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, 1997
[ ] 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:
Series A Common Stock, $0.01 par value
Series B 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, 1997 are
$6,718,000.
At March 27, 1998, the registrant had outstanding 3,714,842
shares of Series A Common Stock, par value $.01 per share, and
3,714,842 Series B Common Stock, par value $.01 per share and the
aggregate market value of both series 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
$623,678.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Proxy Statement dated March 31,
1998, in connection with its Annual Meeting to be held on May 22,
1998, 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 and completed payments
due under the agreement and exercised its option to purchase from
the Company certain trademarks. (See Notes 3 and 4 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 customer's
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 third 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, 1997, the Company had a total firm backlog
of unfilled orders of approximately $2,200,000, as compared with a
backlog of approximately $2,440,000 as of December 31, 1996.
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, 1997, and 1996,
respectively. Prime Government contracts did not exceed 10% of the
Company's backlog of unfilled orders as of December 31, 1997 (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 1997.
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 $0 and $21,400 for the years December 31,
1997 and 1996, respectively. (See Note 1 of the Notes to
Consolidated Financial Statements.)
Environmental Expenditures:
The Company, during 1997 and 1996, did not have any
environmental expenditures.
Employees:
At December 31, 1997, the Company had 73 employees.
Executive Officers:
The following table sets forth the names and ages and the
business experience of the registrant's executive officers.
BUSINESS
EXPERIENCE
NAME AND AGE PRESENT POSITION DURING PAST FIVE
YEARS
Robert S. Schiffman Chairman of the Board; President of the
Company;
54 (1)(2) President; and Chief Chief Executive
Officer;
Executive Officer and Chairman of
the Board
Saul S. Schiffman Vice Chairman of the Vice Chairman of
the
84 (1)(2) Board and Secretary Board
Martin Pelman Vice President and Vice President
and Treasurer
51 Treasurer of the Company
since August
1994; Certified
Public
Accountant;
1990-1993 Group
Controller -
Carlson Health
Care
Communications, Inc.
(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.
ITEM 2. PROPERTIES
The Company entered into a 3-year lease on December 14,
1995, which expires December 1998, for approximately 18,500 square
feet from the owner of the Company's former Union, New Jersey
facility. The Company pays an annual rent of $90,000. (See Notes 8
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 Notes 8 and 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, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Company is listed on the OTC Bulletin Board under the
symbols "TNNYA" and "TNNYB." The approximate number of holders of
record of the Company's Series A Common Stock was 1,019 and Series
B Common Stock was 1,029 at December 31, 1997. In addition,
approximately 50% of the outstanding shares are held for
shareholders' account at brokerage firms and financial
institutions.
On March 11, 1997 the Board of Directors resolved to
amend the Certificate of Incorporation to provide that Common
Stock, $0.01 par value, be issued in two series, denominated Series
A and Series B, both series having the same rights, powers and
privileges, except that Series A has ten (10) votes per share.
The Board also resolved that all issued shares of Common
Stock on April 10, 1997 be classified as Series B Common Stock,
$0.01 par value.
In addition the Board resolved that a stock distribution
of one (1) share of Series A Common Stock, $0.01 par value, be
distributed for each share of Series B Common Stock owned by
shareholders of record on April 10, 1997. The distribution was paid
on May 27, 1997.
This transaction was accounted for as a stock split.
The following table sets forth the range of high and low closing
prices of Common Stock for 1996 and January 1, 1997 through May 26, 1997;
and of Series A Common Stock and Series B Common Stock for the balance of
1997.
PRICE RANGE OF COMMON STOCK
1997 1996
High Low High Low
First Quarter .8125 .59375 .75 .34375
Second Quarter
Common Stock* .8125 .40625 1.00 .54
Series A .125 .0625
Series B .1875 .15625
Third Quarter
Common Stock* 1.00 .50
Series A .25 .125
Series B .15625 .09375
Fourth Quarter
Common Stock* .75 .41
Series A .3125 .08
Series B .11 .0625
*Effective date of split was May 27, 1997.
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
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. At April 23, 1997 the Term Note was renewed until May 31,
1998, and increased to the amount of $750,000. The Bank was granted
a security interest in substantially all the Company's assets. As
at December 31, 1997, the Company had borrowed $750,000 under the
Term Note. On November 5, 1997 the Bank notified the Company that
covenants under the Credit Agreement to maintain certain levels of
debt to tangible net worth and current assets to current
liabilities were not met on the Company's financial statements.
Payments of interest are being met in accordance with the terms of
the Note. The Bank has not made a demand for the principal amount
of the Term Note. The Bank has made it known that it will not renew
the Term Note on May 31, 1998. The Company is actively pursuing
available alternate financing sources; however, there is no
assurance that alternate sources can be found. If the Term Note is
not replaced, this would have a material adverse effect
that may cause insolvency proceedings.
During 1997, the Company has not been able to generate a positive
cash flow from operations.
At December 31, 1997, the Company's cash and cash equivalents
totaled $47,000 as compared to $661,000 at December 31, 1996.
Contributing to the change in cash between years was cash used in
operating activities of $1,255,000 in 1997 and cash provided by
operating activities of $579,000 in 1996. The principal reason for
cash being used in operating activities in 1997 was the loss from
operations and paying of Accounts Payable. 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 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 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, 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 through March,
1998.
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, 1997, the reserve approximated $368,000.
(See Note 3 of the Notes to Consolidated Financial Statements.)
Management believes that during 1998 the Company will not be able
to satisfy the payment of principal of the Term Note. The Company
must renew this Term Note or experience an adverse material effect
on operations.
RESULTS OF OPERATIONS
Total net revenue from continuing operations of $6,718,000 for 1997
compares to 1996 net revenue of $10,640,000.
Product and product-related net revenue for 1997 and 1996 was
$5,203,000 and $8,148,000, respectively. The decrease in net
revenue within this classification, between years, was due to
vacuum system revenue decreasing primarily because of a decline in
orders received during 1997.
Service-related revenues of $1,015,000 for the year 1997 compare to
1996 revenues of $940,000. The 1996 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 1997 was up due to an
increase of service-related orders being received.
Revenue related to the sale of parts totaled $500,000 and $633,000
for the years ended December 31, 1997 and 1996, respectively. The
decrease is due to a lower level of parts orders being received.
License fees of $0 for the year 1997 compare to 1996 fees of
$919,000. The decrease of fees is due to the prepayment of fees by
the Licensee during 1996, which completed payments due under the
License Agreement. (See Note 4 of the Notes to Consolidated
Financial Statements.)
The Company's order backlog at December 31, 1997 and 1996 was
approximately $2,200,000 and $2,440,000, respectively.
The total cost of sales as a percentage of net revenue was 88% for
the year 1997 and compares to 76% for the year 1996.
The 1997 cost of sales related to product and product-related sales
were approximately 97% as compared to 87% for 1996. 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
move to larger facilities at our DynaTenn subsidiary.
Cost of sales of service as a percentage of sales was 61% and 82%
for the years ending December 31, 1997 and 1996, respectively. The
decrease is primarily due to closing service locations which did
not have sales sufficient to cover overhead expenses.
Cost of sales as a percentage of sales during 1996 for parts was
64% and compares to 43% for the year 1996. The increase in the cost
of sales percentage in the 1997/96 comparison was due primarily to
the inventory sales mix.
Selling and administrative expenses were $1,952,000 and $2,049,000
for 1997 and 1996, respectively. The decrease was due to continuing
cost control programs put in place in late 1996.
Interest expense was $76,000 in 1997 and reflects an increase of
$55,000 from the 1996 interest expense of $21,000. The increase is
due primarily to paying interest on bank debt during the year.
Other income, net was $33,000 and $283,000 in 1997 and 1996,
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 4 of the
Notes to Consolidated Financial Statements.)
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards ("SFAS No. 109"),
"Accounting for Income Taxes," which requires an asset and
liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and income
tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
Deferred income taxes are provided for temporary differences
between the financial reporting and income tax basis of the
Company's assets and liabilities. The ultimate realization of the
deferred tax asset depends on the Company's ability to generate
sufficient taxable income in the future. At December 31, 1997, the
Company has available income tax net operating loss carryforwards
of approximately $4,500,000, which expire through 2009. (See Note
10 of the Notes to Consolidated Financial Statements.)
The net (loss) for 1997 was ($1,268,000) as compared to net income
of $730,000 in 1996.
Currently, the Company has its Series A and Series B Common Stock
listed on the OTC Bulletin Board under the symbols "TNNYA" and
"TNNYB", respectively.
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 30, 1998, in connection with its Annual
Meeting to be held May 22, 1998, 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 30, 1998, in connection with its Annual Meeting to be held
on May 22, 1998, 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 30, 1998, in
connection with its Annual Meeting to be held on May 22, 1998,
which paragraph is incorporated herein by reference.
(b) Security Ownership of Management
See page 4 of the registrant's Proxy Statement dated
March 30, 1998, in connection with its Annual Meeting to be held on
May 22, 1998, 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 of
the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
None.
Transaction with Promoters
Not applicable.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and Index of Exhibits
(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
Company's Annual Report on Form
10-KSB for 1995 and incorporated
herein by reference.
(ii) Amendment to Certificate of
Incorporation dated May 13,
1988. Filed as Exhibit
(3)a.(ii) to the Company's
Annual Report on Form 10-KSB for
1995 and incorporated herein by
reference.
(iii) Amendment to Certificate of
Incorporation dated May 24,
1996. Filed as Exhibit
(3)a.(iii) to the Company's
Annual Report on Form 10-KSB for
1996 and incorporated herein by
reference.
(iv) Amendment to Certificate of
Incorporation dated March 11,
1997. Filed as Exhibit (1) to
the Company's Current
Report on Form 8-K for the
event occurring on March 11,
1997, and incorporated herein by
reference.
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
Company's 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 Company's
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
Company's 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 Company's Annual
Report on Form 10-KSB
for 1995 and incorporated
herein by reference.
(ii) Stock Options dated August
15, 1996 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.(ii) to the Company's
Annual Report on Form 10-KSB for 1996
and incorporated herein by reference.
(iii) Stock Option dated January 27,
1997 granted pursuant to
the Company's 1995
Incentive Stock Option Plan
to the following director/officer:
Robert S. Schiffman. Filed as
Exhibit (10)b.(iii)
to the Company's Annual Report
on Form 10-KSB for 1996 and
incorporated herein by
reference.
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 incor-
porated 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 Company's 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
as Exhibit (10) e. (i) to the Company's
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 Company's
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 Company's 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.
(ii) Leased Employee Agreement, dated
December 18, 1992 between Tenney
Engineering, Inc. and Lunaire
Limited.
(iii) Employment Agreement, dated December
18, 1992 between Tenney Engineering,
Inc. and Robert S. Schiffman.
