SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
---
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which transaction applies:
___________________________________________________________________
(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):
___________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
___________________________________________________________________
(5) Total fee paid:
___________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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.
(1) Amount Previously Paid:
___________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
___________________________________________________________________
(3) Filing Party:
___________________________________________________________________
(4) Date Filed:
___________________________________________________________________
TRANS-LUX CORPORATION
26 Pearl Street
Norwalk, Connecticut 06850
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 11, 2009
----------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of TRANS-LUX
CORPORATION will be held at Norwalk Community College, East Campus, Room 230,
188 Richards Avenue, Norwalk, Connecticut, on Friday, December 11, 2009 at 10:00
A.M. local time for the following purposes:
1. To consider and act upon a proposal to amend the Corporation's
Certificate of Incorporation to provide for the automatic
conversion of each share of Class B Stock into 1.3 shares of Common
Stock as provided in a Settlement Agreement approved by the United
States District Court for the Southern District of New York;
2a. To elect one director to serve for a term of three years until her
successor shall be elected and shall have qualified;
2b. If Proposal No. 1 to amend the Corporation's Certificate of
Incorporation is approved, to elect one director to serve for a
term of two years and elect two directors to serve for a term of
three years; in each case until their successors shall be elected
and shall have qualified;
3. To consider and act upon a proposal to amend the 1989 Non-Employee
Director Stock Option Plan to extend the Plan to 2019;
4. To consider and act upon a proposal to ratify the retention of UHY
LLP as the Corporation's independent registered public accounting
firm for the ensuing year; and
5. To transact such other business as may properly come before the
Meeting or any adjournment thereof. The close of business on
October 28, 2009 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
October 28, 2009
-------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------
PROXY STATEMENT
of
TRANS-LUX CORPORATION
for the Annual Meeting of Shareholders
To Be Held on December 11, 2009
---------------------
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 Friday, December 11, 2009, 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 November 6, 2009. 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 October 28, 2009 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 October 28, 2009
and entitled to notice of and to vote at the Meeting 2,020,090 shares of Common
Stock and 286,814 shares of Class B Stock. Each outstanding share of Common
Stock is entitled to one vote on all matters voted on at the Meeting and each
outstanding share of Class B Stock is entitled to ten votes on all matters voted
on at the Meeting. The holders of Common Stock and Class B Stock vote together
on all the proposals, except they will vote as separate classes on Proposal No.
1, the amendment to the Corporation's Certificate of Incorporation.
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,
subject to approval of Proposal No. 1 as to Proposal No. 2b. 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.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO PROVIDE FOR
THE AUTOMATIC CONVERSION OF EACH SHARE OF CLASS B STOCK INTO
1.3 SHARES OF COMMON STOCK AS PROVIDED IN A SETTLEMENT
AGREEMENT APPROVED BY THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK
Proposal No. 1 (Item 1 on Proxy Card)
The Board of Directors has unanimously approved and is submitting for
stockholder approval an amendment to the Corporation's Restated Certificate of
Incorporation as amended ("Certificate of Incorporation") to provide for the
automatic conversion of each outstanding share of Class B Stock into 1.3 shares
of Common Stock. As of September 30, 2009 the Corporation has authorized
5,500,000 shares of Common Stock and 1,000,000 shares of Class B Stock. As of
such date there were 2,020,090 shares of Common Stock outstanding (excluding
treasury shares) and 286,814 shares of Class B Stock outstanding. The Class B
Stock is presently convertible into Common Stock on a share for share basis, has
ten votes per share on all matters submitted to the stockholders and votes
separately as a class on certain matters such as amendments to the Certificate
of Incorporation, mergers, consolidations and certain other significant
transactions for which stockholder approval is required under Delaware law. The
Common Stock is entitled to cash dividends which are 11.1% higher than those
declared on the Class B Stock if such dividends are declared. As such the Class
B Stock is deemed a super voting stock. As a result, the holders of the Class B
Stock have the practical ability to elect all of the Corporation's directors and
to veto major transactions for which a stockholder vote is required under
Delaware law, including mergers, consolidations and certain significant
transactions.
Richard, Matthew and Thomas Brandt together hold 216,608 shares (75.5%) of Class
B Stock (approximately 44.7% of all votes cast on stockholder matters, including
Common Stock acquirable by stock options). Following stockholder approval of
the Certificate of Amendment, the Class B stock will cease to exist and will not
be able to vote as a class on changes to the Certificate of Incorporation. In
addition, after approval of the Certificate of Amendment, the three Brandts will
have 299,319 shares of Common Stock (approximately 12.5% of the total votes cast
on stockholder matters) and will not by themselves or as a group be able to veto
corporate transactions or decide the election of directors.
If the proposal is approved, we will file a Certificate of Amendment to the
Certificate of Incorporation containing the wording in Exhibit A with the
Secretary of State of Delaware which shall become effective upon filing and each
share of Class B Stock shall be converted into 1.3 shares of Common Stock (e.g.,
a certificate for 100 shares of Class B Stock shall thereupon and thereafter be
deemed to represent 130 shares of Common Stock).
WHY WE ARE SEEKING STOCKHOLDER APPROVAL
Pursuant to Delaware law, our Board must approve any amendment to the
Certificate of Incorporation. Any such amendment presently requires the
affirmative vote of a majority of the shares of Common Stock and a majority of
the shares of Class B Stock, each voting separately as a class. In January 2009
a lawsuit (the "Action") was brought derivatively on behalf of the Corporation
by Gabelli Funds, LLC in its capacity as investment manager to several
registered investment companies which, at the time of filing the Action, in the
aggregate, were owners of approximately 783,000 shares of the Common Stock in
the Corporation. These shares represented approximately 38.76% of the
outstanding Common Stock of the Corporation. Named as Defendants were the
Corporation; Richard Brandt, a director of the Corporation at the time of the
Asset Sale (defined herein) who, until he is required to resign this position as
set forth herein, currently remains a director of the Corporation; Matthew
Brandt and Thomas Brandt, officers and directors of the Corporation at the time
of the Asset Sale, who subsequently resigned as officers of the Corporation as a
result of the Asset Sale, and who subsequently resigned as directors of the
Corporation as provided in the Settlement Agreement requiring this proposal; and
Michael R. Mulcahy, an officer and director of the Corporation at the time of
the Asset Sale who currently remains an officer and director of the Corporation.
The defendants were at the time of the Asset Sale, and currently continue to be,
owners of approximately 9.8% of the outstanding Common Stock of Corporation
which, together with their weighted Class B shares, represents approximately
44.5% of the voting power of Corporation. This voting
-2-
power will be significantly reduced by the automatic conversion of Class B
shares into Common Stock as provided in the proposed amendment if approved by
both classes of stockholders.
The Complaint asserted eleven derivative claims against the individual
defendants in their respective capacities as directors and officers/managers of
Corporation on behalf of the nominal defendant Corporation. All of the claims
are alleged to arise from the sale by Corporation of its Entertainment/Real
Estate Division during 2008 (the "Asset Sale"). The derivative claims include
breach of fiduciary duty as managers and as directors, aiding and abetting
breach of fiduciary duty as managers and as directors, negligence as managers
and directors, gross negligence as managers and directors, breach of contract as
managers, aiding and abetting breach of contract as directors, and unjust
enrichment against the defendants as managers.
Settlement discussions, which began before the defendants were required to
respond to the Complaint, were successful and resulted in the Settlement
Agreement. If the defendants had to respond to the Complaint, they would have
denied all of the material allegations of the Complaint, made motions to
dismiss, and raised numerous substantive and procedural defenses as set forth in
the summary below. As further indicated below, the plaintiff would have opposed
such a motion, and attempted to prosecute the claims to verdict at trial.
