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 240.14(a)-11(c) or
Section 240.14a-12
TENNEY ENGINEERING, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per exchange Act Rules 14a-6(i)(4)
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:
[X] 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:
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TENNEY ENGINEERING, INC.
PROXY
Proxy Solicited by Board of Directors for Annual Meeting of
Shareholders
The undersigned hereby appoints SAUL S. SCHIFFMAN and ROBERT
S. SCHIFFMAN and each of them, proxies and attorneys, with full
power of substitution at the Annual Meeting of Shareholders of
TENNEY ENGINEERING, INC. (the "Company") to be held at the offices
of the Company, 1090 Springfield Road, Union, New Jersey 07083, at
9:15 a.m. on Friday May 26, 1995, and any adjournment, with
authority to vote all the Common Stock of said Company which the
undersigned is entitled to vote as follows:
1. ELECTION OF 1 DIRECTOR FOR the nominee WITHOUT AUTHORITY
to serve until the listed below (except to vote for the
third annual meeting as marked to the nominee listed
after his election: contrary below) below
Saul S. Schiffman
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee write that nominee's name in the space provided below.)
PLEASE SIGN AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE
(Continued and to be signed on reverse side)
2. FOR AGAINST ABSTAIN The approval of the 1995
Incentive Stock Option Plan.
3. In their discretion, on such other business as may properly come
before the meeting or any adjournment.
Every properly signed proxy will be voted by the proxies in
accordance with the specifications made thereon. If no
specification is made, it is the intention of the proxies to vote
this proxy FOR the election of Directors and FOR Proposal 2.
Receipt is acknowledged of the Notice of Annual Meeting and
Proxy Statement of the Company dated March 31, 1995.
Dated: , 1995
Signature(s) of Shareholder(s)
Note: Executors, administrators, trustees, and others signing in
a representative capacity should indicate the capacity in which
they sign. If shares are held jointly, EACH holder should sign.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
TENNEY ENGINEERING, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 26, 1995
NOTICE IS HEREBY GIVEN, that the Annual Meeting of
Shareholders of Tenney Engineering, Inc., a New Jersey corporation
(the "Company") will be held at the offices of the Company, 1090
Springfield Road, Union, New Jersey 07083 on Friday, May 26, 1995,
at 9:15 a.m., local time, to consider and act upon the following
matters:
1. To elect one (1) Director of the Company to serve
until the third succeeding annual meeting after his election
and until his respective successors are duly elected and
qualified.
2. To consider and act upon the 1995 Incentive Stock
Option Plan annexed as Exhibit A to the accompanying proxy
statement.
3. To transact such other business as may properly come
before the meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on
March 31, 1995 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting and
any adjournments thereof.
You are cordially invited to attend the meeting in person.
Whether or not you plan to attend the meeting, you are urged to
complete, date and sign the enclosed proxy and mail it promptly in
the return envelope provided for this purpose.
By order of the Board of Directors
SAUL S. SCHIFFMAN
Secretary
March 31, 1995
1090 Springfield Road
Union, New Jersey 07083
ALL SHAREHOLDERS ENTITLED TO VOTE AT THE MEETING ARE REQUESTED TO
COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY TO
TENNEY ENGINEERING, INC., 1090 SPRINGFIELD ROAD, UNION, NEW JERSEY
07083. A RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE.
<PAGE>
TENNEY ENGINEERING, INC.
1090 Springfield Road
Union, New Jersey 07083
Tel. No. (908) 686-7870
PROXY STATEMENT
Annual Meeting of Shareholders
May 26, 1995
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Tenney
Engineering, Inc., a New Jersey corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held at the offices
of the Company, 1090 Springfield Road, Union, New Jersey 07083, on
Friday, May 26, 1995, at 9:15 a.m., local time. The approximate
date on which the form of proxy and this proxy statement are first
being mailed to shareholders is April 10, 1995.
You are requested to complete, sign and date the accompanying
proxy and return it promptly to the Company in the enclosed
envelope. The enclosed proxy may be revoked at any time before it
is exercised, by written notice to the Company bearing a later date
than the proxy, provided said notice is received by the Company
prior to the start of the meeting.
Furthermore, any shareholder attending the meeting may vote in
person whether or not they had previously submitted a proxy. Where
instructions are indicated, proxies will be voted in accordance
therewith. Where no instructions are indicated, proxies will be
voted FOR the nominee for Director set forth below, FOR the
approval of the 1995 Incentive Stock Option Plan, and with regard
to all other matters as recommended by the Board of Directors or,
if no such recommendation is given, in the discretion of the proxy
holders. Election of the directors will require a plurality of the
votes cast at the meeting by the holders of shares entitled to
vote thereon.
The Board of Directors has fixed the close of business on
March 31, 1995, as the record date for the determination of
shareholders who are entitled to notice of and to vote at the
meeting. The presence at the Annual Meeting, in person or by
proxy, of the holders of a majority of the shares outstanding on
March 31, 1995 will constitute a quorum. The Company has
outstanding on March 31, 1995, and entitled to vote with respect to
all matters to be acted upon at the meeting, 3,685,592 shares of
common stock, $.10 par value ("Common Stock"), each of which was
entitled to one vote on all matters to come before the meeting.
The cost of preparing, assembling and mailing this proxy
statement, the notice of meeting and the enclosed proxy is to be
borne by the Company.
In addition to the solicitation of proxies by use of the
mails, the Company may utilize the service of some of the officers
and regular employees of the Company (who will receive no
compensation therefor in addition to their regular salaries) to
solicit proxies personally and by telephone and telegraph. The
Company may request banks, brokers, and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their
principals and to request authority for the execution of proxies.
PRINCIPAL SHAREHOLDERS
As of February 28, 1995, the following have advised the
Company that they are beneficial owners of more than five (5)
percent of the outstanding shares of the Company's Common Stock:
Name and Address of Amount Beneficially Owned Percentage
Beneficial Owner as of February 28, 1995 of Class
Robert S. Schiffman 393,395(1) 10.6%
1090 Springfield Road
Union, New Jersey 07083
(1) Includes 35,000 shares which Mr. Schiffman may purchase under
the 1981 Incentive Stock Option Plan.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation classifies the
Board of Directors into three classes, each of which is elected for
a three-year term. One director is to be elected at the annual
meeting, to serve until the 1998 Annual Meeting of the Shareholders
and until his successor is elected and qualified. The Board has
nominated Saul S. Schiffman, a director whose term is expiring, for
re-election to the Company's Board of Directors at the 1995 Annual
Meeting, for a term of three years, to expire at the annual meeting
in 1998 and until his successor is elected and qualified. The term
of the other three directors will continue as indicated below. Mr.
Schiffman was elected to his present term as Director by
shareholders in May 1992. The size of the Board of Directors was
reduced from 5 to 4 on February 1, 1995, when a director resigned.
If such nominee should be unable to serve, an event not now
anticipated, the proxies will be voted for such persons, if any, as
shall be designated by the Board of Directors to replace such
nominee.
A description of the nominee and incumbent directors is
provided below:
Position with the Company Year First
or Principal Occupation Elected
Nominee and Age During the Past Five Years Director
Saul S. Schiffman Vice Chairman of the Board 1945
81 (1)(2)(3) and since July 8, 1994 Secretary
Director Not Standing for Election Whose Term Expires in 1996:
David C. Schiffman Associate Profession of Psych- 1981
55 (2) (3) ology, State University of
New York at New Paltz
Directors not Standing for Election Whose Terms Expire in 1997:
Robert S. Schiffman Chairman of the Board, 1975
51 (1)(2) President and Chief Executive
Officer of the Company
David A. Schuh Self-Employed Real Estate and 1993
55 (3) Insurance Broker
(1) Member of Executive Committee.
(2) Saul S. Schiffman is the father of Robert S. Schiffman and
David C. Schiffman.
(3) Member of Stock Option Committee.
The Company has no standing audit, nominating or compensation
committee or committees performing similar functions.
The Board of Directors held 4 meetings and the Executive
Committee held 6 meetings in 1994. No Director attended fewer than
75% of the Board, and Committee, meetings, of which he was a
member, held during 1994.
Security Ownership of Management
The following table sets forth the information as of February
28, 1995, regarding the beneficial ownership of common stock by
each Director, Nominee for Director and the Chief Executive Officer
of the Company and by all Directors and Executive Officers as a
group.
Amount Percentage
Name Beneficially Owned of Class
Robert S. Schiffman 393,395(1) 10.6%
David a Schuh None N/A
Saul S. Schiffman 107,675 2.9%
David C. Schiffman 179,707 4.9%
All Directors and Officers
as a group 685,777(2) 18.6%
(1) Includes 35,000 shares which Mr. Schiffman may purchase under
the 1981 Incentive Stock Option Plan.
(2) Includes 35,000 shares which all Officers and Directors may
purchase under the 1981 Incentive Stock Option Plan.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the annual and long-term
compensation of the Company's Chief Executive Officer for fiscal
1994, 1993, and 1992. No other executive officer or employee of
the Company received salary and bonus in 1994 in excess of
$100,000.
Annual
Compensation
Name and
Principal Position Year Salary All Other Compensation
Robt. S. Schiffman 1994 $197,200 $4,912
Chairman of the
Board, President
and CEO 1993 200,200 3,536
1992 206,404 3,538
(1) Inclusive of Company-paid life insurance in the amount of
$200,000 for Robert S. Schiffman and dollar value of personal
use of Company-provided automobile.
Employment Agreement
On December 18, 1992, the Company entered into an Employment
Agreement with Robert S. Schiffman for a term ending December 31,
1996, at an annual salary of not less than $200,000. On the same
day, the Company entered into a licensing agreement with a private
company to manufacture certain products under the Company's name
and it agreed to make Mr. Schiffman's services available to the
licensee through the end of 1996. The licensee is obligated to pay
the Company $120,000 per year for approximately 40% of Mr.
Schiffman's time.
Compensation of Directors
During 1994, each Director who was not a employee of the
Company earned an annual fee at the rate of $4,800 ($400 per
month).
Stock Option Information
The Company's 1981 Incentive Stock Option Plan for officers
and key employees expired in 1991 except for then outstanding
options. Robert S. Schiffman holds an option to purchase 35,000
shares on or before October 17, 1996 at a price of $.34375 per
share. Other employees hold options to purchase 22,000 shares on
or before October 17, 1996 at a price of $.3125 per share. No
options were exercised during 1994. The market value of the
Company's stock on December 31, 1994 was less than the option
exercise price. The plan provided that options could be granted
from time to time at a price of not less than 100% of the fair
market value of the common stock as of the date of grant for
officers and employees who own less than 10% of the voting stock of
the Company and 110% of fair market value for those officers and
employees who own more than 10% of the voting stock (affiliate
employees). Options granted were exercisable immediately and
terminate no later than ten years from date of grant (five years
from date of grant for affiliate employees).
PROPOSAL 2
APPROVAL OF 1995 INCENTIVE STOCK OPTION PLAN
At the Annual Meeting, the holders of the Company's Common
Stock will be presented with a proposal to approve the adoption of
the 1995 Incentive Stock Option Plan (the "Plan") described herein.
The Plan was adopted by the Company's Board of Directors on
February 3, 1995, subject to stockholder approval. No options
under the Plan have been granted as of February 28, 1995.
