U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from __________________ to
_________________
Commission file number 1-4142
TENNEY ENGINEERING, INC.
(Name of small business issuer in its charter)
NEW JERSEY 22-1323920
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
1090 Springfield Road, Union, New Jersey
07083-8197
(Address of principal executive offices)
(Zip Code)
Issuer's telephone number 908-686-7870
Securities registered under Section 12(b) of the Exchange
Act:
None
Securities registered under Section 12(g) of the Exchange
Act:
Common Stock, $0.01 par value
(Title of class)
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the
registrant was required to file such reports), and (2)
has been subject to such filing
requirements for the past 90 days. Yes X ; No
Check if there is no disclosure of delinquent filers
in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated
by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Revenues for the fiscal year ended December 31, 1996
are $10,640,000.
At March 26, 1997, the registrant had outstanding
3,695,592 shares of Common Stock, par value $.01 per
share, and the aggregate market value of the common
shares (based upon the closing price of these shares on
the Nasdaq Stock Market OTC Bulletin Board) held by
nonaffiliates was approximately $2,285,176.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Proxy Statement dated
March 28, 1997, in connection with its Annual Meeting to
be held on May 23, 1997, are incorporated by reference
into Part III.
PART I
ITEM 1. BUSINESS
(a) Business Development
Tenney Engineering, Inc. (the Company) was
incorporated in 1932.
In December 1992, the Company announced that
it would continue a corporate restructuring whereby it
would discontinue the manufacturing of environmental test
equipment at its Union, New Jersey facility (the Union
Facility). In February 1993, the Company discontinued the
manufacturing of environmental test equipment at its
Union, New Jersey, facility. In December 1992, the
Company entered into a six-year License Agreement with a
manufacturer of environmental conditioning equipment
(Licensee) authorizing 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. On November 22, 1996 the
Licensee accelerated payments due under the
agreement and exercised its option to purchase from the
Company certain trademarks. (See Notes 3, 4 and 5 of the
Notes to Consolidated Financial Statements and
Management's Discussion and Analysis.)
In 1992 the Company sold all of its
outstanding stock of its wholly owned subsidiary,
Gloekler Refrigerator Co. (Gloekler), to the then current
manager of the Gloekler operation. Gloekler manufactures
insulated enclosures used in the refrigeration and drug
industries. (See Note 6 of the Notes to Consolidated
Financial Statements.)
(b) Business of Issuer
Principal Products or Services and their Markets:
The Company is engaged in one industry segment: The
engineering, marketing and manufacturing of diversified
high-technology vacuum systems for space simulation,
optic coating and sputtering; and provides service,
refurbishing, upgrading, installation and sale or rental
of reconditioned test equipment.
Vacuum Equipment
The Company's wholly-owned subsidiary DynaTenn, Inc.
(d/b/a DynaVac) is a custom manufacturer of industrial
vacuum equipment. The company provides equipment and
services to a wide range of industries where quality and
reliability are primary elements to profitability.
Primary market concentration is in optical coating
equipment, space simulation systems and components for
the aerospace industry, and medical labware processing
equipment.
Key personnel represent a highly diversified
engineering and manufacturing team offering expertise in
the field of vacuum technology, mechanical and electrical
engineering, advanced control system design, and thermal
vacuum system design. This commitment and experience
enable control over product quality and product
reliability.
DynaVac's coating systems are installed in numerous
facilities worldwide and have a reputation for their
reliability. All systems can be designed to meet the
specific requirements of the customers coating
application. DynaVac also offers retrofitting services to
refurbish an existing system or upgrade it with
proprietary supervisory control systems.
Considerable experience resides both in the company
and amongst its personnel, in the design and construction
of vacuum systems for space simulation. DynaVac systems
are designed to meet a wide range of testing requirements
and are in installations in the U.S. and overseas.
Service
The service operation consists of the service of
environmental equipment and technical support in addition
to the sale of replacement parts, upgrades of older
equipment, instrument calibration and reconditioned
equipment sales and service contracts.
License Fees
As at December 31, 1996, payments due the Company
under the licensing agreement with a manufacturer of
environmental conditioning equipment were completed. (See
License Agreement below and Note 4 of the Notes to
Consolidated Financial Statements.) The Company completed
the second year on its License Agreement with a company
in India that expires in September 1998 whereby the
Tenney name will be utilized for manufacturing
environmental equipment in India which it is expected
would be exported to other areas as well.
Backlog:
As of December 31, 1996, the Company had a total
firm backlog of unfilled orders of approximately
$2,440,000, as compared with a backlog of approximately
$3,870,000 as of December 31, 1995.
Competition:
The number and level of competitors for DynaVac is
different depending on the areas of equipment to be
designed and fabricated. The major competition for
optical box coaters and other coating systems is centered
on one major and several minor U.S. suppliers and two
strong European companies.
The competition for the space simulation equipment
is primarily confined to a relatively few companies, all
of which are significantly larger than DynaVac. With this
size difference, DynaVac has been able to take advantage
of lower overheads to more than maintain a major share of
the new contracts. Some of these contracts are government
contracts or government related.
The Company's service operation is supported by a
nationwide field service force. Some competitive
manufacturers also have direct field service.
Additionally, there are many spin-offs,
former employees and general service companies who also
compete. The Company has the advantage of technical
support, documentation and experience.
Raw Materials:
The Company purchases its raw materials from various
sources and believes that such purchases may be made in
the open market with no difficulty in obtaining adequate
supplies.
Major Customers and Government Contracts:
There was no customer who accounted for net revenue
in excess of 10% during the years ended December 31,
1996, and 1995, respectively. Prime Government contracts
did not exceed 10% of the Company's backlog of unfilled
orders as of December 31, 1996 (see Backlog above). All
such contracts are subject to cancellation at the
convenience of the Government with appropriate
cancellation charges payable by the Government.
License Agreement:
In December 1992, the Company entered into a
six-year licensing agreement with a 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; and 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. During
November, 1996 the Licensee and the Company
agreed to a lump sum payment of $532,000 which
represented the balance of the $1,900,000 license fees
due under the agreement, and the Licensee exercised its
option to purchase for $100,000 the rights, title and
interest to the Tenney trademark.
Patents, Trade Name and Trademarks:
The Company has several trademarks relating to
products, some which were sold to the Licensee (see
above) and some still remaining in use.
Labor Contract:
The Company had no collective bargaining contracts
in force during 1996.
Product Research and Development:
The Company's research activities relating to the
development of new products or services or improvement of
existing products or services are carried on by Company
operating personnel and costs thereof are charged to
operations as incurred. Research and development costs
were $21,400 and $41,100 for the years December
31, 1996 and 1995, respectively. (See Note 1 of the Notes
to Consolidated Financial Statements.)
Environmental Expenditures:
The Company, during 1996, and 1995, did not have any
environmental expenditures.
Employees:
At December 31, 1996, the Company had 81 employees.
<TABLE>
Executive Officers:
The following table sets forth the names and ages
and the business experience of the registrant's executive
officers.
<CAPTION>
<S> <S> <S>
BUSINESS
EXPERIENCE
NAME AND AGE PRESENT POSITION DURING
PAST FIVE YEARS
Robert S. Schiffman Chairman of the Board;
President of the Company;
53 (1)(2) President; and Chief Chief Executive Officer;
Executive Officer and Chairman of the Board
since May 1990.
Saul S. Schiffman Vice Chairman of the Vice Chairman of the
83 (1)(2) Board and Secretary Board since May 1990; and
prior thereto, Chairman of
the Board of the Company
Martin Pelman Vice President and Vice President and Treasurer
50 Treasurer of the Company since August
1994;Certified Public
Accountant; 1990-1993 Group
Controller - Carlson Health
Care Communications, Inc.
</TABLE>
(1) Member of Executive Committee. The Company has no
standing audit, nominating or compensation committee or
committees performing similar functions.
(2) Saul S. Schiffman is the father of Robert S.
Schiffman.
All Officers serve at the pleasure of the Board of
Directors. Robert S. Schiffman had an employment
contract which expired December 31, 1996. (See Note 13 of
the Notes to Consolidated Financial Statements.)
ITEM 2. PROPERTIES
During 1995, the Company used the Union
Facility under a Use and Occupany Agreement with First
Fidelity Bank for a $50,000 rental as part of a
settlement agreement. (See Notes 8, and 9 of
the Notes to the Consolidated Financial Statements.) On
December 14, 1995, the building was sold by First
Fidelity Bank to an outside party and the Company entered
into a three-year lease for approximately 18,500 square
feet of space; the remaining portion of the building is
being developed by the new owner. The Company pays
an annual rent of $90,000. (See Notes 8, 9 and 13 of the
Notes to Consolidated Financial Statements.)
DynaVac during November 1996, leased
approximately 27,900 square feet at a larger facility in
Hingham, Massachusetts under a six-year lease which
became effective in January 1997 and expires in December
2002, at annual rentals of $147,000--1997; $151,000--
1998; $157,000--1999; $163,000--2000; $169,000--2001; and
$176,000--2002. (See Note 13 of the Notes to Consolidated
Financial Statements.)
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material
pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
The Company had no meeting of security holders
during the fourth quarter of the year ended December 31,
1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
The Company is listed 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, 1996 was 1,050. In addition,
approximately 50% of the outstanding shares are held for
shareholders' account at brokerage firms and financial
institutions. The following table sets forth the range
of high and low closing prices for the years 1996 and
1995.
<TABLE>
PRICE RANGE OF COMMON STOCK
<CAPTION>
1996 1995
High Low High Low
<S> <C> <C> <C> <C>
First Quarter .75 .34375 .375 .09375
Second Quarter 1.00 .54 .375 .15625
Third Quarter 1.00 .50 .625 .15625
Fourth Quarter .75 .41 .75 .25
</TABLE>
It has been the Company's policy not to pay cash
dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company and First Fidelity 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. First
Fidelity Bank's security interest in substantially all
the Company's assets remained in effect, until 93
days after the date of the last payment. The forgiveness
of $1,158,663 was recognized quarterly upon the Company's
paying the monthly amounts when due. The Company made
all payments to First Fidelity Bank, and on August 29,
1995, paid any remaining balance.
The 1995 portion of the forgiveness of $869,000 was
recognized during the first three quarters of 1995. In
November 1995, First Fidelity Bank released all its
security interest in the assets of the Company. (See Note
9 of the Notes to Consolidated Financial Statements.)
On September 12, 1996, the Company and Summit Bank, (the
Bank) entered into a Loan and Security Agreement (Term
Note) for a $300,000 renewable working capital line of
credit expiring May 31, 1997. The Bank was granted a
security interest in substantially all the Companys
assets. As at December 31, 1996, the Company had no
borrowings outstanding under the Term Note.
During 1996, the Company has been able to generate a
positive cash flow from operations.
At December 31, 1996, the Company's cash and cash
equivalents totaled $661,000 as compared to $223,000 at
December 31, 1995.
Contributing to the change in cash between years was cash
provided by operating activities of $579,000 in 1996 and
cash used of $56,000 in 1995. The principal reason for
cash being provided by operating activities in 1996 was
the prepayment of License Fees. (See Note 4 of the Notes
to Consolidated Financial Statements.)
During 1996, the primary use of cash was payments of
Accounts Payable, Note Payable and Long-Term Debt.
During November 1996, the Company and the domestic
Licensee agreed to a prepayment of the remaining balance
of the fees due under a six-year License Agreement. In
addition, the Licensee exercised its option to purchase
the Tenney trademark.(See Note 4 of the Notes to
Consolidated Financial Statements.)
The Company is engaged in one industry segment: The
engineering, marketing and manufacturing of diversified
high-technology vacuum systems for space simulation,
optic coating and sputtering; and provides service,
refurbishing, upgrading, installation and sale
or rental of reconditioned test equipment.
The Company formerly had employees who were members of a
union and contributed to multi-employer pension plan for
such employees in accordance with a collective bargaining
agreement based on monthly hours worked. 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, the Company may, under certain circumstances,
become subject to liabilities in excess of contributions
made under its collective bargaining agreement.
During the fourth quarter of 1993, the Company received
a demand from the Sheet Metal Workers' National Pension
Fund (the Fund) for payment of a withdrawal liability
from its union employees multi-employer pension plan in
the amount of $529,743, 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 December 1994, the Company received from the Fund a
modified calculation of the withdrawal liability in the
amount of $502,665.
On December 7, 1995, the Company was served with a
Complaint of Civil Action filed in the U.S. District
Court, Eastern District of Virginia, by the Fund,
demanding payment of past-due installments of withdrawal
liability (aggregating $271,034 at the date of the
Complaint), plus interest on overdue installments,
statutory liquidated damages, attorneys fees and
injunctive relief requiring payment of future quarterly
withdrawal installments and in the alternative immediate
payment of the entire withdrawal liability plus accrued
interest, statutory liquidated damages and attorneys
fees.
The Company negotiated with the Fund the amount of the
liability and an installment payment schedule.
On September 6, 1996, the Company agreed to a settlement
of the matter proposed by the Fund and it executed a
Settlement Agreement(the Agreement). Among other
matters, the Agreement provides that the Company shall
pay the Fund $720,090 (the Settled Amount) on account of
the withdrawal liability, statutory interest and counsel
fees; provided, however, that if the Company pays to
the Fund the amount of $397,330 principal, plus interest
of $74,455, totaling $471,785 -- $75,000 upon signing and
sixty (60) monthly payments of $6,613.09 commencing
October 1, 1996 -- the Fund would accept the total of
$471,785 in satisfaction of the total withdrawal
liability.
The Agreement contains various representations and
warranties by the Company. In the event that timely
payments are not made or the Company otherwise defaults
under the Agreement, the Settled Amount will be due the
Fund, less any payments received. The Company has
made all payments to the Fund when they are due, and
continues to do so.
The Company had reserved on its balance sheet as at
December 31, 1995, the sum of $581,835 for the withdrawal
liability to the Fund.
The Company will charge all the payments made to the Fund
to this reserve account; and if all payments are made in
accordance with the provisions of the Agreement, any
balance in the reserve will be recognized as forgiveness
of indebtedness when payments are complete. At December
31, 1996, the reserve approximated $447,000.
(See Note 3 of the Notes to Consolidated Financial
Statements.)
Management believes that during 1997 the Company will be
able to satisfy, from operations and borrowings, its cash
requirements. 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
$10,640,000 for 1996 compares to 1995 net revenue of
$9,564,000.
Product and product-related net revenue for 1996 and 1995
was $8,148,000 and $7,416,000, respectively. The increase
in net revenue within this classification, between years,
was due to vacuum system revenue increasing primarily
because several large orders were received during 1996,
and the increase of the sale of reconditioned
environmental test equipment.
Service-related revenues of $940,000 for the year 1996
compare to 1995 revenues of $1,020,000. The 1996 and 1995
service revenue included revenue of $120,000 per year
from the Licensee for part-time services of the Company's
president. Such agreement expired on December 31, 1996.
Service revenue in 1996 was down due to a
decrease of service-related orders being received.
Revenue related to the sale of parts totaled $633,000 and
$741,000 for the years ended December 31, 1996 and 1995,
respectively. The decrease is due to a lower level of
parts orders being received.
License fees of $919,000 for the year 1996 compare to
1995 fees of $387,000. The increase of fees is due to
the prepayment of $532,000 by the Licensee. (See Note 4
of the Notes to Consolidated Financial Statements.)
The Company's order backlog at December 31, 1996 and 1995
was approximately $2,440,000 and $3,870,000,
respectively. The decrease in backlog is primarily due to
increased sales in the Companys DynaVac subsidiary.
The total cost of sales as a percentage of net revenue
was 76% for the year 1996 and compares to 73% for the
year 1995.
The 1996 cost of sales related to product and
product-related sales were approximately 87% as compared
to 77% for 1995. The increase in the cost of sales
percentage between years was primarily due to
non-manufacturing use of labor and overhead increases due
to the preparation and move to larger facilities.
Service cost of sales as a percentage of sales was 82%
and 65% for the years ending December 31, 1996 and 1995,
respectively. The increase is primarily due to lower
sales in certain geographic areas which did not cover
fixed overheads associated with those areas.
Cost of sales as a percentage of sales during 1996 for
parts was 43% and compares to 41% for the year 1995. The
increase in the cost of sales percentage in the 96/95
comparison was due primarily to the inventory sales mix.
Selling and administrative expenses were $2,049,000 and
$1,910,000 for 1996 and 1995, respectively. As a
percentage of total net revenue, selling and
administrative expenses were 19% and 20% for 1996 and
1995, respectively.
Interest expense was $21,000 in 1996 and reflects a
decrease of $53,000 from the 1995 interest expense of
$74,000. The decrease is due primarily to the paying off
all bank debt during the year.
The Company had no principal debt forgiveness in 1996 and
recognized $869,000 of principal debt forgiveness in
1995. (See Note 9 of the Notes to Consolidated Financial
Statements.)
Other income, net was $283,000 and $61,000 in 1996 and
1995, respectively. Other income in 1996 was comprised
primarily of income received from the domestic Licensee
for the purchase of the title and interest to the Tenney
trademark. (See Note 9 of the Notes to Consolidated
Financial Statements.)
At December 31, 1996, the Company had available for tax
reporting purposes net operating loss carryforwards of
approximately $2,800,000, expiring through 2008.
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 reflected
future tax benefits on its balance sheet since the
realization of such benefits is dependent on the
Company's 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. (See Note 10 of the
Notes to Consolidated Financial Statements.)
The net income for 1996 was $730,000 as compared to
$1,743,000 in 1995.
Currently, the Company has its Common Stock traded on the
Nasdaq Stock Market OTC Bulletin Board under the symbol
TNGI.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements appearing
on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Information required under this item with
respect to directors is contained on page 3 of the
registrant's Proxy Statement dated March 28, 1997, in
connection with its Annual Meeting to be held May 23,
1997, which is incorporated herein by reference. For
executive officers, see Part I, Item 1 of this
report.
ITEM 10. EXECUTIVE COMPENSATION
See page 5 of the registrant's Proxy Statement
dated March 28, 1997, in connection with its Annual
Meeting to be held on May 23, 1997, which page is
incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial
Owners
See paragraph entitled Principal
Shareholders on page 2 of the registrant's Proxy
Statement dated March 28, 1997, in connection with its
Annual Meeting to be held on May 23, 1997,
which paragraph is incorporated herein by reference.
(b) Security Ownership of Management
See page 4 of the registrant's Proxy
Statement dated March 28, 1997, in connection with its
Annual Meeting to be held on May 23, 1997, which pages
are incorporated herein by reference.
(c) Changes in Control
The Company knows of no contractual
arrangement which may, at a subsequent date, result in a
change of control ofthe Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
None.
Transaction with Promoters
Not applicable.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and Index of Exhibits
(2) a. (i) Stock Purchase Agreement dated
October 2, 1992 between Tenney Engineering, Inc. and PCE,
Inc. Filed as Exhibit 1 to the Company's Current Report
on Form 8-K for the event occurring on November 2, 1992
and incorporated herein by reference.
(3) a. (i) Restated Certificate of Incorporation
of Tenney Engineering, Inc. filed in the office of the
Secretary of State of the State of New Jersey
on June 12, 1984. Filed as Exhibit (3)a.(i)
to the Companys Annual Report on Form 10-
KSB for 1995 and incorporated herein by reference.
(ii) Amendment to Certificate of Incor-
poration dated May 13, 1988. Filed as Exhibit (3)a.(ii)
to the Companys Annual Report on Form 10-KSB for 1995
and incorporated herein by reference.
(iii) Amendment to Certificate of Incor-
poration dated May 24, 1996.
b. (i) By-Laws of Tenney Engineering, Inc.
(As restated by order of the Board of Directors at
a meeting held May 11, 1984). Filed as Exhibit (3)b.(i)
to the Companys Annual Report on Form 10-KSB
for 1995 and incorporated herein by reference.
(ii) Amendment to By-Laws adopted January 26,
1988. Filed as Exhibit (3)b.(ii) to the Companys Annual
Report on Form 10-KSB for 1995 and incorporated herein by
reference.
(10) a. (i) 1995 Incentive Stock Option Plan.
Filed as Exhibit (10) b. (ii) to the Companys Annual
Report on Form 10- KSB for 1994 and incorporated herein
by reference.
b. (i) Stock Options dated June 1, 1995
granted pursuant to the Company's 1995
Incentive Stock Option Plan to the following director and
officers:
Robert S. Schiffman (Director and Officer);
Martin Pelman (Officer). Filed as Exhibit (10) b. (i) to
the Companys Annual Report on Form 10-KSB for 1995
and incorporated herein by reference.
(ii) Stock Options dated August 15, 1996
granted pursuant to the Companys 1995 Incentive Stock
Option Plan to the following director and officers:
Robert S. Schiffman (Director and Officer);
Martin Pelman (Officer).
(iii) Stock Option dated January 27, 1997
granted pursuant to the Companys 1995
Incentive Stock Option Plan to the following
director/officer: Robert S. Schiffman.
c. (i) Restated Retirement Plan for Salaried
Employees of Tenney Engineering dated June 8, 1987. Filed
as Exhibit (10) c. (i) to the Company's Annual Report
on Form 10-KSB for 1994 and incorporated herein by
reference.
(ii) First Amendment to the Restated Retirement Plan
for Salaried Employees of Tenney Engineering, dated June
22, 1987. Filed as Exhibit (10) c. (ii) to the
Company's Annual Report on Form 10-KSB for 1994 and
incorporated herein by reference.
(iii) Second Amendment to the Restated
Retirement Plan for Salaried Employees of Tenney
Engineering, dated July 25, 1989. Filed as Exhibit (10)
c.(iii) to the Company's Annual Report on Form
10-KSB for 1994 and incorporated herein by reference.
(iv) Third Amendment to the Restated Retirement Plan
for Salaried Employees of Tenney Engineering dated
November 12, 1990. Filed as Exhibit (10) c. (iv)
to the Companys Annual Report on Form 10-KSB for 1995 and
incorporated herein by reference.
d. (i) Settlement Agreement dated December 12, 1994
by and among Tenney Engineering, Inc., VacTenn, Inc.,
DynaTenn, Inc., WesTenn Sales Inc., Tenney Environmental
Products,Inc., and First Fidelity Bank, National
Association. Filed as Exhibit (10) d. (xviii) to the
Company's Annual Report on Form 10-KSB for 1994 and
incorporated herein by reference.
e. (i) Lease Agreement dated December 14,
1995, by and among Tenney Engineering, Inc., and Nandan
Company, L.L.C. Filed as Exhibit (10) e. (i) to the
Companys Annual Report on Form 10-KSB for 1995
and incorporated herein by reference.
(ii) First Amendment dated January 12, 1996. Filed
as Exhibit (10) e. (ii) to the Companys Annual Report on
Form 10-KSB for 1995 and incorporated herein by
reference.
f. (i) Employees Salary Savings Plan dated November
27, 1984. Filed as Exhibit (10) e. (i) to the Companys
Annual Report on Form 10-KSB for 1994 and incorporated
herein by reference.
g. (i) License Agreement, dated December 18,
1992 between Tenney Engineering, Inc. and Lunaire
Limited. Filed as Exhibit 1 to the Company's Current
Report on Form 8-K for the event occurring on
December 18, 1992 and incorporated herein by reference.
(ii) Leased Employee Agreement, dated
December 18, 1992 between Tenney Engineering, Inc. and
Lunaire Limited. Filed as Exhibit 2 to the Companys
Current Report on Form 8-K for the event occurring on
December 18, 1992 and incorporated herein by reference.
(iii) Employment Agreement, dated December 18, 1992
between Tenney Engineering, Inc. and Robert S. Schiffman.
Filed as Exhibit 3 to the Company's Current Report on
Form 8-K for the event occurring on December 18, 1992 and
incorporated herein by reference.
(iv) Consulting Agreement between Lunaire Limited
and Robert S. Schiffman, dated December 18, 1992. Filed
as Exhibit 4 to the Company's Current Report on Form 8-K
for the event occurring on December 18, 1992 and
incorporated herein by reference.
(v) Prepayment Agreement dated November 14,
1996, between Tenney Engineering, Inc. and Lunaire
Limited.
h. (i) Lease Agreement dated November 19, 1996,
between 110 Industrial Park, LLC, and DynaTenn, Inc.
d/b/a DynaVac.
(ii) First Lease Amendment dated November 19, 1996,
by and between 110 Industrial Park, LLC, and DynaTenn,
Inc.
i. (i) Loan and Security Agreement dated September
12, 1996, by and among Tenney Engineering, Inc. and
DynaTenn, Inc. and Summit Bank.
(ii) Promissory Grid Note dated September 12,
1996, by and among Tenney Engineering, Inc. and DynaTenn,
Inc. and Summit Bank.
(22) List of Subsidiaries, all of which are
wholly-owned:
Jurisdiction of Percentage of
Name of Company Incorporation Ownership
Tenney Environmental New Jersey 100%
Products, Inc.
WesTenn Sales, Inc. New Jersey 100%
VacTenn, Inc. California 100%
DynaTenn, Inc. Massachusetts 100%
Tenney, Inc. New Jersey 100%
(24) Consent of Independent Certified
Public Accountants.
(27) Financial Data Schedules
(99) a. (i) Complaint of Civil
Action from the Board of Trustees, Sheet Metal Workers'
National Pension Fund to enforce delinquent payments due
under the Multi-Employer Pension Plan Amendments Act of
1980. Filed with the United States District Court,
Eastern District of Virginia, Case No.95-1609-A. Filed as
Exhibit 1 to the Company's Current Report on Form 8-K
for the event occurring on December 7, 1995 and
incorporated herein by reference.
(ii) Answer and Affirmative Defense to the Board of
Trustees, Sheet Metal Workers National Pension Fund to
enforce payments due under the Multi-Employer Pension
Plan Amendments Act of 1980. Filed as Exhibit (99) a.
(ii) to the Companys Current Report on Form 10-KSB
for 1995 for the event occurring on December 7, 1995
and incorporated herein by reference.
(iii) Settlement Agreement settling the action
in the United States District Court for the Eastern
District of Virginia, Alexandria Division entitled The
Board of Trustees Sheet Metal Workers National Pension
Fund, Plaintiff, v. Tenney Engineering, Inc., Defendant,
executed by the Company on September 6, 1996. Filed
as Exhibit (99)(B) to the Companys Current Report on Form
8-K for the event occurring on September 6, 1996 and
incorporated herein by reference.
(b) Reports on Form 8-K
No Form 8-K has been filed during the
last quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TENNEY ENGINEERING, INC.
By: s/Robert S. Schiffman
Robert S. Schiffman
President
(Principal Executive Officer)
By: s/Martin Pelman
Martin Pelman
Vice President and
Treasurer
(Principal Financial
Officer)
Date: March 27, 1997
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
s/Saul S. Schiffman s/David C. Schiffman
Saul S. Schiffman (Director) David C. Schiffman
(Director)
March 27, 1997 March 27, 1997
s/Robert S. Schiffman s/David A. Schuh
Robert S. Schiffman (Director) David A. Schuh
(Director)
March 27, 1997 March 27, 1997
<PAGE>
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES (ITEM 7)
PAGE
FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F - 2
CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 F - 3
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995 F - 4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY) YEARS ENDED DECEMBER 31, 1996
AND 1995 F - 5
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995 F - 6
NOTES TO FINANCIAL STATEMENTS F - 7/22
* * *
<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, 1996, and the related
consolidated statements of operations, changes in
stockholders' equity (deficiency) and cash flows for the
years ended December 31, 1996 and 1995. 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Tenney Engineering,
Inc. and Subsidiaries as of December 31, 1996, and the
consolidated results of its operations and its cash flows
for the years ended December 31, 1996 and 1995 in
conformity with generally accepted accounting
principles.
ZELLER WEISS &
KAHN
Mountainside, New Jersey
March 26, 1997
<PAGE>
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(In thousands
of dollars)
ASSETS
Current assets:
Cash and cash equivalents $ 661
Accounts receivable, net 1,642
Current portion of installment note receivable 55
Inventories 465
Prepaid expenses and other current assets 55
Deferred tax asset 280
Total current assets 3,158
Equipment, net 301
Installment note receivable, noncurrent portion 258
Other assets 218
Total Assets $ 3,935
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 1,460
Current portion of long-term capital leases 43
Accrued payroll and payroll taxes 237
Billings in excess of estimated revenue on
long-term contracts 286
Pension obligation, current portion 73
Total current liabilities 2,099
Long-term debt, net of current portion 512
Total liabilities 2,611
Commitments and contingencies
Stockholders' equity:
Preferred stock $0.01 par value:
Authorized 10,000,000 shares
Issued and outstanding - none
Common stock $.01 par value:
Authorized 50,000,000 shares
Issued 3,704,980 shares 37
Additional paid-in capital 2,295
Retained earnings (deficit) (971)
1,361
Less treasury stock, 9,388 shares, at cost 37
Total stockholders' equity 1,324
Total liabilities and stockholders' equity $ 3,935
See Notes to Consolidated Financial Statements.
<PAGE>
TENNEY ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
(In Thousands of Dollars
Except per Share Amounts)
Net revenue:
Product and product related $ 8,148 $ 7,416
Service 940 1,020
Parts 633 741
License Fees 919 387
Totals 10,640 9,564
Cost of sales:
Product and product related 7,128 6,011
Service 776 663
Parts 271 307
Totals 8,175 6,981
Gross profit 2,465 2,583
Selling and administrative expenses 2,049 1,910
Income from operations 416 673
Other income (expense):
Interest expense (21) (74)
Other income, net 283 61
Totals 262 (13)
Income before income taxes and
extraordinary items 678 660
Income taxes (benefit) (52) (220)
Income before extraordinary items 730 880
Extraordinary item - gain on
restructuring of debt net of
income tax of $6 thousand 0 863
in 1995.
