-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A4LCBLuZlTECYEhnj/tfGsY6hnOdU6bXzHJW0G6aAJIASe51EifnqRrB/GGP2HqE nBT1vm+ax9zBBfAPvvWOTQ== 0000950123-01-001205.txt : 20010214 0000950123-01-001205.hdr.sgml : 20010214 ACCESSION NUMBER: 0000950123-01-001205 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSTECHNOLOGY CORP CENTRAL INDEX KEY: 0000099359 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 954062211 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07872 FILM NUMBER: 1537154 BUSINESS ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 BUSINESS PHONE: 9089031600 MAIL ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 FORMER COMPANY: FORMER CONFORMED NAME: SPACE ORDNANCE SYSTEMS INC DATE OF NAME CHANGE: 19740717 10-Q 1 y45476e10-q.txt TRANSTECHNOLOGY CORPORATION 1 FORM 10-Q -------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-7872 ------------------------- TRANSTECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-4062211 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 150 Allen Road 07938 Liberty Corner, New Jersey (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (908) 903-1600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 --- ----- As of February 8, 2001, the total number of outstanding shares of registrant's one class of common stock was 6,172,186. 2 TRANSTECHNOLOGY CORPORATION INDEX
PART I. Financial Information Page No. Item 1. Financial Statements.................................................... 2 Statements of Consolidated Operations-- Three and Nine Month Periods Ended December 31, 2000 and December 26, 1999................................................... 3 Consolidated Balance Sheets-- December 31, 2000 and March 31, 2000.................................... 4 Statements of Consolidated Cash Flows-- Nine Month Periods Ended December 31, 2000 and December 26, 1999....................................................... 5 Notes to Consolidated Financial Statements.............................. 6-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....................................14-17 Item 3. Quantitative and Qualitative Disclosures about Market Risk.............. 18 PART II. Other Information Item 1. Legal Proceedings....................................................... 19 Item 6. Exhibits and Reports on Form 8-K........................................ 19 SIGNATURES............................................................................. 19 EXHIBIT 10.43..........................................................................20-35 EXHIBIT 10.44..........................................................................36-52
1 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following unaudited Statements of Consolidated Operations, Consolidated Balance Sheets, and Consolidated Cash Flows are of TransTechnology Corporation and its consolidated subsidiaries (collectively, "the Company"). These reports reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods reflected therein. The results reflected in the unaudited Statement of Consolidated Operations for the period ended December 31, 2000, are not necessarily indicative of the results to be expected for the entire year. The following unaudited Consolidated Financial Statements should be read in conjunction with the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this report, as well as the audited financial statements and related notes thereto contained in the Company's Annual Report on Form 10-K filed for the fiscal year ended March 31, 2000. This Form 10-Q contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Such risks and uncertainties include, but are not limited to, unanticipated slowdowns in the Company's major markets, the impact of competition, the effectiveness of operational changes expected to increase efficiency and productivity, and worldwide economic and political conditions and foreign currency fluctuations that may affect worldwide results of operations. [THIS PAGE INTENTIONALLY LEFT BLANK] 2 4 STATEMENTS OF CONSOLIDATED OPERATIONS UNAUDITED (In Thousands of Dollars, Except Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED -------------------------------------- --------------------------------------- DECEMBER 31, 2000 DECEMBER 26, 1999 DECEMBER 31, 2000 DECEMBER 26, 1999 ----------------- ----------------- ----------------- ------------------ Net sales $ 78,297 $ 85,872 $ 241,798 $ 204,143 Cost of sales 59,165 60,246 179,264 143,537 Plant consolidation charge -- -- 2,113 -- ----------------- ----------------- ----------------- ------------------ Gross profit 19,132 25,626 60,421 60,606 ----------------- ----------------- ----------------- ------------------ General, administrative and selling expenses 14,252 14,339 42,538 37,263 Interest expense (a) 8,185 7,137 25,969 12,233 Interest income (19) (188) (98) (324) Other income - net (b) (1,270) (238) (1,929) (601) Provision for plant consolidation -- -- -- 4,490 ----------------- ----------------- ----------------- ------------------ Income (loss) before income taxes and extraordinary charge (2,016) 4,576 (6,059) 7,545 Income taxes (benefit) (766) 1,711 (2,302) 2,852 ----------------- ----------------- ----------------- ------------------ Income (loss) before extraordinary charge (1,250) 2,865 (3,757) 4,693 Extraordinary charge for refinancing of debt -- -- -- (541) ----------------- ----------------- ----------------- ------------------ Net income (loss) $ (1,250) $ 2,865 $ (3,757) $ 4,152 ================= ================= ================= ================== Basic earnings per share: Income (loss) before extraordinary $ (0.20) $ 0.47 $ (0.61) $ 0.77 charge Extraordinary charge for refinancing of debt (net of tax) -- -- -- (0.09) ----------------- ----------------- ----------------- ------------------ Net income (loss) $ (0.20) $ 0.47 $ (0.61) $ 0.68 ================= ================= ================= ================== Diluted earnings per share: Income (loss) before extraordinary $ (0.20) $ 0.47 $ (0.61) $ 0.77 charge Extraordinary charge for refinancing of debt (net of tax) -- -- -- (0.09) ----------------- ----------------- ----------------- ------------------ Net income (loss) $ (0.20) $ 0.47 $ (0.61) $ 0.68 ================= ================= ================= ================== Numbers of shares used in computation of per share information: Basic 6,172,000 6,141,000 6,165,000 6,135,000 Diluted 6,172,000 6,141,000 6,165,000 6,150,000
See accompanying notes to unaudited consolidated financial statements. (a) The interest expense for the nine month period ended December 31, 2000 includes a $2.3 million charge related to loan fees associated with the refinancing of the Company's bridge debt. (b) Other income for the three and nine month periods ended December 31, 2000 includes an arbitration award in the amount of $1.2 million related to the Aerospace Rivet Manufacturers business. 3 5 CONSOLIDATED BALANCE SHEETS UNAUDITED (In Thousands of Dollars)
(UNAUDITED) DECEMBER 31, 2000 MARCH 31, 2000 ------------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 3,287 $ 3,350 Accounts receivable (net of allowance for doubtful accounts of $1,414 at December 31, 2000 and $1,129 at March 31, 2000) 53,145 61,819 Inventories 65,388 65,744 Prepaid expenses and other current assets 2,188 1,942 Deferred income taxes 766 1,872 ------------- ------------ Total current assets 124,774 134,727 ------------- ------------ Property, plant and equipment 152,758 153,068 Less accumulated depreciation and amortization 54,602 47,048 ------------- ------------ Property, plant and equipment - net 98,156 106,020 ------------- ------------ Other assets: Notes receivable 3,513 3,455 Costs in excess of net assets of acquired businesses (net of accumulated amortization: December 31, 2000, $14,756; March 31, 2000, $10,933) 188,369 192,115 Patents and trademarks (net of accumulated amortization: December 31, 2000, $2,096; March 31, 2000, $1,334) 19,971 20,809 Deferred income taxes 11,120 9,987 Other 16,966 15,642 ------------- ------------ Total other assets 239,939 242,008 ------------- ------------ Total $ 462,869 $ 482,755 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Callable long-term debt $ 276,903 $ 82,585 Accounts payable-trade 18,660 25,550 Accrued compensation 8,416 10,359 Accrued income taxes 1,364 5,799 Other current liabilities 11,473 8,672 ------------- ------------ Total current liabilities 316,816 132,965 ------------- ------------ Long-term debt payable to banks and others 1,063 194,759 ------------- ------------ Deferred income taxes 11,790 11,873 ------------- ------------ Other long-term liabilities 10,483 14,275 ------------- ------------ Stockholders' equity: Preferred stock-authorized, 300,000 shares; none issued -- -- Common stock-authorized, 14,700,000 shares of $.01 par value; issued 6,718,614 at December 31, 2000, and 6,691,232 at March 31, 2000 67 67 Additional paid-in capital 78,091 77,587 Retained earnings 58,767 63,722 Accumulated other comprehensive loss (4,852) (3,157) Unearned compensation (287) (267) ------------- ------------ 131,786 137,952 Less treasury stock, at cost - (546,428 shares at December 31, 2000 and 546,394 at March 31, 2000) (9,069) (9,069) ------------- ------------ Total stockholders' equity 122,717 128,883 ------------- ------------ Total $ 462,869 $ 482,755 ============= ============
See accompanying notes to consolidated financial statements. 4 6 STATEMENTS OF CONSOLIDATED CASH FLOWS UNAUDITED (In Thousands of Dollars)
NINE MONTHS ENDED ----------------------------------------- DECEMBER 31, 2000 DECEMBER 26, 1999 ------------------- ------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (3,757) $ 4,152 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Extraordinary charge for refinancing of debt -- 541 Depreciation and amortization 15,955 12,046 Non-cash interest expense 775 -- Provision for losses on notes and accounts receivable 111 182 Loss on sale or disposal of fixed assets 8 18 Gain on sale of marketable securities (13) -- Change in assets and liabilities net of acquisitions: Decrease (increase) in accounts receivable 8,132 (5,182) (Increase) decrease in inventories (646) 1,844 Decrease (increase) in other assets 1,646 (109) (Decrease) increase in accounts payable (6,660) 940 Decrease in accrued compensation (1,850) (1,107) (Decrease) increase in income tax payable (4,435) 410 Decrease in other liabilities (661) (981) -------------- -------------- Net cash provided by operating activities 8,605 12,754 -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisitions net of cash acquired -- (187,086) Capital expenditures (4,485) (5,105) Proceeds from sale of fixed assets 1,119 161 Proceeds from sale of marketable securities 56 3 Decrease in notes receivable 223 665 -------------- -------------- Net cash used in investing activities (3,087) (191,362) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term borrowings 142,177 324,385 Payments on long-term debt (140,888) (139,965) Debt issue costs (5,613) (5,679) Proceeds from issuance of stock under stock option plan -- 254 Dividends paid (1,198) (1,194) -------------- -------------- Net cash (used in) provided by financing activities (5,522) 177,801 -------------- -------------- Effect of exchange rate changes on cash (59) (57) Decrease in cash and cash equivalents (63) (864) Cash and cash equivalents at beginning of period 3,350 2,255 -------------- -------------- Cash and cash equivalents at end of period $ 3,287 $ 1,391 ============== ============== Supplemental Information: Interest payments 20,717 10,309 Income tax payments 1,791 1,418 Increase in senior subordinated note for paid-in-kind interest expense 775 -- Warrant amortization 14 --
See accompanying notes to unaudited consolidated financial statements. 5 7 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands) NOTE 1. Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share is computed by dividing net income by the sum of the weighted-average number of shares outstanding plus the dilutive effect of shares issuable through the exercise of stock options and warrants. The components of the denominator for basic earnings per share and diluted earnings per share are reconciled as follows:
Three Months Ended Nine Months Ended --------------------------------- -------------------------------- December 31, December 26, December 31, September 26, 2000 1999 2000 1999 -------------- --------------- ------------- --------------- Basic Earnings per Share: Weighted-average common shares outstanding 6,172 6,141 6,165 6,135 ============== =============== ============= =============== Diluted Earnings per Share: Weighted-average common shares outstanding 6,172 6,141 6,165 6,135 Stock options (a) -- -- -- 15 -------------- --------------- ------------- --------------- Denominator for Diluted Earnings per Share 6,172 6,141 6,165 6,150 ============== =============== ============= ===============
(a) Excludes anti-dilutive stock options which were 524,000 and 485,000 for the three and nine month periods ended December 31, 2000, and 477,000 and 249,000 for the three and nine month periods ended December 26, 1999. Also excludes anti-dilutive warrants for the three and nine month periods ended December 31, 2000 of 428,000. 6 8 NOTE 2. Comprehensive Income Comprehensive income for the three and nine month periods ended December 31, 2000 and December 26, 1999, is summarized below.