Summary of the Claims of the Plaintiff and Defenses of the Defendants
Plaintiff's Claims
1. The Complaint alleged, among other things, that the claims listed above
stem from the Defendants' role in a transaction involving the sale of the
Corporation's Entertainment Division, which was comprised mostly of the
Corporation's movie theater holdings throughout the country, to an
"outside" entity, the Storyteller Theaters Corporation ("Storyteller") (the
"Asset Sale").
2. The Complaint alleges in addition that as a result of the Asset Sale:
the Corporation did not obtain full and fair value for the sale of
Entertainment Division, the Corporation's future ability to achieve
reasonable growth was adversely affected, and the individual Defendants
benefited at the expense of the Corporation. For example, Thomas and
Matthew Brandt received employment agreements from Storyteller and an
equity stake in the Entertainment Division assets purchased by Storyteller
as a result of the Asset Sale.
3. The Complaint further alleged that in light of the Asset Sale, various
Corporation public filings and press releases contained untrue and false
statements and misstatements of material facts, and/or omissions of
material facts, which were misleading.
4. The Complaint also alleged that plaintiff did not make a demand upon
Defendants because such demand is excused as futile because, among other
reasons, the Defendants were subject to a substantial likelihood of
liability and the Defendants were subject to inherent conflicts of
interest.
Defendants' Responses
1. The Corporation's Board of Directors retained an investment
banking firm, Caymus Partners LLC ("Caymus Partners") as its financial
advisor to render an opinion with respect to the fairness of the Asset
Sale from a financial point of view to the Corporation's public
stockholders. After a full review of the sale process and the
complete details of the final transaction, Caymus Partners concluded
that the Asset Sale was fair to the public stockholders from a
financial point of view.
--------------------
1 The remaining claims (which included individual claims against defendants for
unjust enrichment, fraud, and violations of Rule 10b-5 of the Securities
Exchange Act of 1934) were individual claims. The Settlement Agreement
described below provides for the dismissal of these claims with prejudice.
However, the dismissal of only the stockholder derivative claims required Court
approval.
-3-
2. Three of the four individual defendants - Richard, Matthew and
Thomas Brandt - abstained from voting when the Board of Directors of
the Corporation approved the transaction. The Asset Sale was
unanimously approved by six directors, five of whom are outside
directors (i.e., directors who were not officers or employees of the
Corporation).
3. The Corporation's Certificate of Incorporation includes a
provision pursuant to Delaware Law that completely insulates members
of the Board of Directors from violations of the duty of care.
4. The plaintiff did not have standing to assert derivative claims on
behalf of the Corporation.
5. The plaintiff failed to make proper demand on the Corporation's
Board of Directors in advance of filing its Complaint and failed to
allege facts that would excuse its failure.
6. Storyteller was an independent investor group with no management
in place to run a theater chain such as they were buying from the
Corporation. Accordingly, it was a condition of closing that top
management from the Corporation's theater division sign employment
agreements with Storyteller and that the Corporation through Richard
Brandt provide consulting services for a period of time. The terms
and conditions of the employment agreements signed by Thomas and
Matthew Brandt are common in the industry and, in any event, were
approved by the Caymus Partners review and fairness opinion.
7. It is not correct that Richard Brandt received a consulting fee
from Storyteller. Richard Brandt is a consultant to the Corporation
through a company called Moving Images LLC and has been a consultant
to the Corporation for many years. In connection with the Asset Sale,
Corporation and Storyteller entered into an agreement whereby Richard
Brandt was required to provide certain limited consulting services
directly to Storyteller. Storyteller made payments directly to the
Corporation to reimburse it for the time that Richard Brandt was
devoting to Storyteller rather than to the Corporation. Richard
Brandt did not receive any benefit from Storyteller in connection with
the Asset Sale.
8. Michael R. Mulcahy did not receive any benefit or other advantage
in connection with the modification of his employment agreement with
the Corporation effective January 2009. Rather, Michael R. Mulcahy's
employment agreement was modified solely to comply with new
requirements of Section 409A of the Internal Revenue Code and the
agreement specifically stated in its preamble that it does not
"increase any compensation or other benefits to [Michael Mulcahy] in
order to comply with the 409A Requirements."
9. The employment agreements of Thomas and Matthew Brandt with
Storyteller provided for salaries that were essentially similar to the
salaries that they were receiving at the Corporation. In many other
respects, the employment agreements between Thomas and Matthew Brandt
and Storyteller were less favorable to Thomas and Matthew Brandt than
their agreements with Corporation, which were terminated as a result
of the sale.
10. The employment agreements of Thomas and Matthew Brandt with
Storyteller provided them with equity in Storyteller that is commonly
given to new management and was subject to numerous restrictions on
sale that reduced its value.
Both sides would have continued to contest these and other allegations
and defenses, and would have vigorously litigated their respective
positions summarized above.
THE TERMS OF SETTLEMENT AND COURT APPROVAL
The Settlement Agreement provides essentially as follows:
(1) Thomas Brandt and Matthew Brandt agreed to and have resigned as
directors of the Corporation;
(2) The Parties are to join in an application to the Court to obtain
approval of the Settlement Agreement;
-4-
(3) Upon approval of the Settlement Agreement, (a) the Corporation shall as
promptly as reasonably possible schedule a stockholder meeting at which an
amendment to its Certificate of Incorporation can be presented under applicable
law; (b) the Corporation shall prepare an amendment to the Corporation's
Certificate of Incorporation (the "Certificate of Amendment") which shall
provide that each share of the Corporation's Class B Stock shall be
automatically converted to 1.3 shares of Common Stock upon approval of the
Certificate of Amendment by the stockholders; (c) at the said stockholder
meeting, the Corporation shall submit the Certificate of Amendment for approval
by stockholders and (d) the Settling Parties shall use their best efforts to
cause the Certificate of Amendment to be approved by the Corporation
stockholders.
(4) Upon approval of the Settlement Agreement by the Court, the plaintiff
shall prepare and deliver to counsel for the defendants a voluntary
discontinuance of the Action with prejudice and without costs or attorney fees
to either party (the "Discontinuance with Prejudice") as to both the derivative
claims and the plaintiff's individual claims, which shall be held in escrow by
the defendants' counsel until the Certificate of Amendment has been approved by
the Corporation's stockholders and the GAMCO Nominees described in this proxy
statement have been elected to the Corporation's Board of Directors, at which
point the Discontinuance with Prejudice may be filed at any time without further
notice.
(5) Upon approval of the Certificate of Amendment, Richard Brandt shall
resign as a director of the Corporation and of any subsidiary of the
Corporation. He remains a consultant to the Corporation under the Corporation's
contract with Moving Images LLC.
(6) Upon approval of the Certificate of Amendment, and following the
resignation of Richard Brandt, the Corporation's directors shall at the same
stockholder meeting nominate three candidates proposed by the Gabelli Parties ,
which candidates are referred to as the "GAMCO Nominees." The Settling Parties
will use their best efforts to have the GAMCO Nominees elected to the
Corporation board.
(7) The Agreement also provides for general releases by Gabelli Funds, LLC
and the Gabelli Parties of the Corporation and the defendants, and for a release
by the Corporation and the individual defendants of each other and of Gabelli
Funds and the Gabelli Parties.
