-----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, QgKu81K2ts9KSD7FLrJLjzaF6HIw4/+0dI65us3Bwxm/y1ppPSvSZE3mel+dqafM eabGZ9te6xApChe5w9n//w== 0000099106-05-000005.txt : 20050331 0000099106-05-000005.hdr.sgml : 20050331 20050331170009 ACCESSION NUMBER: 0000099106-05-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050331 DATE AS OF CHANGE: 20050331 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: 05721399 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 tlx10k2004.txt FORM 10K FOR YEAR ENDED 12/31/2004 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, 2004 ----------------- 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: Name of each exchange on Title of each class which registered - ----------------------------- ------------------------ Common Stock, $1.00 par value American Stock Exchange 7 1/2% Convertible Subordinated Notes due 2006 American Stock Exchange 8 1/4% Limited Convertible Senior Subordinated Notes due 2012 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 2004 Form 10-K Cover Page Continued Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X --- --- As of the close of business on March 30, 2005, there were outstanding, 973,259 shares of the Registrant's Common Stock and 287,463 shares of its Class B Stock. Based on the closing stock price of $6.90 on June 30, 2004, the last business day of the Registrant's most recently completed second fiscal quarter, the aggregate market value of the Registrant's Common and Class B Stock held by non-affiliates of the Registrant was $6,960,000. (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 19, 2005, 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 10-14 of this Form 10-K to the extent stated herein. TRANS-LUX CORPORATION 2004 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 7 PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters 8 ITEM 6. Selected Financial Data 9 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 15 ITEM 8. Financial Statements and Supplementary Data 16 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 39 ITEM 9A. Controls and Procedures 39 ITEM 9B. Other Information 39 PART III ITEM 10. Directors and Executive Officers of the Registrant 40 ITEM 11. Executive Compensation 41 ITEM 12. Security Ownership of Certain Beneficial Owners and Management 41 ITEM 13. Certain Relationships and Related Transactions 41 ITEM 14. Principal Accounting Firm Fees 41 PART IV ITEM 15. Exhibits and Financial Statement Schedules 42 Signatures 45
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 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 the Company manufactures, distributes and services. These display systems utilize LED (light emitting diodes), plasma and LCD screens, and light bulb based technologies. Designed to meet the evolving communications needs of both the indoor and outdoor markets, these display products include data, graphics and video displays for stock and commodity exchanges, financial institutions, sports stadiums and venues, schools, casinos, convention centers, corporate, government, theatres, retail, airports and numerous other applications. In addition to its core display business, the Company also owns and operates a chain of motion picture theatres in the western Mountain States and 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, 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 sector, and gaming. The financial 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 dissemination of data. The major stock and commodity exchanges depend on reliable information displays to post stock and -1- commodity prices, trading volumes, interest rates and other financial data. Brokerage firms use 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 change in regulatory environment in the financial marketplace 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 price displays, full color LED tickers, graphics 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, lobbies, inbound/outbound telemarketing centers, retail applications to attract customers 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 and promote concession sales. 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, Indian gaming establishments and racetracks. 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 and racetracks also use electronic displays throughout their facilities to advertise to and attract gaming patrons. Equipment for the Indoor display segment 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 schools, sports stadiums, sports venues, gas stations, highway departments and outdoor advertisers attempting to capture the attention of passers-by. The Outdoor division has a new line of LED message centers, scoreboards and video displays available in monochrome and full color. The Company has utilized its strong position in the Indoor display 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, college sports stadiums, city park and recreational facilities, churches, racetracks, military installations, bridges and other roadway installations, automobile dealerships, banks and other financial institutions. This division generally sells through distributors and dealers. Equipment for the Outdoor display segment generally has a lead-time of 10 to 90 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, 2004 and 2003 was approximately $3.9 million and $3.3 million, respectively. The December 31, 2004 backlog will be recognized in 2005. These amounts include only the sale of products; they do not include new lease orders or renewals of existing lease agreements that may be 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 animation in billions of colors to corporate, financial and entertainment markets where the presentation of multimedia, live-action, advertising and promotions 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. During 2004 the Company's Outdoor Display division continued to enhance CaptiVue(TM), a new product line, launched in 2003, of outdoor full matrix LED message centers offering greater design flexibility, modularity and increased clarity at an economical price, which is being well received in the commercial marketplace. Continued development of new indoor products includes 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; greater 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 at higher resolutions. The Company recently developed tricolor GraphixWalls(TM), its economical full-matrix indoor graphic display product. Featuring flexible functionality at a lower cost, GraphixWall provides a more competitive offering. Applications for GraphixWall displays include flight information, baggage claim and way-finding at airports, automatic call directories at contact centers, order processing support at manufacturing facilities, and for posting prices and promoting products in financial and retail environments. 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 technologies continue to be improved. The Company continued to expand its PromoWall(R) product line, a new product line utilizing various technologies incorporating these features, as well as flat screen displays, which are expected to provide a choice of products for the custom applications demanded by its customers. The Company maintains a staff of 26 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 $2,449,000, $2,609,000 and $3,370,000 in 2004, 2003 and 2002, respectively. The reduction from 2002 is principally due to the sale of the custom sports business during the first quarter of 2003. -3- MARKETING AND DISTRIBUTION - -------------------------- The Company markets its indoor and outdoor electronic information display products in the U.S. and Canada using a combination of distribution channels, including 24 direct sales representatives, four telemarketers, a network of independent dealers and distributors. By working with software vendors and using the internet to expand the quality and quantity of multimedia content that can be delivered to our electronic displays, we are able to offer customers relevant, timely information, content management software and display hardware in the form of turnkey display communications packages. The Company employs a number of different marketing techniques to attract new customers, including direct marketing efforts by its sales force to known and potential users of information displays; internet marketing; advertising in industry publications; and exhibiting at approximately 23 domestic and international trade shows annually. Internationally, the Company uses a combination of internal sales people and independent distributors to market its products outside the U.S. The Company has existing relationships with approximately 22 independent distributors worldwide covering Europe, South and Central America, Canada, Asia and Australia. International sales have represented less than 10% of total revenues in the past three years but the Company believes that it is well positioned for expansion. In addition to its existing distribution networks, the Company signed an agreement in January 2005 with a major, worldwide provider of electronic video displays for the distribution of all Trans-Lux display products, including scoreboards, commercial outdoor signs and indoor display products, on a worldwide basis in conjunction with its own product line. Because this provider employs approximately 50 sales representatives and 100 sales agents worldwide, the agreement significantly increases the scope of the Company's distribution channels around the globe. Headquartered in Norwalk, Connecticut, the Company has major sales and service offices in New York; Chicago; Des Moines, Iowa; Toronto, Ontario; and Brampton, Ontario; as well as approximately 40 satellite offices in the U.S. 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 2004, 2003 and 2002 did not include any single customer that accounted for more than 10% of total revenues. MANUFACTURING AND OPERATIONS - ----------------------------- As of the end of the year, the Company's production facilities were located in Norwalk, Connecticut and Des Moines, Iowa, 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. -4- 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 10,000 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. 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 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 significant amount of purchases directly from foreign suppliers, but certain components such as the LED's are manufactured by foreign sources. The Company is ISO-9001-2000 registered by Underwriters Laboratories at its Norwalk manufacturing 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 ongoing and future success. The Company provides turnkey installation and support for the products it leases and sells in the United States and Canada. 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 dealers and distributors, they offer support for the products they sell. Personnel based in regional and satellite service locations throughout the United States and Canada 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 operates its National Technical Services Center from its Norwalk, Connecticut headquarters, which performs equipment repairs and dispatches service technicians on a nationwide basis. The Company's field service is augmented by various service companies in the United States, Canada and overseas. From time to time the Company uses various -5- third-party service agents to install, service and/or assist in the service of certain displays for reasons that include geographic area, size and height of displays. 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 larger 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 11 locations in the western Mountain States, which includes a twelve-plex theatre in Loveland, Colorado, which is a 50% owned joint venture partnership. In 2002, the Company closed a single screen theatre in Santa Fe, New Mexico. In 2003, the Company closed a non-profitable four-plex theatre in Dillon, Colorado. In 2004, the Company expanded its Durango, Colorado location by adding two additional screens and in January 2005 completed the expansion of its Dillon, Colorado location by adding two additional screens. 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. 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 a national circuit 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. EMPLOYEES - --------- The Company has approximately 470 employees as of February 28, 2005, of which approximately 305 employees support the Company's electronic display business. Less than 1% of the employees are unionized. The Company believes its employee relations are good. -6- ITEM 2. PROPERTIES The Company's headquarters and principal executive offices are located at 110 Richards Avenue, Norwalk, Connecticut. During June 2004, the Company entered into a sale/leaseback of its 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. The Company leased back the property for four years, after which a three-year lease for part of the building will take effect. Approximately 9,500 square feet of the building is currently subleased to others. The Company owns a facility in Des Moines, Iowa and theatre properties in: Sahuarita, Arizona Dillon, Colorado Durango, Colorado Loveland, Colorado (50% ownership) Espanola, New Mexico Los Lunas, New Mexico Santa Fe, New Mexico Taos, New Mexico Laramie, Wyoming The Company also leases nine premises throughout North America for use as sales, service and/or administrative operations, and leases three theatre locations. The aggregate rental expense was $737,000, $528,000 and $643,000 for the years ended December 31, 2004, 2003 and 2002, respectively. ITEM 3. LEGAL PROCEEDINGS The Company is subject to legal proceedings and claims, which arise in the ordinary course of its business. The Company is not a party to any pending legal proceedings and claims that it believes will have a material adverse effect on the consolidated financial position or operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -7- 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 685 holders of record of its Common Stock and approximately 62 holders of record of its Class B Stock as of March 30, 2005. (c) The Board of Directors approved four quarterly cash dividends of $0.035 per share for Common Stock and $0.0315 per share for Class B Stock during 2004. Management and the Board of Directors will continue to review payment of the quarterly cash dividends. (d) The range of Common Stock prices on the American Stock Exchange are set forth in the following table: High Low ---- --- 2004 First Quarter $7.89 $5.99 Second Quarter 8.20 6.30 Third Quarter 7.02 6.10 Fourth Quarter 8.00 6.10 2003 First Quarter $5.35 $4.75 Second Quarter 6.55 5.10 Third Quarter 7.79 6.00 Fourth Quarter 7.19 5.85 -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, 2004, which were derived from the audited consolidated financial statements of the Company and should be read in conjunction with them. Years Ended 2004 2003 2002 2001 2000 ----------- ---- ---- ---- ---- ---- In thousands, except per share data Revenues $ 52,579 $ 56,022 $ 73,206 $ 68,501 $ 65,829 Income (loss) from continuing operations 412 365 34 601 (1,737) Income (loss) from discontinued operation 127 689 394 (92) (494) Net income (loss) 539 1,054 428 509 (2,231) Earnings (loss) per share continuing operations: Basic $ 0.33 $ 0.29 $ 0.03 $ 0.47 $ (1.38) Diluted 0.33 0.29 0.03 0.47 (1.38) Earnings (loss) per share discontinued operation: Basic $ 0.10 $ 0.55 $ 0.31 $ (0.07) $ (0.39) Diluted 0.03 0.20 0.12 (0.07) (0.39) Total earnings (loss) per share: Basic $ 0.43 $ 0.84 $ 0.34 $ 0.40 $ (1.77) Diluted 0.43 0.70 0.34 0.40 (1.77) 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 1,261 1,261 1,261 Total assets $101,114 $100,092 $109,433 $112,597 $112,060 Long-term debt 56,796 60,505 67,209 69,250 68,552 Stockholders' equity 24,605 24,036 23,025 23,568 23,696
-9- (b) The following table sets forth quarterly financial data for years ended December 31, 2004 and December 31, 2003: Quarter Ended March 31 June 30 September 30 December 31(1) - ------------- -------- ------- ------------ -------------- In thousands, except per share data 2004 Revenues $12,329 $13,112 $14,065 $13,073 Gross profit 3,625 3,445 3,805 3,182 Income (loss) from continuing operations 23 727 79 (417) Income from discontinued operation 15 112 - - Net income (loss) 38 839 79 (417) Earnings (loss) per share continuing operations: Basic 0.02 0.58 0.06 (0.33) Diluted 0.02 0.28 0.06 (0.33) Earnings per share discontinued operation: Basic 0.01 0.09 - - Diluted 0.01 0.03 - - Total earnings (loss) per share: Basic 0.03 0.67 0.06 (0.33) Diluted 0.03 0.31 0.06 (0.33) 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 2003 Revenues $15,193 $13,531 $14,529 $12,769 Gross profit 3,765 3,340 4,483 3,839 Income (loss) from continuing operations 43 300 61 (39) Income from discontinued operation 224 268 42 155 Net income 267 568 103 116 Earnings (loss) per share continuing operations: Basic 0.03 0.24 0.05 (0.03) Diluted 0.03 0.18 0.05 (0.03) Earnings per share discontinued operation: Basic 0.18 0.21 0.03 0.13 Diluted 0.18 0.08 0.01 0.04 Total earnings per share: Basic 0.21 0.45 0.08 0.10 Diluted 0.21 0.26 0.08 0.10 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) During the quarter ended December 31, 2003, the Company recorded a decrease in the effective tax rate for the year, which had the effect of decreasing the quarterly income tax expense by approximately $124,000.