Net income $ 730 $ 1,743
Net income per common share before
extraordinary items $ 0.20 $ 0.24
Extraordinary item per common share 0.00 0.24
Net income per common share
(see Note 11) $ 0.20 $ 0.48
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)
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In Thousands of Dollars)
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, 1995 3,694,980 $ 369 $ 1,960 $ (3,444) 9,388 $ 37 $(1,152)
Net income 1,743 1,743
Balance --
December 31, 1995 3,694,980 369 1,960 (1,701) 9,388 37 591
Restatement of
Par Value (332) 332
Issuance of Stock
Option granted
under 1995 Stock
Option Plan 10,000 3 3
Net income 730 730
Balance --
December 31, 1996 3,694,98 0 $ 37 $ 2,295 $ ( 971) 9,388 $ 37 $ 1,324
</TABLE>
See Notes to Consolidated Financial Statements. <PAGE>
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In Thousands of Dollars)
1996 1995
Operating activities:
Net income $ 730 $ 1,743
Adjustments to reconcile income
to net cash provided by (used in)
continuing operations:
Depreciation and amortization 105 72
Deferred tax asset (52) (228)
Gain on debt forgiveness,
principal and interest 0 (869)
Changes in operating assets
and liabilities:
Accounts and installment
receivables 63 (533)
Inventories (154) (27)
Prepaid expenses and other
current assets 42 (11)
Other assets (8) (7)
Accounts payable and other
liabilities (58) 170
Accrued payroll and payroll taxes 75 37
Billings in excess of estimated
revenues (32) (403)
Pension obligation (135) 0
Net cash provided by (used in)
continuing operations 576 (56)
Investing activities:
Acquisition of equipment (68) (50)
Net cash used in investing
activities (68) (50)
Financing activities:
Exercise of Options and Issuance of
Common Stock 3 0
Proceeds from financing 300 0
Payments of note payable and
long-term capital leases (373) (513)
Net cash used in financing
activities (70) (513)
Net increase (decrease) in cash and
cash equivalents 438 (619)
Cash and cash equivalents,
beginning of year 223 842
Cash and cash equivalents,
end of period $ 661 $ 223
Supplemental disclosure of cash
flow information:
Interest paid $ 21 $ 8
Income tax paid 4 28
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
andservices 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.
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. License fees are
fees received under a License Agreement (see Note 4).
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.
Gain per common share:
Gain 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 3,689,390 in 1996 and
3,685,592 in 1995, respectively (see Note 11).
Stock-based compensation:
The Company has adopted SFAS No. 123, Accounting for
Stock-Based Compensation. This standard establishes a
fair value method of accounting for stock-based
compensation plans either through recognition or
disclosure. We intend to adopt this standard by
disclosing the pro forma net income and earnings per
share amounts assuming the fair value method was adopted
on January 1, 1995. The adoption of this standard will
not impact our results of operations, financial position
or cash flows (see Note 11).
Use of estimates:
The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and
revenues and expenses during the period reported. Actual
results could differ from those estimates. Estimates are
used when accounting for long-term contracts, allowance
for doubtful accounts, inventory obsolescence, product
warranty reserves, depreciation and amortization,
employee benefit plans, taxes, restructuring reserves and
contingencies. Certain reclassifications have been made
to prior year amounts to conform with current year
presentations.
Note 2 - Financial condition and results of operation:
As shown in the accompanying consolidated financial
statements, the Company has realized net income for the
years ended December 31, 1996 and 1995, respectively,
from operations, which has resulted in an increase in the
Company's stockholders equity.
On December 12, 1994, First Fidelity Bank and the
Company signed a settlement agreement in which the
Company conveyed to First Fidelity Bank the title in the
real estate located at Union, New Jersey, and reduced
total debt significantly. During 1995, debt to First
Fidelity Bank was extinguished (see Note 9).
As at December 31, 1996, the Licensee paid all
license fees due under the License Agreement (see Note
4).
Note 3 - Restructuring:
The Company in February, 1993, ceased manufacturing
operations at its Union, New Jersey, facility. The
Company is engaged in one industry segment: The
engineering, marketing and manufacturing of diversified
high-technology vacuum systems for space simulation,
optic coating and sputtering; and provides service,
refurbishing, upgrading, installation and sale or rental
of reconditioned test equipment.
The Company formerly had employees who were members
of a union and the Company contributed to a
multi-employer pension plan for such employees in
accordance with a collective bargaining agreement
based on monthly hours worked. Due to the cessation of
manufacturing operations at the Company's Union, New
Jersey manufacturing plant, 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.
During the fourth quarter of 1993, the Company
received a letter from the Trustees of the Sheet Metal
Workers National Pension Fund (Plan Trustees) alleging
$529,743.28, principal, due as withdrawal liability.
Payments may be made in installment with interest and the
Plan Trustees demanded 18 quarterly payments of
$33,879.28 and a final payment of $32,797.59, with the
initial payment to be made by January 19, 1994. The
Company made aprovision for this liability in its 1993
Consolidated Financial Statements. The Plan Trustees'
demand also stated that the amount due was subject to
adjustment for performance of the Plan during 1992.
The Company did not make the January 19, 1994
payment. In December 1994 the Company received from the
Plan Trustees a modified calculation reducing the
withdrawal liability to $502,665 principal amount. The
Plan Trustees demanded payment of sixteen quarterly
installments of $33,879.28 commencing January 19, 1994
and a seventeenth payment of $29,151.09.
The Company did not make any such payments.
On December 7, 1995 the Company was served with a
Summons and Complaint in an action filed in the U.S.
District Court for the Eastern District of Virginia,
Alexandria Division (Case Number 95-1609A) by the Plan
Trustees. A copy of the Complaint was filed as
Exhibit 99 to a report on Form 8-K for an event occurring
December 7, 1995 and reference is made to the Complaint
itself for the terms thereof and the relief demanded by
the Plan Trustees.
The Company has negotiated with the Plan Trustees
the amount of the liability and an installment payment
schedule.
On September 6, 1996, the Company agreed to a
settlement of the matter proposed by the Plan Trustees
and it executed a Settlement Agreement (the Agreement).
Among other matters, the Agreement provides that the
Company shall pay the Plan Trustees $720,090.49 (the
Settled Amount) on account of the withdrawal
liability, statutory interest and counsel fees, provided,
however, that if the Company pays to Plan Trustees
$397,330 plus interest scheduled to be paid $75,000 on or
before September 13, 1996 and sixty (60) monthly payments
of $6,613.09 over a five (5) year period commencing
October 1, 1996, Plan Trustees will accept such
reduced amount in full satisfaction of the withdrawal
liability.
The Agreement contains various representations and
warranties by the Company. In the event that the Company
does not make timely payments or otherwise defaults under
the Agreement, the Settled Amount will be due to Plan
Trustees.
In conjunction with the Agreement, the Company has
executed a confession of judgment for the Settled Amount
in the form annexed to the Agreement, which may be filed
by the Plan Trustees in the event the Company fails to
make timely payments or otherwise defaults under the
Agreement.
At December 31, 1995, the Company had reserved on
its balance sheet the amount of $581,835.64 for the
withdrawal liability to Plan Trustees. Payments to Plan
Trustees under the Agreement, an initial payment of
$75,000 and monthly payments of $6,613.09 will
be charged against this reserve when made. If the
Company does not default and if all payments are made in
accordance with the provisions of the Agreement, any
balance in the reserve will be recognized as forgiveness
of indebtedness when payments are completed. The Company
has timely made all payments due under the Agreement.
In the event that payments to Plan Trustees are not
timely made or in the event of any other default under
the Agreement, Plan Trustees may enter judgment against
the Company for the Settled Amount and the Company would
owe to Plan Trustees an amount in excess of the amount
reserved for the withdrawal liability.
Note 4 - License agreement:
Concurrent with its announcement to discontinue
manufacturing at the Union Facility, the Company entered
into a six-year licensing agreement with a 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. 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 which expired in December 1996 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).
During November 1996, the Company and the Licensee
agreed to accelerate payment of license fees by having
the Licensee prepay $532,000, representing the amount
remaining of the total $1,900,000 license fees. In
addition, the sum of $100,000 for the purchase of
the Companys rights, title and interest in the Tenney
trademark were received. The installation and servicing
agreement and the inventory purchase agreement remain in
effect.
Net revenue for 1996 and 1995 includes consulting
revenue of $120,000. Purchases by the Licensee from the
Company's former subsidiary in 1996 and 1995 totaled
approximately $55,200 and $9,500, respectively.
Note 5 - Accounts receivable:
Accounts receivable consist of the following:
1996
(In Thousands
of Dollars)
Accounts receivable, billed $ 1,670
Allowance for doubtful accounts (28)
Totals $ 1,642
At December 31, 1996, sales recognized on the percentage
of completion method approximated $7,927,000.
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
and the common stock and are personally guaranteed by the
purchaser.
Note 7 - Inventories:
Inventories consist of the following:
1996
(In Thousands
of Dollars)
Raw materials $ 775
Less:
Provision for write-downs
to estimated realizable value 310
Totals $ 465
Accumulated costs on long-term contracts recognized by
the percentage of completion method (see Note 5) were
approximately $5,685,000 and $3,521,000 in 1996 and 1995,
respectively.
Note 8 - Property, Plant and Equipment:
Property and equipment, which is stated at cost, is
summarized as follows at December 31, 1996:
1996
(In Thousands
of Dollars)
Equipment $ 1,331
Equipment under capital leases 352
1,683
Accumulated depreciation (1,382)
Total equipment - net $ 301
The Company leases certain equipment for use in its
operations under capital leases. Property, plant and
equipment at December 31, 1996, included capital leases
of $352,000 and related accumulated depreciation of
$197,000.
During 1995, the Company occupied the Union Facility
under a Use and Occupancy Agreement with First Fidelity
Bank arising out of the conveyance of the title of this
facility under the settlement agreement dated December
1994. First Fidelity sold the property in December 1995,
and the Company entered into a three-year lease with the
new owner of the property for approximately 18,500 square
feet at an annual rental of $90,000.
The Companys DynaVac subsidiary leased a 15,000
square feet facility in Weymouth, Massachusetts, on a
month-to-month basis.
During September 1996, DynaVac leased a 27,900 square
feet facility in Hingham, Massachusetts, for a term of
six years. Effective January 1997, annual rentals are as
follows: 1997--$147,000; 1998--$151,000; 1999--$157,000;
2000--$163,000; 2001--$169,000 and 2002--$176,000.
At December 31, 1996, the aggregate minimum rental
commitments
under non-cancelable leases for the period shown are as
follows:
Capital Operating
Year Leases Leases
(In Thousands of Dollars)
1997 $ 55 $ 237
1998 55 241
1999 55 157
2000 55 163
2001 33 169
Total $ 253 $ 967
Less imputed interest 72
Present value of net
lease payments $ 181
Less current installments 43
Long-term debt obligation
at December 31, 1996 $ 138
Imputed interest was calculated using rates between 7.06%
- - 9.76%
Note 9 - Debt:
Debt maturing within one year consists of the
following at December 31,
1996 1995
(In Thousands of Dollars)
Notes payable - bank $ 0 $ 0
Current portion of
capital leases 43 76
Current portion of
pension obligation 73 36
Total $ 116 $ 112
The Company and First Fidelity 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 remained in effect, until 93
days after the date of the last payment. As at August 30,
1995, the Company completed paying the term note. The
forgiveness of 1,158,663 has been recognized, $289,666
during the fourth quarter of 1994 and the remaining
$868,997 quarterly during the first three
quarters of 1995. In December 1996, First Fidelity Bank
released
their security interest in the Companys assets.
On September 12, 1996, the Company and Summit Bank
(the
Bank) entered into a Loan and Security Agreement for a
$300,000
renewable working capital line of credit (the Term
Note). The
Bank was granted a security interest in substantially all
the
Companys assets. At December 31, 1996, the Company had
no
outstanding borrowings under this line of credit.
Long-term debt consists of the following at December
31,
1996
(In Thousands
of Dollars)
Capital lease obligations $ 181
Multi-employer pension obligation 447
Total long-term debt including
current maturities 628
Less: current maturities 116
Total long-term debt $ 512
Long-term liabilities consist of capital leases
entered into for equipment of $27,300 in 1996 and
$194,000 in 1995, respectively, and the long-term portion
of the multi-employer pension fund liability (see Note
3). The debt to mature under the multi-employer pension
fund liability is $79,400--1997; $79,400--1998;
$79,400--1999; $79,400--2000; and $59,500--2001.
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.
SFAS 109 requires the use of an asset and liability
approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on differences
between the financial statementand tax bases of assets
and liabilities at the tax rates in effect when these
differences are expected to reverse.
Deferred tax assets are reduced by a valuation
allowance if, based on the weight of available evidence,
it is more likely than not that all or some portion of
the deferred tax assets will not be realized. The
ultimate realization of the deferred tax asset depends on
the Company's ability to generate sufficient taxable
income in the future. While management believes that the
total deferred tax asset will eventually be fully
realized by future operations, as a result of the losses
experienced prior to 1994, management recorded a
valuation allowance equal to 100% of the
deferred tax asset upon adoption of SFAS 109 on January
1, 1993. As a result, the initial adoption of SFAS 109
has no impact on the Company's consolidated financial
statements.
At December 31, 1996, it was determined that the
valuation allowance should be reduced by $280,000. This
determination was based primarily on the improvement in
the Company's net income during 1996 and 1995.
Accordingly, management believes that it is more
likely than not that the Company will generate sufficient
taxable income to realize these future tax benefits.
The changes in the valuation allowance resulted in
the recording at December 31, 1995, of an income tax
benefit of $52,000.
If the Company is unable to generate sufficient
taxable income in the future, increases in the valuation
allowance will be required through a charge to expense.
If, however, the Company achieves sufficient
profitability to realize all of the deferred tax assets,
the valuation allowance will be further reduced and
reflected as an income tax benefit in future periods.
The components of the net deferred tax asset are as
follows at December 31, 1996:
(In Thousands
of Dollars)
Deferred tax assets:
Inventory reserve $ 105
Accounts receivable reserve 10
Deferred revenue 110
Deferred compensation 27
Deferred pension obligation 22
Tax loss carryforward 944
Total deferred tax assets 1,218
Deferred tax liabilities:
Depreciation (10)
Valuation allowance (928)
Total net deferred tax assets $ 280
In 1996 and 1995, the Company utilized net operating loss
carryforwards of $587,000 and $1,028,000, respectively.
The income tax expense results from the federal
alternative tax which was allocated as follows:
1996 1995
(In Thousands of Dollars)
Income before extraordinary item $ 4 $ 8
Extraordinary item 0 6
Current income tax expense 4 14
Deferred income tax benefit (56) 228
Net income tax (benefit) $(52) $(214)
At December 31, 1996, the Company has available, for
tax reporting purposes, net operating loss carryforwards
of approximately $2,800,000 which expire through 2008.
A reconciliation of income tax provision at federal
statutory rate to the income tax provision at the
effective tax rate as follows: The effective rate for
1996 and 1995 is 39%.
1996 1995
(In Thousands of Dollars)
Income taxes computed at the
federal statutory rates $ 230 $ 350
State taxes
(net of federal benefit) 40 60
Realization of benefits of tax loss
carryforwards (200) (396)
Valuation allowance
adjusted (122) (228)
Net income tax (benefit) $ (52) $(214)
Note 11 - Common stock:
On May 26, 1995, at the annual meeting, a new
ten-year incentive stock option plan for officers and key
employees was approved and adopted. 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).
The fair value of each option granted is estimated
on the grant date using the Black-Scholes model. The
following assumptions were made in estimating fair value:
Assumption 1995 Plan
Dividend Yield 0%
Risk-free Interest Rate 7.50%
Expected Life 3 Years
Expected Volatility 24.89%
The Company applies APB Option 25 in accounting for
its stock compensation plan. Accordingly, no compensation
cost has been recognized for the 1995 Plan in 1996 or
1995. Had compensation cost been determined on the basis
of fair value pursuant to FASB Statement No. 123, net
income and earnings per share would have been reduced as
follows:
1996 1995
Net income
As reported 730,000 1,743,000
Pro forma 687,000 1,731,000
Primary earnings per share
As reported 0.20 0.48
Pro forma 0.19 0.47
Fully diluted earnings per share
As reported 0.20 0.48
Pro forma 0.19 0.47
Following is a summary of the status of the 1995
Plan during 1996 and 1995:
Weighted
Average
Number of Exercise
Shares Price
Outstanding at 1/1/96 155,000 $ 0.24420
Granted 145,000 0.89789
Exercised (10,000) 0.23437
Canceled 0 --
Outstanding at 12/31/96 290,000 $ 0.57104
Options exercisable at
12/31/96 290,000 $ 0.57104
Weighted average fair value
of options granted during 1996 $ 0.21708
Weighted
Average
Number of Exercise
Shares Price
Outstanding 1981 Plan at
1/1/95 57,000 $0.31250-$0.34375
Granted 155,000 0.24420
Exercised
Canceled 1981 Plan (57,000) 0.31250-0.34375
Outstanding at 12/31/95 155,000 $ 0.24420
Options exercisable at
12/31/95 155,000 $ 0.24420
Weighted average fair value
of options granted during 1995 $ 0.07894
Following is a summary of the status of options
outstanding at December 31, 1996:
Outstanding Options Exercisable Options
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Range Number Life Price Number Price
$0.23437-$0.25781 145,000 2 years $0.24420 145,000 $0.24420
$0.85937-$0.94531 145,000 3 years $0.89789 145,000 $0.89789
On March 11, 1997, the Board of Directors of the
Company adopted an amendment to the Companys Certificate
of Incorporation to classify outstanding Common Stock,
effective at the close of business April 10, 1997, as
Series B Common Stock. The amendment authorizes the
Company to issue 40 million shares of Series B
Common Stock, $.01 par value per share, and 10 million
shares of Series A Common Stock, par value $.01 per
share. The Board of Directors also voted to distribute
one share of Series A Common Stock on May 27, 1997, for
each share of Series B Common Stock owned of record April
10, 1997.
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. During 1996, the Company
accrued pension costs of $25,000 pursuant to Statement of
Financial Accounting Standards No. 87, Employer's
Accounting for Pension Costs. The Company accounted for
the curtailment in 1989 pursuant to Statement of
Financial Accounting Standards No. 88, Employers
Accounting for Settlements and Curtailments of Defined
Benefit Plans and for Termination Benefits.
The following table sets forth the funded status of
the Salaried Plan assuming a discount rate of 6% at
December 31, 1996:
1996
(In Thousands
of Dollars)
Actuarial present value of projected
benefit obligation including vested
benefits of $705,000 $ 705
Plan assets at fair value 658
Plan assets less than projected
benefit obligation consisting of: $ (47)
Unrecognized net transition liability $ (22)
Net accrued pension costs (25)
Total $ (47)
The expected long-term rate of return on assets was 7.0%.
Unionized 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. There was
no related pension expense in 1996 and 1995. Due to the
cessation of manufacturing operations at the Company's
Union, New Jersey, facility, the Company ceased being a
participant in the multi-employer pension plan in
February 1993 (see Note 3).
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
which expired on December 31, 1996, with its
president which requires a minimum annual salary of
$200,000.
Lease commitment:
DynaTenn, Inc. (d/b/a DynaVac), a wholly-owned
subsidiary which manufactures diversified industrial
vacuum equipment, leased its facility in Weymouth,
Massachusetts under an operating lease which expired on
January 1, 1997. Rent charged to operations under
this lease approximated $73,000 and $68,000 in 1996 and
1995, respectively. During September 1996, DynaVac leased
a 27,900 square feet facility in Hingham, Massachusetts,
for a term of six years. Effective January 1997, annual
rentals are as follows: 1997--$147,000; 1998--$151,000;
1999--$157,000; 2000--$163,000; 2001--$169,000 and
2002--$176,000.
Tenney Engineering, Inc. leases its facility in
Union, New Jersey under an operating lease which expires
in December 1998 (see Note 8). Rent charged to operations
under this lease approximated $82,500 in 1996, and rent
under a Use and Occupancy Agreement (see Note 8) was
$50,000 in 1995.
Contingencies:
The Company is not a party to any material pending
legal proceeding.
Note 15 - Other income and (expense):
Other income and (expense) consist of the following:
1996 1995
(In Thousands
of Dollars)
Interest expense $ (21) $ (74)
Sale of Trademark (A) 100 -
Interest income 21
Other, net 183 40
Totals $ 262 $ (13)
(A) In November 1996, the Company and Licensee
agreed to the purchase by the Licensee of the rights,
title and interest in the Tenney trademark (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 to be forgiven
quarterly when periodic quarterly payments totaling
$200,000 are made timely. During the first three quarters
of 1995, the Company made timely payments of amounts due
under the Settlement Agreement and accordingly recognized
approximately $869,000 forgiveness of debt (see Note 9).
Note 17 - Major customer and concentrations of credit
risk:
Major customer:
During the years ended December 31, 1996 and 1995,
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, concentration 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, 1996,
the Company's uninsured cash balance total approximately $461,000.
Note 18 - Supplemental schedule of noncash investing and financing
activities:
During 1996 the Company entered into two five-year capital leases
totaling $27,300 for telephone equipment and service vans. During 1995
the Company recognized $869,000 in forgiveness of debt; and in addition
entered into five-year capital leases in the amount of $194,000 for
equipment.
EXHIBIT (3) a. (iii)
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TENNEY ENGINEERING, INC.
A. The name of the corporation is:
TENNEY ENGINEERING, INC.
B. The amendments adopted are as follows:
(1) An amendment to provide that the number of shares of
the Common Stock of the corporation is authorized to issue be
increased from 10,000,000 shares to 50,000,000 shares and that the
par value of such stock be reduced from $.10 per share to $.01 per
share. The amendment further provides that the corporation would
be authorized to issue Common Stock in series, in each case at the
discretion of the Board of Directors, without further action by the
shareholders unless otherwise required by law or regulation or the
rules of any stock exchange on which the corporations securities
may then be listed, and that the Board of Directors may fix the
number of shares in each such series and the designation and
relatives voting and other rights thereof. To accomplish such
amendment, ARTICLE FOURTH (a) is hereby deleted and a substitute
ARTICLE FOURTH (a) is adopted as follows:
(a) Fifty million (50,000,000) shares of common stock,
par value $.01 each (hereinafter referred to as Common Stock).
The Common Stock may be issued from time to time in one or
more series, each with such distinctive designation as may be
stated in a resolution or resolutions providing for the issue
of such stock from time to time adopted by the Board of
Directors or a duly authorized committee thereof. The
resolution or resolutions providing for the issue of shares of
a particular series shall fix, subject to applicable laws and
the provisions of this ARTICLE FOURTH, for each such series
the number of shares constituting such series and the
designation and power, preferences and relative,
participating, optional or other special rights and the
qualifications, limitations or restrictions thereof,
including, without limiting the generality of the foregoing,
such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the
Board of Directors or a duly authorized committee thereof
under the Business Corporation Act of the State of New Jersey.
The Board of Directors or a duly authorized committee thereof
may change the designation or number of shares, or the
relative rights, preferences, and limitations of the shares,
of any theretofore established class or series no shares of
which have been issued. Until more than one series of Common
Stock is issued the holders of Common Stock shall be entitled
to one vote for each share of Common Stock held.
(2) An amendment to provide that the number of shares of
Preferred Stock the corporation is authorized to issue be increased
from 1,000,000 shares to 5,000,000 shares, and the par value of
such stock be reduced from $1.00 per share to $.01 per share. To
accomplish such amendment, ARTICLE FOURTH (b) is hereby deleted and
a substitute ARTICLE FOURTH (b) is adopted as follows:
(b) Five Million (5,000,000) shares of preferred stock,
par value $.01 each (hereinafter referred to as Preferred
Stock). The Preferred Stock may be issued from time to time
in one or more series, each with such distinctive designation
as may be stated in a resolution or resolutions providing for
the issue of such stock from time to time adopted by the Board
of Directors or a duly authorized committee thereof. The
resolution or resolutions providing for the issue of shares of
a particular series shall fix, subject to applicable laws and
the provisions of this ARTICLE FOURTH, for each such series
the number of shares constituting such series and the
designation and powers, preferences and relative,
participating, optional or other special rights and the
qualifications, limitations or restrictions thereof,
including, without limiting the generality of the foregoing,
such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subject of
matters as may be fixed by resolution or resolutions of the
Board of Directors or a duly authorized committee thereof
under the Business Corporation Act of the State of New Jersey.
The Board of Directors or a duly authorized committee thereof
may change the designation or number of shares, or the
relative rights, preferences, and limitations of the shares,
of any theretofore established class or series no shares of
which has been issued.
C. The foregoing amendments were adopted by the Shareholders
on May 24, 1996.
D. At the time of the adoption of the aforesaid amendments,
the number of shares entitled to vote thereon was 3,685,592 shares
of Common Stock.
E. (1) The number of shares for and against the amendment of
ARTICLE FOURTH (a) was as follows:
For: 2,580,857
Against: 502,467
(2) The number of shares for and against the amendment
of ARTICLE FOURTH (b) was as follows:
For: 1,612,658
Against: 538,217
IN WITNESS WHEREOF, Tenney Engineering, Inc. has caused this
Certificate to be signed by its President this 24th day of May,
1996.
TENNEY ENGINEERING, INC.
By: s/Robert S. Schiffman
Robert S. Schiffman,
President<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TENNEY ENGINEERING, INC.
A. The name of the corporation is:
TENNEY ENGINEERING, INC.
B. The amendments adopted are as follows:
(1) An amendment to provide that the number of shares of
the Common Stock of the corporation is authorized to issue be
increased from 10,000,000 shares to 50,000,000 shares and that the
par value of such stock be reduced from $.10 per share to $.01 per
share. The amendment further provides that the corporation would
be authorized to issue Common Stock in series, in each case at the
discretion of the Board of Directors, without further action by the
shareholders unless otherwise required by law or regulation or the
rules of any stock exchange on which the corporations securities
may then be listed, and that the Board of Directors may fix the
number of shares in each such series and the designation and
relatives voting and other rights thereof. To accomplish such
amendment, ARTICLE FOURTH (a) is hereby deleted and a substitute
ARTICLE FOURTH (a) is adopted as follows:
(a) Fifty million (50,000,000) shares of common stock,
par value $.01 each (hereinafter referred to as Common Stock).
The Common Stock may be issued from time to time in one or
more series, each with such distinctive designation as may be
stated in a resolution or resolutions providing for the issue
of such stock from time to time adopted by the Board of
Directors or a duly authorized committee thereof. The
resolution or resolutions providing for the issue of shares of
a particular series shall fix, subject to applicable laws and
the provisions of this ARTICLE FOURTH, for each such series
the number of shares constituting such series and the
designation and power, preferences and relative,
participating, optional or other special rights and the
qualifications, limitations or restrictions thereof,
including, without limiting the generality of the foregoing,
such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the
Board of Directors or a duly authorized committee thereof
under the Business Corporation Act of the State of New Jersey.
The Board of Directors or a duly authorized committee thereof
may change the designation or number of shares, or the
relative rights, preferences, and limitations of the shares,
of any theretofore established class or series no shares of
which have been issued. Until more than one series of Common
Stock is issued the holders of Common Stock shall be entitled
to one vote for each share of Common Stock held.
(2) An amendment to provide that the number of shares of
Preferred Stock the corporation is authorized to issue be increased
from 1,000,000 shares to 5,000,000 shares, and the par value of
such stock be reduced from $1.00 per share to $.01 per share. To
accomplish such amendment, ARTICLE FOURTH (b) is hereby deleted and
a substitute ARTICLE FOURTH (b) is adopted as follows:
(b) Five Million (5,000,000) shares of preferred stock,
par value $.01 each (hereinafter referred to as Preferred
Stock). The Preferred Stock may be issued from time to time
in one or more series, each with such distinctive designation
as may be stated in a resolution or resolutions providing for
the issue of such stock from time to time adopted by the Board
of Directors or a duly authorized committee thereof. The
resolution or resolutions providing for the issue of shares of
a particular series shall fix, subject to applicable laws and
the provisions of this ARTICLE FOURTH, for each such series
the number of shares constituting such series and the
designation and powers, preferences and relative,
participating, optional or other special rights and the
qualifications, limitations or restrictions thereof,
including, without limiting the generality of the foregoing,
such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subject of
matters as may be fixed by resolution or resolutions of the
Board of Directors or a duly authorized committee thereof
under the Business Corporation Act of the State of New Jersey.
The Board of Directors or a duly authorized committee thereof
may change the designation or number of shares, or the
relative rights, preferences, and limitations of the shares,
of any theretofore established class or series no shares of
which has been issued.
C. The foregoing amendments were adopted by the Shareholders
on May 24, 1996.
D. At the time of the adoption of the aforesaid amendments,
the number of shares entitled to vote thereon was 3,685,592 shares
of Common Stock.
E. (1) The number of shares for and against the amendment of
ARTICLE FOURTH (a) was as follows:
For: 2,580,857
Against: 502,467
(2) The number of shares for and against the amendment
of ARTICLE FOURTH (b) was as follows:
For: 1,612,658
Against: 538,217
IN WITNESS WHEREOF, Tenney Engineering, Inc. has caused this
Certificate to be signed by its President this 24th day of May,
1996.
TENNEY ENGINEERING, INC.
By: s/Robert S. Schiffman
Robert S. Schiffman,
President<PAGE>
EXHIBIT (10) b. (ii)
August 15, 1996
Mr. Robert S. Schiffman
c/o Tenney Engineering, Inc.
1090 Springfield Road
Union, New Jersey 07083
Dear Mr. Schiffman:
The 1995 Incentive Stock Option Plan (the Plan) of Tenney
Engineering, Inc. (the Company) has been adopted by the Board of
Directors and approved by the stockholders of the Company at the
Shareholders meeting held May 26, 1995. A copy of the Plan is
furnished to you herewith as is a Prospectus dated May 26, 1995,
the 1995 Annual Report to Shareholders, and the report on Form 10-
QSB for the second quarter of 1996 filed with the Securities and
Exchange Commission.
We are pleased to inform you that you are hereby, on the date
hereof, granted a Stock Option pursuant to the Plan to purchase
from the Company sixty-five thousand (65,000) shares of the
Companys Common Stock pursuant and subject to the terms of the
Plan. The option price per share is $0.9453125.
Subject to the earlier termination of this option, as provided in
the Plan, you may purchase up to an aggregate of sixty-five
thousand (65,000) of the Companys Common Stock at any time between
February 16, 1997, and August 14, 1999.
Notwithstanding the foregoing, the exercise of your option shall
be subject to the restrictions and limitations set forth in
Sections 6 through 11 of the Plan, which together with all of the
other items, provisions and conditions of the Plan are made a part
of this option with the same effect as if fully set forth herein,
and to the legality of this option and the sale of the securities
offered hereby under applicable state securities laws, if any.