(iv) Consulting Agreement between Lunaire
Limited and Robert S. Schiffman, dated
December 18, 1992.
(v) Prepayment Agreement dated
November 14, 1996,
between Tenney Engineering, Inc.
and Lunaire Limited.
Filed as Exhibit
(10)g.(v) to the Company's Annual Report
on Form 10-KSB for 1996 and
incorporated herein by reference.
h. (i) Lease Agreement dated November 19, 1996,
between 110 Industrial Park, LLC, and
DynaTenn, Inc. d/b/a DynaVac. Filed as
Exhibit (10)h.(i) to the Company's
Annual Report on Form 10-KSB for 1996
and incorporated herein by reference.
(ii) First Lease Amendment dated November 19,
1996, by and between 110 Industrial
Park, LLC, and DynaTenn, Inc.
Filed as Exhibit (10)h.(ii) to the Company's
Annual Report on Form 10-KSB for 1996 and
incorporated herein by reference.
i. (i) Loan and Security Agreement dated September 12,
1996, by and among Tenney Engineering, Inc.
and DynaTenn, Inc. and Summit Bank.
Filed as Exhibit (10)i.(i)
to the Company's Annual Report
on Form 10-KSB for 1996 and
incorporated herein by reference.
(ii) Third Amendment to Loan and Security
Agreement(originally dated
September 12, 1996), by and among Tenney
Engineering, Inc. and DynaTenn and
Summit Bank.
(iii) Promissory Grid Note dated September 12, 1996
by and among Tenney Engineering,
Inc. and DynaTenn, Inc. and Summit Bank.
Filed as Exhibit (10)i.(ii) to the
Company's Annual Report on Form
10-KSB and incorporated herein by reference.
(iv) Amended and Restated Promissory Grid Note
(originally dated September 12,
1996), by and among Tenney Engineering,
Inc. and DynaTenn and Summit Bank.
(22) List of Subsidiaries, all of which are
wholly-owned:
Jurisdiction of Percentage of
Name of Company Incorporation Ownership
Tenney Environmental Products, Inc. New Jersey 100%
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 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
Company's 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
Company's 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.
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 30, 1998
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 David C. Schiffman
(Director) (Director)
March 30, 1998 March 30, 1998
s/Robert S. Schiffman s/David A. Schuh
Robert S. Schiffman David A. Schuh
(Director) (Director)
March 30, 1998 March 30, 1998
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, 1997 F - 3
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996 F - 4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY) YEARS ENDED DECEMBER 31, 1997
AND 1996 F - 5
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996 F - 6
NOTES TO FINANCIAL STATEMENTS F - 7/21
* * *
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,
1997 and the related consolidated statements of operations, changes
in stockholders' equity (deficiency) and cash flows for the years
ended December 31, 1997 and 1996. 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
provides 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, 1997, and the consolidated results of its
operations and its cash flows for the years ended December 31, 1997
and 1996 in conformity with generally accepted accounting
principles.
ZELLER WEISS & KAHN, LLP
Mountainside, New Jersey
March 31, 1998
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(In thousands of dollars)
ASSETS
Current assets:
Cash and cash equivalents $ 47
Accounts receivable, net 1,312
Current portion of installment note
receivable 270
Inventories 627
Prepaid expenses and other current assets 38
Deferred tax asset 95
Total current assets 2,389
Equipment, net 454
Other assets 212
Deferred tax asset - long-term portion 185
Total Assets $ 3,240
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank Term Note Payable $ 750
Accounts payable and other accrued
liabilities 1,197
Current portion of long-term
capital leases 80
Accrued payroll and payroll taxes 171
Billings in excess of estimated revenue on
long-term contracts 414
Pension obligation, current portion 73
Total current liabilities 2,685
Long-term debt, net of current portion 497
Total liabilities 3,182
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 3,727,980 shares Series A 37
Issued 3,727,980 shares Series B 37
Additional paid-in capital 2,263
Retained earnings (deficit) (2,239)
98
Less treasury stock, 26,276 shares, at cost 40
Total stockholders' equity 58
Total liabilities and stockholders'
equity $ 3,240
See Notes to Consolidated Financial Statements.
TENNEY ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
(In Thousands of Dollars
Except per Share Amounts)
Net revenue:
Product and product related $ 5,203 $ 8,148
Service 1,015 940
Parts 500 633
License Fees 0 919
Totals 6,718 10,640
Cost of sales:
Product and product related 5,049 7,128
Service 622 776
Parts 320 271
Totals 5,991 8,175
Gross profit 727 2,465
Selling and administrative expenses 1,952 2,049
Income (loss) from operations (1,225) 416
Other income (expense):
Interest expense (76) (21)
Other income, net 33 283
Totals (43) 262
Income (Loss) before income taxes (1,268) 678
Income taxes (benefit) 0 (52)
Net Income (Loss) $(1,268) $ 730
Net income (loss) per
Common Share: Series A $ (0.17) $ 0.10
Series B (0.17) 0.10
Exercise of options would not be dilutative.
See Notes to Consolidated Financial Statements.
<TABLE>
TENNEY ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY)
YEARS ENDED DECEMBER 31, 1997 AND 1996
(In Thousands of Dollars)
<CAPTION>
Additional Retained Less
Common Stock Paid-in Earnings Treasury Stock
Shares Amount Capital (Deficit) Shares Amount Totals
<S> <C> <C> <C> <C> <C> <C> <C>
Balance --
January 1, 1996 3,694,980 $ 369 $ 1,960 $(1,701) 9,388 $ 37 $ 591
Net income 730 730
Issuance of Stock
Pursuant to Option
granted under 1995
Stock Option Plan 10,000 3 3
Restatement of
Par Value (332) 332
Balance --
December 31, 1996 3,704,980 37 2,295 (971) 9,388 37 1,324
Issuance of Stock
Pursuant to Options
granted under 1995
Stock Option Plan 23,000 5 5
Stock received in
payment of Exercise
Price of Stock Option 3,750 3 (3)
Issuance of new
Common Stock
Series A 3,727,980 37 (37) 13,138
Net (loss) (1,268) (1268)
Balance --
December 31, 1997 $ 2,263 $(2,239) 26,276 $ 40 $ 58
Series A 3,727,980 $ 37
Series B 3,727,980 $ 37
</TABLE>
See Notes to Consolidated Financial Statements.
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
(In Thousands of Dollars)
1997 1996
Operating activities:
Net income (loss) $(1,268) $ 730
Adjustments to reconcile income
to net cash provided by (used in)
continuing operations:
Depreciation and amortization 53 105
Deferred tax asset 0 (52)
Changes in operating assets and
liabilities:
Accounts and installment receivables 373 63
Inventories (162) (154)
Prepaid expenses and other current
assets 17 42
Other assets 6 (8)
Accounts payable and other
liabilities (263) (58)
Accrued payroll and payroll taxes (66) 75
Billings in excess of estimated
revenues 128 (32)
Pension obligation (73) (135)
Net cash provided by (used in)
continuing operations (1,255) 576
Investing activities:
Acquisition of equipment (45) (68)
Net cash used in investing
activities (45) (68)
Financing activities:
Exercise of Options and Issuance of
Common Stock 2 3
Proceeds from working capital
line of credit 750 300
Payments of note payable and
long-term capital leases (66) (373)
Net cash used in financing
activities 686 (70)
Net increase (decrease) in cash and
cash equivalents (614) 438
Cash and cash equivalents,
beginning of year 661 223
Cash and cash equivalents, end of period $ 47 $ 661
Supplemental disclosure of cash flow information:
Interest paid $ 76 $ 21
Income tax paid 0 4
See Notes to Consolidated Financial Statements.
Note 1 - Summary of accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of
Tenney Engineering, Inc. (the "Company") and its wholly-owned
subsidiaries. All material intercompany accounts and transactions
have been eliminated in consolidation.
Net Revenues:
Revenue from product sales and short-term contracts and
services are recognized when the transactions are consummated. The
Company generally recognizes revenue on long-term, large
installation contracts under the percentage of completion method.
Under this method, revenue is recognized according to the ratio of
costs incurred to currently estimated total contract costs. At the
time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is recorded.
Product and product-related net revenue includes revenue from
the Company's manufacturing operation. In 1997 service revenue
includes revenue from the servicing and installation of
environmental equipment and in 1996 included additional revenue
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 in 1996 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 (loss) per common share:
Gain (loss) per common share is computed based on the weighted
average number of common shares outstanding during the year. The
assumed exercise of outstanding stock options would not have a
significant effect on the per share computations. The weighted
average number of common shares outstanding was 3,711,661 Series A
and 3,711,661 Series B in 1997 and 3,689,390 Series A and 3,689,390
Series B in 1996, respectively (see Note 11). 1996 was recast to
show the effect of the issuance of Series A Common Stock.
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 realized a net (loss) for the year ended
December 31, 1997 and net income for the year ended December 31,
1995, respectively, from operations, which has resulted in a
decrease in the Company's stockholders equity.
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. At April 23, 1997 the Term Note was renewed until May
31, 1998, and increased to the amount of $750,000. The Bank was
granted a security interest in substantially all the Company's
assets. As at December 31, 1997, the Company had borrowed $750,000
under the Term Note. On November 5, 1997 the Bank notified the
Company that covenants under the Credit Agreement to maintain
certain levels of debt to tangible net worth and current assets to
current liabilities were not met on the Company's financial
statements. Payments of interest are being met in accordance with
the terms of the Note. The Bank has not made a demand for the
principal amount of the Term Note. The Bank has made it known that
it will not renew the Term Note on May 31, 1998. The Company is
actively pursuing available alternate financing sources; however,
there is no assurance that alternate sources can be found. If the
Term Note is not replaced, this would have a material
adverse effect that may cause insolvency proceedings.
As at December 31, 1996, the Licensee paid all license fees
due under the License Agreement (see Note 4).
Note 3 - Restructuring:
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.
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.
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 made the services of the
Company's president available to the Licensee for a specified
period of time.
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 Company's rights, title and interest in the "Tenney" trademark
were received. The installation and servicing agreement and the
inventory purchase agreement remain in effect through 1998.
Net revenue for 1996 includes consulting revenue of $120,000.
Purchases by the Licensee from the Company's former subsidiary in
1997 and 1996 totaled approximately $42,100 and $55,200,
respectively.
Note 5 - Accounts receivable:
Accounts receivable consist of the following:
1997
(In Thousands
of Dollars)
Accounts receivable, billed $ 955
Accounts receivable, unbilled 385
1,340
Allowance for doubtful accounts (28)
Totals $ 1,312
At December 31, 1997, sales recognized on the percentage of
completion method approximated $4,900,000.
