender, the Borrowers are simultaneously
paying to the Lender the amount of $25,000 in immediately available funds (the
"Amendment Fee").
5. Reaffirmation by the Borrowers. The Borrowers acknowledge that each
is legally, validly and enforceably, jointly and severally indebted to the
Lender under the Notes, without defense, counterclaim or offset, and that each
is legally, validly and enforceably liable to the Lender for all costs and
expenses of collection and reasonable attorneys' fees related to or in any way
arising out of this Agreement, the Notes, the Credit Agreement and the other
Loan Documents. The Borrowers hereby restate and agree to be bound by all the
covenants contained in the Credit Agreement and the other Loan Documents and
reaffirm that all of the representations and warranties contained in the Credit
Agreement and the other Loan Documents remain true and correct in all material
respects with the exception that the financial statements described therein are
deemed true as of the date made. The Borrowers represent that except as set
forth in the Credit Agreement and the other Loan Documents or in writing to the
Lender with respect to the judgment entered against TLX in 1999 arising out of a
certain litigation proceeding commenced in the state of New Mexico, there are no
pending, or to each Borrower's knowledge threatened, any legal proceeding to
which any of the Borrowers or any of the Guarantors is a party which materially
and adversely affects the transactions contemplated by this Agreement or the
ability of the Borrowers or any of the Guarantors to conduct its business on a
consolidated basis. The Borrowers and Guarantors acknowledge and represent that
the resolutions of each dated July 27, 1995 (except for resolutions of Trans-Lux
Midwest Corporation which are dated February 13, 1997), remain in full force and
effect, encompass the execution, delivery and performance of this Agreement, and
have not been modified, amended, rescinded or otherwise abrogated.
6. Reaffirmation by the Guarantors. The Guarantors acknowledge that
each is legally and validly indebted to the Lender under the Guaranty of each
without defense, counterclaim or offset, and affirms that each Guaranty remains
in full force and effect and includes, without limitation, the indebtedness,
liabilities and obligations arising under or in any way connected with the
Loans, this Agreement and the other Loan Documents, whether now existing or
hereafter arising.
7. Reaffirmation re: Collateral. The Borrowers and the Guarantors
reaffirm the liens, security interests and pledges granted to the Lender
pursuant to the Loan Documents to secure the obligations of each thereunder.
8. Other Representations by Borrower and Guarantors. Each of the
Borrowers and the Guarantors represents and confirms that except as expressly
represented in this Agreement, (a) no Event of Default has occurred and is
continuing and that the Lender has not given its consent to or waived any
Default or Event of Default and (b) the Credit Agreement and the other Loan
Documents are in full force and effect and enforceable against the Borrowers and
the Guarantors in accordance with the terms thereof. Each of the Borrowers and
Guarantors represents and confirms that as of the date hereof, each has no claim
or defense (and each of the Borrowers and the Guarantors hereby waives every
claim and defense as of the date hereof) against the Lender arising out of or
relating to the Credit Agreement, this Agreement and the other Loan Documents or
the making, administration or enforcement of the Loans and the remedies provided
for under the Loan Documents.
9. No Waiver by Lender. Each of the Borrowers and the Guarantors
acknowledges that (a) by execution of this Agreement, except as set forth in
Section 3 above, the Lender is not waiving any Default, whether now existing or
hereafter occurring, disclosed or undisclosed, by the Borrowers or the
Guarantors under the Loan Documents and (b) the Lender reserves all rights and
remedies available to it under the Loan Documents and otherwise.
10. Miscellaneous.
-------------
(a) This Agreement may be executed by the parties to this
Agreement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(b) This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with, the law
of the State of Connecticut.
(c) This Agreement shall be deemed a Loan Document under the
Credit Agreement for all purposes.
The parties have executed this Agreement on the date first written above.
BORROWERS:
---------
TRANS-LUX CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
TRANS-LUX DISPLAY CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
TRANS-LUX MONTEZUMA CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Office
INTEGRATED SYSTEMS ENGINEERING, INC.
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
GUARANTORS:
----------
TRANS-LUX DISPLAY CORPORATION
TRANS-LUX CANADA, LTD.