Further, as provided in Section 12 of the Plan, your acceptance of
this option shall constitute your agreement (a) that you will
remain in the employ of the Company, or at the election of the
Company, from time to time, any of its subsidiaries, for a period
of twelve months from the date hereof, and that you will, during
such employment, devote your full time, energy and skill to the
service of the Company or of the subsidiary by which you are
employed and the promotion of its
<PAGE>
- - 2 -
interests, subject to vacations, sick leave, and other absences in
accordance with the Companys or the subsidiarys regular policies;
(b) that in the event of the exercise of this option, the shares
acquired by you will not be sold or transferred in violation of the
Securities Act of 1933, as amended; (c) as required by Section 8 of
the Plan, that you will notify the Company in writing within ten
(10) days of the event if you sell any of the shares acquired on
exercise of the option within two (2) years of the date hereof or
one (1) year after any exercise of this option, and advise the
Company of the selling price of the shares; and (d) as provided in
Section 8 of the Plan, the Company may deduct any income taxes
required by law to be withheld from payments due to you.
Your signature hereon will constitute your acknowledgment of
receipt of a copy of the Plan, a Prospectus dated May 26, 1995, the
1995 Annual Report to Shareholders, the Quarterly Report on Form
10-QSB for the second quarter of 1996, your acceptance of this
option, and your agreement to the terms and conditions hereof.
If you wish to accept this option, sign and return the enclosed
copy to the Company within fourteen (14) days of the date hereof.
Sincerely yours,
TENNEY ENGINEERING, INC.
BY: s/Martin Pelman
Martin Pelman
Vice President, Finance
MP:ca
Enclosures
Received, Accepted and
Agreed to:
s/Robert S. Schiffman
Robert S. Schiffman
Grantee of the above-described option<PAGE>
August 15, 1996
Mr. Martin Pelman
c/o Tenney Engineering, Inc.
1090 Springfield Road
Union, New Jersey 07083
Dear Mr. Pelman:
The 1995 Incentive Stock Option Plan (the Plan) of Tenney
Engineering, Inc. (the Company) has been adopted by the Board of
Directors and approved by the stockholders of the Company at the
Shareholders meeting held May 26, 1995. A copy of the Plan is
furnished to you herewith as is a Prospectus dated May 26, 1995,
the 1995 Annual Report to Shareholders, and the report on Form 10-
QSB for the second quarter of 1996 filed with the Securities and
Exchange Commission.
We are pleased to inform you that you are hereby, on the date
hereof, granted a Stock Option pursuant to the Plan to purchase
from the Company twenty-five thousand (25,000) shares of the
Companys Common Stock pursuant and subject to the terms of the
Plan. The option price per share is $0.859375.
Subject to the earlier termination of this option, as provided in
the Plan, you may purchase up to an aggregate of twenty-five
thousand (25,000) of the Companys Common Stock at any time between
February 16, 1997, and August 14, 1999.
Notwithstanding the foregoing, the exercise of your option shall
be subject to the restrictions and limitations set forth in
Sections 6 through 11 of the Plan, which together with all of the
other items, provisions and conditions of the Plan are made a part
of this option with the same effect as if fully set forth herein,
and to the legality of this option and the sale of the securities
offered hereby under applicable state securities laws, if any.
Further, as provided in Section 12 of the Plan, your acceptance of
this option shall constitute your agreement (a) that you will
remain in the employ of the Company, or at the election of the
Company, from time to time, any of its subsidiaries, for a period
of twelve months from the date hereof, and that you will, during
such employment, devote your full time, energy and skill to the
service of the Company or of the subsidiary by which you are
employed and the promotion of its
<PAGE>
- - 2 -
interests, subject to vacations, sick leave, and other absences in
accordance with the Companys or the subsidiarys regular policies;
(b) that in the event of the exercise of this option, the shares
acquired by you will not be sold or transferred in violation of the
Securities Act of 1933, as amended; (c) as required by Section 8 of
the Plan, that you will notify the Company in writing within ten
(10) days of the event if you sell any of the shares acquired on
exercise of the option within two (2) years of the date hereof or
one (1) year after any exercise of this option, and advise the
Company of the selling price of the shares; and (d) as provided in
Section 8 of the Plan, the Company may deduct any income taxes
required by law to be withheld from payments due to you.
Your signature hereon will constitute your acknowledgment of
receipt of a copy of the Plan, a Prospectus dated May 26, 1995, the
1995 Annual Report to Shareholders, the Quarterly Report on Form
10-QSB for the second quarter of 1996, your acceptance of this
option, and your agreement to the terms and conditions hereof.
If you wish to accept this option, sign and return the enclosed
copy to the Company within fourteen (14) days of the date hereof.
Sincerely yours,
TENNEY ENGINEERING, INC.
BY: s/Robert S. Schiffman
Robert S. Schiffman
President
RSS:ca
Enclosures
Received, Accepted and
Agreed to:
s/Martin Pelman
Martin Pelman
Grantee of the above-described option<PAGE>
EXHIBIT (10) b. (iii)
http://www.tenney.com
January 27, 1997
Mr. Robert S. Schiffman
c/o Tenney Engineering, Inc.
1090 Springfield Road
Union, New Jersey 07083
Dear Mr. Schiffman:
The 1995 Incentive Stock Option Plan (the Plan) of Tenney
Engineering, Inc. (the Company) has been adopted by the Board of
Directors and approved by the stockholders of the Company at the
Shareholders meeting held May 26, 1995. A copy of the Plan is
furnished to you herewith as is a Prospectus dated May 26, 1995,
the 1995 Annual Report to Shareholders, and the report on Form 10-
QSB for the third quarter of 1996 filed with the Securities and
Exchange Commission.
We are pleased to inform you that you are hereby, on the date
hereof, granted a Stock Option pursuant to the Plan to purchase
from the Company fifty thousand (50,000) shares of the Companys
Common Stock pursuant and subject to the terms of the Plan. The
option price per share is $0.7046875.
Subject to the earlier termination of this option, as provided in
the Plan, you may purchase up to an aggregate of fifty thousand
(50,000) shares of the Companys Common Stock at any time between
July 28, 1997, and January 26, 2000.
Notwithstanding the foregoing, the exercise of your option shall
be subject to the restrictions and limitations set forth in
Sections 6 through 11 of the Plan, which together with all of the
other items, provisions and conditions of the Plan are made a part
of this option with the same effect as if fully set forth herein,
and to the legality of this option and the sale of the securities
offered hereby under applicable state securities laws, if any.
Further, as provided in Section 12 of the Plan, your acceptance of
this option shall constitute your agreement (a) that you will
remain in the employ of the Company, or at the election of the
Company, from time to time, any of its subsidiaries, for a period
of twelve months from the date hereof, and that you will, during
such employment, devote your full time, energy and skill to the
service of the Company or of the subsidiary by which you are
employed and the promotion of its
<PAGE>
- - 2 -
interests, subject to vacations, sick leave, and other absences in
accordance with the Companys or the subsidiarys regular policies;
(b) that in the event of the exercise of this option, the shares
acquired by you will not be sold or transferred in violation of the
Securities Act of 1933, as amended; (c) as required by Section 8 of
the Plan, that you will notify the Company in writing within ten
(10) days of the event if you sell any of the shares acquired on
exercise of the option within two (2) years of the date hereof or
one (1) year after any exercise of this option, and advise the
Company of the selling price of the shares; and (d) as provided in
Section 8 of the Plan, the Company may deduct any income taxes
required by law to be withheld from payments due to you.
Your signature hereon will constitute your acknowledgment of
receipt of a copy of the Plan, a Prospectus dated May 26, 1995, the
1995 Annual Report to Shareholders, the Quarterly Report on Form
10-QSB for the third quarter of 1996, your acceptance of this
option, and your agreement to the terms and conditions hereof.
If you wish to accept this option, sign and return the enclosed
copy to the Company within fourteen (14) days of the date hereof.
Sincerely yours,
TENNEY ENGINEERING, INC.
BY: s/Martin Pelman
Martin Pelman
Vice President, Finance
MP:ca
Enclosures
Received, Accepted and
Agreed to:
s/Robert S. Schiffman
Robert S. Schiffman
Grantee of the above-described option<PAGE>
EXHIBIT (10) g. (v)
AGREEMENT BETWEEN
TENNEY ENGINEERING, INC. and LUNAIRE LIMITED
This Agreement, made this 14th day of November, 1996, by and
between TENNEY ENGINEERING, INC., a New Jersey corporation, having
its principal place of business at 1090 Springfield Road, Union,
New Jersey 07083 (referred to hereinafter as Tenney Engineering)
and LUNAIRE LIMITED, a Pennsylvania corporation, having its
principal place of business at 2121 Reach Road, Williamsport,
Pennsylvania 17701 (referred to hereinafter as Lunaire).
Tenney Engineering and Lunaire entered into a Licensing
Agreement on December 18, 1992, pursuant to which Tenney
Engineering licensed to Lunaire use of Tenney Engineerings
engineering drawings, specifications, manufacturing processes and
procedures, quality assurance procedures, computer programs and
other compilations of information and know-how to manufacture
certain products (which products were of a kind previously
manufactured by Tenney Engineering, are more particularly defined
in Section 1.2 of the License Agreement, and are referred to herein
ass the Products) in the continental United States and to sell
and/or lease the Products throughout the world, with the exception
of India. Concurrently with entering into the License Agreement,
the parties entered into the following further agreements, all of
which were dated December 18, 1992: Transition Agreement,
Subcontracting Agreement, Service Agreement, Gloekler Supply
Agreement, Leased Employee Agreement, Prepayment Agreement, Off-set
and Default Agreement, and Letter Agreement relating to technology
transfer contract between Tenney Engineering and certain Chinese
entities (all such further agreements hereinafter being referred to
as the 1992 Agreements).
Under the License Agreement, Lunaire is to pay to Tenney
Engineering five (5%) percent of the net sales of the Products, to
a maximum total license fee of $1,900,000. To date Lunaire has
paid Tenney Engineering license fees of $1,368,438, leaving the net
amount of $531,562, which sum Lunaire has offered to pay at this
time. Lunaire has also offered to pay to Tenney Engineering the
sum of $100,000 to acquire all of Tenney Engineerings right, title
and interest in and to the Tenney trade name and registered
trademark (U.S. registration No. 1,111,,645, which trademark
consists of a distinctive logo (the Logo) and which trade name and
trademark are hereinafter referred to as the Marks) subject,
however to licensee heretofore granted for use of the Marks in
China and India, and subject further to the exceptions and licenses
in favor of Tenney Engineering, as set forth in paragraph 3 hereof.
In consideration of the premises and the mutual promises set
forth herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. At the Closing, Lunaire will pay to Tenney Engineering the
sum of $531,562.00, which sum constitutes all remaining license
fees to which Tenney Engineering is entitled under the License
Agreement, as hereinabove set forth.
2. At the Closing, Lunaire shall pay to Tenney Engineering
the sum of $20,000 representing the remaining balance to be paid
under the Leased Employee Agreement between the parties for the
services of Robert S. Schiffman. Upon consummation of the
transactions contemplated hereby, Lunaire shall be deemed to have
released Tenney Engineering from any further obligations under such
Agreement and to have released Robert S. Schiffman from any and all
obligations under the Consulting Agreement, dated December 18, 1992
between Lunaire and him.
3. At the Closing, Lunaire agrees to pay to Tenney
Engineering the sum of $100,000, in consideration for which Tenney
Engineering, by executing and delivering documents in the forms set
forth in Schedule A annexed hereto, shall transfer and assign to
Lunaire all of its right, title and interest in and to the Marks
and in and to the trademarks listed in Schedule C attached hereto
(which Marks and trademarks shall jointly hereinafter be referred
to as the Tenney Marks) (which transfer includes the right to
sublicense others). The transfer and assignment of the Tenney
Marks shall be subject to the following exceptions and royalty free
licenses granted by Lunaire in favor of Tenney Engineering and its
subsidiaries.
(a) Tenney Engineering and its subsidiaries (hereinafter
defined) shall be entitled to use of all supplies currently on
hand of stationery, business cards, invoices, order forms,
brochures and other advertising materials, and other pre-
printed documents and forms bearing any of the Tenney Marks in
connection with its businesses of servicing, rehabilitating,
retrofitting and reconditioning Products and other
environmental test chambers similar to Products, and the sale
of upgrades and parts therefor (hereinafter referred to as the
Tenney Engineering Businesses); provided, however, that such
use shall be discontinued no later than December 31, 1997; and
further provided, that with respect to instruments, upgrades
or other parts intended for attachment or use in connection
with any Products or other environmental test chambers, Tenney
Engineering and its subsidiaries shall be entitled to purchase
such items bearing the Tenney Marks from Lunaire or from other
suppliers previously dealt with by Tenney Engineering or its
subsidiaries and resell such items without regard to such time
limitation so long as such items are originally purchased by
Lunaire or Tenney Engineering from the manufacturers or other
suppliers inventories of such items bearing the Tenney Marks.
Tenney Engineering shall also be entitled to make use in
connection with the Tenney Engineering Businesses of trucks
and other vehicles bearing the Tenney Marks now on hand until
they are repainted, sold or otherwise disposed of and uniforms
and other work clothing, now on hand, bearing the Tenney Marks
during the useful life thereof. Nothing contained herein,
however, shall be construed to permit Tenney Engineering or
any of its subsidiaries to manufacture and sell new Products
bearing any of the Tenney Marks, except to the extent
explicitly set forth in Paragraph 3(b) hereof. For the
purposes of this agreement subsidiary shall mean any
corporation, a majority of whose outstanding voting shares
shall be owned, directly or indirectly, by Tenney Engineering
or by Lunaire, as the case may be.
(b) Tenney Engineering shall be entitled to retain in
perpetuity its corporate name and any and all subsidiaries of
Tenney Engineering shall be entitled to identify themselves as
subsidiaries or affiliates of Tenney Engineering or Tenney
Engineering, Inc., but without use of the Logo. Tenney
Engineering and all such subsidiaries shall also be entitled
to use such names in perpetuity as trade names in connection
with the Tenney Engineering Businesses and in connection with
the manufacture and sale of products of the kind currently
manufactured by Tenney Engineerings subsidiary, DynaTenn,
Inc., doing business as DynaVac consisting of space simulation
chambers and space simulation components, none of which shall
be manufactured by use of any Tenney Engineering proprietary
drawings or other technology. Such products shall prominently
bear distinctive trademarks different from the Tenney Marks
and the Tenney Engineering name, if displayed, shall be
displayed (without the use of the Logo) in type no larger than
one-quarter (1/4) the size of the type used in DynaVacs name.
(c) Tenney Engineering shall have the right to maintain
all signs now in existence at its facilities.
(d) In no event shall Tenney Engineering sublicense
others, other than its subsidiaries, to use the Tenney Marks.
(e) Tenney Engineering shall have the right to use the
words tenney.com as part of its INTERNET address; provided,
however, that so long as Tenney Engineering shall maintain an
INTERNET Home Page in connection with the Tenney Engineering
Businesses, it shall include in such page (I) advice that new
environmental test chambers are manufactured by the Tenney
Environmental Division of Lunaire Limited and are available
from it and (ii) Lunaires mailing and INTERNET addresses, as
specified by Lunaire. Tenney Engineering may discontinue
display of such information on behalf of Lunaire at any time
after the earlier of December 31, 2003 or the time when sales
of parts and supplies requested by Tenney Engineering under
Paragraph 8 hereof shall cease for any reason for a period of
ninety (90) days. Such display shall be no less prominent
than the display of like information on behalf of Tenney
Engineering and its subsidiaries.
4. Tenney Engineering acknowledges that Lunaire has made the
Products aesthetically different in appearance and has incorporated
numerous improvements, modifications and changes (the Enhancement)
to the Products, and shall be entitled to continue to manufacture
in perpetuity all products formerly manufactured by Tenney
Engineering with the Enhancements, and as may hereinafter be
further enhanced, by Lunaire.
5. Teeny Engineering acknowledges that during the past four
years, Lunaire has manufactured and has sold Products bearing the
name Tenney Environmental extensively throughout the United States
and in many countries throughout the world, and further recognizes
and acknowledges that Lunaire intends to utilize the Tenney and
Tenney Environmental names in conjunction with many of the
environmental chambers and equipment which it will manufacture in
the future (but not in violation of Tenney Engineerings commitments
to companies in India and China, as set forth in the License
Agreement).
6. Under the Service Agreement, Lunaire agreed to engage
Tenney Engineering to perform all of Lunaires requirements for
Service (as defined in such Agreement) of Tenney Equipment (as
defined therein). Lunaire agrees to call upon Tenney Engineering
for Service on Tenney Equipment through the remaining term of the
Service Agreement, in accordance with the practices and procedures
which the parties have established and are presently following.
7. Under the Gloekler Supply Agreement, Lunaire agreed to
purchase certain panels as needed, provided Gloekler Refrigerator
Company (Gloekler) was able to supply panels of equal quality at
a competitive price and with timely delivery as available to
Lunaire from other suppliers. Lunaire agrees to continue to
purchase panels from Gloekler to the extent it has need for panels
of the type which Gloekler manufactures, provided that Gloekler can
provide said panels equal in quality to the quality provided by
other Lunaire suppliers, that said panels are competitively priced
with those provided to Lunaire by other suppliers, and provided
that said panels can be delivered within Lunaires time
requirements. Lunaire will purchase the Gloekler panels and make
payment to Tenney Engineering with respect to said panels, pursuant
to the Gloekler Supply Agreement, and as contemplated in this
paragraph, so long as Gloekler remains indebted to Tenney
Engineering under the Trade Account Agreement which was reflected
as Exhibit A to, and made part of, the Gloekler Supply Agreement.
8. Lunaire agrees to make available to Tenney Engineering
various parts and supplies, in conjunction with the Tenney
Engineering Businesses, at Lunaires cost plus 15%, to the extent
Lunaire may have on hand adequate quantities of the requested parts
or supplies. Lunaires commitment hereunder to assist Tenney
Engineering in procuring parts and supplies pursuant hereto will
terminate December 31, 2003.
9. Upon consummation of the transactions contemplated hereby,
(a) the parties shall be deemed to have mutually released and
forever discharged each other in respect of and from any and all
claims, accounts, and debts of whatever nature or kind that they
may have against each other for all license fees and other payments
called for under the License Agreement and the Leased Employee
Agreement, and (b) all licenses granted and obligations to pay
royalties and the provisions contained in Sections 5, 9, 10, 11.1,
11.2, 16, 17, 18.1, 18.4, and 20 of the License Agreement and the
1992 Agreements (other than the Service Agreement and other than
the Gloekler Supply Agreement, subject to Paragraph 7 hereof) shall
be deemed terminated; however, the other unexecuted portions of the
License Agreement (including without limitation Sections 11.3,
11.4, 12, 13, 14, 15, 18.2, 18.3, 19, and 21 thereof) shall remain
in full force and effect, except to the extent explicitly modified
hereby or in conflict with the terms hereof.
10. Tenney Engineering and Lunaire shall endeavor, no later
than December 31, 1996, to settle and pay all accounts between
them, as of October 31, 1996, (the Accounts) relating to the
purchase and sale of parts between them, payments due arising on
account of the purchase by Lunaire of panels supplied by Gloekler
under the Gloekler Supply Agreement and payments due Tenney under
the Service Agreement. In the event that the parties shall have
failed to settle and pay the Accounts by December 31, 1996, they
shall submit all disputes in connection with the Accounts to an
accounting firm to be mutually agreed to by them prior to December
31, 1996. Each party shall bear one-half of the expense of such
arbitration and the decision of such firm shall be conclusively
binding upon both parties and enforceable in any court of competent
jurisdiction. In the event that the parties shall have failed to
agree upon such firm by December 31, 1996, or in the event that
either party fails to make such submission or fails to pay any fees
or expenses required to complete such arbitration, then, in any of
such events all such disputes shall be arbitrated in accordance
with the provisions of Section 24 of the License Agreement.
11. Closing shall occur within two business days after Tenney
Engineerings satisfaction of the condition set forth in Paragraph
12 hereof; provided, however, that in the event such condition
shall not have been satisfied on or before November 20, 1996,
either party may terminate this agreement upon written notice to
the other. Lunaire shall wire transfer the moneys due to Tenney
Engineering hereunder following confirmation from Peter T. Rado
that he has in his possession and will deliver to Lunaire a duly
signed Bill of Sale and Assignment (a copy of which is attached
hereto as Schedule A) upon Tenney Engineerings receipt of payment
hereunder. Said Bill of Sale will be executed and delivered by
Tenney Engineering to Peter T. Rado concurrently with the signing
of the Agreement.
12. The obligations of Lunaire and Tenney Engineering
hereunder shall be subject to Tenney Engineering securing, prior
to the Closing, the waiver in writing in respect of the
transactions contemplated hereby by Summit Bank, a banking
corporation organized under the laws of the State of New Jersey,
of the prohibition of the sale of assets by Tenney Engineering,
contained in Section 8.1 of a Loan and Security Agreement, dated
September 12, 1996, among such bank, Tenney Engineering, and Tenney
Engineerings subsidiary, DynaTenn, Inc.
13. Tenney Engineering hereby represents to Lunaire that the
Board of Directors of Tenney Engineering has approved the
transactions contemplated hereby.
14. The failure of either party at any time from time to time
to enforce or require performance of any of the provisions of this
Agreement shall in no way be construed to be a waiver of that or
any other provisions of this Agreement or to prevent or limit the
right of such party thereafter to enforce each and every provision
hereof.
15. In the event Tenney Engineering violates the terms of
this Agreement with respect to its use of the Tenney Marks, it
acknowledges that damages at law will be an insufficient remedy to
Lunaire. Accordingly, Tenney Engineering agrees if it utilizes the
Tenney Marks in violation of this agreement or conducts other
activities not authorized hereunder for use of the Tenney Marks,
Lunaire will be entitled to equitable relief, including specific
performance and injunctions, restraining Tenney Engineering from
committing or continuing any such violation of this Agreement in
addition to any and all other remedies available at law or in
equity.
16. The list of the categories of items previously
manufactured by Tenney Engineering, and which Lunaire shall be
entitled to manufacture at all times hereafter, include all
categories of items set forth on Schedule B attached hereto.
17. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject
matter hereof and supersedes all contemporaneous understandings,
representations and warranties of the parties. This Agreement may
not be amended, modified, altered or any of its provisions waived,
except in a writing signed by the party against whom enforcement is
sought.
18. This Agreement will be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, and
the parties agree to submit to the jurisdiction and the venue of
either the United States District Court for the Eastern District
of Pennsylvania or the courts of Lycoming County as may be
appropriate, except with respect to any matters to be arbitrated
under Paragraph 10 hereof, or the enforcement of any awards
rendered in any such arbitration.
IN WITNESS WHEREOF, intending to be legally bound hereby, the
parties have caused this Agreement to be executed on the day and
year first above written.
TENNEY ENGINEERING, INC.
By: s/Robert S. Schiffman
LUNAIRE LIMITED
By: s/Harold L. Lunick
<PAGE>
SCHEDULE A
BILL OF SALE AND ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS that TENNEY ENGINEERING, INC.,
a New Jersey corporation (Seller) in exchange for One Hundred
Thousand Dollars ($100,000.00) paid to it by LUNAIRE LIMITED, a
Pennsylvania corporation (Buyer) pursuant to an Agreement dated
November 14, 1996 (the Agreement) between Buyer and Seller, does by
these presents, sell, assign, transfer and deliver unto Buyer, its
successors and assigns, all of Sellers right, title and interest in
and to the Tenney trade name and registered trademark (U.S.
registration No. 1,111,645) and in and to the trademarks listed in
Exhibit 1 attached hereto.
TO HAVE AND TO HOLD, unto Buyer, its successors and assigns,
FOREVER, Seller warrants and represents that it has good title to
all of said trade names and trademarks being transferred hereby and
that it is delivering said trade names and trademarks to Buyer free
and clear of any security interest or other lien or encumbrance.
Seller authorizes Buyer to take any appropriate action to
protect the right, title and interest in said trade names and
trademarks hereby sold, assigned, transferred and delivered to
Buyer, for the benefit of Buyer, against each and every person or
persons whomsoever claim to have a right in any of said trade names
or trademarks.
Seller hereby convenants that it will from time to time make,
execute, acknowledge and deliver, or cause to be made, executed,
acknowledged and delivered, all such further acts, instruments,
deeds, conveyances, transfers, assignments, consents and assurances
as Buyer ma reasonably request to more effectively sell, assign,
transfer to and vest in Buyer the aforesaid trade names and
trademarks.
IN WITNESS WHEREOF, this Bill of Sale has been duly executed
and delivered by a duly authorized officer of TENNEY ENGINEERING,
INC. this day of November, 1996.
TENNEY ENGINEERING, INC.
By: s/Robert S. Schiffman
<PAGE>
EXHIBIT 1
TRADEMARKS OTHER THAN TENNEY RELATING TO PRODUCTS,
SOME OF WHICH MAY NOT BE IN CURRENT USE
TEMPGARD (U.S. registration expired)
BENCHMASTER (U.S. registration No. 980,347 expired)
(U.S. registration No. 1,395,551 unexpired)
VERSATENN (U.S. registration No. 1,465,276)
VAPOR-FLO (U.S. registration expired)
<PAGE>
SCHEDULE B
CATEGORIES OF ITEMS MANUFACTURED BY TENNEY ENGINEERING
1. Humidity with Altitude
2. AGREE (advisory group on reliability of electronic
equipment) with Vibration
3. AGREE with Humidity.
4. CERT (combined environmental reliability test)
5. Thermal Shock
6. Vibration with Altitude or Humidity
7. Space Simulation
8. Space Simulation Components, i.e., Shrouds, Platens, etc.
9. Explosion
10. Autoclave/Sterilizers
11. ESS (environmental stress screening)
12. Multi-Stage Refrigeration Systems
13. Vapor Recovery Systems
15. Sand & Dust
16. Salt Spray
17. Cooling Air Simulators
18. Cascade Baths
19. Heat Flux Simulator
20. Solar Simulators
21. Motion Simulators
22. HAST (highly accelerated stress test)
<PAGE>
SCHEDULE C
TRADEMARKS OTHER THAN TENNEY RELATING TO PRODUCTS,
SOME OF WHICH MAY NOT BE IN CURRENT USE
TEMPGARD (U.S. registration expired)
BENCHMASTER (U.S. registration No. 980,347 expired)
(U.S. registration No. 1,395,551 unexpired)
VERSATENN (U.S. registration No. 1,465,276)
VAPOR-FLO (U.S. registration expired)
<PAGE>
EXHIBIT (10) h. (i)
LEASE dated November 19, 1996
(to be completed by Landlord)
ARTICLE I
REFERENCE DATA
1.1 Subjects Referred To
Each reference in this Lease to any of the following subjects shall
be construed to incorporate the data stated for that subject in
this Article:
LANDLORD: 110 Industrial Park, LLC
MANAGING AGENT: Rader Properties, Inc.
LANDLORDS ADDRESS: c/o Rader Properties, Inc.
One Pond Park Road
Hingham, MA 02043
LANDLORDS REPRESENTATIVE: James F. Rader
TENANT: Dynatenn, Inc. d/b/a Dynavac
TENANTS ADDRESS 110 Industrial Park Road
(for Notice & Billing): Hingham, MA 02043
BUILDING ADDRESS: 110 Industrial Park Road
Hingham, MA 02043
TENANT PLAN DELIVERY DATE: Not Applicable
SCHEDULED TERM COMMENCEMENT DATE: July 1, 1998
RENTABLE FLOOR AREA TENANTS SPACE: 27,909 Square Feet
TOTAL RENTABLE FLOOR
AREA OF THE BUILDING: 39,000 Square Feet
TENANTS PERCENTAGE OF
OPERATING COSTS: 71.56%
APPROXIMATE TERM: Five (5) Years
EXPIRATION DATE: June 30, 2003
ANNUAL BASE RENT: 5.40 (per s.f.)
LANDLORDS BASE FISCAL YEAR: January 1, 1999 to
December 31, 1999
BASE YEAR ANNUAL
ESTIMATED LANDLORDS OPERATING COSTS: $1.50 (per s.f.)
ANNUAL RENT: $6.90 (per s.f.)
ANNUAL RENT:
$5.40 + $ .70
Annual Base Rent First Year Annual Estimated
(per s.f.) Landlords Operating Cost
(per s.f.)
+ $ .80 = $6.90 x 27,909
First Year Not (per s.f.) Rentable Sq.Ft.
To Exceed Operating
Costs (per s.f.)
= $192,572.16 ANNUAL RENT* $16,047.68 MONTHLY RENT*
* See Exhibit E, Rider 1 and Rider 8
ADDITIONAL RENT: Any monies (including Tenants share of Landlords
Operating Costs) which Landlord is authorized to collect from
Tenant hereunder which is not included in Annual Rent.
SECURITY DEPOSIT: $32,000 GUARANTOR: Tenney Engineering, Inc.
TENANT PLAN EXCESS COSTS
(if presently known): $ NONE
PERMITTED USES: General Office, Manufacturing and Warehouse.
