-----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, RMMJuFnjhMyR0RjTR/wovV0hfz3tYRm2Tr23wsqZzRXKaV+u/y2ONd6x5e4AGC8Q 3WHxJ9n9SD7oH6Xl0Cg/Ug== 0000950123-01-504370.txt : 20010717 0000950123-01-504370.hdr.sgml : 20010717 ACCESSION NUMBER: 0000950123-01-504370 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010716 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-K SEC ACT: SEC FILE NUMBER: 001-07872 FILM NUMBER: 1682037 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-K 1 y50911e10-k.txt TRANSTECHNOLOGY CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2001 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 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 (Title of class) New York Stock Exchange (Name of exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: NONE 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 ---- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of July 6, 2001, the aggregate market value of voting stock held by non-affiliates of the registrant based on the last sales price as reported by the New York Stock Exchange on such date was $55,301,810. (See Item 12) As of July 6, 2001, the registrant had 6,172,077 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The registrant's Proxy Statement for the 2001 Annual Meeting of Shareholders is incorporated by reference into Part III hereof. 2 PART I ITEM 1. BUSINESS. General TransTechnology Corporation develops, manufactures and sells a wide range of products in two industry segments, as described below. TransTechnology Corporation was originally organized in 1962 as a California corporation and was reincorporated in Delaware in 1986. Unless the context otherwise requires, references to the "Company" or the "Registrant" refer to TransTechnology Corporation (including the California corporation prior to the reincorporation) and its consolidated subsidiaries. The Company's fiscal year ends on March 31. Accordingly, all references to years in this report refer to the fiscal year ended March 31 of the indicated year. TransTechnology Corporation's core business areas are specialty fastener products and aerospace products. Specialty Fastener Products The Company's specialty fastener products are manufactured by its Engineered Components Group (Palnut and the Tinnerman companies acquired in 2000), its Engineered Products Group (Breeze Industrial, Pebra, TCR and Aerospace Rivet Manufacturers (ARM)) and its Engineered Rings Group (Seeger-Orbis, TransTechnology Brasil, Waldes/IRR, TransTechnology (GB)). TransTechnology (GB) represents the consolidation of the Anderton and the recently acquired Ellison plants into a single manufacturing facility in Great Britain. The Engineered Components Group includes single and multi-thread metal fasteners, retaining rings and headlight adjusters for the automotive and industrial markets. These fasteners include: lock nuts for load carrying in light duty assemblies or as a supplement to ordinary nuts to assure tightness; the On-Sert(R) fastener, which is pressed onto hollow plastic bosses to increase torque and minimize stripping; push-nuts used as temporary fasteners that hold pre-inserted bolts in place for final assembly or in ratchet plates which fasten onto a shaft or stud; self-threaders used in the installation of automotive trim; U-nuts that provide one-sided screw assembly and are used to fasten bumpers, fenders and grills to vehicles; various single-threaded parts designed for insertion into metal or plastic panels; and a variety of automotive headlight adjusters. Within the Engineered Products Group, Breeze Industrial designs and manufactures a diverse line of high-quality stainless steel hose clamps, including worm drive hose clamps, T-Bolt and V-Band clamps, and light duty clamps for use in the heavy truck and industrial equipment industries by original equipment manufacturers and replacement suppliers. Pebra designs and manufactures hose clamps primarily for heavy truck manufacturers in Europe. TCR designs and manufactures sophisticated externally threaded fastening devices and custom industrial components by combining its expertise in cold forging and machining technologies. TCR products are used by industrial customers worldwide, with key market groups including automotive, hydraulic and recreational product industries. ARM designs and manufactures rivets and externally threaded fasteners primarily for the aerospace industry. Within the Engineered Rings Group, Seeger-Orbis, TransTechnology Brasil, Waldes/IRR and TransTechnology (GB) manufacture a large range of retaining and snap rings used in automotive, marine, household and computer applications that require retention of parts on shafts and axles. 1 3 Specialty fasteners are marketed through a combination of a direct sales force, distributors and manufacturer's representatives. Such products comprised 79%, 80% and 78% of the Company's consolidated net sales in 2001, 2000 and 1999, respectively. At March 31, 2001, the Company's Specialty Fastener Products segment backlog was $59.2 million, compared to $65.4 million at March 31, 2000. Substantially all of the March 31, 2001 backlog is scheduled to be shipped during fiscal 2002. Aerospace Products The Company's aerospace products are designed, developed and manufactured by Breeze-Eastern and Norco. Breeze-Eastern specializes in the design, development and manufacture of sophisticated lifting and restraining products, principally helicopter rescue hoists, reeling machines and external hook systems. In addition, Breeze-Eastern designs, develops and manufactures winches and hoists for aircraft cargo and weapon-handling systems with applications ranging from cargo handling on fixed-wing aircraft to positioning television cameras on blimps, antenna and gear drives. Management believes that Breeze-Eastern is the industry market share leader in sales of personnel-rescue hoists and cargo hook equipment. As a pioneer of helicopter hoist technology, Breeze-Eastern continues to develop sophisticated helicopter hoist systems, including systems for the current generation of Seahawk, Chinook, Dolphin, Merlin and Super Stallion helicopters. Breeze-Eastern also supplies equipment for the United States, Japanese and European Multiple-Launch Rocket Systems which use two specialized hoists to load and unload rocket pod containers. Breeze-Eastern's external cargo hook systems are original equipment on most helicopters manufactured today. These hook systems range from small 1,000-pound capacity models up to the largest 36,000-pound capacity hooks employed on the Super Stallion helicopter. Breeze-Eastern also manufactures aircraft and cargo tie-downs. Norco designs, develops and manufactures mechanical components and systems such as hold open rods, quick connect/disconnect locking systems, helicopter blade restraint systems, latch assemblies, safety locks and application-specific mechanical systems. Its power transmission line of products include rollnuts, rollnut longspan assemblies, ball reversers, ball oscillators, FlenNut assemblies and other application-specific linear motion assemblies. Breeze-Eastern and Norco sell their products through internal marketing representatives and several independent sales representatives and distributors. The Aerospace product lines contributed 21%, 20% and 22% of the Company's consolidated net sales in 2001, 2000 and 1999, respectively. The Aerospace Products segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 2001, the backlog of unfilled orders was $40.2 million, compared to $44.2 million at March 31, 2000. The majority of the March 31, 2001 backlog is expected to be shipped during fiscal 2002. Management Initiatives and Restructuring On January 19, 2001, the Company announced its intention to restructure and divest its cold-headed products (TCR), aerospace rivet (Aerospace Rivets Manufacturers Corp), retaining ring (Seeger-Orbis, TransTechnology (GB), TT Brasil and Waldes/IRR) and hose clamp operations (Breeze Industrial and Pebra) and that it had retained an investment banking firm to consider further strategic and business initiatives following these actions. In association with the restructuring, the Company suspended the payment of its quarterly dividend and recognized a charge in the fourth fiscal quarter of 2001 related to anticipated losses on the sale of several of these businesses as well as the provision for severance and other costs associated with these divestitures. Proceeds from the sales of the businesses will to be used to repay debt and to refocus the Company's efforts on the design, manufacture and marketing of specialized aerospace equipment. 2 4 The Company entered into an amendment of its existing credit agreement under which the Company's senior lenders agreed to forbearance with respect to the Company's continuing violations of certain covenants in the senior credit agreement through September 27, 2001, subject to the Company meeting certain interim debt reduction and EBITDA targets. The Company's subordinated lenders also entered into a forbearance agreement with respect to the Company's expected violation of its net worth covenant as the result of write-offs to be incurred in the fourth fiscal quarter of 2001 as part of its restructuring plan. As discussed in Note 2 in the Notes to Consolidated Financial Statements, the Company reported, on a pre-tax basis, asset impairment charges in the fourth fiscal quarter of 2001 of $67.9 million related to estimated losses on businesses to be sold, primarily related to the write-off of intangible assets and property. In addition, in the fourth fiscal quarter of 2001 the Company reported a pre-tax charge of $10.2 million associated with the write-down of real estate held for sale and equity investments and notes receivable from a 1995 divestiture. The Company expects additional net non-cash write-offs of goodwill in fiscal 2002 resulting from the divestiture process, including a gain on the July 10, 2001 sale of its Breeze Industrial Products and Pebra hose clamp businesses and an anticipated non-cash loss resulting from the planned sale of the TransTechnology Engineered Components business. On April 12, 2001, the Company announced that, following a review of alternative strategic initiatives, it would become solely a manufacturer of niche aerospace products. As a result, the Company said it would divest TransTechnology Engineered Components (TTEC), a manufacturer of spring steel engineered fasteners and headlight adjusters. The Company will seek to have all the divestitures, including TTEC, completed by September 2001. Following the divestiture of the fastener business units, the Company expects to have retired substantially all of its debt and expects to reduce its corporate overhead by more than $4 million from its present $8.7 million level. Additionally, for tax purposes, the Company expects to have significant operating loss carry-forwards which will shelter future earnings from taxes for several years. The Company expects that, when repositioned as an aerospace products manufacturer with revenues from new equipment sales, maintenance and service of existing equipment, and spare parts sales, it will be a significantly more profitable and less leveraged entity, with substantial growth opportunities. Management believes that the Company will present substantially more value to its shareholders after the restructuring than in its present form. On July 10, consistent with the aforementioned actions, the Company completed the previously announced sale of its Breeze Industrial and Pebra hose clamp businesses in the U.S. and Germany, respectively, to Industrial Growth Partners and the current management team of these divested companies for $46.2 million in cash. Proceeds were used to repay debt. The Company is involved in ongoing discussions with potential buyers for the sales of the businesses previously reported as being held for sale. While there can be no assurances that these transactions will be consummated, management believes that they are continuing to make progress toward the execution of its previously announced strategies. Defense Industry Sales Approximately 9% of the Company's consolidated net sales in 2001, as compared to 8% and 10% in 2000 and 1999, respectively, were derived from sales to the United States Government, principally the military services of the Department of Defense and its prime contractors. These contracts typically contain precise performance specifications and are subject to customary provisions which give the United States Government the contractual right of termination for convenience. In the event of termination for convenience, however, the Company is typically protected by provisions allowing reimbursement for costs incurred as well as payment of any applicable fees or profits. No single customer accounted for 10% or more of the Company's net sales in 2001 or 2000. 3 5 Environmental Matters Due primarily to Federal and State legislation which imposes liability, regardless of fault, upon commercial product manufacturers for environmental harm caused by chemicals, processes and practices that were commonly and lawfully used prior to the enactment of such legislation, the Company may be liable for all or a portion of the environmental clean-up costs at sites previously owned or leased by the Company (or corporations acquired by the Company). The Company's contingencies associated with environmental matters are described in Note 13 of "Notes to Consolidated Financial Statements" and in Management's Discussion and Analysis of Financial Condition and Results of Operations. Competition The Company's businesses compete in some markets with entities that are larger and have substantially greater financial and technical resources than the Company. Generally, competitive factors include design capabilities, product performance, delivery and price. The Company's ability to compete successfully in such markets will depend on its ability to develop and apply technological innovations and to expand its customer base and product lines. There can be no assurance that the Company will continue to compete successfully in any or all of the businesses discussed above. The failure of the Company to compete in more than one of these businesses could have a materially adverse effect on the Company's profitability. Raw Materials The various components and raw materials used by the Company to produce its products are generally available from more than one source. In those instances where only a single source for any material is available, such items can generally be redesigned to accommodate materials made by other suppliers. In some cases, the Company stocks an adequate supply of the single source materials for use until a new supplier can be approved. The Company's business is not dependent upon a single supplier or a few suppliers, the loss of which would have a materially adverse effect on the Company's consolidated financial position. Employees As of July 1, 2001, the Company employed 2,331 people. There were 2,025 employees associated with the Specialty Fastener Products segment, 288 with the Aerospace Products segment and 18 with the corporate office. 4 6 Financial Information About Industry Segments Financial information relating to each of the Company's segments has been included in Note 14 of "Notes to Consolidated Financial Statements". Foreign Operations and Sales The Company's foreign-based facilities during fiscal 2001 consisted of the Seeger-Orbis and Pebra facilities located in Koenigstein and Frittlingen, Germany, TransTechnology (GB) Limited's facility located in Glusburn, England, sales offices in Paris, France, Barcelona, Spain and Surrey, England, TransTechnology Brasil's facility located in Sao Paulo, Brazil and TransTechnology Canada Corporation's facility located in Hamilton, Ontario. The Company acquired the Seeger-Orbis and TransTechnology Brazil businesses on June 30, 1995. Pebra was acquired on June 18, 1996. TransTechnology (GB) resulted from the consolidation on December 1, 1999, of Anderton International Limited, acquired on June 30, 1995, and Ellison Holdings PLC, acquired on July 19, 1999. TransTechnology Canada Corporation was incorporated on August 12, 1999 to hold the Canadian based assets of Eaton's Engineered Fasteners Division acquired on August 31, 1999. The Company had sales from its non-U.S. operations of $99.4 million, $66.2 million and $56.7 million in fiscal 2001, 2000 and 1999, respectively, representing 30%, 22% and 25% of the Company's consolidated net sales in each of those years, respectively. The Company had export sales of $41.2 million, $43.3 million and $31.2 million in fiscal 2001, 2000 and 1999, respectively, representing 13%, 15% and 14% of the Company's consolidated net sales in each of those years, respectively. The risk and profitability attendant to these sales is generally comparable to similar products sold in the United States. Net sales, profits and identifiable assets attributable to the Company's foreign and domestic operations, and the identification of export sales by geographic area and domicile of customers, are set forth in Note 14 of "Notes to Consolidated Financial Statements". 5 7 ITEM 2. PROPERTIES The following table sets forth certain information concerning the Company's principal facilities for its continuing operations:
Owned or Location Use of Premises Leased Sq. Ft -------- --------------- -------- ------ Liberty Corner, New Jersey Executive Offices Leased 13,000 SPECIALTY FASTENER PRODUCTS SEGMENT Saltsburg, Pennsylvania Breeze Industrial offices and Owned 137,000 manufacturing plant Mountainside, New Jersey Palnut offices and manufacturing Owned 142,000 plant Irvington, New Jersey Waldes/IRR - Industrial Division Owned 37,000 manufacturing plant Millburn, New Jersey Waldes/IRR - Industrial Division Leased 53,100 offices and distribution center City of Industry, California Aerospace Rivet Manufacturers Leased 60,500 Corporation offices and manufacturing plant Southfield, Michigan Engineered Components sales Leased 6,000 office Brunswick, Ohio TT Engineered Components Leased 44,500 group offices and manufacturing plant Massillon, Ohio TT Engineered Components Owned 190,580 offices and manufacturing plant Hamilton, Ontario, Canada TT Engineered Components Owned 127,913 offices and manufacturing plant Konigstein, Germany Seeger Group offices and Owned 149,000 Seeger-Orbis manufacturing plant Minneapolis, Minnesota TCR Corporation offices Leased 137,000 and manufacturing plant
6 8 SPECIALTY FASTENER PRODUCTS SEGMENT - ---------------- (Continued) Glusburn, England TransTechnology (GB) offices Owned 263,000 and manufacturing plant Surrey, England TransTechnology Engineered Leased 109 Components sales office Sao Paulo, Brazil TransTechnology Brasil offices Owned 85,000 and manufacturing plant Paris, France TransTechnology Engineered Leased 500 Rings sales office Frittlingen, Germany Pebra offices and Owned 30,000 manufacturing plant Barcelona, Spain TransTechnology Engineered Leased 500 Rings sales office AEROSPACE PRODUCTS SEGMENT Union, New Jersey Breeze-Eastern offices Owned 188,000 and manufacturing plant Ridgefield, Connecticut Norco, Inc. offices and Owned 35,000 manufacturing plant
The Company believes that such facilities are suitable and adequate for the Company's foreseeable needs and that additional space, if necessary, will be available. The Company continues to own or lease property that it no longer needs in its operations. These properties are located in California, Pennsylvania, New York and Illinois. In some instances, the properties are leased or subleased and in nearly all instances these properties are for sale. ITEM 3. LEGAL PROCEEDINGS The information required has been included in Note 13 of "Notes to Consolidated Financial Statements". ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the three month period ended March 31, 2001. 7 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock, par value $0.01, is traded on the New York Stock Exchange under the symbol TT. The following table sets forth the range of high and low closing sales prices of shares of the Company's Common Stock for the calendar quarters indicated, as reported by the New York Stock Exchange.
High Low ---- --- Fiscal 2000 First Quarter $20.44 $16.94 Second Quarter 19.75 11.63 Third Quarter 12.31 8.13 Fourth Quarter 15.19 10.50 Fiscal 2001 First Quarter $14.69 $ 8.44 Second Quarter 11.38 6.13 Third Quarter 7.31 2.88 Fourth Quarter 6.75 3.75
As of July 6, 2001, the number of stockholders of record of the Common Stock was 1,788. On July 6, 2001, the closing sales price of the Common Stock was $8.96 per share. The Company paid a regular quarterly dividend of $0.065 per share on June 1, September 1 and December 1, 1999, March 1, June 1, September 1 and December 1, 2000. On January 19, 2001, the Company announced the suspension of its regular quarterly dividend. 8 10 ITEM 6. SELECTED FINANCIAL DATA The following table provides selected financial data with respect to the consolidated statements of operations of the Company for the fiscal five years ended March 31, 2001, and the consolidated balance sheets of the Company at the end of each such year.