Three Months Ended Nine Months Ended --------------------------------- -------------------------------- December 31, December 26, December 31, December 26, 2000 1999 2000 1999 --------------------------------- -------------------------------- Net (loss) income $ (1,250) $ 2,865 $ (3,757) $ 4,152 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment (213) 106 (1,699) (266) Unrealized gains (loss) on securities: Unrealized investment holding loss arising during period -- (2) (6) (2) Less: reclassification adjustment for gains included in net income (loss) 10 -- 10 -- ------------- --------------- ------------- --------------- Total comprehensive (loss) income $ (1,453) $ 2,969 $ (5,452) $ 3,884 ============= =============== ============= ===============
NOTE 3. Inventories Inventories are summarized as follows:
December 31, 2000 March 31, 2000 -------------------- ------------------- Finished goods $23,153 $24,012 Work in process 17,864 18,367 Purchased and manufactured parts 24,371 23,365 --------------- --------------- Total inventories $65,388 $65,744 =============== ===============
7 9 NOTE 4. Long-term Debt Payable to Banks and Others Long-term debt payable, including current maturities, consisted of the following:
December 31, 2000 March 31, 2000 -------------------- ------------------ Revolver - 8.67% - $154,723 Revolver - 9.34% $160,458 - Term loan - 8.69% - 46,250 Term loan - 9.90% 40,625 - Bridge loan - 15.44% - 75,000 Senior Subordinated Notes - 16.00% 75,763 - Other 1,311 1,371 ------------------- ----------------- 278,157 277,344 Less: current maturities 276,903 82,585 Less: unamortized discount 191 -- ------------------- ----------------- Total $1,063 $194,759 =================== =================
Credit Facilities On August 30, 2000, the Company completed a private placement of $75 million in senior subordinated notes (the "Notes") and certain warrants to purchase shares of the Company's common stock (the "Warrants") to a group of institutional investors (collectively, the "Purchasers"). The Company used the proceeds of the private placement to retire, in full, a $75 million Bridge Loan held by a group of lenders led by Fleet National Bank. The Notes are due on August 29, 2005 and bear interest at a rate of 16% per annum, consisting of 13% cash interest on principal, payable quarterly, and 3% interest on principal, payable quarterly in "payment-in-kind" promissory notes. Prepayment of the Notes is permitted after August 29, 2001 at a premium initially of 9% declining to 5%, 3%, and 1% annually, respectively, thereafter. The Notes contain customary financial covenants and events of default, including a cross-default provision to the Company's senior credit facility. The Warrants entitle the Purchasers to acquire in the aggregate 427,602 shares, or 6.5%, of the common stock of the Company at an exercise price of $9.93 a share, which represents the average daily closing price of the Company's common stock on the New York Stock Exchange for the thirty (30) days preceding the completion of the private placement, and which may be subject to a price adjustment on the first anniversary of the issuance of the Warrants. The Warrants must be exercised by August 29, 2010. These Warrants have been valued at an appraised amount of $0.2 million and have been recorded in paid in capital. In connection with the transaction, the Company and certain of its subsidiaries signed a Consent and Amendment Agreement with its current lenders (the "Lenders") under the Company's original $250 million senior credit facility (the "Credit Facility"), in which the Lenders consented to the private placement and amended certain financial covenants associated with the Credit Facility. 8 10 Effective December 31, 2000, the Company was not able to meet certain financial ratio requirements of the Credit Facility as amended. Pursuant to discussions with the Lenders, the Company and the Lenders agreed to an amendment to the Credit Facility to include a forbearance agreement as well as certain other fees and conditions, including the suspension of dividend payments. During the forbearance period the Lenders agree not to exercise certain of their rights and remedies under the Credit Agreement. The Company has, accordingly, classified its bank debt as "current" to reflect the fact that the forbearance period is less than one year. The term of the forbearance period, initially scheduled to expire on January 1, 2001, was subsequently extended by an additional amendment to March 29, 2001. This additional amendment also reduced the Revolver from $200 million to $175 million with an additional sub-limit on usage at $162 million. The Company has taken action to reduce its debt by preparing to sell certain of its businesses in order to either comply with the requirements of the existing agreement as amended or to be in an improved financial position to negotiate further amendments or borrowing alternatives. The Company has made all of its scheduled interest and principal payments. Various factors, including changes in business conditions, anticipated proceeds from the sale of operations and economic conditions in domestic and international markets in which the Company competes, will impact the restructuring results and may affect the ability of the Company to restore compliance with the financial ratios specified in the existing Credit Facility. The Company has unused borrowing capacity for both domestic and international operations of $7.5 million as of December 31, 2000, including letters of credit of $5.0 million. The Revolver and Term Loan are secured by the Company's assets. As of December 31, 2000, the Company had total borrowings of $276.8 million under the agreements which have a current weighted-average interest rate of 11.7%. The Company had $1.3 million of other borrowings, consisting of collateralized borrowing arrangements with fixed interest rates of 3% and 3.75%, and loans on life insurance policies owned by the Company with a fixed interest rate of 5%. Borrowings under the Revolver as of December 31, 2000, were $160.5 million. Interest on the Revolver is tied to the primary bank's prime rate, or at the Company's option, the London Interbank Offered Rate ("LIBOR"), plus a margin that varies depending upon the Company's achievement of certain operating results. As of December 31, 2000, $199.1 million of the Company's outstanding borrowings utilized LIBOR, of which $169.6 million were payable in U.S. Dollars and $9.6 million and $19.9 million were payable in Deutsche marks and Pounds sterling, respectively. Borrowings under the Term Loan as of December 31, 2000, were $40.6 million. As discussed above, the Term Debt, as well as all other debt under the Credit Facility, has been classified as currently payable to reflect the forbearance agreement in place. The Credit Facility requires the Company to maintain interest rate protection on a minimum of 50% of its variable rate debt. The Company has, accordingly, provided sufficiently for this protection by means of interest rate swap agreements which have fixed the rate of interest on $50.0 million of debt at a base rate of 5.48% through May 4, 2002, and $75.0 million of debt at a base rate of 6.58% through March 3, 2003. Under the agreement, the base interest rate is added to the applicable interest rate margin to determine the total interest rate in effect. The Credit Facility restricts annual capital expenditures to $12.0 million through 2001, $13.0 million in 2002, and $15.0 million thereafter, and contains other customary financial covenants, including the requirement to maintain certain financial ratios relating to performance, interest expense and debt levels. As noted above, the Company is currently operating under a forbearance arrangement and is in the process of reducing its debt through the sale of certain of its businesses in order to either comply with the requirements of the existing agreement or to be in an improved financial position to negotiate further amendments or borrowing alternatives. 9 11 NOTE 5. Acquisitions On August 31, 1999, the Company acquired substantially all of the assets and assumed certain liabilities, consisting primarily of trade debts and accrued expenses of the Engineered Fasteners Division and its Tinnerman product line (collectively referred to as "Tinnerman") of Eaton Corporation for a total purchase price of $173.3 million in cash. Tinnerman has 650 employees and manufactures a wide variety of fastening devices for the automotive, business equipment, consumer electronics and home appliance markets. Tinnerman has manufacturing facilities in Brunswick and Massillon, Ohio and Hamilton, Ontario, Canada. On July 19, 1999, the Company acquired all the outstanding capital stock of Ellison Holdings PLC, a privately held company, and its German affiliate Ellison, Rotettges & Co. GmbH (collectively referred to as "Ellison") for $13.8 million in cash, a $0.4 million note payable 24 months from the date of acquisition and other contingent consideration. Ellison, headquartered in Glusburn, West Yorkshire, England, manufactures retaining and snap rings as well as lockwashers for the automotive, heavy vehicle and industrial markets. As part of the acquisition plan, the Company closed its existing Anderton facility in Bingley, U.K. and consolidated that operation with the Ellison facility. In the quarter ended September 26, 1999, the Company recorded a $4.5 million charge for the consolidation. The charge consisted of $3.8 million, principally related to the write-down of Anderton's assets no longer being used to estimated realizable values and other costs directly related to the exit of the facility, and approximately $0.7 million for severance and related benefit payments to approximately 100 Anderton employees. At December 31, 2000, all cash costs associated with this charge have been incurred. In the quarter ended March 31, 2000, $1.0 million was charged to cost of sales primarily due to excess overtime incurred to produce parts pending customer approval on first part production lots. For the quarter ended July 2, 2000, the Company recorded a $1.3 million charge to cost of sales, primarily related to excess overtime to produce parts and premium freight charges. In the quarter ended October 1, 2000, the Company recorded a similar charge in the amount of $0.8 million to cost of sales. The Company has accounted for the above-mentioned acquisitions under the purchase method of accounting and each acquisition has been consolidated with the Company, beginning on the effective date of each acquisition. The excess of the purchase price over the fair value of the net assets acquired is included in the accompanying Consolidated Balance Sheets under the caption "Costs in excess of net assets of acquired businesses" and is being amortized over 40 years. 10 12 The following summarizes the Company's unaudited pro forma information as if the Ellison and Tinnerman acquisitions had occurred on April 1, 1999. The pro forma information is based on historical results of operations, adjusted for acquisition costs, additional interest expense, amortization of goodwill, additional depreciation and income taxes. It is not necessarily indicative of what the results would have been had the Company operated the acquired entities since April 1, 1999.