TRANS-LUX COCTEAU CORPORATION
TRANS-LUX COLORADO CORPORATION
TRANS-LUX DURANGO CORPORATION
TRANS-LUX EXPERIENCE CORPORATION
TRANS-LUX HIGH FIVE CORPORATION
TRANS-LUX INVESTMENT CORPORATION
TRANS-LUX LOMA CORPORATION
TRANS-LUX LOVELAND CORPORATION
TRANS-LUX MIDWEST CORPORATION
TRANS-LUX MONTEZUMA CORPORATION
TRANS-LUX MULTIMEDIA CORPORATION
TRANS-LUX PENNSYLVANIA
CORPORATION
TRANS-LUX PTY, LTD.
TRANS-LUX SEAPORT CORPORATION
TRANS-LUX SERVICE CORPORATION
TRANS-LUX SOUTHWEST CORPORATION
TRANS-LUX STORYTELLER
CORPORATION
TRANS-LUX SYNDICATED PROGRAMS
CORPORATION
TRANS-LUX TAOS CORPORATION
TRANS-LUX THEATRES CORPORATION
INTEGRATED SYSTEMS ENGINEERING, INC.
SAUNDERS REALTY CORPORATION
TRANS-LUX CASTLE ROCK CORPORATION
TRANS-LUX CINEMA CONSULTING CORPORATION
TRANS-LUX FOUR CORNERS CORPORATION
TRANS-LUX LARAMIE CORPORATION
TRANS-LUX LOS LUNAS CORPORATION
TRANS-LUX SKYLINE CORPORATION
TRANS-LUX SUMMIT CORPORATION
TRANS-LUX VALLEY CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
LENDER:
------
FIRST UNION NATIONAL BANK
By /s/ Stehen T. Dorsch
------------------------------------
Stephen T. Dorosh
Title: Vice President
SCHEDULE 1.2
to
CREDIT AGREEMENT
Dated as of August 28, 1995
REPAYMENT OF LOANS
------------------
(a) Loan A. (i) TLX, ISE and TLM shall pay interest on the outstanding
balance of Loan A quarterly in arrears, (A) for a period commencing on the
Closing Date and ending on July 1, 1998, at a per annum rate equal to seven and
eighty-six one hundredths percent (7.86%), as more fully set forth in subsection
(f) below, (B) commencing July 1, 1998, and continuing through December 31, 1999
at a rate per annum equal to one hundred seventy-five basis points (1.75%) above
USD-LIBOR-BBA, (C) commencing January 1, 2000, and continuing through the Term
Loan Maturity Date, at a rate per annum equal to USD-LIBOR- BBA plus the
Applicable Margin and (D) if any interest remains payable after the Term Loan
Maturity Date, upon demand; provided, however, that on June 1, 2001, the
obligors under such Loan shall have the right to request a fixed rate of
interest for the remaining term of such Loan and, provided that Lender at such
time regularly offers fixed interest rates for loans similar to such Loan,
Lender agrees to act reasonably with respect to such request; provided further,
however, that if the Lender declines such request, the interest rate on such
Loan shall continue as set forth in the Agreement.
(ii) The aggregate principal amount of Note A shall be payable
in quarterly installments (consisting of principal) as follows:
Payment Date Amount of Payment
------------ -----------------
October 1, 1995 - July 1, 2005 $ 133,333
Term Loan Maturity Date $2,666,680
(b) Loan B. (i) TLX, ISE, TLCC and TLSC shall pay interest on the
outstanding balance of Loan B, quarterly in arrears (A) for a period commencing
on the Closing Date and ending on July 1, 1998, at a per annum rate equal to
seven and eighty-six one hundredths percent (7.86%), as more fully set forth in
subsection (f) below, (B) commencing July 1, 1998, and continuing through
December 31, 1999 at a rate per annum equal to one hundred seventy- five basis
points (1.75%) above USD-LIBOR-BBA, (C) commencing January 1, 2000, and
continuing through the Term Loan Maturity Date, at a rate per annum equal to
USD-LIBOR- BBA plus the Applicable Margin, and (D) if any interest remains
payable after the Term Loan Maturity Date, upon demand.
