-----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, WPc/IAqX8gXxGPYgYQ3GWWHx/rIZP9sqXImBaX4A6LZIaEHZq6QIwsSraX6/dTpo Nwh3alI+y0nNWxtI35BCaA== 0000950123-99-005672.txt : 19990616 0000950123-99-005672.hdr.sgml : 19990616 ACCESSION NUMBER: 0000950123-99-005672 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990615 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSTECHNOLOGY CORP CENTRAL INDEX KEY: 0000099359 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 954062211 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07872 FILM NUMBER: 99646793 BUSINESS ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 BUSINESS PHONE: 9089031600 MAIL ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 FORMER COMPANY: FORMER CONFORMED NAME: SPACE ORDNANCE SYSTEMS INC DATE OF NAME CHANGE: 19740717 10-K 1 TRANSTECHNOLOGY CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended March 31, 1999 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 June 7, 1999, the aggregate market value of voting stock held by non-affiliates of the registrant based on the last sales price as reported by the New York Stock Exchange on such date was $122,730,560.00. (See Item 12) As of June 7, 1999, the registrant had 6,136,528 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The registrant's Annual Report for the fiscal year ended March 31, 1999 is incorporated by reference into Part I and II hereof. The registrant's Proxy Statement for the fiscal year ended March 31, 1999 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. TransTechnology Corporation's core business areas are specialty fastener products and aerospace products. During 1999, the Company continued its program to improve its position as one of the world's major suppliers of specialty fasteners to the transportation and industrial markets. Key aspects of this program include growth through acquisitions and the consolidation and rationalization of its domestic retaining ring manufacturing operations. Actions taken during 1999 to accomplish these goals included the acquisition of all of the outstanding stock of Aerospace Rivet Manufacturers Corporation. For a more detailed description of this transaction, see Note 3 of "Notes to Consolidated Financial Statements" included in the Company's 1999 Annual Report on page 14 which is incorporated herein by reference. Additionally, the Company has substantially completed the process of consolidating its United States retaining ring manufacturing distribution facilities into one cost efficient manufacturing facility and one overall distribution facility both located in New Jersey. These actions, together with additional strategic acquisition activities during and subsequent to the close of the fiscal year, further strengthen the Company's position as one of the world's major suppliers of specialty fastener products to the transportation and industrial markets. Breeze-Eastern and NORCO, Inc. ("NORCO") make up the aerospace products segment, and are the world's leading designers and manufacturers of sophisticated helicopter rescue hoists, cargo winches, cargo hook systems, mechanical components such as hold open rods, and application-specific mechanical and linear motion systems. These products are sold primarily to military and civilian agencies and aerospace contractors. The acquisition of all of the outstanding stock of NORCO was accomplished in 1999. For a more detailed description of this transaction, see Note 3 of "Notes to Consolidated Financial Statements" included in the Company's 1999 Annual Report on page 14 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"), its Palnut Company division ("Palnut"), TCR Corporation ("TCR"), Waldes/IRR division ("Waldes/IRR"), the Pebra hose clamp business ("Pebra") and Aerospace Rivet Manufacturers Corporation ("ARM"). The Seeger Group of companies and Waldes/IRR all design and manufacture highly engineered retaining rings for both the domestic and international transportation 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 use in the heavy truck and industrial equipment industries by both original equipment manufacturers and replacement suppliers. Pebra designs and manufactures hose clamps primarily for heavy truck manufacturers in Europe. The Palnut Company manufactures single and multi-thread metal fasteners for the automotive and industrial products markets. These include lock nuts used 1 3 for load carrying in light duty assemblies or as a supplement to ordinary nuts to assure tightness; the On-Sert(R) fastener, which is pressed onto hollow plastic bosses to increase torque and minimize stripping; push-nuts used as temporary fasteners that hold pre-inserted bolts in place for final assembly or in ratchet plates which fasten onto a shaft or stud; self-threaders used in the installation of automotive trim; U-Nuts that provide one-sided screw assembly and are used to fasten bumpers, fenders and grills to vehicles; and various single-threaded parts designed for insertion into metal or plastic panels. TCR Corporation designs and manufactures sophisticated externally threaded fastening devices and custom industrial components by combining its expertise in cold forging and machining technologies. TCR products are used by industrial customers worldwide, with key market groups including the automotive, hydraulic and recreational product industries. ARM designs and manufactures rivets and externally threaded fasteners primarily for the aerospace industry. Specialty fasteners are marketed through a combination of a direct sales force, distributors and manufacturing representatives. Such products contributed 78%, 83% and 81% of the Company's consolidated net sales in 1999, 1998 and 1997, respectively. At March 31, 1999, the Company's Specialty Fastener Products segment backlog was $45.9 million, compared to $43.5 million at March 31, 1998. The increase is primarily the result of the acquisition of ARM. Substantially all of the March 31, 1999 backlog is scheduled to be shipped during fiscal 2000. AEROSPACE PRODUCTS The Company's aerospace products are designed, developed and manufactured by Breeze-Eastern and NORCO. Breeze-Eastern specializes in the design, development and manufacture of sophisticated lifting and restraining products, principally helicopter rescue hoists, reeling machines and external hook systems. In addition, Breeze-Eastern designs, develops and manufactures winches and hoists for aircraft cargo and weapon-handling systems with applications ranging from cargo handling on fixed-wing aircraft to positioning television cameras on blimps, antenna and gear drives. Management believes that Breeze-Eastern is the