Note 7 – Long-Term Debt

Long-term debt consists of the following:

In thousands	September 30 2018		December 31 2017
8¼% Limited convertible senior subordinated notes due 2012	$	387	$	387
9½% Subordinated debentures due 2012		220		220
Revolving credit line		933		2,722
Term loans		1,640		790
Term loans - related party		1,000		1,000
Forgivable loan		650		650
Total debt		4,830		5,769
Less deferred financing costs and debt discount		360		206
Net debt		4,470		5,563
Less portion due within one year		3,060		4,029
Net long-term debt	$	1,410	$	1,534

On July 12, 2016, the Company and its wholly-owned subsidiaries Trans-Lux Display Corporation, Trans-Lux Midwest Corporation and Trans-Lux Energy Corporation (the “Borrowers”) entered into a credit and security agreement, as subsequently amended on various dates, the latest being on June 11, 2018 (collectively, the “Credit Agreement”) with CNH as lender, which expires on July 12, 2019. Under the Credit Agreement, the Company is able to borrow up to an aggregate of $4.0 million, which includes (i) up to $3.0 million of a revolving loan, at an interest rate of prime plus 6.0% (11.25% at September 30, 2018), which was previously prime plus 4.0% (8.5% at December 31, 2017) and (ii) a $1.0 million term loan, at an interest rate of prime plus 6.0% (11.25% at September 30, 2018 and December 31, 2017). Interest under the agreement is payable monthly in arrears. The availability under the revolving loan is calculated based on certain percentages of eligible receivables and inventory.

The Credit Agreement contains financial and other covenant requirements, including, but not limited to, financial covenants that require the Borrowers to maintain a fixed charge coverage ratio. As of September 30, 2018, the Company was not in compliance with the fixed charge coverage ratio covenant, which triggered a default under the Credit Agreement. Subsequent to September 30, 2018, the Company and CNH agreed to a forbearance agreement which is effective through February 28, 2019, as long as there are no additional defaults under the Credit Agreement. Under this agreement, CNH will forbear from exercising its rights and remedies under the Credit Agreement for the specified period subject to the agreed terms and conditions, which include an increase in the interest rate and certain other restrictions.

On June 11, 2018, the Company entered into a Subordinated Secured Promissory Note (the “SMI Note”) with SM Investors, L.P. (“SMI”), pursuant to which the Company has borrowed $330,000 from SMI at an initial interest rate of 10.00%. The maturity date of the note is the earlier of June 11, 2020 or the Company’s completion of an additional financing package of at least $1 million. The Company also issued SMI a three-year warrant to purchase 82,500 shares of the Company at an exercise price of $0.01 per share. The Company utilized the Black-Scholes method to calculate the fair value of this warrant at the time of issuance, which was $95,000, and is being treated as a debt discount amortized over the two-year term of the loan.

On June 11, 2018, the Company entered into a Subordinated Secured Promissory Note (the “SMII Note”) with SM Investors II, L.P. (“SMII”), pursuant to which the Company has borrowed $670,000 from SMII at an initial interest rate of 10.00%. The maturity date of the note is the earlier of June 11, 2020 or the Company’s completion of an additional financing package of at least $1 million. The Company also issued SMII a three-year warrant to purchase 167,500 shares of the Company at an exercise price of $0.01 per share. The Company utilized the Black-Scholes method to calculate the fair value of this warrant at the time of issuance, which was $192,000, and is being treated as a debt discount amortized over the two-year term of the loan.

In connection with the financing described in Note 13 – Subsequent Events, SMI and SMII agreed to waive their right of payment with respect to the purchase of 1,315,789 shares for $1.5 million.

In connection with the SMI Note and the SMII Note, the Company and its wholly-owned subsidiaries Trans-Lux Display Corporation, Trans-Lux Midwest Corporation and Trans-Lux Energy Corporation, as borrowers, entered into a Waiver, Consent and Ninth Amendment to the Credit and Security Agreement (“Ninth Amendment”), dated as of June 11, 2018, with CNH, to provide for certain amendments to that certain Credit and Security Agreement with CNH, dated July 12, 2016, to allow for the Company’s entry into the SMI Note and the SMII Note and the security interests granted to SMI and SMII thereunder.

The Company, SMI, SMII and CNH also entered into a Subordination and Intercreditor Agreement (the “SIA”), dated as of June 11, 2018, setting forth CNH’s senior lien position to all collateral of the Company, and the rights of each of CNH, SMI and SMII with respect to the collateral of the Company. The SIA allows the Company to make payments to SMI and SMII as long as the Company is not in default on the Credit and Security Agreement with CNH.

The Company has outstanding $387,000 of Notes which are no longer convertible into common shares. The Notes matured as of March 1, 2012 and are currently in default. As of September 30, 2018 and December 31, 2017, the Company had accrued $290,000 and $266,000, respectively, of interest related to the Notes, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.

The Company has outstanding $220,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of September 30, 2018 and December 31, 2017, the Company had accrued $185,000 and $169,000, respectively, of interest related to the Debentures, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.

On May 23, 2017, the Company received $650,000 structured as a forgivable loan from the City of Hazelwood, Missouri. The loan will be forgiven on a pro-rata basis if predetermined employment levels are attained and would expire on April 1, 2024. If the Company attains the employment levels required by the agreement, there is no interest due, otherwise interest accrues at a rate of prime plus 2.0% (7.25% at September 30, 2018). In February 2018, in accordance with the agreement, the Company requested a 1-year extension of the terms of the agreement, which was approved by the City of Hazelwood in March 2018, so the agreement now terminates on April 1, 2025.

As described in Note 11 – Related Party Transactions, the Company has loans aggregating $1.0 million from an entity affiliated with a director of the Company.