(ii) The aggregate principal amount of Note B shall be payable
in quarterly installments (consisting of principal only) as follows:
Payment Date Amount of Payment
------------ -----------------
October 1, 1995 - July 1, 2002 $ 270,750
(c) Loan C. (i) (x) Commencing on the Closing Date and continuing
through December 31, 1999, TLX shall pay interest on the outstanding balance of
Loan C at an annual interest rate equal to two hundred basis points (2.00%)
above LIBOR Market Index Rate, as more fully set forth in subsection (f) below
and (y) commencing January 1, 2000 and continuing through the Loan C Commitment
Termination Date, TLX shall pay interest on the outstanding balance of Loan C at
a per annum rate equal to LIBOR Market Index Rate plus the Applicable Margin.
(ii) During the Term Credit Portion, TLX shall pay interest on
the outstanding balance of Loan C at an annual interest rate equal to two
hundred twenty-five basis points (2.25%) above LIBOR Market Index Rate, as more
fully set forth in subsection (f) below; provided, however, that on a date
thirty (30) days prior to the Loan C Commitment Termination Date, TLX shall have
the right to request a fixed rate of interest for the Term Credit Portion and,
provided that Lender at such time regularly offers fixed interest rates for
loans similar to the Term Credit Portion, Lender agrees to act reasonably with
respect to such request; provided, further, however, that if the Lender delivers
such request, the interest rate on such Loan shall continue as set forth in this
Agreement. If any interest remains payable after the Loan C Maturity Date, such
interest shall be payable upon demand.
(iii) On the Loan C Commitment Termination Date, the then
outstanding indebtedness under Note C shall be payable in sixteen (16) equal
payments each in the amount of one-sixteenth (1/16th) of the amount then
outstanding under Note C, payable on the first day of the second Fiscal Quarter
subsequent to the Loan C Commitment Termination Date, and continuing on the
first day of each successive Fiscal Quarter and a final payment on the Loan C
Maturity Date of all amounts then outstanding under Note C.
(d) Interest on each of the Loans shall be calculated on the basis of
the actual number of days elapsed over a 365-day year.
(e) If any interest or other payment under any of the Loans becomes due
and payable on a day other than a Business Day, the required payment thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension. Upon the failure of Borrowers to make required
payments under any of the Notes on the date due (after the expiration of any
applicable grace period), Lender shall have the right to directly charge any
Borrower's account maintained with Lender for the amount of such required
payment.
(f) With respect to indebtedness under the Loans which bears interest
tied to LIBOR Market Index Rate, Borrowers shall pay such interest quarterly in
arrears on the sooner to occur of (x) the next preceding Business Day
immediately prior to a Reset Date and (y) the last day of each Fiscal Quarter.
(g) Lender may collect a late charge of four percent (4%) of any
installment of principal, interest or other amount not contested in good faith
by Borrowers due to Lender which is not paid by Borrowers within 10 days after
the due date thereof to cover the extra expense involved in handling such
delinquent payment and Borrowers agree that such amount is reasonable; however,
such late charge shall not affect Lender's right to exercise any of its rights
and remedies provided in the Credit Agreement if an Event of Default has
occurred.
<PAGE>
Exhibit 10.7
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
AGREEMENT ("Amendment") made as of the 23rd day of September, 1999, 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 E T H:
WHEREAS, Employer and Employee entered into an employment agreement
made December 27, 1996, effective January 1, 1997 (the "Agreement");
WHEREAS, Employer and Employee desire to amend the Agreement with
respect to calendar years subsequent to 1998.
NOW, THEREFORE, the parties agree as follows:
1. Section 4(d) of the Agreement is amended in its entirety to read as
follows:
"(d) As additional compensation, Employer shall pay to Employee a
bonus ("Bonus") for each calendar year during the Term in an amount equal to 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 1/2%
$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 - $5,000,000 maximum 5% + $50,000 (Total)
No Bonus shall be payable for Annual Pre-Tax Consolidated Income in excess of
$5,000,000 and the maximum Bonus payable for any year during the Term is
$300,000.
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. Notwithstanding the
foregoing, any interest expense savings resulting from conversion of the
Employer's 7 1/2% Convertible Subordinated Notes due 2006 may be included or
excluded from such calculation by the Board in its sole discretion. 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 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, 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.