PUBLIC LIABILITY INSURANCE:
BODILY INJURY: $1,000,000 per occurrence
PROPERTY DAMAGE: $ 500,000
1.2 Exhibits. These are incorporated as a part of this Lease:
EXHIBIT A---Site Plan
EXHIBIT B---Floor Plan
EXHIBIT C---Landlords Services
EXHIBIT D---Rules and Regulations
EXHIBIT E---Rider
EXHIBIT F---Guaranty (if applicable)
ARTICLE I-- Reference Data
1.1 Subjects Referred To.................................. 1
1.2 Exhibits.............................................. 2
1.3 Table of Articles and Sections........................ 3
ARTICLE II--Premises, Term and Rent
2.1 The Premises......................................... 5
2.2 Rights to Use Common Facilities...................... 6
2.3 Landlords Reservations.............................. 6
2.4 Term................................................. 6
2.5 Monthly Rent Payments................................ 6
2.6 Adjustment for Operating Expenses.................... 6
2.7 Accounting Periods................................... 8
2.8 Interest on Late Payments............................ 8
ARTICLE III-- Construction
3.1 Tenants Plans and Pricing of Tenants Work.DELETED... 9
3.2 Landlords and Tenants Work; Delays..DELETED........ 9
3.3 Alterations and Additions............................ 9
3.4 General Provisions Applicable to Construction........ 10
ARTICLE IV--Landlords Covenants; Interruptions and Delays
4.1 Landlords Covenants................................. 10
4.1.1 Services Furnished by Landlord................ 10
4.1.2 Roof Repairs.................................. 10
4.1.3 Quiet Enjoyment............................... 10
4.2 Interruptions and Delays in Services and
Repairs, Etc......................................... 10
ARTICLE V--Tenants Covenants
5.1 Payments............................................. 11
5.2 Repair and Yield Up.................................. 11
5.3 Use.................................................. 12
5.4 Obstructions; Items Visible From Exterior; Rules
and Regulations...................................... 12
5.5 Safety Appliances; Licenses.......................... 12
5.6 Assignment; Sublease................................. 12
5.7 Indemnity; Insurance................................. 13
5.8 Personal Property at Tenants Risk................... 13
5.9 Right of Entry....................................... 14
5.10 Floor Load; Prevention of Vibration and Noise........ 14
5.11 Security............................................. 14
5.12 Personal Property Taxes.............................. 14
5.13 Payment of Litigation Expenses....................... 14
5.14 Tenant Holdover...................................... 14
5.15 Hazardous Waste...................................... 14
ARTICLE VI--Casualty and Taking
6.1 Termination or Restoration; Rent Adjustment.......... 16
6.2 Eminent Domain Damages Reserved...................... 16
6.3 Temporary Taking..................................... 17
ARTICLE VII--Default
7.1 Events of Default.................................... 17
7.2 Damages.............................................. 17
ARTICLE VIII--Miscellaneous
8.1 Security Deposit..................................... 19
8.2 Notice of Lease; Consent or Approval; Notices
Bind and Inure; Landlords Estate.................... 19
8.3 Landlords Failure to Enforce........................ 20
8.4 Acceptance of Partial Payment of Rent; Delivery
of Keys.............................................. 20
8.5 Cumulative Remedies.................................. 21
8.6 Partial Invalidity................................... 21
8.7 Self-Help............................................ 21
8.8 Tenants Estoppel Certificate........................ 21
8.9 Waiver of Subrogation................................ 22
8.10 All Agreements Contained............................. 22
8.11 Brokerage............................................ 22
8.12 Submission Not an Option............................. 22
ARTICLE IX--Rights of Parties Holding Prior Interests
9.1 Lease Subordinate.................................... 22
9.2 Modification, Termination or Cancellation; Advance
Payments of Rent..................................... 22
9.3 Rights of Holder of Mortgage to Notice of Defaults
by Landlord and to Cure Same......................... 23
9.4 Implementation of Article IX......................... 23
9.5 Annual Financial Statements.......................... 23
ARTICLE II
PREMISES, TERM AND RENT
2.1 The Premises: Landlord hereby leases to Tenant, and Tenant
hereby hires from Landlord, Tenants Space in the Building,
excluding exterior faces of exterior walls, the common emergency
stairways and stairwells, elevators and elevator wells, fan rooms,
electric and telephone closets, janitor closets, the central
atrium, and pipe, ducts, conduits, wires and appurtenant fixtures
serving exclusively or in common other parts of the Building, and
if Tenants Space includes less than the entire rentable area of any
floor, excluding the common corridors, elevator lobby and toilets
located on such floor. Tenants Space with such exclusions is
hereinafter referred to as the Premises. The term Building means
the building erected on the Lot, and the term Lot means all, and
also any part of, the land owned by the Landlord on which the
Building is located plus any additions thereto resulting from the
change of any abutting street line. Property means the Building
and Lot.
2.2 Rights to Use Common Facilities: Tenant shall have, as
appurtenant to the Premises, rights to use in common, subject to
reasonable rules of general applicability to tenants of the
Building from time to time made by Landlord of which Tenant is
given notice: (a) the common lobbies, corridors, stairways and
elevators of the Building, and the pipes, ducts, conduits, wires
and appurtenant meters and equipment serving the Premises in common
with others, (b) common walkways necessary for access to the
Building, (c) if the Premises include less than the entire rentable
floor area of any floor, the common toilets, corridors and elevator
lobby of such floor, and (d) the parking lot, to the extent and in
the location designated by Landlord.
2.3 Landlords Reservations: Landlord reserves the right from
time to time, without unreasonable interference with Tenants use:
(a) to install, use, maintain, repair, replace and relocate for
service to the Premises and other parts of the Building, or either,
pipes, ducts, conduits, wires and appurtenant fixtures, wherever
located in the Premises or Building, and (b) to alter or relocate
any other common facility (including parking areas), provided that
substitutions are substantially equivalent or better.
2.4 Term: Tenant shall have and hold the Premises for a period
commencing on July 1, 1998, and continuing until the Expiration
Date unless sooner terminated as provided in Section 6.1 or Article
VII.
2.5 Monthly Rent Payments: Tenant agrees to pay rent to Landlord
without any offset or reduction whatever (except as made in
accordance with the express provisions of this Lease) equal to
1/12th of the Annual Base Rent plus 1/12 of Landlords reasonable
estimate of Tenants proportionate share of Landlords Operating
Costs in equal installments in advance on the first day of each
calendar month included in the Term; and for any portion of the
calendar month at the beginning or end of the Term, at the
proportionate rate payable for such portion, in advance. The first
installment of Monthly Rent shall be due upon execution of the
Lease.
2.6 Adjustment for Operating Expenses: Tenants proportionate
share of the Landlords Operating Costs shall be determined by
multiplying Landlords Operating Costs by Tenants Percentage of
Operating Costs.
As soon as practicable after the end of each Fiscal Year
ending during the Term and after Lease termination, Landlord shall
render a statement (Landlords Statement) in reasonable detail and
according to usual accounting practices certified by Landlord and
showing for the preceding Fiscal Year or fraction thereof, as the
case may be, Landlords Operating Costs, excluding the interest and
amortization on mortgages for the Building and Lot or leasehold
interests therein and the cost of special services rendered to
tenants (including Tenant) for which a special charge is made, but
including, without limitation: real estate taxes on the Building
and Lot; installments and interest on assessments with respect to
any fiscal year or fraction of a Fiscal Year; premiums for
insurance; compensation and all fringe benefits, workers
compensation insurance premiums and payroll taxes paid by Landlord
to, for or with respect to all persons engaged in the operating,
maintaining, or cleaning of the Building and Lot; all utility
charges not billed directly to tenants by Landlord or the utility;
payments to independent contractors under service contracts for
cleaning, operating, managing, maintaining and repairing the
Building and Lot (which payments may be to affiliates of Landlord
provided the same are at reasonable rates consistent with the type
of occupancy and the services rendered); interest on working
capital borrowed by Landlord in anticipation of receipts from
tenants; the cost of replacement for tools, and other similar
equipment used in the repair, maintenance, cleaning, and protection
of the Property; amounts incurred for legal and professional fees
relating to the Property, excluding fees for securing or renewing
leases; and all other reasonable and necessary expenses paid in
connection with the cleaning, operating, managing, maintaining and
repairing of the Building and Lot, or either, in accordance with
the terms of this Lease it being agreed that if Landlord installs
a new or replacement capital item for the purpose of reducing
Landlords Operating Costs, the cost thereof as reasonably amortized
by Landlord, with interest at the average prime commercial rate in
effect from time to time at the three largest national banks in
Boston, Massachusetts on the unamortized amount, shall be included
in Landlords Operating Costs.
In case of special services which are not rendered to all
areas on a comparable basis, the proportion allocable to the
Premises shall be the same proportion which the Rentable Floor Area
of Tenants Space bears to the total rentable floor area to which
such service is so rendered (such latter area to be determined in
the same manner as the Total Rentable Floor Area of the Building).
The term real estate taxes as used above shall mean all taxes
of every kind and nature assessed by any governmental authority on
the Property, which the Landlord shall become obligated to pay
because of or in connection with the ownership, leasing and
operation of the Property, subject to the following: There shall
be excluded from such taxes all income taxes, excess profit taxes,
excise taxes, franchise taxes, and estate succession, inheritance
and transfer taxes, provided, however, that if at any time during
the Term the present system of ad valorem taxation of real property
shall be changed so that in lieu of the whole or any part of the ad
valorem tax on real property, there shall be assessed on Landlord
a capital levy or other tax on the gross rents received with
respect to the Property, or a federal, state, county, municipal, or
other local income, franchise, excise or similar tax, assessment,
levy or charge (distinct from any now in effect) measured by or
based, in whole or in part, upon any such gross rents, then any and
all of such taxes, assessments, levies or charges, to the extent so
measured or based, shall be deemed to be included within the term
real estate taxes.
Within 10 days after Landlord delivers the Landlords Statement
to Tenant, the difference between Tenants proportionate share of
Landlords Operating Costs as set forth on Landlords Statement and
the estimated payments of operating expenses paid by Tenant for the
preceding year pursuant to Section 2.5 shall either be paid by
Tenant or refunded by Landlord as appropriate.
Notwithstanding any other provisions of this Section 2.6, if
the Term expires or is terminated as of a date other than the last
day of a fiscal year, then for such fraction of a fiscal year at
the end of the Term, Tenants last payment to Landlord under this
Section 2.6 shall be made on the basis of Landlords best estimate
of the items otherwise included in Landlords Statement and shall be
made on or before the later of (a) 10 days after Landlord delivers
such estimate to Tenant or (b) the last day of the Term, with an
appropriate payment or refund to be made upon submission of
Landlords Statement.
2.7 Accounting Periods: Landlord shall have the right from time
to time to change the periods of accounting under Section 2.6 to
any annual period other than a fiscal year, and upon any such
change all items referred to in this Section 2.7 shall be
appropriately apportioned. In all Landlords Statements rendered
under this Section 2.7, amounts for periods partially within and
partially without the accounting periods shall be appropriately
apportioned, any items which are not determinable at the time of a
Landlords Statement shall be included therein on the basis of
Landlords estimate, and with respect thereto Landlord shall render
promptly after determination of a supplemental Landlords Statement,
and appropriate adjustment shall be made according thereto. All
Landlords Statements shall be prepared on an accrual basis of
accounting.
2.8 Interest On Late Payments: All payments of Annual Base Rent
and Additional Rent shall be made to the Managing Agent, or to such
other person as Landlord may from time to time designate. If any
installment of Annual Base Rent or Additional Rent or on account of
leasehold improvements is paid more than 5 days after the due date
thereof, at Landlords election, it shall bear interest at a rate
equal to the prime commercial rate from time to time established by
The First National Bank of Boston plus 4% per annum from such due
date, which interest shall be immediately due and payable as
further Additional Rent. Rental payments made 5 days after the due
date shall also bear an administrative charge of $200.00 payable to
Landlord as Additional Rent for each late payment.
ARTICLE III
CONSTRUCTION
3.1 Tenants Plans and Pricing of Tenants Work: DELETED
3.2 Landlords and Tenants Work; Delays: DELETED
3.3 Alterations and Additions: This Section 3.3 shall apply
before and during the Term. Tenant shall not make any structural
alterations or additions to Tenants Space. Tenant shall not make
any other alterations and additions to Tenants Space except in
accordance with plans and specifications therefor first approved by
Landlord. Said approval shall not be unreasonably withheld.
Landlord shall not be deemed unreasonable for withholding approval
of any alterations or additions which (a) involve or might affect
any structural or exterior element of the Building, any area or
element outside of the Premises, or any facility serving any area
of the Building outside the Premises, or (b) will delay completion
of the Premises or Building, or (c) will require unusual expense to
readapt the Premises to normal office/warehouse use on Lease
termination or in crease the cost of construction or of insurance
or taxes on the Building or of the services called for by Section
4.1 unless Tenant first gives assurance acceptable to Landlord for
payment of such increased cost and that such readaptation will be
made prior to such termination without expense to Landlord. All
alterations and additions shall be part of the Building unless and
until Landlord shall specify the same for removal pursuant to
Section 5.2. All of Tenants alterations and additions and
installation of furnishings shall be coordinated with any work
being performed by or for Landlord and in such manner as to
maintain harmonious labor relations and not to damage the Building
or Lot or interfere with Building construction or operation and,
except for installation of furnishings, shall be performed by
Landlords general contractor or by contractors or workmen first
approved by Landlord. Except for work by Landlords general
contractor, Tenant before its work is started shall: secure all
licenses and permits necessary therefor; deliver to Landlord a
statement of the names of all its contractors and subcontractors
and the estimated cost of all labor and material to be furnished by
them and security satisfactory to Landlord protecting Landlord
against liens arising out of the furnishing of such labor and
material; and cause each contractor to carry workmens compensation
insurance in statutory amounts covering all the contractors and
subcontractors employees and comprehensive public liability
insurance with such limits as Landlord may reasonably require, but
in no event less than $1,000,000 per occurrence, and property
damage insurance with limits of not less than $500,000 (all such
insurance to be written in companies approved by Landlord and
insuring Landlord and Tenant as well as the contractors), and to
deliver to Landlord certificates of all such insurance. Tenant
agrees to pay promptly when due the entire cost of any work done on
the Premises by Tenant, its agents, employees, or independent
contractors, and not to cause or permit any liens for labor or
materials performed or furnished in connection therewith to attach
to the Premises and immediately to discharge any such liens which
may so attach. Tenant shall pay, as Additional Rent, 100% of any
increase in real estate taxes, on the Building which shall, at any
time after commencement of the Term, result from any alteration,
addition or improvement to the Premises made by Tenant.
3.4 General Provisions Applicable to Construction: All
construction work required or permitted by this Lease shall be done
in a good and workmanlike manner with new first class materials and
in compliance with all applicable laws and all lawful ordinances,
regulations and orders of governmental authority and insurers of
the Building. Each party may inspect the work of the other at
reasonable times and shall promptly give notice of observed
defects. Except as otherwise provided in Article IV, the work
required of Landlord pursuant to this Article III shall be deemed
approved by Tenant when Tenant commences occupancy of the Premises
for the Permitted Uses, except for items which are then uncompleted
or do not conform to the drawings and specifications referred to in
Section 3.1, and as to which, in either case, Tenant shall have
given notice to Landlord prior to such date.
ARTICLE IV
LANDLORDS COVENANTS; INTERRUPTIONS AND DELAYS
4.1 Landlords Covenants: Landlord covenants:
4.1.1 Services Furnished by Landlord: to furnish services,
as part of Landlords Operating Costs payable by Tenant,
facilities and supplies set forth in Exhibit C equal in
quality to those customarily provided by landlords in similar
quality buildings in the greater Boston area;
4.1.2 Roof and Structure Repairs: except as otherwise
provided in Article VI and except for damage caused or repairs
required due to the acts or negligence of Tenant, its agents,
employees or contractors, to make such repairs, at Landlords
sole cost, to the roof, foundation, floor slab and underground
plumbing facilities as may be necessary to keep them in
serviceable condition;
4.1.3 Quiet Enjoyment: that Tenant on paying the rent and
performing the Tenant obligations in this Lease shall
peacefully and quietly have, hold and enjoy the Premises,
subject to all the terms and provisions hereof.
4.2 Interruptions and Delays in Services and Repairs, Etc.:
Landlord shall not be liable to Tenant for any compensation or
reduction of rent by reason of inconvenience or annoyance or for
loss of business arising from the necessity of Landlord or its
agents entering the Premises for any of the purposes in this Lease
authorized, or for repairing the Premises or any portion of the
Building however the necessity may occur. In case Landlord is
prevented or delayed from making any repairs, alterations or
improvements, or furnishing any services or performing any other
covenant or duty to be performed on Landlords part, by reason of
any cause reasonably beyond Landlords control, including, without
limitation, the causes set forth in Section 3.2 hereof as being
reasonably beyond Landlords control, Landlord shall not be liable
to Tenant therefor, nor, except as expressly otherwise provided in
Section 6.1, shall Tenant be entitled to any abatement or reduction
of rent by reason thereof, nor shall the same give rise to a claim
in Tenants favor that such failure constitutes actual or
constructive, total or partial, eviction from the Premises.
Landlord reserves the right to stop any service or utility
system, when necessary by reason of accident or emergency, or until
necessary repairs have been completed; provided, however, that in
each instance of stoppage, Landlord shall exercise reasonable
diligence to eliminate the cause thereof. Except in case of
emergency repairs Landlord will give Tenant reasonably advance
notice of any contemplated stoppage and will use reasonable efforts
to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies,
programs and measures as may be necessary, required or expedient
for the conservation or preservation of energy or energy services
or as may be necessary or required to comply with applicable codes,
rules, regulations or standards.
ARTICLE V
TENANTS COVENANTS
Tenant covenants during the Term and such further time as
Tenant occupies any part of the Premises:
5.1 Payments: To pay when due all Annual Rent and Additional
Rent.
5.2 Repair and Yield Up: Except as otherwise provided in Article
VI and Section 4.1.1, to keep the Premises in good order, repair
and condition, reasonable wear and tear only excepted, and all
glass in windows (except glass in exterior walls unless the damage
thereto is attributable to Tenants negligence or misuse) and doors
of the Premises whole and in good condition with glass of the same
quality as that injured or broken, damage by fire only excepted,
and at the expiration or termination of this Lease peaceably yield
up the Premises and all alterations and additions thereto in good
order, repair and condition, reasonable wear and tear excepted,
first removing all goods and effects of Tenant and, to the extent
specified by Landlord by notice to Tenant given at least ten (10)
days before such expiration or termination, all alterations and
additions made by Tenant and all partitions, and repairing any
damage caused by such removal and restoring the Premises and
leaving them clean and neat.
5.3 Use: Continuously from the commencement of the Term to use
and occupy the Premises for the Permitted Uses, and not to injure
or deface the Premises, Building or Lot, nor to permit in the
Premises any auction sale, or inflammable fluids or chemicals, or
nuisance, or the emission from the Premises of any objectionable
noise or odor, nor to use or devote the Premises or any part
thereof for any purpose other than the Permitted Uses, nor any use
thereof which is inconsistent with the maintenance of the Building
as an office/warehouse building of the first class in the quality
of its maintenance, use and occupancy, or which is improper,
offensive, contrary to law or ordinance or liable to invalidate or
increase the premiums for any insurance on the Building or its
contents or liable to render necessary any alteration or addition
to the Building.
5.4 Obstructions; Items Visible From Exterior; Rules and
Regulations: Not to obstruct in any manner any portion of the
Building not hereby leased or any portion thereof or of the Lot
used by Tenant in common with others; not without prior consent of
Landlord to permit the painting or placing of any signs on doors or
any signs, curtains, blinds, shades, awnings, aerials or flagpoles,
or the like, visible from outside the Premises; and to comply with
all reasonable Rules and Regulations now or hereafter made by
Landlord, of which Tenant has been given notice, for the care and
use of the Building and Lot and their facilities and approaches,
including without limitation the Rules and Regulations set forth in
Exhibit F hereto; Landlord shall not be liable to Tenant for the
failure of other occupants of the Building to conform to such Rules
and Regulations.
5.5 Safety Appliances; Licenses: To keep the Premises equipped
with all safety appliances required by law or ordinance or any
other regulation of any public authority because of any use made by
Tenant other than normal office/warehouse use, and to procure all
licenses and permits so required because of such use and, if
requested by Landlord, to do any work so required because of such
use, it being understood that the foregoing provisions shall not be
construed to broaden in any way Tenants Permitted Uses.
5.6 Assignment; Sublease: Not without prior consent of Landlord,
which shall not be unreasonably withheld, to assign, mortgage,
pledge or otherwise transfer this Lease or to make any sublease, or
to permit occupancy of the Premises or any part thereof by anyone
other than Tenant; any assignment or sublease made without such
consent shall be void; as Additional Rent, Tenant shall reimburse
Landlord promptly for reasonable legal and other expenses incurred
by Landlord in connection with any request by Tenant for consent to
assignment or subletting; no assignment or subletting shall affect
the continuing primary liability of Tenant (which, following
assignment, shall be joint and several with the assignee); and no
consent to any of the foregoing in a specific instance shall
operate as a waiver in any subsequent instance. In the event that
any assignee or subtenant pays to Tenant any amounts in excess of
the Annual Rent and Additional Rent then payable hereunder, or pro
rata portion thereof on a square footage basis for any portion of
the Premises, Tenant shall promptly pay said excess to Landlord as
and when received by Tenant. If Tenant requests Landlords consent
to assign this Lease or sublet more than 25% of the Premises,
Landlord shall have the option, exercisable by written notice to
Tenant given within 10 days after receipt of such request, to
terminate this Lease as of a date specified in such notice which
shall be not less than 30 or more than 60 days after the date of
such notice.
5.7 Indemnity; Insurance: To defend with counsel first approved
by Landlord, save harmless, and indemnify Landlord from any
liability for injury, loss, accident or damage to any person or
property, and from any claims, actions, proceedings and expenses
and costs in connection therewith (including, without limitation,
reasonable counsel fees), (i) arising from (a) the omission, fault,
willful act, negligence or other misconduct of Tenant or (b) from
any use made or thing done or occurring on the Premises not due to
the omission, fault, willful act, negligence or other misconduct of
Landlord, or (ii) resulting from the failure of Tenant to perform
and discharge its covenants and obligations under this Lease, and
to maintain in responsible companies qualified to do business, and
in good standing, in Massachusetts public liability insurance
covering the Premises insuring Landlord as well as Tenant with
limits which shall, at the commencement of the Term, be at least
equal to those stated in Section 1.1 and from time to time during
the Term shall be for such higher limits, if any, as are
customarily carried in Boston with respect to similar properties,
and workmens compensation insurance with statutory limits covering
all of Tenants employees working in the Premises, and to deposit
promptly with Landlord certifications for such insurance, and all
renewals thereof, bearing the endorsement that the policies will
not be cancelled or amended until after 10 days written notice to
Landlord.
5.8 Personal Property at Tenants Risk: That all of the
furnishings, fixtures, equipment, effects and property of every
kind, nature and description of Tenant and of all persons claiming
by, through or under Tenant which, during the continuance of this
Lease or any occupancy of the Premises by Tenant or anyone claiming
under Tenant may be on the Premises or elsewhere in the Building or
on the Lot, shall be at the sole risk and hazard of Tenant, and if
the whole or any part thereof shall be destroyed or damaged by
fire, water or otherwise, or by the leakage or bursting of water
pipes, steam pipes, or other pipes, by theft or from any other
cause, no part of said loss or damage is to be charged to or be
borne by Landlord.
5.9 Right of Entry: To permit Landlord and its agents: to examine
the Premises at reasonable times and, if Landlord shall so elect,
to make any repairs or replacements Landlord may deem necessary; to
remove, at Tenants expense, any alterations, additions, signs,
curtains, blinds, shades, awnings, aerials, flagpoles, or the like
not consented to in writing; and to show the Premises to
prospective tenants during the twelve (12) months preceding
expiration of the Term and to prospective purchasers and mortgagees
at all reasonable times.
5.10 Floor Load; Prevention of Vibration and Noise: Not to place
a load upon the Premises exceeding a rate of 80 pounds of live load
per square foot in the office area; and not to place or move any
safe, vault or other heavy equipment in, about or out of the
Premises except in such manner and at such time as Landlord shall
in each instance authorize; Tenants business machines and
mechanical equipment which cause vibration or noise that may be
transmitted to the Building structure or to any other space in the
Building shall be so installed, maintained and used by Tenant as to
minimize such vibration or noise and so as not to distrupt the
normal business operations of other tenants in the Building.
5.11 Security: To comply with all such reasonable measures as
Landlord may deem advisable for the security of the Building and
its occupants, including, without limitation, the evacuation of the
Building for cause, suspected cause, or for drill purposes, the
temporary denial of access to the Building, and the closing of the
Building after regular working hours, (i.e. 8:00 a.m. to 6:00 p.m.
on business week days and on Saturdays from 8:00 a.m. to 1:00 p.m.)
Sundays and legal holidays, subject, however, to Tenants right to
admittance when the Building is closed after regular working hours
under such reasonable regulations as Landlord may prescribe from
time to time which may include, by way of example but not of
limitation, that persons entering or leaving the Building, whether
or not during regular working hours, identify themselves to a
watchman by registration or otherwise and that said persons
establish their right to enter or leave Building.
5.12 Personal Property Taxes: To pay promptly when due all taxes
which may be imposed upon personal property (including, without
limitation, fixtures and equipment) in the Premises to whomever
assessed.
5.13 Payment of Litigation Expenses: As Additional Rent, to pay
all reasonable costs, counsel and other fees incurred by Landlord
in connection with the successful enforcement by Landlord of any
obligations of Tenant under this Lease.
5.14 Tenant Holdover: To pay to Landlord the greater of twice the
then fair market rent as conclusively determined by Landlord or the
total of the Annual Base Rent and Additional Rent then applicable
for each month or portion thereof Tenant shall retain possession of
the Premises or any part thereof after the termination of this
Lease, whether by lapse of time or otherwise, and also to pay all
damages sustained by Landlord on account thereof; the provisions of
this subsection shall not operate as a waiver by Landlord on the
right of re-entry provided in this Lease; at the option of Landlord
exercised by a written notice given to Tenant while such holding
over continues, such holding over shall constitute an extension of
this Lease for a period of one year.
5.15 Hazardous Wastes: Not to use any portion of the Premises,
Building or Lot for the generation or disposal of oil, hazardous
material, hazardous waste, or hazardous substances (collectively,
the Materials), as such terms are defined under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
S9601 et seq., as amended, the Resource Conservation and Recovery
act of 1976, 42 U.S.C. S6901 et seq., as amended, and the
regulations promulgated thereunder, and all applicable state and
local laws, rules and regulations, including, without limitation,
Massachusetts General Laws, Chapters 21C and 21E (the Superfund and
Hazardous Waste Laws), or remove any Materials from the Property
without the express written prior consent of Landlord and, if
required, its mortgagees, and then only to the extent that the
presence or removal of the Materials is (i) properly licensed and
approved by all appropriate governmental officials and in
accordance with all applicable laws and regulations and (ii) in
compliance with any terms and conditions stated in said prior
written approvals by the Landlord or its mortgagees. Tenant shall
promptly provide Landlord with copies of all notices received by
it, including, without limitation, any notice of violations, notice
of responsibility or demand for action from any federal state or
local authority or official in connection with the presence of
Materials in or about the Property or removal of Materials from the
Property. In the event of any release of Materials, as defined in
the Superfund and Hazardous Laws and said release is caused by
Tenant or its agents, employees, visitees or contractors, Tenant
shall promptly remedy the problem in accordance with all applicable
laws and requirements and shall indemnify and hold the Landlord
harmless from and against all loss, costs, liability and damage,
including attorneys fees and the cost of litigation, arising from
the presence or release of any Materials in or on the Premises or
removal of Materials from the Property. Landlord agrees to
indemnify and hold Tenant harmless from and against all loss,
costs, liability and damage including attorneys fees arising from
the release of Materials on the Property and said release is not
caused by Tenant and/or its agents, employees, visitees or
contractors. The provisions of this paragraph shall survive the
expiration or earlier termination of this Lease. Notwithstanding
the foregoing, Tenant shall be permitted to properly use and store
within the Premises such Materials as are required by Tenant for
the Use permitted in this Lease so long as Tenants use of such
Materials is in strict accordance with all laws, rules and
regulations governing such Materials. Tenant shall provide
Landlord with a list of all Materials used by Tenant as of the
commencement date of this Lease.
ARTICLE VI
CASUALTY AND TAKING
6.1 Termination or Restoration; Rent Adjustment: In case during
the Term all or any substantial part of the Premises or the
Building or the Lot are damaged materially by fire or other
casualty or by action of public or other authority in consequence
thereof, or are taken by eminent domain or Landlord receives
compensable damage by reason of anything lawfully done in pursuance
of public or other authority, this Lease shall terminate at
Landlords election, which may be made notwithstanding Landlords
entire interest may have been divested, by notice given to Tenant
within ninety (90) days after such event, specifying the effective
date of termination. The effective date of termination specified
by Landlord shall not be less than thirty (30) nor more than sixty
(60) days after the date of notice of such termination. Unless
terminated pursuant to the foregoing provisions, this Lease shall
remain in full force and effect following any such damage or
taking, subject, however, to the following provisions. If this
Lease is not so terminated, Landlord shall use due diligence
(following the expiration of the period in which Landlord may
terminate this Lease pursuant to the foregoing provisions of this
Section 6.1) to put the Premises, or in case of taking what may
remain thereof (excluding in case of both casualty and taking any
items installed or paid for by Tenant which Tenant may be required
to remove pursuant to Section 5.2), into proper condition for use
and occupation and a just proportion of the Annual Base Rent and
Additional Rent according to the nature and extent of the injury
shall be abated until the Premises or such remainder shall have
been put by Landlord in such condition; and in case of a taking
which permanently reduces the area of the Premises, a just
proportion of the Annual Base Rent and Additional Rent shall be
abated for the remainder of the Term. Notwithstanding the
foregoing, if all or any substantial part of the Premises are
damaged materially or are taken by eminent domain so that Tenant
cannot utilize any portion of the Premises for the Use allowed
hereunder and Landlord cannot restore the Premises within ninety
(90) days from the date of said damage, then Tenant shall have the
right to terminate this Lease by providing fifteen (15) days prior
written notice after the period allowed above for Landlord to
restore.
6.2 Eminent Domain Damages Reserved: Landlord reserves to itself
any and all rights to receive awards made for damages to the
Premises and Building and Lot and the leasehold hereby created, or
any one or more of them, occurring by reason of exercise of eminent
domain or by reason of anything lawfully done in pursuance of
public or other authority. Tenant hereby releases and assigns to
Landlord all Tenants rights to such awards, and covenants to
deliver such further assignments and assurances thereof as Landlord
may from time to time request, hereby irrevocably designating and
appointing Landlord as its attorney-in-fact to execute and deliver
in Tenants name and behalf all such further assignments thereof.
6.3 Temporary Taking: In the event of any taking of the Premises
or any part thereof for temporary use, (i) this Lease shall be and
remain unaffected thereby and rent shall not abate, and (ii) Tenant
shall be entitled to receive for itself such portion or portions of
any award made for such use with respect to the period of the
taking which is within the Term, provided that if such taking shall
remain in force at the expiration or earlier termination of this
Lease, Tenant shall then pay to Landlord a sum equal to the
reasonable cost of performing Tenants obligations under Section 5.2
with respect to surrender of the Premises and upon such payment
shall be excused from such obligations.