YEARS ENDED MARCH 31, 2001 2000 1999 1998 1997 (In thousands, except per share amounts) Net sales(a) $328,071 $299,252 $228,006 $203,928 $178,684 - ------------------------------------------------------------------------------------------------------------------- (Loss) income from continuing operations before income taxes (83,822) 11,508 24,294 20,153 16,620 (Benefit) provision for income taxes (10,852) 4,373 9,704 8,162 6,898 - ------------------------------------------------------------------------------------------------------------------- (Loss) income from continuing operations (72,970) 7,135 14,590 11,991 9,722 Loss from discontinued operations -- -- -- (924) (934) - ------------------------------------------------------------------------------------------------------------------- (Loss) income before extraordinary charge (72,970) 7,135 14,590 11,067 8,788 Extraordinary charge for refinancing of debt -- (541) (781) -- -- - ------------------------------------------------------------------------------------------------------------------- Net (loss) income $(72,970) $ 6,594 $ 13,809 $ 11,067 $ 8,788 - ------------------------------------------------------------------------------------------------------------------- Earnings (loss) per share: Basic: (Loss) income from continuing operations $ (11.83) $ 1.16 $ 2.33 $ 2.17 $ 1.92 Loss from discontinued operations -- -- -- (0.17) (0.18) Extraordinary charge for refinancing of debt -- (0.09) (0.12) -- -- - ------------------------------------------------------------------------------------------------------------------- Net (loss) income per share $ (11.83) $ 1.07 $ 2.21 $ 2.00 $ 1.74 - ------------------------------------------------------------------------------------------------------------------- Diluted: (Loss) income from continuing operations $ (11.83) $ 1.16 $ 2.30 $ 2.11 $ 1.87 Loss from discontinued operations -- -- -- (0.16) (0.18) Extraordinary charge for refinancing of debt -- (0.09) (0.12) -- -- - ------------------------------------------------------------------------------------------------------------------- Net (loss) income per share $ (11.83) $ 1.07 $ 2.18 $ 1.95 $ 1.69 - ------------------------------------------------------------------------------------------------------------------- Dividends declared and paid per share $ 0.195 $ 0.26 $ 0.26 $ 0.26 $ 0.26 - ------------------------------------------------------------------------------------------------------------------- Total assets $393,249 $482,755 $279,720 $236,073 $199,136 Long-term debt $ 1,055(b) $194,759 $102,463 $ 51,350 $ 67,516 Stockholders' equity $ 51,875 $128,883 $123,710 $115,832 $ 77,444 Book value per share $ 8.40 $ 20.97 $ 20.25 $ 18.47 $ 15.40 Shares outstanding at year-end 6,172 6,145 6,108 6,272 5,028 - -------------------------------------------------------------------------------------------------------------------
(a) In 2000, the Company acquired the Engineered Fasteners Division of Eaton Corporation, Ellison Holdings PLC and Ellison, Roettges & Co. GmbH. In 1999, the Company acquired Aerospace Rivet Manufacturers Corporation and NORCO. In 1998, the Company acquired TCR Corporation. In 1997, the Company acquired the Pebra hose clamp business. (b) Excluding callable debt of $271,307. 9 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's fiscal year ends on March 31. Accordingly, all references to years in this Management's Discussion and Analysis refer to the fiscal year ended March 31 of the indicated year. Also, when referred to herein, operating profit means net sales less operating expenses, without deduction for general corporate expenses, interest and income taxes. MANAGEMENT INITIATIVES AND RESTRUCTURING On January 19, 2001, the Company announced its intention to restructure and divest its cold-headed products (TCR), aerospace rivet (Aerospace Rivet Manufacturers Corp), retaining ring (Seeger-Orbis, TransTechnology (GB), TT Brasil, and Waldes/IRR) and hose clamp operations (Breeze Industrial and Pebra). The Company also announced that it had retained an investment banking firm to consider further strategic and business initiatives following these actions. In association with the restructuring, the Company stated it would suspend the payment of its quarterly dividend and recognize a non-recurring charge in the fourth fiscal quarter of 2001 related to anticipated losses on the sale of several of these businesses as well as the provision for severance and other costs associated with these divestitures. Proceeds from the sales of the businesses will be used to repay debt and to refocus the Company's efforts on the design, manufacture and marketing of specialized aerospace equipment. The Company entered into an amendment of its existing credit agreement under which the Company's senior lenders agreed to forbearance with respect to the Company's continuing violations of certain covenants in the senior agreement through September 27, 2001, subject to the Company meeting certain interim debt reduction and EBITDA targets. The Company's subordinated lenders also entered into a letter forbearance agreement with respect to the Company's expected violation of its net worth covenant as the result of write-offs to be incurred in the fourth fiscal quarter of 2001 as part of its restructuring plan. As discussed in Note 2 in the "Notes to Consolidated Financial Statements", the Company reported, on a pre-tax basis, asset impairment charges in the fourth fiscal quarter of 2001 of $67.9 million related to estimated losses on businesses to be sold, primarily related to the write-off of intangible assets and property. In addition, in the fourth fiscal quarter of 2001 the Company reported a pre-tax charge of $10.2 million associated with the write-down of real estate held for sale and equity investments and notes receivable from a 1995 divestiture. The Company expects additional net non-cash write-offs of goodwill in fiscal 2002 resulting from the divestiture process, including a gain on the July 10, 2001 sale of its Breeze Industrial Products and Pebra hose clamp businesses and an anticipated non-cash loss resulting from the planned sale of the TransTechnology Engineered Components business. On April 12, 2001, the Company announced that, following a review of alternative strategic initiatives, it would become solely a manufacturer of niche aerospace products. As a result, the Company will divest TransTechnology Engineered Components (TTEC), a manufacturer of spring steel engineered fasteners and headlight adjusters. The Company will seek to have all the divestitures, including TTEC completed by September 2001. Following the divestiture of the fastener business units, the Company expects to have retired substantially all of its debt and expects to reduce its corporate overhead by more than $4 million from its present $8.7 million level. Additionally, for tax purposes, the Company expects to have significant operating loss carry-forwards which will shelter future earnings from taxes for several years. The Company expects, when repositioned as an aerospace products manufacturer with revenues from new equipment sales, maintenance and service of existing equipment, and spare parts sales, to be significantly more profitable and less leveraged, with substantial growth opportunities. Management believes that the Company will present substantially more value to its shareholders after the restructuring than in its present form. On July 10, consistent with the aforementioned actions, the Company completed the previously announced sale of its Breeze Industrial and Pebra hose clamp businesses in the U.S. and Germany, respectively, to Industrial Growth Partners and the current management team of these divested companies for $46.0 million in cash. Proceeds were used to repay debt. The Company is involved in ongoing discussions with potential buyers for the 10 12 sales of the businesses previously reported as being held for sale. While there can be no assurances that these transactions will be consummated, management believes that they are continuing to make progress toward the execution of its previously announced strategies. RESULTS OF OPERATIONS Net sales increased 9.6% to $328.1 million for 2001 compared to $299.3 million in 2000. Sales in the Specialty Fasteners Products segment increased 8.0% to $257.6 million in 2001 from $238.4 million in 2000. This increase was primarily the result of the Tinnerman acquisition in 2000 where 7 months of operations were reported in 2000 versus a full year in 2001. Sales in the Aerospace Products segment were up 15.9% in 2001 versus 2000 based on strong product demand at both Breeze-Eastern and Norco. Consolidated gross margins were $86.4 million in 2001 versus $88.3 million in 2000. The Company reported an Operating Loss in 2001 of $27.2 million compared to Operating Profit of $40.0 million in 2000. In 2001, the Company reported an asset impairment charge of $67.9 million related to the announced intention to sell its TCR, ARM, and Rings business units. This impairment loss relates primarily to the write-down of goodwill, patents, trademarks and net property. In addition, in 2001 the Company incurred additional costs in the U.K. associated with its consolidation of the Ellison and Anderton retaining ring plants of $2.1 million. Reduced product demand and lower gross margins contributed to this reported Operating Loss in 2001. Specific segment results are discussed below. Net interest expense increased $14.5 million due to higher debt levels in 2001 versus 2000 to fund the Tinnerman and Ellison acquisitions which occurred in 2000. Also contributing to increased interest expense were higher interest rates in 2001 versus 2000 and a charge of $2.3 million in 2001 related to loan fees associated with the refinancing of the Company's bridge loan, which occurred on September 1, 2000. The Company reported a tax benefit of $10.9 million in 2001 which included the estimated tax effects of the sale of the TCR, ARM, and Rings businesses and a valuation allowance for deferred tax assets related to the future sales of these business units. New orders received during 2001 totaled $320.1 million versus $305.2 million in 2000. This increase reflected the inclusion of 12 months of orders in 2001 versus seven months of orders in 2000 for the Tinnerman businesses. This was offset somewhat by lower bookings in several of the Specialty Fasteners Products business units reflecting lower product demand. At March 31, 2001, total backlog of unfilled orders was $99.4 million versus $109.6 million at March 31, 2000. New orders and backlog by segment are discussed below. SPECIALTY FASTENER PRODUCTS SEGMENT 2001 COMPARED TO 2000 Sales for the Specialty Fastener Products segment were $257.6 million in 2001 versus $238.4 million in 2000. $23.4 million of this increase occurred in the Engineered Components businesses, primarily the result of the acquisition of Tinnerman in 2000. Sales at the Hose Clamp businesses (Breeze Industrial and Pebra) were down $4.6 million from 2000 primarily due to weak demand in the heavy truck markets. Sales at the Engineered Rings businesses were up $4.8 million from 2000 in both European and U.S. markets. $4.9 million of this increase resulted from the acquisition of Ellison in 2000; weak local currency exchange rates erased strong increases in unit sales in the U.K., Germany and Brazil. Sales at TCR were $2.6 million below 2000 due to weak product demand for cold-headed products and production problems associated with specific product orders. Operating losses were $45.4 million in 2001 versus operating profit of $24.6 million in 2000. In 2001, the Company reported an asset impairment charge of $67.9 million primarily related to the write-down of goodwill, patents, trademarks, and property. On January 19, 2001, the Company announced that it had intended to sell the TCR, ARM, Rings, and Hose Clamp businesses. This impairment charge was required to write the net assets of certain of these businesses down to estimated net realizable values associated with future dispositions. 11 13 Before the impairment charge, operating profit was $22.4 million. Operating profit was down $2.1 million from 2000 in the Hose Clamp businesses reflecting weak heavy truck production in the last half of fiscal 2001. Operating profit in the Rings businesses was up in 2001 in the U.S., Germany, and Brazil but these improvements were more than offset by additional losses in the U.K. resulting from the consolidation of the Ellison and Anderton plants and associated production and delivery problems. The Company reported additional consolidation-related costs in 2001 of $2.1 million. Operating profit at the Engineered Components businesses was up $2.4 million primarily due to the inclusion of Tinnerman's results for the full year in 2001. Operating profit at TCR was down by 34% from 2000 resulting from weak sales and lower gross margin percentages due to product pricing pressures and production problems. In 2001, $1.3 million was received in an arbitration award at ARM from its largest customer due to a breach of contract to purchase a minimum amount of ARM's products. This amount was included in operating profit in 2001. Gross margin earned at the Engineered Rings businesses in 2001 was $5.2 million below that of 2000 primarily due to additional production costs associated with the U.K. plant consolidation. Gross margin in 2001 at the hose clamp businesses was $2.7 million below 2000 due to lower sales levels and lower gross margin percentages attributable to the slow-down in the heavy truck industry. Gross margin earned at the Engineered Component businesses in 2001 was $5.1 million above 2000 due to a full 12 months reported in 2001 versus 7 months in 2000. New orders during 2001 were $253.5 million versus $243.4 million in 2000. This increase reflects the inclusion of Tinnerman for the full year in 2001. New orders were up 46% in 2001 over 2000 at ARM reflecting stabilization in that business, down 3.1% at the hose clamps businesses, up 1.6% at the Engineered Rings businesses, and down 22.1% at TCR. The backlog at March 31, 2001 was $59.2 million versus $65.4 million at March 31, 2000. Backlog declined over this period in the Engineered Components businesses due to weakened automotive production in the last quarter of 2001. In the Rings businesses, backlog declined as past due unfilled orders related to U.K. production problems became less significant. SPECIALTY FASTENER PRODUCTS SEGMENT 2000 COMPARED WITH 1999 Sales for the Specialty Fastener Products segment were $238.4 million in 2000, an increase of $60.6 million, or 34%, from 1999. The increase in sales was primarily due to the acquisition of Ellison on July 19, 1999 and Tinnerman on August 31, 1999. Increases in domestic hose clamps and assembly fasteners and cold-headed parts sales were offset by decreases in European hose clamps and both domestic and international retaining rings. Sales at ARM continued to decline due to a loss of a substantial portion of business from its largest customer and the down cycle of the airframe industry. The Company filed an arbitration demand against this customer and the former owner seeking damages for fraud and breach of contract, punitive damages and rescission, which was settled in 2001. Operating profit for the Specialty Fastener Products segment was $24.6 million in 2000, a decrease of $1.7 million, or 6%, compared to 1999. Excluding $5.5 million of expenses relating to the consolidation of two retaining ring factories in England as part of the Ellison acquisition program, operating profit increased 15%. This increase was primarily driven by the Tinnerman acquisition. Operating profits at the European operation were lower due to reduced market and economic factors, as well as currency factors, especially the exchange rates between the Pound sterling and the Euro. Domestic retaining ring operating profit was lower due to lower sales volume. Operating profit in assembly fasteners increased in 2000 mainly due to increased sales volume, primarily in the U.S. automotive market. New orders during 2000 for the Specialty Fastener Products segment were $243.4 million, an increase of $71.9 million, or 42%, mainly due to the Tinnerman and Ellison acquisitions which were not owned in 1999. Backlog of unfilled orders as of March 31, 2000 increased to $65.4 million, compared to $45.9 million at March 31, 1999, mainly due to these acquisitions. 12 14 AEROSPACE PRODUCTS SEGMENT 2001 COMPARED WITH 2000 Sales in 2001 were $70.5 million versus $60.8 million in 2000. Sales at Breeze-Eastern were $7.0 million above 2000 primarily due to strong product demand across all product lines and to a lesser degree because of improved product pricing. Sales at Norco were $2.7 million above 2000, attributable to strong demand in the commercial aviation OEM and spare parts business as well as new product introductions. Gross margin earned at Breeze-Eastern increased by $3.4 million in 2001 over 2000 which was the result of greater sales levels over the period as well as a higher gross margin rate. Norco's gross margin increased by $0.8 million primarily due to higher sales levels. Operating income was $18.2 million in 2001 compared to $15.4 million in 2000. The majority of the operating income increase over 2000 occurred at Breeze-Eastern. New orders during 2001 were $66.5 million versus $61.8 million in 2000. In 2001, order intake was up $0.7 million at Breeze Eastern and $4.0 million at Norco compared to 2000. This reflects strong unit demand for these products. Backlog was $40.2 million at March 31, 2001 versus $44.2 million at March 31, 2000. The decline from the past year occurred primarily at Breeze-Eastern and is the result of the timing of large orders received. AEROSPACE PRODUCTS SEGMENT 2000 COMPARED WITH 1999 Sales for the Aerospace Products segment were $60.8 million in 2000, an increase of $10.7 million, or 21%, from 1999. Approximately 9% of the increase came from increased rescue hoist and engineering development programs and 12% due to the inclusion of twelve months of sales from Norco this year compared to eight months in 1999. Operating profit for the Aerospace Products segment was $15.4 million, an increase of $3.3 million, or 27%. This increase was due to the inclusion of Norco for the full year in 2000, as well as increased sales of rescue hoists. New orders during 2000 for the Aerospace Products segment were $61.8 million, an increase of $12.4 million, or 25%, mainly due to the Norco acquisition. Increased orders also included increased engineering program orders and increased orders for spare parts. Backlog of unfilled orders as of March 31, 2000 was $44.2 million, compared to $43.8 million at March 31, 1999. 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. NEW ACCOUNTING STANDARDS 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. The Company has appointed a team to implement SFAS No.133 and the Company has adopted SFAS No. 133 and the corresponding amendments under SFAS No. 138 on April 1, 2001. The impact on the Company of SFAS Nos. 133 and 138, adopted as of April 1, 2001, would result in a charge to other comprehensive income of $3.2 million and an offsetting liability of $3.2 million at that date. 13 15 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 SAB's were implemented effective January 1, 2001, and did not have a material impact on the Company's revenue recognition policies. ACQUISITIONS On August 31, 1999, the Company acquired all of the assets and assumed certain liabilities, consisting primarily of trade debts and accrued expenses, of the Engineered Fasteners Division of Eaton Corporation and its Tinnerman product line (collectively referred to as "Tinnerman") for a total purchase price of $173.3 million in cash. Tinnerman had 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, Roettges & 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. On June 29, 1998, the Company acquired all of the outstanding stock of Aerospace Rivet Manufacturers Corporation ("ARM") for $26.2 million in cash, including direct acquisition costs, and other contingent consideration. ARM, located in City of Industry, California, produces rivets and externally threaded fasteners for the aerospace industry. On July 28, 1998, the Company acquired all of the outstanding stock of Norco, Inc. ("Norco") for $17.7 million in cash, including direct acquisition costs, and other contingent consideration. Norco, located in Ridgefield, Connecticut, produces aircraft engine compartment hold open rods, actuators and other motion control devices for the aerospace industry. ASSETS HELD FOR SALE Included in Other Assets at March 31, 2001 and 2000, were assets held for sale related to businesses previously reported as discontinued operations of $2.9 million and $5.2 million, respectively. LIQUIDITY AND CAPITAL RESOURCES The Company's credit facilities are considered short term and reflect the terms of the forbearance agreement with its lenders (the "Lenders"). The Company plans to reduce debt as previously announced by selling several of its fastener business units, and has taken action and initiated discussions with interested parties. The terms of sale of each business unit are subject to the approval of the Lenders. The Company's debt-to capitalization ratio was 84%, 68%, and 45% as of March 31, 2001, 2000 and 1999, respectively. The higher debt-to-capitalization ratio for 2001 reflects reduced equity due to impairment charges of $78 million recorded in connection with the Company's restructuring and divestiture plan to reduce debt. Higher debt ratios for 2000 reflect the additional bank borrowings necessary for the Tinnerman and Ellison acquisitions in that year. The current ratio as of March 31, 2001 was 0.41, compared to 1.01 and 3.39 at March 31, 2000 and 1999, respectively. Working capital was ($190.8) million at March 31, 2001, down $192.6 million from 2000 and down $261.9 million from 1999. The reduction in working capital in 2001 was due to the reclassification of long term bank debt to short term debt reflecting the terms of the current forbearance agreement, which has expiration dates less than one year. Total debt as of March 31, 2001 was $272.5 million or $4.9 million less than the March 31, 2000 amount. 14 16 Effective December 31, 2000, the Company was not able to meet certain financial ratio requirements of the credit facility (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, the payment of certain other fees by the Company and imposition of certain conditions on the Company, 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 with an additional sub-limit on usage at $162 million. Prior to the March 29, 2001 expiration date, an extension was agreed to extend the termination date until June 27, 2001, provided that certain performance and debt reduction requirements were achieved, in which case the forbearance termination date may be further extended under similar terms and conditions until September 27, 2001. The debt reduction requirements of the forbearance agreement stipulated that $50 million be repaid prior to June 27, 2001, which was deemed satisfied, with the consent of the Lenders, by the sale of the Company's Breeze Industrial and Pebra divisions in July 2001, and the remainder to be repaid prior to the September 27, 2001 termination date. Funds for such debt repayments are expected to be realized from the sale of business assets with the prior consent of the lending group. The forbearance agreement also requires the achievement of minimum levels of EBITDA (earnings before interest, taxes, depreciation, and amortization), and the adherence to borrowing limits as adjusted based on the scheduled debt reduction. Other terms of the forbearance agreement include the payment of certain fees, reporting and consulting requirements. 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 Credit Facility 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 on a timely basis. 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 $6.2 million as of March 31, 2001, including letters of credit of $5.0 million. The Revolver and Term Loan are secured by substantially all of the Company's assets. As of March 31, 2001, the Company had total borrowings of $271.2 million which have a current weighted-average interest rate of 11.5%. Borrowings under the Revolver as of March 31, 2001, were $156.3 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 March 31, 2001, $192.1 million of the Company's outstanding borrowings utilized LIBOR, of which $165.7 million were payable in U.S. Dollars and $7.3 million and $19.1 million were payable in Deutsche marks and Pounds sterling, respectively. The terms of the forbearance agreement provide that the Company's option to borrow at LIBOR is conditional upon the achievement of the debt reduction targets of $50 million by June 27, 2001, and the remainder by September 27, 2001. LIBOR borrowings, expiring prior to these dates, may not be renewed unless such debt reduction has occurred. Effective June 7, 2001, LIBOR borrowings consequently were converted to base rate borrowings at prime rate of 7% plus a margin of 2.5% to equal a borrowing rate of 9.5%. Borrowings under the Term Loan as of March 31, 2001, were $38.8 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 15 17 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 Credit Facility, 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. 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 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 senior debt lenders (the "Lenders") under the Company's $250 million Credit Facility existing at that time, in which the Lenders consented to the private placement and amended certain financial covenants associated with the Credit Facility. As of March 31, 2001, the Company had $1.3 million of other long-term debt 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%. The Company did not purchase any treasury stock in 2001 or 2000 in contrast to 1999 during which the Company purchased 249,000 shares for $4.9 million. Treasury stock purchases are made in the open market or in negotiated transactions when opportunities are deemed to arise. Purchases of treasury stock are limited by the terms of the Company's Credit Facility. Management believes that the Company's plan to divest several of its business units in order to reduce debt, along with the anticipated cash flow from its retained business operations, will be sufficient to support working capital, capital expenditure, and debt service costs. The amount and timing of proceeds from such sales is subject to market and other conditions which the Company cannot control. Capital expenditures in 2001 were $5.7 million compared to $10.0 million in 2000 and $14.8 million in 1999, with capital expenditures for the Fastener Segment being much larger than those required by the Aerospace Products Segment. The Company expects capital expenditures in 2002 to be lower than the 2001 amount mainly due to the planned business unit dispositions. 16 18 INFLATION: While neither inflation nor deflation has had, and the Company does not expect it to have, a material impact upon operating results, there can be no assurance that its business will not be affected by inflation or deflation in the future. CONTINGENCIES ENVIRONMENTAL MATTERS: During the fourth quarter of fiscal 2000, the Company presented an environmental cleanup plan for a portion of a site in Pennsylvania which continues to be owned although the related business has been sold. This plan was submitted pursuant to the Consent Order and Agreement with the Pennsylvania Department of Environmental Protection ("PaDEP") concluded in fiscal 1999. Pursuant to the Consent Order, upon its execution the Company paid $0.2 million for past costs, future oversight expenses and in full settlement of claims made by PaDEP related to the environmental remediation of the site with an additional $0.2 million paid in fiscal 2001. A second Consent Order was concluded with PaDEP in the third quarter of fiscal 2001 for another portion of the site, and a third Consent Order for the remainder of the site is contemplated by October 1, 2002. The Company is also administering an agreed settlement with the Federal government under which the government pays 50% of the environmental response costs associated with a portion of the site. The Company is also in the process of finalizing the documentation of an agreed settlement under which the Federal government will pay 45% of the environmental response costs associated with another portion of the site. At March 31, 2000, the Company's cleanup reserve was $1.7 million based on the net present value of future expected cleanup costs. In fiscal 1999, the Company settled for a recovery of a portion of cleanup costs with its insurance carriers for approximately $5.1 million (net) which was included in Other income-net. The Company expects that remediation at the Pennsylvania site will not be completed for several years. The Company also continues to participate in environmental assessments and remediation work at ten other locations, which include operating facilities, facilities for sale, and previously owned facilities. The Company estimates that its potential cost for implementing corrective action at these sites will not exceed $0.2 million payable over the next several years, and has provided for the estimated costs in its accrual for environmental liabilities. In addition, the Company has been named as a potentially responsible party in seven environmental proceedings pending in several other states in which it is alleged that the Company was a generator of waste that was sent to landfills and other treatment facilities and, as to several sites, it is alleged that the Company was an owner or operator. Such properties generally relate to businesses which have been sold or discontinued. The Company estimates that its expected future costs, and its estimated proportional share of remedial work to be performed, associated with these proceedings will not exceed $0.1 million and has provided for these estimated costs in its accrual for environmental liabilities. LITIGATION: The Company is also engaged in various other legal proceedings incidental to its business. It is the opinion of management that, after taking into consideration information furnished by its counsel, the above matters will have no material effect on the Company's consolidated financial position or the results of the Company's operations in future periods. INFORMATION ABOUT FORWARD-LOOKING STATEMENTS: Certain statements in this document constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the "Acts"). Any statements contained herein that are not statements of historical fact are deemed to be forward-looking statements. The forward-looking statements in this document are based on current beliefs, estimates and assumptions concerning the operations, future results, and prospects of the Company. As actual operations and results may materially differ from those assumed in forward-looking statements, there is no assurance that forward-looking statements will prove to be accurate. Forward-looking statements are subject to the safe harbors created in the Acts. 17 19 Any number of factors could affect future operations and results, including, without limitation, the Company's ability to dispose of some or all of the business operations proposed for divestiture for the consideration currently estimated to be received by the Company or within the timeframe anticipated by the Company; the Company's ability to arrive at a mutually satisfactory amendment of its credit facilities with its lenders, if required; in the event of divestiture, the Company's ability to be profitable with a smaller and less diverse base of operations that will generate less revenue; the value of replacement operations, if any; general industry and economic conditions; interest rate trends; capital requirements; competition from other companies; changes in applicable laws, rules and regulations affecting the Company in the locations in which it conducts its business; the availability of equity and/or debt financing in the amounts and on the terms necessary to support the Company's future business and/or to provide adequate financing for parties interested in purchasing operations identified for divestiture; and those specific risks that are discussed in the Company's previously filed Annual Report on Form 10-K for the fiscal year ended March 31, 2000. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information or future events. ITEM 7A. 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 rates and interest rates. The Company enters into off-balance-sheet forward foreign exchange instruments in order to hedge certain intercompany financing denominated in foreign currencies, accounts receivable denominated in foreign currencies, a percentage of projected sales denominated in foreign currencies, and projected foreign currency intercompany purchases. Gains and losses on forward foreign exchange instruments that hedge specific third party transactions are included in the cost of carrying value of the underlying transaction. Gains and losses on instruments that are hedges of projected third party transactions are included in current period income. The Company recognized $0.5 million of unrealized gains on forward exchange contracts in 2000 that were hedges of forecasted future transactions. In 2001, the Company reversed $0.5 million of these gains as the hedges matured, which reduced income in 2001. At March 31, 2001, the Company had outstanding forward foreign exchange contracts to purchase and sell $10.8 million of various currencies (principally Deutsche marks and Pounds sterling). At March 31, 2001, if all forward contracts were closed out there would be no cash received or paid (the fair value of all outstanding contracts is $0.0 million). A 10% fluctuation in the exchange rates for the currencies hedged would have a $0.9 million effect on fair values of these instruments. The table below summarizes, by currency, the contractual amounts of the Company's foreign exchange contracts at March 31, 2001 and 2000. The "Buy" amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies, and the "Sell" amounts represent the U.S. dollar equivalent to sell foreign currencies (in thousands):
2001 2000 --------------------------------------------- BUY SELL BUY SELL Currency Deutsche mark -- $ 9,977 -- $10,589 Pound sterling $ 779 -- $17,501 1,667 --------------------------------------------- $ 779 $ 9,977 $17,501 $12,256 ---------------------------------------------
18 20 The Company enters into interest rate swap agreements to manage a portion of 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 March 31, 2001 the Company had outstanding interest rate swap agreements to convert $125 million of floating rate debt to fixed rate debt. The fair value of these swaps was approximately ($3.2) million at March 31, 2001.
