-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sr+XiT+4D6jKJLFTF+n+5rK8OkxCfq7wguX+eF/0oATEE3gXeiF/aMBxSdLDBs+b 0g6j3hk4FIiVFceigz0zPQ== 0000099106-02-000003.txt : 20020415 0000099106-02-000003.hdr.sgml : 20020415 ACCESSION NUMBER: 0000099106-02-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS LUX CORP CENTRAL INDEX KEY: 0000099106 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 131394750 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02257 FILM NUMBER: 02596795 BUSINESS ADDRESS: STREET 1: 110 RICHARDS AVE CITY: NORWALK STATE: CT ZIP: 06856-5090 BUSINESS PHONE: 2038534321 MAIL ADDRESS: STREET 1: 110 RICHARDS AVENUE CITY: NORWALK STATE: CT ZIP: 06856-5090 10-K 1 tenkver2.txt FORM 10-K FOR 2001 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, 2001 ----------------- 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 TRANS-LUX CORPORATION 2001 Form 10-K Cover Page Continued As of the close of business on March 28, 2002, there were outstanding, 973,243 shares of the Registrant's Common Stock and 287,505 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 28, 2002 (based on the last sale price on the American Stock Exchange as of such date) was $5,160,032. (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 30, 2002, to be filed with the Commission within 120 days of the Registrant's fiscal year end, (the "Proxy Statement") are incorporated by reference into Part III, Items 10-13 of this Form 10-K to the extent stated herein. TRANS-LUX CORPORATION 2001 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 10 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 13 ITEM 8. Financial Statements and Supplementary Data 14 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35 PART III ITEM 10. Directors and Executive Officers of the Registrant 35 ITEM 11. Executive Compensation 36 ITEM 12. Security Ownership of Certain Beneficial Owners and Management 36 ITEM 13. Certain Relationships and Related Transactions 36 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 36 Signatures 39 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 (light emitting diodes); plasma screens, 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 on-site installation, service and maintenance. The Company's display products include data, graphics, and video displays for stock and commodity exchanges, financial institutions, sports stadiums and 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, a national film booking service and income-producing real estate properties. 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 in 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 installation, 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 industries 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 segments: the Indoor division and the Outdoor division. Electronic information displays are used by financial institutions, including brokerage firms, banks, energy companies, insurance companies and mutual fund companies; by sports stadiums and venues; by educational institutions; by 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. Indoor Division: The indoor electronic display market is currently dominated by three categories of users: financial, government and private, and gaming. The financial market sector, 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 1 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 data. Brokerage firms continue to install electronic ticker displays for both customers and brokers; 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 Indoor division has a new line of advanced last sale ticker displays, full color LED tickers and video displays. The government and private sector 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 sector 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 using enhanced serial controllers 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. Outdoor Division: The outdoor electronic display market is even more diverse than the Indoor division. Displays are being used by sports stadiums, sports venues, banks and other financial institutions, gas stations, highway departments, educational institutions and outdoor advertisers attempting to capture the attention of passers-by. The Outdoor division has a new line of LED message centers and video displays available in monochrome and full color. The Company has utilized its strong position in the indoor market combined with several acquisitions to enhance its presence 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, racetracks, 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, 2001 was approximately $9.3 million compared with the December 31, 2000 sales order backlog of $3.9 million. The December 31, 2001 backlog will be recognized in 2002. These amounts include only the sale of its products, they do not include new lease orders or renewals of existing lease agreements presently in-house. 2 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 product line in order to meet the needs of its customers. The Company developed a full line of RainbowWall(R) high-resolution full color LED displays for indoor and outdoor applications. RainbowWall delivers brilliant video and graphics in billions of colors to sports and commercial markets where the presentation of live-action, advertising, promotions and entertainment is of central importance. ProLine(R), the Company's proprietary controller software, is designed for RainbowWall applications that require dynamic, fast-changing information and imagery. ProLine allows live or recorded video, cable TV, newswire feeds and animations to be combined with text on a single display in flexible zone layouts. Continued development of new indoor products includes progressive meter and serial 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 full-color LED video displays for the outdoor market which has applications particularly in the sports market where enhancing the presentation of live action is of central importance. One example is the recently introduced LED RainbowRibbon(R) fascia display system, which optimizes advertising space on arena and stadium tier fascias by smoothly transitioning between video, advertising, animations, scoring/statistics layouts and text. 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. Full color, live video and digital input technology continue to be developed. The Company is currently focused on certain technologies that 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 50 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 expense, and product enhancement and development amounted to $4,098,000, $4,244,000 and $4,280,000 in 2001, 2000 and 1999, respectively. MARKETING AND DISTRIBUTION - -------------------------- The Company markets its indoor and outdoor electronic information display products primarily through its 43 direct sales representatives, 6 telemarketers and a network of independent dealers and distributors. Our exclusive affiliation with a sports marketing firm, established in 2000, resulted in 3 orders in fiscal 2001. 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 32 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. Working with software vendors and utilizing the internet to expand the quality and quantity of the multimedia content that can be delivered to our displays, we are able to offer customers total communications packages. Internationally, the Company uses a combination of internal sales people and independent distributors to market its products outside the U.S. The Company currently has assembly operations, service centers and sales offices in New South Wales, Australia, Toronto, Canada and Brampton, Canada. The Company has existing relationships with approximately 23 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; Toronto, Canada; Brampton, Canada; Logan, Utah; Des Moines, Iowa; and New South Wales, Australia, as well as approximately 60 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 is from equipment rentals with current lease terms ranging from 30 days to ten years. The Company's revenues in 2001, 2000 and 1999 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; 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. During 2000, the Company completed the construction of a new 55,000 square foot outdoor display manufacturing facility in Logan, Utah. 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, cable assemblies, and surface mount and through-hole designed assemblies. The Company produces more than 30,000 board assemblies annually which are tested with state-of-the-art automated testing equipment. Additional board assembly capacity is increased through outsourcing. The Company's production of many of the subassemblies and all of the final assemblies gives the Company the control needed for on-time delivery to its customers. 4 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 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 at its Norwalk plant facility. The Company's products are also third-party certified as complying with applicable safety, electromagnetic emissions and susceptibility requirements worldwide. The Company believes these distinctions in its industry give 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 installation and service to those who purchase and lease equipment. In the market segments covered by the Company's distributors, 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 rental equipment 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 stadiums, 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 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 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 height of displays. 5 COMPETITION - ----------- The Company's offer of short and long-term rentals 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. THEATRE OPERATIONS - ------------------ The Company currently operates 64 screens in 12 locations in the western Mountain States. In 1999, the Company opened a single theatre and converted a four-plex theatre to a six-plex in Laramie Wyoming, closed a single theatre and opened a six-plex theatre in Espanola, New Mexico and opened a six-plex theatre in Dillon, Colorado; in 2000, the Company opened an eight-plex theatre in Los Lunas, New Mexico and a six-plex theatre in the Green Valley, Arizona area and closed a single theatre in Laramie, Wyoming; and in 2001, the Company closed a three-plex theatre in Los Alamos, New Mexico. The Company also operates 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. In the first quarter of 2000, the Company opened a film booking office, through which it arranges film exhibition for its own theatres and for other independent theatres around the country. 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. 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, licenses and trademarks important to its business. 6 EMPLOYEES - --------- The Company has approximately 660 employees as of February 28, 2002 of which approximately 470 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: Norcross, Georgia Des Moines, Iowa Logan, Utah Theatre Properties in: Sahuarita, Arizona Dillon, Colorado Durango, Colorado Espanola, New Mexico Los Lunas, New Mexico Santa Fe, New Mexico Taos, New Mexico Laramie, Wyoming The Company also leases 13 premises throughout North America and in Australia for use as sales, service and/or administrative operations, and leases 4 theatre locations. The aggregate rental expense was $553,000, $687,000 and $601,000 for the years ended December 31, 2001, 2000 and 1999, 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 appealed the verdict, which was affirmed. The Company filed a certiorari petition which has been granted. Subsequent to year- end, the Company reached a settlement with the plaintiff for an amount less than the amount previously accrued, a portion of which is subject to insurance recovery. In January 2000, a second former employee of the Company commenced a 7 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. Management has received certain claims by customers related to contractual matters, which are being discussed, and believes that it has adequate provisions for such matters. The Company had been involved in arbitration related to the construction of its six-plex movie theatre in Dillon, Colorado. The contractor had alleged claims against the Company in the amount of $489,000 due under a contract. The Company has denied any liability and has asserted claims in the amount of $467,000 that, among other matters, the contractor failed to build the theatre in accordance with the architectural plans. The outcome of this arbitration was payment in the amount of $84,000 to the contractor. 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 725 holders of record of its Common Stock and approximately 66 holders of record of its Class B Stock as of March 28, 2002. (c) The Board of Directors approved four quarterly cash dividends of $.035 per share for Common Stock and $.0315 per share for Class B Stock during 2001. Management and the Board of Directors will continue to review payment of the quarterly cash dividends. The Company is subject to an annual limitation of $750,000 on the payment of cash dividends. (d) The range of Common Stock prices on the American Stock Exchange are set forth in the following table:
High Low ---- --- 2001 First Quarter $5.250 $3.563 Second Quarter 7.050 4.200 Third Quarter 6.000 4.000 Fourth Quarter 6.700 4.000 2000 First Quarter $7.875 $6.000 Second Quarter 6.875 4.250 Third Quarter 5.938 4.375 Fourth Quarter 4.875 3.125
8 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, 2001, which were derived from the audited consolidated financial statements of the Company and should be read in conjunction with them.
Years Ended 2001 2000 1999 1998 1997 - ----------- ---- ---- ---- ---- ---- In thousands, except per share data Revenues $ 70,171 $ 66,763 $ 62,818 $63,778 $53,363 Net income (loss) 509 (2,231) 788 1,699 1,510 Earnings (loss) per share: Basic $ 0.40 $ (1.77) $ 0.61 $ 1.32 $ 1.18 Diluted $ 0.40 $ (1.77) $ 0.61 $ 0.85 $ 0.80 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 1,261 1,261 1,286 1,290 1,281 Total assets $113,897 $113,015 $112,448 $91,146 $88,978 Long-term debt 69,250 68,552 65,952 49,523 49,452 Stockholders' equity 23,568 23,696 26,013 25,851 24,332
(b) The following table sets forth quarterly financial data for the years ended December 31, 2001 and 2000:
Quarter Ended (unaudited) March 31 June 30 September 30 December 31 (1) - ------------------------- -------- ------- ------------ --------------- In thousands, except per share data 2001 Revenues $17,397 $17,076 $18,735 $16,963 Gross profit 6,138 5,731 6,104 5,563 Income before income taxes 46 133 545 338 Net income 25 74 299 111 Earnings per share $ 0.02 $ 0.06 $ 0.24 $ 0.08 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 2000 Revenues $14,652 $16,612 $18,893 $16,606 Gross profit 4,623 5,820 6,613 3,733 Income (loss) before income taxes (1,250) 40 82 (1,970) Net income (loss) (688) 23 44 (1,610) Earnings (loss) per share $ (0.55) $ 0.02 $ 0.04 $ (1.28) 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
(1) The Company recorded the following items during the quarter ended December 31, 2001: (1) a decrease to net income of $110,000 related to an increase in the allowance for doubtful accounts, (2) an increase to net income of $159,000 related to the settlement of a legal matter (see Note 15), and (3) an increase in the effective tax rate for the year, which had the effect of increasing the quarterly income tax expense by approximately $50,000. During the quarter ended December 31, 2000, the Company recorded: (1) an impairment charge of $1,044,000 (net of tax) related to an intangible theatre asset and equipment at its older Lake Dillon, CO theatre and certain older outdoor display manufacturing equipment, (2) a decrease to net income (loss) of $72,000 related to an outdoor sports display sales contract, and (3) a reduction in the effective tax benefit rate for the year, which had the effect of reducing the quarterly income tax benefit by approximately $192,000. 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Trans-Lux is a full service provider of integrated multimedia systems for today's communications environments. The essential elements of these systems are the real-time, programmable electronic information displays we manufacture, distribute and service. Designed to meet the evolving communications needs of both the indoor and outdoor markets, these displays are used primarily in applications for the financial, banking, gaming, corporate, transportation, entertainment and sports industries. In addition to its display business, the Company owns and operates a chain of motion picture theatres in the western Mountain States. The Company operates in three reportable segments: Indoor Display, Outdoor Display, and Entertainment/Real Estate. The Indoor Display segment includes worldwide revenues and related expenses from the rental, maintenance and sale of indoor displays. Included in this segment are the financial, gaming, government and corporate industries. The Outdoor Display segment includes worldwide revenues and related expenses from the rental, maintenance and sale of outdoor displays. Included in this segment are the custom sports, catalog sports, retail and commercial industries. The Entertainment/Real Estate segment includes the operations of the motion picture theatres in the western Mountain States, a national film booking service, and income-producing real estate properties. Critical Accounting Policies and Estimates Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. On an on-going basis, management evaluates its estimates and judgments, including those related to percentage of completion, bad debts, inventories, intangible assets, income taxes, warranty obligations, retirement benefits, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. The Company recognizes revenue on long-term equipment sales contracts using the percentage of completion method based on estimated incurred costs to the estimated total cost for each contract. Should total cost be different than estimated total cost, additional or a reduction of cost of sales may be required. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customer to make required payments. Should non-payment by customers differ from the Company's estimates, revision to increase or decrease the allowance for doubtful accounts may be required. The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates. Should actual product failure rates differ from the Company's estimates, revisions to increase or decrease the estimated warranty liability may be required. The Company writes down its inventory for estimated obsolescence equal to the difference between the carrying value of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required. The Company evaluates intangible assets for possible impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Future adverse changes in market conditions or poor operating results of underlying assets could result in an inability to recover the carrying value of the assets , thereby possibly requiring an impairment charge in the future. The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. While the Company has considered future taxable income and ongoing feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. Results of Operations 2001 Compared to 2000 Total revenues for the year ended December 31, 2001 increased 5.1% to $70.2 million from $66.8 million for the year ended December 31, 2000. Indoor display revenues increased $1.1 million or 4.5%. Of this increase, indoor display equipment rentals and maintenance revenues increased $726,000 or 4.6%, primarily due to new rental and maintenance contracts and renewal of existing contracts, and indoor display equipment sales increased $360,000 or 4.3%, primarily in the gaming and financial industries segment. Outdoor display revenues increased $1.1 million or 3.6%. Of this increase, outdoor display equipment sales increased $1.4 million or 6.4%, primarily in the custom outdoor sports segment. This increase was offset by the decrease in outdoor display equipment rentals and maintenance revenues of $349,000 or 4.3%, primarily due to the continued expected revenue decline in the outdoor rental and maintenance bases previously acquired. Entertainment and real estate revenues increased $1.2 million or 10.3%. This increase is primarily from the revenues from two newly constructed multiplex theatres consisting of 14 screens in Los Lunas, NM and Sahuarita, AZ, which opened in February 2000 and May 2000, respectively, and an increase in overall admissions and ticket prices at the existing cinemas. Total operating income for the year ended December 31, 2001 increased 45.6% to $12.0 million from $8.3 million for the year ended December 31, 2000. Indoor display operating income increased $458,000 or 6.1%, primarily as a result of the increase in revenues. The cost of indoor displays represented 46.4% of related revenues in 2001 compared to 45.7% in 2000. The cost of indoor displays as a percentage of related revenues increased primarily due to a change in the volume mix. Indoor display cost of equipment sales increased $464,000 or 11.9%, primarily due to increased volume. Indoor display cost of equipment rentals and maintenance increased $214,000 or 3.0%, largely due to increased depreciation expense, mainly due to the increase in equipment on rental. Indoor display general and administrative expenses decreased slightly. Outdoor display operating income increased to $1.6 million in 2001 compared to 10 $370,000 in 2000, primarily as a result of an increase in revenues and a decrease in general and administrative expenses. The cost of outdoor displays represented 77.5% of related revenues in 2001 compared to 77.8% in 2000. Outdoor display cost of equipment sales increased $1.1 million or 6.2%, principally due to the increase in volume and the higher content of raw materials due to the new LED technology and installation costs. Outdoor display cost of equipment rentals and maintenance decreased $321,000 or 5.0%, primarily due to reduced field service costs mainly as a result of the expected decline in the outdoor rental and maintenance bases previously acquired. Outdoor display general and administrative expenses decreased $843,000 or 13.1%, primarily due to the consolidation of operations from prior acquisitions and a cost-cutting program put into place in the fourth quarter of 2000. Cost of indoor and outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Entertainment and real estate operating income increased $2.1 million, to $2.5 million in 2001, primarily due to the increase in revenues due to theatre expansion, an increase in overall admissions and ticket prices in the existing cinemas, and the write-off of the $1.3 million intangible theatre asset and equipment at the older Lake Dillon, CO theatre in 2000. Under the terms of its lease, the Company is obligated to operate this theatre and recorded a loss of approximately $250,000 in 2001. When compared to 2000 (before the write-off), the entertainment and real estate operating income would have increased $811,000 or 47.1%. The cost of entertainment and real estate represented 78.9% of related revenues for the year ended December 31, 2001 and 82.5% (before the write-off) in 2000. Cost of entertainment and real estate, which includes film rental costs and depreciation expense, increased $543,000 or 5.5% in 2001 when compared to the year 2000 (before the write-off) due to the expansion of theatre operations and an increase in overall admissions in the existing cinemas. Entertainment and real estate general and administrative expenses decreased $84,000 or 11.9% due to a reduction in payroll costs. Corporate general and administrative expenses decreased $446,000 or 6.9%, principally due to a settlement of a legal matter for an amount less than the amount previously accrued (see Note 15), partially offset by an increase in the allowance for doubtful accounts, which were both recorded in the fourth quarter of 2001, and a cost cutting program put into place in the fourth quarter of 2000. Net interest expense decreased $160,000, which is primarily attributable to the decrease in variable interest rates in 2001 vs. 2000 offset by an increase in long-term debt to fund increased operating activities. The Company uses its revolving credit facility to meet its short-term working capital requirements. Other income primarily relates to the gain from the sale of a theatre leasehold and the earned income portion of municipal forgivable loans, offset partially by a loss from the sale of the former Logan, UT manufacturing facility. The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatre in Loveland, CO. The effective tax rate for the year ended December 31, 2001 was 52.0%. The tax rate was unfavorably impacted primarily by the inability to recognize tax benefits for losses of one foreign subsidiary and a higher tax rate in another foreign subsidiary. For the year ended December 31, 2000, the effective tax benefit rate was 28.0%, which was unfavorably impacted primarily by the inability to recognize tax benefits for losses of a foreign subsidiary. Such benefits could be realized in the future to the extent the foreign subsidiary shows profits. The terrorist attacks of September 11, 2001 and their aftermath has not had a material adverse impact on the results of the Company, but may temporarily affect future sales of indoor displays in the financial industries segment as certain financial companies plan for their relocation. The Company had indoor rental and maintenance revenues generated from signage located at the World Trade Center and the surrounding area, which are subject to insurance recoveries. 2000 Compared to 1999 The Company's total revenues for the year ended December 31, 2000 increased 6.3% to $66.8 million from $62.8 million for the year ended December 31, 1999. Indoor display revenues increased 4.0% to $24.4 million in 2000 from $23.4 million in 1999. Of this increase, $677,000 or 4.4% was in the indoor display equipment rentals and maintenance revenues, primarily due to new rental and maintenance contracts and renewal of existing contracts. Indoor display sales increased $266,000 or 3.3%, primarily in the financial industries segment. Outdoor display revenues decreased 2.6% to $30.5 million in 2000 from $31.3 million in 1999. Of this decrease, $141,000 or 1.7% was in the outdoor display equipment rentals and maintenance revenues, primarily due to the continued expected revenue decline in the outdoor rental and maintenance bases previously acquired. Outdoor display sales decreased $664,000 or 2.9%, primarily in the custom outdoor sports segment. Entertainment and real estate revenues increased 47.3% to $11.9 million in 2000 from $8.1 million in 1999. This increase is primarily from the revenues from the four newly constructed multiplex theatres consisting of 26 screens in Dillon, CO, Espanola, NM, Los Lunas, NM and Sahuarita, AZ, which opened between August 1999 and May 2000, and the acquisition of two theatres in Laramie, WY in May 1999. Total operating income for the year ended December 31, 2000 decreased 22.2% to $8.3 million from $10.6 million for the year ended December 31, 1999. Indoor display operating income increased $141,000 or 1.9%. The cost of indoor displays represented 45.7% of related revenues in 2000 compared to 44.8% in 1999. Indoor display cost of equipment rentals and maintenance increased $537,000 or 8.1%, largely due to increased depreciation expense and field service costs, resulting from the increase in equipment on rental. Indoor display cost of equipment sales increased $94,000 or 2.5%, due to additional volume. The indoor display general and administrative expenses increased $171,000 or 3.1%. Outdoor operating income decreased $1.9 million or 83.6%. The cost of outdoor displays represented 77.8% of related revenues in 2000 and 73.5% in 1999. The sports segment of the outdoor division has become increasingly competitive. As a result, the Company expects to continue to experience erosion in the operating income of the sports sector of the outdoor division, as it continues to attempt to increase its market share, although 2001 did not experience an erosion. Outdoor display cost of equipment sales increased $1.0 million or 6.0%, principally due to higher content of raw materials due to the new LED technology, installation costs, and higher costs related to the new 55,000 square foot manufacturing facility in Logan, UT. In the fourth quarter, the Company wrote off approximately $145,000 of net book value of certain older manufacturing equipment held for sale at its former Logan, UT manufacturing facility after recent marketplace activity provided indication that the Company's carrying value was in excess of net realizable value; due mainly to the installation of state-of-the-art equipment in the new Logan, UT factory. Also during the fourth quarter of 2000, the Company reduced its gross profit by $100,000 relating to an outdoor sports display sales contract. Outdoor display cost of equipment rentals and maintenance decreased $268,000 or 4.0%, primarily due to reduced field service costs mainly as a result of the expected decline in the outdoor rental and maintenance bases previously acquired. The outdoor display general and administrative expenses increased $365,000 or 6.0%, primarily due to expanded sales and marketing efforts related to the sports segment and the operating costs related to the new manufacturing facility in Logan, UT. As a result of declining operating income in the outdoor display segment, management had evaluated the carrying value of the assets, including goodwill, and concluded that no adjustment to carrying value was necessary at that time. Such adjustments may need to be made in the future if circumstances indicate that the carrying value of such assets may not be recoverable, no adjustment was necessary in 2001. The entertainment and real estate operating income decreased $610,000 or 59.4%. This decrease was due to the fourth quarter charge for the write-off of the $1.3 million intangible theatre assets and equipment at its older Lake Dillon, CO theatre. The charge relating to the theatre was taken as a result of continuing disappointing box office receipts resulting in part from the Company's opening of a modern six-plex theatre in the same community in 1999. The Company recorded this impairment after analyzing its latest plans and projections of cash flows for this theatre, and determined that a charge was appropriate at that time. Previously, management had been working various strategies to improve operating results that were not having the desired effect, resulting in the need to record an impairment at that time. Under the terms of its lease, the Company is obligated to operate this theatre until 2014. Before the 11 write-off, the entertainment and real estate division would have had an operating income of $1.7 million, an increase of $696,000 or 67.8%. The cost of entertainment and real estate represented 93.5% (which included the write-off) of related revenues for the year ended December 31, 2000 and 80.6% in 1999. The cost of entertainment and real estate increased $3.3 million or 50.8% in 2000 (before the write-off), mainly as a result of the expansion of theatre operations and theatre start-up expenses for new theatre locations. The entertainment and real estate general and administrative expenses decreased slightly. Corporate general and administrative expenses increased $472,000 or 7.9%, primarily due to a $420,000 negative impact of the effect of foreign currency exchange rates in 2000 versus a $344,000 positive impact in 1999 (a net change of $764,000). Before the negative impact of the foreign currency exchange losses and the 1999 special litigation charge of $408,000 on a retaliatory discharge claim (see Note 15), corporate general and administrative expenses would have increased slightly. Net interest expense increased $1.9 million, which is primarily attributable to an increase in long-term debt due to the expansion of theatre operations and the new outdoor display manufacturing facility in Logan, UT, and an increase in interest rates in 2000 vs. 1999. Other income for 2000 relates largely to the gain on the sale of real estate holdings in Torrance, CA and in Mississauga, Canada. The 1999 other income related primarily to the gain on the repurchase of $1,135,000 par value of the Company's 7 1/2% Convertible Subordinated Notes at a discount and the earned income portion of municipal forgivable loans. The income from joint venture relates to the equity in earnings of the theatre joint venture, MetroLux Theatre in Loveland, CO. The effective tax benefit rate for the year ended December 31, 2000 was 28.0%. The benefit rate was unfavorably impacted primarily by the inability to recognize tax benefits for losses of a foreign subsidiary. Such benefits could be realized in the future to the extent the foreign subsidiary shows profits. For the year ended December 31, 1999, the effective tax rate of 36.0% was primarily as a result of favorable impacts created by the utilization of foreign carryforward tax benefits which had previously been fully reserved. Accounting Standards The Company adopted 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 designate hedging instruments as either fair value, cash flow, or hedges of a net investment in a foreign operation. All derivatives are to be recognized as either assets or liabilities and measured at fair value. Gains or losses resulting from changes in the values of those derivatives are accounted for depending upon its designation and whether it qualifies for hedge accounting. The Company has limited involvement with derivative financial instruments and does not use them for trading purposes; they are only used to manage and fix well-defined interest rate risks. The Company has two interest rate swap agreements effective through August 2002, having a notional value of $5.5 million to reduce exposure to interest fluctuations on its bank term loans, which are classified as cash flow hedges. The adoption of SFAS 133 resulted in the cumulative effect of an accounting change, net of tax, of approximately $15,000 in other comprehensive income (loss). At December 31, 2001, the mark-to-market loss for the interest rate swap hedge included in other comprehensive income totaled $96,000 (net of tax). In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 141, "Business Combinations", effective July 1, 2001, and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), effective for the fiscal years beginning after December 15, 2001. Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the statements. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules of accounting for goodwill and other intangible assets beginning in the first quarter of 2002. On an annual basis, the Company's current amortization of goodwill approximates $97,000. The Company will perform the required impairment tests related to goodwill and indefinite-lived intangible assets recorded on January 1, 2002. The Company has not yet determined what the effect of these tests will be on its earnings and financial position, if any. Any transitional impairment loss would be recognized as a cumulative effect of a change in accounting principle in the Consolidated Statements of Operations. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143), effective for financial statements issued after June 15, 2002. SFAS 143 addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The Company does not believe adopting SFAS 143 will have any effect on its financial statements. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets" (SFAS 144), effective for fiscal years beginning after December 15, 2001. SFAS 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets, including the disposal of a segment of business. The Company has not yet determined what the effect of these tests will be on its earnings and financial position, if any. Liquidity and Capital Resources The Company has a $15.0 million revolving credit facility available until June 2002, at which time the outstanding balance will convert into a four-year term loan. In order to fund on-going and potential new business, the Company is currently in discussions with lenders to arrange additional near-term working capital availability. At December 31, 2001, $12.9 million was outstanding, leaving $1.6 million of additional borrowing capacity under this facility after giving effect to outstanding irrevocable letters of credit in the amount of $0.5 million. These letters of credit, which have terms of less than three months, collateralize the Company's obligations to third parties for the purchase of inventory. The interest rate is LIBOR plus 2.5% (4.35% at December 31, 2001). The revolving credit facility also requires an annual facility fee on the unused commitment of 0.375%. The Company is currently authorized by the Board of Directors to repurchase up to $400,000 of its Common Stock. As of December 31, 2001, a total of 31,656 shares of Common Stock at a cost of $226,000 were repurchased under this program, although none were repurchased during 2001. As of December 31, 2001, the Company had repurchased $1,448,000 par value of its Notes, of which $20,000 par value were purchased during 2001 at a price of $77.00, resulting in an after tax gain of $2,000. The Company believes that cash generated from operations together with cash and cash equivalents on hand and the current availability under the revolving credit facility will be sufficient to fund its anticipated near term cash requirements, but is in discussions with lenders to arrange near-term working capital availability in order to fund ongoing and potential new business. The Company has two term loans under its amended bank Credit Agreement for a total of $5.5 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 to reduce exposure to interest fluctuations, which are classified as cash flow hedges. The interest rate swap agreements have the effect of converting the interest rate on such term loans to fixed average annual rates of 7.82% and 7.88% through July 2002. The Credit Agreement requires compliance with 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 at December 31, 2001 and expects to remain in compliance. Cash and cash equivalents increased $1.8 million in 2001 compared to an increase of $0.3 million in 2000. The increase in 2001 is primarily attributable to borrowings under the revolving credit facility, offset by a decrease in receivables and deferred revenues, deposits and other. The increase in 2000 was primarily attributable to the proceeds received from sale of fixed assets and securities, offset by an increase in inventories and cash utilized for investment in equipment on rental and construction of theatres. The Company continues to experience a favorable collection cycle on its trade receivables. 12 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to interest rate risk on its long-term debt. The Company manages its exposure to changes in interest rates by the use of variable and fixed interest rate debt. In addition the Company has hedged its exposure to changes in interest rates on a portion of its variable debt by entering into interest rate swap agreements to lock in fixed interest rates for a portion of these borrowings. The fair value of the Company's fixed rate long-term debt is disclosed in Note 9 to the Consolidated Financial Statements. In addition, the Company is exposed to foreign currency exchange rate risk mainly as a result of investments in its Australian and Canadian subsidiaries. The Company does not enter into derivatives for trading or speculative purposes. At December 31, 2001, the Company had two interest rate swap agreements effective through August 2002, with a notional amount of $5.5 million. The receive rate is based on a 90 day LIBOR rate. The receive and pay rates related to the interest rate swap were 4.35% and an average of 7.87%, respectively. The fair value of the interest rate swap agreements were approximately ($96,000), net of tax. Interest differentials to be paid or received because of the swap agreements are reflected as an adjustment to interest expense over the related debt period. A one percentage point change in interest rates would result in an annual interest expense fluctuation of approximately $318,000. A 10% change in the Australian and Canadian dollar relative to the U.S. dollar would result in a currency exchange expense fluctuation of approximately $571,000. The fair value is based on dealer quotes, considering current exchange rates. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and supplementary financial information are set forth below: CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share data Years ended December 31 2001 2000 1999 - ------------------------------------------------------------------------------------------------------ Revenues: Equipment rentals and maintenance $24,405 $24,026 $23,490 Equipment sales 32,680 30,876 31,273 Theatre receipts and other 13,086 11,861 8,055 ------- ------- ------- Total revenues 70,171 66,763 62,818 ------- ------- ------- Operating expenses: Cost of equipment rentals and maintenance 13,528 13,636 13,366 Cost of equipment sales 22,777 21,245 20,171 Cost of theatre receipts and other 10,330 9,787 6,492 Write down of theatre assets - 1,306 - ------- ------- ------- Total operating expenses 46,635 45,974 40,029 ------- ------- ------- Gross profit from operations 23,536 20,789 22,789 General and administrative expenses 17,908 19,331 18,341 ------- ------- ------- 5,628 1,458 4,448 Interest income 157 445 592 Interest expense (5,532) (5,980) (4,251) Other income 412 626 258 Income from joint venture 397 353 185 ------- ------- ------- Income (loss) before income taxes 1,062 (3,098) 1,232 ------- ------- ------- Provision (benefit) for income taxes: Current (68) 104 510 Deferred 621 (971) (66) ------- ------- ------- 553 (867) 444 ------- ------- ------- Net income (loss) $ 509 $(2,231) $ 788 ======= ======= ======= Earnings (loss) per share: Basic $ 0.40 ($1.77) $ 0.61 Diluted $ 0.40 ($1.77) $ 0.61 Average common shares outstanding: Basic 1,261 1,261 1,286 Diluted 1,261 1,261 1,288 ______________________________________________________________________________________________________ The accompanying notes are an integral part of these consolidated financial statements.