ARTICLE VII
DEFAULT
7.1 Events of Default: If any default by Tenant continues after
notice from Landlord, in case of the payment of Annual Base Rent or
Additional Rent for more than ten (10) days, or in any other case
for more than thirty (30) days and such additional time, if any, as
is reasonably necessary to cure the default if the default is of
such a nature that it cannot reasonably be cured in thirty (30)
days; or if Tenant or any guarantor of any of Tenants obligations
under this Lease makes any assignment for the benefit of creditors,
or files a petition under any provision or chapter of any
bankruptcy or insolvency law; or if such petition filed against
Tenant or such guarantor is not dismissed within sixty (60) days;
or if a receiver or similar officer becomes entitled to Tenants
leasehold hereunder and is not returned to Tenant within sixty (60)
days; or if such leasehold is taken on execution or other process
of law in any action against Tenant, then in any such case, whether
or not the Term shall have begun, Landlord may immediately, or at
any time while such default exists and without further notice,
terminate this Lease by notice to Tenant, specifying a date not
less than ten (10) days after the giving of such notice on which
this Lease shall terminate and this Lease shall come to an end on
the date specified therein as fully and completely as if such date
were the date herein originally fixed for the expiration of the
Lease Term, and Tenant will then quit and surrender the Premises to
Landlord, but Tenant shall remain liable as hereinafter provided.
7.2 Damages: In the event that this Lease is terminated under any
of the provisions contained in Section 7.1 or shall be otherwise
terminated for breach of any obligation of Tenant, Tenant covenants
to pay forthwith to Landlord, as compensation, the excess of the
total rent reserved for the residue of the Lease Term over the fair
rental value of the Premises as determined by Landlord for said
residue of the Lease Term. In calculating the rent reserved, there
shall be included, in addition to the Annual Base Rent and all
Additional Rent, the value of all other consideration agreed to be
paid or performed by Tenant for said residue. Tenant further
covenants as an additional and cumulative obligations after any
such ending to pay punctually to Landlord, all the sums and perform
all the obligations which Tenant covenants in this Lease to pay and
to perform in the same manner and to the same extent and at the
same time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant under the preceding and next
paragraph, Tenant shall be credited with any amount paid to
Landlord as compensation as in this Section 7.2 provided and also
with the net proceeds of any rent obtained by Landlord by reletting
the Premises, after deducting all Landlords expenses in connection
with such reletting, including, without limitation, all
repossession costs, brokerage commissions, fees for legal services
and expenses of preparing the Premises for such reletting, it being
agreed by Tenant that Landlord may (i) relet the Premises or any
part or parts thereof, for a term or terms which may, at Landlords
option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the Lease Term and may
grant such concessions and free rent as Landlord, in its sole
judgement, considers advisable or necessary to relet the same, and
(ii) make such alterations, repairs and decorations in the Premises
as Landlord, in its sole judgement, considers advisable or
necessary to relet the same, and no action of Landlord in
accordance with the foregoing or failure to relet or to collect
rent under reletting shall operate or be construed to release or
reduce Tenants liability as aforesaid.
In lieu of any other damages or indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing
provisions of this Section 7.2, Landlord may, by written notice to
Tenant, at any time after this Lease is terminated under any of the
provisions contained in Section 7.1 or is otherwise terminated for
breach of any obligation of Tenant and before such full recovery,
elect to recover, and Tenant shall thereupon pay, as liquidated
damages, an amount equal to the aggregate of the Annual Base Rent
and Additional Rent accrued under Section 2.5, 2.6 and 2.7 in the
12 months prior to such termination, plus the amount of Annual Base
Rent and Additional Rent of any kind accrued and unpaid at the time
of termination, plus legal expenses due under Section 5.13, and
less the amount of any recovery by Landlord under the foregoing
provisions of this Section 7.2 up to the time of payment of such
liquidated damages.
Nothing contained in this Lease shall limit or prejudice the
right of Landlord to prove for and obtain in proceedings for
bankruptcy or insolvency by reason of the termination of this
Lease, an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amount of the
loss or damages referred to above.
ARTICLE VIII
MISCELLANEOUS
8.1 Security Deposit: Simultaneous with the execution and
delivery of this Lease, Tenant has delivered to Landlord the
Security Deposit. The Security Deposit shall be held by Landlord,
without interest, as security for the full and timely performance
of Tenants obligations under the terms of this Lease. In the event
that Tenant defaults in respect of any of its obligations
hereunder, Landlord shall have the right to apply the whole or any
portion of the Security Deposit toward payment of any amount in
default or in reduction of any damages Landlord might incur as a
result of said default and such use or application by Landlord
shall be without prejudice of any other remedy Landlord may have
under this Lease or otherwise at law or in equity. If Landlord
applies the Security Deposit or any portion thereof as aforesaid,
Tenant shall, upon Landlords request, promptly replace the amount
applied in order to restore the Security Deposit to its original
amount. Landlord shall be entitled to commingle the Security
Deposit with other assets of Landlord. If Tenant is entitled to a
full refund of the Security Deposit after termination of this
Lease, Landlord shall pay said Security Deposit to Tenant plus
simple interest at the rate of three (3%) percent per year.
8.2 Notice of Lease; Consent or Approval; Notices; Bind and Inure;
Landlords Estate: The titles of the Articles are for convenience
only and not to be considered in construing this Lease. The
Exhibits attached hereto are incorporated herein by reference.
Tenant agrees not to record this Lease, but upon request of either
party, both parties shall execute and deliver a notice of this
Lease in form appropriate for recording or registration, and if
this Lease is terminated before the Term expires, an instrument in
such form acknowledging the date of termination. Whenever any
notice, approval, consent, request or election is given or made
pursuant to this Lease it shall be in writing. Communications and
payments shall be addressed if to Landlord at Landlords Address or
at such other address as may have been specified by prior notice to
Tenant; and if to Tenant at Tenants Address or at such other place
as may have been specified by prior notice to Landlord. Any
communication so addressed shall be mailed by registered or
certified mail, return receipt requested, postage prepaid, by
express mail, by express courier service, or by hand. Notice or
payment shall be deemed given when so delivered by hand or, if
mailed by registered or certified mail, two days after it is
deposited with the U.S. Postal Service, or if sent by express mail
or courier service, one day after it is deposited with the U. S.
Postal or such other service. If Landlord by notice to Tenant at
any time designates some other person to receive payments or
notices, all payments or notices thereafter by Tenant shall be paid
or given to the agent designated until notice to the contrary is
received by Tenant from Landlord. The obligations of this Lease
shall run with the land, and this Lease shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that each original
Landlord named herein and each successive owner of the Premises
shall be liable only for obligations accruing during the period of
its ownership. If Landlord shall at any time be an individual,
joint venture, tenancy in common, firm or partnership (general or
limited) a trust or trustees of a trust, it is specifically
understood and agreed that there shall be no personal liability of
the Landlord or any joint venturer, tenant, partner, trustee,
shareholder, beneficiary or holder of a beneficial interest under
any of the provisions hereof or arising out of the use or
occupation of the Premises by Tenant. In the event of a breach or
default by Landlord of any of its obligations under this Lease,
Tenant shall look solely to the then equity of the Landlord in the
Property for the satisfaction of Tenants remedies, and it is
expressly understood and agreed that Landlords liability under the
terms, covenants, conditions, warranties and obligations of this
Lease shall in no event exceed the value of such equity interest.
8.3 Landlords Failure to Enforce: The failure of Landlord or of
Tenant to seek redress for violation of, or to insist upon strict
performance of, any covenant or condition of this Lease, or, with
respect to such failure of Landlord, any of the Rules and
Regulations referred to in Section 5.4, whether heretofore or
hereafter adopted by Landlord, shall not be deemed a waiver of such
violation nor prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an
original violation, nor shall the failure of Landlord to enforce
any of said Rules and Regulations against any other tenant of the
Building be deemed a waiver of any such Rules or Regulations. The
receipt by Landlord of Annual Base Rent or Additional Rent with
knowledge of the breach of any covenant of this Lease shall not be
deemed a waiver of such breach. No provision of this Lease shall
be deemed to have been waived by Landlord, or by Tenant, unless
such waiver be in writing signed by the party to be charged. No
consent or waiver, express or implied, by Landlord or Tenant to or
of any breach of any agreement or duty shall be construed as a
waiver or consent to or of any other breach of the same or any
other agreement or duty.
8.4 Acceptance of Partial Payments of Rent; Delivery of Keys: No
acceptance by Landlord of a lesser sum than the Annual Base Rent
and Additional Rent then due shall be deemed to be other than on
account of the earliest installment of such rent, due, nor shall
any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to Landlords right to recover the balance of such
installment or pursue any other remedy in this Lease provided. The
delivery of keys to any employee of Landlord or to Landlords agent
or any employee thereof shall not operate as a termination of this
Lease or a surrender of the Premises.
8.5 Cumulative Remedies: The specific remedies to which Landlord
may resort under the terms of this Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress
to which it may be lawfully entitled in case of any breach or
threatened breach by Tenant of any provisions of this Lease. In
addition to the other remedies provided in this Lease, Landlord
shall be entitled to the restraint by injunction of the violation
or attempted or threatened violation of any of the covenants,
conditions or provisions of this Lease or to a decree compelling
specific performance of any such covenants, conditions or
provisions.
8.6 Partial Invalidity: If any term of this Lease, or the
application thereof, to any person or circumstances, shall to any
extent be invalid or unenforceable, the remainder of this Lease, or
the application of such term to persons or circumstances other than
those to which it is invalid or unenforceable, shall not be
affected thereby, and each term of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
8.7 Self-Help: If Tenant shall at any time default in the
performance of any obligation under this Lease, Landlord shall have
the right, but shall not be obligated, to enter upon the Premises
and to perform such obligation notwithstanding the fact that no
specific provision for such substituted performance by Landlord is
made in this Lease with respect to such default. In performing
such obligation, Landlord may make any payment of money or perform
any other act. All sums so paid by Landlord (together with
interest at the rate of 4 percentage points over the then
prevailing prime rate in Boston as set by The First National Bank
of Boston) and all necessary incidental costs and expenses in
connection with the performance of any such act by Landlord, shall
be deemed to be Additional Rent under this Lease and shall be
payable to Landlord immediately on demand. Landlord may exercise
the foregoing rights without waiving any other of its rights or
releasing Tenant from any of its obligations under this Lease.
8.8 Tenants Estoppel Certificate: Tenant agrees from time to
time, upon not less than five days prior written request by
Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing certifying that this Lease is unmodified and
in full force and effect and that Tenant has no defenses, offsets
or counterclaims against its obligations to pay the fixed rent and
additional rent and to perform its other covenants under this Lease
and that there are no uncured defaults of Landlord or Tenant under
this Lease (or, if there have been any modifications, that the same
are in full force and effect as modified and stating the
modifications and, if there are any defenses, offsets,
counterclaims or defaults, setting them forth in reasonable
detail), and the dates to which the fixed rent and additional rent
and other charges have been paid. Any such statement delivered
pursuant to this Section 8.8 may be relied upon by any prospective
purchaser or mortgagee of the Premises or any prospective assignee
of any mortgagee of the Premises.
8.9 Waiver of Subrogation: Any insurance carried by either party
with respect to the Premises or property therein or occurrences
thereon shall, if it can be so written without additional premium
or with any additional premium which the other party agrees to pay,
include a clause or endorsement denying to the insurer rights of
subrogation against the other party to the extent rights have been
waived by the insured prior to occurrence of injury or loss. Each
party, notwithstanding any provisions of this Lease to the
contrary, hereby waives any rights of recovery against the other
for injury or loss due to hazards covered by such insurance to the
extent of the indemnification received thereunder.
8.10 All Agreements Contained: This Lease contains all of the
agreements of the parties with respect to the subject matter
thereof and supersedes all prior dealings between them with respect
to such subject matter.
8.11 Brokerage: Tenant warrants that it has had no dealings with
any broker or agent in connection with this Lease other than Rader
Properties, Inc. and covenants to defend with counsel approved by
Landlord, hold harmless and indemnify Landlord from and against any
and all cost, expense or liability for any compensation,
commissions and charges claimed by any other broker or agent with
respect to Tenants dealings in connection with this Lease or the
negotiation thereof.
8.12 Submission Not an Option: The submission of this Lease or a
summary of some or all of its provisions for examination does not
constitute a reservation of or option of the Premises or an offer
to lease.
ARTICLE IX
RIGHTS OR PARTIES HOLDING PRIOR INTERESTS
9.1 Lease Subordinate: This Lease shall be subject and
subordinate to any first mortgage now or hereafter on the Lot or
Building, or both, which are separately and together hereinafter in
this Article IX referred to as the mortgaged premises, and to each
advance made or hereafter to be made under any mortgage, and to all
renewals, modifications, consolidations, replacements and
extensions thereof and all substitutions therefor. This Section
9.1 shall be self- operative and no further instrument of
subordination shall be required. In confirmation of such
subordination, Tenant shall execute and deliver promptly any
certificate that Landlord or any mortgagee may request. In the
event that any mortgagee or its respective successor in title shall
succeed to the interest of Landlord, then, this Lease shall
nevertheless continue in full force and effect and Tenant shall and
does hereby agree to attorn to such mortgagee or successor and to
recognize such mortgagee or successor as its Landlord. Tenant
shall subordinate this Lease to mortgagee only if each such
mortgagee executes a non-disturbance agreement for the benefit of
Tenant.
9.2 Modification, Termination or Cancellation; Advance Payments of
Rent: No assignment of this Lease and no agreement to make or
accept any surrender, termination or cancellation of this Lease and
no agreement to modify so as to reduce the rent, change the Term or
otherwise materially change the rights of Landlord under this
Lease, or to relieve Tenant of any obligations or liability under
this Lease, shall be valid unless consented to by Landlords
mortgagees of record, if any. No Annual Base Rent or Additional
Rent, or any other charge shall be paid more than ten days prior to
the due date thereof and payments made in violation of this
provision shall (except to the extent that such payments are
actually received by a mortgagee) be a nullity as against any
mortgagee and Tenant shall be liable for the amount of such
payments to such mortgagee.
9.3 Rights of Holder to Notice of Defaults by Landlord and to
Cure Same: No act or failure to act on the part of Landlord which
would entitle Tenant under the terms of this Lease, or by law, to
be relieved of Tenants obligations hereunder or to terminate this
Lease, shall result in a release or termination of such obligations
or a termination of this Lease unless (i) Tenant shall have first
given written notice of Landlords act or failure to act to
Landlords mortgagees of record, if any, specifying the act or
failure to act on the part of Landlord which could or would give
basis to Tenants rights, and (ii) such mortgagees, after receipt of
such notice, have failed or refused to correct or cure the
condition complained of within a reasonable time thereafter; but
nothing contained in this Section 9.3 shall be deemed to impose any
obligation on any such mortgagees to correct or cure any condition.
Reasonable time as used herein means and includes a reasonable time
to obtain possession of the mortgaged premises if the mortgagee
elects to do so and a reasonable time to correct or cure the
condition if such condition is determined to exist.
9.4 Implementation of Article IX: Tenant agrees on request of
Landlord to execute and deliver from time to time any agreement
which may reasonably be deemed necessary to implement the
provisions of this Article IX.
9.5 Annual Financial Statements: The Tenant shall be required to
provide the Landlord with copies of its annual financial
statements. If Tenant obtains audited financial statements it
shall provide these audited statements to Landlord.
EXECUTED as a sealed instrument in four or more counterparts
on the date and year first above written.
LANDLORD: 110 Industrial Park, LLC
BY:s/James F. Rader
Name: James F. Rader
Title: Managing Member
TENANT: DYNATENN, INC.
BY:s/Robert S. Schiffman
Name: R.S. Schiffman
Title: Chairman<PAGE>
EXHIBIT A
110 INDUSTRIAL PARK ROAD
HINGHAM, MASSACHUSETTS
Site Plan
EXHIBIT B
110 INDUSTRIAL PARK ROAD
HINGHAM, MASSACHUSETTS
FLOOR PLAN
Page 1 of 1
EXHIBIT C
110 INDUSTRIAL PARK ROAD
HINGHAM, MASSACHUSETTS
LANDLORDS SERVICES
I. EXTERIOR MAINTENANCE
A. Landlord shall remove snow from the parking lot. Tenant
shall at its sole cost remove snow and ice from all
walkways and doorways providing access to Tenants
Premises.
B. Landlord shall maintain exterior landscaping.
C. Landlord shall clean outside of windows.
Page 1 of 1
EXHIBIT D
110 INDUSTRIAL PARK ROAD
HINGHAM, MASSACHUSETTS
RULES AND REGULATIONS FOR MULTI-TENANT BUILDING
1. No on street parking will be permitted. No overnight parking
of vehicles will be permitted on the Lot.
2. Tenant shall obtain Landlords prior written consent before
making any penetrations in or improvements on the roof
including installation of mechanical equipment. Tenant shall
be solely responsible for any damage to the roof caused by its
agents, employees or contractors.
3. No loading or unloading facilities shall be allowed in the
front of the Premises and/or the Building. No outside storage
will be permitted except for temporary storage for no longer
than 30 days. All dumpster locations must be approved by
Landlord.
4. No signs shall be placed on the face of the Building by Tenant
except for on the loading doors of the Premises and one
Building sign to replace the existing HVEC sign adjacent to
Tenants entrance. Tenant shall also be permitted to use a
portion of the pylon sign on Industrial Park Road. All signs
shall be at Tenants expense. Any other signs shall be subject
to the prior written approval of the Landlord and in
compliance with all applicable sign ordinances and
regulations.
5. The construction, installation and alteration of any
structure, sign, wall, pole, antenna or parking and loading
facility on portion of the property shall be subject to the
prior written approval of Landlord.
6. Tenant shall have full responsibility for protecting the
Premises and all Tenants property located therein from theft
and robbery, and shall keep all doors, windows and transoms
securely fastened when the Premises are not open for business.
However, Tenant shall not re-key any existing lock nor place
any other or additional lock upon any door or other means of
entry within the Premises or elsewhere upon the property
without Landlords prior approval. Any new lock installed by
Tenant or re-keying of any existing locks shall utilize a key
that is included within the Landlords master key system and
Tenant shall provide Landlord with a copy of such new key(s).
7. Tenant shall occupy the Premises in a safe, proper and lawful
manner and keep the Premises and all windows and signs in
good, neat and orderly condition; clean and sanitary, and if
by reason of any infestation by insects, rodents, vermin or
other pests, the Premises becomes infested, Tenant shall be
responsible for exterminating such condition from the
Premises.
Page 1 of 2
8. Tenant shall permit no act or practice which may tend to
injure the Premises, the Building and/or the surrounding area
or any equipment or display located thereon or permit
activities within the Premises to be a nuisance to other
tenants by reason of noise, dust, light, vibration, smell,
radiation or other causes.
9. Tenant shall keep the Premises at a temperature sufficiently
high to prevent freezing of water in pipes in fixtures.
10. In the event that Tenant installs a security system in or for
the benefit of the Premises, Tenant shall furnish Landlord
with all drawings and available manufacturers data for such
system upon termination of the Lease as a condition to a
return of Tenants security deposit.
11. Tenant shall comply with all further rules and regulations for
the use and occupancy of the Premises as Landlord, in its sole
discretion, from time to time promulgates for the best
interest of the Building. Landlord shall have no liability
for violation by any other tenants of the Building of any
rules or regulations nor shall such violation or the waiver
thereof excuse Tenant from compliance.
Page 2 of 2
<PAGE>
EXHIBIT E
110 INDUSTRIAL PARK ROAD
HINGHAM, MASSACHUSETTS
RIDERS
Rider 1: The Annual Base Rent described in Article 1, Section
1.1 hereof shall increase each year of the Term in
accordance with the following schedule:
Period Base Rent/SF Annual Base Rent
Year 1 5.40 150,709
Year 2 5.62 156,849
Year 3 5.84 162,989
Year 4 6.07 169,408
Year 5 6.32 176,385
Rider 2 - Cleaning: Tenant shall be solely responsible for
cleaning its Premises and providing dumpster service. The
location of Tenants dumpster must be approved by Landlord.
Rider 3 - Parking: Tenant shall have the use of 75 parking spaces.
The location of these spaces may change from time to time at
the discretion of the Landlord.
Rider 4 - Utilities: All charges for utilities serving the
Premises including but not limited to water, gas, electric and
telephone shall be paid for solely by the Tenant. Tenant
shall, at its sole cost, pay all costs associated with
installing separate utility meters to monitor Tenants utility
consumption and to ensure that Tenant pays each and every
utility company directly for the cost of Tenants utility
consumption.
Rider 5 - Septic System: In recognition that the Leased Premises
are served by a septic system used jointly with others, Tenant
agrees that the disposal of wastes to such system shall be
limited to domestic and other usage customary for office uses
so that it shall dispose of only domestic and other customary
office liquid wastes compatible with the septic system and
that it shall not violate any applicable government
regulation. Tenant agrees to indemnify Landlord from any
expense of liability, repair and maintenance incurred on
account of Tenants misuse of the septic system.
Rider 6 - Sublease Contingency: Landlord and Tenant hereby
acknowledge that this Lease is contingent upon Tenant
occupying all or a portion of the Premises before November 1,
1996 under a separate sublease agreement containing terms
acceptable to Tenant. If Tenant is unable to obtain occupancy
of the Premises on or before November 1, 1996 then this Lease
shall be void and of no further force and effect between
Landlord and Tenant. In the event that Tenant exercises its
right to terminate the sublease between Tenant, as sublessee
and New England Book Components, Inc. as sublessor of the
Premises under the provisions in the sublease agreement
similar to the provisions of Section 6.1 of this Lease, Tenant
shall have the right to terminate this Lease upon thirty (30)
days prior written notice to Landlord. However, Landlord
shall have the same restoration rights provided in Section 6.1
during the term of the sublease. If the lease between New
England Book Components, Inc. as Lessee and 110 Industrial
Park, LLC as successor to John R. Lombardo as Lessor is
terminated for any reason other than the Tenants (sublessees)
default, then Landlord agrees to assume the rights and
obligations of the sublessor for the remainder of the sublease
term.
Rider 7 - Non Disturbance: Landlord agrees to use reasonable
efforts to furnish Tenant a Non Disturbance Agreement from any
current and subsequent mortgagee(s) that confirms that so long
as Tenant is not in default under any of the terms and
conditions of this Lease, Tenants possession and use of the
Premises shall not be disturbed or interfered with by such
mortgagee(s).
Rider 8 - Condition of the Premises: In addition to the provisions
of Article II, Section 2.6 and Article IV, Tenant and Landlord
acknowledge that the Premises are delivered to Tenant in their
as is condition as of the commencement of this Lease. During
the Term of this Lease, any repairs, maintenance, replacements
or improvements required to be performed in or about the
Premises, except as required under Article IV, Section 4.1.2
hereof, shall be performed by Tenant at Tenants sole cost and
expense. Notwithstanding the foregoing, if any heating and
air conditioning unit serving the Premises cannot be repaired
and must be replaced with a new unit, then Tenants share of
the replacement cost shall not exceed the resulting amount
from multiplying the cost of the replacement unit multiplied
by a fraction, the numerator of which is the remaining term
left on Tenants lease and the denominator of which is the
useful life period of the replacement unit.
Notwithstanding the provisions of Article II, Section 2.6 of
the Lease, the Landlord shall establish a not to exceed amount
the Not To Exceed Operating Costs which amount shall be
included in the Monthly and Annual Rent paid by Tenant. The
Not To Exceed Operating Costs amount shall be the maximum
amount due from Tenant to Landlord for all line items that
make up Landlords Operating Cost excluding water and septic
and utility charges, real estate taxes, as defined in the
Lease and charges for snowplowing. The Not To Exceed
Operating Costs amount shall increase each year of the Term as
follows:
Period Not To Exceed Operating Costs/SF Annual Amount
Year 1 .80 $22,327
2 .83 $23,164
3 .87 $24,281
4 .90 $25,118
5 .94 $26,234
All line items of Landlords Operating Costs which are
specifically excluded from the Not To Exceed Operating Costs
shall be payable by Tenant as required in Section 2.6 and
under the other terms of the Lease.
Rider 9 - Option To Purchase: Provided that Tenant is not in
default under any of the terms and conditions contained in
this Lease, Tenant shall have the right to purchase the
property at any time after October 1, 1999 and before
September 30, 2001 the Option Period. Tenant shall not have
the right to purchase the property at any time other than
during the Option Period unless otherwise agreed to by
Landlord.
To exercise Tenants right to purchase, Tenant must provide
Landlord written notice of its intent to purchase during the
Option Period. A deposit of 10% of the Minimum Purchase Price
must be provided by Tenant immediately upon its receipt of
Landlords Purchase Price Notice which deposit shall be held by
Landlords counsel in escrow pending the transfer of title.
Landlord and Tenant shall execute a mutually acceptable
Purchase and Sale Agreement within thirty (30) days from
Tenants receipt of Landlords Purchase Price Notice. Tenant
shall have fifteen (15) days from the date of the Purchase and
Sale Agreement within which to deliver to Landlord the full
Purchase Price in cash or by certified bank check. If Tenant
fails to deliver to Landlord the Purchase Price funds as
required above, Tenant shall forfeit its deposit which shall
become the property of the Landlord and Tenant shall waive all
right to purchase the property granted hereunder.
The Purchase Price shall be reasonably determined by Landlord
within thirty (30) days from the date of Tenants notice to
exercise its purchase rights hereunder the Landlords Purchase
Price Notice. In determining the Purchase Price, Landlord
shall take into account among other factors what comparable
buildings have sold for in the surrounding Hingham area. In no
event shall the Purchase Price be less than $1,650,000 plus
any improvement costs paid by Landlord during the period of
its ownership plus any financing or pre-payment costs
associated with paying off Landlords mortgage before its
maturity date hereinafter referred to as the Minimum Purchase
Price. If after receiving Landlords Purchase Price Notice,
Tenant disagrees with Landlords determination of the Purchase
Price, Tenant shall notify Landlord in writing within ten (10)
days from receipt of Landlords Purchase Price Notice if Tenant
elects to (a) receive a refund of its deposit or (b) pursue
the appraisal method described below.
Other than Tenants right to terminate its Purchase Option if
(a) it disagrees with the Landlords determination of the
Purchase Price or (b) if Landlord and Tenant fail to execute
the Purchase and Sale Agreement as required above or (c)
Tenant obtains at its sole expense a Hazardous Waste
Investigation Report prepared by a qualified engineer that the
Property fails to conform to all laws governing Hazardous
Materials and such failure is not caused by Tenant and or its
agents, employees, visitees or contractor or (d) Tenant
disagrees with the final appraised value of the Property,
Tenant shall have no other contingencies or rights to
terminate once it notifies Landlord of its intent to purchase.
Notwithstanding the foregoing, if Tenant disagrees with the
Purchase Price contained in Landlords Purchase Price Notice,
then Landlord and Tenant shall each forthwith appoint a
qualified SREA/MAI appraiser with at least five (5) years
commercial appraisal experience in the area in which the
Property is located. Said appraisers shall make a
determination of the fair market value for the Property. In
the event that the parties appraisers do not establish the
same fair market value for the Property, the two appraisers so
chosen shall select a third SREA/MAI appraiser with at least
five (5) years commercial appraisal experience in the area in
which the Property is located, and a decision by a majority of
the three appraisers shall be binding upon the Landlord and
Tenant. Each party shall bear the costs of the appraiser
chosen by said party and the Landlord and Tenant shall share
equally the cost of the third appraiser. All of the
appraisers selected however shall have a total of fifteen days
within which to determine the market value of the property.
In no event shall the appraisal value which is ultimately
determined be any less than the Minimum Purchase Price. The
deadline for completing a Purchase and Sale Agreement shall be
extended to the date which is five (5) days beyond the
deadline for completing the appraisal process. In no event
shall the closing date be any sooner than ten (10) days after
the appraisal process is completed nor any later than thirty
(30) days after the appraisal process is completed. If after
completing the appraisal process Tenant does not accept the
market value for any reason, Tenant shall have the right to
terminate its option to purchase by providing written notice
to Landlord within five (5) days after the completion of the
appraisal. If Tenant elects to terminate as specified herein,
it shall reimburse Landlord for all costs of every kind and
nature which Landlord incurred relating to the terms of this
Option to Purchase. After paying all of Landlords costs from
Tenants deposit, Tenant shall be entitled to a refund of its
deposit paid hereunder if it terminates as specified herein.
Landlord agrees not to place a mortgage or any other lien on
the property which exceeds 80% of the Purchase Price.
The rights provided herein are subject and subordinate to the
terms and provisions of any mortgage financing placed upon the
property. Without limiting the generality of the foregoing,
Tenant acknowledges that such rights shall terminate and be of
no further effect upon any default and/or acceleration of such
financing.
EXHIBIT F
110 INDUSTRIAL PARK ROAD
HINGHAM, MASSACHUSETTS
GUARANTY annexed to Lease dated _________________________
between 110 Industrial Park, LLC (Landlord) and Dynatenn,
Inc. (Tenant).
In consideration of the simultaneous letting, at the request of the
undersigned, of the premises described in the within lease to the
above Tenant, the undersigned does hereby, on behalf of the
undersigned and its heirs, executors, administrators, successors or
assigns of the undersigned, guaranty to Landlord, its successors
and assigns, the full payment, performance and observance of all
the terms, covenants and conditions therein expressed on said
Tenants part to be paid, performed and observed and also all
damages that may arise in consequence of the non-payment, non-
performance or non-observance of said terms, covenants or
conditions, without requiring any notice of non-payment, non-
performance or non-observance, or proof, notice or demand whereby
to charge the undersigned therefor, all of which the undersigned
hereby expressly waives and expressly covenants and agrees that the
obligation of the undersigned hereunder shall in no way be
terminated or otherwise affected or impaired by reason of any
assertion by Landlord against Tenant of any of the rights or
remedies available to Landlord pursuant to said lease or allowed at
law or in equity.