Nine Months Ended December 26, 1999 --------------------- Net sales $242,724 --------------------- Income before extraordinary charge $ 4,012 --------------------- Net income $ 3,471 --------------------- Basic earnings per share $ 0.57 --------------------- Diluted earnings per share $ 0.56 --------------------- Basic Shares 6,135 Diluted Shares 6,150
NOTE 6. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS No. 133. We have appointed a team to implement SFAS No.133 and the Company will adopt SFAS No. 133 and the corresponding amendments under SFAS No. 138 on April 1, 2001. SFAS No. 133, as amended by SFAS No. 138, is not expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows. Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements" was issued in December 1999. SAB No. 101b, "Second Amendment: Revenue Recognition in Financial Statements", defers implementation of SAB No. 101 until no later than the fourth quarter of fiscal 2001. These were implemented effective January 1, 2001, and did not have any material impact on the Company's revenue recognition policies. 11 13 NOTE 7. Disclosures about Segments and Related Information
Nine Months Ended ---------------------------------------------- December 31, 2000 December 26, 1999 ------------------- ------------------- Sales: Specialty fastener products $ 192,176 $ 161,323 Aerospace products 49,622 42,820 ------------------- ------------------- Total $ 241,798 $ 204,143 =================== =================== Operating profit Specialty fastener products (a), (b) $ 15,785 $ 15,682 Aerospace products 11,869 10,062 ------------------- ------------------- Total $ 27,654 $25,744 Corporate expense (8,004) (6,412) Corporate interest and other income 260 446 Interest expense (c) (25,969) (12,233) ------------------- ------------------- Income (loss) before income taxes and extraordinary charge $ (6,059) $7,545 =================== ===================
(a) The results of operations of the Specialty Fasteners Products segment for the nine month period ended December 31, 2000 includes an arbitration award related to the Aerospace Rivet Manufacturers business in the amount of $1.2 million. (b) The results of operations of the Specialty Fasteners Products segment for the nine month periods ended December 31, 2000 and December 26, 1999 includes a charge of $2.1 million and $4.5 million, respectively, related to the consolidation of its two U.K. plants. (c) Interest expense for the nine month period ended December 31, 2000 includes a $2.3 million charge related to loan fees associated with the refinancing of the Company's bridge debt. 12 14
Three Months Ended ------------------------------------------------- December 31, 2000 December 26, 1999 -------------------- -------------------- Sales: Specialty fastener products $ 59,646 $ 69,804 Aerospace products 18,651 16,068 ------------------- ------------------- Total $ 78,297 $ 85,872 =================== =================== Operating profit Specialty fastener products (a) $ 3,610 $ 9,988 Aerospace products 5,031 3,857 ------------------- ------------------- Total $ 8,641 $13,845 Corporate expense (2,500) (2,386) Corporate interest and other income 28 254 Interest expense (8,185) (7,137) ------------------- ------------------- Income (loss) before income taxes and extraordinary charge $ (2,016) $ 4,576 =================== ===================
(a) The results of operations of the Specialty Fasteners Products segment for the three month period ended December 31, 2000 includes an arbitration award related to the Aerospace Rivet Manufacturers business in the amount of $1.2 million. NOTE 8. Subsequent Events On January 19, 2001, the Company announced that it intended to restructure and divest several of its industrial products businesses and that it had retained an investment banking firm to consider further strategic and business initiatives following these actions. As part of this restructuring, the Company will seek to divest four of its specialty fastener operations. The Company intends to sell its cold-headed products, aerospace rivet, retaining ring and hose clamp operations with expected proceeds of $110-130 million, which will be used to retire a portion of its outstanding debt. In connection with the restructuring, the Company will suspend the payment of its quarterly dividend and recognize a non-recurring charge of $65-80 million in its fourth quarter of fiscal 2001. The non-recurring charge includes the anticipated losses on the sale of the aforementioned operations and other costs associated with such divestitures but does not include any gains on the sales of the business units. These gains, which are expected to offset approximately half of the non-recurring charge, will be recognized when the sales of those respective business units are completed. On January 31, 2001, the Company entered into Amendment Agreement No. 3 to the Credit Agreement with the Lenders to March 29, 2001, as well as established the Revolver Sub-Limit described in Note 4 above. On February 8, 2001, the Company received notice from a third party creditor of one of its investments that the creditor has initiated foreclosure proceedings against the subject company on an outstanding debt. If these foreclosure proceedings are concluded, the Company's investment in and note receivable from the subject company will become impared. This could result in a non-cash pretax charge in the fourth quarter of approximately $6.8 million. 13 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS All references to three and nine month periods in this Management's Discussion and Analysis refer to the three and nine month periods ended December 31, 2000 for fiscal year 2001 and the three and nine month periods ended December 26, 1999 for fiscal year 2000. Also, when referred to herein, operating profit means net sales less operating expenses, without deduction for general corporate expenses, interest and income taxes. Unless otherwise indicated, amounts per share refer to diluted amounts per share. Sales for the nine month period in 2001 were $241.8 million, an 18% increase from the comparable period in 2000. For the three month period in 2001, sales were $78.3 million, a 9%, decrease from the comparable period in 2000. Gross profit for the nine month period in 2001 was $60.4 million, which was essentially flat from the comparable period in 2000. For the three month period in 2001, gross profit decreased $6.5 million from the comparable period in 2000. Operating profit for the nine month period in 2001 was $27.7 million, a 7% increase from the comparable period in 2000. Operating profit for the three month period in 2001 was $8.6 million, a decrease of 38% from the comparable period in 2000. Operating profit in the nine month period in 2001 and 2000 includes a charge of $2.1 million and $4.5 million, respectively, related to the consolidation of the Company's two U.K. plants. Operating profit in the 2000 periods only includes the results of Ellison and Tinnerman from the dates of each respective acquisition. Operating profit in the nine and three month periods in 2001 includes a $1.2 million arbitration award related to the Aerospace Rivet Manufacturers business. Changes in sales, operating profit and new orders from continuing operations are discussed below by segment. The Company reported a net loss for the nine month period in 2001 of $3.8 million, or ($0.61) per share, compared to net income of $4.2 million, or $0.68 per share, for the comparable period in 2000. The Company reported a net loss for the three month period in 2001 of $1.3 million, or ($0.20) per share, compared to net income of $2.9 million, or $0.47 per share, for the comparable period in 2000. Net income for the nine month period in 2000 includes an extraordinary charge in the amount of $0.5 million, or ($0.09) per share, after tax, for refinancing of debt. Interest expense increased $13.7 million for the nine month period in 2001, primarily as a result of additional borrowings to fund the Ellison and Tinnerman acquisitions which occurred in the second fiscal quarter of 2000. Interest expense for the three month period increased $1.0 million, due to higher interest rates over 2000. Interest expense in the nine month period in 2001 included a charge of $2.3 million related to refinancing of the Bridge Loan. New orders received during the nine month period in 2001 totaled $241.7 million, an increase of 13% from the comparable period in 2000. The increase in orders for the nine month period is primarily the result of the acquisitions of Tinnerman and Ellison which were not included for the full period of 2000. For the three month period, new orders totaled $75.4 million, a decrease of 9% from the comparable period in 2000. At December 31, 2000, total backlog of unfilled orders was $108.3 million, compared to $104.1 million at December 26, 1999. 14 16 SPECIALTY FASTENER PRODUCTS SEGMENT Sales for the Specialty Fastener Products segment were $192.2 million for the nine month period ended December 31, 2000, an increase of 19% from the comparable period in 2000. The predominant reason for this sales increase was the acquisitions of Tinnerman and Ellison. Sales at the German, UK, Brazilian and U.S. retaining ring operations were 12% higher than last year, reflecting strong product demand and the acquisition of Ellison. The hose clamp business, with significant exposure to heavy-duty truck manufacturing and after-market, has seen sales down 8% from last year. Aerospace Rivet Manufacturers has shown 11% lower sales than in 2000, reflecting a loss of a major customer and an industry-wide slowdown in the aerospace components market. Sales at TCR were down 7% from the comparable period in 2000 due to weaker demand for manufactured products. Sales for the Specialty Fastener Products segment were $59.6 million for the three month period ended December 31, 2000, a 15% decrease from the comparable period in 2000. Sales were 12% lower at the Company's retaining ring operations from the comparable period in 2000, primarily from lower foreign exchange rates. Sales in 2001 were down 20% at its hose clamp business over the comparable period in 2000 due to weaker product demand. Sales at TCR were also down 15% over last year. Operating profit for the nine month period in 2001 was $15.8 million, essentially the same as the comparable period in 2000. In 2001, operating profit included additional plant consolidation charges of $2.1 million for excess overtime, staffing and premium freight. For 2000, only four months of the Tinnerman operating profit was included. The nine month period of 2000 included a $4.5 million charge to consolidate the Ellison and Anderton retaining ring businesses in the U.K. The physical consolidation of the two U.K. facilities is complete and the Anderton facility has been sold. Increases in operating profit at the Company's German, Brazilian and U.S. retaining ring operations were more than offset by production inefficiencies at the U.K. operation. Operating profit at the hose clamp business, ARM and TCR is below last year, respectively. Operating profit for the three month period ended December 31, 2000 was $3.6 million versus $10.0 million for the comparable period in 2000. Approximately one-half of this decline was due to the U.K. operation. Operating profit at the hose clamp, Engineered Components and TCR businesses is below the comparable period in 2000, respectively. Operating profit for ARM in 2001, which includes a $1.2 million arbitration award, exceeds the comparable period in 2000. New orders for the nine month period were $191.0 million, versus $168.7 million in 2000, primarily reflecting the incremental bookings resulting from the acquisitions of Tinnerman and Ellison for the full nine month period in 2001. New orders for the three month period in 2001 were $59.1 million, versus $69.8 million in the comparable period in 2000. Backlog of unfilled orders at December 31, 2000 was $63.1 million, compared to $58.0 million at December 26, 1999. Recent trends in the economy in the United States indicate a softening in automotive and heavy truck manufacturing which are major markets for the Company. This development, coupled with expected losses at the Company's UK facility, could have a negative effect on the Company's operating performance over the next several quarters. 