The settlement of the stockholder derivative claims was approved by the Court
after a hearing on September 15, 2009 at which no objections were received from
any of the Corporation's Common or Class B stockholders. The settlement, among
other things, requires all the Settling Parties to recommend to the stockholders
that they approve the amendment to the Certificate of Incorporation, to vote the
shares of stock that they own or have a right to vote in favor of the amendment,
to cause all proxies received by them to be voted in favor of the proposal and
to use their best efforts to cause their respective directors, officers and
agents not to make any statement inconsistent with approving the amendment. As
of October 27, 2009 based on a 13D filing on such date by them, the Gabelli
Parties had the right to vote an aggregate of 742,800 shares of Common Stock or
36.77% of the outstanding Common Stock. The Brandts, who have agreed to vote in
favor of the proposal, hold 216,608 shares of Class B stock or 75.5% of
outstanding Class B Stock, thus assuring the requisite vote of a majority of
Class B stock outstanding will approve the proposal.
RECOMMENDATION
If this amendment is not approved by the stockholders, the settlement will be
null and void and the Action will proceed at a substantial cost in management
time, attorney fees and other costs to the Corporation, which is obligated to
indemnify the individual defendants except as limited by Delaware law under
certain conditions not applicable to the Action. The affirmative majority of
the shares entitled to vote of both of the Common Stock and Class B Stock voting
separately is required to approve the proposed amendment.
--------------------
2 The Settling Parties are defined in the Agreement as the plaintiff, Gabelli
Funds, LLC, Richard Brandt, Matthew Brandt, Thomas Brandt and Michael R.
Mulcahy, Trans-Lux Corporation (the "Corporation"), GAMCO Asset Management Inc.,
Gabelli Small Cap Growth Fund, Gabelli Global Multimedia Trust, Inc., Gabelli
Dividend and Income Trust, and Gabelli Convertible Fund.
3 In the Agreement, the Gabelli Parties are defined as Gabelli Funds, LLC,
GAMCO Asset Management Inc., Gabelli Small Cap Growth Fund, Gabelli Global
Multimedia Trust, Inc., Gabelli Dividend and Income Trust, and Gabelli
Convertible Fund.
-5-
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS TO THE
STOCKHOLDERS THAT THE CORPORATION'S CERTIFICATE OF
INCORPORATION BE AMENDED TO PROVIDE FOR THE AUTOMATIC
CONVERSION OF EACH SHARE OF CLASS B STOCK INTO 1.3 SHARES OF
COMMON STOCK. IT IS INTENDED THAT PROXIES SOLICITED HEREBY
WILL BE VOTED "FOR" SUCH AMENDMENT TO THE CORPORATION'S
CERTIFICATE OF INCORPORATION.
-6-
ELECTION OF DIRECTORS
Proposal No. 2a (Item 2a 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 seven members. If elected at the Annual
Meeting, the nominee listed below will serve until the Annual Meeting of
Stockholders in 2012, or until her successor is duly elected and qualified. All
other directors will continue as such for the term to which they were elected.
Management has no reason to believe that the nominee is not 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 NOMINEE STANDING FOR ELECTION LISTED BELOW.
Nominee Standing for Election
Name Age Since Expiration of Proposed Term
------------------------------------------------------------------------------
Angela D. Toppi........... 53 - 2012
------------------------------------------------------------------------------
Directors Whose Term Continues
Name Age Since Expiration of Current Term
------------------------------------------------------------------------------
Howard S. Modlin.......... 78 1975 2011
Michael R. Mulcahy........ 61 2002 2011
Jean Firstenberg.......... 73 1989 2010
Gene Jankowski............ 75 1994 2010
Victor Liss............... 72 1988 2010
------------------------------------------------------------------------------
Directors Whose Term Will Expire at the 2009 Annual Meeting
Name Age Since Expiration of Current Term
------------------------------------------------------------------------------
Richard Brandt (1)........ 81 1954 2009
Howard M. Brenner......... 76 1997 2009
------------------------------------------------------------------------------
(1) In the event Proposal No. 1 is not approved, the Board reserves its right
to elect Mr. Brandt to serve as a director until the 2010 Annual Meeting.
Set forth below is biographic information for the individuals nominated to serve
as directors and each Director.
NOMINEE - Three-Year Term Expiring 2012
Angela D. Toppi. Ms. Toppi has been Executive Vice President, Treasurer,
Secretary and Chief Financial Officer of Trans-Lux Corporation for the past
seven years.
-7-
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.
Michael R. Mulcahy has served as a director since 2002 and is President and
Chief Executive Officer of Trans-Lux Corporation. He was formerly Co-Chief
Executive Officer of Trans-Lux Corporation. Mr. Mulcahy has advised the Board
of Directors that he intends to retire at the end of the term of his contract,
but will remain a director.
CONTINUING DIRECTORS - Term Expiring 2010
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
Chair 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.
Gene Jankowski has served as a director since 1994, when he was elected an
independent director. In May 2003 he was elected by the Board 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.
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 Director of Wellpoint, Inc.; a Trustee of Norwalk Hospital; a
Director of BNC Financial Group; and Chairman of the Board of the Bank of
Fairfield. He was 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.
DIRECTORS WHOSE TERM EXPIRE AT THE 2009 ANNUAL MEETING
Richard Brandt had served as a director since 1954. Mr. Brandt had been
Chairman of the Board of Trans-Lux Corporation from 1974 to 2003. Mr. Brandt
is a management consultant to Trans-Lux Corporation; a Director and Chairman of
the Audit and Compensation Committees of Presidential Realty Corporation; and
Chairman Emeritus and Trustee of the American Film Institute. He was formerly a
Trustee of The College of Santa Fe.
Howard M. Brenner had served as a director since 1997. Mr. Brenner is Senior
Advisor of MLGA Holding, Inc.; and a Director of Interep National Radio Sales,
Inc. He was formerly Chairman and Chief Executive Officer of HCFP Brenner
Securities LLC; formerly President of Brenner Securities; formerly Senior Vice
President of Loewenbaum & Company Incorporated; formerly Vice Chairman of
Southcoast Capital Corporation; formerly President of Drexel Burnham Lambert
Incorporated; and formerly a member of the Board of Governors of the American
Stock Exchange and District 10 Committee (NY) National Association of Securities
Dealers Inc.
-8-
ELECTION OF DIRECTORS
Proposal No. 2b (Item 2b on Proxy Card)
If Proposal No. 1 is approved
As set forth in Proposal No. 1, if such Proposal is approved, the Board will
cause the following persons to be nominated for election. Management has no
reason to believe that the nominees are not 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.
SUBJECT TO APPROVAL OF PROPOSAL No. 1,
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
------------------------------------------------------------------------------
George W. Schiele......... 78 - 2011
Glenn J. Angiolillo....... 56 - 2012
Salvatore J. Zizza........ 63 - 2012
------------------------------------------------------------------------------
Set forth below is biographic information for the individuals nominated to serve
as directors.
NOMINEE - Two-Year Term Expiring 2011
George W. Schiele. 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.
NOMINEES - Three-Year Term Expiring 2012
Glenn J. Angiolillo. 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.
Salvatore J. Zizza. 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., from March 2004
until the company's acquisition in April 2009.
-9-
PROPOSED AMENDMENT TO
1989 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Proposal No. 3 (Item 3 on Proxy Card)
The 1989 Non-Employee Director Stock Option Plan (the "Plan") was established at
the Board of Directors Meeting held June 20, 1989 and amended at the Board of
Directors Meeting held December 9, 1999.
The Plan is intended to provide an incentive to attract and keep non-employee
persons of requisite business experience to serve on the Board of Directors of
the Corporation by offering them an opportunity to participate in the growth and
development of the Corporation through stock ownership, and to thereby provide
additional incentive or them to promote the success of the business.