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:
1997
(In Thousands
of Dollars)
Raw materials
$ 779
Less:
Provision for write-downs
to estimated realizable value 152
Totals $ 627
Accumulated costs on long-term contracts recognized by the
percentage of completion method (see Note 5) were approximately
$5,084,000 and $5,685,000 in 1997 and 1996, respectively.
Note 8 - Property and Equipment:
Property and equipment, which is stated at cost, is summarized
as follows at December 31, 1997:
1997
(In Thousands
of Dollars)
Leasehold Improvements $ 70
Equipment 1,444
Equipment under capital leases 375
1,889
Accumulated depreciation (1,435)
Total equipment - net $ 454
The Company leases certain equipment for use in its operations
under capital leases. Property and equipment at December 31, 1997,
included capital leases of $375,000 and related accumulated
depreciation of $134,000.
The Company entered into a three-year lease on December 15,
1995, with the new owner of the Company's former Union, New Jersey,
facility for approximately 18,500 square feet at an annual rental
of $90,000. The lease expires in December 1998.
The Company's 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, 1997, 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)
1998 $ 102 $ 241
1999 102 157
2000 79 163
2001 33 169
2002 21 176
Total $ 337 $ 903
Less imputed interest 55
Present value of net lease payments $ 282
Less current installments 80
Long-term debt obligation at 12/31/97 $ 202
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,
1997 1996
(In Thousands
of Dollars)
Notes payable - bank $ 750 $ 0
Current portion of capital leases 80 43 Current
portion of pension obligation 73 73
Total $ 903 $ 116
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. At April 23, 1997 the Term Note was renewed until May
31, 1998, and increased to the amount of $750,000. The Bank was
granted a security interest in substantially all the Company's
assets. As at December 31, 1997, the Company had borrowed $750,000
under the Term Note. On November 5, 1997 the Bank notified the
Company that covenants under the Credit Agreement to maintain
certain levels of debt to tangible net worth and current assets to
current liabilities were not met on the Company's financial
statements. Payments of interest are being met in accordance with
the terms of the Note. The Bank has not made a demand for the
principal amount of the Term Note. The Bank has made it known that
it will not renew the Term Note on May 31, 1998. The Company is
actively pursuing available alternate financing sources; however,
there is no assurance that alternate sources can be found. If the
Term Note is not replaced, this would have a material
adverse effect that may cause insolvency proceedings.
Long-term debt consists of the following at December 31,
1997
(In Thousands
of Dollars)
Capital lease obligations $ 282
Multi-employer pension obligation 368
Total long-term debt including
current maturities 650
Less: current maturities 153
Total long-term debt $ 497
Long-term liabilities consist of capital leases entered into
for equipment of $161,000 in 1997 and $27,300 in 1996,
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--1998;
$79,400--1999; $79,400--2000; and $59,500--2001.
Note 10 - Income taxes:
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards ("SFAS No. 109"),
"Accounting for Income Taxes," which requires an asset and
liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and income
tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
A reconciliation of the Company's income tax provision that
would be provided based on a statutory federal income tax rate of
34% to the Company's effective rate is as follows:
1997 1996
(In Thousands
of Dollars)
Income taxes computed at the
federal statutory rates $ 0 $ 230
State taxes (net of federal benefit) 0 40
Realization of benefits of tax loss
carryforwards 0 (200)
Valuation allowance adjusted 0 (122)
Net income tax (benefit) $ (0) $ (52)
Deferred income taxes are provided for temporary differences
between the financial reporting and income tax basis of the
Company's assets and liabilities. Temporary differences, net
operating loss carryforwards and valuation allowances comprising
the net deferred taxes on the balance sheet at December 31, 1997,
are as follows:
(In Thousands
of Dollars)
Deferred tax assets:
Inventory reserve $ 52
Accounts receivable reserve 10
Deferred revenue 147
Deferred compensation 24
Deferred pension obligation 12
Tax loss carryforward 1,530
Total deferred tax assets 1,775
Deferred tax liabilities:
Depreciation (10)
Valuation allowance (1,485)
Total net deferred tax assets $ 280
The ultimate realization of the deferred tax asset depends on
the Company's ability to generate sufficient taxable income in the
future.
At December 31, 1997, the Company has available income tax net
operating loss carryforwards of approximately $4,500,000, which
expire through 2009.
Note 11 - Common stock:
On March 11, 1997 the Board of Directors resolved to
amend the Certificate of Incorporation to provide that Common
Stock, $0.01 par value, be issued in two series, denominated Series
A and Series B, both series having the same rights, powers and
privileges, except that Series A has ten (10) votes per share.
The Board also resolved that all issued shares of Common
Stock on April 10, 1997 be classified as Series B Common Stock,
$0.01 par value.
In addition the Board resolved that a stock distribution
of one (1) share of Series A Common Stock, $0.01 par value, be
distributed for each share of Series B Common Stock owned by
shareholders of record on April 10, 1997. The distribution was paid
on May 27, 1997.
This transaction was accounted for as a stock split.
Outstanding options were adjusted effective the close of
business April 10, 1997, so that Optionees have the right to buy a
unit consisting of one share of Series A Common Stock and one share
of Series B Common Stock for each share of Common Stock to which
the option relates at a price per unit equal to the price per share
of Common Stock specified in the outstanding option. The 1995
Incentive Stock Option Plan was amended to relate to an additional
330,000 shares of Series A 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 relating to 400,000 share of Common Stock. 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 1997 or 1996. Had compensation cost
been determined on the basis of fair value pursuant to FASB
Statement No. 123, net income (loss) and earnings per share would
have been reduced as follows:
1997 1996
Net income (loss)
As reported (1,263,000) 730,000
Pro forma (1,266,000) 687,000
Primary earnings (loss) per share
As reported (0.34) 0.20
Pro forma (0.34) 0.19
Fully diluted earnings (loss) per share
As reported (0.34) 0.20
Pro forma (0.34) 0.19
Following is a summary of the status of the 1995 Plan during
1997 and 1996:
Weighted
Average
Number of Exercise
Shares/Units Price
Outstanding at 1/1/97 290,000 $ 0.24420
Granted 50,000 0.704688
Exercised (23,000) 0.23437
Canceled (10,000) 0.89789
Outstanding at 12/31/97 307,000 $ 0.608968
Options exercisable at 12/31/97 290,000 $ 0.57104
Weighted average fair value
of options granted during 1997 $ 0.21708
Weighted
Average
Number of Exercise
Shares Price
Outstanding at 1/1/96 155,000 0.24420
Granted 145,000 0.89789
Exercised (10,000) 0.23431
Outstanding at 12/31/96 280,000 $ 0.51104
Options exercisable at 12/31/96 290,000 $ 0.24420
Weighted average fair value
of options granted during 1996 $ 0.01000
Following is a summary of the status of options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Outstanding Units Exercisable Units
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Range Number Life Price Number Price
<S> <C> <C> <C> <C> <C>
$0.23437-$0.25781 122,000 1 year $0.24420 122,000 $0.24420
$0.85937-$0.94531 135,000 2 years $0.89789 135,000 $0.89789
$0.704688 50,000 3 years $0.704688 50,000 $0.704688
</TABLE>
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 1997, the Company
accrued no pension costs 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, "Employer's
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 5% at December 31, 1997:
1997
(In Thousands
of Dollars)
Actuarial present value of projected
benefit obligation including vested
benefits of $671,000 $ 671
Plan assets at fair value 689
Plan assets less than projected
benefit obligation consisting of: $ (17)
Unrecognized net transition liability $ 0
Net accrued pension costs 0
Total $ 0
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:
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:
1998--$151,000; 1999--$157,000; 2000--$163,000; 2001--$169,000 and
2002--$176,000.
The Company entered into a three-year lease on December 15,
1995, with the new owner of the Company's former Union, New Jersey,
facility for approximately 18,500 square feet at an annual rental
of $90,000. The lease expires in December, 1998.
Contingencies:
The Company is not a party to any material pending legal
proceeding.
Note 14 - Other income and (expense):
Other income and (expense) consist of the following:
1997 1996
(In Thousands
of Dollars)
Interest expense $ (76) $ (21)
Sale of Trademark (A) 0 100
Other, net 33 183
Totals $ (43) $ 262
(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 15 - Major customer and concentrations of credit risk:
Major customer:
During the years ended December 31, 1997 and 1996, 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, concentrations of
credit risk are limited.
The Company maintains cash balances at several financial
institutions located in the Northeast. Accounts at each institution
are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1997, the Company's uninsured cash
balances total approximately zero.
Note 16 - Supplemental schedule of noncash investing and
financing activities:
During 1997 the Company entered into several 5-year capital
leases totaling $161,000 for service vans, machinery and equipment.
* * *
2423F - 24F - 7TENNEY ENGINEERING, INC.AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSTENNEY ENGINEERING, INC.AND
SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EXHIBIT (10) g. (i)
LICENSE AGREEMENT
TENNEY ENGINEERING, INC.
and
LUNAIRE LIMITED
This License Agreement is made this 18th day of
December, 1992, by and between TENNEY ENGINEERING, INC., a NewJersey
corporation, having its principal place of business
at 1090 Springfield Road, Union, New Jersey 07083 (referred
to as ``Licensor'') and LUNAIRE LIMITED, a Pennsylvania corporation,
having its principal place of business at 2121 Reach Road,
Williamsport, Pennsylvania 17701 (referred to as "Licensee'').
Licensor has rights to certain manufacturing
processes and procedures and trademarks relating to environmental
chambers and equipment, and has the right to grant a license andto deliver
technical assistance for the manufacture, use and sales
of said environmental chambers and equipment. Licensee desires to
acquire a license and to receive technical assistance from the
Licensor to manufacture such products in the United States and to
use and sell such products throughout the world with the
exception of India (where Licensor already has in effectLicense agreement
with others).
In consideration of the mutual covenants containedherein and
intending
to be legally bound hereby, the parties
agree as follows:
1. Definitions. For purposes of this
Agreement, the following words shall have the meanings set forthbelow:
1.1 ``Licensee'' as used herein
includes all subsidiaries and affiliates ofLunaire Limited.
1.2 ``Licensed
Products'' or ``Products'' means: manufactured or developed by Licensor;
(b) those items constituting modifications
of the items referred to in subclause (a);
(c) any other items manufactured or
sold by Licensee bearing the ``Tenney'' name; and
(d) those items which fall within any
of the categories enumerated on Exhibit `` A'' attached hereto,
manufactured by Licensee, regardless of the nameplate.
1.3 ``Data''
means information, whether in documentary
form or otherwise, which is possessed or available
to the Licensor relating to the Products including, without
limitation, engineering drawings, specifications, manufacturing
process and procedures, quality assurance procedures, computer programs
(excluding software licensed to Licensor by third
parties) and other compilations of information, but excludingsuch data that
may not be communicated without violating the legal
rights of any third parties.