The undersigned does hereby covenant and agree to and with said
Landlord, its successors and assigns, that the undersigned may be
joined in any action against said Tenant in connection with said
lease and that recovery may be had against the undersigned in such
action or in any independent action against the undersigned without
said Landlord, its successors or assigns, first pursuing or
exhausting any remedy or claim against said Tenant, its successors
or assigns. The undersigned also agrees that, in any jurisdiction,
the undersigned will be conclusively bound by the judgement in any
such action by Landlord against Tenant (wherever brought) as if the
undersigned were a party to such action even though the undersigned
is not joined as a party in such action.
The undersigned further covenants and agrees that this guaranty
shall remain and continue in full force and effect as to any
renewal, modification or extension of the within lease and as to
any assignment or subletting (without need of any notice or further
consent of the undersigned thereto) and during any period when
Tenant, its assignees or sublessees are occupying the premises
described in the within lease.
Page 1 of 2
The undersigned hereby waives all right to trial by jury in any
action or proceeding thereinafter instituted by said Landlord to
which the undersigned may be a party.
This Guaranty shall be governed by and construed under the laws of
the Commonwealth of Massachusetts. The undersigned warrants and
represents that he/she/it has the legal right and capacity to
execute this Guaranty. In the event that this Guaranty shall be
held ineffective or unenforceable by any court of competent
jurisdiction, then the undersigned shall be deemed to be a Tenant
under the within lease with the same force and effect as if the
undersigned where expressly named as a joint Tenant therein.
Executed under seal this 19th day of November, 1996.
Witnesses: Guarantor: Tenney Engineering,
Inc.
s/Martin Pelman s/Robert S. Schiffman
s/Clare Andriola Chairman
Page 2 of 2<PAGE>
EXHIBIT (10) h. (ii)
FIRST LEASE AMENDMENT
AGREEMENT made this 19th day of November, 1996 by and between
110 Industrial Park, LLC (Landlord) and DynaTenn, Inc. (Tenant).
WHEREAS, Landlord and Tenant are parties to a certain Lease
dated November 19, 1996 (the Lease) for Premises at 110 Industrial
Park Road, Hingham, Massachusetts, and described more particularly
in the Lease (the Premises); and
WHEREAS, the Landlord and Tenant desire to make certain
changes in the terms of said Lease:
NOW, THEREFORE, in consideration of mutual covenants, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Article I, Section 1.1 is hereby amended by changing the
Scheduled Term Commencement Date from July 1, 1998 to January 1,
1997 and by changing the Approximate Term from Five (5) Years to
Six (6) Years and by changing the Expiration Date from June 30,
2003 to December 31, 2002. The above change reflects the earlier
commencement of the Lease Term beginning on January 1, 1997 and the
earlier termination on December 31, 2002 hereinafter referred to as
the Revised Lease Term.
2. Article 2, Section 2.4 is hereby amended by changing the
date of Lease Commencement from July 1, 1998 to January 1, 1997.
Page 1 of 3
3. The Base Rental Rate and the Not To Exceed Operating Cost
Rent for the Revised Lease Term shall be as follows:
Period Annual Base Annual Not Total/ Total Annual
Rent/SF To Exceed SF Base Rent
Operating and Not To
Cost Rent/ Exceed Oper-
SF ating Cost
Rent Amount
1/1/97 to
6/30/97 5.20 .80 6.00 167,454
7/1/97 to
12/31/98 5.40 .80 6.20 173,036
11/1/98 to
12/31/99 5.62 .83 6.45 180,013
11/1/99 to
12/31/00 5.84 .87 6.71 187,269
11/1/00 to
12/31/01 6.07 .90 6.97 194,526
11/1/01 to
12/31/02 6.32 .94 7.26 202,619
4. The amounts for Annual Base Rent (per s.f.) and Not To
Exceed Operating Costs (per s.f.) listed in Article 1, Section 1.1
and Exhibit E, Riders 1 and 8 of the Lease are hereby changed to
reflect the above amounts. Notwithstanding the foregoing, Tenant
shall have no obligation to pay the required Base Rent due for the
first, third and fifth month of the Lease Extension Period. Tenant
shall, however, be required to make all payments due of Estimated
and Not To Exceed Operating Cost Rent and any Additional Rent due
for said months. Tenant shall also have the right to deduct the sum
of $8,000.00 from the rent due for the second month of the Term.
Page 2 of 3
5. The following sentence shall be added to Exhibit E, Rider
8 of the Lease:
Landlord shall deliver the Premises in broom clean
condition, vacant and free of all tenancies, on the
Commencement Date.
6. Exhibit E, Rider 6 of the Lease entitled Sublease
Contingency is hereby deleted in its entirety.
7. Exhibit E, Rider 8 of the Lease is hereby amended by
changing the words in the sentence in the first paragraph from ...
if any heating and air conditioning unit serving the Premises... to
if any heating and air conditioning unit serving the Premises as of
the Commencement Date hereof....
8. Except as specifically modified by the terms hereof, the
Lease shall remain in full force and effect in accordance with all
of its terms and conditions.
WITNESS our hands and seals as of the date first above
written.
LANDLORD: 110 Industrial Park, LLC
BY: s/
Title:
TENANT: DynaTenn, Inc.
BY: s/Robert S. Schiffman, Chairman
Page 3 of 3<PAGE>
EXHIBIT (10) i. (i)
LOAN AND SECURITY AGREEMENT
DATED SEPTEMBER 12, 1996
BY AND AMONG
TENNEY ENGINEERING, INC. and DYNATENN, INC.
(the Co-Borrowers)
AND
SUMMIT BANK (the Bank)
Prepared by:
LINDABURY, McCORMICK & ESTABROOK
A Professional Corporation
53 Cardinal Drive
Westfield, New Jersey 07091
(908) 233-6800
By: Lisa A. Freidenrich, Esq.
<PAGE>
THIS LOAN AND SECURITY AGREEMENT (together with any
amendments hereto or modifications hereof from time to time,
hereinafter referred to as the Agreement)is made and entered into
on the 12th day of September, 1996, by and among TENNEY
ENGINEERING, INC., a New Jersey corporation, whose principal
place of business is located at 1090 Springfield Road, Union, New
Jersey (together with its successors and assigns, hereinafter
referred to as Tenney); DYNATENN, INC., a Massachusetts
corporation, whose principal place of business is located at 30
Wood Rock Road, Weymouth, Massachusetts (together with its
successors and assigns, hereinafter referred to as DynaTenn)
(Tenney and DynaTenn are sometimes hereinafter collectively
referred to as Co-Borrowers); and SUMMIT BANK, a banking
corporation duly organized and validly existing under the laws of
the State of New Jersey, whose principal office is located
at 210 Main Street, Hackensack, New Jersey 07601 (together with
its successors and assigns, hereinafter referred to as the Bank).
W I T N E S S E T H:
WHEREAS, the Co-Borrowers have requested that the Bank
provide them with a line of credit to be used by the Co-Borrowers
for working capital and for certain payments in connection with
the Settlement (as hereinafter defined); and
WHEREAS, the Bank has agreed to provide the Co-Borrowers
with a line of credit (hereinafter referred to as the Loan) in
the maximum principal amount of THREE HUNDRED THOUSAND
($300,000.00); and
WHEREAS, in order to induce the Bank to make the Loan, Co-
Borrowers have agreed to grant the Bank a security interest in
certain of their respective assets described hereinafter;
NOW, THEREFORE, in consideration of the Banks willingness to
make the Loan to the Co-Borrowers, as well as the mutual promises
and covenants set forth herein, and desiring to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. In this Agreement, unless a
different meaning is clearly required by the context hereof:
Advance or Advances shall mean a Working Capital Advance(s).
Affiliate means any person, company or business entity under
common control, whether such control be direct or indirect. Co-
Borrowers are Affiliates for purposes of this Agreement. All
officers, shareholders, directors, members, managers, subsidiary
corporations and joint ventures of the Co-Borrowers shall be
deemed to be its Affiliates for purposes of this Agreement.
Agreement means this Loan and Security Agreement and any
amendments, modifications and supplements thereto made in
conformity herewith.
Applicable Working Capital Line of Credit Note shall have
the meaning ascribed to it in subsection 2.1(F) of this
Agreement.
Bank shall have the meaning ascribed to it in the Preamble
to this Agreement.
Co-Borrowers shall have the meaning ascribed to it in the
Preamble to this Agreement.
Co-Borrowers Collateral or Collateral shall have the meaning
ascribed to it in Section 4.1 of this Agreement.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, including all regulations, rules, and orders promulgated
in connection therewith, as same may be amended or supplemented
from time to time.
Event of Default shall mean any Event of Default described
in Section 10.1 of this Agreement.
Fiscal Year means each twelve month period ending on the
31st day of each December arising during the Term. The Term
Fiscal Quarter shall refer to each period of three consecutive
months arising during a Fiscal Year which end on December 31st,
March 31st, June 30th, and September 30th.
Floating Base Lending Rate means the Banks commercial rate
of interest announced from time to time as a means of pricing
some of its loans to its customers. It is neither tied to any
external rate of interest or index nor does it necessarily
reflect the lowest rate of interest actually charged by the Bank
to any particular class or category of its customers. Each
change in the Floating Base Lending Rate shall be effective when
and as such change is announced by the Bank. All calculations of
interest shall be made on the basis of the actual number of days
elapsed and a year consisting of 360 days.
Fund means the Sheet Metal Workers National Pension Fund.
GAAP means generally accepted accounting principles which
are recognized as such by the American Institute of Certified
Public Accountants acting through the Financial Accounting
Standards Board (AFASB@) or through other appropriate boards or
committees thereof and which are consistently applied for all
periods so as to reflect properly the financial condition, and
the results of operations and changes in financial position, of a
Person, except that any accounting principle required to be
changed by FASB (or other appropriate board or committee of the
FASB) in order to continue as a generally accepted accounting
principle may be so changed.
Indebtedness means, with respect to any party:
(i) All indebtedness which would appear as
indebtedness on a balance sheet of such party prepared in
accordance with GAAP (a) for money borrowed, (b) which is
evidenced by securities sold for money or (c) which constitutes
purchase money indebtedness;
(ii) all indebtedness of others guaranteed by such
party;
(iii) all indebtedness secured by any lien upon
property owned by such party, even though such party has not
assumed or become liable for the payment of such indebtedness;
and
(iv) all indebtedness of such party created or arising
under any conditional sale, capital lease or title retention
agreement (including any lease in the nature of a title retention
agreement) with respect to property acquired by such party (even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession of
such property), but only to the extent that such property is
included as an asset on the balance sheet of such party.
Line of Credit shall be used interchangeably with Loan.
Loan Documents shall mean (i) this Agreement, (ii) the Note,
and (iii) any other document or instrument executed in connection
therewith.
Note means the $300,000.00 Note evidencing the Line of
Credit.
Obligations means (i) the full and timely payment of all
amounts due under this Agreement and the Note, when and as same
shall become due in accordance with the terms hereof and thereof;
and (ii) the due and timely performance of all Obligations and
observance of all covenants of the Co-Borrowers hereunder and
under the Note; and (iii) the full and timely payment by the Co-
Borrowers of all amounts due under any document, instrument,
or agreement executed in connection therewith, which may be
issued and honored by the Bank for the benefit of the Co-
Borrowers.
Outstanding Advances means the aggregate amount of all
unpaid Advances from time to time made hereunder by the Bank, as
lender, to the Co-Borrowers, as borrowers.
Permitted Liens means security interests in and to the
Collateral in favor of Persons other than the Bank which are
either (i) purchase money security interests incurred by the Co-
Borrowers in the ordinary course of their business (but subject
to the limitation on capital expenditures imposed by Section 8.4
of this Agreement); (ii) other security interests to which the
Bank has agreed in writing; or (iii) liens for taxes or
assessments or other governmental charges or levies not yet due
and payable.
Person means an individual, corporation, limited liability
company, partnership, joint venture, trust, unincorporated
organization, governmental agency or political subdivision.
Plan means an employee pension benefit plan maintained for
employees of the Co-Borrowers, as defined in Section 3(2) of
ERISA.
Proceeds as used herein, shall mean all proceeds and
products of the Collateral and all additions and accessions to,
replacements of, insurance or condemnation proceeds of, and
documents covering the Collateral, all property received wholly
or partially in trade or exchange for the Collateral, all leases
of the Collateral and all rents, revenues, issues, profits,
and proceeds arising from the sale, lease, license, encumbrance,
collection or any other temporary or permanent disposition of the
Collateral or any interest therein.
Reportable Event means a reportable event as defined in
Section 4043(b) of ERISA, the filing of a notice of intent to
terminate under Section 4041 of ERISA or any other event or
condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or for the appointment of a trustee
to administer, any Plan.
Settlement means that certain settlement by and among the
Fund, Tenney,DynaTenn and others.
Settlement Agreement means that certain Settlement Agreement
by and among the Fund, Tenney, DynaTenn and others.
Subsidiary means any corporation or other legal entity
organized under the laws of any jurisdiction, a majority of the
issued and outstanding shares of capital stock or other evidence
of equity ownership of which is owned of record or beneficially,
directly or indirectly, by either Co-Borrower.
Term means the duration of this Agreement, as specified in
Section 5.5. hereof.
Termination Date shall have the meaning ascribed to it in
subsection 2.1(E) of this Agreement.
Working Capital Advance or Working Capital Advances shall
have the meaning ascribed to it in subsection 2.1(A) of this
Agreement.
Working Capital Line Balance shall have the meaning ascribed
to it in subsection 2.1(C) of this Agreement.
Working Capital Advances Limit shall mean $300,000.00.
Section 1.2. Interpretation and Construction. In this
Agreement, unless the context otherwise requires:
(1) Articles and Sections mentioned by number only are the
respective Articles and Sections of this Agreement so numbered;
(2) The terms hereby, hereof, hereto, herein, hereunder,
and any similar terms, as used in this Agreement, refer to this
Agreement, and the term hereafter shall mean after, and the term
heretofore shall mean before, the date of this Agreement as set
forth in the Preamble hereto;
(3) Words importing a particular gender mean and include
every other gender, and words importing the singular number mean
and include the plural number and vice versa;
(4) Words importing Persons mean and include firms,
associations, partnerships (including limited partnerships),
societies, trusts, public or private corporations, limited
liability companies or other legal entities, including public or
governmental bodies, as well as natural persons;
(5) Any headings preceding the texts of the several
Articles and Sections of this Agreement, and any table of
contents or marginal notes appended to copies hereof, shall be
solely for convenience of reference and shall not constitute a
part of this Agreement, nor shall they affect its meaning,
construction or effect; and
(6) If any clause, provision or Section of this Agreement
shall be ruled invalid or unenforceable by any court of competent
jurisdiction, then such holding shall not invalidate or render
unenforceable any of the remaining provisions hereof.
(7) If, in any Section of this Agreement, a term or word
defined in another Section hereof is referred to, or an act,
remedy, result, right, obligation or consequence afforded to
or affecting either Co-Borrower or the Bank defined in or more
fully set forth in another Section hereof is referred to, then
the parties agree that the other Section or Sections hereof
wherein such term, word, act, remedy, result, right, obligation
or consequence is defined or set forth shall be deemed to be
fully set forth in the Section wherein reference to such term,
word, act, remedy, result, right, obligation or consequence is
made.
ARTICLE II
THE LOAN
Section 2.1 Line of Credit. (A) Subject to the terms and
conditions of this Agreement and provided that no Event of
Default shall have occurred and be continuing hereunder or under
the Loan Documents, the Bank shall make one or more advances
(hereinafter referred to individually as a Working Capital
Advance and collectively as the Working Capital Advances) to Co-
Borrowers, from time to time, to be used by Co-Borrowers as
working capital.
(B) If, for any reason, the Bank shall have (i) made a
Working Capital Advance or Working Capital Advances to either Co-
Borrower of an amount in excess of the Working Capital Advances
Limit, then it is agreed that all Working Capital Advances made
in excess of such Working Capital Advances shall constitute
obligations under this Agreement and shall be entitled to the
benefit of all security provisions under this Agreement and the
Loan Documents. The amount by which the outstanding Working
Capital Advances exceeds the Working Capital Advances Limit shall
be repaid to the Bank in the manner provided in subsection 2.1(G)
below.
(C) Funds under the Line of Credit shall be available to
the Co-Borrowers on a revolving basis for a period beginning on
the date of this Agreement and, unless the Term of the Line of
Credit shall be extended as described in subsection 2.1(F) below,
terminating on the earlier of (i) May 31, 1997, or (ii) the
Termination Date. On the first (1st) day of each calendar month
during the term of the Line of Credit, the Co-Borrowers shall
jointly and severally make payments of interest only, in arrears,
on the then outstanding principal amount of the Line of Credit
(such sum is hereinafter referred to as the Working Capital
Line Balance) at a fluctuating rate equal, at any time and from
time to time, to two percent (2%) over the Banks Floating Base
Lending Rate per annum. Thereafter, unless the Term of the Line
of Credit shall be extended as described in subsection 2.1(F)
below, on the earlier of (i) May 31, 1997, or (ii) the
termination Date, if not sooner paid, the Co-Borrowers shall
jointly and severally pay in full the entire aggregate principal
amount then outstanding under the then Applicable Working Capital
Line of Credit Note, together with accrued and unpaid interest
thereon at the rate set forth therein, and all charges, fees or
payments required to be made under this Agreement which have not
then been paid by the Co-Borrowers. The Co-Borrowers further
expressly acknowledge that the Banks making of the initial
Working Capital Advance, or of any subsequent Working Capital
Advance, shall not give rise to any claim by either Co-Borrower
or any creditor of either Co-Borrower based on contract, implied
contract, reliance or any other foundation in law or in equity
that either Co-Borrower shall be entitled to receive or request
any Working Capital Advance, on or after the earlier of (i) May
31, 1997, or (ii) the Termination Date. The Bank may, but shall
not be obligated to, extend the term of the Line of Credit in
accordance with the terms and provisions of Subsection 2.1(F) of
this Agreement.
(D) Each Working Capital Advance under the Line of Credit
shall be made by depositing the amount of such Working Capital
Advance in an account of Tenney or DynaTenn, as the case may be,
maintained at the Bank or at an Affiliate of the Bank, and shall
be made on the same day as receipt by the Bank of a request for a
Working Capital Advance from Tenney or DynaTenn, as the case may
be (provided such request is received by the Bank before 11:00
a.m. on such date) or such later date as may be specified in the
request.
(E) The Co-Borrowers expressly acknowledge that the Bank
may, upon the occurrence of an Event of Default which is not
cured within the time provided for cure hereunder or under the
Loan Documents, as the case may be, terminate the Co-Borrowers
right to request Working Capital Advances from the Bank by
written notice given to the Co-Borrowers by the Bank. The date
of the Banks written notice of termination given to the Co-
Borrowers shall be referred to as the Termination Date. On the
Termination Date and thereafter, no Co-Borrower shall be
permitted to request Working Capital Advances hereunder and shall
in no event receive Working Capital Advances hereunder.
(F) The Working Capital Advances shall be evidenced by a
promissory grid note (hereinafter referred to as the Note). The
term of the Note shall commence upon the execution of this
Agreement and shall terminate upon the earlier of (i) May 31,
1997, or (ii) the Termination Date. In the event that the term
of the Line of Credit should be extended or renewed, the Co-
Borrowers shall, as a precondition to such extension or renewal,
execute and deliver a replacement note, which shall be in
substantially the form of the Note but which may incorporate such
other or additional terms as the parties shall agree to in
connection with the Co-Borrowers request for such extension or
renewal (such note hereinafter referred to individually as a
Replacement Working Capital Line of Credit Note and collectively
as the Replacement Working Capital Line of Credit Notes and the
Note and the applicable Replacement Working Capital Line of
Credit Note, whichever shall at any particular time be in effect,
shall be referred to herein as the Applicable Working Capital
Line of Credit Note). In the event that one or more Replacement
Working Capital Line of Credit Note(s) shall be executed in
accordance with this subsection 2.1(F), all references in this
Section 2.1 to the maturity date of May 31, 1997 shall
automatically be deemed to be references to the
maturity date set forth in such Replacement Working Capital Line
of Credit Note(s). In the event that the principal amount of the
Line of Credit evidenced in the Replacement Working Capital Line
of Credit Note is greater or less than $300,000.00, all
references in this Section 2.1 to the sum of $300,000.00 shall
automatically be deemed to be references to the increased or
decreased principal amount set forth in such Replacement Working
Capital Line of Credit Note. In the event that the interest rate
with respect to the Line of Credit set forth in such Replacement
Working Capital Line of Credit Note is higher or lower than the
rate of interest set forth in subsection 2.1(C) hereinabove, all
references in subsection 2.1(C) of this Agreement to the rate of
interest applicable to the Line of Credit shall automatically be
deemed to be references to the interest rate set forth in such
Replacement Working Capital Line of Credit Note. The foregoing
three (3) sentences notwithstanding, the Bank is expressly not
obligated to extend or renew the term of the Line of Credit.
The Bank shall maintain an account record of the amount of
all Working Capital Advances made to the Co-Borrowers and
payments of principal and interest made by the Co-Borrowers in
connection therewith, which account record shall serve as prima
facie evidence of the aggregate amount of Outstanding Working
Capital Advances and accrued and unpaid interest from time to
time. The failure of the Bank to maintain an account record upon
the making of any Working Capital Advance or the payment of any
principal or interest thereon, however, shall not limit or impair
the rights and remedies of the Bank if a Working Capital Advance
has actually been made or the rights and remedies of either Co-
Borrower if a payment of principal or interest has been made in
accordance with the provisions of this Agreement and the
Applicable Working Capital Line of Credit Note.
(G) Within the limits of the Working Capital Advances Limit
and the restrictions set forth in subsections 2.1(A), (B), (C),
(D), (E), and (F) hereinabove, and subject to all of the other
terms and conditions of this Agreement, the Co-Borrowers shall be
permitted to borrow, repay, and reborrow under this Agreement and
the Applicable Working Capital Line of Credit Note. No
prepayment shall in any way alter or suspend any Obligations of
the Co-Borrowers under the terms of this Agreement, except to the
extent that such prepayments result in a credit against payments
on the Applicable Working Capital Line of Credit Note as provided
therein, and the Co-Borrowers shall continue to perform and be
responsible for the performance of all terms and provisions of
this Agreement applicable to them. If the Applicable Working
Capital Line of Credit Note should be prepaid in part, then
prepayments shall be applied first to accrued interest and then
to principal.
(H) If at any time the aggregate Outstanding Working
Capital Advances should exceed the Working Capital Advances
Limit, then the Co-Borrowers shall, immediately upon receipt of
written demand therefor from the Bank, jointly and severally
repay the amount by which the then Outstanding Working Capital
Advances exceeds the Working Capital Advances Limit. All such
prepayments shall be applied by the Bank in accordance with the
terms of subsection 2.1(G) hereinabove.
Section 2.2. Cross Collateral/Cross Default. The Co-
Borrowers acknowledge and agree that, in consideration of the
Loan and such other financial accommodations as the Bank
may make to the Co-Borrowers in the future, the Collateral
granted by the Co-Borrowers hereunder shall serve to
collateralize any and all other Indebtedness of the Co-Borrowers
to the Bank, whether presently existing or hereafter arising; and
the parties further agree that: (i) an Event of Default within
the meaning of any loan agreement, note, security agreement
or other document or instrument relating to any other
indebtedness of the Co-Borrowers to the Bank, whether presently
existing or hereafter arising, shall constitute an Event of
Default hereunder and under the Loan Documents; and (ii) that an
Event of Default hereunder or under any of the Loan Documents,
shall constitute an Event of Default within the meaning of any
such other loan agreement, note, security agreement or other
document or instrument.
ARTICLE III
CONDITIONS OF ADVANCES
Section 3.1. Conditions Precedent to the Making of the
Loan. The Bank shall make the Loan subject to the condition
precedent that the Bank shall have received on or before
the date hereof the following documentation in form and substance
satisfactory to the Bank:
(A) Duly executed copies of this Agreement and the Note.
(B) Certified copies of resolutions of the Board of
Directors of Tenney and DynaTenn, approving this Agreement, the
Note, and all documents evidencing other necessary corporate or
membership action and governmental approvals, if any, with
respect to this Agreement, the Note, and all other documents
incident thereto.
(C) A Certificate of the Secretary or an Assistant
Secretary of Tenney and DynaTenn certifying the names and true
signatures of the officers of Tenney and DynaTenn authorized to
sign this Agreement, the Note, and any other documents incident
thereto.
(D) Form UCC-1 Financing Statements prepared for filing in
such filing offices as the Bank may reasonably require,
sufficient to perfect the security interest in the Collateral,
naming Tenney or DynaTenn, as the case may be, as Debtor and the
Bank as Secured Party.
(E) Certificates evidencing the existence of and payment of
all current premiums for insurance required under this Agreement
and evidencing the Banks status as additional insured and loss
payee together with original duplicate copies of the policies of
insurance providing such coverage.
(F) Long Form Good Standing Certificates (showing charter
documents), issued by (i) with respect to Tenney, the Secretary
of State of New Jersey, together with copies of the Certificate
of Incorporation and all amendments thereto, certified to be a
true, accurate, and complete by the Secretary of State of New
Jersey with respect to Tenney, and a copy of the current By-laws
of Tenney, certified to be true, accurate, and complete by the
President or Secretary of Tenney; (ii) with respect to DynaTenn,
the Secretary of State of Massachusetts, together with copies of
the Certificate of Incorporation and all amendments thereto,
certified to be a true, accurate, and complete by the Secretary
of State of Massachusetts with respect to DynaTenn, and a copy of
the current By-laws of DynaTenn, certified to be true, accurate,
and complete by the President or Secretary of DynaTenn and (ii)
Good Standing Certificates issued by the Secretary of State of
each jurisdiction wherein Co-Borrowers are authorized to do
business as a foreign corporation.
(G) An opinion of counsel to the Co-Borrowers, containing
such matters as the Bank may reasonably require.
(H) The Co-Borrowers shall pay the Bank a one percent (1%)
commitment fee.
(I) Such other evidences, searches, documents, certificates
or approvals as the Bank shall reasonably request.
Section 3.2. Conditions Precedent to the Loan. The Bank
may make the Loan subject to the further conditions precedent
that the Co-Borrowers shall have delivered all reports,
documents, etc., required pursuant to this Agreement and that
this Agreement and the security interest granted hereunder by the
Co-Borrowers to the Bank shall be effective to create in the Bank
a legal, valid, binding, and enforceable first security interest
in and lien on the Collateral, except for Permitted Liens, and
all filings, recordings, and other actions that are reasonably
necessary or advisable, in the opinion of the Bank, in order to
establish, protect, preserve, perfect or continue the Banks
security interest in the Collateral as a legal, valid and binding
and enforceable first security interest in and lien on the
Collateral shall have been effected in a manner satisfactory to
the Bank.
ARTICLE IV
SECURITY
Section 4.1 Co-Borrowers Collateral. As collateral
security for the due and punctual payment of the Note, and the
performance by the Co-Borrowers of all of their respective
Obligations to the Bank under this Agreement and each of the Loan
Documents; and as collateral security for the Co-Borrowers
repayment of all sums due, and performance of all acts required,
under any other loan agreement, note, security agreement or other
document or instrument relating to any other Indebtedness of the
Co-Borrowers to the Bank, whether presently existing or hereafter
arising, each of the Co-Borrowers hereby grants to the Bank a
security interest and lien in and to the following:
(i) All inventory (as such term is defined under the
Uniform Commercial Code of New Jersey) of such Co-Borrower,
whether now owned or hereafter acquired, wheresoever located,
including, without limitation, raw materials, work in process,
finished goods, and materials and supplies of any kind, nature
or description used or consumed in business and other goods held
for sale or lease or furnished or to be furnished under contracts
of service; and
(ii) all accounts (as such term is defined in the Uniform
Commercial Code of New Jersey) of such Co-Borrower, whether now
existing or hereafter arising wherever so located, including,
without limitation, all accounts receivable, and contract rights
and any rights to payment for goods sold or leased or for
services rendered which are not evidenced by an instrument or
chattel paper, whether or not such rights have been earned by
performance; and
(iii) all equipment (as such term is defined under the
New Jersey Uniform Commercial Code) of such Co-Borrower, of every
kind and nature, whether now owned or hereafter acquired,
wherever so located, including, without limitation, machinery,
tools, trade, sales and production equipment, motor vehicles,
furniture, furnishings, fixtures, all tangible personal property
similar to any of the foregoing, and all other goods used by such
Co-Borrower which do not constitute inventory; and
(iv) all instruments (including, without limitation,
negotiable instruments and non-negotiable instruments), chattel
paper, general intangibles (including, without limitation, income
tax refunds, copyrights, licenses, rights, patents, patent
rights, franchise rights, distributorship rights, trademarks,
trademark rights, formulae, customer lists and good will) and
documents of title (including, without limitation, bills of
lading, dock warrants, dock receipts and warehouse receipts)(as
each of the foregoing terms is defined under the Uniform
Commercial Code of New Jersey) of such Co-Borrower, whether
now owned or existing or hereafter arising or acquired; and
(v) all interests of such Co-Borrower in goods or
merchandise, wherever so located, whether now owned or existing
or hereafter arising or acquired, as to which an account
receivable has arisen; and
(vi) as to all of the foregoing (i) through (v) inclusive,
cash Proceeds, non-cash Proceeds and products thereof, additions
and accessions thereto, replacements,improvements, appurtenances
thereto and substitutions therefor and all related books,
records, journals, computer print-outs and data of such Co-
Borrower.
All of the foregoing are hereinafter referred to
collectively as the Co-Borrowers Collateral.
Section 4.2. Condition of Collateral. The Co-Borrowers
shall maintain, preserve,and keep all of their respective
properties, equipment, and assets, including but not limited
to the Collateral, in good repair, working order and condition,
and make, or cause to be made, all necessary and appropriate
repairs, renewals, replacements, substitutions, additions,
betterments, and improvements thereto so that the efficiency of
all such property, and assets shall at all times be properly
preserved and maintained.
Section 4.5. Loss or Damage to Collateral. The Co-
Borrowers shall immediately notify the Bank of any material loss
or damage to, or material diminution in, or any occurrence which
would materially adversely effect the value of, the Collateral.