14
CONSOLIDATED BALANCE SHEETS In thousands, except share data December 31 2001 2000 - --------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 5,699 $ 3,920 Available-for-sale securities 530 495 Receivables, less allowance of $465 and $311 9,503 8,010 Unbilled receivables 830 1,158 Inventories 6,837 7,781 Prepaids and other 762 754 -------- -------- Total current assets 24,161 22,118 -------- -------- Equipment on rental 86,147 80,725 Less accumulated depreciation 39,328 34,787 -------- -------- 46,819 45,938 -------- -------- Property, plant and equipment 47,944 48,528 Less accumulated depreciation and amortization 10,729 9,248 -------- -------- 37,215 39,280 Other assets 5,702 5,679 -------- -------- $113,897 $113,015 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 4,614 $ 4,214 Accrued liabilities 6,230 6,079 Current portion of long-term debt 3,331 2,562 -------- -------- Total current liabilities 14,175 12,855 -------- -------- Long-term debt: 7 1/2% convertible subordinated notes due 2006 30,177 30,197 9 1/2% subordinated debentures due 2012 1,057 1,057 Notes payable 38,016 37,298 -------- -------- 69,250 68,552 Deferred revenue, deposits and other 2,930 4,248 Deferred income taxes 3,974 3,664 -------- -------- Commitments and contingencies Stockholders' equity: Capital stock Common - $1 par value - 5,500,000 shares authorized 2,452,900 shares issued in 2001 and 2,445,562 in 2000 2,453 2,445 Class B - $1 par value - 1,000,000 shares authorized 287,505 shares issued in 2001 and 294,843 in 2000 287 295 Additional paid-in-capital 13,901 13,901 Retained earnings 19,360 19,029 Accumulated other comprehensive loss (596) (137) -------- -------- 35,405 35,533 Less treasury stock - at cost - 1,479,688 shares in 2001 and 2000 (excludes additional 287,505 shares held in 2001 and 294,843 in 2000 for conversion of Class B stock) 11,837 11,837 -------- -------- Total stockholders' equity 23,568 23,696 -------- -------- $113,897 $113,015 ======== ======== ___________________________________________________________________________________________________ The accompanying notes are an integral part of these consolidated financial statements.
15 CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands Years ended December 31 2001 2000 1999 - ------------------------------------------------------------------------------------------------------ Cash flows from operating activities Net income (loss) $ 509 $(2,231) $ 788 Adjustment to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 10,067 9,532 8,682 Income from joint venture (397) (353) (185) Deferred income taxes 620 (971) (126) Gain on sale of fixed assets (306) (585) - Loss on sale of securities - 54 3 Gain on repurchase of Company's 7 1/2% convertible subordinated notes (5) (49) (108) Write-off of non-recoverable assets - 1,451 - Changes in operating assets and liabilities: Receivables (1,667) 10 (1,891) Inventories 944 (1,635) (765) Prepaids and other assets (28) 339 (405) Accounts payable and accruals (255) 564 2,257 Deferred revenue, deposits and other (1,298) 433 (539) ------- ------- ------- Net cash provided by operating activities 8,184 6,559 7,711 ------- ------- ------- Cash flows from investing activities Equipment manufactured for rental (7,978) (8,708) (7,373) Purchases of property, plant and equipment (878) (9,607) (12,992) Usage of (increase in) construction funds - 3,290 (3,290) Payments for acquisitions (net) - - (1,163) Proceeds from joint venture 734 227 94 Proceeds from sale of securities - 3,182 1,054 Proceeds from sale of fixed assets 423 2,659 - ------- ------- ------- Net cash used in investing activities (7,699) (8,957) (23,670) ------- ------- ------- Cash flows from financing activities Proceeds from long-term debt 4,130 5,430 20,671 Repayment of long-term debt (2,643) (2,356) (984) Repurchase of Company's 7 1/2% convertible subordinated notes (15) (233) (974) Purchase of treasury stock - - (226) Cash dividends (178) (174) (175) ------- ------- ------- Net cash provided by financing activities 1,294 2,667 18,312 ------- ------- ------- Net increase in cash and cash equivalents 1,779 269 2,353 Cash and cash equivalents at beginning of year 3,920 3,651 1,298 ------- ------- ------- Cash and cash equivalents at end of year $ 5,699 $3,920 $ 3,651 ======= ======= ======= - ------------------------------------------------------------------------------------------------------ Interest paid $ 5,241 $5,657 $ 4,185 Interest received 187 558 617 Income taxes paid (refunded) 411 (14) 1,003 - ------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these consolidated financial statements.
16 Consolidated Statements 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, 2001 Shares Amount Shares Amount Capital Stock Earnings Income (Loss) - ----------------------------------------------------------------------------------------------------------------------------------- Balance January 1, 1999 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), net of tax: 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) Net income (loss) --- --- --- --- --- --- (2,231) --- Cash dividends --- --- --- --- --- --- (174) --- Other comprehensive income (loss), net of tax: Unrealized foreign currency translation --- --- --- --- --- --- --- 20 Unrealized holding gain --- --- --- --- --- --- --- 68 Class B conversion to common stock 1,162 1 (1,162) (1) --- --- --- --- ----------------------------------------------------------------------------------- Balance December 31, 2000 2,445,562 2,445 294,843 295 13,901 (11,837) 19,029 (137) Net income --- --- --- --- --- --- 509 --- Cash dividends --- --- --- --- --- --- (178) --- Other comprehensive income (loss), net of tax: Unrealized foreign currency translation --- --- --- --- --- --- --- 19 Unrealized holding loss --- --- --- --- --- --- --- (9) Minimum pension liability adjustment --- --- --- --- --- --- --- (373) Unrealized derivative loss --- --- --- --- --- --- --- (96) Class B conversion to common stock 7,338 8 (7,338) (8) --- --- --- --- ----------------------------------------------------------------------------------- Balance December 31, 2001 2,452,900 $2,453 287,505 $287 $13,901 $(11,837) $19,360 $(596) - ----------------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Comprehensive Income
In thousands Years ended December 31 2001 2000 1999 - ------------------------------------------------------------------------------ Net income (loss) $ 509 $(2,231) $788 ------------------------ Other comprehensive income (loss), net of tax: Unrealized foreign currency translation 19 20 (142) Unrealized holding gain (loss) on securities (9) 68 (83) Minimum pension liability adjustment (373) - - Unrealized derivative loss (96) - - ------------------------ Total other comprehensive income (loss) (459) 88 (225) ------------------------ Comprehensive income (loss) $ 50 $(2,143) $563 - ----------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
17 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 separate line in the Consolidated Statements of Operations. 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. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary. Estimates are used when accounting for such items as costs of long-term sales contracts, allowance for doubtful accounts, inventory reserves, depreciation and amortization, intangible assets, warranty obligation, income taxes, contingencies and litigation. 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 are stated at fair value. Accounts receivable: Receivables are carried at net realizable value. Reserves for doubtful accounts are provided based on historical experience and current trends. The Company evaluates the adequacy of these reserves regularly. Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market value. Reserves for slow moving and obsolete inventories are provided based on historical experience and demand for servicing of the displays. The Company evaluates the adequacy of these reserves regularly. 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 40 years Machinery, fixtures and equipment 5 to 15 years Leaseholds and improvements 5 to 27 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 seven and ten 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 for assets to be held and used, 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. For assets held for sale, possible impairment is measured by comparing the carrying amount of the asset to net realizable value. Revenue recognition: Rental revenue from rental 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 been billed to the customer. Income is recognized based on the percentage of incurred costs to the estimated total costs for each contract. The determination of the estimated total costs are susceptible to significant change on these sales contracts. 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 Operations. 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 and fix 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 Operations and in interest paid in the Consolidated Statements of Cash Flows. Accounting pronouncements: The Company adopted 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 designate hedging instruments as either fair value, cash flow, or hedges of a net investment in a foreign operation. All derivatives are to be recognized as either assets or liabilities and measured at fair value. Gains or losses resulting from changes in the values of those derivatives are accounted for depending upon its designation and whether it qualifies for hedge accounting. The adoption of SFAS 133 resulted in the cumulative effect of an accounting change, net of tax, of approximately $15,000 in other comprehensive income (loss). In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 141, "Business Combinations", effective July 1, 2001, and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), effective for fiscal years beginning after December 15, 2001. Under 18 SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the statements. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules of accounting for goodwill and other intangible assets beginning in the first quarter 2002. On an annual basis, the Company's current amortization of goodwill approximates $97,000. The Company will perform the required impairment tests related to goodwill and indefinite-lived intangible assets recorded on January 1, 2002. The Company has not yet determined what the effect of these tests will be on its earnings and financial position, if any. Any transitional impairment loss would be recognized as a cumulative effect of a change in accounting principle in the Consolidated Statements of Operations. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143), effective for financial statements issued after June 15, 2002. SFAS 143 addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The Company does not believe adopting SFAS 143 will have any effect on its financial statements. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets" (SFAS 144), effective for fiscal years beginning after December 15, 2001. SFAS 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets, including the disposal of a segment of business. The Company has not yet determined what the effect of these tests will be on its earnings and financial position, if any. Reclassifications: Certain reclassifications of prior year's amounts have been made to conform to the current year's presentation. 2. Available-for-Sale Securities Available-for-sale securities are carried at estimated fair values and the unrealized holding 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 $21,000 and $36,000 (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, 2001 and 2000, respectively. The Company realized losses on the sales of available-for-sale securities of $54,000 in 2000. Available-for-sale securities consist of the following: 2001 2000 ------------------------------------------ Fair Unrealized Fair Unrealized In thousands Value Losses Value Losses - -------------------------------------------------------------------- Equity securities $530 $174 $495 $212 - -------------------------------------------------------------------- 3. Inventories Inventories consist of the following:
In thousands 2001 2000 - -------------------------------------------------------- Raw materials and spare parts $3,785 $4,837 Work-in-progress 1,717 1,450 Finished goods 1,335 1,494 ------ ------ $6,837 $7,781 - --------------------------------------------------------
4. Property, Plant and Equipment Property, plant and equipment consist of the following:
In thousands 2001 2000 - -------------------------------------------------------------- Land, buildings and improvements $36,140 $36,717 Machinery, fixtures and equipment 10,037 9,918 Leaseholds and improvements 1,767 1,893 ------- ------- $47,944 $48,528 - --------------------------------------------------------------
Land, buildings and equipment having a net book value of $29.6 million and $30.0 million at December 31, 2001 and 2000, respectively, were pledged as collateral under mortgage agreements. 5. Other Assets Other assets consist of the following:
In thousands 2001 2000 - ------------------------------------------------------------------------------ Deferred financing costs, net of accumulated amortization of $1,399-2001 and $1,079-2000 $1,412 $1,658 Goodwill and noncompete agreements, net of accumulated amortization of $551- 2001 and $945-2000 1,256 1,362 Investment in joint venture 1,065 899 Prepaids 838 492 Maintenance contracts, net of accumulated amortization of $2,220-2001 and $2,108-2000 406 517 Patents and other intangibles, net of accumulated amortization of $463-2001 and $432-2000 75 106 Deposits and other 650 645 ------ ------ $5,702 $5,679 - ------------------------------------------------------------------------------
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 acquisitions of two separate outdoor businesses. Maintenance contracts represent the present value of acquired agreements to service outdoor display equipment. 6. Write-Off of Assets During the fourth quarter of 2000, the Company recorded an impairment charge of $1,306,000 relating to an intangible theatre asset and equipment at its older Lake Dillon, Colorado, theatre, and $145,000 for certain older outdoor manufacturing equipment. The charge relating to the theatre was taken as a result of continuing disappointing box office receipts resulting in part from the Company's opening of a modern six-plex theatre in the same community in 1999. The Company recorded this impairment after analyzing its latest plans and projections of cash flows for this theatre, and determined that a charge was appropriate at that time. Previously, management had been working various strategies to improve operating results that were not having the desired effect, resulting in the need to record an impairment at that time. Under the terms of its lease, the Company is obligated to operate this theatre until 2014. The charge for the outdoor manufacturing equipment relates to assets held for sale at its former Logan, Utah manufacturing facility after recent marketplace activity provided indication that the Company's carrying value was in excess of net realizable value. During the third quarter 2001, this facility was sold, and a $56,000 loss was recorded. 19 7. Taxes on Income The components of income tax expense (benefit) are as follows:
In thousands 2001 2000 1999 - ----------------------------------------------------------------------- Current: Federal $(413) $(320) $ 277 State and local 27 (23) 64 Foreign 318 447 169 ----- ----- ----- (68) 104 510 Deferred: Federal 605 (601) (157) State and local 16 (313) 131 Foreign - (57) (40) ----- ----- ----- 621 (971) (66) ----- ----- ----- Total income tax expense (benefit) $ 553 $(867) $ 444 - -----------------------------------------------------------------------
Income taxes provided (benefit) differed from the expected federal statutory rate of 34% as follows:
2001 2000 1999 - ---------------------------------------------------------------------------- Statutory federal income tax (benefit) rate 34.0% (34.0%) 34.0% State income taxes, net of federal benefit 2.7 (7.2) 10.4 Foreign operating losses (income) not providing current tax benefit (expense) 2.9 5.4 (12.3) Foreign income taxed at different rates 8.0 2.7 (0.5) Income tax credits 1.4 3.9 - Other 3.0 1.2 4.4 ----- ----- ----- Effective income tax rate (benefit) 52.0% (28.0%) 36.0% - ----------------------------------------------------------------------------
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:
In thousands 2001 2000 - ---------------------------------------------------------------- Deferred tax asset: Tax credit carryforwards $ 1,988 $ 2,276 Operating loss carryforwards 4,392 3,687 Net pension cost 475 78 Bad debts 159 77 Litigation 86 201 Other 629 662 Valuation allowance (304) (320) ------- ------- 7,425 6,661 Deferred tax liability: Depreciation 10,722 9,675 Gain on purchase of Company's 9% debentures 439 439 Other 238 211 ------- ------- 11,399 10,325 ------- ------- Net deferred tax liability $ 3,974 $ 3,664 - ----------------------------------------------------------------
Tax credit carryforwards primarily relate to federal alternative minimum taxes of $1.7 million paid by the Company which may be carried forward indefinitely. Operating tax loss carryforwards primarily relate to U.S. federal net operating loss carryforwards of approximately $10.5 million, which begin to expire in 2019 and Australian net operating loss carryforwards of approximately $0.2 million which begin to expire in 2007. A valuation allowance has been established for the amount of deferred tax assets related to Australian and state net operating loss carryforwards and foreign tax credits, which management estimates will more likely than not expire unused. 8. Accrued Liabilities Accrued liabilities consist of the following:
In thousands 2001 2000 - -------------------------------------------------------------------- Compensation and employee benefits $1,712 $1,213 Pension liability 1,207 214 Interest payable 704 643 Taxes payable 222 1,210 Other 2,385 2,799 ------ ------ $6,230 $6,079 - --------------------------------------------------------------------
9. Long-Term Debt Long-term debt consists of the following:
In thousands 2001 2000 - ------------------------------------------------------------------------------- 7 1/2% convertible subordinated notes due 2006 $30,177 $30,197 9 1/2% subordinated debentures due 2012 1,057 1,057 Term loans - bank, secured due in quarterly installments through 2005 5,479 7,095 Revolving credit facility - bank, secured 12,900 9,050 Real estate mortgages - secured, due in monthly installments through 2021 18,200 18,561 Loan payable - IRB, due in annual installments through 2014 4,390 4,615 Loan payable - CEBA, secured, due in monthly installments through 2006 at 0.0% 245 295 Loan payable - CDA, secured due in monthly installments through 2002 at 5.0% 54 135 Capital lease obligation - secured, due in monthly installments through 2004 at 5.3% 79 109 ------- ------- 72,581 71,114 Less portion due within one year 3,331 2,562 ------- ------- Long-term debt $69,250 $68,552 - -------------------------------------------------------------------------------
Payments of long-term debt due for the next five years are: In thousands 2002 2003 2004 2005 2006 - --------------------------------------------------------------- $3,331 $4,960 $5,008 $7,617 $4,101 - --------------------------------------------------------------- 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 declining premiums. The related Indenture agreement requires compliance with certain financial covenants, which include a limitation on the Company's ability to incur indebtedness of five times EBITDA plus $5.0 million. During 2001, the Company repurchased $20,000 face value of its Notes at $77.00, and recognized $2,000 of income (net of tax). 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 declining premiums. The Company has a bank Credit Agreement, which provides for both term loans and a $15 million revolving credit facility, including letters of credit, which are available until June 2002, and requires an annual facility fee on the unused commitment of 0.375%. The Company has provided the bank with a security interest in substantially all assets of its display business. At December 31, 2001, under the term loans, $4.7 million and $0.8 million were outstanding. Under the revolving credit facility, $12.9 million was outstanding leaving $1.6 million in borrowing capacity under this facility, and has outstanding irrevocable letters of credit in the amount of $0.5 million. These letters of credit, which have terms of less than three months, collateralize the Company's obligations to third parties for the purchase of inventory. The fair value of these letters of credit approximates contract values based on the nature of the 20 fee arrangements with the issuing bank. The Credit Agreement requires compliance with certain financial covenants which, at December 31, 2001, included a defined debt service coverage ratio of 1.40 to 1.0, a defined debt to cash flow ratio of 3.75 to 1.0 and an annual limitation of $750,000 on cash dividends. At December 31, 2001, the Company was in compliance with such financial covenants. The term loans bear interest at LIBOR plus 1.75%. At December 31, 2001, 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 to reduce exposure to interest fluctuations, which are classified as cash flow hedges. The interest rate swap agreements have the effect of converting the interest rate on such term loans to a fixed average annual rate of 7.87% through July 2002. At January 1, 2001, the Company adopted the provisions of SFAS 133 and recorded a cumulative effect of an accounting change, net of tax, of approximately $15,000 in other comprehensive income (loss). At December 31, 2001, the cost to the Company to terminate the interest rate swap agreements was approximately $96,000, net of tax. Payments on the $0.8 million term loan are due in even quarterly installments through July 2002, and payments on the $4.7 million term loan are due in even quarterly installments through July 2005 and a final maturity of $2.8 million in August 2005. Under the Credit Agreement, the outstanding balance on the revolving credit facility will convert into a four-year term loan. 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 2.5% (4.35% at December 31, 2001). The Company has mortgages on certain of its facilities, which are payable in monthly installments, the last of which extends to 2021. Depending upon the mortgage, the interest rate is either fixed, floating or adjustable. At December 31, 2001, such interest rates ranged from 3.89% to 8.91%. 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 its new 55,000 square foot outdoor display manufacturing 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 the 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, 2001, the interest rates on the Bonds were 1.80% and 2.10%, respectively, plus a 1.25% letter of credit fee. During 2001, the Company incurred interest costs of $5.5 million. At December 31, 2001, the fair value of the Notes and the Debentures was $25.8 million and $1.0 million, respectively. The fair value of the remaining long-term debt approximates the carrying value. 10. Stockholders' Equity During 2001, 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 2001 and January 2002. 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, 2001, under this program, the Company had purchased 31,656 shares at a cost of $226,000. The stockholders previously 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, 2001 and 2000. 11. Engineering Development Engineering development expense was $297,000, $326,000 and $535,000 for 2001, 2000 and 1999, 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 at least the required minimum amounts sufficient to satisfy regulatory funding standards, but not more than the maximum tax-deductible amount. At December 31, 2001, plan assets consist principally of insurance company funds, mutual funds and $203,000 in the Company's 9 1/2% subordinated debentures. The funded status of the plan as of December 31, 2001 and 2000 is as follows:
In thousands 2001 2000 - ------------------------------------------------------------------------------- Change in projected benefit obligation Projected benefit obligation at beginning of year $ 7,597 $ 6,438 Service cost 568 568 Interest cost 560 493 Actuarial loss 46 340 Amendments to plan 167 - Benefits paid (77) (242) ------ ------ Projected benefit obligation at end of year $ 8,861 $ 7,597 ------ ------ Change in plan assets Fair value of plan assets at beginning of year $ 5,625 $ 5,988 Actual return on plan assets (12) (121) Company contributions 311 - Benefits paid (77) (242) ------ ------ Fair value of plan assets at end of year $ 5,847 $ 5,625 ------ ------ Funded status Funded status (underfunded) $(3,014) $(1,972) Unrecognized net actuarial loss 2,253 1,747 Unrecognized prior service cost 175 11 ------ ------ Net pension benefit liability $ (586) $ (214) ------ ------ Net pension benefit liability Pension benefit liability $(1,382) $ (214) Unrecognized prior service cost 175 - Accumulated other comprehensive loss 621 - ------ ------ Net pension benefit liability $ (586) $ (214) ------ ------ Weighted-average assumptions as of December 31 Discount rate 7.25% 7.50% Expected return on plan assets 9.50% 9.50% Rate of compensation increase 3.75% 4.25% - --------------------------------------------------------------------------------
21 The following items are components of the net periodic pension cost for the three years ended December 31, 2001:
In thousands 2001 2000 1999 - -------------------------------------------------------------------------- Service cost $ 568 $ 568 $ 565 Interest cost 560 493 446 Expected return on plan assets (537) (561) (536) Amortization of prior service cost 2 2 2 Amortization of net actuarial loss 90 8 88 --- --- --- Net periodic pension cost - funded plan $ 683 $ 510 $ 565 - --------------------------------------------------------------------------
In addition, the Company provides unfunded supplemental retirement benefits for the Chief Executive Officer. The Company recognized a benefit of $127,000 for 2001 due to amendments to the pension plan and accrued $111,000 and $97,000 for 2000 and 1999, respectively, for such benefits. The total liability accrued was $456,000, $583,000 and $472,000 at December 31, 2001, 2000 and 1999, respectively. The Company does not offer any postretirement benefits other than the pension and the supplemental retirement benefits described herein. 13. Stock Option Plans The Company has four stock option plans. Under the 1995 Stock Option Plan and the 1992 Stock Option Plan, 125,000 and 50,000 shares of Common Stock, respectively, were authorized for grant to key employees. Under the Non- Employee Director Stock Option Plan, 30,000 shares of Common Stock were authorized for grant. During 2001, the Company adopted a Non-Statutory Stock Option Agreement reserving 10,000 shares of Common Stock for issue to the Chairman of the Board. Changes in the stock option plans are as follows:
Number of Shares Weighted ---------------- Average Authorized Granted Available Exercise Price - ----------------------------------------------------------------------------------------- Balance January 1, 1999 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 Additional shares authorized 25,000 - 25,000 - Terminated (2,650) (3,850) 1,200 8.16 Granted - 5,500 (5,500) 6.40 ---------------------------------------------------- Balance December 31, 2000 174,859 130,159 44,700 9.26 Additional shares authorized 10,000 - 10,000 - Terminated - (32,100) 32,100 8.86 Granted - 13,500 (13,500) 4.18 ---------------------------------------------------- Balance December 31, 2001 184,859 111,559 73,300 $8.75 - -----------------------------------------------------------------------------------------
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, 2001, under the 1995 Plan, options for 58,939 shares with exercise prices ranging from $6.50 to $15.1875 per share were outstanding, all of which were exercisable. During 2001, no options were exercised and options for 30,600 shares expired. During 2000, options for 5,000 shares were granted at an exercise price of $6.50 per share, no options were exercised, and options for 1,200 shares expired. 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. At December 31, 2001, under the 1992 Plan, options for 28,620 shares with exercise prices ranging from $6.3125 to $9.6875 per share were outstanding, all of which were exercisable. During 2001, no options were exercised, and no options expired. During 2000, no options were exercised, and options for 2,650 shares expired. During 1999, no options were exercised, and options for 300 shares expired. 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, 2001, options for 14,000 shares with exercise prices ranging from $4.025 to $13.00 per share were outstanding, 10,500 of which were exercisable. During 2001, options for 3,500 shares were granted with exercise prices ranging from $4.025 to $6.15, no options were exercised, and options for 1,500 shares expired. During 2000, options for 500 shares were granted at an exercise price of $5.375 per share, no options were exercised, and no options expired. During 1999, options for 1,500 shares were granted at an exercise price of $8.00 per share, no options were exercised, and no options expired. Under the Non-Statutory Stock Option Agreement for the Chairman of the Board, the option price must be at least 100% of the market value of the Common Stock at time of grant and the exercise period is for ten years from date of grant. At December 31, 2001, the option for 10,000 shares with an exercise price of $4.025 was outstanding and was exercisable. During 2001, the option for 10,000 shares was granted at an exercise price of $4.025, the option was not exercised and did not expire. The following tables summarize information about stock options outstanding at December 31, 2001:
Weighted Average Range of Number Remaining Weighted Average Exercise Prices Outstanding Contractual Life Exercise Price - ---------------------------------------------------------------------------- $ 4.03 - $ 6.31 17,920 6.8 $ 4.68 6.32 - 7.56 8,900 5.0 6.97 7.57 - 8.13 29,539 3.4 8.12 8.14 - 9.69 19,900 5.0 9.22 9.70 - 12.63 33,500 4.1 11.41 12.64 - 15.19 1,800 3.9 13.97 --------------------------------------------------- 111,559 4.6 $ 8.75 - ----------------------------------------------------------------------------
Range of Number Weighted Average Exercise Prices Exercisable Exercise Price - ---------------------------------------------------------- $ 4.03 - $6.31 14,420 $ 4.69 6.32 - 7.56 8,900 6.97 7.57 - 8.13 29,539 8.12 8.14 - 9.69 19,900 9.22 9.70 - 12.63 33,500 11.41 12.64 - 15.19 1,800 13.97 ----------------------------------- 108,059 $ 8.89 - ----------------------------------------------------------
The estimated fair value of options granted during 2001, 2000 and 1999 was $1.81, $2.69 and $3.93 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 (loss) and 22 earnings (loss) per share for the years ended December 31, 2001, 2000 and 1999 would have been reported as the pro forma amounts indicated below:
In thousands, except per share data 2001 2000 1999 - ------------------------------------------------------------------------------------- Net income (loss) applicable to common shareholders As reported $ 509 $(2,231) $ 788 Pro forma 504 (2,274) 737 ---------------------------- Net income (loss) per common and common equivalent share As reported $0.40 $ (1.77) $0.61 Pro forma 0.40 (1.80) 0.56 - -------------------------------------------------------------------------------------
The fair value of options granted under the Company's stock option plans during 2001, 2000 and 1999 was estimated on dates of grant using the binomial options-pricing model with the following weighted-average assumptions used: dividend yield of approximately 2.72% in 2001, 2.60% in 2000 and 1.77% in 1999, expected volatility of approximately 41% in 2001 and 37% in 2000 and 1999, risk free interest rate of approximately 5.46% in 2001, 5.48% in 2000 and 6.48% in 1999, and expected lives of option grants of approximately four years in 2001, 2000 and 1999. 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, 2001:
In thousands, except per share data 2001 2000 1999 - ----------------------------------------------------------------------------- Basic earnings (loss) per share computation: Net income (loss) $ 509 $(2,231) $ 788 ------------------------------ Weighted average common shares outstanding 1,261 1,261 1,286 ------------------------------ Basic earnings (loss) per common share $ 0.40 $ (1.77) $ 0.61 ------------------------------ Diluted earnings (loss) per share computation: Net income (loss) $ 509 $(2,231) $ 788 ------------------------------ Weighted average common shares outstanding 1,261 1,261 1,286 Assumes exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options (1) - - 2 ------------------------------ Total weighted average shares 1,261 1,261 1,288 ------------------------------ Diluted earnings (loss) per common share $ 0.40 $ (1.77) $ 0.61 - -----------------------------------------------------------------------------
(1) The 2001 and 2000 diluted earnings (loss) per common share calculation does not include options to purchase 111,559 and 130,159 shares of common stock, respectively, as the effect is antidilutive. The 1999 diluted earnings per common share calculation does not include options to purchase 88,500 shares of common stock, which were outstanding, with exercise prices ranging from $8.625 to $15.1875 per share because the exercise prices were greater than the average market price of the common stock. 15. Commitments and Contingencies Contingencies: The Company has employment agreements with certain executive officers, which expire at various dates through December 2010. At December 31, 2001, the aggregate commitment for future salaries, excluding bonuses, was approximately $4.6 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 Sheets. The loans are 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 is classified as deferred revenue, deposits and other in the Consolidated Balance Sheets. This grant will be forgiven under certain circumstances, which include 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 appealed the verdict, which was affirmed. The Company filed a certiorari petition that has been granted. Subsequent to year- end, the Company reached a settlement with the plaintiff for an amount less than the amount previously accrued, a portion of which is subject to insurance recovery. 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. Management has received certain claims by customers related to contractual matters, which are being discussed, and believes that it has adequate provisions for such matters. The Company had been involved in arbitration related to the construction of its six-plex movie theatre in Dillon, Colorado. The contractor had alleged claims against the Company in the amount of $489,000 due under a contract. The Company had denied any liability and has asserted claims in the amount of $467,000 that, among other matters, the contractor failed to build the theatre in accordance with the architectural plans. The outcome of this arbitration was payment in the amount of $84,000 to the contractor. 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, 2001 are as follows: $612,000 - 2002, $555,000 - 2003, $484,000 - 2004, $446,000 - 2005, $347,000 - 2006, $2,348,000 - thereafter. Rent expense was $553,000, $687,000 and $601,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Commitments: The Company has a purchase commitment with one of its suppliers to purchase a specified quantity of raw materials over the next two years. In the event the Company does not purchase the specified quantity, a maximum surcharge of $66,667 can be imposed by the supplier. The Company has satisfied its minimum purchase requirement for 2001. Guarantees: The Company has guaranteed $1.5 million (60%) of a $2.5 million mortgage loan obtained by its joint venture, MetroLux Theatres. During 2000, the Company entered into two sale/leaseback transactions for theatre equipment that are classified as operating leases. The Company has guaranteed up to a maximum of $1,285,000 if, upon default, the lessor cannot recover the unamortized balance. 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 makers 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 are managed in 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 23 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/Real Estate Division owns a chain of motion picture theatres in the western Mountain States, a national film booking service and income-producing real estate properties. 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 general and administrative items relate to costs that 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 1, 2001 is as follows:
In thousands 2001 2000 1999 - ----------------------------------------------------------------------------------- Revenues: Indoor display $ 25,449 $ 24,363 $23,419 Outdoor display 31,636 30,539 31,344 Entertainment/real estate 13,086 11,861 8,055 ----------------------------------- Total revenues $ 70,171 $ 66,763 $62,818 ----------------------------------- Operating income: Indoor display $ 7,931 $ 7,473 $ 7,331 Outdoor display 1,563 370 2,252 Entertainment/real estate 2,534 417 1,027 ----------------------------------- Total operating income 12,028 8,260 10,610 Other income 412 626 258 Corporate general and administrative expenses (6,003) (6,449) (5,977) Interest expense - net (5,375) (5,535) (3,659) ----------------------------------- Income (loss) before income taxes $ 1,062 $ (3,098) $ 1,232 ----------------------------------- Assets: Indoor display $ 43,592 $ 42,887 Outdoor display 36,529 37,683 Entertainment/real estate 26,891 27,237 ---------------------- Total identifiable assets 107,012 107,807 General corporate 6,885 5,208 ---------------------- Total assets $113,897 $113,015 ---------------------- Depreciation and amortization: Indoor display $ 5,643 $ 5,187 $ 4,853 Outdoor display 2,977 2,791 2,581 Entertainment/real estate 935 993 594 General corporate 512 561 654 ----------------------------------- Total depreciation and amortization $ 10,067 $ 9,532 $ 8,682 ----------------------------------- Capital expenditures: Indoor display $ 6,502 $ 7,162 $ 5,820 Outdoor display 1,801 5,202 4,147 Entertainment/real estate 435 5,822 10,101 General corporate 118 129 297 ----------------------------------- Total capital expenditures $ 8,856 $ 18,315 $20,365 - -----------------------------------------------------------------------------------