15 17 AEROSPACE PRODUCTS SEGMENT Sales for the Aerospace Products segment were $49.6 million for the nine month period in 2001, compared to $42.8 million, or 16%, for the comparable period in 2000. Sales during 2001 at Breeze-Eastern were 18% ahead of 2000. Sales at Norco were 12% ahead of 2000. Sales for the Aerospace products segment were $18.7 million for the three month period in 2001, an increase of $2.6 million, or 16%, from the comparable period in 2000. For the three month period in 2001, sales at Breeze-Eastern were 15% ahead of 2000 and sales at Norco were 18% ahead of 2000. Operating profit for the nine month period in 2001 was $11.9 million, an 18% increase from the nine month period in 2000. This increase in operating profit was spread between Breeze-Eastern and Norco and was the direct result of sales volume increases. Operating profit for the three month period in 2001 was $5.0 million, an increase of 30% from the comparable period in 2000. Most of this increase is attributable to higher sales volume. New orders for the nine month period in 2001 were $50.7 million versus $45.1 million in 2000. Bookings at Breeze-Eastern were up $2.6 million from 2000. Bookings at Norco were $3.0 million ahead of 2000. New orders for the three month period in 2001 were $16.3 million, a 21% increase over the comparable period in 2000. Bookings for the quarter ended December 31, 2000 at Breeze-Eastern were $2.5 million higher than the comparable period ended in 2000. Bookings at Norco were $0.4 million higher than 2000. Backlog of unfilled orders at December 31, 2000, was $45.2 million, compared to $46.1 million at December 26, 1999. LIQUIDITY AND CAPITAL RESOURCES Effective December 31, 2000, the Company was not able to meet certain financial ratio requirements of the Credit Facility as amended. Pursuant to discussions with its Lenders, the Company and the Lenders agreed to an amendment to the Credit Facility to include a forbearance agreement as well as certain other fees and conditions, including the suspension of dividend payments. During the forbearance period the Lenders agree not to exercise certain of their rights and remedies under the Credit Agreement. The Company has, accordingly, classified its bank debt as "current" to reflect the fact that the forbearance period is less than one year. The term of the forbearance period, initially scheduled to expire on January 31, 2001, was subsequently extended by an additional amendment to March 29, 2001. This additional amendment also reduced the Revolver from $200 million to $175 million and included the establishment of a sub-limit or borrowings under the Revolver of $162 million, as well as certain other fees and conditions. The Company has taken action to reduce its debt by preparing to sell certain of its businesses in order to either comply with the requirements of the existing agreement as amended or to be in an improved financial position to negotiate further amendments or borrowing alternatives. The Company has made all of its scheduled interest and principal payments. The Company's debt-to-capitalization ratio was 69% as of December 31, 2000, compared to 68% as of March 31, 2000. The current ratio at December 31, 2000 was 0.4 compared to 1.0 at March 31, 2000. Working capital was ($192.0) million as of December 31, 2000, down $193.8 million from March 31, 2000. Both the decrease in the current ratio and the decrease in working capital reflect the reclassification of long term debt to short term as discussed above. 16 18 Capital expenditures were $4.5 million for the nine month period and $1.0 million for the three month period ended December 31, 2000. There were approximately $0.7 million of capital expenditure commitments outstanding at December 31, 2000. The Company's cash flow from operations and available credit facilities are considered adequate to fund the short-term operating needs. The Company's long-term capital needs are expected to be provided for after completion of the restructuring actions taken as discussed above. To date, cash flow from operations has been sufficient to enable the Company's scheduled interest and principal payments. Various factors, including changes in business conditions, anticipated proceeds from the sale of operations and economic conditions in domestic and international markets in which the Company competes, will impact the restructuring results and may affect the ability of the Company to restore compliance with the financial ratios specified in the existing Credit Facility. In August 2000, the Company received $1.0 million for the sale of the Anderton facility located in Bingley, England. The proceeds were used to repay existing debt in accordance with the terms of the Credit Facility. EURO CURRENCY Effective January 1, 1999, eleven countries comprising the European Union established fixed foreign currency exchange rates and adopted a common currency unit designated as the "Euro." The Euro has since become publicly traded and is currently used in commerce during the present transition period which is scheduled to end January 1, 2002, at which time a Euro denominated currency is scheduled to be issued and is intended to replace those currencies of the eleven member countries. The transition to the Euro has not resulted in problems for the Company to date, and is not expected to have any material adverse impact on the Company's future operations. IMPACT OF INFLATION The Company's primary costs, inventory and labor, increase with inflation. Recovery of the costs has to come from improved operating efficiencies and, to the extent permitted by our competition, through improved gross profit margins. 17 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company enters into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates and interest rates. The counter parties are major financial institutions. The Company uses forward exchange contracts principally to hedge foreign currency intercompany loans made between its corporate headquarters and its foreign subsidiaries and between various foreign subsidiaries. As part of its overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, the Company hedges a portion of anticipated net sales that are expected to be denominated in foreign currency. In addition, the Company hedges a portion of expected future intercompany purchases denominated in foreign currency anticipated over the ensuing twelve month period. At December 31, 2000, the Company had contracts for the sale of $13.5 million and the purchase of $3.8 million of foreign currencies at fixed rates. Based on the foreign exchange contracts outstanding at December 31, 2000, each 10% devaluation of the U.S. dollar compared to the level of foreign exchange rates for currencies under contract at December 31, 2000, would result in approximately $1.3 million of unrealized losses on foreign exchange contracts involving foreign currency sales and purchases. Conversely, a 10% appreciation of the U.S. dollar would result in $1.2 million of unrealized gains. Consistent with the nature of the economic hedge provided by such foreign exchange contracts, such unrealized gains and losses would be offset by corresponding decreases and increases, respectively, in the dollar value of future foreign currency underlying transactions. The Company enters into interest rate swap agreements to manage its exposure to interest rate changes. The swaps involve the exchange of fixed and variable interest rate payments without exchanging the notional principal amount. Payments or receipts on the swap agreements are recorded as adjustments to interest expense. At December 31, 2000, the Company had interest rate swap agreements to convert $125.0 million of notional amount of floating interest rate debt to fixed rate. At December 31, 2000, the fair value of these swap agreements was approximately ($1.0) million. In the event of a 25 basis point (one-quarter percent) increase in interest rates, the fair value of these swap agreements would have been approximately ($0.5) million as of December 31, 2000. 18 20 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is engaged in various legal proceedings incidental to its business. It is the opinion of management that, after taking into consideration information furnished by its counsel, these matters will not have a material effect on the Company's consolidated financial position or the results of the Company's operations in future periods. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.43 Amendment Agreement No. 2 to the Second Amended and Restated Credit Agreement dated as of December 29, 2000 between the Company and Fleet National Bank and the other Lenders referred to therein. 10.44 Amendment Agreement No. 3 to the Second Amended and Restated Credit Agreement dated as of January 31, 2001 between the Company and Fleet National Bank and the other Lenders referred to therein. (b) No reports on Form 8-K were filed during the quarter ended December 31, 2000. SIGNATURES Pursuant to the requirements 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. TRANSTECHNOLOGY CORPORATION (Registrant) Dated: February 12, 2000 By: /s/Joseph F. Spanier ------------------------------------------- JOSEPH F. SPANIER, Vice President Treasurer and Chief Financial Officer* *On behalf of the Registrant and as Principal Financial and Accounting Officer. 19 EX-10.43 2 y45476ex10-43.txt AMENDMENT AGREEMENT NO. 2 1 EXHIBIT 10.43 AMENDMENT AGREEMENT NO. 2 dated as of December 29, 2000 to that certain SECOND AMENDED AND RESTATED CREDIT AGREEMENT This AMENDMENT AGREEMENT NO. 2 (this "Amendment"), dated as of December 29, 2000, is by and among (a) TransTechnology Corporation ("TransTechnology"), TransTechnology Seeger-Orbis GmbH ("GmbH") and TransTechnology (GB) Limited ("Limited", together with TransTechnology and GmbH, the "Borrowers"), (b) Fleet National Bank ("FNB") and the other lending institutions listed on Schedule 1 to the Credit Agreement (collectively, the "Lenders"), (c) FNB, acting through its London Branch, as Sterling Fronting Bank (the "Sterling Fronting Bank"), (d) BHF-BANK Aktiengesellschaft, as DM Fronting Bank (the "DM Fronting Bank"; together with the Sterling Fronting Bank, the "Fronting Banks"), (e) FNB, as issuing bank for Letters of Credit (in such capacity, the "Issuing Bank"), (f) ABN AMRO Bank N.V., as Syndication Agent, (g) Bank One, NA, as Documentation Agent, and (h) FNB as Administrative Agent for the Lenders, the Fronting Banks and the Issuing Bank (in such capacity, the "Administrative Agent"). Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in that certain Second Amended and Restated Credit Agreement dated as of June 30, 1995, and amended and restated as of July 24, 1998, as further amended and restated as of August 31, 1999 and as amended by that certain Consent and Amendment Agreement No. 1 dated as of August 21, 2000 (as so amended and restated, the "Credit Agreement"), to which the Borrowers, the Lenders and the Administrative Agent are parties. WHEREAS, the Borrowers have indicated to the Administrative Agent and the Lenders that, based upon the Borrowers' projected financial results for the quarter ending December 31, 2000, certain Defaults or Events of Default may arise from and after December 31, 2000; WHEREAS, the Borrowers have requested that the Lenders and the Administrative Agent forbear from enforcing their rights with respect to such potential Defaults and Events of Default; and WHEREAS, the Lenders and the Administrative Agent are willing to forbear from enforcing their rights with respect to such potential Defaults and Events of Default, but only on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing premises, the parties hereto hereby agree as follows: 2 -2- SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended with effect from the Effective Date (as defined in Section 9 below) by deleting Section 9.4(b) of the Credit Agreement in its entirety and substituting in lieu thereof the following new Section 9.4(b): "(b) as soon as practicable, but in any event not later than (i) twenty-five (25) days after the end of each calendar month, and (ii) forty-five (45) days after the end of each of the fiscal quarters of TransTechnology, copies of the unaudited consolidated balance sheet of TransTechnology and its Subsidiaries and the unaudited consolidating balance sheet of TransTechnology and its Subsidiaries, each as at the end of such month or quarter, as applicable, and the related consolidated and consolidating statements of income and consolidated statement of cash flow for the portion of TransTechnology's fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of TransTechnology that the information contained in such financial statements fairly presents the financial position of TransTechnology and its Subsidiaries on the date thereof (subject to year-end adjustments);" SECTION 2. RATIFICATION OF EXISTING AGREEMENTS. The Borrowers and the Guarantors agree that the Obligations of the Borrowers and the Guarantors to the Administrative Agent and the Lenders as evidenced by or otherwise arising under the Credit Agreement, the Notes and the other Loan Documents, except as otherwise expressly modified in this Amendment upon the terms set forth herein, are, by the Borrowers' and Guarantors' execution of this Amendment, ratified and confirmed in all respects. In addition, by the execution of this Amendment, the Borrowers and Guarantors represent and warrant that no counterclaim, right of set-off or defense of any kind exists or is outstanding with respect to such Obligations. SECTION 3. FORBEARANCE AGREEMENT. Subject to the terms and conditions set forth herein, the Administrative Agent and each of the Lenders agrees to forbear from (a) exercising their rights and remedies under the Credit Agreement and the other Loan Documents to collect the indebtedness of the Borrowers to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents and (b) ceasing to make Revolving Credit Loans or International Facility Loans or to issue, extend or renew Letters of Credit until that date (the "Forbearance Termination Date") which is the earliest to occur of (i) the failure after the date hereof of the Borrowers and their Subsidiaries to comply with any of the terms or conditions set forth in the Credit Agreement and/or the other Loan Documents (as modified by this Amendment), other than the failure to comply with the provisions of Sections 11.1 - 11.4 of the Credit Agreement for 3 -3- the period commencing on January 1, 2001 and ending on January 31, 2001, (ii) the occurrence after the date hereof of any Default or Event of Default, other than a Default or Event of Default resulting from the failure to comply with the provisions of Sections 11.1 - 11.4 of the Credit Agreement for the period commencing on January 1, 2001 and ending on January 31, 2001, (iii) the failure of the Borrowers or their Subsidiaries to comply with any term set forth in this Amendment, (iv) the date on which the Administrative Agent determines that a material adverse change in the business, assets, financial condition or prospects of the Borrowers and their Subsidiaries, taken as a whole, has occurred, (v) the date that the Borrowers, any of their Subsidiaries or any Affiliate of the Borrowers shall commence any litigation proceeding against the Administrative Agent or any Lender or any Affiliate of the Administrative Agent or any Lender in connection with or related to any of the transactions contemplated by the Credit Agreement, the other Loan Documents, this Amendment or any documents, agreements or instruments executed in connection with any of the foregoing, (vi) the date that any holder of Subordinated Debt takes any action in enforcement of its rights under such Subordinated Debt, or any "Event of Default" under and as defined in any instrument evidencing any such Subordinated Debt shall have occurred, the effect of which would, but for the provisions of the Intercreditor and Subordination Agreement dated as of August 29, 2000, with respect thereto, be to permit the holder of such Subordinated Debt to accelerate such Indebtedness, or (vii) January 31, 2001. On and after the Forbearance Termination Date, the Administrative Agent and each of the Lenders shall be free in its sole and absolute discretion to proceed to enforce any or all of its rights under or in respect of the Credit Agreement, the other Loan Documents and applicable law, including, without limitation, (x) the right to require the immediate repayment of the Loans and the other Obligations in full, (y) the right to require deposit of cash collateral or the delivery of a letter of credit reasonably satisfactory to the Administrative Agent in an amount equal to the then Maximum Drawing Amount of all Letters of Credit in accordance with Section 5.2(c) of the Credit Agreement, and (z) the right to cease making Revolving Credit Loans or International Facility Loans, or issuing, extending or renewing Letters of Credit. SECTION 4. COVENANTS. Without any prejudice or impairment whatsoever to any of the rights and remedies of the Administrative Agent or any Lender contained in the Credit Agreement or in any other Loan Documents, the Borrowers covenant and agree with the Administrative Agent and each of the Lenders as follows: (a) Revolver Sublimit. Notwithstanding anything to the contrary stated in Section 2 of the Credit Agreement, at no time during the period beginning on the date hereof and ending on the Forbearance Termination Date shall the Administrative Agent or any of the Lenders be obligated to make or fund any Revolving Credit Loans if, after the making of such Revolving Credit Loan, the sum of (i) the outstanding amount of the Revolving Credit Loans (after giving effect to all amounts requested), (ii) the Maximum Drawing Amount, (iii) all Unpaid Reimbursement Obligations, and (iv) the International Facility Amount (such aggregate amount, the "Revolving Facility Usage"), would exceed during any period set forth in the table below the amount set forth opposite such period in such table (such amount, the then applicable "Revolver Sublimit"): 4 -4-
Period Revolver Sublimit ------ ----------------- December 29, 2000 - January 18, 2001 $168,000,000 January 19, 2001 - January 30, 2001 $166,000,000 January 31, 2001 and thereafter $162,000,000
If the Revolving Facility Usage at any time exceeds the Revolver Sublimit in effect at such time, TransTechnology shall immediately prepay an amount equal to such excess to the Administrative Agent for the account of the Lenders and the Administrative Agent, for application to the outstanding principal amount of the Revolving Credit Loans. Notwithstanding the foregoing, the Revolving Credit Commitments of the Lenders shall not be reduced or deemed to be reduced hereby and the Commitment Fees payable pursuant to Sections 2.2, 3.13 and 3.14 of the Credit Agreement shall continue to be payable with respect to the aggregate Revolving Credit Commitments, the Maximum DM Amount and the Maximum Sterling Amount, respectively. (b) Letters of Credit. Notwithstanding anything to the contrary stated in Section 5 of the Credit Agreement, at no time during the period beginning on the date hereof and ending on the Forbearance Termination Date shall the Issuing Bank be required to issue, extend or renew any Letter of Credit if, as a result thereof, the Revolving Facility Usage, after giving effect to such issuance, extension or renewal, would exceed the Revolver Sublimit in effect at such time. (c) Applicable Margin. Notwithstanding anything to the contrary stated in the definition of "Applicable Margin" in the Credit Agreement or in Section 6.11 of the Credit Agreement, between January 1, 2001 and the Forbearance Termination Date the Applicable Margin in effect with respect to Base Rate Loans shall be 2.50%, and the Applicable Margin in effect with respect to Eurocurrency Rate Loans shall be 4.00%; provided that, for the avoidance of doubt, in the event that any Default or Event of Default occurring or arising prior to the Forbearance Termination Date is continuing on the Forbearance Termination Date, the provisions of Section 6.11 of the Credit Agreement shall apply at such time to the determination of the applicable rate of interest on the Loans outstanding at such time. (d) Eurocurrency Rate Loans. Notwithstanding anything to the contrary stated in the definition of "Interest Period" in the Credit Agreement or in Section 2.7, Section 3.5 or Section 4.5 of the Credit Agreement, between the Effective Date and the Forbearance Termination Date TransTechnology may elect to convert any part of the Loans to or maintain any part of the Loans as Eurocurrency Rate Loans in accordance with the applicable provisions of the Credit Agreement as in effect as of the Effective Date, so long as the Interest Periods with respect to any Eurocurrency Rate Loans borrowed, converted or renewed after the Effective Date do not extend beyond January 31, 2001. (e) Distributions. Notwithstanding anything to the contrary stated in Section 10.4 of the Credit Agreement, TransTechnology shall not from the 5 -5- date hereof until the Forbearance Termination Date declare or pay any dividends on or in respect of, or make any other Distributions on or in respect of, any shares of the capital stock of TransTechnology. (f) Retention of Consultant; Financial Information. Prior to the close of business on January 5, 2001, TransTechnology shall engage a consultant to work on behalf of TransTechnology and its Subsidiaries on the implementation of their strategic plans (the "Consultant"). The identity of the Consultant shall be reasonably acceptable to the Administrative Agent. TransTechnology shall provide to the Administrative Agent and the Lenders, with the assistance of the Consultant, financial information regarding TransTechnology and its Subsidiaries required to permit the Lenders' evaluation of, among other things, the financial covenant levels applicable to the Borrowers and their Subsidiaries, and which will include, but not be limited to, the following: (i) as soon as practicable after the Consultant's engagement, and in any event by January 16, 2001, projections of weekly cash flow (including receipts, collections and disbursements), between the date of the Consultant's engagement and March 31, 2001, and no later than the end of each week thereafter, such projections for each period of thirteen weeks commencing with the following week; and (ii) as soon as practicable after the Consultant's engagement, full projections (including statements of income and cash flows and balance sheets) for each quarter between the Effective Date and March 31, 2003, and for each month between the Effective Date and September 30, 2001. (g) Expenses. The Borrowers shall pay or reimburse on demand the Administrative Agent and each of the Lenders for all reasonable costs and expenses the Administrative Agent or such Lender incurs in connection with the negotiation, execution and delivery of the agreements and transactions contemplated by this Amendment or which otherwise are required to be paid under the Loan Documents. (h) Compliance with Loan Documents. The Borrowers and their Subsidiaries shall comply with all of the terms, covenants and provisions contained in the Credit Agreement and the other Loan Documents except as such terms, covenants and provisions are expressly modified by this Amendment upon the terms set forth herein. (i) Further Assurances. The Borrowers and their Subsidiaries shall at any time or from time to time execute and deliver such further instruments and take such further action as the Administrative Agent may reasonably request to effect the purposes of this Amendment, the Credit Agreement and the other Loan Documents. 