-10- 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. This segment includes the financial, gaming, government, and corporate markets. 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 (which the Company sold during the first quarter of 2003), catalog sports, retail and commercial markets. In addition, on April 28, 2004, the Company sold its Australian operations, effective as of February 29, 2004. The Company has accounted for the Australian operations as a discontinued operation. Accordingly, the consolidated financial statements reflect the assets and liabilities of the discontinued operation and the operations for the current and prior periods are reported as a discontinued operation (see Note 6). Also, on June 3, 2004, the Company entered into a sale/leaseback of its Norwalk, Connecticut headquarters (see Note 6). The Entertainment/Real Estate segment includes the operations of the motion picture theatres in the western Mountain States 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 ongoing basis, management evaluates its estimates and judgments, including those related to percentage of completion, uncollectable accounts, inventories, goodwill and intangible assets, income taxes, warranty obligations, benefit plans, 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. Senior management has discussed the development and selection of these accounting estimates and the related disclosures with the audit committee of the Board of Directors. Management believes the following critical accounting policies, among others, involve its more significant judgments and estimates used in the preparation of its consolidated financial statements: Percentage of Completion: 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 actual total cost be different from estimated total cost, additional or a reduction of cost of sales may be required. Uncollectable Accounts: The Company maintains allowances for uncollectable accounts for estimated losses resulting from the inability of its customers to make required payments. Should non-payment by customers differ from the Company's estimates, a revision to increase or decrease the allowance for uncollectable accounts may be required. Inventories: 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. Goodwill and Intangible Assets: The Company evaluates goodwill and intangible assets for possible impairment annually for goodwill and when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable for other intangible assets. 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. Income Taxes: 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. Warranty Obligations: 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. Benefit Plans: The Company is required to make estimates and assumptions to determine benefit plan liabilities, which include investment returns, rates of salary increases and discount rates. During 2004 and 2003, the Company recorded an after tax minimum pension liability adjustment in other comprehensive loss of $117,000 and $149,000, respectively. Estimates and assumptions are reviewed annually with the assistance of external actuarial professionals and adjusted as circumstances change. At December 31, 2004, plan assets were invested 54.5% in guaranteed investment contracts, 42.0% in equity and index funds, 2.3% in bonds and 1.2% in money market funds. The investment return assumption takes the asset mix into consideration. The assumed discount rate reflects the rate at which the pension benefits could be settled. At December 31, 2004, the weighted average rates used for the computation of benefit plan liabilities were: investment returns, 8.75%; rates of salary increases, 3.00%; and discount rate, 6.00%. Net periodic cost for 2005 will be based -11- on the December 31, 2004 valuation. The defined benefit plan periodic cost was $280,000 in 2004, $867,000 in 2003 and $755,000 in 2002. As of December 31, 2003, the benefit service under the defined benefit plan had been frozen and, accordingly, there is no service cost for the year ended December 31, 2004. At December 31, 2004, assuming no change in the other assumptions, a one percentage point change in investment returns would affect the net periodic cost by $68,000 and a one percentage point change in the discount rate would affect the net periodic cost by $106,000. Quantitative and Qualitative Disclosures About Market Risks The Company's cash flows and earnings are subject to fluctuations from changes in interest rates and foreign currency exchange rates. The Company manages its exposures to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of interest-rate swap agreements and forward exchange contracts. At December 31, 2004, long-term debt outstanding of $25.6 million was at variable rates of interest ranging from 4.06% to 5.25% and $31.2 million was at fixed rates ranging from 7.50% to 9.50%. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes and, at December 31, 2004, was not involved in any derivative financial instruments. Results of Operations 2004 Compared to 2003 Total revenues for the year ended December 31, 2004 decreased 6.1% to $52.6 million from $56.0 million for the year ended December 31, 2003, principally due to the sale of the custom sports business during the first quarter of 2003. As a result of the sale, the Company is reporting lower revenues (see Note 6 to the Consolidated Financial Statements). The operations and cash flows of the custom sports business were not clearly distinguishable from other components of the Outdoor display segment and therefore have not been reported as a discontinued operation. Indoor display revenues decreased $671,000 or 3.7%. Of this decrease, Indoor display equipment rentals and maintenance revenues decreased $1.4 million or 11.3%, primarily due to disconnects and non-renewals of equipment on rental and maintenance on existing contracts in the financial services and energy markets, offset by an increase in Indoor display equipment sales of $738,000 or 13.2%, due to an increase in sales in the gaming market. The financial services market continues to be negatively impacted due to the downturn in the economy, resulting in consolidation within that industry. Although the market conditions appear to be improving, installations of new equipment tend to lag any economic turnaround. Outdoor display revenues decreased $2.4 million or 9.8%. Of this decrease, Outdoor display equipment sales decreased $1.8 million or 10.3%, primarily in the custom outdoor sports sector, which decrease was primarily a result of the sale of the custom sports business during the first quarter of 2003. Outdoor display equipment rentals and maintenance revenues decreased $561,000 or 8.7%, primarily due to the continued expected revenue decline in the Outdoor equipment rentals and maintenance bases previously acquired. Entertainment/real estate revenues decreased $384,000 or 2.8%. Gross box office and concession revenues were basically level compared to 2003, but other theatre-related income was lower. In April 2004, the Company expanded one of its Durango, Colorado theatres from a five-plex to a seven-plex. In January 2003, the Company closed its older non-profitable Lake Dillon theatre for a net payment of $34,000 to the landlord. In connection with its newer six-plex theatre in Dillon, Colorado, which is in the process of a two screen expansion, the Company entered into a 15-year noncompete agreement for $450,000, which was paid in 2003. Total operating income for the year ended December 31, 2004 decreased 5.7% to $5.9 million from $6.3 million for the year ended December 31, 2003, principally due to the decrease in revenues in indoor display equipment rentals and maintenance and the sale of the custom sports business during the first quarter of 2003. Indoor display operating income decreased $543,000 or 18.2%, primarily as a result of the decrease in revenues in the financial services and energy markets. The cost of indoor displays represented 62.4% of related revenues in 2004 compared to 58.8% in 2003. The cost of indoor displays as a percentage of related revenues increased primarily due to the relationship between field service costs of equipment rentals and maintenance increasing and the revenues from indoor equipment rentals and maintenance decreasing. The Company initiated certain cost saving measures in 2003 to reduce field service costs and continues to strategically address the field service costs. Indoor display cost of equipment rentals and maintenance increased $112,000 or 1.5%, largely due to an increase in depreciation expense. Indoor display cost of equipment sales increased $120,000 or 3.9%, primarily due to volume mix. Indoor display general and administrative expenses decreased $360,000 or 8.1%, due to continued reduction of certain overhead costs such as sales salaries, related payroll benefits and travel expenses. Cost of indoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Outdoor display operating income increased to $386,000 in 2004 compared to a loss of $263,000 in 2003, primarily as a result of the sale of the custom outdoor sports business, which was sold during the first quarter of 2003, and the Company initiating certain cost saving measures during the second quarter of 2003. The cost of outdoor displays represented 80.6% of related revenues in 2004 compared to 81.6% in 2003. This improvement is due to a reduction in field service costs of approximately $413,000, the sale of the custom outdoor sports business and a reduction in the cost of raw materials. Outdoor display cost of equipment sales decreased $1.8 million or 13.2%, principally due to the decrease in volume, as a result of the sale of the custom sports business during the first quarter of 2003. Outdoor display cost of equipment rentals and maintenance decreased $364,000 or 6.0%, primarily due to a decrease in field service payroll, benefits and overhead expenses. Outdoor display general and administrative expenses decreased $874,000 or 18.5%, primarily due to the sale of the custom sports business during the first quarter of 2003 and collections of previously reserved accounts receivable. Cost of outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Entertainment/real estate operating income decreased $464,000 or 12.9%, primarily due to an increase in other operating expenses and a decrease in MetroLux Theatre joint venture income of $297,000 to $396,000 in 2004, principally due to a reduction in box office revenue as a result of another theatre chain opening a cinema in a neighboring town. The 2003 MetroLux Theatre joint venture income was $693,000, which included a gain on the sale of vacant land of $122,000. The cost of entertainment/real estate represented 75.4% of related revenues in 2004 compared to 74.3% in 2003. Cost of entertainment/real estate, which includes film rental costs and depreciation expense, decreased $142,000 or 1.4%, due to a reduction in payroll and related benefits and certain other operating expenses. Entertainment/real estate general and administrative expenses decreased $75,000 or 11.7% due to a continued reduction of certain overhead costs such as salaries and travel expenses. Corporate general and administrative expenses decreased $1.6 million or 28.3%, principally resulting from certain cost saving measures initiated during the second quarter of 2003 and reduction in certain overhead costs primarily in pension and benefit costs, medical and general insurance -12- costs, and a $125,000 positive impact of the effect of foreign currency exchange rates in 2004 compared to a $29,000 positive impact in 2003. Net interest expense decreased $142,000, which is primarily attributable to a decrease in long-term debt due to the assumption of debt by the purchaser of the custom sports business, use of proceeds from the sale of its Australian subsidiary in April 2004, the sale/leaseback of its headquarters facility in June 2004 and regular scheduled payments of long-term debt offset by an increase in variable interest rates. During December 2004, the Company successfully completed an amendment of its senior debt, which includes a term loan of $10.0 million, a non-revolving line of credit of up to $6.2 million, and a revolving loan of up to $5.0 million. To meet its short-term working capital requirements, the revolving loan facility, if needed, was fully available at December 31, 2004. The gain on sale of assets in 2004 primarily relates to the sale/leaseback of the Company's Norwalk, Connecticut headquarters. The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatres, in Loveland, Colorado. Other income primarily relates to the earned income portion of municipal forgivable loans. The effective tax rate for the year ended December 31, 2004 was 50.9%. For the year ended December 31, 2003, the effective tax rate was 64.3%. Both year-end rates were affected by foreign subsidiary income being taxed at higher rates. 2003 Compared to 2002 Total revenues for the year ended December 31, 2003 decreased 23.5% to $56.0 million from $73.2 million for the year ended December 31, 2002, principally due to the sale of the custom sports business during the first quarter of 2003 (see Note 6 to the Consolidated Financial Statements). Indoor display revenues decreased $2.1 million or 10.5%. Of this decrease, indoor display equipment rentals and maintenance revenues decreased $1.6 million or 11.3%, primarily due to disconnects and non-renewals of equipment on rental on existing contracts in the financial services and energy markets, and indoor display equipment sales decreased $538,000 or 8.8%, primarily in the financial services market. The financial services market continues to be negatively impacted due to the downturn in the economy, resulting in consolidation within that industry. Although the market conditions appear to be improving, installations of new equipment tend to lag any economic turnaround. Outdoor display revenues decreased $14.3 million or 37.2%. Of this decrease, outdoor display equipment sales decreased $14.2 million or 44.4%, primarily in the custom outdoor sports sector, which decrease was a result of the sale of the custom sports business during the first quarter of 2003. Outdoor display equipment rentals and maintenance revenues decreased $166,000 or 2.5%, primarily due to the expected continuing decline in the outdoor equipment rentals and maintenance bases previously acquired. Entertainment/real estate revenues decreased $721,000 or 5.0%, primarily from a decrease in overall admissions of 6.2%, attributable to fewer screens in operation and fewer high grossing films compared to 2002. In January 2003, the Company closed its older non-profitable Lake Dillon theatre for a net payment of $34,000 to the landlord. In connection with its newer six-plex theatre in Dillon, Colorado, the Company entered into a 15-year noncompete agreement for $450,000, which was paid in 2003. Total operating income for the year ended December 31, 2003 decreased 33.2% to $6.3 million from $9.4 million for the year ended December 31, 2002, principally due to the decrease in revenues in indoor display equipment rentals and maintenance and the sale of the custom sports business during the first quarter of 2003. Indoor display operating income decreased $2.2 million or 42.3%, primarily as a result of the decrease in revenues in the financial services and energy markets. The cost of indoor displays represented 58.8% of related revenues in 2003 compared to 51.7% in 2002. The cost of indoor displays as a percentage of related revenues increased primarily due to higher depreciation expense and the relationship between field service costs of equipment rentals and maintenance increasing and the revenues from indoor equipment rentals and maintenance decreasing. The Company continues to strategically address the field service costs, and during 2003, consolidated its national field service center from Norcross, Georgia to its Norwalk, Connecticut headquarters. In addition, during the second quarter of 2003, the Company initiated certain cost saving measures and recorded a charge for lay-offs and early retirement incentives of approximately $19,000. Indoor display cost of equipment rentals and maintenance increased $36,000 or 0.5%, due to an increase in depreciation expense. Indoor display cost of equipment sales increased $151,000 or 5.2%, primarily due to volume mix. Indoor display general and administrative expenses decreased $119,000 or 2.6%, principally resulting from certain cost saving measures initiated during the second quarter of 2003. Outdoor display operating income decreased by $1.1 million to a loss of $263,000 in 2003 compared to a profit of $803,000 in 2002, primarily as a result of a decrease in outdoor display equipment sales attributed to the sale of the custom outdoor sports business during the first quarter of 2003 and the expected revenue decline in outdoor equipment rentals and maintenance bases from previous acquisitions. During the second quarter of 2003, the Company initiated certain cost saving measures and recorded a charge for lay-offs and early retirement incentives of approximately $47,000. The cost of outdoor displays represented 81.6% of related revenues in 2003 compared to 80.8% in 2002. Outdoor display cost of equipment sales decreased $11.2 million or 45.1%, primarily due to the decrease in volume as a result of the sale of the custom sports business during the first quarter of 2003. Outdoor display cost of equipment rentals and maintenance decreased $165,000 or 2.6%, primarily due to a decrease in field service costs. Outdoor display general and administrative expenses decreased $1.9 million or 28.5%, primarily due to the sale of the custom sports business during the first quarter of 2003. Cost of indoor and outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Entertainment/real estate operating income increased $113,000 or 3.3%, primarily due to a decrease in operating expenses. The cost of entertainment/real estate represented 74.3% of related revenues in 2003 compared to 77.4% in 2002. Cost of entertainment/real estate, which includes film rental costs and depreciation expense, decreased $984,000 or 8.8%, due to variable expenses such as film rental costs decreasing due to a decrease in overall box office revenues and a decrease in the film rental percentage as a percent of revenue. Entertainment/real estate general and administrative expenses increased $42,000 or 7.0% as a result of an increase in certain overhead costs such as medical and benefits. Corporate general and administrative expenses increased $314,000 or 6.0%, principally resulting from certain cost saving measures initiated during the second quarter of 2003, which included a charge for lay-offs and early retirement incentives of approximately $46,000, a $29,000 positive impact of the effect of foreign currency exchange rates in 2003 compared to a $56,000 negative impact in 2002, and increases in certain overhead costs in medical and general insurance costs, pension and benefit costs. Net interest expense decreased $587,000, which is primarily attributable to the decrease in variable interest rates and renegotiated terms of certain debt in 2003 vs. 2002, a decrease in long-term debt due to the assumption of debt by the purchaser of the custom sports business and regular scheduled payments of long-term debt. The Company has a revolving credit facility to meet its short-term working capital requirements, if needed, which was fully available at December 31, 2003. The gain on sale of assets relates to the sales of vacant land and of the custom sports business. The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatres, in Loveland, -13- Colorado. Other income primarily relates to the earned income portion of municipal forgivable loans offset by a write-down of available-for-sale securities to reflect losses that were considered to be other than temporary. The effective tax rate for the year ended December 31, 2003 was 64.3%. For the year ended December 31, 2002, the effective tax rate was 86.2%. Both year-end rates were affected by foreign subsidiary income being taxed at higher rates. The 2002 tax rate was further impacted by unused income tax credits and state minimum franchise taxes in excess of state income tax rates. Liquidity and Capital Resources During December 2004, the Company successfully completed an amendment of its senior debt, which includes a term loan of $10.0 million, a non-revolving line of credit of up to $6.2 million for the purpose of financing 50% of the redemption and/or purchase of the remaining Old Notes (defined below) on a matching basis, and a revolving loan of up to $5.0 million at variable interest rates ranging from LIBOR plus 2.25% to Prime plus 0.25% (4.80% at December 31, 2004). The term loan, non-revolving line of credit, and revolving loan mature on January 1, 2012, January 1, 2007, and January 1, 2008, respectively. The non-revolving line of credit is convertible into a Converted Term Loan maturing January 1, 2012. At December 31, 2004, the entire non-revolving and revolving loan facilities were available, as none had been drawn. The credit agreement requires an annual facility fee on the unused commitment of 0.25%, and requires compliance with certain financial covenants, which include a fixed charge coverage ratio of 1.1 to 1.0, a loan-to-value ratio of not more than 50%, a leverage ratio of 3.0 to 1.0, maintaining a tangible net worth of not less than $20.5 million plus 50% of net income beginning December 31, 2004 and maintaining accounts with an average monthly compensating balance of not less than $750,000. At December 31, 2004, the Company was in compliance with such financial covenants. The Company believes that cash generated from operations together with cash and cash equivalents on hand and the current availability under the non-revolving line of credit and revolving loan will be sufficient to fund its anticipated current and near term cash requirements. The Company continually evaluates the need and availability of long-term capital in order to fund potential new opportunities. On April 14, 2004, the Company successfully completed its offer to exchange $1,000 principal amount of its new 8 1/4% Limited Convertible Senior Subordinated Notes due 2012 ("New Notes") for each $1,000 principal amount of its 7 1/2% Convertible Subordinated Notes due 2006 ("Old Notes"). The exchange offer commenced March 2, 2004 and expired on April 14, 2004. A total of $17.9 million principal amount of Old Notes were exchanged, leaving $12.3 million principal amount of Old Notes outstanding. The New Notes provide for a higher interest rate, which is payable semi-annually, have a longer term, are convertible into Common Stock at a lower conversion price of $9.00 per share until March 1, 2007, may be redeemed by the Company, in whole or in part, at declining premiums beginning March 1, 2006 and are senior to the Old Notes and the Company's 9 1/2% Subordinated Debentures due 2012. The Indenture agreement related to the Old Notes 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. Cash and cash equivalents increased $376,000 in 2004 compared to increases of $3.8 and $2.6 million in 2003 and 2002, respectively. The increase in 2004 is primarily attributable to proceeds received from sales of assets of $7.0 million, proceeds from the sale of available-for-sale securities of $0.3 million, proceeds received from construction loan borrowings of $1.5 million, proceeds from the Company's joint venture of $0.2 million, and operating activities of $6.8 million, offset by the investment in equipment manufactured for rental of $5.3 million, purchases of property, plant and equipment, including expansion of the Company's movie theatres in Durango and Dillon, Colorado, of $3.0 million, purchases of available-for-sale securities of $0.3 million, reduction in long-term debt of $6.1 million, payments of dividends of $0.2 million, and cash used by the discontinued operation of $0.5 million. The increase in 2003 is primarily attributable to proceeds received from sales of vacant land of $2.8 million and the custom sports business of $3.4 million, proceeds from the Company's joint venture of $0.9 million, proceeds from the sale of available-for-sale securities of $0.3 million and operating activities of $6.6 million, offset by the investment in equipment manufactured for rental, expansion of the Company's movie theatre in Durango, Colorado, other equipment purchases of $5.3 million, reduction in long-term debt of $3.7 million, payments of dividends of $0.2 million, and cash used by the discontinued operation of $1.0 million. The increase in 2002 was primarily attributable to proceeds received from sale of a building of $0.8 million, proceeds from the Company's joint venture of $0.8 million, and operating activities of $9.2 million, offset by the investment in equipment manufactured for rental and other equipment purchases of $6.2 million, from financing activities of $1.8 million and cash used by the discontinued operation of $0.2 million. The Company experiences a favorable collection cycle on its trade receivables. Under various agreements, the Company is obligated to make future cash payments in fixed amounts. These include payments under the Company's long-term debt agreements, employment and consulting agreement payments and rent payments required under operating lease agreements. The following table summarizes the Company's fixed cash obligations as of December 31, 2004 over the next five fiscal years: In thousands 2005 2006 2007 2008 2009 - -------------------------------------------------------------------------------- Current portion of long-term debt $1,744 $ - $ - $ - $ - Long-term debt - 14,458 2,090 4,704 2,258 Employment and consulting agreement obligations 1,095 473 404 404 404 Operating lease payments 749 650 472 360 264 ------ ------- ------ ------ ------ Total $3,588 $15,581 $2,966 $5,468 $2,926 - --------------------------------------------------------------------------------
Off-Balance Sheet Arrangements: The Company has no majority-owned subsidiaries that are not included in the consolidated financial statements nor does it have any interests in or relationships with any special purpose off-balance sheet financing entities. The Company's $1.1 million investment in the MetroLux Theatres joint venture is accounted for under the equity method of accounting. The Company has guaranteed $1.1 million (60%) of a $1.9 million mortgage loan held by MetroLux Theatres. During 2000, the Company entered into two sale/leaseback transactions for theatre equipment that terminate in September 2005, which are classified as operating leases. The Company has guaranteed up to a maximum of $403,000 if, upon default, the lessor cannot recover the unamortized balance. 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, terrorist acts and war. -14- 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, through August 2002, the Company had 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 Canadian subsidiary. A 10% change in the Canadian dollar relative to the U.S. dollar would result in a currency exchange expense fluctuation of approximately $167,000. The fair value is based on dealer quotes, considering current exchange rates. The Company does not enter into derivatives for trading or speculative purposes. A one percentage point change in interest rates would result in an annual interest expense fluctuation of approximately $263,000. -15- 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 2004 2003 2002 - --------------------------------------------------------------------------------------------------------- Revenues: Equipment rentals and maintenance $16,944 $18,915 $20,659 Equipment sales 22,269 23,357 38,076 Theatre receipts and other 13,366 13,750 14,471 --------------------------------- Total revenues 52,579 56,022 73,206 --------------------------------- Operating expenses: Cost of equipment rentals and maintenance 13,398 13,650 13,778 Cost of equipment sales 15,052 16,731 27,811 Cost of theatre receipts and other 10,072 10,214 11,198 --------------------------------- Total operating expenses 38,522 40,595 52,787 --------------------------------- Gross profit from operations 14,057 15,427 20,419 General and administrative expenses 12,501 15,385 17,032 Interest income 184 49 118 Interest expense (3,915) (3,922) (4,578) Gain on sale of assets 2,536 4,207 314 Other income (expense) 82 (46) 204 --------------------------------- Income (loss) from continuing operations before income taxes, income from joint venture and discontinued operation 443 330 (555) Provision (benefit) for income taxes: Current 366 464 (369) Deferred 61 194 581 --------------------------------- Total provision for income taxes 427 658 212 --------------------------------- Income from joint venture 396 693 801 --------------------------------- Income from continuing operations 412 365 34 Income from discontinued operation, net of income taxes 127 689 394 --------------------------------- Net income $ 539 $ 1,054 $ 428 ================================= Earnings per share continuing operations: Basic $ 0.33 $ 0.29 $ 0.03 Diluted $ 0.33 $ 0.29 $ 0.03 Earnings per share discontinued operation: Basic $ 0.10 $ 0.55 $ 0.31 Diluted $ 0.03 $ 0.20 $ 0.12 Total earnings per share: Basic $ 0.43 $ 0.84 $ 0.34 Diluted $ 0.43 $ 0.70 $ 0.34 Average common shares outstanding: Basic 1,261 1,261 1,261 Diluted 3,932 3,421 3,418 - --------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
-16- CONSOLIDATED BALANCE SHEETS In thousands, except share data December 31 2004 2003 - ---------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 12,398 $ 12,022 Available-for-sale securities 388 393 Receivables, less allowance of $711 - 2004 and $1,092 - 2003 5,989 5,170 Unbilled receivables 585 729 Inventories 6,565 5,647 Prepaids and other 534 956 Assets of discontinued operation - 1,930 ----------------------- Total current assets 26,459 26,847 ----------------------- Rental equipment 90,938 89,560 Less accumulated depreciation 52,538 48,654 ----------------------- 38,400 40,906 ----------------------- Property, plant and equipment 37,747 41,742 Less accumulated depreciation and amortization 8,787 11,763 ----------------------- 28,960 29,979 Goodwill 1,004 1,004 Other assets 6,291 3,286 ----------------------- TOTAL ASSETS $101,114 $102,022 ======================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,413 $ 1,535 Accrued liabilities 7,353 6,578 Current portion of long-term debt 1,744 2,637 Liabilities of discontinued operation - 414 ----------------------- Total current liabilities 11,510 11,164 ----------------------- Long-term debt: 7 1/2% convertible subordinated notes due 2006 12,309 30,177 8 1/4% limited convertible senior subordinated notes due 2012 17,868 - 9 1/2% subordinated debentures due 2012 1,057 1,057 Notes payable 25,562 29,271 ----------------------- 56,796 60,505 Deferred credits, deposits and other 3,959 2,052 Deferred income taxes 4,244 4,265 Commitments and contingencies Stockholders' equity: Capital stock Common - $1 par value - 5,500,000 shares authorized, 2,452,942 and 2,452,900 shares issued in 2004 and 2003 2,453 2,453 Class B - $1 par value - 1,000,000 shares authorized, 287,463 and 287,505 shares issued in 2004 and 2003 287 287 Additional paid-in-capital 13,901 13,901 Retained earnings 20,852 20,490 Accumulated other comprehensive loss (1,050) (1,258) ----------------------- 36,443 35,873 Less treasury stock - at cost - 1,479,714 and 1,479,688 shares in 2004 and 2003 (excludes additional 287,463 and 287,505 shares held in 2004 and 2003 for conversion of Class B stock) 11,838 11,837 ----------------------- Total stockholders' equity 24,605 24,036 ----------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $101,114 $102,022 ======================= The accompanying notes are an integral part of these consolidated financial statements.