industry market share leader in sales of personnel-rescue hoists and cargo hook equipment. As a pioneer of helicopter hoist technology, Breeze-Eastern continues to develop sophisticated helicopter hoist systems, including systems for the current generation of Seahawk, Chinook, Dolphin, Merlin and Super Stallion helicopters. Breeze-Eastern also supplies equipment for the United States, Japanese and European Multiple-Launch Rocket Systems which use two specialized hoists to load and unload rocket pod containers. Breeze-Eastern's external cargo-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. NORCO designs, develops and manufactures mechanical components and systems such as hold open rods, quick connect/disconnect locking systems, helicopter blade restraint systems, latch assemblies, safety locks and application-specific mechanical systems. Its power transmission line of products include rollnuts, rollnut longspan assemblies, ball reversers, ball oscillators, FlenNut(TM) assemblies and other application-specific linear motion assemblies. Breeze-Eastern and NORCO sell their products through internal marketing representatives and several independent sales representatives and distributors. The Aerospace product lines contributed 22%, 17% and 19% to the Company's consolidated net sales in 1999, 1998 and 1997, respectively. The Aerospace Product segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 1999, the backlog of unfilled orders was $43.8 million, compared to $32.4 million at March 31, 1998. The increase is primarily the result of the acquisition of NORCO. The majority of the March 31, 1999 backlog is expected to be shipped during fiscal 2000. 2 4 DEFENSE INDUSTRY SALES Approximately 10% of the Company's consolidated net sales in 1999, as compared to 11% and 9% in 1998 and 1997, 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. 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 12 of Notes to Consolidated Financial Statements included in the Company's 1999 Annual Report on page 20 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, 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 successfully compete in any or all of the businesses discussed above. The failure of the Company to compete in more than one of these businesses could have a materially adverse effect on the Company's profitability. RAW MATERIALS The various components and raw materials used by the Company to produce its products are generally available from more than one source. In those instances where only a single source for any material is available, such items can generally be redesigned to accommodate materials made by other suppliers. In some cases, the Company stocks an adequate supply of the single source materials for use until a new supplier can be approved. The Company's business is not dependent upon a single supplier or a few suppliers, the loss of which would have a materially adverse effect on the Company's consolidated financial position. 3 5 EMPLOYEES As of May 28, 1999, the Company employed 1,750 people. There were 1,438 employees associated with the Specialty Fastener Products segment, 291 with the Aerospace Products segment and 21 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 1999 Annual Report on pages 20-22 and is incorporated herein by reference. FOREIGN OPERATIONS AND SALES The Company's foreign-based facilities during fiscal 1999 consisted of the Seeger-Orbis and Pebra facilities located in Germany, the Anderton facility located in the U.K., a sales office in Paris, France and the Seeger Reno facility located in Brazil. The Company acquired all of these businesses on June 30, 1995, except for Pebra which was acquired on June 18, 1996. The Company had foreign sales of $56.7 million, $57.2 million and $58.0 million in fiscal 1999, 1998 and 1997, respectively, representing 25%, 28% and 32% of the Company's consolidated net sales in each of those years, respectively. The Company had export sales of $31.2 million, $20.3 million and $19.8 million in fiscal 1999, 1998 and 1997, respectively, representing 14%, 10% and 11% of the Company's consolidated net sales in each of those years, respectively. The risk and profitability attendant to these sales is generally comparable to similar products sold in the United States. Net sales, profits and identifiable assets attributable to the Company's foreign and domestic operations, and the identification of export sales by geographic area, are set forth in Note 13 of Notes to Consolidated Financial Statements in the Company's 1999 Annual Report on pages 20-22 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 13,000 SPECIALTY FASTENER PRODUCTS SEGMENT Saltsburg, Pennsylvania Breeze Industrial offices and Owned 120,000 manufacturing plant Mountainside, New Jersey Palnut offices and manufacturing Owned 142,000 plant Irvington, New Jersey Industrial Retaining Ring Owned 37,000 manufacturing plant Millburn, New Jersey Waldes/IRR offices Leased 53,100 and distribution center Santa Fe Springs, California Aerospace Rivet Manufacturers Leased 33,000 Corporation office and manufacturing plant Southfield, Michigan Specialty fastener sales office Leased 1,000 Konigstein, Germany Seeger Group offices and Owned 149,000 Seeger-Orbis manufacturing plant Minneapolis, Minnesota TCR Corporation offices Leased 137,000 and plant Bingley, England Anderton offices and Owned 124,000 manufacturing plant Sao Paulo, Brazil Seeger Reno offices and Owned 85,000 manufacturing plant Paris, France Retaining ring sales office Leased 500 Frittlingen, Germany Pebra offices and Owned 30,000 manufacturing plant
5 7 AEROSPACE PRODUCTS SEGMENT Union, New Jersey Breeze-Eastern offices Owned 188,000 and manufacturing plant Ridgefield, Connecticut NORCO, Inc. Owned 35,000
The Company believes that such facilities are suitable and adequate for the Company's foreseeable needs and that additional space, if necessary, will be available. The Company continues to own or lease property that it no longer needs in its operations. These properties are located in California, Pennsylvania, New York and Illinois. In some instances, the properties are leased or subleased and in nearly all instances these properties are for sale. ITEM 3. LEGAL PROCEEDINGS The information required has been included in Note 12 of Notes to Consolidated Financial Statements included in the Company's 1999 Annual Report on page 20 and is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the three month period ended March 31, 1999. 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 of the Company's Common Stock for the calendar quarters indicated, as reported by the New York Stock Exchange.
