-----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, HrxslgPnxcILbgAu/2+8ePYa5Fa45ohd0cEKPwSAfGO8YoZ/iJfAC+7WWe9iznKF HgU7UpwMmILwERgLtPsLWA== 0000950123-96-003316.txt : 19960629 0000950123-96-003316.hdr.sgml : 19960629 ACCESSION NUMBER: 0000950123-96-003316 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960627 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSTECHNOLOGY CORP CENTRAL INDEX KEY: 0000099359 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 954062211 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07872 FILM NUMBER: 96586549 BUSINESS ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 BUSINESS PHONE: 908-964-5600 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 FORM 1O-K 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 [FEE REQUIRED] For the fiscal year ended March 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ------------ ------------ Commission file number 1-7872 --------------------- 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 May 30, 1996, the aggregate market value of voting stock held by nonaffiliates of the registrant based on the last sales price as reported by the New York Stock Exchange on such date was $90,166,595. As of May 30, 1996, the registrant had 5,109,228 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The registrant's Annual Report for the fiscal year ended March 31, 1996, is incorporated by reference into Part I and II hereof. The registrant's Proxy Statement for the fiscal year ended March 31, 1996 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 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. During 1996, the Company continued its program of focusing on core businesses by acquiring a group of companies that manufacture retaining rings (the Seeger Group, with locations in Germany, UK, Brazil and New Jersey), and selling the Company's Electronics division and the domestic and European portions of the Company's computer graphics service operations. These actions have positioned the company as a major worldwide supplier of specialty fasteners to the automotive and industrial markets. The Breeze-Eastern division makes up the rescue hoist and cargo hook products segment, and is the world's leader in these systems which are sold primarily to military and civilian agencies. DISCONTINUED OPERATIONS The following entities, discontinued in the years indicated, have been classified as discontinued operations in the Company's financial statements: Federal Laboratories (tear gas) (1994), the Lundy Technical Center (chaff) (1995), TransTechnology Electronics (1995), and TransTechnology Systems & Services (computer maintenance and service) (1995). For a more detailed description of these transactions, see "Note 2" of the "Notes to Consolidated Financial Statements" included in the Company's 1996 Annual Report on pages 16 and 17 which is incorporated herein by reference. SPECIALTY FASTENER PRODUCTS The Company's specialty fastener products are manufactured by its Seeger Group of companies ("Seeger-Orbis", "Anderton", and "Seeger Reno"), its Breeze Industrial Products division ("Breeze Industrial") and its Palnut Company division ("Palnut", "Industrial Retaining Ring Company" and "Seeger, Inc."). Seeger, Inc. was acquired as part of the Seeger Group purchase and is now included in the Palnut Company division. The Seeger Group of companies, Industrial Retaining Ring Company and Seeger, Inc. design and manufacture highly engineered retaining rings for both the domestic and international automotive and industrial markets. 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 the appliance and hardware markets. These clamps are widely used in the heavy-duty vehicle, industrial, automotive and aircraft industries by both original equipment manufacturers and replacement suppliers. The Palnut Company manufactures single and multi-thread metal fasteners for the automotive and industrial products markets industries. These include lock-nuts used 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 1 3 bosses to increase torque and minimize stripping; push-nuts used as temporary fasteners that hold preinserted bolts in place for final assembly or in rachet 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; and various single-threaded parts designed for insertion into metal or plastic panels. Specialty fasteners are marketed through a combination of a direct sales force, distributors and manufacturing representatives. Such products contributed 81%, 70% and 64% of the Company's consolidated sales from continuing operations in 1996, 1995 and 1994, respectively. Through its MassTech product line, Breeze Industrial also manufactures tachometers and related items such as speed sensors that are used to measure rotational shaft speeds and direction, and to indicate revolutions per minute. These products are sold to heavy-duty original equipment manufacturers and in the military and high-performance markets. At March 31, 1996, the Company's Specialty Fastener Products segment backlog was $31.4 million, compared to $12.7 million at March 31, 1995. The increase is primarily the result of the acquisition of the Seeger Group of companies. Substantially all of the March 31, 1996 backlog is scheduled to be shipped during fiscal 1997. RESCUE HOIST AND CARGO HOOK PRODUCTS The Company's Breeze-Eastern division ("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-lift 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 and electronic control boxes and components for helicopter tow boom assemblies for helicopters employed in Navy minesweeping operations. Breeze-Eastern sells its products through an internal marketing representative and several independent sales representatives and distributors. Breeze-Eastern's product lines contributed 19%, 30% and 36% to the Company's consolidated sales in 1996, 1995 and 1994, respectively. The declining percentage is attributable primarily to the acquisitions of fastener businesses (Palnut, Industrial Retaining Ring and the Seeger Group). 2 4 The Rescue Hoist and Cargo Hook Product segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 1996, the backlog of unfilled orders was $30.9 million, compared to $21.8 million at March 31, 1995. The majority of the March 31, 1996 backlog is anticipated to be shipped during fiscal 1997. DEFENSE INDUSTRY SALES Only 8% of the Company's revenues in 1996, as compared to 18% and 23% in 1995 and 1994, 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. With overall defense spending down, it is expected that the defense market for the Company's products will decline in the future. However, the overall reduction in the Company's dependence on these products renders it less vulnerable to defense budget cuts. 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 11 of Notes to Consolidated Financial Statements included in the Company's 1996 Annual Report on page 22 which is incorporated herein by reference. 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 and 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. The Company is successfully doing so both internally and through acquisitions. 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 material and adverse effect on the Company's profitability. 3 5 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, most of 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. No material part of the Company's business is 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 May 26, 1996 the Company employed 1,437 persons. There were 1,240 employees associated with the Specialty Fastener Products segment, 178 with the Rescue Hoist and Cargo Hook Products segment and 19 with the corporate office. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Financial information relating to each of the Company's segments has been included in Note 13 of Notes to Consolidated Financial Statements included in the Company's 1996 Annual Report on pages 22-24 and is incorporated herein by reference. FOREIGN OPERATIONS AND EXPORT SALES The Company's foreign-based facilities during fiscal 1996 consisted of the Seeger-Orbis facilities located in Germany, the Anderton facility located in England, and the Seeger Reno facility located in Brazil. The Company acquired these three businesses on June 30, 1995. Additionally, the Company had foreign-based facilities during fiscal 1996 that are treated as discontinued operations as of March 31, 1996. The Company had foreign sales of $45.2 million in fiscal 1996, representing 29% of the Company's consolidated sales from continuing operations. The Company had export sales of $16.9 million, $15.4 million and $14.9 million in fiscal 1996, 1995 and 1994, respectively, representing 11%, 15% and 18% of the Company's consolidated sales from continuing operations in each of those years, respectively. The risk and profitability attendant to these sales are generally comparable to similar products sold in the United States. Sales, profits and identifiable assets attributable to the Company's foreign and domestic operations, and the identification of export sales by geographic area, are set forth in Note 13 of Notes to Consolidated Financial Statements in the Company's 1996 Annual Report on pages 22-24 and is incorporated herein by reference. 4 6 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 10,000 SPECIALTY FASTENER PRODUCTS SEGMENT - ---------------- Saltsburg, Pennsylvania Breeze Industrial offices and Owned 100,000 manufacturing plant Mountainside, New Jersey Palnut offices and manufacturing Owned 142,000 plant Irvington, New Jersey Industrial Retaining Ring Owned 37,000 manufacturing plant Somerset, New Jersey Seeger, Inc. offices Leased 104,000 and manufacturing plant Konigstein, Germany Seeger Group offices and Owned 149,000 Seeger-Orbis manufacturing plant Eichen, Germany Seeger-Orbis manufacturing Owned 51,000 plant Bingley, England Anderton offices and Owned 124,000 manufacturing plant Sao Paulo, Brazil Seeger Reno offices and Owned 85,000 manufacturing plant RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT - --------------------- Union, New Jersey Breeze-Eastern offices Owned 188,000 and manufacturing plant
5 7 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, Illinois and North Carolina. 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 11 of Notes to Consolidated Financial Statements included in the Company's 1996 Annual Report on page 22 and is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 6 8 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 on the New York Stock Exchange for the Common Stock for the calendar quarters indicated, as reported by the New York Stock Exchange.
High Low ---- --- Fiscal 1995 First Quarter $ 16-5/8 $ 12-3/8 Second Quarter 13-5/8 10-3/4 Third Quarter 12-1/2 10-1/2 Fourth Quarter 13-5/8 10 Fiscal 1996 First Quarter $ 13-1/2 $ 10-3/4 Second Quarter 14-7/8 12 Third Quarter 15-1/8 11-7/8 Fourth Quarter 15 12-1/2 Fiscal 1997 First Quarter $ 19-3/4 $ 14-7/8 (through May 30, 1996)
As of May 30, 1996, the number of stockholders of record of the Common Stock was 2,483. On May 30, 1996 the closing sales price of the Common Stock was $19.25. The Company's bank indebtedness permits quarterly dividend payments which cannot exceed 25% of the Company's cumulative net income in each year. The Company paid a regular quarterly dividend of $0.06 per share on June 1, 1994, and an increased dividend of $0.065 per share on September 1 and December 1, 1994, March 1, June 1, September 1 and December 1, 1995 and March 1, 1996. 7 9 ITEM 6. SELECTED FINANCIAL DATA The information required has been included in the Company's 1996 Annual Report on page 1 and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required has been included in the Company's 1996 Annual Report on pages 26-30 and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements: The information required has been included in the Company's 1996 Annual Report on pages 11-25 and is incorporated herein by reference. Quarterly Financial Data: The information required has been included in Note 14 of Notes to Consolidated Financial Statements in the Company's 1996 Annual Report on page 24 and is incorporated herein by reference. Financial Statement Schedules: Schedule II -- Consolidated Valuation and Qualifying Accounts for years ended March 31, 1996, 1995 and 1994. Schedules required by Article 5 of Regulation S-X, other than those listed above, are omitted because of the absence of the conditions under which they are required. 8 10 INDEPENDENT AUDITORS' REPORT To the Stockholders and the Board of Directors of TransTechnology Corporation: We have audited the financial statements of TransTechnology Corporation as of March 31, 1996 and 1995, and for each of the three years in the period ended March 31, 1996, and have issued our report thereon dated May 28, 1996; such financial statements and report are included in your 1996 Annual Report and are incorporated herein by reference. Our audits also included the financial statement schedule of TransTechnology Corporation, listed in Item 14. This financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/Deloitte & Touche LLP - ------------------------ Parsippany, New Jersey May 28, 1996 9 11 TRANSTECHNOLOGY CORPORATION SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR YEARS ENDED MARCH 31, 1996, MARCH 31, 1995 AND MARCH 31, 1994
BALANCE AT CHARGED TO BALANCE BEGINNING OF COSTS AND OTHER AT END DESCRIPTION PERIOD EXPENSES INCREASES DEDUCTIONS(A) OF PERIOD - ----------- ------ -------- --------- ------------- --------- 1996 Allowances for doubtful accounts and sales returns $103,000 $468,000 $382,000(B) $218,000 $735,000 1995 Allowances for doubtful accounts and sales returns $271,000 $ 65,000 $ 23,000(C) $256,000(D) $103,000 1994 Allowances for doubtful accounts and sales returns $318,000 $102,000 $ 72,000(C) $221,000 $271,000
(A) Amount represents write-off of uncollectible accounts. (B) Amount represents balance acquired from Seeger acquisition. (C) Amount consists primarily of sales adjustments charged to revenue accounts. (D) Amount includes $97,000 reserves for uncollectible accounts of discontinued operations reclassed to net assets held for sale. 10 12 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 Company's Proxy Statement for the year ended March 31, 1996 and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1996 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 Company's Proxy Statement for the year ended March 31, 1996 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1996 and is incorporated herein by reference. 11 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed as part of this report: 1. Financial Statements: The following financial statements have been included in the Company's 1996 Annual Report on pages 11-25 and are incorporated herein by reference: Consolidated Balance Sheets at March 31, 1996 and March 31, 1995 Statements of Consolidated Operations for the years ended March 31, 1996, March 31, 1995 and March 31, 1994 Statements of Consolidated Cash Flows for the years ended March 31, 1996, March 31, 1995 and March 31, 1994 Statements of Consolidated Stockholders' Equity for the years ended March 31, 1996, March 31, 1995 and March 31, 1994 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, 1996, 1995 and 1994 3. Exhibits: The exhibits listed on the accompanying Index to Exhibits are filed as part of this report. (b) Reports on Form 8-K: In July 1995, a report on Form 8-K was filed to report the acquisition of substantially all of SKF USA Inc.'s Seeger Division and all of the outstanding stock of SKF GmbH's Seeger-Orbis GmbH subsidiary on June 30, 1995. A report on Form 8-K/A was filed in September 1995 amending the report on Form 8-K previously filed in July 1995. A report on Form 8-K/A was filed in November 1995 supplementing the report on Form 8-K previously filed in July 1995 and containing required financial statements. In November 1995, a report on Form 8-K was filed to report the sale of substantially all of the assets of the Company's TransTechnology Electronics Division to ElecSys Incorporated on August 18, 1995. 12 14 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: June 17, 1996 TRANSTECHNOLOGY CORPORATION By: /s/Michael J. Berthelot ----------------------------- Michael J. Berthelot, Chairman of the Board and Chief Executive Officer 13 15 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 and June 17, 1996 - ---------------------------- and Chief Executive Officer MICHAEL J. BERTHELOT (Principal Executive Officer) /s/Patrick K. Bolger President, Chief Operating June 17, 1996 - ---------------------------- Officer and Director PATRICK K. BOLGER /s/Chandler J. Moisen Senior Vice President, Treasurer and June 17, 1996 - ---------------------------- Chief Financial Officer CHANDLER J. MOISEN (Principal Financial and Accounting Officer) /s/Walter Belleville Director June 18, 1996 - ---------------------------- WALTER BELLEVILLE /s/Gideon Argov Director June 17, 1996 - ---------------------------- GIDEON ARGOV /s/Thomas V. Chema Director June 17, 1996 - ---------------------------- THOMAS V. CHEMA /s/James A. Lawrence Director June 18, 1996 - ---------------------------- JAMES A. LAWRENCE /s/Michel Glouchevitch Director June 18, 1996 - ---------------------------- MICHEL GLOUCHEVITCH
14 16 INDEX TO EXHIBITS
Page Sequentially Numbered -------- 3.1 Certificate of Incorporation of the Company.(1) -- 3.2 Bylaws of the Company. -- 10.1 1996-1998 Long Term Incentive Plan of the Company. -- 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 1996-1998 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 Revolving Credit and Loan Agreement dated as of June 30, 1995 between the Company and the First National Bank of Boston.(7) -- 10.9 First Amendment to the Revolving Credit and Loan Agreement dated as of August 29, 1995 between the Company and the First National Bank of Boston. -- 10.10 Second Amendment to the Revolving Credit and Loan Agreement dated as of October 27, 1995 between the Company and the First National Bank of Boston. -- 10.11 Third Amendment to the Revolving Credit and Loan Agreement dated as of March 29, 1996 between the Company and the First National Bank of Boston. -- 13 The Company's 1996 Annual Report. -- 21 List of Subsidiaries of the Company. -- 23 Independent Auditors' Consent. -- 27 Financial Data Schedule. -- - ---------------------- (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. 33-87800 dated December 22, 1994. -- (3) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1995. --
15 17
Page Sequentially Numbered -------- (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. --
16 EX-3.2 2 BYLAWS OF THE COMPANY 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 BYLAWS - Page 1 2 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 10 nor more than sixty 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. 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 BYLAWS - Page 2 3 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 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 10 days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical 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 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 1 or 3. If there are 3 Inspectors of Election, the decision, act or certificate of a majority shall be effective and shall represent BYLAWS - Page 3 4 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 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, BYLAWS - Page 4 5 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 May 10,1996 the authorized number of directors of the corporation shall be seven 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. BYLAWS - Page 5 6 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. 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 BYLAWS - Page 6 7 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 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 BYLAWS - Page 7 8 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. 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 BYLAWS - Page 8 9 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. BYLAWS - Page 9 10 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 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. BYLAWS - Page 10 11 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 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. BYLAWS - Page 11 12 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 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 days, and in case of a meeting of stockholders, not less than 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 BYLAWS - Page 12 13 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. Restated: May 10,1996 GH:1305 BYLAWS - Page 13 EX-10.1 3 INCENTIVE COMPENSATION PLAN 1 EXHIBIT 10.1 TRANSTECHNOLOGY CORPORATION FY'96-98 INCENTIVE COMPENSATION PLAN The goal of the 1996-98 Incentive Compensation Plan is to directly align the focus and remuneration of the divisional and corporate management with that of the shareholders. This means that long term growth in the value of the business, in addition to short term profit increases, will be key considerations in awarding bonuses. That is not to say, however, that short term achievements should not be considered for the payment of bonuses or that the time frame of paying out such "Shareholder Value" based bonuses should be excessively long. Individuals receiving bonuses should have the criteria used in determining and measuring those bonuses fall within events which they can control and/or influence. Individuals, and individual business units, should be rewarded for their performance and should not be penalized for the failure of another unit, yet at the same time, at another level, it is important to recognize that we are all in this together. Incentive Compensation should be adequately high to motivate the best managers, yet not become an obstacle in the minds of shareholders that management is receiving a disproportionate award. Each of these considerations is addressed and included in this plan. The 1996-98 plan reflects the input of the corporate officers and staff, division presidents, and the Incentive Compensation Committee of the Board of Directors. THE OBJECTIVES OF THE 1996-1998 INCENTIVE COMPENSATION PLAN ("THE PLAN") ARE TO (1) RECOGNIZE THE ACHIEVEMENT OF ABOVE AVERAGE RESULTS IN THE CURRENT FISCAL YEAR; AND, (2) REWARD INCREASES IN THE VALUE OF THE ENTITY (AS DETERMINED BY THE MARKETS AND AS SHARED WITH THE SHAREHOLDERS) OVER THE LONGER TERM. These goals are consistent with the guidelines and objectives of the incentive compensation program as established by the Board of Directors. DIVISIONAL BONUS POOLS ANNUAL CASH BONUS The Plan will have two components. The first is a bonus to be paid in cash annually at the conclusion of the fiscal year end audit, as is currently done. Determination of the bonus pool amount and eligibility will be essentially unchanged from that used in the old plan. The '96-'98 Plan's bonus pool for a division staff will be 2% of BTP before the bonus, any acquisition interest, and corporate charges and .6% of that same sum for Division Presidents. The total amount of the annual cash bonus pool, however, will be reduced by the elimination of the "multiples" that were a significant portion of the '93-'95 Plan. The '93-'95 plan "multiples" were established as an incentive for the divisions to provide consistent financial performance during the difficult corporate restructuring that was 2 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995 PAGE 2 accomplished over the period. Now, with the corporate restructuring essentially complete, the focus of the '96-'98 Plan is to increase shareholder value, primarily through annual increases in BTP. A comparison of the bonus target criteria between the old and new plans is as follows:
CRITERIA '93-'95 '96-'98 Tactical plan operating income 35% 30% Tactical plan objectives 30% 15% Tactical plan cash flow 10% 10% Return on investment 20% 15% 10% Operating income growth 7.5% 10% 30% Productivity growth 6% 0% 5% Total 100% 100%
Consistent with the overall objective of the '96-'98 Plan to increase BTP over the prior period, the "growth" criteria, operating income growth and productivity growth have been increased to provide the proper focus for the Divisions. Each individual criteria for the annual cash bonus will stand on its own merit and no bonus will be paid for the performance against the criteria that is less than 80% of the target. In the event that a "hurdle" rate, such as tactical plan targets, ROI, growth, etc are exceeded, then the relative points awarded under that criteria may exceed the amount shown above by the ratio of the actual over the target. As a result, based upon the measurable criteria, the bonus paid out could be more than 100% of the target bonus. An example of how a bonus could exceed 100% of the target bonus is set forth below:
CRITERIA Actual Plan points Bonus points Tactical plan operating income 120% 30% 36% Tactical plan objectives 100% 15% 15% Tactical plan cash flow 90% 10% 9% Return on investment 20% 25% 10% 12% Operating income growth 7.5% 10% 30% 40% Productivity growth 6% 8% 5% 6.5% Total 100% 100% 118.5%