The Plan is not qualified under Section 40l(a) of the Code and is not subject to
the Employee Retirement Income Security Act of 1974.
Summary of the Plan
The basic provisions of the Plan are as follows:
1. Thirty thousand (30,000) shares of the Common Stock, $1.00 par value, are
authorized for issuance under the Plan, which number of shares is subject to
adjustment by reason of certain specified changes in the capitalization of the
Corporation. Of such 30,000 shares, as of September 30, 2009, 11,000 options
have been granted and are outstanding, 8,500 have been previously exercised and
10,500 options remain available for grant.
2. The Plan is administered by the Compensation Committee of the Board of
Directors.
3. The granting of an option under the Plan is subject to the following terms
and conditions:
The Corporation shall grant to each Non-Employee Director an option to purchase
additional shares based on the following schedule of Years of Service which each
such person has served as a member of the Board.
Years of Service No. of Options (Non-Cumulative)
---------------- -------------------------------
Less than 5 500
5th full year 500
10th full year 500
20th full year 1,000
The Corporation shall grant to each Non-Employee Director additional options to
purchase additional shares in an amount equal to the number of options granted
(i) which expire, on the date of expiration of such option, and (ii) which were
heretofore exercised or hereafter are exercised, on the later to occur of four
(4) years from the date of grant or the date of exercise of such exercised
option.
4. The option prices must be at least 100% of the market value of the Common
Stock on the date the option is granted. No option may be exercised prior to
one year after date of grant and the optionee must be a director of the Company
at time of exercise, except in certain cases as permitted by the Compensation
Committee. Exercise periods are for six years from date of grant and terminate
at a stipulated period of time after an optionee ceases to be a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE PROPOSED AMENDMENT TO THE 1989 NON-
EMPLOYEE DIRECTOR STOCK OPTION PLAN
-10-
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Proposal No. 4 (Item 4 on Proxy Card)
Ratification of Appointment of Independent Registered Accounting Firm
UHY LLP ("UHY") has 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. The Audit Committee of
the Board of Directors has appointed UHY as our independent registered public
accounting firm for the year ending December 31, 2009. The proposal to appoint
UHY as the independent registered public accounting firm will be approved if, at
the Annual Meeting at which a quorum is present, the votes cast in favor of the
proposal exceed the votes cast opposing the proposal.
Representatives of UHY 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.
Change in Auditors: On July 9, 2008, the Corporation, 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.
Eisner reported on the Corporation's financial statements for the years ended
December 31, 2007 and 2006 and through the date of dismissal of Eisner. There
were no disagreements with Eisner on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to Eisner's satisfaction, would have caused them to make a
reference to the subject matter in conjunction with their report on the
Corporation's consolidated financial statements or such years; and there were no
reportable events, as listed in Item 304 (a) (1) (v) of Regulation S-K.
During the years ended December 31, 2007 and 2006 and through the date of the
Audit Committee's decision, the Corporation did not consult UHY with respect to
the application of accounting principles to a specified transaction, either
completed or proposed, or type of audit opinion that might be rendered on the
Corporation's consolidated financial statements, or any other matter or
reportable events listed in Item 304 (a) (2) (i) and (ii) of Regulation S-K.
Through and as of September 30, 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 2008, Advisors did not provide any services to the
Corporation.
Audit Committee Pre-Approval of Independent Auditor Services: All audit
services provided by UHY for 2008 were approved by the Audit Committee in
advance of the work being performed.
-11-
Audit Fees: UHY audit fees were $258,000 in 2008. UHY audit fees include fees
associated with the annual audit of the Corporation's financial statements and
the reviews of the Corporation's second and third quarterly reports on Form
10-Q. Eisner audit fees were $52,000 in 2008 and $297,000 in 2007. Eisner
audit fees in 2008 include fees associated with the reviews of the Corporation's
annual report and the first quarterly report on Form 10-Q. Eisner audit fees in
2007 included fees associated with the annual audit of the Corporation's 2007
financial statements and the reviews of the Corporation's quarterly reports on
Form 10-Q.
Audit-Related Fees: There were no audit-related services in 2008. $6,000 and
$5,000 was paid to Eisner in 2008 and 2007, respectively, 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
UHY as our independent registered public accounting firm for the fiscal year
ending December 31, 2009 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 UHY LLP AS THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO
AUDIT THE FINANCIAL STATEMENTS OF THE CORPORATION
FOR THE 2009 FISCAL YEAR.
-12-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of October 28, 2009 (or such other
date specified) with respect to the beneficial ownership of the Corporation's
Class B Stock and 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 outstanding Class B Stock and/or Common Stock and who is deemed to
be such beneficial owner of the Corporation's Class B Stock and 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.
Amount
Name, Status and Beneficially Percent Percent
Mailing Address Title of Class Owned of Class of All Classes
--------------------------------------------------------------------------------------------
5% Stockholders:
----------------
Richard Brandt.................... Class B Stock 133,208 (1) 46.44% 5.77%
Chairman Emeritus of the Board of Common Stock 15,895 (1) * *
Directors, Consultant and
beneficial owner of more than 5%
of the Corporation's Class B Stock
26 Pearl Street
Norwalk, CT 06850
Gabelli Funds, LLC................ Common Stock 742,800 (2) 36.77% 32.20%
Beneficial owner of more than 5%
of the Corporation's Common Stock
One Corporate Center
Rye, NY 10580-1434
Matthew Brandt (3)................ Class B Stock 41,700 14.54% 1.81%
Beneficial owner of more than 5% Common Stock 480 * *
of the Corporation's Class B Stock
4605 Lankershim Blvd
North Hollywood, CA 91602
Thomas Brandt (3)................. Class B Stock 41,700 14.54% 1.81%
Beneficial owner of more than 5% Common Stock 1,354 * *
of the Corporation's Class B Stock
26 Pearl Street
Norwalk, CT 06850
Non-Employee Director Nominees:
-------------------------------
Glenn J. Angiolillo............... Common Stock - * *
George W. Schiele................. Common Stock - * *
Salvatore J. Zizza (4)............ Common Stock - * *
Non-Employee Directors:
-----------------------
Howard M. Brenner................. Common Stock 2,000 (5) * *
Jean Firstenberg.................. Common Stock 1,420 (5) * *
Gene Jankowski.................... Common Stock 4,000 (6) * *
Victor Liss....................... Class B Stock 9,728 3.39% *
Common Stock 10,906 (6) * *
Howard S. Modlin.................. Class B Stock 8,751 (7) 3.05% *
Common Stock 1,000 (5) * *
Named Executive Officers:
-------------------------
Karl P. Hirschauer................ Common Stock 629 * *
Thomas F. Mahoney................. Common Stock 2,600 (8) * *
Al L. Miller...................... Common Stock 611 * *
Michael R. Mulcahy................ Common Stock 8,303 (9) * *
Angela D. Toppi................... Common Stock 6,000 (9) * *
All directors and executive....... Class B Stock 151,687 (10) 52.89% 6.58%
officers as a group (14 persons) Common Stock 53,364 (10) 2.60% 2.28%
--------------------------------------------------------------------------------------------
-13-
* Represents less than 1% of total number of outstanding shares.
(1) The amount includes 4,232 shares of Class B Stock owned by Mrs. Brandt and 12,500
shares of Common Stock acquirable upon exercise of stock options.
(2) Based on Schedule 13D, Amendment No. 70 dated October 27, 2009 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) Mr. M. Brandt and Mr. T. Brandt are Mr. R. Brandt's sons.
(4) Mr. Zizza disclaims any interest in the share set forth in footnote 2 above.
