SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12.
TRANS-LUX CORPORATION
_______________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
___________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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TRANS-LUX CORPORATION
26 Pearl Street
Norwalk, Connecticut 06850
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 23, 2010
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of TRANS-LUX
CORPORATION will be held at the Norwalk Community College, East Campus, 188
Richards Avenue, Norwalk, Connecticut, on Thursday, September 23, 2010 at 10:00
A.M. local time for the following purposes:
1. To consider and act upon a proposal for a 1-for-50 reverse
stock split of the outstanding Common Stock followed
immediately by a 50-for-1 forward stock split;
2. To consider and act upon a proposal to amend the
Corporation's Restated Certificate of Incorporation to remove
Class B Stock from authorized capital stock;
3. To consider and act upon a proposal to amend the
Corporation's Restated Certificate of Incorporation to (a) modify
provisions relating to Class A Stock and (b) increase authorized
Common Stock;
4. To consider and act upon a proposal to approve the adoption
of the 2010 Long-Term Incentive Plan;
5. To elect two directors to serve for a term of three years, in
each case until their successors shall be elected and shall
have qualified;
6. To consider and act upon a proposal to ratify the retention
of BDO USA, LLP, as the Corporation's independent
registered public accounting firm for the ensuing year; and
7. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
The close of business on August 6, 2010 has been fixed as the record date for
the determination of the stockholders entitled to notice of and to vote at the
Meeting.
By Order of the Board of Directors,
Angela D. Toppi
Corporate Secretary
Dated: Norwalk, Connecticut
August 6, 2010
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Please mark, date, sign and return promptly the enclosed proxy so that your
shares may be represented at the Meeting. A return envelope, which requires no
postage, if mailed in the United States, is enclosed for your convenience.
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PROXY STATEMENT
of
TRANS-LUX CORPORATION
for the Annual Meeting of Shareholders
To Be Held on September 23, 2010
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This statement is furnished in connection with the solicitation by the Board of
Directors of TRANS-LUX CORPORATION (hereinafter called the ("Corporation") of
proxies in the accompanying form to be used at the Annual Meeting of the
Stockholders of the Corporation to be held on Thursday, September 23, 2010, and
at any adjournment thereof, for the purposes set forth in the accompanying
notice of the Meeting. It is intended that this Statement and the proxies
solicited hereby be mailed to stockholders no later than August 13, 2010. A
stockholder who shall sign and return a proxy in the form enclosed with this
statement has the power to revoke it at any time before it is exercised by
giving written notice of revocation or a proxy of later date and returning it to
the Corporation, Attention: Corporate Secretary, or by voting in person at the
Meeting. Proxies properly executed and received in time for the Meeting will be
voted.
The close of business on August 6, 2010 has been fixed as the record date for
the determination of the stockholders entitled to notice of and to vote at the
Meeting. There were outstanding as of the close of business on August 6, 2010
and entitled to notice of and to vote at the Meeting 2,442,923 shares of Common
Stock. Each outstanding share of Common Stock is entitled to one vote on all
matters voted on at the Meeting.
Unless otherwise specified, the proxies in the accompanying form will be voted
in favor of all of the proposals set forth in the Notice of Annual Meeting. In
the discretion of the proxyholders, the proxies will also be voted for or
against such other matters as may properly come before the Meeting. The Board
of Directors is not aware that any other matters are to be presented for action
at the Meeting.
PROPOSAL TO APPROVE
A 1-FOR-50 REVERSE STOCK SPLIT
OF THE OUTSTANDING COMMON STOCK
FOLLOWED IMMEDIATELY BY
A 50-FOR-1 FORWARD STOCK SPLIT
Proposal No. 1 (Item 1 on Proxy Card)
The Board of Directors is recommending to the stockholders that they approve a
1-for-50 reverse stock split of our outstanding shares of Common Stock, which
would be followed immediately by a 50-for-1 forward stock split.
Summary of Reverse Stock Split and Forward Stock Split Proposal
The Board of Directors has reviewed, authorized and recommends the proposed
reverse stock split of our outstanding shares of Common Stock. The proposal, if
approved, would result in each share of our Common Stock held by a stockholder
owning less than 50 shares at the effective time of the reverse stock split
being converted into the right to receive cash in the amount of our average
closing price for the five trading days preceding the date of our Annual Meeting
on which sales took place, while each share of Common Stock held by a
stockholder owning 50 or more shares will continue to represent one share of our
Common Stock without any payment. Immediately after the reverse stock split is
effective, it would be followed by a forward stock split of 50-for-1. The
reverse stock split and forward stock split are voted on as one proposal and are
sometimes referred collectively to as the reverse stock split or "going dark."
See "Special Factors - Purposes of the Reverse Stock Split," "Background of the
Reverse Stock Split," "Reasons for the Reverse Stock Split" and "Fairness of the
Reverse Stock Split" in this Proxy Statement. The approval of a majority of the
outstanding shares of Common Stock is required to approve the reverse stock
split. If approved, such reverse stock split will become effective upon the
filing of an amendment to our Restated Certificate of Incorporation, as amended,
which is intended to be filed with the Delaware Secretary of State promptly
following the approval at the Annual Meeting as set forth in Appendix A to this
Proxy Statement, unless the Board of Directors decides to abandon the reverse
stock split. See "Fairness of the Reverse Stock Split - Reservation of Rights."
No persons have been retained to solicit votes or make recommendation for the
approval of the reverse stock split proposal.
The reverse stock split followed by the forward stock split is intended to
enable us to avoid the costly expenses of remaining a publicly held corporation
required to file reports with the Securities and Exchange Commission ("SEC"),
particularly the internal control requirements being imposed by the
Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"). Present holders of more than 50
shares of Common Stock will still retain an equity interest in the Corporation,
while holders who would otherwise receive fractional shares will instead receive
cash in lieu of the fractional shares on the basis of the average closing market
price of the Common Stock for the five trading days preceding the Annual
Meeting. Of the 630 stockholders of record who currently hold shares of Common
Stock, approximately 450 stockholders hold less than 50 shares and will receive
payment in lieu of shares. All stockholders who own less than 50 shares will be
required to surrender their current certificate and will receive a letter of
transmittal to accompany their certificate in order to receive payment for
fractional shares. Of the Corporation's 12 officers and directors, 10 hold more
than 50 shares and will remain stockholders. The outstanding stock options held
by officers, directors and a consultant will not have to be adjusted to reflect
the reverse stock split because it is followed by a forward stock split.
In addition to this Proxy Statement, the Corporation will file a Schedule 13e-3
in accordance with Rule 13e-3 under the Securities Exchange Act of 1934. The
Board of Directors has determined that the reverse stock split is fair to and in
the best interest of all the Corporation's unaffiliated stockholders and has
unanimously approved the reverse stock split and actions implementing the
reverse stock split, if approved. See also "Fairness of the Reverse Stock Split
- Recommendation of the Corporation's Board of Directors."
Directors and officers currently beneficially own approximately 4.26% of the
outstanding Common Stock. After the reverse stock split, directors and officers
would own approximately 4.27% of the Common Stock. All directors and officers
have indicated they will vote "For" the reverse stock split proposal. See also
"Vote Required for Approval" and "Effects of the Reverse Stock Split."
The reverse stock split is not expected to affect the Corporation's operations
except for the anticipated cost and management time savings associated with
termination of the Corporation's public corporation obligations and cash spent
on payment for fractional shares. The proposal will likely result in a
delisting of the Common Stock on the NYSE Amex ("NYSE Amex") or ("Exchange") and
give rise to a Repurchase Event under the Corporation's indenture ("Indenture")
governing our 8 1/4% Limited Convertible Senior Subordinated Notes due 2012
("Notes"). The Corporation does not have the cash to repurchase any Notes
issued under such Indenture and the Corporation already is in default under such
Indenture, but the terms of our bank loan ("Senior Indebtedness") and such
Indenture will prohibit the holders from collecting payment under the
Subordination provisions so long as the Senior Indebtedness is outstanding. See
"Special Factors - Background of the Reverse Stock Split."
If the reverse stock split is approved, the Corporation will be eligible to
cease filing periodic public reports with the SEC, which the Corporation intends
to do. This may result in the Corporation's Common Stock being quoted only in
the over-the-counter ("OTC") pink sheets.
The Corporation did not approve a special committee of independent directors to
review this proposal. A majority of the Board of Directors is considered
independent and the proposal was unanimously approved by all directors.
Stockholders who receive payment for fractional shares will realize a gain or
loss for Federal income tax purposes for the difference between the payment for
fractional shares and their tax basis in their shares. See "Effects of the
Reverse Stock Split - Federal Income Tax Consequences of the Reverse Stock
Split." Stockholders are urged to consult with their own tax advisor for the
tax consequences of the reverse stock split in light of each stockholder's own
particular circumstances.
Stockholders are not entitled to appraisal rights under the Corporation's
Restated Certificate of Incorporation or the Delaware General Corporation Law.
See also "Terms of the Reverse Stock Split - Dissenter's Rights."
QUESTIONS AND ANSWERS CONCERNING
THE REVERSE STOCK SPLIT
The following questions and answers address some commonly asked questions about
this proposal that may not be addressed in the above summary. They may not
include all information you deem important and we urge you to read the entire
proposal carefully.
Question: What are some of the advantages of the 1-for-50 reverse stock split?
Answer: The Board believes that the reverse stock split will have the following
advantages, among others. Terminating the registration of our Common Stock
under the Exchange Act will eliminate the costs of being a public reporting
corporation, with estimated annual cost savings of approximately $275,000
before taxes excluding the cost of management time.
Terminating the registration will eliminate the cost of complying with
Sarbanes-Oxley which implementation is estimated at $100,000 as well as annual
compliance by the Corporation's independent registered public accounting firm
certification estimated at $57,000.
Providing liquidity for stockholders holding less than 50 shares of Common Stock
by having their fractional shares purchased without paying any commission.
Eliminating our obligation to publicly disclose sensitive business information.
Reducing our exposure for filings that would have been made under the Exchange
Act.
Question: What are some of the disadvantages of the reverse stock split?
Answer: Stockholders owning less than 50 shares of Common Stock will be forced
to cash out their shares at this time and not have the opportunity to
participate in or benefit from any possible future appreciation in the
Corporation's value and will recognize a gain or loss on the transaction unless
they purchase additional shares prior to the effective date of the reverse stock
split so that they own an aggregate of 50 or more shares.
Stockholders remaining after the reverse stock split will no longer have
available all of the information currently available in the Corporation's
filings at the SEC under the Exchange Act. They will also lose the ability to
seek damages for filings which might be claimed to violate the provisions of the
Exchange Act for documents filed with the SEC and will not have the protection
of certification required of the Chief Executive Officer and Chief Financial
Officer in such filings. While we plan to make information available that
complies with Rule 15c2-11 under the Exchange Act to enable brokers to trade the
Common Stock in the OTC pink sheets, such information will be less comprehensive
than that filed with the SEC.
Stockholders who remain will have less liquidity for their shares because of
delisting on the NYSE Amex and uncertain opportunity of trading in the OTC pink
sheets to the extent market makers are willing to quote the Corporation's stock
in the pink sheets. The Corporation may find it more difficult to attract new
officers and employees if the Common Stock is not readily traded and quoted.
The Corporation will be less likely to be able to use its Common Stock in
acquisitions of assets or companies although no such acquisition had been
previously made utilizing Common Stock.
It will be more difficult for the Corporation to publicly sell equity securities
unless it agrees to again be a public reporting corporation with the SEC.
Question: Why is the Corporation seeking to "go dark" now?
Answer: The Corporation has sustained losses for several years and the cost of
compliance of being a public reporting corporation diverts its cash resources
from research, sales and other business activity. In addition, the Corporation
has often had a thin trading market for its securities and there is limited
liquidity for stockholders. A disproportionate number, 450, of its 630 holders
of record own less than 50 shares of Common Stock and an aggregate of
approximately only 5,700 shares.
Question: What are some of the factors supporting the Board's decision to
recommend the reverse stock split?
Answer: The Board based its decision primarily on the expensive cost of
complying as a public reporting corporation filing reports with the SEC and
considered both advantages and disadvantages discussed above. Nevertheless, the
Board reserves the right to modify or abandon the reverse stock split even if
approved. See "Fairness of the Reverse Stock Split."
Question: What are the interests of the officers and directors in the reverse
stock split?
Answer: The primary interest is avoiding the costs of being a public reporting
corporation filing reports with the SEC, complying with Sarbanes-Oxley and the
potential liability and diversion of management time for responding to lawsuits
and cost of defending them which diminishes the cash available for operations,
projects and incentives. The officers and directors do not own a relatively
large percentage of the current outstanding stock (4.26%) in aggregate and such
amount will not significantly increase (aggregate of 4.27% if approved).
Question: What is the estimated total cost of the reverse stock split to the
Corporation?
Answer: The Corporation estimates the total cost of the reverse stock split
will approximate $70,000 of which approximately $5,000 is to cash out fractional
interests of holders with less than 50 shares of Common Stock, $55,000 in legal
and accounting fees to review the transaction and other costs such as the
transfer agent's handling of exchanging certificates for payment of fractional
shares.
Question: Why didn't the Board of Directors establish a committee of
independent directors to approve the reverse stock split?
Answer: A majority of the Board of Directors consists of independent directors
who approved and recommended unanimously that the proposal be submitted to
stockholders so there was no need to establish a separate committee. The
holdings of such outside directors is also rather small, less than 2.0% in
aggregate, so there is no perceived material financial benefit to them if the
proposal is approved by stockholders.
SPECIAL FACTORS
Purposes of the Reverse Stock Split
The primary purpose of the reverse stock split is to enable a "going dark
transaction." This will enable us to save money being spent because of our
status as a public reporting corporation filing reports with the SEC and avoid
what will be a prohibitive expense to us of complying with Sarbanes-Oxley based
on our constrained cash flow. The reverse stock split is intended to decrease
our total stockholders of record below 300, to approximately 180 from our
present 630 holders of records. We will then be able to file a Form 15 with the
SEC and a Form 25 with the NYSE Amex terminating the registration of our Common
Stock and our reporting obligations under the Exchange Act. Unless we comply
with Rule 15c2-11 under the Exchange Act, which we intend to do, market makers
are not permitted to quote our Common Stock on the OTC pink sheets if we are not
current in our filings with the SEC. Upon filing of Form 15 and Form 25 we
expect our Common Stock and our Notes described below to be delisted from
trading on the NYSE Amex which will also result in a savings of the annual fee
of such Exchange, currently $27,500. It is quite conceivable such Exchange will
move to delist us in any event. On July 2, 2010, the Corporation received a
letter from the Exchange advising that the Corporation is not in compliance with
two of the Exchange's continued listing standards and in order to maintain its
listing, the Corporation must submit a plan addressing how it intends to regain
compliance; if the plan is not submitted or not accepted, the Corporation will
be subject to delisting proceedings.
Background of the Reverse Stock Split
The cost of compliance of being a public reporting corporation has increased
dramatically since passage of Sarbanes-Oxley and required compliance with its
provisions. While the SEC has delayed implementation of certain provisions, the
eventual cost of compliance will drain us of valuable cash resources. Our
Common Stock has had sparse trading activity from time to time. We do not
realize many benefits associated with being a public reporting corporation such
as enhanced stockholder value, due to limited liquidity and the market price of
our Common Stock. We have not been able to seriously consider "going dark"
because of provisions in our Notes which enable the holders of such Notes to
demand we repurchase their Notes if such a proposal is filed with the SEC.
However, since we already have an event of default under the Indenture for the
Notes for failure to pay interest on such Notes, the holders of such Notes are
entitled to demand repurchase of their Notes at this time in any event. The
holder of our Senior Indebtedness, People's United Bank, by notice to the
trustee under the Indenture governing the Notes can cause the implementation of
the Notes' subordination provisions to the People's United Bank's Senior
Indebtedness which provide they cannot receive payment on the Notes until such
Senior Indebtedness is paid in full or the event of default is cured. While
there can be no assurance we can refinance these Notes and eliminate the event
of default and repurchase obligation, we perceive no greater harm in going
forward with the "going dark" proposal since we have not paid the $417,800
interest payment on the Notes currently in default. Accordingly, the reverse
stock split proposal was approved at our March 26, 2010 Board of Directors
Meeting.
REASONS FOR THE REVERSE STOCK SPLIT
Small Public Corporation
The Corporation is a smaller reporting corporation as defined by SEC Rules and
small by other measures, such as gross assets, market value, gross receipts,
employees, etc. Our stockholder base is small and we have a disproportionate
number of stockholders owning a small number of shares. Of our 630 stockholders
or record, 492 stockholders own less than 100 shares and 450 stockholders own
less than 50, the reverse stock split divider. These 450 stockholders only own
an aggregate of approximately 5,700 shares.
Negative Aspects of Remaining Public
The Board believes the Corporation and its stockholders currently derive no
material benefit from continued registration under the Exchange Act. In recent
years the global economic crisis has adversely affected many of our customers
and our businesses. As a result we have incurred significant operating losses
and been unsuccessful in increasing stockholder value or attracting investor
interest despite operating as a publicly held corporation for over 84 years with
the oldest listing on the American Stock Exchange at the time of its merger with
the New York Stock Exchange. With our present inability to provide increased
value to our stockholders as a public reporting corporation filing reports with
the SEC and especially in light of the significantly increased burdens
associated with being such a public reporting corporation following passage of
Sarbanes-Oxley, our Board of Directors and management do not believe remaining a
public reporting corporation is in the best interest of the Corporation or its
stockholders. The costs and burdens imposed on us as a result of being a
public reporting corporation are likely to increase significantly as a result of
such legislation and implementation of related corporate governance reforms.
The tangible and intangible costs of being a public reporting corporation filing
reports with the SEC are not justified because we are unable to realize many of
the benefits that publicly traded companies sometimes realize. The Board does
not believe we are in a position at this time to use our status as a public
reporting corporation to raise equity capital through sales of our securities in
a public offering or otherwise access the public markets to raise capital. Our
small public float and limited trading volume often limits the ability of our
stockholders to sell their shares without reducing the trading price of our
Common Stock. During the past 12 months, the average monthly trading volume of
our Common Stock on the NYSE Amex was approximately 8,000 shares.
Continuing as a public reporting corporation filing reports with the SEC
provides certain benefits, namely a broader public market for sale and exchange
of shares, stockholder liquidity and readily accessible financial, business and
management information about us. The reason for substantially limiting these
benefits is that they are expensive and of limited effect for small public
companies like us. Our small market capitalization and operating losses do not
attract substantial investment activity or analyst interest, and our largest
stockholder has substantially reduced the amount of shares held in various
funds. As a result, the Board has determined that the costs of remaining a
publicly reporting traded entity outweigh the benefits for us.
Termination of Registration and Reporting Requirements:
Reduction of Expenses
The reason for the reverse stock split is to qualify the Corporation for
deregistration of its securities under SEC Rules 12d2-2(c) and 12g-4(a)(1) and
(b). The first rule allows a corporation to withdraw its registration from
listing on a national securities exchange while the second rule allows a
corporation with a class of securities held by less than 300 persons to
terminate registration and reporting requirements with respect to such class of
securities. We feel it is our duty in fairness to all of our stockholders and
an exercise of good business judgment to accomplish this reverse stock split as
soon as possible.
The reverse stock split will terminate the equity interests of approximately 450
holders of our Common Stock who hold fewer than 50 shares. The reverse stock
split is expected to relieve us of the administrative burden, cost and
competitive disadvantage associated with filing reports and otherwise complying
with the requirements of registration under the Federal securities laws by
deregistering our Common Stock and Notes under the Exchange Act. Additionally,
the reverse stock split would provide small stockholders a beneficial medium to
liquidate their equity interests at what we deem a fair price without having to
pay brokerage commission, which could be disproportionate in relation to the
price and small number of shares (average of approximately only 12 shares).
We are preparing this termination at this time as part of our ongoing effort to
control unnecessary expenses and to cut general and administrative costs
associated with independent registered public accounting firm fees,
Sarbanes-Oxley compliance and other miscellaneous fees associated with being a
public reporting corporation, which we estimate amount to be approximately
$275,000 annually.
The costs and burdens imposed on us as a result of remaining a public
corporation are expensive. We estimate the cost of complying with implementing
internal controls required by Sarbanes-Oxley will be $100,000 and the annual
certification related to controls by our independent registered public
accounting firm is approximately $57,000. When that provision is effective,
there is also increased management time and effort, particularly of our Chief
Executive Officer and Chief Financial Officer to certify the financial
statements of each of our public filings with the SEC as required under
Sarbanes-Oxley and implemented by the SEC. These indirect costs and time drain
can be substantial. These expenses and management time incurred will be avoided
if we "go dark," although under Delaware law, we are still required to hold an
Annual Meeting of Stockholders or a stockholder could bring suit in Delaware
demanding a meeting if more than 13 months passes from our last meeting.
However, the time otherwise currently devoted to public corporation reporting
obligations can be devoted to other purposes such as sales, marketing and/or
operational projects to further promote our business.
Alternatives to Reverse Stock Split
The Board did not consider various alternatives to a reverse stock split because
they were not feasible or desirable. For example, a freeze out merger where a
majority of stockholders approve a merger transaction resulting in most
unaffiliated stockholders being eliminated and receiving cash would require
payment beyond our ability and likely give rise to litigation. Likewise, a
tender offer would require a greater cash expenditure to reduce the number of
stockholders below 300 and would not necessarily be successful.
In addition, we have not received any serious proposals to buy or merge us, and
any informal contacts have not advanced, as there was no indication of any
serious price offer acceptable to recommend to stockholders to sell or merge us.
EFFECTS OF THE REVERSE STOCK SPLIT
Any stockholder who owns less than 50 shares of Common Stock will be paid cash
equal to the average closing trading price of the Common Stock for the five (5)
trading days immediately preceding the date of the 2010 Annual Meeting on which
sales took place for the fractional shares resulting from the reverse stock
split. Such holders of Common Stock will cease to be stockholders and not be
able to participate in our potential future growth and earnings. These
stockholders will obtain liquidity for their shares without incurring
transaction costs, but will be eliminated as stockholders unless they purchase
additional shares prior to the effective date of the reverse stock split so that
they own an aggregate of 50 or more shares of Common Stock. Stockholders who
own 50 or more shares of Common Stock prior to the reverse stock split will
remain stockholders of the Corporation after the reverse stock split followed by
the forward stock split, owning full shares of our Common Stock, without
receiving cash for fractional shares, and thus remain eligible to participate in
potential future growth and earnings by us.