3 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995 PAGE 3 Under the above scenario, the actual bonus to be paid would be 118.5% of the respective 2% and .6% for Division staff and Presidents. The excess over 100% has no effect on the DEV portion of the bonus. Division Presidents, who in the past received a cash bonus equal to 50% (i.e., 1%) of that paid into the staff pool, has a pool established at 30% (or .6%) of that established for the division staff. This reflects the desire to have Division Presidents rewarded more as entrepreneurs who are paid upon the sale of their business than as caretakers who complete each year and do not necessarily have the longer term goal in mind. This reduction of 40% compared to the prior years' plan is compensated for by establishing the Long Term component of the plan, as discussed below. The add-on restricted stock bonus would be reduced from the old plan's 25% to 10%. Criteria for awarding bonuses (operating income to tac plan, 20% return on equity, cash flow objectives, 15% annual operating income growth, and strategic/operational goals) are generally the same, as shown above, however, 6% annual productivity increases will become one of the "bogies" for earning annual cash bonuses. LONG TERM INCREASE IN SHAREHOLDER VALUE BONUS The second bonus component will be based upon the relative contribution to increased shareholder value over a three year period as determined by the market place. This component, in essence, determines a value for each operating division based upon its Earnings before interest and taxes ("EBIT") and TTC's Price Earnings multiple ("PE"). This PE is independently established in the stock market and is a reflection of the value placed upon TTC by investors. The increase in value of the entity over the three year term of the Plan (DELTA ENTERPRISE VALUE, OR "DEV") would be determined and, to the extent that DEV exceeded a hurdle rate of return, established by the Board and commensurate with the long term financial goals of TTC, then 2.0% of that excess increase in value would be paid to the Division President, in cash, at the end of the measurement period (generally, 3/31/98). The '96-'98 Plan therefore provides participants the opportunity to realize a bonus not only by increasing annual earnings and achieving annual operating, financial, and personal goals, but also for a achieving an increase in the value of the company as a whole as expressed by a higher PE ratio. The correlation with the PE ratio ties this portion of the bonus directly to real, long term increases in shareholder value. However, out of fairness 4 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995 PAGE 4 to the individual divisions, in order to avoid a "penalty" as a result of a bear market, or the failure of another business unit, a floor PE, equal to that at the beginning of the initial measurement period for "Enterprise Value", i.e., that at 3/31/95, would be established. The ending DEV then would be determined using a PE not lower than the floor PE as established at the beginning of the '96-98 Plan. ENTERPRISE VALUE of a division will be determined by multiplying the division's BTP (with corporate fees, interest and any accrued bonuses added back) by the EBIT multiple. BTP will be that determined upon the completion of the year end certified audit. Local third party debt will be subtracted in arriving at net enterprise value, at the beginning and end of the measurement period. THE EBIT MULTIPLE is derived using TTC's PE ratio based upon the average closing price for the ten days following the release of the current fiscal year end earnings (May 17, 1995) divided by the per share income from continuing operations for that fiscal year ($1.45). The resultant PE ratio is then multiplied by TTC's ratio of Net Income from continuing operations to EBIT in order to obtain the EBIT multiple. For the seven trading days following the release of FY'95 earnings, the average PE was approximately 8 times. For FY'95 net income from continuing operations was $7 million and EBIT was $12.7 million, yielding a ratio of 55%. Multiplying this ratio times the PE of 8 yields an EBIT multiple of 4.5. To determine Enterprise Value, using the above EBIT multiple on Breeze Industrial's FY'95 results, yields an enterprise value of $35.8 million at the end of FY'95. The final beginning Enterprise Value, for purposes of calculating DEV under the bonus plan, would not be determined until the closing trades on June 1, 1995 are reported, thus completing the ten day trading period. The DEV Hurdle Rate has been established at 12% by the Board of Directors. This rate is established to represent the overall return an investor would seek at the beginning of the three year measurement period. To the extent that the actual realized return only meets that expectation, no DEV bonus would be paid, as the increase in shareholder value would not be considered "above average" or "outstanding", the criteria for earning a bonus. However, to the extent that the hurdle was exceeded, then an increase in shareholder value beyond the expectations of the market has been deemed delivered, and participants in the plan will truly have earned a bonus based upon delivering increases in shareholder value. The DEV bonus payout has been established at 2% of the excess of 5 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995 PAGE 5 the DEV required using the compounded hurdle rate. The "target" Enterprise Value will be determined in June, 1995. An annual statement of "Interim" Enterprise Value will be circulated amongst the divisions at the end of FY'96 and FY'97 in order to communicate progress towards the DEV goal and to provide measurement points in the event of certain events. There is no ceiling or cap placed upon the bonuses to be paid. The DEV PE floor ratio would be established as previously noted. IN THE EVENT OF THE SALE OF A DIVISION, the final Enterprise Value will be the selling price of the Division and the DEV bonus will be calculated on the difference between the final Enterprise Value and the Base Enterprise value. IN THE EVENT OF THE SALE OR MERGER OF TRANSTECHNOLOGY, the final Enterprise Value will be calculated using the PE ratio which results from the transaction's selling price per share of TTC stock against the most recent fiscal year end earnings data. IN THE EVENT OF TERMINATION OF EMPLOYMENT, DEATH, OR DISABILITY, bonus calculation rules will be applied as are currently done for longevity, however, the final DEV bonus for such participants will be calculated using the PE ratio and EPS at the end of the current fiscal year as if it were the final year of the Plan. IN THE EVENT OF A CHANGE IN CONTROL, as defined in the Long Term Incentive Plan approved by the shareholders, the Enterprise Value would be calculated using the EBIT multiplier based on a PE derived from the average closing price of TT stock for the ten trading days immediately preceding the change in control and the EPS from the most recent fiscal year ended prior to the change in control or the trailing four fiscal quarters, whichever is greater, (adjusted for actual shares outstanding prior to the change in control). Within ten days of a change in control occurring, the bonus pool under the resultant DEV calculation will be paid out in cash to the participants. For purposes of this plan, A GROUP DIRECTOR will be treated as a President of the entire group with any bonus calculated based upon the operations of the group on a consolidated basis. PRESIDENTS OF BUSINESS UNITS WITHIN A GROUP will be treated as Division Presidents. In a case where a Group Director also acts as a Division President, in recognition of the fact that the second in charge at the local operation in essence performs the role of a local Division President, the Group Director shall designate the person to be 6 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995 PAGE 6 treated, for purposes of this Plan, as Division President. In no instance may a Group Director receive a bonus as Group Director and Division President. 7 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995 PAGE 7 CORPORATE OFFICE POOLS ANNUAL CASH BONUSES The Plan will have two components. The first is a bonus to be paid in cash annually at the conclusion of the fiscal year end audit, as is currently done. The '93-'95 Plan bonus pool for the corporate office pools, combined, was 2.5% of BTP before the bonus. Under the '96-98 Plan, this pool would change to 3.25% of net after tax income from continuing operations. This change of measuring the the pool from BTP to after tax earnings serves as a reduction of annual cash bonuses by approximately 60%. Criteria for awarding bonuses are as set forth below:
Officers Officers Staff CRITERIA '93-'95 '96-'98 '96-98 Tactical plan operating income 35% 30% 20% Personal plan objectives 30% 15% 40% Tactical plan cash flow 10% 10% 5% Return on investment 20% 15% 10% 5% Operating income growth 7.5% 10% 30% 25% Productivity growth 6% 0% 5% 5% Total 100% 100% 100%
Each individual criteria for the annual cash bonus will stand on its own merit and no bonus will be paid for performance against the criteria that is less than 80% of the target. No bonus pool will be paid against the criteria that is less than 80% of target. As in the Division bonus program, performance in excess of 100% of goal for operating income, cash flow, return on investment, operating income and/or productivity growth may result in bonus points exceeding 100% of the target bonus. 8 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995 PAGE 8 In the old plan, there were two separate pools for the corporate officers/staff and other corporate staffers received subjective bonuses unaffiliated with hard targets or measurements. In the new plan, the pool has been slightly increased but the number of participants broadened. Allocations of the corporate pool are as follows: CEO 30.46% COO 20.31% CFO 16.92% VP Operations 13.04% General Counsel 8.46% Corp. Staff 10.80% ----- Total 100%
Bonus awards from the pool for non-officers would be based 40% upon the achievement of personal objectives and 60% upon the achievement of corporate goals. Personal goals must be established by department heads jointly with the participants, in writing, at the beginning of the fiscal year and made subject to review at year end, prior to recommendation of bonus payments. Corporate Officers will receive an add-on bonus in restricted stock equal to 10% of the annual cash bonus, similar to that feature in the Division's plans. Current criteria for meeting non-financial objectives and goals generally remain unchanged, although the productivity increase standard has been added to the corporate goals as a bonus criteria. LONG TERM INCREASE IN SHAREHOLDER VALUE BONUS The Corporate Office will have a single DEV pool which will be based upon changes in Enterprise Value using the PE ratio calculated using the same methods as that for the Divisions applied to Net income (after tax) from continuing operations for the period. There would be no adjustment to an EBIT multiplier for the Corporate Office pool. Payout procedures and timing are the same as that used in the Divisions. The DEV component of the Corporate Office pool will be paid in cash upon the conclusion of the FY'98 year end audit and the ten day stock trading period following the release of the audited earnings. The DEV bonus pool, which will equal 5% of the excess DEV over the 12% hurdle rate, will be allocated in the same manner as the annual cash bonus pool as reflected above. EX-10.9 4 AMENDMENT 1 TO REVOLVING CREDIT AND LOAN AGREEMENT 1 EXHIBIT 10.9 AMENDMENT AGREEMENT NO.1 dated as of August 29, 1995 to that certain $115,000,000 REVOLVING CREDIT AND TERM LOAN AGREEMENT and other Loan Documents executed in connection therewith This AMENDMENT AGREEMENT NO.1 (the "Amendment"), dated as of August 29, 1995, is by and among TRANSTECHNOLOGY CORPORATION ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GMBH ("GmbH"), TTUK ACQUISITION CO. LIMITED ("Limited" and, together with TransTechnology and GmbH, the "Borrowers"), THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), the other lending institutions listed on Schedule I (the "Banks") and Schedule 2 (the "Term B Lenders") thereto, THE FIRST NATIONAL BANK OF BOSTON, acting through its London Branch and its Frankfurt Branch, as fronting bank (in such capacity, the "Fronting Bank"), THE FIRST NATIONAL BANK OF BOSTON, as issuing bank (in such capacity, the "Issuing Bank", and together with the Banks, the Term B Lenders and the Fronting Bank, the "Lenders") and THE FIRST NATIONAL BANK OF BOSTON, as Agent (in such capacity, the "Agent"). Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agent are parties to (i) that certain Revolving Credit and Term Loan Agreement dated as of June 30, 1995 (as amended and in effect from time to time, the "Credit Agreement"); and (ii) the other Loan Documents executed in connection therewith; WHEREAS, the Lenders, the Agent and the Borrowers have agreed to amend the Credit Agreement and certain of the Loan Documents as hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing premises, the parties hereby agree as follows: SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Subordinated Debt" in its entirety and substituting therefor the following: 2 -2- Subordinated Debt. Unsecured Indebtedness of TransTechnology or any of its Subsidiaries in an amount, containing other terms and conditions, and expressly subordinated and made junior to the payment and performance in full of the Obligations, pursuant to a written instrument containing subordination provisions, in each respect satisfactory to and approved by both the Majority Banks and the Majority Term B Lenders in writing. (b) Section 6.3.2. of the Credit Agreement is hereby amended by inserting before the semi-colon at the end of subsection (a), clause (ii) the following: provided, however, that, for purposes of this clause (ii) only, the Applicable Margin shall be deemed to be that Applicable Margin which is to be applied to Eurocurrency Rate Loans (c) Section 6.12 of the Credit Agreement is hereby amended by adding the following new subsection: 6.12.4. NOTICE TO BANKS. Not less than once each month the Agent will notify each of the Banks as to such Bank's balance of all Fronted Loans outstanding at such time. (d) Section 11.2 of the Credit Agreement is hereby amended by deleting from clause (i)(B) the phrase "to the extent permitted by Section 11.6". (e) Section 14.1 of the Credit Agreement is hereby amended by inserting after the phrase "approval of the Lenders" in subsection (j) thereof the following: (and, notwithstanding anything herein to the contrary, if any guaranty shall be cancelled, terminated, revoked or rescinded without the consent of the Lenders) (f) Section 20.1.2 of the Credit Agreement is hereby amended by deleting clause (iii) of the first sentence thereof in its entirety and substituting therefor the following: (iii) each partial assignment shall be in a minimum amount of $5,000,000 and SECTION 2. AMENDMENT TO SUBSIDIARY GUARANTY. Section 6.1 of the Subsidiary Guaranty is hereby amended by (a) deleting the word "each" in the second line thereof and substituting therefor the word "none"; and 3 -3- (b) deleting the word "such" in the third line thereof and substituting therefor the word "each". SECTION 3. AMENDMENT TO SECURITY AGREEMENT. Section 6 of the Security Agreement is hereby amended by inserting after the phrase "of the Credit Agreement," the words "none of". SECTION 4. AMENDMENT TO TRADEMARK COLLATERAL SECURITY AND PLEDGE AGREEMENT. The Trademark Collateral Security and Pledge Agreement is hereby amended by deleting Schedule A thereto in its entirety and substituting therefor the Schedule A attached hereto as Exhibit 1. SECTION 5. AMENDMENT TO PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT. The Patent Collateral Assignment and Security Agreement is hereby amended by deleting Schedule A thereto in its entirety and substituting therefor the Schedule A attached hereto as Exhibit 2. SECTION 6. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment Agreement No. 1 shall be conditioned upon the satisfaction of the following conditions precedent: SECTION 6.1. DELIVERY OF DOCUMENTS. The Borrowers shall have delivered to the Agent this Amendment executed and delivered by each of the Borrowers, the Lenders and the Agent; SECTION 6.2. LEGALITY OF TRANSACTION. No change in applicable law shall have occurred as a consequence of which it shall have become and continue to be unlawful on the date this Amendment is to become effective (a) for the 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 6.3. PERFORMANCE. Each of the Borrowers shall have duly and properly performed, complied with and observed in all material respects its covenants, agreements and obligations contained in the Loan Documents required to be performed, complied with or observed by it on or prior to the date this Amendment is to become effective. No event shall have occurred on or prior to the date this Amendment is to become effective and be continuing, and no condition shall exist on the date this Amendment is to become effective which constitutes a Default or Event of Default under any of the Loan Documents. SECTION 6.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Amendment and all instruments and documents incidental thereto shall be in form and substance reasonably satisfactory to the Agent and the Agent shall have received all such counterpart originals or certified or other copies of all such instruments and documents as the Agent shall have reasonably requested. 4 -4- SECTION 7. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Lenders as follows: (a) The representations and warranties of such Borrower contained in the Credit Agreement and the other Loan Documents, as amended hereby, were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to therein shall be the financial statements of such Borrower most recently delivered to the Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby; (i) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval, consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity of this Amendment and which is required by law or the regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, 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, loan or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; and (c) This Amendment, the Credit Agreement as amended hereby, and the other Loan Documents, as amended hereby constitute the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors, and (ii) enforcement may be subject to general principles of equity, and the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceeding for such remedies may be brought. SECTION 8. NO OTHER AMENDMENTS. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. 5 -5- SECTION 9. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. SECTION 10. EFFECTIVE DATE. Subject to the satisfaction of the conditions precedent set forth in Section 6 hereof, this Amendment shall be deemed to be effective as of the date hereof (the "Effective Date"). 6 - 6 - IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No. 1 as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/Chandler J. Moisen ----------------------------------- Name: Chandler J. Moisen Title: Senior VP TRANSTECHNOLOGY SEEGER-ORBIS GmbH By: /s/Chandler J. Moisen ----------------------------------- Name: Chandler J. Moisen Title: Attorney-in-fact TTUK ACQUISITION CO. LIMITED By: /s/Chandler J. Moisen ----------------------------------- Name: Chandler J. Moisen Title: Attorney By: /s/Valentina Doss ----------------------------------- Name: Valentina Doss Title: Attorney THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent, Issuing Bank and Fronting Bank By: /s/ J. Peter Mitchell ----------------------------------- Name: J. Peter Mitchell Title: Director 7 EXHIBIT 1 SCHEDULE A (List of U.S. Trademarks) U.S. Trademark Registrations
Trademark or Service Mark Registration No. - ------------------------- ---------------- BREEZE 294,293 PAL 340,210 PALNUT 556,075 CRESCENT 615,340 PUSHNUT 617,710 AERO-SEAL JET and Design 622,536 PUSHNUTS 651,077 SNAP-PAK 708,065 GRIPRING 721,293 RING-O-MAT 721,869 RING-MOUNT 737,496 RETAINING RING DESIGN 780,219 POWER-SEAL 869,921 ON-SERT 882,005 MASSTECH 970,172 MAKE-A-CLAMP 975,772 TRUARC (BLOCK LETTERS) 1,001,237 MULTIARC (block) 1,020,954 PRONG-LOCK 1,026,539 KLIPRING 1,035,195 BREEZE 1,134,995 BREEZE 1,135,036 BREEZE 1,147,031 RING-GUN 1,172,919 RING-JECTOR 1,172,920 ROL-PAK 1,179,814 "MT" LOGO 1,249,749 BI-PRO 1,261,528 ERC 1,299,267 CONSTANT-TORQUE 1,307,639 TRUARC RADIAL POWER-GUN 1,329,250 RETAINING RING DESIGN 1,330,849 SEEGER 1,437,708 SEEGER & DESIGN 1,444,876 A/U logo 1,449,269 AERO-AW1 1,723,241
8 - 2 - Trademark Applications
Trademark or Service Mark Serial No. - ------------------------- ---------- A (design) 74/446,309 EURO-SEAL Application pending CLIP-RING WITH GLOBE (design) Application pending CLIP-RING Application pending FASTENING IS OUR BUSINESS Application pending
9 SCHEDULE A (CONT.) (LIST OF FOREIGN TRADEMARKS) TRANSTECHNOLOGY CORPORATION
Trademark or Service Mark Registration No. Country - ------------------------- ---------------- ------- PALNUT (R) 32136 Australia PALNUT (R) 006049 Benelux PALNUT (R) 002553287 Brazil PUSHNUT (R) 125904 Canada PAL (R) 156512 Canada PALNUT (R) 1,364,519 France PALNUT (R) 73275/157026 France PALNUT (R) 114499 India PALNUT (R) XXXXXX Italy PALNUT (R) 236052 Italy ON-SERT with Katakan (R) 1597356 Japan ON-SERT w/ Katakana (R) 1520146 Japan PALNUT (R) 860/60 Malawi PALNUT (R) 283205 Mexico PALNUT (R) 68730 New Zealand PALNUT (R) 371521 U.K. PAL (R) 1056305 U.K. ON-SERT (R) 1064188 U.K. PALNUT (R) 1020657 Germany PALNUT (R) 860/60(ZAM) Zambia PALNUT (R) 860/60 (Zim) Zimbabwe WALDES TRUARC INC. Trademark or Service Mark Registration No. Country - ------------------------- ---------------- ------- TRUARC 113/1947 Denmark DESIGN MARK 151/38743 Canada TRUARC 041,123 Benelux TRUARC 21274 Austria TRUARC 619,687 Germany TRUARC RADIAL POWER GUN 316,711 Mexico TRUARC (block letters) 21/839 Phillipines TRUARC (stylized) 351,903 Switzerland TRUARC 49152 Thailand TRUARC (block letters) 168460 Uruguay TRUARC 39911 Norway TRUARC 0196015 Spain
10 -2- TRUARC 76828 Turkey TRUARC 37,198 Israel TRUARC 76103-f Venezuela TRUARC 351,903 Switzerland TRUARC 62,631 Sweden TRUARC 214,294 Italy TRUARC 36809 Israel WALDES TRUARC 335,459 Chile TRUARC 335,460 Chile WALDES TRUARC 1,160,544 Argentina WALDES TRUARC 1,160,545 Argentina WALDES TRUARC 1,160,546 Argentina WALDES TRUARC 1,160,547 Argentina WALDES TRUARC 1,160,548 Argentina WALDES TRUARC 1,160,549 Argentina WALDES TRUARC 1,160,550 Argentina WALDES TRUARC 1,160,551 Argentina WALDES TRUARC 1,160,552 Argentina TRUARC 1,142,971 Japan TRUARC RADIAL POWER GUN 328,509 Canada TRUARC 1,001,443 France TRUARC 285,851 India TRUARC 285,853 India WALDES TRUARC 361,878 Mexico MULTIARC 347,047 Canada TRUARC 18695 Canada TRUARC B716,372 U.K. RING-JECTOR (word) 1,478,546 France ROL-PAK (word) 1,478,544 France GRIPRING 1,478,547 France RING-GUN (word) 1,478,543 France RETAINING RING (device) 1,478,542 France SNAP-PAK (word) 1,478,541 France RING-O-MAT (word) 1,478,545 France TRUARC 630,996 U.K. KLIPRING 1,244,673 France MULTIARC 1,244,672 France TRUARC 383,007 Mexico TRUARC RADIAL POWER GUN 501,116 Italy TRUARC 21,274 Austria TRUARC RADIAL POWER GUN 1,087,422 Germany TRUARC A106152 Australia TRUARC 1,173,535 Japan TRUARC 56,957 Singapore
11 -3- WALDES TRUARC 003588920 Brazil MULTIARC 2258136 Japan (PENDING) WALDES TRUARC INC. TRUARC RADIAL POWER GUN 94 544 805 France
12 EXHIBIT 2 SCHEDULE A (LIST OF U.S. PATENTS)
Title Registration No. - ----- ---------------- Clamp Body 289,141 Apparatus for Controlling 3,992,300 Iron Content of a Zine Phosphating Bath Cable Tensioning Device 4,227,678 Releasable Hose Fitting 4,270,777 Blind Clip Fastener 4,300,865 Self-Retaining Spring Washer 4,300,866 Quick Disconnect Connector with 4,445,743 Positive Locking Device Self-Locking Coupling Nut 4,588,245 Hand Applicator for Radially Assembled 4,592,122 Spring Retaining Rings Fastener Clip 4,610,588 Connector Mechanical Interlock 4,610,496 Using Ball Detents Radially Assembled Spring Retaining Ring 4,667,399 and Power Gun for Assembling Same Helicopter Cargo Hook 4,678,219 Tiedown Chain 4,850,768 Bowed External Spring Retaining Ring of 4,886,408 the E-Shaped Type Push-Nut Type Fastener 4,911,594 Push-In Fastener Clip 4,925,351 Twist-off Pushnut Fastener 5,110,246 Pushnut for automatic Feeder 5,195,860
13 SCHEDULE A (CONT.) (LIST OF FOREIGN PATENTS) TRANSTECHNOLOGY CORPORATION
Title Registration No. Country - ----- ---------------- ------- Helicopter Cargo Hook 1,282,094 Canada Tiedown Chain 2,151,328 U.K. Tiedown Chain 1,179,862 Italian Fastener Clip 1,250,163 Canada Fastener Clip P35246510 Germany Fastener Clip 2,162,272 U.K. Fastener Clip 85111233 France Fastener Clip 292,080 Spain Push-Nut Type Fastener pending U.K. Push-Nut Type Fastener pending Japan Push-Nut Type Fastener pending Korea Push-Nut Type Fastener pending Netherlands Push-Nut Type Fastener pending Sweden WALDES TRUARC INC. Title Registration No. Country - ----- ---------------- ------- Double-Bevel Spring Retaining Ring 0019361 U.K. Double-Bevel Spring Retaining Ring 30 68 775 Germany Double Bevel Spring Retaining Ring IT 0019361 Italy Bowed External Spring Retaining Ring of the E-Shaped Type 1,275,586 Canada Double-Bevel Spring Retaining Ring 182,386 Mexico Methods and Apparatus for Installing a Radially Assembled Spring Retaining Ring into an External Groove of a Workpiece 162,356 Mexico 25 54 555 Germany (PENDING) Hand Applicator for Radially Assembled Spring 527,862 Canada Punching Method and Apparatus for Making a Bowed External Retaining Ring 527,864 Canada
14 EXHIBIT A SCHEDULE 1 The Banks