A brief description of the material features of the Plan
follows, but the description is qualified in its entirety by the
terms of the Plan, a copy of which is included as Exhibit A to this
Proxy Statement.
General
The Plan authorizes the granting of "incentive stock options"
(as defined in Section 422 of the Internal Revenue Code of 1986, as
amended, (the "Code")). Options may be granted under the Plan for
a period through January 31, 2005 unless the Plan is earlier
terminated. The Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time by the
Board of Directors except that stockholder approval is required to
increase the number of shares that may be issued under the Plan, to
reduce the minimum option price below the fair market value of the
shares when an option is granted, to extend the period during which
an option may be exercised or to modify the Plan in a manner
requiring stockholder approval under Rule 16b-3 of the Securities
and Exchange Commission. The Plan is not subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and is not a qualified Plan under Section 401(a) of the
Code. Proceeds received by the Company from the sale of Common
Stock pursuant to the exercise of options granted under the Plan
will be used for general corporate purposes.
Securities Subject to the Plan
Subject to approval by the holders of the Company's Common
Stock, the aggregate number of shares which may be issued upon
exercise of options granted under the Plan shall not exceed
400,000.
There is no restriction as to the number of options or as to
the maximum number of shares that may be granted to any employee
subject to the following. Options granted under the Plan may be
granted with respect to any number of shares of Common Stock
subject to the limitation that the aggregate fair market value of
such shares with respect to which such options are exercisable for
the first time by an employee during any one calendar year (under
all such plans of the Company, any parent and any subsidiary) shall
not exceed $100,000. For purposes of this paragraph fair market
value of the shares subject to an option shall be determined at the
time an option is granted.
If an option expires or is cancelled without having been fully
exercised, the number of shares as to which such option was not
exercised prior to its expiration or cancellation may again be
optioned under the Plan. The Plan provides for appropriate
adjustments in the number and kind of shares subject to the Plan
and to outstanding options in the event of a stock split, stock
dividend or certain other similar changes in the Company's Common
Stock and in the event of a merger, consolidation or certain other
types of recapitalization.
Administration of the Plan
The Plan provides for administration by a committee
("Committee"), consisting of at least three Directors, appointed
from time to time (and removable) by the Company's Board of
Directors. No person is eligible to serve on the Committee unless
such person is then a "disinterested person" within the meaning of
paragraph (c)(2) of Rule 16b-3. No option may be granted to a
member of the Committee. The current members of the Committee are
Messrs. Saul S. Schiffman, David A. Schiffman and David Schuh.
In additional to administering the Plan, the Committee is also
authorized to interpret the Plan, to adopt such rules for the
administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such
rules.
Members of the Committee will receive such compensation for
their services as may be determined by the Board. All expenses and
liabilities that the members of the Committee incur in connection
with the administration of the Plan will be borne by the Company.
Eligibility and Participation
Any executive or other key employee of the Company or of any
corporation which is then a subsidiary of the Company (as such
terms are defined in the Plan), including Officers, will be
eligible to be granted options. Directors of the Company are
eligible to be granted options only if they are also employees.
The Committee is authorized to determine which individuals are
key employees, to select from among them the individuals to whom
options are to be granted, to determine the number of shares to be
subject to such options, and to establish the terms and conditions
of the options, consistent with the Plan.
Terms of Options
Exercisability of Options. Options are exercisable at such
times and in such installments (which may be cumulative) as the
Committee may provide in the terms of each individual option.
Generally, options will be exercisable immediately except that no
option granted to an officer will be exercisable during the first
six months after such option is granted.
Options are exercisable in whole or in part by written notice
to the Company, specifying the number of shares being purchased and
accompanied by payment of the purchase price for such shares. The
option exercise price may be paid in cash or by check except that
with the permission of the Committee it may be paid with the
delivery of shares of the Company's Common Stock having a value
equal to the option exercise price or a combination of such shares
and cash. The Committee may, as a condition to the exercise of any
option, require that the optionee deliver such representations and
documents as it deems necessary to effect compliance with
applicable federal and state securities laws and regulations. The
Committee may also take whatever additional action it deems
appropriate to effect such compliance.
Stock Option Agreements: Consideration to the Company. In
consideration of the granting of an option, the employee to whom
such option is granted will agree, in a written stock option
agreement (a "Stock Option Agreement"), to remain in the employ of
the Company, a parent corporation or a subsidiary of the Company,
for a period of at least one year after the option is granted.
Nothing in the Plan or in any Stock Option Agreement will confer
upon any optionee any right to continue in the employ of the
Company, a parent corporation or any subsidiary of the Company, or
will interfere with or restrict in any way the rights of the
Company, a parent corporation or a subsidiary of the Company, to
discharge any optionee at any time for any reason whatsoever, with
or without cause.
Purchase Price of Shares Subject to Options. The price of the
shares of Common Stock subject to each option shall be set by the
Committee; provided, however, that the price per share of an option
shall be not less than 100% of the fair market value of such shares
on the date such option is granted; provided, further, the price
per share shall not be less than 110% of the fair market value of
such shares on the date such option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the
Code) more than ten percent of the total combined voting power of
all classes of stock of the Company, any subsidiary or any parent
corporation.
Non-Assignability. Options may be transferred only by will or
by the laws of descent and distribution. During a participant's
lifetime, options are exercisable only by the participant.
Expiration of Options. Options granted under the Plan shall
be for a term fixed by the Committee but not longer than ten years,
or five years in the case of an option granted to an optionee
owning 10% or more of the Company's outstanding stock at the date
of grant. Options granted under the Plan may not be exercised
unless the optionee at the time of exercise is an employee of the
company or one of its subsidiaries except in the case of
termination of employment by reason of disability or death in which
case the option may be exercised up to 12 months after such event
but in no case after the original expiration date of the option.
Adjustments upon Change in Capitalization. If the outstanding
shares of Common Stock subject to options are changed into or
exchanged for a different number or kind of shares of the Company
or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split-up,
stock dividend or combination of shares, the Board of Directors
will make an appropriate and equitable adjustment in the number and
kind of shares as to which all outstanding options, or portions
thereof then unexercised, will be exercisable, to the end that
after such event the optionee's proportionate interest will be
maintained as before the occurrence of such event.
Transfer Restrictions. Unless otherwise approved in writing
by the Committee, no shares acquired upon exercise of any option by
any officer (as defined in Rule 16a-1(f) of the Securities and
Exchange Commission) may be sold, assigned, pledged, encumbered or
otherwise transferred until at least six months have elapsed from
(but excluding) the date that such option was granted. The
Committee, in its discretion, may impose such other restrictions on
the transferability of the shares purchasable upon the exercise of
an option as it deems appropriate. Any such other restriction
shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificate evidencing such shares. The
Committee may require the employee to give the Company prompt
notice of any disposition of shares of stock, acquired by exercise
of an option, within two years from the date of granting such
option or one year after the transfer of such shares to such
employee.
No Rights as a Stockholder. The holders of options will not
be, nor have any of the rights or privileges of, a stockholder of
the Company as to shares covered by an option until such shares are
issued by the Company and delivered to such holders.
Conformity to Securities Laws. The Plan is intended to
conform to the extent necessary with all provisions of the
Securities Act of 1933, as amended and of the Securities Exchange
Act of 1934, as amended and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder,
including without limitation Rule 16b-3. The Plan will be
administered, and options will be granted and may be exercised,
only in such a manner as to conform to such laws, rules and
regulations.
Federal Income Tax Consequences
The following discussion is a general summary of the material
federal income tax consequences to participants in the Plan. The
discussion is based on the Code, regulations thereunder, rulings
and decisions now in effect, all of which are subject to change.
The summary does not discuss all aspects of federal income taxation
that may be relevant to a particular participant in light of such
participant's personal investment circumstances. Also, state and
local income taxes are not discussed and may vary from locality to
locality.
Holders of options will not be considered to have received
taxable income upon either the grant of the option or its exercise.
Upon the sale or other taxable disposition of the shares of the
Common Stock, long-term capital gain will normally be recognized in
the full amount of the difference between the amount realized and
the option exercise price if no disposition of the shares has taken
place within either (a) two years from the date of grant of the
option or (b) one year from the date of transfer of the shares of
the Common stock to the optionee upon exercise. If the shares of
the Common Stock are sold or otherwise disposed of before the end
of the one-year period or the two-year period, the difference
between the option exercise price and the fair market value of the
shares of the Common Stock on the date of the option's exercise
will be taxed as ordinary income; the balance of the gain, if any,
will be taxed as capital gain. If the shares of the Common Stock
are disposed of before the expiration of the one-year period or the
two-year period and the amount realized is less than the fair
market value of the shares at the date of exercise, the optionee's
ordinary income is limited to the amount realized less the option
exercise price paid. The Company will be entitled to a tax
deduction in regard to an option only to the extent the optionee
has ordinary income upon sale or other disposition of the shares of
the Common Stock.
The tax consequences resulting from the exercise of an option
through delivery of already-owned shares of Common Stock are not
completely certain. In published rulings and proposed regulations,
the Internal Revenue Service has taken the position that generally
the employee will recognize no income upon such stock-for-stock
exercise (subject to the discussion above), that, to the extent an
equivalent number of shares is acquired, the employee's basis in
the shares acquired upon such exercise is equal to the employee's
basis in the surrendered shares increased by any compensation
income recognized by the employee, that the employee's basis in any
additional shares acquired upon such exercise is zero, and that any
sale or other disposition of the acquired shares within the one-
year or two-year period described above will be viewed as a
disposition of the shares with the lowest basis first.
The difference between the fair market value of the shares of
Common Stock on the Exercise date and the exercise price of an
incentive stock option is generally deemed to be a "tax preference"
under the alternative minimum tax rules of the Code.
Vote Required
The affirmative vote of a majority of the shares of the
Company's Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting will be required for
approval of the 1995 Incentive Stock Option Plan. In addition, the
total votes cast must be over 50 percent of the outstanding shares
of Common Stock. For these purposes, abstentions will have the
same effect as a vote against and "broker non-votes" will not be
deemed to be votes cast.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
ADOPTION OF THE 1995 INCENTIVE STOCK OPTION PLAN.
<PAGE>
AUDITORS
Zeller Weiss & Kahn have audited the financial statements of
the Company since 1994 and have been selected by the Board of
Directors to audit the Company's financial statements for the year
1995.
SHAREHOLDER PROPOSALS FOR
NEXT ANNUAL MEETING
Shareholders may present proposals which are proper subjects
for consideration at the 1996 Annual Meeting of Shareholders of the
Company for inclusion in its proxy material relating to that
meeting. These proposals should be submitted in writing and
otherwise in the manner specified by Securities and Exchange
Commission rules to Tenney Engineering, Inc., 1090 Springfield
Road, Union, New Jersey 07083. Attention: Secretary. They must
be received by January 31, 1996, in order to be included in the
proxy materials for the 1996 Annual Meeting.
GENERAL INFORMATION AND OTHER MATTERS
Management does not know of any other matters which are likely
to be brought before the meeting. However, in the event that any
other matters properly come before the meeting, the persons named
in the enclosed proxy will vote the proxy in accordance with their
judgment on such matters.
By order of the Board of Directors
By SAUL S. SCHIFFMAN
Secretary
March 31, 1995
1090 Springfield Road
Union, New Jersey 07083
<PAGE>
TENNEY ENGINEERING, INC.