The primary benefit of the reverse stock split followed by the forward stock
split and "going-private transaction" of the Corporation and remaining
stockholders is the opportunity to benefit from value created from reduction in
expenses associated with being a publicly traded reporting corporation. Costs
associated with independent registered public accounting firm fees, attorney's
fees, transfer agent fees and miscellaneous fees amounted to approximately
$295,000 in 2009 before taking into account internal payroll costs associated
with compliance and reporting activities or any costs associated with potential
stockholder litigation. Additionally we estimate we will avoid over $157,000 of
annual costs in compliance with internal control implementation and
approximately $78,000 costs annually thereafter for not having to comply with
Sarbanes-Oxley.
Potential Detriments of the Reverse Stock Split to Stockholders
The detriments associated with the reverse stock split and "going dark
transaction" is primarily eliminating the Corporation's access to public capital
markets, unless we were willing to again file reports with the SEC, and reduced
liquidity for remaining stockholders. The officers, directors and remaining
stockholders will benefit from financial transparency of our compliance with
Rule 15c2-11 under the Exchange Act making certain information available on our
website to market makers as well as stockholders, including financial results as
follows:
i. Our exact name.
ii. Our address of our principal executive offices.
iii. Our state of incorporation.
iv. The exact title and class of the security.
v. The par or stated value of the security.
vi. The number of shares of our Common Stock outstanding as of the end of our
most recent fiscal year.
vii. The name and address of our transfer agent.
viii. The nature of our business.
ix. The nature of our products or services offered.
x. The nature and extent of our facilities.
xi. The name of our chief executive officer and members of the Board of
Directors.
xii. Our most recent balance sheet and profit and loss and retained earnings
statements.
xiii. Similar financial information for our 2 preceding fiscal years.
While we intend to make such information available on our website, and comply
with Delaware law by holding annual meetings, there will be no access to the
SEC's Edgar site for information after we "go dark" and less information
available than required of a public reporting corporation.
Only stockholders holding less than 50 shares of Common Stock will be forced to
liquidate their shares and receive cash for fractional shares when they
surrender their stock certificate(s) to the transfer agent. Such former
stockholders will lose the opportunity to participate in any possible future
growth and earnings by us.
It is expected approximately 450 stockholders of our current 630 stockholders of
record will be cashed out of their approximate aggregate of 5,700 shares,
leaving 180 stockholders of record which are less than 300 stockholders,
enabling us to cease filing reports with the SEC under the Exchange Act. It is
estimated that officers and directors who currently own approximately 4.26% of
the outstanding Common Stock (excluding stock options) will hold approximately
4.27% after the reverse stock split.
Since we will terminate our reporting obligations, the remaining stockholders
will not have the protection of officers' certification required of reports
filed with the SEC and will receive less information than currently available.
FINANCIAL EFFECT OF THE REVERSE STOCK SPLIT
Completion of the reverse stock split will require approximately $70,000 of
cash, which includes the cost of purchasing the fractional shares that remain
after the reverse stock split, the legal costs, accountant's costs and other
expenses related to the transaction. As a result, we will have decreased
working capital following the reverse stock split which could have some adverse
effect on our liquidity, results of operations and cash flow. The payments to
holders of fewer than 50 shares of Common Stock will be paid out of working
capital. See "Financing of the Reverse Stock Split." The forward stock split
does not result in additional expense because holders of 50 or more shares will
retain the same number of shares and not have to trade in their stock
certificates for new certificates.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
A summary of the federal income tax consequences of the reverse stock split is
set forth below. The discussion is based on present federal income tax law.
The discussion is not, and should not be relied on as, a comprehensive analysis
of the tax issues arising from or relating to the reverse stock split. This
summary does not purport to deal with all aspects of federal income taxation
that may be relevant to a particular stockholder in light of such stockholder's
personal investment circumstances or to certain types of stockholders subject to
special treatment under the Internal Revenue Code of 1986, as amended.
Accordingly, stockholders are urged to consult their personal tax advisors for
an analysis of the effect of the reverse stock split based on their own tax
situations, including consequences under applicable state, local or foreign tax
laws.
The Corporation believes that the receipt of cash for fractional shares will be
deemed a sale of the fractional shares for income tax purposes and the
difference between the amount of cash received for the fractional shares and the
stockholder's tax basis in such shares will be the gain or loss to be
recognized. The gain or loss will generally be a capital gain or loss, with
treatment being short term if owned less than one (1) year and long term if
owned for a year or more.
The Corporation believes the transactions consisting of a reverse stock split
followed by a forward stock split will qualify as a recapitalization under
Section 368 of the Internal Revenue Code. Therefore, such transactions will
result in no material Federal income tax consequences to us.
The shares of Common Stock held by remaining stockholders will have an aggregate
basis, for computing gain or loss, equal to the same aggregate basis of the
shares of existing Common Stock held by such stockholder immediately prior to
the reverse stock split and forward stock split. Such stockholder's holding
period for their shares will include the same holding period for their shares of
Common Stock prior to the transaction, provided that such outstanding shares of
existing Common Stock were held by the stockholder as capital assets on the
effective date of the reverse stock split.
The purchase of the fractional shares by us will be considered a purchase and
retirement of our own stock. Such purchase will be treated as a reduction of
stockholders' equity. We have no present plans to resell or dispose of the
fractional shares acquired in this transaction.
FAIRNESS OF THE REVERSE STOCK SPLIT
Recommendation of the Corporation's Board of Directors
Our Board of Directors ("Board") believe that the reverse stock split followed
by the forward stock split is fair to the unaffiliated stockholders of the
Corporation, including those being redeemed pursuant to the reverse stock split
and those who will retain an equity interest in the Corporation subsequent to
the consummation of the reverse stock split and forward stock split. The
discussion below summarizes some of the material factors, both positive and
negative, considered by the Board in reaching their fairness determinations, in
addition to the detailed discussion in the Proxy Statement at "Special Factors -
Background of the Reverse Stock Split," "Reasons for the Reverse Stock Split,"
and "Effects of the Reverse Stock Split." For the reasons described below and
under "Fairness of the Reverse Stock Split - Procedural Fairness to Unaffiliated
Stockholders," the Board also believes that the process by which the transaction
is to be approved is fair to unaffiliated stockholders, including those being
redeemed pursuant to the reverse stock split and those who will retain an equity
interest in the Corporation subsequent to the consummation of the reverse stock
split including:
* Director and officer participation in the reverse stock split. No
director or officer of the Corporation will be cashed out of their
investment in the Corporation as a result of the reverse stock split
and each will remain stockholders in the Corporation along with the
unaffiliated stockholders who are not cashed out as a result of the
reverse stock split, holding the same number of shares of Common Stock
as a result of the forward stock split.
* Sales or transfers to discontinue stock ownership. Stockholders who
would otherwise retain an equity interest in the Corporation after the
consummation of the reverse stock split have some control as to whether
they will retain an interest in the Corporation by selling or
transferring shares of Common Stock prior to the effective date of the
reverse stock split to bring their equity interest to below 50 shares,
and, therefore, be cashed out pursuant to the reverse stock split.
In consideration of these factors, and without assigning any particular weight
to the specific factors, our Board has unanimously determined that the reverse
stock split is fair to, and in the best interest of, all of our unaffiliated
stockholders, and we should submit the reverse stock split to a vote of our
stockholders, and recommend that they vote to approve the reverse stock split.
We anticipate that each member of the Board and each officer of our Corporation
who owns, or controls directly or indirectly, shares of Common Stock will vote
his or her shares, or cause any controlled shares to be voted, in favor of the
reverse stock split.
Reservation of Rights
Although the Board requests stockholder approval of the reverse stock split, the
Board reserves the right to decide, in its discretion, to withdraw the reverse
stock split from the agenda of the Annual Meeting of Stockholders prior to any
stockholder vote thereon, to abandon the reverse stock split even if the
proposal is approved, or to modify the terms of the reverse stock split to be
submitted for stockholder approval. The Board presently believes that the
reverse stock split is in our best interests, that of our stockholders being
redeemed pursuant to the reverse stock split, and our stockholders who will
retain an equity interest in the Corporation subsequent to the consummation of
the reverse stock split, and thus has recommended a vote for the proposed
amendment to the Restated Certificate of Incorporation of the Corporation.
However, the Board nonetheless believes that it is prudent to recognize that,
between the date of this Proxy Statement and the date of the Annual Meeting of
Stockholders, factual circumstances could possibly change such that it might not
be appropriate or desirable to effect the reverse stock split and forward stock
split at that time or on the terms currently proposed. Such factual
circumstances could include a superior offer to our stockholders, a material
change in the Corporation's business or litigation affecting our ability to
proceed with the reverse stock split and forward stock split, which the Board in
its discretion determines to be significant enough to withdraw the reverse stock
split from the agenda of the Annual Meeting of Stockholders prior to any
stockholder vote thereon, to abandon the reverse stock split even if the
proposal is approved, or to modify the terms of the reverse stock split to be
submitted for stockholder approval. If the Board decides to withdraw or modify
the reverse stock split, the Board will notify the stockholders of such decision
promptly in accordance with applicable rules and regulations.
Fairness; Factors Considered
In considering whether the cash payment of the average closing price for five
trading days immediately preceding the date of the Annual Meeting for pre-split
share of Common Stock payable to unaffiliated stockholders whose shares will be
redeemed in connection with the reverse stock split is substantively fair from a
financial point of our unaffiliated stockholders, our Board considered various
factors set forth below:
Current Market Prices. During the last twelve (12) months, the average daily
closing price of the Corporation's Common Stock was $0.94 per share. Trading
has been sporadic, and on several days in 2009 and 2010, no trading activity
took place. The last sale price per share for our Common Stock as reported on
the NYSE Amex on June 30, 2010 was $0.61. During the twelve (12) month period
from July 1, 2009 to June 30, 2010 the closing price per share for the Common
Stock has been in the range of $0.30 to $3.50. The Board considered the current
market price to be consistent with our opportunities and risks on a going
concern basis, and considered this factor as rather significant in determining
the overall fairness of the transaction to unaffiliated stockholders due to the
low trading volume.
Liquidation Value. Our Board determined that the liquidation value of our
assets was not a significant factor because it concluded that such action would
not maximize stockholder value due to our lack of material tangible assets and
the difficulty that would be encountered in attempting to sell our stock or our
assets at a fair and adequate price.
Purchase Prices Paid in Recent Repurchases of Common Stock. This factor was not
considered because there have been no repurchases of our Common Stock by us in
the last twelve (12) months.
Firm Offers to Acquire Control of the Corporation. We have not received, during
the past two (2) years, any firm offers for our merger or consolidation with or
into another corporation, or vice versa, or the sale or transfer of all or
substantially all of our assets to another corporation, or a purchase of our
securities by another person that would involve a change in our control. We did
sell substantially all the assets of our Entertainment Division in 2008 to an
unaffiliated purchaser, which resulted in litigation described in our Proxy
Statement for our December 11, 2009 Annual Meeting of Stockholders.
Purchases to Continue Stock Ownership. Stockholders may elect to remain
stockholders of the Corporation by acquiring sufficient shares so that they hold
at least 50 shares of Common Stock in their account immediately prior to the
reverse stock split. Therefore they can control the decision as to whether to
remain stockholders in the Corporation after the reverse stock split is
consummated or receive cash consideration offered for fractional shares in
connection with the reverse stock split.
Stockholder Information and Financial Transparency. Officers, directors and
unaffiliated stockholders who continue to hold an equity interest in the
Corporation following the reverse stock split will not have available to them
the same detailed information regarding our operations and results that is
currently available to them in our filings with the SEC and will lose some
financial transparency that is currently available to them.
Sarbanes-Oxley Act of 2002. We will no longer be subject to the reporting
provisions of Sarbanes-Oxley or the Exchange Act and our officers will no longer
be required to certify the accuracy of our financial statements.
Future Cost Savings. Stockholders who continue to hold an equity interest in
the Corporation will benefit from the future cost savings expected to be
realized by terminating our public corporation reporting status.
Director and Officer Participation in the Reverse Stock Split. None of our
directors or officers will be cashed out of their investment in the Corporation
as a result of the reverse stock split. Accordingly, such directors and
officers will continue to benefit from their equity ownership in the Corporation
after the reverse stock split.
Sales or Transfers to Discontinue Stock Ownership. Stockholders who would
otherwise retain an equity interest in the Corporation after the consummation of
the reverse stock split have some control as to whether they will retain an
interest in the Corporation by selling or transferring shares of Common Stock
prior to the effective date of the reverse stock split, to sell their entire
interest, or bring their equity interest to below 50 shares of Common Stock,
and, therefore, be cashed out pursuant to the reverse stock split.
Alternative Plans
As indicated herein, our directors and officers, who collectively hold
approximately 4.26% of our outstanding Common Stock, have orally advised us that
they intend to vote for the proposal. Accordingly, approval of the matter is
not assured without the affirmative vote of additional stockholders. In the
event that we do not receive enough votes to approve the proposal set forth
herein, we will continue to operate as a public corporation filing reports with
the SEC.
Procedural Fairness to Unaffiliated Stockholders
Our Board determined that the reverse stock split is procedurally fair to
unaffiliated stockholders. We have not and do not intend to retain an
unaffiliated representative to act solely on behalf of unaffiliated security
holders for purposes of negotiation of the terms of the transaction described
herein or preparing a report concerning the fairness of the reverse stock split
which would be an expense we cannot afford. The terms and conditions of the
reverse stock split proposal were proposed by our Board which unanimously
concluded that the reverse stock split is in our best interest and all of our
stockholders, including unaffiliated stockholders. The "going private
transaction" pursuant to Rule 13e-3 was approved by all six (6) directors who
are deemed independent directors out of a total of nine (9) directors then on
our Board.
Our Board also determined that the reverse stock split is procedurally fair to
the unaffiliated stockholders because unaffiliated stockholders are generally in
a position to either disapprove the transaction or control whether or not they
remain stockholders after the reverse stock split by acquiring sufficient shares
so that they hold at least 50 shares of Common Stock immediately prior to the
reverse stock split or selling or transferring sufficient shares so that they
hold less than 50 shares of Common Stock immediately prior to the reverse stock
split.
We reasonably believe that the 1-for-50 reverse stock split followed by the
50-for-1 forward stock split and the related "going dark transaction" are
procedurally and substantively fair to unaffiliated stockholders. This decision
was unanimously reached by the Board on March 26, 2010.
TERMS OF THE REVERSE STOCK SPLIT
General
If our stockholders approve the reverse stock split followed by the forward
stock split and the Amendment to the Corporation's Restated Certificate of
Incorporation, the reverse stock split will become effective upon the filing of
the Amendment with the Delaware Secretary of State and the forward stock split
immediately thereafter. On the effective date of the reverse stock split each
50 shares of existing Common Stock issued and outstanding will be automatically
converted into one (1) share of new Common Stock and then converted back to 50
shares of Common Stock. To the extent such holders would also have fractional
shares as a result of the reverse stock split, such fractions are converted back
to full shares as a result of the forward stock split.
We will not issue fractional shares or scrip resulting from the reverse stock
split. Instead, we will purchase all shares eliminated for cash, based on the
average closing price of our Common Stock on the five (5) trading days preceding
the 2010 Annual Meeting of Stockholders. This is the same formula we used last
year in cashing out fractional shares when each share of our Class B Stock was
automatically converted into 1.3 shares of Common Stock as approved by the
stockholders.
While it is the Board's present intention to effect the reverse stock split and
forward stock split, the Board may, at any time prior to the effective date of
the reverse stock split, abandon the filing of the Amendment to the
Corporation's Restated Certificate of Incorporation and the reverse stock split
without further action by the stockholders.
Exchange of Certificates; No Fractional Shares
After the effective date, we will authorize the payment for certificates
representing less than 50 shares of Common Stock presently outstanding on the
effective date upon surrender of an existing certificate evidencing such
outstanding shares of existing Common Stock.
Our transfer agent, Continental Stock Transfer and Trust Corporation, will
represent us as exchange agent in connection with the reverse stock split. As
soon as practicable after the effective date, the holders of the Common Stock
owning less than 50 shares will be notified that the reverse stock split has
been effected and should surrender to the exchange agent any certificate(s)
representing outstanding shares of our Common Stock in exchange for cash for any
fractional shares. It is anticipated that the payment in cash for any
fractional shares will be paid by us within thirty (30) days after such shares
are surrendered to us for payment. No interest will be paid to any cashed out
stockholders on the cash payments to be made from the effective date of the
reverse stock split.
Registered stockholders who hold physical stock certificates representing less
than 50 shares of Common Stock in the aggregate will be instructed to surrender
their current certificate(s) and will receive a letter of transmittal to
accompany their current certificate(s) to the exchange agent in order to receive
their fractional share payment. Stockholders who hold their shares in book
entry form will automatically receive payment by check. Stockholders who hold
their shares in a brokerage account will have the relevant account automatically
credited by the broker. In the event that any certificate representing shares
of Common Stock is not presented for cash upon request by us, the cash payment
will be administered in accordance with the relevant state abandoned property
laws. Until the cash payments have been delivered to the public official
pursuant to the abandoned property laws, such payments will be paid to the
holder thereof or his or her designee at such time as the cashed out shares have
been properly presented for exchange.
Stockholders who own 50 or more shares of Common Stock do not have to exchange
certificates as they will continue to hold the same number of shares after the
reverse stock split and forward stock split are effected by the Amendment filed
with the State of Delaware Secretary of State.
Resale of Securities
Concurrently with the consummation of the reverse stock split, we will make a
filing with the SEC to eliminate our ongoing reporting obligations, and will
make a filing with the NYSE Amex to discontinue trading in our Common Stock and
Notes. We will put on our website the information required by Rule 15c2-11
under the Exchange Act so market makers who wish to do so will have the
requisite information to transact trades in the OTC pink sheets. We cannot
guaranty the extent of any public market for our Common Stock in the pink
sheets. The fractional shares of the Common Stock acquired by us in the reverse
stock split will be considered a purchase and retirement of our Common Stock.
The purchase will be treated as a reduction of our stockholders' equity. We
have no present plans to resell or dispose of the fractional shares acquired in
the transaction, except as may be used under the proposed 2010 Long-Term
Incentive Plan.
Dissenter's Rights
Stockholders who dissent from a reverse stock split have no appraisal rights
under Delaware law or under the Corporation's Restated Certificate of
Incorporation or By-Laws in connection with the reverse stock split. Our Board
did not grant unaffiliated stockholders access to our corporate files, nor
extend the right to retain counsel or appraisal services at our expense.
Retaining an unaffiliated representative would be an added expense of the
reverse stock split. There may exist other rights or actions under state law
for stockholders who are aggrieved by reverse stock splits generally. Although
the nature and extent of such rights or actions are uncertain and may vary
depending upon facts or circumstances, stockholder challenges to corporate
action in general are related to the fiduciary responsibilities of corporate
officers and directors and to the fairness of corporate transactions. For
example, stockholders could, if they deemed such to be applicable, despite the
small aggregate number of shares involved being cashed out, i.e. 5,700 shares,
take appropriate legal action against us and our Board, and claim that the
reverse stock split was unfair to the unaffiliated stockholders, and/or that
there was no justifiable or reasonable business purpose for the reverse stock
split.
FINANCING OF THE REVERSE STOCK SPLIT
The Board estimates that the total cost to us of the reverse stock split for
payment of the fractional share interests and the estimated transactional fees
and expenses will be approximately $70,000. We intend to finance the reverse
stock split out of working capital.
COSTS OF THE REVERSE STOCK SPLIT
The Corporation estimates of the costs incurred or expected to be incurred in
connection with the reverse stock split to be approximately $70,000. Actual
costs of the transaction may be more or less than this estimate. We will be
responsible for paying these costs.
Fractional Shares Payment $ 5,000
Legal Fees 40,000
Accounting Fees 15,000
SEC Filing Fees 10
Transfer Agent Fees 3,500
Printing and Mailing Costs 3,000
Miscellaneous 3,490
-------
Total $70,000
=======
CONDUCT OF THE CORPORATION'S BUSINESS
AFTER THE REVERSE STOCK SPLIT
We expect our business and operations to continue as they are currently being
conducted and, except as disclosed in this Proxy Statement, the reverse stock
split is not anticipated to have any effect upon the conduct of our business.
We expect to realize time and cost savings as a result of terminating our public
corporation reporting status. If the reverse stock split is consummated, all
persons beneficially owning fewer than 50 shares of Common Stock at the
effective time of the reverse stock split will no longer have any equity
interest in, and will not be stockholders of, the Corporation and therefore will
not participate in any future potential earnings and growth by us.
As a result of the reverse stock split the registration of our Common Stock
under the Exchange Act will be terminated and trading of our Common Stock may be
limited depending on broker interest and our continued provision of information
to satisfy Rule 15c2-11 under the Exchange Act. In addition, because our Common
Stock will no longer be subject to the reporting requirements of the Exchange
Act, we will be relieved of our obligation to comply with the proxy rules of
Regulation 14A under Section 14 of the Exchange Act, and our officers and
directors and stockholders owing more than ten percent (10%) of Common Stock
will be relieved of the stock ownership reporting requirements and "short swing"
trading restrictions under Section 16 of the Exchange Act. Further, we will
cease being subject to the liability provision of the Exchange Act, and will
cease filing information with the SEC. Among other things the effect of this
change will be a savings to us in not having to comply with the requirements of
the Exchange Act. However, we will still be subject to Delaware law
requirements of holding an annual meeting and compliance will require a
simplified proxy statement not subject to Section 14 of the Exchange Act,
although potentially subject to lawsuits claiming the information was false or
misleading.
As stated throughout this Proxy Statement, we believe that there are significant
advantages in effecting the reverse stock split, and "going dark transaction"
and we plan to avail ourselves of any opportunities we may have as a
non-reporting publicly held corporation, including, but not limited to,
improving our ability to compete in the marketplace, making ourselves a more
viable candidate with respect to a merger or acquisition transaction with any
one of our competitors or entering into some type of joint venture or other
arrangement. Although management currently is not pursuing any negotiations
with respect to any sale or merger transaction, there is always a possibility
that we may enter into an arrangement in the future and our remaining
stockholders may receive payment for their shares in any transaction in excess
of payment made for cashed out fractional shares.