High Low ---- --- Fiscal 1998 First Quarter $ 22-7/8 $ 19-7/8 Second Quarter 26-11/16 22-3/4 Third Quarter 28-5/16 26 Fourth Quarter 30-5/16 25-1/2 Fiscal 1999 First Quarter $ 30-5/8 $ 25-9/16 Second Quarter 27-1/8 20-1/4 Third Quarter 23-11/16 18-9/16 Fourth Quarter 20-3/4 16-1/2 Fiscal 2000 First Quarter $ 21-1/4 $ 16-1/2 (through June 7, 1999)
As of June 7, 1999, the number of stockholders of record of the Common Stock was 1,878. On June 7, 1999, the closing sales price of the Common Stock was $20.00. 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 $0.065 per share on June 2, September 1 and December 1, 1997, March 2, June 1, September 1 and December 1, 1998 and March 1, 1999. 7 9 ITEM 6. SELECTED FINANCIAL DATA The information required has been included in the Company's 1999 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 1999 Annual Report on pages 24-29 and is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required has been included in the Company's 1999 Annual Report on pages 28-29 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 1999 Annual Report on pages 9-29 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 1999 Annual Report on page 22 and is incorporated herein by reference. Financial Statement Schedules: Schedule II -- Consolidated Valuation and Qualifying Accounts for years ended March 31, 1999, 1998 and 1997. Schedules required by Article 5 of Regulation S-X, other than that listed above, are omitted because of the absence of the conditions under which they are required. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 8 10 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, 1999 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, 1999 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, 1999 and is incorporated herein by reference. For purposes of the calculation of the aggregate market value of voting stock held by non-affiliates, the Company has assumed that the shares of Common Stock beneficially owned by Dr. Arch C. Scurlock are not held by an affiliate of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1999 and is incorporated herein by reference. 9 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed as part of the Annual Report: 1. Financial Statements: Consolidated Balance Sheets at March 31, 1999 and 1998 Statements of Consolidated Operations for the years ended March 31, 1999, 1998 and 1997 Statements of Consolidated Cash Flows for the years ended March 31, 1999, 1998 and 1997 Statements of Consolidated Stockholders' Equity for the years ended March 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements Independent Auditors' Report 2. Financial Statement Schedules: Independent Auditors' Report Schedule II - Consolidated Valuation and Qualifying Accounts for the years ended March 31, 1999, 1998 and 1997 3. Exhibits: The exhibits listed on the accompanying Index to Exhibits are filed as part of this report. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the three-month period ended March 31, 1999. 10 12 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 11, 1999 TRANSTECHNOLOGY CORPORATION By: /s/Michael J. Berthelot Michael J. Berthelot, Chairman of the Board, President and Chief Executive Officer 11 13 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/Michael J. Berthelot Chairman of the Board, President June 11, 1999 - ----------------------------------- and Chief Executive Officer MICHAEL J. BERTHELOT (Principal Executive Officer) /s/Joseph F. Spanier Vice President, Chief Financial Officer June 11, 1999 - ----------------------------------- and Treasurer JOSEPH F. SPANIER (Principal Financial and Accounting Officer) /s/Walter Belleville Director June 11, 1999 - ----------------------------------- WALTER BELLEVILLE /s/Gideon Argov Director June 11, 1999 - ----------------------------------- GIDEON ARGOV /s/Thomas V. Chema Director June 11, 1999 - ----------------------------------- THOMAS V. CHEMA /s/James A. Lawrence Director June 11, 1999 - ----------------------------------- JAMES A. LAWRENCE /s/Michel Glouchevitch Director June 11, 1999 - ----------------------------------- MICHEL GLOUCHEVITCH /s/William J. Recker Director June 11, 1999 - ----------------------------------- WILLIAM J. RECKER
12 14 INDEPENDENT AUDITORS' REPORT To the Stockholders and the Board of Directors of TransTechnology Corporation: We have audited the consolidated financial statements of TransTechnology Corporation and subsidiaries as of March 31, 1999 and 1998, and for each of the three years in the period ended March 31, 1999, and have issued our report thereon dated May 12, 1999; such consolidated financial statements and report are included in your 1999 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 consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP Parsippany, New Jersey May 12, 1999 13 15 TRANSTECHNOLOGY CORPORATION SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR YEARS ENDED MARCH 31, 1999, 1998 AND 1997 (IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING OF COSTS AND OTHER AT END DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD - -------------------- ------------- ---------- ----------- ---------- --------- 1999 Allowances for doubtful accounts and sales returns $ 556 $ 230 $ 40(A) $ 586 $ 240 Inventory reserves $6,382 $1,432 -- $3,099 $4,715 Environmental reserves $3,141 $ 479 -- $1,480 $2,140 1998 Allowances for doubtful accounts and sales returns $ 588 $ 537 $ 20(B) $ 589 $ 556 Inventory reserves $6,363 $1,014 -- $ 995 $6,382 Environmental reserves $3,177 $ 642 -- $ 678 $3,141 1997 Allowances for doubtful accounts and sales returns $ 735 $ 139 $ 246 $ 532 $ 588 Inventory reserves $7,704 $ 825 -- $2,166 $6,363 Environmental $3,885 $ 238 -- $ 946 $3,177 reserves
(A) Amount represents balances acquired from ARM and NORCO, Inc. acquisitions. (B) Amount represents balance acquired from TCR Corporation acquisition. 14 16 INDEX TO EXHIBITS
Page Sequentially Numbered 3.1 Certificate of Incorporation of the Company.(1) -- 3.2 Bylaws of the Company Amended and Restated as of April 15, 1999. -- 10.1 1996 - 1998 Incentive Compensation Plan of the Company.(10) -- 10.2 Amended and Restated 1992 Long Term Incentive Plan of the Company.(2) -- 10.3 Form of Incentive Stock Option Agreement.(2) -- 10.4 Form of Director Stock Option Agreement.(3) -- 10.5 Form of Restricted Stock Award Agreement used under the Company's Amended and Restated 1992 Long Term Incentive Plan.(4) -- 10.6 Indemnification Agreement dated February 11, 1987 between the Company and each of its officers and directors.(5) -- 10.7 Executive Life Insurance Plan.(6) -- 10.8 Amended and Restated Credit Agreement dated as of June 30, 1995 and amended and restated as of July 24, 1998 between the Company and BankBoston, N.A. -- 10.9 Amendment Agreement No. 1 to the Amended and Restated Credit Agreement dated as of August 21, 1998 between the Company and BankBoston, N.A. -- 10.10 Amendment Agreement No. 2 to the Amended and Restated Credit Agreement dated as of November 27, 1998 between the Company and BankBoston, N.A. -- 10.11 Amendment Agreement No. 3 to the Amended and Restated Credit Agreement dated as of December 23, 1998 between the Company and BankBoston, N.A. -- 10.14 Form of Executive Severance Agreement with Officers of the Company.(10) -- 10.15 Form of Executive Severance Agreement with Subsidiary Presidents.(10) -- 10.16 Form of Executive Severance Agreement with Division Presidents.(10) -- 10.17 Form of Executive Severance Agreement with Overseas Subsidiary Managing Directors.(10) -- 10.18 Form of First Amendment to Executive Severance Agreement with Officers of the Company.(11) -- 10.19 Form of First Amendment to Executive Severance Agreement with Subsidiary Presidents.(11) -- 10.20 Form of First Amendment to Executive Severance Agreement with Division Presidents.(11) -- 10.21 Form of First Amendment to Executive Severance Agreement with Overseas Subsidiary Managing Directors.(11) -- 10.22 Consulting Agreement with John Dalton. -- 10.23 1999-2001 Incentive Compensation Plan of the Company. -- 10.24 1998 Non-Employee Directors' Stock Option Plan of the Company.(12) --