(5) The amount includes 1,000 shares of Common Stock acquirable upon exercise of stock
options.
(6) The amount includes 1,500 shares of Common Stock acquirable upon exercise of stock
options.
(7) The amount includes 5,939 shares of Class B Stock owned by Mr. Modlin's immediate
family or held in trust for Mr. Modlin's immediate family.
(8) The amount includes 2,500 shares of Common Stock acquirable upon exercise of stock
options.
(9) The amount includes 5,000 shares of Common Stock acquirable upon exercise of stock
options.
(10) The amount includes 10,171 shares of Class B Stock set forth in footnotes 1 and 6 above
and 30,000 shares of Common Stock which members of the group have the right to acquire by
exercise of stock options (including director stock options).
-14-
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 2008, the Board of Directors held seven 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 ($400 for telephonic meetings), while employee directors
and Mr. Brandt receive an annual fee of $1,360 and $320 for each meeting of the
Board attended ($160 for telephonic meetings). Mr. Jankowski receives 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 Listing Standards require that a listed company's Board of
Directors must consist of a majority of independent directors as defined in
Section 303A.01 of such NYSE Amex Listing Standards, unless the company is
considered a controlled company. Section 303A of the NYSE Amex Listing
Standards defines a controlled company as a company in which over 50% of the
voting power is held by an individual or group. In accordance with the NYSE
Amex Listing Standards, the Corporation is presently considered a controlled
company, and therefore, exempt from the requirements of Section 303A. If all
the Proposals are approved and the new directors assume office, the Corporation
will have a majority of independent directors and will no longer be considered a
controlled company.
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 an Executive Committee, a Compensation
Committee and an Audit Committee.
-15-
Executive Committee
The members of the Executive Committee of the Board of Directors are Messrs.
Brandt, Jankowski, Liss, Modlin and Mulcahy. The Executive Committee is
authorized to exercise the powers of the Board of Directors during the intervals
between the meetings of the Board and is, from time to time, delegated certain
authorizations by the Board in matters pertaining to the Corporation. The
Executive Committee held zero meetings in 2008. Members of said Committee
receive a fee of $320 for each meeting of the Committee they attend.
Compensation Committee
The members of the Compensation Committee of the Board of Directors are Messrs.
Modlin, Brenner and Jankowski and Ms. Firstenberg. The Compensation Committee
reviews compensation and other benefits. The Compensation Committee held three
meetings in 2008. None of the members of the Compensation Committee during 2008
and continuing through 2009 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 Messrs. Brenner and Jankowski, and Mr. Modlin, ex officio. Each of the
directors is considered "independent" as defined by the NYSE Amex Listing
Standards. The Committee operates under a formal written charter approved by
the Committee and adopted by the Board of Directors. The Board of Directors has
determined that director Gene Jankowski meets the definition of "audit committee
financial expert" set forth in Item 407 of Regulation S-K, as promulgated by the
SEC. The Audit Committee held four meetings in 2008. 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 Chairperson, Ms. Firstenberg, receives an
annual fee of $2,400 and $100 for each quarterly telephonic meeting with the
independent auditors.
Nominating or Similar Committee
The Board of Directors has not established a nominating or similar committee.
In accordance with the NYSE Amex Listing Standards, as previously discussed in
the section entitled "Corporate Governance Policies and Procedures," the
Corporation is presently considered a controlled company, and therefore, not
presently required by such NYSE Amex Listing Standards to have a nominating
committee recommend or cast votes for the nomination or election of directors.
The Board of Directors does not have any specific, minimum qualifications that
the Board believes must be met by a nominee for a position on the Board, or any
specific qualities or skills that the Board believes are necessary for one or
more of the directors to possess. The Board has consistently sought to nominate
to the Board of Directors eminently qualified individuals whom the Board
believes would provide substantial benefit and guidance to the Corporation. The
Board believes that substantial judgment, diligence and care are required to
identify and select qualified persons as directors and does not believe that it
would be appropriate to place limitations on its own discretion. Currently, all
directors participate in the consideration of director nominees.
Corporate Governance Committee
The Board of Directors has not established a corporate governance committee.
The Board of Directors acts as the corporate governance committee.
-16-
Independence of Non-Employee Directors
A director is considered independent under NYSE Amex rules if the Board of
Directors determines that the director does not have any direct or indirect
material relationship with the Corporation. Mr. Mulcahy is an employee of the
Corporation and Mr. Brandt is a consultant to the Corporation and, therefore,
have been determined by the Board to fall outside the definition of "independent
director." Messrs. Brenner, Jankowski, Liss and Modlin 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.
Brenner, Jankowski and Liss and Ms. Firstenberg are "independent directors"
within the meaning of the rules of the NYSE Amex, 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
Messrs. Brenner and Jankowski and Ms. Firstenberg are independent under the
SEC's audit committee independence standards. The three nominees proposed in
Proposal No. 2b, if elected, would be deemed independent directors.
Non-Employee Director Stock Option Plan
The Board of Directors has previously established a Non-Employee Director Stock
Option Plan that is the subject of Proposal No. 3, 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.
Director Compensation Table
Medical
Director and/or Insurance
Trustee Fees Premiums Option Awards Total
Name Year ($) ($) ($)(1) ($)
--------------------------------------------------------------------------------
Richard Brandt........ 2008 4,500 9,237 - 13,737
Howard M. Brenner..... 2008 13,800 - 837 14,637
Jean Firstenberg...... 2008 17,100 - - 17,100
Gene Jankowski........ 2008 21,800 - - 21,800
Victor Liss........... 2008 10,500 4,619 2,512 17,631
Howard S. Modlin...... 2008 15,800 - 1,675 17,475
Michael R. Mulcahy.... 2008 4,500 - - 4,500
--------------------------------------------------------------------------------
(1) The options were granted pursuant to the 1989 Non-Employee Director Stock
Option Plan described above.
Audit Committee Report
The following is a report of the Audit Committee of the Board of Directors: The
three members of the Audit Committee of the Board of Directors listed below are
independent directors as defined by the NYSE Amex Listing Standards. 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.
-17-
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 by Independent
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." 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, 2008. 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, 2008,
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, 2008, audit fees of $258,000 were paid or
accrued to UHY, the Corporation's independent registered public accounting firm.
Audit fees for 2008 consisted of (i) audit of the Corporation's annual financial
statements and (ii) reviews of the Corporation's second and third quarterly
financial statements. During the years ended December 31, 2008 and 2007, audit
fees of $52,000 and $297,000, respectively, were paid or accrued to Eisner, 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. Audit fees for 2007 consisted of (i) audit of the Corporation's
annual financial statements and (ii) reviews of the Corporation's quarterly
financial statements. During the year ended December 31, 2007, audit-related
fees of $11,000 were paid or accrued to Eisner.
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:
Jean Firstenberg, Chairperson
Howard M. Brenner
Gene Jankowski
Howard S. Modlin, ex officio
-18-
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
All matters concerning executive compensation for Mr. Mulcahy, 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. Our executives' compensation has three
primary components - base salary, a yearly cash incentive bonus and stock option
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 Options. We use stock options 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.
We account for the equity compensation expense for our employees under the rules
of SFAS 123R, which requires us to estimate and record an expense for each award
of equity compensation over the service period of the award. Accounting rules
also require us to record cash compensation as an expense at the time the
obligation is accrued. No stock options were awarded during 2008 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.
-19-
Cash Incentive Bonuses. 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, 2008.
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, Mr. Mulcahy and Ms. Toppi's employment
agreements provide for a "Change in Control of Employer" provision, entitling
them 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 his/her agreement for three (3) years at his/her then
current salary subject to the cost-of-living adjustment if such Change in
Control is approved by Mr. Brandt.