1.4 ``Subsidiary''
means any company or other limited
liability organization more than 50% of the voting share
capital of which is owned or controlled by Licensor or Licensee,
as the case may be.
1.5 ``Affiliate'' means any corporation
directly or indirectly controlling, or under common control with
Licensor or Licensee, as the case may be.
2. License Grant.
2.1 Subject to the provisions of paragraph 2.3
below, Licensor hereby grants to Licensee the license to use
the data made available hereunder to manufacture the Products
in the United States, and the license to sell and lease the
Products throughout the world, with the exception of India.
2.2 The term ``Licensed Territory '' for
purposes of this Agreement shall mean the continental United
States when referring to the license to manufacture, and shallmean the
world, with the exception of India, when referring to the
license to sell and lease the Products.
2.3 Nothing in this Agreement shall preclude
Licensor, its subsidiaries and affiliates from using the data
directly in the manufacture and sale of the Products anywhere inthe world.
Licensor shall not, however, grant to any other person or entity
any rights or license to use the data or trademarks,
or to manufacture or sell the Products within North America or
Europe during the term of this Agreement. do not include the right to
sublicense to others without
the prior written consent of Licensor. However, Licensee (other
than its subsidiaries and affiliates) shall have the right of
sublicense to any subsidiary or affiliate of Licensee without
Licensor's prior written consent.
3. Modifications. The Licensee shall have the right
without any restriction to make and sell any
improvement, modification or changes (hereinafter `` enhancements'') to
the Products, including all variety ofinventions and innovations
developed by Licensee. The Licensee shall notify Licensor in writing of
all functional and materialenhancements introduced by the Licensee during
the term of thisAgreement.
4. Term. Unless sooner terminated as provided
herein, the term of this Agreement shall commence December 18,1992 and
conclude December 31, 1998.
5. Technical Assistance. Effective upon signing and during
the term of this Agreement, the Licensor shall make
available to Licensee all of its present data relating to the Products
including all existing improvements, modificationsand changes thereto.
6. Non-Disclosure. Licensee understands that the
data made available by the Licensor hereunder is confidential innature.
Licensee agrees not to disclose or make such data public
which is not generally published or lawfully available to third
parties, without the prior written consent of Licensor, and
further agrees to take all required measures to prevent any
acquisition, disposition or use of such data by any person,firm or
corporation not expressly authorized to receive such
information under the Agreement. Nothing herein shall prevent the
disclosure by the Licensee (1) to its suppliers of
specifications and technical information necessary to permit the supplier
to make parts and sub-assemblies to be used by Licensee in the
manufacture or repair of the Products; (2) toits customers to the extent
necessary for sales and fulfillment oforders; and (3) to its employees to
enable them to manufactureand service the Products. Licensee will secure
confidentiality
agreements with all suppliers and employees to whom confidential data
is disclosed.
7. Trademarks/Licensor's Name.
7.1 Licensor grants Licensee a
nonexclusive, non-transferrable, license for the term of theAgreement to
use the ``Tenney'' registered trademark in connectionwith the Products.
Licensor represents that it has registered the trademark
with the U.S. Patent and Trademark Office and owns all right,
title and interest in and to the trademark. made name
``Tenney Environmental'' in the conduct of its business relativeto its
manufacture and sale of Licensed Products throughout the
Licensed Territory.
7.3 A list of all other trademarks owned by
Licensor relating to each of the Products are set forth in
Exhibit ``B'' attached hereto and incorporated herein. The Licensor
hereby grants Licensee a nonexclusive, non-transferrable, license for the
term of the Agreement to use such trademarks in connection with the
Products throughout theLicensed Territory.
7.4 Licensee shall have the right to utilize
its own trademarks in connection with the Products and other
products which incorporate the data as long as such use is
consistent with the requirements set forth in this Agreement.
7.5 In the event Licensor and its
subsidiaries and affiliates no longer manufactures the Licensed
Products on December 1, 1998, Licensee shall have an option to acquire
all right, title and interest of Licensor touse thorughout the
Licensed Territory the ``Tenney'' trade name and registered trademark
upon payment to Licensor of $100,000on or before December 31, 1998
subject, however, to the rightsalready granted by Licensor to the China
National Machinery Import and Export Corporation, Liaoning Testing
Equipment Fac
8. License Fees.
8.1 In consideration for the licenses
granted
hereunder, Licensee agrees to pay to Licensor a license
fee equal
to five percent (5%) of the net sales price (as
hereinafter
defined) of all Products manufactured and sold by
Licensee
pursuant to this Agreement, five percent (5%) of the
rental fees
on all Products manufactured and leased by Licensee
pursuant to
this Agreement, and five percent (5%) of all
installation and
training fees charged with respect to the Products
(except where
performed by Licensor), said payments to continue until
Licensor
has received $1,900,000, or until this Agreement
terminates
(subject to paragraph 8.4 hereof), whichever first
occurs. ``net sales
price'' shall mean Licensee's invoice
price to its customers and
any rent charged for leased Products to its customers,
less:
(a) separately stated charges (other
than for
installation and training) billed to the customer at
Licensee's
cost;
(b) product returns and allowances, to be
charged
to Licensor when made or allowed; and
(c) sales, excise or use taxes separately
stated
and paid as shown on the invoice.
8.3 Sales shall be deemed to have been
consummated, for
purposes of the license fee payments and reporting
hereunder, at
the time the customer is billed with respect to the
shipment of
the Products, or with respect to the rent due, as the
case may
be.
8.4 In the event the term of any lease extends
beyond
the termination date hereof, the amount billed for rent
accruing
both before and after such date shall be subject to such
license
fee, unless or until Licensor has received $1,900,000.
In the
event the customer exercises any option to purchase any
Licensed
Product, the amount payable by such customer, whether
before or
after termination of this Agreement, shall also be
subject to
such license fee, unless or until Licensor has
received
$1,900,000.
8.5 In the event any Products are
incorporated into
products performing additional functions or are
included in a
package transaction with other products, the license
fee to be
paid by the Licensee (a) in the case of Products
incorporated
into products performing additional functions,
shall be
determined by an equitable apportionment of the price
of such
products between the features represented by
Licensee's
technology, and the features represented by the
Products
incorporated therein, and (b) in the case of
package
transactions, shall be determined by an equitable
apportionment
of the price of each item included in the package.
8.6 The Licensee shall pay the license fee due
Licensor
within five (5) business days following the end of
each month
based upon all sales consummated during such month. Each
payment
will be accompanied by a report prepared in requirements set
forth in paragraph 10 below. Late
payments shall
be the subject of a service charge, for handling and
processing
the same, at one percent (1%) per month or portion
thereof that
such payment is past due; a payment shall be considered
past due
if not received by the Licensor by the tenth (10th)
calendar day
after the end of a calendar month.
8.7 No license fee shall be due to
Licensor with
respect to the sale of Licensee's existing products
which are
similar in nature to Licensor's Products, and which are
sold to
Licensee's customer under Licensee's name alone, except
as herein
specifically provided.
8.8 Should Licensee be unable to collect on its
invoice
with respect to the sale of a Licensed Product within
six (6)
months of submission of said invoice, Licensee will be
entitled
to a credit for the license fee previously paid to
Licensor with
respect to said sale. Should Licensee subsequently
collect monies
with respect to said invoice, it will pay to Licensor a
license
fee on the net amount collected.
9. Books and Records.
9.1 Licensee agrees to maintain complete,
accurate and
current books and records of all activities relating
to the
manufacture, purchase and sale of the Licensed
Products. The
books and records shall contain such underlying details
as are
necessary to determine and verify the license fees due
under this
Agreement.
9.2 Licensee shall make available to Licensor
and its
representatives any information reasonably
requested and
necessary or useful to establish the accuracy of the
books and
records or to determine the amount of license fees
due. Upon
Licensor's request and at its expense, Licensee will
provide
copies of such information.
9.3 Licensee agrees to maintain such books and
records
for a period of no less than four (4) years following the
fiscal
year to which they pertain.
10. Reports and Audit.
10.1 Licensee will submit to Licensor by
the 5th
business day following the end of each month a complete
report
setting forth:
(a) the gross and net sales price, and net
rental
payments, with respect to all Licensed Products sold
during the
month, including an itemization of deductions
pursuant to
paragraph 8.2 above; and
(b) the net license fee due.
10.2 In the event Licensor requests an audit
by an
independent accountant selected by Licensor to certify as
to the
payments and reports made by Licensee, the cost of
such audit
shall be borne by Licensor. If such audit reveals a
discrepancy
in excess of five percent (5%) of total net sales
reported for
the period(s) in question, Licensee shall pay the cost
of such
audit as well as the additional license fee due and
payable
(including service charges for late payment) within
twenty (20)
days following written notice of such
discrepancy. Any
discrepancy in Licensee's favor shall be remitted by
Licensor to
Licensee within twenty (20) days following completion
of the
audit.
11. Sales Activities and Service.
11.1 During the term of this Agreement,
Licensee shall
promote and sell the Products diligently and in good
faith in a
manner calculated to maximize the sales thereof.
11.2 Licensor shall promptly supply Licensee
with its
current sales literature relating to the Products.
11.3 In the event Licensor should be
unwilling or
unable to manufacture any one or more of the Products,
it shall <PAGE>
refer all prospective customers, inquiries and orders
for the
purchase of such Products to Licensee.
11.4 Licensor shall be responsible for all
warranties
and customer service on Products sold by it. Licensee
shall be
responsible for all warranties and customer service on
Products
sold by it.
12. Warranties.
12.1 Licensor warrants that it is the owner of
the data
and that it is entitled to license Licensee hereunder.
12.2 Licensee agrees to manufacture the
Products
utilizing Licensor's data or enhancements thereto, and
further
warrants that the workmanship and quality of the
Products
manufactured will be comparable to or exceed
Licensor's
workmanship and quality.
12.3 Licensee agrees to extend equipment
warranties to
purchasers of Products manufactured by Licensee on
terms and
conditions which equal or exceed Licensor's warranty as
set forth
in Exhibit `` C'' attached hereto
and incorporated herein.
13. Patent Protection.
13.1 Licensor does not have any current
patents
covering its data.
13.2 Licensor and Licensee agree with respect
to any
future developments that all costs, fees and expense
directly or
indirectly incurred or assessed to prosecute to
completion any
patent applications filed during the term of this
Agreement shall
be borne by the party responsible for the invention and
shall be
the sole property of said party.
13.3 Licensee shall not be entitled to
use any
enhancements, inventions, innovations, methodology or
other data
hereafter developed by Licensor with respect to the
Products.
13.4 Licensor shall not be entitled to
use any
enhancements, inventions, innovations, methodology or
other data
developed by Licensee with respect to the Products.