15 17
Page Sequentially Numbered 10.25 Form of Stock Option Agreement used under the Company's 1998 Non-Employee Directors' Stock Option Plan -- 13 The Company's 1999 Annual Report. -- 21 List of Subsidiaries of the Company. -- 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. 333-45059 dated January 28, 1998. -- (3) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1995. -- (4) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1994. -- (5) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1987. -- (6) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1989. -- (7) Incorporated by reference from the Company's Report on Form 8-K filed on July 14, 1995. -- (8) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1996. -- (9) Incorporated by reference from the Company's Report on Form 8-K filed on April 29, 1997. -- (10) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1997. -- (11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the Quarter ended December 27, 1998. -- (12) Incorporated by reference from the Company's Registration Statement on Form S-8 No. 333-70877 dated January 20, 1999. --
16 EX-3.2 2 BYLAWS 1 Exhibit 3.2 BYLAWS OF TRANSTECHNOLOGY CORPORATION (A Delaware Corporation) ARTICLE I Offices Section 1.01. REGISTERED OFFICE. The registered office of TransTechnology Corporation (the "Corporation") in the State of Delaware shall be at Corporation Trust Center, 100 West Tenth Street, in the City of Wilmington, County of New Castle, State of Delaware, and the name of the registered agent at that address shall be The Corporation Trust Company. Section 1.02. PRINCIPAL EXECUTIVE OFFICE. Effective as of May 10, 1996 the principal executive address of the corporation shall be located at 150 Allen Road, Liberty Corner, New Jersey 07938. The Board of Directors of the Corporation (the "Board") may change the location of said principal executive office. Section 1.03. OTHER OFFICES. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require. ARTICLE II Meetings of Stockholders Section 2.01. ANNUAL MEETINGS. The annual meeting of stockholders of the Corporation shall be held on such date and at such time as the Board shall determine. At each annual meeting of stockholders, directors shall be elected in accordance with the provisions of Section 3.03 and any other proper business may be transacted. Section 2.02. SPECIAL MEETINGS. Special meetings of stockholders for any purpose may be called at any time by a majority of the Board, the Chairman of the Board, the President or the Secretary. Special meetings may not be called by any other person. Each special meeting shall be held at such date and time as is requested by the person or persons calling the meeting, within the limits fixed by law. Section 2.03. PLACE OF MEETINGS. Each annual or special meeting of stockholders shall be held at such location as may be determined by the Board or, if no such determination is made, at such place as may be determined by the Chairman of the Board. If no location is so determined, any annual or special meeting shall be held at the principal executive office of the Corporation. Section 2.04. NOTICE OF MEETINGS. Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than 10 nor more than sixty days before the date of the meeting to each stockholder of record entitled to vote BYLAWS - Page 1 2 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 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, BYLAWS - Page 2 3 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 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: BYLAWS - Page 3 4 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, 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 April 15, 1999, the authorized number of directors of the corporation shall be eight 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 BYLAWS - Page 4 5 successor shall have been elected and shall qualify or until he shall resign or shall have been removed. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office. Section 3.06. PLACE OF MEETING, ETC. The Board or any committee thereof may hold any of its meetings at any place, within or without the State of Delaware, as the Board or such committee may, from time to time, by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board or such committee can hear each other, and such participation shall constitute presence in person at such meeting. Section 3.07. FIRST MEETING. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required. Section 3.08. REGULAR MEETING. Regular meetings of the Board may be held at such times as the Board shall, from time to time, by resolution determine. If any date fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given. Section 3.09. SPECIAL MEETING. Special meetings of the Board for any purpose shall be called at any time by the Chairman of the Board or, if he is absent or unable or refuses to act, by the President or, if he is absent or unable or refuses to act, by any Vice President, Secretary or by any two directors. For any special meeting of the Board of Directors, the Executive Committee, if such a committee has been created pursuant to Section 3.13 hereof, may by resolution change the location of that meeting, provided the Executive Committee resolution to that effect is adopted not later than the later of a) five days before the called date of the meeting, or b) one day after the receipt of the call of the meeting by the Chairman of the Executive Committee. Except as otherwise provided by law or by the Bylaws, written notice of the time and place of special meetings shall be delivered personally to each director, or sent to each director by mail or by other form of written communication, charges prepaid, addressed to him at his address as it is shown upon the records of the Corporation, or if it is not so shown on such records and is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed or telegraphed, it shall be deposited in the United States mail or delivered to the telegraph company in the county in which the principal executive office for the transaction of business of the Corporation is located at least forty-eight hours prior to the time of the holding of the meeting. In case such notice is delivered personally as above provided, it shall be so delivered at least 24 hours prior to the time of the holding of the meeting. Such mailing, telegraphing or delivery as above provided shall be due, legal and personal notice to such director. Except where otherwise required by law or by the Bylaws, notice of the purpose of a special meeting need not be given. Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. BYLAWS - Page 5 6 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 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 BYLAWS - Page 6 7 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 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. BYLAWS - Page 7 8 He also shall perform such other duties as may be assigned to him, from time to time, by the Chairman of the Board or the Board. Section 4.09. OTHER OFFICERS. The Board may also elect one or more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers. Section 4.10. WHEN DUTIES OF AN OFFICER MAY BE DELEGATED. In the case of the absence or disability of an officer or for any other reason that may seem sufficient to the Board, the Board, or any officer designated by it, or the Chairman of the Board may, for the time of the absence or disability, delegate such officer's duties and powers to any other officer of the Corporation. Section 4.11. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Board, to the Chairman of the Board, to the President, or to the Secretary. Any such resignation shall take effect at the time specified therein unless otherwise determined by the Board. The acceptance of a resignation by the Corporation shall not be necessary to make it effective. Section 4.12. REMOVAL. Any officer of the Corporation may be removed, with or without cause, by the affirmative vote of a majority of the entire Board. ARTICLE V Contracts, Checks, Drafts, Bank Accounts, Etc. Section 5.01. EXECUTION OF CONTRACTS. The Board, except as otherwise provided in the Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or 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. BYLAWS - Page 8 9 Section 5.04. GENERAL AND SPECIAL BANK ACCOUNTS. The Board may, from time to time, authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may select or as may be selected by any officer, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of the Bylaws as it may deem expedient. ARTICLE VI Indemnification Except to the extent prohibited by then applicable law, the Corporation (i) shall indemnify and hold harmless each person who was or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise (any such action, suit or proceeding being hereafter in this Article referred to as a "proceeding"), by reason of the fact that such person is or was a director or officer of the Corporation, is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or was a director or officer of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation; and (ii) may indemnify and hold harmless each person who was or is a party to, or is threatened to be made a party to, any such proceeding by reason of the fact that such person is or was an employee or agent of the Corporation, is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or was an employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of any enterprise at the request of such corporation (any such person being hereafter in the Article referred to as an "indemnifiable party"). Where required by law, the indemnification provided for in this Article shall be made only as authorized in the specific case upon a determination, in the manner provided by law, that the indemnification of 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 9 10 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 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. BYLAWS - Page 10 11 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: April 15, 1999 BYLAWS - Page 11 EX-10.8 3 AMENDED AND RESTATED CREDIT AGREEMENT 1 Exhibit 10.8 AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 30, 1995 and amended and restated as of July 24, 1998 among TRANSTECHNOLOGY CORPORATION, TRANSTECHNOLOGY SEEGER-ORBIS GmbH, ANDERTON INTERNATIONAL LIMITED, THE LENDERS REFERRED TO HEREIN, BANKBOSTON, N.A., acting through its London Branch, as Sterling Fronting Bank, BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank, and BANKBOSTON, N.A. as Agent and Issuing Bank Arranged by: BANCBOSTON SECURITIES, INC. 2 -ii- TABLE OF CONTENTS 1. DEFINITIONS AND RULES OF INTERPRETATION...................................................1 1.1. Definitions....................................................................1 1.2. Rules of Interpretation........................................................23 2. THE REVOLVING CREDIT FACILITY.............................................................23 2.1. Commitment to Lend..............................................................23 2.2. Revolving Credit Commitment Fee. ...............................................24 2.3. Reduction of Total Revolving Credit Commitment..................................24 2.4. The Revolving Credit Notes......................................................24 2.5. Interest on Revolving Credit Loans..............................................25 2.6. Requests for Revolving Credit Loans.............................................25 2.7. Conversion Options..............................................................26 2.7.1. Conversion to Different Type of Revolving Credit Loan. .............26 2.7.2. Continuation of Type of Revolving Credit Loan. .....................26 2.7.3. Eurocurrency Rate Loans..............................................27 2.8 Funds for Revolving Credit Loans.................................................27 2.9. Maturity of Revolving Credit Loans..............................................27 2.10. Mandatory Repayments of Revolving Credit Loans.................................27 2.11. Optional Repayments of Revolving Credit Loans..................................27 3. INTERNATIONAL CREDIT FACILITY.............................................................28 3.1. DM Facility Loans..............................................................28 3.2. Mandatory Repayments of DM Facility Loans.......................................29 3.3. Sterling Facility Loans........................................................29 3.4. Mandatory Repayments of Sterling Facility Loans................................29 3.5. Interest on International Facility Loans.......................................30 3.6. Requests for DM Eurocurrency Loans.............................................30 3.7. Requests for Sterling Eurocurrency Loans.......................................31 3.8. Evidence of DM Facility Loans..................................................31 3.9. Evidence of Sterling Facility Loans............................................31 3.10. Maturity of DM Facility Loans.................................................32 3.11. Maturity of Sterling Facility Loans...........................................32 3.12. Optional Repayment of International Facility Loans.............................32 3.13. DM Facility Commitment Fee.....................................................33 3.14. Sterling Facility Commitment Fee...............................................33 4. MANDATORY PREPAYMENT OF LOANS..............................................................34 4.1. Mandatory Prepayments from Asset Sales or New Debt..............................34 4.2. Mandatory Prepayments from New Equity...........................................34 4.3. Application of Proceeds.........................................................34 5. LETTERS OF CREDIT. ........................................................................34 5.1. Letter of Credit Commitments....................................................34 5.1.1. Commitment to Issue Letters of Credit................................35 5.1.2. Letter of Credit Applications........................................35 5.1.3. Terms of Letters of Credit...........................................35 5.1.4. Reimbursement Obligations of Lenders.................................35 5.1.5. Participations of Lenders............................................36 5.2. Reimbursement Obligation of TransTechnology.....................................36 5.3. Letter of Credit Payments.......................................................37