1995 INCENTIVE STOCK OPTION PLAN Exhibit A
1. OBJECTIVES OF THE PLAN
Tenney Engineering, Inc. (the "Corporation") hereby
establishes its 1995 Incentive Stock Option Plan (the "Plan") upon
the terms and conditions hereinafter stated. The purpose of the
Plan is intended to encourage ownership of Common Stock of the
Corporation by officers and key employees of the Corporation and
its present and future Subsidiaries, and to provide incentives for
them to put forth maximum efforts for the success of the
Corporation. By extending to officers and key employees the
opportunity to acquire a proprietary interest in the Corporation
and to participate in its success, the Plan may be expected to
benefit the Corporation and its shareholders by making it possible
for the Corporation to attract and retain the best available talent
and by rewarding key management and technical personnel for their
part in increasing the value of the Corporation's shares.
Accordingly, the Corporation will from time to time, on or before
January 31, 2005, grant to such employees as may be selected in the
manner hereinafter provided, options to purchase shares of Common
Stock, $.10 par value, of the Corporation.
2. DEFINITIONS
Unless otherwise required by the context, the following terms
when used in the Plan shall have the meanings set forth in this
Section 2.
(a) Affiliated Employee: An Employee to whom an Option is
granted under the Plan who, at the time of grant of such Option,
owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation or of its Parent
or Subsidiary inclusive of shares attributed to the Employee by the
provisions of Section 424(d) of the Code or any other Section
thereof.
(b) Board of Directors: The Board of Directors of the
Corporation.
(c) Common Stock: The Common Stock of the Corporation, par
value $.10 per share, or such other class of shares or other
securities as may be applicable pursuant to the adjustment
provisions of Section 4.
(d) Code: The Internal Revenue Code of 1986, as heretofore
or hereafter amended.
(e) Committee: The committee designated to administer the
Plan pursuant to the provisions of Section 3.
(f) Corporation: Tenney Engineering, Inc., a New Jersey
corporation, its successors and assigns.
(g) Employee: A key employee of the Company or a Subsidiary,
including an officer or director who is such a key employee and who
has not attained the age of seventy-five years:
(h) Exchange Act: The Securities Exchange Act of 1934, as
amended.
(i) Fair Market Value: Fair Market Value on any date means
the average of the high and low sales prices of the Common Stock on
such date on the principal national securities exchange on which
such Common Stock is listed or admitted to trading, or if such
Common Stock is not so listed or admitted to trading, the
arithmetic mean of the per share closing bid price and per share
closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or
such other market in which such prices are regularly quoted, or, if
there have been no published bid or asked quotations with respect
to the Common Stock on such date, the Fair Market Value shall be
the value established by the Board in good faith and in accordance
with Section 422 of the Code provided, however that if such method
of determining Fair Market Value shall not be consistent with the
regulations of the Secretary of the Treasury or his delegate at the
time applicable to an Incentive Stock Option, Fair Market Value
shall be determined in accordance with such regulations and shall
mean the value as so determined.
(j) Incentive Stock Options: Options intended to meet the
requirements of an Incentive Stock Option as defined in Section 422
of the Code as in effect at the time of the grant of any such
option or any statutory provision that may hereafter replace such
Section.
(k) Officer: An officer of the Corporation as defined in
Rule 16a-1(f) under the Exchange Act as such Rule may be amended in
the future.
(l) Optionee: An Employee to whom an option is granted under
the Plan.
(m) Options: The options granted from time to time under the
Plan.
(n) Parent: Any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation if,
at the time of granting of the Option, each of the corporations
other than the Corporation owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain.
(o) Plan: Tenney Engineering, Inc. 1995 Incentive Stock
Option Plan herein set forth, as the same may from time to time be
amended.
(p) Rule 16b-3: Rule 16b-3 under the Exchange Act as such
Rule may be amended in the future.
(q) Subsidiary: Any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation
if, at the time of granting of the Option, each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
3. COMMITTEE: INTERPRETATION AND REGULATIONS
(a) The Plan shall be administered by a committee appointed
by the Board of Directors consisting of not less than three
directors of the Corporation. The members of the Committee shall
in the first instance be elected by the Board of Directors at the
meeting of the Board of Directors at which the Plan is approved and
thereafter at the first meeting of the Board of Directors following
each annual meeting of stockholders. The term of each member of
the Committee shall be until his successor is chosen and qualified.
The provisions of the By-Laws of the Corporation pertaining to
resignation or removal of officers and vacancies in the offices
shall apply to members of the Committee. No person appointed to
the Committee shall be eligible, nor have been eligible for one
year prior to appointment, for the grant of a stock option pursuant
to the Plan or any other plan of the Corporation or any of its
affiliates, while serving on the Committee and no person shall be
appointed to or shall serve as a member of the Committee unless at
the time of such appointment and service he shall be a
"disinterested person" as defined in Rule 16b-3 or any other
provision that may replace such Rule and be in effect at such time.
(b) The Committee shall have full power to interpret and
administer the Plan and full authority to act in selecting the
Employees to whom Options will be granted, in determining the
number of shares of Common Stock to be optioned to each such
Employee and the terms and conditions of Options granted under the
Plan and shall have the power to make regulations for carrying out
the Plan and make such changes in such regulations as from time to
time the Committee deems proper. Any interpretation by such
Committee of the terms and provisions of the Plan and the
administration thereof, and all action taken by the Committee,
shall be final, binding and conclusive on the Corporation, its
stockholders, Subsidiaries, all Employees, and upon their
respective legal representatives, successors and assigns, and upon
all other persons claiming under or through any of them.
(c) Members of the Board of Directors and members of the
Committee acting under the Plan shall be fully protected in
replying in good faith upon the advice of counsel and shall incur
no liability except for gross negligence or willful misconduct in
the performance of their duties or as expressly provided by
statute.
(d) The fact that a member of the Board of Directors shall at
the time be, or shall theretofore have been or thereafter may be,
a person who has received or is eligible to receive an Option shall
not disqualify him from taking part in and voting at any time as a
member of the Board of Directors in favor of or against any
amendment or repeal of the Plan.
4. STOCK SUBJECT TO THE PLAN-ADJUSTMENTS
The shares of Common Stock to be issued upon exercise of
Options granted under this Plan shall be made available, at the
discretion of the Board of Directors, either from the authorized
but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Corporation, including shares purchased in the
open market.
Subject to the provisions of the next succeeding paragraph of
this Section 4, the aggregate number of shares of Common Stock for
which Options may be granted under this Plan shall not exceed
400,000 shares.
If, prior to January 31, 2005, an Option granted under this
Plan shall expire or terminate for any reason without having been
exercised in full, the shares subject to such Option to the extent
not purchased by the Optionee shall (unless this Plan shall have
been terminated) become available for option to other Employees.
In the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation
or any other change in the corporate structure of the Corporation
affecting shares of its Common Stock, or a sale by the Corporation
of all or part of its assets, or any distribution to stockholders
other than a cash dividend, the Committee shall recommend and the
Board of Directors shall make appropriate adjustment in the number
and kind of shares authorized by the Plan, in the aggregate and to
any individual Employee, in the number and kind of shares subject
to unexercised Options theretofore granted and in the option price
of such shares in order to prevent substantial dilution or
enlargement of the rights granted to, or available for
participants, in the Plan; provided, however, that all adjustments
made as the results of the foregoing in respect of each Option
shall be made so that such Option shall continue to be an Incentive
Stock Option as defined in Section 422 of the Code, as amended, or
any statutory provision that may hereafter replace such Section, as
in effect at the time. No fractional shares shall be issued and
any fractional shares resulting from adjustments pursuant to this
paragraph shall be eliminated from the respective Option.
5. OPTION PRICE
The purchase price per share of Common Stock under each Option
shall be determined by the Committee, but shall not be less than
100%, or in the case of an Affiliated Employee 110%, of the Fair
Market Value of the Common Stock on the date the Option is granted,
and in no event less than the par value of the Common Stock.
6. ELIGIBILITY OF OPTIONEES: AWARD OF OPTIONS
Options will be granted only to persons who are Employees. No
option may be awarded to any member of the Committee.
Subject to the terms, provisions and conditions of this Plan,
the Committee shall have exclusive jurisdiction (a) to select the
Employees to be granted Options (it being understood that subject
to the limits as to number of shares specified below under this
Plan, more than one Option may be granted to an Employee under this
Plan and options may be granted to an Employee under this and other
stock option plans of the Corporation, concurrently or
sequentially), (b) to determine the number of shares subject to
each Option, (c) to determine the time or times when the Options
will be granted, (d) to determine the option price of the shares
subject to each Option, which price shall be not less than the
minimum specified in Section 5 of the Plan, (e) to determine the
time or times when each Option may be exercised within the limits
stated in this Plan, and (f) to prescribe the form, which shall be
consistent with this Plan, of the instruments evidencing any
Options granted under this Plan. Except as the Committee may
otherwise provide with respect to Options granted to Optionees who
are not Officers, no Option may be exercised in whole or in part
during the first six months after such Option is granted.
Each award of Options shall be evidenced by an Incentive Stock
Option agreement with provisions not inconsistent with the Plan and
as approved by the Committee (which terms and conditions need not
be the same in each case and may be changed from time to time).
The Incentive Stock Option agreement shall contain such terms and
conditions as may be necessary or requisite in the sole opinion of
the Committee to qualify such Options as "Incentive Stock Options"
under Section 422 of the Code. Each provision of the Plan and of
each Incentive Stock Option granted hereunder shall be construed so
that each Option shall be an Incentive Stock Option, as defined in
the Code, and any provision that cannot be so construed shall be
disregarded.
Each Option granted under this Plan shall terminate not later
than ten years, or if granted to an Affiliated Employee, five
years, after the date on which it was granted. The Committee may,
in its discretion, prescribe a shorter period for any individual
Option or Options. Subject to the provisions of Sections 9 and 11
hereof, an Option may only be exercised while the Optionee is an
Employee of the Corporation or a Parent or Subsidiary, or a
corporation or Parent or Subsidiary thereof, issuing or assuming a
stock option in a transaction to which Section 424(a) of the Code
applies.
Options granted under this Plan may be granted with respect to
any number of shares of Common Stock subject to the limitation that
the aggregate Fair Market Value of such shares with respect to
which such options are exercisable for the first time by an
Employee during any one calendar year (under all such plans of the
Corporation, any Parent and any Subsidiary) shall not exceed
$100,000 as provided in Section 422(d) of the Code. For purposes
of this paragraph Fair Market Value of the shares subject to an
Option shall be determined at the time an option is granted.
7. NON-TRANSFERABILITY OF OPTION
No Option granted under this Plan shall be transferable by the
Optionee otherwise than by his last will and testament, or by the
laws of descent and distribution, and such Option shall be
exercisable during his lifetime only by him.