Other than as described in this Proxy Statement as to the proposals to
amend provisions of Class A Stock and increase authorized Common Stock plus
Class A shares to be issued to a partner to a joint venture,
neither we nor our management has any current plans or proposals to effect any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, to sell or transfer any material amount of its assets, to change
our Board or management; or change materially our capitalization, or otherwise
to effect any material change in our corporate structure or business, although
we are constantly seeking ways to refinance our indebtedness. There are no
plans to change any material term of any severance agreement or retention bonus
plan agreement with any of our executive officers.
PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME
Our Common Stock is traded on the NYSE Amex under the symbol TLX. The following
table sets forth for the periods indicated the high and low sale prices of our
Common Stock on such Exchange and the American Stock Exchange each quarter
during the past two (2) years and during 2010 prior to the initial public
announcement related to the reverse stock split proposal on and for the period
between the date of that announcement and up to the issuance of this Proxy
Statement to our stockholders.
High Low
---- ---
Year ending December 31, 2010
-----------------------------
First Quarter.............................. $1.90 $0.57
Second Quarter............................. 0.88 0.40
Year ended December 31, 2009
----------------------------
First Quarter.............................. $0.90 $0.20
Second Quarter............................. 2.31 0.24
Third Quarter.............................. 3.50 0.78
Fourth Quarter............................. 1.49 0.30
Year ended December 31, 2008
----------------------------
First Quarter.............................. $6.70 $3.00
Second Quarter............................. 4.15 3.15
Third Quarter.............................. 6.10 1.80
Fourth Quarter............................. 2.65 0.50
As of June 30, 2010, we had approximately 630 holders of our Common Stock.
No dividends have been declared or paid by us on our Common Stock to the date of
this Proxy Statement since May 2, 2006.
During the twelve (12) month period prior to the announcement of the proposed
reverse stock split, the average monthly trading volume on the NYSE Amex of our
Common Stock was approximately 8,000 shares.
FINANCIAL STATEMENTS
The financial statements of the Corporation for the two years ended December 31,
2009 and as of December 31, 2009 and 2008 contained in the Corporation's Form
10-K for the year ended December 31, 2009 filed with the SEC are incorporated by
reference in this Proxy Statement and are contained in the accompanying Annual
Report to Stockholders.
VOTE REQUIRED FOR APPROVAL
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE 1-FOR-50 REVERSE STOCK SPLIT
FOLLOWED BY A 50-FOR-1 FORWARD STOCK SPLIT. THE AFFIRMATIVE
VOTE OF A MAJORITY VOTE OF OUR SHARES OUTSTANDING OF OUR
COMMON STOCK IS REQUIRED TO APPROVE THE 1-FOR-50 REVERSE STOCK
SPLIT FOLLOWED BY A FORWARD STOCK SPLIT OF 50-FOR-1 OF THE
SHARES OF THE REMAINING STOCKHOLDERS. IT IS INTENDED THAT
PROXIES SOLICITED HEREBY WILL BE VOTED "FOR" SUCH PROPOSAL
UNLESS THE STOCKHOLDER SPECIFIES OTHERWISE.
PROPOSAL TO AMEND
THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION
TO REMOVE CLASS B STOCK FROM AUTHORIZED CAPITAL STOCK
Proposal No. 2 (Item 2 on Proxy Card)
The Corporation presently has authorized 5,500,000 shares of Common Stock, $1.00
par value, 3,000,000 shares of Class A Stock, $1.00 par value, 1,000,000 shares
of Class B Stock, $1.00 par value and 500,000 shares of Preferred Stock, $1.00
par value. On December 11, 2009, the stockholders approved the automatic
conversion of all Class B Stock into Common Stock in a ratio of 1.3 shares of
Common Stock for each share of Class B Stock in accordance with a Settlement
Agreement approved by the United States District Court. A Certificate of
Amendment was filed December 14, 2009 and as a result, all shares of Class B
Stock were converted into Common Stock and none are outstanding.
The Class B Stock is a supervoting stock with ten votes per share on all matters
including the election of directors, but votes separately as a class on certain
amendments to the Corporation's Restated Certificate of Incorporation and
mergers, consolidations and other extraordinary transactions. The Class B Stock
is entitled to receive cash dividends that are lower than cash dividends that
may be paid on the Common Stock and Class A Stock. No cash dividends are
currently being paid. No further shares of Class B Stock can be issued without
the approval of the holders of Common Stock. In addition the Class B Stock has
a "sunset provision" which means if the outstanding Class B Stock is less than
5% of combined Common Stock and Class B Stock outstanding, the Class B Stock
would automatically convert into Common Stock.
The Board of Directors has no intention of asking stockholders to authorize
Class B Stock in the future and is of the opinion that it should be permanently
removed consistent with the sunset provision. The affirmative vote of a
majority of the shares outstanding of the Common Stock is required to approve
the proposed amendment to the Corporation's Restated Certificate of
Incorporation removing the Class B Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT
TO THE CORPORATION'S RESTATED CERTIFICATE OF
INCORPORATION TO REMOVE CLASS B STOCK FROM
AUTHORIZED CAPITAL STOCK. IT IS INTENDED THAT PROXIES
SOLICITED HEREBY WILL BE VOTED "FOR" SUCH AMENDMENT
TO THE CORPORATION'S RESTATED CERTIFICATE OF
INCORPORATION UNLESS THE STOCKHOLDER SPECIFIES
OTHERWISE.
PROPOSAL TO AMEND
THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION TO
(a) MODIFY PROVISIONS RELATING TO CLASS A STOCK AND
(b) INCREASE AUTHORIZED COMMON STOCK.
Proposal No. 3 (Item 3 (a) and (b) on Proxy Card)
At the present time the Corporation has authorized capital of 10,000,000 shares
consisting of 5,500,000 shares of Common Stock, $1.00 par value, 3,000,000
shares of Class A Stock, $1.00 par value, 1,000,000 shares of Class B Stock,
$1.00 par value and 500,000 shares of Preferred Stock, $1.00 par value. Of the
Common Stock, 2,674,000 are authorized, but unissued. Of such unissued shares,
39,000 are reserved for Stock Option Plans. There are no shares of Class B
Stock, Class A Stock or Preferred Stock outstanding and it is intended to (i)
remove the Class B Stock from the Corporation's Restated Certificate of
Incorporation as set forth in Proposal No. 2 and (ii) (a) modify the provisions
of Class A Stock and (b) increase authorized Common Stock from 5,500,000 shares
to 8,500,000 shares under this Porposal No. 3.
As set forth above, the Corporation presently has authorized 3,000,000 shares of
non-voting Class A Stock, none of which are outstanding and none have ever been
issued. An additional 3,000,000 shares of Class A Stock were approved by
stockholders at the 1998 Annual Meeting of Stockholders, but as permitted in the
Proxy Statement covering such proposal, a Certificate of Amendment was never
filed to authorize the additional number of shares. The provisions of the Class
A Stock provide that the Class A Stock will automatically convert into Common
Stock at such time as the Class B Stock is converted into Common Stock. Since
the Class B Stock converted into Common Stock as described in this Proxy
Statement, no shares of Class A Stock may be issued based on such "sunset
provision." In addition, the Corporation's Restated Certificate of
Incorporation provides the Board can retire (remove) the Class A Stock from the
Corporation's Restated Certificate of Incorporation if no shares were
outstanding five years from the date of original authorization in 1995.
The Board of Directors is recommending that instead of removing the Class A
Stock, the provisions governing such Class A Stock be amended in order to
eliminate the provisions requiring the conversion of the Class A Stock into
Common Stock, specifically provide such Class A Stock is non-convertible, and
extending the sunset provision to provide that the Board of Directors may retire
such Class of Stock if no shares of Class A Stock are outstanding five years
from the date of the 2010 Annual Meeting of Stockholders. In all other
respects, there are no material changes to the Class A Stock and a copy of
Article FOURTH as proposed to be amended by eliminating the Class B Stock,
amending the provisions of Class A Stock, and increasing authorized Common
Stock by 3,000,000 shares as set forth in Appendix B to this Proxy Statement to
which reference is made for the full details of such Amendment to the
Corporation's Restated Certificate of Incorporation.
The purpose of the (a) amendments to the Class A Stock to keep it authorized and
eliminate the provisions requiring the conversion of Class A Stock into Common
Stock and (b) authorization of additional Common Stock is to provide greater
flexibility in the capitalization of the Corporation to meet the constantly
changing needs of the Corporation and the market place. The existing authorized
shares of Class A Stock and existing and additional authorized Common Stock may
be issued from time to time in connection with equity capital offerings,
acquisitions, payment of debt by offering shares in exchange, availabilty for
employee stock option plans, as set forth in a separate proposal in this Proxy
Statement, stock dividends, potential issuing of shares in connection with a
joint venture, and other corporate purposes. If the proposed amendments are
authorized, the Board of Directors may be in a position to issue such shares
without further approval of the stockholders, although certain employee stock
options or similar plans may still require stockholders' approval. Although the
Corporation is continually alert to acquisitions and other investment
opportunities, there have been no previous acquisitions for stock and none are
presently contemplated except for potential issuance to a joint venture partner
of 300,000 shares of Class A Stock, where the other party is making a
substantial cash contribution of $2.0 million to the joint venture. There can
be no assurance that any such other transactions will be effected.
The Common Stock and Class A Stock have substantially identical rights, except
that the holders of the Class A Stock have a 10% higher dividend right than the
Common Stock and generally are not entitled to vote on any matter except as
otherwise required by law. It is not intended that an application for listing
the Class A Stock on any stock exchange will be filed. If shares are issued,
there may be no public market.
If the stockholders approve the proposals to (a) amend the Class A Stock and (b)
increase authorized Common Stock, it is expected that an Amendment to the
Corporation's Restated Certificate of Incorporation reflecting the changes
resulting from the proposals on the Class B Stock, Class A Stock and Common
Stock will subsequently be filed with the State of Delaware Secretary of State
and become effective on the respective filing thereof.
Description of Capital Stock. Following is a summary of the rights,
preferences, powers and limitations of the Common Stock and Class A Stock after
giving effect to the amendments contemplated by this Proxy Statement.
Voting. The shares of Common Stock are entitled to one vote per share on all
matters submitted to stockholders. Holders of Common Stock and Class A Stock do
not have preemptive rights or cumulative voting rights. Each share of Class A
Stock has no voting right except as otherwise required by law. Under the
Delaware General Corporation Law, holders of the Class A Stock are entitled to
vote on proposals to increase or decrease the number of authorized shares of
Class A Stock, change the par value of the Class A Stock or to alter or change
the powers, preferences or special rights of the shares of Class A Stock which
may affect them adversely.
Dividends and Other Distributions. Dividends on the Common Stock will be paid
if, and when declared. Stock dividends on and stock splits of Common Stock will
only be payable or made in shares of Common Stock. Each outstanding share of
Class A Stock will be entitled to receive such dividends and other distributions
in cash, stock or property as may be declared by the Board of Directors of the
Corporation, provided that, if at any time a cash dividend is paid on the Common
Stock, a cash dividend will also be paid on the Class A Stock in an amount 10%
higher than the amount per share paid on the Common Stock. In no event shall
dividends and other distributions be paid on any of the Common Stock or Class A
Stock unless the other such class of stock also receives dividends subject to
the above provisions for the requirement of the respective higher cash dividends
for Class A Stock. Dividends or other distributions payable in shares of stock
shall be made to holders of Class A Stock in shares of Class A Stock. The
Corporation's Restated Certificate of Incorporation provides that the Board of
Directors can authorize a distribution of Class A Stock proportionately to
holders of Common Stock and Class A Stock. In no event will either Common Stock
or Class A Stock be split, divided or combined unless the other is also
proportionately split, divided or combined. The Corporation does not currently
pay cash dividends and payment of such dividends is not contemplated in the
foreseeable future.
Convertibility. The Class A Stock is not convertible into any other class of
stock.
Other Distributions. The holders of Common Stock and Class A Stock are each
entitled to receive the same consideration per share in the event of any
liquidation, dissolution or winding-up of the Corporation.
Mergers and Acquisitions. The holders of Common Stock and Class A Stock are
each entitled to receive the same per share consideration, if any, received in a
merger or consolidation of the Corporation (whether or not the Corporation is
the surviving corporation).
The affirmative vote of a majority of the shares outstanding of the Common Stock
is required to approve the proposed amendments to the Corporation's Restated
Certificate of Incorporation on (a) amending the Class A Stock and (b)
increasing authorized Common Stock. If the proposal on Class A Stock is not
approved, it will be deemed authorization of filing of an amendment retiring the
Class A Stock since no further shares may be issued in absence of such approval
of the amendment and may require us to issue Common Stock to the joint venture
partner instead.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT
TO THE CORPORATION'S RESTATED CERTIFICATE OF
INCORPORATION TO (a) MODIFY PROVISIONS RELATING TO CLASS A
STOCK AND (b) INCREASE AUTHORIZED COMMON STOCK.
IT IS INTENDED THAT PROXIES SOLICITED HEREBY
WILL BE VOTED "FOR" BOTH SUCH AMENDMENTS TO THE
CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION
UNLESS THE STOCKHOLDER SPECIFIES OTHERWISE.
PROPOSAL TO APPROVE
THE ADOPTION OF THE 2010 LONG-TERM INCENTIVE PLAN
PROPOSAL NO. 4 (Item 4 on Proxy Card)
We are asking the Corporation's stockholders to approve the adoption of the
Corporation's 2010 Long-Term Incentive Plan (the "Long-Term Incentive Plan" or
"Plan") to allow for an aggregate of 1,200,000 shares of Class A Stock and/or
Common Stock that we may issue under the Long-Term Incentive Plan. The
Long-Term Incentive Plan was adopted by the Corporation's Board of Directors on
July 2, 2010.
Our Board of Directors has adopted, subject to stockholder approval, the
Long-Term Incentive Plan to provide us the ability to grant a variety of equity
awards as a valuable tool to help attract, motivate, and retain eligible
employees and directors of the Corporation. The Board of Directors has
determined that we should authorize 1,200,000 shares of the Corporation's Class
A Stock and/or Common Stock as available under the Long-Term Incentive Plan to
enable the Corporation to grant equity incentive awards at levels deemed
appropriate by the Compensation Committee and the Board of Directors.
Currently, the Corporation has no stock incentive plans for employees as the
Corporation's previous plans expired. The ability to grant options and awards
involving Class A Stock is subject to approval of the proposal in this Proxy
Statement to amend such Class A Stock. Awards of Stock under the Plan may be
less attractive to employees if the stockholders approve the "going dark"
proposal to be voted on at this meeting.
If our stockholders fail to approve the Long-Term Incentive Plan, no awards or
options may be granted to employees under the rules of the NYSE Amex corporate
governance provisions.
Introduction
The objectives of the Long-Term Incentive Plan are to (a) optimize the
profitability and growth of the Corporation through long-term incentives that
are consistent with the Corporation's goals and that link the interests of
participants to those of the Corporation's stockholders; (b) provide
participants with incentives for excellence in individual performance; (c)
provide flexibility to the Corporation in its ability to motivate, attract, and
retain the services of participants who make significant contributions to the
Corporation's success; and (d) allow participants to share in the success of the
Corporation. The Long-Term Incentive Plan is a broad-based incentive plan that
provides for granting stock options, restricted stock units, restricted stock
and other awards. There are no cash awards under the Plan.
The Board of Directors believes that the Corporation's long-term success is
dependent upon motivating, attracting, and retaining its key employees and
directors, and aligning the interests of such individuals with those of the
Corporation's stockholders. The adoption of the Long-Term Incentive Plan
provides the Compensation Committee the flexibility to continue to make
competitive grants to its key employees and directors as part of the
Corporation's overall compensation program.
As of June 30, 2010, we had an aggregate of 39,000 shares of Common Stock
subject to outstanding options under our previous stock option plans, consisting
of 7,500 shares of Common Stock subject to outstanding options under the expired
1995 Stock Option Plan, 8,500 shares of Common Stock subject to outstanding
options and 13,000 shares of Common Stock available for future awards under the
Corporation's Non-Employee Director Stock Option Plan and 10,000 shares of
Common Stock subject to outstanding options under a Non-Statutory Stock Option
Agreement for the former Chairman of the Board.
The closing sale price of the Corporation's Common Stock on the NYSE Amex on
June 30, 2010 was $0.61 per share.
Key Features of the Plan
Limitation on shares authorized. The aggregate maximum number of shares of
Class A Stock and Common Stock that awards may be granted under the Long-Term
Incentive Plan is 1,200,000 shares.
Limitation on term of stock option awards. The term of each stock option will
not exceed ten years.
There may be no repricing or grant of discounted stock options. The Long-Term
Incentive Plan does not permit the repricing of stock options either by amending
an existing award agreement or by substituting a new award at a lower price.
The Plan prohibits the granting of stock options with an exercise price less
than the fair market value of the Corporation's respective class of Common
Stock, as applicable, on the date of grant.
Plan Summary
The material provisions of the Long-Term Incentive Plan, as proposed to be
adopted pursuant to this Proposal No. 4, are summarized below. This summary
does not purport to be complete, and is qualified in its entirety by reference
to the full text of the Long-Term Incentive Plan attached as Appendix C to this
Proxy Statement.
General. The Long-Term Incentive Plan permits the grant to eligible
participants of equity-based incentive compensation opportunities, including
stock options, restricted stock units, restricted stock, and other awards. Each
award will be evidenced by an award agreement.
Duration of the Plan. The Long-Term Incentive Plan, as proposed to be adopted
pursuant to this Proposal No. 4, will be effective on the date that the
Long-Term Incentive Plan is approved by our stockholders, and, generally, will
terminate on the ten-year anniversary thereof.
Administration. The Long-Term Incentive Plan is administered by the
Compensation Committee; provided, that, the Board of Directors may, in its sole
discretion, make awards under the Plan. Subject to the terms of the Plan, the
Compensation Committee has authority to (a) select the individuals who may
participate in the Plan; (b) determine the sizes and types of awards that are
granted under the Plan; (c) determine the terms and conditions of awards in a
manner consistent with the Plan; (d) construe and interpret the Plan and any
award agreement or other agreement or instrument entered into or issued under
the Plan; (e) establish, amend, or waive rules and regulations for the Plan's
administration; (f) amend the terms and conditions of any outstanding award; and
(g) make all other determinations that may be necessary or advisable for the
administration of the Plan. The Compensation Committee may delegate certain of
its responsibilities and authority to other persons, subject to applicable law.
Shares Covered by the Plan. Under the Plan, the Corporation may issue a total
of 1,200,000 shares of Class A Stock and/or Common Stock, subject to adjustments
as provided in the Plan. The following shares are not taken into account in
applying these limitations: (a) shares covered by the unexercised portion of an
option that terminates, expires or is canceled, (b) shares forfeited or
repurchased under the Plan, (c) shares covered by awards that are forfeited,
canceled, or terminated, and (d) shares used or withheld in order to pay the
exercise or purchase price under an award or to satisfy the tax withholding
obligations associated with the exercise, vesting, or settlement of an award.
Individual Award Limitations. The maximum aggregate number of shares that may
be granted to any one participant in any one year under the Plan is 300,000 with
respect to stock options and 300,000 with respect to restricted stock or
restricted stock units.
Eligibility. Awards may be made under the Plan to any employee or director of
the Corporation or its subsidiaries. Currently, there are approximately 179
individuals eligible to participate in the Plan. For purposes of the Plan, a
subsidiary is any entity in which the Corporation has a direct or indirect
ownership interest of at least 50% and any entity in which the Corporation holds
a direct or indirect ownership interest of less than 50%, but which, in the
discretion of the Compensation Committee, is treated as a subsidiary for
purposes of the Plan.
Forms of Awards. Stock Options. The Corporation may grant stock options that
qualify as "incentive stock options" ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as well as stock options that do
not qualify as ISOs. Only employees of the Corporation or a subsidiary may be
granted ISOs. Generally, the term of a stock option is ten years; provided,
however, different limitations apply to ISOs granted to ten-percent
stockholders, in such case, the term may not be greater than five years and the
exercise price may not be less than 110% of the fair market value of the
respective class of our Common Stock on the date the option is granted.
The Compensation Committee may impose such exercise, forfeiture, and other terms
and conditions as it deems appropriate with respect to stock options. The
exercise price of stock options may be paid (a) in cash or its equivalent, (b)
at the discretion of the Compensation Committee, in shares of Class A Stock
and/or Common Stock having a fair market value equal to the aggregate exercise
price for the shares being purchased and satisfying such other requirements as
may be imposed by the Compensation Committee (which shares may be previously
owned or may be shares that would otherwise have been issuable upon exercise of
the option if the exercise price had been paid in cash), (c) at the discretion
of the Compensation Committee, partly in cash (or its equivalent) and partly in
shares of Class A Stock and/or Common Stock, (d) through the delivery of
irrevocable instructions to a broker to deliver promptly to the Corporation an
amount equal to the aggregate exercise price for the shares being purchased, or
(e) through such other means as shall be prescribed in the award agreement or by
the Compensation Committee or the Board of Directors.
The Compensation Committee may establish such exercise and other conditions
applicable to a stock option following the termination of the participant's
employment or other service with the Corporation and its subsidiaries as the
Compensation Committee deems appropriate on a grant-by-grant basis.
Restricted Stock and Restricted Stock Units. The Compensation Committee may
grant participants restricted stock awards under the Plan. The Compensation
Committee shall impose such conditions and/or restrictions on any shares of
restricted stock as the Compensation Committee may determine including, without
limitation, a requirement that participants pay a stipulated purchase price for
each share of restricted stock, transfer restrictions, restrictions based upon
the achievement of specific performance goals, time-based restrictions, or
restrictions under applicable federal or state securities laws. Subject to such
conditions as the Compensation Committee may impose, the recipient of a
restricted stock award may be given the rights to vote and receive dividends on
shares covered by the award pending the vesting or forfeiture of the shares.
The Compensation Committee may grant participants restricted stock units under
the Plan, which generally consist of the right to receive shares of Common Stock
as determined by the Compensation Committee in the future. Each restricted
stock unit shall have the value of one respective share of Class A Stock and/or
Common Stock, as applicable. Grants of restricted stock units will be subject
to the terms and conditions as the Compensation Committee may impose, including
without limitation, continuing employment or service for a specified period of
time or satisfaction of specified performance criteria.