17. Fourth Quarter Events (unaudited) The Company recorded the following items during the quarter ended December 31, 2001: (1) a decrease to net income of $110,000 related to an increase in the allowance for doubtful accounts, (2) an increase to net income of $159,000 related to the settlement of a legal matter (see Note 15), and (3) an increase in the effective tax rate for the year, which had the effect of increasing the quarterly income tax expense by approximately $50,000. During the quarter ended December 31, 2000, the Company recorded: (1) an impairment charge of $1,044,000 (net of tax) related to an intangible theatre asset and equipment at its older Lake Dillon, CO theatre and certain older outdoor display manufacturing equipment, (2) a decrease to net income (loss) of $72,000 related to an outdoor sports display contract, and (3) a reduction in the effective tax benefit rate for the year, which had the effect of reducing the quarterly income tax benefit by approximately $192,000. Independent Auditors' Report To the Board of Directors and Stockholders of Trans-Lux Corporation, Norwalk, Connecticut: We have audited the accompanying consolidated balance sheets of Trans-Lux Corporation and its subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, 2001. 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 did not audit the 2001 financial statements of MetroLux Theatres, the Company's investment in which is accounted for by use of the equity method. The Company's equity of $1,065,000 in MetroLux Theatres' net assets at December 31, 2001, and of $397,000 in that company's net income for the year then ended are included in the accompanying 2001 financial statements. The 2001 financial statements of MetroLux Theatres were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such company in the 2001 financial statements, is based solely on the report of such other auditors. 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 and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Stamford, Connecticut March 27, 2002 - -------------------------------------------------------------------------------- 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 share through competition, introduction of competing products by others, pressure on prices from competition or purchasers of the Company's products, interest rate and foreign exchange fluctuations, such as the decline in the value of the Australian dollar, terrorist acts and war. 24 Partners MetroLux Theatres Norwalk, Connecticut Independent Auditors' Report We have audited the accompanying balance sheet of MetroLux Theatres as of December 31, 2001 and the related statements of income, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MetroLux Theatres as of December 31, 2001, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Kellogg & Andelson February 18, 2002 25 METROLUX THEATRES BALANCE SHEET DECEMBER 31, 2001 (Dollars in thousands)
ASSETS CURRENT ASSETS: Cash $ 707 Concession supplies 10 Prepaid expenses and other current assets 11 ----- Total current assets 728 FIXED ASSETS, net 4,331 OTHER ASSETS: Due from partners 1 Intangible assets, net 16 ----- Total other assets 17 ----- $5,076 ===== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Film rentals payable $ 211 Accounts payable and accrued expenses 164 Current portion of long-term debt 207 ----- Total current liabilities 582 LONG-TERM DEBT, net of current portion 2,293 DEFERRED REVENUES 71 ----- Total liabilities 2,946 ----- PARTNERS' EQUITY 2,130 ----- $5,076 ===== The accompanying notes are an integral part of the financial statements
26 METROLUX THEATRES STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2001 (Dollars in thousands)
OPERATING REVENUES: Theatre operations Admissions $2,434 Concessions 1,045 Other operating revenues 59 ----- Total operating revenues 3,538 ----- OPERATING EXPENSES: Theatre operations Film costs and advertising 1,379 Cost of concessions 183 Other operating expenses 868 Administrative expenses 110 ----- Total operating expenses 2,540 ----- INCOME FROM OPERATIONS 998 ----- OTHER INCOME (EXPENSE): Interest income 5 Gain on sale of assets 43 Interest expense (252) ----- Net other (expense) (204) ----- NET INCOME $ 794 ===== The accompanying notes are an integral part of the financial statements
27 METROLUX THEATRES STATEMENT OF PARTNERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001 (Dollars in thousands)
Trans-Lux Metro Colorado Loveland Corporation Corporation Total -------------- ----------- ------ PARTNERS' EQUITY, January 1, 2001 $ 816 $ 816 $1,632 PARTNERSHIP DISTRIBUTIONS (148) (148) (296) NET INCOME 397 397 794 ----- ----- ----- PARTNERS' EQUITY, December 31, 2001 $1,065 $1,065 $2,130 ===== ===== ===== The accompanying notes are an integral part of the financial statements
28 METROLUX THEATRES STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2001 (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 794 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 146 Gain on sale of fixed assets (42) Write off of prepaid financing costs 30 Changes in assets and liabilities: Prepaid expenses and other current assets (2) Due from partners (162) Film rentals payable 76 Accounts payable and accrued expenses (4) Deferred revenue 6 --- Net cash provided by operating activities 842 --- CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of fixed assets 45 Acquisition of fixed assets (178) --- Net cash (used in) investing activities (133) --- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on note to general partner (502) Net proceeds from issuance of long-term debt 157 Principal payment on long-term debt (129) Partnership distributions (296) --- Net cash (used in) financing activities (770) --- NET CHANGE IN CASH (61) CASH, beginning of year 768 --- CASH, end of year $ 707 === SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 251 === Income taxes paid $ - ===
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: On December 28, 2001, the Company refinanced their long-term note with a new bank. The amount refinanced was approximately $2,343,000 along with approximately $16,000 of loan fees deducted out of net proceeds. The accompanying notes are an integral part of the financial statements 29 METROLUX THEATRES NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ MetroLux Theatres (the "Company") is a general partnership entered between Metro Colorado Corporation, a California corporation, and Trans-Lux Loveland Corporation, a Colorado corporation. The partnership was created for the purpose of engaging in the business of constructing, purchasing, owning, operating and performing all functions in relation to the operation of a multi-screen movie theatre, ancillary real estate and other entertainment uses in Loveland, Colorado. Fixed Assets ------------ Fixed assets are stated at cost, net of accumulated depreciation. Depreciation is provided utilizing straight-line and accelerated methods at rates based upon the estimated useful lives of the various classes of assets. Buildings and improvements 10-39 years Theatre equipment 10 years Furniture and other equipment 5-10 years Major repairs and replacements are capitalized and ordinary maintenance and repairs are charged to operations as incurred. Intangible Assets ----------------- Intangible assets consist of loan fees net of accumulated amortization. Amortization is provided utilizing straight-line method over the life of the loan. Income Taxes ------------ The Company is treated as a partnership for federal and state income tax purposes. Consequently, federal and state income taxes are not payable by, or provided for, the Company. Partners are taxed individually on their shares of the Company's earnings. The Company's net income or loss is allocated among the partners in accordance with their percentage of ownership. Revenue Recognition ------------------- The Company recognizes revenue when tickets and concession goods are sold at the theatres and recognizes revenue on gift certificates and group activity when they are redeemed. 30 METROLUX THEATRES NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED ------------------------------------------------------ Concentrations of Credit Risk ----------------------------- Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash. The Company places its cash with high credit quality financial institutions. Total amounts for the year ended December 31, 2001 in excess of the FDIC limit amounted to approximately $415,000. Management Estimates -------------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. 2. DUE FROM PARTNERS ----------------- As of December 31, 2001, the net advances due from the general partners were approximately $1,000. These advances are unsecured, non-interest bearing and not expected to be repaid within the next year. 3. FIXED ASSETS - (Dollars in thousands) ------------------------------------- Fixed assets consist of the following for the year ended December 31, 2001: Buildings $4,027 Tenant improvements 38 Theatre equipment 197 Land 707 ----- 4,969 Less: accumulated depreciation and amortization 638 ----- $4,331 ===== Depreciation and amortization expense for the year ended December 31, 2001 was approximately $146,000. 31 METROLUX THEATRES NOTES TO FINANCIAL STATEMENTS 4. INTANGIBLE ASSETS ----------------- Intangible assets consist of loan fees of approximately $16,000 at December 31, 2001 that were incurred during the refinancing of the Company's long-term debt (Note 5). 5. LONG-TERM DEBT - (Dollars in thousands) --------------------------------------- Long-term debt consists of the following for the year ended December 31, 2001: On December 28, 2001, the Company refinanced a $2.5 million real estate loan with a new bank. Borrowings under the term loan bear interest, at the bank's prime rate minus .30% fixed (4.45% at December 31, 2001) for one year. Principal payments under the agreement are in equal monthly installments of approximately $26,000 of principal and interest, maturing January 2009 with one last payment of approximately $899,000. The loan is collateralized by the assets of the Company and 60% of the debt is guaranteed by each of the partners. $2,500 Less: current portion 207 ----- $2,293 ===== Maturities of long-term debt outstanding at December 31, 2001 are as follows: Year Ending December 31, ------------ 2002 $ 207 2003 213 2004 222 2005 233 2006 243 Thereafter 1,382 ----- $2,500 ===== 32 METROLUX THEATRES NOTES TO FINANCIAL STATEMENTS 6. DEFERRED REVENUES - (Dollars in thousands) ------------------------------------------ Deferred revenues at December 31, 2001 consist of gift certificates and group activity passes that are used for concession goods and admissions at theatres, respectively. The breakdown is as follows as of December 31, 2001: Gift certificates $68 Group activity passes 3 -- $71 == 7. COMMITMENTS ----------- On November 1996, the Company entered into a month to month sublease agreement with an unrelated party for $1,500 a month. As of December 31, 2001, the Company accrued $18,000 of sublease income. 8. PENSION PLAN ------------ The Company has adopted a Tax Savings Plan covering substantially all of its employees. Participating employees may contribute 1% to 20% (15% - 2001) of their salary, subject to required participating percentages of 401(k) regulations. The Company contributes, at the discretion of management, a matching contribution of 50% of the employees' contribution up to a maximum of 8% of the employees' gross salary. Employees are vested 25% per year after completing one year of service and are fully vested after four years. Contributions made for the year ended December 31, 2001 were $179. 9. SALE OF ASSETS -------------- During the year ended December 31, 2001, the Company sold land and received proceeds of $45,000 and recorded a gain of approximately $43,000 related to the sale. 10. RELATED PARTY TRANSACTIONS -------------------------- During the year ended December 31, 2001, the Company paid off a note to a general partner in the amount of approximately $502,000. Additionally, the Company repaid advances to general partners' in the amount of approximately $162,000. 33 TRANS-LUX CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Allowance for Doubtful Accounts For the Years Ended December 31, 2001, 2000 and 1999
Balance at Additions Year ended Beginning Charged to Costs Balance at December 31 of Year and Expenses Deductions (1) End of Year - ----------- ---------- ---------------- ------------ ----------- 1999 $574 $281 ($354) $501 2000 $501 $97 ($287) $311 2001 $311 $298 ($144) $465 - ------------------------------------------------------------------------------------ (1) Deductions represent uncollectod accounts charged against the allowance, net of recoveries, and other.
34 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 - ------------------ ---------------------------------------- --- Michael R. Mulcahy President and Co-Chief Executive Officer 53 Thomas Brandt Executive Vice President and Co-Chief 38 Executive Officer Matthew Brandt Executive Vice President 38 Al L. Miller Executive Vice President 56 Angela D. Toppi Executive Vice President, Treasurer, 46 Secretary and Chief Financial Officer Karl P. Hirschauer Senior Vice President 56 Thomas F. Mahoney Senior Vice President 54 Messrs. Mulcahy, Hirschauer, Mahoney and Ms. Toppi have been associated in an executive capacity with the Company for more than five years. Mr. T. Brandt was elected Executive Vice President and Co-Chief Executive Officer on March 27, 2002, effective April 1, 2002, and has been employed since 1985. He served as Senior Vice President in charge of theatre operations between September 27, 1997 and April 1, 2002, and as Vice President in charge of theatre operations between May 22, 1991 and September 27, 1997. Mr. M. Brandt was elected Executive Vice President on March 27, 2002, effective April 1, 2002, and has been employed since 1985. He served as Senior Vice President in charge of theatre operations between September 27, 1997 and 35 April 1, 2002, and as Vice President in charge of theatre operations between May 22, 1991 and September 27, 1997. Mr. Miller was elected Executive Vice President overseeing electronic display manufacturing, materials and field service and the outdoor display operations on March 27, 2002, effective April 1, 2002. On September 27, 1997 Mr. Miller was elected Senior Vice President of manufacturing and materials and on February 1, 2000, field service operations were 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. (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 of Trans-Lux Corporation: Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Balance Sheets as of December 31, 2001 and 2000 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999 36 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements Independent Auditors' Report Financial Statements of MetroLux Theatres, a 50% owned entity, accounted for by the equity method: Independent Auditor's Report Balance Sheet as of December 31, 2001 Statement of Income for the Year Ended December 31, 2001 Statement of Partners' Equity for the Year Ended December 31, 2001 Statement of Cash Flows for the Year Ended December 31, 2001 Notes to Financial Statements (2) Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts (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, filed herewith. 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 January 1, 2001 and Amendment No. 1 dated April 1, 2002, filed herewith. 10.4(a) 1989 Non-Employee Director Stock Option Plan, as amended (incorporated by reference to Exhibit 10.4(a) of Form 10-K for the year ended December 31, 1999). (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 7, 2000). 37 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). 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 (incorporated by reference to Exhibit 10.5 of Form 10-K for the year ended December 31, 1999). Letter Agreement dated as of September 30, 2000 and Letter Agreement dated as of December 31, 2000 (incorporated by reference to Exhibit 10.5 of Form 10-K for the year ended December 31, 2000. 10.6 Employment Agreement with Richard Brandt dated as of September 1, 2000 (incorporated by reference to Exhibit 10(a) of Form 10-Q for the quarter ended September 30, 2000). 10.7 Consulting Agreement with Victor Liss dated as of April 1, 2002, filed herewith. 10.8 Employment Agreement with Michael R. Mulcahy dated as of April 1, 2002, filed herewith. 10.9 Employment Agreement with Thomas Brandt dated as of April 1, 2002, filed herewith. 10.10 Employment Agreement with Matthew Brandt dated as of April 1, 2002, filed herewith. 10.11 Employment Agreement with Al Miller dated as of April 1, 2002, filed herewith. 10.12 Employment Agreement with Karl Hirschauer dated as of January 1, 2000 (incorporated by reference to Exhibit 10.10 of Form 10-K for the year ended December 31, 1999). 10.13 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). Amendment to Employment Agreement dated as of May 31, 2001 (incorporated by reference to Exhibit 10(b) of Form 10-Q for the quarter ended June 30, 2001). 10.14 Employment Agreement with Angela Toppi dated as of January 1, 2000 (incorporated by reference to Exhibit 10.13 of Form 10-K for the year ended December 31, 1999). 10.15 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, filed herewith. (c) No reports on Form 8-K were filed during the last quarter of the period covered by this report. 38 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 Executive Vice President and Chief Financial Officer by /s/ Robert P. Bosworth ------------------------- Robert P. Bosworth Vice President and Chief Accounting Officer Dated: March 29, 2002 39 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 29, 2002 - ------------------------------------- Richard Brandt, Chairman of the Board /s/ Victor Liss March 29, 2002 - ------------------------------------- Victor Liss, Vice Chairman of the Board /s/ Steven Baruch March 29, 2002 - ------------------------------------- Steven Baruch, Director /s/ Matthew Brandt March 29, 2002 - ------------------------------------- Matthew Brandt, Executive Vice President /s/ Thomas Brandt March 29, 2002 - ------------------------------------- Thomas Brandt, Executive Vice President and Co-Chief Executive Officer /s/ Howard M. Brenner March 29, 2002 - ------------------------------------- Howard M. Brenner, Director /s/ Jean Firstenberg March 29, 2002 - ------------------------------------- Jean Firstenberg, Director /s/ Robert B. Greenes March 29, 2002 - ------------------------------------- Robert Greenes, Director /s/ Gene F. Jankowski March 29, 2002 - ------------------------------------- Gene F. Jankowski, Director /s/ Howard S. Modlin March 29, 2002 - ------------------------------------- Howard S. Modlin, Director 40 EX-3 3 dec01ex3b.txt EXHIBIT 3(B) BY-LAWS Exhibit 3(b) BY-LAWS of TRANS-LUX CORPORATION --------------------- As Amended and Effective December 12, 2001 OFFICES ------- 1. The Corporation may have an office or offices at such place or places within and/or without the State of Delaware as the Board of Directors may from time to time appoint, or the business of the Corporation may require. SEAL ---- 2. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware," and be in such form as the Board of Directors shall determine. STOCKHOLDERS' MEETINGS ---------------------- 3. All meetings of the stockholders shall be held at the office of the Corporation or such other place as the Board of Directors shall designate in the notice of such meeting. 4. (a) The annual meeting of stockholders shall be held on the last Thursday of April in each year if not a legal holiday and if a legal holiday, then on the next secular day following, or such other date as selected by the Board of Directors, at such hour as the Board of Directors shall fix and designate in the notice of meeting, for the purpose of electing directors, by ballot, and for the transaction of such other business as may properly be brought before the meeting. (b) At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this paragraph and applicable law. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered or mailed to and received at the principal executive offices of the Corporation in accordance with Rule 14a-8(3)(i) under the Securities Exchange Act of 1934 or, if the Corporation is not subject to such proxy rule, not less than 30 days prior to the date of the annual meeting. A stockholder's notice to the Secretary shall set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (iii) the class and number of shares of the Corporation's capital stock that are beneficially owned by such stockholder and (iv) any material interest of such stockholder in such business. Notwithstanding anything in these by-laws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this paragraph (b). The officer of the Corporation or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this paragraph (b) and, if he should so determine, he shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted. (c) Only persons who are nominated in accordance with the procedures set forth in these by-laws shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (c). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered or mailed to and received at the principal executive offices of the Corporation not less than 120 days prior to the anniversary date of the immediately preceding annual meeting. Such stockholder's notice shall set forth (i) as to each person whom such stockholder proposes to nominate for election or re-election as a director, (x) whether such nominee is to be elected by the holders of the Common Stock, Class B Stock or both in accordance with the certificate of incorporation and these by-laws, and (y) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving the notice (x) the name and address, as they appear on the Corporation's books, of such stockholder and (y) the class and number of shares of the Corporation's capital stock that are beneficially owned by such stockholder. At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this paragraph (c). The officer of the Corporation or other person presiding at the meeting shall, if the facts so warrant, determine and declare to the meeting that a nomination was not made in accordance with such provisions and, if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. 5. The holders of a majority of the voting power of the stock issued and outstanding, and entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by law, by the certificate of incorporation or by these by-laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person, or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting stock shall be present. At such adjourned meeting at which the requisite amount of voting stock shall be represented any business may be transacted which might have been transacted at the meeting as originally notified. 6. At each meeting of the stockholders every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. All proxies shall be subject to cancellation before any meeting, and any proxy shall be deemed cancelled by a proxy of later date. Each holder of Common Stock shall have one vote and each holder of Class B Stock shall have ten votes for each such share of stock having voting power registered in his name on the books of the Corporation as of the record date set by the Board of Directors. The vote for directors, and, upon the demand of any stockholder, the vote upon any question before the meeting shall be by ballot. All elections shall be had and all questions decided by a plurality vote except where a greater vote or a separate plurality vote of the Common Stock and Class B Stock is required by the certificate of incorporation. 7. There shall be appointed by the Board of Directors at a regular or special meeting of the Board preceding a stockholders' meeting at which an election of directors shall take place, two (2) inspectors of election. If any or all of the inspectors so appointed by the Board of Directors shall refuse to act or fail to attend the stockholders' meeting, then the Chairman of the Board shall at the opening of the stockholders' meeting appoint an inspector or inspectors to fill any vacancy caused by any or all of said inspectors failing to attend or refusing to act. The inspectors appointed to act as aforesaid, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of inspectors at such meeting, and according to their best ability, and the oath so taken shall be subscribed by them and filed with the Secretary of the Corporation. Inspectors shall receive and take charge of all proxies and ballots and shall decide all questions touching upon the qualification of voters, the validity of proxies and the acceptance and rejection of votes. If a proxy is apparently the act of the stockholder and regular upon its face, the inspectors may accept the same. Inspectors shall make a written certificate of the result of election and file the same with the Secretary of the Corporation. 8. Written notice of the annual meeting shall be mailed to each stockholder entitled to vote thereat at such address as appears on the stock book of the Corporation, at least twenty days prior to the meeting. 9. A complete list of the stockholders entitled to vote at the ensuing elections, arranged in alphabetical order, with the residence of each, and the number of voting shares held by each shall be prepared by the Secretary and filed in the office where the election is to be held, at least ten days before every election, and shall at all times, during the usual hours for business, and during the whole time of said election, be open to the examination of any stockholder. 10. Special meetings of the stockholders, for any purpose, or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board and shall be called by the Chairman of the Board or by the Secretary at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. 11. Business transacted at all special meetings shall be confined to the objects stated in the call. 12. Written notice of a special meeting of the stockholders, stating the time and place and object thereof shall be mailed, postage prepaid at least fourteen days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the Corporation. 13. Independent public auditors of the books of the Corporation and its subsidiaries shall be recommended by the stockholders of the Corporation at each annual meeting and a representative of the auditing firm last chosen shall be requested to attend the annual meeting each year. DIRECTORS --------- 14. (a) The Management of all the affairs, property and business of the Corporation shall be vested in a Board of Directors consisting of not less than five, nor more than fifteen persons, the exact number to be fixed from time to time by resolution of a majority of the directors. Directors shall be divided into three classes, the size of each class to be determined by the directors prior to the election of a particular class. At each annual meeting, directors shall be elected for a term of three years to replace those whose terms shall expire or for the remaining term of the class for which such directors have been chosen, as the case may be, and shall hold office until their successors shall be elected and shall qualify. Any vacancies in the Board, or any increase thereof to the maximum number, may be filled by vote of the existing Board of Directors at any time. (b) The holders of the Common Stock, voting separately as a class, shall have the right at each meeting of stockholders with respect to election of directors to elect such number of directors who, together with all other directors previously elected by the holders of Common Stock (the "Common Stock Directors") and whose terms are not expiring at such meeting, constitute twenty-five (25%) of the total number of directors of the entire Board of Directors. Such right to elect directors shall be in accordance with the certificate of incorporation and these by-laws of the Corporation in effect from time to time. The remaining directors of the Board of Directors shall be elected by the holders of Class B Stock voting separately as a class. In the event that twenty-five percent (25%) of the number of directors so fixed at any time is not a whole number, the number of Common Stock Directors shall be rounded up to the nearest whole number. Notwithstanding the foregoing, in no event shall the Common Stock Directors constitute more than twenty-five (25%) (or the next highest whole number) of the entire Board of Directors and, in the event that on the record date of any stockholder meeting with respect to the election of directors the number of Common Stock Directors whose terms are not expiring at such stockholder meeting, constitute at least twenty-five (25%) of the entire Board of Directors, the holders of Common Stock shall have no vote in the election of directors at such meeting and no Common Stock Directors shall be elected at such meeting. (c) If on the record date of any stockholder meeting with respect to the election of directors the number of shares of Class B Stock which is issued and outstanding is less than twelve-and-a-half percent (12-1/2%) of the total number of shares of Common Stock and Class B Stock which is issued and outstanding, the holders of the Common Stock shall vote separately as a class to elect twenty-five percent (25%) of the directors to be elected in the manner specified in paragraph (b), and shall also be entitled to vote in the election of the remaining directors to be elected, together with the holders of the Class B Stock, voting, for this purpose as one class, with each share of Common Stock entitled to one (1) vote and each share of Class B Stock entitled to ten (10) votes. (d) In the event that the continued listing for trading of the Corporation's Common Stock on the American Stock Exchange no longer requires twenty-five percent (25%) of the number of directors to be elected by the holders of the Common Stock in the manner specified in Paragraphs (b) and (c), then such right of the holders of Common Stock to elect twenty-five percent (25%) of the number of directors shall cease and at all elections of directors following such change, the Common Stock and Class B Stock shall vote in the election of directors as one class, with each share of Common Stock entitled to one (1) vote and each share of Class B Stock entitled to ten (10) votes. 15. The directors may hold their meetings at such office of the Corporation or such other place as they may from time to time determine. At all meetings of the Board of Directors, a majority of the Board shall constitute a quorum and be empowered to transact any business that may come before it. 16. In addition to the powers and authorities by these by-laws expressly conferred upon them the Board may exercise all such powers of the Corporation, and do all such legal acts and things as are not by statute or by the certificate of incorporation or these by-laws directed or required to be exercised or done by the stockholders. It may make any rules and regulations for the transaction of the Corporation's business and the conduct, powers and duties of its officers and employees, not inconsistent with the statutes or the certificate of incorporation of the Corporation or these by-laws. INDEMNIFICATION OF DIRECTORS AND OFFICERS ----------------------------------------- 17. (a) The Corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs (a) and (b), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under paragraphs (a) and (b) (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. (e) (i) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Paragraph 17. (ii) Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Paragraph 17. (f) The indemnification provided by this Paragraph 17 shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (g) The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Paragraph 17. The foregoing rights of indemnification shall not be exclusive of other rights to which such director, officer, employee or agent may be entitled as a matter of law. EXECUTIVE COMMITTEE AND OTHER COMMITTEES ---------------------------------------- 18. The directors may elect from their number an Executive Committee of not less than three nor more than six members, one of whom shall be the Chairman of the Board, which may make its own rules of procedure and shall meet where and as provided by such rules or by a resolution of the directors. A majority shall constitute a quorum and in every case the affirmative vote of a majority of all the members of such committee shall be necessary to adopt any resolution. Vacancies in the membership of such committee may be filled by the Board of Directors at a regular meeting or special meeting called for that purpose. 19. During the interval between the meetings of directors, the Executive Committee shall have and may exercise all powers of the directors in the management of the business and affairs of the Corporation, including powers to authorize the seal of the Corporation to be affixed to all papers which may require it in such manner as such committee shall deem best for the interests of the Corporation in all cases in which specific directions shall not have been given by the directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. 20. In addition to the Executive Committee, the Board of Directors may designate one or more other committees, each committee to consist of one or more of the directors as elected by the Board of Directors. Such committee shall have such powers and authority as the Board of Directors may provide. Each such committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS ------------------------- 21. At the first meeting of the Board of Directors following the annual meeting of stockholders, the directors shall have the power to set fees for their services, and for services on any committee, special or standing. MEETINGS OF THE BOARD --------------------- 22. Regular meetings of the Board may be held without notice at such time and place as shall from time to time be determined by the Board. 23. Special meetings of the Board may be called by the Chairman of the Board or by the Vice Chairman on five (5) days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the Chairman of the Board or by the Vice Chairman or Secretary in like manner and on like notice on the written request of any four (4) directors. 24. At all meetings of the Board a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum, shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation or by these by-laws. OFFICERS -------- 25. The officers of the Corporation shall be chosen by the directors. There shall be one or more Chief Executive Officers, a President, one or more Vice-Presidents, a Secretary and Treasurer. The Secretary and Treasurer may be the same person and any of the Vice-Presidents may hold at the same time the office of Secretary or Treasurer. 26. The Board of Directors may appoint such other officers and agents from their members, or otherwise, as shall be deemed necessary including Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers who shall hold their offices for such term and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. 27. The salaries of all officers of the Corporation shall be fixed by the Board of Directors. 28. The officers and agents of the Corporation shall hold office until their successors are chosen and qualify in their stead. Any officer or agent elected, or appointed, by the Board may be removed at any time by an affirmative vote of a majority of the whole Board of Directors. CHAIRMAN OF THE BOARD --------------------- 29. The Chairman of the Board of Directors shall be chosen by the directors from amongst their number and shall preside at all meetings of the stockholders and the Board of Directors. He shall not be deemed an officer, but he, with the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, may sign all certificates of the shares of the capital stock of the Corporation. He shall be an ex officio member of any and all committees. VICE CHAIRMAN OF THE BOARD -------------------------- 30. The Board of Directors may elect, from amongst their number, a Vice Chairman of the Board of Directors who, in the absence of the Chairman of the Board, shall preside at all meetings of stockholders and Board of Directors. He shall not be deemed an officer of the Corporation. With the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, he may sign all certificates of shares of the capital stock of the Corporation. The Vice Chairman shall perform such other duties as may be assigned to him by the Board of Directors. CHIEF EXECUTIVE OFFICER ----------------------- 31. The Board of Directors may appoint one or more officers to serve as Chief or Co-Chief Executive Officer. The Chief or Co-Chief Executive Officer shall have such duties as shall be determined from time to time by the Board. The Chief Executive Officer, or one of the Co-Chief Executive Officers as determined by the Board of Directors, in the absence of the Chairman of the Board and the Vice Chairman of the Board, shall preside at all meetings of the Stockholders and if a Director, the Board of Directors. THE PRESIDENT ------------- 32. The President, in the absence of the Chairman of the Board, Vice Chairman of the Board and Chief Executive Officer or Co-Chief Executive Officers, shall preside at all meetings of the Stockholders and, if a Director, the Board of Directors. Unless otherwise limited by the Board of Directors, he shall have power to sign and execute all authorized bonds, contracts or other obligations in the name of the Corporation and with the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary may sign all certificates of the shares of the capital stock of the Corporation. He shall perform such other duties as may be assigned to him by the Board of Directors. VICE-PRESIDENTS --------------- 33. Except as otherwise provided by the Board of Directors, in the absence or disability of the President, the Executive Vice President, the Senior Vice Presidents and the other Vice-Presidents in the order in which they shall have been elected at the last election of officers by the Board of Directors, shall perform the duties and exercise the powers of the President and shall perform such other duties as the Board of Directors shall prescribe. SECRETARY --------- 34. The Secretary shall attend all sessions of the Board and all meetings of the stockholders, and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chief Executive Officer or the President, under whose supervision he shall be. He shall be sworn to the faithful discharge of his duty. TREASURER --------- 35. (a) The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. (b) He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. 