8. EXERCISE OF OPTIONS
A person electing to exercise an Option shall give written
notice to the Secretary of the Corporation of such election and the
number of shares he has elected to purchase, and shall, at the time
of exercise, tender the full cash purchase price of the shares he
has elected to purchase, or with the consent of the Committee
through the delivery of shares of the Corporation's Common Stock
(duly endorsed for transfer and with transfer taxes paid) having a
Fair Market Value (on the tender date) equal to the option price or
a combination thereof, accompanied, if required by the Committee,
by a written representation in form satisfactory to the Committee
that at such time it is his then present intention to acquire the
shares being purchased for investment, and not with a view to, or
for sale in connection with, a distribution thereof. Until the
person electing to exercise his Option has made such payment,
and/or tendered certificates for shares of Common Stock, and has
had issued to him a certificate or certificates for the shares so
purchased, he shall possess none of the rights of a stockholder
with respect to any such share or shares. No holder of an Option
shall have any of the rights of a stockholder with respect to any
shares covered by such Option until he shall become the holder of
record of such shares.
The Committee, in its sole discretion, may establish
procedures whereby an Optionee, subject to the requirements of Rule
16b-3, Regulation T, federal income tax laws, and other federal,
state and local tax and securities laws, can exercise an Option or
a portion thereof without making a direct payment of the option
price to the Corporation. If the Committee so elects to establish
a cashless exercise program, the Committee shall determine, in its
sole discretion, and from time to time, such administrative
procedures and policies as it deems appropriate and such procedures
and policies shall be binding on any Optionee wishing to utilize
the cashless exercise program.
The Corporation shall have the right to deduct from any cash
payment made under the Plan or to the extent permitted by law any
other payment due an Optionee any federal, state or local income,
or other taxes required by law to be withheld with respect to such
payment. Participants shall be required to satisfy any liability
for withholding taxes as a prerequisite to the Corporation's
obligation to deliver shares or securities of the Corporation upon
exercise of a Stock Option.
Any Stock Option may provide by the grant that the recipient
of such award may elect, in accordance with any applicable
regulations, to pay a portion or all of the amount of the required
withholding taxes in shares of Common Stock. In that event, the
Optionee shall authorize the Corporation to withhold, or shall
agree to deliver to the Corporation, shares owned by such Optionee
having a Fair Market Value equal to the amount of withholding tax
liability.
If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder,
of any Common Stock issued to such Optionee pursuant to the
exercise of an Option within the two-year period commencing on the
day after the date of the grant or within the one-year period
commencing on the day after the date of transfer of such Common
Stock to the Optionee pursuant to such exercise, the Optionee
shall, within ten (10) days of such disposition, notify the
Corporation thereof, by delivery of written notice to the
Corporation at its principal executive office.
9. TERMINATION OF EMPLOYMENT
If and when an Optionee shall cease to be an Employee of the
Corporation or a Parent or subsidiary thereof, or of a corporation
or Parent or Subsidiary thereof issuing or assuming a stock option
in a transaction to which Section 424(a) of the Code applies, any
Option granted to him under this Plan shall terminate, provided
that if the cessation of employment is due to his death or
disability, the option may be exercised during the time and in the
manner provided in Section 11 of this Plan, but not later than the
termination date of the Option, and not to a greater extent than
the Employee would have been entitled to immediately prior to his
cessation of employment or death. Any question as to whether and
when there as been cessation or employment, or permanent and total
disability of an Employee (as defined in Section 11) shall be
determined by the Committee, and its determination of such
questions shall be final.
In the event the Optionee is employed by a Subsidiary of the
Corporation and if (i) such Subsidiary ceases to be a Subsidiary
and (ii) such Optionee is after such date not employed by the
Corporation or a Parent or Subsidiary, then the Option may be
exercised (with respect to all or any part of the unexercised
portion of such Option regardless of the exercise dates provided by
the Option agreement at any time within one month after the
Subsidiary ceased to be a Subsidiary, but in no event after the
expiration of the term of the Option. Nothing in the Plan or in
any Option awarded pursuant to the Plan or in any Option agreement
shall confer upon any Employee the right to continue in the employ
of the Corporation or any Subsidiary or interfere in any way with
the right of the Corporation or any Subsidiary to terminate his
employment at any time for any reason, with or without cause.
10. LEGEND OF STOCK CERTIFICATES
Shares of stock issued on exercise of Options may, in the
discretion of the Committee, be stamped with a legend to the effect
(a) that the shares have not been registered under the Securities
Act of 1933, as amended, and/or (b) that they may not be sold,
transferred, pledged or hypothecated in the absence of an effective
Registration Statement for the shares under the Securities Act of
1933, as amended, or an opinion of counsel to the Corporation that
registration is not required under said Act.
11. DEATH OR DISABILITY OF OPTIONEE
Should an Optionee die while in the employ of the Corporation
or a Parent or Subsidiary any Option theretofore granted to him
under this Plan may be exercised by the Optionee's estate or by the
person designated in such Optionee's last will and testament;
provided the Option is so exercised within twelve (12) months of
such death but not later than the termination date of the Option,
and provided further that the Option may be exercised only if and
to the extent that the Optionee was entitled to exercise it at the
date of his death.
Should an Optionee become permanently and totally disabled, as
defined in Section 105(d)(4) of the Code and regulations
promulgated with respect thereto, while in the employ of the
Corporation or a Parent or Subsidiary any option theretofore
granted to him under the Plan may be exercised by him until the
later of the following dates: (a) three (3) months less one day,
after cessation of employment by the Corporation, a Parent or
Subsidiary or (b) twelve (12) months after he becomes permanently
and totally disabled, provided however no Option may be exercised
later than the termination date of the Option and only if and to
the extent that the Optionee was entitled to exercise it at the
date of the termination of his employment by the Corporation, its
Parent or a Subsidiary.
12. EMPLOYEES' AGREEMENTS TO SERVE
Each Employee granted an Option shall enter into an agreement
with the Corporation or any of its Subsidiaries as may be
designated by the Committee or the Board of Directors, agreeing
that he will remain in the employ of the Corporation or such
Subsidiary or, at the election of the Corporation from time to
time, the Corporation itself, its Parent, or any of its other
Subsidiaries, for a period of at least twelve (12) months after the
date of grant of the Option (provided, however, that in the event
an Employee is granted two options concurrently under this Plan or
under this and any other stock option plan of the Corporation, such
agreement need relate to only one period of employment of at least
12 months) and that he will, during such employment, devote his
full time, energy and skill to the service of the Corporation,
Parent, or such Subsidiary and the promotion of its interests,
subject to vacations, sick leave and other absences in accordance
with the employing corporation's regular policies.
13. AMENDMENTS TO PLAN
The Board of Directors of the Corporation may at any time
terminate or from time to time modify or suspend this Plan,
provided that no such modification without the approval of
stockholders shall:
(a) increase the maximum number of shares as to which Options
may be granted under this Plan subject to adjustment in accordance
with Section 4;
(b) permit the granting of options under this Plan at any
option price less than 100% of the Fair Market Value of the stock
at the date of grant;
(c) permit exercise of an Option unless full payment for the
shares as to which the Option is exercised is made at the time of
purchase;
(d) extend the period during which Option may be exercised or
increase the extent to which Options may be exercised during any
period;
(e) abolish or reduce the powers of the Committee, change
eligibility for membership on the Committee or permit the grant of
Options to members of the Committee; or
(f) change the provisions of this Section 13; or
(g) change any provision requiring Stockholder approval under
Rule 16b-3.
14. MERGER, CONSOLIDATION OR LIQUIDATION
If at any time prior to the termination of an Option, the
Board of Directors of the Corporation resolves (a) to make the
Corporation a party to any merger or consolidation under the terms
of which the Corporation shall not be the surviving company and
which does not provide that the surviving company shall assume the
Option (which shall mean an assumption which complies with and
qualifies under Section 424(a) of the Code) or if the Corporation
shall be the surviving corporation in such merger but such merger
involves an exchange of cash and/or other property for the Common
Stock of the Corporation outstanding immediately prior to the
merger, or (b) to liquidate the Corporation, then, during the
period commencing on the date of mailing the notice to the
stockholders of the Corporation of a meeting of the stockholders to
vote on such proposed merger, consolidation or liquidation, and
ending on the date five days prior to the date specified by the
Board of Directors for the voting by the stockholders on such
proposed merger, consolidation or liquidation, the Option may be
exercised with respect to all or any part of the unexercised
portion of the Option regardless of the exercise dates provided
therein. In the event a merger or consolidation is effected in
which the Corporation is not the surviving company or if it is the
surviving corporation and such merger involves an exchange of cash
and/or other property for the Common Stock of the Corporation
outstanding immediately prior to the merger, each Option granted
under the Plan shall terminate on the date of filing the agreement
of merger or consolidation with the Secretary of State of New
Jersey, except to the extent that it is assumed by the surviving
corporation (but only in those cases where the Corporation is not
the surviving corporation) which shall mean assumed in a
transaction to which Section 424(a) of the Code applies. In the
event of liquidation of the Corporation, the Option shall terminate
two business days prior to the date of filing of a Certificate of
Dissolution of the Corporation with the Secretary of State of New
Jersey, except to the extent it is assumed by another corporation
which shall mean assumed in a transaction to which Section 424(a)
of the Code applies.
15. EFFECTIVENESS OF THE PLAN
The Plan shall be effective on February 3, 1995, the date of
adoption by the Board of Directors, subject to approval of the Plan
by the affirmative vote, either in person or by proxy, of the
holders of a majority of the securities of the Corporation present,
or represented, and entitled to vote at the meeting of stockholders
next following such date, and before January 31, 1996, on a
proposal to approve the Plan, provided a quorum is present.
Options may be granted prior to such Stockholder approval;
provided, however, that such Options shall not be exercisable prior
to the time when the Plan is approved by the Stockholders;
provided, further, that if such approval has not been obtained at
the Stockholders meeting next following February 3, 1995 and before
January 31, 1996, all Options previously granted under the Plan
shall thereupon be cancelled and become null and void. The
Corporation shall take such actions with respect to the Plan as may
be necessary to satisfy the requirements of Rule 16b-3(b).
16. TITLES
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.
17. CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with
all provisions of the Securities Act and the Exchange Act and any
and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including without limitation Rule
16b-3. Notwithstanding anything herein to the contrary, the Plan
shall be administered, and Options shall be granted and may be
exercised, only in such a manner as to conform to such laws, rules
and regulations. To the extent permitted by applicable law, the
Plan and Options granted hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
TO TENNEY SHAREHOLDERS:
Tenney Engineering, Inc. in 1994 had revenues of $7,159,000 as compared
to $7,564,000 in 1993, which included approximately $800,000 in sales of the
environmental test chambers now being manufactured under license and being
marketed under the name of "Tenney Environmental."
The year was momentous:
* Third and fourth quarters of 1994 resulted in operating profits
totaling $92,000, as compared to the same period in 1993 which
sustained operating (losses) of $(1,109,000). DynaTenn was
profitable in 1994 and increased sales over 1993 and the backlog of
orders should result in profits for 1995. The Service Division also
increased its sales level.
* For the year 1994 the Company had a net profit of $1,146,000,
compared to the net (loss) of $(2,319,000) in 1993.
* A settlement was reached with our Bank wherein the Company conveyed
its real property in Union, New Jersey, to the Bank and received a
substantial reduction of debt due. The settlement agreement enabled
the Company to recognize a gain of $1,460,000 on the exchange of real
estate and forgiveness of debt in the amount of $224,000 for the year
ended December 31, 1994. By meeting the agreement requirements, the
Company, during 1995, will be able to recognize $869,000 of
additional forgiveness of debt. Operating costs have been
substantially reduced and are now based on a fixed yearly rental for
space used.