14. Infringment and Litigation.
14.1 Licensor will promptly notify Licensee
of any
infringement of the data or trademarks licensed
hereunder and
shall, at its own expense, take any action necessary to
end such
infringment and prosecute claims for damages, and
Licensor shall
be entitled to receive any recovery resulting therefrom.
Licensee
shall have the right, at its option, to join Licensor
in the
prosecution of any action to enjoin such infringment or
any claim
for damages, in which case the parties shall share
equally in the <PAGE>
expenses and each shall be allocated its proportionate
share of
the recovery resulting from such action or claim. If the
Licensor
for any reason fails to commence or prosecute any such
action
against an infringer, Licensee shall have the right to
bring such
action on its own behalf, in which action the Licensor
agrees to
cooperate, and the Licensee shall be entitled to
receive the
entire recovery resulting therefrom.
14.2 Each party shall promptly notify the
other in
writing in the event that a third party shall bring
claim of
infringement by the Licensed Products against the
Licensor or
Licensee, either in the United States or in any foreign
country.
If the alleged infringement is so substantial as to
threaten the
competitive position of Licensee and/or Licensee is
enjoined from
exercise of its license hereunder, in either such case,
Licensor
will defend against such claim and/or obtain a license to
permit
Licensee to exercise its license free of such claim.
15. Disclaimer of Liability.
15.1 The Licensor shall not have any liability
for any
of the Products manufactured and sold by the Licensee
pursuant to
this License. Licensee shall indemnify, defend and
hold the
Licensor harmless from and against any claim, demand,
cost, loss,
damage and expenses, including attorneys' fees, caused
by or
arising from workmanship or material of any of the
Products
manufactured or sold by the Licensee.
15.2 The Licensee shall not have any liability
for any
of the Products manufactured and sold by the Licensor.
Licensor
shall indemnify, defend and hold the Licensee harmless
from and
against any claim, demand, cost, loss, damage and
expenses,
including attorneys' fees, caused by or arising from
workmanship
or material of any of the Products manufactured or sold
by the
Licensor.
16. Termination
16.1 This Agreement may be terminated by
Licensee upon
default or breach by Licensor by giving Licensor written
notice
of intention to so terminate, which notice shall
specify the
default or breach. Such termination shall become
effective sixty
(60) days following receipt of such notice,
providing such
default or breach is not cured by Licensor prior thereto.
16.2 Licensor may terminate this Agreement
upon the
occurrence of an event of default as defined in
paragraph 16.3
hereof.
16.3 `` Event of
Default'' shall mean: <PAGE>
(a) failure of Licensee to make any
payment due
Licensor hereunder within fifteen (15) days after the
date such
payment shall be due;
(b) an other breach or default
under this
Agreement provided that Licensee shall not have cured
such breach
or default within thirty (30) days after receipt from
Licensor of
notice thereof;
(c) admission by Licensee in writing
of its
inability to meet its debts as they become due;
(d) the making by Licensee of any
composition with
its creditors or a general assignment for the benefit
of its
creditors;
(e) the commencement of any
voluntary or
involuntary bankruptcy, insolvency, reorganization,
liquidation,
or suspension of payments, proceedings involving Licensee
and the
same not being dismissed within thirty (30) days after
the date
of commencement; and
(f) other than by reason of death or
disability,
the failure of Harold L. Lunick either to remain as
the Chief
Executive Officer of Licensee, or alternatively to be
directly or
indirectly in control of Licensee.
17. Option to Terminate.
17.1 Licensor shall have the option to
terminate this
Agreement effective March 31st of any year, upon sixty
(60) days
written notice, if Licensee has failed to pay
during the
preceding year the following Minimum License Fee:
During the Calendar Year Minimum License Fee
Required
1993 $160,000.00
1994 $200,000.00
1995 $300,000.00
1996 and thereafter $400,000.00
17.2 To the extent Licensee has paid License
Fees in
any year in excess of the Minimum License Fee
Required, said
excess will be treated as if paid in the following year.
17.3 Should Licensor exercise its option
hereunder,
this Agreement will be deemed to have terminated by
reason of
Licensee's default; provided, however, that Licensee may
remedy
its default, and retain all of its rights hereunder, by
paying to
Licensor within said sixty (60) day period a sum which
when added <PAGE>
to the License Fees actually paid during the year
equals the
Minimum License Fee Required for said year.
18. Rights After Termination.
18.1 In the event of termination of this
Agreement, as
a result of Licensee's default, all rights and licenses
granted
to Licensee hereunder shall cease, and Licensee shall
cease to
use all Data supplied by Licensor hereunder, other
than data
which is in the common domain, which was utilized by
Licensee
prior to this license or which was developed
independently of the
Data by Licensee since the grant of this license. Any
provisions
to the contrary notwithstanding, Licensee shall have
the right
for one (1) year from the date of termination to
complete the
manufacture and sale of those Licensed Products which,
at the
time of termination, are in the course of production and
to sell
or dispose of all Licensed Products then in its
inventory;
provided that Licensee shall pay to Licensor all fees
due or to
become due thereon in accordance with the terms
of this
Agreement.
18.2 If, at the time of termination,
Licensee has
performed all of the obligations required of it
hereunder, it
will be entitled to continue to use the Data in the
manufacture
of products that are competitive with the Licensed
Products;
provided said products are aesthetically different in
appearance
from, and incorporate enhancements, developed by Licensee
and at
its expense, to the underlying technology, efficiency
and/or
functions of, the Licensed Products as currently
manufactured by
Licensor.
18.3 Termination of this Agreement shall not
relieve
either party of any obligation to the other arising prior
to such
termination.
18.4 Upon termination (whether upon expiration
of the
term hereof or an Event of Default) of this Agreement,
in the
event Licensee shall not have exercised its rights
under
paragraph 7.5 and subject to the provisions of
paragraph 17.1,
Licensee shall cease use of the name ``Tenney''
or
``Tenney
Environmental'' , or any variant
thereof for trademark purposes,
for trade name purposes, as the name or part of the name
of any
corporation, or for any other purpose whatsoever.
19. Insurance. Licensee agrees to maintain in
effect a
products liability insurance policy in an amount not
less than
$3,000,000 covering all claims with respect to any
products
manufactured or sold within the terms of the license
granted
hereunder. The policy shall include Licensor as an
additionally
named insured. Licensee agrees to furnish a certificate
of such
insurance to Licensor on or before the date of the first
sale or
use of any products.
20. Material Purchases. <PAGE>
20.1 Licensee shall order and purchase from
Licensor
raw materials, and partially manufactured materials,
useable by
it in manufacturing Licensed Products. The price at
which said
materials will be purchased will be equal to Licensor's
invoice
cost. To the extent materials have been partially
manufactured,
Licensee will pay Licensor its invoice cost of the
materials plus
Licensor's labor hours expended valued at Licensee's
burdened
labor rate.
20.2 Licensee agrees that it will order not
less than
$500,000 of useable materials from Licensor within
ninety (90)
days of the execution of this Agreement, not less
than forty
percent (40%) of which will be ordered during the initial
thirty
(30) day period following the execution of this
Agreement.
Payment for such materials shall be due within thirty
(30) days
after each shipment.
21. Disclaimer of Agency. The Licensee is an
independent
contractor and nothing in this Agreement shall be
construed to
create an employer-employee, agency, joint venture or
partnership
relationship between the parties. Neither party has any
right or
authority to assume, create or incur any liability or
obligation
of any kind, express or implied, against or in the name
of or on
behalf of the other party.
22. Enforcement. The failure of either party at any
time or
from time to time to enforce or require performance of
any of the
provisions of this Agreement, or to exercise any right or
option
herein set forth, shall in no way be construed to be a
waiver of
that or any other provision of this Agreement or to
prevent or
limit the right of such party thereafter to enforce
each and
every such provison in strict accordance therewith. No
waiver by
either party of any default of the other party shall be
held to
be waiver of any other or subsequent default.
23. Notices. Any and all notices required or
permitted under
this Agreement shall be in writing and shall be
sent by
registered mail, or by other means which afford the
sender
evidence of delivery, to the respective parties at the
following
addresses unless and until a different address
has been
designated by written notice to the other party:
Licensor: Robert S. Schiffman, President
Tenney Engineering, Inc.
1090 Springfield Road
Union, New Jersey 07083
Licensee: Harold L. Lunick, President
Lunaire Limited
2121 Reach Road
Williamsport, Pennsylvania 17701
<PAGE>
24. Arbitration. All disputes arising under
and in
connection with this Agreement, or the
interpretation or
enforcement thereof, shall be decided by one (1)
arbitrator in an
arbitration proceeding conforming to the rules of the
American
Arbitration Association applicable to commercial
arbitrations.
The arbitrator shall be chosen by agreement of the
parties or, if
they cannot agree, then the arbitrator shall be appointed
by the
American Arbitration Association. The arbitration
shall take
place in Trenton, New Jersey, and the decision of the
arbitrator
shall be conclusively binding upon the parties. Such
decision
shall be nonappealable and enforceable as a judgment in
any court
of competent jurisdiction. The cost of the arbitration
shall be
borne in accordance with the award of the arbitrator,
otherwise
the parties shall share the cost equally.
25. Assignment. This Agreement shall not be
assignable by
either party without the prior written approval of
the other
party; provided, however, that Licensor or Licensee may
assign
any of its rights under this Agreement to any entity
controlled
by or affiliated with Licensor or Licensee, or any
entity which
is the successor by merger or purchase of substantially
all the
assets and business of Licensor or Licensee. To the
extent
assignable, this Agreement shall be binding upon and
inure to the
benefit of, the parties hereto, their successors and
assigns.
26. Governing Law. This Agreement shall be
construed and
enforced in accordance with the laws of the State of New
Jersey
except where federal laws of the United States and
foreign
countries are applicable and have precedence.
27. Entire Agreement. This Agreement constitutes the
entire
agreement and understanding between the parties with
respect to
the subject matter hereof and supersedes all
prior or
contemporaneous agreements, 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 parties against whom enforcement is
sought.
28. Mutual Representations. Each person who
executes this
Agreement on behalf of a corporate party represents and
warrants
that the necessary corporate authorization to enter
into this
Agreement has been obtained.
29. Counterparts. This Agreement may be executed in
one or
more counterparts by one or all of the parties, each
of which
counterpart shall be an original and all of which
together shall
constitute a single agreement.
IN WITNESS WHEREOF, intending to be legally bound
hereby,
the parties have caused this License Agreement to be
executed on
the day and year first above written.