36. He shall give the Corporation a bond if required by the Board of Directors in a sum, and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office, and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. VACANCIES --------- 37. If the office of any director, or of any officer or agent, one or more, becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the directors then in office, although less than a quorum, by a majority vote, may choose a successor or successors, who shall hold office for the unexpired term in respect, of which such vacancy occurred. DUTIES OF OFFICERS MAY BE DELEGATED ----------------------------------- 38. In case of the absence of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director; PROVIDED, a majority of the entire Board concur therein. STOCK ----- 39. The Board of Directors shall have power to fix from time to time the price at which the authorized shares of common stock of the Corporation may be issued and sold at a price which the Board of Directors in their sole judgment, shall fix and determine, and all shares when issued and sold shall be deemed fully paid and non-assessable. 40. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the Chairman of the Board, the Vice Chairman of the Board or President, and the Treasurer, or an Assistant Treasurer, or the Secretary, or an Assistant Secretary. TRANSFER OF STOCK ----------------- 41. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor. REGISTERED STOCKHOLDERS ----------------------- 42. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware. LOST CERTIFICATE ---------------- 43. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such manner as the Board of Directors may require, and shall, if the directors so require, give the Corporation a bond of indemnity, in form and with one or more sureties satisfactory to the Board, in such sum as it may direct whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. No resolution of the Board shall be required with respect to the replacement of 200 or fewer shares where appropriate bond of indemnity is provided. INSPECTION OF BOOKS ------------------- 44. The directors shall determine from time to time whether, and if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically open to inspection) or any of them shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. CHECKS ------ 45. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. FISCAL YEAR ----------- 46. The fiscal year shall begin on the first day of each year. DIVIDENDS --------- 47. Dividends upon the capital stock of the Corporation, when earned, may be declared by the Board of Directors at any regular or special meeting. Before payment of any dividend or making any distribution of profits, there may be set aside out of the surplus or net profits of the Corporation, such a sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation. NOTICES ------- 48. Whenever under the provisions of these by-laws notice is required to be given to any director, officer or stockholder, it shall not be construed to mean personal notice, but such notice as may be given in writing, by mail, by depositing the same in the post-office or letter-box in a postpaid wrapper, addressed to such stockholder, officer or director at such address as appears on the books of the Corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed. Any stockholder, director, or officer may waive any notice required to be given under these by-laws. AMENDMENTS ---------- 49. The Board of Directors by a vote of the majority of the whole Board may at any meeting make and alter the by-laws for the Corporation. GENDER ------ 50. Words of the masculine gender used herein shall include the feminine and the neuter, and may refer to a corporation. EX-10 4 dec01ex10.txt EXHIBIT 10 AGREEMENTS Exhibit 10.3 RETIREMENT PENSION PLAN FOR EMPLOYEES OF TRANS-LUX CORPORATION AND CERTAIN OF ITS SUBSIDIARIES AND/OR AFFILIATES Effective January 1, 1945 As Amended and Restated Effective January 1, 2001 (Most recent determination letter dated March 17, 1994) Pension plan - 2001 Filing version - 12/5/01.doc INDEX INTRODUCTION....................................................1 SECTION I: DEFINITIONS..................................2-10 SECTION II: ELIGIBILITY.................................11-12 SECTION III: RETIREMENT DATES..............................13 SECTION IV: RETIREMENT BENEFITS........................14-17 SECTION V: NORMAL FORM OF BENEFIT AT RETIREMENT........18-19 SECTION VI: OPTIONAL FORM OF BENEFITS...................20-21 SECTION VII: DEATH BENEFITS..............................22-23 SECTION VIII: CONTRIBUTIONS..................................24 SECTION IX: TERMINATION OF SERVICE......................25-27 SECTION X: DISABILITY.....................................28 SECTION XI: TIME OF COMMENCEMENT OF PAYMENT.............29-33 SECTION XII: REEMPLOYMENT...................................34 SECTION XIII: LIMITATION OF ASSIGNMENT....................35-36 SECTION XIV: LIMITATION OF RIGHTS OFEMPLOYEE................37 SECTION XV: AMENDMENT TO OR TERMINATION OF THE PLAN.....38-40 SECTION XVI: GOVERNMENTAL RESTRICTIONS...................41-42 SECTION XVII: ADMINISTRATION OF THE PLAN..................43-46 SECTION XVIII: TRUST AGREEMENT................................47 SECTION XIX: TOP HEAVY PROVISIONS........................48-53 SECTION XX: MISCELLANEOUS...............................54-55 APPENDIX A: OPTION FACTORS..............................56-57 INTRODUCTION ------------ Pursuant to a resolution of the Board of Directors of each of the participating corporations (defined in Section I as the "Company"), the Retirement Pension Plan for the benefit of the eligible employees of each participating corporation was adopted effective as of January 1, 1945. The Plan was amended and restated in its entirety effective as of January 1, 1976. The Plan was again amended and restated effective January 1, 1985 to conform to the applicable provisions of the Tax Equity Act of 1984, the Retirement Equity Act of 1984 and, furthermore, to incorporate amendments generally effective January 1, 1984 with respect to the Tax Equity and Fiscal Responsibility Act. The Plan was again amended and restated for the primary purpose of conformance to the Tax Reform Act of 1986 and other applicable legislation and was subsequently amended to comply with changes required to comply with the Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997. The Plan is amended and restated effective January 1, 2001 to incorporate amendments since the last restatement and to make other changes deemed necessary by the Board of Directors. This amendment and restatement of the Plan is effective January 1, 2001 except as may otherwise be provided in the Plan. The Plan as amended and restated shall apply to Employees who have one Hour of Service on and after January 1,2001. The rights of those Employees who have retired, died or terminated employment shall be governed by the Plan in existence on the date of retirement, death, or termination of employment and shall not be changed by virtue of this Plan as amended or restated unless specifically provided for herein. 1 SECTION I --------- DEFINITIONS ----------- The following words and phrases shall be defined as stated below, unless a different meaning is clearly indicated by the context. 1.1 "Accrued Benefit" means the annual amount of a Member's retirement benefit under the normal form of payment provided in Section 5.2 hereof and payable as of the Member's Normal Retirement Date or as of the date the Member otherwise ceases to be an Employee, whichever is applicable. A Member's Accrued Benefit shall be computed in accordance with Section 4.1 hereof based on the Member's Salary at the time of computation and his expected years of Credited Service at the date of calculation. A Member's Accrued Benefit shall not be reduced on account of any increase in the Member's age or service. 1.2 "Act" means the Employee Retirement Income Security Act of 1974 and any amendments thereto. 1.3 "Actuarial Equivalent," when used with reference to any form of benefit, means a form of benefit which has the same value as the referenced benefit, based on the actuarial factors set forth in Appendix A hereof. 1.4 "Actuary" means a person who is enrolled by the Joint Board for the Enrollment of Actuaries established under the Act and engaged by the Pension Committee on behalf of the Members. 1.5 "Adjustment Factor" means the cost-of-living adjustment factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code for Plan Years beginning after December 31, 1987, applied to such items and in such manner as the Secretary shall prescribe. 1.6 "Affiliated Employer" shall mean the Company and any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 1.7 "Approved Leave of Absence" means an unpaid leave of absence granted by the Company for such reason as the Pension Committee may determine by rules applied in a non- discriminatory manner to persons in similar circumstances. 2x 1.8 "Beneficiary" means any person (including a Contingent Annuitant), designated by the Member to receive any death benefits which may be payable under the Plan in the event of the Member's death. Such Beneficiary designation is subject to the spousal consent requirements of Section 5.1. 1.9 "Board" means the Board of Directors of Trans-Lux Corporation. 1.10 "Code" means the Internal Revenue Code of 1986 as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered. 1.11 "Company" means Trans-Lux Corporation and any subsidiary or Affiliated Employer as shall adopt the Plan by resolution of their respective Boards of Directors under the terms and conditions set forth by the Board. 1.12 "Contingent Annuitant" means a person designated by a Member, who has elected a Joint and Survivorship Annuity option under Section 6.1(b) hereof, to receive any death benefit payable under such option. Designation of a Contingent Annuitant is subject to the spousal consent requirements of Section 5.1. 1.13 "Credited Service" means for an Employee who first completes an Hour of Service after January 1, 1986, the years of service rendered by an Employee to the Company commencing on the first of the month coincident with or next following the completion of one Year of Eligibility Service and ending on his Deferred, Normal, or Earlier Retirement Date, date of death, or other termination of employment. In the year of a Member's Deferred, Normal or Earlier Retirement Date, date of death or other termination of employment, such Member shall accrue Credited Service at the rate of 1/12th of a year for each month during which he is credited with at least one Hour of Service for the performance of duties. For an Employee who first performs an Hour of Service prior to January 1, 1986, Credited Service shall begin on the earlier of a) January 1st nearest to the completion of one Year of Eligibility Service or b) the first of the month coincident with or next following the completion of one Year of Eligibility Service. Notwithstanding anything in this Section 1.13 to the contrary, all periods of service in the uniformed services of the United States (as defined in Section 4303(13) and 4303(16) of the Uniformed Services Employment and Reemployment Rights Act of 1994) shall be included in the Employee's Credited Service if he returns to employment with the Company or an Affiliated Employer having applied to return while his reemployment rights were protected by law. 3 1.14 "Employee" means any person employed on a salaried basis, including an officer or director who is otherwise regularly employed in the service of the Company, who received earnings from the Company other than a pension, severance pay, retainer, or fee under contract. Effective January 1, 1996, "Employee" shall also include salaried employees of Integrated Systems Engineering, Inc. as well as full-time salaried employees of the theater executive office and theater managers. The term "Employee" shall include "leased employees" (as defined in Section 414(n)(2) of the Code) for purposes of Section 410 of the Code but such employees shall not be eligible for participation in the Plan. Notwithstanding anything to the contrary in this Section, "Employee" does not include any person not deemed by the Company to be a common law employee of the Company in accordance with the Company's standard practice and does not include any person covered by a collective bargaining agreement to which the Company is a party unless such agreement specifically provides for participation in the Plan. In addition, any person classified as an independent contractor or consultant by the Company shall, during such period, be excluded from the definition of Employee, regardless of such person's reclassification for such period by the Internal Revenue Service for tax withholding purposes. "Employee" may, however, include the employee of another company whose assets the Company may acquire and the Board admits to membership in the Plan on such terms and conditions as it may in its discretion decide, provided that it shall act in a uniform and non-discriminatory manner. The Chairman of the Board shall not be eligible to participate in the Plan and immediately upon his election as Chairman shall cease to be a member of the Plan. 1.15 "Final Average Salary" means the average of a Member's Salaries during the 60 highest months within the final 120 months of service preceding his Normal, Deferred or Earlier Retirement Date (whichever is applicable), death, or other severance of employment; provided, however, that if such Member has less than 60 months of Salaries as of the applicable date, his average salary for the actual period of service prior to such applicable date shall be used. 1.16 "Highly Compensated Employee" means any employee of the Company or an Affiliated Employer (whether or not eligible for membership in the Plan) who (i) was a five percent owner (as defined in Section 416(i) of the Code) for such Plan Year or the Prior Plan Year, or 4 (ii) for the preceding Plan Year received "statutory compensation" in excess of $80,000, and was among the highest 20 percent of employees for the preceding Plan Year when ranked by "statutory compensation" paid for that year excluding, for purposes of determining the number of such employees, such employees as the Pension Committee may determine on a consistent basis pursuant to Section 414(q) of the Code. The $80,000 dollar amount in the preceding sentence shall be adjusted from time to time for cost of living in accordance with Section 414(q) of the Code. Notwithstanding the foregoing, employees who are nonresident aliens and who receive no earned income from the Company or an Affiliated Employer which constitutes income from sources within the United States shall be disregarded for all purposes of this Section. The Company's top-paid group election as described above, shall be used consistently in determining Highly- Compensated Employees for determination years of all employee benefit plans of the Company and Affiliated Employers for which Section 414(q) of the Code applies (other than a multi- employer plan) that begin with or within the same calendar year, until such election is changed by Plan amendment in accordance with IRS requirements. Notwithstanding the foregoing, the consistency provision in the preceding sentence shall not apply for the Plan Year beginning in 1997, and for the Plan Years beginning in 1998 and 1999, shall apply only with respect to all qualified retirement plans (other than a multi-employer plan) of the Company and Affiliated Employers. The provisions of this Section shall be further subject to such additional requirements as shall be described in Section 414(q) of the Code and its applicable regulations, which shall override any aspects of this Section inconsistent therewith. For purposes of this Section, "statutory compensation" means the wages, salaries, and other amounts paid in respect of an employee for service actually rendered to the Company or an Affiliated Employer, including by way of example, overtime, bonuses and commissions, but excluding deferred compensation, stock plans, and other distributions which receive special tax benefits under the Code. Any employee's statutory compensation shall be determined prior to any reduction under a cash or deferred arrangement which meets the requirements of Section 401(k) of the Code or any reductions pursuant to a cafeteria plan under Section 125 of the Code. 5 1.17 "Hour of Service" means: (a) each hour for which an Employee is paid or entitled to payment for the performance of duties for an Affiliated Employer; (b) each hour for which an Employee is paid or entitled to payment by an Affiliated Employer prior to his termination of employment with the Affiliated Employer, up to a maximum of 501 hours for any single continuous period on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity, (including disability), layoff, jury duty, military duty, or leave of absence. Notwithstanding the preceding sentence, the Employee will not be credited with the Hours of Service if no duties are performed and payment is made or due under a plan maintained solely for the purpose of complying with the applicable workers compensation or unemployment compensation or disability insurance laws and Hours of Service will not be credited for payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee; (c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliated Employer, provided, however, that no more than 501 Hours of Service will be credited for payments of back pay to the extent that such back pay is awarded or agreed to for a period during which an Employee did not or would not have performed duties. Hours of Service shall be computed and credited in accordance with paragraphs (b) and (c) of Section 2530.200b-2 of the Department of Labor Regulations which are herein incorporated by reference. Such hours of Service shall be credited under either subparagraphs (a), (b), and (c) of this definition 1.17. Hours of Service shall include all periods of an Employee's service in the services of the United States (as defined in Sections 4303(13) and 4303(16) of the Uniformed Services Employment and Reemployment Rights Act of 1994) if the Employee returns to employment with the Company or an Affiliated Company having applied to return while his reemployment rights were protected by law. 1.18 "Member" means any Employee participating in the Plan in accordance with Section II hereof. 1.19 "One Year Break in Service" means a Plan Year during which an Employee or Member shall not have accumulated more than 500 Hours of Service. 6 For Plan Years commencing on or after January 1, 1985, solely for purposes of determining whether a Break in Service has occurred, an Employee will be granted Hours of Service, which otherwise would normally not have been credited up to a maximum of 501 Hours of Service for absences due to pregnancy, birth or adoption of a child or caring for a child following birth or adoption, provided the Employee furnishes the Pension Committee with such timely information as the Committee shall require that such absence from service is the result of the reasons specified under this paragraph. For purposes of the preceding sentence, Hours of Service shall be credited in the Year of Eligibility Service or year of Vesting Service (whichever is applicable) in which such absence occurs if such crediting of Hours of Service would prevent a Break in Service. In each other case, such Hours of Service will be credited in the subsequent Year of Eligibility Service or year of Vesting Service. Commencing August 5, 1993, solely for the purpose of determining whether a Break in Service has occurred, an Employee will be granted Hours of Service for a period of leave on or after such date granted pursuant to the Family and Medical Leave Act of 1993 and its regulations for the birth, adoption, or placement of a child, to care for a spouse or an immediate family member with a serious illness, or for the employee's own illness. Effective October 13, 1996, a Break in Service shall not be deemed to have occurred if the Employee is absent because of service in the uniformed services of the United States (as defined in Sections 4303(13) and 4303(16) of the Uniformed Services Employment and Reemployment Rights Act of 1994) and he returns to employment with the Company or an Affiliated Employer having applied to return while his reemployment rights were protected by law. 1.20 "Pension Committee" means the committee which shall direct the general administration of the Plan in accordance with Section XVII hereof. 1.21 "Plan" means the Retirement Pension Plan for Employees of Trans-Lux Corporation and certain of its subsidiaries and affiliates. 1.22 "Plan Year" means the consecutive 12-month period commencing on January 1 of each year. 1.23 "Qualified Domestic Relations Order" means a judgement, decree, or order which relates to the provision of child support, alimony payments, or marital property rights of a Spouse, former spouse, child or other dependent of a Member made pursuant to a State domestic relations order. Such Qualified Domestic Relations Order must specify the name and 7 address of the Member and alternate payee, the amount or percentage (or a determination thereof) of the Member's benefit to be paid to the alternate payee, the number of payments (or periods) to which the order applies and that the order applies to the Plan. 1.24 "Qualified Joint and Survivor Annuity" means the benefit payable at retirement for the life of the Member with payments continuing after his death to, and for the life of, his Spouse in an amount equal to half of the amount of the benefits payable during the joint lives of the Member and his Spouse and which is the Actuarial Equivalent of a benefit payable for the life of the Member. 1.25 "PBGC" means the Pension Benefit Guaranty Corporation. 1.26 "Reemployment Commencement Date" means the date on which an Employee completes his first Hour of Service following his last One Year Break in Service. 1.27 "Retirement Commencement Date" means the first day of the first period for which a Member's retirement benefits are paid as an annuity or in any other form, regardless of the actual date of payment. 1.28 "Retirement Date" means a Member's Normal, Earlier or Deferred Retirement Date as set forth in Section III. 1.29 "Salary" means the basic compensation, excluding overtime, bonuses, and commissions, paid to an Employee of the Company. Salary shall also include amounts elected by the Employee and deferred through a salary reduction feature of a qualified profit sharing plan meeting the requirements of Code Section 401(k). Effective January 1, 1989, Salary for any purpose under the Plan shall be limited to $200,000 in any Plan Year multiplied by the Adjustment Factor, for Plan Years beginning in 1990, and each Plan Year thereafter. Salary for any prior Plan Year that is taken into account in determining benefits in a current Plan Year shall be subject to the applicable Salary limitation of the prior Plan Year. For this purpose, Salary for Plan Years beginning before January 1, 1990, shall be deemed to be limited to $200,000. Notwithstanding the above, effective for years beginning on and after January 1, 1994, the Salary taken into account under the Plan shall not exceed $150,000 as adjusted by the Adjustment Factor in $10,000 increments rounded down to the nearest $10,000 in accordance with Code Sections 401(a)(17) and 415(d). The limitation of this paragraph shall not operate so as to reduce a Member's Accrued Benefit to an amount which is less than such Member's Accrued Benefit determined on December 31, 1993 without regard to this 8 provision and, further provided that a Member's Salary earned prior to January l, l994 shall continue to be adjusted in accordance with this Section 1.28 as if the $200,000 limitation, and any adjustments thereto, continued to apply. The annual Salary of each Member taken into account in determining benefit accruals in any Plan Year beginning after December 31, 2001, shall not exceed $200,000. Salary means the amount determined in accordance with the first paragraph of this Section for the Plan Year or such other consecutive 12-month period over which Salary is otherwise determined under the Plan (the determination period). For purposes of determining benefit accruals in a Play Year beginning after December 31, 200l, Salary for any prior determination period shall be limited to $200,000. Solely to the extent it does not violate the provisions of Section 415 of the Code or any other provision of applicable law, the salary to be used for determining the Accrued Benefit earned by such an Employee during his years in the uniformed services of the United States shall be the salary the Employee would have received but for his service in the uniformed services of the United States or, if the Pension Committee determines that such rate cannot be determined with reasonable certainty, the Employee's average rate of compensation during the 12-month period (or his entire period of employment, if less) immediately preceding the Employee's service in the uniformed services of the United States. 1.30 "Spouse" means the legally married husband or wife of a Member. In certain circumstances the Committee shall determine the designation of a Spouse. 1.31 "Social Security Covered Compensation" means, for a Plan Year, the average (without indexing) of the taxable wage bases in effect for each calendar year during the 35-year period ending on the last day of the calendar year in which the Member attains Social Security Retirement Age. In determining a Member's covered compensation for a Plan Year, the taxable wage base for the current Plan Year and any subsequent Plan Year shall be assumed to be the same as the taxable wage base in effect as of the beginning of the Plan Year for which the determination is being made. A Member's covered compensation for a Plan Year after the 35-year period is the Member's covered compensation for the Plan Year during which the Member attained Social Security Retirement Age. A Member's covered compensation before the 35-year period is the taxable wage base in effect as of the beginning of the Plan Year. A Member's covered compensation shall automatically be adjusted for each Plan Year. 9 1.32 "Social Security Retirement Age" means the age used as the retirement age for the Member under Section 216(l) of the Social Security Act, except that such section shall be applied without regard to the age increase factor, and as if the early retirement age under Section 216(i)(2) of such Act were age 62. 1.33 "Terminated Vested Participant" means a Member who has terminated employment with an Affiliated Employer for reasons other than death or retirement, at any time after he has attained a non-forfeitable interest in his Accrued Benefit in accordance with Section 9.2 or Section 9.3, whichever is applicable. 1.34 "Trust Agreement" means the agreement providing for the Trust Fund. 1.35 "Trustee" means the trustee under the Trust Agreement or any successor trustee. 1.36 "Trust Fund" or "Fund" means the fund established under a Trust Agreement by contributions made by the Company. 1.37 "Vesting Service" means the period of service of an Employee with an Affiliated Employer, as determined under Section 9.4 hereof, recognized for purposes of determining eligibility for a nonforfeitable benefit under Section IX of the Plan. 1.38 "Year of Eligibility Service" means the completion of 1,000 Hours of Service in an eligibility computation period. The eligibility computation period is the 12 consecutive month period commencing on the date the Employee first performs an Hour of Service for an Affiliated Employer and each anniversary thereof. 10 SECTION II ---------- ELIGIBILITY ----------- 2.1 Each Member of the Plan as of December 31, 1975 shall continue to be a Member of the Plan on January 1, 1976. 2.2 Each Employee on and after January 1, 1976 and prior to January 1, 1985 shall become a Member on the January 1 nearest the date on which he completes one Year of Eligibility Service and attains age 25. 2.3 Each other Employee on and after January 1, 1985, shall become a Member on the January 1 nearest the date on which he completes one Year of Eligibility Service and attains age 21. 2.4 A Member, who ceases to be an Employee, due to his becoming covered under another pension or retirement plan established pursuant to a collective bargaining agreement to which the Company is a party, will be deemed to continue as a Member of this Plan with respect to his Accrued Benefit as of the date of such coverage. No Credited Service shall be earned during the period of such coverage. Upon becoming once again an Employee, he shall resume Plan participation as of the date he again becomes an Employee. If such a Member receives credit for service under a plan established pursuant to such collective bargaining agreement, which service is also Credited Service under this Plan, his Accrued Benefit based on such Credited Service under this Plan shall be reduced by the Actuarial Equivalent of the benefit for such service under such other plan. 2.5 An Employee who incurs a One Year Break in Service prior to January 1, 1985 and who is not entitled to a nonforfeitable benefit pursuant to Section 9.2 shall be admitted or readmitted to membership on his Reemployment Commencement Date and prior Years of Eligibility Service shall be restored on such date provided that the number of consecutive One Year Breaks in Service does not equal or exceed his aggregate Years of Eligibility Service accrued prior to such One Year Break in Service and is not disregarded as a result of a previous One Year Break in Service, and further provided that, the Employee has satisfied the minimum age and service requirements of this Plan. An Employee who (i) is not entitled to a nonforfeitable benefit pursuant to Sections 3.1, 9.2, or 9.3 and (ii) incurs a One Year Break in Service on or after January 1, 1985, shall be admitted or readmitted to membership on his Reemployment Commencement Date provided such Employee has met the minimum age and service requirements of this Section II. Prior Years of Eligibility Service, not previously 11 disregarded as a result of a previous One Year Break in Service, shall be restored as of the Reemployment Commencement Date provided the consecutive number of One Year Breaks in Service does not equal or exceed the greater of: (a) the aggregate number of Years of Eligibility Service completed prior to the One Year Break in Service; or (b) 5 years. For purposes of this section 2.5 a One Year Break in Service is a Year of Eligibility Service in which an Employee shall not have accumulated more than 500 Hours of Service. An Employee entitled to a nonforfeitable benefit shall be restored to membership upon his Reemployment Commencement Date. Any other Employee, upon reemployment, shall be considered a new Employee and shall be required to satisfy the minimum age and service requirements of this Section II without regard to service prior to a One Year Break in Service or employment termination. 12 SECTION III ----------- RETIREMENT DATES ---------------- 3.1 Normal Retirement Date ----------------------- The Normal Retirement Date for a Member who has completed one Hour of Service on or after January 1, 1988 shall be the first day of the month coinciding with or next following his Normal Retirement Age which shall be the later of his 65th birthday or the fifth anniversary of the date on which he became a Plan Member. A Member shall be fully (100%) vested in his Accrued Benefit upon attainment of Normal Retirement Age. 3.2 Earlier Retirement Date ----------------------- Any Member who was such on December 31, 1982, may elect an Earlier Retirement Date which may be the first day of any month not more than ten years prior to his Normal Retirement Date. Any Member who became a Member on or after January 1, 1983, may elect an Earlier Retirement Date which may be the first day of any month which is not more than ten years prior to the Member's Normal Retirement Date, provided that such Member has completed ten years of Credited Service on the Earlier Retirement Date. Effective January 1, 1988, a Member may elect an Earlier Retirement Date which shall be the first day of any month following the attainment of age 55 and completion of 10 Years of Credited Service. 3.3 Deferred Retirement Date ------------------------ A Member who continues employment after Normal Retirement Date may elect to commence payments under the Plan on the first day of any month on or after the attainment of his Normal Retirement Date or defer commencement of payment until the earlier of the first of the month following termination of employment or the April 1 following the calendar year of his attainment of age 70-1/2. In the event a benefit commences under this Section 3.3 prior to the Member's actual retirement date, the benefit accrued under Section 4.1 at the end of each Plan Year, beginning on and after the date in which the Participant attains Normal Retirement Date, shall be reduced by the Actuarial Equivalent of the benefit payments received in such Plan Year. In no event shall the reduction provided in the preceding sentence reduce additional accrual in any Plan Year below zero. 13 SECTION IV ---------- RETIREMENT BENEFITS ------------------- 4.1 At Normal or Deferred Retirement Date ------------------------------------- Effective on and after January 1, 1989, solely for Members who have completed an Hour of Service on or after such date, the annual amount of retirement benefit commencing on or after Normal Retirement shall be equal to: (i) 1% of Final Average Salary plus (ii) .5% of Final Average Salary in excess of Social Security Covered Compensation, multiplied by years (or fractions thereof) of Credited Service. Notwithstanding the above, in determining the amount of a Member's retirement benefit under this paragraph, (a) Such benefit shall not be less than the benefit the Member would have been entitled to receive under (b) or (c) of this Section 4.1 determined on the date so specified; (b) Effective on and after January 1, 1983, and prior to January 1, 1989, for Members who had not attained Normal Retirement Date as of January 1, 1983, the annual amount of retirement benefit commencing at Normal Retirement Date to such Member who retires on or after Normal Retirement Date shall be equal to (i) 1- 1/2% of Final Average Salary determined on December 31, 1988, and without regard to the annual limitation on Salary for years prior to January 1, 1990, (as defined in Section 1.28), (ii) less 1-1/4% for Primary Social Security Benefit, multiplied by the years (and fractions thereof) of his Credited Service determined on December 31, 1988. For purposes of this subsection (b), Primary Social Security Benefit means an amount equal to the annual old-age primary insurance benefit under the Social Security Act in effect at the Member's Social Security Retirement Age or other date of termination of his employment with the Company, if earlier; provided, however, that if a Member (i) elects to retire on an Earlier Retirement Date prior to his Social Security Retirement Age, or (ii) his employment by the Company is otherwise terminated prior to his Social Security Retirement Age, his Primary Social Security Benefit shall be determined by projecting to Social Security Retirement Age his annual Compensation as of this Early Retirement Date or the date of his last employment, as the case may be, assuming that there shall be no change in the social security wage base or social security benefit schedule caused by the automatic provision with 14 respect to the cost of living under the Social Security Act. The amount of Primary Social Security Benefit shall be estimated based on actual salary in all years for which records are available while an Employee of the Company, and a salary discount assumption applied to Annual Earnings in the year of the last recorded salary and each year prior thereto until age 22, which shall be a level percentage of 6% per year. In the event that within 180 days, beginning on the date which is the later of the date the Member separates from service or the date the Member is notified of the benefit amount, the Member supplies accurate documentation of the Member's actual salary history as determined by the Social Security Administration, the benefit to which the Member is entitled shall be adjusted based on any differences which shall occur. (c) The benefit of a Member, who was such on December 31, 1982, shall not be less than the Accrued Benefit to which he was entitled under the provisions of the Plan as in effect on December 31, 1982. The benefit payable under the form of payment elected by such a Member shall not be less than benefit payable under the same form of payment based on the Accrued Benefit as of December 31, 1982. (d) On and after May 11, 1981, solely for purposes of determining the annual amount of retirement benefit commencing at Normal Retirement Date for a Member who was a member in the Pension Plan for Employees of Canadian Trans-Lux Corporation Limited (the "Canadian Plan"), the Normal Retirement Benefit shall be determined in accordance with this Section 4.1 based on years of Credited Service while a Member of the Plan and Credited Service while a member of the Canadian Plan, but only if such service under the Canadian Plan would qualify as Credited Service under the Plan if such service were performed while a Member of the Plan, reduced by the amount of benefit such individual is entitled to receive under the Canadian Plan. Such reduction shall not reduce the amount such Member is entitled to receive under this Plan to an amount less than zero. (e) On and after January 1, 1996, solely for purposes of determining the annual amount of retirement benefit commencing at Normal Retirement Date for a Member who was an employee of Integrated Systems Engineering, Inc., 15 as well as full-time salaried employees of the theatre executive office and theatre managers, the Normal Retirement Benefit shall be determined in accordance with this Section 4.1 based on years of Credited Service completed after January 1, 1996. 4.2 At Earlier Retirement Date -------------------------- The annual retirement benefit, commencing at Earlier Retirement Date to a Member who retires on an Earlier Retirement Date, shall be equal to the Actuarial Equivalent (as set forth in Appendix A) of the Accrued Benefit he would have received commencing at Normal Retirement Date, as computed in accordance with Section 4.1 hereof. Notwithstanding the foregoing, a Participant may elect to defer the commencement of benefits until the date the Member would have attained Normal Retirement Date, in which case the benefit shall equal the Member's Accrued Benefit. 