3 -iii- 5.4. Obligations Absolute............................................................37 5.5. Reliance by Issuing Bank........................................................38 5.6. Letter of Credit Fee............................................................38 5.7. Resignation of Issuing Bank.....................................................39 6. CERTAIN GENERAL PROVISIONS.................................................................39 6.1. Closing and Structuring Fees....................................................39 6.2. Agent's Fee.....................................................................40 6.3. Payment Provisions.............................................................40 6.3.1. Currency of Account..................................................40 6.3.2. Application of Interest Payments.....................................40 6.3.3. Judgment Currency....................................................41 6.3.4. Time of Payment......................................................41 6.3.5. Payments by Agent....................................................41 6.3.6. No Offset, etc.......................................................42 6.4. Computations....................................................................42 6.5. Inability to Determine Eurocurrency Rate........................................42 6.6. Illegality......................................................................43 6.7. Additional Costs, etc...........................................................43 6.8. Capital Adequacy................................................................45 6.9. Certificate.....................................................................45 6.10. Indemnity......................................................................46 6.11. Interest After Default.........................................................46 6.11.1. Overdue Amounts.....................................................46 6.11.2. Amounts Not Overdue.................................................46 6.12. Fronting Bank Provisions.......................................................46 6.12.1. Fronting Fee........................................................47 6.12.2. Indemnities.........................................................47 6.12.3. Resignation of Fronting Bank........................................48 6.12.4. Notice to Lenders. ...............................................49 6.13. Limits on Number of Separate Eurocurrency Rate Loans...........................49 7. COLLATERAL SECURITY AND GUARANTIES.........................................................49 7.1. Security of Borrowers...........................................................49 7.2. Guaranties and Security of Subsidiaries.........................................50 7.3.Pledges of Stock..................................................................49 7.4.Guarantees and Pledges of Assets of Foreign Subsidiaries..........................49 8. REPRESENTATIONS AND WARRANTIES.............................................................50 8.1. Corporate Authority.............................................................51 8.1.1. Incorporation; Good Standing.........................................51 8.1.2. Authorization........................................................50 8.1.3. Enforceability.......................................................50 8.2.Governmental Approvals............................................................51 8.3.Title to Properties; Leases.......................................................51 8.4. Financial Statements and Projections............................................52 8.4.1. Financial Statements................................................52 8.4.2. Projections.........................................................52 8.5. No Material Changes, etc........................................................53 8.6. Franchises, Patents, Copyrights, etc............................................53 8.7. Litigation......................................................................53
4 -iv- 8.8. No Materially Adverse Contracts, etc............................................54 8.9. Compliance with Other Instruments, Laws, etc....................................54 8.10. Tax Status.....................................................................54 8.11. No Event of Default............................................................54 8.12. Holding Company and Investment Company Acts....................................54 8.13. Absence of Financing Statements, etc...........................................55 8.14. Perfection of Security Interest................................................55 8.15. Certain Transactions...........................................................55 8.16. Employee Benefit Plans.........................................................55 8.16.1. In General..........................................................55 8.16.2. Terminability of Welfare Plans......................................56 8.16.3. Guaranteed Pension Plans............................................56 8.16.4. Multiemployer Plans.................................................56 8.16.5. Compliance with Employment Benefit Laws.............................57 8.17. Use of Proceeds................................................................57 8.18. Environmental Compliance.......................................................57 8.19. Subsidiaries, etc..............................................................58 8.20. Bank Accounts..................................................................58 8.21. Year 2000 Compliance...........................................................58 9. AFFIRMATIVE COVENANTS OF THE BORROWERS.....................................................59 9.1. Punctual Payment................................................................59 9.2. Maintenance of Offices..........................................................59 9.3. Records and Accounts............................................................60 9.4. Financial Statements, Certificates and Information..............................60 9.5. Notices.........................................................................61 9.5.1. Defaults.............................................................61 9.5.2. Environmental Events.................................................61 9.5.3. Notification of Claims against Collateral............................62 9.5.4. Notice of Litigation and Judgments...................................62 9.6. Corporate Existence; Maintenance of Properties..................................62 9.7. Insurance.......................................................................63 9.8. Taxes...........................................................................63 9.9. Inspection of Properties and Books, etc.........................................63 9.9.1. General..............................................................63 9.9.2. Environmental Assessments............................................64 9.9.3. Communications with Accountants......................................64 9.10. Compliance with Laws, Contracts, Licenses, and Permits.........................65 9.11. Employee Benefit Plans.........................................................65 9.12. Use of Proceeds................................................................65 9.13. Additional Mortgaged Property..................................................65 9.14. Bank Accounts..................................................................66 9.15. Interest Rate Protection.......................................................66 9.16. Further Assurances.............................................................66 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS...............................................66 10.1. Restrictions on Indebtedness...................................................67 10.2. Restrictions on Liens..........................................................68 10.3. Restrictions on Investments....................................................69 10.4. Distributions..................................................................70