- -------------------------------------------------------------------------------------------------------------------------- Bank Address of Lending Office Revolving Credit $34,000,000 $4,000,000 $2,000,000 (Domestic and Eurodollar) and Term A Revolver Revolver Revolver Commitment (Germany) (UK) Percentage - -------------------------------------------------------------------------------------------------------------------------- The First National 100 Federal Street 21.166667% 8,216,666.78 966,666.68 483,333.34 Bank of Boston Boston, MA 02110 Fax No: (+1) 617-434-6685 - -------------------------------------------------------------------------------------------------------------------------- National Bank of One Cleveland Center 22.222222% 7,555,555.48 888,888.88 444,444.44 Canada 1375 East 9th Street Suite 2430 Cleveland, OH 44114 Fax No: (216) 574-9236 - -------------------------------------------------------------------------------------------------------------------------- BHF-Bank AG 590 Madison Avenue 15% 5,100,000.00 600,000.00 300,000.00 New York, NY 10022-2540 Fax No: (212) 766-5911 - -------------------------------------------------------------------------------------------------------------------------- Dresdner Bank AG 75 Wall Street 13.611111% 4,627,777.74 544,444,44 272,222.22 New York Branch New York, NY 10005 and Fax No: (212) 574-0129 Grand Cayman Branch - -------------------------------------------------------------------------------------------------------------------------- NBD Bank 611 Woodward Avenue 15% 5,100,000.00 600,000.00 300,000.00 Detroit, MI 48226 Fax No: (313) 225-1586 - -------------------------------------------------------------------------------------------------------------------------- United Jersey Bank 26 East Salem, 6th Floor 10% 3,400,000.00 400,000.00 200,000.00 Hackensack, NJ 07602 Fax No: (201) 343-6723 - -------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------- Bank $30,000,000 $8,000,000 $12,000,000 Term A Term A Term A (US) (UK) (Germany) - ---------------------------------------------------------------------------- The First National 7,250,000.10 1,933,333.36 2,900,000.04 Bank of Boston - ---------------------------------------------------------------------------- National Bank of 6,666,666.60 1,777,777.76 2,666,666.64 Canada - ---------------------------------------------------------------------------- BHF-Bank AG 4,500,000.00 1,200,000.00 1,800,000.00 - ---------------------------------------------------------------------------- Dresdner Bank AG 4,083,333.30 1,088,888.88 1,633,333.32 New York Branch and Grand Cayman Branch - ---------------------------------------------------------------------------- NBD Bank 4,500,000.00 1,200,000.00 1,800,000.00 - ---------------------------------------------------------------------------- United Jersey Bank 3,000,000.00 800,000.00 1,200,000.00 - ----------------------------------------------------------------------------
15 SCHEDULE 2 The Term B Lenders
Term B Address of Lending Office Term B Commitment $25,000,000 Lender (Domestic and Eurodollar) Percentage Term B - ------ ------------------------- ---------- ------ The First National 100 Federal Street 5% 1,250,000.00 Bank of Boston Boston, MA 02110 Fax: (+1) 617-434-6685 Dresdner Bank AG, 75 Wall Street 5% 1,250,000,00 New York Branch and New York, NY 10005 Grand Cayman Branch Fax: (212) 574-0129 Senior Debt Portfolio 24 Federal Street, 6th Fl. 30% 7,500,000.00 (Eaton Vance) Boston, MA 02110 Fax: (517) 695-9594 Merrill Lynch Senior 800 Scudders Mills Road 60% 15,000,000.00 Floating Rate Fund, Plainsboro, NJ 08536 Inc. Fax: (609) 282-2756
EX-10.10 5 AMENDMENT 2 TO REVOLVING CREDIT AND LOAN AGREEMENT 1 EXHIBIT 10.10 CONSENT AND AMENDMENT AGREEMENT NO.2 dated as of October 27, 1995 to that certain TRANSTECHNOLOGY CORPORATION $115,000,000 REVOLVING CREDIT AND TERM LOAN AGREEMENT This AMENDMENT AGREEMENT NO. 2 AND CONSENT (the "Amendment"), dated as of October 27, 1995, is by and among TRANSTECHNOLOGY CORPORATION ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GMBH, in the process of changing its name from kimo Buroservice GmbH ("GmbH"), TTUK ACQUISITION CO. LIMITED ("Limited" and, together with TransTechnology and GmbH, the "Borrowers"), THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), the other lending institutions listed on Schedule 1 (the "Banks") and Schedule 2 (the "Term B Lenders") to the Credit Agreement (as defined below), THE FIRST NATIONAL BANK OF BOSTON, acting through its London Branch and its Frankfurt Branch, as fronting bank (in such capacity, the "Fronting Bank"), THE FIRST NATIONAL BANK OF BOSTON, as issuing bank (in such capacity, the "Issuing Bank", and together with the Banks, the Term B Lenders and the Fronting Bank, the "Lenders") and THE FIRST NATIONAL BANK OF BOSTON, as Agent (in such capacity, the "Agent") and NATIONAL BANK OF CANADA as Co-Agent. Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit and Term Loan Agreement dated as of June 30, 1995 (as amended and in effect from time to time, the "Credit Agreement"); WHEREAS, the Borrowers have proposed to the Lenders and the Agent certain changes in the structure of the German Merger whereby in place of a merger (as described in the Credit Agreement), Seeger-Orbis will be converted into a German commercial general partnership, the interests in which will be held by GmbH and TransTechnology Seeger-Orbis Beteiligungsgesellschaft mbH ("TTSOB"), a newly acquired wholly-owned subsidiary of GmbH; WHEREAS, the Borrowers have proposed to the Lenders and the Agent certain changes in the English Asset Transfer whereby in place of a "hive-down" of the assets and liabilities of Limited into Anderton, Anderton will transfer its assets and liabilities to Limited in a so-called "hive-up"; and WHEREAS, the Lenders, the Agent and the Borrowers have agreed to amend the Credit Agreement to reflect such changes as hereinafter set forth; 2 -2- NOW, THEREFORE, in consideration of the foregoing premises, the parties hereby agree as follows: SECTION 1. CONSENT. The Agent and the Lenders hereby consent to the following: (a) completion of the English Asset Transfer (as defined in the Credit Agreement, as amended hereby) and transactions related thereto, so long as the same are done in conformity with the documents referred to in Part I of Schedule A hereto, each in form and substance satisfactory to the Agent and the Lenders; (b) completion of the German Conversion (as defined in the Credit Agreement, as amended hereby) and transactions related thereto, so long as the same are done in conformity with the documents referred to in Part II of Schedule A hereto, each in form and substance satisfactory to the Lenders and the Agent, including without limitation the transfer of one equity interest in Seeger-Orbis to TTSOB; (c) amendment of the Articles of Association of GmbH and TTSOB to change the ending date of their fiscal year from December 31 to March 31; (d) amendment of the Articles of Association of Anderton in connection with the English Asset Transfer (as defined in the Credit Agreement, as amended hereby); and (e) the changes of names of WTI to "Seeger Inc."; of Limited to "Anderton International Limited"; of Seeger-Orbis to "Seeger-Orbis GmbH & Co. oHG" or a similar name; and of Anderton to "AIL Predecessors Limited" or a similar name. The Lenders hereby authorize and instruct the Agent to take all actions necessary to give effect to the foregoing consent. SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the definitions of "Anderton Assumption Agreement", "German Merger" and "Merger Documents" in their entirety. (b) Section 1.1 of the Credit Agreement is further amended by deleting from the definition of "Acquisition Documents" the phrase "Merger Documents" and substituting therefor the phrase "Conversion Documents". 3 -3- (c) Section 1.1 of the Credit Agreement is further amended by inserting into the definition of "Debenture" after the phrase "made by Anderton" the following: and the Debenture made by Limited contemporaneously with the completion of the English Asset Transfer, each (d) Section 1.1 of the Credit Agreement is further amended by deleting the definitions of "Brazilian Pledge Agreement", "German Mortgages", "German Pledge Agreements" and "German Security Documents" in their entirety and substituting therefor the following: Brazilian Pledge Agreement. The Pledge of Quotas made or to be made in favor of the Fronting Bank with respect to the share capital of the Brazilian Subsidiary, in form and substance satisfactory to the Agent and the Lenders. German Mortgages. The Real Estate Mortgage(s) entered into or to be entered into by SO oHG in favor of the Fronting Bank with respect to the real property of SO oHG at: (a) Wiesbadener Strasse/Fischbacher Strasse, Konigstein, Germany (Folio 19-615); (b) Wiesbadener Strasse, Konigstein, Germany (Folio 21-699); and (c) Zum Junkerwald, Eichen, Germany (Folio 40-1399), each in form and substance satisfactory to the Lenders and the Agent. German Pledge Agreement. The Pledge of Shares made by (a) TTSO Inc. in favor of the Lenders and the Agent with respect to the share capital of GmbH and (b) GmbH in favor of the Fronting Bank with respect to the share capital of Seeger-Orbis, in form and substance satisfactory to the Lenders and the Agent. German Security Documents. The Pledges as to Equipment, Inventory and Intangible Assets and Assignment of Accounts Receivable entered into or to be entered into by SO oHG in favor of the Fronting Bank with respect to all of the equipment, inventory, intangible assets and accounts receivable of SO oHG, each in form and substance satisfactory to the Lenders and the Agent, and the German Pledge Agreement. (f) Section 1.1 of the Credit Agreement is further amended by deleting from the definition of "GmbH" the second sentence thereof. 4 -4- (g) Section 1.1 of the Credit Agreement is further amended by deleting from the definition of "Limited" the second sentence thereof. (h) Section 1.1 of the Credit Agreement is further amended by deleting from the definition of "Loan Documents" the phrase "the Anderton Assumption Agreement," and substituting therefor the phrase "the Brazilian Pledge Agreement,". (i) Section 1.1 of the Credit Agreement is further amended by inserting the following new definitions in the appropriate alphabetical sequence thereof: Conversion Documents. The Partnership Agreement, the resolution of the shareholders of Seeger-Orbis to convert Seeger-Orbis into SO oHG, and all other documents required to be filed with various German Commercial Registrars in order to consummate the German Conversion. Domestic Subsidiaries. Those Subsidiaries of TransTechnology which are incorporated in or organized under the laws of any state, district or territory of the United States or of the Commonwealth of Puerto Rico. Foreign Subsidiaries. Those Subsidiaries of TransTechnology other than the Domestic Subsidiaries. German Conversion. The conversion of Seeger-Orbis into SO oHG pursuant to the Conversion Documents. Partnership Agreement. The partnership agreement of SO oHG entered into between TTSOB and GmbH, as in effect on October 27, 1995. SO oHG. Seeger-Orbis GmbH & Co. oHG (or a similar name), a German general partnership, at least ninety-nine percent (99%) of whose partnership interests are held by GmbH and the remainder of whose partnership interests are held by TTSOB. TTSOB. TransTechnology Seeger-Orbis Beteiligungsgesellschaft mbH, a German limited liability company and a wholly-owned subsidiary of GmbH. (j) Section 7.1 of the Credit Agreement is hereby amended by inserting after the phrase "all of the assets of GmbH" in the second sentence thereof the phrase "and SO oHG". 5 -5- (k) Section 7 of the Credit Agreement is further amended by adding the following new subsections in the appropriate numerical sequence thereof: 7.3. PLEDGES OF STOCK. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, including without limitation the German Pledge Agreement and the Charge Over Shares from TTSO, Inc., to the extent that any pledge, lien, security interest, charge, mortgage or other encumbrance over any shares of a Foreign Subsidiary granted by TransTechnology or any of its Domestic Subsidiaries extends or purports to extend to any shares in excess of 65% of the aggregate issued and outstanding shares of capital stock of such Foreign Subsidiary, neither the Agent nor any of the Lenders shall exercise any rights it may have or purport to have with respect to such excess shares. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, in the event that TransTechnology or any of the Domestic Subsidiaries delivers to the Agent or, as the case may be, the Fronting Bank, certificates or other instruments representing greater than 65% of the aggregate issued and outstanding shares of capital stock of such Foreign Subsidiary, the shares in excess of 65% of such Foreign Subsidiary's capital stock shall not be subject to any pledge, lien, security interest, charge, mortgage or other encumbrance under this Agreement or any of the other Loan Documents but shall be held in the custody of the Agent for and on behalf of TransTechnology or such Domestic Subsidiary, as applicable, until such time as TransTechnology or such Domestic Subsidiary shall have delivered to the Agent certificates or other instruments representing 65% of the aggregate issued and outstanding shares of capital stock of such Foreign Subsidiary, at which time the Agent shall release the original certificates or other instruments delivered to it or the Fronting Bank to TransTechnology or the applicable Domestic Subsidiary. 7.4. GUARANTEES AND PLEDGES OF ASSETS OF FOREIGN SUBSIDIARIES. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, no guarantee entered into by any Foreign Subsidiary, including without limitation either of the English Guarantees, shall be construed in any way as a guarantee of, and no pledge, lien, security interest, charge, mortgage or other encumbrance over any assets of a Foreign Subsidiary shall be construed in any way to secure, any obligation of TransTechnology or any of its Domestic Subsidiaries. (l) Section 8.2 of the Credit Agreement is hereby amended by deleting the phrase "Merger Documents will" and substituting therefor the phrase "Conversion Documents". (m) Section 9.16 of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting therefor the following: 6 -6- 9.16. GERMAN CONVERSION. TransTechnology, GmbH and Seeger-Orbis (a) shall use their respective best efforts to pursue the completion of the German Conversion pursuant to and in accordance with the Conversion Documents, (b) shall submit or file by December 31, 1995 all documents required to be submitted or filed with the appropriate Commercial Registrar necessary to give legal effect to the German Conversion, and (c) shall promptly pay all filing fees in connection therewith. Each such submission or filing shall be true, accurate and complete, and TransTechnology shall as soon as practicable send, or procure the sending of, a copy of each such submission or filing to the Agent at its address specified in Section 21. GmbH and Seeger-Orbis shall deliver to the Agent, immediately following the submission or filing of the documents referred to in the first sentence of this Section 9.16, such documents and instruments as the Agent may request in order to facilitate the completion of the German Conversion following the occurrence and during the continuance of any Event of Default. (n) Section 9.17 of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting therefor the following: 9.17. ENGLISH ASSET TRANSFER. Limited shall only enter into any transfer of the assets and liabilities of Anderton to Limited (any such transaction, the "English Asset Transfer") if the Agent shall have received such documentary evidence satisfactory to it of: (a) compliance of the English Asset Transfer, and any variation of the English Guarantees to be carried out concurrently with the English Asset Transfer, with sections 151-158 of the Companies Act 1985 of the United Kingdom, including a copy addressed to the Agent of the auditor's report and a certified copy of the statutory declaration required to be delivered under such sections of the Companies Act, a certified copy of the Articles of Association of Anderton, as amended to permit (amongst other things) the English Asset Transfer and such opinions of English solicitors as to such compliance as the Agent may require; and (b) the corporate capacity of Limited and Anderton to enter into the English Asset Transfer and related transactions, including such opinions of English solicitors on such subject as the Agent may require. (o) Section 9 of the Credit Agreement is further amended by inserting the following new subsections in the appropriate numerical sequence thereof: 9.19. GERMAN MORTGAGES. SO oHG will submit or file as soon as possible, and in any event by February 29, 1996, all documents required to be submitted or filed with the appropriate Registrar in order to give legal effect to the German Mortgages. 7 -7- 9.20. BRAZILIAN PLEDGE AGREEMENT. GmbH, in its capacity as managing partner of SO oHG, will execute and deliver to the Agent the Brazilian Pledge Agreement as soon as possible, and in any event by February 29, 1996. 9.21. SHARES IN ANDERTON. Limited will deliver or cause to be delivered to the Agent, immediately following completion of adjudication of the amount payable as stamp duty in connection with the transfer of the shares of Anderton from Seeger-Orbis to Limited, the duly-stamped share transfer forms and share certificates of Anderton evidencing the transfer of the shares of Anderton from Limited to Firnabos Nominees Limited, as the Agent's nominee, pursuant to and in accordance with the Charges over Shares. (p) Section 10.5.1 of the Credit Agreement is hereby amended by: (i) inserting after the word "consolidation," in the third line thereof the phrase "convert any of the Borrower or its Subsidiaries from one form of corporate organization or partnership to another,"; (ii) inserting after the word "merger" in clause (d) thereof the word ", conversion"; and (iii) deleting from clause (d) thereof the phrase ", including without limitation the German Merger and the English Asset Transfer" and inserting at the end of such section the following: provided that no assets of any such Subsidiary which prior to such merger or consolidation were pledged to the Agent or the Lenders or in or over which the Agent or the Lenders had any security interest, charge, lien or other encumbrance shall, as a result of such merger, conversion or consolidation, cease to be so pledged or otherwise encumbered. (q) Section 10 of the Credit Agreement is further amended by adding the following new subsection in the appropriate numerical sequence thereof: 10.12. PARTNERSHIP AGREEMENT. TransTechnology will not, and will not permit any of its Subsidiaries to, amend, supplement, restate or otherwise modify the Partnership Agreement as in effect as of October 27, 1995, without the prior written consent of the Agent and the Majority Lenders. (r) Section 12.1.1 of the Credit Agreement is hereby amended by deleting the phrase "the Anderton Assumption Agreement and". 8 -8- (s) Section 12.1.2 of the Credit Agreement is hereby amended by deleting the phrase "Merger Documents" and substituting therefor the phrase "Conversion Documents". (t) Section 14.1(q) of the Credit Agreement is hereby amended by deleting the word "Merger" wherever it appears therein and in each case substituting therefor the word "Conversion". (u) Section 20.9 of the Credit Agreement is hereby amended by deleting the phrase ", including pursuant to the English Asset Transfer and the Anderton Assumption Agreement,". SECTION 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of the amendment to the Credit Agreement as provided above shall be conditioned upon the satisfaction of the following conditions precedent: SECTION 3.1. DELIVERY OF DOCUMENTS. The Borrowers shall have delivered to the Agent (i) this Amendment, duly executed by each of the Borrowers, the Lenders and the Agent and (ii) unless otherwise specified, each of the documents listed on Schedule A hereto, duly executed by each of the parties thereto (as applicable), each in form and substance satisfactory to the Lenders and the Agent, unless waived by the Agent, and any other documents reasonably requested by the Agent in connection with the German Conversion, the English Asset Transfer and the Brazilian Pledge Agreement. 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 Amendment is to become effective (a) for the 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 Amendment is to become effective. No event shall have occurred on or prior to the date this Amendment is to become effective and be continuing, and no condition shall exist on the date this Amendment is to become effective which constitutes a Default or Event of Default under any of the Loan Documents. SECTION 3.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Amendment and all instruments and documents incidental thereto shall be in form and substance reasonably satisfactory to the Agent and the Agent shall have received all such counterpart originals or certified or other copies of all such instruments and documents as the Agent shall have reasonably requested. 9 -9- SECTION 4. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Lenders as follows: (a) The representations and warranties of such Borrower contained in the Credit Agreement and the other Loan Documents, as amended hereby, were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to therein shall be the financial statements of such Borrower most recently delivered to the Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby: (i) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval, consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity of this Amendment and which is required by law or the regulation or rule of any agency or authority, or other person, association or entity, except for those filings required by applicable law to give effect to the German Conversion and the English Asset Transfer, (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, 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, loan or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; and (c) This Amendment, the Credit Agreement as amended hereby, and the other Loan Documents, as amended hereby constitute the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors, and (ii) enforcement may be subject to general principles of equity, and the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceeding for such remedies may be brought. 10 -10- SECTION 5. NO OTHER AMENDMENTS. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. SECTION 7. EFFECTIVE DATE. Subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, the amendment to the Credit Agreement as set forth in Section 1 herein shall be deemed to be effective as of the date hereof (the "Effective Date"). SECTION 8. GOVERNING LAW. This Amendment is intended to take effect as an agreement under seal and shall be construed according to and governed by the laws of the Commonwealth of Massachusetts. (next page is signature page) 11 IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No.2 and Consent as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/Chandler J. Moisen -------------------------------- Name: Chandler J. Moisen Title: Senior VP TRANSTECHNOLOGY SEEGER- ORBIS GmbH By: /s/Chandler J. Moisen -------------------------------- Name: Chandler J. Moisen Title: Attorney-in-Fact TTUK ACQUISITION CO. LIMITED By: /s/Chandler J. Moisen -------------------------------- Name: Chandler J. Moisen Title: Attorney By: /s/Michael J. Berthelot -------------------------------- Name: Michael J. Berthelot Title: Director THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent, Issuing Bank and Fronting Bank By: /s/ Nancy E. Fuller -------------------------------- Name: Nancy E. Fuller Title: Director 12 NATIONAL BANK OF CANADA, individually and as Co-Agent By: /s/ Douglas K. Winget -------------------------------- Name: Douglas K. Winget Title: Assistant Vice President BHF-BANK AKTIENGESELLSCHAFT By: /s/David Fraenkel -------------------------------- Name: David Fraenkel Title: VP By: /s/ Linda Pace -------------------------------- Name: Linda Pace Title: AVP DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH By: /s/Andrew K. Mittag -------------------------------- Name: Andrew K. Mittag Title: Vice President By: /s/ R. Conroy -------------------------------- Name: Richard W. Conroy Title: Vice President 13 NBD BANK By: /s/ T. J. King -------------------------------- Name: Timothy J. King Title: Second Vice President UNITED JERSEY BANK By: /s/ Edith Neuman -------------------------------- Name: Edith Neuman Title: Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: /s/ Barbara Campbell -------------------------------- Name: Barbara Campbell Title: Assistant Treasurer MERRILL LYNCH SENIOR FLOATING FUND RATE, INC. By: /s/Anthony R. Clemente -------------------------------- Name: Anthony R. Clemente Title: Authorized Signatory 14 The Guarantors under (and as defined in) the Subsidiary Guaranty hereby acknowledge that they have read and are aware of the provisions of this Amendment and hereby reaffirm their absolute and unconditional guaranty of the Borrowers' payment and performance of their obligations to the Lenders and the Agent under the Credit Agreement as amended hereby. TRANSTECHNOLOGY ACQUISITION CORPORATION By: /s/ Chandler J. Moisen -------------------------------- PALNUT FASTENERS, INC. By: /s/ Chandler J. Moisen -------------------------------- INDUSTRIAL RETAINING RING COMPANY By: /s/ Chandler J. Moisen -------------------------------- RETAINERS, INC. By: /s/ C.S. Raman -------------------------------- RANCHO TRANSTECHNOLOGY CORPORATION By: /s/ Chandler J. Moisen -------------------------------- 15 TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/ Chandler J. Moisen -------------------------------- ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/ Chandler J. Moisen -------------------------------- SSP INDUSTRIES By: /s/Chandler J. Moisen -------------------------------- SSP INTERNATIONAL SALES, INC. By: /s/ Chandler J. Moisen -------------------------------- TRANSTECHNOLOGY SEEGER INC. formerly know as TRANSTECHNOLOGY SEEGER- ORBIS, INC. By: /s/ Chandler J. Moisen -------------------------------- SEEGER INC. (formerly known as WALDES TRUARC INC.) By: /s/ Chandler J. Moisen -------------------------------- 16 The Guarantors under and as defined in the English Guarantees hereby acknowledge that they have read and are aware of the provisions of this Amendment and hereby reaffirm their absolute and unconditional guarantee of the Obligations referred to in the English Guarantees, as such English Guarantees may be amended in connection with this Amendment. ANDERTON INTERNATIONAL LIMITED By: /s/ Ulf Jemsby -------------------------------- Name: Ulf Jemsby Title: Director By: /s/ Robert Wieremiej -------------------------------- Name: Robert Wieremiej Title: Director TTUK ACQUISITION CO. LIMITED By: /s/ Chandler J. Moisen -------------------------------- Name: Chandler J. Moisen Title: Attorney By: /s/ Michael J. Berthelot -------------------------------- Name: Michael J. Berthelot Title: Director 17 SCHEDULE A Documents identified with an asterisk (*) should be delivered to the Agent as certified copies. I. DOCUMENTS TO BE DELIVERED TO THE AGENT IN CONNECTION WITH THE ENGLISH ASSET TRANSFER 1. Duly-stamped share transfer form evidencing transfer of shares of Anderton from Limited to Firnabos Nominees Limited (the nominee company of the Agent which will hold the shares as collateral), pursuant to the Charge over Shares given by Limited and dated 30 June 1995 (to be delivered after completion of Amendment Agreement No.2). 