Unless the Compensation Committee determines otherwise in its discretion, the
holder of restricted stock units will not have any rights of a shareholder
(including, without limitation, dividend rights and voting rights) with respect
to shares of Class A Stock and/or Common Stock covered by the restricted stock
units.
Unless the Compensation Committee determines otherwise, shares of non-vested
restricted stock and non-vested restricted stock unit awards will be forfeited
upon the recipient's termination of employment or other service with the
Corporation and its subsidiaries.
Other Awards. The Plan gives the Compensation Committee broad discretion to
grant other types of equity-based awards and the payment of Class A Stock
and/or Common Stock in lieu of cash under any Corporation incentive bonus plan
or program. Subject to the terms of the Plan, the Compensation Committee, in
its sole discretion, shall determine the terms and conditions of such other
awards.
Performance-Based Awards. The Compensation Committee may also grant
performance-based awards under the Plan. In general, performance-based awards
provide for the payment of shares of Class A Stock and/or Common Stock upon the
achievement of predetermined performance objectives established by the
Compensation Committee. Performance objectives may be based upon any one or
more of the following business criteria:
-income measures (including, but not limited to, gross profit, operating income,
earnings before or after taxes, profits before or after taxes, net income or
earnings per share);
-return measures (including, but not limited to, return on assets, investment,
equity, or sales or pre-tax margin);
-cash flow thresholds;
-gross revenues;
-sales results;
-market share results;
-economic value added;
-share price (including, but not limited to, growth measures and total
stockholder return).
The above performance objectives may be applied to an individual, a business
unit or division, the Corporation and any one or more of its subsidiaries, or
such other operating units as the Compensation Committee may designate. The
above performance objectives may be expressed in absolute or relative terms.
The Compensation Committee shall have the discretion to adjust the
determinations of the degree of attainment of the pre-established performance
objective; provided that awards that are designed to qualify for the
"performance-based compensation" exemption from the deduction limitation
provisions of Section 162(m) of the Code may not be adjusted upward (although
the Compensation Committee shall retain the discretion to adjust such awards
downward). In the case of any award that is granted subject to the condition
that a specified performance objective be achieved, no payment under such award
shall be made prior to the time that the Compensation Committee certifies in
writing that the performance objective has been achieved.
Deferrals. The Compensation Committee may permit or require a participant to
defer receipt of the payment of cash or the delivery of shares of Class A Stock
and/or Common Stock that would otherwise be due under an award, provided that
the deferral arrangement satisfies the applicable election, distribution timing
and other requirements of Section 409A of the Code.
No Right to Employment or Participation. The Plan shall not interfere with or
limit in any way the right of the Corporation or of any subsidiary to terminate
any employee's employment or service at any time, and the Plan shall not confer
upon any employee the right to continue in the employ of the Corporation or of
any subsidiary. No employee shall have the right to be selected to receive an
award or, having been so selected, to be selected to receive a future award.
Adjustments of Awards. Generally, in the event of a change in corporate
capitalization, such as a stock split, or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other distribution
of stock or property of the Corporation, any reorganization or any partial or
complete liquidation of the Corporation, the Corporation will adjust (a) the
number of shares of Class A Stock and/or Common Stock that may be issued under
the Plan, (b) the number of shares of Class A Stock and/or Common Stock that may
be covered by awards made to an individual in any calendar year, and (c) the
number and price of shares of Class A Stock and/or Common Stock subject to
outstanding awards, as may be determined to be appropriate and equitable by the
Compensation Committee, in its discretion, to prevent dilution and enlargement
of the benefits available under the Plan and the rights of participants.
Change of Control. In the event of a change of control of the Corporation, the
Board of Directors may in its sole discretion direct that (a) all option holders
shall be permitted to exercise their outstanding options in whole or in part
(whether or not otherwise exercisable) immediately prior to such change of
control; or (b) if, as part of a change of control transaction, the shareholders
of the Corporation receive capital stock of another corporation ("Exchange
Stock") in exchange for their shares of Class A Stock and/or Common Stock
(whether or not such Exchange Stock is the sole consideration), the Board of
Directors may direct that all options for shares of Class A Stock and/or Common
Stock that are outstanding at the time of the change of control transaction
shall be converted into options for shares of Exchange Stock, such that the
vesting and other terms and conditions of the converted options shall be
substantially the same as the vesting and corresponding other terms and
conditions of the original options. The Board of Directors, acting in its
discretion, may accelerate vesting of other non-vested awards, and cause cash
settlements and/or other adjustments to be made to any outstanding awards
(including, without limitation, options as it deems appropriate in the context
of a change of control transaction, taking into account with respect to other
awards the manner in which outstanding options are being treated. Generally,
any outstanding options that are not exercised prior to certain transactions,
including a merger where the Corporation is not the surviving entity, a
liquidation or a sale of all or substantially all of the Corporation's assets,
will thereupon terminate.
For purposes of the Long-Term Incentive Plan, a change of control, unless
otherwise defined by the Compensation Committee, means:
The Corporation's stockholders approve a merger or consolidation of the
Corporation with any other corporation, other than a merger or consolidation
that would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 60% of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; or
The Corporation's stockholders approve a plan of complete liquidation of the
Corporation or an agreement of sale or disposition of all or substantially all
of the Corporation's assets.
Amendment and Termination of the Plan. Subject to the terms of the Plan, the
Compensation Committee may at any time and from time to time, alter, amend,
suspend, or terminate the Plan in whole or in part; provided that, unless the
Compensation Committee specifically provides otherwise, any revision or
amendment that would cause the Plan to fail to comply with any requirement of
applicable law, regulation, or rule if such amendment were not approved by the
stockholders of the Corporation, shall not be effective unless and until
stockholder approval is obtained.
U.S. Federal Income Tax Consequences
Stock Options. The grant of a stock option under the Long-Term Incentive Plan
is not a taxable event to the participant for federal income tax purposes. In
general, ordinary income is realized upon the exercise of a stock option (other
than an ISO) in an amount equal to the excess of the fair market value on the
exercise date of the shares acquired pursuant to the exercise over the option
exercise price paid for the shares. The Corporation generally will be entitled
to a deduction equal to the amount of ordinary income realized by a participant
upon the exercise of an option. The tax basis of shares acquired upon the
exercise of a stock option (other than an ISO) is equal to the value of the
shares on the date of exercise. Upon a subsequent sale of the shares, capital
gain or loss (long-term or short-term, depending on the holding period of the
shares sold) will be realized in an amount equal to the difference between the
selling price and the basis of the shares.
No income is realized upon the exercise of an ISO other than for purposes of the
alternative minimum tax. Income or loss is realized upon a disposition of
shares acquired pursuant to the exercise of an ISO. If the disposition occurs
more than one year after the ISO exercise date and more than two years after the
ISO grant date, then gain or loss on the disposition, measured by the difference
between the selling price and the option exercise price for the shares, will be
long-term capital gain or loss. If the disposition occurs within one year of
the exercise date or within two years of the grant date, then the gain realized
on the disposition will be taxable as ordinary income to the extent such gain is
not more than the difference between the value of the shares on the date of
exercise and the exercise price, and the balance of the gain, if any, will be
capital gain. The Corporation is not entitled to a deduction with respect to
the exercise of an ISO; however, in general, it is entitled to a deduction
corresponding to the ordinary income realized by a participant upon a
disposition of shares acquired pursuant to the exercise of an ISO before the
satisfaction of the applicable one and two-year holding period requirements
described above.
Restricted Stock Awards and Restricted Stock Units. In general, a participant
will realize ordinary income with respect to Common Stock received pursuant to a
restricted stock award at the time the shares become vested in accordance with
the terms of the award in an amount equal to the fair market value of the shares
at the time they become vested, and except as discussed below, the Corporation
is generally entitled to a corresponding deduction. The participant's tax basis
in the shares will be equal to the ordinary income recognized. Upon subsequent
disposition of the shares, the participant will realize long-term or short-term
capital gain or loss, depending on the holding period of the shares sold.
A participant may make an "early income election" within 30 days of the receipt
of restricted shares of Class A Stock and/or Common Stock, in which case the
participant will realize ordinary income on the date the restricted shares are
received equal to the difference between the value of the shares on that date
and the amount, if any, paid for the shares. In such event, any appreciation in
the value of the shares after the date of the award will be taxable as capital
gain upon a subsequent disposition of the shares. The Corporation's deduction
is limited to the amount of ordinary income realized by the participant as a
result of the early income election.
A participant who receives restricted stock unit awards will be taxed at
ordinary income tax rates on the then fair market value of the shares of the
respective class of Class A Stock and/or Common Stock distributed at the time of
settlement of the restricted stock unit awards and, except as discussed below,
the Corporation will generally be entitled to a tax deduction at that time. The
participant's tax basis in the shares will equal the amount taxed as ordinary
income, and on subsequent disposition, the participant will realize long-term or
short-term capital gain or loss.
Other Awards. Other awards will generally result in ordinary income to the
participant at the later of the time of delivery of shares, or other awards, or
the time that either the risk of forfeiture or restriction on transferability
lapses on previously delivered shares, or other awards. Except as discussed
below, the Corporation generally will be entitled to a tax deduction equal to
the amount recognized as ordinary income by the participant in connection with
an award, but will not be entitled to a tax deduction relating to amounts that
represent a capital gain to a participant.
Section 162(m) of the Code. Section 162(m) of the Code ("Section 162(m)")
generally allows the Corporation to obtain tax deductions without limit for
performance-based compensation. The Corporation intends that options, and
contingent performance awards granted under the Long-Term Incentive Plan will
qualify as performance-based compensation not subject to the $1 million
deductibility limitations under Section 162(m).
THE ABOVE SUMMARY PERTAINS SOLELY TO CERTAIN U.S. FEDERAL
INCOME TAX CONSEQUENCES ASSOCIATED WITH AWARDS MADE UNDER THE LONG-
TERM INCENTIVE PLAN AND DOES NOT PURPORT TO BE COMPLETE. THE SUMMARY
DOES NOT ADDRESS ALL FEDERAL INCOME TAX CONSEQUENCES AND IT DOES NOT
ADDRESS STATE, LOCAL, AND NON-U.S. TAX CONSIDERATIONS.
Legal Limitations:
The issuance of any shares under the Long-Term Incentive Plan may be subject to
prior listing thereof on any exchange on which such shares are traded. The
shares will be held by the participant for investment unless the Corporation
registers the shares under the Securities Act of 1933, as amended.
The affirmative vote as a majority of the shares of Common Stock voted at the
meeting is required to approve the proposal to adopt the Long-Term Incentive
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" THE PROPOSED 2010 LONG-
TERM INCENTIVE PLAN. IT IS INTENDED THAT PROXIES
SOLICITED HEREBY WILL BE VOTED "FOR" SUCH PLAN UNLESS
THE STOCKHOLDER SPECIFIES OTHERWISE.
ELECTION OF DIRECTORS
Proposal No. 5 (Item 5 on Proxy Card)
The Board of Directors of Trans-Lux Corporation is divided into three classes
with the term of office of one of the three classes of directors expiring each
year and with each class being elected for a three-year term. The Board of
Directors currently consists of eight members. If elected at the Annual
Meeting, the nominees listed below will serve until the Annual Meeting of
Stockholders in 2013, or until their successors are duly elected and qualified.
All other directors will continue as such for the term to which they were
elected. Mr. Gene Jankowski, who was Chairman and Mr. Victor Liss, Vice
Chairman, whose terms will expire at the 2010 Annual Meeting, have decided not
to stand for re-election and Mr. Jankowski resigned on June 10, 2010.
Management has no reason to believe that any nominee will not be available
or will not serve if elected, but if a nominee should not become available to
serve as a director, full discretion is reserved to the persons named as proxies
to vote for such other persons as may be nominated. Proxies will be voted "FOR"
the nominees unless the stockholder specifies otherwise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE NOMINEES STANDING FOR ELECTION LISTED BELOW.
Nominees Standing for Election
Name Age Since Expiration of Proposed Term
-------------------------------------------------------------------
Jean-Marc (J.M.) Allain.... 40 - 2013
Jean Firstenberg........... 74 1989 2013
-------------------------------------------------------------------
Directors Whose Term Continues
Name Age Since Expiration of Current Term
-------------------------------------------------------------------
Glenn J. Angiolillo........ 56 2009 2012
Angela D. Toppi............ 54 2009 2012
Salvatore J. Zizza......... 64 2009 2012
Howard S. Modlin........... 79 1975 2011
Michael R. Mulcahy......... 62 2002 2011
George W. Schiele.......... 78 2009 2011
-------------------------------------------------------------------
Directors Whose Term Will Expire at the 2010 Annual Meeting
or Have Resigned
Name Age Since Expiration of Current Term
------------------------------------------------------------------
Gene Jankowski*............ 76 1994 2010
Victor Liss................ 73 1988 2010
-------------------------------------------------------------------
* Resigned on June 10, 2010
Set forth below is biographic information for the individuals nominated to serve
as directors and each director. The members of the Nominating Committee have
recommended, and the independent members of the Board of Directors have
nominated, the persons listed below as nominees for the Board of Directors. Ms.
Firstenberg presently serves as a director; Mr. Allain will be standing for his
first election.
NOMINEES - Three-Year Term Expiring 2013
J.M. Allain became the President and Chief Executive Officer of Trans-Lux
Corporation on February 16, 2010. Mr. Allain most recently served as President
of Panasonic Solutions Company from July 2008 through October 2009; Vice
President of Duos Technologies from August 2007 through June 2008; General
Manager of Netversant Solutions from October 2004 through June 2005; and Vice
President of Adesta, LLC from May 2002 through September 2004. Mr. Allain has
familiarity with the operational requirements of complex organizations and has
experience dealing with reorganizations and turnarounds. His employment
agreement provides that if consistent with duties and obligations under Delaware
law, the Corporation will recommend his nomination to the Board as and when a
seat becomes available. It is anticipated that with his experience he will
become an important contributor to our Board. If Mr. Allain's employment is
terminated, he has agreed to immediately resign as a director.
Jean Firstenberg has served as a director since 1989 when she was elected an
independent director. Ms. Firstenberg is President Emerita and a member of the
Board of Trustees of the American Film Institute. She was President and Chief
Executive Officer of the American Film Institute from 1980 to 2007. She is
Chairperson of the Citizen's Stamp Advisory Committee; a member of the Board of
Trustees of Women's Sports Foundation; and was formerly a Trustee of Boston
University. As President and Chief Executive Officer of the American Film
Institute for 27 years, Ms. Firstenberg brings valuable insight into the
operational requirements and strategic planning process of a company. In
addition, Ms. Firstenberg's more than 20 years of experience as a director of
Trans-Lux Corporation and her prior role as Chairperson of the Audit Committee
gives her a deep understanding of the Corporation and its operations.
CONTINUING DIRECTORS - Term Expiring 2012
Glenn J. Angiolillo has served as a director since 2009 when he was elected an
independent director. He was elected by the Board of Directors to serve as
Chairman of the Board (a non-executive position) of Trans-Lux Corporation on
June 10, 2010 when Mr. Jankowski resigned. Mr. Angiolillo is currently
President of GJA Corp., a consulting and advisory firm specializing in wealth
management, since 1998; a Director of LICT Corp., formerly known as Lynch
Interactive Corp.; Director of NYMagic, Inc.; and a Director of Gaylord
Entertainment Co. Previously, Mr. Angiolillo was a partner and member of the
Management Committee in the law firm of Cummings & Lockwood where he
concentrated in the areas of corporate law, mergers and acquisitions and banking
and finance. Mr. Angiolillo was elected a director in accordance with a
Settlement Agreement approved by the United States District Court for the
Southern District of New York described in the Corporation's proxy statement for
the December 11, 2009 Annual Meeting of Stockholders. It is anticipated that
Mr. Angiolillo's experience and service to other boards of directors will allow
him to make valuable contributions to the Board.
Angela D. Toppi has served as a director since 2009 and has been Executive Vice
President, Treasurer, Secretary and Chief Financial Officer of Trans-Lux
Corporation for the past eight years. Ms. Toppi's extensive leadership
experience at Trans-Lux Corporation for over 23 years of service and involvement
with numerous restructuring and organizational transactions gives her a deep
understanding of the Corporation. Ms. Toppi is a Certified Public Accountant.
As Chief Financial Officer, Ms. Toppi provides valuable insight to the Board.
Salvatore J. Zizza has served as a director since 2009 when he was elected an
independent director. Mr. Zizza is currently the Chairman of Zizza & Co.
Ltd.; Chairman of Metropolitan Paper Recycling; Chairman of Bethlehem Advanced
Materials; a Director of Hollis-Eden Pharmaceuticals; and a Director of several
of the Gabelli open and closed-end funds, including The Gabelli Equity Trust,
The Gabelli Asset Fund, The Gabelli Growth Fund, The Gabelli Convertible and
Income Securities Fund, The Gabelli Utility Trust Fund, The Gabelli Global
Multimedia Trust, The Gabelli Equity Series Fund, The Gabelli Dividend and
Income Trust, The Gabelli Gold Fund, The Gabelli International Growth Fund, The
Gabelli Global Gold & Natural Resources Fund, and the GAMCO Westwood Funds.
Previously, Mr. Zizza was a Director of Earl Scheib, Inc. Mr. Zizza was
elected in accordance with a Settlement Agreement approved by the United States
District Court for the Southern District of New York described in the
Corporation's proxy statement for the December 11, 2009 Annual Meeting of
Stockholders. It is anticipated that Mr. Zizza's extensive experience and
service to numerous other boards of directors will allow Mr. Zizza to provide
valuable contributions to the Board, and in addition, also serve as Chairman of
the Audit Committee.
CONTINUING DIRECTORS - Term Expiring 2011
Howard S. Modlin has served as a director since 1975 and is an attorney and
President of the firm Weisman Celler Spett & Modlin, P.C.; and Chairman and
Chief Executive Officer of General DataComm Industries, Inc. Previously, Mr.
Modlin was a Director of Fedders Corporation. Mr. Modlin's extensive legal
background, President of his law firm, and Chairman and Chief Executive Officer
of General DataComm Industries brings valuable insight into the operational
requirements and strategic planning process of a company. In addition, Mr.
Modlin's extensive experience and his more than 35 years of service on the Board
make him a valuable Director.
Michael R. Mulcahy has served as a director since 2002 and was the President
and Chief Executive Officer of Trans-Lux Corporation until his retirement on
December 31, 2009. He was formerly Co-Chief Executive Officer of Trans-Lux
Corporation. Mr. Mulcahy spent over 42 years employed at Trans-Lux Corporation
and was involved with numerous organization changes, including those initiated
while he was President and Chief Executive Officer, which gives him a deep
knowledge and insight of the Corporation. His service as both a Director and in
management makes him well qualified to serve as a Director.
George W. Schiele has served as a director since 2009 when he was elected an
independent director. Mr. Schiele is currently President of George W.
Schiele, Inc., a holding company; President and Trustee of LAL Family Partners
LP; President and Trustee of 4003 Corporation; a Director of Connecticut
Innovations, Inc. and Chairman of its Investment Committee; and a Director and
Executive Board member of The Yankee Institute. Mr. Schiele was elected in
accordance with a Settlement Agreement approved by the United States District
Court for the Southern District of New York described in the Corporation's proxy
statement for the December 11, 2009 Annual Meeting of Stockholders. It is
anticipated that Mr. Schiele's experience and service to other boards of
directors will allow him to make valuable contributions to the Board.
DIRECTORS WHOSE TERM EXPIRE AT THE 2010 ANNUAL MEETING OR HAVE RESIGNED
Gene Jankowski who resigned on June 10, 2010 has served as a director since 1994
when he was elected an independent director. In May 2003 he was elected by the
Board of Directors to serve as Chairman of the Board (a non-executive position)
of Trans-Lux Corporation. Mr. Jankowski is Chairman of Jankowski
Communications System, Inc.; Advisor Managing Director of Veronis Suhler &
Associates Inc.; and Chairman Emeritus of the American Film Institute. He was
formerly a Director of TV Azteca; formerly Co-Chairman of St. Vincent's
College; formerly a Trustee of St. Vincent's Medical Center; and formerly
President and Chairman of the CBS Broadcast Group. Mr. Jankowski has brought
critical experience and insight to our board during the more than 16 years of
service as a director of Trans-Lux Corporation and the last seven years as
Chairman. Mr. Jankowski's profound understanding of the Corporation made him
particularly qualified to serve as Chairman of the Board.
Victor Liss has served as a director since 1988 and has been an independent
director since January 2007. In 1991 he was elected by the Board to serve as
Vice Chairman of the Board (a non-executive position) of Trans-Lux Corporation.
Mr. Liss is a Trustee of Norwalk Hospital; a Director of BNC Financial Group;
and Chairman of the Board of the Bank of Fairfield. He was formerly a Director
of Wellpoint, Inc.; formerly Chairman of the Board of Trustees of Norwalk
Hospital; formerly Co-Chairman of the Advisory Board to University College of
Sacred Heart University; and formerly Consultant, President and Chief Executive
Officer of Trans-Lux Corporation. His service on the boards of directors of
numerous companies and organizations, and his more than 22 years service on the
Board makes him a valuable Director.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Proposal No. 6 (Item 6 on Proxy Card)
Ratification of Appointment of Independent Registered Accounting Firm
UHY LLP ("UHY") had served as our independent registered public accounting firm
since July 8, 2008, when the Audit Committee of the Corporation's Board of
Directors approved their engagement to audit the Corporation's financial
statements for the fiscal year ended December 31, 2008. On April 16, 2010, UHY
merged its New England practice into Marcum, LLP. As a result of the merger,
UHY declined reappointment as our independent registered public accountant firm
for the fiscal year ending December 31, 2010. The Audit Committee of the Board
of Directors has appointed BDO USA, LLP ("BDO"), as successor to UHY, as our
independent registered public accounting firm for the year ending December 31,
2010.
Representatives of BDO will be present at the Annual Meeting and
will have an opportunity to make a statement if they desire to do so. They will
also be available to respond to appropriate questions.
The Audit Committee is not aware of any disagreements between management and UHY
regarding accounting principles and their application or otherwise. As a result
of the aforementioned merger, UHY issued a letter dated April 20, 2010,
addressed to the Securities and Exchange Commission, that UHY agrees that there
were no disagreements on any matters of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.