4.3 Maximum Benefits ---------------- (a) Notwithstanding any provision of the Plan to the contrary, the maximum annual benefit payable to a Member under the Plan shall be subject to the limitations set forth in Section 415 of the Code and any regulations or rulings issued thereunder. If the benefit begins before the Member's 62nd birthday, the dollar limitation described in Section 415(b)(1)(A) of the Code shall be the Actuarial Equivalent of the maximum benefit payable at age 62. If the benefit begins after the Member's Social Security Retirement Age, such dollar limitation shall be the Actuarial Equivalent of the maximum benefit payable at the Member's Social Security Retirement Age. If the benefit is payable neither as a life annuity nor as a qualified joint and survivor annuity with the Member's Spouse as beneficiary, the maximum limitation shall be the Actuarial Equivalent of the maximum limitation otherwise applicable. Effective on January 1, 1999, Actuarial Equivalent for purposes of this Section 4.03 shall be determined in accordance with Section 415(b) of the Code and the regulations or rulings issued thereunder and using the Plan's early retirement, late retirement or optional benefit factors as appropriate, or, if less, using factors calculated from the IRS Mortality Rate, if applicable, and (i) with respect to an adjustment for certain forms of benefit under Section 415(b)(2)(B) of the Code, the IRS Interest Rate if the benefit is subject to the provisions of Section 417(e)(3) of the Code or five percent otherwise; 16 and (ii) with respect to any other adjustment for commencement of benefits before or after Social Security Retirement Age required under Section 415(b)(2)(C) or (D) of the Code, an interest rate of five percent. (b) For limitation years commencing prior to January 1, 2000, if a Member is a participant in any qualified defined contribution plan required to be taken into account for purposes of applying the combined plan limitations contained in Section 415(e) of the Code, then for any year the sum of the defined benefit plan fraction and the defined contribution plan fraction, as such terms are defined in said Section 415(e), shall not exceed 1.0. If for any year the foregoing combined plan limitation would be exceeded, the benefit provided under this Plan shall be reduced to the extent necessary to meet that limitation. If a Member's benefit commenced prior to January 1, 2000, and was limited by the provisions of Section 415(e) of the Code, such benefit shall be redetermined as of January 1, 2000 without regard to the provisions of said Section 415(e) and such recomputed benefit shall be payable on and after January 1, 2000, but only if the Pension Committee finds that doing so will not result in the duplication of benefits payable from this Plan and any other qualified or nonqualified plan sponsored by the Company. 17 SECTION V --------- NORMAL FORM OF BENEFIT AT RETIREMENT ------------------------------------ 5.1 Subject to the provisions of Section 11.2, effective on and after August 23, 1984, the normal form of payment of retirement benefits for a Member who is married on his Retirement Commencement Date shall be the Qualified Joint and Survivor Annuity. No sooner than 30 days nor later than 90 days prior to a Member Retirement Commencement Date, the Committee shall provide the Member with written explanation of (a) the terms and conditions of the Qualified Joint and Survivor Annuity, (b) the Member's right to revoke and reelect the Qualified Joint and Survivor Annuity, (c) the rights of the Member's Spouse to consent to any revocation of the Qualified Joint and Survivor Annuity and, (d) effective on and after August 22, 1988, a general description of the eligibility conditions and other material features of any optional form of benefit and sufficient additional information to explain the relative values of the optional forms of benefit under the Plan. An election to waive the Qualified Joint and Survivor Annuity must be made within the 90-day period commencing prior to the Member's Retirement Commencement Date. An election to waive the Qualified Joint and Survivor Annuity shall only be effective if the Member's Spouse consents in writing to such election. Spousal consent must acknowledge the effect of such election, specify the alternate form of payment selected, designate the alternate beneficiary who is eligible to receive the benefits under the Plan, if any, and be witnessed by a Plan representative or a notary public. If such Member effectively elects not to receive his retirement benefits in the form of a Qualified Joint and Survivor Annuity, then the Member may elect to receive payment of such retirement benefit in the form of a life annuity as provided in Section 5.2 below, or in any optional form of payment provided in Section 6.1. A Spouse's consent to waive any benefits hereunder shall only be effective with respect to such Spouse. An alternate beneficiary or form of payment consented to by a Spouse in lieu of the form of benefit payable under this Section 5.1 may not be changed unless such change is to the Qualified Joint and Survivor Annuity or the Spouse again consents in writing to such change. In the event a Spouse is legally incompetent to give consent, the legal guardian of the Spouse may give consent. 18 Former Members of the Plan who completed one Hour of Service after September 1, 1974, and separated from service prior to January 1, 1976, and who have not commenced benefits under this Plan, as of August 23, 1984, may elect or revoke the Qualified Joint and Survivor Annuity according to the provisions of the Plan in effect on August 22, 1984. 5.2 Subject to the provisions of Section 11.2, if a Member has no Spouse, his Spouse cannot be located, the Member is legally separated from or has been abandoned by said Spouse (within the meaning of local law) and the Member has a court order to such effect, or the Member is otherwise exempt from the requirements of Section 5.1 pursuant to regulations issued by the Secretary of the Treasury, the normal form of payment of his retirement benefits shall be a monthly life annuity terminating with the last payment preceding his death. A Member who meets the requirements of this Section 5.2 shall be eligible to reject the normal form of payment and elect an optional form of benefit in the same manner and within the same time period prescribed in Section 5.1, except that spousal consent shall not be required. 19 SECTION VI ---------- OPTIONAL FORM OF BENEFITS ------------------------- 6.1 In lieu of normal form of payment provided under Section 5.1 or Section 5.2 (provided a Member who is married to a Spouse has obtained his Spouse's consent as required by Section 5.1), a Member may elect an optional form of benefit described in this Section 6.1. Any optional form shall be the Actuarial Equivalent of the normal form provided in Section 5.2. (a) Ten Year Certain and Life: An actuarially reduced monthly life annuity payable to the Member at his Retirement Commencement Date and terminating with the last payment preceding his death, provided that not less than 120 monthly payments shall be made to him and his Beneficiary. (b) Joint and Survivorship Annuity: An actuarially reduced monthly life annuity payable to the Member at his Retirement Commencement Date and providing for the continuation of such reduced retirement benefit in an amount equal to 100%, 66-2/3% or 50% of such reduced retirement benefit, to the Contingent Annuitant for as long as the Contingent Annuitant lives. Under this option, the amount of reduction in the retirement benefit depends upon the age of the Member and the Contingent Annuitant at the date the benefit is to commence and the amount of the continuing payment elected as stated in Appendix A. (c) Social Security Offset: A Member who retires prior to his Social Security Retirement Age may elect a retirement benefit, which is the Actuarial Equivalent of the retirement benefit such Member would receive as if Social Security Benefits had commenced as of his date of retirement, so that at the time such Member's old-age benefit under Title II of the Social Security Act actually becomes payable, he will receive a reduced amount from the Plan, and the amount of benefits such Member shall receive both before and after such Social Security benefit commences shall be approximately equal. (d) Lump Sum Option: A Member may elect a lump sum form of payment, which is the Actuarial Equivalent determined in accordance with Section 11.2(b) and Appendix A of the retirement benefit otherwise payable to him. Distributions of lump sum amounts shall be permitted at 20 any date which is prior to the Member's Normal Retirement Date only upon the consent of the Member if such Lump Sum amount exceeds $3500, effective through December 31, 1997, and $5,000 on and after January 1, 1998, as determined under Section 11.2(b). Payment of a lump sum amount under this section (d) shall represent a complete discharge of the Plan's liability to such Member. 6.2 The optional benefits, as provided in Section 6.1, are subject to the following limitations and restrictions: With respect to all optional retirement benefits provided hereunder, the Member may elect any one of the options at least 90 days prior to Deferred, Normal or Earlier Retirement Date and shall be effective on the Participant's Deferred, Normal or Earlier Retirement Date, by written notice delivered to the Pension Committee and shall be effective on the date of the Retirement Commencement Date. No optional form under Section 6.1 of the Plan shall be payable over a period exceeding one of the following: (a) the life of a Member or the joint lives of a Member and his Spouse, or designated Beneficiary, as the case may be; or (b) the life expectancy of the Member or joint life expectancy of a Member, his Spouse or designated Beneficiary, as the case may be. Life expectancy shall be determined according to Code regulation 1.72-9. Any payments to a Contingent Annuitant or Beneficiary, who is not the Spouse of the Member, shall be subject to the limitation that the present value of payments to the Member, calculated as of the appropriate retirement date, must exceed 50% of the then present value of the total payments to be made to the Member and his Beneficiary. 6.3 Prior to the distribution of any benefit payable hereunder, if the present value of such benefit is in excess of $3,500 through December 31, 1997 and $5,000 on and after January 1, 1998, then such benefit shall not be distributed before the Member's Normal Retirement date unless the Member and, if applicable, the Member's Spouse, consent in writing thereto, except that if such benefit is payable as a Qualified Joint and Survivor Annuity and is immediately distributable, written consent to the distribution shall not be required. 21 SECTION VII ----------- DEATH BENEFITS -------------- 7.1 Pre-Retirement Spouse's Benefit ------------------------------- (a) If a Member dies in the active service of the Employer after having satisfied the requirements for Earlier Retirement Date, but prior to his Normal Retirement Date, and is survived by a Spouse, such Spouse shall be entitled to receive a monthly benefit for life commencing on the first day of the month following the date of death of the Member except that if the present value (as determined under Section 11.2) of the benefit payable to the Spouse is $3500 or less though December 31, 1997 or $5,000 or less on and after January 1, 1998, such amount shall be payable under Section 11.2. The annual amount of such benefit shall be the greater of the benefit provided in Section (b) or, on and after August 23, 1984, the benefit provided in Section (c). (b) If the surviving Spouse is not more than five years younger than the deceased Member, the benefit shall be 50% of the deceased Member's Accrued Benefit, computed as if such Member had retired on the day before he died. If the surviving Spouse is more than five years younger than the deceased Member, the benefit shall be computed as in the preceding paragraph and such amount shall be reduced by (i) and, if applicable, (ii) below: (i) 1% for each full year in excess of five years up to a maximum of twenty-five years that the Spouse is younger than the Member; and (ii) 2% for each full year in excess of twenty- five years that the Spouse is younger than the Member. (c) Effective on and after August 23, 1984, in the event of the death of a Member with a Spouse, who is entitled to receive benefits in accordance with Section 9.2 or 9.3 (whichever is applicable) and who has not commenced benefits under the Plan, a survivor annuity shall be payable to his Spouse for such Spouse's lifetime, with monthly payments commencing on the first day of the month coincident with or next following the later of (i) the date of the Member's death, or (ii) the date the Member would have attained age 55 if he had completed 10 Years of Credited Service as of his date of death, unless the Spouse elects to defer such payment until the 22 date the Member would have attained Normal Retirement Date, or in any other case, the date the Member would have attained age 65. Notwithstanding the preceding sentence, if the present value (determined under Section 11.2) of the survivor annuity is less than $3500 effective through December 31, 1997 or $5,000 on and after January 1, 1998, then the benefit shall automatically be distributed in a single cash payment as provided under Section 11.2. The survivor annuity shall be equal to Member's Accrued Benefit payable as a Qualified Joint and Survivor Annuity determined as follows: (i) In the case of a Member who has attained Earliest Retirement Age as of his death, such Qualified Joint and Survivor Annuity shall be determined as if the Member had retired on the date of death and Section 4.2 of the Plan applied. (ii) In the case of a Member who had not attained Earliest Retirement Age as of his date of death, such Qualified Joint and Survivor Annuity shall be determined as if the Member had: (A) separated from service on his date of death or termination of employment whichever is earlier; and (B) survived until Earliest Retirement Age and Section 4.2 of the Plan applied, and; (C) died on the day following his Earliest Retirement Age. For the purposes of this section, "Earliest Retirement Age" shall mean age 55 if a Member had completed 10 Years of Credited Service as of his date of death or separation from service, whichever occurs first, or in any other case, age 65. A former Member who has one Hour of Service on and after January 1, 1976, who has separated from service prior to August 23, 1984, and who has a vested benefit in accordance with Section 9.2 as of his date of termination, shall have this Section 7.1(c) apply upon the occasion of his death provided such former Member had not commenced payment of his vested benefit under the Plan as of August 23, 1984. (d) Applicable Provisions on Death - If either (i) a Spouse's benefit shall have become payable under the provisions of Section 7.1(b) or (c) or (ii) the benefit shall have become effective under the provisions of Section V or Section VI, the death benefit, if any, shall be that provided by such applicable section. 23 SECTION VIII ------------ CONTRIBUTIONS ------------- 8.1 The Company, in accordance with the requirements of Code Section 412, shall make contributions to the Trustee as are actuarially necessary to provide the retirement benefits under the Plan. Contributions shall be made conditioned upon their deductibility under Code Section 404. Any contribution which is made under this Section 8.1 which is determined by an Actuary to be non-deductible under Code Section 404 shall be returned to the Employer within the next following one-year period, provided the Actuary certifies to the non- deductibility of such contribution under Section 404 of the Code. No contributions will be required of Members. 8.2 The Company reserves the right to reduce, suspend, or discontinue its contributions for any reason at any time, provided that it shall be impossible, at any time prior to the satisfaction of all liabilities with respect to all Members, Spouses, Contingent Annuitants, and Beneficiaries under the Plan, for any part of the Trust Fund to revert to the Company, or to be used for, or diverted to, any purpose other than their exclusive benefit. Any assets remaining in the Trust upon a Plan termination or a discontinuance of contributions to the Plan, after satisfaction of liabilities with respect to all Members, Spouses, Contingent Annuitants and Beneficiaries under the Plan, shall revert to the Company. 24 SECTION IX ---------- TERMINATION OF SERVICE ---------------------- 9.1 Before 10 Years of Vesting Service ---------------------------------- (a) A Member whose service with the Company is terminated prior to January 1, 1989, for reasons other than total and permanent disability and before his Normal or Earlier Retirement Date and before completing at least 10 years of Vesting Service shall not be entitled to any benefits under the Plan. (b) Any forfeitures arising as a result of this Section 9.1 shall be used to reduce the Company's cost under the Plan. 9.2 With 10 or More Years of Vesting Service ---------------------------------------- (a) A Member, whose service with the Company is terminated after December 31, 1975, but before January 1, 1989, and before his Normal or Earlier Retirement Date, having completed at least 10 years of Vesting Service, shall be entitled to his Accrued Benefit as of his date of such termination with benefits commencing at his Normal Retirement Date. (b) A Member, who is entitled to a retirement benefit under subparagraph (a) above, may elect to receive his retirement benefit commencing at an Earlier Retirement Date which shall be the first day of any specified month subsequent to the date of his election. In such event,the retirement benefit then payable shall be equal to the Actuarial Equivalent of the Accrued Benefit which he was entitled to receive at his Normal Retirement Date. 9.3 Provisions effective on and after January 1, 1989 ------------------------------------------------- (a) A Member whose service with the Employer is terminated for reasons other than total and permanent disability and before his Normal or Earlier Retirement Date and before completing at least 5 years of Vesting Service shall not be entitled to any benefits under the Plan. Any forfeitures arising as a result of this Section (a) shall be used to reduce the Company's cost under the Plan. (b) A Member, whose service with the Employer is terminated before his Normal or Earlier Retirement Date, having completed at least 5 years of Vesting Service shall be entitled to his Accrued Benefit as of the date of such termination with benefits commencing at his Normal Retirement Date. 25 (c) A Member, who is entitled to a retirement benefit under subparagraph (b) above, may elect to receive his retirement benefit commencing at an Earlier Retirement Date provided the Member has satisfied the provisions of Section 3.2, which shall be the first day of any specified month subsequent to the date of his election. In such event, the retirement benefit then payable shall be equal to the Actuarial Equivalent of the Accrued Benefit which he was entitled to receive at his Normal Retirement Date. 9.4 Vesting service --------------- (a) Service Prior to January 1, 1976 -------------------------------- Vesting Service for Plan Years beginning prior to January 1, 1976, shall be equal to the continuous service recognized under the provisions of the Plan as in effect prior to January 1, 1976. (b) Service on and after January 1, 1976 The computation period for the determination of Vesting Service on and after January 1, 1976 shall be the Plan Year. An Employee shall accrue one year of Vesting Service for each Plan Year in which he completed 1,000 Hours of Service. If an Employee has a One Year Break in Service (commencing on or after January 1, 1976) and is later reemployed, his period of Vesting Service prior to his Reemployment Commencement Date shall be restored, provided such Employee completes a Year of Eligibility Service and further provided that, if such Employee was not vested in accordance with Section 9.2(a) or 9.3(b) at the time his One Year Break in Service commenced, the period of his Vesting Service prior to such occurrence shall not be taken into account if the number of consecutive One Year Breaks in Service equals or exceeds the greater of a) his aggregate years of Vesting Service accrued before such One Year Break in Service, or b) on and after January 1, 1985, five years. (c) An employee who became a Member on or after January 1, 1985, shall not accrue Vesting Service for services rendered prior to the Plan Year in which the Employee's 18th birthday occurs. (d) Solely for determining the nonforfeitability of any benefit under the Plan, former Members who terminated employment with the Company for immediate employment with a Gulf & Western entity (hereinafter called the "Corporation") because of the sale of certain subsidiaries and divisions to the Corporation on July 26 25, 1986, shall continue to accrue Vesting Service under this Plan for so long as they are employed by the Corporation provided such service conforms to the requirements of Vesting Service set forth in Section 1.36 as if such Vesting Service was performed for the Company, and further provided that the Corporation provides such timely information as may be required to determine Vesting Service with respect to such former Members. The above paragraph shall not be construed as establishing or continuing any contract of employment between the Company and former Members. 27 SECTION X --------- DISABILITY ---------- 10.1 In the event a Member is determined by the Pension Committee to be totally and permanently disabled according to Section 10.2 and has attained age 45 and completed at least 15 years of Vesting Service, he shall be entitled to a disability benefit as defined in Section 10.3. 10.2 The Pension Committee shall base its determination of total and permanent disability on the medical opinion of a committee of doctors chosen by the Pension Committee. 10.3 The disability benefit shall be equal to the Member's Accrued Benefit at the date of disability. Such benefit shall be reduced for immediate payment according to the Actuarial Equivalent early retirement factors of the Plan. However, if an Employee is below age 55, the Actuarial Equivalent reduction factor used for immediate payment will not be less than the factor that would be used as if the Employee was age 55. 10.4 Disability benefits shall be payable in the same manner and form as set forth in Section V, unless the Member, and if applicable, the Member's Spouse, consent in accordance with Section 5.1 to receive an optional form of benefit under Section VI. 28 SECTION XI ---------- TIME OF COMMENCEMENT OF PAYMENT ------------------------------- 11.1 Commencement of Payment ----------------------- Unless a Member elects otherwise, the payment to him of his retirement benefit shall begin not later than the 60th day after the close of the Plan Year in which occurs the later of: (a) the Member's Normal Retirement Date, or (b) the fifth anniversary of the Member's participation in the Plan, or (c) the date the Member terminates his service with the Company. In no event, however, shall a retirement benefit becoming payable under this Plan commence later than the April 1 following the calendar year in which the Member attains age 70-1/2. If the amount of the retirement benefit cannot be ascertained or if the Committee after diligent search cannot locate the Member within the time limits set forth above, a retroactive payment of such retirement benefit shall be made no later than 60 days after the earliest date on which such amount can be ascertained or the date on which the Member is located, whichever is applicable. 11.2 Payment of Lump Sum Benefits ---------------------------- (a) Payment of Small Benefits Effective January 1, 1989, and notwithstanding any other provisions of the Plan, if the present value of the benefit payable to the Member (or the spouse or other designated beneficiary), determined in the Plan Year in which such Member retires, dies, or terminates employment with the Employer, is not in excess of $3,500 for Plan Years ending on or before December 31, 1997 or $5,000 for Plan Years ending on and after January 1, 1998, then such Member (Spouse or other designated Beneficiary) shall receive as of the date of his retirement, termination or death a lump sum distribution equal to the present value of such vested benefit. For purposes of determining whether the present value of the vested benefit exceeds $3,500 or $5,000, as the case may be, and the amount of such distribution payable to the Member, the present value shall be calculated as provided in subsection (b) below. To the extent permitted by law, in the event the present value of a Member's benefit exceeds $3,500 upon an initial determination of its present value prior to January 1, 1998, the present value shall be redetermined 29 as of January 1, 1998 and if such redetermined present value is $5,000 or less, it shall be paid to the Member (Spouse or other designated Beneficiary) in accordance with this Section. The present value of the benefit shall be redetermined annually as of the first day of each subsequent Plan Year. Any lump sum benefit payable shall be made as soon as practicable following the determination that the amount qualifies for distribution under the provisions of this Section 11.2. However, in no event shall lump sum payments be made under this Section after the date benefit payments have begun as an annuity. (b) For purposes of determining the present value and the amount of a lump sum payment of the Member's vested benefit under Section 6.1(d) or 11.2(a),the Interest Rate shall be the IRS Interest Rate determined under Appendix A. 11.3 No portion of the Member's Accrued Benefit may commence to be distributed under the Plan prior to the Member's Normal Retirement Date unless: (a) the Member and such Member's Spouse, if applicable, consents in writing to such distribution within the 90- day period prior to the Retirement Commencement Date; or (b) the benefit is provided in accordance with Section 5.1 or 5.2. Notwithstanding the foregoing, no consent shall be required if the Member's Accrued Benefit determined in accordance with Section 11.2 is less than $3,500 for Plan Years ending on or before December 31, 1977 or $5,000 for Plan Years ending on or after January 1, 1998. Notwithstanding anything in the Plan to the contrary, after having received any required written explanation of his benefits, a Member may (with any applicable spousal consent) affirmatively elect to have his benefit commence sooner than 30 days following his receipt of the written explanation, provided all of the following requirements are met: (i) the Pension Committee clearly informs the Member3 that he has a period of at least 30 days after receiving the notice to decide when to have his benefits begin and, if applicable, to choose a particular optional form of payment; 30 (ii) the Member affirmatively elects a date for his benefits to begin and, if applicable, an optional1 form of payment, after receiving the written explanation; (iii) the member is permitted to revoke his election until the later of his Retirement Commencement Date1 or seven days following the day he received the written explanation; and (iv) payment does not commence less than seven days following the day after the written explanation is received by the Member. 11.4 Distribution Requirements ------------------------- All distributions shall be determined and made in accordance with regulations (including proposed regulations) under Code Section 401(a)(9) and the minimum distribution incidental benefit requirement of Section 1.401(a)(9) of the regulations. The provisions of this Section 11.4 shall supercede any other provision of the Plan. (a) If the Member dies after distribution of his or her interest has begun, the remaining portion of such interest, if any, will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Member's death. (b) If the Member dies before distribution of his or her interest begins, distribution of the Member's entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Member's death except to the extent that an election is made to receive distributions in accordance with (i) or (ii) below: (i) if any portion of a Member's interest is payable to (or for the benefit of) a designated Beneficiary, such portion shall be distributed (in accordance with regulations) over the life of such designated Beneficiary (or over a period not extending beyond the life expectancy of such Beneficiary), beginning no later than one year after the date of the Member's death or such later date as the Secretary of the Treasury may, by regulation prescribe; or (ii) if the designated Beneficiary is the surviving Spouse of the Member, the date distributions are required to begin under (i) above shall not be earlier than the later (A) the end of the calendar year following the calendar year in which the Member died or (B) the end of the calendar year in 31 which the Member would have attained age 70-1/2. (c) If the surviving Spouse dies before distribution to such Spouse, the provisions of subsection (b), with the exception of paragraph (ii) therein, shall be applied as if the surviving Spouse were the Member. (d) For purposes of this Section, the life expectancy of a Member and the Member's Spouse (other than in the case of a life annuity) may be redetermined but not more frequently than annually. (e) Under regulations prescribed by the Secretary of the Treasury for purposes of this Section, any amount paid to a minor child shall be treated as if it had been paid to the surviving Spouse if such amount will become payable to the surviving Spouse upon such child attaining the age of majority. 11.5 Direct Rollover Distribution ---------------------------- In the event a distribution is made under Section 6.1(d) or a distribution is made under the mandatory cash out provisions contained in Section 11.2 for benefits of $3,500 or less or $5,000 or less, as the case may be, the Member may, at any time prior to the Retirement Commencement Date, elect to roll over such distribution to an individual retirement account as defined in Code Section 408(a), an individual retirement annuity under Code Section 408(b), or a defined contribution plan qualified under Code Section 401(a) (hereinafter collectively known as "recipient plan") subject to the following terms and conditions: (a) The Pension Committee within a reasonable period prior to the time the election is required to be made under this Section 11.5, furnishes a written explanation to the Member of the consequences of making or not making the election. (b) the Member shall be required to represent to the Pension Committee that any recipient plan is (or is intended to be) eligible as an individual retirement plan under Code Section 408(a) an individual retirement annuity under 408(b) or a qualified defined contribution plan under Code Section 401(a) and provide any other reasonable information the Pension Committee shall require (including the name, address and account numbers with respect to a recipient plan); (c) a Member failing to elect the rollover option under this Section ll.5 prior to a Retirement Commencement Date shall be deemed not to have elected a rollover option; 32 (d) the Pension Committee may adopt any reasonable procedures to accomplish the direct rollover, as a trustee to trustee transfer, including distribution in the form of a restricted check payable to a fund or a trustee for the benefit of the Member; (e) amounts eligible for direct rollover may be distributed to a maximum of three recipient plans; (f) a Member shall be permitted to divide a distribution in the form of a percentage or dollar amount to be rolled over to a recipient plan and the remainder to be received currently by the Member; (g) a surviving Spouse, or a Spouse or former Spouse in compliance with a qualified domestic relations order, shall have the same rights as a Member under this Section ll.5, except that rollovers shall not be permitted to any recipient plan which is a qualified plan under Code Section 401(a). Amounts required to be distributed pursuant to Section ll.l shall not be eligible for the direct rollover option set forth in this Section ll.5. 33 SECTION XII ----------- REEMPLOYMENT ------------ 12.1 If any retired Member is reemployed by the Company prior to his Normal Retirement Date, his retirement benefit payments, if any, shall cease; any election of an optional benefit in effect thereunder shall become void and the provisions of Section 5.1 hereof shall again become effective. Any Credited Service to which he was entitled when he retired shall be restored to him, and upon subsequent retirement, his retirement benefits shall be redetermined based on his Salary and Credited Service before and after the period of prior retirement reduced by the Actuarial Equivalent of the benefits previously received, if any. Such reduction shall not reduce the benefit payable to the Member to an amount which is less than the benefit payable to the Member prior to the Member's reemployment. 12.2 If any Member, who received or is receiving a disability benefit under Section X hereof, is reemployed by the Company prior to his Normal Retirement Date, any disability benefit payments he was receiving shall cease and the provisions of Section 5.1 hereof shall again become effective. Any Vesting Service and Credited Service to which he was entitled when he became disabled shall be restored to him, and upon subsequent retirement or termination of service his benefit shall be redetermined based on his Salary and Credited Service before and after his disability, reduced by the Actuarial Equivalent of the benefits previously received, if any. 12.3 If a former Member who terminated service after he had earned a vested interest under Section 9.2(a) or Section 9.3(b) is reemployed he shall thereupon again become a Member of the Plan. Any Credited Service to which he was entitled shall be restored to him and upon subsequent retirement or termination of service his benefit shall be based on his Salary and Credited Service before and after his initial termination of service reduced by the Actuarial Equivalent of the benefits previously received, if any. 12.4 If a former Employee who terminated service in accordance with Section 9.1 or Section 9.3(a) is reemployed, his entitlement to membership and his prior Vesting Service shall be determined as provided in Section 2.5 and 9.4(a) and (b). Any Credited Service recognized for the period of Vesting Service restored pursuant to said Section shall also be restored to him. 34 SECTION XIII ------------ LIMITATION OF ASSIGNMENT ------------------------ The benefits payable hereunder to any Member, Spouse, Beneficiary, or Contingent Annuitant, if any, shall not be assigned, commuted, anticipated, alienated, sold, transferred, pledged, encumbered or charged, and shall not be subject by attachment or otherwise to the claims of any creditors of the Member, Spouse, Beneficiary or Contingent Annuitant. Notwithstanding the above, the Committee shall direct the Trustees to comply with a Qualified Domestic Relations Order provided such order does not require a form of benefit not otherwise provided under the Plan, or require increased benefits, or require the payment of benefits to an Alternate Payee (as described below) which are required to be paid to another Alternate Payee under a previous Qualified Domestic Relations Order. Payments in compliance with a Qualified Domestic Relations Order may commence, in the case of a Member who has not separated from service no earlier than the first day of the month coincident with or next following the date the Member attains "Earliest Retirement Age" as defined in Section 414(p) of the Code, based on the Actuarial Equivalent of the Member's Accrued Benefit on the date payments are to begin. For purposes of this Section an Alternate Payee shall mean a Spouse, former Spouse, child or dependent of the Member who is recognized by a domestic relations order as having the right to receive all or a portion of, the benefits payable under the Plan to the Member. The Pension Committee shall notify each Member and any Alternate Payee of its receipt of any domestic relations order, the Plan procedures for determining the qualified statute of such order, and the procedures for the administration of such distributions. If the present value of any series of payments meeting the criteria set forth for Qualifed Domestic Relations Orders amounts to $5,000 or less, an Actuarial Equivalent lump sum payment, determined in the manner described in Section 5.1, shall be made in lieu of the series of payments. Notwithstanding the first paragraph of this Section, a Member's benefits under the Plan shall be offset by the amount the Member is required to pay to the Plan under the circumstances set forth in Section 401(a)(13)(C) of the Code. Except as otherwise provided in this Section, no part of the corpus or income of the funds of the Plan shall be used for, or diverted to, purposes other than for the exclusive benefit of Members and other persons entitled to benefits under the Plan and 35 paying Plan expenses not otherwise paid by the Company, before the satisfaction of all liabilities with respect to them. No person shall have any interest in or right to any part of the earnings of the funds of the Plan or any right in, or to, any part of the assets held under the Plan, except as and to the extent expressly provided in the Plan. 36 SECTION XIV ----------- LIMITATION OF RIGHTS OF THE EMPLOYEE ------------------------------------ This Plan is a voluntary program on the part of the Company and shall not be deemed to constitute a contract between an Employer and any Member or to be a consideration for, or inducement of, employment for any Employee or Member. Nothing contained in the Plan shall be deemed to give a) a Member the right to be retained in the service of an Employer or to interfere with the right of an Employer to discharge or retire the Member, or b) any Member, Spouse, or Beneficiary any right or claim to any payment under the Plan, except as such payment may be provided for under the terms of the Plan and then only to the extent that assets are available in the hands of the Trustee for the making of such payment. 