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. There were no special benefits or perquisites provided to any
executive officer in 2008.
Compensation Committee Report
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
Howard M. Brenner
Jean Firstenberg
Gene Jankowski
-20-
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, the Named Executive Officers of the
Corporation for 2008 and the management consultant.
Summary Compensation Table
Annual Compensation
Change in
Pension
Value of
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) ($)
-----------------------------------------------------------------------------------------------------------------------
Michael R. Mulcahy... 2008 303,590 - - - - - 25,640 329,230
President and CEO 2007 289,698 - - - - - 23,768 313,466
Angela D. Toppi...... 2008 193,658 - - - - - 3,065 196,723
Executive Vice 2007 180,192 7,500 - - - - 2,279 189,971
President, Treasurer,
Secretary and CFO
Al L. Miller......... 2008 160,787 26,867 - - - - 1,393 189,047
Executive Vice 2007 152,385 22,328 - - - - 1,583 176,296
President of
Manufacturing
Thomas F. Mahoney.... 2008 148,136 37,335 - - - - 792 186,263
Senior Vice President 2007 150,000 41,994 - - - - 792 192,786
of Sales
Karl P. Hirschauer... 2008 170,799 - - - - - 1,303 172,102
Senior Vice President 2007 166,000 - - - - - 1,374 167,374
of Engineering
Richard Brandt (2)... 2008 300,000 - - - - - 51,903 351,903
Management Consultant 2007 300,000 - - - - - 51,413 351,413
-----------------------------------------------------------------------------------------------------------------------
(1) See "All Other Compensation Table" below for further details.
(2) For Mr. Brandt reflects fees paid under a consulting agreement described
below in the section entitled "Employment Agreements."
All Other Compensation Table
Director
and/or
Trustee Insurance Total
Fees Premiums Other All Other
Name Year ($) ($) ($)(1) Compensation ($)
------------------------------------------------------------------------------
Michael R. Mulcahy.... 2008 4,500 20,453 687 25,640
Angela D. Toppi....... 2008 500 2,565 - 3,065
Al L. Miller.......... 2008 - 856 537 1,393
Thomas F. Mahoney..... 2008 - 792 - 792
Karl P. Hirschauer.... 2008 - 935 368 1,303
Richard Brandt........ 2008 4,500 38,100 9,303 51,903
------------------------------------------------------------------------------
(1) Other consists of personal use of company vehicle and for Mr. Brandt
includes a tax equalization payment.
-21-
Retirement Plan
The Corporation made a cash contribution of $382,000, which is the minimum
required contribution, to the Corporation's retirement plan for 2008 by
September 15, 2009 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'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. The following table presents
estimated retirement benefits payable at normal retirement date, which normally
is age 65. The amounts shown include estimated Social Security benefits that
would be deducted in calculating benefits payable under such Plan.
Estimated Annual Retirement Benefits
Based on Credited Service Years
Final Average Salary for
Highest Five of the Ten Years
Preceding Retirement 10 20 30 35 40
--------------------------------------------------------------------------------
$100,000 $15,000 $30,000 $45,000 $52,500 $60,000
125,000 18,750 37,500 56,250 65,625 75,000
150,000 22,500 45,000 67,500 78,750 90,000
200,000 (1) 30,000 60,000 90,000 105,000 120,000 (2)
--------------------------------------------------------------------------------
(1) $245,000 is the legislated annual cap on compensation.
(2) $195,000 is the maximum legislated annual benefits payable from a qualified
pension plan.
As of January 1, 2009, Messrs. Hirschauer, Mahoney, Miller and Mulcahy and Ms.
Toppi had 23, 26, 35, 35 and 16 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.
Certain Transactions
During the year 2008, $300,000 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. M. Brandt and Mr. T.
Brandt, former directors and executive officers of the Corporation, as more
fully described below in the section entitled "Employment Agreements." During
the year 2008, $146,333 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 has an employment agreement with Mr. Michael R. Mulcahy for a
term expiring March 31, 2010, which provides for compensation at the annual rate
of $307,151 through March 31, 2010, subject to annual cost-of-living
adjustments. Mr. Mulcahy is entitled to receive as a profit participation 2
1/2% of the Corporation's pre-tax consolidated earnings if earnings are $500,000
up to $1,000,000, 3 1/4% of the Corporation's pre-tax consolidated earnings if
earnings are over $1,000,000 up to $2,000,000 and 4% of the Corporation's
pre-tax consolidated earnings if earnings are 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
provides that if Mr. Mulcahy is disabled, the Corporation will pay to him 50%
of the salary he is 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 dies during the term of said agreement, the Corporation shall
pay to his widow death benefits in an amount equal to 50% of his then annual
salary for the
-22-
immediate preceding fiscal year for twenty-four (24) months. The Corporation
has purchased two life insurance policies in the amount of $500,000 and $75,000
in favor of Mr. Mulcahy's beneficiary. The agreement also provides 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 is discontinued following a Change in Control. The
agreement further provides 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 occurs, unless he rejects a proposed
renewal contract for a term of at least three years and upon the same terms and
conditions in effect at such time. The agreement also contains 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 has the option of extending his agreement for three (3) years through March
31, 2013 at his then current salary subject to the cost-of-living adjustment in
the event such Change in Control is approved by Mr. Brandt (or a majority of
his sons if he dies or is disabled).
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 through March 31, 2012 at her then current salary subject to the
cost-of-living adjustment if such Change in Control is approved as provided
above. 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 an employment agreement with Mr. Thomas F. Mahoney that
expired and is now on a 30-day basis, which provides for compensation at the
annual rate of $152,000. Mr. Mahoney is entitled to receive a performance
bonus and sales override target amount of earnings of $50,000 per annum. Mr.
Mahoney 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 $20,000 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. Mahoney is disabled, the Corporation will pay to him 35%
of the salary he is entitled to receive for the duration of the disability
during the term. In the event Mr. Mahoney dies during the
-23-
term of said agreement, the Corporation shall pay to his beneficiary death
benefits in an amount equal to 35% of his then annual salary for the immediate
preceding fiscal year for the duration of the term, or eighteen (18) months,
whichever is less.
The Corporation has an employment agreement with Mr. Karl P. Hirschauer for a
term expiring March 31, 2010, which provides for compensation at the annual rate
of $171,500 through June 30, 2009 and $175,500 through March 31, 2010. Mr.
Hirschauer is entitled to receive as a profit participation 3/8% of 1% of the
Corporation's pre-tax consolidated earnings if earnings exceed $500,000, with a
maximum of $20,000 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. Hirschauer is disabled, the Corporation will pay to him
35% of the salary he is entitled to receive for the duration of the disability
during the term. In the event Mr. Hirschauer dies during the term of said
agreement, the Corporation shall pay to his beneficiary death benefits in an
amount equal to 35% of his 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 has a consulting agreement with Moving Images, LLC, a private
company owned by family members of Mr. Richard Brandt, Chairman Emeritus 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 fails to elect Mr. Brandt to his present
positions, Moving Images, LLC has the right to receive the payments for the
balance of the term of its agreement, including certain lump sum payments
thereof. Moving Images, LLC agreed to reduce their 2008 fees by $90,406 plus
the cost-of-living adjustment.
The foregoing is a summary of the agreements and reference is made to the
agreements, each of which has been filed with the SEC, for the full terms
thereof.
During 2009, the named executives agreed to a voluntary reduction in their
salary for ten months; and during 2008, the named executives agreed to defer
their increases for nine months. The named executives and other executives plus
Moving Images, LLC agreed to defer their increases for nine months during 2007,
for six months during 2006 and for three months during 2005, 2004 and 2003.