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 financing, with any such
amount excluded for such year considered in calculating future year's pre-tax
consolidated income as if no prepayment had occurred.
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 $5,250,000, 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."
2. Section 4(e) of the Agreement is amended in its entirety to read as
follows:
"(e) In the event Employee terminates his employment prior to the
end of any calendar year other than as provided in Section 9 of the Agreement,
(i) if such termination is at the end of the Term on April 1, 2002, Employee
shall be entitled to one-fourth (25%) of the Bonus for the year ended December
31, 2002, as calculated for 2002 under Section 4(d), and (ii) if Employee
terminates his employment in accordance with Section 2, Employee shall be
entitled to a pro rata portion of the Bonus for the year in which such
termination occurs, as calculated under Section 4(d) based on the Early
Termination Date, in each case such Bonus to be paid at the same time as
provided in Section 4(d). If (iii) Employer terminates Employee's employment
with cause prior to the end of any such calendar year, or (iv) Employee
terminates his employment otherwise than in accordance with Section 2 or Section
9, no Bonus shall be paid for such calendar year in either such case."
3. This Amendment shall be construed in accordance with the laws of the
State of New York.
4. All other terms and conditions of the Agreement remain in full force
and effect.
5. 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 Amendment to the 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
<PAGE>
Exhibit 10.10
AGREEMENT made as of the 15th day of December l999 effective January l,
2000 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, 2000 and terminating December 3l, 2002.
(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.
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, 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.
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 1ists 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
TWENTY-EIGHT THOUSAND DOLLARS ($128,000) per annum during the period January l,
2000 to December 31, 2000; at the rate of ONE HUNDRED THIRTY-FIVE THOUSAND
DOLLARS ($135,000) per annum during the period January 1, 2001 to December 31,
2001 and at the rate of ONE HUNDRED FORTY THOUSAND DOLLARS ($l40,000) per annum
during the period January 1, 2002 to December 31, 2002. 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.
(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, 2001, 2002, and 2003,
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, 2000, 2001, and 2002 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.
If Pre-Tax Consolidated
Earnings Exceed For Annual Non-Cumulative Level of
2000, 2001 and 2002 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 up to the 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 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 2000, 2001
or 2002 fiscal year, no Bonus shall be paid for such fiscal year. In the event
of Employee's death on or after January 1 of 2001, 2002 or 2003, 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 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. Notwithstanding the
foregoing, any interest expense savings resulting from converstion of the
Employer's 7 1/2% Convertible Subordinated Notes due 2006 may be included or
excluded in such calculation by the Board in its sole discretion. 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 2000, 2001 and 2002. 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, 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 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.
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 Section 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,
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 Section 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. 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, 2000 the Employment Agreement between the
parties dated December 27, 1996, except for any Bonus for l999 payable in 2000
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/ Karl Hirschauer
-----------------------------
Karl Hirschauer
EXHIBIT A TO
EMPLOYMENT AGREEMENT
EFFECTIVE AS OF JANUARY 1, 2000
ADDITIONAL OBLIGATIONS OF EMPLOYEE
1. All inventions, developments and improvements conceived or made by
Employee, solely or jointly with others, during the period of Employee's
employment by the Employer, whether or not conceived during business hours,
which pertain to any product, goods, apparatus, equipment, systems, methods or
processes made, used or sold by the Employer, or with regard to which the
Employer is conducting research or development work, either alone or in
cooperation with others, shall be a work made for hire, under the supervision of
the Employer, and shall be the property of the Employer, whether patentable or
not.
2. Employee agrees to promptly and voluntarily disclose to the Employer
all such inventions, developments, and improvements conceived or made by
Employee during the period of Employee's employment, and one year thereafter,
and to sign, when requested by Employer any United States and foreign patent
applications or any divisional, continuing, renewal or reissue applications
pertaining thereto, and to provide the Employer or its agents or attorneys with
all reasonable assistance in the preparation and presentation of patent or
copyright applications, drawings, specifications and the like, provided that all
fees pertaining to such applications are to be paid by the Employer. Employee
also agree to assign to the Employer all such inventions, developments and
improvements and any United States and foreign patent applications or
divisional, continuing, renewal or reissue applications pertaining thereto, and
any patent issuing thereon, and Employee agrees to sign any assignments or other
instruments that might, in the opinion of the Employer, be required to carry out
this provision. Employee will perform Employee's obligations under this
paragraph without requesting or receiving any payment therefore other than
Employee's usual salary from the Employer.