NOTIONAL AMOUNT RECEIVE PAY (IN THOUSANDS) MATURITIES RATE(1) RATE March 31, 2001 $25,000 5/02 4.88% 5.48% 25,000 5/02 4.88 5.48 37,500 3/03 4.88 6.58 37,500 3/03 4.88 6.58
(1) Based on three-month LIBOR ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Financial Statements: Independent Auditors' Report ................................... 20 Statements of Consolidated Operations .......................... 21 Consolidated Balance Sheets .................................... 22 Statements of Consolidated Cash Flows .......................... 23 Statements of Consolidated Shareholders' Equity ................ 24 Notes to Consolidated Financial Statements ..................... 25 Financial Statement Schedules: Schedule II - Consolidated Valuation and Qualifying Accounts for years ended March 31, 2001, 2000 and 1999. Schedules referenced in Article 5 of Regulation S-X, other than that listed above, are not required and have been omitted.
19 21 INDEPENDENT AUDITORS' REPORT To the Stockholders and the Board of Directors of TransTechnology Corporation: We have audited the accompanying consolidated balance sheets of TransTechnology Corporation and subsidiaries as of March 31, 2001 and 2000, and the related statements of consolidated operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 2001. Our audits also included the financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of TransTechnology Corporation and subsidiaries at March 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2001 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth herein. Parsippany, New Jersey July 13, 2001 20 22 TRANSTECHNOLOGY CORPORATION STATEMENTS OF CONSOLIDATED OPERATIONS (In thousands, except share data)
Years ended March 31, 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------ Net sales $ 328,071 $ 299,252 $ 228,006 Cost of sales 239,517 209,949 156,090 Plant consolidation charge 2,113 991 -- - ------------------------------------------------------------------------------------------------------------------ Gross profit 86,441 88,312 71,916 General, administrative and selling expenses 59,617 53,447 46,552 Interest expense 34,420 19,945 6,938 Interest income (114) (518) (412) Other income - net (1,747) (624) (6,362) Allowance on notes receivable -- -- 906 Provision for plant consolidation -- 4,554 -- Provision for impairment of business unit assets 67,879 -- -- Provision for impairment of corporate assets 10,208 -- -- - ------------------------------------------------------------------------------------------------------------------ (Loss) income before income taxes and extraordinary charge (83,822) 11,508 24,294 (Benefit) provision for income taxes (10,852) 4,373 9,704 - ------------------------------------------------------------------------------------------------------------------ (Loss) income before extraordinary charge (72,970) 7,135 14,590 Extraordinary charge for refinancing of debt (net of applicable tax benefits of $339 and $532 for 2000 and 1999, respectively) -- (541) (781) - ------------------------------------------------------------------------------------------------------------------ Net (loss) income $ (72,970) $ 6,594 $ 13,809 - ------------------------------------------------------------------------------------------------------------------ Earnings (loss) per share: Basic: (Loss) income before extraordinary charge $ (11.83) $ 1.16 $ 2.33 Extraordinary charge for refinancing of debt -- (0.09) (0.12) - ------------------------------------------------------------------------------------------------------------------ Net (loss) income per share $ (11.83) $ 1.07 $ 2.21 - ------------------------------------------------------------------------------------------------------------------ Diluted: (Loss) income before extraordinary charge $ (11.83) $ 1.16 $ 2.30 Extraordinary charge for refinancing of debt -- (0.09) (0.12) - ------------------------------------------------------------------------------------------------------------------ Net (loss) income per share $ (11.83) $ 1.07 $ 2.18 - ------------------------------------------------------------------------------------------------------------------ Weighted - average basic shares outstanding 6,167,000 6,139,000 6,249,000 Weighted - average diluted shares outstanding 6,167,000 6,150,000 6,341,000
See notes to consolidated financial statements 21 23 TRANSTECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
MARCH 31, ASSETS 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 1,964 $ 3,350 Accounts receivable (net of allowance for doubtful accounts of $1,529 and $1,129 in 2001 and 2000, respectively) 58,581 61,819 Inventories 61,346 65,744 Prepaid expenses and other current assets 1,839 1,902 Income tax receivable 5,600 40 Deferred income taxes 1,512 1,872 - ----------------------------------------------------------------------------------------------------------------------- Total current assets 130,842 134,727 - ----------------------------------------------------------------------------------------------------------------------- PROPERTY: Land 13,210 14,320 Buildings 28,412 29,933 Machinery and equipment 93,654 93,725 Furniture and fixtures 10,963 11,587 Leasehold improvements 3,587 3,503 - ----------------------------------------------------------------------------------------------------------------------- Total 149,826 153,068 Less accumulated depreciation and amortization 68,572 47,048 - ----------------------------------------------------------------------------------------------------------------------- Property - net 81,254 106,020 - ----------------------------------------------------------------------------------------------------------------------- OTHER ASSETS: Notes receivable 61 3,455 Costs in excess of net assets of acquired businesses (net of accumulated amortization of $15,589 and $10,933 in 2001 and 2000, respectively) 139,793 192,115 Patents and trademarks (net of accumulated amortization of $2,310 and $1,334 in 2001 and 2000, respectively) 16,902 20,809 Deferred income taxes 11,360 9,987 Other 13,037 15,642 - ----------------------------------------------------------------------------------------------------------------------- Total other assets 181,153 242,008 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 393,249 $ 482,755 - ----------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Callable long-term debt $ 271,307 $ -- Current portion of long-term debt 88 82,585 Accounts payable - trade 20,067 25,550 Accrued compensation 10,295 10,359 Accrued income taxes 3,194 5,799 Other current liabilities 16,734 8,672 - ----------------------------------------------------------------------------------------------------------------------- Total current liabilities 321,685 132,965 - ----------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS 1,055 194,759 - ----------------------------------------------------------------------------------------------------------------------- DEFERRED INCOME TAXES 5,298 11,873 - ----------------------------------------------------------------------------------------------------------------------- OTHER LONG-TERM LIABILITIES 13,336 14,275 - ----------------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Notes 12 and 13) - ----------------------------------------------------------------------------------------------------------------------- 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 and 6,691,232 shares in 2001 and 2000, respectively 67 67 Additional paid-in capital 78,091 77,587 Notes receivable from officers (191) -- (Accumulated deficit) retained earnings (10,446) 63,722 Accumulated other comprehensive loss (6,323) (3,157) Unearned compensation (253) (267) - ----------------------------------------------------------------------------------------------------------------------- 60,945 137,952 Less treasury stock, at cost - 546,428 and 546,394 shares in 2001 and 2000, respectively (9,070) (9,069) - ----------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 51,875 128,883 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 393,249 $ 482,755 - -----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 22 24 TRANSTECHNOLOGY CORPORATION STATEMENTS OF CONSOLIDATED CASH FLOWS (In thousands)
YEARS ENDED MARCH 31, 2001 2000 1999 - ------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net (loss) income $(72,970) $ 6,594 $ 13,809 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary charge for refinancing of debt -- 541 781 Gain on sale of marketable securities (13) -- (1,082) Impairment of assets 66,052 -- -- Depreciation and amortization 19,632 17,617 10,802 Non-cash interest expense 1,484 -- -- Write-down of assets - plant consolidation -- 1,762 -- Provision for losses on accounts and notes receivable, and cost investments 7,479 199 803 Loss (gain) on sale or disposal of fixed assets and discontinued businesses 64 10 (28) Changes in assets and liabilities - excluding the effects of acquisitions: Decrease (increase) in accounts receivable 1,839 (9,923) 1,073 Decrease in inventories 1,983 4,089 2,266 (Increase) decrease in other assets (2,258) (1,472) 1,888 (Decrease) increase in accounts payable (2,094) 7,369 (2,604) Increase (decrease) in accrued compensation 161 2,548 (3,603) (Decrease) increase in income taxes payable (8,165) 3,924 686 Increase (decrease) in other liabilities 681 (6,550) (6,115) - ------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 13,875 26,708 18,676 - ------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Business acquisitions -- (187,086) (43,901) Capital expenditures (5,671) (10,037) (14,759) Proceeds from sale of fixed assets and discontinued businesses 1,231 534 502 Proceeds from sale of marketable securities 56 3 2,024 Decrease in notes and other receivables 233 782 3,128 - ------------------------------------------------------------------------------------------------------- Net cash used in investing activities (4,151) (195,804) (53,006) - ------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Payments on long-term debt (82,500) (3,750) (60,099) Proceeds from long-term borrowings and bridge loan 75,000 125,000 -- Issuance (repayment) of other debt, net 4,074 55,993 99,246 Debt issue costs (6,276) (5,679) -- Exercise of stock options and other -- 310 1,157 Treasury stock purchases -- -- (4,926) Dividends paid (1,198) (1,593) (1,625) - ------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (10,900) 170,281 33,753 - ------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (210) (90) (128) (Decrease) increase in cash and cash equivalents (1,386) 1,095 (705) Cash and cash equivalents at beginning of year 3,350 2,255 2,960 - ------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 1,964 $ 3,350 $ 2,255 - ------------------------------------------------------------------------------------------------------- Supplemental information: Interest payments $ 29,475 $ 17,959 $ 7,130 Income tax payments 2,658 2,218 5,177 Increase in senior subordinated note for paid-in-kind interest expense 1,332 -- -- Warrants issued 214 -- -- - -------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 23 25 TRANSTECHNOLOGY CORPORATION STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
YEARS ENDED ADDITIONAL MARCH 31, 2001, COMMON STOCK TREASURY STOCK PAID-IN 2000 AND 1999 SHARES AMOUNT SHARES AMOUNT CAPITAL - ------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1998 6,564,079 $ 66 (292,054) $(3,999) $75,959 Net income -- -- -- -- -- Other comprehensive income: Currency translation adjustment (net of taxes of $467) -- -- -- -- -- Unrealized investment holding gains (net of taxes of $117) -- -- -- -- -- Cash dividends ($.26 per share) -- -- -- -- -- Purchase of treasury stock (248,700) (4,926) -- Issuance of stock under stock option plan 84,714 1 -- -- 1,156 Issuance of stock under bonus plan 5,062 -- (5,459) (139) 131 - ------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1999 6,653,855 67 (546,213) (9,064) 77,246 Net income -- -- -- -- -- Other comprehensive income: Currency translation adjustment (net of taxes of $80) -- -- -- -- -- Unrealized investment holding losses (net of taxes of $3) -- -- -- -- -- Cash dividends ($.26 per share) -- -- -- -- -- Issuance of stock under stock option plan 29,200 -- -- -- 189 Issuance of stock under bonus plan 8,177 -- (181) (5) 152 - ------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 2000 6,691,232 67 (546,394) (9,069) 77,587 Net loss -- -- -- -- -- Other comprehensive loss: Minimum pension liability adjustment (net of taxes of $685) -- -- -- -- -- Currency translation adjustment (net of taxes of $1,093) -- -- -- -- -- Unrealized investment holding loss -- -- -- -- -- Less: reclassification adjust- ment for gains included in net loss -- -- -- -- -- Cash dividends -- -- -- -- -- Issuance of warrants under mezzanine debt -- -- -- -- 214 Issuance of stock under stock option plan/other 15,000 -- -- -- 171 Issuance of stock under bonus plan 12,382 -- (34) (1) 119 - ------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 2001 6,718,614 $ 67 (546,428) $(9,070) $78,091 =================================================================================================
RETAINED NOTES ACCUMULATED YEARS ENDED EARNINGS RECEIVABLE OTHER TOTAL MARCH 31, 2001, (ACCUMULATED FROM COMPREHENSIVE UNEARNED COMPREHENSIVE 2000 AND 1999 DEFICIT) OFFICERS LOSS COMPENSATION INCOME (LOSS) - ------------------------------------------------------------------------------------------------ ------------- BALANCE, MARCH 31, 1998 $ 46,537 -- $ (2,495) $ (236) Net income 13,809 -- -- -- $13,809.00 Other comprehensive income: Currency translation adjustment (net of taxes of $467) -- -- (701) -- (701) Unrealized investment holding gains (net of taxes of $117) -- -- 175 -- 175 Cash dividends ($.26 per share) (1,625) -- -- -- -- Purchase of treasury stock -- -- -- -- -- Issuance of stock under stock option plan -- -- -- -- -- Issuance of stock under bonus plan -- -- -- (3) -- - ------------------------------------------------------------------------------------------------ ------------- BALANCE, MARCH 31, 1999 58,721 -- (3,021) (239) $ 13,283 ============= Net income 6,594 -- -- -- $ 6,594.00 Other comprehensive income: Currency translation adjustment (net of taxes of $80) -- -- (131) -- (131) Unrealized investment holding losses (net of taxes of $3) -- -- (5) -- (5) Cash dividends ($.26 per share) (1,593) -- -- -- -- Issuance of stock under stock option plan -- -- -- -- -- Issuance of stock under bonus plan -- -- -- (28) -- - ------------------------------------------------------------------------------------------------ ------------- BALANCE, MARCH 31, 2000 63,722 -- (3,157) (267) $ 6,458 ============= Net loss (72,970) -- -- $ (72,970) Other comprehensive loss: Minimum pension liability adjustment (net of taxes of $685) -- -- (1,141) -- (1,141) Currency translation adjustment (net of taxes of $1,093) -- -- (2,029) -- (2,029) Unrealized investment holding loss -- -- (6) -- (6) Less: reclassification adjust- ment for gains included in net loss -- -- 10 -- 10 Cash dividends (1,198) -- -- -- -- Issuance of warrants under mezzanine debt -- -- -- -- -- Issuance of stock under stock option plan/other -- (191) -- -- -- Issuance of stock under bonus plan -- -- -- 14 -- - ------------------------------------------------------------------------------------------------ ------------- BALANCE, MARCH 31, 2001 $(10,446) $ (191) $ (6,323) $ (253) $ (76,136) ================================================================================================ =============
See notes to consolidated financial statements. 24 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share amounts) NOTE 1 Summary of Accounting Principles BUSINESS - The fiscal year for TransTechnology Corporation (the "Company") ends on March 31. Accordingly, all references to years in the Notes to Consolidated Financial Statements refer to the fiscal year ended March 31 of the indicated year unless otherwise specified. The Company develops, manufactures and sells a wide range of products in two industry segments, Specialty Fastener Products and Aerospace Products. The Company has manufacturing facilities located in the United States, Canada, Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment produces highly engineered precision metal retaining rings, gear driven band fasteners, circlips, custom cold-formed parts, head light adjusters, rivets and other threaded and non-threaded assembly fasteners primarily for the automotive, heavy truck, industrial, aerospace and consumer/durables markets and accounted for approximately 79% of the Company's consolidated 2001 net sales. Through its Aerospace Products Segment, the Company develops, manufactures, sells and services a complete line of sophisticated lifting and restraining products, principally performance critical helicopter rescue hoist and cargo hook systems, winches and hoists for aircraft and weapons systems and aircraft engine compartment hold open rods, actuators and other motion control devices. This segment accounted for approximately 21% of the Company's consolidated 2001 net sales. USE OF ESTIMATES - The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Estimates used for asset impairment are based upon future cash flow projections or, in the case of assets to be sold, appraisals and fair market value estimates obtained from investment bankers. PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which, except one subsidiary in Spain, are wholly-owned. Intercompany balances and transactions are eliminated in consolidation. Investments in less than 20% owned companies are accounted for by the cost method. REVENUE RECOGNITION - Revenue is recognized at the later of 1) when products are shipped to customers, or 2) when title passes to customers. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments with a maturity at date of acquisition of three months or less to be cash equivalents. INVENTORIES - Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Cost includes material, labor and manufacturing overhead costs. PROPERTY AND RELATED DEPRECIATION AND AMORTIZATION - Property is recorded at cost. Provisions for depreciation are made on a straight-line basis over the estimated useful lives of depreciable assets ranging from three to thirty years. Amortization of leasehold improvements is computed on a straight-line basis over the shorter of the estimated useful lives of the improvements or the terms of the leases. The Company reviews property and equipment and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation expense for the years ended March 31, 2001, 2000 and 1999 was $11.1 million, $11.2 million and $8.6 million, respectively. 25 27 COSTS IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES - The difference between the purchase price and the fair value of the net assets of acquired businesses 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. The Company periodically estimates the future undiscounted cash flows of the businesses to which goodwill relates to ensure that the carrying value of such goodwill has not been impaired. PATENTS AND TRADEMARKS - Patents are amortized on a straight-line basis over their remaining lives not to exceed 20 years. Trademarks are amortized on a straight-line basis over 40 years. EARNINGS PER SHARE ("EPS") - The computation of basic earnings per share is based on the weighted-average number of common shares outstanding. The computation of diluted earnings per share assumes the foregoing and, in addition, the exercise of all dilutive stock options using the treasury stock method. The components of the denominator for basic earnings per common share and diluted earnings per common share are reconciled as follows:
2001 2000 1999 Basic earnings per common share: Weighted-average common shares outstanding 6,167,000 6,139,000 6,249,000 ----------------------------------- Diluted earnings per common share: Weighted-average common share outstanding 6,167,000 6,139,000 6,249,000 Stock options -- 11,000 92,000 ----------------------------------- Denominator for diluted earnings per common share 6,167,000 6,150,000 6,341,000 -----------------------------------