-17- CONSOLIDATED STATEMENTS OF CASH FLOWS In thousands Years ended December 31 2004 2003 2002 - ----------------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 539 $ 1,054 $ 428 Income from discontinued operation 127 689 394 ------------------------------- Income from continuing operations 412 365 34 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,852 9,889 10,153 Income from joint venture (396) (693) (801) Deferred income taxes 61 204 581 Gain on sale of assets (2,536) (4,207) (314) Write down of available-for-sale securities - 129 - Gain on sale of available-for-sale securities (27) (28) - Changes in operating assets and liabilities: Receivables (675) 1,379 2,019 Inventories (918) 916 (591) Prepaids and other assets (239) (374) (132) Accounts payable and accruals 1,581 (122) (1,809) Deferred credits, deposits and other (310) (890) 32 ------------------------------- Net cash provided by operating activities 6,805 6,568 9,172 ------------------------------- Cash flows from investing activities Equipment manufactured for rental (5,284) (4,145) (5,468) Purchases of property, plant and equipment (3,039) (1,183) (691) Purchases of available-for-sale securities (282) (113) - Proceeds from sale of available-for-sale securities 307 312 - Proceeds from joint venture, net 150 900 775 Proceeds from sale of assets 7,028 6,245 758 ------------------------------- Net cash provided by (used in) investing activities (1,120) 2,016 (4,626) ------------------------------- Cash flows from financing activities Proceeds from long-term debt 20,596 17,438 2,233 Payments of long-term debt (25,198) (21,113) (3,842) Purchase of treasury stock (1) - - Cash dividends (177) (176) (176) ------------------------------- Net cash used in financing activities (4,780) (3,851) (1,785) ------------------------------- Net cash used in discontinued operation (529) (981) (190) ------------------------------- Net increase in cash and cash equivalents 376 3,752 2,571 Cash and cash equivalents at beginning of year 12,022 8,270 5,699 ------------------------------- Cash and cash equivalents at end of year $ 12,398 $ 12,022 $ 8,270 =============================== - ----------------------------------------------------------------------------------------------------------------- Interest paid $ 3,172 $ 3,661 $ 4,253 Interest received 162 112 131 Income taxes paid (refunded) 41 272 (523) - ----------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
-18- 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, 2004 Shares Amount Shares Amount Capital Stock Earnings Income (Loss) - ----------------------------------------------------------------------------------------------------------------------------------- Balance January 1, 2002 2,452,900 $2,453 287,505 $287 $13,901 $(11,837) $19,360 $ (596) Net income - - - - - - 428 - Cash dividends - - - - - - (176) - Other comprehensive income (loss), net of tax: Unrealized foreign currency translation - - - - - - - (56) Unrealized holding loss - - - - - - - (14) Minimum pension liability adjustment - - - - - - - (821) Unrealized derivative gain - - - - - - - 96 ---------------------------------------------------------------------------------- Balance December 31, 2002 2,452,900 2,453 287,505 287 13,901 (11,837) 19,612 (1,391) Net income - - - - - - 1,054 - Cash dividends - - - - - - (176) - Other comprehensive income (loss), net of tax: Unrealized foreign currency translation - - - - - - - 179 Unrealized holding gain - - - - - - - 25 Reclassification adjustment on securities - - - - - - - 78 Minimum pension liability adjustment - - - - - - - (149) ---------------------------------------------------------------------------------- Balance December 31, 2003 2,452,900 2,453 287,505 287 13,901 (11,837) 20,490 (1,258) Net income - - - - - - 539 - Cash dividends - - - - - - (177) - Common stock acquired (26 shares) - - - - - (1) - - Other comprehensive income (loss), net of tax: Unrealized foreign currency translation - - - - - - - 329 Unrealized holding loss - - - - - - - (4) Minimum pension liability adjustment - - - - - - - (117) Class B conversion to common stock 42 - (42) - - - - - ---------------------------------------------------------------------------------- Balance December 31, 2004 2,452,942 $2,453 287,463 $287 $13,901 $(11,838) $20,852 $(1,050) - ----------------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME In thousands Years ended December 31 2004 2003 2002 - --------------------------------------------------------------------------------------- Net income $ 539 $1,054 $ 428 --------------------------- Other comprehensive income (loss): Unrealized foreign currency translation 329 179 (56) Unrealized holding gain (loss) on securities (7) 42 (8) Reclassification adjustment on securities - 129 - Minimum pension liability adjustment (196) (247) (1,368) Unrealized derivative gain - - 174 Income tax benefit related to items of other comprehensive income 82 30 463 --------------------------- Total other comprehensive income (loss), net of tax 208 133 (795) --------------------------- Comprehensive income (loss) $ 747 $1,187 $ (367) - --------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
-19- Notes To Consolidated Financial Statements 1. Summary of Significant Accounting Policies Trans-Lux Corporation is a leading manufacturer and supplier of programmable electronic information displays and owner/operator of cinemas. 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 included in other assets in the Consolidated Balance Sheets and is recorded as income from joint venture 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 uncollectable accounts, inventory valuation allowances, depreciation and amortization, intangible assets, income taxes, warranty obligation, benefit plans, 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. The Company's credit facility with its senior lender requires maintaining accounts with an average monthly compensating balance of not less than $750,000. Available-for-sale securities: Available-for-sale securities consist of mutual fixed income funds and equity securities and are stated at fair value with changes in fair value reflected in other comprehensive income (loss). Accounts receivable: Receivables are carried at net realizable value. Reserves for uncollectable accounts are provided based on historical experience and current trends. The Company evaluates the adequacy of these reserves regularly. The following is a summary of the allowance for uncollectable accounts at December 31: In thousands 2004 2003 2002 - ---------------------------------------------------------------------- Balance at beginning of year $1,092 $1,009 $ 465 Provisions 213 718 835 Deductions (594) (635) (291) -------------------------------- Balance at end of year $ 711 $1,092 $1,009 - ----------------------------------------------------------------------
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers and relatively small account balances within the majority of the Company's customer base, and their dispersion across different businesses. The Company periodically evaluates the financial strength of its customers and believes that its credit risk exposure is limited. Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market value. Valuation allowances 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 valuation allowances regularly. Rental equipment and property, plant and equipment: Rental equipment 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: - ----------------------------------------------------- Rental equipment 10 to 15 years Buildings and improvements 10 to 40 years Machinery, fixtures and equipment 4 to 15 years Leaseholds and improvements 5 to 27 years - ----------------------------------------------------- When rental equipment and property, plant and equipment are fully depreciated, retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the accounts. Goodwill and intangibles: The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), effective January 1, 2002. Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized, but are reviewed annually for impairment, or more frequently if indications of possible impairment exist. The Company performed the requisite transitional impairment tests for goodwill as of January 1, 2002, which indicated that there was no transitional impairment loss. In connection with the sale of the custom sports business, in the first quarter of 2003 (see Note 6), the Company reduced goodwill by $229,000. Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired. Identifiable intangible assets are recorded at cost and amortized over their estimated useful life on a straight line basis; noncompete agreements over their terms of seven and 10 years; deferred financing costs over the life of the related debt of two to 20 years; and other intangibles over 10 years. The Company periodically evaluates the value of its goodwill and the period of amortization of its other intangible assets and determines if such assets are impaired by comparing the carrying values with estimated future undiscounted cash flows. The Company performed the annual impairment tests for goodwill as of October 1, 2004, 2003 and 2002, and determined that goodwill was not impaired as of those dates. Other intangible assets are evaluated when indicators of impairment exist. Maintenance contracts: Purchased maintenance contracts are stated at cost and are being amortized over their economic lives of 15 years using an accelerated method, which contemplates contract expiration, fall-out and non-renewal. Impairment or disposal of long-lived assets: The Company evaluates whether there has been an impairment in any of its long-lived assets, excluding goodwill, if certain circumstances indicate that a possible impairment may exist. An impairment in value exists when the carrying value of a long-lived asset exceeds its undiscounted cash flows. If it is determined that an impairment in value has occurred, the carrying value is written down to its fair value. Revenue recognition: 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 is susceptible to change on these sales contracts. Revenues on equipment sales, other than long-term equipment sales contracts, are recognized upon shipment when title and risk of loss passes to the customer. Theatre receipts and other revenues are recognized at time service is provided. -20- 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 in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. 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. Stock-based compensation plans: The Company records compensation expense for its stock-based employee compensation plans, which are described more fully in Note 13, in accordance with the intrinsic-value method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." Intrinsic value is the amount by which the market price of the underlying stock exceeds the exercise price of the stock option or award on the measurement date, generally the date of grant. During 2004, 2003 and 2002, the Company issued all stock options at 100% of market value at date of grant. Accordingly, no compensation cost has been recognized for its stock option plans. In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123 (revised 2004)"). SFAS 123 (revised 2004) establishes standards that require companies to record the cost resulting from all share-based payment transactions using the fair value method. Transition under SFAS 123 (revised 2004) requires using a modified version of prospective application under which compensation costs are recorded for all unvested share-based payments outstanding or a modified retrospective method under which all prior periods impacted by SFAS 123 are restated. SFAS 123 (revised 2004) is effective as of the first quarter that begins after June 15, 2005, with early adoption permitted. The following table illustrates the effect on net income and earnings per share for the years ended December 31, 2004, 2003 and 2002 if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation: In thousands, except per share data 2004 2003 2002 - ------------------------------------------------------------------------------- Net income, as reported $ 539 $1,054 $ 428 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax 7 17 51 ------------------------- Pro forma net income $ 532 $1,037 $ 377 ------------------------- Earnings per share: Basic, as reported $0.43 $ 0.84 $0.34 Diluted, as reported $0.43 $ 0.70 $0.34 ------------------------- Basic, pro forma $0.42 $ 0.82 $0.30 Diluted, pro forma $0.42 $ 0.70 $0.30 - -------------------------------------------------------------------------------
Accounting pronouncements: In December 2003, the FASB issued FASB Interpretation No. 46R, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (revised December 2003)" ("FIN 46R"), which addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, which was issued in January 2003. Before concluding that it is appropriate to apply the Accounting Research Bulletin No. 51 voting interest consolidation model to an entity, an enterprise must first determine that the entity is not a variable interest entity. The adoption of FIN 46R on March 31, 2004, did not have any effect on the Company's consolidated financial statements Reclassifications: Certain reclassifications of prior years' amounts have been made to conform to the current year's presentation. 2. Available-for-Sale Securities Available-for-sale securities are carried at estimated fair values and the unrealized holding gains and losses are excluded from earnings and are reported net of income taxes in accumulated other comprehensive loss until realized. Adjustments of $4,000 and $103,000 were made to equity to reflect the net unrealized gains on available-for-sale securities at December 31, 2004 and 2003, respectively. During the second quarter of 2003, the Company wrote down available-for-sale securities by $129,000 to reflect losses that were considered to be other than temporary. The Company realized gains of $27,000 and $28,000 on the sales of available-for-sale securities during 2004 and 2003, respectively. Available-for-sale securities consist of the following: 2004 2003 -------------------------------------------- Fair Unrealized Fair Unrealized In thousands Value Losses Value Losses - ----------------------------------------------------------------------- Mutual funds $330 $15 $349 $11 Equity securities 58 3 44 - -------------------------------------------- $388 $18 $393 $11 - -----------------------------------------------------------------------
3. Inventories Inventories consist of the following: In thousands 2004 2003 - ---------------------------------------------------------------- Raw materials and spare parts $4,704 $3,767 Work-in-progress 1,357 1,234 Finished goods 504 646 ------------------------ $6,565 $5,647 - ----------------------------------------------------------------
4. Property, Plant and Equipment Property, plant and equipment consist of the following: In thousands 2004 2003 - ---------------------------------------------------------------- Land, buildings and improvements $29,906 $33,391 Machinery, fixtures and equipment 6,864 7,374 Leaseholds and improvements 977 977 ------------------------- $37,747 $41,742 - ----------------------------------------------------------------
Land, buildings and equipment having a net book value of $26.1 million and $26.8 million at December 31, 2004 and 2003, respectively, were pledged as collateral under mortgage agreements. 5. Other Assets Other assets consist of the following: In thousands 2004 2003 - ------------------------------------------------------------------------- Receivable - sale/leaseback of facility $2,580 $ - Investment in joint venture (see Note 17) 1,133 888 Deferred financing costs, net of accumulated amortization of $985 - 2004 and $1,495 - 2003 1,025 1,013 Noncompete agreements, net of accumulated amortization of $239 - 2004 and $185 - 2003 367 421 Prepaids 295 323 Maintenance contracts, net of accumulated amortization of $2,194 - 2004 and $2,130 - 2003 193 257 Deposits and other 698 384 --------------------- $6,291 $3,286 - -------------------------------------------------------------------------
-21- The receivable - sale/leaseback of facility relates to a long-term receivable secured by a purchase money mortgage subordinated to a $3.5 million first mortgage in favor of the purchaser of the Norwalk, Connecticut facility (see Note 6). Deferred financing costs relate to the issuance of the 7 1/2% convertible subordinated notes, the 8 1/4% limited convertible senior subordinated notes, the 9 1/2% subordinated debentures, mortgages and other financing agreements. Noncompete agreements relate to the acquisition of one of the outdoor businesses, the acquisition of theatre leases and a $450,000 restrictive covenant agreement relating to a theatre. Maintenance contracts represent the present value of acquired agreements to service outdoor display equipment. Future amortization expense of intangible assets over the next five years is expected as follows: $288,000 - 2005, $267,000 - 2006, $194,000 - 2007, $193,000 - 2008, $151,000 - 2009. 6. Sale of Assets and Discontinued Operation Sale of Assets On June 3, 2004, the Company entered into a sale/leaseback of its Norwalk, Connecticut headquarters for a sales price of $8.1 million, of which $5.5 million was paid in cash and the balance of $2.6 million is payable, with interest, four years from closing. The Company leased back the property for four years, after which a three-year lease for part of the building will take effect. The $2.6 million receivable is included in other assets in the Consolidated Balance Sheets. In accordance with SFAS No. 28 "Accounting for Sales with Leasebacks," the Company recorded a gain of approximately $2.5 million ($1.5 million, net of tax), on the sale and deferred $2.2 million of the gain for a total gain of $4.7 million. The deferred gain represents the present value of the lease payments over the term of the leaseback and will be recognized proportionately to the rental charge over the next seven years and is included in deferred credits, deposits and other in the Consolidated Balance Sheets. The $2.6 million balance of the purchase price is secured by a purchase money mortgage subordinate to a $3.5 million first mortgage in favor of the purchaser's lender. In conjunction with the sale, the Company prepaid $4.9 million of its long-term debt with its senior lenders. On June 30, 2003, the Company sold a parcel of vacant land adjacent to its corporate headquarters in Norwalk, Connecticut for a cash price of $3.0 million. The Company recorded a gain of approximately $1.5 million, net of tax, on the sale. On March 28, 2003, the Company sold its custom sports business located in Logan, Utah for $7.9 million, of which $3.7 million was paid in cash and $4.2 million was in assumption of two Industrial Revenue Bonds. The Company recorded a gain of approximately $876,000, net of tax, on the sale. As part of sale, the Company recorded bonuses to certain continuing employees of $75,000, which was included in the recorded gain. As a result of the sale, the Company is reporting lower revenues. The operations and cash flows of the custom sports business were not clearly distinguishable from other components of the outdoor display segment and therefore have not been reported as a discontinued operation. Discontinued Operation On April 28, 2004, the Company completed an agreement to sell the capital stock of its Australian subsidiary, Trans-Lux Pty Limited ("PTY"), for $1.7 million in cash, and the operating results were assumed by the buyer effective as of February 29, 2004. In accordance with the provisions of SFAS No. 144, "Accounting For the Impairment or Disposal of Long-lived Assets," the Company has accounted for PTY as a discontinued operation. The consolidated financial statements reflect the assets and liabilities of the discontinued operation and the operations for the prior periods are reported as a discontinued operation. The following table presents the financial results of the discontinued operation: In thousands 2004 2003 2002 - ---------------------------------------------------------------- Revenues $ 135 $1,552 $1,685 Operating expenses 126 1,000 1,066 ------------------------- Gross profit 9 552 619 General and administrative expenses (126) (680) (614) Foreign currency gain 141 941 330 Interest income 3 64 59 Gain on sale of assets 112 - - Income tax provision (12) (188) - ------------------------- Income from discontinued operation $ 127 $ 689 $ 394 ------------------------- Earnings per share: Basic $0.10 $ 0.55 $ 0.31 Diluted $0.03 $ 0.20 $ 0.12 - ----------------------------------------------------------------
The following table presents the principal assets and liabilities of the discontinued operation: December 31 In thousands 2003 - --------------------------------------------------------------- Accounts receivable $ 870 Inventories 114 Property and equipment, net 690 Other assets 256 ------ Total assets of discontinued operation 1,930 Accrued expenses, accounts and income taxes payable 414 Intercompany payable (eliminated in consolidation) $1,924 - ---------------------------------------------------------------
7. Taxes on Income The components of income tax expense are as follows: In thousands 2004 2003 2002 - ----------------------------------------------------------------------- Current: Federal $ - $ - $(704) State and local 60 110 (3) Foreign 306 354 338 ---------------------------------------- 366 464 (369) ---------------------------------------- Deferred: Federal 44 157 600 State and local 17 37 (19) ---------------------------------------- 61 194 581 ---------------------------------------- Total income tax expense $427 $658 $ 212 - -----------------------------------------------------------------------
Income taxes provided differed from the expected federal statutory rate of 34% as follows: 2004 2003 2002 - --------------------------------------------------------------------------- Statutory federal income tax rate 34.0% 34.0% 34.0% State income taxes, net of federal benefit 6.0 9.5 (6.0) Foreign income taxed at different rates 8.8 11.6 37.1 Unused income tax credits - - 17.8 Other 2.1 9.2 3.3 --------------------------- Effective income tax rate 50.9% 64.3% 86.2% - ---------------------------------------------------------------------------
-22- 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 2004 2003 - --------------------------------------------------------------- Deferred tax asset: Tax credit carryforwards $ 1,050 $ 1,050 Operating loss carryforwards 5,089 5,900 Net pension costs 681 700 Bad debts 251 394 Other 703 570 Valuation allowance (68) (156) ---------------------- 7,706 8,458 ---------------------- Deferred tax liability: Depreciation 10,979 11,840 Gain on purchase of the Company's 9% subordinated debentures 439 439 Other 532 444 ---------------------- 11,950 12,723 ---------------------- Net deferred tax liability $ 4,244 $ 4,265 - ---------------------------------------------------------------