2. Share certificate of Anderton evidencing ownership by Firnabos Nominees Limited of all of the issued and outstanding share capital of Anderton (to be delivered after completion of Amendment Agreement No. 2). *3. Agreement in respect of the purchase and sale of assets between Anderton and Limited (the "Hive-Up Agreement"). *4. Declaration of all directors of Anderton in relation to assistance for the acquisition of shares (the "Statutory Declaration", to be filed with Companies House on Form 155(6)(A)). 5. Report of Arthur Andersen, as auditors of Anderton, addressed to the Agent. *6. Deed of Transfer or other conveyance of freehold property at Ferncliffe Road, Bingley, Yorkshire, from Anderton to Limited. 7. Debenture of Limited in favor of the Agent (the "New Debenture"). *8. Evidence of transfer of one share of Limited from TTSO Inc. to GmbH, subject to the Agent's interest under the Charge over Shares given by TTSO Inc. dated 30 June 1995 (the "TTSO Inc. Charge"). 9. Share certificates of Limited showing company's name as "Anderton International Limited", re-issued in the name of Firnabos Nominees Limited, pursuant to the TTSO Inc. Charge. 10. Deed of Variation between Anderton and the Agent, varying the terms of the Deed of Guarantee and Indemnity made by Anderton and dated 30 June 1995. 18 -2- 11. Deed of Variation executed by each of Limited and the Agent, varying the terms of the Deed of Guarantee and Indemnity made by Limited and dated 30 June 1995. 12. Certified copy of Anderton's Memorandum and Articles of Association, as amended. 13. Certificate of Limited to the Agent, certifying no amendment of its Memorandum or Articles of Association since 30 June 1995. 14. Certificate of Incorporation upon Change of Name evidencing change of name of Limited to "Anderton International Limited". 15. Certificate of Incorporation upon Change of Name evidencing change of name of Anderton to "AIL Predecessors Limited" or a similar name. 16. Partial Release by the Agent of existing Debenture granted by Anderton, to permit registration of item 6 with H.M. Land Registry. 17. Legal opinion of Eversheds, solicitors for Limited and Anderton. II. DOCUMENTS TO BE DELIVERED TO THE AGENT IN CONNECTION WITH THE GERMAN CONVERSION *1. Evidence of filing of draft of resolution by GmbH and TTSOB (as shareholders of Seeger-Orbis) to convert Seeger-Orbis into SO oHG (the "Conversion Resolution" or UmwandlungsbeschluB) with the Works Council (Betriebsrat) of Seeger-Orbis. *2. Partnership Agreement among GmbH and TTSOB relating to SO oHG. 3. Notarized adoption of the Conversion Resolution at a meeting of the shareholders of Seeger-Orbis. 4. Evidence of filing of the Conversion Resolution with the Commercial Registrar, Konigstein. 5. Assignment of Accounts Receivable of SO oHG to the Agent (to be delivered promptly upon completion of registration of the German Conversion). 6. Pledges as to Equipment, Inventory and Intangible Assets of SO oHG to the Agent (to be delivered promptly upon completion of registration of the German Conversion). 19 -3- 7. Legal opinion of Jones, Day, Reavis & Pogue, Frankfurt office. III. DOCUMENTS TO BE DELIVERED TO THE AGENT AFTER COMPLETION OF AMENDMENT AGREEMENT NO. 2 IN CONNECTION WITH THE PLEDGE OF QUOTAS OF THE BRAZILIAN SUBSIDIARY 1. Brazilian-law Quota Pledge Agreement by GmbH as managing partner of SO oHG in favor of the Fronting Bank. 2. Certificates representing all of the issued and outstanding quotas of the Brazilian Subsidiary, together with voting powers therefor executed in blank and left undated. 3. Such other documents with respect to the Brazilian Pledge Agreement as the Agent may reasonably require. In each of parts I, II and II above, the Agent should also receive certified copies of all board and shareholder resolutions as referred to in the respective closing agendas prepared in connection with each of the referenced transactions. EX-10.11 6 AMENDMENT 3 TO REVOLVING CREDIT AND LOAN AGREEMENT 1 EXHIBIT 10.11 AMENDMENT AGREEMENT NO.3 dated as of March 29, 1996 to that certain $115,000,000 REVOLVING CREDIT AND TERM LOAN AGREEMENT This AMENDMENT AGREEMENT NO.3 (this "Amendment"), dated as of March 29, 1996, is by and among TRANSTECHNOLOGY CORPORATION ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GMBH ("GmbH"), ANDERTON INTERNATIONAL LIMITED (formerly known as TTUK Acquisition Co. Limited) ("Limited" and, together with TransTechnology and GmbH, the "Borrowers"), THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), the other lending institutions listed on Schedule 1 (the "Banks") and Schedule 2 (the "Term B Lenders") to the Credit Agreement (as defined below), THE FIRST NATIONAL BANK OF BOSTON, acting through its London Branch and its Frankfurt Branch, as fronting bank (in such capacity, the "Fronting Bank"), THE FIRST NATIONAL BANK OF BOSTON, as issuing bank (in such capacity, the "Issuing Bank", and together with the Banks, the Term B Lenders and the Fronting Bank, the "Lenders") and THE FIRST NATIONAL BANK OF BOSTON, as Agent (in such capacity, the "Agent"). Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit and Term Loan Agreement dated as of June 30, 1995, as amended by Amendment Agreement No.1 dated as of August 29, 1995 and by Consent and Amendment Agreement No.2 dated as of October 27, 1995 (as so amended, the "Credit Agreement"); WHEREAS, the Borrowers have proposed reallocating the availability of the respective borrowing facilities provided for in the Credit Agreement by increasing the maximum amount of Sterling Facility Loans available by the Sterling Equivalent of $1,000,000, to an aggregate amount of the Sterling Equivalent of $3,000,000, and by correspondingly decreasing the maximum amount of Revolving Credit Loans available by $600,000, and by decreasing the maximum amount of DM Facility Loans available by the DM Equivalent of $400,000; WHEREAS, the parties to the Credit Agreement wish to amend Schedule 3 thereto to reflect the actual amounts of amortization payments to be made on the German Tranche and the UK Tranche of Term Loan A in Deutschmarks and Sterling, rather than the Dollar Equivalents thereof; 2 -2- WHEREAS, this Amendment neither affects Term Loan B nor alters the apportionment of any repayments or prepayment of any Loans to which the Term B Lenders are entitled, and is consequently effective without the written consent of the Term B Lenders upon execution and delivery by the Banks, the Fronting Bank, the Agent and the Borrowers; WHEREAS, the Banks, the Fronting Bank, the Agent and the Borrowers have agreed to amend the Credit Agreement as hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing premises, the parties hereby agree as follows: SECTION 1. Amendments to Credit Agreement. The Credit Agreement is hereby amended with effect from the Effective Date (as defined in Section 6 of this Amendment) as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Borrowing Base" in its entirety and substituting therefor the following: "Borrowing Base. At the relevant time of reference thereto, an amount determined by the Agent by reference to the most recent Borrowing Base Report, which is equal to the sum of: (a) 80.00% of Eligible Accounts Receivable for which invoices have been issued and are payable; plus (b) 50.00% of the net book value (determined on a first-in first-out basis at lower of cost or market) of Eligible Inventory provided however that the aggregate amount included in the Borrowing Base under this clause (b) shall not exceed $19,000,000, provided that such $19,000,000 amount may be adjusted by the Agent to reflect any acquisitions or divestitures subsequent to the Closing Date; plus (c) 50.00% of the Determined Value of the Mace Stock; less (d) $600,000." (b) Section 1.1 of the Credit Agreement is further amended by inserting the following new definitions in the appropriate alphabetical sequence thereof: "Determined Value. At the relevant time of reference thereto, the lesser of (i) the net book value at such time of the Mace Stock, determined in accordance with generally accepted accounting principles, and (ii) the fair market value at such time of the Mace Stock, as 3 -3- determined by the most recent appraisal thereof (if any) conducted by or on behalf of the Agent, provided, however that the Agent shall, upon written notice to TransTechnology, be entitled to reduce or otherwise adjust the Determined Value of the Mace Stock, on a commercially reasonable basis, in light of material changes in the solvency, organizational structure or financial condition of Mace if such material changes are not otherwise reflected in the Determined Value." "Mace. Mace Security International, Inc., a Delaware corporation." "Mace Stock. The 580,000 fully paid and non-assessable shares of the common stock, $.01 par value, of Mace issued in the name of TransTechnology and delivered to the Agent, together with stock powers therefor executed in blank, on or prior to the Closing Date, so long as such shares are and remain (a) pledged to the Agent for the benefit of the Lenders and the Agent pursuant to and in compliance with the Security Documents, (b) held by the Agent, together with stock powers therefor executed in blank, subject to a perfected first priority security interest in favor of the Agent for the benefit of the Lenders and the Agent under the laws of the Commonwealth of Massachusetts and (c) subject to no lien, security interest or other encumbrance other than the security interest described in clause (b) above." (c) Section 2.12 of the Credit Agreement is hereby amended by deleting the amount of "$1,000,000" and substituting therefor the amount of "$200,000". (d) Section 3.1 of the Credit Agreement is hereby amended by deleting the amount of "$4,000,000" and substituting therefor the amount of "$3,600,000". (e) Section 3.2 of the Credit Agreement is hereby amended by deleting the phrase "more that 5%" and substituting therefor the phrase "more than 5%". (f) Section 3.2 of the Credit Agreement is further amended by deleting the amount of "$4,000,000" and substituting therefor the amount of "$3,600,000". (g) Section 3.2 of the Credit Agreement is further amended by deleting the amount of "$16,000,000" and substituting therefor the amount of "$15,600,000". (h) Section 3.3 of the Credit Agreement is hereby amended by deleting the amount of "$2,000,000" and substituting therefor the amount of "$3,000,000". 4 -4- (i) Section 3.4 of the Credit Agreement is hereby amended by deleting the amount of "$2,000,000" and substituting therefor the amount of "$3,000,000". (j) Section 3.4 of the Credit Agreement is further amended by deleting the amount of "$10,000,000" and substituting therefor the amount of "$11,000,000". (k) Section 3 of the Credit Agreement is further amended by adding the following new subsection in the appropriate numerical sequence thereof: "3.12. OPTIONAL REPAYMENT OF INTERNATIONAL FACILITY LOANS. GmbH and Limited shall each have the right, at their election, to repay the outstanding amount of the International Facility Loans, as a whole or in part, at any time without penalty or premium, provided that any full or partial prepayment of the outstanding amount of any Eurocurrency Rate Loans pursuant to this Section 3.12 may be made only on the last day of the Interest Period relating thereto, unless all costs in connection with such prepayment are paid in full simultaneously with such prepayment pursuant to Section 6.10. GmbH and Limited, as the case may be, shall each give the Fronting Bank, no later than 10:00 a.m., Frankfurt time, at least three (3) Eurocurrency Business Days prior written notice of any proposed prepayment pursuant to this Section 3.12 of Base Rate Loans, and four (4) Eurocurrency Business Days notice of any proposed prepayment pursuant to this Section 3.12 of Eurocurrency Rate Loans, in each case specifying the proposed date of prepayment of International Facility Loans and the principal amount to be prepaid. Each such partial prepayment of the DM Facility Loans shall be in an integral multiple of DM50,000, and each such partial prepayment of the Sterling Facility Loans shall be in an integral multiple of pounds sterling 50,000. Prepayment shall be accompanied by the payment of accrued interest on the principal prepaid to the date of prepayment and shall be applied, in the absence of instruction by GmbH or Limited, as the case may be, first to the principal of Base Rate Loans and then to the principal of Eurocurrency Rate Loans or both, at the Fronting Bank's option. Notwithstanding anything in this Credit Agreement to the contrary, (a) there shall be an interval of not less than two (2) weeks between each prepayment by GmbH under this Section 3.12, and (b) there shall be an interval of not less than two (2) weeks between each prepayment by Limited under this Section 3.12." (1) The Credit Agreement is further amended by deleting Schedule 1 thereto in its entirety and substituting therefor the Schedule 1 attached hereto as Exhibit A, and by deleting Schedule 3 thereto in its entirety and substituting therefor the Schedule 3 attached hereto as Exhibit B. 5 -5- SECTION 2. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment shall be conditioned upon the satisfaction of the following conditions precedent: SECTION 2.1. DELIVERY OF DOCUMENTS. The Borrowers shall have delivered to the Agent: (a) this Amendment executed and delivered by each of the Borrowers, the Banks, the Fronting Bank and the Agent; (b) the legal opinion of Eversheds, solicitors for Anderton International Limited, addressed to the Lenders and the Agent, satisfactory in form and substance to the Agent's counsel; and (c) the legal opinion of Gerald C. Harvey, Esq., general counsel for TransTechnology, addressed to the Lenders and the Agent, dated as of the Effective Date (as defined in Section 6 of this Amendment), and satisfactory in form and substance to the Agent's counsel. SECTION 2.2. LEGALITY OF TRANSACTION. No change in applicable law shall have occurred as a consequence of which it shall have become and continue to be unlawful on the date this Amendment is to become effective (a) for the 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 2.3. PERFORMANCE. Each of the Borrowers shall have duly and properly performed, complied with and observed in all material respects its covenants, agreements and obligations contained in the Loan Documents required to be performed, complied with or observed by it on or prior to the date this Amendment is to become effective. No event shall have occurred on or prior to the date this Amendment is to become effective and be continuing, and no condition shall exist on the date this Amendment is to become effective which constitutes a Default or Event of Default under any of the Loan Documents. SECTION 2.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Amendment and all instruments and documents incidental thereto shall be in form and substance reasonably satisfactory to the Agent and the Agent shall have received all such counterpart originals or certified or other copies of all such instruments and documents as the Agent shall have reasonably requested. SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Lenders as follows: (a) The representations and warranties of such Borrower contained in the Credit Agreement and the other Loan Documents to which it is a party were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to therein shall be the financial statements of such Borrower most recently delivered to the Agent, and except as such 6 -6- representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby; (i) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval, consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity of this Amendment and which is required by law or the regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, 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, loan or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; and (c) This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors, and (ii) enforcement may be subject to general principles of equity, and the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceeding for such remedies may be brought. SECTION 4. NO OTHER AMENDMENTS. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. SECTION 5. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. SECTION 6. EFFECTIVE DATE. Subject to the Satisfaction of the conditions precedent set forth in Section 2 hereof, this Amendment shall be deemed to be effective as of the date hereof (the "Effective Date"). 7 -7- IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No. 3 as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Senior Vice President TRANSTECHNOLOGY SEEGER- ORBIS GmbH By: /s/Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Attorney-in-Fact ANDERTON INTERNATIONAL LIMITED (formerly known as TTUK ACQUISITION CO. LIMITED) By: /s/ Ulf Jemsby --------------------------------- Name: Ulf Jemsby Title: Director By: /s/Michael J. Berthelot --------------------------------- Name: Michael J. Berthelot Title: Director 8 -8- THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent, Issuing Bank and Fronting Bank By: /s/ Maura C. Wadlinger --------------------------------- Name: Maura C. Wadlinger Title: Vice President NATIONAL BANK OF CANADA individually and as Co-Agent By: /s/ Douglas K. Winget --------------------------------- Name: Douglas K. Winget Title: Assistant Vice President BHF-BANK AKTIENGESELLSCHAFT By: /s/ David Fraenkel --------------------------------- Name: David Fraenkel Title: VP By: /s/ Linda Pace --------------------------------- Name: Linda Pace Title: AVP 9 -9- DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH By: /s/ Andrew K. Mittag --------------------------------- Name: Andrew K. Mittag Title: Vice President By: /s/ Nicholas Kalogeropoulos --------------------------------- Name: Nicholas Kalogeropoulos Title: Assistant Treasurer NBD BANK By: /s/ W.T. Huebner --------------------------------- Name: W.T. Huebner Title: Vice President UNITED JERSEY BANK By: /s/ Edith Neuman --------------------------------- Name: Edith Neuman Title: Vice President 10 -10- SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: /s/ Jeffrey S. Garner --------------------------------- Name: Jeffrey S. Garner Title: Vice President MERRILL LYNCH SENIOR FLOATING FUND RATE, INC. By: /s/ Anthony R. Clemente --------------------------------- Name: Anthony R. Clemente Title: Authorized Signatory 11 -11- The Guarantors under (and as defined in) the Subsidiary Guaranty hereby acknowledge that they have read and are aware of the provisions of this Amendment and hereby reaffirm their absolute and unconditional guaranty of the Borrowers' payment and performance of their obligations to the Lenders and the Agent under the Credit Agreement as amended hereby. TRANSTECHNOLOGY ACQUISITION CORPORATION By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Treasurer PALNUT FASTENERS, INC. By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Treasurer INDUSTRIAL RETAINING RING COMPANY By: /s/Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Chief Financial Officer RETAINERS, INC. By: /s/ Steven R. Wilson --------------------------------- Name: Steven R. Wilson Title: President 12 -12- RANCHO TRANSTECHNOLOGY CORPORATION By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Treasurer TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Treasurer ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Chief Financial Officer SSP INDUSTRIES By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Treasurer SSP INTERNATIONAL SALES, INC. By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President & Treasurer 13 -13- TRANSTECHNOLOGY SEEGER INC. (formerly known as TRANSTECHNOLOGY SEEGER- ORBIS, INC.) By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President, Chief Financial Officer and Treasurer SEEGER INC. (formerly known as WALDES TRUARC INC.) By: /s/ Chandler J. Moisen --------------------------------- Name: Chandler J. Moisen Title: Vice President, Chief Financial Officer and Treasurer 14 -14- The Guarantors under and as defined in the English Guarantees hereby acknowledge that they have read and are aware of the provisions of this Amendment and hereby reaffirm their absolute and unconditional guarantee of the Obligations referred to in the English Guarantees, as such English Guarantees may be amended in connection with this Amendment. ANDERTON INTERNATIONAL LIMITED (formerly known as TTUK ACQUISITION CO. LIMITED) By: /s/ Robert Wieremiej --------------------------------- Name: Robert Wieremiej Title: Director By: /s/ Michael J. Berthelot --------------------------------- Name: Michael J. Berthelot Title: Director ANDERTON (PREDECESSORS) LIMITED (formerly known as ANDERTON INTERNATIONAL LIMITED) By: /s/ Ulf Jemsby --------------------------------- Name: Ulf Jemsby Title: Director By: /s/ Robert Wieremiej --------------------------------- Name: Robert Wieremiej Title: Director 15 EXHIBIT A SCHEDULE 1 The Banks
Revolving Credit $3,600,000 Address of Lending Office and Term A Commitment $33,400,000 Revolver Bank (Domestic and Eurodollar) Percentage Revolver (Germany) - ---- ------------------------- --------------------- ----------- ---------- The First National Bank 100 Federal Street 24.166667% 8,071,666.78 870,000.01 of Boston Boston, MA 02110 Fax No: (+1) 617-434-6685 National Bank of One Cleveland Center 22.222222% 7,422,222.15 799,999.99 Canada 1375 East 9th Street, Suite 2430 Cleveland, OH 44114 Fax No: (216) 574-9236 BHF-Bank AG 590 Madison Avenue 15% 5,010,000.00 540,000.00 New York, NY 10022-2540 Fax No: (212) 756-5911 Dresdner Bank AG 75 Wall Street 13.611111% 4,546,111.07 490,000.00 New York Branch New York, NY 10005 and Fax No: (212) 574-0120 Grand Cayman Branch NBD Bank 611 Woodward Avenue 15% 5,010,000.00 540,000.00 Detroit, MI 48226 Fax No: (313) 225-1586 United Jersey Bank 25 East Salem, 6th Floor 10% 3,340,000.00 360,000.00 Hackensack, NJ 07602 Fax No: (201) 343-6723 $3,000,000 $30,000,000 $8,000,000 $12,000,000 Revolver Term A Term A Term A Bank (UK) (US) (UK) (Germany) - ---- ---------- ----------- ---------- ----------- The First National 725,000.01 7,250,000.10 1,933,333.36 2,900,000.04 Bank of Boston National Bank of 666,666.66 6,666,666.60 1,777,777.76 2,666,666.64 Canada BHF-Bank AG 450,000.00 4,500,000.00 1,200,000.00 1,800,000.00 Desdner Bank AG 408,333.33 4,083,333.30 1,088,888.88 1,633,333.32 New York Branch and Grand Cayman Branch NBD Bank 450,000.00 4,500,000.00 1,200,000.00 1,800,000.00 United Jersey Bank 300,000.00 3,000,000.00 800,000.00 1,200,000.00
16 EXHIBIT B SCHEDULE 3 Amortization of Term Loans Term Loan A
Quarter First US German UK Term Ending Tranche ($) Tranche (DM) Tranche (pounds sterling) Loan B ($) - ------ ----------- ------------ ------------------------- ---------- 12/31/95 600,000 688,080 206,718.37 3/31/96 600,000 666,816 203,627.09 6/30/96 600,000 666,816 203,627.09 500,000 9/30/96 600,000 666,816 203,627.09 12/31/96 600,000 666,816 203,627.09 3/31/97 600,000 666,816 203,627.09 6/30/97 600,000 666,816 203,627.09 500,000 9/30/97 600,000 666,816 203,627.09 12/31/97 600,000 666,816 203,627.09 3/31/98 600,000 666,816 203,627.09 6/30/98 600,000 666,816 203,627.09 500,000 9/98 600,000 666,816 203,627.09 12/98 600,000 666,816 203,627.09 3/99 600,000 666,816 203,627.09 6/99 750,000 833,520 254,533.87 500,000 9/99 750,000 833,520 254,533.87 12/99 750,000 833,520 254,533.87 3/00 750,000 833,520 254,533.87 6/00 1,200,000 1,333,632 407,254.19 500,000 9/00 1,200,000 1,333,632 407,254.19 12/00 1,200,000 1,312,368 404,162.93 --------- --------- ---------- 3/01 6/01 7,500,000 9/01 12/01 3/02 6/02 15,000,000 ---------- Total(1)/ 15,000,000 16,670,400 5,090,677.33 25,000,000
- -------------------- (1)/ Total payments to be made on the German Tranche and UK Tranche of Term Loan A are the respective DM Equivalent and Sterling Equivalent of $12,000,000 and $8,000,000, as of June 30,1995. EX-13 7 ANNUAL REPORT 1 EXHIBIT 13 [GRAPHIC] [TRANSTECHNOLOGY LOGO] ANNUAL REPORT FISCAL YEAR ENDING MARCH 31, 1996 2 - -------------------------------------------------------------------------------- Photography by Kan
CONTENTS - -------------------------------------------------------------------------------- Selected Financial Data ............................................ 1 Letter to Shareholders ............................................. 2 Specialty Fastener Products ........................................ 6 Rescue Hoist and Cargo Hook Products ............................... 9 Financial Information .............................................. 11
3 Selected Financial Data - -------------------------------------------------------------------------------- The following table provides selected financial data with respect to the consolidated statements of operations of the Company for the fiscal years ended March 31, 1996, 1995, 1994, 1993 and 1992 and the consolidated balance sheets of the Company at the end of each such period.