Options to purchase 505,971 shares of common stock at prices between $8.84 and $27.88 were outstanding during 2001 but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares. Similarly, during 2000 options to purchase 288,759 shares of common stock at prices between $15.13 and $30.13 were outstanding but were not included in the computation of diluted EPS. During 1999, options to purchase 169,774 shares of common stock at prices between $22.94 and $27.88 were outstanding but were not included in the computation of diluted EPS. RESEARCH, DEVELOPMENT AND ENGINEERING COSTS - Research and development costs and engineering costs, which are charged to expense when incurred, amounted to $2.4 million, $2.0 million and $2.4 million in 2001, 2000 and 1999, respectively. Included in these amounts were expenditures of $1.2 million, $1.3 million and $1.2 million in 2001, 2000 and 1999, respectively, which represent costs related to research and development activities. FOREIGN CURRENCY TRANSLATION - The assets and liabilities of the Company's international operations have been translated into U.S. dollars at year-end exchange rates, with resulting translation gains and losses accumulated as a separate component of accumulated other comprehensive loss. Income and expense items are converted into U.S. dollars at average rates of exchange prevailing during the year. 26 28 INCOME TAXES - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company periodically assesses recoverability of deferred tax assets and provisions for valuation allowances are made as required. INVESTMENTS - During 1999, the Company sold 465,000 shares of Mace Security International common stock, received in a prior transaction, for $2.0 million in cash and realized a pretax gain of $1.1 million. In 2001, the Company wrote off its investment in an investee in the amount of $3.2 million together with a note receivable in the amount of $3.7 million as a result of a foreclosure on the investee's outstanding loans by its senior lenders. FINANCIAL INSTRUMENTS - The Company does not hold or issue financial instruments for trading purposes. Amounts to be paid or received under interest rate swap agreements are recognized as increases or reductions in interest expense in the periods in which they accrue. The Company enters into off-balance-sheet forward foreign exchange instruments in order to hedge certain intercompany loans denominated in foreign currencies, accounts receivable denominated in foreign currencies, a percentage of projected sales denominated in foreign currencies, and projected foreign currency intercompany purchases. Gains and losses on the financing transactions are included in other income - net. Gains and losses on forward foreign exchange instruments that hedge specific third party transactions are included in the cost or carrying value of the underlying transaction. Gains and losses on instruments that are hedges of projected third party transactions are included in current period income. NEW ACCOUNTING STANDARDS - 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. The Company has appointed a team to implement SFAS No.133 and the Company has adopted SFAS No. 133 and the corresponding amendments under SFAS No. 138 on April 1, 2001. The impact on the Company of SFAS Nos. 133 and 138, adopted as of April 1, 2001, would result in a charge to other comprehensive income of $3.2 million and an offsetting liability of $3.2 million at that date. 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 SAB's were implemented effective January 1, 2001, and did not have any material impact on the Company's revenue recognition policies. IMPAIRMENT OF LONG-LIVED ASSETS - The Company, in the event that circumstances arise that indicate that it's long-lived assets may be impaired, performs evaluations of asset impairment in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The assets' carrying values are compared to the estimated future undiscounted cash flows of the assets, or expected sale proceeds for assets expected to be sold, to determine if a write-down is required. The Company reported an impairment of long-lived assets in 2001 as discussed below. SEGMENT INFORMATION - The Company has reported segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 requires disclosure of financial data based on the "management approach" to business decision-making. The management approach is based on internal information used for making operating decisions and assessing the performance of the Company's reportable segments. SFAS No. 131 also requires disclosures regarding products and services. Segment information is reported separately in Note 14 to the consolidated financial statements. RECLASSIFICATIONS - Certain reclassifications have been made to prior years' financial statements to conform to the 2001 presentation. 27 29 NOTE 2 Management Initiatives and Restructuring On January 19, 2001, the Company announced its intention to restructure and divest its cold - headed products (TCR), aerospace rivet (Aerospace Rivet Manufacturers Corp), retaining ring (Seeger-Orbis, TransTechnology (GB), TT Brasil and TT Engineered Rings USA) and hose clamp operations (Breeze Industrial and Pebra). The Company stated that it had retained an investment banking firm to consider further strategic and business initiatives following these actions. In association with the restructuring, the Company stated it would suspend the payment of its quarterly dividend and recognize a charge in the fourth fiscal quarter of 2001 related to anticipated losses on the sale of several of these businesses as well as the provision for severance and other costs associated with these divestitures. Proceeds from the sales of the businesses will be used to repay debt and to refocus the Company's efforts on the design, manufacture and marketing of specialized aerospace equipment. The Company entered into an amendment of its existing credit agreement under which the Company's senior lenders agreed to forbearance with respect to the Company's continuing violations of certain covenants in the senior agreement through September 27, 2001, subject to the Company meeting certain interim debt reduction and EBITDA targets. The Company's subordinated lenders also entered into a forbearance agreement with respect to the Company's expected violation of its net worth covenant as the result of write-offs to be incurred in the fourth fiscal quarter of 2001 as part of its restructuring plan. In connection with this restructuring in the fourth quarter of 2001, the Company recognized an impairment charge of $67.9 million relating to a writedown of assets to expected realizable values of the Aerospace Rivet Manufacturers, TCR and the Engineered Rings businesses. Net realizable value is fair value less cost to sell. The Company has ceased depreciating/amortizing these assets effective January 19, 2001. The resultant carrying value of these businesses to be sold at March 31, 2001 was $85.3 million, which is the Company's combined estimate of realizable value. This impairment charge is summarized as follows:
Impairment Charge Writedown of Property, net $13,462 Writedown of Goodwill 47,659 Writedown of Patents and Trademarks 2,631 Establishment of liabilities for transaction costs 1,750 Establishment of liabilities, other 2,377 ------- $67,879 =======
The Company expects additional net non-cash write-offs of goodwill in fiscal 2002 resulting from the divestiture process, including a gain on the July 10, 2001 sale of its Breeze Industrial Products and Pebra hose clamp businesses and an anticipated non-cash loss resulting from the planned sale of the TransTechnology Engineered Components business. The results of operations in 2001 for businesses to be sold, before the impairment charge, were as follows: Sales $152,098 Operating Income 5,293
28 30 In addition, the Company reported a provision for impairment of corporate assets in the fourth quarter of 2001. These assets, which are related to sold businesses, are summarized as follows: Writedown of note receivable due from and equity investment of investee, net $ 7,688 Writedown of real estate held for sale 2,300 Other 220 ------- Total impairment - corporate assets $10,208 =======
The reduced carrying value of these assets, after the impairment charge, was $1.7 million at March 31, 2001. NOTE 3 Assets Held for Sale Included in Other Assets at both March 31, 2001 and 2000 were assets held for sale related to businesses previously reported as discontinued operations of $2.9 million and $5.2 million, respectively. NOTE 4 Acquisitions On August 31, 1999, the Company acquired all of the assets and assumed certain liabilities, consisting primarily of trade debts and accrued expenses, of the Engineered Fasteners Division of Eaton Corporation and its Tinnerman product line (collectively referred to as "Tinnerman") for a total purchase price of $173.3 million in cash. Tinnerman had 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, Roettges & 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 facility in Bingley, UK and consolidated that operation with the Ellison facility. On June 29, 1998, the Company acquired all of the outstanding stock of Aerospace Rivet Manufacturers Corporation ("ARM") for $26.2 million in cash. ARM, located in City of Industry, California, produces rivets and externally threaded fasteners for the aerospace industry. The Company recorded $21.7 million of goodwill associated with this acquisition. As discussed below, the Company announced the intention to sell ARM on January 19, 2001. A valuation allowance for the unamortized balance of goodwill was established in 2001. On July 28, 1998, the Company acquired all of the outstanding stock of Norco, Inc. ("Norco") for $17.7 million in cash, including direct acquisition costs, and other contingent consideration. Norco, located in Ridgefield, Connecticut, produces aircraft engine compartment hold open rods, actuators and other motion control devices for the aerospace industry. The Company recorded $7.1 million of goodwill associated with this acquisition which is being amortized over 40 years. 29 31 The following table presents the allocation of purchase price of the 2000 acquisitions:
TINNERMAN ELLISON Purchase Price $ 173,329 $ 14,172 Tangible Net Assets 37,637 12,865 Goodwill 117,692 892 Patents 4,850 -- Trademarks 13,150 --
The following table presents the allocation of purchase price of the 1999 acquisitions:
NORCO ARM Purchase Price $ 17,705 $ 26,195 Tangible Net Assets 10,587 4,460 Goodwill 7,118 21,735
The following summarizes the Company's pro forma information as if the acquisitions of Tinnerman, Ellison, ARM and Norco had occurred at the beginning of the period presented. The pro forma results give effect to the amortization of goodwill and additional depreciation and the effects on interest expense and taxes.
2000 1999 Net sales $338,747 $345,768 -------- -------- Income from continuing operations $ 7,378 $ 13,064 -------- -------- Net income $ 6,837 $ 12,283 -------- -------- Basic earnings per share $ 1.11 $ 1.97 -------- -------- Diluted earnings per share $ 1.11 $ 1.94 -------- --------
The above pro forma information does not purport to be indicative of the financial results which actually would have occurred had the acquisitions been made at the beginning of the period presented or subsequent to that date. 30 32 NOTE 5 Inventories Inventories at March 31, consisted of the following:
2001 2000 Finished goods $21,114 $24,012 Work in process 18,075 18,367 Purchased and manufactured parts 22,157 23,365 ------- ------- Total $61,346 $65,744 ======= =======
NOTE 6 Income Taxes The components of total income (loss) from operations (including continuing extraordinary items) before income taxes were:
2001 2000 1999 Domestic ($51,288) $ 16,008 $ 23,689 Foreign (32,534) (5,378) (708) -------- -------- -------- Total (83,822) $ 10,630 $ 22,981 ======== ======== ========
The provision (benefit) for income taxes is summarized below:
2001 2000 1999 Currently payable (receivable): Federal ($ 5,600) $ 3,285 $ 3,771 Foreign 105 1,318 -- State 452 419 587 -------- -------- -------- (5,043) 5,022 4,358 -------- -------- -------- Deferred (15,455) (988) 4,814 Valuation allowance 9,646 -- -- -------- -------- -------- (5,809) (988) 4,814 -------- -------- -------- Total ($10,852) $ 4,034 $ 9,172 ======== ======== ========
The provision (benefit) for income taxes is allocated between continuing operations and extraordinary items as summarized below:
2001 2000 1999 Continuing ($10,852) $ 4,373 $ 9,704 Extraordinary -- (339) (532) -------- -------- Total ($10,852) $ 4,034 $ 9,172 ======== ======== ========
31 33 The consolidated effective tax rates for continuing operations differ from the federal statutory rates as follows:
2001 2000 1999 Statutory federal rate (35.0%) 35.0% 35.0% State income taxes after federal income tax (2.0) 5.2 4.9 Earnings of the foreign sales corporation -- (9.1) (3.4) Amortization of purchase price of businesses not deductible for tax purposes 14.0 5.2 2.3 Foreign rate differential 4.7 3.2 1.0 Valuation allowance 11.5 -- -- Investment write-offs (9.5) -- -- AMT credit (.5) -- -- Other 3.9 (1.5) 0.2 ------ ------ ------ Consolidated effective tax rate (12.9%) 38.0% 40.0% ====== ====== ======
The following is an analysis of accumulated deferred income taxes:
2001 2000 Assets: Current: Bad debts $ 408 $ -- Employee benefit accruals 884 829 Inventory 680 56 Net operating loss carry-forward 100 796 Other (560) 191 -------- -------- Total current 1,512 1,872 -------- -------- Noncurrent: Employee benefit accruals 754 666 Environmental 389 583 Accrued liabilities 984 2,046 AMT credit 453 -- Net operating loss carry-forward 16,818 4,531 Other 1,608 2,161 Valuation allowance (9,646) -- -------- -------- Total noncurrent 11,360 9,987 -------- -------- Total assets $ 12,872 $ 11,859 ======== ======== Liabilities: Property $ 5,298 $ 9,858 Other -- 2,015 -------- -------- Total liabilities $ 5,298 $ 11,873 ======== ========
The cumulative amount of undistributed earnings of international subsidiaries for which U.S. income taxes have not been provided was approximately $4.9 million at March 31, 2001. It is not practical to estimate the amount of unrecognized deferred U.S. taxes on these undistributed earnings. 32 34 The valuation allowance required under Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," has been established for deferred income tax benefits related to certain foreign subsidiary loss carry-forwards that may not be realized. The Company has federal, state and foreign net operating loss carry-forwards of $12.0 million, $26.0 million and $32.0 million, respectively, which will be available to offset taxable income during the carry-forward period (through 2021). The tax benefits of these items are reflected in the above analysis of deferred tax assets and liabilities. If not used, some of these carry-forwards begin to expire in 2004. The Company also has an alternative minimum tax credit carry-forward of approximately $0.5 million which can be carried forward indefinitely. NOTE 7 Long-term Debt Payable to Banks and Others Long-term debt payable to banks and others, including current maturities, at March 31 consisted of the following:
2001 2000 Credit agreement - 10.5% $ 2,900 $ -- Credit agreement - 9.95% 153,368 -- Credit agreement - 8.67% -- 154,723 Term loan - 8.69% -- 46,250 Term loan - 9.06% 38,750 -- Bridge loan - 15.44% -- 75,000 Senior Subordinated Notes - 16% 76,332 -- Other 1,289 1,371 -------- -------- 272,639 277,344 Less current maturities and amounts callable by lenders 271,395 82,585 Less unamortized discount 189 -- -------- -------- Total long-term debt $ 1,055 $194,759 ======== ========
CREDIT FACILITIES - Effective December 31, 2000, the Company was not able to meet certain financial ratio requirements of the credit facility (the "Credit Facility") as amended. Pursuant to discussions with the senior debt lenders (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 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 with an additional sub-limit on usage at $162 million. Prior to the March 29, 2001 expiration date, an extension was agreed to extend the termination date until June 27, 2001, provided that certain performance and debt reduction requirements are achieved in which case the forbearance termination date may be further extended under similar terms and conditions until September 27, 2001. The debt reduction requirements of the forbearance agreement stipulated that $50 million was to be repaid prior to the June 27, 2001 date, which was deemed satisfied, with the consent of the Lenders, by the sale of the Company's Breeze Industrial and Pebra divisions in July 2001, and the remainder to be repaid prior to the September 27, 2001 termination date. Funds for such debt repayments are expected to be realized from the sale of business assets with the prior consent of the Lenders. The forbearance agreement also requires the achievement of minimum levels of EBITDA (earnings before interest, taxes, 33 35 depreciation, and amortization), and the adherence to borrowing limits as adjusted based on the scheduled debt reduction. Other terms of the forbearance agreement include certain fees, reporting and consulting requirements. 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 on a timely basis. 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 $6.2 million as of March 31, 2001, including letters of credit of $5.0 million. The Revolver and Term Loan are secured by the Company's assets. As of March 31, 2001, the Company had total borrowings of $271.2 million which have a current weighted-average interest rate of 11.5%. Borrowings under the Revolver as of March 31, 2001, were $156.3 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 March 31, 2001, $192.1 million of the Company's outstanding borrowings utilized LIBOR, of which $165.7 million were payable in U.S. Dollars and $7.3 million and $19.1 million were payable in Deutsche marks and Pounds sterling, respectively. The terms of the forbearance agreement provide that the Company's option to borrow at LIBOR is conditional upon the achievement of the debt reduction targets of $50 million by June 27, 2001, and the remainder by September 27, 2001. LIBOR borrowings, expiring prior to these dates, may not be renewed unless such debt reduction has occurred. Effective June 7, 2001, LIBOR borrowings consequently were converted to base rate borrowings at prime rate of 7% plus a margin of 2.5% to equal a borrowing rate of 9.5%. Borrowings under the Term Loan as of March 31, 2001, were $38.8 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 $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. SENIOR SUBORDINATED NOTES - 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 34 36 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 the Lenders under the Company's $250 million Credit Facility existing at that time, in which the Lenders consented to the private placement and amended certain financial covenants associated with the Credit Facility. OTHER - As of March 31, 2001, the Company had $1.3 million of other long-term debt 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%.
Debt maturities 2002 $ 88 2003 91 2004 94 2005 79 2006 45 Thereafter 892 ------ Total $1,289 ------
NOTE 8 Stockholders' Equity and Employee/Director Stock Options The Company maintains the amended and restated 1992 long-term incentive plan (the "1992 Plan"), the 1998 non-employee directors stock option plan (the "1998 Plan") and the 1999 long-term incentive plan (the "1999 Plan"). Under the terms of the 1992 Plan, 800,000 of the Company's common shares may be granted as stock options or awarded as restricted stock to officers, directors and certain employees of the Company through September 2002. Under the terms of the 1999 plan, 300,000 of the Company's common shares may be granted as stock options or awarded as restricted stock to officers, directors and certain employees of the Company through July 2009. Under both plans, option exercise prices equal the fair market value of the common shares at their grant dates. For grants made prior to May 1999, options expire not later than five years after the date of the grant. Options granted beginning in May 1999 expire not later than 10 years after the date of the grant; options granted to officers and employees, awarded as part of a three-year bonus plan, expire not later than 5 years after the date of the grant. Options granted to directors and to officers and employees with the annual yearly cash bonus vest ratably over three years beginning one year after the date of the grant; options granted to officers and employees awarded as part of a three-year long term bonus plan vest at the end of the three-year plan period. Restricted stock is payable in equivalent number of common shares. The shares are distributable in a single installment and, with respect to officers and employees, restrictions lapse ratably over a three-year period from the date of the award, and with respect to directors, the restrictions lapse after one year. Under the terms of the 1998 Plan, non-employee directors are entitled to receive matching options for each share of the Company's common stock which they hold at the end of a 60-day period following initial election as a director, but not to exceed 25,000 shares with the strike price of the option being the fair market value of the shares at their grant dates, and thereafter, for each share of the Company's common stock that they purchase on the open market, with the strike price of the option being the purchase price of the share, up to a maximum of 5,000 options in any twelve month period or 15,000 options over a three-year period. Options granted under the 1998 Plan vest on the first anniversary of the grant, provided that, exclusive of the options granted to match shares held at the end of the 60-day period, the optionee may not acquire by exercise of the options more than 5,000 shares in any one year. Options expire not later than five years after the date of the grant. 35 37 The Company continues to apply the accounting standards set forth in APB No. 25. However, disclosures are required of pro forma net income and earnings per share as if the Company had adopted the accounting provisions of SFAS No. 123, "Accounting for Stock-Based Compensation". Based on Black-Scholes values, pro forma net income for 2001, 2000 and 1999 would be ($73.3) million, $6.2 million and $13.4 million, respectively; pro forma earnings per common share for 2001, 2000 and 1999 would be ($11.89), $1.00 and $2.11, respectively. The following table summarizes stock option activity over the past three years under the plan:
WEIGHTED- AVERAGE NUMBER EXERCISE OF SHARES PRICE Outstanding at March 31, 1998 373,798 $15.63 Granted 181,156 26.92 Exercised (84,714) 13.03 Canceled or expired (32,194) 23.81 -------- Outstanding at March 31, 1999 438,046 17.66 Granted 155,715 18.90 Exercised (29,200) 14.53 Canceled or expired (75,521) 15.47 -------- Outstanding at March 31, 2000 489,040 19.56 Granted 151,737 9.74 Exercised (15,000) 11.38 Canceled or expired (83,606) 20.19 -------- Outstanding at March 31, 2001 542,171 18.25 -------- Options exercisable at March 31, 1999 197,417 14.74 Options exercisable at March 31, 2000 183,829 19.13 Options exercisable at March 31, 2001 247,119 20.92
In 2001, 2000 and 1999 the Company awarded restricted stock totaling 12,382 shares, 8,177 shares and 5,062 shares, respectively. The weighted-average fair value of this restricted stock was $9.63, $18.60 and $25.33 in 2001, 2000 and 1999, respectively. The expense recorded in 2001, 2000 and 1999 for restricted stock was $133,000, $124,000 and $107,000, respectively. The weighted-average Black-Scholes value per option granted in 2001, 2000 and 1999 was $3.00, $4.74 and $6.62, respectively. The following weighted-average assumptions were used in the Black-Scholes option pricing model for options granted in 2001, 2000 and 1999:
2001 2000 1999 Dividend yield 0.9% 1.3% 1.4% Volatility 38.4% 25.0% 24.0% Risk-free interest rate 6.3% 5.5% 5.5% Expected term of options (in years) 4.0 4.0 4.0
36 38 For options outstanding and exercisable at March 31, 2001, the exercise price ranges and average remaining lives were:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------- --------------------------- NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED RANGE OF OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE EXERCISE AT REMAINING EXERCISE AT EXERCISE PRICES MARCH 31, 2001 LIFE PRICE MARCH 31, 2001 PRICE $3-10 119,960 4 $ 7.87 -- -- 10-15 9,905 4 11.87 -- -- 15-21 274,015 2 18.57 175,632 $18.47 21-28 138,291 2 27.07 71,487 26.91 ------- ------ ------- ------ 542,171 2 $18.25 247,119 $20.92 ------- ------ ------- ------
NOTES RECEIVABLE FROM OFFICERS - Notes receivable from officers result from the exercise of stock options in exchange for notes. The notes are full recourse promissory notes bearing interest at 5% and are collateralized by the stock issued upon exercise of the stock options. Principal and interest are due in May 2002. NOTE 9 Employee Benefit Plans The Company has three defined contribution plans covering substantially all domestic employees. Contributions are based on certain percentages of an employee's eligible compensation. Expenses related to these plans were $2.8 million, $3.0 million and $2.5 million in 2001, 2000 and 1999, respectively. The Company provides postretirement benefits to union employees at two of the Company's divisions. The Company funds these benefits on a pay-as-you-go basis. In addition, the Company maintains three defined benefit retirement plans for certain employees. Funding policies are based upon local statutes. Each of the three defined benefit retirement plans at March 31, 2001, had benefit obligations in excess of plan assets as shown below. At March 31, 2000, one defined benefit retirement plan had a benefit obligation of $5.2 million and no plan assets. The other two defined benefit plans had a combined benefit obligation of $16.9 million and plan assets of $19.8 million.