3. In any action, claim, or proceeding in which this Agreement or any
provision thereof is in issue, the parties agree that the Employer shall have
the benefit of a prima facie presumption that any invention, development or
improvement as referred to in paragraph 1 which is disclosed or offered to
others, or published or reduced to practice by Employee within a period of one
year after the termination of Employee's employment with Employer, or any such
inventions, developments or improvements disclosed in a patent application filed
by Employee within one year of the termination of Employee's employment by
Employer, was conceived or made during the period of Employee's employment.
4. All work done by Employee for the Employer relating in any way to
the conception, design, development, support, maintenance, sales or leasing of
products for the Employer is the property of the Employer and Employee hereby
assigns to the Employer all of Employee's rights therein. This paragraph
applies to work performed by Employee before and after the signing of this
Agreement.
Trans-Lux Corporation
By: /s/ Michael R. Mulcahy /s/ Karl Hirschauer
------------------------------ ---------------------------------
Karl Hirschauer
<PAGE>
Exhibit 10.12
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
AGREEMENT ("Amendment") made as of the 20th day of December, 1999
by and between TRANS-LUX CORPORATION, a Delaware corporation having an office at
110 Richards Avenue, Norwalk, Connecticut 06856-5090 (hereinafter called
"Employer"), and AL MILLER residing at 22 Deer Run Lane, Shelton, Connecticut
06484 (hereinafter called, "Employee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Employer and Employee entered into an employment agreement
made as of the 1st day of January, 1999 (the "Agreement").
WHEREAS, Employer and Employee desire to amend the Agreement.
NOW, THEREFORE, the parties agree as follows:
1. The first sentence of Section 4(a) of the Agreement is amended
in its entirety to read as follows:
"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
THOUSAND DOLLARS ($90,000) per annum during the period January 1, 1999 to
December 31, 1999; at the rate of ONE HUNDRED FOUR THOUSAND DOLLARS ($104,000)
per annum during the period January 1, 2000 to December 31, 2000 and at the rate
of ONE HUNDRED TEN THOUSAND DOLLARS ($110,000) per annum during the period
January 1, 2001 to December 31, 2001."
2. Section 4(d) of the Agreement is amended by adding the
following sentence on Page 7 in the last paragraph, line 8 after "parties.":
"Notwithstanding the foregoing, any interest expense savings
resulting from conversion of the Employer's 7 1/2% Convertible
Subordinated Notes due 2006 may be included or excluded in such
calculation by the Board in its sole discretion."
3. This Amendment shall be construed in accordance with the laws
of the State of New York.
4. All other terms and conditions of the Agreement remain in full
force and effect.
5. 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 Amendment to the Agreement has been duly
executed on the day and year above written.
TRANS-LUX CORPORATION
By: /s/ Michael R. Mulcahy
---------------------------------
Executive Vice President
/s/ Al Miller
---------------------------------
AL MILLER
<PAGE>
Exhibit 10.13
AGREEMENT made as of December 22nd, 1999 effective the lst day of
January, 2000 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, 2000 and terminating December 3l, 2002.
(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.
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
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 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
TWENTY THOUSAND DOLLARS ($l20,000) per annum during the period January l, 2000
to December 3l, 2000; at the rate of ONE HUNDRED TWENTY-SIX THOUSAND DOLLARS
($126,000) per annum during the period January l, 2001 to December 3l, 2001 and
at the rate of ONE HUNDRED THIRTY-TWO THOUSAND DOLLARS ($l32,000) per annum
during the period January l, 2002 to December 3l, 2002. 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.