SELECTED FINANCIAL DATA YEARS ENDED MARCH 31, (in thousands except per share amounts) 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------- Revenues from continuing operations $ 159,854 $ 102,692 $ 82,843 $64,671 $ 56,790 - ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes $ 14,300 $ 10,842 $ 8,860 $ 4,285 $ (507) Provision (credit) for income taxes 5,792 3,457 3,060 962 (77) - ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations 8,508 7,385 5,800 3,323 (430) Income (loss) from discontinued operations (1,134) (4,852) 1,084 1,810 (8,985) - ----------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 7,374 $ 2,533 $ 6,884 $ 5,133 $ (9,415) Earnings (loss) per share: Income (loss) from continuing operations $ 1.67 $ 1.45 $ 1.13 $ 0.65 $ (0.08) Income (loss) from discontinued operations (0.22) (0.95) 0.21 0.36 (1.77) - ----------------------------------------------------------------------------------------------------------------------------- Earnings (loss) per share $ 1.45 $ 0.50 $ 1.34 $ 1.01 $ (1.85) - ----------------------------------------------------------------------------------------------------------------------------- Dividends declared and paid per share $ 0.26 $ 0.255 $ 0.24 $ 1.56 -- - ----------------------------------------------------------------------------------------------------------------------------- Total assets $ 199,367 $ 129,396 $125,857 $97,763 $ 104,905 Long-term debt $ 72,565 $ 37,021 $ 33,168 $12,387 $ 528 Shareholders' equity $ 72,470 $ 64,502 $ 65,953 $61,214 $ 63,735 Book value per share $ 14.21 $ 12.72 $ 12.71 $ 11.95 $ 12.54 Shares outstanding at year-end 5,099 5,070 5,189 5,122 5,084 - ----------------------------------------------------------------------------------------------------------------------------- MARKET AND DIVIDEND DATA - ----------------------------------------------------------------------------------------------------------------------------- Market Price -------------------------------------------------------------- Quarter Ended High Low Dividends - ----------------------------------------------------------------------------------------------------------------------------- June 30, 1994 16-5/8 12-3/8 .060 September 30, 1994 13-5/8 10-3/4 .065 December 31, 1994 12-1/2 10-1/2 .065 March 31, 1995 13-5/8 10 .065 June 30, 1995 13-1/2 10-3/4 .065 September 30, 1995 14-7/8 12 .065 December 31, 1995 15-1/8 11-7/8 .065 March 31, 1996 15 12-1/2 .065 - -----------------------------------------------------------------------------------------------------------------------------
1 4 Fellow Shareholders: - -------------------------------------------------------------------------------- The fiscal year ended March 31, 1996 was the fourth consecutive year of increasing earnings for your company, with earnings from continuing operations reaching $1.67 per share, a 15% increase over the prior year's $1.45 per share. Even more important than a single year's earnings improvement, your company has firmly established itself as one of the premier specialty fastener companies in the world. The acquisition and integration of the companies we have acquired over the past three years, capped by the June 1995 acquisition of the Seeger Group, have built a solid base for the future of TransTechnology Corporation. With number one rankings in global market share in two of our four product lines (retaining rings and helicopter rescue hoists and cargo hooks) and positions of leadership in the US in the other two (gear driven band fasteners and assembly fasteners), our company now casts a long shadow over its markets. Almost every aspect of fiscal year 1996 was an improvement over the prior fiscal year. Revenues were up 56%, operating profit was up 72%, cash flow from operating activities was up 43%, and net income was up 191% -- all the result of our program of focused acquisitions and concentration on improvement in each of our business units. Capital expenditures rose 29%, reflecting our commitment to the future of our existing businesses and our desire to seek internally generated as well as external sources of growth. From each of these perspectives, it was, indeed, a very good year. [GRAPH]
INCOME PER SHARE FROM CONTINUING OPERATIONS (IN DOLLARS) 1992 (0.08) 1993 0.65 1994 1.13 1995 1.45 1996 1.67
At the risk of being repetitive, and boring, it is important to once again evaluate our progress against the goals and strategy we have laid out for our company. Our simple, straightforward strategy remains unchanged from 1992; to grow through acquisitions which complement existing product lines with a continuing focus upon a narrow range of industrial products sold to a wide range of end-users. The acquisition of the Seeger Group perfectly exemplified this strategy, vaulting us into the world-wide number one market position in retaining rings while enhancing our Industrial Retaining Ring business. By the end of fiscal 1996, specialty fasteners constituted 83% of TransTechnology's annualized revenues. We expect, in the future, to continue our program of strategic acquisitions in existing product lines, with a goal of achieving global number one market positions in each of them. In fiscal 1996 we achieved most of our financial goals. Our EPS increase of 15.2%, continuing operations' return on average equity of 12.4%, and dividend payout of 15.6% of income from continuing operations each met or exceeded our fiscal 1996 goals of 15%, 12% and less than 25%, respectively. Since the 2 5 installation of our management team in October 1992, EPS from continuing operations have grown at a compound rate of 37% from the $.65 per share reported for the fiscal year ended March 31, 1993 to the $1.67 reported for fiscal 1996. [GRAPH]
NET SALES ($ IN MILLIONS) 1992 56,344 1993 63,999 1994 81,873 1995 101,122 1996 158,024
The only financial goal not achieved in the 1996 fiscal year was our debt to total capitalization target of 35% or less. Total long and short term debt, which finished the year at $78.6 million, or 52% of total capitalization, was well above the objective. This higher than desired level of debt is entirely attributable to the $43 million acquisition of the Seeger Group. At June 30, 1995, the closing date of that transaction, total debt was $89.5 million, or 58% of total capitalization. While debt was reduced almost $10 million in the last three quarters of the fiscal year, we recognize the importance of a strong balance sheet and will continue our efforts to further reduce debt in the new fiscal year. As I said at our shareholders' meeting last year, now is the time to raise the hurdle with regard to our goals. While our operating and acquisition strategies remain unchanged, our target financial goals, to be achieved by the fiscal year ending in 2001, have been moved upwards to $500 million in revenues with a 7% net income margin and a 15% return on average equity. We continue to keep our EPS growth goal at 15%, compounded annually over that same period, to limit our dividend to 25% or less of continuing operations' income and to pursue a debt to total capitalization ratio of 35% or less. We believe that, with hard work and the avoidance of a calamity, all of these goals are achievable over the next five years. [GRAPH]
INCOME FROM CONTINUING OPERATIONS ($ IN MILLIONS) 1992 (430) 1993 3,323 1994 5,800 1995 7,385 1996 8,508
We also remain keenly focused on maintaining a flexible and diversified mix of end-user markets for our fastener products. It is important to us that we not become overly dependent upon a single geographic or end-user market. To this end, we are attempting to develop a mix that includes diversification by geographic (Europe, North America, and South America) and end-user markets, such as automotive, heavy- truck, repair maintenance and overhaul, industrial equipment, and consumer products. In fiscal year 1996 almost 40% of our revenues were generated outside of the United States, and the largest single end-user market, worldwide automotive OEM's, accounted for only 30% of global revenues. This focus on diversified 3 6 geographic and end-user markets impacts our analysis of acquisition candidates as well as the utilization of our resources for capital expenditures, new product development and marketing programs. Fiscal 1996 was a year of integration and foundation building for fiscal 1997 and beyond, as we stepped up the pace of inter-divisional cooperation and assistance as a result of the Seeger Group's acquisition. As the only multinational manufacturer of our fastener products, we are well positioned to meet our customers' increasing demands for a single global source of supply. We see significant opportunities to increase sales of fastener products through our cross-selling program, begun in April 1996. Under this program, we expect our US manufactured gear driven band and assembly fasteners to be marketed in Europe and South America by our business units there, and for the products manufactured in Europe and Brazil to be marketed in the US by our domestic units. In many instances, prospective cross-selling customers are the same customers we already call on for other TransTechnology products. We have also commenced a manufacturing rationalization program, whereby manufacturing of specific parts is centralized rather than having multiple factories manufacture the same component. This rationalization lowers costs and working capital needs while improving efficiency. A great amount of effort has gone into a program of complete tooling review and upgrades at each of our factories, again with an eye towards lower manufacturing costs through higher efficiencies and throughput. We believe that each of these programs will be a key part of our effort to achieve our internal revenue and margin improvement goals over the next five years. [GRAPH]
YEAR-END MARKET PRICE OF STOCK (IN DOLLARS) 1992 8.00 1993 10.50 1994 15.38 1995 11.38 1996 15.00
Much remains to be done, however, before we fully realize the potential which lies within our company, and many challenges must be met along the way. We need to become more proactive with our customers to meet their needs and we must react more quickly in those instances where events seem to overtake us in the market-place. A greater effort towards customer service, specifically product engineering support and marketing resources, must continue as an internal focus for improvement. The reduction of costs, at every level of the company, through improved production efficiencies and investments in modern equipment, is imperative to remaining competitive in the global marketplace. It is equally important to have properly skilled people in the appropriate positions at every level of the company to provide the resources for our new products and projects, and the identification and development of these people is a "must do" to assure our future. 4 7 [PHOTO OF MICHAEL J. BERTHELOT] I would like to thank each of our 1,500 employees and associates for their efforts over the past fiscal year. The people at Breeze-Eastern, who have achieved a solid turnaround of their business, worked hard and long for several years and have emerged victorious. The people of our Breeze Industrial, Palnut and Industrial Retaining Ring businesses have literally travelled about the world on an almost continuous basis over the past year, performing due diligence and then integration activities in Germany, England, the US and Brazil. Adapting to a new system of objectives, management, data processing, and accounting and finance rules is a daunting challenge, yet the people of the Seeger Group put forth a yeoman's effort to ensure a smooth and seamless transition. Without the enthusiasm and desire to succeed shown by our people around the world, the results of the past year could not have been achieved. To each of you, I extend the thanks of the Board of Directors, the shareholders, and my own personal appreciation for your hard work and dedication. We welcome Michel Glouchevitch, a managing director of a California based investment firm, as the newest member of our Board of Directors. Michel's observations and guidance as we move forward with acquisitions and financing issues in the future will be greatly valued by the Board and the management team. On behalf of our Board of Directors and the management team, I express our appreciation for the confidence and support shown by the shareholders over the past year. Our goal is to enhance shareholder value, and we try to guide our actions by that basic principle. I personally thank you for the opportunity to participate in the revitalization and rebirth of this company, and I commit myself to continuing our efforts to move TransTechnology to even greater heights in the future. /s/ Michael J. Berthelot Michael J. Berthelot Chairman and Chief Executive Officer 5 8 SPECIALTY FASTENER PRODUCTS - -------------------------------------------------------------------------------- TransTechnology Corporation derives over 80% of its revenues from the manufacture and sale of specialty fasteners and is the seventh largest fastener manufacturer in the United States. Operating in small niches within the $6 billion domestic and $30 billion global fastener markets, the company operates under some of the most well known brand names in the world and is an acknowledged market leader in each of its product lines. The company's specialty fastener products are used in a myriad of industries, ranging from automotive and heavy truck manufacturing to computer disk drives, toys and caskets. Specialty fastener products are distributed through in-house sales forces, distributors, and manufacturers' representatives around the world. Through increased engineering and marketing resources, the company continues to search for new applications for its products in new industries throughout the globe. [GRAPHIC] Breeze Industrial's Aero Seal clamps. 6 9 - -------------------------------------------------------------------------------- GEAR DRIVEN BAND FASTENERS TransTechnology's Breeze Industrial Products division is the only full-line manufacturer of gear driven band clamps in the world. Worm gear, constant-torque, T-Bolt and V-Band, as well as perforated and non-perforated clamps are part of a broad line of products for automotive, heavy truck, industrial and marine. "Breeze" stainless steel clamps, well known for their quality and engineering, are specified by Caterpillar, Navistar, and other major heavy equipment manufacturers for whom Breeze is a certified supplier. Breeze "Aero-Seal(R)", "Power-Seal(R)" and "Euro-Seal(TM)" clamps are sold in hardware, automotive and retail stores for use in repair, maintenance and overhaul applications and are used by many manufacturers of industrial and consumer products. ASSEMBLY FASTENERS TransTechnology's Palnut division is one of the leading manufacturers of assembly fasteners in the United States, supplying "Palnut" highly engineered custom fastening devices primarily to the automotive industry. Lock-nuts, push-nuts, u-nuts, and a variety of single and multi-threaded stainless and high-carbon steel fasteners are provided to the toy, appliance, casket, and lighting industries for use in assembling products. [GRAPHICS] The Palnut Company's lock-nuts and pushnuts. 7 10 RETAINING RINGS TransTechnology is the world's largest manufacturer of retaining rings, with six distinct operations in the United States, Germany, England, and Brazil. These products are highly engineered, usually to a customer's exacting specifications, and are used in engines, transmissions, drive trains, and braking systems on automobiles, trucks, and off-road equipment. They also find application in industrial equipment, computers, photographic equipment, appliances, marine applications, and almost any situation where movement on a shaft must be restricted. The company operates under the well known brand names "Seeger-Orbis" (Germany), "Seeger- Reno" (Brazil), "Anderton" and "Anderton-United" (United Kingdom and United States), "Waldes/Truarc" (United States) and "Industrial Retaining Ring" (United States). [GRAPHIC] Seeger Group's retaining rings. 8 11 Rescue Hoist and Cargo Hook Products - -------------------------------------------------------------------------------- TransTechnology's Breeze-Eastern division is the world's leading designer and manufacturer of sophisticated helicopter rescue hoists and cargo hook systems. These systems add significantly to the versatility of an aircraft for a relatively small cost. They are used around the world by military and civilian agencies to save lives, complete missions, and transport cargo. Most helicopter manufacturers today, including Sikorsky, Bell, Aerospatiale, and Agusta specify Breeze-Eastern's systems as standard equipment on their aircraft because of Breeze-Eastern's record for safety, reliability, durability, and service. Breeze-Eastern also manufactures handling systems for weapon's platforms and motion control actuation devices. Innovation and new product development remain an important focus at Breeze-Eastern. Participation in the V-22 Osprey program presents the division with an opportunity for substantial growth in the future on one of the first new airframe projects in years. The use of computerized testing equipment, composite materials, the integration of electronics into hoists and hooks, and the use of lighter and faster motors are all Breeze-Eastern's accomplishments over the past several years. Breeze-Eastern has made a substantial commitment to increased engineering, new product, and research and development projects for the future in order to maintain the confidence and trust of its customers and users and to assure its continued position as the global market leader. [GRAPHIC] Breeze-Eastern rescue hoist 9 12 BOARD OF DIRECTORS AND CORPORATE OFFICERS - -------------------------------------------------------------------------------- [PHOTO OF BOARD OF DIRECTORS] BOARD OF DIRECTORS (From left to right) Back Row: Gideon Argov, James A. Lawrence, Michel Glouchevitch, Walter Belleville Center Row: Thomas V. Chema, Patrick K. Bolger Center Front: Michael J. Berthelot [PHOTO OF CORPORATE OFFICERS] CORPORATE OFFICERS Standing from left to right: Winston Lau, Vice President of Operations Michael J. Berthelot, Chairman of the Board and Chief Executive Officer Monica Aguirre, Assistant Secretary Chandler J. Moisen, Senior Vice President, Chief Financial Officer and Treasurer Sitting from left to right: Gerald C. Harvey, Vice President, Secretary and General Counsel Patrick K. Bolger, President and Chief Operating Officer 10 13 Consolidated Balance Sheets - --------------------------------------------------------------------------------
March 31, ASSETS 1996 1995 - ----------------------------------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 2,362,000 $ 1,544,000 Accounts receivable (net of allowance for doubtful accounts of $735,000 and $103,000 in 1996 and 1995, respectively) 28,368,000 19,484,000 Notes receivable 1,258,000 836,000 Inventories 50,551,000 25,239,000 Prepaid expenses and other current assets 1,726,000 2,706,000 Deferred income taxes 1,037,000 2,592,000 Net assets held for sale 9,980,000 24,269,000 - ----------------------------------------------------------------------------------------------------------------------- Total current assets 95,282,000 76,670,000 - ----------------------------------------------------------------------------------------------------------------------- Property: Land 12,616,000 4,330,000 Buildings 20,523,000 13,268,000 Machinery and equipment 39,600,000 21,772,000 Furniture and fixtures 5,398,000 3,043,000 Leasehold improvements 189,000 161,000 - ----------------------------------------------------------------------------------------------------------------------- Total 78,326,000 42,574,000 Less accumulated depreciation and amortization 17,749,000 13,040,000 - ----------------------------------------------------------------------------------------------------------------------- Property-net 60,577,000 29,534,000 - ----------------------------------------------------------------------------------------------------------------------- Other assets: Notes receivable 12,824,000 3,274,000 Costs in excess of net assets of acquired businesses (net of accumulated amortization: $3,308,000 and $2,793,000 in 1996 and 1995, respectively 16,411,000 12,813,000 Other 14,273,000 7,105,000 - ----------------------------------------------------------------------------------------------------------------------- Total other assets 43,508,000 23,192,000 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 199,367,000 $ 129,396,000 - ----------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------------------- Current liabilities: Current portion of long-term debt $ 6,026,000 $ 3,356,000 Accounts payable-trade 14,719,000 9,147,000 Accrued compensation 6,473,000 4,247,000 Accrued income taxes 1,415,000 591,000 Other current liabilities 9,301,000 6,267,000 - ----------------------------------------------------------------------------------------------------------------------- Total current liabilities 37,934,000 23,608,000 - ----------------------------------------------------------------------------------------------------------------------- Long-term debt payable to banks and others 72,565,000 37,021,000 - ----------------------------------------------------------------------------------------------------------------------- Other long-term liabilities 16,398,000 4,265,000 - ----------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Preferred stock-authorized, 300,000 shares; none issued -- -- Common stock-authorized, 14,700,000 shares of $.01 par value; issued, 5,276,463 and 5,242,316 shares in 1996 and 1995, respectively 53,000 52,000 Additional paid-in capital 46,188,000 45,802,000 Retained earnings 29,467,000 23,418,000 Other stockholders' equity (1,083,000) (2,680,000) - ----------------------------------------------------------------------------------------------------------------------- 74,625,000 66,592,000 Less treasury stock, at cost - 177,500 shares and 172,500 shares in 1996 and 1995, respectively (2,155,000) (2,090,000) - ----------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 72,470,000 64,502,000 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 199,367,000 $ 129,396,000 - -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 11 14 STATEMENTS OF CONSOLIDATED OPERATIONS - --------------------------------------------------------------------------------