Stock Option Plans and Stock Options
The Corporation had an incentive stock option plan, which provided for the grant
of incentive stock options at fair market value on date of grant. The plan has
expired and no further options may be granted. Options outstanding are
exercisable during the period one to 10 years after date of grant and while the
holder is in the employ of the Corporation and survive the termination of the
plan. The Corporation has a Non-Employee Director Stock Option Plan, which
provides for the grant of incentive stock options at fair market value on date
of grant, pursuant to which the option set forth below was granted. Options
outstanding are exercisable during the period one to six years after date of
grant and while a director. There were no stock options granted in fiscal 2008
to the named executive officers or the management consultant.
-24-
The following table sets forth information as to the named executive officers
and the management consultant with respect to the value realized on exercise of
stock options, and (iii) fiscal year end option values.
Aggregate Option Exercises in Last Fiscal Year
And Fiscal Year End Option Values
Number of Value of Unexercised In-the-
Unexercised Options Money Options at Fiscal Year
Option Exercises at Fiscal Year End End ($)(1)
---------------------------- ---------------------------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized($) Unexercisable Unexercisable
------------------------------------------------------------------------------------------------------------
Michael R. Mulcahy........ None - 5,000/ - - / -
Angela D. Toppi........... None - 5,000/ - - / -
Richard Brandt (2)........ None - 12,500/ - - / -
Thomas F. Mahoney......... None - 2,500/ - - / -
------------------------------------------------------------------------------------------------------------
(1) Market value of underlying securities at fiscal year end, minus the exercise price.
(2) 10,000 of 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.
2,500 of the stock options were granted under the Non-Employee Director Stock Option Plan. See the
section above entitled "Non-Employee Director Stock Option Plan" for a description of the plan.
-25-
FIVE-YEAR CORPORATE PERFORMANCE GRAPH
The following graph compares the Corporation's total stockholder return over the
five fiscal years ended December 31, 2008 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 Corporation's Common Stock.
COMPARATIVE FIVE YEAR TOTAL RETURNS *
Trans-Lux Corporation, Amex Composite Index, AMEX US Total Return Index, Russell
2000 Index **
2003 2004 2005 2006 2007 2008
------------------------------------------------------------------
XAX 100.00 122.22 149.89 175.23 205.33 119.09
AMEX US 100.00 115.54 125.04 145.10 150.43 N/A
RUSSELL 2000 100.00 117.00 120.88 141.55 137.55 89.68
TLX 100.00 124.47 94.94 128.63 104.40 12.56
------------------------------------------------------------------
* 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, AMEX US and RUSSELL 2000.
-26-
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, 2008, the Corporation's executive officers and
directors have complied with the Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS - 2010 ANNUAL MEETING
If any stockholder desires to submit a proposal for action at the 2010 annual
meeting, such proposal must be received by the Corporation's Corporate Secretary
on or before December 26, 2009. Nominations for directors at the 2010 annual
meeting by stockholders must be in accordance with Article 4(c) of the
Corporation's By-Laws and received on or before February 4, 2010.
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
October 28, 2009
-27-
APPENDIX A
CERTIFICATE OF INCORPORATION
ARTICLE FOURTH, PARAGRAPH A, SECTION IV(a)
CONVERSION RIGHTS
PROPOSED NEW SUBSECTION (e)
(e) Notwithstanding anything contained in this Section IV, subsection (a),
pursuant to the affirmative vote of a voting majority of the shares of the
Common Stock and of a voting majority of the shares of the Class B Stock, each
voting separately as a class as provided in Paragraph A II(b) of this Article
FOURTH at the 2009 Annual Meeting of Stockholders, immediately upon the filing
of a certificate of amendment containing this subsection (e), each share of
Class B Stock shall be converted into 1.3 shares of Common Stock (e.g. a
certificate for 100 shares of Class B Stock shall thereupon and thereafter be
deemed to represent 130 shares of Common Stock). Fractional shares shall be
valued based on the average of the daily closing price of the Common Stock on
the five trading days immediately preceding the date of the 2009 Annual Meeting
on which sales took place.
-A-1-
APPENDIX B
TRANS-LUX CORPORATION
1989 Non-Employee Director Stock Option Plan
(As amended at the Board of Directors Meeting held
September 25, 2009 and subject to approval by stockholders
at the 2009 Annual Meeting.)
1. Purpose: The purpose of this Plan is to enable the Corporation to attract
and keep non-employee persons of requisite business experience to serve on the
Board of Directors of the Corporation by offering them an opportunity to
participate in the growth and development of the Corporation through stock
ownership, and to thereby provide additional incentive for them to promote the
success of the business.
2. Stock Subject to the Plan: The shares of stock to be offered pursuant to
this Plan shall be shares of the Corporation's authorized common capital stock,
and may be unissued shares or reacquired shares. The aggregate number of shares
which may be delivered upon exercise of all options granted under the Plan shall
not be more than 30,000 shares, subject to adjustment as provided in the Plan.
Shares subject to but not delivered under any option terminating or expiring for
any reason prior to the exercise thereof by the optionee in full shall be deemed
available for options thereafter granted during the continuance of the Plan.
3. Administration of the Plan: The Compensation Committee of the Board of
Directors (hereinafter called "Committee"), subject to the provisions of the
Plan, shall have plenary authority in its sole discretion to interpret the Plan;
and to prescribe, amend, and rescind rules and regulations relating to it.
4. Non-Employee Directors to Whom Options May be Granted: Subject to the terms
and conditions set forth herein, the Corporation:
(a) hereby grants to each new Non-Employee Director who becomes a member
of the Board following September 25, 2009, options to purchase shares based on
the following schedule of Years of Service which each such person has served as
a member of the Board.
Years of Service No. of Options (Cumulative)
---------------- ---------------------------
Less than 5 500
5 or more 1,000
10 or more 1,500
20 or more 2,500
(b) shall grant to each Non-Employee Director who receives an option
hereunder an option to purchase additional shares based on the following
schedule of Years of Service which each such person has served as a member of
the Board after the Effective Date.
Years of Service No. of Options (Non-Cumulative)
---------------- -------------------------------
5th full year 500
10th full year 500
20th full year 1,000
(c) shall grant to each Non-Employee Director who is hereafter elected
to the Board an option to purchase 500 shares on the date of election to the
Board. Such persons shall also be entitled to the grant of options in
accordance with (b) above.
-B-1-
For purposes hereof, Year of Service shall mean a calendar year or aggregate
portions thereof during which a Director is a Non-Employee Director. A
Non-Employee Director shall mean a person who is or becomes a Director of the
Corporation and is not an employee of the Corporation.
(d) shall grant to each Non-Employee Director additional options to
purchase additional shares in an amount equal to (i) the number of options
granted under Section 4(a) (x) which have previously expired, on the effective
date of this amendment to the Plan, or (y) which hereafter expire, on the date
of expiration of such option, and (ii) which were heretofore exercised or
hereafter are exercised, on the later to occur of (x) four (4) years from the
date of grant, (y) the date of exercise of such exercised option or (z) the
effective date of this amendment to the Plan.
5. Option Price: The purchase price of the shares of Common Stock which shall
be covered by each option shall be 100% of the fair market value of such shares
as of the date of the granting of the option. Such fair market value shall be
deemed to be the mean of the high and low prices of the Common Stock of this
Corporation as quoted on a national securities exchange(s) on the day on which
the option shall be granted and such option by its terms shall not be
exercisable after the expiration of six (6) years from the date such option is
granted.