5 -v- 10.5. Merger, Consolidation and Disposition of Assets................................70 10.5.1. Mergers and Acquisitions............................................70 10.5.2. Disposition of Assets...............................................71 10.6. Sale and Leaseback.............................................................72 10.7. Compliance with Environmental Laws.............................................72 10.8. Subordinated Debt..............................................................72 10.9. Employee Benefit Plans.........................................................72 10.10. Bank Accounts.................................................................73 10.11. Operating Leases..............................................................73 10.12.SO OHG Partnership Agreement....................................................71 10.13.Maintenance of Business.........................................................71 11. FINANCIAL COVENANTS OF THE BORROWERS......................................................74 11.1. Consolidated EBITDA to Consolidated Total Interest Expense.....................74 11.2. Debt to Capital Ratio..........................................................74 11.3. Leverage.Ratio.................................................................74 11.4. Minimum Net Worth..............................................................74 11.5. Capital Expenditures...........................................................74 12. CLOSING CONDITIONS. ......................................................................75 12.1. Loan Documents.................................................................75 12.2. Certified Copies of Charter Documents..........................................75 12.3. Corporate Action...............................................................76 12.4. Incumbency Certificate.........................................................76 12.5. Validity of Liens..............................................................76 12.6. Perfection Certificates and UCC Search Results.................................76 12.7. Surveys........................................................................76 12.8. Title Insurance................................................................77 12.9. Landlord Consents..............................................................77 12.10. Certificates of Insurance.....................................................77 12.11. Bank Agency Agreements........................................................77 12.12. Hazardous Waste Assessments...................................................77 12.13. Solvency Certificate..........................................................77 12.14. Opinions of Counsel...........................................................78 12.15. Payment of Fees...............................................................78 13. CONDITIONS TO ALL BORROWINGS..............................................................75 13.1. Representations True; No Event of Default......................................78 13.2. No Legal Impediment............................................................79 13.3. Governmental Regulation........................................................79 13.4. Proceedings and Documents......................................................79 14. EVENTS OF DEFAULT; ACCELERATION; ETC......................................................80 14.1. Events of Default and Acceleration.............................................80 14.2. Termination of Commitment......................................................83 14.3. Remedies.......................................................................83 14.4. Distribution of Collateral Proceeds............................................84 15. SETOFF. ..................................................................................84 16. THE AGENT. ...............................................................................85 16.1. Authorization..................................................................85 16.2. Employees and Agents...........................................................86 16.3. No Liability...................................................................86
6 -vi- 16.4. No Representations.............................................................87 16.5. Payments.......................................................................87 16.5.1. Payments to Agent...................................................87 16.5.2. Distribution by Agent...............................................87 16.5.3. Delinquent Lenders..................................................88 16.6. Holders of Notes...............................................................88 16.7. Indemnity......................................................................88 16.8. Agent as Lender................................................................89 16.9. Resignation of Agent...........................................................89 17. EXPENSES. ................................................................................89 18. INDEMNIFICATION. .........................................................................91 19. SURVIVAL OF COVENANTS, ETC................................................................91 20. ASSIGNMENT AND PARTICIPATION..............................................................92 20.1. Conditions to Assignment.......................................................92 20.2. Certain Representations and Warranties; Limitations; Covenants.................92 20.3. Register.......................................................................94 20.4. New Notes......................................................................94 20.5. Participations.................................................................95 20.6. Disclosure.....................................................................95 20.7. Assignee or Participant Affiliated with TransTechnology........................95 20.8. Miscellaneous Assignment Provisions............................................96 20.9. Assignment by the Borrowers....................................................96 20.10. Syndication...................................................................91 21. NOTICES, ETC. ............................................................................96 22. GOVERNING LAW. ...........................................................................97 23. HEADINGS. ................................................................................98 24. COUNTERPARTS. ............................................................................99 25. ENTIRE AGREEMENT, ETC. ...................................................................99 26. WAIVER OF JURY TRIAL. ....................................................................99 27. CONSENTS, AMENDMENTS, WAIVERS, ETC........................................................99 27.1. Voting Procedures..............................................................99 27.2. Borrowers' Consent Not Required for Certain Amendments.........................101 27.3. Course of Dealing..............................................................101 28. SEVERABILITY. ............................................................................101 29. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.............................................95 29.1. Sharing of Information with Section 20 Subsidiary..............................101 29.2. Confidentiality................................................................102 29.3. Prior Notification.............................................................102 29.4. Other..........................................................................102 30.TRANSITIONAL ARRANGEMENTS...................................................................97 30.1. Original Credit Agreement Superseded...........................................97 30.2. Interest and Fees Under Superseded Agreement...................................103