6 -6- (j) Event of Default; Extension of Forbearance. Any failure by any of the Borrowers or their Subsidiaries to comply with any provision of this Section 4 applicable to such Borrower or Subsidiary, or any material breach by any of the Borrowers of any of their representations and warranties set forth in Section 6 below, shall constitute an Event of Default; provided that, notwithstanding anything to the contrary stated in Section 27 of the Credit Agreement, (i) any waiver of, or agreement to forbear from the exercise of remedies with respect to or from ceasing to make Loans and Letters of Credit available as a result of, any Event of Default arising as a result of any breach of Section 4(a) or Section 4(b) above, (ii) any extension of the Lenders' and the Administrative Agent's forbearance agreements set forth in Section 3 above to end on any date following January 31, 2001, and (iii) any amendment to the provisions of this Section 4(j) or of Section 4(a) or Section 4(b) above shall in any case require the written consent of Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the principal amount of the Revolving Credit Notes and the Term Notes, taken together, outstanding as of the effective date of any such waiver, agreement, extension or amendment. SECTION 5. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment shall be conditioned upon the satisfaction of the following conditions precedent: SECTION 5.1. DELIVERY OF DOCUMENTS. (a) This Amendment shall have been executed and delivered to the Administrative Agent by each of the Borrowers, each of the Guarantors, and the Majority Lenders. (b) The Company and the holders of a majority of the principal amount of the "Outstanding Notes", as such term is defined in the Securities Purchase Agreement of the Company dated as of August 29, 2000 (such holders, the "Requisite Noteholders"), shall have executed and delivered to the Administrative Agent an agreement pursuant to which the Requisite Noteholders shall agree, among other things, to forbear until the earlier of (i) February 15, 2001, and (ii) the date 15 days following the Forbearance Termination Date, from the exercise of any rights or remedies available to them as a result of any "Event of Default" arising under (and as defined in) such Securities Purchase Agreement and the Notes issued thereunder. SECTION 5.2. LEGALITY OF TRANSACTION. No change in applicable law shall have occurred as a consequence of which it shall have become and continue to be unlawful on the date this Amendment is to become effective (a) for the Administrative Agent or any Lender to perform any of its obligations under any of the Loan Documents or (b) for any of the Borrowers to perform any of its agreements or obligations under any of the Loan Documents. SECTION 5.3. PERFORMANCE. Each of the Borrowers shall have duly and properly performed, complied with and observed in all material respects its covenants, agreements and obligations contained in the Loan Documents 7 -7- required to be performed, complied with or observed by it on or prior to the date this Amendment is to become effective. No event shall have occurred on or prior to the Effective Date and be continuing, and no condition shall exist on the Effective Date which constitutes a Default or Event of Default. SECTION 5.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Amendment and all instruments and documents incidental thereto shall be in form and substance reasonably satisfactory to the Administrative Agent and the Administrative Agent shall have received all such counterpart originals or certified or other copies of all such instruments and documents as the Administrative Agent shall have reasonably requested. SECTION 6. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Lenders as follows: (a) The representations and warranties of such Borrower and of each Guarantor contained in the Credit Agreement and the other Loan Documents to which such Borrower or Guarantor, as the case may be, is a party were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to in the representations and warranties contained in the Credit Agreement shall be the financial statements of TransTechnology and its Subsidiaries most recently delivered to the Administrative Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby: (i) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval or consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity or enforceability of this Amendment and which is required by law or any regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, any law, regulation or rule binding on or applicable to such Borrower or any provision of the charter documents or by-laws of such Borrower, (iv) do not result in any breach of or constitute a default under any agreement or instrument to which such Borrower is a party or to which it or any of its properties are bound, including without limitation any indenture, credit or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; and 8 -8- (c) This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors, and (ii) enforcement may be subject to general principles of equity, and the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceeding for such remedies may be brought. SECTION 7. NO OTHER AMENDMENTS. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. SECTION 8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. SECTION 9. EFFECTIVE DATE. Subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, this Amendment shall be deemed to be effective as of December 29, 2000 (the "Effective Date"). 9 IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No. 2 as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/Joseph F. Spanier ----------------------------------------- Name: Joseph F. Spanier Title: Vice President, Chief Financial Officer & Treasurer TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/Michael J. Berthelot ----------------------------------------- Name: Michael J. Berthelot Title: Geschaftsfuhrer TRANSTECHNOLOGY (GB) LIMITED By: /s/Michael J. Berthelot ----------------------------------------- Name: Michael J. Berthelot Title: Director By: /s/Gerald C. Harvey ----------------------------------------- Name: Gerald C. Harvey Title: Director S-1 10 FLEET NATIONAL BANK, individually, as Administrative Agent and as Sterling Fronting Bank By: /s/Michael J. McDermott ----------------------------------------- Name: Michael J. McDermott Title: Managing Director BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank By: --------------------------------------------- Name: Title: By: --------------------------------------------- Name: Title: ABN AMRO BANK N.V., individually and as Syndication Agent By: --------------------------------------------- Name: Title: By: --------------------------------------------- Name: Title: BANK ONE, NA, individually and as Documentation Agent By: /s/Jeffrey Lubatkin --------------------------------------------- Name: Jeffrey Lubatkin Title: Vice President S-2 11 THE BANK OF NEW YORK By: /s/Jeffrey S. Witte --------------------------------------------- Name: Jeffrey S. Witte Title: Vice President KEY CORPORATE CAPITAL INC. By: /s/Alex Strazzella --------------------------------------------- Name: Alex Strazzella Title: Vice President BANK OF NOVA SCOTIA By: /s/Brian S. Allen --------------------------------------------- Name: Brian S. Allen Title: Managing Director COMERICA BANK By: /s/Jeffrey Peck --------------------------------------------- Name: Jeffrey Peck Title: Vice President DRESDNER BANK, AG, NEW YORK AND GRAND CAYMAN BRANCHES By: --------------------------------------------- Name: Title: By: --------------------------------------------- Name: Title: S-3 12 SUMMIT BANK By: /s/Kevin M. Behan --------------------------------------------- Name: Kevin M. Behan Title: Vice President S-4 13 The Guarantors under (and as defined in) the Subsidiary Guaranty hereby acknowledge that they have read and are aware of the provisions of this Amendment and hereby reaffirm their absolute and unconditional guaranty of the Borrowers' payment and performance of their obligations to the Lenders and the Administrative Agent under the Credit Agreement as amended hereby. TRANSTECHNOLOGY ACQUISITION CORPORATION By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary PALNUT FASTENERS, INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RETAINERS, INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-5 14 RANCHO TRANSTECHNOLOGY CORPORATION By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INDUSTRIES By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INTERNATIONAL SALES, INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-6 15 TRANSTECHNOLOGY SEEGER INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SEEGER INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TCR CORPORATION By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary NORCO, INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-7 16 ELLISON RING & WASHER INC. By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY CANADA CORPORATION By: /s/Gerald C. Harvey ---------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-8 EX-10.44 3 y45476ex10-44.txt AMENDMENT AGREEMENT NO. 3 1 EXHIBIT 10.44 AMENDMENT AGREEMENT NO. 3 dated as of January 31, 2001 to that certain SECOND AMENDED AND RESTATED CREDIT AGREEMENT This AMENDMENT AGREEMENT NO. 3 (this "Amendment"), dated as of January 31, 2001, is by and among (a) TransTechnology Corporation ("TransTechnology"), TransTechnology Seeger-Orbis GmbH ("GmbH") and TransTechnology (GB) Limited ("Limited", together with TransTechnology and GmbH, the "Borrowers"), (b) Fleet National Bank ("FNB") and the other lending institutions listed on Schedule 1 to the Credit Agreement (collectively, the "Lenders"), (c) FNB, acting through its London Branch, as Sterling Fronting Bank (the "Sterling Fronting Bank"), (d) BHF-BANK Aktiengesellschaft, as DM Fronting Bank (the "DM Fronting Bank"; together with the Sterling Fronting Bank, the "Fronting Banks"), (e) FNB, as issuing bank for Letters of Credit (in such capacity, the "Issuing Bank"), (f) ABN AMRO Bank N.V., as Syndication Agent, (g) Bank One, NA, as Documentation Agent, and (h) FNB as Administrative Agent for the Lenders, the Fronting Banks and the Issuing Bank (in such capacity, the "Administrative Agent"). Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in that certain Second Amended and Restated Credit Agreement dated as of June 30, 1995, and amended and restated as of July 24, 1998, as further amended and restated as of August 31, 1999, as amended by that certain Consent and Amendment Agreement No. 1 dated as of August 21, 2000 and as further amended by that certain Amendment Agreement No. 2 ("Amendment No. 2") dated as of December 29, 2000 (as so amended and restated, the "Credit Agreement"), to which the Borrowers, the Lenders and the Administrative Agent are parties. WHEREAS, pursuant to the terms of Amendment No. 2, the Lenders and the Administrative Agent agreed to forbear from (a) exercising their rights and remedies under the Credit Agreement and the other Loan Documents to collect the indebtedness of the Borrowers to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents and (b) ceasing to make Revolving Credit Loans or International Facility Loans or to issue, extend or renew Letters of Credit; WHEREAS, in accordance with Section 2.3 of the Credit Agreement, the Borrowers have requested that the Total Revolving Credit Commitment be reduced to $175,000,000; WHEREAS, pursuant to the terms of Amendment No. 2, the forbearance period will end on January 31, 2001; 2 -2- WHEREAS, the Borrowers have requested that the Lenders and the Administrative Agent extend such forbearance period; and WHEREAS, the Lenders and the Administrative Agent are willing to extend such forbearance period, but only on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing premises, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended with effect from the Effective Date (as defined in Section 11 below) as follows: (a) In accordance with the Borrowers' notice given under Section 2.3 of the Credit Agreement to reduce the Total Revolving Credit Commitment to $175,000,000, Section 1 of the Credit Agreement is hereby amended by deleting the definition of "Total Revolving Credit Commitment" and substituting in lieu thereof the following new definition: "Total Revolving Credit Commitment. The sum of the Revolving Credit Commitments of the Lenders, as in effect from time to time, being $200,000,000 on the Closing Date and being reduced to $175,000,000 as of January 31, 2001, whereupon the Revolving Credit Commitments of the Lenders shall be reduced pro rata on such date in accordance with their respective Commitment Percentages." (b) Section 9.4 of the Credit Agreement is hereby amended by deleting the word "and" from the end of Section 9.4(e), by deleting the period in Section 9.4(f) and substituting in lieu thereof "; and", and by inserting after Section 9.4(f) the following new Section 9.4(g): "(g) as soon as practicable, but in any event not later than Wednesday of each week, (i) a weekly cash flow report for the previous week with a comparison to the amount previously projected for such week and (ii) a rolling cash forecast for the next thirteen (13) week period, all such information in form and with such detail as is reasonably satisfactory to the Lenders." SECTION 2. RATIFICATION OF EXISTING AGREEMENTS. The Borrowers and the Guarantors agree that the Obligations of the Borrowers and the Guarantors to the Administrative Agent and the Lenders as evidenced by or otherwise arising under the Credit Agreement, the Notes and the other Loan Documents, are, by the Borrowers' and Guarantors' execution of this Amendment, ratified and confirmed in all respects. In addition, by the execution of this Amendment, the Borrowers and Guarantors represent and warrant that no counterclaim, right of set-off or defense of any kind exists or is outstanding with respect to such Obligations. 3 -3- SECTION 3. FORBEARANCE AGREEMENT. Subject to the terms and conditions set forth herein, each of the Administrative Agent and the Lenders agrees to forbear from (a) exercising their rights and remedies under the Credit Agreement and the other Loan Documents to collect the indebtedness of the Borrowers to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents and (b) ceasing to make Revolving Credit Loans or International Facility Loans or to issue, extend or renew Letters of Credit until that date (the "Forbearance Termination Date") which is the earliest to occur of (i) the failure after the date hereof of the Borrowers and their Subsidiaries to comply with any of the terms or conditions set forth in the Credit Agreement and/or the other Loan Documents (as modified by this Amendment), other than the failure to comply with the provisions of Sections 11.1 - 11.4 of the Credit Agreement for the period commencing on January 1, 2001 and ending on March 29, 2001 (the "Specified Defaults"), (ii) the occurrence after the date hereof of any Default or Event of Default, other than a Specified Default, (iii) the failure of the Borrowers or their Subsidiaries to comply with any term set forth in this Amendment, (iv) the date on which the Administrative Agent determines that a material adverse change in the business, assets, financial condition or prospects of the Borrowers and their Subsidiaries, taken as a whole, has occurred, (v) the date that the Borrowers, any of their Subsidiaries or any Affiliate of the Borrowers shall commence any litigation proceeding against the Administrative Agent or any Lender or any Affiliate of the Administrative Agent or any Lender in connection with or related to any of the transactions contemplated by the Credit Agreement, the other Loan Documents, this Amendment or any documents, agreements or instruments executed in connection with any of the foregoing, (vi) the date that any holder of Subordinated Debt takes any action in enforcement of its rights under such Subordinated Debt, or any "Event of Default" under and as defined in any instrument evidencing any such Subordinated Debt shall have occurred, the effect of which would be to permit the holder of such Subordinated Debt to accelerate such Indebtedness, or (vii) March 29, 2001. On and after the Forbearance Termination Date, each of the Administrative Agent and the Lenders shall be free in its sole and absolute discretion to proceed to enforce any or all of its rights under or in respect of the Credit Agreement, the other Loan Documents and applicable law, including, without limitation, (x) the right to require the immediate repayment of the Loans and the other Obligations in full, (y) the right to require deposit of cash collateral or the delivery of a letter of credit reasonably satisfactory to the Administrative Agent in an amount equal to the then Maximum Drawing Amount of all Letters of Credit in accordance with Section 5.2(c) of the Credit Agreement, and (z) the right to cease making Revolving Credit Loans or International Facility Loans, or issuing, extending or renewing Letters of Credit. SECTION 4. COVENANTS. Without any prejudice or impairment whatsoever to any of the rights and remedies of the Administrative Agent or any Lender contained in the Credit Agreement or in any other Loan Documents, the Borrowers covenant and agree with the Administrative Agent and each of the Lenders as follows: 4 -4- (a) Revolver Sublimit. Notwithstanding anything to the contrary stated in Section 2 of the Credit Agreement, at no time during the period beginning on the date hereof and ending on the Forbearance Termination Date shall the Administrative Agent or any of the Lenders be obligated to make or fund any Revolving Credit Loans if, after the making of such Revolving Credit Loan, the sum of (i) the outstanding amount of the Revolving Credit Loans (after giving effect to all amounts requested), (ii) the Maximum Drawing Amount, (iii) all Unpaid Reimbursement Obligations, and (iv) the International Facility Amount (such aggregate amount, the "Revolving Facility Usage"), would exceed $162,000,000 (such amount, the "Revolver Sublimit"). If the Revolving Facility Usage at any time exceeds the Revolver Sublimit in effect at such time, TransTechnology shall immediately prepay an amount equal to such excess to the Administrative Agent for the account of the Lenders and the Administrative Agent, for application to the outstanding principal amount of the Revolving Credit Loans. Notwithstanding the foregoing, the Revolving Credit Commitments of the Lenders shall not be reduced or deemed to be reduced hereby and the Commitment Fees payable pursuant to Sections 2.2, 3.13 and 3.14 of the Credit Agreement shall continue to be payable with respect to the aggregate Revolving Credit Commitments, the Maximum DM Amount and the Maximum Sterling Amount, respectively. (b) Letters of Credit. Notwithstanding anything to the contrary stated in Section 5 of the Credit Agreement, at no time during the period beginning on the date hereof and ending on the Forbearance Termination Date shall the Issuing Bank be required to issue, extend or renew any Letter of Credit if, as a result thereof, the Revolving Facility Usage, after giving effect to such issuance, extension or renewal, would exceed the Revolver Sublimit in effect at such time. (c) Applicable Margin. Notwithstanding anything to the contrary stated in the definition of "Applicable Margin" in the Credit Agreement or in Section 6.11 of the Credit Agreement, between January 1, 2001 and the Forbearance Termination Date the Applicable Margin in effect with respect to Base Rate Loans shall be 2.50%, and the Applicable Margin in effect with respect to Eurocurrency Rate Loans shall be 4.00%; provided that, for the avoidance of doubt, in the event that any Default or Event of Default occurring or arising prior to the Forbearance Termination Date is continuing on the Forbearance Termination Date, the provisions of Section 6.11 of the Credit Agreement shall apply at such time to the determination of the applicable rate of interest on the Loans outstanding at such time. (d) Eurocurrency Rate Loans. Notwithstanding anything to the contrary stated in the definition of "Interest Period" in the Credit Agreement or in Section 2.7, Section 3.5 or Section 4.5 of the Credit Agreement, between the Effective Date and the Forbearance Termination Date TransTechnology may elect to convert any part of the Loans to or maintain any part of the Loans as Eurocurrency Rate Loans in accordance with the applicable provisions of the Credit Agreement as in effect as of the Effective Date, so long as the Interest Periods with respect to any 5 -5- Eurocurrency Rate Loans borrowed, converted or renewed after the Effective Date do not extend beyond April 5, 2001. (e) Distributions. Notwithstanding anything to the contrary stated in Section 10.4 of the Credit Agreement, TransTechnology shall not from the date hereof until the Forbearance Termination Date declare or pay any dividends on or in respect of, or make any other Distributions on or in respect of, any shares of the capital stock of TransTechnology. (f) Retention of Consultant; Financial Information. TransTechnology has engaged Carl Marks Consulting Group LLC as a consultant to work on behalf of TransTechnology and its Subsidiaries on the implementation of their strategic plans (the "Consultant"). TransTechnology shall provide to the Administrative Agent and the Lenders, with the assistance of the Consultant, financial information regarding TransTechnology and its Subsidiaries required to permit the Lenders' evaluation of, among other things, the financial covenant levels applicable to the Borrowers and their Subsidiaries, and which will include, but not be limited to, thirteen (13) week projections of weekly cash flow (including receipts, collections and disbursements) updated on a weekly basis. (g) Independent Valuation. The Borrowers agree that (i) the Administrative Agent and the Lenders shall have the right to retain a third party advisor to review and validate the financial information being provided to the Lenders by the Borrowers, (ii) the Administrative Agent and the Lenders shall have the right to retain a third party investment banker or appraiser to conduct a business evaluation of the assets of Borrowers and (iii) the Borrowers will cooperate with all reasonable requests of such advisors and investment banker or appraiser. The Administrative Agent and the Lenders agree that (A) they will consult with the Borrowers prior to retaining any third party advisor, investment banker or appraiser and (B) any third party advisor, investment banker or appraiser retained by them shall enter into reasonable and customary confidentiality agreements with the Borrowers. (h) Expenses. The Borrowers shall pay or reimburse on demand the Administrative Agent and each of the Lenders for all reasonable costs and expenses the Administrative Agent or such Lender incurs in connection with the negotiation, execution and delivery of the agreements and transactions contemplated by this Amendment or which otherwise are required to be paid under the Loan Documents, including without limitation any reasonable and customary expenses incurred pursuant to paragraph (g) of this Section 4. (i) Compliance with Loan Documents. The Borrowers and their Subsidiaries shall comply with all of the terms, covenants and provisions contained in the Credit Agreement and the other Loan Documents except as such terms, covenants and provisions are expressly modified by this Amendment upon the terms set forth herein. 