Our continuing business includes our DynaTenn, Inc. (d/b/a DynaVac)
subsidiary as well as our Service Division, in addition to fees
earned from the
licensing of the "Tenney" name in the United States and abroad. Through its
DynaTenn subsidiary, Tenney continues to engineer, design and manufacture its
custom vacuum equipment, providing equipment and services to a wide range of
industries. Primary market concentrations are in optical coating, space
simulation systems and components for the aerospace industry and
medical labware
processing equipment. The Service Division continues servicing,
refurbishing,
upgrading and installing of environmental equipment.
In August of 1994 the Company named Martin Pelman as Vice President,
Finance and Chief Financial Officer.
On February 1, 1995, Walter Gottesman resigned from the Board of Directors.
Walter had been with the Company since 1952 and first became a
director in 1965.
Sincere thanks are expressed for his many years of loyal dedication.
Thanks for your continued support.
Sincerely,
Robert S. Schiffman
Chairman, President and
Chief Executive Officer
March 31, 1995<PAGE>
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(In thousands of dollars)
ASSETS
Current assets:
Cash and cash equivalents $ 842
Accounts receivable, net 1,164
Current portion of installment receivables 128
Inventories 284
Prepaid expenses and other current assets 86
Total current assets 2,504
Equipment, net 139
Installment receivables, noncurrent portion 258
Other assets 138
Total Assets $ 3,039
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Note payable - bank and current portion of
long-term debt $ 590
Debt deficiency - deferred forgiveness 869
Accrued payroll and payroll taxes 125
Billings in excess of estimated revenue
on long-term contracts 721
Pension obligation, current portion 222
Total current liabilities 3,875
Long-term debt, noncurrent portion 36
Pension obligation, noncurrent portion 280
Total liabilities 4,191
Commitments and contingencies
Stockholders' equity (deficiency):
Preferred stock $1.00 par value:
Authorized 1,000,000 shares
Issued and outstanding - none
Common stock $.10 par value:
Authorized 10,000,000 shares
Issued 3,694,980 shares 369
Additional paid-in capital 1,960
Retained earnings (deficit) (3,444)
(1,115)
Less treasury stock, 9,388 shares, at cost 37
Total stockholders' equity (deficiency) (1,152)
Total liabilities and stockholders'
equity (deficiency) $ 3,039
See Notes to Consolidated Financial Statements.<PAGE>
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
(In Thousands of Dollars
Except per Share Amounts)
Net revenue:
Product and product related $ 5,108 $ 5,584
Service 1,448 1,322
Parts 603 658
Totals 7,159 7,564
Cost of sales:
Product and product related 4,256 5,554
Service 920 1,017
Parts 278 415
Totals 5,454 6,986
Gross profit 1,726 578
Other expenses:
Selling and administrative expenses 1,942 1,961
Provision for loss on restructuring (28) 530
Totals 1,914 2,491
(Loss) from operations (209) (1,913)
Other income (expense):
Interest expense (367) (454)
Gain on exchange of property in lieu of
foreclosure 1460 -
Other income, net 66 48
Totals 1,159 (406)
Income (loss) before income taxes and
extraordinary items 950 (2,319)
Income taxes (24) -
Income before extraordinary items 926 -
Extraordinary item - gain on restructuring
of debt net of income tax of $4 thousand 220 -
Net income (loss) $ 1,146 $(2,319)
Net income (loss) per common share before
extraordinary items $ 0.25 $ (0.63)
Extraordinary item per common share 0.06 -
Net income per common share $ 0.31 $ (0.63)
Exercise of options would not be dilutative.
See Notes to Consolidated Financial Statements.<PAGE>
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1994 AND 1993
(In Thousands of Dollars)
<CAPTION>
Additional Retained Less
Common Stock Paid-in Earnings Treasury Stock
Shares Amount Capital (Deficit) Shares Amount Totals
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1,
1993 3,677,480 $ 368 $ 2,053 $ (2,271) 32,888 $ 135 $ 15
Net loss (2,319) (2,319)
Issuance of common
stock 17,500 1 (93) (23,500) (98) 6
Balance December
31, 1993 3,694,980 369 1,960 (4,590) 9,388 37 (2,298)
Net income 1,146 1,146
Issuance of common
stock
Balance December
31, 1994 3,694,980 $ 369 $ 1,960 $ (3,444) 9,388 $ 37 $ (1,152)
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
1994 1993
<S> <C> <C>
Operating activities: (In Thousands of Dollars)
Net income (loss) $ 1,146 $(2,319)
Adjustments to reconcile loss to net cash
provided by (used in) continuing operations:
Depreciation and amortization 132 190
Provision for restructuring (89) (197)
Provision for pension withdrawal liability (28) 530
Provision for inventory write-downs 200 195
Provision for bad debts 50 106
License and related fees - 160
Gain on sale of:
Property and equipment - (11)
Gain on exchange of property
in lieu of foreclosure (1,460) -
Gain of debt forgiveness, principal and interest (289)
Changes in operating assets and liabilities:
Accounts and installment receivables 141 1,467
Inventories 428 1,319
Prepaid expenses and other current assets (23) 47
Other assets (90) (5)
Accounts payable and other liabilities 196 (572)
Accrued payroll and payroll taxes (41) (266)
Billings in excess of estimated revenues 667 6
Deferred income - (320)
Net cash provided by continuing operations 940 330
Investing activities:
Proceeds from sale of:
Property and equipment - 111
Acquisition of equipment (42) (4)
Environmental compliance costs - (86)
Net cash provided by (used in) investing activities (42) 21
Financing activities:
Payments of note payable and long-term debt (345) (404)
Proceeds from issuance of common stock - 6
Net cash used in financing activities (345) (398)
Net increase (decrease) in cash and cash equivalents 553 (47)
Cash and cash equivalents, beginning of year 289 336
Cash and cash equivalents, end of period $ 842 $ 289
Supplemental disclosure of cash flow information:
Interest paid $ 37 $ 454
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
Note 1 - Summary of accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of Tenney
Engineering, Inc. (the "Company") and its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Net Revenues:
Revenue from product sales and short-term contracts and services are
recognized when the transactions are consummated. The Company generally
recognizes revenue on long-term, large installation contracts under the
percentage of completion method. Under this method, revenue is recognized
according to the ratio of costs incurred to currently estimated
total contract
costs. At the time a loss on a contract becomes known, the entire amount of
the estimated ultimate loss is recorded.
Product and product-related net revenue includes revenue from the Company's
manufacturing operation, including the discontinued activities (see Note 3),
license and technology fees and rental income. Service revenue includes
revenue from the servicing and installation of environmental equipment and
from the services provided under the Leased Employee Agreement with the
Licensee (see Note 4). Parts revenue includes revenue from the sale of
replacement and spare parts for equipment previously manufactured by the
Company as well as equipment now being manufactured by the Licensee.
Cash equivalents:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Inventories:
Inventories are valued at the lower of cost (first-in, first-out) or market.
Work-in-process inventories are stated at actual production cost, including
factory overhead.
Machinery and equipment:
Machinery and equipment are carried at cost, less accumulated depreciation.
Depreciation is provided using primarily the straight-line method over the
estimated useful lives of the assets. Estimated useful lives vary from 3 to
10 years.
Research and development costs:
Costs and expenses related to research and product development are expensed
as incurred. Research and development costs aggregated approximately $0 and
$10,000 1994 and 1993, respectively.
Gain (loss) per common share:
Gain (loss) per common share is computed based on the weighted average number
of common shares outstanding during the year. The assumed exercise of
outstanding stock options would not have a significant effect on the per
share computations. The weighted average number of common shares outstanding
was 3,685,592 in 1994 and 3,670,502 in 1993.
Note 2 - Going concern considerations:
Financial condition and results of operation:
As shown in the accompanying consolidated financial statements, the Company,
until the year ended December 31, 1994, had suffered recurring losses from
continuing operations which resulted in a deterioration of the Company's
consolidated financial condition. Net income in 1994 resulted in a reduction
of any further deterioration of the Company's consolidated financial
condition.
During 1993 with the cessation of manufacturing operations at the Union
Facility (see Note 3), the Company placed the property for sale and recorded
the asset with a net book value of approximately $401,000 as property held for
sale. During 1994, the Company failed to make certain payments due under the
term note (see Note 9), and started to negotiate with the bank asking for
relief. During the fourth quarter the bank started legal proceedings to
protect its security position under the security agreement and cure the
default. On December 12, 1994, the bank and the Company signed a settlement
agreement in which the Company conveyed to the bank the title in the real
estate located at Union and reduced total debt significantly (see Note 9).
As at December 31, 1994, the Company completed two years under the license
agreement, and the licensee has performed its obligations, for the most part,
under the various agreements incorporated under the license agreement (see
Note 3).
The accompanying Consolidated Financial Statements do not include any
adjustments that might be necessary should the Company be unable to continue
as a going concern.
Significant obligation:
As discussed in Notes 3 and 12, with the cessation of its manufacturing
operations at the Union Facility, the Company received a revised
notification for payment of a withdrawal liability from its
union employees' multi-employer pension plan in the amount of
approximately $502,000. The Company has engaged counsel to advise
it with respect to this matter. The Company must reduce or eliminate its
multi-employer pension liability and/or obtain favorable installment payment
terms. Failure to achieve such reduction or to obtain favorable installment
payment terms will have a material adverse effect on the Company.
Note 3 - Restructuring:
The Company in February, 1993, ceased manufacturing operations at its Union
Facility. The Company's operations now consist of manufacturing, through
one of its wholly owned subsidiaries, diversified vacuum systems for space
simulation, optic coating and plasma treatment for medical labware,
the servicing and installation of environmental equipment, and earning
license and technology fees.
In connection with the cessation of manufacturing at the Union Facility, the
Company received, during the fourth quarter of 1993, a demand for payment of a
withdrawal liability from its union employees' multi-employer pension plan
in the amount of approximately $530,000, to be paid in quarterly payments
starting in January, 1994. The Company engaged counsel to advise it in
these matters and made a provision for this amount in the 1993
Consolidated Financial Statements. The Company failed to make
the first payment when due in January 1994.
In March 1994 the Company received notice that they were in default.
In May 1994 the Company proposed an amount significantly less
than the original amount of $530,000. In June 1994 the Company received
notification from the fund rejecting the Company's offer. In November the
Company submitted another offer, still significantly less than the original
amount requested by the fund, and in addition tendered a monthly payment
less than the original periodic payment request. The Company
continues to tender these periodic payments. In December
1994 the Company received from the fund a modified calculation of
the withdrawal liability in the amount of approximately $502,000.
The Company is negotiating a solution with the fund
through legal counsel and accordingly have classified
the provision as being current and non-current. (See Note 12.)
The Company reported a net income of $1,146,000 and a net (loss)
of $(2,319,000) for the years ended December 31, 1994 and 1993,
respectively. The table below presents the Company's consolidated net
revenue and gross profit for those periods, and the estimated portions
thereof attributable to its continuing activities and the activities that
have been discontinued. For financial accounting purposes, the discontinued
activities are considered to be a portion of the same business segment
as those of the continuing activities and, accordingly, have not been
reflected as a discontinued operation in the Company's
consolidated financial statements.