TENNEY ENGINEERING, INC. <PAGE>
BY: s/Robert S. Schiffman
ATTEST:
LUNAIRE LIMITED
BY: s/Harold L. Lunick
ATTEST: <PAGE>
EXHIBIT A
CATEGORIES OF ITEMS MANUFACTURED BY LICENSEE
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
14. Refrigerant 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>
EXHIBIT B
TRADEMARKS OTHER THAN ``TENNEY'' RELATING TO
PRODUCTS,
SOME OF WHICH MAY NOT BE IN CURRENT USE
TEMPGARD
BENCHMASTER
MICROTENN
COMPROTENN
TENNTROL
VIDEOTENN
VACTENN
DIGITENN
VERSATENN
RELIATEMP
RELIALAB
HERMETICOOL
VAPOR-FLO <PAGE>
EXHIBIT C
WARRANTIES TO PURCHASES OF PRODUCTS MANUFACTURED
BY
LICENSEE
(See annexed domestic and international warranty
certificates) <PAGE>
EXHIBIT (10) g. (ii)
LEASED EMPLOYEE AGREEMENT
LUNAIRE LIMITED
and
TENNEY ENGINEERING, INC.
This Agreement This Agreement
This Agreement entered into this 18th day of December,
1992,
by and between LUNAIRE LIMITED
LUNAIRE LIMITED LUNAIRE
LIMITED, a Pennsylvania corporation
(`` `` `` Lunaire
Lunaire Lunaire'' ''
'') having an address at 2121 Reach Road, Williamsport,
Pennsylvania 17701 and TENNEY ENGINEERING, INC.
TENNEY ENGINEERING, INC.
TENNEY ENGINEERING, INC., a New Jersey
corporation (`` ``
``Tenney Tenney
Tenney'' ''
'') having an address at 1090 Springfield
Road, Union, New Jersey 07083.
Concurrently with the execution of this Agreement,
Lunaire
and Tenney have entered into a License Agreement of
even date
(the ``License Agreement ''), under which Tenney is
licensing
Lunaire to manufacture and sell certain Tenney
products. By
reason of said License Agreement, Lunaire is making a
significant
financial commitment, including acquiring additional
space,
additional personnel and additional equipment, as
well as
committing to the license fee payable under the
License
Agreement.
Lunaire has expressed its willingness to enter
into the
License Agreement only if the services of Robert S.
Schiffman
(`` Schiffman'') and such other employees
of Tenney as may be
needed by Lunaire, are made available to it on a
part-time basis.
Lunaire considers such services essential to its
successful <PAGE>
exploitation of the License Agreement, in view of
Schiffman's
broad technical and marketing expertise and the
technical and
manufacturing expertise of other Tenney personnel.
This Leased Employee Agreement is entered into
as an
inducement to Lunaire to enter into the License
Agreement and
represents an integral part of said License Agreement.
In consideration of these premises and the mutual
promises
herein contained, the parties agree as follows:
1. Tenney agrees to provide to Lunaire, and
Lunaire agrees
to engage, the services of Schiffman for a maximum of
24 hours
during the period from the date hereof through December
31, 1992,
and thereafter approximately 180 hours in each calendar
quarter
of the term, said days to be those reasonably
requested by
Lunaire. In order to permit Schiffman to plan his
schedule,
Lunaire will provide Schiffman with a minimum of five
(5) days
notice as to his assignments, it being understood that
Lunaire
shall reschedule any assignment on account of any
conflicting
prior commitments of Schiffman of which it is
notified by
Schiffman and shall agree to any other reasonable
requests of
Schiffman for rescheduling the assignments. All travel
time of
Schiffman to and from any assignment at a place more
than fifty
(50) miles from Tenney's above stated address
(any such
assignment, whether relating to Schiffman or other
employee of
Tenney, being hereinafter referred to as a
``Distant
Assignment'' ) shall be charged
against such maximum. In no event
shall Schiffman be required hereunder to spend more than
five (5) <PAGE>
days of any ten (10) day period at any Distant Assignment
without
his prior consent.
2. With respect to all other personnel,
Lunaire will
designate that individual or those individuals whose
services it
wishes to utilize and Tenney agrees to provide the
services of
said individuals. The parties agree to utilize a
good faith
effort to accommodate the reasonable needs of each other.
3. With respect to Schiffman and all other
employees
provided pursuant hereto, Tenney agrees that it
will be
responsible for the payment of all compensation,
holidays,
vacations, medical coverage, pension or other employee
benefits,
as well as FICA, federal and state unemployment taxes,
workmen's
compensation and other direct and indirect employee
expenses.
4. Tenney will file all required federal and state
reports
and returns with respect to all personnel which it
provides to
Lunaire.
5. Lunaire agrees to pay to Tenney as follows:
(a) With respect to Schiffman, the sum of
$10,000 for
each calendar month or part thereof included in the
period from
January 1, 1993 through the end of the term hereof, to be
paid by
Lunaire on or before the 25th day each such month,
provided,
however, that Lunaire may discontinue such payments with
respect
to all calendar months commencing after (i) the
death of
Schiffman, or (ii) the end of any period of
ninety (90)
consecutive days during all of which days Schiffman
shall be <PAGE>
unable to perform required services hereunder. In
addition,
Lunaire agrees to pay to Tenney the sum of $4,000,000 in
respect
of the period from the date hereof through December 31,
1992.
(b) With respect to other personnel, an
amount
equivalent to 140% of the employee's daily
salary/hourly wage,
plus any overtime incurred, for each day worked, said
sum to be
billed by Tenney weekly, and to be paid by Lunaire
within seven
(7) days of receipt of Tenney's invoice.
6. Lunaire will reimburse Tenney for all
reasonable
travel, food, and lodging expenses incurred by Tenney
personnel
in connection with any Distant Assignment, said
charges to be
billed by Tenney monthly, without markup, and to be
paid by
Lunaire within seven (7) days of receipt, provided,
however, that
any travel in Tenney or employee owned or leased
vehicles shall
be charged at the rate prescribed by the Internal Revenue
Service
then prevailing.
7. The term of this Agreement with respect to all
Tenney
personnel shall be for a period commencing the date
hereof and
ending December 31, 1996.
8. Tenney will not be in default hereunder should
any of
its personnel no longer be in its employ in the future.
In the
event Tenney plans to discharge or lay off any of its
current
personnel, it will advise Lunaire of such plans, so that
Lunaire <PAGE>
might have an opportunity to explore the possible
employment of
said individual directly.
9. Should Tenney personnel serving hereunder be
involved
in an accident, Tenney will promptly advise Lunaire
thereof by
FAX as soon as relevant details become available to
Tenney.
10. This Agreement will be construed and
enforced in
accordance with the laws of the State of New Jersey,
except where
federal law has precedence.
11. This Agreement represents the entire
understanding
between the parties with respect to the subject matter
hereof,
and any modification or amendment hereof shall be
effective only
if in writing executed by both parties.
12. All disputes arising under and in connection
with this
Agreement, or the interpretation or enforcement thereof,
shall be
decided by one (1) arbitrator in an arbitration
proceeding
conforming to the rules of the American Arbitration
Association
applicable to commercial arbitrations. The arbitrator
shall be
chosen by agreement of the parties or, if they cannot
agree, then
the arbitrator shall be appointed by the American
Arbitration
Association. The arbitration shall take place in
Trenton, New
Jersey, and the decision of the arbitrator shall be
conclusively
binding upon the parties. Such decision shall be
nonappealable
and enforceable as a judgment in any court of
competent
jurisdiction. The cost of the arbitration shall be
borne in <PAGE>
accordance with the award of the arbitrator;
otherwise the
parties shall share the cost equally.
IN WITNESS WHEREOF, intending to be legally bound
hereby,
the parties have duly signed this Agreement the day
and year
first above written.
LUNAIRE LIMITED
LUNAIRE LIMITED
LUNAIRE LIMITED
BY: s/Harold L. Lunick
BY: s/Harold L. Lunick
BY: s/Harold L. Lunick
TENNEY ENGINEERING, INC.
TENNEY ENGINEERING, INC.
TENNEY ENGINEERING, INC.
BY: s/Robert S. Schiffman
BY: s/Robert S. Schiffman
BY: s/Robert S. Schiffman <PAGE>
EXHIBIT (10) g. (iii)
EMPLOYMENT AGREEMENT
TENNEY ENGINEERING, INC.
and
ROBERT S. SCHIFFMAN
AGREEMENT entered into on the 18th day of
December 1992
between TENNEY ENGINEERING, INC., a corporation
organized under
the laws of the State of New Jersey (hereinafter
called the
`` Company'') and ROBERT S. SCHIFFMAN (herein
after referred to as
`` Schiffman'').
W I T N E S S E T H :
WHEREAS, Schiffman has been employed by the Company
for 27
years and has been its chief executive officer for nine
(9) years
and
WHEREAS, the Company contemplates
discontinuing the
manufacture of environmental test chambers at its
Union, New
Jersey facility within three months of the date of this
Agreement
and it has entered into a license agreement with LUNAIRE
LIMITED
(hereinafter called ``
Lunaire'') licensing Lunaire to manufacture
environmental test chambers under the name Tenney, and
Lunaire
has insisted as a condition to entering into such
license
agreement that the Company provide to Lunaire the
services of
Schiffman through the end of 1996 and the Company and
Lunaire
have entered into an agreement dated December 18,
1992 (the <PAGE>
`` Agreement'') pursuant to which the
Company has agreed to
provide to Lunaire the services of Schiffman for
approximately
180 hours per calendar quarter through December 31,
1996 for
which the Company will be paid $10,000 per month, and
WHEREAS, the Company desires to assure itself of
Schiffman's
services from the date hereof through the end of
1996 (the
`` Term'') the period that it is obligated to
furnish Schiffman's
services to Lunaire and to assure itself that he will
continue to
manage the affairs of the Company and its subsidiaries
during
such period including supervising the disposition of its
Union,
New Jersey manufacturing facility and obtaining of the
necessary
environmental clearance from the State of New Jersey to
permit
sale of such facility, and
WHEREAS, Schiffman is willing to continue his
employment
with the Company for the Term and to provide to
Lunaire the
services which the Company has contracted to provide
to it in
accordance with the terms of the Agreement,
NOW, THEREFORE, in consideration of their mutual
promises
herein contained and each intending to be legally bound
hereby,
the parties hereto agree as follows:
1. The Company agrees to employ Schiffman in an
executive
capacity for the period beginning the date hereof and
ending
December 31, 1996;
2. Schiffman shall serve the Company in an
executive
capacity and shall have such responsibilities, powers and
duties
as may from time to time be prescribed by the Board of
Directors
of the Company provided that such duties and
responsibilities are <PAGE>
substantially consistent with those of an executive
officer.
Schiffman acknowledges receipt of a copy of the
Agreement and
agrees on behalf of the Company to provide to
Lunaire the
services which Tenney has contracted to furnish to
Lunaire during
the Term.
3. During the Term, Schiffman shall devote all
reasonable
efforts to the performance of his duties hereunder and
to the
promotion of the business and interests of the Company
including
the rendering on behalf of the Company of services to
Lunaire
pursuant to the Agreement and will devote substantially
all of
his time to the performance of such duties.