(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, 2001, 2002, and 2003,
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, 2000, 2001 and 2002 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
If Pre-Tax Consolidated
Earnings Exceed for Annual Non-Cumulative Level of
2000, 2001 and 2002 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
1,000,000 2,500.00
1,125,000 2,812.50
1,250,000 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 and up** 20,000.00 (maximum)
_______
** For each incremental level of $125,000 between $3,000,000
and $8,000,000 not listed, there is an additional Bonus
of $3l2.50 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 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 2000, 2001 or 2002
fiscal year, no Bonus shall be paid for such fiscal year. In the event of
Employee's death on or after January l of 2001, 2002 or 2003, 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 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. Notwithstanding the
foregoing, any interest expense savings resulting from conversion of the
Employer's 7 1/2% Convertible Subordinated Notes due 2006 may be included or
excluded in such calculation by the Board in its sole discretion. 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 2000, 2001 and 2002. 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.
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 Section 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,
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 Exhibit A to this Agreement.
8. In the event any provision of Section 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 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
and supersedes as of January 1, 2000 the Employment Agreement between the
parties dated January 1, 1997 except for any Bonus for 1999 payable in 2000 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/ Angela Toppi
-------------------------
Angela Toppi
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
A. As of December 31, 1999 the following are subsidiaries more than 50% owned
(included in the consolidated financial statements):
<CAPTION>
Jurisdiction of Percentage
Name Incorporation Owned
- - ------------------------- --------------- ----------
<S> <S> <C>
Integrated Systems Engineering, Inc Utah 100%
Saunders Realty Corporation New York 100
Trans-Lux Canada Ltd. Canada 100
Trans-Lux Castle Rock Corporation (2) Colorado 100
Trans-Lux Cinema Consulting Corporation (4) California 100
Trans-Lux Cocteau Corporation (2) New Mexico 100
Trans-Lux Colorado Corporation (2) Colorado 100
Trans-Lux Display Corporation Delaware 100
Trans-Lux Durango Corporation (2) Colorado 100
Trans-Lux Experience Corporation New York 100
Trans-Lux Four Corners Corporations (2) New Mexico 100
Trans-Lux FSC Corporation (3) Barbados 100
Trans-Lux High Five Corporation (2) Colorado 100
Trans-Lux Investment Corporation Delaware 100
Trans-Lux Laramie Corporation (2) Wyoming 100
Trans-Lux Loma Corporation (2) New Mexico 100
Trans-Lux Los Lunas Corporation (2) New Mexico 100
Trans-Lux Loveland Corporation (2) Colorado 100
Trans-Lux Midwest Corporation Iowa 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 Limited Australia 100
Trans-Lux Seaport Corporation New York 100
Trans-Lux Service Corporation New York 100
Trans-Lux Skyline Corporation (2) Colorado 100
Trans-Lux Southwest Corporation (2) New Mexico 100
Trans-Lux Storyteller Corporation (2) New Mexico 100
Trans-Lux Summit Corporation (2) Colorado 100
Trans-Lux Syndicated Programs Corporation New York 100
Trans-Lux Taos Corporation (2) New Mexico 100
Trans-Lux Theatres Corporation (1) Texas 100
Trans-Lux Valley Corporation (2) Arizona 100
<FN>
(1) Wholly-owned subsidiary of Trans-Lux Investment Corporation.
(2) Wholly-owned subsidiary of Trans-Lux Theatres Corporation.
(3) Wholly-owned subsidiary of Trans-Lux Syndicated Programs Corporation.
(4) Wholly-owned subsidiary of Trans-Lux Multimedia Corporation.
</FN>
</TABLE>
B. Other entities (accounted for in the consolidated financial statements under
the equity method):
MetroLux Theatres - A joint venture partnership 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,651
<SECURITIES> 3,666
<RECEIVABLES> 9,565
<ALLOWANCES> 501
<INVENTORY> 6,146
<CURRENT-ASSETS> 23,417
<PP&E> 119,611
<DEPRECIATION> 40,319
<TOTAL-ASSETS> 112,448
<CURRENT-LIABILITIES> 12,162
<BONDS> 31,547
<COMMON> 2,740
0
0
<OTHER-SE> 23,273
<TOTAL-LIABILITY-AND-EQUITY> 112,448
<SALES> 39,328
<TOTAL-REVENUES> 62,818
<CGS> 26,663
<TOTAL-COSTS> 40,029
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,251
<INCOME-PRETAX> 1,232
<INCOME-TAX> 444
<INCOME-CONTINUING> 788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 788
<EPS-BASIC> 0.61
<EPS-DILUTED> 0.61
</TABLE>