<TABLE>
1994 1993
<CAPTION>
(In Thousands
of Dollars)
<S> <C> <C>
Net revenue:
Continued activities $ 6,845 $ 6,500
Discontinued activities 314 1,100
Totals $ 7,159 $ 7,600
Gross profit:
Continuing activities $ 1,746 $ 1,400
Discontinued activities (20) (800)
Totals $ 1,726 $ 600
</TABLE>
Note 4 - License agreement:
Concurrent with the Company's announcement to discontinue manufacturing
at the Union Facility, the Company entered into a six-year licensing
agreement with a privately owned manufacturer (the "Licensee") of
environmental conditioning equipment. The terms of the agreement, among
others, provide for: the Licensee to manufacture and sell environmental
test chambers and other equipment under the Tenney name with the
Company also retaining the right to manufacture such
products; the Company to receive license fees (up to a maximum of $1,900,000)
equal to 5% of qualifying sales during the term of the agreement with
specified minimum amounts payable annually; an option for the
Licensee to purchase the Company's rights, title and
interest in the Tenney trademark for $100,000 at the end of the license term
in the event the Company is no longer manufacturing such products;
the Company to perform all servicing and installation of the
aforementioned equipment; a two-year lease of a portion of the Union Facility
for annual rent of $40,000, payable quarterly, which expired on December 31,
1994, and perform other Company obligations related to the Technology
Transfer Agreement (see Note 14). The agreement further requires
the Licensee to purchase annually, from a former subsidiary of
the Company, depending on market conditions, certain minimum amounts
of inventory with cash payments thereon being made directly to the Company
(see Note 6).
In addition, the Company entered into a four-year consulting agreement
with the Licensee whereby, for an annual fee of $120,000, the Company
will make the services of the Company's president available to the
Licensee for a specified period of time (see Note 13).
In 1994 and 1993, the Company earned License fees of approximately $275,000
and $319,000, respectively. Net revenue for 1994 and 1993 also
includes rental income of $40,000 and consulting revenue of $121,000
and $120,000, respectively. Purchases by the Licensee from the Company's
former subsidiary in 1994 and 1993 totaled approximately $2,400
and $68,000, respectively.
The Licensee, in order to reduce its past due obligations to the Company, has
made weekly payment commitments to the Company in amounts less than required
under the various agreements. As at December 31, 1994, the Licensee has
become current with its obligations and weekly payment commitments
stopped during February, 1995. At December 31, 1993, the Company
and Licensee were disputing certain invoices. This dispute was resolved
in 1994 and the provision provided for in 1993 proved adequate and
was closed. Any future payment delays constitute an event which would
permit the Company to declare a default under and to terminate the License
Agreement and other agreements with the Licensee. These
rights the Company has not exercised to date.
Note 5 - Accounts receivable:
<TABLE>
Accounts receivable consist of the following:
<CAPTION>
1994
(In Thousands
of Dollars)
<S> <C>
Accounts receivable, billed $1,191
Due from Licensee, net 60
1,251
Allowance for doubtful accounts 87
Totals $1,164
</TABLE>
At December 31, 1994, sales recognized on the percentage of completion method
approximated $4,339,000.
Note 6 - Note receivable:
In December 1992, the Company sold all of the outstanding stock of its wholly-
owned insulated enclosure subsidiary, Gloekler Refrigerator Company
("Gloekler") for aggregate consideration of approximately $858,000, of
which $300,000 was cash. The balance was evidenced by installment
receivables which provide for payments by Gloekler either in cash
or by credits issued for inventory purchases through 2005. The receivables,
which have been discounted to reflect imputed interest are secured by a
second lien on all of Gloekler's assets
including the common stock and are personally guaranteed by the purchaser.
Note 7 - Inventories:
Inventories consist of the following:
1994
(In Thousands
of Dollars)
Raw materials $ 611
Work in process 115
726
Less:
Customer advances on contracts included
in work in process 68
Provsion for write-downs to estimated
realizable value 374
Totals $ 284
Accumulated costs on long-term contracts recognized by the percentage of
completion method (see Note 5) were approximately $3,514,000 and $5,116,000
in 1994 and 1993, respectively.
Note 8 - Property:
At December 31, 1993, land and building of approximately $401,000, net of
accumulated depreciation of $1,118,000, had been reclassified to property
held for sale. In October 1993, the Company received the necessary
governmental approvals to permit the sale of the Union Facility. Costs
associated with obtaining the approval have been capitalized
(see Notes 3 and 9).
On December 12, 1994, in accordance with the Settlement Agreement, the
Company conveyed to the bank the title to all real estate located in Union,
with a net book value of approximately $340,000 net of
accumulated depreciation (see Notes 3 and 9).
In conjunction with the conveyance of the property, the Company entered into
a Use and Occupancy Agreement for approximately 9,500 square feet of space
at an annual rental of $50,000 and 25% of building operating costs
(excluding real estate taxes). The term of the Use and Occupancy Agreement
is on a monthly basis and the termination date is dependent upon the bank
selling the property (see Note 9).
Note 9 - Short-term note payable:
The Company was indebted to First Fidelity Bank, N.A. (the "Bank")
in the amount of $1,020,000 principal at June 30, 1994, pursuant to a
line of credit agreement evidenced by a promissory note (the "Term Note"),
the maturity date of which had been extended from time to time. The Company
was also indebted to the Bank in the amount of $2,480,474 principal
pursuant to a mortgage loan. The Company had not been current in
making interestor amortization payments to the Bank since
April 1, 1994. As of June 1, 1994 the Company and the Bank entered into a
forbearance agreement whereby the Bank agreed, subject to certain conditions
which were met, not to exercise certain of its rights under the line of
credit and mortgage loan agreements until June 30, 1994. The loans were
secured by a mortgage on the Company's real property in Union, New Jersey,
and a security interest in substantially all of the Company's other assets.
As of September 30, 1994, the Company was indebted to the Bank in the amount of
$1,017,648 principal, pursuant to the line of credit agreement, and
$2,480,474 principal, pursuant to the mortgage loan. On October 13, 1994,
the Bank commenced an action against the Company seeking to enforce its
rights with respect to such obligations.
As of December 12, 1994, the Company was indebted to the Bank in the
amount of $1,017,648 principal, pursuant to the line of credit agreement,
and $2,480,474 principal pursuant to the mortgage loan, in addition to
$260,541 in interest and fees. The Company and the Bank entered into
a Settlement Agreement as at December 12, 1994, in which the Company
conveyed the title to the real estate located in Union, for a credit of
$1,800,000 against the total indebtedness of $3,758,663, the remaining
balance of $1,958,663 was converted to a non-interest
Note due September 30, 1995, in the amount of $800,000, payable $200,000 in
December, 1994, and the balance of $600,000 due in nine monthly non-interest
-bearing amounts of $66,667, and forgiveness of debt of $1,158,663. The
original Term Note security in substantially all the Company's assets
remains in effect, until 93 days after the date of the last payment.
Upon failure to pay any amount when due, after a five-day remedy period, the
Bank may obtain a writ or other appropriate action to attach or
seize assets of the Company to satisfy the total remaining amount due,
including interest from the date of default. As at December 31, 1994,
the Company prepaid $45,000 of the January 31, 1995, payment,
which reduced the balance of the Term Note to $555,000. The forgiveness of
$1,158,663 may be recognized quarterly upon the Company's completion of
paying the monthly amounts when due. During December 1994 the Company paid
$200,000 and accordingly recognized forgiveness of approximately $289,666
principal and interest.
Note 10 - Income taxes:
Effective January 1, 1993, the Company has adopted the Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes,"
which applies a balance sheet approach to income tax accounting. The new
standard requires the Company to reflect on its balance sheet the anticipated
tax impact of future taxable income or deductions implicit in the balance
sheet in the form of temporary differences. The Company has not
reflected any future tax benefits on its balance sheet as the value of the
deferred tax asset resulting from the net operating loss carryforwards
was offset by a valuation allowance of equal amount.
At December 31, 1994, the Company has available, for tax reporting purposes,
net operating loss carryforwards of approximately $4,200,000, which expire
through 2008.
<TABLE>
The components of income tax expenses are:
<CAPTION>
1994 1993
(In Thousands
of Dollars)
<S> <C> <C>
Income taxes currently payable:
Federal income tax - regular $ 600 -
Federal alternative minimum tax 28 -
State income tax 165 -
Tax benefit arising from carryforward
of net operating losses $(765) -
1994 Income Tax Expenses $ 28 -
Note 10 - Income taxes (concluded):
The income tax expense in 1994 results from the federal alternative
minimum tax rate of 20%, which was allocated as follows:
1994
(In Thousands
of Dollars)
Income before extraordinary item $ 24
Extraordinary item 4
1994 Income Tax Expenses $ 28
Note 11 - Common stock:
In 1991, the Company's incentive stock option plan for officers and key
employees expired except for then outstanding options. The plan
provided that options could be granted from time to time at a price of not
less than 100% of the fair market value of the common stock as of
the date of grant for officers and employees who own less than 10%
of the voting stock of the Company and 110% of
fair market value for those officers and employees who own
more than 10% of the voting stock (affiliate employees). Options granted
are exercisable immediately and terminate no later than ten years from
date of grant (five years from date of grant for affiliate employees).
</TABLE>
<TABLE>
A summary of plan transactions follows:
<CAPTION>
Number of Option Price
Shares per Share
<S> <C> <C>
Outstanding and exercisable - January
1, 1992 199,500 $.1875 - $.34375
Cancelled (15,000) $.3125
Exercised (12,000) $.1875
Outstanding and exercisable - December
31, 1992 172,500 $.1875 - $.34375
Cancelled (41,500) $.1875 - $.31250
Exercised (57,500) $.1875 - $.31250
Outstanding and exercisable - December
31, 1993 73,500 $.31250 - $.34375
Cancelled (16,500) $.31250
Outstanding and exercisable - December
31, 1994 57,000 $.31250 - $.34375
</TABLE>
On February 3, 1995, the Board of Directors of the Company approved a new
ten-year incentive stock option plan for officers and key employees in the
amount of 400,000 shares, to be put up for a vote of approval at the Annual
Meeting to be held on May 26, 1995.
Note 12 - Retirement and pension plans:
The Company maintains a retirement plan for salaried employees (the
"Salaried Plan") which provides for defined benefits. The Company's
funding policy is to contribute annually at least the minimum amount required
by the Employee Retirement Income Security Act of 1974. In June 1989,
the Company amended the Salaried Plan so that benefits would no longer
accrue and subsequent to that date contributions have not been required
due to the overfunded status of the Salaried Plan. The Company accounted
for the curtailment in 1989 pursuant to Statement of Financial Accounting
Standards No. 88, "Employer's Accounting for Settlements
and Curtailments of Defined Benefit Plans and for Termination Benefits."
<TABLE>
The following table sets forth the funded status of the Salaried Plan assuming
a discount rate of 7.5% at December 31, 1994:
<CAPTION>
1994
(In Thousands
of Dollars)
<S> <C>
Actuarial present value of projected benefit obligation
including vested benefits of $583,000 $584
Plan assets at fair value, primarily insurance contracts 661
Plan assets in excess of projected benefit obligation
consisting entirely of unrecognized net gain $ 77
The expected long-term rate of return on assets was 7.5%.
Union employees were included in a separate multi-employer pension plan to
which the Company made monthly contributions in accordance with a contractual
union agreement based on monthly hours worked. Related pension expense
amounted to approximately $0 and $11,000 in 1994 and 1993, respectively.