PENSION BENEFITS POSTRETIREMENT BENEFITS --------------------------------------------------------- YEAR ENDED MARCH 31, YEAR ENDED MARCH 31, --------------------------------------------------------- 2001 2000 1999 2001 2000 1999 COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost $ 462 $ 444 $402 $45 $15 $2 Interest cost 1,577 1,211 835 176 119 69 Expected return on plan assets (108) (1,611) (573) -- -- -- Amortization of net (gain) loss (1,359) 505 43 19 28 -- Amortization of prior service cost 38 -- -- -- -- -- ----- ----- ---- ---- ---- --- Net periodic benefit cost $ 610 $ 549 $707 $240 $162 $71 ----- ----- ---- ---- ---- ---
37 39 WEIGHTED-AVERAGE ASSUMPTIONS AS OF MARCH 31: Discount rate 6.58% 6.67% 6.00% 7.13% 7.88% 7.00% Expected return on plan assets 7.87% 7.59% 7.00% -- -- -- Rate of compensation increase 2.68% 3.13% 3.25% -- -- --
POSTRETIREMENT PENSION BENEFITS BENEFITS ------------------- -------------------- YEAR ENDED MARCH 31, YEAR ENDED MARCH 31, ------------------- -------------------- 2001 2000 2001 2000 CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $ 22,098 $ 13,702 $ 2,365 $ 1,024 Service cost 462 444 45 15 Interest cost 1,577 1,211 175 119 Plan participants' contributions 114 131 -- -- Effect of acquisitions -- 9,108 -- 1,122 Amendments 825 -- -- -- Actuarial gain (loss) 1,271 (341) 88 223 Benefits paid (2,082) (1,402) (152) (138) Effect of foreign exchange (1,284) (755) -- -- -------- -------- -------- -------- Benefit obligation at end of year $ 22,981 $ 22,098 $ 2,521 $ 2,365 ======== ======== ======== ========
POSTRETIREMENT PENSION BENEFITS BENEFITS ------------------- -------------------- YEAR ENDED MARCH 31, YEAR ENDED MARCH 31, ------------------- -------------------- 2001 2000 2001 2000 CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year $ 19,752 $ 7,565 $ -- $ -- Effect of acquisitions -- 11,725 -- -- Actual return on plan assets (1,298) 1,069 -- -- Employer contribution 275 352 152 138 Plan participants' contributions 114 131 -- -- Benefits paid (1,705) (978) (152) (138) Effect of foreign exchange (915) (112) -- -- -------- -------- -------- -------- Fair value of plan assets at end of year $ 16,223 $ 19,752 $ -- $ -- ======== ======== ======== ========
38 40
PENSION BENEFITS POSTRETIREMENT BENEFITS -------------------- ----------------------- YEAR ENDED MARCH 31, YEAR ENDED MARCH 31, -------------------- ----------------------- 2001 2000 2001 2000 RECONCILIATION OF FUNDED STATUS: Funded status $(6,758) $(2,346) $(2,521) $(2,365) Unrecognized actuarial loss (gain) 1,868 (2,440) 326 258 Unrecognized prior service cost 1,037 516 -- -- ------- ------- ------- ------- Accrued liability $(3,853) $(4,270) $(2,195) $(2,107) ======= ======= ======= =======
For measurement purposes, a 7.53% and 9.57% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001 and 2000, respectively. The rate was assumed to decrease gradually to 4.61% by 2009 and remain at that level thereafter. Under the Plan, the actuarially determined effect of a one-percentage point change in the assumed health case cost trend would have the following effects.
ONE ONE PERCENTAGE PERCENTAGE POINT POINT INCREASE DECREASE Effect on total of service and interest cost components $ 31 $ (25) Effect on accumulated postretirement benefit obligation 241 (252)
NOTE 10 Financial Instruments INTEREST RATE SWAP AGREEMENTS - The Company periodically enters into interest rate swap agreements to effectively convert all or a portion of its floating-rate debt to fixed-rate debt in order to reduce the Company's risk to movements in interest rates. Such agreements involve the exchange of fixed and floating interest rate payments over the life of the agreement without the exchange of the underlying principal amounts. Accordingly, the impact of fluctuations in interest rates on these interest rate swap agreements is fully offset by the opposite impact on the related debt. Swap agreements are only entered into with strong creditworthy counterparties. The swap agreements in effect were as follows:
NOTIONAL AMOUNT RECEIVE PAY (IN THOUSANDS) MATURITIES RATE(1) RATE March 31, 2001 $25,000 5/02 4.88% 5.48% 25,000 5/02 4.88 5.48 37,500 3/03 4.88 6.58 37,500 3/03 4.88 6.58
(1) Based on three-month LIBOR 39 41 FOREIGN CURRENCY EXCHANGE AGREEMENTS - The Company enters into forward foreign currency agreements to hedge foreign currency financing transactions. Realized and unrealized gains and losses arising from forward currency contracts are recognized as adjustments to the gains and losses resulting from the underlying hedged transactions. The Company enters into off-balance-sheet forward foreign exchange instruments in order to hedge certain intercompany financing denominated in foreign currencies, accounts receivable denominated in foreign currencies, a percentage of projected sales denominated in foreign currencies, and projected foreign currency intercompany purchases. The Company only hedges projected transactions that are expected to materialize within 12 months. Gains and losses on forward foreign exchange instruments that hedge specific identifiable third party transactions are deferred and ultimately included in the cost of the underlying transaction. Gains and losses on instruments that are hedges of projected third party transactions are not deferred and are included in current period income as "other income-net". The Company recognized $0.5 million of unrealized losses on forward exchange contracts in 2001 related to hedges of projected third party transactions. Deferred hedge gains or losses at March 31, 2001 were negligible. The table below summarizes, by currency, the contractual amounts of the Company's foreign exchange contracts at March 31, 2001 and 2000. The "Buy" amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies, and the "Sell" amounts represent the U.S. dollar equivalent to sell foreign currencies (in thousands):
2001 2000 ------------------------------------------------ BUY SELL BUY SELL Currency Deutsche mark -- $9,977 -- $10,589 Pound sterling $779 -- $17,501 1,667 ------------------------------------------------ $779 $9,977 $17,501 $12,256 ------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS - SFAS No. 107, "Disclosure about Fair Value of Financial Instruments" and No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments," are part of a continuing process by the Financial Accounting Standards Board to improve information regarding financial instruments. The following methods and assumptions were used by the Company in estimating the fair value of each class of financial instruments: CASH AND CASH EQUIVALENTS - The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. DEBT - The carrying amounts of the Company's debt approximates its fair value. CONCENTRATION OF CREDIT RISK - The Company is subject to a concentration of credit risk primarily with its trade and notes receivable. The Company grants credit to certain customers who meet pre-established credit requirements, and generally requires no collateral from its customers. Estimates of potential credit losses are provided for in the Company's consolidated financial statements and are within management's expectations and industry averages. As of March 31, 2001, the Company had no other significant concentrations of credit risk. 40 42 INTEREST RATE SWAPS AND FORWARD FOREIGN EXCHANGE AGREEMENTS - The fair values of the Company's interest rate swaps and forward foreign exchange agreements are the estimated amounts the Company would pay or receive to terminate the agreements at March 31, 2001 and 2000 based upon quoted market prices as provided by financial institutions which are counterparties to the agreements and were as follows (in thousands):
2001 2000 (PAY) RECEIVE Interest rate swap agreements $(3,207) $2,405 Forward foreign exchange agreements (9) 1,537
NOTE 11 Extraordinary Item In 2000, the Company refinanced its credit facilities. Due to the termination of the prior credit agreement, the Company recognized an extraordinary charge of $0.5 million, net of tax, to write-off the unamortized portion of loan origination fees associated with the prior agreement. In fiscal 1999, the Company recognized an extraordinary charge of $0.8 million, net of tax, to write-off the remaining deferred loan fees associated with the early extinguishment of the Company's indebtedness pursuant to its revised and amended revolving credit facility. NOTE 12 Commitments Rent expense under operating leases for the years ended March 31, 2001, 2000, and 1999 was $3.0 million, $2.7 million and $3.2 million, respectively. The Company and its subsidiaries have minimum rental commitments under noncancelable operating leases, primarily leased buildings, as follows (in thousands): 2002 $3,041 2003 2,184 2004 1,002 2005 593 2006 496 Beyond 2006 1,876 ----- Total 9,192 =====
41 43 NOTE 13 Contingencies ENVIRONMENTAL MATTERS. During the fourth quarter of fiscal 2000, the Company presented an environmental cleanup plan for a portion of a site in Pennsylvania which continues to be owned although the related business has been sold. This plan was submitted pursuant to the Consent Order and Agreement with the Pennsylvania Department of Environmental Protection ("PaDEP") concluded in fiscal 1999. Pursuant to the Consent Order, upon its execution the Company paid $0.2 million for past costs, future oversight expenses and in full settlement of claims made by PaDEP related to the environmental remediation of the site with an additional $0.2 million paid in fiscal 2001. A second Consent Order was concluded with PaDEP in the third quarter of fiscal 2001 for another portion of the site, and a third Consent Order for the remainder of the site is contemplated by October 1, 2002. The Company is also administering an agreed settlement with the Federal government under which the government pays 50% of the environmental response costs associated with a portion of the site. The Company is also in the process of finalizing the documentation of an agreed settlement under which the Federal government will pay 45% of the environmental response costs associated with another portion of the site. At March 31, 2000, the Company's cleanup reserve was $1.7 million based on the net present value of future expected cleanup costs. In fiscal 1999, the Company settled for a recovery of a portion of cleanup costs with its insurance carriers for approximately $5.1 million (net) which is included in Other income-net. The Company expects that remediation at the Pennsylvania site will not be completed for several years. The Company also continues to participate in environmental assessments and remediation work at ten other locations, which include operating facilities, facilities for sale, and previously owned facilities. The Company estimates that its potential cost for implementing corrective action at these sites will not exceed $0.2 million payable over the next several years, and has provided for the estimated costs in its accrual for environmental liabilities. In addition, the Company has been named as a potentially responsible party in seven environmental proceedings pending in several other states in which it is alleged that the Company was a generator of waste that was sent to landfills and other treatment facilities and, as to several sites, it is alleged that the Company was an owner or operator. Such properties generally relate to businesses which have been sold or discontinued. The Company estimates that its expected future costs, and its estimated proportional share of remedial work to be performed, associated with these proceedings will not exceed $0.1 million and has provided for these estimated costs in its accrual for environmental liabilities. LITIGATION. The Company is also engaged in various other legal proceedings incidental to its business. It is the opinion of management that, after taking into consideration information furnished by its counsel, the above matters will have no material effect on the Company's consolidated financial position or the results of the Company's operations in future periods. NOTE 14 Segment and Geographic Information The Company has two business segments. Each segment has separate management teams that report operating results regularly which are reviewed by the chief executive officer of the Company. Certain businesses have been aggregated into the same reportable segment because they have similar products and services, production processes, types of customers and distribution methods and their long-term financial performance is affected by similar economic conditions. 42 44 The Company develops, manufactures and sells a wide range of products in two industry segments, Specialty Fastener Products and Aerospace Products. The Company has manufacturing facilities located in the United States, Canada, Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment produces highly engineered precision metal retaining rings, gear driven band fasteners, circlips, custom cold-formed parts, head light adjusters, rivets and other threaded and non-threaded assembly fasteners primarily for the automotive, heavy truck, industrial, aerospace and consumer/durables markets and accounted for approximately 79% of the Company's consolidated 2001 net sales. Through its Aerospace Products Segment, the Company develops, manufactures, sells and services a complete line of sophisticated lifting and restraining products, principally performance critical helicopter rescue hoist and cargo hook systems, winches and hoists for aircraft and weapons systems and aircraft engine compartment hold open rods, actuators and other motion control devices. This segment accounted for approximately 21% of the Company's consolidated 2001 net sales. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on operating profit of the respective segments. Operating profit is net sales less operating expenses. General corporate expenses, interest and income taxes have not been deducted in determining operating profit. Assets, depreciation and amortization and capital expenditures are those identifiable to a particular segment by their use. Approximately 9%, 8% and 10% of sales from continuing operations in 2001, 2000 and 1999, respectively, were derived from sales to the United States Government and its prime contractors which are attributable primarily to Aerospace Products. No single customer accounted for 10% or more of the Company's net sales in 2001 or 2000. Long-lived assets, other than goodwill, trademarks, patents and deferred taxes in the U.S. and foreign countries, are as follows:
March 31, 2001 March 31, 2000 -------------- -------------- United States $ 69,586 $ 81,649 Outside the United States 24,766 43,468 -------- -------- $ 94,352 $125,117 ======== ========
43 45
OPERATING DEPRECIATION/ FISCAL NET PROFIT(1) CAPITAL AMORTIZATION IDENTIFIABLE (IN THOUSANDS) YEAR SALES (LOSS) EXPENDITURES EXPENSE ASSETS - ----------------------------------------------------------------------------------------------------------------------- Specialty Fastener 2001 $257,589 $(45,444)(2) $ 5,373 $15,004 $298,427 Products 2000 238,416 24,615(3) 9,589 14,310 406,476 1999 177,837 26,284 13,652 8,812 205,206 - ----------------------------------------------------------------------------------------------------------------------- Aerospace Products 2001 70,482 18,211 227 1,156 51,523 2000 60,836 15,377 435 1,062 49,163 1999 50,169 12,080 728 991 51,883 - ----------------------------------------------------------------------------------------------------------------------- Total segments 2001 328,071 (27,233) 5,600 16,160 349,950 2000 299,252 39,992 10,024 15,372 455,639 1999 228,006 38,364 14,380 9,803 257,089 - ----------------------------------------------------------------------------------------------------------------------- Corporate 2001 -- (22,479) 71 3,472 43,299 2000 -- (9,131) 13 2,245 27,116 1999 -- (13,243)(4) 379 999 22,631 - ----------------------------------------------------------------------------------------------------------------------- Corporate interest 2001 -- 310 -- -- -- and other income-net 2000 -- 592 -- -- -- 1999 -- 6,111(5) -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Interest expense 2001 -- (34,420) -- -- -- 2000 -- (19,945) -- -- -- 1999 -- (6,938) -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Consolidated 2001 328,071 (83,822) 5,671 19,632 393,249 2000 299,252 11,508 10,037 17,617 482,755 1999 228,006 24,294 14,759 10,802 279,720 - -----------------------------------------------------------------------------------------------------------------------
(1) Operating profit represents net sales less operating expenses which include all costs and expenses related to the Company's operations in each segment. General corporate expenses and other income earned at the corporate level are included in the corporate section. Interest expense is separately reported. The amount of the "Consolidated" line represents "Income from continuing operations before income taxes." (2) Specialty fastener operating loss for 2001 includes an impairment charge or $67.9 million related to the expected sale of Aerospace Rivet Manufacturers Corp., TCR and the rings businesses. (3) Specialty fastener operating income for 2000 includes charges of $5.5 million relating to the consolidation of two manufacturing facilities in England. (4) Corporate expense for 1999 includes a $0.9 million pretax charge to the allowance for notes receivable, and a $1.5 million pretax incentive compensation award. (5) Corporate interest and other income for 1999 includes a pretax net gain of $5.1 million for settlement of litigation claims against its insurance carriers for environmental matters and a $1.1 million gain on sale of marketable securities. 44 46 Export sales are defined as sales to customers in foreign countries by the Company's U.S. based operations. Export sales amounted to the following:
LOCATION 2001 2000 1999 Europe $23,097 $18,144 $15,680 Canada 8,377 10,788 9,170 Pacific and Far East 5,573 7,083 3,344 Mexico, Central and South America 3,559 4,348 2,267 Middle East 287 1,336 415 Other 304 1,627 275 ------- ------- ------- Total $41,197 $43,326 $31,151 ======= ======= =======
Net sales below show the geographic location of customers:
LOCATION 2001 2000 1999 United States $214,259 $191,206 $137,836 Germany 38,804 34,957 28,032 Other non-U.S 75,008 73,089 62,138 -------- -------- -------- Total $328,071 $299,252 $228,006 ======== ======== ========
Results set forth below for international operations represent sales and operating income of domestic and foreign based subsidiaries based on the location the product was shipped from:
2001 2000 1999 Net sales: Domestic operations $ 228,689 $ 233,038 $ 171,302 International operations (1) 99,382 66,214 56,704 --------- --------- --------- Net sales $ 328,071 $ 299,252 $ 228,006 ========= ========= ========= Operating (loss) income: Domestic operations (10,886) $ 42,711 $ 34,621 International operations (1) (16,347) (2,719) 3,743 --------- --------- --------- Operating (loss) income (27,233) 39,992 38,364 Interest expense (34,420) (19,945) (6,938) Corporate expense and other (22,169) (8,539) (7,132) --------- --------- --------- (Loss) income before taxes $ (83,822) $ 11,508 $ 24,294 --------- --------- --------- Identifiable assets: Domestic operations $ 288,009 $ 358,218 $ 193,690 International operations (1) 60,635 97,421 63,399 Corporate 44,605 27,116 22,631 --------- --------- --------- Total assets $ 393,249 $ 482,755 $ 279,720 ========= ========= =========
(1) International operations are primarily in Germany, Great Britain, Canada and Brazil. 45 47 NOTE 15 Subsequent Event On July 10, the Company completed the sale of its Breeze Industrial Products and Pebra hose clamp businesses in the U.S. and Germany, respectively, to Industrial Growth Partners and the current management team of Breeze/Pebra for $46.2 million. The proceeds of the sale were used to retire debt. NOTE 16 Unaudited Quarterly Financial Data
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL 2001 Net sales $ 84,365 $ 79,136 $ 78,297 $ 86,273 $ 328,071 Gross profit 21,849 19,440 19,132 26,020 86,441 Net loss (752) (1,755) (1,250) (69,213)(1) (72,970) ======== =========== ======== ======== =========== Basic loss per share: Net loss $ (0.12) $ (0.28) $ (0.20) $ (11.21) $ (11.83) ======== =========== ======== ======== =========== Diluted loss per share: Net loss $ (0.12) $ (0.28) $ (0.20) $ (11.21) $ (11.83) ======== =========== ======== ======== =========== 2000 Net sales $ 55,368 $ 62,903 $ 85,872 $ 95,109 $ 299,252 Gross profit 16,117 18,863 25,626 27,706 88,312 Income (loss) before extraordinary charge 2,158 (330)(2) 2,865 2,442(2) 7,135 Extraordinary charge for refinancing of debt -- (541) -- -- (541) Net income (loss) $ 2,158 $ (871) $ 2,865 $ 2,442 $ 6,594 ======== =========== ======== ======== =========== Basic earnings (loss) per share: Income (loss) before extraordinary charge $ 0.35 $ (0.05) $ 0.47 $ 0.40 $ 1.16 Extraordinary charge for refinancing of debt -- (0.09) -- -- (0.09) -------- ----------- -------- -------- ----------- Net income (loss) $ 0.35 $ (0.14) $ 0.47 $ 0.40 $ 1.07 ======== =========== ======== ======== =========== Diluted earnings (loss) per share: Income (loss) before extraordinary charge $ 0.35 $ (0.05) $ 0.47 $ 0.40 $ 1.16 Extraordinary charge for refinancing of debt -- (0.09) -- -- (0.09) -------- ----------- -------- -------- ----------- Net income (loss) $ 0.35 $ (0.14) $ 0.47 $ 0.40 $ 1.07 ======== =========== ======== ======== ===========
(1) Includes an impairment charge of $67.9 million related to a write-down of net carrying values of ARM, TCR and the rings businesses that are to be sold. It also includes a provision for impairment of corporate assets in the amount of $10.2 million for the write-off of a note receivable and equity ownership in an investee and write-down of certain assets expected to be liquidated. (2) The second and fourth quarters of 2000 include charges of $4.5 million and $1.1 million, respectively, relating to the consolidation of two manufacturing facilities in England. 46 48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is contained in the Registrant's Proxy Statement for the 2001 Annual Meeting of Shareholders and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is contained in the Registrant's Proxy Statement for the 2001 Annual Meeting of Shareholders and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is contained in the Registrant's Proxy Statement for the 2001 Annual Meeting of Shareholders and is incorporated herein by reference. For purposes of the calculation of the aggregate market value of voting stock held by non-affiliates, the Company has assumed that the shares of Common Stock beneficially owned by Dr. Arch C. Scurlock are not held by an affiliate of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is contained in the Registrant's Proxy Statement for the 2001 Annual Meeting of Shareholders and is incorporated herein by reference. 47 49 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements, Schedules and Exhibits: 1. Financial Statements: Consolidated Balance Sheets at March 31, 2001 and 2000 Statements of Consolidated Operations for the years ended March 31, 2001, 2000 and 1999 Statements of Consolidated Cash Flows for the years ended March 31, 2001, 2000 and 1999 Statements of Consolidated Stockholders' Equity for the years ended March 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements Independent Auditors' Report 2. Financial Statement Schedules Schedule II - Consolidated Valuation and Qualifying Accounts for the years ended March 31, 2001, 2000 and 1999 3. Exhibits: The exhibits listed on the accompanying Index to Exhibits are filed as part of this report. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the three-month period ended March 31, 2001. 48 50 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: July 13, 2001 TRANSTECHNOLOGY CORPORATION By: /s/ Michael J. Berthelot -------------------------------- Michael J. Berthelot, Chairman of the Board, President and Chief Executive Officer 49 51 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date /s/Michael J. Berthelot Chairman of the Board, President July 13, 2001 - -------------------------- and Chief Executive Officer MICHAEL J. BERTHELOT (Principal Executive Officer) /s/Joseph F. Spanier Vice President, Chief Financial Officer July 13, 2001 - -------------------------- and Treasurer JOSEPH F. SPANIER (Principal Financial and Accounting Officer) /s/Daniel Abramowitz Director July 13, 2001 - -------------------------- DANIEL ABRAMOWITZ /s/Gideon Argov Director July 13, 2001 - -------------------------- GIDEON ARGOV /s/Walter Belleville Director July 13, 2001 - -------------------------- WALTER BELLEVILLE /s/Thomas V. Chema Director July 13, 2001 - -------------------------- THOMAS V. CHEMA /s/John H. Dalton Director July 13, 2001 - -------------------------- JOHN H. DALTON /s/Michel Glouchevitch Director July 13, 2001 - -------------------------- MICHEL GLOUCHEVITCH /s/James A. Lawrence Director July 13, 2001 - -------------------------- JAMES A. LAWRENCE /s/William J. Recker Director July 13, 2001 - -------------------------- WILLIAM J. RECKER
50 52 TRANSTECHNOLOGY CORPORATION SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR YEARS ENDED MARCH 31, 2001, 2000 AND 1999 (IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING OF COSTS AND OTHER AT END DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD - ----------- ------------ ---------- ---------- ---------- --------- 2001 Allowances for doubtful accounts and sales returns $1,129 $1,165 $ -- $ 765 $1,529 Inventory reserves $5,781 $2,065 $ -- $2,082 $5,764 Environmental reserves $1,914 $1,158 $ -- $ 632 $2,440 Allowance for tax loss valuation $ -- $9,646 $ -- $ -- $9,646 2000 Allowances for doubtful accounts and sales returns $ 240 $ 778 $ 488 (A) $ 377 $1,129 Inventory reserves $4,715 $3,305 $ 466 $2,705 $5,781 Environmental reserves $2,140 $ 201 $ -- $ 427 $1,914 Allowance for tax loss valuation $ -- $ -- $ -- $ -- $ -- 1999 Allowances for doubtful accounts and sales returns $ 556 $ 230 $ 40 (B) $ 586 $ 240 Inventory reserves $6,382 $1,432 $ -- $3,099 $4,715 Environmental reserves $3,141 $ 479 $ -- $1,480 $2,140 Allowance for tax loss valuation $ -- $ -- $ -- $ -- $ --
(A) Amount represents balance acquired from Tinnerman and Ellison acquisitions. (B) Amount represents balances acquired from ARM and Norco, Inc. acquisitions. 51 53 INDEX TO EXHIBITS 3.1 Certificate of Incorporation of the Company. (1) 3.2 Bylaws of the Company Amended and Restated as of June 4, 2001. 10.1 1996 - 1998 Incentive Compensation Plan of the Company. (10) 10.2 Amended and Restated 1992 Long Term Incentive Plan of the Company. (2) 10.3 Form of Incentive Stock Option Agreement. (2) 10.4 Form of Director Stock Option Agreement. (3) 10.5 Form of Restricted Stock Award Agreement used under the Company's Amended and Restated 1992 Long Term Incentive Plan. (4) 10.6 Indemnification Agreement dated February 11, 1987 between the Company and each of its officers and directors. (5) 10.7 Executive Life Insurance Plan. (6) 10.8 Amended and Restated Credit Agreement dated as of June 30, 1995 and amended and restated as of July 24, 1998 between the Company and BankBoston, N.A. (13) 10.9 Amendment Agreement No. 1 to the Amended and Restated Credit Agreement dated as of August 21, 1998 between the Company and BankBoston, N.A. (13) 10.10 Amendment Agreement No. 2 to the Amended and Restated Credit Agreement dated as of November 27, 1998 between the Company and BankBoston, N.A. (13) 10.11 Amendment Agreement No. 3 to the Amended and Restated Credit Agreement dated as of December 23, 1998 between the Company and BankBoston, N.A. (13) 10.14 Form of Executive Severance Agreement with Officers of the Company. (10) 10.15 Form of Executive Severance Agreement with Subsidiary Presidents. (10) 10.16 Form of Executive Severance Agreement with Division Presidents. (10) 10.17 Form of Executive Severance Agreement with Overseas Subsidiary Managing Directors. (10) 10.18 Form of First Amendment to Executive Severance Agreement with Officers of the Company. (11) 10.19 Form of First Amendment to Executive Severance Agreement with Subsidiary Presidents. (11) 10.20 Form of First Amendment to Executive Severance Agreement with Division Presidents. (11) 10.21 Form of First Amendment to Executive Severance Agreement with Overseas Subsidiary Managing Directors. (11) 10.22 Form of Second Amendment to Executive Severance Agreement with Officers of the Company. 10.23 Form of Second Amendment to Executive Severance Agreement with Subsidiary Presidents. 10.24 Form of Second Amendment to Executive Severance Agreement with Division Presidents. 10.25 Form of Second Amendment to Executive Severance Agreement with Overseas Subsidiary Managing Directors.