For the years ended March 31, 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------------- Revenues: Sales $ 158,024,000 $ 101,122,000 $81,873,000 Interest income 1,010,000 760,000 675,000 Other income 820,000 810,000 295,000 - -------------------------------------------------------------------------------------------------------------------------- Total 159,854,000 102,692,000 82,843,000 - -------------------------------------------------------------------------------------------------------------------------- Cost of goods sold 107,426,000 71,968,000 57,887,000 - -------------------------------------------------------------------------------------------------------------------------- Gross profit 52,428,000 30,724,000 24,956,000 General, administrative and selling expenses 31,812,000 17,051,000 14,973,000 Interest expense 6,316,000 2,831,000 1,123,000 - -------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 14,300,000 10,842,000 8,860,000 Provision for income taxes 5,792,000 3,457,000 3,060,000 - -------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 8,508,000 7,385,000 5,800,000 Discontinued operations: (Loss) income from operations (net of applicable tax benefits of $323,000, $1,619,000 and $213,000 for 1996, 1995 and 1994, respectively) (517,000) (2,602,000) 324,000 (Loss) gain from disposal (net of applicable tax benefits of $1,077,000, $1,400,000 for 1996 and 1995, respectively, and net of applicable tax provision of $306,000 for 1994) (617,000) (2,250,000) 760,000 - -------------------------------------------------------------------------------------------------------------------------- Net income $ 7,374,000 $ 2,533,000 $ 6,884,000 - -------------------------------------------------------------------------------------------------------------------------- Earnings per share Income from continuing operations $ 1.67 $ 1.45 $ 1.13 (Loss) income from discontinued operations (0.22) (0.95) 0.21 - -------------------------------------------------------------------------------------------------------------------------- Income per share $ 1.45 $ 0.50 $ 1.34 - -------------------------------------------------------------------------------------------------------------------------- Number of shares used in computation of per share information 5,093,000 5,109,000 5,143,000 - --------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements 12 15 Statements of Consolidated Cash Flows - --------------------------------------------------------------------------------
For the years ended March 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 7,374,000 $ 2,533,000 $ 6,884,000 Adjustments to reconcile net income to net cash provided by operating activities: Loss recognized on write-down of marketable securities 2,613,000 -- -- Depreciation and amortization 6,027,000 5,349,000 4,505,000 Provision for losses on accounts receivable 468,000 65,000 102,000 Gain (loss) on sale or disposal of fixed assets and discontinued businesses (307,000) 704,000 (452,000) Change in assets and liabilities net of acquisitions and dispositions: Decrease (increase) in accounts receivable 4,290,000 (2,672,000) 261,000 (Increase) decrease in inventories (6,098,000) 5,595,000 (200,000) (Increase) in net assets held for sale (1,915,000) (3,672,000) (1,133,000) Decrease (increase) in other assets 4,825,000 (2,521,000) (1,031,000) Increase in accounts payable 462,000 3,211,000 506,000 Increase in accrued compensation 2,226,000 1,041,000 1,137,000 (Decrease) in income tax payable (676,000) (121,000) (928,000) (Decrease) in other liabilities (8,577,000) (2,043,000) (2,895,000) - ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 10,712,000 7,469,000 6,756,000 - ------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Business acquisitions (45,594,000) (15,952,000) (22,670,000) Capital expenditures (6,471,000) (5,033,000) (4,973,000) Proceeds from sale of fixed assets and discontinued business 8,111,000 6,977,000 1,027,000 Decrease (increase) in notes receivable 1,055,000 2,515,000 (176,000) - ------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (42,899,000) (11,493,000) (26,792,000) - ------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term borrowings 107,363,000 42,019,000 34,400,000 Payments on long-term debt (73,156,000) (36,289,000) (12,178,000) Proceeds from issuance of stock under stock option plan 188,000 202,000 571,000 Stock repurchases increase (65,000) (2,090,000) -- Dividends paid (1,325,000) (1,301,000) (1,235,000) - ------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 33,005,000 2,541,000 21,558,000 - ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 818,000 (1,483,000) 1,522,000 Cash and cash equivalents at beginning of year 1,544,000 3,027,000 1,505,000 - ------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 2,362,000 $ 1,544,000 $ 3,027,000 - ------------------------------------------------------------------------------------------------------------------- Supplemental Information: Interest payments $ 5,036,000 $ 3,054,000 $ 1,602,000 Income tax payments $ 1,989,000 $ 1,573,000 $ 4,476,000 - -------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 13 16 Statements of Consolidated Stockholders' Equity - -------------------------------------------------------------------------------
For the years ended Common Stock Treasury Stock Additional March 31, 1996, --------------------- ----------------------- Paid-In Retained 1995 and 1994 Shares Amount Shares Amount Capital Earnings - ---------------------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1993 5,121,604 $51,000 -- $ -- $44,616,000 $ 16,537,000 Net income -- -- -- -- -- 6,884,000 Cash dividends ($.24 per share) -- -- -- -- -- (1,235,000) Issuance of stock under stock option plan 57,415 1,000 -- -- 570,000 -- Issuance of stock under incentive bonus plan - net 10,085 -- -- -- 97,000 -- Foreign translation adjustments -- -- -- -- -- -- Unrealized investment holding losses -- -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1994 5,189,104 52,000 -- -- 45,283,000 22,186,000 Net Income -- -- -- -- -- 2,533,000 Cash dividends ($.255 per share) -- -- -- -- -- (1,301,000) Purchase of treasury stock -- -- (172,500) (2,090,000) -- -- Issuance of stock under stock option plan 24,789 -- -- -- 202,000 -- Issuance of stock under incentive bonus plan - net 28,423 -- -- -- 317,000 -- Foreign translation adjustments -- -- -- -- -- -- Unrealized investment holding losses -- -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1995 5,242,316 52,000 (172,500) (2,090,000) 45,802,000 23,418,000 Net income -- -- -- -- -- 7,374,000 Cash dividends ($.26 per share) -- -- -- -- -- (1,325,000) Purchase of treasury stock -- -- (5,000) (65,000) -- -- Issuance of stock under stock option plan 20,308 1,000 -- -- 187,000 -- Issuance of stock under incentive bonus plan - net 13,839 -- -- -- 199,000 -- Foreign translation adjustments -- -- -- -- -- -- Realized investment holding losses -- -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1996 5,276,463 $53,000 (177,500) $(2,155,00) $46,188,000 $ 29,467,000 - ---------------------------------------------------------------------------------------------------------------------------------- Other Stockholders' Equity Total - ---------------------------------------------------------------------------- Balance, March 31, 1993 $ 10,000 $ 61,214,000 Net income -- 6,884,000 Cash dividends ($.24 per share) -- (1,235,000) Issuance of stock under stock option plan -- 571,000 Issuance of stock under incentive bonus plan - net (65,000) 32,000 Foreign translation adjustments 56,000 56,000 Unrealized investment holding losses (1,569,000) (1,569,000) - ---------------------------------------------------------------------------- Balance, March 31, 1994 (1,568,000) 65,953,000 Net Income -- 2,533,000 Cash dividends ($.255 per share) -- (1,301,000) Purchase of treasury stock -- (2,090,000) Issuance of stock under stock option plan -- 202,000 Issuance of stock under incentive bonus plan - net (122,000) 195,000 Foreign translation adjustments 54,000 54,000 Unrealized investment holding losses (1,044,000) (1,044,000) - ---------------------------------------------------------------------------- Balance, March 31, 1995 (2,680,000) 64,502,000 Net income -- 7,374,000 Cash dividends ($.26 per share) -- (1,325,000) Purchase of treasury stock -- (65,000) Issuance of stock under stock option plan -- 188,000 Issuance of stock under incentive bonus plan - net (122,000) 77,000 Foreign translation adjustments (894,000) (894,000) Realized investment holding losses 2,613,000 2,613,000 - ---------------------------------------------------------------------------- Balance, March 31, 1996 $ (1,083,000) $ 72,470,000 - ----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 1. SUMMARY OF ACCOUNTING PRINCIPLES TransTechnology Corporation (the "Company") develops, manufactures and sells a wide range of products in two industry segments, Specialty Fastener Products, and Rescue Hoist and Cargo Hook Products. The Company has manufacturing facilities located in the United States, Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment produces highly engineered precision metal retaining rings, clamps, circlips, spring pins and other fasteners for primarily the automotive, heavy truck, industrial and toy markets, and accounted for approximately 81 percent of the Company's consolidated 1996 net sales. Through its Rescue Hoist and Cargo Hook Products Segment, the Company develops, manufactures, sells and services a complete line of sophisticated lifting and restraining products - principally helicopter rescue hoist and cargo hook systems, and winches and hoists for aircraft and weapons systems, and accounted for approximately 19 percent of the Company's consolidated 1996 net sales. 14 17 USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial statements include the accounts of TransTechnology Corporation and its subsidiaries, all of which are wholly-owned. Intercompany balances and transactions are eliminated in consolidation. RELATED PARTY. Research Industries Incorporated owns approximately 22% of the Company's outstanding common stock. Two former directors of the Company are the only shareholders of Research Industries Incorporated, and each of these directors had a consulting contract with the Company that expired during fiscal 1995. During fiscal 1995 and 1994, the Company expensed and paid $0.7 and $0.9 million, respectively, for these contracts. ACCOUNTING FOR CONTRACTS. All of the Company's contracts are firm fixed-price. Sales and cost of sales on such contracts are recorded as deliveries are made. Losses on contracts are recorded in full as they are identified. 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. ACCOUNTS RECEIVABLE. Accounts receivable from the United States Government represent billed receivables and substantially all amounts are expected to be collected within one year. The Company has no amounts billed under retainage provisions of contracts. 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. 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. 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 forty years, or shorter periods where deemed appropriate. The Company has determined that there is no impairment in value since projected future operating results on an undiscounted basis through the period such costs in excess of net assets of acquired businesses is being amortized are expected to be sufficient to absorb the amortization. EARNINGS PER SHARE. Earnings per share are based on the weighted average number of common shares and, if dilutive, common stock equivalents (stock options) outstanding during each year. RESEARCH, DEVELOPMENT AND ENGINEERING COSTS. Research and development costs and engineering costs in support of active products, which are charged to expense when incurred, amounted to $1.7 million, $1.4 million and $1.4 million in 1996, 1995 and 1994, respectively. Included in these amounts were expenditures of $0.9 million, $0.4 million and $0.6 million in 1996, 1995 and 1994, respectively, which represent costs related to research and development activities. FOREIGN CURRENCY TRANSLATION. Pursuant to Statement of Financial Accounting Standards No. 52, the assets and liabilities of the Company's international operations, other than the operations located in a highly inflationary country, have been translated into U.S. Dollars at year-end exchange rates, with resulting translation gains and losses accumulated as a separate component of stockholders' equity. Income and expense items are converted into U.S. Dollars at average rates of exchange prevailing during the year. Translation adjustments of the operation located in a country with a highly inflationary economy, are included as a component of operating income. INCOME TAXES. Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Statement No. 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial 15 18 statement carrying amounts of existing assets and liabilities and their respective tax bases. The adoption of Statement No. 109 had no material effect on the financial statements. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company makes contributions toward the cost of providing certain health care and life insurance benefits to certain retirees, their beneficiaries and covered dependents. The accrual method of accounting for these benefits was adopted April 1, 1993 in accordance with the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." INVESTMENTS. On March 1, 1994 the Company received 465,000 shares of Mace Security International common stock, valued at $3.4 million, as partial consideration for the sale of a division. In the fourth quarter of 1996 the Company recorded a $2.6 million pre-tax charge to continuing operations to write-down the carrying value of equity securities acquired from the sale of this division to their current market value as the decline in value of those securities was determined to be other than temporary. 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 purchase commitments. Gains and losses on these instruments are included in other income/expense in the accompanying Statements of Consolidated Operations. NEW ACCOUNTING STANDARDS. In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of," which the Company is required to adopt during fiscal 1997. The adoption of SFAS No. 121 is not expected to have a material impact on the Company's consolidated financial statements. Also in 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which requires companies to measure employee stock compensation plans based on the fair value method of accounting or to continue to apply APB No. 25, "Accounting for Stock Issued to Employees," and provide pro forma footnote disclosures under the fair value method in SFAS No. 123. The Company will continue to apply the principles of APB No. 25 and provide pro forma fair value disclosures starting in the 1997 Annual Report. RECLASSIFICATIONS. Certain reclassifications have been made to prior years to conform to the 1996 presentation. 2. DISCONTINUED OPERATIONS In June 1995 and January 1996, the Company sold the domestic and European portions of its computer graphics service operations, respectively, in two separate transactions to two different buyers. These businesses operated under the name TransTechnology Systems & Services and were classified as discontinued operations in March 1995. The sale of the domestic portion for $0.7 million in cash and $0.6 million in notes receivable was for book value, and the sale of the European portion for $0.1 million in cash and $0.2 million in notes receivable resulted in an after-tax gain on disposal of $0.1 million in 1996. In August 1995, the company sold its Electronics division for $4.4 million in cash and $9.6 million in notes receivable. The sale of this operation resulted in an after-tax gain on disposal of $0.2 million. In March 1995, the Company sold substantially all of the assets and business of its chaff products operation for $6.7 million in cash. The sale of this operation resulted in an after-tax loss on disposal of $0.4 million. Additional after-tax disposal costs of $0.2 million were recorded in 1996 in connection with the sale. The Company retained the chaff avionics product line and negotiated its sale separately in May 1995 for $0.3 million in cash and $0.7 million in notes receivable, resulting in an after-tax gain on disposal of $0.4 million. In the fourth quarter of 1996, the Company recorded an after-tax charge of $0.4 million to record the anticipated loss on the sale of the facility, that was formerly used by this operation. In March 1994, the Company sold its tear-gas division which operates under the name Federal Laboratories, for $1.0 million in cash, $1.2 million in notes receivable and 465,000 shares of Mace Security International, Inc. common stock. The sale of this division resulted in an after-tax gain on disposal of $0.5 million. Additional after-tax disposal costs of $0.1 million and $0.5 million were recorded in 1996 and 1995, respectively, in connection with the sale. 16 19 Additional after-tax costs of $0.6 million and $1.4 million were recorded in 1996 and 1995, respectively, in connection with other previously discontinued and sold operations, and an after-tax gain on disposal of $0.3 million was recorded in 1994. These additional costs represent adjustments to previous estimates related primarily to legal and environmental matters. Operating results of the discontinued businesses were as follows:
1996 1995 1994 - --------------------------------------------------------------------- Total revenues $ 7,951,000 $ 35,515,000 $43,661,000 --------------------------------------------------------------------- (Loss) income before income taxes $ (840,000) $ (4,221,000) $ 111,000 Income tax benefit 323,000 1,619,000 213,000 --------------------------------------------------------------------- (Loss) income from operations $ (517,000) $ (2,602,000) $ 324,000 ---------------------------------------------------------------------
The loss from operations includes interest expense of $206,000, $488,000 and $523,000 in 1996, 1995 and 1994, respectively. Net assets held for sale at March 31, 1996 and 1995 were as follows:
1996 1995 - --------------------------------------------------------------------- Accounts receivable $ 143,000 $ 6,344,000 Inventory 529,000 10,993,000 Property 8,667,000 10,109,000 Other assets 1,269,000 1,755,000 Liabilities (628,000) (4,932,000) - --------------------------------------------------------------------- Net assets held for sale $ 9,980,000 $ 24,269,000 - ---------------------------------------------------------------------
3. ACQUISITIONS On June 30, 1995, the Company acquired the Seeger Group of companies from a unit of AB SKF of Goteborg, Sweden for approximately $43 million in cash plus direct acquisition costs and the assumption of trade debts and accrued expenses. The Seeger Group, headquartered in Konigstein, Germany, is the global leader in manufacturing circlips, snap rings and retaining rings. The Seeger Group operates under the trade names of "Seeger", "Anderton", and "Waldes" with over 900 employees at its five manufacturing facilities located in Germany, the UK, Brazil and the U.S.A. Effective August 31, 1994, the Company acquired all of the outstanding capital stock of Industrial Retaining Ring Company and its affiliated companies for a total purchase price of $15.3 million in cash and the assumption of liabilities. Industrial Retaining Ring Company manufactures retaining rings and clips used primarily in the heavy equipment and industrial machinery industries. On August 2, 1993, the Company acquired substantially all of the assets of the Palnut fastener operation ("Palnut") of TRW Inc. for a total purchase price of $20.5 million in cash and the assumption of certain liabilities consisting primarily of trade payables and accrued expenses aggregating approximately $1.4 million. The Palnut operation manufactures single and multi-thread metal fasteners, for the automotive and industrial products industries. The following summarizes TransTechnology Corporation's unaudited combined Proforma Revenue, Net Income and Earnings (Loss) per Share information prepared as if the acquisitions of the Seeger Group and Industrial Retaining Ring Company had occurred at the beginning of the periods presented.
For the years ended March 31, (Unaudited) 1996 1995 - ---------------------------------------------------------------------- Revenue $ 180,281,000 $ 165,646,000 - ---------------------------------------------------------------------- Income from continuing operations $ 10,130,000 $ 8,387,000 Loss from discontinued operations (1,134,000) (4,852,000) - ---------------------------------------------------------------------- Net income $ 8,996,000* $ 3,535,000 - ---------------------------------------------------------------------- Earnings per share from continuing operations $ 1.99 $ 1.64 Loss per share from discontinued operations (0.22) (0.95) - ---------------------------------------------------------------------- Earnings per share $ 1.77 $ 0.69 - ----------------------------------------------------------------------
* 1996 net income includes $2.1 million non-recurring income from the sale of unused land to an affiliate of the former parent company.