Through and as of December 31, 2009, UHY and UHY Advisors, Inc. ("Advisors"),
as separate legal entities, collectively provide attest, accounting, tax and
business consulting services through an alternative practice structure which is
necessitated by most state statutes that prohibit corporate ownership of firms
that provide attest services. UHY is a licensed CPA firm and provides attest
services only, whereas Advisors provides the other services. UHY leases
auditing staff who are full time, permanent employees of Advisors. UHY has only
a few full time employees; however, the Partners of UHY are also Managing
Directors of Advisors. While few of the audit services performed were provided
by permanent, full time employees of UHY, for the most part, the leased staff
are CPA qualified and satisfy the continuing education and other professional
requirements. UHY trains, manages and supervises the audit services and audit
staff, and is exclusively responsible for the opinion rendered in connection
with its examination. During 2009, Advisors did not provide any services to the
Corporation.
Change in Auditors: As previously reported in our October 28, 2009 proxy
statement, the Corporation, on July 9, 2008, based on the Audit Committee's
recommendation and approval, dismissed Eisner LLP ("Eisner") as the
Corporation's independent registered public accounting firm. The Audit
Committee took this action after consultation with management to enable the
Corporation to obtain audit and related services at a lower annual cost. There
were no disagreements with Eisner on any matter of accounting principles and
their application or otherwise.
Audit Committee Pre-Approval of Independent Auditor Services: All audit
services provided by UHY for 2009 were approved by the Audit Committee in
advance of the work being performed. BDO did not provide any services prior to
its appointment in 2010.
Audit Fees: UHY audit fees were $229,000 and $258,000 in 2009 and 2008,
respectively. UHY audit fees include fees associated with the annual audit of
the Corporation's financial statements and the reviews of the Corporation's
quarterly reports on Form 10-Q (only the second and third quarter reviews in
2008). Eisner audit fees were $52,000 in 2008. Eisner audit fees in 2008
include fees associated with the review of the Corporation's annual report and
the first quarterly report on Form 10-Q.
Audit-Related Fees: There were no audit-related services provided by UHY in
2009 and 2008. In 2008, $6,000 was paid to Eisner for assistance related to
various financial reporting matters.
Tax Fees: Neither UHY nor Eisner provided any tax services.
All Other Fees: Neither UHY nor Eisner provided any non-audit services.
Vote Required: The ratification of the appointment by our Audit Committee of
BDO as our independent registered public accounting firm for the fiscal year
ending December 31, 2010 requires the affirmative vote of a majority of the
shares of Common Stock of the Corporation voting in person or by proxy on such
ratification. Although stockholder approval of the appointment is not required
by law and is not binding on the Audit Committee, the Committee will take the
appointment under advisement if such appointment is not approved by the
affirmative vote of a majority of the votes cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO RATIFY THE APPOINTMENT OF BDO USA, LLP,
AS SUCCESSOR TO UHY LLP, AS THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM TO AUDIT THE
FINANCIAL STATEMENTS OF THE CORPORATION FOR THE 2010
FISCAL YEAR.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of June 30, 2010 (or such other
date specified) with respect to the beneficial ownership of the Corporation's
Common Stock or shares acquirable within 60 days of such date by (i) each person
known by the Corporation to own more than 5% of the Corporation's Common Stock
and who is deemed to be such beneficial owner of the Corporation's Common Stock
under Rule 13d-3(a)(ii); (ii) each person who is a director of the Corporation;
(iii) each named executive in the Summary Compensation Table; and (iv) all
persons as a group who are executive officers and directors of the Corporation,
and as to the percentage of outstanding shares held by them on that date.
-------------------------------------------------------------------
Number of
Shares
Beneficially Percent
Name, Status and Mailing Address Owned of Class
-------------------------------------------------------------------
5% Stockholders:
----------------
Richard Brandt............................. 181,063 (1) 7.38%
Former Chairman of the Board of Directors
and consultant to Trans-Lux Corporation
2209 Miguel Chavez Road Bldg A
Santa Fe, NM 87505
Gabelli Funds, LLC......................... 510,600 (2) 20.90%
One Corporate Center
Rye, NY 10580-1434
Non-Employee Directors:
-----------------------
Glenn J. Angiolillo........................ 100 *
Jean Firstenberg........................... 1,920 (3) *
Victor Liss................................ 23,552 (3) *
Howard S. Modlin........................... 13,873 (4) *
George W. Schiele.......................... - *
Salvatore J. Zizza (5)..................... - *
Named Executive Officers:
-------------------------
J.M. Allain................................ 50,000 (6) 2.05%
Al L. Miller............................... 611 *
Michael R. Mulcahy......................... 3,303 *
Angela D. Toppi............................ 6,000 (7) *
All directors and executive officers ...... 102,588 (8) 4.18%
as a group (12 persons)
-------------------------------------------------------------------
* Represents less than 1% of total number of outstanding shares.
(1) The amount includes 10,000 shares of Common Stock acquirable upon exercise
of stock options. The amount excludes 54,690 shares owned by M. Brandt and
55,564 shares owned by T. Brandt, sons of Mr. R. Brandt and former
officers and directors of the Company.
(2) Based on Schedule 13D, Amendment No. 81 dated June 16, 2010 by Mario J.
Gabelli, GGCP, Inc., Gabelli Funds, LLC, Teton Advisors, Inc., Gamco
Investors, Inc. and Gamco Asset Management Inc., which companies are parent
holding companies and/or registered investment advisers. All securities are
held as agent for the account of various investment company fund accounts
managed by such reporting person. Except under certain conditions, Gabelli
Funds, LLC has sole voting power and sole dispositive power over such
shares.
(3) The amount includes 1,500 shares of Common Stock acquirable upon exercise of
stock options.
(4) The amount includes 7,719 shares of Common Stock owned by Mr. Modlin's
immediate family or held in trust for Mr. Modlin's immediate family and
2,500 shares of Common Stock acquirable upon exercise of stock options.
(5) Mr. Zizza disclaims any interest in the shares set forth in footnote 2
above.
(6) The amount represents 50,000 shares of restricted stock granted on February
16, 2010 and vests 50% on the one-year anniversary date of grant and the
remaining 50% vests on the two-year anniversary date of grant, provided Mr.
Allain is employed by the Corporation on those dates.
(7) The amount includes 5,000 shares of Common Stock acquirable upon exercise of
stock options.
(8) The amount includes 13,000 shares of Common Stock set forth in footnotes
above which members of the group have the right to acquire by exercise of
stock options (including director stock options).
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 2009, the Board of Directors held 16 meetings. All directors attended
75% or more of such meetings and of committees of which they were members. The
Corporation does not have a formal policy regarding directors' attendance at
annual stockholders meetings. Nevertheless, the Corporation strongly encourages
and prefers that directors attend regular and special Board meetings as well as
the annual meeting of stockholders in person, although attendance by
teleconference is considered adequate. The Corporation recognizes that
attendance of the Board members at all meetings may not be possible, and excuses
absences for good cause.
Non-employee directors receive an annual fee of $2,800 and $800 for each meeting
of the Board attended ($300 for telephonic meetings), while employee directors
receive an annual fee of $1,360 and $320 for each meeting of the Board attended
($100 for telephonic meetings). Mr. Jankowski received an annual fee of $6,400
as Chairman of the Board and Mr. Liss receives an annual fee of $800 as Vice
Chairman of the Board. Fees for members of the Board and Committees are
determined annually by the entire Board of Directors based on review of
compensation paid by other similar size companies, the amounts currently paid by
the Corporation, the overall policy for determining compensation paid to
officers and employees of the Corporation and the general financial condition of
the Corporation.
Corporate Governance Policies and Procedures
The Board of Directors has adopted a Code of Business Conduct and Ethics
Guidelines that applies specifically to Board Members and Executive Officers.
The Code is designed to promote compliance with applicable laws and regulations,
to promote honest and ethical conduct, including full, fair, accurate and timely
disclosure in reports and communications with the public. The Code is available
for viewing on the Corporation's website at www.trans-lux.com. Any amendments
to, or waivers from, the Code of Business Conduct and Ethics Guidelines will be
posted on the website. In addition, the Board of Directors adopted a Whistle
Blowing policy, which provides procedures for the receipt, retention and
treatment of complaints received by the Corporation regarding accounting,
internal accounting controls and auditing matters, as well as the confidential,
anonymous submission of concerns regarding questionable accounting or auditing
practices.
The NYSE Amex Company Guide require that a listed company's Board of Directors
must consist of a majority of independent directors as defined in Section 803A
of such NYSE Amex Company Guide, unless the company is considered a Smaller
Reporting Company as defined in Securities Exchange Act of 1934 ("Exchange Act")
Rules. In accordance with the NYSE Amex Company Guide, Section 801(h), the
Corporation is presently considered a Smaller Reporting Company, and therefore,
is only required to maintain a board of directors of at least 50% independent
directors. Prior to December 11, 2009, the Corporation was exempt from NYSE
Amex Company Guide, Section 802 since the Corporation was considered a
controlled company, as over 50% of the voting power was held by an individual or
group. The Corporation is no longer considered a controlled company.
Corporate Leadership Structure
Two separate individuals serve as the Corporation's Chairman of the Board and
Chief Executive Officer. The Chairman is not an executive officer. He provides
leadership to the Board in the fulfillment of its responsibilities in presiding
over Board meetings. He also presides over meetings of the stockholders. The
Chief Executive Officer, who is newly elected and not currently a director, is
responsible for directing the operational activities of the Corporation.
Risk Management
Our Board and Audit Committee are actively involved in risk management. Both
the Board and Audit Committee regularly review the financial position of the
Corporation and operations of the Corporation and other relevant information,
especially cash management and risks associated with the Corporation's financial
position and operations.
Communication with the Board of Directors
Security holders are permitted to communicate with the members of the Board by
forwarding written communications to the Corporation's Corporate Secretary at
the Corporation's headquarters in Norwalk, Connecticut. The Corporate Secretary
will present all communications, as received and without screening, to the Board
at its next regularly scheduled meeting.
Committees of the Board of Directors
The Board of Directors has appointed a Compensation Committee, an Audit
Committee and a Nominating Committee. During 2009, the Board of Directors
eliminated the Executive Committee. The Executive Committee did not meet in
2009.
Compensation Committee
The members of the Compensation Committee of the Board of Directors are Messrs.
Angiolillo, Modlin and Schiele and Ms. Firstenberg. The Compensation Committee
reviews compensation and other benefits. The Compensation Committee held two
meetings in 2009. None of the members of the Compensation Committee during 2009
and continuing through 2010 is or has been an officer or employee of the
Corporation. The Compensation Committee does not have a charter. There are no
compensation committee interlock relationships with respect to the Corporation.
Members of said Committee receive a fee of $320 for each meeting of the
Committee they attend and the Chairman, Mr. Modlin, receives an annual fee of
$1,600.
Audit Committee
The members of the Audit Committee of the Board of Directors are Ms. Firstenberg
and Mr. Zizza. Mr. Modlin served in an ex-officio capacity until
February 10, 2010, and resigned in order to comply with NYSE Amex Company Guide
requirements. Each of the directors is considered "independent" as defined by
the NYSE Amex Company Guide. The Committee operates under a formal written
charter approved by the Committee and adopted by the Board of Directors. The
Board of Directors had determined that former director Mr. Jankowski who
resigned on June 10, 2010 met the definition of "audit committee financial
expert" set forth in Item 407 of Regulation S-K, as promulgated by the
Securities and Exchange Commission ("SEC"). The Board has approved Mr. Zizza
as the replacement "audit connittee financial expert." The Audit Committee held
6 meetings in 2009. The responsibilities of the Audit Committee include the
appointment of the auditors, review of the audit function and material aspects
thereof with the Corporation's independent auditors, and compliance with
Corporation policies and applicable laws and regulations. Members of said
Committee receive a fee of $400 for each meeting of the Committee they attend
and the Chairman, Mr. Zizza, receives an annual fee of $2,400 and $100 for each
quarterly telephonic meeting with the independent auditors.
Nominating Committee
The Corporation's Nominating Committee was established at the December 11, 2009
meeting of the Board of Directors in accordance with the NYSE Amex Company Guide
requirements. Previously the Corporation was considered a controlled company,
and therefore, was not required to have a nominating committee. A written
charter for the Nominating Committee has been adopted; a copy of the Charter is
attached as Appendix D. The Committee recommends for consideration by the Board
of Directors, nominees for election of directors at the Corporation's Annual
Meeting. Except as qualified below in connection with settlement of a lawsuit,
director nominees are considered on the basis of, among other things,
experience, expertise, skills, knowledge, integrity, understanding the
Corporation's business and willingness to devote time and effort to Board
responsibilities. The Committee does not have a separate policy regarding
diversity of the Board. Three of the directors, Glenn J. Angiolillo, George W.
Schiele and Salvatore J. Zizza (the "Gamco Nominees") were elected in
accordance with a Settlement Agreement approved by the United States District
Court for the Southern District of New York described in the Corporation's proxy
statement for the December 11, 2009 Annual Meeting of Stockholders. If any of
them or their replacements is unwilling or unable to serve as a director prior
to the 2012 Annual Meeting of Stockholders, the Corporation, consistent with
duties and obligations under Delaware law, shall use its best efforts to replace
said director with a nominee suggested by the Gabelli parties, the Settlement
Group, consisting of Gabelli Funds, LLC, Gamco Asset Management, Inc., Gabelli
Cap Growth Fund, Gabelli Global Multimedia Trust, Inc., Gabelli Dividend and
Income Trust and Gabelli Convertible Fund.
The members of the Nominating Committee of the Board of Directors are Messrs.
Angiolillo and Zizza and Ms. Firstenberg, each of who is independent in
accordance with the NYSE Amex Company Guide requirements. The Nominating
Committee is responsible for identifying, researching and nominating directors
for election by our stockholders and selecting nominees to fill vacancies on our
Board of Directors or a committee of the Board. The Nominating Committee was
established on December 11, 2009 and did not meet in 2009. In March 2010, the
Nominating Committee met twice to discuss, among other things, nominating the
directors for election by our stockholders at this Annual Meeting of
Stockholders.
Corporate Governance Committee
The Board of Directors has not established a corporate governance committee.
The Board of Directors acts as the corporate governance committee.
Independence of Non-Employee Directors
A director is considered independent under NYSE Amex Company Guide requirements
if the Board of Directors determines that the director does not have any direct
or indirect material relationship with the Corporation. Mr. Mulcahy is a
former employee of the Corporation and Ms. Toppi is an employee of the
Corporation and, therefore, has been determined by the Board to fall outside the
definition of "independent director." Messrs. Angiolillo, Liss, Modlin, Schiele
and Zizza and Ms. Firstenberg are non-employee directors of the Corporation.
Mr. Modlin is not considered independent due to the legal services rendered by
the law firm of which Mr. Modlin is the president. The Board of Directors has
determined that Messrs. Angiolillo, Liss, Schiele and Zizza and Ms.
Firstenberg are "independent directors" within the meaning of the rules of the
NYSE Amex Company Guide, since they had no relationship with the Corporation
other than their status and payment as non-employee directors, and as
stockholders. The Board of Directors has determined that Mr. Zizza and Ms.
Firstenberg are independent under the SEC's audit committee independence
standards.
Non-Employee Director Stock Option Plan
The Board of Directors has previously established a Non-Employee Director Stock
Option Plan, which as amended, covers a maximum of 30,000 shares for grant.
Options are for a period of six years from date of grant, are granted at fair
market value on date of grant, may be exercised at any time after one year from
date of grant while a director and are based on years of service, with a minimum
of 500 stock options for each director, an additional 500 stock options based on
five or more years of service, another 500 stock options based on 10 or more
years of service and an additional 1,000 stock options based on 20 or more years
of service. Additional stock options are granted upon the expiration or
exercise of any such option, which is no earlier than four years after date of
grant, in an amount equal to such exercised or expired options.
Compensation of Directors
The following table represents director compensation for 2009.
---------------------------------------------------------------------------------------------------
Nonqualified
Non-Equity Deferred
Fees Stock Option Incentive Plan Compensation All Other
Earned Awards Awards Compensation Earnings Compensation Total
Name ($) ($) ($)(1) ($) ($) ($)(2) ($)
---------------------------------------------------------------------------------------------------
Glenn J. Angiolillo..... 1,120 - 286 - - - 1,406
Matthew Brandt (3)...... 2,600 - - - - - 2,600
Richard Brandt (4)...... 5,680 - - - - 9,237 14,917
Thomas Brandt (3)....... 2,600 - - - - - 2,600
Howard M. Brenner (4)... 13,520 - 471 - - - 13,991
Jean Firstenberg........ 18,940 - 233 - - - 19,173
Gene Jankowski (5)...... 21,620 - - - - - 21,620
Victor Liss............. 15,200 - - - - 770 15,970
Howard S. Modlin........ 17,940 - 700 - - - 18,640
Michael R. Mulcahy...... 6,400 - - - - - 6,400
George W. Schiele....... 800 - 286 - - - 1,086
Angela D. Toppi......... 720 - - - - - 720
Salvatore J. Zizza...... 800 - 286 - - - 1,086
---------------------------------------------------------------------------------------------------
(1) The options were granted pursuant to the 1989 Non-Employee Director Stock
Option Plan described above. The amount represents the fair value of options
awarded at date of grant.
(2) All other compensation consists of medical insurance premiums paid.
(3) Messrs. M. Brandt and T. Brandt are sons of Mr. R. Brandt and resigned as
directors on June 23, 2009 in accordance with the Settlement Agreement.
(4) Messrs. R. Brandt and Brenner's term as a board member expired on December
11, 2009.
(5) Mr. Jankowski resigned on June 10, 2010.
Audit Committee Report
The information contained in this Proxy Statement shall not be deemed to be
"soliciting material" or "filed with the SEC" or subject to the liabilities of
Section 18 of the Exchange Act, except to the extent that we specifically
incorporate it by reference into a document filed under the Securities Act of
1933 ("Securities Act") or Exchange Act.
The following is a report of the Audit Committee of the Board of Directors:
The two members of the Audit Committee of the Board of Directors listed below
are independent directors as defined by the NYSE Amex Company Guide. The Board
of Directors has adopted a written charter for the Audit Committee.
The responsibilities of the Audit Committee include recommending to the Board of
Directors an accounting firm to be engaged as the Corporation's independent
registered public accounting firm. Management is responsible for the
preparation of the Corporation's financial statements and the financial
reporting process, including the system of internal controls. The independent
registered public accountants are responsible for expressing an opinion on the
conformity of those audited financial statements with accounting principles
generally accepted in the United States of America. The Audit Committee's
responsibility is to oversee these processes.
The Audit Committee has met and held discussions with management and the
independent registered public accountants. The Audit Committee has reviewed and
discussed the matters required to be discussed by Statement On Auditing
Standards No. 61, "Communication with Audit Committees," as amended. The
Corporation's independent registered public accountants have provided to the
Audit Committee the written disclosures and the letter required under
Independence Standards of the Public Company Accounting Oversight Board
(PCAOB) Rule 3526, "Communication Discussions with Audit Committees Concerning
Independence." The Audit Committee also considered the compatibilities of
non-audit services with the accountants' independence.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed
and discussed with management the Corporation's audited consolidated financial
statements contained in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 2009. The Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements in the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2009,
as filed with the Securities and Exchange Commission.
The Audit Committee has discussed the overall scope and plans for the audit with
the independent accountants selected by the directors. The Audit Committee will
meet with the independent accountants, with and without management present, to
discuss the results of their examination and the overall quality of the
Corporation's financial reporting.
Independent Registered Public Accounting Firms' Fees
During the year ended December 31, 2009 and 2008, audit fees of $229,000 and
$258,000, respectively, were paid or accrued to UHY, the Corporation's
independent registered public accounting firm. Audit fees for 2009 and 2008
consisted of (i) audit of the Corporation's annual financial statements and (ii)
reviews of the Corporation's quarterly financial statements (only the second and
third quarter reviews for 2008). During the year ended December 31, 2008, audit
fees of $52,000 was paid or accrued to Eisner LLP, the Corporation's former
independent registered public accounting firm. Audit fees for 2008 consisted of
(i) review of the Corporation's annual financial statements and (ii) review of
the Corporation's first quarterly financial statement.
The Audit Committee of the Board of Directors has considered the absence of
non-audit services by the auditors for financial information systems design and
implementation and absence of all other non-audit services as compatible with
maintaining the auditor's independence.
This report is submitted by the Audit Committee. Its members are:
Salvatore J. Zizza, Chairman
Jean Firstenberg
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
All matters concerning executive compensation for the Chief Executive Officer
and other executive officers are considered by the Corporation's Compensation
Committee. The following paragraphs discuss the principles underlying our
executive compensation decisions and the most important factors relevant to an
analysis of these decisions. It provides qualitative information regarding the
manner and context in which compensation is awarded to and earned by our
executive officers and places in perspective the data presented in the tables
and other quantitative information that follows this section.
Our compensation of executives is designed to attract, as needed, individuals
with the skills necessary for us to achieve our business plan, to reward those
individuals fairly over time, and to retain those individuals who continue to
perform at or above our expectations, without incurring risk-taking incentives
that are reasonably likely to have a material adverse effect on the Corporation.
Our executives' compensation has three primary components - base salary, a
yearly cash incentive bonus and stock option/restricted stock awards.
Base Salary. We fix the base salary of each of our executives at a level we
believe enables us to hire and retain individuals in a competitive environment
and rewards satisfactory individual performance and a satisfactory level of
contribution to our overall business goals. We also take into account the base
salaries paid by similarly sized companies and the base salaries of other
companies with which we believe we compete for talent. To this end, we
subscribe to certain executive compensation surveys and other databases and
review them when making a crucial executive hiring decision and annually or at
the end of the term of the employment agreement when we review executive
compensation.
Cash Incentive Bonus. We designed the cash incentive bonuses for each of our
executives to focus the executive on achieving key financial and/or operational
objectives within a yearly time horizon, as described in more detail below.
Stock Option/Restricted Stock Awards. We use stock options or restricted stock
awards when employment agreements are entered into and/or to reward long-term
performance; these options are intended to produce value for each executive if
the Corporation's performance is outstanding and if the executive has an
extended tenure and are also based on availability of options.
We view the three primary components of our executive compensation as related
but distinct. Although we review total compensation, we do not believe that
significant compensation derived from one component of compensation should
negate or reduce compensation from other components. We determine the
appropriate level for each compensation component based in part, but not
exclusively, on our view of internal equity and consistency, individual
performance and other information we deem relevant, such as the survey data
referred to above. We believe that salary and cash incentive bonuses are
primary considerations and that stock options are secondary considerations.