52 54 10.26 Consulting Agreement with John Dalton. (13) 10.27 1999-2001 Incentive Compensation Plan of the Company. (13) 10.28 1998 Non-Employee Directors' Stock Option Plan of the Company. (12) 10.29 Form of Stock Option Agreement used under the Company's 1998 Non-Employee Directors' Stock Option Plan. (13) 10.30 1999 Long Term Incentive Plan of the Company. (13) 10.31 Form of Stock Option Agreement used under the Company's 1999 Long Term Incentive Plan. (15) 10.32 Form of Restricted Stock Award Agreement used under the Company's 1999 Long Term Incentive Plan. (15) 10.33 Second Amended and Restated Credit Agreement dated as of June 30, 1995, amended and restated as of July 24, 1998 and further amended and restated as of as of August 31, 1999 among TransTechnology Corporation, TransTechnology Seeger-Orbis GmbH, TransTechnology (GB) Limited, The Lenders referred to therein, BankBoston, N.A., acting through its London Branch, as Sterling Fronting Bank, BHF-Bank Aktiengesellschaft, as DM Fronting Bank, ABN AMRO Bank, N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent and BankBoston, N.A. as Administrative Agent and Issuing Bank. (14) 10.34 Securities Purchase Agreement dated as of August 29, 2000 by and among TransTechnology Corporation; J.H. Whitney Mezzanine Fund, L.P.; Albion Alliance Mezzanine Fund I, L.P.; Albion Alliance Mezzanine Fund II, L.P.; the Equitable Life Assurance Society of the United States; Fleet Corporate Finance, Inc.; and Citizens Capital, Inc. (16) 10.35(i) Warrant dated as of August 29, 2000 issued by TransTechnology Corporation to J.H. Whitney Mezzanine Fund, L.P. for 171,041 shares of TransTechnology common stock. (16) 10.35(ii) Schedule of other substantially similar warrants issued by TransTechnology Corporation to other Purchasers under the Securities Purchase Agreement. (16) 10.36 Registration Rights Agreement dated as of August 29, 2000 by and among TransTechnology Corporation and the Purchasers referred to therein. (16) 10.37 Subordinated Indebtedness Intercreditor Agreement dated as of August 29, 2000 among TransTechnology Corporation, the Existing Guarantors named therein, and the Purchasers referred to therein. (16) 10.38 Consent and Amendment Agreement No. 1 dated as of August 21, 2000 to that certain Second Amended and Restated Credit Agreement dated as June 30, 1995, and amended and restated as of July 24, 1998, and as further amended and restated as of August 31, 1999, by and among TransTechnology Corporation, TransTechnology Seeger-Orbis GmbH and TransTechnology (GB) Limited; Fleet National Bank and other Lenders referred to within; Fleet National Bank, acting through its London Branch as Sterling Fronting Bank; BHF-BANK Aktiengesellschaft, as DM Fronting Bank; ABN AMRO Bank N.V., as Syndication Agent; Bank One, NA (formerly known as the First National Bank of Chicago), as Documentation Agent and Fleet National Bank as Issuing Bank and Administrative Agent. (16) 10.39 Intercreditor and Subordination Agreement dated as of August 29, 2000 among Fleet National Bank, as administrative agent for the Lenders as defined therein, TransTechnology Corporation, and the Purchasers referred to therein. (16) 10.40 Indemnification Agreement dated January 13, 2000 between the Company and each of its officers and directors. (15)
53 55 10.41 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. (17) 10.42 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. (17) 10.43 Forbearance and Waiver Agreement dated as of March 29, 2001 between the Company, Fleet National Bank and the other Lenders referred to therein. 10.44 Consent and Amendment to Forbearance Agreement of Fleet National Bank and the other Lenders referred to therein dated June 25, 2001. 21 List of Subsidiaries of the Company.
- --------------------- (1) Incorporated by reference from the Company's Form 8-A Registration Statement No. 2-85599 dated February 9, 1987. (2) Incorporated by reference from the Company's Registration Statement on Form S-8 No. 333-45059 dated January 28, 1998. (3) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1995. (4) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1994. (5) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1987. (6) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1989. (7) Incorporated by reference from the Company's Report on Form 8-K filed on July 14, 1995. (8) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1996. (9) Incorporated by reference from the Company's Report on Form 8-K filed on April 29, 1997. (10) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1997. (11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the Quarter ended December 27, 1998. (12) Incorporated by reference from the Company's Registration Statement on Form S-8 No. 333-70877 dated January 20, 1999. (13) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1999. (14) Incorporated by reference from the Company's Report on Form 8-K filed on November 12, 1999. 54 56 (15) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 2000. (16) Incorporated by reference from the Company's Report on Form 8-K filed on September 14, 2000. (17) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the Quarter ended December 31, 2000. 55 EX-3.2 2 y50911ex3-2.txt AMENDED AND RESTATED BYLAWS 1 EXHIBIT 3.2 BYLAWS OF TRANSTECHNOLOGY CORPORATION (A Delaware Corporation) ARTICLE I Offices Section 1.01. REGISTERED OFFICE. The registered office of TransTechnology Corporation (the "Corporation") in the State of Delaware shall be at Corporation Trust Center, 100 West Tenth Street, in the City of Wilmington, County of New Castle, State of Delaware, and the name of the registered agent at that address shall be The Corporation Trust Company. Section 1.02. PRINCIPAL EXECUTIVE OFFICE. Effective as of May 10, 1996 the principal executive address of the corporation shall be located at 150 Allen Road, Liberty Corner, New Jersey 07938. The Board of Directors of the Corporation (the "Board") may change the location of said principal executive office. Section 1.03. OTHER OFFICES. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require. ARTICLE II Meetings of Stockholders Section 2.01. ANNUAL MEETINGS. The annual meeting of stockholders of the Corporation shall be held on such date and at such time as the Board shall determine. At each annual meeting of stockholders, directors shall be elected in accordance with the provisions of Section 3.03 and any other proper business may be transacted. Section 2.02. SPECIAL MEETINGS. Special meetings of stockholders for any purpose may be called at any time by a majority of the Board, the Chairman of the Board, the President or the Secretary. Special meetings may not be called by any other person. Each special meeting shall be held at such date and time as is requested by the person or persons calling the meeting, within the limits fixed by law. Section 2.03. PLACE OF MEETINGS. Each annual or special meeting of stockholders shall be held at such location as may be determined by the Board or, if no such determination is made, at such place as may be determined by the Chairman of the Board. If no location is so determined, any annual or special meeting shall be held at the principal executive office of the Corporation. Section 2.04. NOTICE OF MEETINGS. Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his post-office address furnished by him to the Secretary for such purpose or, if he shall not have furnished to the Secretary his address for such purpose, then at his post-office address last known to the Secretary, or by transmitting a notice thereof to him at such address by telegraph, cable or wireless. 2 Except as otherwise expressly required by law, the notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder to whom notice may be omitted pursuant to applicable Delaware law or who shall have waived such notice and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. Section 2.05. CONDUCT OF MEETINGS. All annual and special meetings of stockholders shall be conducted in accordance with such rules and procedures as the Board may determine subject to the requirements of applicable law and, as to matters not governed by such rules and procedures, as the chairman of such meeting shall determine. The chairman of any annual or special meeting of stockholders shall be the Chairman of the Board if he is willing, and if not, then the President. The Secretary, or in the absence of the Secretary, a person designated by the Chairman of the Board or President, as the case may be, shall act as secretary of the meeting. Section 2.06. QUORUM. At any meeting of stockholders, the presence, in person or by proxy, of the holders of record of a majority of shares then issued and outstanding and entitled to vote at the meeting shall constitute a quorum for the transaction of business; provided, however, that this Section 2.06 shall not affect any different requirement which may exist under statute, pursuant to the rights of any authorized class or series of stock, or under the Certificate of Incorporation of the Corporation (the "Certificate") for the vote necessary for the adoption of any measure governed thereby. In the absence of a quorum, the stockholders present in person or by proxy, by majority vote and without further notice, may adjourn the meeting from time to time until a quorum is attained. At any reconvened meeting following such an adjournment at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 2.07. VOTES REQUIRED. A majority of the votes cast at a duly called meeting of stockholders, at which a quorum is present, shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless the vote of a greater or different number thereof is required by statute, by the rights of any authorized class of stock or by the Certificate. Unless the Certificate or a resolution of the Board of Directors adopted in connection with the issuance of shares of any class or series of stock provides for a greater or lesser number of votes per share, or limits or denies voting rights, each outstanding share of stock, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Section 2.08. PROXIES. A stockholder may vote the shares owned of record by him either in person or by proxy executed in writing (which shall include writings sent by telex, telegraph, cable or facsimile transmission) by the stockholder himself or by his duly authorized attorney-in-fact. No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be in writing, subscribed by the stockholder or his duly authorized attorney-in-fact, and dated, but it need not be sealed, witnessed or acknowledged. Section 2.09. LIST OF STOCKHOLDERS. The Secretary of the Corporation shall prepare and make (or cause to be prepared and made), at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical BYLAWS-Page 2 3 order and showing the address of, and the number of shares registered in the name of, each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the duration thereof, and may be inspected by any stockholder who is present. Section 2.10. INSPECTORS OF ELECTION. In advance of any meeting of stockholders, the Board may appoint Inspectors of Election to act at such meeting or at any adjournments thereof. If such Inspectors are not so appointed or fail or refuse to act, the chairman of any such meeting may (and, upon the demand of any stockholder or stockholder's proxy, shall) make such an appointment. The number of Inspectors of Election shall be one (1) or three (3). If there are three (3) Inspectors of Election, the decision, act or certificate of a majority shall be effective and shall represent the decision, act or certificate of all. No such Inspector need be a stockholder of the Corporation. The Inspectors of Election shall determine the number of shares outstanding, the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; they shall receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close and determine the result; and finally, they shall do such acts as may be proper to conduct the election or vote with fairness to all stockholders. On request, the Inspectors shall make a report in writing to the secretary of the meeting concerning any challenge, question or other matter as may have been determined by them and shall execute and deliver to such secretary a certificate of any fact found by them. ARTICLE III Directors Section 3.01. GENERAL POWERS. Subject to any requirements in the Certificate or the Bylaws, and of applicable law as to action which must be authorized or approved by the stockholders, any and all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be under the direction of, the Board to the fullest extent permitted by law. Without limiting the generality of the foregoing, it is hereby expressly declared that the directors shall have the following powers, to wit: First - To select and remove all the officers, agents and employees of the Corporation, prescribe such powers and duties for them as may not be inconsistent with law, with the Certificate or the Bylaws and fix their compensation. Second - To conduct, manage and control the affairs and business of the Corporation, and to make such rules and regulations therefor not inconsistent with law, or with the Certificate or the Bylaws, as they may deem best. Third - To change the location of the registered office of the Corporation in Section 1.01; to change the principal executive office for the transaction of the business of the Corporation from one location to another as provided in Section 1.02; to fix and locate, from time to time, one or more subsidiary offices of the Corporation within or BYLAWS-Page 3 4 without the State of Delaware as provided in Section 1.03; to designate any place within or without the State of Delaware for the holding of any stockholders' meeting; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates, from time to time, and in their judgment as they may deem best; provided, however, that such seal and such certificates shall at all times comply with the law. Fourth - To authorize the issuance of shares of stock of the Corporation, from time to time, upon such terms and for such considerations as may be lawful. Fifth - To borrow money and incur indebtedness for the purposes of the Corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust and securities therefor. Section 3.02. NUMBER AND TERM OF OFFICE. Effective as of June 4, 2001, the authorized number of directors of the corporation shall be ten (10) until this section is amended by a resolution duly adopted by the Board or by the stockholders, in either case in accordance with the provisions of Article V of the Certificate. Directors need not be stockholders. Each of the directors shall hold office until his successor shall have been duly elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided. Section 3.03. ELECTION OF DIRECTORS. The directors shall be elected by the stockholders of the Corporation, and at each election the persons receiving the greater number of votes, up to the number of directors then to be elected, shall be the persons then elected. The election of directors is subject to any provisions contained in the Certificate relating thereto. Section 3.04. RESIGNATIONS. Any director may resign at any time by giving written notice to the Board or to the Secretary. Any such resignation shall take effect at the time specified therein, or, if the time is not specified, it shall take effect immediately upon receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.05. VACANCIES. Except as otherwise provided in the Certificate, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office. Section 3.06. PLACE OF MEETING, ETC. The Board or any committee thereof may hold any of its meetings at any place, within or without the State of Delaware, as the Board or such committee may, from time to time, by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board or such committee can hear each other, and such participation shall constitute presence in person at such meeting. BYLAWS-Page 4 5 Section 3.07. FIRST MEETING. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required. Section 3.08. REGULAR MEETING. Regular meetings of the Board may be held at such times as the Board shall, from time to time, by resolution determine. If any date fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given. Section 3.09. SPECIAL MEETING. Special meetings of the Board for any purpose shall be called at any time by the Chairman of the Board or, if he is absent or unable or refuses to act, by the President or, if he is absent or unable or refuses to act, by any Vice President, Secretary or by any two directors. For any special meeting of the Board of Directors, the Executive Committee, if such a committee has been created pursuant to Section 3.13 hereof, may by resolution change the location of that meeting, provided the Executive Committee resolution to that effect is adopted not later than the later of a) five days before the called date of the meeting, or b) one day after the receipt of the call of the meeting by the Chairman of the Executive Committee. Except as otherwise provided by law or by the Bylaws, written notice of the time and place of special meetings shall be delivered personally to each director, or sent to each director by mail or by other form of written communication, charges prepaid, addressed to him at his address as it is shown upon the records of the Corporation, or if it is not so shown on such records and is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed or telegraphed, it shall be deposited in the United States mail or delivered to the telegraph company in the county in which the principal executive office for the transaction of business of the Corporation is located at least forty-eight hours prior to the time of the holding of the meeting. In case such notice is delivered personally as above provided, it shall be so delivered at least 24 hours prior to the time of the holding of the meeting. Such mailing, telegraphing or delivery as above provided shall be due, legal and personal notice to such director. Except where otherwise required by law or by the Bylaws, notice of the purpose of a special meeting need not be given. Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 3.10. QUORUM AND MANNER OF ACTING. Except as otherwise provided in the Bylaws, the Certificate or by applicable law, the presence of a majority of the total number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same, from time to time, until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such. Section 3.11. ACTION BY CONSENT. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if consent in writing is given thereto by all members of the Board or of such committee, as the case may be, and such consent is filed with the minutes of proceedings of the Board or committee. Section 3.12. COMPENSATION. Directors who are not employees of the Corporation or any of its subsidiaries may receive an annual fee for their services as directors in an amount fixed by resolution of the Board, and in addition, a fixed fee, with or without expenses of attendance, may be allowed by resolution of the Board for attendance at each meeting, including each meeting of a BYLAWS-Page 5 6 committee of the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. Section 3.13. COMMITTEES. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board and subject to any restrictions or limitations on the delegation of power and authority imposed by applicable law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Any such committee may keep written minutes of its meetings and shall report on its meetings to the Board at the next regular meeting of the Board. Section 3.14 MEETINGS OF COMMITTEES. Each committee of the Board shall fix its own rules of procedure consist with the provisions of applicable law and of any resolutions of the Board governing such committee. Each committee shall meet as provided by such rules or such resolution of the Board. Unless otherwise provided by such rules or by such resolution, the provisions of the Bylaws under Article III entitled "Directors" relating to the place of holding meetings and the notice required for meetings of the Board of Directors shall govern the place of meetings and notice of meetings for committees of the Board. A majority of the members of each committee shall constitute a quorum thereof, except that when a committee consists of 1 member, then the 1 member shall constitute a quorum. In the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present and the meeting may be held as adjourned without further notice or waiver. Except in cases where it is otherwise provided by the rules of such committee or by a resolution of the Board, the vote of a majority of the members present at a duly constituted meeting at which a quorum is present shall be sufficient to pass any measure by the committee. ARTICLE IV Officers Section 4.01 DESIGNATION, ELECTION AND TERM OF OFFICE. The Corporation shall have a Vice-Chairman of the Board, a President, a chief financial officer, such vice presidents as the Board deems appropriate, and a Secretary. These officers shall be elected annually by the Board at the organizational meeting immediately following the annual meeting of stockholders, and each such officer shall hold office until the corresponding meeting of the Board in the next year and until his successor shall have been elected and qualified or until his earlier resignation, death or removal. In its discretion, the Board may leave unfilled for any period it may fix any office to the ext allowed by law. Any vacancy in any of the above offices may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.02. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside, if present and willing, at all stockholders and Board of Directors' meetings. In addition, he shall have such other duties as may, from time-to-time, be assigned to him by the Board of Directors. Section 4.03. VICE-CHAIRMAN OF THE BOARD. The Vice-Chairman of the Board shall, in the absence or inability of the Chairman of the Board to perform such duties, assume the duties and responsibilities of the Chairman of the Board as defined in Section 4.02 of these Bylaws; and shall have such other duties as may, from time-to-time, be assigned him by the Board of Directors. BYLAWS-Page 6 7 Section 4.04. PRESIDENT. Except to the extent that the Bylaws or the Board of Directors assign specific powers and duties to the Chairman of the Board and/or the Vice-Chairman of the Board, the President shall be the Corporation's General Manager and Chief Executive Officer and, subject to the control of the Board of Directors, shall have general charge, supervision and control over the Corporation's assets, businesses, operations and its officers. The managerial powers and duties of the President include, but are not limited to, all of the general powers and duties of management usually vested in the office of a president of a corporation, and the making of reports to the Board of Directors and stockholders. Section 4.05. EXECUTIVE VICE PRESIDENT. The Board may appoint an Executive Vice President, who shall be accountable to the President. He shall perform such duties as may be assigned to him, from time to time, by the Board in its enabling resolution and by the President. Section 4.06. VICE PRESIDENT/CHIEF FINANCIAL OFFICER. The chief financial officer of the Corporation shall be a vice president. He shall report to the President and be responsible for the management and supervision of all financial matters and for the financial growth and stability of the Corporation. In addition, he shall have the duties usually vested in the treasurer's office of a corporation. Section 4.07. VICE PRESIDENTS. Vice Presidents of the Corporation that are elected by the Board shall perform such duties as may be assigned to them, from time to time, by the President. Such vice presidents may be designated as Group Vice Presidents, Senior Vice Presidents or other appropriate designations given by the Board in its enabling resolutions. Section 4.08. SECRETARY. The Secretary shall keep the minutes of the meetings of the stockholders, the Board and all committee meetings. He shall be the custodian of the corporate seal and shall affix it to all documents which he is authorized by law or the Board to sign and seal. He also shall perform such other duties as may be assigned to him, from time to time, by the Chairman of the Board or the Board. Section 4.09. OTHER OFFICERS. The Board may also elect one or more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers. Section 4.10. WHEN DUTIES OF AN OFFICER MAY BE DELEGATED. In the case of the absence or disability of an officer or for any other reason that may seem sufficient to the Board, the Board, or any officer designated by it, or the Chairman of the Board may, for the time of the absence or disability, delegate such officer's duties and powers to any other officer of the Corporation. Section 4.11. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Board, to the Chairman of the Board, to the President, or to the Secretary. Any such resignation shall take effect at the time specified therein unless otherwise determined by the Board. The acceptance of a resignation by the Corporation shall not be necessary to make it effective. Section 4.12. REMOVAL. Any officer of the Corporation may be removed, with or without cause, by the affirmative vote of a majority of the entire Board. ARTICLE V Contracts, Checks, Drafts, Bank Accounts, Etc. Section 5.01. EXECUTION OF CONTRACTS. The Board, except as otherwise provided in the Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or BYLAWS-Page 7 8 execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by the Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. Section 5.02. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such officer, assistant, agent or attorney shall give such bond, if any, as the Board may require. Section 5.03. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited, from time to time, to the credit of the Corporation in such banks, trust companies or other depositaries as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such powers shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the President, any Vice President or the chief financial officer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, sign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation. Section 5.04. GENERAL AND SPECIAL BANK ACCOUNTS. The Board may, from time to time, authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may select or as may be selected by any officer, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of the Bylaws as it may deem expedient. ARTICLE VI Indemnification Except to the extent prohibited by then applicable law, the Corporation (i) shall indemnify and hold harmless each person who was or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise (any such action, suit or proceeding being hereafter in this Article referred to as a "proceeding"), by reason of the fact that such person is or was a director or officer of the Corporation, is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or was a director or officer of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation; and (ii) may indemnify and hold harmless each person who was or is a party to, or is threatened to be made a party to, any such proceeding by reason of the fact that such person is or was an employee or agent of the Corporation, is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or was an employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of any enterprise at the request of such corporation (any such person being hereafter in the Article referred to as an "indemnifiable party"). Where required by law, the indemnification provided for in this Article shall be made only as authorized in the specific case upon a determination, in the manner provided by law, that the indemnification of BYLAWS-Page 8 9 the indemnifiable party is proper in the circumstances. The Corporation shall advance to indemnifiable parties expenses incurred in defending any proceeding prior to the final disposition thereof except to the ext prohibited by then applicable law. This Article shall create a right of indemnification for each such indemnifiable party whether or not the proceeding to which the indemnification relates arose in whole or in part prior to adoption of this Article (or the adoption of the comparable provisions of the Bylaws of the Corporation's predecessor corporation) and, in the event of the death of an indemnifiable party, such right shall extend to such indemnifiable party's legal representatives. The right of indemnification hereby given shall not be exclusive of any right such indemnifiable party may have, whether by law or under any agreement, insurance policy, vote of the Board or stockholders, or otherwise. The Corporation shall have power to purchase and maintain insurance on behalf of any indemnifiable party against any liability asserted against or incurred by the indemnifiable party in such capacity or arising out of the indemnifiable party's status as such whether or not the Corporation would have the power to indemnify the indemnifiable party against such liability. ARTICLE VII Stock Section 7.01. CERTIFICATES. Except as otherwise provided by law, each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number and class (and series, if appropriate) of shares of stock owned by him in the Corporation. Each certificate shall be signed in the name of the Corporation by the Chairman of the Board and the President, together with the Secretary. Any or all of the signatures on any certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. Section 7.02. TRANSFER OF SHARES. Shares of stock shall be transferable on the books of the Corporation only by the holder thereof, in person or by his duly authorized attorney, upon the surrender of the certificate representing the shares to be transferred, properly endorsed, to the Corporation's registrar if the Corporation has a registrar. The Board shall have power and authority to make such other rules and regulations concerning the issue, transfer and registration of certificates of the Corporation's stock as it may deem expedient. Section 7.03. TRANSFER AGENTS AND REGISTRARS. The Corporation may have one or more transfer agents and one or more registrars of its stock whose respective duties the Board or the Secretary may, from time to time, define. No certificate of stock shall be valid until countersigned by a transfer agent, if the Corporation has a transfer agent, or until registered by a registrar, if the Corporation has a registrar. The duties of transfer agent and registrar may be combined. Section 7.04. STOCK LEDGERS. Original or duplicate stock ledgers, containing the names and addresses of the stockholders of the Corporation and the number of shares of each class of stock held by them, shall be kept at the principal executive office of the Corporation or at the office of its transfer agent or registrar. Section 7.05. RECORD DATES. The Board shall fix, in advance, a date as the record date for the purpose of determining stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any BYLAWS-Page 9 10 change, conversion or exchange of stock, or in order to make a determination of stockholders for any other proper purpose. Such date in any case shall be not more than sixty (60) days, and in case of a meeting of stockholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board. Section 7.06. NEW CERTIFICATES. In case any certificate of stock is lost, stolen, mutilated or destroyed, the Board may authorize the issuance of a new certificate in place thereof upon such terms and conditions as it may deem advisable; or the Board may delegate such power to the Secretary; but the Board or Secretary or agents, in their discretion, may refuse to issue such a new certificate unless the Corporation is ordered to do so by a court of competent jurisdiction. ARTICLE VIII General Provisions Section 8.01. DIVIDENDS. Subject to limitations contained in Delaware Law and the Certificate, the Board may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, securities of the Corporation or other property. Section 8.02. VOTING OF STOCK IN OTHER CORPORATIONS. Any shares of stock in other corporations or associations which may, from time to time, be held by the Corporation, may be represented and voted at any of the stockholders' meetings thereof by the Chairman of the Board, the President or the Secretary. The Board, however, may by resolution appoint some other person or persons to vote such shares, in which case such person or persons shall be entitled to vote such shares upon the production of a certified copy of such resolution. Section 8.03. AMENDMENTS. These Bylaws may be adopted, repealed, rescinded, altered or amended only as provided in the Certificate. Amended: June 4, 2001 BYLAWS-Page 10 EX-10.22 3 y50911ex10-22.txt SECOND AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT 1 EXHIBIT 10.22 AMENDMENT NO. 2 TO EXECUTIVE SEVERANCE AGREEMENT (THE "AGREEMENT") Reference is made to the Agreement between you (the "Executive") and the undersigned Corporation with respect to certain severance arrangements which apply only in the event that a Change in Control of the Corporation occurs after the date of the Agreement, as the Agreement was amended by Amendment No. 1. Capitalized terms used herein shall have the meanings given to them in the Agreement unless expressly provided otherwise. As an inducement to the Executive to continue his employment with the Corporation, the Agreement is hereby amended as follows: A) Paragraph 18 of the Agreement is amended in its entirety to state: Absent a change in control or unless extended in writing by the parties hereto, this Agreement shall expire on January 31, 2003. B) The second sentence of Paragraph 2 is deleted in its entirety and the following provision substituted therefor: As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date, less any amounts remaining to be paid by the Executive for such restricted stock or the exercise of such stock options. C) The last two (2) lines of Paragraph 5.a. are deleted in their entirety and the following provision substituted therefor: employment (i) for Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; D) Paragraph 5.e. is deleted in its entirety and the following provision substituted therefor: The failure by the Corporation to continue to provide the Executive with compensation and benefits provided as of the date hereof or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant or the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; 2 E) The last two (2) lines of Paragraph 6.e. are deleted in their entirety and the following provision substituted therefor: interest paid by the Executive (the "Excise Tax") shall be reimbursed to the Executive by the Corporation. In addition, the Executive shall be entitled to receive an additional payment or payments (a "Gross Up Payment") in an amount such that, after payment by the Executive of all taxes (including federal, state and local taxes and any interest or penalties imposed with respect to such taxes and including any Excise Tax) imposed upon the Gross Up Payment, the Executive and/or his estate collectively retain (or have withheld and credited on his behalf for tax purposes) an amount of the Gross Up Payment equal to the Excise Tax. This Amendment No. 2, extending the term and obligations of the Agreement and Amendment No. 1 thereto, and the transactions contemplated hereby and thereby has been duly approved and authorized by the Board of Directors of the Corporation at a Regular Meeting on January 18, 2001. The parties agree that this Amendment No. 2 shall effectively revive all the conditions and obligations imposed on the parties by the Agreement, as amended by Amendment No. 1 and any rights which either party may have by virtue of the former agreements shall be adopted as a part of this Amendment No. 2 and considered in full force and effect, except as specifically provided in this Amendment No. 2. IN WITNESS WHEREOF, this Amendment No. 2 is executed by or on behalf of the undersigned as of January , 2001. By: -------------------------------------- Accepted and agreed to: - -------------------------------- EX-10.23 4 y50911ex10-23.txt SECOND AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT 1 EXHIBIT 10.23 AMENDMENT NO. 2 TO EXECUTIVE SEVERANCE AGREEMENT (THE "AGREEMENT") Reference is made to the Agreement between you (the "Executive") and the undersigned Employer with respect to certain severance arrangements which apply only in the event that a Change in Control of the Corporation occurs after the date of the Agreement, as the Agreement was amended by Amendment No. 1. Capitalized terms used herein shall have the meanings given to them in the Agreement unless expressly provided otherwise. As an inducement to the Executive to continue his employment with the Employer, the Agreement is hereby amended as follows: A) Paragraph 18 of the Agreement is amended in its entirety to state: Absent a change in control or unless extended in writing by the parties hereto, this Agreement shall expire on January 31, 2003. B) The second sentence of Paragraph 2 is deleted in its entirety and the following provision substituted therefor: As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date, less any amounts remaining to be paid by the Executive for such restricted stock or the exercise of such stock options. C) The last two (2) lines of Paragraph 5.a. are deleted in their entirety and the following provision substituted therefor: employment (i) for Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; D) Paragraph 5.e. is deleted in its entirety and the following provision substituted therefor: The failure by the Employer to continue to provide the Executive with compensation and benefits provided as of the date hereof or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant or the taking of any action by the Employer which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; 2 19 E) The last two (2) lines of Paragraph 6.e. are deleted in their entirety and the following provision substituted therefor: interest paid by the Executive (the "Excise Tax") shall be reimbursed to the Executive by the Employer. In addition, the Executive shall be entitled to receive an additional payment or payments (a "Gross Up Payment") in an amount such that, after payment by the Executive of all taxes (including federal, state and local taxes and any interest or penalties imposed with respect to such taxes and including any Excise Tax) imposed upon the Gross Up Payment, the Executive and/or his estate collectively retain (or have withheld and credited on his behalf for tax purposes) an amount of the Gross Up Payment equal to the Excise Tax. This Amendment No. 2, extending the term and obligations of the Agreement and Amendment No. 1 thereto, and the transactions contemplated hereby and thereby has been duly approved and authorized by the Board of Directors of the Corporation at a Regular Meeting on January 18, 2001. The parties agree that this Amendment No. 2 shall effectively revive all the conditions and obligations imposed on the parties by the Agreement, as amended by Amendment No. 1 and any rights which either party may have by virtue of the former agreements shall be adopted as a part of this Amendment No. 2 and considered in full force and effect, except as specifically provided in this Amendment No. 2. IN WITNESS WHEREOF, this Amendment No. 2 is executed by or on behalf of the undersigned as of January , 2001. By: ------------------------------------- Accepted and agreed to: - ----------------------------------- EX-10.24 5 y50911ex10-24.txt SECOND AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT 1 EXHIBIT 10.24 AMENDMENT NO. 2 TO EXECUTIVE SEVERANCE AGREEMENT (THE "AGREEMENT") Reference is made to the Agreement between you (the "Executive") and the undersigned Corporation with respect to certain severance arrangements which apply only in the event that a Change in Control of the Corporation occurs after the date of the Agreement, as the Agreement was amended by Amendment No. 1. Capitalized terms used herein shall have the meanings given to them in the Agreement unless expressly provided otherwise. As an inducement to the Executive to continue his employment with the Corporation, the Agreement is hereby amended as follows: A) Paragraph 18 of the Agreement is amended in its entirety to state: Absent a change in control or unless extended in writing by the parties hereto, this Agreement shall expire on January 31, 2003. B) The second sentence of Paragraph 2 is deleted in its entirety and the following provision substituted therefor: As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date, less any amounts remaining to be paid by the Executive for such restricted stock or the exercise of such stock options. C) The last two (2) lines of Paragraph 5.a. are deleted in their entirety and the following provision substituted therefor: employment (i) for Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; D) Paragraph 5.e. is deleted in its entirety and the following provision substituted therefor: The failure by the Corporation to continue to provide the Executive with compensation and benefits provided as of the date hereof or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant or the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; 2 E) The last two (2) lines of Paragraph 6.e. are deleted in their entirety and the following provision substituted therefor: interest paid by the Executive (the "Excise Tax") shall be reimbursed to the Executive by the Corporation. In addition, the Executive shall be entitled to receive an additional payment or payments (a "Gross Up Payment") in an amount such that, after payment by the Executive of all taxes (including federal, state and local taxes and any interest or penalties imposed with respect to such taxes and including any Excise Tax) imposed upon the Gross Up Payment, the Executive and/or his estate collectively retain (or have withheld and credited on his behalf for tax purposes) an amount of the Gross Up Payment equal to the Excise Tax. This Amendment No. 2, extending the term and obligations of the Agreement and Amendment No. 1 thereto, and the transactions contemplated hereby and thereby has been duly approved and authorized by the Board of Directors of the Corporation at a Regular Meeting on January 18, 2001. The parties agree that this Amendment No. 2 shall effectively revive all the conditions and obligations imposed on the parties by the Agreement, as amended by Amendment No. 1 and any rights which either party may have by virtue of the former agreements shall be adopted as a part of this Amendment No. 2 and considered in full force and effect, except as specifically provided in this Amendment No. 2. IN WITNESS WHEREOF, this Amendment No. 2 is executed by or on behalf of the undersigned as of January , 2001. By: ------------------------------------ Accepted and agreed to: - ------------------------------------ EX-10.25 6 y50911ex10-25.txt SECOND AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT 1 EXHIBIT 10.25 AMENDMENT NO. 2 TO EXECUTIVE SEVERANCE AGREEMENT (THE "AGREEMENT") Reference is made to the Agreement between you (the "Executive") and the undersigned Employer with respect to certain severance arrangements which apply only in the event that a Change in Control of the Corporation occurs after the date of the Agreement, as the Agreement was amended by Amendment No. 1. Capitalized terms used herein shall have the meanings given to them in the Agreement unless expressly provided otherwise. As an inducement to the Executive to continue his employment with the Employer, the Agreement is hereby amended as follows: A) Paragraph 16 of the Agreement is amended in its entirety to state: Absent a change in control or unless extended in writing by the parties hereto, this Agreement shall expire on January 31, 2003. B) The second sentence of Paragraph 2 is deleted in its entirety and the following provision substituted therefor: As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date, less any amounts remaining to be paid by the Executive for such restricted stock or the exercise of such stock options. C) The last two (2) lines of Paragraph 5.a. are deleted in their entirety and the following provision substituted therefor: employment (i) for Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; D) Paragraph 5.e. is deleted in its entirety and the following provision substituted therefor: The failure by the Employer to continue to provide the Executive with compensation and benefits provided as of the date hereof or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant or the taking of any action by the Employer which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; 2 This Amendment No. 2, extending the term and obligations of the Agreement and Amendment No. 1 thereto, and the transactions contemplated hereby and thereby has been duly approved and authorized by the Board of Directors of the Corporation at a Regular Meeting on January 18, 2001. The parties agree that this Amendment No. 2 shall effectively revive all the conditions and obligations imposed on the parties by the Agreement, as amended by Amendment No. 1 and any rights which either party may have by virtue of the former agreements shall be adopted as a part of this Amendment No. 2 and considered in full force and effect, except as specifically provided in this Amendment No. 2. IN WITNESS WHEREOF, this Amendment No. 2 is executed by or on behalf of the undersigned as of January , 2001. - By: -------------------------------------- Accepted and agreed to: - -------------------------------------- EX-10.43 7 y50911ex10-43.txt FORBEARANCE AND WAIVER AGREEMENT 1 EXHIBIT 10.43 FORBEARANCE AND WAIVER AGREEMENT This FORBEARANCE AND WAIVER AGREEMENT, dated as of March 29, 2001 (this "Agreement"), 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 (as hereinafter defined) (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"), and (f) FNB as Administrative Agent for the Lenders, the Fronting Banks and the Issuing Bank (in such capacity, the "Administrative Agent"). WHEREAS, the Borrowers, the Lenders, the Fronting Banks, the Issuing Bank, ABN AMRO Bank N.V., as Syndication Agent, Bank One, NA, as Documentation Agent, and the Administrative Agent are parties to 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, as further amended by that certain Amendment Agreement No. 2 dated as of December 29, 2000, and as further amended by that certain Amendment Agreement No. 3 ("Amendment No. 3") dated as of January 31, 2001 (as so amended and restated, the "Credit Agreement"). Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in the Credit Agreement; WHEREAS, pursuant to the terms of Amendment No. 3, 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, pursuant to the terms of Amendment No. 3 the forbearance period will end on March 29, 2001; WHEREAS, the Borrowers have requested that the Lenders and the Administrative Agent extend such forbearance period; 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; WHEREAS, TransTechnology has notified the Administrative Agent and the Lenders of TransTechnology's desire to cause Limited to become a "Wholly-Owned Subsidiary Guarantor" as defined in the Senior Subordinated Loan Agreement, so that 2 - 2 - certain transactions between TransTechnology and Limited will not be subject to the restrictions on such transactions contained in Section9.2 of the Senior Subordinated Loan Agreement; and WHEREAS, the parties hereto agree that in order for Limited to become a "Wholly-Owned Subsidiary Guarantor" as defined in the Senior Subordinated Loan Agreement, Limited must first guaranty all of the Obligations of the Borrowers (other than Limited) under the Credit Agreement and that such guaranty will require the Borrowers to waive certain rights contained in Sections7.3 and 7.4 of the Credit Agreement; NOW, THEREFORE, in consideration of the foregoing premises, the parties hereto hereby agree as follows: SECTION 1. 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, other than the failure to comply with the provisions of SectionSection11.1 - 11.5 of the Credit Agreement for the period commencing on January 1, 2001 and ending on September 27, 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 to (a) make prepayments of principal on account of the Term Loan of, and (b) prepay and permanently reduce the Revolving Credit Loans by an aggregate amount of not less than Fifty Million Dollars ($50,000,000) (the "$50,000,000 Prepayment") prior to June 27, 2001, (iv) the failure of the Borrowers after the date hereof to comply with the financial covenant set forth in Section3(a) hereof, (v) the failure of the Borrowers or their Subsidiaries to comply with any term set forth in this Agreement, (vi) 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, (vii) 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 Agreement or any documents, agreements or instruments executed in connection with any of the foregoing, (viii) 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, and (ix) September 27, 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 3 - 3 - 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 Section5.2(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 2. ASSET SALES. The Borrowers may from time to time request that the Lenders consent to sales of certain assets of the Borrowers and their Subsidiaries. In connection with any such request the Borrowers will provide the Administrative Agent and the Lenders with (a) a summary of the proposed transaction, (b) all documents relating to such sale, including, but not limited to, any fairness opinions issued in connection with such sale, and (c) new monthly balance sheets and cash flow projections taking into account the effect of the closing of any such proposed sale including monthly projections relating to usage of Revolving Credit Loans going forward. The Administrative Agent and the Lenders will promptly consider any such request, but shall have no obligation to consent to any such request. The Borrowers hereby agree that the net proceeds from any such asset sales shall be used to permanently reduce the Loans. SECTION 3. 