Tax credit carryforwards primarily relate to federal alternative minimum taxes of $0.9 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 $12.9 million, which begin to expire in 2019. A valuation allowance has been established for the amount of deferred tax assets related to state net operating loss carryforwards and job credits, which management estimates will more likely than not expire unused. 8. Accrued Liabilities Accrued liabilities consist of the following: In thousands 2004 2003 - -------------------------------------------------------------- Pension liability (see Note 12) $1,844 $1,908 Compensation and employee benefits 1,272 1,348 Interest payable 655 399 Taxes payable 656 294 Warranty obligations 260 308 Other 2,666 2,321 -------------------- $7,353 $6,578 - --------------------------------------------------------------
Warranty obligations: 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. A summary of the warranty liabilities at December 31, follows: In thousands 2004 2003 2002 - -------------------------------------------------------------------- Balance at beginning of year $308 $ 541 $ 310 Provisions - 29 594 Deductions (48) (262) (363) ------------------------ Balance at end of year $260 $ 308 $ 541 - --------------------------------------------------------------------
9. Long-Term Debt Long-term debt consist of the following: \ In thousands 2004 2003 - ------------------------------------------------------------------------- 7 1/2% convertible subordinated notes due 2006 $12,309 $30,177 8 1/4% limited convertible senior subordinated notes due 2012 17,868 - 9 1/2% subordinated debentures due 2012 1,057 1,057 Term loan - bank secured, due in quarterly installments through 2012 10,000 15,105 Real estate mortgages - secured, due in monthly installments through 2024 17,078 16,525 Loans payable - CEBA, secured, due in monthly installments through 2007 228 278 ---------------------- 58,540 63,142 Less portion due within one year 1,744 2,637 ---------------------- Long-term debt $56,796 $60,505 - -------------------------------------------------------------------------
Payments of long-term debt due for the next five years are: In thousands 2005 2006 2007 2008 2009 - ---------------------------------------------------------------- $1,744 $14,458 $2,090 $4,704 $2,258 - ---------------------------------------------------------------- The 7 1/2% Convertible Subordinated Notes (the "Old Notes") are due in 2006. Interest is payable semiannually. The Old Notes are convertible into Common Stock of the Company at a conversion price of $14.013 per share. The Old 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. On April 14, 2004, the Company successfully completed its offer to exchange $1,000 principal amount of its new 8 1/4% Limited Convertible Senior Subordinated Notes due 2012 (the "New Notes") for each $1,000 principal amount of its Old Notes. The exchange offer commenced March 2, 2004 and expired on April 14, 2004. A total of $17.9 million principal amount of Old Notes were exchanged, leaving $12.3 million principal amount of Old Notes outstanding. The New Notes provide for a higher interest rate, which is payable semi-annually, have a longer term, are convertible into Common Stock at a lower conversion price of $9.00 per share until March 1, 2007, may be redeemed by the Company, in whole or in part, at declining premiums beginning March 1, 2006 and are senior to the Old Notes and the Company's 9 1/2% Subordinated Debentures (the "Debentures") due 2012. 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. During December 2004, the Company successfully completed an amendment of its senior debt, which includes a term loan of $10.0 million, a non-revolving line of credit of up to $6.2 million, and a revolving loan of up to $5.0 million at variable interest rates ranging from LIBOR plus 2.25% to Prime plus 0.25% (4.80% at December 31, 2004). The term loan, non-revolving line of credit, and revolving loan mature on January 1, 2012, January 1, 2007, and January 1, 2008, respectively. The non-revolving line of credit is convertible into a converted term loan maturing January 1, 2012. At December 31, 2004, the entire line of credit facility was available as none had been drawn. The credit agreement requires an annual facility fee on the unused commitment of 0.25%, and requires compliance with certain financial covenants, which include a fixed charge coverage ratio of 1.1 to 1.0, a loan-to-value ratio of not more than 50%, a leverage ratio of 3.0 to 1.0, maintaining a tangible net worth of not less than $20.5 million, -23- plus 50% of net income beginning December 31, 2004 and maintaining accounts with an average monthly compensating balance of not less than $750,000. At December 31, 2004, the Company was in compliance with such financial covenants. At December 31, 2004, the Company was not involved in any derivative financial instruments. The Company has mortgages on certain of its facilities at variable rates of interest, which are payable in monthly installments, the last of which extends to 2024. At December 31, 2004, such variable interest rates ranged from 4.06% to 5.25%. During 1999, the Company received $400,000 structured as forgivable loans from the State of Iowa, City of Des Moines and Polk County, which were classified as deferred credits, deposits and other in the Consolidated Balance Sheets prior to December 31, 2002. The loans were forgiven on a pro-rata basis when predetermined employment levels were attained. As of December 31, 2002, the Company did not meet the maximum specified employment levels and, accordingly, is required to repay the non-forgiven portion, although during 2004 and 2003 none was required to be repaid. At December 31, 2004, the non-forgiven amount totaled $133,333 and is expected to be payable in even monthly installments over two years at 6.0% interest, if not renegotiated. During 2003, the Company incurred interest costs of $3.9 million. At December 31, 2004, the fair value of the Notes and the Debentures was $30.7 million and $1.0 million, respectively. The fair value of the remaining long-term debt approximates the carrying value. 10. Stockholders' Equity During 2004, 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 2004 and January 2005. 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 10% 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 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. 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 2.9 million and 2.2 million at December 31, 2004 and 2003, respectively. 11. Engineering Development Engineering development expense was $443,000, $469,000 and $496,000 for 2004, 2003, and 2002, 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. As of December 31, 2003, the benefit service under the pension plan has been frozen and, accordingly, there is no service cost for the year ended December 31, 2004. For 2004 and 2003, due primarily to a drop in the discount rate and the effect of the plan's investment experience at the December 31 measurement date on the valuation of plan assets, the accrued benefit obligation of the plan exceeded the fair value of plan assets. The Company's pension obligations for this plan exceeded plan assets by $3.3 million at December 31, 2004. The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The portfolio contains a diversified blend of equity and fixed income investments. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews. At December 31, 2004 and 2003, the Company's pension plan weighted average asset allocations by asset category are as follows: 2004 2003 - ---------------------------------------------------------------- Guaranteed investment contracts 54.5% 55.8% Equity and index funds 42.0 40.7 Bonds 2.3 2.5 Money market funds 1.2 1.0 ---------------------- 100.0% 100.0% - ----------------------------------------------------------------
Bonds include $167,000 of the Company's 9 1/2% subordinated debentures for 2004 and 2003. The funded status of the plan as of December 31, 2004 and 2003 is as follows: In thousands 2004 2003 - ----------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $10,069 $ 9,476 Service cost - 509 Interest cost 609 593 Actuarial loss 446 613 Curtailment - (195) Benefits paid (459) (927) -------------------- Benefit obligation at end of year $10,665 $10,069 -------------------- Change in plan assets: Fair value of plan assets at beginning of year $ 6,812 $ 5,684 Actual return on plan assets 503 605 Company contributions 524 1,450 Benefits paid (459) (927) -------------------- Fair value of plan assets at end of year $ 7,380 $ 6,812 -------------------- Funded status: Funded status (underfunded) $(3,285) $(3,257) Unrecognized net actuarial loss 3,875 3,586 Unrecognized prior service cost 127 144 -------------------- Net amount $ 717 $ 473 -------------------- Amounts recognized in the balance sheet consist of: Accrued benefit liability $(1,843) $(1,908) Unrecognized prior service cost 127 144 Accumulated other comprehensive loss 2,433 2,237 -------------------- Net amount $ 717 $ 473 -------------------- Weighted average assumptions as of December 31: Discount rate: Components of cost 6.25% 6.75% Benefit obligations 6.00% 6.25% Expected return on plan assets 8.75% 8.75% Rate of compensation increase 3.00% 3.00% - -----------------------------------------------------------------------------
-24- The accumulated benefit obligation at December 31, 2004 and 2003 was $9.2 million and $8.7 million, respectively. The Company estimates that a minimum of approximately $56,000 in contributions will be made in 2005. The following table presents the components of the net periodic pension cost for the three years ended December 31, 2004: In thousands 2004 2003 2002 - ------------------------------------------------------------------------- Service cost $ - $ 509 $ 556 Interest cost 609 593 602 Expected return on plan assets (591) (537) (547) Amortization of prior service cost 17 19 18 Amortization of net actuarial loss 245 221 126 Curtailment - 62 - --------------------------- Net periodic pension cost - funded plan $ 280 $ 867 $ 755 - -------------------------------------------------------------------------
In addition, the Company provided unfunded supplemental retirement benefits for the retired former Chief Executive Officer. During 2003 and 2002, the Company made payments totaling $174,000 and $332,000, respectively, for such benefits. The 2003 payment was the final amount due under such agreement. The Company does not offer any post-retirement 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. Under the Non-Statutory Stock Option Agreement, 10,000 shares of Common Stock were authorized and issued to the former Chairman of the Board. Changes in the stock option plans are as follows: Weighted Number of Shares Average ------------------------------------ Exercise Authorized Granted Available Price - ---------------------------------------------------------------------------- Balance January 1, 2002 184,859 112,059 72,800 $ 8.75 Terminated (21,720) (57,420) 35,700 9.86 Granted - 29,500 (29,500) 5.48 --------------------------------- Balance December 31, 2002 163,139 84,139 79,000 6.85 Terminated (2,400) (9,600) 7,200 7.81 Granted - 5,000 (5,000) 5.16 --------------------------------- Balance December 31, 2003 160,739 79,539 81,200 6.62 Terminated (4,500) (5,500) 1,000 10.29 Granted - 7,000 (7,000) 6.81 --------------------------------- Balance December 31, 2004 156,239 81,039 75,200 6.39 - ----------------------------------------------------------------------------
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, 2004, under the 1995 Plan, options for 56,039 shares with exercise prices ranging from $5.40 to $15.1875 per share were outstanding, 51,039 of which were exercisable. During 2004, options for 5,000 shares were granted with an exercise price of $7.00 per share, no options were exercised, and no options expired. During 2003, no options were exercised, and options for 6,700 shares expired. During 2002, options for 27,500 shares were granted at exercise prices ranging from $5.40 to $6.10 per share, no options were exercised, and options for 28,700 shares expired. At December 31, 2004, under the 1992 Plan, no options were outstanding, all remaining 4,500 shares expired in 2004, none of which were exercised. During 2003, no options were exercised, and options for 2,400 shares expired. During 2002, no options were exercised, and options for 21,720 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, 2004, options for 15,000 shares with exercise prices ranging from $4.025 to $8.00 per share were outstanding, 13,000 of which were exercisable. During 2004, options for 2,000 shares were granted with an exercise price of $6.35 per share, no options were exercised, and options for 1,000 shares expired. During 2003, options for 5,000 shares were granted with exercise prices ranging from $4.95 to $7.00, no options were exercised, and options for 500 shares expired. During 2002, options for 2,000 shares were granted with exercise prices ranging from $5.40 to $6.55, no options were exercised, and options for 7,000 shares expired. Under the Non-Statutory Stock Option Agreement for the former 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 10 years from date of grant. At December 31, 2004, the options for 10,000 shares with an exercise price of $4.025 were outstanding and exercisable. During 2004, 2003 and 2002, no options were exercised and no options expired. The following tables summarize information about stock options outstanding at December 31, 2004: Weighted Average Weighted Range of Number Remaining Average Exercise Prices Outstanding Contractual Life Exercise Price - --------------------------------------------------------------------------- $ 4.03 - $ 6.15 47,500 6.4 $ 5.05 6.16 - 7.00 8,000 7.7 6.81 7.01 - 8.13 11,739 .6 8.10 8.14 - 9.00 12,500 3.7 9.00 9.01 - 11.44 1,000 2.2 11.44 11.45 - 15.19 300 2.8 15.19 ------ 81,039 5.2 6.39 - --------------------------------------------------------------------------- Weighted Range of Number Average Exercise Prices Exercisable Exercise Price - --------------------------------------------------------------------------- $ 4.03 - $ 6.15 47,500 $ 5.05 6.16 - 7.00 1,000 6.78 7.01 - 8.13 11,739 8.10 8.14 - 9.00 12,500 9.00 9.01 - 11.44 1,000 11.44 11.45 - 15.19 300 15.19 ------ 74,039 6.35 - ---------------------------------------------------------------------------
-25- The estimated fair value of options granted during 2004, 2003 and 2002 was $3.26, $2.18 and $2.71 per share, respectively. The fair value of options granted under the Company's stock option plans during 2004, 2003 and 2002 was estimated on dates of grant using the binomial options-pricing model with the following weighted average assumptions used: 2004 2003 2002 - ------------------------------------------------------------------------- Dividend yield 2.04% 2.50% 2.51% Expected volatility 44.00% 46.00% 47.00% Risk free interest rate 4.92% 4.94% 4.78% Expected lives of option grants (years) 4.0 4.0 4.0 - -------------------------------------------------------------------------
14. Earnings Per Common Share Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company's diluted earnings per common share is calculated by adjusting net income for the after-tax interest expense on convertible debt and dividing that amount by the weighted average number of common shares outstanding, adjusted for shares that would be assumed outstanding after convertible debt conversion and stock options vested under the treasury stock method. The weighted average number of outstanding stock options, which were excluded from the calculation of diluted earnings per share because their impact would have been antidilutive, aggregated 26,039 in 2004 and 34,539 in 2003. The following table sets forth the computation of basic and diluted earnings per share: In thousands, except per share data 2004 2003 2002 - ---------------------------------------------------------------------------------------- Numerator: Income from continuing operations $ 412 $ 365 $ 34 Income from discontinued operation 127 689 394 ------ ------ ------ Net income 539 1,054 428 Add interest expense on 7 1/2% convertible subordinated notes, and 8 1/4% limited convertible senior subordinated notes, net of tax 1,757 1,356 1,640 ------ ------ ------ Net income, adjusted $2,296 $2,410 $2,068 ------ ------ ------ Denominator: Basic - weighted average common shares outstanding 1,261 1,261 1,261 Dilutive effect of: Convertible notes 2,658 2,153 2,153 Stock options 13 7 4 ------ ------ ------ Diluted shares outstanding 3,932 3,421 3,418 ------ ------ ------ Earnings per share continuing operations: Basic $ 0.33 $ 0.29 $ 0.03 Diluted $ 0.33 $ 0.29 $ 0.03 Earnings per share discontinued operation: Basic $ 0.10 $ 0.55 $ 0.31 Diluted $ 0.03 $ 0.20 $ 0.12 Total earnings per share: Basic $0.43 $0.84 $0.34 Diluted $0.43 $0.70 $0.34 - ----------------------------------------------------------------------------------------
15. Commitments and Contingencies Contingencies: The Company has employment agreements with certain executive officers, which expire at various dates through March 2006, and a consulting agreement with a private company owned by the children of a certain board member who is a former officer of the Company and performs the consulting services on behalf of such company, which expires December 2011. At December 31, 2004, the aggregate commitment for future salaries and consulting fees, excluding bonuses, was approximately $3.6 million. During 1996, the Company received a $350,000 grant from the State of Connecticut Department of Economic Development, which is classified as deferred credits, 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, which was satisfied, 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. The Company is not a party to any pending legal proceedings and claims that it believes will have a material adverse effect on the consolidated financial position or operations of the Company. 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, 2004 are as follows: $748,500 - 2005, $650,200 - 2006, $472,200 - 2007, $360,000 - 2008, $263,500 - 2009, $1,186,400 - thereafter. Rent expense was $737,000, $528,000 and $643,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Guarantees: The Company has guaranteed $1.1 million (60%) of a $1.9 million mortgage loan held by its joint venture, MetroLux Theatres, until December 2008. 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 $402,800 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 are 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 operations in the U.S. The Company also has operations in Canada. The Indoor display and Outdoor display segments are differentiated primarily by the customers they serve. The Entertainment/Real Estate segment owns a chain of motion picture theatres in the western Mountain States 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. -26- Information about the Company's operations in its three business segments for the three years ended December 31, 2004 is as follows: In thousands 2004 2003 2002 - ------------------------------------------------------------------------------------------------- Revenues: Indoor display $ 17,356 $ 18,027 $20,144 Outdoor display 21,857 24,245 38,591 Entertainment/real estate 13,366 13,750 14,471 ------------------------------------------ Total revenues $ 52,579 $ 56,022 $73,206 ------------------------------------------ Operating income: Indoor display $ 2,433 $ 2,976 $ 5,319 Outdoor display 386 (263) 803 Entertainment/real estate 3,123 3,587 3,474 ------------------------------------------ Total operating income 5,942 6,300 9,596 Other income 2,618 4,161 519 Corporate general and administrative expenses (3,990) (5,565) (5,409) Interest expense - net (3,731) (3,873) (4,460) Income tax provision (427) (658) (212) ------------------------------------------ Income from continuing operations 412 365 34 Income from discontinued operation, net of taxes 127 689 394 ------------------------------------------ Net income $ 539 $ 1,054 $ 428 ------------------------------------------ Assets: Indoor display $ 34,041 $ 35,963 Outdoor display 25,769 25,068 Entertainment/real estate 28,246 26,283 ------------------------ Total identifiable assets 88,056 87,314 General corporate 13,058 12,778 Assets of discontinued operation - 1,930 ------------------------ Total assets $101,114 $102,022 ------------------------ Depreciation and amortization: Indoor display $ 5,970 $ 5,987 $ 5,846 Outdoor display 2,463 2,484 2,911 Entertainment/real estate 955 933 924 General corporate 464 485 472 ------------------------------------------ Total depreciation and amortization $ 9,852 $ 9,889 $10,153 ------------------------------------------ Capital expenditures: Indoor display $ 4,082 $ 3,823 $ 4,042 Outdoor display 1,476 723 1,678 Entertainment/real estate 2,703 724 337 General corporate 62 58 102 ------------------------------------------ Total capital expenditures $ 8,323 $ 5,328 $ 6,159 - -------------------------------------------------------------------------------------------------
17. Joint Venture The Company has a 50% ownership in a joint venture partnership, MetroLux Theatres ("MetroLux"), accounted for by the equity method. The following results of operations summary information relates to MetroLux for the three years ended December 31, 2004, and balance sheet summary information as of December 31, 2004 and 2003. In thousands 2004 2003 2002 - --------------------------------------------------------------------------- Revenues $3,548 $3,996 $4,116 Gross profit 1,004 1,358 1,447 Other income (expense) (74) 138 296 Net income 794 1,384 1,602 Company's share of partnership net income 396 693 801 -------------------------- Current assets 606 341 Noncurrent assets 3,897 3,937 ---------------- Total assets 4,503 4,278 ---------------- Current liabilities 608 653 Noncurrent liabilities 1,635 1,859 ---------------- Total liabilities 2,243 2,512 ---------------- Company's equity in partnership net assets $1,133 $ 888 - ---------------------------------------------------------------------------