Except as described below, we have not adopted any formal or informal policies
or guidelines for allocating compensation between long-term and currently paid
out compensation, between cash and non-cash compensation, or among different
forms of compensation. This is due to the small size of our executive team and
the need to tailor each executive's award to attract and retain that executive.
In addition to the three primary components of compensation described above, we
provide our executives with benefits that are generally available to our
salaried employees. These benefits include health and medical benefits,
flexible spending plans and life insurance. We also provide our executives with
severance and certain additional benefits in the event of a change of control of
the Corporation, as described in more detail below. However, for the first time
the Corporation, as an inducement to Mr. Allain to enter into an employment
contract, granted him 50,000 restricted shares of Common Stock which vest 50%
after one year and the remaining 50% after two years, provided Mr. Allain is
employed by Trans-Lux Corporation on the dates the shares vest.
No stock options were awarded during 2009 to any employees, and therefore, the
Corporation did not record any related compensation expense. There are no stock
option plans currently in effect providing for the grant of new options to
employees. There is a proposal elsewhere in this Proxy Statement to adopt a new
Long-Term Incentive Plan for officers and employees.
Cash Incentive Bonus. Yearly cash incentive bonuses for our executives are
established as part of their respective individual employment agreements. Each
of these employment agreements provides that the executive will receive a cash
incentive bonus determined in the discretion of our Board of Directors, based
upon the financial performance of the Corporation. These criteria are
established by the Compensation Committee and approved by the full Board of
Directors at the time the individual employment agreement is entered into and
includes specific objectives relating to the achievement of operational and/or
financial results. Based on the results of the Corporation, no cash incentive
bonuses were paid for the year ended December 31, 2009.
Severance and Change in Control Benefits. Each of our executives has a
provision in his/her employment agreement providing for certain severance
benefits in the event of termination without cause. The severance provisions
are described below in the section entitled "Employment Agreements."
In addition to the severance benefits, Ms. Toppi's employment agreement
provides for a "Change in Control of Employer" provision, entitling her to
terminate the agreement on 75 days prior written notice and receive a lump sum
payment, grossed up for taxes if subject to Section 4999 of the Internal Revenue
Code of 1986 if such payment is deemed to be an "excess parachute payment" under
Section 280G of the Internal Revenue Code of 1986, and the option of extending
her agreement for three (3) years at her then current salary subject to the
cost-of-living adjustment if such Change in Control is approved.
Supplemental Executive Retirement Agreement. Former President and Chief
Executive Officer Michael Mulcahy retired on December 31, 2009. In accordance
with his agreement, Mr. Mulcahy was due a Supplemental Executive Retirement
Payment ("SERP"). The benefit payment was due on July 1, 2010 in the amount of
$353,000 plus tax effect of approximately $170,000.
Other Benefits. Our executives are eligible to participate in all of our
employee benefit plans, such as medical, group life and disability insurance,
pension plan and our 401(k) plan, in each case on the same basis as our other
employees. Except for the SERP established approximately eight years ago for
Mr. Mulcahy, there were no special benefits or perquisites provided to any
executive officer in 2009.
Compensation Consultants. The Corporation has not engaged the services of any
outside compensation consultant for 2009.
Compensation Committee Report
The information contained in this Proxy Statement shall not be deemed to be
"soliciting material" or "filed with the SEC" or subject to the liabilities of
Section 18 of the Exchange Act, except to the extent that we specifically
incorporate it by reference into a document filed under the Securities Act or
Exchange Act.
The Compensation Committee has reviewed and discussed the foregoing Compensation
Discussion and Analysis with management and, based on such review and
discussions, the Compensation Committee has recommended to the Board of
Directors that the Compensation Discussion and Analysis be included in this
Proxy Statement.
This report is submitted by the Compensation Committee. Its members are:
Howard S. Modlin, Chairman
Glenn J. Angiolillo
Jean Firstenberg
George W. Schiele
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT
Compensation of Executive Officers
The following table provides certain summary information for the last fiscal
year of the Corporation concerning compensation paid or accrued by the
Corporation and its subsidiaries to or on behalf of the Corporation's Chief
Executive Officer, Chief Financial Officer, one other Named Executive Officer of
the Corporation for 2009 and the management consultant.
Summary Compensation Table
Annual Compensation
---------------------------------------------------------------------------------------------------------------------
Nonqualified
Non-Equity Deferred
Stock Option Incentive Plan Compensation All Other
Name and Salary Bonus Awards Awards Compensation Earnings Compensation Total
Principal Position Year ($) ($) ($) ($) ($) ($) ($)(1) ($)
---------------------------------------------------------------------------------------------------------------------
Michael R. Mulcahy (2).... 2009 259,700 - - - - - 536,659 796,359
President and Chief 2008 303,590 - - - - - 25,640 329,230
Executive Officer
Angela D. Toppi........... 2009 174,839 - - - - - 3,132 177,971
Executive Vice President, 2008 193,658 - - - - - 3,065 196,723
Treasurer, Secretary and
Chief Financial Officer
Al L. Miller.............. 2009 140,997 25,713 - - - - 1,224 167,934
Executive Vice President 2008 160,787 26,867 - - - - 1,393 189,047
of Manufacturing
Richard Brandt (3)........ 2009 150,000 - - - - - 24,217 174,217
Management Consultant 2008 300,000 - - - - - 51,903 351,903
---------------------------------------------------------------------------------------------------------------------
(1) See "All Other Compensation" below for further details.
(2) Mr. Mulcahy retired effective December 31, 2009. In accordance with his agreement, Mr. Mulcahy is due a
Supplemental Executive Retirement Payment ("SERP"). The SERP benefit payment was due on July 1, 2010 in the
amount of $353,000 plus tax effect of approximately $170,000 and is included in "All Other Compensation."
(3) For Mr. Brandt, reflects fees paid under a consulting agreement described below in the section entitled
"Employment Agreements."
All Other Compensation
During 2009, "All Other Compensation" consisted of director and/or trustee fees,
insurance premiums, supplemental executive retirement payment and other items.
The following is a table of amounts per named individual:
-----------------------------------------------------------------------------------------
Supplemental
Director and/or Insurance Executive Total
Trustee Fees Premiums Retirement Other All Other
Name ($) ($) Benefit ($) ($)(1) Compensation ($)
-----------------------------------------------------------------------------------------
Michael R. Mulcahy.... 6,400 6,715 522,976 568 536,659
Angela D. Toppi....... 720 2,412 - - 3,132
Al L. Miller.......... - 847 - 377 1,224
Richard Brandt........ 5,680 9,438 - 9,099 24,217
-----------------------------------------------------------------------------------------
(1) Other consists of personal use of company vehicle and for Mr. Brandt includes a tax
equalization payment.
During 2009, the named executives agreed to a voluntary reduction in their
salary for ten months; and during 2008, the named executives agreed to defer
their increases for nine months.
Retirement Plan
The Corporation made a cash contribution of $253,000 during 2009, which is less
than the minimum required contribution, to the Corporation's retirement plan for
all eligible employees and the individuals listed in the Summary Compensation
Table, except for Mr. Brandt who previously received his benefits and no longer
participates. The Corporation has filed a request for a waiver of the minimum
funding standard as permitted under 412(d) of the Internal Revenue Code and
Section 303 of the Employee Retirement Income Security Act of 1974.
The Corporation's retirement plan covers all salaried employees over age 21 with
at least one year of service who are not covered by a collective bargaining
agreement to which the Corporation is a party. Retirement benefits are based on
the final average salary for the highest five of the ten years preceding
retirement. For example, estimated annual retirement benefits payable at normal
retirement date, which normally is age 65, is approximately $15,000 for an
individual with ten years of credited service and with a final average salary of
$100,000; and approximately $120,000 for an individual with 40 years of credited
service and with a final average salary of $200,000. Currently, $245,000 is the
legislated annual cap on determining the final average salary and $195,000 is
the maximum legislated annual benefit payable from a qualified pension plan.
As of January 1, 2010, Mr. Miller and Ms. Toppi had 36 and 17 years of
credited service, respectively. As of December 31, 2003, the benefit service
under the pension plan had been frozen, and, accordingly, no further years of
credited service have been allowed, and as of April 30, 2009, the benefit under
the pension plan has been frozen, and, accordingly, there is no further increase
in benefit being accrued. The normal annual retirement benefit for Mr. Miller
and Ms. Toppi is approximately $50,000 and $36,000, respectively.
Supplemental Executive Retirement Agreement
President and Chief Executive Officer Michael Mulcahy retired on December 31,
2009. In accordance with his agreement, Mr. Mulcahy was due a Supplemental
Executive Retirement Payment ("SERP"). The SERP benefit payment was due on July
1, 2010 in the amount of $353,000 plus tax effect of approximately $170,000.
Certain Transactions
During the year 2009, $150,000 in consulting fees for consulting services
rendered by Mr. Brandt was paid by the Corporation to Moving Images, LLC, which
is owned by members of his family, which includes Mr. Matthew Brandt and Mr.
Thomas Brandt, former directors and executive officers of the Corporation, as
more fully described below in the section entitled "Employment Agreements."
During the year 2009, $132,000 in fees for legal services rendered was paid by
the Corporation to the law firm of which Mr. Modlin, a director of the
Corporation, is the president.
Employment Agreements
The Corporation executed an employment agreement with J.M. Allain on February
16, 2010 for a term expiring on February 16, 2012. Mr. Allain was appointed as
President and Chief Executive Officer of the Corporation at that time. The
agreement provides for compensation at the annual rate of $250,000 through
February 16, 2012. Mr. Allain is entitled to receive a one-time bonus of
$50,000 in the event that the cash flow of the Corporation, before financing
activities and sale of real estate, exceeds $2.5 million for 2010 or 2011,
during the term of the employment agreement. Payment of such bonus shall be
made only once, if earned, within 120 days after the end of the period earned.
In addition, Mr. Allain is entitled to receive up to 50,000 shares of
restricted Common Stock of the Corporation upon achieving specified levels of
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"),
excluding (i) sales of real estate and (ii) the amount by which (x) any item or
items of unusual or extraordinary gain in the aggregate exceeds 20% of the
Corporation's net book value as at the end of the immediate preceding fiscal
year or (y) any items of unusual or extraordinary loss in the aggregate exceeds
20% of the Corporation's net book value as at the end of the immediate preceding
calendar year, in each case in (x) and (y) above as determined by accounting
principles generally accepted in the United States of America, and items of gain
and loss shall not be netted against each other for purpose of the above 20%
calculation. Mr. Allain will receive 10,000 shares of restricted stock if
EBITDA equals $4.6 million for 2010 or 2011, and for each $200,000 increase in
EBITDA over $4.6 million, Mr. Allain will receive an additional 10,000 shares
of restricted stock, not to exceed 50,000 shares of restricted stock in the
aggregate. Delivery of such restricted shares shall be made within 120 days
after the end of the period earned. Also, Mr. Allain executed, concurrently
with his employment agreement, a restricted stock agreement, awarding him 50,000
shares of restricted stock. The restricted stock vests at the rate of 50% on
February 16, 2011 and the remaining 50% on February 16, 2012, provided Mr.
Allain is employed by the Corporation on the respective vesting dates. His
employment agreement provides that if consistent with duties and obligations
under Delaware law, the Corporation will recommend his nomination to the Board
as and when a seat becomes available. If Mr. Allain's employment is terminated
for any reason, he is entitled to four months salary as severance pay and he
has agreed to immediately resign as a director.
The Corporation had an employment agreement with Mr. Michael R. Mulcahy for a
term expiring March 31, 2010. Mr. Mulcahy retired on December 31, 2009 and was
due to receive a Supplemental Executive Retirement Payment of $353,000 grossed
up for taxes on July 1, 2010. Mr. Mulcahy's employment agreement provided for
compensation at the annual rate of $307,151 through March 31, 2010, subject to
annual cost-of-living adjustments. Mr. Mulcahy was entitled to receive as a
profit participation 2 1/2% of the Corporation's pre-tax consolidated earnings
if earnings were $500,000 up to $1,000,000, 3 1/4% of the Corporation's pre-tax
consolidated earnings if earnings were over $1,000,000 up to $2,000,000 and 4%
of the Corporation's pre-tax consolidated earnings if earnings were over
$2,000,000, with a maximum of $150,000 for any fiscal year. Such pre-tax
consolidated earnings shall not include any defined extraordinary or unusual
items of gain or loss as determined by accounting principles generally accepted
in the United States of America to the extent such item exceeds 20% of net book
value. The agreement further provided that if Mr. Mulcahy was disabled, the
Corporation would pay to him 50% of the salary he was entitled to receive for
the duration of the disability during the term, but in no event less than
twenty-four (24) months. In the event Mr. Mulcahy died during the term of said
agreement, the Corporation would have paid to his widow death benefits in an
amount equal to 50% of his then annual salary for the immediate preceding fiscal
year for twenty-four (24) months. The Corporation had purchased two life
insurance policies in the amount of $500,000 and $75,000 in favor of Mr.
Mulcahy's beneficiary. The agreement also provided for supplemental retirement
benefits in excess of the limitations on the maximum annual benefits imposed by
Section 415 of the Internal Revenue Code of 1986 and if the Pension Plan was
discontinued following a Change in Control. The agreement further provided for
severance pay equal to 100% of his base salary in effect at time of termination
of employment for a period of three (3) years or until his 65th birthday,
whichever first occurred, unless he rejected a proposed renewal contract for a
term of at least three years and upon the same terms and conditions in effect at
such time but Mr. Mulcahy elected to retire. The agreement also contained a
"Change in Control of Employer" provision, entitling Mr. Mulcahy to terminate
the agreement on 75 days prior written notice and receive a lump sum payment of
$1,200,000, grossed up for taxes if subject to Section 4999 of the Internal
Revenue Code of 1986 if such payment is deemed to be an "excess parachute
payment" under Section 280G of the Internal Revenue Code of 1986. Mr. Mulcahy
also had the option of extending his agreement for three (3) years at his then
current salary subject to the cost-of-living adjustment in the event such Change
in Control was approved.
The Corporation has an employment agreement with Ms. Angela D. Toppi that
expired and is now on a 30-day basis, which provides for compensation at the
annual rate of $200,000. The agreement provides that if Ms. Toppi is disabled,
the Corporation will pay to her 50% of the salary she is entitled to receive for
the duration of the disability during the term, but in no event less than
eighteen (18) months. In the event Ms. Toppi dies during the term of said
agreement, the Corporation shall pay to her beneficiary death benefits in an
amount equal to 50% of her then annual salary for the immediate preceding fiscal
year for the duration of the term, but in no event less than eighteen (18)
months. The Corporation will reimburse Ms. Toppi up to $2,500 per annum for
the cost of long-term disability insurance and life insurance. The agreement
further provides for severance pay equal to 100% of her base salary in effect at
time of termination of employment for a period of one (1) year if the
Corporation continues a non-compete clause. The agreement also contains a
"Change in Control of Employer" provision, entitling Ms. Toppi to terminate the
agreement on 75 days prior written notice and receive a lump sum payment of 2.9
times her salary level then in effect, grossed up for taxes if subject to
Section 4999 of the Internal Revenue Code of 1986 if such payment is deemed to
be an "excess parachute payment" under Section 280G of the Internal Revenue Code
of 1986. Ms. Toppi also has the option of extending her agreement for three
(3) years at her then current salary subject to the cost-of-living adjustment if
such Change in Control is approved. The agreement also provides for
supplemental retirement benefits in the absence of the Pension Plan in the event
of a Change in Control.
The Corporation has an employment agreement with Mr. Al L. Miller that expired
and is now on a 30-day basis, which provides for compensation at the annual rate
of $161,500. Mr. Miller is entitled to receive a performance bonus and sales
override target amount of earnings of $45,000 per annum. Mr. Miller is also
entitled to receive as a profit participation 1/2 of 1% of the Corporation's
pre-tax consolidated earnings if earnings exceed $500,000, with a maximum of
$40,000 for any fiscal year. Such pre-tax consolidated earnings shall not
include any defined extraordinary or unusual items of gain or loss as determined
by accounting principles generally accepted in the United States of America to
the extent such item exceeds 20% of net book value. The agreement provides that
if Mr. Miller is disabled, the Corporation will pay to him 40% of the salary he
is entitled to receive for the duration of the disability during the term, but
in no event less than ninety (90) days. In the event Mr. Miller dies during
the term of said agreement, the Corporation shall pay to his beneficiary death
benefits in an amount equal to 40% of his then annual salary for the immediate
preceding fiscal year for the duration of the term.
The Corporation has a consulting agreement with Moving Images, LLC, a private
company owned by family members of Mr. Richard Brandt, former Chairman of the
Board. The consulting agreement, which replaced a similar agreement with Mr.
Brandt, who performs the consulting services on behalf of such company, expires
on December 31, 2014. The agreement provides for annual payments of $300,000
through December 31, 2011 and $195,000 through December 31, 2014. The agreement
contains graduated bonus provisions based on the Corporation's defined pre-tax
consolidated earnings, not to exceed $142,976, subject to cost-of-living
adjustments and provides for profit participation of 1 1/2% of the Corporation's
defined pre-tax consolidated earnings. Such pre-tax consolidated earnings shall
not include any defined extraordinary or unusual items of gain or loss as
determined by accounting principles generally accepted in the United States of
America to the extent such item exceeds 20% of net book value. The agreement
further provides that if Mr. Brandt is disabled or dies during the term of said
agreement, the Corporation shall pay to Moving Images, LLC, at his then annual
consulting fee in effect, for the remaining term of the agreement. The
agreement further provides for severance pay for the term of said agreement
equal to his then annual consulting fee in effect at time of termination of
employment in a lump sum payment. If there is a "change in control" as defined
therein, or if the Corporation failed to elect Mr. Brandt to his present
positions without his consent, Moving Images, LLC has the right to receive the
payments through December 31, 2011, including certain lump sum payments thereof.
Moving Images, LLC agreed to reduce their 2008 fees by $90,406 plus the
cost-of-living adjustment. On March 26, 2010, the Board of Directors authorized
that future payments, if any, to Moving Images, LLC would only be made for
specific services rendered as authorized by the Corporation's Chief Executive
Officer and suspended all other aspects of the agreement.
The foregoing is a summary of the agreements and reference is made to the
agreements, each of which has been filed with the SEC, for the full terms
thereof.
During 2009, the named executives agreed to a voluntary reduction in their
salary for ten months; and during 2008, the named executives agreed to defer
their increases for nine months. The named executives and other executives plus
Moving Images, LLC agreed to defer their increases for nine months during 2007,
for six months during 2006 and for three months during 2005, 2004 and 2003.
Stock Option Plans and Stock Options
The Corporation had an incentive stock option plan, which provided for the grant
of incentive stock options at fair market value on date of grant. The plan has
expired and no further options may be granted. Options outstanding are
exercisable during the period one to 10 years after date of grant and while the
holder is in the employ of the Corporation and survive the termination of the
plan. The Corporation has a Non-Employee Director Stock Option Plan, which
provides for the grant of incentive stock options at fair market value on date
of grant, pursuant to which the option set forth below was granted. Options
outstanding are exercisable during the period one to six years after date of
grant and while a director. There were no stock options granted in fiscal 2009
to the named executive officers or the management consultant and no stock
options were exercised in fiscal 2009.
The following table sets forth information as to the named executive officers
and the management consultant with respect to unexercised options and equity
incentive plan awards as of the end of the fiscal year.
Outstanding Equity Awards at Fiscal Year-End
---------------------------------------------------------------------------------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Equity Plan Market or
Incentive Awards: Payout
Plan Market Number of Value of
Awards: Value of Unearned Unearned
Number of Number of Shares of Shares, Shares,
Number of Securities Shares or Units of Units or Units or
Securities Underlying Units of Stock Other other
Underlying Unexercised Option Stock that that have Rights that Rights that
Unexercised Unearned Exercise Option have not not have not have not
Options Options Price Expiration Vested Vested Vested Vested
Name # # $ Date # $ # $
---------------------------------------------------------------------------------------------------------------------
Michael R. Mulcahy.... - - - - - - -
Angela D. Toppi....... 5,000 - $7.00 03/24/14 - - - -
Al L. Miller.......... - - - - - - -
Richard Brandt (1).... 10,000 - 4.03 09/25/11 - - - -
---------------------------------------------------------------------------------------------------------------------
(1) Mr. Brandt's stock options were granted under a Non-Statutory Stock Option Agreement, which provided for the
grant of incentive stock options at fair market value of the Common Stock on date of grant. Options outstanding
are exercisable during the period one to 10 years after date of grant.
FIVE-YEAR CORPORATE PERFORMANCE GRAPH
The following graph compares the Corporation's total stockholder return over the
five fiscal years ended December 31, 2009 with the Amex Composite Index ("XAX"),
the Total Return Index for American Stock Exchange US ("AMEX US") and the
Russell 2000 Index ("RUSSELL 2000"). The NYSE Amex has ceased to track the AMEX
US, therefore the Corporation selected the XAX as the broad market index. The
stockholder return shown on the graph as "TLX" is not intended to be indicative
of future performance of the Corporation's Common Stock.
COMPARATIVE FIVE YEAR TOTAL RETURNS*
Trans-Lux Corporation, Amex Composite Index, AMEX US Total Return Index, Russell
2000 Index**
2004 2005 2006 2007 2008 2009
-------------------------------------------------------------
XAX 100.00 122.64 143.37 168.00 97.43 127.23
RUSSELL 2000 100.00 103.32 120.89 117.57 76.65 95.98
TLX 100.00 76.28 103.34 83.88 10.09 9.31
-------------------------------------------------------------
* Cumulative total return assumes reinvestment of dividends.
** Peer group consists of the RUSSELL 2000. Assumes $100 investment at the
close of trading on the last trading day preceding the first day of the
fifth preceding fiscal year in TLX Common Stock, XAX and RUSSELL 2000.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Corporation's executive officers and directors are required under Section
16(a) of the Securities Exchange Act of 1934 to file reports of ownership and
changes in ownership with the SEC and the NYSE Amex. Copies of those reports
must also be furnished to the Corporation.
Based solely on a review of the copies of reports furnished to the Corporation
for the year ended December 31, 2009, the Corporation's executive officers and
directors have complied with the Section 16(a) filing requirements, with the
exception of a Form 3 filed late by Mr. Schiele due to a delay in obtaining a
Securities and Exchange Commission CIK code in order to electronically file the
report, although timely requested.