In the event that the Bank, in its sole discretion, shall
determine that there has been any such loss, damage or material
diminution in value, the Co-Borrowers shall, whenever the Bank so
requests, pay to the Bank, within thirty (30) days of written
notice to the Co-Borrowers, such amount as the Bank, in its sole
discretion, shall have determined represents such loss, damage or
material diminution in value (any such payment, however, shall
not affect the Banks security interest in the Collateral). The
preceding sentence shall not apply in the event that the Co-
Borrowers can show to the Banks satisfaction that the Collateral
is adequately insured and the Co-Borrowers are able to use such
insurance proceeds to repair and/or restore the Collateral;
however, under such circumstances the Co-Borrowers may not be
permitted to borrow any amounts under the Loan until the repairs
and/or restorations have been made to the Banks satisfaction.
ARTICLE V
PAYMENTS; TERM OF AGREEMENT
Section 5.1. Obligations to Continue. If the Co-Borrowers
should fail to make payments of any amount required under this
Agreement or under any of the Note, when due, then the amount so
in default shall continue as an Obligation of the Co-Borrowers
until it shall have been fully paid, and the Co-Borrowers shall
pay the same with interest at a rate equal to Five Percent (5.0%)
above the then applicable rate set forth in the applicable Note;
provided, however, that at no time shall such rate of interest
exceed the maximum rate of interest permissible under the laws of
the State of New Jersey.
Section 5.2. Late Payment. In the event that the Co-
Borrowers should fail to make any payment required hereunder
within ten (10) days of when due, the Co-Borrowers shall,
to the extent permitted by law, pay the Bank a late charge of
five percent (5%) of the overdue payment but in any event not
less than $25 or more than $2,500. Any such late charge
assessed is immediately due and payable.
Section 5.3. Manner of Payment. All payments of principal
and interest to be made by the Co-Borrowers with respect to the
Note, and all other Obligations of the Co-Borrowers to the Bank
hereunder, shall be made to the Bank at 210 Main Street,
Hackensack, New Jersey 07601, or to such other place as the Bank
shall direct, in immediately available funds. Notwithstanding the
foregoing or any provision in the Note, the Co-Borrowers hereby
jointly, severally, and irrevocably authorize and direct the
Bank, on the due date of any payment under the Note, to charge
any account maintained by either Co-Borrower at the Bank for the
full amount of any principal or interest then due under the
Notes, or any other amount due hereunder or under the Loan
Documents.
Section 5.4. Payments on Non-Business Days. Whenever any
payment to be made hereunder or under the Note shall be stated to
be due on a Saturday, Sunday or a public holiday under the laws
of the State of New Jersey, such payment may be made on the next
succeeding business day, and such extension of time shall in such
case be included in the computation of payment of interest
hereunder or under the Note. In addition, if the tenth
(10th) day following the due date falls on a Saturday, Sunday or
public holiday the next succeeding business day will be treated
as the tenth (10th) day.
Section 5.5. Effective Date and Term. This Agreement shall
become effective immediately upon execution hereof by all parties
hereto. The Term of this Agreement shall commence as of such
date and, subject to the provisions hereof, shall expire at
midnight on such date as the principal amount of the Note,
together with accrued interest thereon, and all other Obligations
owed to the Bank, shall have been fully paid or satisfied as
provided herein and therein. This Agreement shall remain in full
force and effect during the Term. If, in the sole discretion of
the Bank, the Note should be renewed, replaced or substituted
for, then the Term hereof shall be extended and this Agreement
shall remain in full force and effect until the principal amount
of the Note, as renewed, replaced or substituted for, and
interest thereof shall have been fully paid as provided therein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE CO-BORROWERS
The Co-Borrowers represent and warrant that:
Section 6.1. Legal Existence and Power, Etc. (A)
Tenney and DynaTenn each (i) is a corporation duly organized,
validly existing, and in good standing under the laws of
the State of its formation; (ii) has the corporate power,
authority, and capacity to own its respective properties and
assets and to carry on its respective business as now being
conducted; (iii) is qualified to transact business in every
jurisdiction wherein such qualification is necessary; and (iv)
has the corporate power to execute and deliver this
Agreement and the Loan Documents, and to perform each and every
one of its Obligations hereunder and thereunder.
(B) The execution, delivery, and performance by the Co-
Borrowers of this Agreement and the Note authorized by all
requisite corporate action and no other corporate proceedings on
the part of the Co-Borrowers or their respective shareholders,
officers or directors is necessary or required under law or by
their respective certificates of incorporation or by-laws.
Section 6.2. Authorization, No Conflict, Etc. Neither the
execution, delivery or performance of this Agreement and the Loan
Documents, nor the consummation of the transactions contemplated
hereby or thereby, nor the performance of or compliance with the
terms and conditions contained herein and therein (i) will
violate any provision of law, any order of any court or other
agency of government applicable to the Co-Borrowers or their
respective certificates of incorporation or by-laws; (ii) except
as set forth in Exhibit 6.2, will violate any provision of any
material indenture, agreement or other instrument to which
either of them is a party, or by which any of them or any of
their respective properties or assets are bound; (iii) except as
set forth in Exhibit 6.2, will conflict with, result in a breach
of or constitute (with or without due notice and/or lapse of
time) a default under any such indenture, agreement or other
instrument; and (iv) will result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon
any of the properties or assets of the Co-Borrowers other than in
favor of the Bank. This Agreement, the Note, and any Obligations
of the Co-Borrowers under this Agreement or the Note, when
executed and delivered by the Co-Borrowers, respectively, will be
the legal, valid, and binding obligations of the Co-Borrowers,
enforceable against each of the Co-Borrowers in accordance with
their respective terms, except as may be limited by bankruptcy,
insolvency and other laws affecting the rights of creditors
generally, or by general principle of equity.
Section 6.3. Litigation, Etc. Except as disclosed in
Exhibit 6.3, there is no action, suit, inquiry, investigation or
proceeding, at law or in equity, or before or by any
governmental instrumentality or other agency now pending, or, to
the knowledge of the Co-Borrowers, threatened against or
affecting either Co-Borrower, or any of their respective
properties, wherein an unfavorable decision, ruling or finding
would (i) materially impair the right of such Co-Borrower to
carry on its business substantially as now conducted; (ii) to the
extent not covered by insurance, result in any material adverse
change in the business, financial condition, properties or
operations of such Co-Borrower; or (iii) adversely affect
the validity or enforceability hereof or of any of the Loan
Documents, or the transactions contemplated thereby. All
authorizations, consents, and approvals of governmental bodies
or agencies required in connection with the execution and
delivery of this Agreement or in connection with the performance
by the Co-Borrowers of their respective Obligations hereunder
have been obtained.
Section 6.4. Taxes, Etc. The Co-Borrowers have duly filed
or caused to be filed all federal, state, and local tax reports
and returns which were required to be filed by them as of
the date hereof and have paid or caused to be paid all taxes
shown to be due on said returns, to the extent that such taxes
have become due, except such taxes that are contested in good
faith by them. Such reports and returns are true, correct, and
complete. The Co-Borrowers have paid in full all deficiency
assessments with respect to any federal, state, and local tax
returns which have been examined by any taxing authorities,
except such deficiency assessments that are contested in good
faith by them. The Co-Borrowers have not received a statutory
notice of proposed deficiency assessment with respect to any
federal or state taxes.
Section 6.5. Other Agreements. Except as described in
Exhibit 6.5 attached hereto, to the best of their knowledge, (i)
neither of the Co-Borrowers is a party to any agreement
or instrument or subject to any charter or other corporate
restriction which materially adversely affects its or his
business, properties, assets, operations or financial condition;
and (ii) neither of the Co-Borrowers is in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any material agreement or
instrument to which it is a party.
Section 6.6. Financial Statements and Information; No
Material Adverse Change. All consolidated financial statements
heretofore submitted by Tenney to the Bank (i) fairly
present the financial position and results of operations of
Tenney and its Subsidiaries (including, without limitation,
DynaTenn) as of and for the periods indicated, (ii) reflect all
of Tenneys and its Subsidiaries, (including, without limitation,
DynaTenn) material liabilities as of such date, and (iii) have
been prepared in accordance with GAAP, in
accordance with past practices of Tenney.
The Co-Borrowers have, as of the date hereof, good and
marketable title to all of the properties and assets reflected on
such financial statements (except for those disposed of
subsequent to such date in the ordinary course of business and
for items covered under capitalized leases, as defined in
accordance with GAAP) including without limitation the
Collateral, free and clear of all mortgages, pledges, security
interests, liens, charges and encumbrances other than those in
favor of the Bank, except for (i) liens and security interests
disclosed in Exhibit 6.6 attached hereto, and (ii) purchase money
liens on motor vehicles. There has been no material adverse
change in the business, properties or condition (financial
or otherwise) of either Co-Borrower since the date of the
financial statements submitted to the Bank.
Section 6.7. Accuracy of Statements. All statements,
representations, and warranties made by the Co-Borrowers in this
Agreement and in any other agreement, document, certificate or
instrument delivered or to be delivered by the Co-Borrowers under
this Agreement are, and shall be true, correct, and complete in
all material respects at the time they were made and on and as at
the date of each Advance under Line of Credit and no information
has been or will be omitted therefrom which would make any of
them misleading or incomplete in any material respect.
Section 6.8. Concerning Employee Benefit Plans. No
Reportable Event with respect to any Plan which would have a
material adverse effect on the financial condition or business
of either Co-Borrower has occurred and is continuing. Neither of
the Co-Borrowers is a party nor will become a party during the
Term to any multi-employer plan, as that term is defined under
ERISA.
Section 6.9. Location of Collateral. Attached hereto as
Exhibit 6.9 is a list showing (i) all places at which the Co-
Borrowers conduct business operations; and (ii) all places at
which the Co-Borrowers maintain, or will maintain, the
Collateral. Such list indicates whether the premises are owned
or leased by the Co-Borrowers or any Subsidiary or whether
the premises are the premises of a third Person. The Co-
Borrowers shall not transfer or permit the transfer to a location
other than the locations described in Exhibit 6.9 of any of the
Collateral, its records relating to the Collateral, and its other
books, records, journals, receipts, orders, receipts and
correspondence, unless the Co-Borrower (i) notifies the Bank
in advance of such transfer; and (ii) takes all steps necessary,
including but not limited to filing UCC-3 continuation
statements, filing new financing statements or executing
additional security agreements in order to insure that the Banks
security interest in the Collateral remains perfected throughout
the term of the Loan.
Section 6.10. Investment Companies. Neither of the Co-
Borrowers is an investment company, or an affiliated person of,
or promoter or principal underwriter for, an
investment company, as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C. Sec. 80(a)(1), et
seq.) (hereinafter the Act). The making of the Loan hereunder by
the Bank, the application of the proceeds and repayment thereof
by the Co-Borrowers and the performance of the transactions
contemplated by this Agreement will not violate any provision of
the Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder. The proceeds of
the borrowings made pursuant to this Agreement will be used only
for the purposes contemplated hereunder. None of the
proceeds will be used, directly or indirectly, for the purpose of
the purchasing or carrying any margin security or for the purpose
of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry margin security or for any other
purpose which might constitute any of the Loan under this
Agreement a purpose credit within the meaning of Regulation U or
Regulation X of the Federal Reserve Board. The Co-Borrowers will
not take, or permit any agent acting on its behalf to take, any
action which might cause this Agreement or any document or
instrument delivered pursuant hereto to violate any regulation
of the Federal Reserve Board.
Section 6.11. Ownership and Management of Co-Borrowers.
Appended hereto as Exhibit 6.11 is (i) with respect to Tenney, a
true, accurate, and complete list of its officers and directors;
and (ii) with respect to DynaTenn, a complete list of its
shareholders, officers, and directors.
Section 6.12. Survival. The Co-Borrowers agree that all
representations, warranties, and covenants made by them herein
and in the certificates, exhibits or instruments delivered
pursuant hereto or in connection herewith, shall be deemed to
have been relied upon by the Bank, notwithstanding any
investigation heretofore or hereafter made by the Bank. All such
representations, warranties, covenants and certificates, exhibits
and instruments shall survive the making of the Loan and the
disbursement of subsequent Advances in accordance with the
terms hereof.
ARTICLE VII
AFFIRMATIVE COVENANTS OF THE CO-BORROWERS
The Co-Borrowers jointly and severally covenant and agree
that, from the date hereof until payment in full of the principal
of and interest on the Note, unless the Bank shall otherwise
consent in writing, they shall:
Section 7.1. Legal Existence, Properties, Etc. (A) Do or
cause to be done all things necessary to preserve and keep in
full force and effect Tenneys and DynaTenns corporate
existence, rights and franchises; (B) upon written request
therefor by the Bank, cause either Co-Borrower to become
authorized to do business in any state in which the failure to do
so would materially adversely affect such Co-Borrowers business
operations; (C) comply with all laws applicable to the Co-
Borrowers, and their respective business operations; (D)
continue to conduct and operate the Co-Borrowers respective
business substantially as conducted and operated during the
present and preceding Fiscal Years; (E) at all times
maintain, preserve, and protect all franchises and trade names;
and (F) keep and maintain full and accurate accounts and records
in accordance with GAAP.
Section 7.2. Payment of Indebtedness, Taxes, Etc. (A) Pay
all of its Indebtedness and Obligations in accordance with normal
terms and in a manner not inconsistent with past practices; (B)
perform its obligations in accordance with the Settlement and the
Settlement Agreement, including, but not limited to, payment of
the initial $75,000.00 payment due and all subsequent payments
required under the terms of the Settlement; and (C) prepare and
timely file all federal, state, and local tax returns required to
be filed by it and pay and discharge or cause to be paid and
discharged promptly all taxes, assessments, and governmental
charges or levies imposed upon it or upon its income and profits,
or upon any of its property, real, personal or mixed, or upon any
part thereof, before the same shall become in default, as well as
all lawful claims for labor, materials, and supplies or otherwise
which, if unpaid, might become a lien or charge upon its
properties or any part thereof; provided, however, that the Co-
Borrowers, as the case may be, shall not be required to pay
and discharge or to cause to be paid and discharged any such
Indebtedness, tax, assessment, charge, levy or claim so long as
the validity or amount thereof shall be contested in good
faith by appropriate proceedings diligently pursued and adequate
reserves reasonably satisfactory to the Bank have been
established by the Co-Borrowers, as the case may be.
Section 7.3. Financial Statements, Reports, Etc. Furnish
to the Bank:
(A) As soon as available and in any event within one
hundred twenty (120) days after the end of each Fiscal Year of
Tenney , consolidated financial statements of Tenney
and its Subsidiaries (including, without limitation, DynaTenn,
which shall be prepared on an audited basis, including an audited
consolidated balance sheet and income statement prepared
in accordance with GAAP , by outside certified public
accountants acceptable to Bank; and accompanied by an opinion
(which opinion is without material qualifications) thereon by
independent certified public accountants selected by Tenney and
acceptable to the Bank;
(B) Simultaneously with the delivery of the annual
financial statements referred to in subsection (A) above, a
certificate of the independent certified public accountants who
audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which
constitutes an Event of Default, or if such accountants shall
have obtained knowledge of any such condition or event, then
specifying in such certificate each such condition or event of
which they have knowledge and the nature and status thereof.
(C) Promptly upon receipt thereof, copies of any reports
submitted to any of the Co-Borrowers by their independent
certified public accountants in connection with examination of
the financial statements of the Co-Borrowers made by such
accountants.
(D) So long as any of the Note shall remain unpaid or this
Agreement shall be in effect, the Co-Borrowers shall not, without
the prior, written consent of the Bank, create, incur, assume or
suffer to exist, any mortgage, deed of trust, pledge, lien,
security interest, hypothecation or other preferential
arrangement, change or encumbrance (including, without
limitation, any conditional sale or other title retention
agreement), of any nature, except for Permitted Liens, upon or
with respect to any of their respective properties or assets,
including any of the Collateral, other than (i) liens created in
favor of the Bank; (ii) liens in existence as of the date hereof
disclosed in Exhibit 6.6 attached hereto; and (iii) lease finance
arrangements;
(E) (i) As soon as possible and in any event within fifteen
(15) days after either Co-Borrower knows or has reason to know
that any Reportable Event has occurred, a statement of the
President or Chief Financial Officer of either Co-Borrower,
describing such Reportable Event and the action, if any, which
such Co-Borrower proposes to take with respect thereto and a copy
of any report describing such event which is required to be filed
under ERISA, as amended; and (ii) promptly after receipt thereof
by either Co-Borrower, copies of each notice received from the
Pension Benefit Guaranty Corporation of such corporations
intention to terminate any Plan or to have a trustee appointed to
administer any Plan;
(F) Within five (5) days after becoming aware of the
existence of any Event of Default or act, condition or event
which, with or without notice or lapse of time or both,
would become an Event of Default, notice to the Bank of the same;
(G) Written notice to the Bank immediately upon receipt of
any information, notices, claims or investigations as to any
discharges, spills, emissions or disposal of pollutants by, or on
any property of, either Co-Borrower, which pollutants include,
without limitation, any hazardous waste or hazardous substances
as defined by the Industrial Site Recovery Act, (N.J.S.A. _
13:1K-6 et seq.) or by any other state or federal environmental
law or regulation, which must be reported pursuant to the New
Jersey Spill Compensation and Control Act, the New Jersey
Underground Storage Tank Registration Law, the Uniform Fire
Safety Act, the Hazardous and Solid Waste Amendments of 1984, the
federal Water Pollution Control Act, or the federal Comprehensive
Environmental Response Compensation and Liability Act;
(H) Promptly, from time to time, such other information
regarding the operations,business, affairs and financial
condition of the Co-Borrowers as the Bank may reasonably
request; and
(I) As soon as available and in any event within forty-
five (45) days after the filing thereof with the federal
Securities and Exchange Commission, Co-Borrowers Securities and
Exchange Commission Form 10Q and 10K together with all exhibits,
addenda and attachments thereto and materials or information
filed therewith.
(J) On or before the ten (10th) day of each month, the Co-
Borrowers shall submit to the Bank a Borrowing Base Certificate
on the Banks form, together with a detailed accounts receivable
aging report setting forth the amount due and owing on
Receivables on its books as of the close of the preceding month,
together with a reconciliation report reasonably satisfactory to
the Bank showing all sales, collections, payments and adjustments
to receivables on their respective books as of the last business
day of the preceding month.
(K) As soon as available, but in any event no later than
thirty (30) days of the date of payment by Tenney of the initial
$75,000.00 under the Settlement Agreement, a receipt or some
other proof satisfactory in form and substance to the Bank,
evidencing payment to the Fund of said initial $75,000.00.
Thereafter, evidence of payment of all subsequent payments
required pursuant to the terms of the Settlement.
Section 7.4. Insurance. The Co-Borrowers shall, at all
times during the term of this Agreement and the Note, maintain
insurance on their respective assets and properties with
insurance companies reasonably satisfactory to the Bank, in such
amounts, in such manner, and against such loss, damage or
liability (including liability to third parties), as is customary
with companies in the same or similar business and located in the
same or similar areas. In all cases, such insurance shall
include:
(i) Public liability insurance insuring against any
and all liability or claims of liability arising out of,
occasioned by, or resulting from any accident or otherwise
resulting in or about the premises occupied by the Co-Borrowers
in a minimum amount of $1,000,000.00 for the death of or bodily
injury to one Person, $3,000,000.00 for the death of or bodily
injury in any one accident or occurrence, and $500,000.00 for
loss or damage to the property of any Person or Persons;
(ii) Property damage and broad form fire and extended
coverage insurance with respect to all Collateral and all of its
other assets and insurance insuring against such other hazards,
casualties and contingencies as the Bank may require; and
(iii) Workers compensation insurance, business
interruption insurance, and any insurance that may be required by
law.
Such insurance coverage may be affected under overall
blanket or excess coverage policies of the Co-Borrowers and shall
be for amounts sufficient to prevent the Co-Borrowers from being
co-insurers within the terms of such policy. Each insurance
policy maintained pursuant to this Section other than public
liability and workers compensation insurance policies shall name
the Bank as loss payee and additional insured. Each insurance
policy maintained pursuant to this Section shall contain a
provision that such policy shall not be canceled or altered
unless the Bank is notified in writing at least thirty (30) days
prior to such cancellation or alteration. At least thirty (30)
days prior to the expiration of any such policy, the Co-Borrowers
shall furnish evidence satisfactory to the Bank that such policy
has been renewed or replaced.
In the event of any loss or damage to or taking or
condemnation of assets of the Co-Borrowers, the proceeds of any
insurance policy or condemnation award covering the same
shall be applied (1) to pay for the cost of making such repairs,
restorations, reconstructions or replacements of the assets
involved as are necessary to repair, restore or reconstruct said
assets to substantially their condition immediately prior to such
event or to a condition of at last equivalent value; or (2) if
either: (i) the Bank shall have reasonably determined, after
consultation with the Co-Borrower, that the proceeds of all
available insurance settlements and/or condemnation awards,
together with all sources of equity funds available to the Co-
Borrowers, are insufficient to effect the restoration of the Co-
Borrowers business as a going concern without a material and
adverse change in such Co-Borrowers ability to repay the
Loan when due; or (ii) any Event of Default shall have occurred;
to prepay all or, to the extent that proceeds are insufficient to
prepay all, to prepay a portion of the aggregate principal amount
of the Note. Prepayment of the Note shall be applied first to
accrued interest and then to principal in inverse order of
maturity.
In the event of a public liability occurrence, the proceeds
of any insurance policy covering the same shall be applied toward
satisfaction of any liability resulting from such occurrence.
Section 7.5. Notification of Bank. The Co-Borrowers, as
the case may be, shall notify the Bank promptly of the initiation
of any suit at law or in equity against it involving money
or property valued in excess of Fifty Thousand Dollars
($50,000.00), unless the same is fully covered by insurance and
the insurer acknowledges liability therefor in writing, in which
case notice need be given only if the suit involves money or
property valued in excess of One Hundred Thousand Dollars
($100,000.00), or any investigation or proceeding before or by
any administrative or governmental agency the effect of which
would be to limit materially, prohibit or restrict the manner in
which either Co-Borrower presently conducts its business.
In addition, the Co-Borrowers, shall immediately notify the Bank
of any (i) change of its name, change of its corporate identity
or the identities of its shareholders, members or manager; (ii)
labor controversy resulting in or threatening to result in a
strike or other form of labor disturbance against either Co-
Borrower; and (iii) within thirty (30) days in advance, any
change in either Co-Borrowers principal business locations or the
establishment of a new business location.
Section 7.6. Maintenance of Bank Accounts. Tenney shall
maintain its principal banking accounts with the Bank or an
Affiliate of the Bank.
Section 7.7. Records. The Co-Borrowers shall maintain
accurate and complete records of their respective business
activities, and shall permit the Bank, or any of its agents, at
intervals to be determined by the Bank provided reasonable notice
is given, to inspect during normal business hours, and provided
the Co-Borrowers business is not disrupted, any Collateral and
examine and copy any books and records of the Co-Borrowers
relating to the Collateral and further to examine, check, audit,
make copies of, or extracts from, any of the Co-Borrowers books,
records, journals, receipts, orders, correspondence or other
data.
Section 7.8 Financial Covenants. During the Term of this
Agreement:
(A) Except as provided below in this subsection (A), (i)
as of September 30, 1996, Co-Borrowers ratio of Debt to Tangible
Net Worth shall not exceed 4.0 to 1.00 and (ii) as of December
31, 1996, Co-Borrowers ratio of Debt to Tangible Net Worth shall
not exceed 3.75 to 1.00. As used herein, the term Debt means the
total liabilities of the Co-Borrowers (determined in accordance
with GAAP ); and the term Tangible Net Worth means the net worth
of the total net worth of the Co-Borrowers (determined in
accordance with GAAP)less intangible assets (determined in
accordance with GAAP ).
(B) The Co-Borrowers shall maintain a zero balance with
respect to the Line of Credit for at least one (1) period of not
less than thirty (30) consecutive days during each year of the
Term of this Agreement.
(C) As of the last day of each Fiscal Quarter of the Co-
Borrowers, the Co-Borrowers shall maintain a ratio of Current
Assets to Current Liabilities (each determined in accordance with
GAAP ) of not less than 1.25 to 1.00.
(D) As of the last day of each Fiscal Year of the Co-
Borrowers, the Co-Borrowers Interest Coverage Ratio for any
fiscal year shall not be less than 5.0 to 1.00. As used herein,
the term Interest Coverage Ratio shall be determined in
accordance with the following equation:
net income after payment of taxes plus interest expense
plus depreciation minus dividends paid
interest expense
Section 7.9 [INTENTIONALLY OMITTED].
Section 7.10 Maintenance of Banks Perfected Security
Interest in Collateral. The Co-Borrowers shall take all steps
necessary, including but not limited to filing UCC-3
continuation statements, filing new financing statements or
executing additional security agreements in order to insure that
the Banks security interest in the Collateral remains
perfected throughout the Term of this Agreement. The Co-
Borrowers covenant and agree to promptly notify the Bank in the
event that any of the Collateral is moved from the place
or places set forth in Exhibit 6.9 and further agree to take any
and all steps necessary to insure that the Banks security
interest in any Collateral which is moved out of state continues
to be perfected in favor of the Bank.
ARTICLE VIII
NEGATIVE COVENANTS
The Co-Borrowers covenant and agree that, from the date
hereof until payment in full of the principal of and interest on
the Note, and all other Obligations of the Co-Borrowers
hereunder or under the Note, unless the Bank shall otherwise
consent in writing, they will not, either directly or indirectly:
Section 8.1. Creation of Subsidiary; Sale of Assets. (A)
Create, form or acquire any Subsidiary, unless the Bank is given
adequate advance written notice and (i) the Subsidiary
is in the Co-Borrowers present line of business; (ii) no Co-
Borrower has committed an Event of Default hereunder or an event
which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default hereunder; and (iii) if
funds under the Note are used in connection with such
acquisition, then the Co-Borrower must also grant, or cause to be
granted, to the Bank a perfected first lien security interest in
the assets of the Subsidiary being created, formed or acquired
and the Co-Borrower, as the case may be, must execute
any and all documents, instruments, etc. and take any and all
acts to insure that the Bank is granted a perfected first lien
security interest therein; or (B) transfer, sell, lease, dispose
or convey any or all of its assets or property, other than (i)
the sale or lease of Inventory in the ordinary course of
business, or (ii) the sale, lease or disposition of any property
which is replaced with property of substantially similar value
and character, except for the disposal of obsolete equipment as
the Co-Borrowers shall determine in the exercise of its
reasonable business judgment.
Section 8.2. Restrictions on Further Borrowing. (A)
Create, incur, assume or permit to exist, or allow any Subsidiary
to create, incur, assume or permit to exist, any Indebtedness
other than in the ordinary course of business with respect to
which financing the Co-Borrowers shall give Bank a right of first
refusal to provide such financing on account of either borrowed
money or the deferred purchase price of property; (B) create,
incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist,
any lien, mortgage, deed of trust, security interest, pledge, or
other charge or encumbrance of any nature or kind (real or
personal, tangible or intangible) upon or with respect to any of
its assets, whether now owned or hereafter acquired, except for
(i) liens in existence as of the date hereof disclosed in Exhibit
6.6 hereof; (ii) lease finance arrangements; and (iii) liens on
motor vehicles; or (C) guarantee or otherwise become responsible
for or permit any Subsidiary to guarantee or otherwise become
responsible for the obligations of any other Person, except for
guarantees for the benefit of the Bank; provided however, that
the foregoing shall not prohibit (i) the Advances hereunder; or
(ii) the endorsement of negotiable instruments for deposit or
collection and similar transactions in the ordinary course of
business.
Section 8.3. Certain Significant Changes. (A) Consolidate
with or merge into or acquire the stock or assets of, or
membership in, any person, firm, joint venture, partnership,
corporation, limited liability company or other entity; or permit
one or more other person, firm, joint venture, partnership,
corporation, limited liability company or other entity to
consolidate with it, merge into or acquire its stock or assets,
except that the Bank shall permit the Co-Borrowers to acquire the
stock or assets, or merge into or consolidate with any person,
firm, joint venture, partnership, corporation, limited liability
company or other entity provided that the Bank is given adequate
advance written notice and (i) the acquired entity or assets is
in the Co-Borrowers present line of business; (ii) no Co-Borrower
has committed an Event of Default hereunder or an event which,
with the giving of notice or lapse of time, or both, would
constitute, an Event of Default hereunder; and (iii) if funds
under the Note are used in connection with such acquisition, then
the Co-Borrowers, as the case may be, must also grant, or cause
to be granted, to the Bank a perfected first lien security
interest in the assets being purchased and the Co-Borrower, and
must execute any and all documents, instruments, etc. and take
any and all acts to insure that the Bank is granted a perfected
first lien security interest therein;
(B) Change its name without giving the Bank adequate prior
written notice and without executing the appropriate
documentation with the Secretary of States office and
without re-executing documentation to the Bank to insure that the
Bank continues to have a valid first priority security interest
in the Collateral;
(C) Change the nature of its business;
(D) Permit any Subsidiary to consolidate with or merge
into any other corporation or allow one or more other
corporations to consolidate with or merge with or merge into any
Subsidiary except to the extent permissible for the Co-Borrowers
under subsection 8.3(A) above; or
(E) Dissolve or take any steps to dissolve or permit any
Subsidiary to dissolve or take any steps to dissolve; or
(F) With respect to DynaTenn, cause or permit any change
in its equity ownership, without the prior, express written
consent of the Bank.
Section 8.4. Capital Expenditures. Enter into any
agreement to purchase or pay for or become obligated to pay for
capital expenditures, long term or capital leases or sale and
leaseback arrangements during any Fiscal Year in an amount in
excess of One Hundred Thousand Dollars ($100,000.00), without the
prior written consent of the Bank.
Section 8.5. Transfer of Note or Receivables. Sell,
assign, transfer, discount or otherwise dispose of any accounts
receivable or any promissory note payable to either Co-Borrower
with or without recourse, except for collection without recourse
in the ordinary course of business.
Section 8.6. Prepayment. Prepay any Indebtedness other
than trade credit incurred in the ordinary course of business, to
any person, without the prior express written consent of Bank.
Section 8.7. Loans. Make loans to any Person or Persons,
without the prior express written consent of the Bank.
Section 8.8. Modification of Documents. Change, alter,
amend, restate or modify either Co-Borrowers Certificate of
Incorporation or By-laws without the Banks prior written
consent.