The Company's equity in partnership net assets is reflected in other assets in the Consolidated Balance Sheets. Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Trans-Lux Corporation Norwalk, CT We have audited the accompanying consolidated balance sheets of Trans-Lux Corporation and subsidiaries (the "Company") as of December 31, 2004 and 2003, 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, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We did not audit the 2002 financial statements of MetroLux Theatres, the Company's joint venture investment, which is accounted for by use of the equity method. The Company's income from joint venture of $801,000 for the year ended December 31, 2002 is included in the accompanying 2002 financial statements. The 2002 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 amount included for such company in the 2002 financial statements, is based solely on the report of such other auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditor, such consolidated financial statements present fairly, in all material respects, the financial position of Trans-Lux Corporation and subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Stamford, CT March 29, 2005 -27- Guillen, Suede and Company A Professional Corporation of Certified Public Accountants 21031 Ventura Boulevard, Suite 1105, Woodland Hills, CA 91364 TEL: (818) 348-4800 FAX: (818) 348-6326 Visit us on the web at www.gsandcocpa.com Board of Directors MetroLux Theatres Norwalk, Connecticut Independent Auditors' Report We have audited the accompanying balance sheet of MetroLux Theatres as of December 31, 2004, 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. The financial statements of MetroLux Theatres as of December 31, 2003, were audited by other auditors whose report dated February 26, 2004, expressed an unqualified opinion on those statements. 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, 2004, 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/ Guillen, Suede and Company - ------------------------------ February 25, 2005 -28- METROLUX THEATRES BALANCE SHEETS DECEMBER 31, 2004 AND 2003 (Dollars in thousands) ASSETS 2004 2003 ------ ------ CURRENT ASSETS: Cash $ 541 $ 299 Concession supplies 13 13 Prepaid expenses and other current assets 52 15 Due from Partners - 14 ------ ------ Total current assets 606 341 PROPERTY AND EQUIPMENT, net 3,882 3,917 INTANGIBLE ASSETS, NET 15 20 ------ ------ $4,503 $4,278 ====== ====== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Film rentals payable $ 127 $ 159 Accounts payable and accrued expenses 165 171 Current portion of long-term debt 225 238 Deferred revenues 82 85 Due to Partners 9 - ------ ------ Total current liabilities 608 653 ------ ------ LONG-TERM DEBT, net of current portion 1,635 1,859 ------ ------ Total liabilities 2,243 2,512 COMMITMENTS - - PARTNERS' EQUITY 2,260 1,766 ------ ------ $4,503 $4,278 ====== ======
The accompanying notes are an integral part of the financial statements. -29- METROLUX THEATRES STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (Dollars in thousands) 2004 2003 ------ ------ OPERATING REVENUES: Theatre operations Admissions $2,401 $2,765 Concessions 1,077 1,162 Other operating revenues 70 69 ------ ------ Total operating revenues 3,548 3,996 ------ ------ OPERATING EXPENSES: Theatre operations Film costs and advertising 1,389 1,566 Cost of concessions 209 183 Other operating expenses 946 889 Administrative expenses 136 112 ------ ------ Total operating expenses 2,680 2,750 ------ ------ INCOME FROM OPERATIONS 868 1,246 ------ ------ OTHER (EXPENSE) INCOME: Interest income 1 1 Gain on sale of property and equipment - 248 Interest expense (75) (88) Write off of construction in progress - (23) ------ ------ Net other (expense) income (74) 138 ------ ------ NET INCOME $ 794 $1,384 ====== ======
The accompanying notes are an integral part of the financial statements. -30- METROLUX THEATRES STATEMENTS OF PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (Dollars in thousands) Trans-Lux Metro Colorado Loveland Corporation Corporation Total -------------- ----------- ------- PARTNERS' EQUITY, January 1, 2003 $1,091 $1,091 $ 2,182 PARTNERSHIP DISTRIBUTIONS (900) (900) (1,800) NET INCOME 692 692 1,384 ------ ------ ------- PARTNERS' EQUITY, December 31, 2003 883 883 1,766 EQUITY CONTRIBUTION FROM LEASE GUARANTEE 17 17 34 PARTNERSHIP DISTRIBUTIONS (167) (167) (334) NET INCOME 397 397 794 ------ ------ ------- PARTNERS' EQUITY, December 31, 2004 $1,130 $1,130 $ 2,260 ====== ====== =======
The accompanying notes are an integral part of the financial statements. -31- METROLUX THEATRES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (Dollars in thousands) 2004 2003 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 794 $ 1,384 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 164 155 Gain on sale of property and equipment - (248) Write off of construction in progress - 23 Changes in assets and liabilities: Concession supplies - (4) Prepaid expenses and other current assets (3) 2 Film rentals payable (32) (17) Accounts payable and accrued expenses (6) (44) Deferred revenues (3) (2) Due from Partners 23 (10) ----- ------ Net cash provided by operating activities 937 1,239 ----- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of property and equipment - 327 Acquisition of property and equipment (124) (64) ----- ------- Net cash (used in) provided by investing activities (124) 263 CASH FLOWS FROM FINANCING ACTIVITIES: Principal payment on long-term debt (237) (223) Partnership distributions (334) (1,800) ----- ------- Net cash (used in) financing activities (571) (2,023) NET INCREASE (DECREASE) IN CASH 242 (521) CASH, beginning of year 299 820 ----- ------- CASH, end of year $ 541 $ 299 ----- ------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 75 $ 89 ===== ======= NON-CASH OPERATING AND FINANCING ACTIVITIES: During the year ended December 31, 2004, the Company recorded prepaid rent through an increase in equity in the amount of $34 (See Note 7).
The accompanying notes are an integral part of the financial statements. -32- METROLUX THEATRES NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Nature of Operations -------------------- MetroLux Theatres (the "Company") is a general partnership between Metro Colorado Corporation, a California corporation ("Metro Colorado"), and Trans-Lux Loveland Corporation, a Colorado corporation ("Trans-Lux"). The partnership was created for the purpose of engaging in the business of constructing, purchasing, owning 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. Property and Equipment ---------------------- Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided utilizing straight-line and accelerated methods over the estimated useful lives of the assets as follows Buildings and improvements 10-39 years Theatre equipment 5-10 years Software 3 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 the straight-line method over the term 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, or provided for, by 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. Revenue from gift certificates and group activity is recognized when they are redeemed. -33- METROLUX THEATRES NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED ------------------------------------------------------- Concentration of Credit Risk (Dollars in thousands) --------------------------------------------------- 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 years ended December 31, 2004 and 2003 in excess of the FDIC limit amounted to approximately $519 and $162, respectively. Services from Partners ----------------------- The Partners provide management and administrative services to the Company. Trans-Lux provides oversight over the Company's movie theatre operations and Metro Colorado provides accounting, payroll, human resource and other management and administrative services. The services provided by the Partners are deemed to be of equal value and are not recognized on the financial statements of the Company. 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. NOTE 2 - DUE FROM PARTNERS (Dollars in thousands) ---------------------------------------- As of December 31, 2004 and 2003, the net advances due (to) from the general partners were approximately ($9) and $14, respectively. These advances are unsecured, non-interest bearing and are expected to be repaid within the next year. During the year ended December 31, 2004, the Company received net advances from the general partners of $23. During the year ended December 31, 2003, the Company made net advances to general partners of approximately $10. -34- METROLUX THEATRES NOTES TO THE FINANCIAL STATEMENTS NOTE 3 - PROPERTY AND EQUIPMENT ---------------------- Property and equipment consist of the following for the years ended December 31: 2004 2003 ------ ------ Buildings $4,027 $4,027 Improvements 66 66 Theatre equipment 231 231 Land 519 519 Construction in progress 124 - Software 9 9 ------ ------ 4,976 4,852 Less: accumulated depreciation and amortization 1,094 935 ------ ------ $3,882 $3,917 ====== ====== Depreciation and amortization expense for the years ended December 31, 2004 and 2003 was approximately $159 and $150, respectively.
NOTE 4 - INTANGIBLE ASSETS (Dollars in thousands) ---------------------------------------- Intangible assets consist of the following for the years ended December 31: 2004 2003 ----- ----- Loan fees $29 $29 Less: accumulated amortization 14 9 --- --- $15 $20 === === Amortization expense related to intangible assets amounted to $5 for each of the years ended December 31, 2004 and 2003.
-35- METROLUX THEATRES NOTES TO THE FINANCIAL STATEMENTS NOTE 5 - LONG-TERM DEBT (Dollars in thousands) Long-term debt consists of the following for the years ended December 31: 2004 2003 ------ ------ The Company has a $2.5 million real estate loan with a bank. Borrowings under the term loan bear interest at the bank's prime rate minus 0.30% (4.95% and 3.70% at December 31, 2004 and 2003, respectively). Payments under the agreement are in equal monthly installments of approximately $26 of principal and interest, maturing January 2009 with one last payment of interest and principal of approximately $890. The loan is collateralized by the assets of the Company and 60% of the debt is guaranteed by each of the Partners. $1,860 $2,097 Less: current portion 225 238 ------ ------ $1,635 $1,859 ====== ====== Maturities of long-term debt outstanding at December 31, 2004 are as follows: Year Ending December 31, ------------ 2005 $ 225 2006 236 2007 248 2008 261 2009 890 ------ $1,860 ======
-36- METROLUX THEATRES NOTES TO THE FINANCIAL STATEMENTS NOTE 6 - DEFERRED REVENUES (Dollars in thousands) ---------------------------------------- Deferred revenues at December 31, 2004 and 2003 consist of gift certificates and group activity passes that are used for concession goods and admissions at theatres, respectively. The breakdowns is as follows as of December 31: 2004 2003 ---- ---- Gift certificates $75 $75 Group activity passes 7 10 --- --- $82 $85 === ===
NOTE 7 - COMMITMENTS (Dollars in thousands) ---------------------------------- In August 2004, the Company signed a lease for a space for a new multi-screen movie theatre. The theatre is under construction and is expected to open in October 2005. The initial lease term is for 15 years and may be extended for a total of three extension periods of 5 years each. The lease requires minimum annual rent payments ranging from $500 to $600 and contains a provision for an additional rent equal to 10% of gross annual revenue if the revenues exceed certain thresholds. The lease is guaranteed by Metropolitan Theatres Corporation ("MTC"), a parent of Metro Colorado Corporation. The future minimum rent payments are as follows: Year Ending December 31, ------------ 2005 $ 83 2006 500 2007 500 2008 500 2009 500 2010-2014 2,742 2015-2019 2,992 Thereafter 100 ------- $7,917 ======= The Company has a month to month sublease agreement with an unrelated party for $2 a month. For the years ending December 31, 2004 and 2003, the Company recognized $18 of sublease income for each of the years.
-37- METROLUX THEATRES NOTES TO THE FINANCIAL STATEMENTS NOTE 7 - COMMITMENTS (Dollars in thousands) - CONTINUED ---------------------------------------------- In connection with the guarantee by MTC mentioned above, Trans-Lux paid MTC $17 in consideration for the guarantee of the new lease. In accordance with FASB Interpretation No. 45 - "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others", the Company recorded the payment by Trans-Lux, and the respective value of the guarantee for Metro Colorado, as an equity contribution by the Partners, and an increase in prepaid rent in the accompanying financial statements. NOTE 8 - PENSION PLAN (Dollars in thousands) ----------------------------------- The Company has adopted a Safe Harbor Plan covering substantially all of its employees. Participating employees may contribute 1% to 20% of their salary, subject to required participating percentages of 401(k) regulations. The Company contributes, at the discretion of management, a matching of 100% of the first 3% of the employee's contribution and matches 50% of the 2% of the employee's contribution up to a maximum of 5% of the employee's gross salary. Contributions made for the years ended December 31, 2004 and 2003 were $3 and $2, respectively. NOTE 9 - SALE OF ASSETS (Dollars in thousands) ------------------------------------- During the year ended December 31, 2003, the Company sold land and received net proceeds of $327. The sale resulted in a gain of $248 which was recorded in the year ended December 31, 2003. -38- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. The Company's President and Co-Chief Executive Officer, Michael R. Mulcahy, the Company's Executive Vice President and Co-Chief Executive Officer, Thomas Brandt, and the Company's Executive Vice President and Chief Financial Officer, Angela D. Toppi have evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of a date within 90 days of the filing date of this annual report. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Based on this evaluation, the Company's Co-Chief Executive Officers and Chief Financial Officer have concluded that these controls are effective. (b) Changes in internal control over financial reporting. There has been no change in the Company's internal control over financial reporting that occurred in the fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. ITEM 9B. OTHER INFORMATION During the last quarter of the period covered by this report on Form 10-K, the registrant filed the following: (a) Form 8-K dated November 10, 2004, pertaining to the financial performance for the third quarter of 2004 set forth in a press release. (b) Form 8-K dated December 23, 2004, pertaining to the Company entering into an amended and restated commercial loan and security agreement. -39- 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 56 Thomas Brandt Executive Vice President and Co-Chief 41 Executive Officer Matthew Brandt Executive Vice President 41 Al L. Miller Executive Vice President 59 Angela D. Toppi Executive Vice President, Treasurer, 49 Secretary and Chief Financial Officer Karl P. Hirschauer Senior Vice President 59 John Long Senior Vice President 58 Thomas F. Mahoney Senior Vice President 57
Messrs. Mulcahy, T. Brandt, M. Brandt, Miller, Hirschauer, Mahoney and Ms. Toppi have been associated in an executive capacity with the Company for more than five years. Mr. Long was elected Senior Vice President in charge of Outdoor Operations on March 24, 2004 and has been employed by the Company since 1997. Mr. Long served as Senior Vice President of Outdoor Display Subsidiaries between March 27, 2002 and March 24, 2004 and served as Vice President of Trans-Lux Midwest Corporation between December 10, 1998 and March 27, 2002. (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. -40- 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. Equity Compensation Plan Information ------------------------------------ Securities Weighted Securities to be issued average available for December 31, 2004 upon exercise exercise price future issuance - -------------------------------------------------------------------------------------------- Equity compensation plans approved by stockholders 71,039 $6.72 75,200 Equity compensation plans not approved by stockholders 10,000 $4.03 - ------ ------ Total 81,039 $6.39 75,200 ------ ------
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. ITEM 14. PRINCIPAL ACCOUNTING FIRM FEES The information required by this Item is incorporated herein by reference to the Section entitled "Ratification of the selection of Independent Registered Public Accounting Firm" in the Company's Proxy Statement. -41- PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: (1) Consolidated Financial Statements of Trans-Lux Corporation: Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003 and 2002 Consolidated Balance Sheets as of December 31, 2004 and 2003 Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2004, 2003 and 2002 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2004, 2003 and 2002 Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Financial statements of MetroLux Theatres, a 50% owned entity, accounted for by the equity method: Independent Auditors' Report Balance Sheets as of December 31, 2004 and 2003 Statements of Income for the Years Ended December 31, 2004 and 2003 Statements of Partners' Equity for the Years Ended December 31, 2004 and 2003 Statements of Cash Flows for the Years Ended December 31, 2004 and 2003 Notes to Financial Statements (2) Financial Statement Schedules: None. (3) Exhibits: 3(a) Form of Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of Registration No. 333-15481). (b) By-Laws of the Registrant (incorporated by reference to Exhibit 3(b) of Form 10-K for the year ended December 31, 2001). 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). (c) Indenture dated as of March 1, 2004 (form of said indenture is incorporated by reference to Exhibit 12(d) of Schedule TO dated March 2, 2004). 10.1 Form of Indemnity Agreement -- Directors (form of said agreement is incorporated by reference to Exhibit 10.1 of Registration No. 333-15481). -42- 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 as of April 1, 2002 (incorporated by reference to Exhibit 10.3 of Form 10-K for the year ended December 31, 2001). Amendment No. 2 dated as of December 31, 2002 (incorporated by reference to Exhibit 10.3 of Form 10-K for the year ended December 31, 2002). Amendment No. 3 dated as of December 31, 2003 (incorporated by reference to Exhibit 10.3 of Form 10-K for the year ended December 31, 2003). 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) 1995 Stock Option Plan, as amended (incorporated by reference to Proxy Statement dated April 7, 2000). 10.5 Amended and Restated Commercial Loan and Security Agreement with People's Bank dated December 23, 2004 (incorporated by reference to Exhibit 10(a) of Form 8-K filed December 28, 2004). 10.6 Consulting Agreement with Moving Images, LLC dated as of December 1, 2004 and termination letter with Richard Brandt, filed herewith. 10.7 Employment Agreement with Michael R. Mulcahy dated as of April 1, 2005, filed herewith. 10.8 Employment Agreement with Thomas Brandt dated as of April 1, 2005, filed herewith. 10.9 Employment Agreement with Angela D. Toppi dated as of April 1, 2005, filed herewith. 10.10 Employment Agreement with Matthew Brandt dated as of April 1, 2005, filed herewith. 10.11 Employment Agreement with Al Miller dated as of April 1, 2002 (incorporated by reference to Exhibit 10.11 of Form 10-K for the year ended December 31, 2001). 10.12 Employment Agreement with Thomas F. Mahoney dated as of June 1, 2002 (incorporated by reference to Exhibit 10(a) of Form 10-Q for the quarter ended June 30, 2002). 10.13 Employment Agreement with Karl P. Hirschauer dated as of April 1, 2003 (incorporated by reference to Exhibit 10.12 of Form 10-K for the year ended December 31, 2003) 21 List of Subsidiaries, filed herewith. 31.1 Certification of Michael R. Mulcahy, President and Co-Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. -43- 31.2 Certification of Thomas Brandt, Executive Vice President and Co-Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. 31.3 Certification of Angela D. Toppi, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. 32.1 Certification of Michael R. Mulcahy, President and Co-Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 32.2 Certification of Thomas Brandt, Executive Vice President and Co-Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 32.3 Certification of Angela D. Toppi, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. -44- 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 Dated: March 31, 2005 -45- 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/ Gene F. Jankowski March 31, 2005 - ----------------------------------------- Gene F. Jankowski, Chairman of the Board /s/ Victor Liss March 31, 2005 - ----------------------------------------- Victor Liss, Vice Chairman of the Board /s/ Steven Baruch March 31, 2005 - ----------------------------------------- Steven Baruch, Director /s/ Matthew Brandt March 31, 2005 - ----------------------------------------- Matthew Brandt, Executive Vice President and Director /s/ Richard Brandt March 31, 2005 - ----------------------------------------- Richard Brandt, Director /s/ Thomas Brandt March 31, 2005 - ----------------------------------------- Thomas Brandt, Executive Vice President and Co-Chief Executive Officer and Director /s/ Howard M. Brenner March 31, 2005 - ----------------------------------------- Howard M. Brenner, Director /s/ Jean Firstenberg March 31, 2005 - ----------------------------------------- Jean Firstenberg, Director /s/ Robert B. Greenes March 31, 2005 - ----------------------------------------- Robert Greenes, Director /s/ Howard S. Modlin March 31, 2005 - ----------------------------------------- Howard S. Modlin, Director /s/ Michael R. Mulcahy March 31, 2005 - ----------------------------------------- Michael R. Mulcahy, President and Co-Chief Executive Officer and Director -46- EX-10.6 2 movimgs.txt COSULTING AGREEMENT - MOVING IMAGES Exhibit 10.6 CONSULTING AGREEMENT made as of December 1, 2004, by and between TRANS-LUX CORPORATION, a Delaware corporation, transacting business at 110 Richards Avenue, Norwalk, Connecticut (hereinafter referred to as "TLX"), and MOVING IMAGES, LLC, a Connecticut limited liability company , having an address c/o David Brandt, 113 Buckingham Road, Upper Montclair NJ 07043 (hereinafter referred to as "Consultant"). WHEREAS, Consultant has simultaneously engaged Richard Brandt ("Brandt"), to perform consulting services to and on behalf of Consultant to TLX; WHEREAS, Brandt has had a long, continuously successful experience and performance in the business operations of TLX and has a unique and deep knowledge of the management, needs, trade secrets, know-how and affairs of TLX and its subsidiaries and affiliates; and WHEREAS, it is the considered judgment of the Board of Directors of TLX that it is in the best interests and to the advantage of TLX that it engage Consultant for the performance of consulting services to TLX to be provided by Brandt on behalf of Consultant to the extent and upon the terms hereinafter provided; NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree with each other that the following is their agreement ("Agreement") in its entirety effective December 1, 2004: 1. TLX hereby engages Consultant to perform consulting services to TLX on the terms and conditions hereinafter set forth, and Consultant hereby accepts such engagement with TLX for a term ("Term") of seven years and one (1) month commencing on December 1, 2004 and ending on December 31, 2011. Notwithstanding the foregoing, Consultant may terminate the Term of this Agreement at any time, on no less than sixty (60) days prior written notice only if Brandt likewise terminates his consulting arrangement with Consultant. A copy of such agreement has been provided to TLX on execution hereof for information and shall be kept confidential by TLX in the same manner as TLX protects its own confidential information. 