6 -6- (j) Further Assurances. The Borrowers and their Subsidiaries shall at any time or from time to time execute and deliver such further instruments and take such further action as the Administrative Agent may reasonably request to effect the purposes of this Amendment, the Credit Agreement and the other Loan Documents. (k) Event of Default; Extension of Forbearance. Any failure by any of the Borrowers or their Subsidiaries to comply with any provision of this Section 4 applicable to such Borrower or Subsidiary, or any material breach by any of the Borrowers of any of their representations and warranties set forth in Section 6 below, shall constitute an Event of Default; provided that, notwithstanding anything to the contrary stated in Section 27 of the Credit Agreement, (i) any waiver of, or agreement to forbear from the exercise of remedies with respect to or from ceasing to make Loans and Letters of Credit available as a result of, any Event of Default arising as a result of any breach of Section 4(a) or Section 4(b) above, (ii) any extension of the Lenders' and the Administrative Agent's forbearance agreements set forth in Section 3 above to end on any date following March 29, 2001, and (iii) any amendment to the provisions of this Section 4(k) or of Section 4(a) or Section 4(b) above shall in any case require the written consent of Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the principal amount of the Revolving Credit Notes and the Term Notes, taken together, outstanding as of the effective date of any such waiver, agreement, extension or amendment. SECTION 5. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment shall be conditioned upon the satisfaction of the following conditions precedent: SECTION 5.1. DELIVERY OF DOCUMENTS. This Amendment shall have been executed and delivered to the Administrative Agent by each of the Borrowers, each of the Guarantors, and Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the principal amount of the Revolving Credit Notes and the Term Notes, taken together. SECTION 5.2. LEGALITY OF TRANSACTION. No change in applicable law shall have occurred as a consequence of which it shall have become and continue to be unlawful on the date this Amendment is to become effective (a) for the Administrative Agent or any Lender to perform any of its obligations under any of the Loan Documents or (b) for any of the Borrowers to perform any of its agreements or obligations under any of the Loan Documents. SECTION 5.3. PERFORMANCE. Each of the Borrowers shall have duly and properly performed, complied with and observed in all material respects its covenants, agreements and obligations contained in the Loan Documents required to be performed, complied with or observed by it on or prior to the date this Amendment is to become effective. Except for the Specified Defaults, no event shall have occurred on or prior to the Effective Date, and be continuing, and no condition shall exist on the Effective Date, which constitutes a Default or Event of Default. 7 -7- SECTION 5.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Amendment and all instruments and documents incidental thereto shall be in form and substance reasonably satisfactory to the Administrative Agent and the Administrative Agent shall have received all such counterpart originals or certified or other copies of all such instruments and documents as the Administrative Agent shall have reasonably requested. SECTION 5.5. PAYMENT OF AMENDMENT FEE. The payment in cash of the Amendment Fee (as defined in Section 10 below) to the Administrative Agent on behalf of the Lenders. SECTION 6. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Lenders as follows: (a) The representations and warranties of such Borrower and of each Guarantor contained in the Credit Agreement and the other Loan Documents to which such Borrower or Guarantor, as the case may be, is a party were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to in the representations and warranties contained in the Credit Agreement shall be the financial statements of TransTechnology and its Subsidiaries most recently delivered to the Administrative Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby: (i) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval or consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity or enforceability of this Amendment and which is required by law or any regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, any law, regulation or rule binding on or applicable to such Borrower or any provision of the charter documents or by-laws of such Borrower, (iv) do not result in any breach of or constitute a default under any agreement or instrument to which such Borrower is a party or to which it or any of its properties are bound, including without limitation any indenture, credit or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; 8 -8- (c) This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors, and (ii) enforcement may be subject to general principles of equity, and the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceeding for such remedies may be brought; and (d) As of the date hereof, no "Event of Default" under and as defined in any instrument evidencing any Subordinated Debt has occurred. SECTION 7. NO OTHER AMENDMENTS. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. SECTION 8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. SECTION 9. RELEASE. In order to induce the Administrative Agent and the Lenders to enter into this Amendment, each Borrower acknowledges and agrees that: (i) no Borrower has any claim or cause of action against the Administrative Agent or any Lender (or any of its respective directors, officers, employees or agents); (ii) no Borrower has any offset right, counterclaim or defense of any kind against any of their respective obligations, indebtedness or liabilities to the Administrative Agent or any Lender; and (iii) each of the Administrative Agent and the Lenders has heretofore properly performed and satisfied in a timely manner all of its obligations to each Borrower. The Borrowers wish to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of the Administrative Agent's and the Lenders' rights, interests, contracts, collateral security or remedies. Therefore, each Borrower unconditionally releases, waives and forever discharges (A) any and all liabilities, obligations, duties, promises or indebtedness of any kind of the Administrative Agent or any Lender to any Borrower, except the obligations to be performed by the Administrative Agent or any Lender on or after the date hereof as expressly stated in this Amendment, the Credit Agreement and the other Loan Documents, and (B) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which any Borrower might otherwise have against the Administrative Agent, any Lender or any of its directors, officers, employees or agents, in either case (A) or (B), on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind existing as of the date hereof, or occurring prior to the date hereof. 9 -9- SECTION 10. AMENDMENT FEE. In connection with the approval of this Amendment, TransTechnology hereby agrees to pay to the Administrative Agent for the pro-rata benefit of each Lender consenting to this Amendment an amendment fee equal to $215,625 (one-tenth of one percent (1/10%) of each such consenting Lender's Commitment) (the "Amendment Fee"). SECTION 11. EFFECTIVE DATE. Subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, this Amendment shall be deemed to be effective as of January 31, 2001 (the "Effective Date"). SECTION 12. AMENDMENT NO. 2. Except with respect to amendments to the Credit Agreement contained in Amendment No. 2, this Amendment supercedes the Borrowers' obligations contained in Amendment No. 2. [Remainder of Page Intentionally Left Blank] 10 IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No. 3 as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier ---------------------------------------- Name: Joseph F. Spanier Title: Vice President, Chief Financial Officer and Treasurer TRANSTECHNOLOGY SEEGER- ORBIS GMBH By: /s/ Michael J. Berthelot ---------------------------------------- Name: Michael J. Berthelot Title: Geschaftsfuhrer TRANSTECHNOLOGY (GB) LIMITED By: /s/ Michael J. Berthelot ---------------------------------------- Name: Michael J. Berthelot Title: Director By: /s/ Gerald C. Harvey ---------------------------------------- Name: Gerald C. Harvey Title: Director S-1 11 FLEET NATIONAL BANK, individually, as Administrative Agent and as Sterling Fronting Bank By: /s/Peggy Peckham ----------------------------------- Name: Peggy Peckham Title: Senior Vice President BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank By: /s/Dr. Hans-Martin Konrad ------------------------------------- Name: Dr. Hans-Martin Konrad Title: General Manager By: /s/Andreas Horbert ------------------------------------- Name: Andreas Horbert Title: Relationship Manager ABN AMRO BANK N.V., individually and as Syndication Agent By: /s/Steven C. Wimpenny ------------------------------------- Name: Steven C. Wimpenny Title: Group Senior Vice President By: /s/Parker H. Douglas ------------------------------------- Name: Parker H. Douglas Title: Group Vice President BANK ONE, NA, individually and as Documentation Agent By: /s/Phillip D. Martin -------------------------------------- Name: Phillip D. Martin Title: First Vice President S-2 12 THE BANK OF NEW YORK By: /s/Richard J. Baldwin ------------------------------------- Name: Richard J. Baldwin Title: Vice President KEY CORPORATE CAPITAL INC. By: /s/Mark Kleinhaut ------------------------------------- Name: Mark Kleinhaut Title: Vice President BANK OF NOVA SCOTIA By: /s/Brian S. Allen ------------------------------------- Name: Brian S. Allen Title: Managing Director COMERICA BANK By: /s/Jeffrey Peck ------------------------------------- Name: Jeffrey Peck Title: Vice President DRESDNER BANK, AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/Gabriela E. Fields ------------------------------------- Name: Gabriela E. Fields Title: Asst. Treasurer By: /s/Thomas Hasenauer ------------------------------------- Name: Thomas Hasenauer Title: Asst. Treasurer S-3 13 SUMMIT BANK By: /s/Stephen T. Hill ------------------------------------- Name: Stephen T. Hill Title: Vice President S-4 14 The Guarantors under (and as defined in) the Subsidiary Guaranty hereby acknowledge that they have read and are aware of the provisions of this Amendment and hereby reaffirm their absolute and unconditional guaranty of the Borrowers' payment and performance of their obligations to the Lenders and the Administrative Agent under the Credit Agreement as amended hereby. TRANSTECHNOLOGY ACQUISITION CORPORATION By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary PALNUT FASTENERS, INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RETAINERS, INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-5 15 RANCHO TRANSTECHNOLOGY CORPORATION By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INDUSTRIES By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INTERNATIONAL SALES, INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-6 16 TRANSTECHNOLOGY SEEGER INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SEEGER INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TCR CORPORATION By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary NORCO, INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-7 17 ELLISON RING & WASHER INC. By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY CANADA CORPORATION By: /s/ Gerald C. Harvey ------------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary S-8 -----END PRIVACY-ENHANCED MESSAGE-----