37 SECTION XV ---------- AMENDMENT TO OR TERMINATION OF THE PLAN --------------------------------------- 15.1 Amendment --------- (a) The Board reserves the right to amend the Plan at any time to any extent that it may, in its sole and complete discretion, deem advisable, including any amendment deemed necessary to ensure initial qualification or continued qualification of the Plan under the Code or any other applicable Federal or State laws. (b) No such amendment shall increase the duties or responsibilities of the Trustee without its written consent thereto. (c) No such amendment shall have the effect of diverting any part of the principal or income of the Trust Fund for purposes other than the exclusive benefit of its Members and their Spouses, Contingent Annuitants and any other designated Beneficiaries, prior to the satisfaction of all liabilities under the Plan. (d) Except to the maximum extent permitted or required by the Code or any other applicable section of the law and the regulations issued thereunder, no amendment or modification shall be made which would: (i) retroactively impair any rights to any benefit under the Plan which any Member, Beneficiary, Spouse or other eligible survivor would otherwise have been entitled to as of the date of such amendment, (ii) permit the elimination or reduction of a subsidy or an early retirement benefit (as defined in Code regulations) prior to the effective date of such amendment, or (iii) permit the elimination of an optional form of benefit with respect to benefits attributable to Vesting Service prior to the effective date of such amendment. In the case of a retirement type subsidy, this subsection (iii) shall apply only with respect to a Member who satisfies (either prior to or subsequent to the effective date of the amendment) preamendment conditions for such subsidy. The foregoing shall not operate to limit the application of an amendment described in Code Section 412(c)(8). 15.2 Termination ----------- 38 The Company reserves the right to terminate the Plan in whole or in part at any time by action of its Board of Directors. Upon complete or partial termination of the Plan, the nonforfeitable benefits of each Member (or, in the event of a partial termination, each Member affected by such partial termination) shall become nonforfeitable as of the date of such termination. In the event of such termination, after providing for the expenses of the Plan, the assets of the Plan applicable to Members affected by such termination shall be used and applied for the satisfaction of all liabilities under the Plan in the manner prescribed by Section 4044 of the Act (or corresponding provision of any subsequent applicable law in effect at the time). The Pension Committee may direct that benefits may be provided by the purchase of annuities, by continuing the Fund in existence and making provision thereunder for the payment of retirement benefits or by immediate distribution from the Fund. If, upon satisfaction of all benefit liabilities under the Plan with respect to Members, former Members, their Spouses and Beneficiaries, there is a balance remaining in the Fund, such balance shall be returned to the Company. 15.3 Amendment Following Change in Control ------------------------------------- Notwithstanding the provisions of Subsection 15.1(a), the Board of Directors shall have the right to amend or terminate the Plan at any time; provided, however, that for a period of three years following a "change in control" (as such term is defined in Section 15.4), the provisions of the Plan may not be amended if any amendment would adversely affect the rights, expectancies or benefits of any Member, Spouse or other designated Beneficiary provided by the Plan as in effect immediately prior to the Change in Control. 15.4 Termination Following Change in Control --------------------------------------- Notwithstanding the preceding provisions of this Section or any other provision of this Plan, in the event this Plan is terminated within three years following a "change in control" (as hereinafter defined), the assets of the Plan shall be applied in accordance with the preceding provisions of this Section 15.2 to satisfy all liabilities to retired Members, Members, Spouses, Contingent Annuitants and Beneficiaries. If, after satisfaction of such liabilities, there are assets remaining in the Plan, such assets shall be applied on a pro rata basis to increase the benefits to Members who are in active service of the Company on the date of such termination; provided, however, that if any portion of an 39 allocation of such assets, when added to any other payments to any individual who is a "disqualified individual," as such term is defined in Section 280G(c) of the Code, would result in the imposition of an excise tax pursuant to Section 4999 of the Code (as determined by the Trustee), then such allocation shall be reduced until either no portion of the allocation would result in the imposition of such excise tax or such allocation is reduced to zero. For purposes hereof, a "change in control" shall mean: (a) the acquisition by any corporation, person, or business entity of more than 20% of the then outstanding voting stock of the Company, other than through a transaction consented to by the Board of Directors of the Company prior to such acquisition of more than 20% of such then outstanding voting stock, and which consent of the Board of Directors of the Company is contained in a resolution of such Board adopted on a date which is both prior to such acquisition and subsequent to January 1, 1986, or (b) the purchase of shares of voting stock of the Company pursuant to a tender offer or exchange offer which is opposed by a majority of the members then serving on the Company's Board of Directors. Notwithstanding, the provisions of Section 15.1(a) hereof, the foregoing provisions of this paragraph may not be amended, following a "change in control", without the written consent of a majority, in both number and interest, of the Members who are in active service with the Company on the date of such amendment. 40 SECTION XVI ----------- GOVERNMENTAL RESTRICTIONS ------------------------- 16.1 Limitation Concerning Highly Compensated Employees or Highly ------------------------------------------------------------ Compensated Former Employees ---------------------------- (a) The provisions of this Section shall apply (i) in the event the Plan is terminated, to any Member who is a highly compensated employee or highly compensated former employee (as those terms are defined in Section 414(q) of the Code) of the Company or an Affiliated Employer and (ii) in any other event, to any Member who is one of the 25 highly compensated employees or highly compensated former employees of the Company or Affiliated Employer with the greatest compensation in any Plan Year. The amount of the annual payments to any one of the Members to whom this Section applies shall not be greater than an amount equal to the annual payments that would be made on behalf of the Member during the year under a single life annuity that is the Actuarial Equivalent to the sum of the Member's Accrued Benefit and the Member's other benefits under the Plan. (b) If, (i) after payment of Accrued Benefits or other benefits to any one of the Members to whom this Section applies, the value of Plan assets equals or exceeds 110 percent of the value of current liabilities (as that term is defined in Section 412(l)(7) of the Code) of the Plan, (ii) the value of the Accrued Benefit and other benefits of any one of the Members to whom this Section applies is less than one percent of the value of current liabilities of the Plan, or (iii) the value of the benefits payable to a Member to whom this Section applies does not exceed the amount described in Section 411(a)(11)(A) of the Code, the provisions of paragraph (a) above will not be applicable to the payment of benefits to such Member. (c) If any Member to whom this Section applies elects to receive a lump sum payment in lieu of his Pension and the provisions of paragraph (b) above are not met with respect to such Member, the Member shall be entitled to receive his benefit in full provided he shall agree to repay to the Plan any portion of the lump sum payment which would be restricted by operation of the provisions of paragraph (a) and shall provide adequate security to guarantee that repayment. 41 (d) Notwithstanding paragraph (a) of this Section, in the event the Plan is terminated, the restriction of this Section shall not be applicable if the benefit payable to any highly compensated employee and any highly compensated former employee is limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Code. (e) If it should subsequently be determined by statute, court decision acquiesced in by the Commissioner of Internal Revenue, or ruling by the Commissioner of Internal Revenue that the provisions of this Section are no longer necessary to qualify the Plan under the Code, this Section shall be ineffective without the necessity of further amendment to the Plan. 42 SECTION XVII ------------ ADMINISTRATION OF THE PLAN -------------------------- 17.1 The general administration of the Plan shall be placed in a Pension Committee consisting of not less than three nor more than nine persons who shall be appointed, from time to time, by the Board to serve at the pleasure of said Board. The members of the Pension Committee shall collectively be the Plan Administrator and Named Fiduciary, as such terms are defined under the Act. 17.2 Any person appointed as a member of the Pension Committee shall signify his acceptance in writing to the Board. Any member of the Pension Committee may resign by delivering his written resignation to the Board and such resignation shall become effective upon delivery or any later date specified therein. 17.3 The members of the Pension Committee will serve without compensation for services as such, but the Company on an equitable basis shall pay or reimburse the Pension Committee for all expenses reasonably incurred by the Pension Committee and shall indemnify the Pension Committee and each member thereof against all loss, liability and expense occasioned by any act or omission to act taken or determined upon by it, or him, except any such act or omission which is due to willful misconduct, fraud or lack of good faith. 17.4 A majority of the members of the Pension Committee, at the time in office, may do any act which this Plan authorizes or requires the Pension Committee to do, and the action of such majority of the members expressed from time to time by a vote at a meeting, or in writing without a meeting, shall constitute the action of the Pension Committee and shall have the same effect for all the members at the time in office. The Pension Committee may, by a writing signed by a majority of its members, delegate to any one member of the Pension Committee the authority to give certified notice in writing of any action taken by the Pension Committee and may assign specific duties and responsibilities to one or more of its members. 17.5 Subject to the limitations of the Plan, the Pension Committee shall establish rules for the administration of the Plan and the transaction of its business. The determination of the Pension Committee as to any questions involving the general administration of the Plan or the proper interpretation of any of its provisions shall be conclusive. 17.6 The Pension Committee's determination, as to which Employees are eligible to be Members and of a Member's period of 43 Credited Service and Salary, shall be conclusive. Any discretionary actions to be taken under this Plan by the Pension Committee with respect to the classification of Members or benefits shall be uniform in their nature and applicable to all Members similarly situated and shall be taken with care, skill, prudence and diligence that a prudent man acting in a like capacity under circumstances similar to those then prevailing would use. The Pension Committee shall have complete and discretionary authority to determine eligibility for benefits, the amount of benefits and to otherwise interpret and administer the provisions of the Plan. The Pension Committee may appoint accountants, attorneys, Actuaries or other agents as it may deem necessary or advisable in order to properly administer and implement the Plan, and may delegate to such appointees appropriate ministerial duties consistent with their background and experience, to the extent that such duties are properly delegable under the Act. The Pension Committee shall not be liable for any act or omission of such accountant, attorney, Actuary, or other agent in carrying out their delegated responsibilities provided that the Pension Committee does not fail to conduct itself in the manner described above with respect to such designation of agents and allocation of duties, and provided further, that the Pension Committee does not (i) knowingly participate in or knowingly undertake to conceal an act or omission of such agent, knowing that such act or omission is inconsistent with the requirements of the Plan and of the Act, or (ii) through a failure to comply with the prudent action described above enable such agent to commit such an improper act or omission, or (iii) have knowledge of such improper act or omission on the part of such agent, and yet fail to make reasonable efforts under the circumstances to remedy such improper act or omission. 17.7 The Pension Committee shall keep in convenient form such data as may be necessary for actuarial valuations with respect to the operation and administration of the Plan and may (a) adopt standards for use in all actuarial calculations required in connection with the Plan; (b) establish the rate of contribution required to maintain the Plan; and (c) advise the Company of the rate so established. The Pension Committee shall submit annually to the Board a report showing, in reasonable summary, the financial 44 condition of the Trust Fund and giving a brief account of the operations of the Plan for the past year, and any further information which the Board may require. 17.8 The members of the Pension Committee, and the Company and its officers and directors shall be entitled to rely upon all tables, valuations, certificates and reports made by any Actuary or accountant so selected, and upon all opinions given by any legal counsel so selected, and the members of the Pension Committee shall be fully protected with respect to any actions taken or suffered by them in good faith in reliance upon such Actuary, accountant, or counsel, and all action so taken or suffered shall be conclusive upon each of them and upon all Members, retired Members, Spouses, Contingent Annuitants and Beneficiaries. 17.9 The Pension Committee shall make all reports and give all notices with respect to the Plan and the administration thereof which may be required under the provisions of the Code or of the Act and the regulations promulgated thereunder. 17.10 Denial of Claims Procedure -------------------------- Any application for benefits by a Member, his Spouse, or other designated Beneficiary, submitted to the Pension Committee on appropriate form shall constitute a claim. In any instance where such claim is denied in whole or in part by the Pension Committee, their decision shall be submitted in writing to the Member, Spouse, or Beneficiary, within 90 days following receipt of such claim, unless special circumstances require additional time, which may be up to an additional 90 days provided the claimant is notified within the initial 90-day period, setting forth the following: (a) basis for denial of claim; (b) plan provision on which denial is based; (c) description of any additional information required of the Member, his Spouse, or other Beneficiary; (d) an explanation of why such information is necessary; and (e) an explanation of the procedures for reviewing claims under the Plan. Upon receipt of denial of a claim by the Member, Spouse, Contingent Annuitant, or Beneficiary, an appeal requesting further review may be submitted to the Pension Committee within 60 days following receipt of such denial. Upon receipt of a request for review, the Pension Committee will meet and render a decision within 60 days following the receipt of an appeal unless special circumstances exist which may permit an extension of time, in which case a decision shall be made as soon as possible after the 60-day period, but may in no event be extended beyond 120 days following 45 receipt of appeal. The Pension Committee's ultimate decision shall be submitted to the Member, Spouse, or Beneficiary in writing, setting forth the specific reasons for the decision and specific references to the provisions of the Plan on which the decision is based. 17.11 Facility of Payment ------------------- If the Pension Committee shall find that a Member or other person entitled to a benefit is unable to care for his affairs because of illness or accident or because he is a minor, the Pension Committee may direct that any benefit due him, unless claim shall have been made for the benefit by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides. Any payment so made shall be a complete discharge of the liabilities of the Plan for that benefit. Furthermore, if the Pension Committee receives on behalf of a Member a power of attorney with respect to such Member valid under state law, the Pension Committee shall comply with the instructions of the named attorney to the extent that the Pension Committee would comply with such instructions if given by the Member and such instructions are consistent with the power of attorney. 46 SECTION XVIII ------------- TRUST AGREEMENT --------------- 18.1 As a part of this Plan the Company has entered into a Trust Agreement under which the Trustee shall receive the contribution of the Company under this Plan to the Trust Fund on behalf of the Members and shall hold, invest and distribute such fund in accordance with the terms and provisions of the Plan and the Trust Agreement. 18.2 The Company intends that this shall be a permanent Plan for the exclusive benefit of its Members and expects to contribute to the Trust Fund the amounts which will provide in full the benefits payable under the Plan. The Company may rely upon the estimates made by the Pension Committee of the amount of contributions needed to fund the Plan in accordance with the requirements of Section 412 of the Code. Neither the Company, the Pension Committee, nor the Trustee shall be liable under the Plan if the Trust Fund should be insufficient to provide for the payment of such benefits. Such benefits are to be payable from the Trust Fund only and to the extent that such Trust Fund shall suffice therefore. 47 SECTION XIX ----------- TOP HEAVY PROVISIONS -------------------- 19.1 Definitions ----------- The following words and phrases in this Section XIX shall have the following meanings, unless the context clearly indicates otherwise. (a) Key Employee - Members, retired and former Members, ------------ Spouses, Beneficiaries and Contingent Annuitants who during the current Plan Year or any of the four preceding Plan Years are considered "Key Employees" under Code Section 416(i) and regulations issued thereunder. (b) Participant - A Member or former Member of a plan ----------- included within the aggregation group set forth in Section 19.2. On and after January 1, 1985, the term "Participant" shall not include an individual who has not performed services for the Company within a five- year period ending on a Determination Date. (c) Determination Date - December 31, 1983, and each ------------------ subsequent December 31st thereafter. (d) Top Heavy Year - Any Plan Year in which the Plan is -------------- determined to be Top Heavy under subsection 19.2. (e) Effective Date - January 1, 1984. -------------- 19.2 Top-Heavy Plan Defined ---------------------- (a) Plan Aggregation All defined benefit plans and defined contribution plans maintained by the Company or an Affiliated Employer shall be aggregated (Aggregate Group of Plans) for purposes of this Section 19.2 as if all Employees included in the Aggregate Group were Employees of the Company. The Required Aggregation Group of the Company includes each plan of the Aggregate Group in which a Key Employee participates and each other plan of the Company which enables any plan in which a Key Employee participates to meet the requirements of Section 401(a)(4) or 410 of the Code. The Permissive Aggregation Group shall consist of plans of the Aggregate Group that are in a Required Aggregation Group plus one or more plans that are not part of a Required Aggregation Group, but that satisfy the requirements of Sections 401(a)(4) and 410 of the Code when considered together with a Required Aggregation Group. The Company shall determine on each Determination Date as to whether 48 the Required Aggregation Group or Permissive Aggregation Group is to be applied to Top Heavy determination. (b) Determination of Top Heavy This Plan shall be a Top Heavy Plan with respect to any Plan Year starting on or after the Effective Date of this Section XIX only if on the Determination Date applicable to such Plan Year the sum of: (i) The present value of Accrued Benefits for Key Employees, as determined under the provisions of this Section applicable to Defined Benefit Plans for all such plans included within the Required Aggregation Group or the Permissive Aggregation Group, and (ii) The aggregate of the account balances of Key Employees (as adjusted under the provisions of this Article applicable to Defined Contribution Plans), under all such plans included within the Required Aggregation Group or the permissive Aggregation Group; exceeds 60% of a similar sum determined for all Participants in such Required or Permissive Aggregation Groups. (c) Adjustments to the Present Value of Accrued Benefits for Defined Benefit Plans. For any defined benefit plan included within the Required or Permissive Aggregation Group, the present value of Accrued Benefits of any Participant shall be increased to reflect any distribution from the Plan with respect to such Participant during the five-year period ending on the Determination Date. Solely for purposes of determining if the Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is top heavy (within the meaning of Section 416(g) of the Code) the Accrued Benefit of an Employee other than a Key Employee shall be determined under the method, if any, that uniformly applies for accrual purposes under all Plans maintained by the Employer, or if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section 411(1)(c). (d) Adjustment to the Value of Account Balance for Defined Contribution Plans. For any defined contribution plan included within the Aggregate Group, the total Account Balances shall be increased to reflect the value of any distributions made to a Participant by the Plan during the five-year period 49 ending on the Determination Date and reduced to eliminate the value of any rollover contributions included in such participant's Account Balances made after December 31, 1983, provided such rollover contribution is initiated by the Participant and not made from an Aggregate Group Plan. In addition, Account Balances of participants shall be reduced by the portion of such balances attributable to qualified voluntary employee contributions made pursuant to Section 219 of the Internal Revenue Code. (e) Adjustment for Prior Key Employees. Employee in prior Plan Years who is not a Key Employee with respect to a current Plan Year shall be excluded entirely in computing the percentage in Section 19.2. (f) Present value of Accrued Benefits for Defined Benefit Plans shall be determined, for the purposes of Section 19.2(2)(a), according to the 1984 - UP Mortality Table and a 7-1/2% interest rate. 19.3 Minimum Benefit --------------- For any Top Heavy Plan Year, the following provisions will apply. (a) Notwithstanding the provisions of Section 4.1, for each non-Key Employee covered under this Plan and a defined contribution plan, if the Company maintains a defined contribution plan and, if minimum benefits as defined by Code Section 416(c) and subsequent IRS regulations are provided such that the requirements of Code Section 416(f) are satisfied for such Plan Year, then no minimum benefits will be provided under this Plan for that Plan Year. (b) If the conditions under paragraph (a) above are not met with respect to any Plan Year during which the Plan is a Top Heavy Plan, the Accrued Benefit, derived from Company contributions, of a Member who is not a Key Employee shall not be less than 2% of such Member's Average Compensation multiplied by his Years of Service (not to exceed ten years). (c) For purposes of this Section, the following definitions are applicable: (i) Years of Service shall be the Member's Years of Vesting Service, except that the following Years of Vesting Service shall be disregarded: (A) Any Plan Year during which the Plan was not a Top Heavy Plan; and 50 (B) Any Plan Year beginning before 1984. (ii) Average Compensation shall be the Member's Compensation from the Company during that period of five consecutive Top Heavy Plan Years (or actual Top Heavy Plan Years, if less than five) which produce the highest average. (iii) Accrued Benefit shall be an annual benefit payable in the form of a single life annuity (with no ancillary benefits) and beginning at Normal Retirement Date. 19.4 Vesting ------- An active Member in a Top Heavy Plan shall have a nonforfeitable interest in his Accrued Benefit derived from Company contributions as provided under the following schedule: Years of Nonforfeitable Vesting Service Percentage --------------- -------------- Less than 2 0% 2 20% 3 40% 4 60% 5 or more 100% Accrued Benefit, for the purposes of this subsection, shall include that portion of Accrued Benefits which the Member earned during all prior Plan Years, whether or not the Plan was a Top Heavy Plan during such prior Plan Years. If the Plan ceases to be a Top Heavy Plan, Section 9.2(a) shall again apply, provided that any portion of the Accrued Benefit that was nonforfeitable before the Plan ceased to be a Top Heavy Plan shall remain nonforfeitable and any Member who has five or more Years of Vesting Service, or effective January 1, 1989, three or more years of Vesting Service, may elect to remain subject to the vesting schedule of this section. 19.5 Notwithstanding anything in this Section XIX to the contrary, the following provisions shall apply for Plan Years beginning on or after January 1, 2002, for purposes of determining whether the Plan is Top Heavy and whether it satisfies the minimum benefit requirements of Section 416(c) of the Code. (a) Key employee. Key employee means any employee or former ------------- employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Company having annual compensation greater than $130,000 (as adjusted 51 under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the Company, or a 1-percent owner of the Company having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder. (b) Determination of present values and amounts. This -------------------------------------------- Subsection (b) shall apply for purposes of determining the present values of Employee's accrued benefits as of the determination date. (i) Distributions during year ending on the --------------------------------------- determination date. The present values of an ------------------- Employee's accrued benefit of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period." (ii) Employees not performing services during year --------------------------------------------- ending on the determination date. The accrued --------------------------------- benefit of any individual who has not performed services for the Company during the 1-year period ending on the determination date shall not be taken into account. (c) Minimum benefits. ---------------------------------------- (i) Matching contributions. For purposes of satisfying ----------------------- the minimum benefit requirements of Section 416(c)(1) of the Code and the Plan, in determining years of service with the Company, any service with the Company shall be disregarded to the extent such service occurs during a Plan Year when the Plan 52 benefits (within the meaning of Section 410(b) of the Code) no Key Employee or former Key Employee. 53 SECTION XX ---------- MISCELLANEOUS ------------- 20.1 Effect of Plan Merger --------------------- In the event of a merger or consolidation of the Plan with any other plan or a transfer of assets or liabilities of the Plan to any other plan or a transfer of assets or liabilities of any other plan to the Plan, each Member (if the Plan or the plan to which assets or liabilities have been transferred then terminated) shall be entitled to receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan or the plan from which the transfer to the Plan was made had been terminated. No transfer of assets or liabilities shall be made from the Plan to another plan which does not have a provision similar to this Section 20.1. Notwithstanding the preceding provisions of Section 20.1 or any other provision of this Plan, in the event of any such merger, consolidation or transfer of assets or liabilities which is effected within three years following a "change in control" (as defined in Section 15.4), the accrued benefit of each Member who is in active service of the Company on the date of such merger, consolidation or transfer of assets or liabilities, other than any person who is a "disqualified individual," as such term is defined in Section 280G(c) of the Code, shall be increased in accordance with the provisions of Section 15.2 such that any excess, as of the date of any such transaction, of the fair market value of the assets of the Plan over the present value of accrued benefits hereunder (determined as if the Plan had terminated immediately prior to such transaction) is exhausted. Notwithstanding the provisions of Section 15.1(a) hereof, the foregoing provisions of this paragraph may not be amended, following a "change in control", without the written consent of a majority, in both number and interest, of the Members who are in active service with the Company on the date of such amendment. 20.2 Construction ---------------------------------------- This Plan shall be administered, construed and enforced according to the Act and, to the extent not preempted by the Act, the laws of the State of New York. The foregoing constitutes the Retirement Pension Plan, as amended, restated and adopted by Trans-Lux Corporation for its employees and the employees of its designated subsidiaries, effective January 1, 2001. 54 IN WITNESS WHEREOF, the proper officer of Trans-Lux Corporation has caused this Plan to be executed this ______ day of ___________________, 2001. TRANS-LUX CORPORATION ________________________ ATTEST:__________________ 55 APPENDIX A Option Factors -------------- The following option factors shall be used in determining actuarial equivalency: (a) IRS Interest Rate means the lesser of (i) the annual rate of interest on 30-year Treasury Securities as specified by the Commissioner for the second full calendar month preceding the applicable Stability Period or (ii) the average of the annual interest rates on 30-year Treasury Securities as specified by the Commissioner of Internal Revenue for the six month period ending three full calendar months prior to the Retirement Commencement date, rounded to the nearest 1/4 percent. However, the for the period beginning on January 1, 1996 and ending on December 31, 1996, the interest rate under (I) above, determined as of the 60th day prior to the Retirement Commencement date, shall be used instead if it would produce a greater benefit. IRS Mortality Rate means the mortality table prescribed by the Secretary of the Treasury under Section 417(e)(3)(A)(ii)(I) of the Code as in effect on the first day of the applicable Stability Period. Stability Period means the calendar year in which the Retirement Commencement Date for a distribution occurs. (b) Early Retirement Factors are based on the following table (factors are interpolated to reflect an employee's attained age expressed in years and completed months). AGE EARLY RETIREMENT FACTOR --- ----------------------- 65 1.00 64 .94 63 .88 62 .82 61 .76 60 .70 59 .67 58 .64 57 .61 56 .58 55 .55 (c) Qualified Joint and Survivor Annuity and 50% Joint and Survivor Factor is .85: plus (minus) an additional 1% for each full year in excess of five years up to a 56 maximum of twenty-five years that the contingent annuitant is older (younger) than the annuitant. For each full year in excess of twenty-five years that the Spouse is younger than the annuitant, there is a 2% per year reduction. The maximum 50% Joint and Survivor factor is 90% regardless of the ages of the annuitant and Spouse. The minimum 50% Joint and Survivor factor is dependent on the ages of the annuitant and the Spouse. The ages of the annuitant and the spouse shall be based on attained age expressed in years and completed months. (d) 100% Joint and Survivor Factor is .75: plus (minus) an additional 1% for each full year in excess of five years up to a maximum of twenty-five years that the Spouse is older (younger) than the annuitant. For each full year in excess of 25 years that the Spouse is younger than the annuitant, there is a 2% per year reduction. The maximum 100% Joint and Survivor Factor is 80% regardless of the ages of the annuitant and the Spouse. The minimum 100% Joint and Survivor Factor is completely dependent on the ages of the annuitant and the Spouse. The ages of the annuitant and the Spouse shall be based on attained age expressed in years and completed months. (e) Ten Year Certain Option Faction is 90%. (f) Social Security Leveling option and all other options approved by the Pension Committee (except (a) - (e) above) are based on: Interest - 6 1/2% compounded annually Mortality - UP 1984 Table 57 AMENDMENT NO. 1 TO THE RETIREMENT PENSION PLAN FOR EMPLOYEES OF TRANS-LUX CORPORATION AND CERTAIN OF ITS SUBSIDIARIES AND/OR AFFILIATES As Amended and Restated Effective as of January 1, 2001 WHEREAS, Trans-Lux Corporation ("Company") maintains the Retirement Pension Plan for Employees of Trans-Lux Corporation and Certain of its Subsidiaries and/or Affiliates ("Plan"), as amended and restated effective January 1, 2001; and WHEREAS, in accordance with the power reserved to it in Section 15.1 of the Plan, the Board of Directors of the Company may amend the Plan from time to time, subject to certain conditions not now relevant; and WHEREAS, the Company deems it advisable to amend the Plan to provide an additional optional form of benefit; NOW, THEREFORE, it is RESOLVED, that effective as of April 1, 2002, a new Section 6.1 (e) be, and hereby is, added to the Plan to read in it entirety as follows: "6.1(e) Two-Year Certain Option: A Member may elect a two-year certain form of payment. The first payment shall be equal to one-half the Actual Equivalent lump sum value of the retirement benefit otherwise payable to the Member at his Retirement Commencement Date and shall be equal to one-half the Actual Equivalent lump sum value of the retirement benefit otherwise payable to him at his Retirement Commencement Date increased with interest for the one-year period at the IRS interest Rate determined under Appendix A at his Retirement Commencement Date. For purposes of this Section 6.1 (e), Actuarial Equivalent shall be determined in accordance with Section 11.2(b) and Appendix A." To record the adoption of this amendment to the Plan, Trans-Lux Corporation has authorized its officers to affix its corporate name and seal this ____ day of __________, 2002. (CORPORATE SEAL) TRANS-LUX CORPORATIONS Attest: ______________________ By: _______________________ Exhibit 10.7 CONSULTING AGREEMENT made _____ ___, 2001, effective as of April 1, 2002, by and between TRANS-LUX CORPORATION, a Delaware corporation, transacting business at 110 Richards Avenue, Norwalk, Connecticut (hereinafter referred to as "Company"), and VICTOR LISS, residing at 112 Buckboard Lane, Fairfield, CT 06430 (hereinafter referred to as "Liss"). WHEREAS, the parties have heretofore entered into an employment agreement effective as of January 1, 1997 as amended (the "Employment Agreement") the term of which expires as of close of business on March 31, 2002; and WHEREAS, it is the considered judgment of the Board of Directors of the Company that it is in the best interests and to the advantage of the Company that it secure to itself additional commitments from Liss for the performance of consulting services to the Company to the extent and upon the terms hereinafter provided; NOW, THEREFORE, in consideration of the mutual premises herein contained, the parties agree with each other that the following is their consulting agreement ("Agreement") in its entirety effective April 1, 2002: 1. The Company hereby engages Liss to perform consulting services as an independent contractor to the Company on the terms and conditions hereinafter set forth, and Liss hereby accepts such engagement with the Company for a term ("Term") of two (2) years commencing on April 1, 2002 and ending on March 31, 2004. During the Consulting Term, Liss will render to the Company such consulting services as may be reasonably assigned to him from time to time by the Board of Directors of the Company, Chairman of the Board or Chief Executive Officer of the Company, provided that such services are of a type, dignity and nature appropriate to the Vice Chairman of the Board of Directors and former chief executive officer and President of the Company. Such services shall include, among other things, general consultation with and guidance of senior executive officers and review of SEC filings and financing and banking transactions. Such consulting services shall be required to be rendered by him only in Norwalk, Connecticut or such other location in the United States designated by Liss. Liss' inability to act as such consultant by reason of illness, disability or lack of capacity shall not be deemed a breach of this Agreement, and in Liss' sole opinion the rendition of such services shall not be detrimental or injurious to his health. It is further agreed that such services shall not require more than two hundred sixty-two and one-half (262 1/2) hours in the aggregate during year one and no more than one hundred fifty-seven and 1/2 (157 1/2) hours in the aggregate for year two. The hours are based on the rate of $285.71 per hour. Liss' unavailability at any particular time shall not constitute a breach of this Agreement, Liss may, in his sole opinion, determine that such services may be rendered by telephone, mail or other means of communication, and Liss' failure to render such services because of his absence from Norwalk, Connecticut or such other location in the United States designated by Liss shall not be deemed a breach of this Agreement. Liss shall be the sole and absolute judge of his ability to render such consulting services, and Liss' conclusion that the rendition thereof would be harmful to him shall absolve and excuse Liss from the rendition of such consulting services. Liss shall report to the Company whenever any yearly limit is approached and in the event the maximum limits are being approached, Liss and the Company will meet to discuss such additional required services and whether Liss is available or willing to provide services and the rate paid for such additional services. (c) During the Term the Company may, but is not obligated to nominate Liss as a director and may also recommend to the Board his appointment as a member of the Executive Committee of the Board or such other Committee as may be deemed appropriate. However, in the event that Liss shall not be at all times during the Term hereof a member of its Board of Directors and a member of its Executive Committee, the same shall not constitute a material breach of this Agreement by the Company. 