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) Financial Covenant. During the period beginning on May 30, 2001 and ending on the Forbearance Termination Date, at no time shall Modified Consolidated EBITDA as of the last day of each month be less than the amount set forth on Schedule 3(a) attached hereto for such period. As used herein "Modified Consolidated EBITDA" shall mean Consolidated EBITDA with "Reference Periods" beginning on April 1, 2001 and ending on the last day of each month (commencing with the month ending May 30, 2001) plus the forbearance fees paid to the Lenders pursuant to Section10 hereof during such period plus the expenses incurred in accordance with SectionSection3(g) and (i) hereof during such period. The Borrowers shall deliver to the Administrative Agent and the Lenders evidence of compliance with this paragraph (a) simultaneously with the delivery of the monthly financial statements required by Section9.4(d) of the Credit Agreement. (b) Revolver Sublimit. Notwithstanding anything to the contrary stated in Section2 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 $162,500,000 (such amount, the "Revolver Sublimit"). If the Revolving Facility Usage at any time exceeds the Revolver Sublimit in effect at such time, 4 - 4 - 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 SectionSection2.2, 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. (c) Letters of Credit. Notwithstanding anything to the contrary stated in Section5 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 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. (d) Applicable Margin. Notwithstanding anything to the contrary stated in the definition of "Applicable Margin" in the Credit Agreement or in Section6.11 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 Section6.11 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. (e) Eurocurrency Rate Loans / Sterling Facility Loans. Notwithstanding anything to the contrary stated in the definition of "Interest Period" in the Credit Agreement or in Section2.7, Section3.5 or Section4.5 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 (i) June 27, 2001 unless the $50,000,000 Prepayment has occurred, and (ii) September 27, 2001 even if the $50,000,000 Prepayment has occurred. Further, the Sterling Fronting Bank may make Sterling Facility Loans denominated in Dollars or Euros with interest on such Sterling Facility Loans to be calculated and shared with the Lenders in a manner consistent with Section3 of the Credit Agreement. (f) Distributions. Notwithstanding anything to the contrary stated in Section10.4 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. 5 - 5 - (g) 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 to be 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. (h) 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. (i) 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 Agreement or which otherwise are required to be paid under the Loan Documents, including without limitation any reasonable and customary fees and expenses incurred pursuant to Section3(h) hereof. (j) 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 Agreement upon the terms set forth herein. (k) Delivery of Documents. As a condition to the Lenders allowing Limited to become a "Wholly-Owned Subsidiary Guarantor" as defined in the Senior Subordinated Loan Agreement, (i) the Borrowers shall deliver to the Administrative Agent, no later than April 6, 2001, the items set forth on Exhibit A attached hereto, all of which shall be in form and substance reasonably satisfactory to the Administrative Agent and its counsel, and (ii) the Borrowers and their Subsidiaries shall not make Investments in Limited from the Effective Date through the Forbearance Termination Date in excess of $2,200,000. (l) Further Assurances. The Borrowers and their Subsidiaries shall at any time and from time to time execute and deliver such further instruments 6 - 6 - and take such further action as the Administrative Agent may reasonably request to effect the purposes of this Agreement, the Credit Agreement and the other Loan Documents. (m) Payments To Senior Subordinated Loans. The Lenders, the Administrative Agent, and the holders of the Senior Subordinated Loans shall continue to have all of the rights under and in connection with the Intercreditor and Subordination Agreement, dated as of August 29, 2000, among the Administrative Agent, TransTechnology, and the Purchasers named therein. (n) Event of Default; Extension of Forbearance. Any failure by any of the Borrowers or their Subsidiaries to comply with any provision of this Section3 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 Section6 below, shall constitute an Event of Default; provided that, notwithstanding anything to the contrary stated in Section27 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 Section3(b) or Section3(c) above, (ii) any extension of the Lenders' and the Administrative Agent's forbearance agreements set forth in Section1 above to end on any date following September 27, 2001, and (iii) any amendment to the provisions of this Section3(n) or of Section3(b) or Section3(c) 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 4. WAIVER AGREEMENT. The Borrowers hereby agree to permanently waive their rights under (a) Section7.3 of the Credit Agreement with regard to any pledge of the share capital of Limited by TransTechnology or any of its Subsidiaries, including but not limited to the pledge contained in the Charge over Shares, dated June 30, 1995 (as amended), from TTSO Inc. in favor of the Administrative Agent with respect to 65% of the share capital of Limited, and (b) Section7.4 of the Credit Agreement with regard to the Deed of Guarantee and Indemnity, dated June 30, 1995 (as amended), made by Limited in favor of the Administrative Agent. SECTION 5. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement shall be conditioned upon the satisfaction of the following conditions precedent: SECTION 5.1. DELIVERY OF DOCUMENTS. (a) This Agreement 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. (b) The Company and the holders of all of the Senior Subordinated Loans shall have executed and delivered to the Administrative Agent an agreement in substantially the form of Exhibit B hereto. 7 - 7 - 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 Agreement 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 Agreement 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. SECTION 5.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Agreement 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 FORBEARANCE FEE. The payment in cash of the Initial Forbearance Fee (as defined in Section10 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) Except as set forth on Schedule 6(a) hereto, 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 and projections referred to in the representations and warranties contained in the Credit Agreement shall be the financial statements and projections 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 Agreement 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 Agreement 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 8 - 8 - 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; (c) This Agreement and the Credit Agreement 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. REAFFIRMATION. Except as modified hereby, the Borrowers hereby reaffirm in all respects all the covenants, agreements, terms and conditions of the Credit Agreement and the other Loan Documents which are incorporated in full herein by reference, and all terms, conditions and provisions thereof shall remain in full force and effect. SECTION 8. EXECUTION IN COUNTERPARTS. This Agreement 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 Agreement, 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 Agreement, 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 9 - 9 - 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 Agreement, 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. SECTION 10. FORBEARANCE FEE. In connection with the approval of this Agreement, TransTechnology hereby agrees to pay to the Administrative Agent for the pro-rata benefit of each Lender (such amounts to be due and owing irrespective of the occurrence of a Forbearance Termination Date): (a) A forbearance fee (the "Initial Forbearance Fee") on the date hereof equal to one-quarter of one percent (1/4%) of the Revolving Credit Commitment and the then outstanding principal amount of the Term Loan; (b) An additional forbearance fee on June 27, 2001 equal to one-quarter of one percent (1/4%) of the Revolving Credit Commitment and the then outstanding principal amount of the Term Loan if the Obligations are not paid in full in cash and the Revolving Credit Commitment of each of the Lenders shall have expired or been reduced to zero on or prior to such date; (c) An additional forbearance fee on June 27, 2001 equal to one-quarter of one percent (1/4%) of the Revolving Credit Commitment and the then outstanding principal amount of the Term Loan if the $50,000,000 Prepayment shall not have occurred on or prior to such date; and (d) An additional forbearance fee on September 25, 2001 equal to one-quarter of one percent (1/4%) of the Revolving Credit Commitment and the then outstanding principal amount of the Term Loan if the Obligations are not paid in full in cash and the Revolving Credit Commitment of each of the Lenders shall have expired or been reduced to zero on or prior to such date. SECTION 11. EFFECTIVE DATE. Subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, this Agreement shall be deemed to be effective as of March 29, 2001 (the "Effective Date"). SECTION 12. AMENDMENT NO. 3. Except with respect to amendments to the Credit Agreement contained in Amendment No. 3, this Agreement supersedes the Borrowers' obligations contained in Amendment No. 3. [Remainder of Page Intentionally Left Blank] 10 IN WITNESS WHEREOF, the undersigned have duly executed this Forbearance and Waiver Agreement 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, Treasurer & CFO TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/Michael J. Berthelot ---------------------------------------- Name: Michael J. Berthelot Title: Managing Director 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: --------------------------------------- Name: Title: By: --------------------------------------- Name: Title: ABN AMRO BANK N.V., individually and as Syndication Agent By: /s/Parker H. Douglas --------------------------------------- Name: Parker H. Douglas Title: Group Vice President By: /s/William J. Fitzgerald --------------------------------------- Name: William J. Fitzgerald Title: Senior 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 THE BANK OF NOVA SCOTIA By: /s/Brian Allen --------------------------------------- Name: Brian Allen Title: Managing Director COMERICA BANK By: /s/Jeffrey E. Peck --------------------------------------- Name: Jeffrey E. Peck Title: Vice President DRESDNER BANK, AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/James M. Gallagher --------------------------------------- Name: James M. Gallagher Title: First Vice President By: /s/Thomas R. Brady --------------------------------------- Name: Thomas R. Brady Title: Vice President S-3 13 FLEET NATIONAL BANK, (successor by merger to Summit Bank) By: /s/Peggy Peckham --------------------------------------- Name: Peggy Peckham Title: Senior 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 Agreement 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 affected 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 18 Exhibit A 19 Exhibit B 20 Schedule 3(a) Financial Covenant
Period Modified Consolidated EBITDA ------ ---------------------------- April 1, 2001 through May 31, 2001 $6,700,000 April 1, 2001 through June 30, 2001 $11,050,000 April 1, 2001 through July 31, 2001 $13,240,000 April 1, 2001 through August 31, 2001 $16,940,000 April 1, 2001 through September 30, 2001 $22,040,000
21 Schedule 6(a) EX-10.44 8 y50911ex10-44.txt CONSENT AND AMENDMENT TO FORBEARANCE AGREEMENT 1 EXHIBIT 10.44 CONSENT AND AMENDMENT TO FORBEARANCE AGREEMENT This CONSENT AND AMENDMENT TO FORBEARANCE AGREEMENT, dated as of June 25, 2001 (this "Agreement"), 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 (as hereinafter defined) (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"), and (f) FNB as Administrative Agent for the Lenders, the Fronting Banks and the Issuing Bank (in such capacity, the "Administrative Agent"). WHEREAS, the Borrowers, the Lenders, the Fronting Banks, the Issuing Bank, ABN AMRO Bank N.V., as Syndication Agent, Bank One, NA, as Documentation Agent, and the Administrative Agent are parties to 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, as further amended by that certain Amendment Agreement No. 2 dated as of December 29, 2000, and as further amended by that certain Amendment Agreement No. 3 ("Amendment No. 3") dated as of January 31, 2001 (as so amended and restated, the "Credit Agreement"). Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in the Credit Agreement; WHEREAS, pursuant to that certain Forbearance and Waiver Agreement (the "Forbearance Agreement") dated as of March 29, 2001, by and among the Borrowers, the Lenders, the Fronting Banks, and the Administrative Agent, 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 Section2 of the Forbearance Agreement, the Borrowers have requested that the Lenders consent to the sale (the "Sale") of the (i) Breeze Industrial Products Division of TransTechnology to Breeze Industrial Products Corporation (a new entity being formed by a management group led by Bob Tunno with Industrial Growth Partners), and (ii) Pebra Division of GmbH to Breeze Pebra GmbH (a new entity being formed by a management group led by Bob Tunno with Industrial Growth Partners) (the "Breeze Assets"); and 2 WHEREAS, the Lenders and the Administrative Agent are willing to consent to the Sale, 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. CONSENT TO SALE. Subject to the satisfaction of the conditions contained in Section3 hereof, the Lenders, the Fronting Banks, and the Administrative Agent consent to the Sale and to release the Administrative Agent's liens on the Breeze Assets so long as (a) the Net Cash Proceeds received by the Borrowers in connection with the Sale (the "Sale Proceeds") are not less than $45,000,000, (b) all documents (the "Sale Documents") relating to the Sale, including, but not limited to any fairness opinions issued in connection with the Sale, shall be in form and substance satisfactory to the Administrative Agent, (c) all Sale Proceeds shall be applied immediately upon receipt first, to pay in full the principal of the Term Loan and second, to prepay the Revolving Credit Loans, DM Eurocurrency Loans or DM Overdraft Advances, and (d) the Sale Proceeds are received not later than July 11, 2001. The Borrowers, the Lenders, the Fronting Banks, and the Administrative Agent hereby agree that upon the consummation of the Sale the Total Revolving Credit Commitment shall be reduced to $161,000,000 whereupon the Revolving Credit Commitments of the Lenders shall be reduced pro rata on such date in accordance with their respective Commitment Percentages. The Lenders and the Fronting Banks authorize the Administrative Agent to enter into appropriate release documents necessary in order to release the Administrative Agent's liens on the Breeze Assets. SECTION 2. AMENDMENT TO FORBEARANCE AGREEMENT. (a) The Forbearance Agreement is hereby amended with effect from the Effective Date of this Agreement as follows: (i) Section 3(e) of the Forbearance Agreement is amended by deleting the date "June 27, 2001" contained therein and substituting the date "July 11, 2001". (ii) Schedule 6(a) of the Forbearance Agreement is deleted in its entirety and replaced with Schedule 6(a) attached hereto. (iii) Section 10(b) and (c) of the Forbearance Agreement is amended by deleting each paragraph in its entirety and replacing them with the following new paragraphs: "(b) An additional forbearance fee equal to one-half of one percent (1/2%) of the Revolving Credit Commitment and the then outstanding principal amount of the Term Loan (after giving effect to the payment of the Loans if the payment is due in connection with the closing of the Sale) on June 27, 2001; 3 - 3 - (c) Intentionally Omitted; and" (iv) The Forbearance Agreement shall be deemed amended to include capitalized defined terms used in this Agreement to the extent not defined in the Forbearance Agreement. (b) The Forbearance Agreement is hereby amended with effect from the closing date of the Sale (so long as the Sale occurs on or prior to July 11, 2001) as follows: (i) Section 1 of the Forbearance Agreement is hereby amended by replacing the existing (iii) contained therein in its entirety with the phrase "(iii) intentionally omitted". (ii) Schedule 3(a) of the Forbearance Agreement is deleted in its entirety and replaced with Schedule 3(a) attached hereto. (iii) Section 3(a) of the Forbearance Agreement is amended by inserting at the end of the second sentence contained therein the following new proviso: ";provided, however, Modified Consolidated EBITDA for periods after June 1, 2001 shall not include any amounts relating to or otherwise attributed to the Breeze Assets." (iv) Section 3(b) of the Forbearance Agreement is amended by (A) deleting the dollar amount "$162,500,000" contained in the first sentence thereof and replacing it with the dollar amount "$154,000,000" and (B) inserting at the end of thereof the following new sentence: "Notwithstanding anything to the contrary stated in Section 3 of the Credit Agreement, Total DM Facility Usage shall not exceed the DM Equivalent at such time of $10,000,000 minus the amount of the DM Eurocurrency Loans and DM Overdraft Advances prepaid in connection with the Sale." (v) Section 3(e) of the Forbearance Agreement is amended by deleting the phrase "(i) July 11, 2001 unless the $50,000,000 Prepayment has occurred, and (ii) September 27, 2001 even if the $50,000,000 Prepayment has occurred" contained in the first sentence therein and replacing it with the phrase "September 27, 2001". SECTION 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement shall be conditioned upon the satisfaction of the following conditions precedent: SECTION 3.1. DELIVERY OF DOCUMENTS, PAYOFF OF LOANS. (a) This Agreement shall have been executed and delivered to the Administrative Agent by each of the Borrowers, each of the Guarantors, and the requisite Lenders. (b) No later than the close of business on June 29, 2001, the Administrative Agent shall have received from the Borrowers the signed purchase and sale agreements related to the Breeze Assets located in the United 4 - 4 - States which shall be in form and substance satisfactory to the Administrative Agent. SECTION 3.2. 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 Agreement 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 3.3. 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 Agreement is to become effective. Except for the Specified Defaults (as defined in the Forbearance Agreement), 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 3.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Agreement 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 4. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Lenders as follows: (a) Except as set forth on Schedule 6(a) to the Forbearance Agreement, the representations and warranties of such Borrower and of each Guarantor contained in the Credit Agreement, the Forbearance 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 and projections referred to in the representations and warranties contained in the Credit Agreement shall be the financial statements and projections 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 Agreement 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 Agreement and which is required by law or any regulation or rule of any agency or authority, or other person, association 5 - 5 - 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; (c) This Agreement and the Credit Agreement 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 5. REAFFIRMATION. Except as modified hereby, the Borrowers hereby reaffirm in all respects all the covenants, agreements, terms and conditions of the Credit Agreement, the Forbearance Agreement and the other Loan Documents which are incorporated in full herein by reference, and all terms, conditions and provisions thereof shall remain in full force and effect. SECTION 6. EXECUTION IN COUNTERPARTS. This Agreement 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 Agreement, 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 7. RELEASE. In order to induce the Administrative Agent and the Lenders to enter into this Agreement, 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 6 - 6 - 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 Agreement, the Credit Agreement, the Forbearance 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. SECTION 8. EFFECTIVE DATE. This Agreement shall be deemed to be effective as of the date of satisfaction of the last conditions precedent set forth inSection3 hereof (the "Effective Date"). [Remainder of Page Intentionally Left Blank] 7 IN WITNESS WHEREOF, the undersigned have duly executed this Consent and Amendment to Forbearance Agreement 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, Treasurer & CFO TRANSTECHNOLOGY SEEGER-ORBIS GmbH By: /s/Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Managing Director 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 8 - 2 - 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/Constanze Neumann --------------------------------------- Name: Constanze Neumann Title: Treasurer By: /s/Andreas Herbert --------------------------------------- Name: Andreas Herbert Title: Assistant Treasurer ABN AMRO BANK N.V., individually and as Syndication Agent By: /s/Parker Douglas --------------------------------------- Name: Parker Douglas Title: Group Vice President By: /s/William J. Fitzgerald --------------------------------------- Name: William J. Fitzgerald Title: Senior Vice President BANK ONE, NA, individually and as Documentation Agent By: /s/Phillip D. Martin --------------------------------------- Name: Phillip D. Martin Title: Senior Vice President 9 - 3 - THE BANK OF NEW YORK By: /s/Richard Baldwin --------------------------------------- Name: Richard Baldwin Title: Vice President KEY CORPORATE CAPITAL INC. By: /s/Mark Kleinhaut --------------------------------------- Name: Mark Kleinhaut Title: Vice President THE BANK OF NOVA SCOTIA By: /s/John W. Campbell --------------------------------------- Name: John W. Campbell Title: Managing Director COMERICA BANK By: /s/Jeffrey E. Peck --------------------------------------- Name: Jeffrey E. Peck Title: Vice President DRESDNER BANK, AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/James M. Gallagher --------------------------------------- Name: James M. Gallagher Title: First Vice President By: /s/Richard J. Sweeney --------------------------------------- Name: Richard J. Sweeney Title: Vice President 10 - 4 - FLEET NATIONAL BANK, (successor by merger to Summit Bank) By: /s/Peggy Peckham --------------------------------------- Name: Peggy Peckham Title: Senior Vice President 11 - 5 - The Guarantors under (and as defined in) the Subsidiary Guaranty hereby acknowledge that they have read and are aware of the provisions of this Agreement 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 affected hereby. TRANSTECHNOLOGY ACQUISITION CORPORATION By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary PALNUT FASTENERS, INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary RETAINERS, INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 12 - 6 - RANCHO TRANSTECHNOLOGY CORPORATION By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES,INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SSP INDUSTRIES By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SSP INTERNATIONAL SALES, INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 13 - 7 - TRANSTECHNOLOGY SEEGER INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SEEGER INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TCR CORPORATION By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary NORCO, INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary ELLISON RING & WASHER INC. By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 14 - 8 - TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY CANADA CORPORATION By: /s/Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 15 Schedule 3(a) Financial Covenant
Period Modified Consolidated EBITDA ------ ---------------------------- April 1, 2001 through May 31, 2001 $6,700,000 April 1, 2001 through June 30, 2001 $10,400,000 April 1, 2001 through July 31, 2001 $12,300,000 April 1, 2001 through August 31, 2001 $15,500,000 April 1, 2001 through September 30, 2001 $20,000,000
EX-21 9 y50911ex21.txt SUBSIDIARIES 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY --------------------------- LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES OF TRANSTECHNOLOGY CORPORATION
Jurisdiction of Incorporation --------------- Aerospace Rivet Manufacturers Corporation California Anderton (Predecessors) Limited England Electronic Connections and Assemblies, Inc. Delaware TTERUSA Inc. New Jersey NORCO, Inc. Connecticut Palnut Fasteners, Inc. Delaware Rancho TransTechnology Corporation California Retainers, Inc. New Jersey Seeger Inc. Delaware Seeger-Orbis Beteiligungsgesellschaft GmbH Germany Seeger-Orbis GmbH & Co. OHG Germany TransTechnology Brasil Ltda. Brazil SSP Industries California SSP International Sales, Inc. California TCR Corporation Minnesota TransTechnology (GB) Limited England TransTechnology Acquisition Corporation Delaware TransTechnology Aerospace, Inc. California TransTechnology Australasia Pty. Ltd. Australia TransTechnology International Corporation Virgin Islands TransTechnology Seeger Inc. Delaware TransTechnology Seeger-Orbis GmbH Germany TransTechnology Systems & Services, Inc. Michigan TransTechnology Canada Corporation Ontario, Canada TransTechnology Engineered Components, LLC Delaware
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