4. The Company agrees to pay Schiffman during the
Term a
salary of $200,000 per year, subject to such
increases or
decreases as the Company's Board of Directors may
approve,
payable in equal installments not less frequently than
monthly
but no decrease shall reduce such salary to less than at
the rate
of $200,000 per year.
5. During the Term Schiffman shall be accorded
the right
to participate in any and all group insurance, stock
option plans
and accident, disability, sickness and hospitalization
insurance,
and all other plans for the benefit of the Company's
officers
which shall be in effect during the Term. During
the Term
Schiffman shall be provided with a leased or Company
owned car
comparable to the type of car which he has been furnished
in the
past. Schiffman shall be entitled to receive prompt
reimbursement
for reasonable expenses incurred by him in accordance
with the
policies and procedures of the Company for its executive
officers <PAGE>
in performing services hereunder including services
provided to
Lunaire under the Agreement, provided that he properly
accounts
therefor in accordance with Company policy.
Schiffman shall be entitled to the number of
vacation days
in each calendar year determined by the Company from time
to time
for its senior executive officers, but not less than
four weeks
in any calendar year (prorated in any calendar year in
which he
is employed hereunder for less than the entire year in
accordance
with the number of days in such calendar year during
which he is
so employed). Schiffman will not be entitled to receive
payment
for vacation days not taken during a calendar year. He
shall also
be entitled to all paid holidays given by the Company
to its
executive officers.
6. In the event that Schiffman shall, during
the Term,
fail to perform his duties hereunder owing to
illness or
disability, and such illness or disability shall
continue for a
period of more than six consecutive months, the
Company shall
have the right, by notice sent by registered or
certified mail
addressed to Schiffman at his residence or such other
place as
Schiffman shall designate in writing, to terminate
Schiffman's
employment hereunder as of a date (not less than 30
days after
the date of the sending of such notice) to be specified
in such
notice.*
*If Schiffman's disability ceases and he is able to
resume his
employment, the Company shall re-employ him for the
balance of
the Term. <PAGE>
7. This Agreement shall continue in full force and
effect
notwithstanding that the Company shall discontinue its
business,
and this agreement shall be enforceable against the
successors
and assigns of the Company, including any corporation
or party
which buys all of its stock or with which it
merges or
consolidates.
8. Any dispute or controversy arising under
or in
connection with this agreement shall be settled
exclusively by
arbitration in Newark, New Jersey in accordance with the
rules of
the American Arbitration Association then in
effect.
Notwithstanding the pendency of any such dispute or
controversy,
the Company will continue to pay Schiffman his full
compensation
in effect when the notice giving rise to the dispute
was given
and continue him as a participant in all compensation,
benefit
and insurance plans in which he was participating when
the notice
giving rise to the dispute was given, until the
dispute is
finally resolved. Judgment may be entered on the
arbitrator's
award in any court having jurisdiction.
9. The invalidity or unenforceability of any
provisions of
this Agreement shall not affect the validity or
enforceability of
any other provision of this agreement, which shall remain
in full
force and effect.
10. This agreement may be executed in one
or more
counterparts, each of which shall be deemed to be an
original but
all of which together will constitute one and
the same
instrument. <PAGE>
11. This agreement constitutes the entire agreement
between
the parties hereto relating to the employment of
Schiffman by the
Company. This agreement may be modified, supplemented or
amended
only by and with the express, written consent of both
parties
hereto. This agreement may not be discharged
except by
performance or another agreement in writing.
12. This agreement and the legal relations
among the
parties hereto shall be governed by and construed in
accordance
with the laws of New Jersey applicable to contracts made
and to
be performed in New Jersey.
IN WITNESS WHEREOF, the parties hereto have
caused these
presents to be executed as of the day and year
first above
written.
TENNEY ENGINEERING, INC.
By: s/Saul S. Schiffman
s/Robert S. Schiffman
ATTEST:
s/Frank E. Colgan <PAGE>
EXHIBIT (10) g. (iv)
CONSULTING AGREEMENT
LUNAIRE LIMITED
and
ROBERT S. SCHIFFMAN
This Agreement This Agreement
This Agreement entered into this 18th day of December,
1992,
by and between LUNAIRE LIMITED (
LUNAIRE LIMITED ( LUNAIRE LIMITED (``
``
``
Lunaire Lunaire
Lunaire''
''
'')
) ) having
an address at
2121 Reach Road, Williamsport, Pennsylvania and
ROBERT S.
ROBERT S.
ROBERT S.
SCHIFFMAN ( SCHIFFMAN ( SCHIFFMAN (``
`` ``Schiffman
Schiffman Schiffman''
'' '')
)
) having an address at 25 Far Brook
Drive, Short Hills, New Jersey 07078.
Concurrently with the execution of this Agreement,
Lunaire
has entered into a License Agreement (the ``License
Agreement'')
of even date with Tenney Engineering, Inc. (
(
(``
``
``Tenney
Tenney
Tenney''
''
'')
)
). As an
integral part of the License Agreement, the parties also
entered
into a Leased Employee Agreement of even date. This
Consulting
Agreement is entered into as an additional inducement to
Lunaire
to enter into the License Agreement.
It is the purpose of this Agreement to provide
Lunaire with
additional assurances that Schiffman will be available to
Lunaire
to provide technical and marketing assistance during
the next
four (4) years.
In consideration of these premises and the
promises
contained herein, the parties agree as follows: <PAGE>
1. In the event Schiffman ceases to be in the
employ of
Tenney, Schiffman agrees to provide on a consulting
basis such
technical and marketing services as may be requested of
him by
Lunaire or required under the terms hereof in his
capacity as an
independent contractor, and not as an employee of
Lunaire.
2. Lunaire shall have the option of engaging
Schiffman
hereunder by giving him notice within thirty (30)
days of
Lunaire's receipt of notice from Tenney or from
Schiffman, that
Tenney will no longer be in a position to provide his
services
under the Employee Lease Agreement referred to above.
3. In the event that Tenney shall be legally
barred from
providing or otherwise unable to provide the
services of
Schiffman to Lunaire under said Leased Employee
Agreement by
operation of law or by reason of any bankruptcy or
insolvency
proceeding, any dissolution of Tenney, or the judgment,
decree or
order of any court or administrative agency of
competent
jurisdiction, then, upon the occurrence of any such event
Lunaire
shall engage the services of Schiffman.
4. The term of this Agreement shall commence as of
either
the date on which Lunaire sends the notice to
Schiffman under
paragraph 2 hereof or the date of the occurrence of
an event
described in paragraph 3 hereof, whichever is the first
to occur,
and shall end the earliest to occur of (a) December 31,
1996, (b) <PAGE>
the death of Schiffman, (c) the end of any period of
ninety (90)
consecutive days during all of which days Schiffman is
unable to
perform required services hereunder, or (d) termination
of the
License Agreement for any reason.
5. Schiffman agrees to make himself available to
Lunaire
for approximately of 180 hours in each calendar quarter
of the
term (such number of hours to be apportioned in the case
of any
partial calendar quarter included in the term), said
days to be
those reasonably requested by Lunaire. In order to
permit
Schiffman to plan his schedule, Lunaire will provide
Schiffman
with a minimum of five (5) days notice as to his
assignments, it
being understood that Lunaire shall reschedule any
assignment on
account of any conflicting prior commitments of
Schiffman of
which it is notified by Schiffman and shall agree to
any other
reasonable requests of Schiffman for
rescheduling the
assignments. All travel time of Schiffman to and from
Schiffman's
above stated address (any such assignment being
hereinafter
referred to as a `` Distant
Assignment'') shall be charged against
such maximum. In no event shall Schiffman be required
hereunder
to spend more than five (5) days of any ten (10) day
period at an
Distant Assignment without his prior consent.
6. Lunaire shall pay Schiffman the sum of $10,000
for each
calendar month, or part thereof, included in the term
hereof,
within seven (7) days after the end of each such month. <PAGE>
7. Lunaire will reimburse Schiffman for all
reasonable
travel, food, and lodging expenses incurred by
Schiffman in
connection with any Distant Assignment, said charges to
be billed
by Schiffman monthly and to be paid by Lunaire within
seven (7)
days of receipt, provided, however, that any travel in
vehicles
owned or leased by Schiffman shall be charged at
the rate
prescribed by the Internal Revenue Service then
prevailing.
8. Schiffman agrees and acknowledges that all
information
which he obtains concerning Lunaire, its
finances, its
technology, its marketing and its manufacturing
techniques, to
the extent confidential or otherwise unique to Lunaire,
will be
held as confidential by him for the period during which
he is a
consultant to Lunaire and for a period of two
(2) years
thereafter. Schiffman agrees that he will not,
directly or
indirectly, use or disclose such information to others.
9. This Agreement will be construed and
enforced in
accordance with the laws of the State of New Jersey.
10. This Agreement represents the entire
understanding
between the parties hereto, and any modification or
amendment
hereof shall be effective only if in writing executed
by both
parties. <PAGE>
11. Should Schiffman be involved in an accident,
Schiffman,
if able to do so, will promptly advise Lunaire thereof as
soon as
practicable.
12. All disputes arising under and in connection
with this
Agreement, or the interpretation or enforcement thereof,
shall be
decided by one (1) arbitrator in an arbitration
proceeding
conforming to the rules of the American Arbitration
Association
applicable to commercial arbitrations. The arbitrator
shall be
chosen by agreement of the parties or, if they cannot
agree, then
the arbitrator shall be appointed by the American
Arbitration
Association. The arbitration shall take place in
Trenton, New
Jersey, and the decision of the arbitrator shall be
conclusively
binding upon the parties. Such decision shall be
nonappealable
and enforceable as a judgment in any court of
competent
jurisdiction. The cost of the arbitration shall be
borne in
accordance with the award of the arbitrator;
otherwise the
parties shall share the cost equally.
IN WITNESS WHEREOF, IN WITNESS
WHEREOF, IN WITNESS WHEREOF, intending to be
legally bound hereby,
the parties have duly signed this Agreement the day
and year
first above written.
LUNAIRE LIMITED
LUNAIRE LIMITED
LUNAIRE LIMITED
BY: s/Harold L. Lunick
BY: s/Harold L. Lunick
BY: s/Harold L. Lunick
s/Robert S. Schiffman
s/Robert S. Schiffman
s/Robert S. Schiffman <PAGE>
EXHIBIT (10) i. (ii)
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
(originally dated September 12, 1996)
THIS THIRD AMENDMENT TO LOAN AND SECURITY
AGREEMENT dated
this day of May, 1997 is made 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 110
Industrial Park Road, Hingham, Massachusetts 02043
(together with
its successors and assigns, hereinafter referred to as
``Dyna
Tenn'' ) (Tenney and DynaTenn are
sometimes hereinafter
collectively referred to as the context may require as
the ``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 07061 (together with its
successors and
assigns, hereinafter referred to as the ``
Bank'').