2. (a) During the Term, Consultant will cause Brandt to render to TLX such consulting services as may be reasonably assigned to Consultant from time to time by the Board of Directors of TLX, or by the Executive Committee of TLX, provided that such services are of a type, dignity and nature appropriate to the former Chairman of the Board, chief executive officer and executive manager of TLX and further provided that: (i) such consulting services shall be required to be rendered by Brandt only in Santa Fe, New Mexico or such other location in the United States designated by Brandt, (ii) Consultant's inability to act as such consultant by reason of illness, disability or lack of capacity of Brandt shall not be deemed a breach of this Agreement, and (iii) in Brandt's sole opinion the rendition of such services shall not be detrimental or injurious to Brandt's health. It is further agreed that such services shall not require more than sixty (60) hours service during any month; that Brandt's unavailability at any particular time shall not constitute a breach by Consultant of this Agreement; that Brandt may, in his sole opinion, determine that such services may be rendered by telephone, mail or other means of communication; and that Consultant's failure to render such services because of Brandt's absence from Santa Fe, New Mexico or such other location in the United States designated by Brandt shall not be deemed a breach by Consultant of this Agreement. Brandt shall be the sole and absolute judge of his ability to render such consulting services on behalf of Consultant, and Brandt's conclusion that the rendition thereof would be harmful to him shall absolve and excuse Consultant from the rendition of such consulting services, but the payments and/or benefits to Consultant shall continue to be made as provided in Paragraph 3(f). (b) During the Term TLX shall use its best efforts to nominate and elect Brandt from year to year as a director, and a member of the Executive Committee of TLX. In the event that Brandt shall not be elected at all times during the Term hereof, as a member of the TLX Board of Directors, and as a member of the Executive Committee, unless Brandt in writing declines to so serve or resigns as a director or member of the Executive Committee, the same shall, at Consultant's option, constitute a material breach of this Agreement by TLX unless TLX shall completely cure such breach within thirty (30) days from receiving notice from Consultant specifically setting forth the claimed breach. Upon (i) failure of TLX to cure such breach within such thirty (30) day period, or (ii) in the event there is a "Change-in-Control" as hereinafter defined, Consultant, at its option, shall at any time thereafter be entitled to terminate its obligations hereunder by notice ("Notice") to TLX, specifically including the rendition of any services by Consultant to TLX. A reciprocal notice given by Brandt to Consultant and received by TLX shall also constitute such notice to TLX. After the giving of the Notice, TLX shall pay to Consultant, notwithstanding such termination, all sums payable or otherwise provided to Consultant under this Agreement for the balance of the Term, including, but not limited to: (i) the Fees, Profit Participation and Bonus payments provided to be paid to Consultant pursuant to Paragraphs 3(a), (b) and (c) for the period from the date of such Notice of termination through December 31, 2011; and (ii) the insurance and other benefits provided under this Agreement. The aforesaid sums and benefits shall be paid or provided to Consultant as follows: (i) the aggregate fees provided to be paid for the balance of the Term pursuant to Paragraph 3(a) shall be paid to Consultant in one lump sum ten (10) days after such Notice of termination, in the same aggregate amounts as are so provided in said Paragraph 3(a) to be paid for the balance of the Term (adjusted for the CPI Adjustment, as hereinafter defined, to the date of such payment); and (ii) the sums provided to be paid pursuant to Paragraphs 3(b) and (c) and the insurance and other benefits provided under this Agreement, shall be paid or provided to Consultant in the same manner, at the same times, and in the same amounts as is provided in the said Paragraphs (b) and (c) and in Paragraph 4 and elsewhere in the Agreement to be paid or provided during the balance of the Term. (c) Nothing contained in this Agreement shall in any way limit or prevent Consultant or Brandt from: (i) being connected with, in any manner whatsoever, including, without limiting the generality of the foregoing, as owner, investor, executive or director or otherwise in any business whatsoever, including, without limiting the generality thereof, the business of producing, distributing or exhibiting motion pictures, or the business of film booking and buying, so long as the business is not directly competitive with any business of TLX; (ii) owning or dealing in the stock or securities of any corporation whose stocks or securities are traded on any public market provided that such aggregate holdings of Consultant and Brandt in any individual corporation that is a direct competitor of TLX shall not exceed five (5%) percent of the outstanding securities of any class of any such corporation. (d) Nothing in this Agreement shall prevent TLX from paying compensation to Brandt as a director, member of its Executive Committee or otherwise. (e) A "Change-in-Control" shall occur if, after the date hereof (i) any Person is or becomes the beneficial owner, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions of shares of capital stock of TLX entitling such Person to exercise 20% or more of the total voting power of all shares of capital stock of TLX entitled to vote generally in the election of directors; (ii) TLX sells or transfers all or substantially all of the assets of TLX to another Person; (iii) there occurs any consolidation of TLX with, or merger of TLX into, any other Person, any merger of another Person into TLX other than (a) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock and Class B Stock, (b) a merger which is effected solely to change the jurisdiction of incorporation of TLX and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock, or (c) a transaction in which the stockholders of TLX immediately prior to such transaction owned, directly or indirectly, immediately following such transaction, a majority of the combined voting power of the voting capital stock of the corporation resulting from the transaction, such stock to be owned by such stockholders in substantially the same proportion as their ownership of the voting stock of TLX immediately prior to such transaction; (iv) a change in the Board of Directors in which the individuals who constituted the Board of Directors at the beginning of the 24-month period immediately preceding such change (together with any other director whose election by the Board of Directors or whose nomination for election by the stockholders of TLX was approved by a vote of at least a majority of the directors then in office either who were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or (v) the Common Stock is the subject of a "Rule 13e-3 transaction" as defined under the Securities Exchange Act of 1934 ("Exchange Act"). For purposes of this Section 2, the term "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Such term also (i) includes any syndicate or group deemed to be a "Person" under Section 13(d)(3) of the Exchange Act, but (ii) excludes Brandt, TLX, any Subsidiary, any existing Person (including, directly or indirectly, the immediate family (parents, spouse, children, stepchildren, brothers or sisters) of any such Person), who currently beneficially owns shares of TLX's capital stock with 20% or more of the voting power as described above, or any current or future employee or director benefit plan of TLX or any Subsidiary or any entity holding capital stock of TLX for or pursuant to the terms of such plan, or any underwriter engaged in a firm commitment underwriting in connection with a public offering of capital stock of TLX. "Subsidiary" means a corporation of which more than 50% of the issued and outstanding stock entitled to vote for the election of directors (otherwise than by reason of default in dividends) is at the time owned or controlled, directly or indirectly, by TLX. 3. (a) During the Term TLX agrees to pay Consultant, fees ("Fees") at the rate of $384,636.72 per annum for the balance of 2004, and at such rate, subject to the CPI Adjustment for each future calendar year commencing January 1, 2005, as hereinafter provided. (b) During the Term TLX also agrees to pay Consultant (i) an amount equal to one and one-half percent (1-1/2%) of TLX's pre-tax consolidated earnings, as hereinafter defined, in each calendar year (including the full 2004 calendar year) during the Term hereof, (hereinafter the amounts payable under this Paragraph 3(b) are collectively referred to as the "Profit Participation"). Such pre-tax consolidated earnings shall be fixed and determined by the independent certified public accountants regularly employed by TLX. Such independent certified public accountants, in ascertaining such pre-tax consolidated earnings, shall apply all accounting practices and procedures heretofore applied by TLX's independent certified public accountants in arriving at such annual pre-tax consolidated earnings as disclosed in TLX's annual statement for that year of profit and loss released to its stockholders. The determination by such independent certified public accountants shall be final, absolute and controlling upon the parties. Payment of such amount, if any is due, shall be made for each year by TLX to Consultant within thirty (30) days after such accountant shall have furnished an opinion on such statement to TLX disclosing TLX's pre-tax consolidated earnings for such calendar year. TLX undertakes to use its reasonable efforts to cause said accountants to prepare and furnish such opinion within one hundred thirty (130) days from the close of each such fiscal year and to cause said independent certified public accountants, concomitantly with the delivery of such opinion by said accountants to it, to deliver a copy of such statement to Consultant and Brandt. TLX shall not have any liability to Consultant arising out of any delays with respect to the foregoing. (c) The Board of Directors of TLX, upon the recommendation of the Compensation Committee of the Board of Directors, shall consider no later than May of each year the grant of a bonus ("Bonus") to Consultant based upon the performance of Consultant during the immediate preceding year during the Term. In determining whether to grant any such Bonus and the amount thereof, consideration may be given to the performance of TLX in light of competitive and economic conditions. Notwithstanding the foregoing, TLX shall pay to Consultant the highest Bonus applicable for each calendar year ending December 31, commencing December 31, 2004, in the respective amounts hereinafter set forth, in the event TLX's pre-tax consolidated earnings for any year during the Term determined in accordance with Paragraph 3(b), meets or exceeds the respective amounts hereinafter set forth. If Pre-Tax Consolidated Annual Non-Cumulative Level of Earnings in Any Year Exceed Bonus Payable - --------------------------- ------------- $ 250,000 5,000 500,000 10,000 750,000 15,000 1,000,000 20,000 1,250,000 31,250 1,500,000 37,500 1,750,000 43,750 2,000,000 50,000 Over 2,000,000 $ 50,000 plus 2-1/2% of each full increment of $250,000 over $2,000,000, the total annual bonus not to exceed $142,976 (e.g., if $2,900,000, $50,000 plus 2-1/2% of $750,000 or $50,000 plus $18,750 or a total of $68,750). The maximum of $142,976 payable hereunder for 2004 shall be subject to the CPI Adjustment for years following 2004 as hereinafter provided. (d) Notwithstanding Paragraphs 3(b) and 3(c) of this Agreement, for purposes of Paragraphs 3(b) and 3(c) of this Agreement, there shall be excluded from the calculation of pre-tax consolidated earnings during the Term of this Agreement (i) the amount by which (x) any item or items of unusual or extraordinary gain in the aggregate exceeds 20% of TLX's net book value as at the end of the immediate preceding calendar year or (y) any item of unusual or extraordinary loss in the aggregate exceeds 20% of TLX's net book value as at the end of the immediate preceding calendar year, in each case in (x) and (y) above as determined in accordance with generally accepted accounting principles, and items of gain and loss shall not be netted against each other for purpose of the above 20% calculation, (ii) any direct effect on pre-tax consolidated earnings of write-offs of existing prepaid financing costs prior to the normal amortization schedule of such financings provided however that for the purposes of this Paragraph 3(d), such financing costs shall thereafter be amortized in accordance with such normal amortization schedule of such financings, or (iii) any contractual Bonuses and/or Profit Participations accrued or paid to Consultant and TLX employees. Each Bonus payment shall be made in accordance with the time provisions set forth in Paragraph 3(b). Notwithstanding the foregoing, the Board may, in any event, even if any of the aforesaid pre-tax consolidated earnings levels are not exceeded, grant Consultant the aforesaid Bonus or any portion thereof for any such year or any other bonus based on its performance. In the event Consultant is entitled to or is awarded a Bonus, TLX shall notify Consultant thereof no later than May 31 following such year and Consultant as directed by Brandt shall have the option of receiving such Bonus in (i) cash, (ii) Common Stock and/or Class A Stock of TLX or (iii) cash and Common Stock and/or Class A Stock in such ratio as Consultant elects as directed by Brandt. Such election shall be made by Consultant by written notice to TLX and TLX shall pay said Bonus in the form elected by Consultant within fourteen (14) days after receipt of Consultant's written notice thereof. Upon Consultant's failure to make such election within sixty (60) days after notice to Consultant from TLX of the Bonus, such Bonus shall be paid in cash to Consultant on the day following the expiration of said sixty (60) day period. In the event Consultant elects to receive any such Bonus in Common Stock and/or Class A Stock of TLX, the same shall be valued at the latest closing price of such Common Stock and/or Class A Stock, as the case may be, on (i) the American Stock Exchange (or other principal stock exchange on which TLX's Common Stock and/or Class A Stock is listed or, (ii) if not so listed, on the NASDAQ National Market System ("NMS") or any comparable system if listed thereon, or (iii) if not quoted on the NMS or a comparable system, at the mean between the average of the high and low bid and asked prices on the over-the-counter market) on the date of Consultant's election. If there is no trade on such date on any such exchange or market, then the value shall be the closing price on the date on which it last traded. Consultant may direct TLX to issue some or all of such shares to Brandt in lieu of Consultant. (e) TLX may make appropriate deductions from the said payments required to be made in this Paragraph 3 to Consultant, to comply with all governmental withholding requirements. The payments provided in Paragraph 3(a) shall be made in equal monthly installments on the 15th day of each month. The payments provided to be made to Consultant pursuant to said Paragraph 3(a) and the maximum Bonus payable under Paragraph 3(c) shall each be appropriately adjusted upward ("CPI Adjustment") for inflation at the beginning of each calendar year commencing in 2005 based on the United States Department of Labor Bureau of Labor Statistics, Consumer Price Index, United States City Average, all items (2004=100). The CPI Adjustment shall be paid retroactively when determined, for payments already made in the applicable calendar year. Consultant may direct TLX to pay 95% of all payments under Paragraphs 3(a), (b) and (c) directly to Brandt so long as Brandt is alive, and following such death, all such payments shall be made directly to Consultant. Consultant shall also be entitled to reimbursement from TLX for the amount of the social security payments payable by Brandt, if any, based on amounts paid to him by Consultant from amounts paid to Consultant under this Agreement to the extent such social security payments would have been made by TLX if the applicable portion of the Fees under Paragraph 3(a) were paid by TLX directly to Brandt as a salary. Any such reimbursement payable by TLX hereunder shall be grossed up to take into account and reimburse Consultant for any tax consequences resulting to Brandt therefrom. The amount of such reimbursement may be made by TLX directly to Brandt at Brandt's request. This Agreement shall not be deemed abrogated or terminated if TLX, in its discretion, shall determine to increase the compensation of Consultant for any period of time, or if Consultant shall accept such increase. (f) If, during the Term of this Agreement, Consultant or Brandt on behalf of Consultant 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 and/or benefits provided in Paragraphs 3 and 4 and elsewhere in this Agreement to be made or provided to Consultant, shall continue to be made or provided to Consultant 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 Paragraphs 3 and 4 and elsewhere in this Agreement, except that all benefits shall be paid directly to Brandt or to Consultant on behalf of Brandt. If Brandt shall die during the Term, TLX shall pay to Consultant an amount equal to the aggregate payments provided to be made under Paragraphs 3 (a), (b) and (c) that otherwise would have been payable to Consultant during the Term but for Brandt's death, for the balance of the Term through December 31, 2011, without any reduction whatsoever. In calculating the respective payments hereunder to be made under Paragraphs 3(b) and 3(c), such amounts shall respectively equal (i) the highest Profit Participation provided for in Paragraph 3(b) hereof and (ii) the highest Bonus payment provided for in Paragraph 3(c) hereof, received in each case by Consultant or Brandt during the seven (7) year period preceding Brandt's death (including for this calculation any payments of Profit Participation and Bonus paid to Brandt under any prior employment and consulting agreements). Such payments of the amounts provided in Paragraphs 3(a), (b) and (c) shall be made at the same times, in the same manner, and in the same amount as provided in Paragraph 3(a) and for the amounts in Paragraphs 3 (b) and (c) as adjusted herein. 4. (a) TLX will continue to furnish to Consultant (provided Brandt is insurable) a policy of life insurance upon Brandt's life, the term of which shall continue during the Term through December 31, 2011. Such policy shall provide that Consultant, upon the expiration of said policy, shall have a conversion right privilege, if same is available. Said policy shall provide for a death benefit of $250,000 payable as follows: Sixty (60%) percent of the death benefit of such policy to Helen K. Brandt, Brandt's wife, and in such event the remaining forty (40%) percent of such death benefit shall be equally divided among his surviving issue, per stirpes and not per capita. In the event that Brandt's wife shall predecease Brandt, then such policy shall provide that the entire death benefit payable thereunder shall be payable in equal shares to Brandt's surviving issue, per stirpes and not per capita. If Brandt shall not be insurable, or if the amount of such insurance is less than $250,000, then, upon Brandt's death during the Term hereof, TLX shall in every event, pay to Consultant the amount of such uninsured portion within 30 days after Brandt's said death. Notwithstanding the foregoing, Consultant hereby directs that any such uninsured portion be paid directly to Brandt's said widow and/or issue as provided above in this Paragraph 4(a). For example, if the amount of insurance is $130,000, then $120,000 shall be paid by TLX to Brandt's said widow and/or issue within 30 days after Brandt's death. (b) TLX shall also provide to or on behalf of Consultant during the Term, at TLX's expense, medical insurance coverage for Brandt and his wife at least at the same levels as in effect for Brandt on the date immediately preceding the execution of this Agreement, as well as any other group insurance plan, hospitalization plan (subject to Medicare reimbursements), medical service plan or any other benefit plan which TLX may have in effect during the Term. Included in such plans and benefits that TLX will make available or pay to Brandt are travel and accident insurance and Christmas bonuses to the extent the same are made available or paid to the senior executives of TLX. Consultant shall also be entitled for the benefit of Brandt to any other insurance and other employee benefits, including life insurance on Brandt's life, which are available to senior executives of TLX. Notwithstanding the foregoing, Consultant acknowledges and agrees that (i) Consultant is accepting $50,000 of group term life insurance on Brandt's life in place of the larger amount of group term life that Brandt otherwise would be entitled to if employed by TLX and (ii) Consultant and Brandt are not entitled to participate in TLX's existing pension plan. TLX shall continue to pay for and/or reimburse Brandt or Brandt's widow for premiums paid (similarly grossed up for tax purposes) for a second to die life insurance policy on their lives which is presently in place. Brandt's widow shall also be entitled to receive health benefits as and to the extent provided by resolution of the Board of Directors of TLX adopted on September 23, 1999, notwithstanding the earlier termination of this Agreement. 