2. (a) For all services rendered by Liss during the Term, Liss shall be paid a fee of (i) $75,000 for the first twelve months and (ii) $45,000 for the second twelve months of the Term. (b) During the Term so long as Liss is a Director the Company agrees to pay Liss Directors' fees and fees as a member of the Committees, if any, of the Board of Directors of the Company in the same amounts as non-employee directors are paid. (c) The Company may make appropriate deductions from the said payments required to be made in this Paragraph 2 to Liss, to comply with all governmental withholding requirements. (d) The payments provided in Paragraph 2(a) shall be made in equal monthly installments on or about the 15th day of each month, or as otherwise may be the practice of the Company in making similar payments, but not less often than once monthly. (e) This Agreement shall not be deemed abrogated or terminated if the Company, in its discretion, shall determine to increase the compensation of Liss for any period of time, or if Liss shall accept such increase. (f) If, during the Term of this Agreement, Liss shall be prevented from performing or be unable to perform, or fail to perform his duties by reason of illness or any other incapacity or disability, the payments provided in Paragraph 2 shall continue to be made or provided to Liss for the balance of the Term, without any reduction whatsoever, at the same times, in the same manner, and in the same amounts as provided in Paragraph 2 in this Agreement. 3. (a) The Company will continue to furnish to Liss (provided Liss is insurable) a present group policy of life insurance in the amount of $50,000 upon Liss' life, the term of which shall continue during the Term payable to the Victor S. Liss Irrevocable Insurance Trust provided such insurance may be maintained on behalf of consultants like Liss. Such policy shall provide that Liss, upon the expiration of said policy, shall have a conversion right privilege, if same is available. Company also agrees to provide Liss during the Term an additional $290,000 in life insurance at the approximate $3,000 annual cost as currently published by the American Institute of Certified Public Accountants Insurance Trust ("Trust"), but in no event more than $6,000 per year payable by Company. "Company Cash Value" shall mean the cash value of the policy at the time of conversion. The life insurance policy #4333167 in amount of $75,000 on Liss life may be converted by Liss, if possible, as of April 1, 2002, provided, however, that (i) the Company Cash Value at time of death or termination of the policy will be retained by the Company so that (x) Liss' beneficiary, in the event of Liss' death, shall receive the difference between the face value of the policy and the Company Cash Value paid to the Company and (y) Liss, on termination of the policy, shall receive any cash value in excess of the Company Cash Value, (ii) Liss shall not be entitled to borrow against the Company Cash Value and (iii) Liss may apply the annual dividends and any additional cash value above Company Cash Value against premium payments due on said policy. (b) The Company shall also provide to Liss and his wife during the Term, at the Company's expense, medical insurance coverage for Liss secondary to Medicare and his wife primary at least at the same levels as in effect for him on the date of the execution of this Agreement. Included in such plans and benefits that the Company will make available or pay to Liss are travel and accident insurance in connection with services rendered hereunder and Christmas or similar bonuses (based on average weekly compensation) to the extent the same are made available or paid to the senior executives of the Company. 4. The Company agrees that during the Term hereof Liss shall from time to time be provided with available secretarial and administrative support, office space and office equipment in connection with his services under this Agreement. The Company shall also reimburse Liss for all reasonable out-of-pocket expenses incurred by him in furtherance of the business and activities of the Company, including travel, board and hotel expenses, it being understood that any individual travel or other event in excess of $5,000 shall require prior approval. On the conclusion of the Employment Agreement on March 31, 2002, the Company shall transfer without charge title to Liss of the Company automobile presently used by Liss in its then condition. 5. A waiver by either party of any of the terms and conditions of this Agreement in any instance shall be in writing and shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach thereof. 6. Any and all notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when deposited in the United States mails, certified or registered, addressed as follows: To Liss: VICTOR LISS 112 Buckboard Lane Fairfield, CT 06430 To Company: Trans-Lux Corporation 110 Richards Avenue Norwalk, Connecticut 06854 Att: CFO With a copy to CEO Either party may, by written notice to the other, change the address to which notices are to be addressed. 7. Both parties recognize that the services to be rendered by Liss pursuant to this Agreement are extraordinary and unique. During the Term of this Agreement, any subsequent retention of Liss as a consultant by Company and so long as Liss is a director of Company, and for a period of two (2) years after the latest termination of all retention as a consultant and/or as a director of the Company, Liss 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 thereafter engaged in by Company or by any of its subsidiaries during the Term of this Agreement and during any subsequent retention as a consultant of Company by Company or service by Liss as a director of Company, and Liss shall not engage in any such business, directly or indirectly on his own account, and, except for investments which do not exceed five percent (5%) of the outstanding shares of stock of a company listed on a national securities exchange. Liss shall not become interested in such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity. Nothing herein shall prevent Liss from serving as a director, including as a member of audit committee, of a company which does not engage in a business directly on indirectly competitive to those now or then engaged in by Company. In consideration of the execution of this consulting agreement by the Company, Liss further agrees in addition to his agreements herein contained, to execute simultaneously herewith, the agreement covering certain aspects of retention, protecting confidentiality and prohibiting unfair competition, in the form annexed hereto as Exhibit A. Company shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages for any breach of this Agreement and/or the agreement in the form of Exhibit A or to enjoin Liss from any breach of this Agreement and/or the agreement in the form of Exhibit A, but nothing herein contained shall be construed to prevent Company from pursuing such other remedies as Company may elect to invoke. If there is a conflict between the terms of this Agreement and Exhibit A the most restrictive provision shall prevail. 8. In the event any provision of paragraph 7 of this Agreement shall be held invalid or unenforceable by reason of the geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to such provision and shall not effect 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 Company may itself, or through any of its subsidiaries or affiliates, make payment to Liss of the compensation due him hereunder, provided, however, that if such payment be made by a company other than the Company, that fact shall not relieve the Company of its obligations hereunder, except with respect to the extent of the amounts so paid. 10. The provisions hereof shall be binding upon and shall inure to the benefit of Liss, his heirs, executors and administrators and the Company and its successors. During the Term of this Agreement, if the Company shall at any time be consolidated or merged into any other corporation, or if substantially all of the assets of the Company are transferred to any other corporation, the provisions of this Agreement shall be binding upon and inure to the benefit of the corporation resulting in such merger, or to which such assets shall have been transferred, and this provision shall apply in the event of any subsequent merger, consolidation or transfer. 11. (a) This Agreement contains all the understandings and agreements arrived at between the parties in relation to the subject matter and supersedes as of April 1, 2002 the Employment Agreement between the parties except all rights and benefits which accrued or accrue to Liss on or prior to March 31, 2002 under said Employment Agreement shall not be abrogated by this Agreement and shall remain in full force and effect. In addition, Company agrees that in the event at any time doing the Term or subsequent to termination of this Agreement the outstanding litigation with Seitzinger is favorably resolved or exposure reduced, then the amount of the favorable benefit to the Company will be added back without duplication to each previously impacted fiscal year to recalculate the Bonuses and Profit Participation payable to Liss for such fiscal year as if determined during that fiscal year through March 31, 2002 and the amount paid within three (3) months of final resolution of such litigation. (b) Liss shall receive a bonus in the amount of twenty-five percent (25%) of the Bonus calculated under paragraph 4(d) of the Employment Agreement for the calendar year 2002. Any payment under this subparagraph 11(b) shall be made no later than April 15, 2003. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 12. This Agreement shall not be varied, altered, modified, changed or in any way amended, except by an instrument in writing, executed by the parties hereto, or their legal representatives. IN WITNESS WHEREOF, Liss has executed and the Company has caused its Chief Financial Officer, on its behalf, to execute this Agreement, on the day and year first above written. TRANS-LUX CORPORATION By:______________________________ Chief Financial Officer _______________________________ VICTOR LISS Exhibit 10.8 AGREEMENT made February ___, 2002 effective as of the 1st day of April 2002 by and between TRANS-LUX CORPORATION, a Delaware corporation having an office at 110 Richards Avenue, Norwalk, CT 06856-5090 (hereinafter called "Employer"), and MICHAEL R. MULCAHY residing at 24 Beeholm Road, Redding, CT 06896 (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 April 1, 2002 and terminating March 31, 2005. (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 President and Co-Chief Executive Officer of Employer during the first twelve (12) months of the Term of this Agreement and thereafter to President or both of such positions. 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, or the Chief Executive Officer (if Employee is not the Chief or Co-Chief Executive Officer), 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 vacations, 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. Subject to execution of this Agreement, Employee has been nominated as a director of Employer for election at Employer's 2002 Annual Meeting of Stockholders, but Employer cannot guaranty that Employee will be so elected by the stockholders, and the failure of Employee to be so elected as director of Employer shall not constitute breach of this Agreement. Employer agrees that during the Term of this Agreement Employee's principal office of employment shall be within a seventy-five (75) mile radius of Norwalk, Connecticut. During the Term of this Agreement and during any subsequent employment of Employee by Employer, Employee shall use his best efforts, skills and abilities in the performance of his services hereunder and to promote the interests of Employer, its affiliates, divisions and subsidiaries. Employee shall not, during the Term and during any subsequent employment of Employee by Employer, be engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage. The foregoing shall not be construed as preventing Employee from investing his assets in such form or manner as will not require any services on the part of Employee in the operation of the affairs of the companies in which such investments are made, provided, however, that Employee shall not, either directly or indirectly, be a director of or make any investments in any company or companies which are engaged in businesses competitive with those conducted by Employer or by any of its subsidiaries or affiliates except where such investments are in stock of a company listed on a national securities exchange, and such stock of Employee does not exceed one percent (1%) of the outstanding shares of stock of such listed company. Employee shall not at any time during or after the Term of this Agreement use (except on behalf of Employer), divulge, furnish or make accessible to any third person or organization any confidential information concerning Employer or any of its subsidiaries or affiliates or the businesses of any of the foregoing including, without limitation, confidential methods of operations and organization, confidential sources of supply, identity of employees, customer lists and confidential financial information. 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 during the term of their employment, by any of them. 4. (a) For all services rendered by Employee during the Term of this Agreement, Employer shall pay Employee a salary at the rate of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) per annum during the period April 1, 2002 to March 31, 2003, at the rate of TWO HUNDRED SIXTY THOUSAND DOLLARS ($260,000) per annum during the period April 1, 2003 to March 31, 2004, and at the rate of TWO HUNDRED SEVENTY THOUSAND DOLLARS ($270,000) per annum during the period April 1, 2004 to March 31, 2005. 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. In addition to the group insurance set forth herein, Employer also agrees to continue to provide Employee with term life insurance in the amount of $75,000 at the non-smoking rate during the term of this Agreement, provided Employee is insurable at standard rates, with Employee paying any excess premium over the non-smoking rate. The Employer shall transfer such policy to Employee on his retirement or termination of this Agreement by either party without cause. All payments under this Agreement are in United States dollars unless otherwise specified. In the event Employee is non-insurable, then Employer shall pay to Employee from such determination during the remainder of the Term annually the amount the premium for the above mentioned $75,000 policy would have been at the standard rates. Upon termination of this Agreement as a result of expiration of the Term (without any new agreement), or termination by either party of any at-will employment basis or either the Employee's retirement or discharge without cause, Employer agrees to pay for (i) continuation of coverage of Employee's present $75,000 life insurance for one (1) year and, (ii) unless Medicare or equivalent is in effect, medical insurance coverage, for Employee and his present spouse for the period of time coverage is available under COBRA, not to exceed eighteen (18) months and, thereafter for additional months so that the maximum time period for medical coverage is three (3) years, provided, however, any such coverage shall cease at Employee's 65th birthday (or in the case of his spouse, what would have been Employee's 65th birthday if he dies during such time period). (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 four (4) consecutive months (excluding normal vacation time) during the Term hereof, Employer agrees to pay Employee thereafter for the duration of such incapacity (i) during the Term, or (ii) 24 months, whichever is greater, 45% of the base salary which Employee would otherwise have been entitled to receive if not for the illness or other incapacity; provided, however, if such incapacity ceases while such payments are being made, then any such payments shall cease. Notwithstanding the foregoing, to the extent such 24 month period continues after the end of the Term and Employee is entitled to payments under Section 7, then the payment under this Section 4(c) shall terminate and Section 7 shall apply. If payments under Section 7 cease because of Employee's death prior to the end of the 24 month period under this Section 4(c), then the balance of the payments hereunder will be made, for example, if Employee has received 6 months of disability payments before the Term expires and dies after receiving 12 months of payments under Section 7, then Employee's widow or surviving issue will receive the remaining 6 months of payments under this Section 4(c). If Employee dies during such 24 month period prior to the end of the Term, then Section 4(e) shall apply and the payments under this Section 4(c) shall terminate. (d) The Board upon the recommendation of the Compensation Committee of the Board shall consider no later than May 31, 2003, 2004, 2005 and 2006 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 Employer's performance for Employer's immediately preceding fiscal year. Notwithstanding the foregoing, Employer shall pay Employee the Bonus rate applicable for each level of annual pre-tax consolidated earnings for any of the fiscal years ending December 31, 2002 (including the period January 1-March 31, 2002 as provided hereafter in Section 13), 2003, 2004 and 2005 only, (provided however that the Bonus, if any, for 2005 shall be 25% of the amount set forth below for such year), in the respective amounts hereinafter set forth in the event Employer's pre-tax consolidated earnings for such year determined in accordance with Section 4(d) meet or exceed the respective amounts hereinafter set forth, not to exceed $150,000 for any year ($37,500 for January 1-March 31, 2005).
Amount of Annual Pre-Tax Bonus Percent Highest Amount Consolidated Earnings on Amount Per Level - -------------------------- ------------- -------------- Up to - $ 1,000,000 2 1/2% $25,000 $1,000,000 - 2,000,000 3 1/4% 32,500 $2,000,000 - 4,312,500 4% 92,500 -------- $150,000 (highest aggregate Bonus)
No Bonus shall be payable for annual pre-tax consolidated earnings less than $250,000 or in excess of $4,312,500. 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, (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, or (z) any contractual Bonuses and or contractual profit participations accrued or paid to Employee and other employees. 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 2002, 2003 and 2004 fiscal year, or on March 31, 2005 no Bonus shall be paid for such fiscal year or part thereof as to 2005. In the event of Employee's death on or after January 1 of 2003, 2004 or 2005, or April 1, 2005 as to 2005, any Bonus to which he is otherwise entitled for the prior fiscal year or 2005, as the case may be, 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 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 2002, 2003, 2004 and 2005. Employer undertakes to use reasonable efforts to cause said accountants to prepare and furnish such statements within one hundred thirty (130) days from the close of each such fiscal year and to cause said independent certified public accountants, concomitantly with delivery of such statement by accountants to it, to deliver a copy of such statement to Employee. The Employer shall not have any liability to Employee arising out of any delays with respect to the foregoing. In lieu of and not in duplication of the Bonus payable to Employee under this Section 4(d) Employee shall be entitled to receive a sales override commission ("Sales Override Commission") under Employer's Sales Override Commission Plan (as currently in place and compensated monthly) based on all sales and rentals of Employee's world wide sales staff. The Sales Override Commission shall not exceed $30,000 during the twelve-month period ending March 31, 2003, $20,000 during the twelve-month period ending March 31, 2004, and $10,000 during the twelve-month period ending March 31, 2005, respectively. To the extent Employee is entitled to a Bonus for any calendar year under this Section 4(d), any Sales Override Commission amounts paid under this Section 4(d) during such applicable calendar year shall be deducted from the Bonus otherwise payable to Employee so that Employee is entitled to the higher of the Sales Commission Override paid or Bonus payable in applicable calendar year, but not both. Sales Override Commission earned for the three months ended March 31, 2002 shall not apply to this credit arrangement. (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 twenty-four (24) months, annual death benefits payable weekly or in accordance with Employer's payroll practices in an amount equal to 45% of Employee's then annual base salary rate. (f) So long as Employer's Common Stock is publicly traded, Employee, in lieu of receiving cash payment of any Bonus, may elect to receive all or part of any such Bonus by delivery of the Employer's Common Stock, par value $1.00 per share ("Common Stock") valued at the closing market price on date of election, or if not traded on such date, the last reported closing market price. Such election must (i) be made within ten (10) days after notice of the amount of such Bonus and (ii) require a minimum of one hundred (100) shares. No fractional shares will be issued. Employee acknowledges that any such shares must be purchased for investment and not with a view to distribution and cannot be resold without an exemption from registration under the Securities Act of 1933, as amended, such as Rule 144 which requires, among other things, a one (1) year holding period. Prior to commencement of any fiscal year period under Section 4(d), Employee may also elect to defer payment of any such Bonus for up to ten (10) years by giving written notice to Employer of Employee's request for said deferral. Any such deferred Bonus shall not accrue interest whatsoever. (g) So long as Employer's Common Stock is publicly traded, on April 1, 2002 Employer shall grant Employee pursuant to Employer's 1995 Stock Option Plan ("Option Plan"), the option ("Option") to purchase 5,000 shares of Common Stock at a price per share equal to the fair market value of Common Stock of Employer on the date thereof in accordance with paragraph 5 of the Option Plan and upon the other terms and conditions set forth in the form of the option agreement annexed hereto as Exhibit A. Such option agreement shall be executed by Employee as of such date. (h) Employer agrees to continue to provide Employee with split dollar life insurance in the initial face amount of $500,000 with paid-up additions from dividends for up to the first 20 years of the policy in accordance with Male Smoker Age 50 Presentation annexed hereto as Exhibit B. In the event and at such time as Employee stops smoking in accordance with the insurance company's regulations, any premium reductions resulting therefrom shall be utilized to purchase additional life insurance for Employee under separate policies in accordance with the available offerings. (i) In addition, Employer agrees to pay to Employee and his beneficiaries ("Beneficiaries") as additional supplemental retirement benefits ("ASRB"), an amount so that the aggregate retirement benefits payable to Employee and Beneficiaries under the Trans-Lux Corporation Pension Plan ("Plan") plus such ASRB will equal the amount which would have been payable to Employee and Beneficiaries under the Plan but for (i) the limitations on the maximum annual benefits imposed by Section 415 of the Internal Revenue Code of 1986 ("IRC"), (ii) the limitations on the amount of annual compensation which may be taken into account under Section 401(a)(17) of the IRC, and (iii) any further limitations in benefits under the plan resulting from statutory changes or from modifications in the Plan required by statutory changes after December 31, 2001. It is understood that the purpose of this paragraph is that (a) Employee and Beneficiaries shall receive as a result of the ASRB payment the full benefit which would otherwise have been payable from the Plan had no Plan or statutory restrictions been imposed by law and (b) that any additional taxes payable by Employee on any ASRB payment as a result of such Plan or statutory restrictions shall be paid to Employee by Employer grossed up in such manner as to offset the effect of Employee's state and federal income taxes on such payments. The ASRB payable pursuant to this paragraph shall be paid to the same parties and at the same time that the payments under the Plan are paid, provided, however, that Employee may defer receipt of any ASRB payments attributable to services rendered in any year, for up to ten (10) 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. Any such deferred ASRB payment shall not accrue interest whatsoever. The obligations of Employer payable pursuant to this subparagraph (i) are intended to be unfunded for income tax purposes and shall not constitute a trust fund, escrow amount, amount set apart, or other account credited with funds for the benefit of Employee or his Beneficiaries. 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 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, Employee shall not directly or indirectly (i) engage or otherwise be involved in the recruitment or employment of the Employer's employees or any individual who was such an employee within one (1) year of any such termination of employment, (ii) solicit or assist in obtaining business from a customer of the Employer who was a customer during the two (2) year period prior to termination of employment, with respect to products or services competitive with products or services of Employer, or (iii) communicate, publish, or otherwise transmit, in any manner whatsoever, untrue or negative information or comments regarding Employer. 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 the event Employee leaves the employ of Employer (or successor to Employer which assumes this Agreement) at the end of the Term or the end of the term of any "proposed renewal contract" as hereinafter set forth in this Section, then, except as hereinafter provided, Employer shall pay to Employee weekly or bi-weekly in accordance with Employer's payroll practices as severance pay, an amount equal to one hundred percent (100%) of Employee's base salary under Section 4(a) in effect at time of termination of employment (e.g., at rate of $270,000 per annum if termination is April 1, 2005) for a period of two (2) years or until Employee's death, whichever first occurs. The foregoing severance payments shall not apply if (i) Employee is discharged for cause or (ii) Employee rejects a "proposed renewal contract" having a term of at least two (2) years and otherwise having at least the same terms and conditions as in effect on March 31, 2005, or at the end of the term of any subsequent renewal contract, provided no such renewal contract will continue past Employee's 65th birthday and will automatically terminate on such date unless the parties otherwise mutually agree in writing. Furthermore, if Employee violates the confidentiality clause in Section 3 or violates or challenges the enforceability of any of the clauses of this Section 7, Employer may, in addition to all other remedies to which it is entitled, cease the payments under this Section 7. The severance pay hereunder is not payable in the event Employee dies during the Term or for any time period following his death during the above severance pay period. In the event Employee is disabled at the end of the Term and receiving payments under Section 4(c), then the payment under this Section 7 shall be at the rate of forty-five percent (45%), and not one hundred percent (100%), of Employee's base salary under Section 4(a) in effect at time of termination of employment and shall be in lieu of any payments under Section 4(c) which payments shall terminate so that there is no duplication of payment; provided, however, if such disability ceases prior to the end of the two (2) year time period, the payment rate shall be one hundred percent (100%) so long as any disability does not recur. During the period in which Employer makes payment to Employee under this Section 7, Employee agrees to be available for reasonable telephonic consultation as to matters Employee worked on during the Term. 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. (a) Employee shall have the right to cancel and terminate this Agreement on 75 days prior written notice from the date of occurrence if there has been a "Change in Control of Employer", as hereinafter defined. Upon such termination becoming effective pursuant to such notice by Employee, (a) Employer and Employee shall be released from all further liability and obligations provided for in the Agreement, except that Employee shall still be subject to and bound by his obligations under Section 7 as modified herein; (b) Employer shall pay to Employee his Bonus for the prior calendar year (if not previously paid) as and to the extent provided for in Section 4 (d); and (c) Employee shall be paid in a lump sum on the effective date of termination the amount of $1,200,000. If Employee is incapacitated at the time of his notice under this Section 9(a), the above payments shall be in lieu of the payments provided under Section 4(c) which payments shall cease and terminate at the end of the 75 day notice period. In the event of Employee's death during the 75 day notice period, any amounts still payable to Employee by reason of such termination shall be paid to his widow if she shall survive him, or if she shall predecease him, to his surviving issue, per stirpes and not per capita. The notice under this Section 9 must be given within 60 days of the occurrence of the applicable event or be deemed waived. To the extent any such payments made pursuant to this Section 9(a) above are deemed to be an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and are subject to tax pursuant to Section 4999 of the Code, such payments shall be grossed up in such a manner as to offset the effect of such excise tax on such payments. For purpose of this Section 9(a), the phrase "Change in Control of Employer" shall be deemed to have occurred if (x) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) hereafter becomes the beneficial owner, directly or indirectly, of securities of Employer, representing 25% or more of the combined voting power of the Employer's then outstanding securities (other than Richard Brandt and/or members of his family, directly or indirectly through trusts or otherwise), and (y) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Employer cease by reason of a contested election to constitute at least a majority thereof, unless Richard Brandt (or, in the event of his death, a majority of David Brandt, Matthew Brandt and Thomas Brandt) shall have approved such change in the majority. For further purposes of this Section 9(a) or in the event Employer rejects this Agreement in a proceeding for relief under Chapter 11 of the Bankruptcy Code, then, in either such case, the restriction in Section 7(ii) shall only apply to a customer of Employer who was a customer during the six (6) month period prior to termination of employment with respect to replacing Employer's leased products with competitor's purchased or leased products or Employer's service contracts with replacement service contracts for Employer's equipment, as long as such service or lease agreement is in effect (including continuation of use or other extension beyond the termination date thereof). The restrictions in Section 7(i) and (iii) shall continue without modification, but the obligation to provide telephonic consulting shall terminate. (b) Notwithstanding the provisions of Section 9(a) above, if as a result of one or more sales of securities of Employer after the date hereof one or more persons acting as a group acquire a majority voting power in the election of directors of Employer and there is a proposed change in individuals who will then constitute a majority of the Board of Directors in the immediate following election of directors of Employer in a non-contested election, and Employee does not desire to remain employed by Employer if such change occurs, and gives Employer notice thereof within 15 days after advice of such proposed transaction of such election, the Board of Directors of Employer prior to such election may, but is not obligated to, consider (i) mutual cancellation of this Agreement and (ii) such payment, if any, to Employee as determined by such Board of Directors in its sole discretion, which Employee acknowledges may not be exercised by such Board of Directors or, if exercised, may only be for a nominal amount. This Agreement shall continue in full force and effect unless and until there is mutual agreement by Employer and Employee as provided in the last sentence of Section 13 hereof as to any action under this Section 9(b). 10. The waiver by Employer of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. 11. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and 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 Chief Financial Officer, 110 Richards Avenue, Norwalk, Connecticut 06856-5090, in the case of Employer, or such other address as designated in writing by the parties. 12. This Agreement shall be construed in accordance with the laws of the State of New York. 13. This instrument contains the entire agreement between the parties and supersedes as of April 1, 2002 the Agreement between Employer and Employee dated as of June 1, 1998 as amended except any amounts which accrued as of such date and are unpaid but excluding any Bonus for the period January 1-March 31, 2002 which is covered by Section 4(d) hereof. 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:______________________________ Vice Chairman of the Board ______________________________ Michael R. Mulcahy Exhibit 10.9 AGREEMENT made March 14, 2002 effective as of the 1st day of April 2002 by and between TRANS-LUX CORPORATION, a Delaware corporation having an office at 110 Richards Avenue Norwalk, CT 06856-5090 (hereinafter called "Employer"), and THOMAS BRANDT having a mailing address at 25-13 Old Kings Highway North #122, Darien, CT 06820 (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 April 1, 2002 and terminating March 31, 2005. (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 Executive Vice President during the Term and Co-Chief Executive Officer of Employer during the first twelve (12) months of the Term of this Agreement and thereafter to either one or both of such positions. 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, and the Vice-Chairman of the Board, and all of the services to be rendered hereunder by Employee shall at all times be subject to the control, direction and supervision of the 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 vacations, 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 Employer also agrees to use reasonable efforts to have Employee nominated as a director of Employer for re-election at Employer's 2003 Annual Meeting of Stockholders, but Employer cannot guaranty that Employee will be so elected by the stockholders, and the failure of Employee to be so re-elected as director of Employer shall not constitute breach of this Agreement. Employer agrees that during the Term of this Agreement Employee's principal office of employment shall be within a seventy-five (75) mile radius of Norwalk, Connecticut. Nothing herein shall prohibit Employee from residing within a seventy-five (75) mile radius of another significant office of Employer or its significant subsidiaries. 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, except Employee may engage in non-competitive business activities that do not interfere with his duties or availability hereunder and are of a part-time nature. The foregoing shall not be construed as preventing Employee from investing his assets in such form or manner as will not require any services on the part of Employee in the operation of the affairs of the companies in which such investments are made, provided, however, that Employee shall not, either directly or indirectly, be a director of or make any investments in any company or companies which are engaged in businesses competitive with those conducted by Employer or by any of its subsidiaries or affiliates except where such investments are in stock of a company listed on a national securities exchange, and such stock of Employee does not exceed one percent (1%) of the outstanding shares of stock of such listed company. Employee shall not at any time during or after the Term of this Agreement use (except on behalf of Employer), divulge, furnish or make accessible to any third person or organization any confidential information concerning Employer or any of its subsidiaries or affiliates or the businesses of any of the foregoing including, without limitation, confidential methods of operations and organization, confidential sources of supply, identity of employees, customer lists and confidential financial information. 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. 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 SIXTY FIVE THOUSAND DOLLARS ($165,000) per annum during the period April 1, 2002 to March 31, 2003, at the rate of ONE HUNDRED SEVENTY- FIVE THOUSAND DOLLARS ($175,000) per annum during the period April 1, 2003 to March 31, 2004, and at the rate of ONE HUNDRED NINETY THOUSAND DOLLARS ($190,000) per annum during the period April 1, 2004 to March 31, 2005. 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. In addition to the group insurance set forth herein, Employer also agrees to consider providing Employee with additional life insurance if Employee begets or adopts children. The Employer shall transfer any transferable policy to Employee on his retirement or termination of this Agreement by either party without cause. 