R E C I T A L S
A. Pursuant to a certain Loan and Security
Agreement dated
September 12, 1996, as amended by that certain Amendment
to Loan
and Security Agreement dated as of February 20, 1997, and
further
amended by that certain Second Amendment to Loan and
Security
Agreement dated as of April 23, 1997 (together with
all other
amendments thereto hereinafter referred to as the
``Loan
Agreement'' ), the Bank provided the
Co-Borrowers with a working
capital line of credit in the original maximum principal
amount
of THREE HUNDRED THOUSAND DOLLARS ($300,000.00), which
maximum
principal amount was subsequently increased to FOUR
HUNDRED
THOUSAND DOLLARS ($400,000.00) and later increased
to SEVEN
HUNDRED FIFTY THOUSAND DOLLARS ($750,000.00)
(hereinafter
referred to interchangeably as the ``Line of Credit''
or the
`` Loan'').
B. The Loan is presently evidenced by a certain
Amended and
Restated Promissory Grid Note dated April 23, 1997,
in the
original maximum principal amount of $750,000.00
(hereinafter
referred to as the ``
Note'').
C. Pursuant to the terms of the Loan Agreement and
the Note,
the term of the Line of Credit expires on May 31, 1998.
NOW THEREFORE, in consideration of the facts
recited
hereinabove and the payment by the Co-Borrowers to the
Bank of
the sum of Ten Dollars ($10.00) and other good and
valuable
consideration, the receipt and sufficiency of
which is <PAGE>
acknowledged, and intending to be legally bound
hereby, the
parties hereto agree as follows:
1. Capitalized terms used but not defined in this
Amendment
shall have the meanings ascribed to them in the Loan
Agreement,
unless a different meaning is clearly required by the
context
hereof.
2. A definition of ``
Eligible Receivables
Eligible Receivables Eligible
Receivables ''
'' ''
shall be added
and shall state:
`` Eligible Receivables '' means and
includes only Receivables
arising out of sales made by the Co-Borrowers in the
ordinary
course of its business to a Person who is not an
Affiliate of the
Co-Borrowers or controlled by an Affiliate of the
Co-Borrowers,
which are absolute and not contingent upon the
fulfillment of any
condition whatsoever. In addition, to be an Eligible
Receivable,
a Receivable must satisfy ___
all of the following criteria:
(a) It must be a true and correct statement of a
bona fide
indebtedness incurred in the amount of the account for
goods sold
or leased and delivered to the account debtor obligated
on such
Receivable; and
(b) no warranty with respect to such Receivable
shall have
been breached; and
(c) the account debtor shall not have disputed
liability
with respect to such Receivable or made any claim with
respect to
any other Receivable due from such customer or account
debtor to
a Co-Borrower; and
(d) the account debtor shall not have filed a
petition for
bankruptcy or reorganization under the Bankruptcy Code,
nor shall
any such petition under the Bankruptcy Code have
been filed
against the account debtor, nor shall the account
debtor have
made an assignment for the benefit of creditors, nor
shall the
account debtor have failed, suspended business
operations, become
insolvent, nor shall the account debtor have or
suffered a
receiver or a trustee to have been appointed for
all or a
significant portion of its assets or affairs, unless
the Bank
shall have specifically agreed that such Receivable
is an
Eligible Receivable in the reasonable exercise of its
discretion;
and
(e) such Receivable shall not be more than ninety
(90) days
past original invoice date; and
(f) such Receivable shall be owned solely by
the Co-
Borrowers free from any liens, security interests
or other
encumbrances, except liens, security interests and
encumbrances
in favor of the Bank; and <PAGE>
(g) such Receivable shall not be covered by any
financing
statement filed on record in any recording office,
except in
favor of the Bank; and
(h) the sale to the account debtor shall not have
been on a
bill-and-hold, guarantied sale, sale-and-return, sale on
approval
or assignment basis; and
(i) the sale shall not have been to an account
debtor
outside of the United States nor to an account debtor
which is
the federal government or governmental agency or
instrumentality
thereof; and
(j) the Bank shall believe, in its reasonable
judgment, that
collection of such Receivable is not insecure and
that such
Receivable will be paid by the account debtor in the
ordinary
course of business; and
(k) such Receivable shall not be offset by a payable
owed to
the same party; and
(l) not more than fifty percent (50%) of the
Receivable
shall be ineligible for any reason; and
(m) such Receivable must not
not not
arise out of, or in connection
with, a sale or other transaction between the
Co-Borrowers and an
Affiliate; and
(n) such Receivable shall account for less than
twenty
percent (20%) of the aggregate value of all Receivables;
and
(o) such Receivable shall otherwise be deemed
to be
acceptable to the Bank in its sole discretion.
3. A definition of ``
`` ``Receivables
Receivables
Receivables''
'' '' shall be added
and shall
state:
`` Receivables'' means and includes (i) all
existing and future
created or acquired accounts (as defined in the
Uniform
Commercial Code of New Jersey (``UCC''
)); (ii) receivables; (iii)
rights of any kind of the Co-Borrowers to receive
payment for
goods sold or leased or for services rendered in the
ordinary
course of its business; (iv) contract rights; (v)
documents (as
defined in the UCC); (vi) instruments (as defined in
the UCC);
(vii) patent rights; (viii) royalties; (ix) bills; (x)
leases;
(xi) rents; (xii) chattel paper (as defined in the UCC);
(xiii)
license rights; (xiv) rights to refund or
indemnification; (xv)
acceptances; and (xvi) tax refunds and other general
intangibles
of every kind or nature and all forms of obligations
whatsoever
owing, together with all instruments and all documents
of title
representing the foregoing and all rights in any
merchandise or
goods which any of the same may represent, together
with all
right, title, security, and guarantees with respect
to each <PAGE>
Receivable, including any right of stoppage in
transit, and
together with all Proceeds thereof.
4. The definition of ``
Working Capital Advances Limit ''
shall be amended to mean the lesser of (i) $750,000.00,
or (ii)
one hundred percent (100%) of Eligible Receivables.
5. The Co-Borrowers hereby affirm that all
representations
and warranties made by them in the Loan Agreement,
continue to be
true, accurate, and complete as of the date of this
Amendment,
with the same effect as if such representations and
warranties
were made on the date hereof.
6. Any and all Indebtedness and other Obligations of
the Co-
Borrowers thereunder are reaffirmed and reacknowledged
hereby and
thereby.
7. From and after the execution hereof, all
references to
the ``Loan Agreement,'' whether or not defined as such,
in the
Loan Agreement or in any of the Loan Documents, shall be
deemed
to be references to the Loan Agreement as amended
by this
Amendment.
8. This Amendment has been duly executed and
validly
delivered by the parties hereto, and constitutes the
legal,
valid, and binding obligations of the parties hereto,
enforceable
against them in accordance with its terms.
9. Except to the extent expressly amended hereby
(in which
case the terms hereof shall prevail) the various
terms and
provisions of the Loan Agreement shall remain in full
force and
effect.
IN WITNESS WHEREOF, the parties have executed and
delivered
this Amendment on the date and year first written above.
ATTEST: TENNEY ENGINEERING,
INC.
(Corporate Seal)
s/Martin Pelman By: s/Robert S.
Schiffman
Martin Pelman, Asst. Secretary Robert S. Schiffman,
President
DYNATENN, INC.
s/Martin Pelman By: s/Robert S.
Schiffman
Martin Pelman, Asst. Clerk Robert S. Schiffman,
Chief Executive
Officer
SUMMIT BANK
By: s/Pete J. Kaznoski
Pete J. Kaznoski,
Assistant Vice
President <PAGE>
EXHIBIT (10) i. (iv)
AMENDED AND RESTATED
PROMISSORY GRID NOTE
(originally dated September 12, 1996)
UP TO $750,000.00 Westfield, New Jersey
April 23, 1997
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 [110 Industrial Park Road, Hingham, Massachusetts
02043]
(together with its successors and assigns, hereinafter
referred
to as `` Dyna Tenn'') (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, 1998, or (ii) the
Termination Date,
the principal sum of SEVEN HUNDRED FIFTY THOUSAND
DOLLARS
($750,000.00), 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, as amended, 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 one and three quarters
percent
(1.75%) over the Bank's Floating Base Lending Rate per
annum.
THIS NOTE AMENDS, RESTATES, SUPERSEDES, AND REPLACES THAT
CERTAIN
NOTE DATED SEPTEMBER 12, 1996 EVIDENCING A LOAN IN THE
ORIGINAL
PRINCIPAL AMOUNT NOT TO EXCEED THREE HUNDRED THOUSAND
DOLLARS AND
NO CENTS ($300,000.00), AS AMENDED BY THAT CERTAIN
AMENDMENT TO
PROMISSORY NOTE DATED AS OF FEBRUARY 20, 1997.
Capitalized terms used but not defined in this
Note shall
have the means ascribed to them in that certain Loan and
Security
Agreement dated on September 12, 1996, as amended
pursuant to a
certain Amendment to 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, as amended. <PAGE>
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 May 1,
1997, and
continuing thereafter on the first (1st) day of each
succeeding
calendar month, through and including May 1, 1998.
Thereafter, on
May 31, 1998, 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 or 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 and
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 <PAGE>
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
<PAGE>
s/Martin Pelman By: s/Robert S.
Schiffman
Martin Pelman, Asst. Secretary Robert S. Schiffman,
President
ATTEST: DYNATENN, INC.
a Massachusetts
corporation
s/Martin Pelman By: s/Robert S.
Schiffman
Martin Pelman, Asst. Clerk Robert S. Schiffman
Chief Executive Officer
STATE OF NEW JERSEY)
)
COUNTY OF UNION )
I CERTIFY that on April 23, 1997, 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.
s/Robert E. Hakusa
A Notary Public of the State of New Jersey
STATE OF NEW JERSEY)
)
COUNTY OF UNION )
I CERTIFY that on April 23, 1997, 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.
s/Robert E. Hakusa
A Notary Public of the State of New Jersey <PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 47000
<SECURITIES> 0
<RECEIVABLES> 1312000
<ALLOWANCES> 0
<INVENTORY> 627000
<CURRENT-ASSETS> 2389000
<PP&E> 1889000
<DEPRECIATION> (1435000)
<TOTAL-ASSETS> 3240000
<CURRENT-LIABILITIES> 2685000
<BONDS> 0
0
0
<COMMON> 74000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3240000
<SALES> 6718000
<TOTAL-REVENUES> 6718000
<CGS> 5991000
<TOTAL-COSTS> 5991000
<OTHER-EXPENSES> 1952000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76000
<INCOME-PRETAX> (1268000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1268000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1268000)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