5. TLX agrees that during the Term hereof it shall provide Brandt with appropriate secretarial and administrative support, office space and office equipment in connection with the services to be performed under this Agreement. TLX shall also reimburse Brandt directly for all out-of-pocket expenses incurred by Brandt in furtherance of the business and activities of TLX, including travel, board and hotel expenses. During the Term hereof, there shall be allowance for Brandt for reasonable periods of vacations for Brandt's services not in excess of a total of six (6) weeks in any one year. TLX shall also furnish Brandt with a car and driver, as may be requested by Brandt during the Term hereof for use by Brandt in connection with his services to Consultant for TLX hereunder. 6. 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. 7. 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: Consultant c/o David Brandt 113 Buckingham Road Upper Montclair NJ 07043 and c/o Thomas Brandt 67 Wesgate Drive Stamford CT 06902 With a copy to: Richard Brandt P.O. Box 839 Tesuque New Mexico 87574 To TLX: Trans-Lux Corporation 110 Richards Avenue Norwalk, Connecticut 06854 Att: President Either party may, by written notice to the other, change the address to which notices are to be addressed. 8. TLX may itself, or through any of its subsidiaries or affiliates, make payment to Consultant of the compensation due it hereunder, provided, however, that if such payment be made by a company other than TLX, that fact shall not relieve TLX of its obligations hereunder, except with respect to the extent of the amounts so paid. 9. The provisions hereof shall be binding upon and shall inure to the benefit of Consultant, and its successors and TLX and its successors, and Brandt to the extent Brandt is entitled to direct payments for reimbursement and/or benefits as a third party beneficiary hereof. During the Term of this Agreement, if TLX shall at any time be consolidated or merged into any other corporation, or if substantially all of the assets of TLX 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. 10. Whenever in this Agreement the term "issue" is used it shall mean natural issue except in the case of Brandt's grandchildren issue shall include grandchildren legally adopted by Brandt's natural children. 11. This Agreement contains all the understandings and agreements arrived at between the parties in relation to the subject matter and supersedes any and all prior understandings and agreements, except it does not affect any insurance agreements with Brandt. 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, Consultant has executed and TLX has caused its President, on its behalf, to execute this Agreement, on the day and year first above written. TRANS-LUX CORPORATION By: /s/ Angela D. Toppi ------------------------------------- Angela D. Toppi, Title - Executive Vice President MOVING IMAGES, LLC By: /s/ David Brandt ------------------------------------- David Brandt Title - Manager December 1, 2004 Mr. Richard Brandt P.O. Box 839 Tesuque, NM 87574 Dear Richard: Reference is made to your consulting agreement effective as of June 1, 2003. We hereby mutually agree such consulting agreement is terminated effective December 1, 2004 simultaneously with our entering into a new consulting agreement with Moving Images, LLC. It is understood such termination shall not affect any insurance or other agreements between Trans-Lux Corporation and you nor any amounts accrued or outstanding and not paid to you as of such termination date under such terminated consulting agreement. In addition, to the extent you have deferred the start of increases of fees under such terminated consulting agreement, in the event and to the extent Trans-Lux Corporation retroactively pays deferred amounts of increases under employment agreements with executive officers, you shall likewise be entitled to receive the amount deferred by you for periods preceding the effective date of cancellation of your consulting agreement. Please acknowledge below your acceptance of this letter. Trans-Lux Corporation By: /s/ Angela D. Toppi ---------------------------------------- Angela D. Toppi, Executive Vice President Accepted and Agreed: /s/ Richard Brandt - -------------------------- Richard Brandt EX-10.7 3 mmcontract.txt EMPLOYMENT CONTRACT - M. MULCAHY Exhibit 10.7 AGREEMENT made February 22, 2005 effective as of the 1st day of April 2005 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 five year period commencing April 1, 2005 and terminating March 31, 2010. (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 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, provided, however, that the duties assigned shall be of a character and dignity appropriate to a senior executive of a corporation and consistent with Employee's background and experience, 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 2005 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 sixty (60) 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 EIGHTY THOUSAND DOLLARS ($280,000) per annum during each of the periods April 1, 2005 to March 31, 2006, April 1, 2006 to March 31, 2007, April 1, 2007 to March 31, 2008, April 1, 2008 to March 31, 2009 and April 1, 2009 to March 31, 2010 and subject to the CPI Adjustment, as hereinafter defined, for each future calendar year subsequent to 2005. The payments to be made to Employee for the twelve month periods commencing April 1, 2006, 2007, 2008 and 2009 shall each be appropriately adjusted upward ("CPI Adjustment") for inflation in the prior calendar year at the beginning of each such twelve month period based on the United States Department of Labor Bureau of Labor Statistics, Consumer Price Index, United States City Average, all items (2006 = 100). 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, 50% 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, 2006, 2007, 2008, 2009, 2010 and 2011 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, 2005 (including the period January 1-March 31, 2005 as provided hereafter in Section 13), 2006, 2007, 2008, 2009 and 2010 only, (provided however that the Bonus, if any, for 2010 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, 2010). Amount of Annual Pre-Tax Bonus Percent Highest Amount Consolidated Earnings on Amount Per Level - ------------------------ ------------- -------------- $ 0 - $ 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 $500,000 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 2005, 2006, 2007, 2008 and 2009 fiscal year, or on March 31, 2010 no Bonus shall be paid for such fiscal year or part thereof as to 2009. In the event of Employee's death on or after January 1 of 2006, 2007, 2008, 2009 or 2010, or April 1, 2010 as to 2010, any Bonus to which he is otherwise entitled for the prior fiscal year or 2010, 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 and 8-1/4% Limited Convertible Senior Subordinated Notes due 2012 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 2005, 2006, 2007, 2008, 2009 and 2010. Employer undertakes to use reasonable efforts to cause said accountants to prepare and furnish such statements within one hundred thirty (130) days from the close of each such fiscal year and to cause said independent certified public accountants, concomitantly with delivery of such statement by accountants to it, to deliver a copy of such statement to Employee. The Employer shall not have any liability to Employee arising out of any delays with respect to the foregoing. (e) In the event Employee dies during the Term of this Agreement while the Employee is still in the Employ of Employer, Employer shall pay to Employee's widow or his surviving issue, as the case may be, for twenty-four (24) months, annual death benefits payable weekly or in accordance with Employer's payroll practices in an amount equal to 50% 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) 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. (h) In addition, Employer agrees to pay to Employee and his beneficiaries ("Beneficiaries") as additional supplemental retirement benefits ("ASRB"), an amount so that the aggregate retirement benefits payable to 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 (h) are intended to be unfunded for income tax purposes and shall not constitute a trust fund, escrow amount, amount set apart, or other account credited with funds for the benefit of Employee or his Beneficiaries. 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 $280,000 plus CPI Adjustment per annum if termination is April 1, 2010) for a period of three (3) years, or until Employee reaches age 65 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 three (3) years and otherwise having at least the same terms and conditions as in effect on March 31, 2010, 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 fifty percent (50%), 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) In the event there is a Change in Control of Employer when a change in the majority of the Board of Directors is approved as provided in Section 9(a) above, then notwithstanding such approval, (i) the Term of this Agreement shall be extended for an additional three (3) years (each an "extended year") through March 31, 2013, (ii) the salary during each such extended year shall be at the higher of the annual rate of Two Hundred Ninety Five Thousand Dollars ($295,000) or the salary rate in effect on March 31, 2010 based on the CPI Adjustment, (iii) the salary shall continue to be adjusted by the CPI Adjustment for the last two years of the extended Term based on the increase from April 1, 2010, and (iv) Employee shall be entitled to a Bonus for each such extended year equal to the greater of the Bonus rate in effect for 2009 or the highest annual Bonus paid Employee during the five (5) calendar year period preceding such approved Change in Control of Employer. In the event of a Change in Control of Employer, services rendered by Employee for the balance of the Term will be of a type, dignity and nature appropriate to the President and Co-Chief Executive Officer of the Employer and of similar responsibility and authority as then being rendered. (c) In the event of a Change in Control of Employer under either (x) Section 9(a), whether or not Employee terminates this Agreement, or (y) Section 9(b) above, then Employer shall give Employee, (i) to the extent Employer did not receive credit for service because a freeze was in effect, additional ASRB under Section 4(h) under the present Plan for the amount of such credit not realized because of the freeze; and (ii) if the Employer discontinues such Plan, (x) additional ASRB for the amount of credit for service not realized because of discontinuance, and (y) ASRB as provided in Section 4(h) as if such Plan had not been discontinued. 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, 2005 the Agreement between Employer and Employee dated as of April 1, 2002 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, 2005 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: /s/ Thomas Brandt ------------------------------------ Executive Vice President /s/ Michael R. Mulcahy ------------------------------------ Michael R. Mulcahy EX-10.8 4 tbcontract.txt EMPLOYMENT CONTRACT - T. BRANDT Exhibit 10.8 AGREEMENT made February 22, 2005 effective as of the 1st day of April 2005 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 residing at 67 Wesgate Drive, Stamford, CT 06902 (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, 2005 and terminating March 31, 2009. (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 and Co-Chief Executive Officer 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, and the Vice-Chairman of the Board, provided, however, that the duties assigned shall be of a character and dignity appropriate to a senior executive of a corporation and consistent with Employee's background, education and experience, 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 2006 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 sixty (60) mile radius of Norwalk, Connecticut. Nothing herein shall prohibit Employee from residing within a sixty (60) 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 TWO HUNDRED THOUSAND DOLLARS ($200,000) per annum during the period April 1, 2005 to March 31, 2006, at the rate of TWO HUNDRED TEN THOUSAND DOLLARS ($210,000) per annum during the period April 1, 2006 to March 31, 2007, at the rate of TWO HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($225,000) during the period April 1, 2007 to March 31, 2008, and at the rate of TWO HUNDRED FORTY THOUSAND DOLLARS ($240,000) per annum during the period April 1, 2008 to March 31, 2009. 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, 50% 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, 2006, 2007, 2008, 2009 and 2010 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 (i) two percent (2%) of the pre-tax consolidated earnings for the fiscal years ending December 31, 2005 and 2006, and two and one half percent (2-1/2%) of the pre-tax consolidated earnings for the fiscal years ending December 31, 2007, 2008 and 2009 (including the period January 1-March 31, 2005 as provided in Section 13), plus (ii) three-eighths of one percent (3/8 of 1%) 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 and Theatrical Flow, if any, for 2009 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 $500,000. Notwithstanding the foregoing, the portion of the Bonus applicable to Theatrical Flow shall be paid at 50% of such formula if annual pre-tax earnings are less than $500,000. 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 2005, 2006, 2007 and 2008 fiscal year, or on March 31, 2009 no Bonus shall be paid for such fiscal year or part thereof as to 2009. In the event of Employee's death on or after January 1 of 2006, 2007, 2008, or 2009 or April 1, 2009 as to 2009, any Bonus to which he is otherwise entitled for the prior fiscal year or 2009, 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 and 8-1/4% Limited Convertible Senior Subordinated Notes due 2012 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 2005, 2006, 2007 , 2008 and 2009. 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 50% 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. 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, 2009, 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 $240,000 per annum if termination is April 1, 2009) 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. (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 2.9 times his salary level then in effect. 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 or increase Employee's tax liability based on alternative minimum tax provisions, such payments shall be grossed up in such a manner as to offset the effect of such excise tax and alternative minimum 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, 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 (b) In the event there is a Change in Control of Employer when a change in the majority of the Board of Directors is approved as provided in Section 9(a) above, then notwithstanding such approval, (i) the Term of this Agreement shall be extended for an additional three (3) years (each an "extended year") through March 31, 2012, (ii) the salary during each such extended year shall be at the annual rate of Two Hundred Sixty Thousand Dollars ($260,000), (iii) the salary shall be adjusted by the CPI Adjustment as hereinafter defined applicable to the last two years of the extended Term based on the increase from April 1, 2009, and (iv) Employee shall be entitled to a Bonus for each such extended year equal to the greater of the Bonus rate in effect for 2008 or the highest annual Bonus paid Employee during the five (5) calendar year period preceding such approved Change in Control of Employer. "CPI Adjustment" shall mean the adjustment for inflation at the beginning of each calendar year commencing in 2010 based on the United States Department of Labor Bureau of Labor Statistics, Consumer Price Index, United States City Average, all items (2009 = 100). The CPI Adjustment shall be implemented effective April 1, 2010 and April 1, 2011 respectively. (c) In the event of a Change in Control of Employer under either (x) Section 9(a), whether or not Employee terminates this Agreement, or (y) Section 9(b) above, then Employer shall give Employee,(i) to the extent Employee did not receive credit for service because a freeze was in effect, a supplemental retirement benefit ("ASRB") for the amount of such credit not realized because of the freeze and (ii) if the Employer discontinues its Pension Plan, (x) additional ASRB for the amount of credit for service not realized because of discontinuance, and (y) ASRB as provided in this Section 9(c) as if such Plan had not been discontinued. It is understood that the purpose of this paragraph is that (a) Employee and Employee's Beneficiary shall receive as a result of the ASRB payment, the full benefit which would otherwise have been payable from the Employer's Pension Plan had no freeze been imposed and (b) that any additional taxes payable by Employee on any ASRB payment as a result of statutory restrictions with respect to the ASRB, if any, 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 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 (c) 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 Employee's Beneficiaries. 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 as of April 1, 2005 the Agreement between Employer and Employee dated as of April 1, 2002, as amended, except any amounts which accrued as of April 1, 2005 and are unpaid, but excluding Bonus for the period January 1 - March 31, 2005 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: /s/ Michael R. Mulcahy ____________________________________ President /s/ Thomas Brandt ____________________________________ Thomas Brandt Schedule A Thomas Brandt Override Bonus Caculation Bonus Rate: 0.375% Pretax income must be in excess of $1.0M to be eligible for override. To be calculated annually for each fiscal year ending 12/31 as follows: - ----------------------------------------------------------------------- Pretax income for all theatre operations Pretax income for Trans-Lux Cinema Consulting Corporation Pretax income for Trans-Lux Loveland Corporation Less: local theatre overhead Less: general and administrative expenses overhead "Plus: amortization of Skyline noncompete of $45,000 per annum." "Less: Capital expenditures over $100,000*" Plus / Less: Gain or Loss on sale of assets - ----------------------------------------------------------------------- Equals Pretax income subject to bonus rate ======================================================================= * New construction or acquisitions not deducted for bonus calculation. EX-10.9 5 adtcntr.txt EMPLOYMENT CONTRACT - A. TOPPI Exhibit 10.9 AGREEMENT made March 21, 2005 effective as of April 1, 2005 by and between TRANS-LUX CORPORATION, a Delaware corporation having an office at 110 Richards Avenue, Norwalk, Connecticut 06856-5090 (hereinafter called "Employer"), and ANGELA TOPPI residing at 105 Cedar Lane, Ridgefield, Connecticut 06877 (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, 2005 and terminating March 31, 2009. (b) In the event that Employee remains or continues in the employ of Employer after the Term, such employment, in the absence of a further written agreement, shall be on an at-will basis, terminable by either party hereto on thirty (30) days' notice to the other and, upon the 30th day following such notice the employment of Employee shall terminate. (c) Upon expiration of the Term of this Agreement, neither party shall have any further obligations or liabilities to the other except as otherwise specifically provided in this Agreement. 