6. Duration of Options: The duration of each option shall be not more than six
(6) years from the date of the granting thereof, but may be for a lesser term as
shall be fixed by the Board of Directors, but shall be subject to earlier
termination as hereinafter provided.
7. Exercise of Options: An option when and after it becomes exercisable may be
exercised at any time, or from time to time during its term as to any part of or
all of the shares which shall be optioned, provided, however, that:
(a) an option may not be exercised as to less than 100 shares at any one
time (or the remaining shares then purchasable under the option if the same be
less than 100 shares);
(b) the purchase price of the shares as to which an option shall be
exercised shall be paid in full in cash and/or by delivery of Common Stock of
the Corporation valued at the fair market value of such Common Stock as
determined in paragraph 5 on the date of exercise;
(c) each option shall be subject to the following additional conditions
precedent and restrictions thereon with respect to its exercise:
(i) Each Non-Employee Director to whom an option is granted under
the Plan must remain as a Director of the Corporation for one year from the date
the option is granted or such shorter period as permitted by the Committee
before he shall have the right to exercise any part thereof. Thereafter all or
any part of the shares covered by each option may be purchased at any time or
from time to time during the option period, provided, however, that no option
may be exercised unless the optionee is at the time of such exercise a Director
of the Corporation.
(ii) No option shall be transferable by an optionee otherwise than
by Will or by the laws of descent and distribution and is exercisable during
optionee's lifetime only by the optionee.
(iii) Each optionee shall agree that optionee will purchase the
optioned shares for investment and not with any present intention to resell the
shares.
(iv) No shares acquired on exercise of options may in any event be
sold or otherwise disposed of for value within six (6) months of the date of
grant of the options whether or not the shares are registered under the
Securities Act of l933 except on a sale to the Corporation in accordance with
Rule l6b-3(d) and (e).
-B-2-
8. Limitations on Participation:
(a) If an optionee shall cease to be a Director of the Corporation for
any reason (other than death or disability), he may, but only within the 90 days
next succeeding such cessation of directorship, exercise his option to the
extent that he was entitled to exercise it at the date of such cessation, unless
he was removed for cause by the stockholders. If an optionee shall be removed
for cause, his option shall terminate on the date of such removal and he shall
forfeit any and all rights which may have accrued prior thereto. All options to
the extent not exercisable on the date of cessation of directorship shall be
forfeited.
(b) In the event of death of an optionee while a Director of the
Corporation, the option theretofore granted to him shall be exercisable only
within nine months next following the date of his death by the person or persons
to whom the optionee's rights under the option shall pass by the optionee's Will
or the laws of descent and distribution, or within six months after the date of
the appointment of an administrator or executor of the estate of such optionee,
whichever date shall sooner occur, and then only if and to the extent that he
was entitled to exercise it at the date of his death, provided, however, that he
shall be deemed to be so entitled even if such death shall have taken place
prior to the expiration of one year from the date of the granting of the option,
anything in this Plan to the contrary notwithstanding.
(c) In the event that an optionee becomes permanently and totally
disabled and resigns as a Director, the optionee may, but only within one year
next succeeding the day of the commencement of such disability, exercise his
option to the extent that he was entitled to exercise his option, but in no
event after the expiration of the option. For this purpose, an optionee shall
be considered permanently and totally disabled if he is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve
months. An optionee shall not be considered to be permanently and totally
disabled unless he furnishes proof of the existence thereof in such form and
manner, and at such times, as the Committee may require. The Committee's
determination of whether the optionee is permanently and totally disabled shall
be final and absolute, and shall not be subject to question by the optionee, a
representative of the optionee, or the Corporation.
9. Adjustments Upon Changes in Capitalization: In the event of changes in the
outstanding Common Stock of the Corporation by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations, or liquidations, the number
and class of shares available under the Plan and the aggregate and the maximum
number of shares as to which options may be granted to any Non-Employee Director
shall be correspondingly adjusted by the Committee. No adjustment shall be made
in the minimum number of shares which may be purchased at any time.
10. Effectiveness of the Plan: The Plan, as amended, shall be extended to
December 31, 2019, provided that:
(a) if not previously listed, the shares of the Common Stock reserved
for the Plan shall have been duly listed, upon official notice of issuance, upon
the national exchange whereon they are traded and registered under the
Securities Exchange Act of 1934, as amended; and
(b) the Board of Directors shall have been advised by counsel that all
applicable legal requirements have been complied with; and
(c) the stockholders shall approve the amendment extending the Plan to
December 31, 2019.
Notwithstanding the foregoing, if all conditions are satisfied or inapplicable,
the effective date of the amendment shall be the date of approved by the
stockholders.
-B-3-
11. Time of Granting Options: Whenever a director is eligible under paragraph
4 for the receipt of an option, the Corporation shall forthwith send notice
thereof to the designee. The date of eligibility shall be the date of granting
the option to such participant for all purposes of this Plan. The notice shall
be in the form of a Grant approved by the Board of Directors of this
Corporation.
12. Termination and Amendment of the Plan: The Plan shall terminate on
December 31, 2019, and an option shall not be granted under the Plan after that
date. The Board of Directors may at any time, or from time to time, modify or
amend the Plan including the form of option agreement, in such respects as it
shall deem advisable in order that options shall conform to any change in the
law, or in any other respects.
By Order of the Board of Directors
TRANS-LUX CORPORATION
-B-4-
TRANS*LUX (R)
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
DECEMBER 11, 2009
NORWALK, CONNECTICUT
PROXY
TRANS-LUX CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 11, 2009
(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 MICHAEL R. MULCAHY 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, Room 230, 188 Richards
Avenue, Norwalk, Connecticut, 06854 on December 11, 2009 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, 2a, 2b (provided Item 1 is approved) 3
and 4.
Item 1 FOR AGAINST ABSTAIN Amend the Corporation's Certificate of
____ ____ ____ Incorporation to provide for the automatic
\___\ \___\ \___\ conversion of each share of Class B Stock
into 1.3 shares of Common Stock as provided
in a Settlement Agreement.
Item 2a FOR WITHHELD Election of Angela D. Toppi to serve as a
____ ____ director for a three-year term, until her
\___\ \___\ successor is elected and shall have
qualified.
Item 2b FOR WITHHELD Election of George W. Shiele to serve as a
____ ____ director for a two-year term, and Glenn J.
\___\ \___\ Angiolillo and Salvatore J. Zizza to serve
as directors for a three-year term, until
their successors are elected and shall have
qualified.
Authority is withheld with respect to the
following nominee(s).
________________________________
________________________________
Item 3 FOR AGAINST ABSTAIN Amend the 1989 Non-Employee Director Stock
____ ____ ____ Option Plan to extend the Plan to 2019.
\___\ \___\ \___\
Item 4 FOR AGAINST ABSTAIN Ratify the retention of UHY LLP as the
____ ____ ____ independent registered accounting firm for
\___\ \___\ \___\ the Corporation 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, THE
AMENDMENT TO THE CORPORATION'S CERTIFICATE OF INCORPORATION, "FOR" ITEM 2a,
"FOR" ITEM 3, AMENDMENT TO THE NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND "FOR"
ITEM 4, RETENTION OF UHY LLP AS THE CORPORATION'S INDEPENDENT ACCOUNTING FIRM.
SUBJECT TO APPROVAL OF ITEM 1, THIS PROXY WILL BE VOTED "FOR" ITEM 2b, THE
ELECTION OF THE NOMINEES FOR DIRECTORS.
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 October 28, 2009.
Dated:__________________, 2009
________________________ (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.