4. INVENTORIES - ---------------------------------------------------------------------- Inventories at March 31 consisted of the following: 1996 1995 - ---------------------------------------------------------------------- Finished goods $22,645,000 $ 6,152,000 Work in process 9,326,000 3,867,000 Purchased and manufactured parts 18,580,000 15,220,000 - ---------------------------------------------------------------------- Total $50,551,000 $ 25,239,000 - ----------------------------------------------------------------------
17 20 5. INCOME TAXES - -------------------------------------------------------------------------------- The components of total income (loss) from operations (including continuing and discontinued operations) before income taxes were:
1996 1995 1994 - ---------------------------------------------------------------------- Domestic $8,124,000 $3,694,000 $11,010,000 Foreign 3,642,000 (723,000) (973,000) - ---------------------------------------------------------------------- Total $11,766,000 $2,971,000 $10,037,000 - ----------------------------------------------------------------------
The provision (benefit) for income taxes is summarized below:
1996 1995 1994 - ---------------------------------------------------------------------- Currently payable: Domestic $1,813,000 $140,000 $2,987,000 Foreign 656,000 - (109,000) State 517,000 208,000 734,000 - ---------------------------------------------------------------------- 2,986,000 348,000 3,612,000 Deferred 1,406,000 90,000 (459,000) - ---------------------------------------------------------------------- Total $4,392,000 $438,000 $3,153,000 - ----------------------------------------------------------------------
The provision (benefit) for income taxes is allocated between continuing and discontinued operations as summarized below:
1996 1995 1994 - ---------------------------------------------------------------------- Continuing $5,792,000 $3,457,000 $3,060,000 Discontinued (1,400,000) (3,019,000) 93,000 - ---------------------------------------------------------------------- Total $4,392,000 $ 438,000 $3,153,000 - ----------------------------------------------------------------------
The consolidated effective tax rates for continuing operations differ from the federal statutory rates as follows:
1996 1995 1994 - ---------------------------------------------------------------------- Statutory federal rate 34.0% 34.0% 34.0% State income taxes after federal income tax 3.6% 4.6% 4.7% Earnings of the foreign sales corporation (2.6%) (2.6%) (3.7%) Amortization of purchase adjustments not deductible for tax purposes 1.9% 1.0% 1.5% Revision of prior years' tax accruals - (5.1%) (1.7%) Foreign rate differential 2.6% - - Other 1.0% - (0.3%) - ---------------------------------------------------------------------- Consolidated effective tax rate 40.5% 31.9% 34.5% - ----------------------------------------------------------------------
The following is an analysis of accumulated deferred income taxes:
1996 1995 - --------------------------------------------------------------------------- Assets Current Inventory $ 969,000 $2,307,000 Other 68,000 285,000 - --------------------------------------------------------------------------- Total current 1,037,000 2,592,000 - --------------------------------------------------------------------------- Non-current Environmental 1,067,000 1,274,000 Purchase accounting adjustments 3,820,000 -- Investment 1,049,000 -- Other 737,000 360,000 - --------------------------------------------------------------------------- Total non-current 6,673,000 1,634,000 - --------------------------------------------------------------------------- Total assets $7,710,000 $4,226,000 - --------------------------------------------------------------------------- Liabilities Non-current Depreciation $1,200,000 $1,147,000 Purchase accounting adjustments 2,097,000 -- Other 605,000 -- - --------------------------------------------------------------------------- Total liabilities $3,902,000 $1,147,000 - --------------------------------------------------------------------------- Summary-accumulated deferred income taxes Net current assets $1,037,000 $2,592,000 Net non-current assets 2,771,000 487,000 - --------------------------------------------------------------------------- Total $3,808,000 $3,079,000 - ---------------------------------------------------------------------------
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS - -------------------------------------------------------------------------------- Long-term debt payable, including current maturities, at March 31 consisted of the following:
1996 1995 - ----------------------------------------------------------------- Credit Agreement - 8.3125% $ -- $16,300,000 Credit Agreement - 7.965% 21,420,000 -- Term Loan - 7.804% 31,320,000 -- Term Loan - 9.0% -- 8,080,000 Term Loan - 9.79% 25,000,000 -- Term Loan - 9.0% -- 15,000,000 Other 851,000 997,000 - ------------------------------------------------------------------ 78,591,000 40,377,000 Less current maturities 6,026,000 3,356,000 - ------------------------------------------------------------------ Total $72,565,000 $37,021,000 - ------------------------------------------------------------------
CREDIT AGREEMENT At March 31, 1996, the Company's debt consisted of $17.2 million of borrowings under a revolving credit line, $4.2 million of borrowings under international lines of credit, a $31.3 million term loan, a $25 million term loan and $0.9 million of other borrowings. The revolving bank credit line commitment is $33.4 million, will be available to the Company through December 18 21 31, 2000 and is subject to a borrowing base formula. The agreement provides for borrowings and letters of credit based on collateralized accounts receivable and inventory. In addition, all of the remaining assets of the Company and its subsidiaries are included as collateral. Letters of credit, which are included in the borrowing base formula, are limited to $5 million. Letters of credit under the line at March 31, 1996 were $0.8 million. The total commitment from the international lines of credit are $6.6 million and have the same availability and collateral as the revolving credit line, but are not subject to a borrowing base formula. Interest on the revolver and international lines of credit are 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 and financial goals. The $31.3 million and $25 million term loans are with the same lenders as the revolving and international lines of credit, are secured by the same collateral, and are due and payable on December 31, 2000 and June 30, 2002, respectively. The $31.3 million term loan has an additional $15 million available through March 1997 for future acquisitions. Quarterly principal payments on the $31.3 million term loan of $1.4 million, with escalations to $1.8 million and $2.8 million in June 1999 and June 2000, respectively, began on December 31, 1995, and are due and payable on the last day of each quarter through December 31, 2000. Interest on the $31.3 million term loan is tied to the lending bank's prime rate, or LIBOR, plus a margin that varies, depending on the Company's achievement of certain operating and financial goals. Principal payments on the $25 million term loan of $0.5 million are due and payable annually beginning on June 30, 1996 through June 30, 2000, with final balloon payments of $7.5 million and $15 million due and payable on June 30, 2001 and June 30, 2002, respectively. Interest on the $25 million term loan accrues at the primary lending bank's prime rate plus two percentage points. The agreement also gives the Company the option of using LIBOR plus three and one-quarter percentage points. At March 31, 1996, the Company had $53.8 million of borrowings utilizing LIBOR. The credit facility limits the Company's ability to pay dividends to 25% of net income and restricts capital expenditures to $6.5 million for the fiscal year ended March 31, 1996, and $7 million annually thereafter for the life of the agreement, as well as containing other customary financial covenants. OTHER Other long-term debt is comprised principally of an obligation due under a collateralized borrowing arrangement with a fixed interest rate of 3% due December 2004 and loans on life insurance policies owned by the Company with a fixed interest rate of 5%.
Debt maturities - ----------------------------------------------------------------- 1997 (current) $ 6,026,000 1998 5,993,000 1999 5,995,000 2000 7,359,000 2001 30,146,000 Thereafter 23,072,000 - ----------------------------------------------------------------- Total $78,591,000 - -----------------------------------------------------------------
7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS Under the Company's stock option plan, options to purchase shares of the Company's common stock have been granted to directors, officers and key employees at prices determined by the Board of Directors which may not be less than 100% of the fair market value at date of grant. At March 31, 1996, there were 408,596 options outstanding, of which 177,253 were exercisable at that date. The remaining options for 231,343 shares become exercisable on various dates through February 1999. The table below summarizes stock option transactions:
1996 1995 1994 - -------------------------------------------------------------------------------- Options outstanding, beginning of year ($5.50-$18.53 per share) 375,015 230,537 169,679 Options granted ($9.63-$15.13 per share) 109,000 234,836 146,500 Options exercised ($5.50-$13.44 per share) (20,308) (24,789) (57,415) Options expired and cancelled (55,111) (65,569) (28,227) - -------------------------------------------------------------------------------- Options outstanding, end of year ($5.50-$18.53 per share) 408,596 375,015 230,537 - -------------------------------------------------------------------------------- Aggregate option price $ 5,156,300 $ 4,637,517 $ 2,406,531 - -------------------------------------------------------------------------------- Options exercisable ($7.50-$18.53 per share) 177,253 72,843 63,914 - --------------------------------------------------------------------------------
19 22 8. EMPLOYEE BENEFIT PLANS The Company has an incentive bonus plan which provides for cash payments to selected employees based upon formulas approved by the Board of Directors. Provisions for awards under the plan approximated $1,745,000, $1,220,000 and $1,301,000 in 1996, 1995 and 1994, respectively. The Company has two 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 $1,823,000, $1,373,000, and $1,786,000 in 1996, 1995, and 1994, respectively. Two divisions of the Company also make contributions to union-sponsored multi-employer pension plans in accordance with the negotiated labor contracts. Contributions to the plans were $373,000, $275,000 and $226,000 in 1996, 1995 and 1994, respectively. Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 ("SFAS No. 106") on Employers' Accounting for Postretirement Benefits Other Than Pensions. This statement requires that the cost of these benefits, which are primarily health care related, be recognized in the financial statements during the employee's active working career. The Company's previous practice was to recognize expense as claims were paid. The plan maintained by the Company provides postretirement benefits to union employees at one of the Company's divisions. Adopting the new standard created a previously unrecognized obligation covering prior years. This transition obligation, estimated at $2.9 million, before tax effects, is being amortized on a straight-line basis over the average remaining service life of active employees, estimated by the Company to be approximately 20 years. During fiscal year 1994, the Company adopted an amendment to the plan resulting in a decrease of $859,000 to the transition obligation. The components of net postretirement benefit cost for the years ended March 31 were as follows:
1996 1995 1994 - -------------------------------------------------------------------------------- Service cost (benefits earned during the year) $ 88,000 $ 94,000 $124,000 Interest cost on projected postretirement benefit obligation 168,000 168,000 196,000 Amortization of transition obligation 101,000 101,000 123,000 Amortization of net gain (10,000) -- -- - -------------------------------------------------------------------------------- Total postretirement benefit cost $ 347,000 $363,000 $443,000 - --------------------------------------------------------------------------------
The accumulated postretirement benefit obligation and funded status at March 31 were as follows: Accumulated postretirement benefit obligation:
1996 1995 - ------------------------------------------------------------------------------- Retirees $ (774,000) $ (711,000) Fully eligible plan participants (365,000) (364,000) Other active plan participants (1,161,000) (958,000) - ------------------------------------------------------------------------------- Accumulated postretirement benefit obligation (2,300,000) (2,033,000) Plan assets at fair value -- -- - ------------------------------------------------------------------------------- Accumulated postretirement benefit obligation in excess of plan assets (2,300,000) (2,033,000) Unrecognized net (gain) loss (217,000) (356,000) Unrecognized transition obligation 1,724,000 1,826,000 - ------------------------------------------------------------------------------- Accrued postretirement benefit liability $ (793,000) $ (563,000) - -------------------------------------------------------------------------------
Accrued postretirement benefit cost is included in other liabilities on the balance sheet. The assumed health care cost trend rates used for measurement purposes were 12% and 13% for 1996 and 1995, respectively, trending down 1% each year to 10% in 1998 and then decreasing .5% each year to 6.0% in 2006 and beyond, for substantially all participants. The weighted-average discount rates used were 7.5% and 8.5% at March 31, 1996 and 1995, respectively. A 1% increase in health care trend rate would increase the annual expense by approximately 12.2% for the year ended March 31, 1996 and accumulated postretirement benefit obligation by approximately 13.5% at March 31, 1996. 20 23 In addition, the Company maintains several defined benefit retirement plans for certain non-U.S. employees. Funding policies are based on local statutes. Net periodic pension cost for the plans at March 31, 1996 includes the following:
Service cost $ 40,000 Interest cost 343,000 Net deferral and amortization 34,000 - ------------------------------------------------------------------------------- Net periodic pension cost $ 417,000 - -------------------------------------------------------------------------------
The following table sets forth the funded status of the plan at March 31, 1996:
Total accumulated benefit obligation $6,370,000 - ------------------------------------------------------------------------------- Projected benefit obligation $6,615,000 Unrecognized net loss 245,000 - ------------------------------------------------------------------------------- Unfunded accrued pension cost (included in other long term liabilities) $6,370,000 - -------------------------------------------------------------------------------
In determining the projected benefit obligation, the discount rate was 7.5% and the rate of salary increases was 3% in 1996. 9. 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:
Interest Rate - ------------------------------------------------------------------------------- Notional Amount Maturities Receive(1) Pay - ------------------------------------------------------------------------------- March 31, 1996... $25,000,000 8/98 5.88%(1) 6.54% - ------------------------------------------------------------------------------- DM15,315,000 12/98 3.36% 4.57% - ------------------------------------------------------------------------------- (1) Three-month LIBOR.
FOREIGN CURRENCY EXCHANGE AGREEMENTS The Company enters into off-balance sheet forward foreign exchange instruments in order to hedge certain purchase commitments. At March 31, 1996 the company had outstanding forward foreign exchange contracts totalling DM 1,500,000 ($1,015,000) maturing through September 1996. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair values of cash and cash equivalents, receivables and notes receivables approximate their carrying values due to the short-term nature of the instruments. The fair value of the Company's long-term notes receivables and debt approximates their carrying values due to the variable interest-rate feature of the instruments. The fair values of the Company's interest rate swaps and forward foreign exchange agreements are the estimated amounts the Company would have to pay or receive, ($1,397,000) and $30,000, respectively to terminate the agreements based upon quoted market prices as provided by financial institutions which are counterparties to the agreements. 10. COMMITMENTS - -------------------------------------------------------------------------------- Rent expense under operating leases, net of sub-leases, for the years ended March 31, 1996, 1995, and 1994 was $1,979,000, $1,802,000 and $1,450,000, respectively. The Company has no material capital leases. The Company and its subsidiaries have minimum rental commitments under noncancellable operating leases (relating primarily to leased buildings) which are as follows:
Year ending March 31: - ------------------------------------------------------------------ 1997 $2,864,000 1998 2,482,000 1999 1,853,000 2000 873,000 2001 455,000 Thereafter 497,000 - ------------------------------------------------------------------- Total $9,024,000 - -------------------------------------------------------------------
Included in the above amounts is the aggregate lease commitment associated with the Company's former corporate office which has been sub-leased. Future sub-lease rentals receivable at March 31, 1996 totalled $1,017,000. Other-long-term liabilities at March 31, 1996, include a $0.2 million obligation associated with the lease which expires in July 1998. 21 24 11. CONTINGENCIES - -------------------------------------------------------------------------------- The Company has commenced environmental site assessments and cleanup feasibility studies to determine the presence, extent and sources of any environmental contamination at sites in Pennsylvania and Illinois which continue to be owned although the related businesses have been sold. Although no governmental action requiring remediation has been taken at this time, the Company is working in cooperation with the relevant state authorities and any remedial work required to be performed would be subject to their approval. At the Pennsylvania sites, a feasibility study has been prepared and submitted to the state. Based upon that study and upon claims for recovery which the Company has against others, a pre-tax charge of $3.6 million (net of $1.2 million in probable recoveries from third parties) was recorded in March 1993 for future cleanup costs at the Pennsylvania sites. At March 31, 1996, the balance of this clean-up reserve was $2.4 million. In addition, the Company is pursuing recovery of a portion of clean-up costs in litigation with several of its insurance carriers. The Company expects that remediation work at the Pennsylvania site will not be completed until fiscal 1999. In addition, the Company has been named as a potentially responsible party in various environmental remediation recovery 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. It is not possible to reliably estimate the costs associated with any remedial work to be performed until studies at these sites have been completed, the scope of work defined and a method of remediation selected and approved by the relevant state authorities. The Company is also engaged in various other legal proceedings incidental to its business. It is the opinion of the management that, after taking into consideration information furnished by its counsel, the above matters will not have a material effect on the consolidated financial position of the Company. 12. SUBSEQUENT EVENTS - -------------------------------------------------------------------------------- On May 15, 1996, the Company sold real property in Florida formerly occupied by its chaff division, and terminated the lease of the property, for total consideration of $1,984,000, paid in cash. On May 25, 1996, the Company entered into a definitive agreement to acquire the assets and business of the hose clamp product line of Pebra GmbH Paul Braun i.K. This business, located in Frittlingen, Germany, manufactures heavy-duty hose clamps used primarily by heavy truck OEM's in Germany. Revenues for the year ended December 31, 1995, were approximately $6.5 million. The transaction is expected to be completed in June 1996 with a purchase price of $3 million provided by the Company's existing revolving credit line. 13. SEGMENT AND GEOGRAPHIC INFORMATION - -------------------------------------------------------------------------------- The Company develops, manufactures and sells primarily specialty fastener products and rescue hoist and cargo hook products. Specialty Fastener Products include gear- driven band fasteners, threaded fasteners and retaining rings for the marine, auto, toy, aircraft, heavy equipment and industrial machinery industries. Rescue Hoist and Cargo Hook Products include lifting, control, and restraint devices principally helicopter rescue hoists and external hook systems, winches and hoists for aircraft and weapon-handling systems, and aircraft and cargo tie-downs. 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 8%, 18% and 23% of sales from continuing operations in 1996, 1995 and 1994, respectively, were derived from sales to the United States Government and its prime contractors which are attributable primarily to the Rescue Hoist and Cargo Hook Products Segment. 22 25
Operating Depreciation/ Fiscal Profit Capital Amortization Identifiable Year Sales (Loss)(1) Expenditures(2) Expense(2) Assets - ---------------------------------------------------------------------------------------------------------------------------------- Specialty fastener 1996 $127,487,000 $23,702,000 $5,171,000 $4,710,000 $138,001,000 products 1995 71,103,000 16,500,000 3,193,000 1,906,000 60,986,000 1994 52,319,000 10,018,000 2,289,000 1,545,000 38,669,000 - ---------------------------------------------------------------------------------------------------------------------------------- Rescue hoist and 1996 30,537,000 4,928,000 901,000 756,000 26,334,000 cargo hook products 1995 30,019,000 160,000 469,000 605,000 24,493,000 1994 29,554,000 3,772,000 661,000 675,000 32,249,000 - ---------------------------------------------------------------------------------------------------------------------------------- Total segments 1996 158,024,000 28,630,000 6,072,000 5,466,000 164,335,000 1995 101,122,000 16,660,000 3,662,000 2,511,000 85,479,000 1994 81,873,000 13,790,000 2,950,000 2,220,000 70,918,000 - ---------------------------------------------------------------------------------------------------------------------------------- Corporate 1996 - (8,987,000)(3) 399,000 438,000 35,032,000 1995 - (3,882,000) 64,000 260,000 43,917,000 1994 - (4,646,000) 56,000 283,000 54,939,000 - ---------------------------------------------------------------------------------------------------------------------------------- Corporate interest 1996 - 973,000 - - - and other income 1995 - 895,000 - - - 1994 - 839,000 - - - - ---------------------------------------------------------------------------------------------------------------------------------- Interest expense 1996 - (6,316,000) - - - 1995 - (2,831,000) - - - 1994 - (1,123,000) - - - - ---------------------------------------------------------------------------------------------------------------------------------- Consolidated 1996 $158,024,000 $14,300,000 $6,471,000 $5,904,000 $199,367,000 1995 101,122,000 10,842,000 3,726,000 2,771,000 129,396,000 1994 81,873,000 8,860,000 3,006,000 2,503,000 125,857,000 - ----------------------------------------------------------------------------------------------------------------------------------
(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 investments and other income earned at the corporate level are included in the corporate section. Interest expense is also separately reported. The amount of the "Consolidated" line represents "Income from Continuing Operations Before Income Taxes." Loss from discontinued operations is not included. (2) The capital expenditures and depreciation/amortization expense from discontinued operations are excluded from the above schedule. (3) Corporate operating profit in 1996 includes a pre - tax charge of $2.6 million for marketable equity securities write-down. In 1996, 1995 and 1994, the Company had revenues from export sales as follows:
Location 1996 1995 1994(a) - -------------------------------------------------------------------------------------------------------- Western Europe $ 7,230,000 $ 6,641,000 $ 6,221,000 Canada 6,323,000 5,896,000 3,630,000 Pacific and Far East 2,312,000 1,638,000 4,159,000 Mexico, Central and South America 851,000 1,015,000 657,000 Middle East 167,000 114,000 142,000 Other 22,000 136,000 141,000 - -------------------------------------------------------------------------------------------------------- Total $16,905,000 $15,440,000 $14,950,000 - --------------------------------------------------------------------------------------------------------
(a) Restated to reflect only continuing operations. 23 26 Results set forth below for international operations represents sales and operating income of foreign based Company members:
1996 - ------------------------------------------------------------------------------------------------ Net sales Domestic operations $ 112,860,000 International operations (1) 45,164,000 - ------------------------------------------------------------------------------------------------ Net sales $ 158,024,000 - ------------------------------------------------------------------------------------------------ Operating income Domestic operations $ 22,454,000 International operations (1) 6,176,000 - ------------------------------------------------------------------------------------------------ Operating income 28,630,000 Interest expense (6,316,000) Corporate expense and other (8,014,000) - ------------------------------------------------------------------------------------------------ Income from continuing operations before tax $ 14,300,000 - ------------------------------------------------------------------------------------------------ Identifiable assets Domestic operations $ 96,944,000 International operations (1) 67,391,000 Corporate 35,032,000 - ------------------------------------------------------------------------------------------------ Total assets $ 199,367,000 - ------------------------------------------------------------------------------------------------
In prior years the Company had no significant international operations. (1) International operations are primarily located in Europe.
14. UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) - --------------------------------------------------------------------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL - --------------------------------------------------------------------------------------------------------------------- 1996 - --------------------------------------------------------------------------------------------------------------------- Total revenues $ 26,410 $ 44,434 $ 41,601 $ 47,409 $ 159,854 Gross profit 8,471 12,462 14,332 17,163 52,428 Income from continuing operations 1,733 1,343 2,793 2,639 8,508 Loss from discontinued operations (172) (149) (447) (366) (1,134) - --------------------------------------------------------------------------------------------------------------------- Net income $ 1,561 $ 1,194 $ 2,346 $ 2,273 7,374 - --------------------------------------------------------------------------------------------------------------------- Earnings (loss) per share: Income from continuing operations $ 0.34 $ 0.26 $ 0.55 $ 0.52 $ 1.67 Loss from discontinued operations (0.03) (0.03) (0.09) (0.07) (0.22) - --------------------------------------------------------------------------------------------------------------------- Net income $ 0.31 $ 0.23 $ 0.46 $ 0.45 $ 1.45 - --------------------------------------------------------------------------------------------------------------------- 1995 - --------------------------------------------------------------------------------------------------------------------- Total revenues $ 22,437 $ 22,411 $ 26,328 $ 31,516 $ 102,692 Gross profit 6,138 6,951 8,569 9,066 30,724 Income from continuing operations 1,597 1,169 2,434 2,185 7,385 Loss from discontinued operations (525) (972) (1,080) (2,275) (4,852) - --------------------------------------------------------------------------------------------------------------------- Net income (loss) 1,072 197 1,354 (90) 2,533 - --------------------------------------------------------------------------------------------------------------------- Earnings (loss) per share: Income from continuing operations $ 0.31 $ 0.23 $ 0.48 $ 0.43 $ 1.45 Loss from discontinued operations (0.10) (0.19) (0.21) (0.45) (0.95) - --------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 0.21 $ 0.04 $ 0.27 $ (0.02) $ 0.50 - ---------------------------------------------------------------------------------------------------------------------
24 27 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, 1996 and 1995 and the related statements of consolidated operations, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1996. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the financial statements based on our audits. We did not audit the financial statements of The New Seeger Group (whose members are consolidated subsidiaries) for the period ending March 31, 1996, which statements reflect total assets and total revenues constituting 32% and 28%, respectively, of the related consolidated totals for the year. These statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for The New Seeger Group for the period ended March 31, 1996, is based solely on the report of such other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of TransTechnology Corporation and subsidiaries at March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1996 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Parsippany, New Jersey May 28, 1996 25 28 Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS The Company's fiscal year ends on March 31. Accordingly, all references to years in this Management's Discussion 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. Revenue from continuing operations in 1996 was $159.9 million, an increase of $57.2 million or 56% from 1995, compared with a $19.8 million or 24% increase from 1994 to 1995. Gross profit in 1996 increased $21.7 million or 71% from 1995, compared with an increase of $5.8 million or 23% from 1994 to 1995. Operating profit from continuing operations for 1996 was $28.6 million, an increase of $12 million or 72% from 1995, compared with an increase of $2.9 million or 21% from 1994 to 1995. Changes in sales, operating profit and new orders from continuing operations are discussed below by segment, and additional information regarding industry segments is contained in Note 13 of the Notes to Financial Statements. Net income, including discontinued operations, for 1996 was $7.4 million or $1.45 per share, compared to $2.5 million or $.50 per share in 1995. These changes in net income were affected both by operating profit, as discussed in the Business Segment sections below, and by discontinued operations, as discussed in the Discontinued Operations section below. Net loss from discontinued operations, including disposal losses, was $1.1 million or $.22 per share in 1996 and $4.9 million or $.95 per share in 1995. In the fourth quarter of 1996 the Company recorded a $2.6 million pre-tax charge to continuing operations to write-down the carrying value of equity securities acquired from the sale of its tear gas division to their current market value when the decline in value of those securities was determined to be other than temporary. Unrealized holding losses on these securities had previously been recorded as a direct reduction to stockholders' equity. In 1996 the company sold the domestic and European portions of its computer graphics service operations, which operated under the name TransTechnology Systems & Services, its Electronics division and the chaff avionics product line as discussed below in the Discontinued Operations section. On June 30, 1995 the Company acquired the Seeger Group of companies as discussed below in the Acquisitions section and the Business Segment section. In the fourth quarter of 1995 the Company sold primarily all of the assets and business of its chaff products operation as discussed below in the Discontinued Operations section. In August, 1994 the Company acquired Industrial Retaining Ring Company as discussed below in the Acquisitions section and the Business Segment section. In the fourth quarter of 1994, the Company recorded a reduction of $0.8 million of Federal income tax provisions. Also in the fourth quarter of 1994 the Company sold its tear gas division as discussed below in the discontinued operations section. In August 1993, the Company acquired the Palnut fastener division as discussed below in the Acquisitions section and the Business Segment section. Interest expense increased $3.5 million in 1996 primarily as a result of increased bank borrowings used for the acquisition of the Seeger Group of companies, as discussed below in the Liquidity and Capital Resources section. Interest expense increased $1.7 million from 1994 to 1995 primarily as a result of increased bank borrowings used for the acquisition of Industrial Retaining Ring Company, as discussed below in the Liquidity and Capital Resources section, and higher interest rates on the Company's debt in fiscal 1995 due to increases in the prime interest rate throughout the year. New orders received during 1996 by continuing operations totaled $162.6 million, an increase of $58.1 million or 56% from 1995. New orders received during 1995 by continuing operations totaled $104.5 million, an increase of $17.1 million or 20% from 1994. New orders are discussed below by industry segment. At March 31, 1996, total backlog of unfilled orders was $62.3 million, compared to $34.4 million and $30.9 million at March 31, 1995 and 1994, respectively. In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which the Company is required to adopt during fiscal 1997. The adoption of SFAS No. 121 is not expected to have a material impact on the Company's consolidated financial statements. Also in 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which requires companies to measure employee stock compensation plans based on the fair value method of accounting or to continue to apply APB No. 25, "Accounting for Stock Issued to Employees," and provide pro forma footnote disclosures under the fair 26 29 value method in SFAS No. 123. The Company will continue to apply the principles of APB No. 25 and provide pro forma fair value disclosures starting in the 1997 Annual Report. In March 1994, the Company adopted Statement of Financial Accounting Standard No. 115, related to accounting for certain investments in debt and equity securities. Adoption of this statement resulted in a gross unrealized holding loss of $1.6 million, reported as a direct reduction to stockholders' equity in the March 31, 1994 balance sheet. At March 31, 1996, this gross unrealized holding loss, which had increased to $2.6 million, was reclassified as a realized holding loss, and a pre-tax charge of $2.6 million was recorded in the fourth quarter Statement of Operations. ACQUISITIONS - -------------------------------------------------------------------------------- On June 30, 1995, the Company acquired the Seeger Group of companies from a unit of AB SKF of Goteborg, Sweden for approximately $43 million in cash plus direct acquisition costs and the assumption of trade debts and accrued expenses. The Seeger Group, headquartered in Konigstein, Germany, is the global leader in manufacturing circlips, snap rings and retaining rings. The Seeger Group operates under the trade names of "Seeger", "Anderton", and "Waldes" with over 900 employees at its five manufacturing facilities located in Germany, the UK, Brazil and the U.S.A. Effective August 31, 1994, the Company acquired all of the outstanding capital stock of Industrial Retaining Ring Company and its affiliated companies for a total purchase price of $15.3 million in cash and the assumption of liabilities. Industrial Retaining Ring Company manufactures retaining rings and clips used primarily in the heavy equipment and industrial machinery industries. On August 2, 1993, the Company acquired substantially all of the assets of the Palnut fastener operation ("Palnut") of TRW Inc. for a total purchase price of $20.5 million in cash and the assumption of certain liabilities consisting primarily of trade payables and accrued expenses aggregating approximately $1.4 million. The Palnut operation manufactures single and multi-thread metal fasteners, for the automotive and industrial products industries. DISCONTINUED OPERATIONS - -------------------------------------------------------------------------------- In June 1995 and January 1996, the Company sold the domestic and European portions of its computer graphics service operations, respectively, in two separate transactions to two different buyers. These businesses operated under the name TransTechnology Systems & Services and were classified as discontinued operations in March 1995. The sale of the domestic portion for $0.7 million in cash and $0.6 million in notes receivable was for book value, and the sale of the European portion for $0.1 million in cash and $0.2 million in notes receivable resulted in an after-tax gain on disposal of $0.1 million. In August 1995, the company sold its Electronics division for $4.4 million in cash and $9.6 million in notes receivable. The sale of this operation resulted in an after-tax gain on disposal of $0.2 million. In March 1995, the Company sold substantially all of the assets and business of its chaff products operation for $6.7 million in cash. The sale of this operation resulted in an after-tax loss on disposal of $0.4 million. Additional after-tax disposal costs of $0.2 million were recorded in 1996 in connection with the sale. The Company retained the chaff avionics product line and negotiated its sale separately in May 1995 for $0.3 million in cash and $0.7 million in notes receivable, resulting in an after-tax gain on disposal of $0.4 million. In the fourth quarter of 1996, the Company recorded an after-tax charge of $0.4 million to record the anticipated loss on the sale of the facility that was formerly used by this operation. In March 1994, the Company sold its tear-gas division which operates under the name Federal Laboratories, for $1.0 million in cash, $1.2 million in notes receivable and 465,000 shares of Mace Security International, Inc. common stock. The sale of this division resulted in a after-tax gain on disposal of $0.5 million. Additional after-tax disposal costs of $0.1 million and $0.5 million were recorded in 1996 and 1995, respectively, in connection with the sale. Additional after-tax costs of $0.6 million and $1.4 million were recorded in 1996 and 1995, respectively, in connection with other previously discontinued and sold operations, and an after-tax gain on disposal of $0.3 million was recorded in 1994. These additional costs represent adjustments to previous estimates related primarily to environmental and legal matters. 27 30 SPECIALTY FASTENER PRODUCTS SEGMENT 1996 COMPARED WITH 1995 - -------------------------------------------------------------------------------- Sales for the Specialty Fastener Products segment were $127.5 million in 1996, an increase of $56.4 million or 79% from 1995. The increase in sales was primarily due to the inclusion of nine months of Seeger Group operations in 1996, and to a lesser extent, the inclusion of twelve months of Industrial Retaining Ring Company operations in 1996 versus eight months in 1995, and increased industrial and truck fastener demand for gear-driven fasteners in fiscal 1996. Operating profit for the Specialty Fastener Products segment was $23.7 million in 1996, an increase of $7.2 million or 44% from 1995. The primary factors contributing to the segments increased operating profit in 1996 were the inclusion of nine months of Seeger Group operations, the inclusion of twelve months of Industrial Retaining Ring Company operations in 1996 versus eight months in 1995, and increased shipments of gear-driven fasteners. In 1996, new orders in the Specialty Fastener Products segment increased $48.8 million or 66% from 1995. The primary reasons for the increase were the inclusion of nine months of Seeger Group operations in 1996, the inclusion of twelve months of Industrial Retaining Ring Company operations versus eight months in 1995, and the increased demand for gear-driven fasteners. Backlog of unfilled orders was $31.4 million at March 31, 1996, compared to $12.7 million at March 31, 1995. 1995 COMPARED WITH 1994 - -------------------------------------------------------------------------------- Sales for the Specialty Fastener Products segment were $71.1 million in 1995, an increase of $18.8 million or 36% from 1994. The increase in sales was primarily due to the inclusion of twelve months of Palnut fastener operations in 1995 versus eight months in 1994, the inclusion of eight months of Industrial Retaining Ring Company operations in 1995, and increased industrial and truck fastener demand for gear-driven fasteners in fiscal 1995. Operating profit for the Specialty Fastener Products segment was $16.5 million in 1995, an increase of $6.5 million or 65% from 1994. The primary factors contributing to the segments increased operating profit in 1995 were the inclusion of eight months of Industrial Retaining Ring Company operations, the inclusion of twelve months of Palnut fastener operations in 1995 versus eight months in 1994 and increased shipments of gear-driven fasteners. In 1995, new orders in the Specialty Fastener Products segment increased $14.4 million or 24% from 1994. The primary reasons for the increase were the inclusion of twelve months of Palnut fastener operations in 1995 versus eight months in 1994, the inclusion of eight months of Industrial Retaining Ring Company operations and the increased demand for gear-driven fasteners. Backlog of unfilled orders was $12.7 million at March 31, 1995, compared to $9.5 million at March 31, 1994. RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT 1996 COMPARED WITH 1995 - -------------------------------------------------------------------------------- Sales for the Rescue Hoist and Cargo Hook Products segment were $30.5 million in 1996, an increase of $0.5 million or 2% from 1995. All three product lines in this segment, rescue hoists and related spare parts, cargo hooks, and tie-downs had little change in sales from 1995 levels. Following the second full year under a new management team, the Rescue Hoist and Cargo Hook Products segment reported an operating profit of $4.9 million in 1996, compared to $0.2 million in 1995. The increase was primarily due to plant operating efficiencies, price adjustments and better inventory utilization. In 1996 new orders in the Rescue Hoist and Cargo Hook Products segment increased by $9.3 million or 31% from 1995. This increase, led by the Rescue Hoist product line, was primarily due to increased marketing effort and customer timing of order placement. At March 31, 1996, the backlog of unfilled orders was $30.9 million, compared to $21.8 million at March 31, 1995. 1995 COMPARED WITH 1994 - -------------------------------------------------------------------------------- Sales for the Rescue Hoist and Cargo Hook Products segment were flat in 1995 at $30.0 million. All three product lines in this segment, rescue hoists and related spare parts, cargo hooks, and tie-downs, experienced virtually identical sales as in 1994. Operating profit for the Rescue Hoist and Cargo Hook Products segment was $0.2 million in 1995, a decrease of $3.6 million or 96% from 1994. The decrease was primarily due to reduced margins for all product lines through the first three quarters from shipments on low profit contracts. 28 31 In 1995 new orders in the Rescue Hoist and Cargo Hook Products segment increased by $2.7 million or 10% from 1994. New orders for rescue hoists and related spare parts were up $5.2 million or 27%, new orders for cargo hooks were down $2.8 million or 35%, and new orders for tie-downs were up $0.3 million or 55%, in 1995 over 1994. These changes were primarily due to customer timing of order placement. At March 31, 1995, the backlog of unfilled orders was $21.8 million, compared to $21.4 million at March 31, 1994. LIQUIDITY AND CAPITAL RESOURCES - -------------------------------------------------------------------------------- The Company's debt-to-capitalization ratio was 52%, 38% and 34% as of March 31, 1996, 1995 and 1994, respectively. The current ratio at March 31, 1996, stood at 2.51, compared to 3.25 and 3.49 at March 31, 1995 and 1994, respectively. Working capital was $57.3 million at March 31, 1996, up $4.2 million from March 31, 1995 and up $3.4 million from March 31, 1994. At March 31, 1996, the Company's debt consisted of $17.2 million of borrowings under a revolving credit line, $4.2 million of borrowings under international lines of credit, a $31.3 million term loan, a $25 million term loan and $0.9 million of other borrowings. The revolving bank credit line commitment of $33.4 million will be available to the Company through December 31, 2000 and is subject to a borrowing base formula. The agreement provides for borrowings and letters of credit based on collateralized accounts receivable and inventory. In addition, all of the remaining assets of the Company and its subsidiaries are included as collateral. Letters of credit, which are included in the borrowing base formula, are limited to $5 million. Letters of credit under the line at March 31, 1996 were $0.8 million. The total commitment from the international lines of credit are $6.6 million and have the same availability and collateral as the revolving credit line, but are not subject to a borrowing base formula. Interest on the revolver and international lines of credit are 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 and financial goals. The $31.3 million and $25 million term loans are with the same lenders as the revolving and international lines of credit, are secured by the same collateral, and are due and payable on December 31, 2000 and June 30, 2002, respectively. The $31.3 million term loan has an additional $15 million available through March 1997 for future acquisitions. Quarterly principal payments on the $31.3 million term loan of $1.4 million, with escalations to $1.8 million and $2.8 million in June 1999 and June 2000, respectively, began on December 31, 1995, and are due and payable on the last day of each quarter through December 31, 2000. Interest on the $31.3 million term loan is tied to the lending bank's prime rate, or LIBOR, plus a margin that varies depending on the Company's achievement of certain operating and financial goals. Principal payments on the $25 million term loan of $0.5 million are due and payable annually beginning on June 30, 1996 through June 30, 2000, with final balloon payments of $7.5 million and $15 million due and payable on June 30, 2001 and June 30, 2002, respectively. Interest on the $25 million term loan accrues at the primary lending bank's prime rate plus two percentage points. The agreement also gives the Company the option of using LIBOR plus three and one-quarter percentage points. At March 31, 1996, the Company had $53.8 million of borrowings utilizing LIBOR. The credit facility limits the Company's ability to pay dividends to 25% of net income and restricts capital expenditures to $6.5 million for the fiscal year ended March 31, 1996, and $7 million annually thereafter for the life of the agreement, as well as containing other customary financial covenants. On May 13, 1994, the Company obtained authorization to repurchase up to 200,000 shares of the Company's common stock at an aggregate price not to exceed $2.5 million. Through March 31, 1996, the Company had repurchased 177,500 shares at an aggregate cost of $2.2 million. Management believes that the Company's anticipated cash flow from operations, combined with the bank credit described above, will be sufficient to support current and forecasted working capital requirements and dividend payments. Capital expenditures in 1996 were $6.5 million as compared with $5 million in 1995. The Company's two industry segments have similar cash flow requirements. The Company is subject to various contingencies related to land and groundwater contamination at several facilities. These matters are described in Note 11 of the Notes to Financial Statements. Management believes that, after taking into consideration information provided by counsel, the resolution of these matters will not have a material adverse effect on the Company's liquidity. 29 32 - -------------------------------------------------------------------------------- On May 15, 1996 the Company sold real property in Florida formerly occupied by its chaff division, and terminated the lease of the property, for total consideration of $1,984,000, paid in cash. On May 25, 1996, the Company entered into a definitive agreement to acquire the assets and business of the hose clamp product line of Pebra GmbH Paul Braun i.K. This business, located in Frittlingen, Germany, manufactures heavy-duty hose clamps used primarily by heavy truck OEM's in Germany. Revenues for the year ended December 31, 1995, were approximately $6.5 million. The transaction is expected to be completed in June 1996 with a purchase price of $3 million provided by the Company's existing revolving credit line. 30 33 DIRECTORS - -------------------------------------------------------------------------------- - -- Gideon Argov Chairman of the Board, President and Chief Executive Officer Kollmorgen Corporation (High-performance motion control systems) - - --Walter Belleville Chairman and Chief Executive Officer ATI Machinery, Inc. (Heavy machinery) + Michael J. Berthelot Chairman of the Board and Chief Executive Officer TransTechnology Corporation Patrick K. Bolger President and Chief Operating Officer TransTechnology Corporation + --Thomas V. Chema Partner Arter & Hadden (Telecommunications consulting) Michel Glouchevitch Managing Director Triumph Capital Group - - + James A. Lawrence President and Chief Executive Officer Asia/Middle East/Africa Pepsi-Cola Company - - Audit Committee + Nominating Committee - -- Incentives & Compensation Committee CORPORATE OFFICE - -------------------------------------------------------------------------------- 150 Allen Road Liberty Corner, NJ 07938 908/903-1600 Fax 908/903-1616 COUNSEL - -------------------------------------------------------------------------------- Hahn, Loeser & Parks Cleveland, Ohio AUDITORS - -------------------------------------------------------------------------------- Deloitte & Touche LLP Parsippany, New Jersey CORPORATE OFFICERS - -------------------------------------------------------------------------------- Michael J. Berthelot Chairman of the Board and Chief Executive Officer Patrick K. Bolger President and Chief Operating Officer Chandler J. Moisen Senior Vice President, Chief Financial Officer and Treasurer Winston Lau Vice President of Operations Gerald C. Harvey Vice President, Secretary and General Counsel Monica Aguirre Assistant Secretary ANNUAL MEETING - -------------------------------------------------------------------------------- The Annual Shareholders' Meeting will be held on Wednesday, July 24, 1996 at the Marriott Financial Center Hotel, 85 West Street, New York, NY 10006. FORM 10-K AND ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- The Company, upon request to the Investor Relations department, will provide to any shareholder a copy of the Form 10-K required to be filed with the Securities and Exchange Commission and any other available information. TRANSFER AGENT AND REGISTRAR - -------------------------------------------------------------------------------- Wachovia Bank & Trust Co., N.A. Winston-Salem, North Carolina INVESTOR RELATIONS CONTACT Michael J. Berthelot Chairman of the Board and Chief Executive Officer TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07938 908/903-1600 OPERATIONAL GROUPS - -------------------------------------------------------------------------------- Specialty Fasteners BREEZE INDUSTRIAL PRODUCTS Gear-driven band fasteners 100 Aero-Seal Drive Saltsburg, PA 15681-9594 412/639-3571 Fax 412/639-3020 Robert Tunno - Division President THE PALNUT COMPANY Single and multi-thread fasteners 152 Glen Road Mountainside, NJ 07092-2997 908/233-3300 Fax 908/233-6566 Winston Lau - Division President INDUSTRIAL RETAINING RING (IRR) Multi-sized retaining rings 57 Cordier Street Irvington, NJ 07111-4035 201/926-5000 Fax 201/926-4699 SEEGER INC. Retaining rings and assembly tools 500 Memorial Drive Somerset, NJ 08875 908/469-7999 Fax 908/469-2413 THE SEEGER GROUP Retaining rings and circlips Wiesbadener Strasse 243 D-61462 Konigstein, Germany 49/6174 2050 Fax 49/6174 205 100 Ulf Jemsby - Managing Director SEEGER-ORBIS GmbH Konigstein, Germany Ulf Jemsby - Managing Director ANDERTON INTERNATIONAL LTD. Bingley, West Yorkshire, England Robert Wieremiej - Managing Director SEEGER-RENO INDUSTRIA E COMERCIO LTD. Sao Paulo, Brazil Joao Scivoletto - Managing Director RESCUE HOISTS AND CARGO HOOKS BREEZE-EASTERN Lifting and restraint products 700 Liberty Avenue Union, NJ 07083-4115 908/686-4000 Fax 908/686-9292 Robert White - Division President 34 150 Allen Road Liberty Corner, New Jersey 07938 908/903-1600 EX-21 8 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 TRANSTECHNOLOGY CORPORATION SUBSIDIARIES OF THE COMPANY LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES OF TRANSTECHNOLOGY CORPORATION AS OF MAY 30,1996
Jurisdiction of Incorporation ------------- Anderton (Predecessors) Limited (formerly Anderton International Ltd.) England Anderton International Limited (formerly TTUK Acquisition Co. Ltd.) England Electronic Connections and Assemblies, Inc. Delaware Industrial Retaining Ring Company New Jersey Palnut Fasteners, Inc. Delaware Rancho TransTechnology Corporation California Retainers, Inc. New Jersey Seeger Inc. DBA Seeger of New Jersey Company Delaware Seeger-Orbis Beteiligungsgesellschaft mbH Germany Seeger-Orbis GmbH & Co. OHG Germany Seeger Reno Industria e Comercio Ltd. Brazilian SSP Industries California SSP International Sales, Inc. California TransTechnology Acquisition Corporation Delaware TransTechnology Australasia Pty. Ltd. Australia TransTechnology (Europe) Ltd. England TransTechnology International Corporation Virgin Islands TransTechnology Seeger Inc. Delaware TransTechnology Seeger-Orbis GmbH Germany TransTechnology Systems & Services, Inc. Michigan
EX-23 9 INDEPENDENT AUDITORS' CONSENT 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 33-19390, Post-Effective Amendment No. 1 to Registration Statement No. 2-84205, Registration Statement No.33-59546, and Registration Statement No.33-878000 on Forms S-8, and this Annual Report on Form 10-K of TransTechnology Corporation for the year ended March 31, 1996, of our report dated May 28, 1996. /s/Deloitte & Touche LLP - ------------------------ Parsippany, New Jersey June 24, 1996 EX-27 10 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAR-31-1996 MAR-31-1996 2,352 0 28,368 735 50,551 95,282 78,326 17,749 199,367 37,934 78,591 0 0 53 (3,238) 199,367 158,024 159,854 107,426 38,128 0 468 6,316 14,300 5,792 8,508 (1,134) 0 0 7,374 1.45 1.45
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