Due to the cessation of manufacturing operations at the Company's Union
Facility (see Note 3), the Company ceased being a participant in the
multi-employer pension plan in February 1993. Under the Multi-Employer
Pension Plan Amendments Act of 1980, the Company may, under
certain circumstances, become subject to liabilities in excess of
contributions made under its collective bargaining agreement. Generally, a
liability may be incurred upon the termination, withdrawal or partial
withdrawal from an underfunded plan which would be based upon a formula
specified by the plan.
During the fourth quarter 1993, the Company received a demand from the Sheet
Metal Workers' National Pension Fund (the "Fund"), that it make payment of
$529,743.28 as a result of the Company's withdrawal from the Fund. The
demand is for 18 quarterly payments of $33,879.28 except for a final
payment of $32,797.59, with the initial payment to be made by January 19,
1994. The Company engaged counsel to advise it in these matters and made a
provision for this amount in the 1993 Consolidated Financial Statements.
The demand also states that the amount due is subject to adjustment for
performance of the Fund during 1992.
The Company did not make the January 19, 1994 payment. In a letter dated
March 16, 1994, the Fund advised the Company that it was delinquent in
making its first withdrawal liability payment and that failure to correct
the delinquency within sixty days will constitute a default. If a
default is declared, the Fund can bring suit to collect the delinquent
withdrawal liability payment(s) and/or the full amount of the withdrawal
liability due.
In May 1994 the Company proposed an amount significantly less than the
original amount of $530,000. In June 1994 the Company received notification
from the fund rejecting the Company's original offer. In November
the Company submitted another offer, still significantly less than the
original amount requested by the fund, and in addition tendered
a monthly payment less than the original periodic payment request.
The Company continues to tender these periodic payments. In December
1994 the Company received from the fund a modified
calculation of the withdrawal liability in the amount of approximately
$502,000. The Company is negotiating a solution with the fund through legal
counsel and accordingly have classified the provision as being current
and non-current.
If the Company is unable to substantially reduce the amount being demanded
and/or obtain favorable installment payment terms, it will have a material
adverse effect on the Company. The balance sheet presentation of the
obligation to the Fund reflects the obligation being due in installments.
Note 13 - Commitments and contingencies:
Employment agreement:
In connection with the license agreement which provides for the Company to
receive $120,000 annually pursuant to a consulting agreement (see Note 4),
the Company entered into a four-year employment agreement with its president
which requires a minimum annual salary of $200,000 commencing in 1993.
Lease commitment:
DynaTenn, Inc. (d/b/a "DynaVac"), a wholly-owned subsidiary which
manufactures diversified industrial vacuum equipment, leases its facility
in Weymouth, Massachusetts under an operating lease which expired in December
1994. DynaVac renewed the lease on a monthly basis upon expiration. Rent
charged to operations under this lease approximated $60,000 and $58,000 in
1994 and 1993, respectively.
Contingencies:
The Company is involved in various lawsuits, most of which are covered by
insurance and subject to deductible amounts. Management believes that the
outcome of these lawsuits will not have a material adverse effect on the
Company's consolidated financial condition.
Note 14 - Technology Transfer Agreement:
In April 1991, the Company entered into a Technology Transfer Agreement (the
"Technology Agreement") with an entity in the People's Republic of China for
an eight-year period. The Technology Agreement requires the Company to
provide certain technology to assist the purchaser in developing
and producing environmental chambers. Provisions of the
Technology Agreement include time tables during which the technology will
be transferred and training will be provided. In addition, should the
purchaser be successful in developing and producing products, of which there
is no guarantee, the Technology Agreement contains provisions relating to
the future purchase of these products by the Company and places restrictions
on the purchaser's sale of products within the Company's marketplace.
In conjunction with the license agreement (see Note 4), the Licensee agreed
to perform certain of the Company's obligations under the
Technology Agreement, including the purchase of products.
The aggregate contract amount under the Technology Agreement is $1,200,000,
which is secured by a letter of guarantee. Payments occur upon
the completion of certain milestones and revenue is recognized as earned.
Payments from this contract totalled approximately $0, $149,000, $165,000
and $360,000 in 1994, 1993, 1992 and 1991, respectively. During 1994
and 1993, the Company recognized in net revenue approximately $20,000 and
$84,000, respectively, under the Technology Agreement. Related expenses
approximated $0 and $67,000 in 1994 and 1993, respectively.
Note 15 - Other income and (expense):
Other income and (expense) consist of the following:
1994 1993
(In Thousands
of Dollars)
Interest expense $ (367) $ (454)
Gain on:
Exchange of property in lieu
of foreclosure (A) 1,460 -
Equipment - 11
Interest income 23 35
Other, net 43 2
Totals $1,159 $ (406)
(A) On December 1, 1994, the Company entered into a Settlement Agreement with
the Bank, which in part required the Company to convey to the Bank the
title to the real estate, with a net book value of approximately
$340,000, for a credit against the total indebtedness of $1,800,000,
which resulted in a net gain of $1,460,000 for the year (see Note 9).
Note 16 - Extraordinary item
Extraordinary item consists of gain on restructuring of debt net of income
taxes. The Settlement Agreement also provided for the forgiveness of
debt of $1,158,000, principal and interest, to be forgiven quarterly,
if periodic quarterly payments totaling $200,000 are made timely. The
Company in December of 1994 made the first required payment of $200,000, and
recognized the forgiveness of $224,000 principal and $65,000 interest
forgiveness was netted against interest expense for the year ended
December 31, 1994 (see Note 9).
Note 17 - Major customer and concentrations of credit risk:
Major customer:
There was one major customer who accounted for net revenue in excess of 10%
during the year ended December 31, 1994. During the year ended December
31, 1993, the Company did not have any major customer who contributed more
than 10% of net revenue.
Concentrations of credit risk:
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash equivalents, accounts receivable and
inventories. The Company places its cash and cash equivalents in highly
liquid instruments with high credit quality financial institutions.
In general, the Company's accounts receivable result from its manufacturing
and servicing operations and reflect a broad customer base to primarily
large-sized companies both nationally and internationally. Also, the Company
routinely assesses the financial strength of its customers. As a
consequence, with the exception of the major customer noted above and amounts
due from the Licensee, concentrations of credit risk are limited.
The Company maintains cash balances at several financial institutions located
in the Northeast. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. At December 31, 1994, the
Company's uninsured cash balances total approximately $450,000.
Note 18 - Supplemental schedule of noncash investing and financing activities:
During 1994 the Company exchanged property with a book value of
approximately $340,000 for a credit against its bank indebtedness of
$1,800,000.In addition, the Bank forgave approximately $224,000 of principal
indebtedness (see Notes 15 and 16). In 1993, equipment and an equipment
obligation totaling approximately $25,000 were assumed by the Licensee. In
addition, treasury stock was issued for the exercise of stock options totaling
30,000 common shares which were paid for by the tendering of 16,500 shares
of the Company's common stock having an equal fair market value.
* * *
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Tenney Engineering, Inc.
We have audited the accompanying consolidated balance sheet of Tenney
Engineering, Inc. and Subsidiaries as of December 31, 1994, and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency) and cash flows for the years ended December 31, 1994 and 1993.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Tenney
Engineering, Inc. and Subsidiaries as of December 31, 1994, and the results of
its operations and its cash flows for the years ended December 31, 1994 and
1993 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company continues to incur losses from
operations and has reported a net working capital deficiency and a net
stockholders' equity deficiency, which have created substantial doubt about
its ability to continue as a going concern. Managements' plans in regard to
this matter are also discussed in Note 2. These financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
ZELLER WEISS & KAHN
Mountainside, New Jersey
March 29, 1995<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
During 1994, the restructuring that was started in 1992 was substantially
concluded. As of December 12, 1994, the Company was indebted to its Bank
lender in the amount of $1,017,648 principal, pursuant to a line of credit
agreement, and $2,480,474 principal pursuant to a mortgage loan secured
by a mortgage on the Company's Union, New Jersey facility, in addition
to $260,541 in interest and fees. The Company and the Bank entered into
a Settlement Agreement as at December 12, 1994, in which the Company conveyed
the title to the real estate located in Union, New Jersey for a
credit of $1,800,000 against the total indebtedness of $3,758,663. The
remaining balance of $1,958,663 was converted to a non-interest Note due
September 30, 1995 in the amount of $800,000, payable $200,000 in
December 1994 and the balance of $600,000 due in nine monthly non-interest-
bearing amounts of $66,667, and forgiveness of debt of $1,158,663. The Bank's
security interest in substantially all the Company's assets remains in
effect, until 93 days after the date of the last payment. In the event the
Company does not make the payments due under the Settlement Agreement,
the Bank can demand payment of the total amount due of $1,958,667 reduced by
the percentage paid under the Settlement Agreement and seek to enforce its
security interest in substantially all the Company's assets. The
forgiveness of $1,158,663 may be recognized quarterly upon the Company's
completion of paying the monthly amounts when due. During December 1994 the
Company paid $200,000 and accordingly recognized forgiveness of approximately
$289,666 principal and interest. (See Note 9 of the Notes to Consolidated
Financial Statements.)
During the first quarter of 1995, the Company has paid to the Bank the first
quarter payment requirement of $200,000, which entitles the Company to
recognize a gain on debt forgiveness of approximately $289,600. The
Company has prepaid approximately $22,000 of the September 1995 monthly
obligation.
During 1994, the Company has been able to generate a positive cash flow
from operations.
At December 31, 1994, the Company's cash and cash equivalents totaled
$842,000 as compared to $289,000 at December 31, 1993. Contributing to
the change in cash between years was cash provided by operating activities of
$940,000 in 1994 and $330,000 in 1993. The two principal reasons for the cash
provided by operating activities in 1994 were $428,000 realization of
inventory and $667,000 progress payments received in advance of billings
on work-in-process projects. The primary use of cash was the reduction of
the Company's note payable bank and long-term mortgage obligation (see
Note 9 of the Notes to Consolidated Financial Statements).
Contributing to liquidity during 1993 was the sale of equipment for
approximately $111,000. In addition, in 1993, the Company expended funds
of approximately $86,000 for environmental compliance costs and $404,000 was
used to reduce the note payable bank and long-term debt. At December 31,
1994, the Company had a deficiency in working capital of $1,371,000 as
compared to a deficiency of $246,000 at December 31, 1993. During 1994
certain 1993 long-term liabilities were reclassified as current liabilities.
At December 31, 1994, the Company completed two years of the six-year
License Agreement with a privately owned manufacturer of environmental
conditioning equipment ("Licensee"), which authorized the Licensee to
manufacture and sell environmental test chambers and other equipment under
the "Tenney" name with the Company retaining the right to manufacture such
products. (See Notes 3 and 4 of the Notes to Consolidated Financial
Statements.)
The Company's operations now consist of manufacturing through its DynaTenn,
Inc. subsidiary (d/b/a "DynaVac") diversified vacuum systems for space
simulation, optic coating and plasma treatment for medical labware and
servicing, refurbishing, upgrading and installing environmental equipment
and earning license and technology fees and rental income.
To provide additional funds in 1993 and to assist the Licensee in the
startup of production, in accordance with the license agreement, the Licensee
purchased approximately $500,000 of usable inventory from the Company. The
Licensee also assumed a certain long-term equipment obligation of the
Company in the amount of approximately $25,000.