STOCKHOLDER PROPOSALS - 2011 ANNUAL MEETING
If any stockholder desires to submit a proposal for action at the 2011 annual
meeting, such proposal must be received by the Corporation's Corporate Secretary
on or before December 24, 2010. Nominations for directors at the 2011 annual
meeting by stockholders must be in accordance with Article 4(c) of the
Corporation's By-Laws and received on or before February 17, 2011.
COST OF SOLICITATION
The cost of preparing and mailing material in connection with the solicitation
of proxies is to be borne by the Corporation. Solicitation will be made by the
Corporation's regular employees in the total approximate number of 10.
Solicitation will be made by mail, telephone and in person.
By Order of the Board of Directors
Angela D. Toppi
Corporate Secretary
Dated: Norwalk, Connecticut
August 6, 2010
APPENDIX A
CERTIFICATE OF INCORPORATION
ARTICLE FOURTH
PROPOSED NEW PARAGRAPH V
V. Reverse Stock Split and Forward Stock Split.
(a). Reverse Stock Split: At 6:00 p.m. Eastern Time on ______________,
--------------------
2010 * (the "Reverse Stock Split Effective Time"), each fifty (50) issued and
outstanding shares of the Corporation's Common Stock, par value $1.00 per share,
immediately prior to the Reverse Stock Split Effective Time will be and are
automatically reclassified as and converted, without any further action on the
part of the Corporation or any stockholder, into one (1) fully-paid and
nonassessable share of Common Stock, par value $1.00 per share, of the
Corporation (the "Reverse Stock Split"). In connection with the Reverse Stock
Split, the Corporation shall not issue fractional shares to holders of less than
fifty (50) shares of Common Stock. As a result of the Reverse Stock Split, each
stockholder of the Corporation holding less than fifty (50) shares of Common
Stock immediately prior to the Reverse Stock Split Effective Time shall only
have the right to receive cash equal to the average of the daily closing prices
on the five trading days immediately preceding the date of the 2010 Annual
Meeting on which sales took place multiplied by the number of shares of Common
Stock owned by such stockholder immediately prior to the Reverse Stock Split
Effective Time, and such stockholder shall no longer have any further rights as
a stockholder of the Corporation. Each stockholder of record holding fifty (50)
shares or more of Common Stock immediately prior to the Reverse Stock Split
Effective Time shall continue as a stockholder of the Corporation with respect
to all shares of Common Stock held by such stockholder, including full shares
and fractional shares resulting from the Reverse Stock Split.
(b). Forward Stock Split: At 6:01 p.m. Eastern Time on ____________, 2010
--------------------
* (the "Forward Stock Split Effective Time"), each issued and outstanding shares
of the Corporation's Common Stock, par value $1.00 per share, including
fractional shares of Common Stock, will be and are automatically reclassified as
and converted, without any further action on the part of the Corporation or any
stockholder, into shares of Common Stock of the Corporation at a ratio of fifty
(50) shares of Common Stock for each one (1) share of Common Stock issued and
outstanding immediately prior to the Forward Stock Split Effective Time, such
that each stockholder of at least one (1) full share at the Reverse Stock Split
Effective Time shall hold at the Forward Stock Split Effective Time the same
number of shares of Common Stock as such stockholder held immediately prior to
the Reverse Stock Split (the "Forward Stock Split").
-------------------------
* The date inserted will be the date the Certificate of Amendment is filed with
the Secretary of State of Delaware, which date will be approximately one (1)
business day following the Annual Meeting if approved.
Revised Article FOURTH if Proposals 1, 2 and 3 are approved
APPENDIX B
FOURTH: The aggregate number of shares of stock of all classes which the
Corporation shall have authority to issue is 12,000,000, consisting of 8,500,000
shares of Common Stock having a par value of $1.00 per share, 3,000,000 shares
of Class A Stock having a par value of $1.00 per share, and 500,000 shares of
Preferred Stock having a par value of $1.00 per share.
The powers, preferences and the relative, participating, optional and other
rights and the qualifications, limitations and restrictions thereof, of each
class of stock, and the express grant of authority to the Board of Directors to
fix by resolution the designations and the powers, preferences and rights of
each share of Preferred Stock and the qualifications, limitations and
restrictions thereof, which are not fixed by this Certificate of Incorporation,
are as follows:
A. Common Stock and Class A Stock
I. Dividends, etc. Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Certificate of Incorporation,
as amended from time to time, holders of Common Stock and Class A Stock shall be
entitled to receive such dividends and other distributions in cash, stock or
property of the Corporation as may be declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation legally available
therefor, provided that in the case of cash dividends, if at any time a cash
dividend is paid on the Common Stock, a cash dividend will also be paid on the
Class A Stock in an amount per share of Class A Stock equal to 110% of the
amount of the cash dividends paid on each share of the Common Stock (rounded up,
if necessary to the nearest one-hundredth of a cent), and provided that in no
event shall dividends and other distributions be paid on any of the Common Stock
and Class A Stock unless the other such class of stock also receive dividends
subject to the above provisions for the requirement of the higher cash dividends
for Class A Stock and provided, further, that in the case of dividends or other
distributions payable in stock of the Corporation other than Preferred Stock,
including distributions pursuant to stock splits or divisions of stock of the
Corporation other than Preferred Stock, which occur after the initial issuance
of shares of Class A Stock by the Corporation, except as specifically provided
herein, only shares of Common Stock shall be distributed with respect to Common
Stock and only shares of Class A Stock in an amount per share equal to the
amount per share paid with respect to the Common Stock shall be distributed with
respect to the Class A Stock, except that the Board of Directors may declare a
distribution of Class A Stock proportionately to all holders of Common Stock and
Class A Stock, and that, in the case of any combination or reclassification of
the Common Stock, the shares of Class A Stock shall also be combined or
reclassified, so that the number of shares of Class A Stock outstanding
immediately following such combination or reclassification shall bear the same
relationship to the number of shares of Class A Stock outstanding immediately
prior to such combination or reclassification as the number of shares of Common
Stock outstanding immediately following such combination or reclassification
bears to the number of shares of Common Stock outstanding immediately prior to
such combination or reclassification.
II. Voting:
(a) At every meeting of the stockholders every holder of Common Stock shall
be entitled to one (1) vote in person or by proxy for each share of Common
Stock, standing in his name on the transfer books of the Corporation.
(b) The holders of Class A Stock shall not be entitled to vote at any
meeting of the stockholders or otherwise, except as may be specifically required
by applicable law.
(c) The provisions of this Article FOURTH of the Certificate of
Incorporation shall not be modified, revised, altered or amended, repealed or
rescinded in whole or in part, without the affirmative vote of a voting majority
of the shares of the Common Stock.
(d) The Corporation may not effect or consummate:
(1) any merger or consolidation of the Corporation with or into any other
corporation;
(2) any sale, lease, exchange or other disposition of all or substantially
all of the assets of the Corporation to or with any other person; or unless and
until such transaction is authorized by the vote, if any, required by Articles
NINTH and TWELFTH of this Certificate of Incorporation and by Delaware law;
(3) any dissolution of the Corporation;
unless and until such transaction is authorized by a majority of the voting
power of the shares of Common Stock entitled to vote, but the foregoing shall
not apply to any merger or other transaction described in the preceding
subparagraphs (1) and (2) if the other party to the merger or other transaction
is a Subsidiary of the Corporation.
For purposes of this paragraph (d) a "Subsidiary" is any corporation more
than 50% of the voting securities of which are owned directly or indirectly by
the Corporation; and a "person" is any individual, partnership, corporation or
entity.
(e) Every reference in this Certificate of Incorporation to a majority or
other proportion of shares of stock shall refer to such majority or other
proportion of the votes of such shares of stock.
III. Conversion Rights. Neither the shares of Common Stock or the shares
of Class A Stock are convertible into any other class of stock.
IV. Liquidation Rights. In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of each series of Preferred Stock shall be entitled to
receive, out of the net assets of the Corporation, an amount for each share
equal to the amount fixed and determined by the Board of Directors in any
resolution or resolutions providing for the issuance of any particular series of
Preferred Stock, plus an amount equal to all dividends accrued and unpaid on
shares of such series to the date fixed for distribution, and no more, before
any of the assets of the Corporation shall be distributed or paid over to the
holders of Common Stock. After payment in full of said amounts to the holders
of Preferred Stock of all series, the remaining assets and funds of the
Corporation shall be divided among and paid ratably to the holders of Common
Stock and Class A Stock (considered for this purpose as one class). If, upon
such dissolution, liquidation or winding up, the assets of the Corporation
distributable as aforesaid among the holders of Preferred Stock of all series
shall be insufficient to permit full payment to them of said preferential
amounts, then such assets shall be distributed among such holders, first in the
order of their respective preferences, and second, as to such holders who are
next entitled to such assets and who rank equally with regard to such assets,
ratably in proportion to the respective total amounts which they shall be
entitled to receive as provided in this Section IV. A merger or consolidation
of the Corporation with or into any other corporation or a sale or conveyance of
all or any part of the assets of the Corporation (which shall not in fact result
in the liquidation of the Corporation and the distribution of assets to
stockholders) shall not be deemed to be a voluntary or involuntary liquidation
or dissolution or winding up of the Corporation within the meaning of this
Section IV.
(If Proposal No. 1 is accepted, the following paragraph V will be added.)
V. Reverse Stock Split and Forward Stock Split.
(a). Reverse Stock Split: At 6:00 p.m. Eastern Time on ______________,
--------------------
2010 * (the "Reverse Stock Split Effective Time"), each fifty (50) issued and
outstanding shares of the Corporation's Common Stock, par value $1.00 per share,
immediately prior to the Reverse Stock Split Effective Time will be and are
automatically reclassified as and converted, without any further action on the
part of the Corporation or any stockholder, into one (1) fully-paid and
nonassessable share of Common Stock, par value $1.00 per share, of the
Corporation (the "Reverse Stock Split"). In connection with the Reverse Stock
Split, the Corporation shall not issue fractional shares to holders of less than
fifty (50) shares of Common Stock. As a result of the Reverse Stock Split, each
stockholder of the Corporation holding less than fifty (50) shares of Common
Stock immediately prior to the Reverse Stock Split Effective Time shall only
have the right to receive cash equal to the average of the daily closing prices
on the five trading days immediately preceding the date of the 2010 Annual
Meeting on which sales took place multiplied by the number of shares of Common
Stock owned by such stockholder immediately prior to the Reverse Stock Split
Effective Time, and such stockholder shall no longer have any further rights as
a stockholder of the Corporation. Each stockholder of record holding fifty (50)
shares or more of Common Stock immediately prior to the Reverse Stock Split
Effective Time shall continue as a stockholder of the Corporation with respect
to all shares of Common Stock held by such stockholder, including full shares
and fractional shares resulting from the Reverse Stock Split.
(b). Forward Stock Split: At 6:01 p.m. Eastern Time on ______________,
--------------------
2010 * (the "Forward Stock Split Effective Time"), each issued and outstanding
shares of the Corporation's Common Stock, par value $1.00 per share, including
fractional shares of Common Stock, will be and are automatically reclassified as
and converted, without any further action on the part of the Corporation or any
stockholder, into shares of Common Stock of the Corporation at a ratio of fifty
(50) shares of Common Stock for each one (1) share of Common Stock issued and
outstanding immediately prior to the Forward Stock Split Effective Time, such
that each stockholder of at least one (1) full share at the Reverse Stock Split
Effective Time shall hold at the Forward Stock Split Effective Time the same
number of shares of Common Stock as such stockholder held immediately prior to
the Reverse Stock Split (the "Forward Stock Split").
B. Preferred Stock.
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article FOURTH, to provide for the issuance of
the preferred shares in series, and by filing a certificate pursuant to the
General Corporation Law of Delaware, to establish the number of shares to be
included in each such series, and to fix the designations, relative rights,
preferences and limitations of the shares of each such series. The authority of
the Board with respect to each series shall include, but not be limited to,
determination of the following:
(a) The number of shares constituting that series and the distinctive
designations of that series;
(b) The dividend rate on the shares of that series, whether dividends shall
be cumulative and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
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* The date inserted will be the date the Certificate of Amendment is filed with
the Secretary of State of Delaware, which date will be approximately one (1)
business day following the Annual Meeting if approved.
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
Dividends on outstanding preferred shares shall be declared and paid, or
set apart for payment, before any dividends shall be declared and paid, or set
apart for payment, on the common shares with respect to the dividend period.
Any and all such shares issued, and for which the full consideration has
been paid or delivered shall be deemed fully paid stock and the holder of such
shares shall not be liable for any further call or assessment or any other
payment thereon.
C. Authorized Shares of Capital Stock.
Except as may be provided in the terms and conditions fixed by the Board of
Directors for any series of Preferred Stock, and in addition to any other vote
that may be required by statute, stock exchange regulations, this Certificate of
Incorporation or any amendment hereof, the number of authorized shares of any
class or classes of stock of the Corporation may be increased or decreased by
the affirmative vote of the holders of a majority of the outstanding shares of
stock of the Corporation entitled to vote. In the event no shares of Class A
Stock are outstanding five years from the date of the 2010 Annual Meeting of
Stockholders, the Board of Directors may at any time thereafter retire and
thereby eliminate the Class A Stock from the certificate of incorporation and
reduce accordingly the number of authorized shares of capital stock of the
Corporation.
APPENDIX C
TRANS-LUX CORPORATION
2010 LONG-TERM INCENTIVE PLAN
ARTICLE 1
GENERAL PLAN INFORMATION
1.1 Background. The Plan permits the grant to Employees and Directors of
equity-based incentive compensation opportunities, including Restricted Stock,
Restricted Stock Units, Options, including ISOs, NQSOs and Other Awards.
1.2 Objectives. The objectives of the Plan are to optimize the profitability
and growth of the Company through long-term incentives that are consistent with
the Company's goals and that link the interests of Participants to those of the
Company's stockholders; to provide Participants with incentives for excellence
in individual performance; to provide flexibility to the Company in its ability
to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success; and to allow Participants to
share in the success of the Company.
1.3 Duration of the Plan. The Plan shall be effective on the date on which it
is approved by stockholders. The Plan shall remain in effect until terminated
pursuant to Article 15, subject to the right of the Committee to amend or
terminate the Plan at any time or until there are no more Shares available for
issuance under the Plan.
ARTICLE 2
DEFINITIONS
As used herein, the masculine includes the feminine and the singular includes
the plural, and vice versa, and the following terms shall have the meanings set
forth below, unless otherwise clearly required by the context.
2.1 "Award" means a grant under the Plan of Options, Restricted Stock,
Restricted Stock Units and Other Awards.
2.2 "Award Agreement" means an agreement entered into by the Company and a
Participant, or another instrument prepared by the Company in lieu of such an
agreement, setting forth the terms and conditions applicable to an Award
pursuant to the Plan. An Award Agreement may be in hard copy, electronic form
or such other form as the Company may permit.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Change of Control" unless otherwise defined by the Committee shall be
deemed to have occurred if and when, after the Effective Date: the Company's
stockholders approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 60% of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or the
Company's stockholders approve a plan of complete liquidation of the Company or
an agreement of sale or disposition of all or substantially all of the Company's
assets.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means the Compensation Committee of the Board or any other
committee appointed by the Board to administer the Plan and Awards to
Participants who are Employees or Directors.
2.7 "Company" means Trans-Lux Corporation, a Delaware corporation, and any
successor thereto.
2.8 "Director" means a member of the Board.
2.9 "Disability" means, unless otherwise determined by the Committee, a
recipient's absence from employment or other service for at least one hundred
eighty (180) days in any twelve (12) month period as a result of his incapacity
due to physical or mental illness, as determined by the Committee.
2.10 "Effective Date" means the date the Plan becomes effective in accordance
with Section 1.3.
2.11 "Employee" means any employee of the Company or a Subsidiary.
2.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.13 "Fair Market Value" means, as of any date, the value of the respective
class of Shares determined as follows:
a) if the respective Shares are listed on any established stock exchange or a
national market system, including without limitation, NYSE American Exchange,
its fair market value will be the closing sales price of such respective Shares
(or the closing bid, if no sales were reported) as quoted on such system or
exchange (or the exchange or system with the greatest volume of trading in the
respective Shares) on the date of determination (or, if no closing sales price
or closing bid was reported on that date, as applicable, on the last trading
date such closing sales price or closing bid was reported), as reported in The
Wall Street Journal or such other source as the Committee or Board deems
reliable; or
b) if the respective Shares are regularly quoted on an automated quotation
system (including the OTC Bulletin Board) or by a recognized securities dealer
(including the pink sheets), but selling prices are not reported, the fair
market value of such respective Shares will be the mean between the high bid and
high asked prices for such Shares on the date of determination (or, if no such
prices were reported on that date, on the last date such prices were reported),
as reported in The Wall Street Journal or such other source as the Committee or
the Board deems reliable; or
c) in the absence of an established market for such respective Shares of the
type described in (a) and (b), above, the fair market value thereof will be
determined by the Committee or the Board in good faith.
2.14 "ISO" means an Option that is designated by the Committee as an "incentive
stock option" within the meaning of Section 422 of the Code.
2.15 "NQSO" means an Option that is not designated by the Committee as an ISO.
2.16 "Option" means an incentive stock option or a nonqualified stock option
granted pursuant to the Plan.
2.17 "Other Award" means an Award granted to a Participant pursuant to Article
8.
2.18 "Participant" means an Employee or Director who has been selected to
receive an Award or who holds an outstanding Award.
2.19 "Performance-Based Exception" means the performance-based exception from
the tax deductibility limitation imposed by Code Section 162(m), as set forth in
Code Section 162(m)(4)(C).
2.20 "Plan" means the Trans-Lux Corporation Long-Term Incentive Plan, as it is
set forth herein and as it may be amended and restated from time to time.
2.21 "Restricted Stock" means an Award granted pursuant to Section 7.1.
2.22 "Restricted Stock Unit" means an Award granted pursuant to Section 7.5.
2.23 "Restricted Period" means the period during which the transfer of Shares of
Restricted Stock is limited in some way (based on the passage of time, the
achievement of performance goals, or the occurrence of other events determined
by the Committee in its discretion) and the Shares are subject to a substantial
risk of forfeiture, as provided in Article 7.
2.24 "Share" means a share of the Company's Class A Stock, $1.00 par value per
share, or a share of the Company's Common Stock, $1.00 par value per share, as
the case may be.
2.25 "Share Pool" means the number of Shares available under Section 4.1, as
adjusted pursuant to Section 4.3.
2.26 "Subsidiary" means a corporation, partnership, joint venture, or other
entity in which the Company has a direct or indirect ownership interest of at
least fifty percent (50%); provided that the Shares subject to any Award
constitute "service recipient stock" for purposes of Section 409A of the Code or
otherwise do not subject the Award to Section 409A of the Code.
2.27 "Ten Percent Stockholder" means a Participant who owns stock of the Company
possessing more than ten percent of the total combined voting of all classes of
stock of the Company or its parent or subsidiary corporation (within the meaning
of Section 422(b) of the Code).
ARTICLE 3
ADMINISTRATION
3.1 General. Except as otherwise determined by the Board in its discretion, the
Plan shall be administered by the Committee; provided that the Board may, in
its sole discretion, make Awards under the Plan.
3.2 Authority of the Committee. Except as limited by law or by the Certificate
of Incorporation or By-Laws of the Company, and subject to the provisions
hereof, the Committee shall have full power in its discretion to select
Employees or Directors who shall participate in the Plan; determine the sizes
and types of Awards; determine the terms and conditions of Awards in a manner
consistent with the Plan; construe and interpret the Plan and any Award
Agreement or other agreement or instrument entered into or issued under the
Plan; establish, amend, or waive rules and regulations for the Plan's
administration; amend the terms and conditions of any outstanding Award;
determine whether and on what terms and conditions outstanding Awards will be
adjusted for dividend equivalents (i.e. a credit, made at the discretion of the
Committee, to the account of a Participant in an amount equal to the cash
dividends, if any, paid on one Share for each Share represented or covered by an
outstanding Award held by the Participant); and establish a program pursuant to
which designated Participants may receive an Award under the Plan in lieu of
compensation otherwise payable in cash. Further, the Committee shall make all
other determinations that may be necessary or advisable for the administration
of the Plan.
3.3 Delegation of Authority. Subject to the requirements of applicable law, the
Committee may delegate to any person or group or subcommittee of persons (who
may, but need not be members of the Committee) such Plan-related functions
within the scope of its responsibility, power and authority as it deems
appropriate.
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* The inclusion of Class A Stock is subject to approval of such Class A Stock at
the 2010 Annual Meeting of Stockholders
Without limiting the foregoing, the Committee may delegate administrative duties
to such person or persons as it deems appropriate. The Committee may not
delegate its authority with respect to (a) non-ministerial actions with respect
to individuals who are subject to the reporting requirements of Section 16(a)
of the Exchange Act; (b) non-ministerial actions with respect to Awards that are
intended to qualify for the Performance-Based Exception; and (c) certifying the
satisfaction of performance goals and other material terms attributable to
Awards intended to qualify for the Performance-Based Exception.
3.4 Decisions Binding. All determinations and decisions made by the Committee,
and all related orders and resolutions of such committee shall be final,
conclusive, and binding on all persons.
3.5 Performance-Based Awards. For purposes of the Plan, it shall be presumed,
unless the Committee indicates to the contrary, that all Awards to Employees are
intended to qualify for the Performance-Based Exception. If the Committee does
not intend an Award to an Employee to qualify for the Performance-Based
Exception, the Committee shall reflect its intent in its records in such manner
as the Committee determines to be appropriate.
ARTICLE 4
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 Number of Shares Issuable under the Plan. Shares that may be issued
pursuant to Awards may be either authorized and unissued Shares, or authorized
and issued Shares held in the Company's treasury, or any combination of the
foregoing. Subject to adjustment as provided in Section 4.3, there shall be
reserved for issuance under Awards an aggregate of 1,200,000 shares of Class A
Stock and Common Stock. For the purposes hereof, the following Shares covered
by previously-granted Awards will be deemed not to have been issued under the
Plan and will remain in the Share Pool: (a) Shares covered by the unexercised
portion of an Option that terminates, expires, is canceled or is settled in
cash, (b) Shares forfeited or repurchased under the Plan, (c) Shares covered by
Awards that are forfeited, canceled, terminated or settled in cash, and (d)
Shares withheld in order to pay the exercise or purchase price under an Award or
to satisfy the tax withholding obligations associated with the exercise, vesting
or settlement of an Award.