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 four (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 24 months, whichever is greater, 40% of the base salary which Employee would otherwise have been entitled to receive if not for the illness or other incapacity; provided, however, if such incapacity ceases following the end of the Term, then any such payments shall cease. Notwithstanding the foregoing, to the extent such 24 month period continues after the end of the Term and Employee is entitled to payments under Section 7, then the payment under this Section 4(c) shall terminate and Section 7 shall apply. If payments under Section 7 cease because of Employee's death prior to the end of the 24 month period under this Section 4(c), then the balance of the payments hereunder will be made, e.g., if, Employee has received 6 months of disability payments before the Term expires and dies after receiving 12 months of payments under Section 7, then Employee's beneficiary designated in writing by Employee from time to time or in the event such beneficiary pre-deceases Employee or if there is no beneficiary designated, Employee's estate (whichever is applicable shall be deemed the "Beneficiary") will receive the remaining 6 months of payments under this Section 4(c). If Employee dies during such 24 month period prior to the end of the Term, then Section 4(e) shall apply and the payments under this Section 4(c) shall terminate. (d) The Board upon the recommendation of the Compensation Committee of the Board shall consider no later than May 31, 2003, 2004, 2005 and 2006 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 Employer's performance for Employer's immediately preceding fiscal year. Notwithstanding the foregoing, based on Employer's annual pre-tax consolidated earnings for the applicable fiscal year Employer shall pay Employee a Bonus at the rate of one percent (1%) for the fiscal year ending December 31, 2002, one and one-quarter percent (1 1/4%) for the fiscal year ending December 31, 2003, and one and one-half percent (1 1/2%) for the fiscal years ending December 31, 2004 and December 31, 2005 (provided however that the Bonus, if any, for 2005 shall be 25% of the amount for such year). No Bonus shall be payable for any fiscal year in which annual pre-tax consolidated earnings determined in accordance with Section 4(d) are less than $250,000. There shall be excluded from the calculation of annual 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, (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, or (z) any contractual Bonuses and or contractual profit participations accrued or paid to Employee and other employees. 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 2002, 2003 and 2004 fiscal year, or on March 31, 2005 no Bonus shall be paid for such fiscal year or part thereof as to 2005. In the event of Employee's death on or after January 1 of 2003, 2004 or 2005, or April 1, 2005 as to 2005, any Bonus to which he is otherwise entitled for the prior fiscal year or 2005, as the case may be, shall be paid to his Beneficiary. Such annual 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 annual 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 2002, 2003, 2004 and 2005. Employer undertakes to use reasonable efforts to cause said accountants to prepare and furnish such statements within one hundred thirty (130) days from the close of each such fiscal year and to cause said independent certified public accountants, concomitantly with delivery of such statement by accountants to it, to deliver a copy of such statement to Employee. The Employer shall not have any liability to Employee arising out of any delays with respect to the foregoing. (e) In the event Employee dies during the Term of this Agreement while the Employee is still in the Employ of Employer, Employer shall pay to Employee's Beneficiary for twenty-four (24) months, annual death benefits payable weekly or in accordance with Employer's payroll practices in an amount equal to 40% of Employee's then annual base salary rate. (f) So long as Employer's Common Stock is publicly traded, Employee, in lieu of receiving cash payment of any Bonus, may elect to receive all or part of any such Bonus by delivery of the Employer's Common Stock, par value $1.00 per share ("Common Stock") valued at the closing market price on date of election, or if not traded on such date, the last reported closing market price. Such election must (i) be made within ten (10) days after notice of the amount of such Bonus and (ii) require a minimum of one hundred (100) shares. No fractional shares will be issued. Employee acknowledges that any such shares must be purchased for investment and not with a view to distribution and cannot be resold without an exemption from registration under the Securities Act of 1933, as amended, such as Rule 144 which requires, among other things, a one (1) year holding period. Prior to commencement of any fiscal year period under Section 4(d), Employee may also elect to defer payment of any such Bonus for up to ten (10) years by giving written notice to Employer of Employee's request for said deferral. Any such deferred Bonus shall not accrue interest whatsoever. (g) So long as Employer's Common Stock is publicly traded, on April 1, 2002, Employer shall grant Employee pursuant to Employer's 1995 Stock Option Plan ("Plan"), the option ("Option") to purchase 10,000 shares of Common Stock at a price per share equal to the fair market value of Common Stock of Employer on the date thereof in accordance with paragraph 5 of the Plan and upon the other terms and conditions set forth in the form of the option agreement annexed hereto as Exhibit A. Such option agreement shall be executed by Employee as of such date. 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 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, Employee shall not directly or indirectly (i) engage or otherwise be involved in the recruitment or employment of the Employer's employees or any individual who was such an employee within one (1) year prior to any such termination of employment, (ii) solicit or assist in obtaining business from a customer of the Employer who was a customer during the two (2) year period prior to termination of employment, with respect to products or services competitive with products or services of Employer, or (iii) communicate, publish, or otherwise transmit, in any manner whatsoever, untrue or negative information or comments regarding Employer. Notwithstanding the foregoing, Employee may engage in the theatre, movie and real estate business subject to (i), (ii) with regard to the display business only, and (iii) above. The restriction in (ii) above shall not apply if following the end of the Term (x) Employee's employment is terminated without cause by Employer or (y) Employee resigns because Employee is not offered a replacement contract for a term of at least two (2) years and otherwise having at least the same terms and conditions as in effect on March 31, 2005, or at the end of any subsequent renewal contract, provided no such renewal contract will continue past Employee's 65th birthday and will automatically terminate on such date unless the parties otherwise mutually agree in writing, unless in either case of (x) or (y) above Employer pays to Employee weekly or bi-weekly in accordance with Employer's payroll practices as severance pay, an amount equal to Employee's base salary in effect at the time of termination of employment (e.g., at a rate of $190,000 per annum if termination is April 1, 2005) for a period of one (1) year, subject to credit to Employer for any new compensation received by Employee during such one (1) year period, such credit not to exceed any weekly or bi-weekly payment hereunder. Employee shall certify to Employer at least bi-weekly the amount of any such compensation with reasonable back-up, i.e., copy of pay slip. If Employee dies during the one (1) year severance period, the balance of the severance payments shall be payable to Employee's Beneficiary; provided, however, if Employee was receiving payments under Section 4(c) because of disability which disability payments terminated because of the notice given under this Section 7, then the payments hereunder shall cease and the balance of the disability payments under Section 4(c) shall be made as provided therein. 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. 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. Employee shall have the right to cancel and terminate this Agreement on 75 days prior written notice from the date of occurrence if there has been a "Change in Control of Employer", as hereinafter defined. Upon such termination becoming effective pursuant to such notice by Employee, (a) Employer and Employee shall be released from all further liability and obligations provided for in the Agreement, except that Employee shall still be subject to and bound by his obligations under Section 7 as modified herein; (b) Employer shall pay to Employee his Bonus for the prior calendar year (if not previously paid) as and to the extent provided for in Section 4 (d); and (c) Employee shall be paid in a lump sum on the effective date of termination the amount of $600,000. If Employee is incapacitated at the time of his notice under this Section 9, the above payments shall be in lieu of the payments provided under Section 4(c) which payments shall cease and terminate at the end of the 75 day notice period. In the event of Employee's death during the 75 day notice period, if notice of termination has been given, any amounts still payable to Employee by reason of such termination or otherwise payable under this Agreement shall be paid to his Beneficiary in lieu of the death benefit payments under Section 4(e). The notice under this Section 9 must be given within 60 days of the occurrence of the applicable event or be deemed waived. To the extent any such payments made pursuant to Section 9 above are deemed to be an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and are subject to tax pursuant to Section 4999 of the Code, such payments shall be grossed up in such a manner as to offset the effect of such excise tax on such payments. For purpose of this Section 9, the phrase "Change in Control of Employer" shall be deemed to have occurred if (x) any person (as such term is used in Sections 13 (d) and 14 (d) (2) of the Securities Exchange Act of 1934) hereafter becomes the beneficial owner, directly or indirectly, of securities of Employer, representing 25% or more of the combined voting power of the Employer's then outstanding securities (other than members of Richard Brandt's family, including Employee, directly or indirectly through trusts or otherwise), and (y) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Employer cease by reason of a contested election to constitute at least a majority thereof, unless Richard Brandt (or, in the event of his death or incapacity, i.e., inability to manage his own affairs, a majority of David Brandt, Matthew Brandt and Employee) shall have approved such change in the majority. For further purposes of this Section 9 only, he restriction in Section 7(ii) shall only apply to a customer of Employer who was a customer during the six (6) month period prior to termination of employment (with respect to replacing Employer's leased products with competitor's purchased or leased products or Employer's service contracts with replacement service contracts for Employer's equipment, as long as such service or lease agreement is in effect (including continuation of use or other extension beyond the termination date thereof). The restrictions in Section 7(i) and (iii) shall continue without modification. 10. The waiver by Employer of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. 11. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and 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, President or Chief Financial Officer 110 Richards Avenue, Norwalk, Connecticut 06856-5090, in the case of Employer, or such other address as designated in writing by the parties. 12. This Agreement shall be construed in accordance with the laws of the State of New York. 13. This instrument contains the entire agreement between the parties and supersedes all prior written or oral discussions or agreements on the subject matter hereof. 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: ___________________________________ Vice Chairman of the Board ___________________________________ Thomas Brandt Exhibit 10.10 AGREEMENT made March 14, 2002 effective as of the 1st day of April 2002 by and between TRANS-LUX CORPORATION, a Delaware corporation having an office at 110 Richards Avenue, Norwalk, CT 06856-5090 (hereinafter called "Employer"), and MATTHEW BRANDT residing at 2222 North Beachwood Drive, Apartment 413, Los Angeles, CA 90068 (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 April 1, 2002 and terminating March 31, 2005. (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 Executive Vice President of Employer and Vice Chairman of the Executive Committee of the Board 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, and the Vice-Chairman of the Board, and all of the services to be rendered hereunder by Employee shall at all times be subject to the control, direction and supervision of the 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 vacations, 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; and $5,000.00 per annum if elected Vice Chairman of the Executive Committee or such other amount as determined by the Compensation Committee and Board of Directors in fixing fees for Committee Chairpersons. Employee has been nominated as a director of Employer for re- election at Employer's 2002 Annual Meeting of Stockholders, but Employer cannot guaranty that Employee will be so elected by the stockholders, and the failure of Employee to be so re- elected as director of Employer shall not constitute breach of this Agreement. Employer agrees that during the Term of this Agreement Employee's principal office of employment shall be within a seventy-five (75) mile radius of Los Angeles, San Diego or Santa Barbara, California, Santa Fe, New Mexico or Norwalk, Connecticut. 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 except Employee may engage in non-competitive business activities which do not interfere with his duties or availability hereunder and are of a part-time nature. The foregoing shall not be construed as preventing Employee from investing his assets in such form or manner as will not require any services on the part of Employee in the operation of the affairs of the companies in which such investments are made, provided, however, that Employee shall not, either directly or indirectly, be a director of or make any investments in any company or companies which are engaged in businesses competitive with those conducted by Employer or by any of its subsidiaries or affiliates except where such investments are in stock of a company listed on a national securities exchange, and such stock of Employee does not exceed one percent (1%) of the outstanding shares of stock of such listed company. Employee shall not at any time during or after the Term of this Agreement use (except on behalf of Employer), divulge, furnish or make accessible to any third person or organization any confidential information concerning Employer or any of its subsidiaries or affiliates or the businesses of any of the foregoing including, without limitation, confidential methods of operations and organization, confidential sources of supply, identity of employees, customer lists and confidential financial information. 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. 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 SIXTY THOUSAND DOLLARS ($160,000) per annum during the period April 1, 2002 to March 31, 2003, at the rate of ONE HUNDRED SEVENTY THOUSAND DOLLARS ($170,000) per annum during the period April 1, 2003 to March 31, 2004, and at the rate of ONE HUNDRED EIGHTY-FIVE THOUSAND DOLLARS ($185,000) per annum during the period April 1, 2004 to March 31, 2005. 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. In addition to the group insurance set forth herein, Employer also agrees consider providing Employee with additional life insurance if Employee begets or adopts children. The Employer shall transfer any transferable policy to Employee on his retirement or termination of this Agreement by either party without cause. 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 four (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 24 months, whichever is greater, 40% of the base salary which Employee would otherwise have been entitled to receive if not for the illness or other incapacity; provided, however, if such incapacity ceases following the end of the Term, then any such payments shall cease. Notwithstanding the foregoing, to the extent such 24 month period continues after the end of the Term and Employee is entitled to payments under Section 7, then the payment under this Section 4(c) shall terminate and Section 7 shall apply. If payments under Section 7 cease because of Employee's death prior to the end of the 24 month period under this Section 4(c), then the balance of the payments hereunder will be made, e.g., if Employee has received 6 months of disability payments before the Term expires and dies after receiving 12 months of payments under Section 7, then Employee's beneficiary designated in writing by Employee from time to time or in the event such beneficiary pre-deceases Employee, or if there is no beneficiary designated, Employee's estate (whichever is applicable shall be deemed the "Beneficiary") will receive the remaining 6 months of payments under this Section 4(c). If Employee dies during such 24 month period prior to the end of the Term, then Section 4(e) shall apply and the payments under this Section 4(c) shall terminate. (d) The Board upon the recommendation of the Compensation Committee of the Board shall consider no later than May 31, 2003, 2004, 2005 and 2006 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 Employer's performance for Employer's immediately preceding fiscal year. Notwithstanding the foregoing, based on Employer's annual pre-tax consolidated earnings for the applicable fiscal year, Employer shall pay Employee a Bonus at the rate (i) of one-half of one percent (1/2%) for the fiscal year ending December 31, 2002, three-quarters of one percent (3/4%) for the fiscal year ending December 31, 2003 and one percent (1%) for each of the fiscal years ending December 31, 2004 and 2005, plus (ii) a percentage of the Employer's theatrical net pre-tax cash flow ("Theatrical Flow") as hereinafter defined in Schedule A attached hereto (provided however that the Bonus, if any, for 2005 shall be 25% of the amount for such year). No Bonus shall be payable for any fiscal year in which annual pre-tax consolidated earnings, regardless of Theatrical Flow, as determined in accordance with Section 4(d), are less than $250,000. There shall be excluded from the calculation of annual 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, (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, or (z) any contractual Bonuses and or contractual profit participations accrued or paid to Employee and other employees. 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 2002, 2003 and 2004 fiscal year, or on March 31, 2005 no Bonus shall be paid for such fiscal year or part thereof as to 2005. In the event of Employee's death on or after January 1 of 2003, 2004 or 2005, or April 1, 2005 as to 2005, any Bonus to which he is otherwise entitled for the prior fiscal year or 2005, as the case may be, shall be paid to his Beneficiary. Such annual pre-tax consolidated earnings and Theatrical Flow shall be fixed and determined by the independent certified public accountants regularly employed by Employer. Such independent certified public accountants, in ascertaining such annual 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 2002, 2003, 2004 and 2005. Employer undertakes to use reasonable efforts to cause said accountants to prepare and furnish such statements within one hundred thirty (130) days from the close of each such fiscal year and to cause said independent certified public accountants, concomitantly with delivery of such statement by accountants to it, to deliver a copy of such statement to Employee. The Employer shall not have any liability to Employee arising out of any delays with respect to the foregoing. (e) In the event Employee dies during the Term of this Agreement while the Employee is still in the Employ of Employer, Employer shall pay to Employee's Beneficiary for twenty-four (24) months, annual death benefits payable weekly or in accordance with Employer's payroll practices in an amount equal to 40% of Employee's then annual base salary rate. (f) So long as Employer's Common Stock is publicly traded, Employee, in lieu of receiving cash payment of any Bonus, may elect to receive all or part of any such Bonus by delivery of the Employer's Common Stock, par value $1.00 per share ("Common Stock") valued at the closing market price on date of election, or if not traded on such date, the last reported closing market price. Such election must (i) be made within ten (10) days after notice of the amount of such Bonus and (ii) require a minimum of one hundred (100) shares. No fractional shares will be issued. Employee acknowledges that any such shares must be purchased for investment and not with a view to distribution and cannot be resold without an exemption from registration under the Securities Act of 1933, as amended, such as Rule 144 which requires, among other things, a one (1) year holding period. Prior to commencement of any fiscal year period under Section 4(d), Employee may also elect to defer payment of any such Bonus for up to ten (10) years by giving written notice to Employer of Employee's request for said deferral. Any such deferred Bonus shall not accrue interest whatsoever. (g) So long as Employer's Common Stock is publicly traded, on April 1, 2002 Employer shall grant Employee pursuant to Employer's 1995 Stock Option Plan ("Plan"), the option ("Option") to purchase 10,000 shares of Common Stock at a price per share equal to the fair market value of Common Stock of Employer on the date thereof in accordance with paragraph 5 of the Plan and upon the other terms and conditions set forth in the form of the option agreement annexed hereto as Exhibit A. Such option agreement shall be executed by Employee as of such date. 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 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, Employee shall not directly or indirectly (i) engage or otherwise be involved in the recruitment or employment of the Employer's employees or any individual who was such an employee within one (1) year prior to any such termination of employment, (ii) solicit or assist in obtaining business from a customer of the Employer who was a customer during the two (2) year period prior to termination of employment, with respect to products or services competitive with products or services of Employer, or (iii) communicate, publish, or otherwise transmit, in any manner whatsoever, untrue or negative information or comments regarding Employer. Notwithstanding the foregoing, Employee may engage in the theatre, movie and real estate business subject to (i), (ii) with regard to the display business only and (iii) above. The restriction in (ii) above shall not apply if following the end of the Term (x) Employee's employment is terminated without cause by Employer or (y) Employee resigns because Employee is not offered a replacement contract for a term of at least two (2) years and otherwise having at least the same terms and conditions as in effect on March 31, 2005, or at the end of any subsequent renewal contract, provided no such renewal contract will continue past Employee's 65th birthday and will automatically terminate on such date unless the parties otherwise mutually agree in writing, unless in either case of (x) or (y) above Employer pays to Employee weekly or bi-weekly in accordance with Employer's payroll practices as severance pay, an amount equal to Employee's base salary in effect at the time of termination of employment (e.g., at a rate of $185,000 per annum if termination is April 1, 2005) for a period of one (1) year, subject to credit to Employer for any new compensation received by Employee from third parties during such one (1) year period, such credit not to exceed any weekly or bi-weekly payment hereunder. Employee shall certify to Employer at least bi-weekly the amount of any such compensation with reasonable back-up, i.e., copy of pay slip. If Employee dies during the one (1) year severance period, the balance of the severance payments shall be payable to Employee's Beneficiary; provided however, if Employee was receiving payments under Section 4(c) because of disability which disability payments terminated because of the notice given under this Section 7, then the payments hereunder shall cease and the balance of the disability payments under Section 4(c) shall be made as provided therein. 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. 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. Employee shall have the right to cancel and terminate this Agreement on 75 days prior written notice from the date of occurrence if there has been a "Change in Control of Employer", as hereinafter defined. Upon such termination becoming effective pursuant to such notice by Employee, (a) Employer and Employee shall be released from all further liability and obligations provided for in the Agreement, except that Employee shall still be subject to and bound by his obligations under Section 7 as modified herein; (b) Employer shall pay to Employee his Bonus for the prior calendar year (if not previously paid) as and to the extent provided for in Section 4 (d); and (c) Employee shall be paid in a lump sum on the effective date of termination the amount of $600,000. If Employee is incapacitated at the time of his notice under this Section 9, the above payments shall be in lieu of the payments provided under Section 4(c) which payments shall cease and terminate at the end of the 75 day notice period. In the event of Employee's death during the 75 day notice period, if notice of termination has been given, any amounts still payable to Employee by reason of such termination or otherwise payable under this Agreement shall be paid to his Beneficiary in lieu of the death benefit payments under Section 4(e). The notice under this Section 9 must be given within 60 days of the occurrence of the applicable event or be deemed waived. To the extent any such payments made pursuant to Section 9 above are deemed to be an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and are subject to tax pursuant to Section 4999 of the Code, such payments shall be grossed up in such a manner as to offset the effect of such excise tax on such payments. For purpose of this Section 9, the phrase "Change in Control of Employer" shall be deemed to have occurred if (x) any person (as such term is used in Sections 13 (d) and 14 (d) (2) of the Securities Exchange Act of 1934) hereafter becomes the beneficial owner, directly or indirectly, of securities of Employer, representing 25% or more of the combined voting power of the Employer's then outstanding securities (other than members of Richard Brandt's family, including Employee, directly or indirectly through trusts or otherwise), and (y) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Employer cease by reason of a contested election to constitute at least a majority thereof, unless Richard Brandt (or in the event of his death or incapacity, i.e., inability to manage his own affairs, a majority of David Brandt, Thomas Brandt and Employee) shall have approved such change in the majority. For further purposes of this Section 9 only, the restriction in Section 7(ii) shall only apply to a customer of Employer who was a customer during the six (6) month period prior to termination of employment (with respect to replacing Employer's leased products with competitor's purchased or leased products or Employer's service contracts with replacement service contracts for Employer's equipment, as long as such service or lease agreement is in effect (including continuation of use or other extension beyond the termination date thereof). The restrictions in Section 7(i) and (iii) shall continue without modification. 10. The waiver by Employer of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. 11. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and 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, President or Chief Financial Officer 110 Richards Avenue, Norwalk, Connecticut 06856-5090, in the case of Employer, or such other address as designated in writing by the parties. 12. This Agreement shall be construed in accordance with the laws of the State of New York. 13. This instrument contains the entire agreement between the parties and supersedes all prior written or oral discussions or agreements on the subject matter hereof. 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: ___________________________________ Vice Chairman of the Board ___________________________________ Matthew Brandt Exhibit 10.11 AGREEMENT made as of the lst day of April, 2002 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: - - - - - - - - - - 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 April 1, 2002 and terminating March 31, 2005. (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 reasonable efforts to cause Employee to be elected and continue to be elected an Executive 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, Chief or Co-Chief Executive Officer or 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 Chief or Co-Chief Executive Officer and President and 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, except for current real estate ventures disclosed to Employer concurrently with the signing of this Agreement. 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 which such investments are in stock of a company listed on a national securities exchange, and such stock of Employee does not exceed one percent (1%) of the outstanding shares of stock of such listed company. Employee shall not at any time during or after the Term of this Agreement use (except on behalf of Employer), divulge, furnish or make accessible to any third person or organization any confidential information concerning Employer or any of its subsidiaries or affiliates or the businesses of any of the foregoing including, without limitation, confidential methods of operations and organization, confidential sources of supply, identity of employees, customer 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-FIVE THOUSAND DOLLARS ($125,000) per annum during the period April 1, 2002 to March 31, 2003; at the rate of ONE HUNDRED THIRTY-TWO THOUSAND FIVE HUNDRED DOLLARS ($132,500) per annum during the period April 1, 2003 to March 31, 2004; and at the rate of ONE HUNDRED FORTY THOUSAND DOLLARS ($140,000) per annum during the period April 1, 2004 to March 31, 2005. 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 his 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 four (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 eighteen (18) months, whichever is less, but in no event less than ninety (90) days, 40% 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, 2003, 2004, 2005 and 2006, 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, 2002 (including the period January 1 - March 31, 2002, as provided hereafter in Section 12), 2003, 2004 and 2005 (provided, however, the Bonus, if any, for 2005 shall be 25% of the amount in such year), in the event Employer's pre-tax consolidated earnings for such year determined in accordance with Section 4(d) exceed the respective amounts hereinafter set forth. The Bonuses shall not exceed $20,000 for any year ($5,000 for January 1 - March 31, 2005). If Pre-Tax Consolidated Annual Non-Cumulative Level Earnings Exceed of Bonus Payable ----------------------- --------------------------- $ 250,000 $ 625.00 375,000 937.50 500,000 1,250.00 625,000 1,562.50 750,000 1,875.00 875,000 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 7,178.00 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 $l25,000 between $3,000,000 and $8,000,000 not listed, there is an additional Bonus of $312.50 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 2002, 2003 or 2004 fiscal year or on March 31, 2005, no Bonus shall be paid for such fiscal year. In the event of Employee's death on or after January 1 of 2003, 2004 or 2005 or April 1, 2005 as to 2005, any Bonus to which he is otherwise entitled for the prior fiscal year or 2005 shall be paid to his surviving spouse 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 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 2002, 2003, 2004, and 2005. Employer undertakes to use reasonable efforts to cause said accountants to prepare and furnish such statements within one hundred thirty (130) days from the close of each such fiscal year and to cause said independent certified public accountants, concomitantly with delivery of such statement by accountants to it, to deliver a copy of such statement to Employee. The Employer shall not have any liability to Employee arising out of any delays with respect to the foregoing. (e) In the event Employee dies during the Term of this Agreement while the Employee is still in the Employ of Employer, Employer shall pay to Employee's surviving spouse 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 40% 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 his own account and, except as permitted by paragraph 3 of this Agreement, Employee shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity. For a period of two (2) years following termination of employment for any reason, Employee shall not directly or indirectly (i) engage or otherwise be involved in the recruitment or employment of any Employer employee or, (ii) solicit or render any service directly or indirectly to any other person or entity with regard to soliciting any customer of the Employer during the two (2) year period prior to termination of employment with respect to products or services competitive with products or services of Employer. Employee shall at no time during or after employment disclose to any person, other than Employer, or otherwise use any information of or regarding Employer except on behalf of Employer, nor communicate, publish, or otherwise transmit, in any manner whatsoever, untrue information or negative, competitive, personal or other information or comments regarding Employer. In addition, Employee agrees that all lists, materials, books, files, reports, correspondence, records and other documents and information ("Employer Materials") used, prepared or made available to Employee, shall be and shall remain the property of Employer. Upon the termination of employment of Employee or the expiration of this Agreement, 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 during the term of their employment 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 paragraph 7 of this Agreement shall be held invalid or unenforceable by reason of the geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement, and this Agreement shall be construed as if the geographic or business scope or the duration of such provision had been more narrowly drawn so as not to be invalid or unenforceable. 9. The waiver by Employer of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. 10. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and served personally or sent by United States certified or registered mail, return receipt requested, or overnight courier such as Federal Express or Airborne to his address as stated on Employer's records, in the case of Employee, or to the office of Trans-Lux Corporation, attention of the Chairman, President, or Chief Financial Officer, 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 April 1, 2002 the Agreement between Employer and Employee dated as of January 1, 1999, as amended except any amounts which accrued as of such date and are unpaid, but excluding the Bonus for the period January 1 - March 31, 2002 which is covered by Section 4(d) hereof. 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: _______________________________ Executive Vice President _______________________________ AL MILLER EX-21 5 dec01ex2.txt EXHIBIT 21 LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF THE COMPANY A. As of December 31, 2001 the following are subsidiaries more than 50% owned (included in the consolidated financial statements): Jurisdiction of Percentage Name Incorporation Owned - ------------------------- --------------- ---------- 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 (6) New Mexico 100 Trans-Lux Colorado Corporation (6) Colorado 100 Trans-Lux Desert Sky Corporation (6) Arizona 100 Trans-Lux Display Corporation Delaware 100 Trans-Lux Dreamcatcher Corporation (6) New Mexico 100 Trans-Lux Durango Corporation (5) Colorado 100 Trans-Lux Experience Corporation New York 100 Trans-Lux Four Corners Corporations (5) New Mexico 100 Trans-Lux FSC Corporation (3) Barbados 100 Trans-Lux High Five Corporation (6) Colorado 100 Trans-Lux Investment Corporation Delaware 100 Trans-Lux Laramie Corporation (6) Wyoming 100 Trans-Lux Loma Corporation (6) New Mexico 100 Trans-Lux Los Lunas Corporation (5) New Mexico 100 Trans-Lux Loveland Corporation (6) Colorado 100 Trans-Lux Midwest Corporation Iowa 100 Trans-Lux Montezuma Corporation (5) New Mexico 100 Trans-Lux Movie Operations Corporation (4) Texas 100 Trans-Lux Multimedia Corporation New York 100 Trans-Lux Holding Corporation Connecticut 100 Trans-Lux Pennsylvania Corporation (2) Pennsylvania 100 Trans-Lux Pty Limited Australia 100 Trans-Lux Real Estate Corporation (4) Texas 100 Trans-Lux Seaport Corporation New York 100 Trans-Lux Service Corporation New York 100 Trans-Lux Skyline Corporation (6) Colorado 100 Trans-Lux Southwest Corporation (6) New Mexico 100 Trans-Lux Starlight Corporation (6) New Mexico 100 Trans-Lux Storyteller Corporation (6) New Mexico 100 Trans-Lux Summit Corporation (5) Colorado 100 Trans-Lux Syndicated Programs Corporation New York 100 Trans-Lux Taos Corporation (5) New Mexico 100 Trans-Lux Theatres Corporation (1) Texas 100 Trans-Lux Valley Corporation (5) Arizona 100 Trans-Lux West Corporation Utah 100 Trans-Lux Wyoming Corporation (5) Wyoming 100 (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 Holding Corporation. (5) Wholly-owned subsidiary of Trans-Lux Real Estate Corporation (6) Wholly-owned subsidiary of Trans-Lux Movie Operations Corporation 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% venture. Metro Colorado Corporation owns the remaining 50% of the joint venture and is unrelated to the Registrant. -----END PRIVACY-ENHANCED MESSAGE-----