3. Employee shall be employed in an executive capacity of Employer (and such of its affiliates, divisions and subsidiaries as Employer shall designate). Employer shall use its best efforts to cause Employee to be elected and continue to be elected a Chief Financial Officer and 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, President or Chief Executive Officer, provided, however, that the duties assigned shall be of a character and dignity appropriate to a senior executive of a corporation and consistent with Employee's background, education and experience, and all of the services to be rendered hereunder by Employee shall at all times be subject to the control, direction and supervision of the Board of Directors of Employer, to which Employee does hereby agree to be bound. Employee shall devote her entire time, attention and energies during usual business hours (subject to Employer's policy with respect to holidays and illnesses for comparable executives of Employer) to the business and affairs of Employer, its affiliates, divisions and subsidiaries, as Employer shall from time to time direct. Employee further agrees during the Term of this Agreement to serve as an officer or director of Employer or of any affiliate or subsidiary of Employer as Employer may request, and if Employee serves as such officer or a director she will do so without additional compensation, other than director's fees or honoraria, if any. Employer agrees that during the Term of this Agreement Employee's principal office of employment shall be within a sixty (60) mile radius of Norwalk, Connecticut. Nothing herein shall prohibit Employee from residing within a sixty (60) 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 her best efforts, skills and abilities in the performance of her services hereunder and to promote the interests of Employer, its affiliates, divisions and subsidiaries. Employee shall not, during the Term and during any subsequent employment of Employee by Employer, be engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage. The foregoing shall not be construed as preventing Employee from investing her assets in such form or manner as will not require any services on the part of Employee in the operation of the affairs of the companies in which such investments are made, provided, however, that Employee shall not, either directly or indirectly, be a director of or make any investments in any company or companies which are engaged in businesses competitive with those conducted by Employer or by any of its subsidiaries or affiliates except where such investments are in stock of a company listed on a national securities exchange, and such stock of Employee does not exceed one percent (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 SEVENTY THOUSAND DOLLARS ($170,000) per annum during the period April 1, 2005 to March 31, 2006; at the rate of ONE HUNDRED EIGHTY THOUSAND DOLLARS ($180,000) per annum during the period April 1, 2006 to March 31, 2007; at the rate of ONE HUNDRED NINETY THOUSAND DOLLARS ($190,000) per annum during the period April 1, 2007 to March 31, 2008 and at the rate of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) during the period April 1, 2008 to March 31, 2009. Such salary shall be payable weekly, or monthly, or in accordance with the payroll practices of Employer for its executives. The Employee shall also be entitled to all rights and benefits for which she shall be eligible under any stock option plan, bonus, participation or extra compensation plans, pensions, group insurance or other benefits which Employer presently provides, or may provide for her and for its employees generally. This Agreement shall not be deemed abrogated or terminated if Employer, in its discretion, shall determine to increase the compensation of Employee for any period of time, or if the Employee shall accept such increase. In addition to the group insurance set forth above, Employer also agrees to reimburse Employee $2,500 per annum for the total cost of (i) long term disability insurance currently obtained through the American Institute of Certified Public Accountants ("AICPA"), or any replacement thereof, and (ii) the cost of life insurance currently obtained though the AICPA or any replacement thereof. All payments under this Agreement are in United States dollars unless otherwise specified. (b) Employer may make appropriate deductions from the said payments required to be made in this Section 4 to Employee to comply with all governmental withholding requirements. (c) If, during the Term of this Agreement and if the Employee is still in the employ of Employer, Employee shall be prevented from performing or be unable to perform, or fail to perform, her duties by reason of illness or any other incapacity for 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 18 months, whichever is greater, 50% 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. To the extent such 18 month period continues after the end of the Term and Employee is entitled to payments under Section 7, then the payments under this Section 4(c) shall terminate and Section 7 shall apply. If Employee dies during the Term while receiving payments under this Section 4(c), 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, 2006, 2007, 2008, 2009 and 2010, respectively the grant of a bonus to Employee based on Employee's performance for the immediately preceding fiscal year. In the event of Employee's death on or after January 1 of 2006, 2007, 2008 or 2009 or April 1, 2009, on a pro rata basis (one-quarter of the amount) as to 2009, any Bonus to which she is otherwise granted for the prior fiscal year or 2009, as the case may be, shall be paid to 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"). Such Bonus shall be paid at the same time Employer pays bonuses to other executive officers of Employer based on their performance for such fiscal year. (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 the balance of the Term of the Agreement, or eighteen (18) months, whichever is greater, annual death benefits payable weekly or in accordance with Employer's payroll practices in an amount equal to 50% of Employee's then annual base salary rate. 5. During the Term of this Agreement, Employer will reimburse Employee for traveling or other out-of-pocket expenses and disbursements incurred by Employee with Employer's approval in furtherance of the businesses of Employer, its affiliates, divisions or subsidiaries, upon presentation of such supporting information as Employer may from time to time request. 6. During the Term of this Agreement, Employee shall be entitled to a vacation during the usual vacation period of Employer in accordance with such vacation schedules as Employer may prescribe. 7. Both parties recognize that the services to be rendered by Employee pursuant to this Agreement are extraordinary and unique. During the Term of this Agreement, and during any subsequent employment of Employee by Employer, Employee shall not, directly or indirectly, enter into the employ of or render any services to any person, partnership, association or corporation engaged in a business or businesses in any way, directly or indirectly, competitive to those now or hereafter engaged in by Employer or by any of its subsidiaries during the Term of this Agreement and during any subsequent employment of Employee by Employer and Employee shall not engage in any such business, directly or indirectly on her own account and, except as permitted by Section 3 of this Agreement, Employee shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity. For a period of two (2) years following termination of employment for any reason, Employee shall not directly or indirectly (i) engage or otherwise be involved in the recruitment or employment of any Employer employee or, (ii) solicit or render any service directly or indirectly to any other person or entity with regard to soliciting any customer of the Employer during the two (2) year period prior to termination of employment with respect to products or services competitive with products or services of Employer. Employee shall at no time during or after employment disclose to any person, other than Employer, or otherwise use any information of or regarding Employer except on behalf of Employer, nor communicate, publish, or otherwise transmit, in any manner whatsoever, untrue information or negative, competitive, personal or other information or comments regarding Employer. 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, 2009, 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 (i.e., at a rate of $200,000 per annum if termination is April 1, 2009) 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 payments made under this Section 7, then the payments under this Section 7 shall cease and the balance of the disability payments under Section 4(c) shall be made as provided therein without duplication for the number of months payments were made under this Section 7 (i.e., if Employee was disabled and received six monthly disability payment under Section 4(c), the Term expired and Employee received six months of payments under Section 7 and died, then six more months of disability payments under Section 4(c) would be made. 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 B to this Agreement. 8. In the event any provision of Section 7 of this Agreement shall be held invalid or unenforceable by reason of the geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement, and this Agreement shall be construed as if the geographic or business scope or the duration of such provision had been more narrowly drawn so as not to be invalid or unenforceable. 9. (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 her obligations under Section 7 of the Agreement; (b) Employer shall pay to Employee her 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 2.9 times her salary level then in effect. If Employee is incapacitated at the time of her 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 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 or increase Employee's tax liability based on alternative minimum tax provisions, such payments shall be grossed up in such a manner as to offset the effect of such excise tax and alternative minimum 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, 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 Thomas Brandt) shall have approved such change in the majority. (b) In the event there is a Change in Control of Employer when a change in the majority of the Board of Directors is approved as provided in Section 9(a) above, then notwithstanding such approval, (i) the Term of this Agreement shall be extended for an additional three (3) years (each an "extended year") through March 31, 2012, (ii) the salary during each such extended year shall be at the annual rate of Two Hundred Fifteen Thousand Dollars ($215,000), (iii) the salary shall be adjusted by the CPI Adjustment as hereinafter defined applicable to the last two years of the extended Term based on the increase from April 1, 2009, and (iv) Employee shall be entitled to a Bonus for each such extended year equal to the greater of the Bonus rate in effect for 2008 or the highest annual Bonus paid Employee during the five (5) calendar year period preceding such approved Change in Control of Employer. "CPI Adjustment" shall mean the adjustment for inflation at the beginning of each calendar year commencing in 2010 based on the United States Department of Labor Bureau of Labor Statistics, Consumer Price Index, United States City Average, all items (2009 = 100). The CPI Adjustment shall be implemented effective April 1, 2010 and April 1, 2011 respectively. (c) In the event of a Change in Control of Employer under either (x) Section 9(a), whether or not Employee terminates this Agreement, or (y) Section 9(b) above, then Employer shall give Employee,(i) to the extent Employee did not receive credit for service because a freeze was in effect, a supplemental retirement benefit ("ASRB") for the amount of such credit not realized because of the freeze and (ii) if the Employer discontinues its Pension Plan, (x) additional ASRB for the amount of credit not realized because of discontinuance, and (y) ASRB as provided in this Section 9(c) as if such Plan had not been discontinued. It is understood that the purpose of this paragraph is that (a) Employee and Employee's Beneficiary shall receive as a result of the ASRB payment, the full benefit which would otherwise have been payable from the Employer's Pension Plan had no freeze been imposed and (b) that any additional taxes payable by Employee on any ASRB payment as a result of statutory restrictions with respect to the ASRB, if any, 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 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 (c) 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 Employee's Beneficiaries. 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 her address as stated on Employer's records, in the case of Employee, or to the office of Trans-Lux Corporation, attention of the Chairman, or President or Chief Executive 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, 2005 the Employment Agreement, as amended, between the parties effective January 1, 2003 except any amounts accrued as of April 1, 2005 and are unpaid, but excluding any Bonus for 2005 payable in 2006 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: /s/ Michael R. Mulcahy _____________________________ President /s/ Angela Toppi _____________________________ Angela Toppi EX-10.10 6 mbcontract.txt EMPLOYMENT CONTRACT - M. BRANDT Exhibit 10.10 AGREEMENT made February 25, 2005 effective as of the 1st day of April 2005 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, 2005 and terminating March 31, 2009. (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, Vice Chairman of the Executive Committee of the Board and President of the Theatre Division 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, provided, however, that the duties assigned shall be of a character and dignity appropriate to a senior executive of a corporation and consistent with Employee's background, education and experience, 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 2005 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 sixty (60) 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 NINETY-FIVE THOUSAND DOLLARS ($195,000) per annum during the period April 1, 2005 to March 31, 2006, at the rate of TWO HUNDRED FIVE THOUSAND DOLLARS ($205,000) per annum during the period April 1, 2006 to March 31, 2007, at the rate of TWO HUNDRED TWENTY THOUSAND DOLLARS ($220,000) per annum during the period April 1, 2007 to March 31, 2008 and at the rate of TWO HUNDRED THIRTY THOUSAND DOLLARS ($230,000) per annum during the period April 1, 2008 to March 31, 2009. 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, 50% 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, 2006, 2007, 2008, 2009 and 2010 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 and one- half percent (1 1/2%) of the pre-tax consolidated earnings for the fiscal years ending December 31, 2005 (including the period January 1 - March 31, 2005 as provided hereafter in Section 13) and 2006, and two percent (2%) of the pre-tax consolidated earnings for each of the fiscal years ending December 31, 2007, 2008 and 2009, plus (ii) seven-eighths of one percent (7/8 of 1%) of the Employer's theatrical net pre-tax cash flow for each such fiscal year ending December 31, 2005 through 2009 ("Theatrical Flow") as hereinafter defined in Schedule A attached hereto (provided however that the Bonus and Theatrical Flow, if any, for 2009 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 $500,000. Notwithstanding the foregoing, the portion of the Bonus applicable to Theatrical Flow shall be paid at 50% of such formula if annual pre-tax earnings are less than $500,000. 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 2005, 2006, 2007 and 2008 fiscal year, or on March 31, 2009 no Bonus shall be paid for such fiscal year or part thereof as to 2009. In the event of Employee's death on or after January 1 of 2006, 2007 2008,or 2009, or April 1, 2009 as to 2009, any Bonus to which he is otherwise entitled for the prior fiscal year or 2009, 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 and 8 1/4% Limited Convertible Senior Subordinated Notes due 2012 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 2005, 2006, 2007, 2008 and 2009. 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 50% 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. 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, 2009, 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 $230,000 per annum if termination is April 1, 2009) 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. (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 2.9 times his salary level then in effect. 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 or increase Employee's tax liability based on alternative minimum tax provisions, such payments shall be grossed up in such a manner as to offset the effect of such excise tax and alternative minimum 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. (b) In the event there is a Change in Control of Employer when a change in the majority of the Board of Directors is approved as provided in Section 9(a) above, then notwithstanding such approval, (i) the Term of this Agreement shall be extended for an additional three (3) years (each an "extended year") through March 31, 2012, (ii) the salary during each such extended year shall be at the annual rate of Two Hundred Fifty Thousand Dollars ($250,000), (iii) the salary shall be adjusted by the CPI Adjustment as hereinafter defined applicable to the last two years of the extended Term based on the increase from April 1, 2009, and (iv) Employee shall be entitled to a Bonus for each such extended year equal to the greater of the Bonus rate in effect for 2008 or the highest annual Bonus paid Employee during the five (5) calendar year period preceding such approved Change in Control of Employer. "CPI Adjustment" shall mean the adjustment for inflation at the beginning of each calendar year commencing in 2010 based on the United States Department of Labor Bureau of Labor Statistics, Consumer Price Index, United States City Average, all items (2009 = 100). The CPI Adjustment shall be implemented effective April 1, 2010 and April 1, 2011 respectively. (c) In the event of a Change in Control of Employer under either (x) Section 9(a), whether or not Employee terminates this Agreement, or (y) Section 9(b) above, then Employer shall give Employee, (i) to the extent Employee did not receive credit for service because a freeze was in effect, a supplemental retirement benefit ("ASRB") for the amount of such credit not realized because of the freeze and (ii) if the Employer discontinues its Pension Plan, (x) additional ASRB for the amount of credit for service not realized because of discontinuance, and (y) ASRB as provided in this Section 9(c) as if such Plan had not been discontinued. It is understood that the purpose of this paragraph is that (a) Employee and Employee's Beneficiary shall receive as a result of the ASRB payment, the full benefit which would otherwise have been payable from the Employer's Pension Plan had no freeze been imposed and (b) that any additional taxes payable by Employee on any ASRB payment as a result of statutory restrictions with respect to the ASRB, if any, 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 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 (c) 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 Employee's Beneficiaries. 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 as of April 1, 2005, the Agreement between Employer and Employee dated as of April 1, 2002, as amended, except any amounts which accrued as of April 1, 2005 and are unpaid, but excluding any Bonus and Theatrical Flow for the period January 1, 2005 - March 31, 2005 which are 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: /s/ Michael R. Mulcahy __________________________________ President /s/ Matthew Brandt __________________________________ Matthew Brandt Schedule A Matthew Brandt Override Bonus Caculation Bonus Rate: 0.875% Pretax income must be in excess of $1.0M to be eligible for override. To be calculated annually for each fiscal year ending 12/31 as follows: - ----------------------------------------------------------------------- Pretax income for all theatre operations Pretax income for Trans-Lux Cinema Consulting Corporation Pretax income for Trans-Lux Loveland Corporation Less: local theatre overhead Less: general and administrative expenses overhead "Plus: amortization of Skyline noncompete of $45,000 per annum." "Less: Capital expenditures over $100,000*" Plus / Less: Gain or Loss on sale of assets - ----------------------------------------------------------------------- Equals Pretax income subject to bonus rate ======================================================================= * New construction or acquisitions not deducted for bonus calculation. EX-21 7 x210410k.txt LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF THE COMPANY A. As of December 31, 2004 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 Corporation (5) New Mexico 100 Trans-Lux High Five Corporation (6) Colorado 100 Trans-Lux Holding Corporation Connecticut 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 New Mexico Corporation (6) New Mexico 100 Trans-Lux Pennsylvania Corporation (2) Pennsylvania 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 entity (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. EX-31.1 8 mm04ex311.txt CERTIFICATION - M. MULCAHY EXHIBIT 31.1 CERTIFICATION I, Michael R. Mulcahy, President and Co-Chief Executive Officer of Trans-Lux Corporation certify that: 1. I have reviewed this Annual Report on Form 10-K (the "Report") of Trans-Lux Corporation; 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and c) disclosed in this Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Michael R. Mulcahy ---------------------------------------- Date: March 31, 2005 Michael R. Mulcahy President and Co-Chief Executive Officer EX-31.2 9 tb04ex312.txt CERTIFICATION - T. BRANDT EXHIBIT 31.2 CERTIFICATION I, Thomas Brandt, Executive Vice President and Co-Chief Executive Officer of Trans-Lux Corporation certify that: 1. I have reviewed this Annual Report on Form 10-K (the "Report") of Trans-Lux Corporation; 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and c) disclosed in this Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Thomas Brandt ---------------------------------------- Date: March 31, 2005 Thomas Brandt Executive Vice President and Co-Chief Executive Officer EX-31.3 10 at04ex313.txt CERTIFICATION - A. TOPPI EXHIBIT 31.3 CERTIFICATION I, Angela D. Toppi, Executive Vice President and Chief Financial Officer of Trans-Lux Corporation certify that: 1. I have reviewed this Annual Report on Form 10-K (the "Report") of Trans-Lux Corporation; 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and c) disclosed in this Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Angela D. Toppi ---------------------------------------- Date: March 31, 2005 Angela D. Toppi Executive Vice President and Chief Financial Officer EX-32.1 11 mm04ex321.txt CERTIFICATION, SEC. 906 - M. MULCAHY EXHIBIT 32.1 CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael R. Mulcahy, President and Co-Chief Executive Officer of Trans-Lux Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 to the best of my knowledge, that: (1) The Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Michael R. Mulcahy ---------------------------------------- Date: March 31, 2005 Michael R. Mulcahy President and Co-Chief Executive Officer This Certification accompanies this Form 10-K as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Company or the certifying officer. EX-32.2 12 tb04ex322.txt CERTIFICATION, SEC. 906 - T. BRANDT EXHIBIT 32.2 CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Thomas Brandt, Executive Vice President and Co-Chief Executive Officer of Trans-Lux Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 to the best of my knowledge, that: (1) The Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Thomas Brandt ---------------------------------------- Date: March 31, 2005 Thomas Brandt Executive Vice President and Co-Chief Executive Officer This Certification accompanies this Form 10-K as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Company or the certifying officer. EX-32.3 13 at04ex323.txt CERTIFICATION, SEC. 906 - A. TOPPI EXHIBIT 32.3 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Angela D. Toppi, Executive Vice President and Chief Financial Officer of Trans-Lux Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 to the best of my knowledge, that: (1) The Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Angela D. Toppi ---------------------------------------- Date: March 31, 2005 Angela D. Toppi Executive Vice President and Chief Financial Officer This Certification accompanies this Form 10-K as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Company or the certifying officer. -----END PRIVACY-ENHANCED MESSAGE-----