4.2 Individual Award Limitations. The maximum aggregate number of Shares that
may be granted to any one Participant in any one year under the Plan with
respect to Options shall be 300,000. The maximum aggregate number of Shares
that may be granted to any one Participant in any one year with respect to
Restricted Stock or Restricted Stock Units shall be 300,000. There are no cash
awards under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any change in corporate
capitalization, such as a stock split, or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other distribution
of stock or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368) or
any partial or complete liquidation of the Company, such adjustment shall be
made in the number and class of Shares available for grant under Section 4.1, in
the number and class of and/or price of Shares subject to outstanding Awards,
and in the per-Participant Award limits set forth in Section 4.2 hereof, as may
be determined to be appropriate and equitable by the Committee, in its
discretion, to prevent dilution or enlargement of the benefits available under
the Plan and of the rights of Participants; provided that the number of Shares
subject to any Award shall always be a whole number. In a stock-for-stock
acquisition of the Company, the Committee may, in its discretion, substitute
securities of another issuer for any Shares subject to outstanding Awards.
ARTICLE 5
ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. All Employees or Directors are eligible to participate in the
Plan. Only Employees or Directors of the Company or a Subsidiary may be granted
ISOs.
5.2 Actual Participation. Subject to the provisions of the Plan, the Committee
may, from time to time, select from all Employees or Directors those to whom
Awards shall be granted and shall determine the nature and size of each Award.
ARTICLE 6
STOCK OPTIONS
6.1 Grant of Options. Subject to the terms of the Plan, Options may be granted
to Participants in such number, and upon such terms, and at any time and from
time to time as shall be determined by the Committee.
6.2 Option Exercise Price. The Option exercise price under each Option shall
not be less than one hundred percent (100%) of the Fair Market Value of the
respective Share on the date the Option is granted. Notwithstanding the
foregoing, in the case of an ISO granted to a Ten Percent Stockholder, the
Option exercise price under each ISO shall not be less than one hundred ten
percent (110%) of the Fair Market Value of the respective Share on the date the
Option is granted. The Board and the Committee may not reprice Options granted
under the Plan, either by amending an existing award agreement or by
substituting a new Award at a lower price.
6.3 Term of Options. Each Option granted to a Participant shall expire at such
time as the Committee shall determine at the time of grant; provided that no
Option shall be exercisable after the tenth (10th) anniversary of its date of
grant. Notwithstanding the foregoing, in the case of an ISO granted to a Ten
Percent Stockholder, the Option shall not be exercisable after the fifth (5th)
anniversary of its date of grant.
6.4 Exercise of Options. Options granted under the Plan shall be exercisable at
such times and be subject to such restrictions and conditions as the Committee
shall in each instance approve, which need not be the same for each grant or for
each Participant. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.
6.5 Payment. The purchase price for the Shares as to which an Option is
exercised shall be paid to the Company in full at the time of exercise as
follows:
a) in cash or its equivalent;
b) at the discretion of the Committee, in Shares having a Fair Market Value
equal to the aggregate Option exercise price for the Shares being purchased and
satisfying such other requirements as may be imposed by the Committee (which
Shares may be previously owned or may be Shares that would otherwise have been
issuable upon exercise of the Option if the exercise price had been paid in
cash);
c) at the discretion of the Committee, partly in cash (or its equivalent) and
partly in Shares;
d) through the delivery of irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the aggregate Option exercise price
for the Shares being purchased; or
e) through such other means as shall be prescribed in the Award Agreement or by
the Committee or the Board.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment of the Option
exercise price, the Company may deliver to the Participant, in the Participant's
name (or, at the direction of the Participant, jointly in the names of the
Participant and the Participant's spouse), one or more Share certificates for
the Shares purchased under the Option(s).
6.6 Limitations on ISOs. Notwithstanding anything in the Plan to the contrary,
to the extent required from time to time by the Code and/or applicable
regulations, the following additional provisions shall apply to the grant of
Options that are intended to qualify as ISOs:
Fair Market Value Limitation. The aggregate Fair Market Value (determined as of
the date the ISO is granted) of the Shares with respect to which ISOs are
exercisable for the first time by any Participant during any calendar year
(under all plans of the Company (or any parent or subsidiary corporation within
the meaning of Code Section 424) shall not exceed one hundred thousand dollars
($100,000) or such other amount as may subsequently be specified by the Code
and/or applicable regulations; provided that, to the extent that such
limitation is exceeded, any Options on Shares with a Fair Market Value in excess
of such amount shall be deemed to be NQSOs.
Code Section 422. ISOs shall contain such other provisions as the Committee
shall deem advisable, but shall in all events be consistent with and contain or
be deemed to contain all provisions required in order to qualify as incentive
stock options under Section 422 of the Code. Only Employees may receive ISOs.
Moreover, no ISOs may be granted more than ten (10) years from the earlier of
the date on which the Plan was adopted by the Board or the date the Plan
received stockholder approval.
ARTICLE 7
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Shares of Restricted
Stock to Participants in such amounts as the Committee shall determine.
7.2 Restrictions. The Committee shall impose such conditions and/or
restrictions on any Shares of Restricted Stock as the Committee may determine
including, without limitation, a requirement that Participants pay a stipulated
purchase price for each Share of Restricted Stock, transfer restrictions,
restrictions based upon the achievement of specific performance goals,
time-based restrictions, and/or restrictions under applicable federal or state
securities laws.
The Company may retain the certificates representing Shares of Restricted Stock
in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article and subject to satisfaction of
applicable tax withholding requirements, Shares of Restricted Stock that have
not yet been forfeited or canceled shall become freely transferable (subject to
any restrictions under applicable securities laws) by the Participant if and
when the Shares become vested and the applicable restrictions lapse.
7.3 Voting Rights. At the discretion of the Committee, Participants holding
Shares of Restricted Stock may be granted full voting rights with respect to
those Shares.
7.4 Dividends and other Distributions. At the discretion of the Committee, the
holder of Shares of Restricted Stock may be credited with any cash dividends
paid with respect to such Shares. The Committee may apply any restrictions to
the dividends that the Committee deems appropriate. Without limiting the
generality of the preceding sentence, if the grant or vesting of Restricted
Stock is designed to comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Restricted Stock, so that the
dividends and/or the Restricted Stock shall be eligible for the
Performance-Based Exception.
7.5 Restricted Stock Units. The Committee may grant Restricted Stock Units to
any Participant, subject to the terms and conditions of this Article being
applied to such Awards as if those Awards were for Restricted Stock and subject
to such other terms and conditions as the Committee may determine (including,
but not limited to, requiring or permitting deferral of the payment of such
Awards after the time that Participants become vested in them, notwithstanding
any provision to the contrary in Section 7.2 above). Each Restricted Stock Unit
shall have the value of one respective Share. Unless the Committee in its
discretion determines otherwise, the holder of Restricted Stock Units shall not
have any rights of a Stockholder (including, without limitation, dividend rights
and voting rights) with respect to the Shares covered by the Restricted Stock
Units. Restricted Stock Units may be paid at such time as the Committee may
determine in its discretion, and payments may be made in cash, Shares, or a
combination thereof, as determined by the Committee in its discretion.
Restricted Stock Units that become vested must be settled by the 15th day of the
third month following the calendar year in which such vesting occurs.
Alternatively, the Award may provide for deferred settlement, provided that the
deferral election(s) and designated settlement date(s) or event(s), as well as
the Award Agreement itself, satisfy the election, distribution timing and
documentation requirements of Section 409A of the Code.
ARTICLE 8
OTHER AWARDS
8.1 General. Subject to the terms of the Plan, the Committee may grant any
types of Awards other than those that are specifically set forth in Articles 6
through 7 hereof, including, but not limited to, the payment of Shares in lieu
of cash under any Company incentive bonus plan or program. Subject to the terms
of the Plan, the Committee, in its sole discretion, shall determine the terms
and conditions of such Other Awards.
ARTICLE 9
AWARD AGREEMENTS
9.1 In General. Each Award shall be evidenced by an Award Agreement that shall
include such provisions as the Committee shall determine and that shall
specify -
in the case of an Option, the number of respective Shares to which the Option
pertains, the Option exercise price or grant price, the term of the Option, the
schedule on which the Option becomes exercisable, and whether it is intended to
be an ISO or an NQSO;
in the case of Restricted Stock or Restricted Stock Units, the number of
respective Shares of Restricted Stock or Restricted Stock Units granted, the
applicable restrictions and the Restriction Period(s).
9.2 Severance from Service. Each Award Agreement shall set forth the extent to
which the Participant shall have rights under the Award following the
Participant's severance from service with the Company and its Subsidiaries
(within the meaning of Section 409A of the Code). The Award Agreement may make
distinctions based on the reason for the Participant's severance from service
(subject to Section 409A of the Code).
9.3 Restrictions on Transferability. Subject to the provisions of the Plan,
each Award Agreement shall set forth such restrictions on the transferability of
the Award and on the transferability of Shares acquired pursuant to the Award as
the Committee may deem advisable, including, without limitation, restrictions
under applicable securities laws, under the requirements of any stock exchange
or market upon which such Shares are then listed and/or then traded, and under
any blue sky or state securities laws applicable to such Shares. In the case of
an ISO (and in the case of any other Award, except as otherwise provided in the
Award Agreement), a Participant's Award may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution, and shall be exercisable during the
Participant's lifetime only by the Participant.
9.4 Uniformity Not Required. The provisions of the Award Agreements need not be
uniform among all Awards, among all Awards of the same type, among all Awards
granted to the same Participant, or among all Awards granted at the same time.
ARTICLE 10
PERFORMANCE MEASURES
10.1 Performance Criteria. Unless and until the Company's stockholders approve
a change in the general performance measures set forth in this Article 10, the
attainment of which may determine the degree of payout and/or vesting with
respect to Awards that are designed to qualify for the Performance-Based
Exception, the performance measure(s) to be used for purposes of such grants may
be measured or applied to an individual, a business unit or division, the
Company and any one or more of its subsidiaries, or such other operating units
as the Committee may designate, may be expressed in absolute or relative terms,
and shall be chosen from among, and may include any combination of, the
following:
-income measures (including, but not limited to, gross profit, operating income,
earnings before or after taxes, profits before or after taxes, net income or
earnings per share);
-return measures (including, but not limited to, return on assets, investment,
equity, or sales or pre-tax margin);
-cash flow thresholds;
-gross revenues;
-sales results;
-market share results;
-economic value added; or
-share price (including, but not limited to, growth measures and total
stockholder return).
10.2 Adjustments. The Committee shall have the discretion to adjust the
determinations of the degree of attainment of the pre-established performance
goals; provided that Awards that are designed to qualify for the
Performance-Based Exception may not be adjusted upward (although the Committee
shall retain the discretion to adjust such Awards downward).
10.3 Certification. In the case of any Award that is granted subject to the
condition that a specified performance measure be achieved, no payment under
such Award shall be made prior to the time that the Committee certifies in
writing that the performance measure has been achieved. For this purpose,
approved minutes of the Committee meeting at which the certification is made
shall be treated as a written certification. No such certification is required,
however, in the case of an Award that is based solely on an increase in the
value of a Share from the date such Award was made.
ARTICLE 11
BENEFICIARY DESIGNATION
Each Participant may, from time to time, name any beneficiary or beneficiaries
to whom any benefit under the Plan is to be paid in case of the Participant's
death before the Participant receives any or all of such benefit. Each such
designation shall revoke all prior designations by the same Participant with
respect to such benefit, shall be in a form prescribed by the Company, and shall
be effective only when filed by the Participant in writing with the Company
during the Participant's lifetime. In the absence of any such designation, any
benefits remaining unpaid under the Plan at the Participant's death shall be
paid to the Participant's estate unless otherwise provided in the Award
Agreement.
ARTICLE 12
DEFERRALS
The Committee may permit or require a Participant to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due pursuant
to the terms of an Award, provided, however, that any such deferral arrangement
shall be structured in a manner that is intended to satisfy the election and
distribution timing and documentation requirements of Section 409A of the Code.
ARTICLE 13
NO RIGHT TO EMPLOYMENT OR PARTICIPATION
13.1 Employment. The Plan shall not interfere with or limit in any way the
right of the Company or of any Subsidiary to terminate any Employee's employment
at any time, and the Plan shall not confer upon any Employee the right to
continue in the employ of the Company or of any Subsidiary.
13.2 Participation. No Employee shall have the right to be selected to receive
an Award or, having been so selected, to be selected to receive a future Award.
ARTICLE 14
CHANGE OF CONTROL
In the event of a Change of Control, the Board may in its sole discretion direct
that (a) all option holders shall be permitted to exercise their outstanding
Options in whole or in part (whether or not otherwise exercisable) immediately
prior to such Change of Control; or (b) if, as part of a Change of Control
transaction, the stockholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their Shares (whether or not such
Exchange Stock is the sole consideration), the Board may direct that all options
for Shares that are outstanding at the time of the Change of Control transaction
shall be converted into options (as the case may be) for shares of Exchange
Stock, such that the vesting and other terms and conditions of the converted
options shall be substantially the same as the vesting and corresponding other
terms and conditions of the original options. The Board, acting in its
discretion, may accelerate vesting of other non-vested awards, and cause cash
settlements and/or other adjustments to be made to any outstanding awards
(including, without limitation, options) as it deems appropriate in the context
of a Change of Control transaction, taking into account with respect to other
awards the manner in which outstanding options are being treated. To the extent
determined by the Committee, any outstanding options that are not exercised
before a Change of Control described in Section 2.5(c) or (d) shall thereupon
terminate.
ARTICLE 15
AMENDMENT AND TERMINATION
15.1 Amendment and Termination. Subject to the terms of the Plan, the Committee
may at any time and from time to time, alter, amend, suspend, or terminate the
Plan in whole or in part; provided that, unless the Committee specifically
provides otherwise, any revision or amendment that would cause the Plan to fail
to comply with any requirement of applicable law, regulation, or rule if such
amendment were not approved by the Stockholders of the Company shall not be
effective unless and until stockholder approval is obtained.
15.2 Term of the Plan. Unless sooner terminated, the Plan shall terminate on
the tenth anniversary of the date of its adoption by the Company's stockholders.
15.3 Outstanding Awards. Notwithstanding any other provision of the Plan to the
contrary, no termination, amendment, or modification of the Plan shall cause,
without the consent of the Participant, any previously granted Awards to be
forfeited or altered in a way that adversely affects the Participant. After the
termination of the Plan, any previously granted Award shall remain in effect and
shall continue to be governed by the terms of the Plan, the Award, and any
applicable Award Agreement.
ARTICLE 16
TAX WITHHOLDING
16.1 Tax Withholding. The Company and its Subsidiaries shall have the power and
the right to deduct or withhold, or to require a Participant to remit to the
Company or to a Subsidiary, an amount that the Company or a Subsidiary
reasonably determines to be required to comply with federal, state, local, or
foreign tax withholding requirements.
16.2 Share Withholding. With respect to withholding required upon the exercise
of Options, upon the lapse of restrictions on Restricted Stock, or upon any
other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory withholding tax that could be imposed on the
transaction. All such elections shall be irrevocable, made in writing, signed
by the Participant, and shall be subject to any restrictions or limitations that
the Committee, in its discretion, deems appropriate.
ARTICLE 17
SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 18
LEGAL CONSTRUCTION
18.1 Severability. If any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
18.2 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
18.3 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of Connecticut (without
regard to the legislative or judicial conflict of laws rules of any state),
except to the extent superseded by federal law.
APPENDIX D
TRANS-LUX CORPORATION
NOMINATING COMMITTEE CHARTER
I. Authority and Purpose
The Nominating Committee (the "Committee") of the Board of Directors (the
"Board") of Trans-Lux Corporation, a Delaware corporation (the "Company"), is
appointed by the Board and shall have the responsibility of identifying and
recommending to the Board potential candidates for nomination to the Board. The
Committee shall undertake those specific duties and responsibilities listed
below and such other duties as the Board shall from time to time prescribe. All
powers of the Committee are subject to any restrictions in the Company's By-Laws
and applicable law.
II. Membership Requirements
The Committee shall be comprised of that number of Directors as the Board shall
determine from time to time, such number not to be less than two (2). The
members of the Committee shall meet the independence and experience requirements
of the NYSE Amex Company Guide as well as applicable regulations, rules and
orders of the Securities and Exchange Commission (the "SEC"). The members of
the Committee, including the Chair thereof, shall be appointed annually by the
Board. Unless otherwise directed by the Board, each member shall serve until
such member ceases to serve as a member of the Board, or until his or her
successor has been duly appointed by the Board.
III. Meetings
The Committee shall meet at least once a year. Meetings may be called by the
Chair of the Committee or the Chair of the Board. All meetings of and other
actions by the Committee shall be held or otherwise taken pursuant to the
Company's By-Laws, including by-law provisions governing notices of meetings,
waivers thereof, the number of Committee members required to take actions at
meetings or by written consent, and other related matters.
A. Unless otherwise authorized by an amendment to this Charter or as provided
in the By-Laws of the Company, the Committee shall not delegate any of its
authority to any subcommittee.
B. The Committee shall maintain written minutes of its meetings, which minutes
will be filed with the minutes of the meetings of the Board.
IV. Duties and Responsibilities
The Committee shall have the duty and responsibility of identifying and making
recommendations to the Board of potential candidates for nominations or election
to the Board of the Company. Qualifications to consider, among others, in the
selection of candidates are experience in business, finance, administration,
familiarity with the Company's industry, and reputation. In making its
selection, the Committee will bear in mind that the foremost responsibility of a
director of the Company is to represent the interests of the stockholders as a
whole.
V. Assessment and Disclosure of Charter
The Committee shall periodically review and reassess the adequacy of this
charter and propose any changes to the Board for approval. This charter will be
made available on the Company's website at www.trans-lux.com.
TRANS-LUX
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
SEPTEMBER 23, 2010
NORWALK, CONNECTICUT
PROXY
TRANS-LUX CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 23, 2010
(SOLICITED ON BEHALF OF BOARD OF DIRECTORS)
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder of TRANS-LUX
CORPORATION hereby constitutes and appoints ANGELA D. TOPPI and HOWARD S.
MODLIN, and each of them, the attorneys and proxies of the undersigned, with
full power of substitution, to vote for and in the name, place and stead of the
undersigned, at the Annual Meeting of the Stockholders of said Corporation, to
be held at Norwalk Community College, East Campus, 188 Richards Avenue, Norwalk,
Connecticut, 06854 on September 23, 2010 at 10:00 A.M., and at any adjournment
thereof, the number of votes the undersigned would be entitled to cast if
present for the following matters and, in their discretion, upon such other
matters as may properly come before the meeting or any adjournment thereof:
Directors recommend vote FOR Items 1, 2, 3, 4, 5 and 6.
Item 1 FOR AGAINST ABSTAIN Ratify the approval for a 1-for-50 reverse
____ ____ ____ stock split of the outstanding Common Stock
\___\ \___\ \___\ followed immediately by a 50-for-1 forward
stock split.
Item 2 FOR AGAINST ABSTAIN Ratify the amendment of the Corporation's
____ ____ ____ Restated Certificate of Incorporation to
\___\ \___\ \___\ remove Class B Stock from authorized
capital stock.
Item 3 FOR AGAINST ABSTAIN Ratify the amendment of the Corporation's
____ ____ ____ Restated Certificate of Incorporation to (a)
\___\ \___\ \___\ modify provisions relating to Class A
Stock and (b) increase authorized Common
Stock.
Item 4 FOR AGAINST ABSTAIN Ratify the approval of the adoption of the
____ ____ ____ 2010 Long-Term Incentive Plan.
\___\ \___\ \___\
Item 5 FOR WITHHELD Election of Jean-Marc Allain and Jean
____ ____ Firstenberg to serve as directors for a
\___\ \___\ three-year term, in each case until their
successors shall be elected and shall have
qualified.
Authority is withheld with respect to the
following nominee.
______________________________
Item 6 FOR AGAINST ABSTAIN Ratify the retention of BDO USA, LLP,
____ ____ ____ as successors to UHY LLP, as the
\___\ \___\ \___\ Corporation's independent registered public
accounting firm for the ensuing year.
(Continued and to be signed on other side.)
(Continued from other side.)
UNLESS YOU SPECIFY OTHERWISE, THIS PROXY WILL BE VOTED "FOR" ITEM 1, TO APPROVE
A 1-FOR-50 REVERSE STOCK SPLIT OF THE OUTSTANDING COMMON STOCK FOLLOWED
IMMEDIATELY BY A 50-FOR-1 FORWARD STOCK SPLIT, "FOR" ITEM 2, TO RATIFY THE
AMENDMENT OF THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION TO REMOVE
CLASS B STOCK FROM AUTHORIZED CAPITAL STOCK, "FOR" ITEM 3, TO RATIFY THE
AMENDMENT OF THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION TO (a)
MODIFY THE PROVISIONS RELATING TO CLASS A STOCK AND (b) INCREASE AUTHORIZED
COMMON STOCK, "FOR" ITEM 4, TO RATIFY THE ADOPTION OF THE 2010 LONG-TERM
INCENTIVE PLAN, "FOR" ITEM 5, FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS,
AND "FOR" ITEM 6, TO RATIFY THE RETENTION OF BDO USA, LLP, AS SUCCESSOR TO
UHY LLP, AS THE CORPORATION'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE ENSUING YEAR.
A majority of said attorneys and proxies, or their substitutes at said meeting,
or any adjournment thereof, may exercise all of the powers hereby given. Any
proxy to vote any of the shares with respect to which the undersigned is or
would be entitled to vote, heretofore given to any person or persons other than
the persons named above, is hereby revoked.
IN WITNESS WHEREOF, the undersigned has signed and sealed this proxy and hereby
acknowledges receipt of a copy of the notice of said meeting and proxy statement
in reference thereto, both dated August 6, 2010.
Dated:________________, 2010
________________________ (L.S.)
Stockholder(s) Signature
________________________(L.S.)
NOTE: This proxy properly filled in,
dated and signed, should be returned
immediately in the enclosed postpaid
envelope to TRANS-LUX CORPORATION, 26
Pearl Street, Norwalk, Connecticut
06850. If the signer is a corporation,
sign in full the corporate name by a
duly authorized officer. If signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title as such.