Section 8.9. Change Business. Materially change or alter
the nature of its business.
Section 8.10. Change Location. Change the place where its
books and records are maintained without the prior written
notification of the Bank and without executing any and
all documents or instruments or taking any acts in order to
maintain the Banks security interest in the Collateral.
Section 8.11. Relocation of Collateral. Transfer its
chief executive offices or maintain or permit any Subsidiary or
other Person to maintain records with respect to the Collateral
at any location other than those listed on Exhibit 6.9 (as
amended from time to time in accordance with the notice required
under Section 11.1 hereof), respectively, except after the
delivery to the Bank of notice thereof and of filed UCC-1
Financing Statement in form satisfactory to the Bank or other
documents or instruments necessary to preserve the Banks
security interest in the Collateral.
Section 8.12. Partnerships. Enter or permit any
Subsidiary to enter into any general or limited partnership or
joint venture in whatever capacity.
ARTICLE IX
SPECIAL PROVISIONS WITH RESPECT TO
COLLATERAL, RECEIVABLES, AND RELATED MATTERS
Section 9.1 Special Provisions. The Co-Borrowers
covenant and agree that the Bank may examine and inspect the
Collateral, and all books and records with respect thereto at any
time during the Co-Borrowers normal business hours provided
advance notice is given and the Co-Borrowers normal business
activities are not interrupted. The Co-Borrowers will
jointly and severally pay, and cause each Subsidiary to pay, all
costs to be paid with respect to taxes, assessments, governmental
charges or private encumbrances levied, assessed, imposed or
payable upon or with respect to the Collateral or any part
thereof except for taxes, assessments, governmental charges or
private encumbrances which are being contested in good faith.
Section 9.2 Receivables. The Co-Borrowers covenant and
agree that:
(A) The Co-Borrowers shall not settle or adjust any
material dispute or claim, or grant any discount (except ordinary
trade discounts), except in the ordinary course of its
business, without the Banks written consent.
(B) The Co-Borrowers shall notify the Bank promptly in
writing of all disputes and claims in excess of One Hundred
Thousand Dollars ($100,000.00) relating to any of their
respective accounts receivable.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default. Any one or more of the
following may, at the option of the Bank, be deemed an Event of
Default hereunder:
(A) If any representation or warranty made by either Co-
Borrower in any of the Loan Documents or in any report,
certificate, financial statement or instrument furnished in
connection therewith or in connection with any instrument of
security furnished by either Co-Borrower to the Bank shall prove
to have been inaccurate in any substantial and material
adverse respect as of the date or dates with respect to which it
is deemed to have been made;
(B) The Co-Borrowers shall have failed to make any
installment of principal or interest on the Note within ten (10)
days of its due date thereunder. In the event that any
such payment shall not be received by the Bank within such ten
(10) day period, the Bank shall, in addition to and not to the
exclusion of any of its rights under the Loan Documents
(including but not limited to the right to accelerate payment of
the Loan), be entitled to, and the Co-Borrowers shall jointly and
severally pay to the Bank, a late charge of five percent
(5%) of the overdue payment, but in any event not less than $25
or more than $2,500. Late charges assessed by the Bank are
immediately due and payable; payments received after 3:00
p.m. will be deemed received on the next banking day.
(C) Either Co-Borrower shall have failed duly to observe
or perform any covenant, condition or agreement with respect to
the payment of monies on the part of such Co-Borrower to be
observed or performed pursuant to the terms of the Loan
Documents, other than the payment of principal and interest which
shall be governed by (B) above, and such default shall have
remained uncured for a period of fifteen (15) days after the
occurrence thereof;
(D) Either Co-Borrower shall have failed duly to observe
or perform any covenant, condition or agreement on the part of
such Co-Borrower to be observed or performed pursuant to the
terms of the Loan Documents, other than the payment of monies
which shall be governed by (B) and (C) above, and such default
shall have remained uncured for a period of thirty (30) days
after the occurrence thereof.
(E) (i) Either Co-Borrower shall have applied for or
consented to the appointment of a custodian, receiver, trustee or
liquidator of all or a substantial part of their respective
assets; or, (ii) a custodian shall have been appointed with or
without consent of either Co-Borrower; or, (iii) either Co-
Borrower shall generally not be paying their respective debts as
they become due; or, (iv) either Co-Borrower shall have made a
general assignment for the benefit of creditors; or, (v) either
Co-Borrower shall have filed a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization or an
arrangement with creditors, or have taken advantage of any
insolvency law or have filed an answer admitting the material
allegations of a petition in bankruptcy, reorganization or
insolvency proceeding; or, (vi) a petition in bankruptcy shall
have been filed against either Co-Borrower and shall not have
been dismissed for a period of sixty (60) consecutive days after
notice, or if an order for relief has been entered under the
Bankruptcy Code; or, (vii) an order, judgment or decree shall
have been entered without the application, approval or consent of
either Co-Borrower by any court of competent jurisdiction
appointing a receiver, trustee, custodian or liquidator
of either Co-Borrower or of a substantial part of their
respective assets and such order, judgment or decree shall have
continued unstayed and in effect for any period of forty-five
(45) consecutive days following notice thereof;
(F) An event of default shall occur under any note,
document, instrument or agreement by and between the Bank and
either Co-Borrower, whether existing as of the date
hereof or entered into hereafter;
(G) A writ of execution or attachment or any similar
process shall be issued or levied against all or any part of or
interest in any of the substantial properties or assets of either
Co-Borrower or any judgment involving monetary damages shall be
entered against such Co-Borrower which shall become a lien on the
such Co-Borrowers substantial properties or assets or any portion
thereof or interest therein and an appeal shall not be taken and
actively prosecuted with respect to such judgment within thirty
(30) days of the date of its entry, or such execution, attachment
or similar process shall not be released, bonded, satisfied,
vacated or stayed within thirty (30) days after the date of its
entry or levy, and said writ of execution,
attachment, levy or judgment shall involve monetary damages not
covered by insurance aggregating more than $100,000.00;
(H) Either Co-Borrower shall have entered into any
secondary financing or shall have consented to the placing of any
lien on any of the Collateral without the prior, written
consent of the Bank, except as otherwise expressly permitted
under this Agreement;
(I) Either of the Co-Borrowers shall have entered into any
financing which exceeds One Hundred Thousand Dollars
($100,000.00) in the aggregate without giving the Bank
advance written notice of same; and/or
(J) The occurrence of any event of termination or
dissolution of either Co-Borrower, whether voluntary or
involuntary, and whether pursuant to their respective
certificates of incorporation, by-laws, or by statute, at law or
in equity.
(K) The exercise by Lunaire Limited of certain rights
granted under that certain License Agreement dated December 18,
1992, by and between Tenney and Lunaire Limited, to purchase the
Tenney name.
Section 10.2. Remedies on Default. Whenever any Event of
Default shall have occurred and be continuing within the meaning
hereof or of the Note, the Bank may take any one or more of the
following steps:
(A) By notice to the Co-Borrowers, cease making Advances
to the Co-Borrowers under the Line of Credit, and declare all
amounts payable hereunder and pursuant to the Note, to be
immediately due and payable, both as to principal and interest,
without presentment, demand, protest, or other notice of any
kind, all of which are expressly waived hereby, anything herein
or in the Note, to the contrary notwithstanding;
(B) Take any action available by statute, at law or in
equity to collect the payments then due and thereafter to become
due hereunder or under the Note, or to enforce performance and
observance of any Obligation, agreement or covenant of the Co-
Borrowers under this Agreement and the Note;
(C) At any time and from time to time, without notice to
the Co-Borrowers (any such notice being expressly waived by the
Co-Borrowers), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by the Bank to
or for the credit or the account of the Co-Borrowers against any
and all of the Obligations of the Co-Borrowers now or hereafter
existing under this Agreement or the Note, irrespective of
whether or not the Bank shall have made any demand under this
Agreement or the Note and although such Obligations may be
unmatured. The Bank shall be deemed to have exercised such set-
off and application immediately upon the occurrence of such Event
of Default notwithstanding the fact that the actual book entries
may be made at some time subsequent thereto. The Bank agrees
promptly to notify the Co-Borrowers, as the case may be, after
any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such
set-off and application. The rights of the Bank under this
subsection 10.2(C) are in addition to other rights and remedies
(including without limitation other rights of set-off) which the
Bank may have;
(D) To exercise any and all rights and remedies conferred
upon secured parties by the Uniform Commercial Code and other
applicable laws under all applicable jurisdictions; and
(E) Collect interest on the then outstanding principal
amount of the Note, at a rate equal to Five Percent (5%) above
the then applicable rate set forth in each Note, upon the
occurrence of an Event of Default with respect to payment of
monies under subsection 10.1(B), (C) or (D); provided, however,
that such rate of interest shall never exceed the maximum rate of
interest permissible under the laws of the State of New Jersey.
Without limiting the foregoing, in exercising its remedies
upon the occurrence of an Event of Default, the Bank shall not be
responsible nor liable for any shortage, discrepancy,
damage, loss or destruction of any part of the Collateral
wherever the same may be located, regardless of the cause
thereof, unless the same shall happen through the gross
negligence or willful misconduct of the Bank.
Except as otherwise provided herein, no remedy herein
conferred or reserved to the Bank is intended to be exclusive of
any other available remedy, but each and every remedy shall be
cumulative and in addition to every other remedy given under this
Agreement, the Note, or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right
or power accruing upon any Event of Default shall impair any such
right or power or shall be construed as a waiver thereof, but any
such right or power may be exercised from time to time and as
often as may be deemed expedient. The Bank may exercise any
remedy reserved to it in this Agreement and in the Note, without
giving notice of its intention to do so, unless such notice is
expressly required by this Section 10.2.
Section 10.3. Further Rights of Bank. The Co-Borrowers
shall do all things and deliver all instruments reasonably
requested by the Bank in order to protect or perfect any
security interest or lien given hereunder, including without
limitation financing statements under the Uniform Commercial Code
and all documents and instruments necessary under the Federal
Assignment of Claims Act. The Co-Borrowers hereby authorize the
Bank to execute alone any financing statement or other documents
or instruments that the Bank may require in order to perfect,
protect or establish any lien or security interest hereunder and
further authorize the Bank to sign the Co-Borrowers name on the
same. Neither the Bank nor the attorney-in-fact shall be liable
for any act or omission, error in judgment or mistake of law
so long as the same is not malicious or grossly negligent.
In the event that either Co-Borrower should fail to
purchase or maintain insurance (where applicable), or to pay any
tax, assessment, government charge or levy, except as the
same may be otherwise permitted hereunder, or in the event that
any lien, encumbrance or security interest prohibited hereby
should not be paid in full or discharged, or in the event
that either Co-Borrower should fail to perform or comply with any
other covenant, promise or obligation to the Bank hereunder or
under the Loan Documents, the Bank may, but shall not be required
to, perform, pay, satisfy, discharge or bond the same for the
account of the Co-Borrower, as the case may be, and all monies so
paid by the Bank shall be treated as an Advance hereunder to the
Co-Borrowers.
Section 10.4. Jurisdictional Unenforceability.
Notwithstanding the foregoing, any provision of this Agreement is
determined by competent authority to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
Unenforceability, without invalidating the remaining provisions
hereof, and any such prohibition or Unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices. All notices, certificates or other
communications hereunder shall be in writing and shall be deemed
given when personally delivered or three days after having been
mailed by registered or certified mail, postage prepaid and
addressed as follows:
If to the Bank:
Summit Bank
Raritan Plaza II, Second Floor
Fieldcrest Avenue
Edison, NJ 08837
Attention: Mr. Pete J. Kaznoski
-copy to-
Robert S. Burney, Esq.
Lindabury, McCormick & Estabrook, P.A.
53 Cardinal Drive
P.O. Box 2369
Westfield, New Jersey 07091
If to Tenney:
Tenney Engineering, Inc.
1090 Springfield Road
Union, New Jersey 07083
Attention: Mr. Martin Pelman
-copy to-
Peter Rado, Esq.
Ide, Haigney & Rado
317 Madison Avenue
New York, New York 10017
If to DynaTenn:
DynaTenn, Inc.
30 Wood Rock Road
Weymouth, Massachusetts
-copy to-
Peter Rado, Esq.
Ide, Haigney & Rado
317 Madison Avenue
New York, New York 10017
The Bank and the Co-Borrowers, by notice given hereunder, may
designate any further or different addresses to which subsequent
notices, certificates or other communications shall be sent,
which notice shall be deemed given when received.
Section 11.2. Applicable Law. This Agreement and the Loan
Documents shall be construed in accordance with and governed by
the laws of the State of New Jersey.
Section 11.3. Waiver. Neither any failure nor delay on
the part of the Bank in exercising any right, power or remedy
hereunder or under the Note shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy hereunder or under
the Note.
Section 11.4. Amendment. No modification, amendment or
waiver of any provision of this Agreement, or of the Note, nor
consent to any departure by either Co-Borrower herefrom or
therefrom, shall in any event be effective irrespective of any
course of dealing between the parties, unless the same shall be
in writing and executed by the Co-Borrower, as the case may be,
and a duly authorized officer of the Bank, and then such waiver
or consent shall be effective only in the specific instances and
for the purposes for which given. No notice to or demand on
either Co-Borrower shall, in any case, thereby entitle such Co-
Borrower to any other or further notice or demand in the same,
similar or other circumstances.
Section 11.5. Survival; Successors and Assigns. All
covenants, agreements, representations, and warranties made
herein, in the Loan Documents, and the certificates delivered
pursuant hereto shall survive the making by the Bank of the Loan
and the Advances and the execution and delivery to the Bank of
the Note evidencing the Loan and the Advances and shall continue
in full force and effect so long as the Note remains outstanding
and unpaid. Whenever in this Agreement any of the parties herein
is referred to, such references shall be deemed to include the
successors and assigns of each such party. All covenants,
promises, and agreements by or on behalf of the Co-Borrowers and
the Bank which are contained in this Agreement shall bind and
inure to the benefit of the successors and assigns (or heirs,
executors, beneficiaries as may be the case) of the Co-Borrowers
and the Bank, respectively.
Section 11.6. Expenses. The Co-Borrowers shall jointly
and severally pay all reasonable out-of-pocket costs and expenses
incurred by the Bank in connection with the preparation of this
Agreement and the Loan Documents (whether or not the transactions
hereby contemplated shall be consummated), the making of the
Advances, including, but not limited to, appraisal fees, and
costs incurred in connection with the enforcement of the rights
of the Bank in connection with the Loan and the collection of any
sums due the Bank hereunder. In particular and not in limitation
of the foregoing, the Co-Borrowers agree to pay all reasonable
costs and expenses of perfecting, which occurs after the date of
execution of this Agreement, collecting, defending, declaring and
enforcing the Banks security interests, and rights hereunder,
including but not limited to filing and recording fees,mortgage
title insurance fees and reasonable Bank counsel fees (whether or
not litigation is commenced).
Section 11.7. Waiver of Jury Trial; Venue. The Co-
Borrowers hereby jointly and severally waive trial by jury and
consent to and confer personal jurisdiction upon the courts
of the State of New Jersey, and expressly waive any objection as
to venue in such courts. The Bank likewise waives trial by jury.
IN WITNESS WHEREOF, the Co-Borrowers and the Bank have
caused this Agreement to be duly executed on the date first
written above.
ATTEST:
TENNEY ENGINEERING, INC.
(Corporate Seal)
By:
Martin Pelman, Asst. Secretary
Robert S. Schiffman, President
DYNATENN, INC.
s/Martin Pelman By:
Martin Pelman, Asst. Clerk
s/Robert S. Schiffman,
Robert S. Schiffman
Chief Executive Officer
ATTEST: SUMMIT BANK
(Corporate Seal)
By: s/Pete J. Kaznoski
Pete J. Kaznoski, Assistant Vice President
<PAGE>
EXHIBIT 6.2
1. Term Lease Master Agreement by and between IBM Credit
Corporation as lessor and Tenney as lessee, Agreement #FMC 0146,
as supplemented by (1) Term Lease Supplement executed by
Tenney on 6/21/95 and by IBM on 7/20/95; and (2) Term Lease
Supplement executed by Tenney on 7/28/96 and by IBM on 3/27/96.
2. Equipment Lease Agreement dated 6/10/96 by and between
Jefferson Bank as lessor, and Tenney as lessee, relating to a 108
Executone Phone System.
3. Lease between Vendor Lease Management Group as Lessor and
DynaTenn, Inc., d/b/a DynaVac as lessee. Equipment Lease No.
20005 executed by lessee on February 24, 1992.<PAGE>
EXHIBIT 6.3
LITIGATION, ETC.
1. Action in the United States District Court for the Eastern
District of Virginia, Alexandria Division entitled The Board of
Trustees Sheet Metal Workers National Pension Fund, Plaintiff, v.
Tenney Engineering, Inc., et al. [Tenney subsidiaries],
Defendants, Civil Action No. 95-1609A. The Plaintiff and
Defendants entered into a settlement agreement executed by the
Defendants on September 6, 1996 and by the Plaintiff on September
10, 1996 pursuant to which the Defendants agreed that they owed
the Plaintiff $720,090.49 and the Plaintiff agreed that it would
accept in payment of the Defendants obligation to Plaintiff the
sum of $75,000.00 payable on or before September 13, 1996 and 60
monthly payments of $6,613.09 each payable monthly commencing
October 1, 1996. If Defendants do not timely make such payments
or otherwise default under the settlement agreement Plaintiff may
enter a consent judgment, executed by Defendants, for the full
amount admitted to be owed.
2. Action in the Superior Court of New Jersey entitled J.H.
Cohen, Plaintiff Company v. Tenney Engineering, Defendant, Case
No. L-0046360 which resulted in a judgment against Tenney in the
amount of $28,000.00 of which $19,000 has been paid.*
3. Action in the Supreme Court, Erie County, entitled
Electrolab, Inc. v. Tenney Engineering, Inc., Index No.
1994/13374. Plaintiff asserted a claim of $18,000.00, $7,000.00
of which has been paid and $10,000.00 of which is now in
dispute.*
______________________________________
*These litigations are not regarded as material by Tenney.<PAGE>
EXHIBIT 6.5
1. Term Lease Master Agreement by and between IBM Credit
Corporation as lessor and Tenney as lessee, Agreement #FMC 0146,
as supplemented by (1) Term Lease Supplement executed by Tenney
on 6/21/95 and by IBM on 7/20/95; and (2) Term Lease Supplement
executed by Tenney on 7/28/96 and by IBM on 3/27/96.
2. Equipment Lease Agreement dated 6/10/96 by and between
Jefferson Bank as lessor, and Tenney as lessee, relating to a 108
Executone Phone System.
3. Lease between Vendor Lease Management Group as Lessor and
DynaTenn, Inc., d/b/a DynaVac as lessee. Equipment Lease No.
20005 executed by lessee on February 24, 1992.<PAGE>
EXHIBIT 6.6
LIENS AND SECURITY INTERESTS
1. UCC-1 Financing Statements filed with the Secretary of
State of New Jersey
Debtor Secured Party Filing Number
Date of Filing
Tenney Engineering, Inc. Jefferson Bank 1709355
7/15/96
Tenney Engineering, Inc. IBM Credit Corp. 1645205
7/10/96
2. UCC-1 Financing Statements filed with the Clerk of Union
County, New Jersey
Debtor Secured Party Filing Number
Date of Filing
Tenney Engineering, Inc. Jefferson Bank 004619
7/03/96
3. UCC-1 Financing Statements filed with the Secretary of State
of Massachusetts
Debtor Secured Party Filing Number
Date of Filing
DynaTenn, Inc. SNET Credit, Inc. 081822
3/25/92
DynaTenn, Inc. Loral Infrared &
Imaging Systems, Inc. 328070
7/26/95
DynaTenn, Inc. Loral Infrared &
Imaging Systems, Inc. 345261
10/18/95
<PAGE>
EXHIBIT 6.9
LOCATION OF COLLATERAL
1. 1090 Springfield Road, Union, New Jersey 07083.
2. 30 Wood Rock Road, Weymouth, Massachusetts 02188.
3. Small amounts of inventory and tools and a small number of
motor vehicles owned by Tenney are in the custody of service
personnel at various locations.<PAGE>
EXHIBIT 6.11
OWNERSHIP AND MANAGEMENT OF CO-BORROWERS
1. Re: Tenney Engineering
A. Directors
Saul S. Schiffman
Robert S. Schiffman
David C. Schiffman
David Schuh
C. Officers
President Robert S. Schiffman
Vice Chairman and Saul S. Schiffman
Secretary
Vice-President
Treasurer, and Martin Pelman
Assistant Secretary
2. Re: DynaTenn, Inc.
A. Shareholders Shares Owned
Tenney Engineering, Inc. 100% of all
outstanding
B. Directors
Saul S. Schiffman
Robert S. Schiffman
Martin Pelman
C. Officers
Chief Executive Officer and Chairman Robert S. Schiffman
President Leon McCrary
Vice President Thomas P. Foley
Treasurer and Assistant Clerk Martin Pelman
Assistant Clerk Saul S. Schiffman
<PAGE>
EXHIBIT (10) i. (ii)
PROMISSORY GRID NOTE
UP TO $300,000.00 Westfield, New Jersey
September 12, 1996
FOR VALUE RECEIVED, TENNEY ENGINEERING, INC., a corporation
duly organized and validly existing under the laws of the State
of New Jersey, having its principal office at 1090 Springfield
Road, Union, New Jersey 07083 (together with its successors and
assigns, hereinafter referred to as Tenney) and DYNATENN, INC., a
corporation duly organized and validly existing under the laws of
the State of Massachusetts, having its principal office at 30
Wood Rock Road, Weymouth, Massachusetts (together with its
successors and assigns, hereinafter referred to as DynaTenn)
(Tenney and DynaTenn are hereinafter referred to collectively as
the Co-Borrowers) hereby jointly and severally promise to pay to
the order of SUMMIT BANK, a banking corporation duly organized
and validly existing under the laws of the State of New Jersey,
having its principal office at 210 Main Street, Hackensack, New
Jersey 07601 (together with its successors and assigns,
hereinafter referred to as the Bank) on the earlier of (i) May
31, 1997, or (ii) the Termination Date, the principal sum of
THREE HUNDRED THOUSAND ($300,000.00), or, if less, then the
aggregate unpaid principal amount of all Working Capital Advances
made by the Bank to the Co-Borrowers pursuant to Section 2.1 of
the Loan and Security Agreement, in lawful money of the United
States of America, in immediately available funds, and to pay
interest thereon, in like funds, at a fluctuating interest rate
equal, at any time and from time to time, to two percent (2%)
over the Banks Floating Base Lending Rate per annum.
Capitalized terms used but not defined in this Note shall
have the meanings ascribed to them in that certain Loan and
Security Agreement dated on the date hereof, by and among
the Co-Borrowers and the Bank, which is hereby incorporated
verbatim herein in its entirety and made part hereof, unless a
different meaning is clearly required by the context hereof.
This Note is the Note, as such term is defined in the Loan and
Security Agreement.
Interest on the unpaid principal amount of each Working
Capital Advance, at the fluctuating rate described hereinabove,
shall accrue from the date such Working Capital Advance is made
until the principal amount thereof shall be paid in full.
Interest shall be payable monthly, in arrears, on the first (1st)
day of each calendar month, commencing October 1, 1996, and
continuing thereafter on the first (1st) day of each succeeding
calendar month, through and including May 1, 1997. Thereafter,
on May 31, 1997, or, if earlier, then on the Termination Date,
all unpaid principal and accrued and unpaid interest hereon shall
be due and payable in full. Interest hereon shall be computed on
the basis of the actual number of days elapsed over a year
consisting of 360 days. The Co-Borrowers shall be permitted to
make discretionary principal payments against the Line of Credit
without premium or penalty. Such principal payments shall be
applied by the Bank in the manner specified in subsection 2.1(G)
of the Loan and Security Agreement.
The Bank shall maintain an account record of the amount of
all Working Capital Advances made to the Co-Borrowers and
payments of principal and interest made by the Co-Borrowers in
connection therewith, which account record shall serve as prima
facie evidence of the aggregate amount of Outstanding Working
Capital Advances and accrued and unpaid interest thereon from
time to time. The failure of the Bank to maintain such an
account record upon the making of any Working Capital Advance or
the payment of any principal or interest, however, shall not
alter or impair the rights and remedies of the Bank if any
Working Capital Advance has actually been made or the rights and
remedies of the Co-Borrowers in the event that a payment of
principal or interest has been made in accordance with the
provisions of the Loan and Security Agreement and this Note.
The Co-Borrowers hereby irrevocably authorize and direct the
Bank, on the date that any payment of principal or interest shall
be due, to charge any account maintained by any Co-Borrower at
the Bank for the full amount of such principal or interest.
If the Co-Borrowers shall have failed to make any payment of
any installment of principal or interest hereon within ten (10)
days of its due date hereunder, then the Bank shall, in addition
to and not to the exclusion of any of its other rights or
remedies under the Loan Documents (including but not limited to
the right to accelerate payment of this Note), be entitled to,
and the Co-Borrowers shall jointly and severally pay to the Bank,
a late charge equal to five percent (5%) of the overdue payment,
but in any event not less than $25 or more than $2,500. Late
charges assessed by the Bank are immediately due and payable.
Payments shall be deemed to be made on the banking day upon which
payment is received by the Bank; payments received after 3:00
p.m. will be deemed received on the next banking day.
Payment of the principal of and accrued interest on this
Note is secured by a first priority security interest in the lien
upon certain of the Collateral granted by the Co-Borrowers to the
Bank pursuant to the Loan and Security Agreement. Reference is
hereby made to the Loan and Security Agreement for a more
complete description of the security for the repayment of
principal and interest on this Note, the rights and Obligations
of the Co-Borrowers in connection therewith, and other matters
affecting the indebtedness evidenced by this Note.
Upon the occurrence of an Event of Default, as defined in
the Loan and Security Agreement, as amended, the principal amount
hereof, together with accrued interest thereon, may become, or
may be declared to be, immediately due and payable, in the
manner, upon the conditions, and with the effect provided in said
Agreement.
The Co-Borrowers acknowledge that the Bank does not intend
for the aggregate principal amount of the Outstanding Working
Capital Advances under Section 2.1 of the Loan and Security
Agreement to exceed, at any time, the Working Capital Advances
Limit which is specifically defined in subsection 2.1(A) of the
Loan and Security Agreement. Notwithstanding the foregoing, if,
for any reason, the Bank should advance to the Co-Borrowers sums
in excess of said Working Capital Advances Limit, then the Co-
Borrowers agree that they will, immediately upon receipt of
written notice from the Bank, jointly and severally repay the
amount by which the Outstanding Working Capital Advances under
Section 2.1 of the Loan and Security Agreement exceeds the
Working Capital Advances Limit.
This Note shall be governed by and construed in accordance
with the laws of the State of New Jersey.
The Co-Borrowers and any endorsers or guarantors of this
Note hereby waive presentment, demand for payment, protest and
notice of protest and all other demands and notices in connection
with the payment and enforcement of this Note and consent to
extensions of time in the payment of any moneys payable under
this Note, or forbearance of their indulgence, without notice.
The Co-Borrowers hereby waive trial by jury and consent to
and confer personal jurisdiction upon the courts of the State of
New Jersey, and expressly waive any objection as to venue in such
courts, and agree that service of process may be made upon them
by mailing a copy of the Summons by United States Certified Mail,
Return Receipt Requested, to the Co-Borrowers at their respective
addresses. The Bank likewise waives trial by jury.
IN WITNESS WHEREOF, the undersigned have caused this Note to
be duly executed on the day and year first above written.
ATTEST: TENNEY ENGINEERING, INC.
(Corporate Seal) a New Jersey corporation
By:s/Martin Pelman s/Robert S. Schiffman
Martin Pelman, Asst. Secretary Robert S. Schiffman, President
ATTEST: DYNATENN, INC.
a Massachusetts Corporation
By: s/Martin Pelman s/Robert S. Schiffman
Martin Pelman, Asst. Clerk Robert S. Schiffman,
Chief Executive Officer
<PAGE>
STATE OF NEW JERSEY )
)
COUNTY OF UNION )
I CERTIFY that on September 12, 1996, ROBERT S. SCHIFFMAN,
personally came before me and this person acknowledged under
oath, to my satisfaction, that:
(a) he signed, sealed and delivered the attached document
as President of TENNEY ENGINEERING, INC., the corporation named
in this document;
(b) the proper corporate seal was affixed; and
(c) this document was signed and made by the corporation as
its voluntary act and deed by virtue of authority from its Board
of Directors.
A Notary Public of the State of New Jersey
STATE OF NEW JERSEY )
)
COUNTY OF UNION )
I CERTIFY that on September 12, 1996, ROBERT S. SCHIFFMAN,
personally came before me and this person acknowledged under
oath, to my satisfaction, that:
(a) he signed, sealed and delivered the attached document
as Chief Executive Officer of DYNATENN, INC., the corporation
named in this document;
(b) the proper corporate seal was affixed; and
(c) this document was signed and made by the corporation as
its voluntary act and deed by virtue of authority from its Board
of Directors.
A Notary Public of the State of New Jersey
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 661000
<SECURITIES> 0
<RECEIVABLES> 1670000
<ALLOWANCES> (28000)
<INVENTORY> 465000
<CURRENT-ASSETS> 3158000
<PP&E> 1683000
<DEPRECIATION> (1382000)
<TOTAL-ASSETS> 3935000
<CURRENT-LIABILITIES> 2099000
<BONDS> 0
0
0
<COMMON> 37000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3935000
<SALES> 10640000
<TOTAL-REVENUES> 10640000
<CGS> 8175000
<TOTAL-COSTS> 10224000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21000
<INCOME-PRETAX> 678000
<INCOME-TAX> (52000)
<INCOME-CONTINUING> 730000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 730000
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the
Registration Statement on Form S-8 (Registration No. 33-59639) of
Tenney Engineering, Inc., of our report dated March 26, 1997, on
the consolidated financial statements and schedules of Tenney
Engineering, Inc., and Subsidiaries appearing in this Annual Report
on Form 10-KSB for the year ended December 31, 1996.
ZELLER WEISS & KAHN
Mountainside, New Jersey
March 26, 1997