During 1994, the Licensee, in order to continue to reduce its overdue
obligations to the Company, has made weekly payments to the Company. As at
December 31, 1994, the Licensee has become current with its obligations and
weekly payments stopped during February, 1995. At December 31, 1993, the
Company and Licensee were disputing certain invoices. This dispute
has been resolved in 1994 and the provision provided for in 1993 proved
adequate and was closed. Any future payment delays by Licensee constitute an
event which would permit the Company to declare a default under and to
terminate the License Agreement and other agreements with the Licensee.
These rights the Company has not exercised to date.
In 1993, the Company sold manufacturing equipment relating to its
discontinued activities to an auctioneer for $100,000. The gain on this sale
of approximately $93,000 was added to the restructuring provision. During
1994, there were no additional costs related to discontinued activities; and
accordingly, any remaining provisions were closed.
The Company terminated its manufacturing operation at the Union Facility
during February 1993. To ensure that all orders were completed, the Company
in 1992 entered into a Subcontract Agreement with the Licensee to finish any
orders which were not completed prior to the cessation of the manufacturing
operations at the Union Facility. During 1993, the Licensee completed
manufacturing on all orders which were sent to it for completion. During
1994 the Company completed all orders that were pending final completion as
at December 31, 1993, and converted them into receivables. A portion of such
funds are committed to reduce the Company's short-term indebtedness to its
bank under the Settlement Agreement. (See Note 9 of the Notes to
Consolidated Financial Statements.)
Prior to the cessation of manufacturing at the Union Facility, the Company
participated in a multi-employer pension plan. Due to the cessation
of manufacturing operations at the Company's Union Facility (see Note 3 of
the Notes to Consolidated Financial Statements), the Company ceased being
a participant in the multi-employer pension plan in February 1993.
Under the Multi-Employer Pension Plan Amendments Act of 1980, a Company may,
under certain circumstances, become subject to liabilities in excess of
contributions made under its collective bargaining agreement. Generally,
a liability may be incurred upon the termination, withdrawal or partial
withdrawal from an underfunded plan which would be based
upon a formula specified by the plan.
During the fourth quarter of 1993, the Company received a demand from the
Sheet Metal Workers' National Pension Fund (the "Fund"), that it
make payment of $529,743.28 as a result of the Company's withdrawal from the
Fund. The demand is for 18 quarterly payments of $33,879.28 except for a
final payment of $32,797.59, with the initial payment to be made by
January 19, 1994. The Company did not make the January 19, 1994 payment.
In a letter dated March 16, 1994, the Fund advised the Company that it
was delinquent in making its first withdrawal liability payment and that
failure to correct the delinquency within sixty days will constitute a
default.
The Company engaged counsel to advise it with respect to these matters.
On or about December 8, 1994 the Company received a modified calculation
from the Fund lowering the principal amount of the withdrawal liability to
$502,665.64. During the month of November, 1994 the Company started to
tender monthly payments in an amount substantially less than demanded by
the Fund. The balance sheet presentation of the obligation to the Fund
reflects the obligation being due in installments. (See Note 12
of the Notes to Consolidated Financial Statements.)
In April 1991, the Company entered into a Technology Transfer Agreement with
an entity in the People's Republic of China. This agreement is for a
period of eight years and provides for payments to the Company upon the
completion of certain milestones. The total contract fee is $1,200,000
(see Note 14 of the Notes to Consolidated Financial Statements) of which
the Company received cash of approximately $0, $149,000, $165,000 and
$360,000 in 1994, 1993, 1992 and 1991, respectively. The Company is not
dependent upon the Licensee to fulfill its obligation under this agreement.
(See Note 14 of the Notes to Consolidated Financial Statements.)
Management believes that during 1995 the Company will be able to satisfy its
cash requirements for normal operations, bank debt under the Settlement
Agreement and to reduce accounts payable obligations which are beyond the
terms extended. The Company must reduce or eliminate its multi-employer
pension liability and/or obtain favorable installment payment terms.
Failure to achieve such reductions or to obtain favorable installment
payment terms will have a material adverse effect on the Company.
The Company has been able to generate a positive cash flow from its normal
business activities. In addition, the Licensee, achieving a sales level
comparable to what the Company had been able to attain in recent
years, will be able to provide the Company with a stream of funds from
license fees. The Company expects the Licensee to perform under the terms
of the License and related agreements. Additionally, the Company must
complete its open order backlog in a timely manner and then collect
on such receivables.
RESULTS OF OPERATIONS
Total net revenue from continuing operations of $7,159,000 for 1994 compares
to 1993 net revenue of $7,564,000.
Product and product-related net revenue for 1994 and 1993 was $5,108,000
and $5,584,000, respectively. The decline in net revenue within this
classification, between years, was primarily due to activities which were
discontinued. Vacuum system revenue increased by approximately $500,000
due primarily to several large orders received during the fourth
quarter of 1994, which will be substantially completed during 1995.
License fees earned of approximately $275,400 and $319,000 during
the years 1994 and 1993, respectively, were included in this revenue
classification. Net revenue for 1994 and 1993 includes revenue of
approximately $20,000 and $84,000, respectively, related to the
Technology Transfer Agreement.
(See Note 14 of the Notes to Consolidated Financial Statements.)
Service-related revenues of $1,448,000 for the year 1994 compares to 1993
revenues of $1,322,000. The 1994 service revenue included revenue from
the Company's Leased Employee Agreement with the Licensee of
approximately $121,000. Service revenue in 1994 was favorably affected when
the Company was able to continue a program of upgrading and retrofitting
older equipment for existing customers.
Revenue related to the sale of parts totaled $603,000 and $658,000 for the
years ended December 31, 1994 and 1993, respectively. The decrease in
the 1994 parts revenue was due primarily to a large shipment in 1993 of
parts to an entity in China which was not repeated.
The Company currently has a Technology Transfer Agreement with this entity.
(See Note 14 of the Notes to Consolidated Financial Statements.)
The Company's order backlog at December 31, 1994 and 1993 was approximately
$5,300,000 and $2,100,000, respectively. The increase in backlog is
primarily due to the Company's DynaVac subsidiary.
The total cost of sales as a percentage of net revenue was 76% for the year
1994 and compares to 92% for the year 1993.
The 1994 cost of sales related to product and product-related sales were
approximately 83% as compared to 99.5% for 1993. The decrease in the cost
of sales percentage between years was primarily due to the completion of
activities related to the restructuring and discontinued businesses during
the first part of 1994, which then, during the second half of 1994, enabled
the Company to pursue additional billable service opportunities.
Service cost of sales as a percentage of sales was 64% and 77% for the years
ending December 31, 1994 and 1993, respectively. The decrease in the cost
of sales percentage between years was due primarily to the ending of
activities associated with the restructuring and discontinued businesses
which enabled the Company to continue to initiate cost containment programs.
Cost of sales as a percentage of sales during 1994 for parts was 46% and
compares to 63% for the year 1993. The decrease in the cost of sales
percentage in the 94/93 comparison was due primarily to the continuation
of inventory control programs.
Selling and administrative expenses were $1,942,000 and $1,961,000 for 1994
and 1993, respectively. The decrease in the 1994/93 period was due
primarily to the restructuring. As a percentage of total net revenue, selling
and administrative expenses were 27% and 26% for 1994 and 1993, respectively.
In 1992 a provision was recorded for the cessation of manufacturing at the
Union Facility in February 1993. The provision included severance
and statutory payments, write-downs of inventories to estimated realizable
values, outside professional fees and other expenses that would be
associated with the discontinuance of this manufacturing facility. During
1994,there were no additional provisions related to the restructuring. All
costs relating to the restructuring were charged against the provisions
and all provisions were closed.
Interest expense was $367,000 in 1994 and reflects a decrease of $87,000
from the 1993 interest expense of $454,000. The decrease is due to
the lower debt level between years and the reduction of $65,000 interest
forgiveness under the Settlement Agreement with the bank reached in
December, 1994. (See Note 9 of the Notes to Consolidated Financial
Statements.)
Gain on the exchange of property in lieu of foreclosure and principal debt
forgiveness was $1,684,000. The Company recognized a gain of $1,460,000
on the conveyance of the Union Facility to the bank under the Settlement
Agreement. In addition, the Company recognized $224,000 of principal debt
forgiveness and $65,000 of interest forgiveness which was applied
to interest expense. (See Note 9 of the Notes to Consolidated Financial
Statements.)
Other income, net was $66,000 and $48,000 in 1994 and 1993, respectively.
Other income in 1994 was comprised of interest income related to the
Company's installment receivables. (See Note 6 of the Notes to Consolidated
Financial Statements.)
At December 31, 1994, the Company had available for tax reporting purposes
net operating loss carryforwards of approximately $4,200,000,
expiring through 2008. (See Note 10 of the Notes to Consolidated Financial
Statements.) Effective January 1, 1993, the Company has adopted
the Statement of Financial Accounting Standards ("SFAS No. 109"),
"Accounting for Income Taxes," which applies a balance sheet approach to
income tax accounting. The new standard requires the Company to reflect on
its balance sheet the anticipated tax impact of future taxable income or
deductions implicit in the balance sheet in the form of temporary differences.
The Company has not reflected any future tax benefits on its balance sheet
since the realization of any such benefits is dependent on the Company's
return to profitability. The cumulative effect to January 1, 1993 of the
adoption of SFAS No. 109 was immaterial. As permitted by SFAS No. 109, prior
year's financial statements have not been restated.
The net income for 1994 was $1,146,000 as compared to the net (loss)
of $(2,319,000) in 1993.
During June, 1994, the American Stock Exchange received approval from the
Securities and Exchange Commission to strike the Company's Common Stock
from listing and registration on the Exchange. June 24, 1994, was the last
day the Company's Common Stock was traded on the
Exchange. Currently, the Company has its Common Stock traded on the Nasdaq
Stock Market OTC Bulletin Board under the symbol "TNGI".
<PAGE>
MARKET FOR COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
The stock of Tenney Engineering, Inc. had been traded on the
American Stock Exchange under the symbol "TNY" from December 2, 1958
through June 24, 1994. From June 25, 1994 the stock of Tenney Engineering,
Inc. has been traded on the Nasdaq Stock Market OTC Bulletin Board under the
symbol "TNGI". The approximate number of holders of record of the
Company's Common Stock at December 31, 1994 was 1,114. The following table
sets forth the range of high and low closing prices for transactions.
PRICE RANGE OF COMMON STOCK
1994 1993
High Low High Low
First Quarter 3/8 1/4 1 5/8
Second Quarter 5/16 1/8 3/4 5/16
Third Quarter 3/8 1/16 11/16 3/16
Fourth Quarter 1/4 3/64 1/2 1/4
It has been the Company's policy not to pay cash dividends.
A copy of the Company's 1994 report filed with the
Securities and Exchange Commission, on Form 10-KSB, is
available to shareholders on request. It may be
obtained by writing Martin Pelman, Treasurer, Tenney
Engineering, Inc., 1090 Springfield Road, P.O. Box 3142,
Union, New Jersey 07083-1942.
REGISTRAR AND TRANSFER AGENT
Continental Stock Transfer & Trust Company
New York, N.Y.
ACCOUNTANTS
Zeller Weiss & Kahn
Mountainside, N.J.
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