7 List of Schedules and Exhibits Exhibits Exhibit A - Revolving Credit Note Exhibit B - Form of Loan Request Exhibit C - Compliance Certificate Exhibit D - Form of Assignment and Acceptance Schedules Schedule 1 - The Lenders Schedule 8.3 - Title to Properties Schedule 8.7 - Litigation Schedule 8.10 - Tax Compliance Schedule 8.16.5 - Compliance with Employee Benefit Laws Schedule 8.18 - Environmental Compliance Schedule 8.19 - Subsidiaries Schedule 8.20 - Bank Accounts Schedule 10.1 - Existing Indebtedness Schedule 10.2 - Existing Liens Schedule 10.3 - Existing Investments Schedule 10.5.2 - Disposable Assets 8 AMENDED AND RESTATED CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT is made as of June 30, 1995, and amended and restated as of July 24, 1998, by and among TRANSTECHNOLOGY CORPORATION, a Delaware corporation having its principal place of business at 150 Allen Road, Liberty Corner, New Jersey 07938, USA ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GMBH, a German limited liability company having its principal place of business on the date hereof at Konigstein, Germany ("GmbH"), ANDERTON INTERNATIONAL LIMITED, an English limited liability company (registered no. 3062174) having its registered office at P.O. Box 6, Ferncliffe Road, Bingley, West Yorkshire BD16 2PL, England ("Limited"), BANKBOSTON, N.A., a United States national banking association ("BankBoston") and the other lending institutions listed on Schedule 1 (BankBoston and such other institutions, collectively, the "Lenders"), BANKBOSTON, N.A., acting through its London Branch, as Sterling Fronting Bank (the "Sterling Fronting Bank"), BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank (the "DM Fronting Bank"), BANKBOSTON, N.A., as issuing bank (in such capacity, the "Issuing Bank") and BANKBOSTON, N.A., as Agent for the Lenders, the Sterling Fronting Bank, the DM Fronting Bank and the Issuing Bank (in such capacity, the "Agent"). WHEREAS, pursuant to the Revolving Credit and Term Loan Agreement dated as of June 30, 1995 (as amended and in effect from time to time, the "Original Credit Agreement"), by and among the Borrowers, BankBoston (then known as The First National Bank of Boston), the other Lenders (as defined therein) (as defined therein) and BankBoston, as Agent, the Lenders party thereto made loans to the Borrowers to make certain acquisitions and for general corporate purposes; and WHEREAS, the Borrowers have requested, among other things, to amend and restate the Original Credit Agreement, and the Lenders and the Agent are willing to amend the Original Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, the Borrowers, the Lenders and the Agent agree that on the Closing Date the Original Credit Agreement and all Schedules and Exhibits thereto are hereby amended and restated in their entirety as set forth herein and in the Schedules and Exhibits hereto and shall remain in full force and effect only as set forth herein. 1. DEFINITIONS AND RULES OF INTERPRETATION. 1.1. DEFINITIONS. The following terms shall have the meanings set forth in this Section 1 or elsewhere in the provisions of this Credit Agreement referred to below: Acquisition Closing Date. The date of completion of any Approved Acquisition. 9 -2- Acquisition Documents. As to any Approved Acquisition, the purchase and sale agreement with respect to such acquisition, and any other related documents to be executed and/or delivered in connection therewith. Affiliate. With respect to any Person, any other Person that would be considered to be an affiliate of such Person under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if such Person were issuing securities. Agent's Head Office. The Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time. Agent's Special Counsel. Bingham Dana LLP, or such other counsel as may be approved by the Agent. Applicable Margin. For each period commencing on a Reset Date through the date immediately preceding the next Reset Date (each such period, a "Rate Setting Period"), the Applicable Margin shall be the applicable percentage set forth in the chart below (the "Pricing Grid") based upon the Leverage Ratio as determined for the Reference Period ended on the last day of the fiscal quarter ended immediately preceding the applicable Rate Setting Period.
Applicable Margin Leverage Ratio Base Rate Eurocurrency Commitment Loans Rate Loans Fee Rate 2.00:1 or lower 0% 1.0% .25% 2.50:1 or lower, but higher than 0% 1.25% .30% 2.00:1 3.00:1 or lower, but higher than 0% 1.5% .375% 2.50:1 3.50:1 or lower, but higher than 0.25% 1.75% .5% 3.00:1 Higher than 3.50:1 0.5% 2.0% .5%
Notwithstanding the foregoing, from the Closing Date until the earlier of the Placing Date and December 31, 1998, (i) the Commitment Fee Rate shall not be less than 0.30%, and (ii) the Applicable Margin with respect to Eurocurrency Rate Loans and Letter of Credit Fees shall not be less than 1.25%. If no Compliance Certificate is delivered when required by Section 9.4(c), then, for the period commencing on the next Reset Date following the date on which such delivery was required through the date immediately following the date of actual delivery to the Agent of such Compliance Certificate, the Applicable Margin and the Commitment Fee Rate shall be set at the highest applicable rate or margin set forth above. 10 -3- Approved Acquisition. An acquisition by any member of the TransTechnology Group of the shares or of substantially all of the assets of a corporation or business, as the case may be, whose operations are substantially concentrated in the Business (such corporation or business, the "Target"), provided that either (i) audited financial statements for the Target are available for its most recently ended fiscal year and have been delivered to the Agent and each of the Lenders, and the aggregate consideration payable by the applicable member of the TransTechnology Group either (A) does not exceed $30,000,000 in cash on the Acquisition Closing Date with respect thereto, or (B) is payable in shares of capital stock of TransTechnology, or (ii) such acquisition is approved in writing prior to the closing date thereof by the Majority Lenders, and provided further that in each case, each of the following conditions, if applicable, are either fulfilled or are waived in writing by the Majority Lenders: (a) the sum of (i) the purchase price payable for the Target (including all deferred amounts), plus (ii) all Indebtedness of the Target being assumed by the purchaser in connection with the acquisition, shall not exceed seven (7) times the Target's Consolidated EBITDA (mutatis mutandis to reflect such amount's reference to the Target) for the Reference Period ended on the last day of the fiscal quarter ended immediately preceding the proposed Acquisition Closing Date; (b) the acquisition of the Target is to be concluded pursuant to negotiated agreements with the Target or its owners or other controlling interests and approved by the Target's board of directors or other governing body, and not as a result of a hostile tender or otherwise without the Target's acquiescence; (c) upon completion of the proposed acquisition, the assets of the Target shall be subject to no lien, encumbrance, mortgage, pledge, charge, restriction or other security other than liens which would be Permitted Liens hereunder and lessor's interests under the Capitalized Leases of the Target being assumed by the purchaser; (d) no Default or Event of Default shall have occurred and be continuing at the time of completion of the proposed acquisition, and no Default or Event of Default would result therefrom; (e) without limiting the requirement in clause (d) above, (i) upon completion of the proposed acquisition TransTechnology and its Subsidiaries (including the Target from and after the proposed date of completion of such acquisition) shall be in compliance with the financial covenants set forth in Section 11 following acquisition of the Target assuming total outstanding amounts of and interest rates on the Loans, to be the same as those in effect on the applicable Acquisition Closing Date after completion of such acquisition, and (ii) in the event that the total consideration payable in connection with such 11 -4- acquisition exceeds $10,000,000, TransTechnology shall have delivered to the Agent prior to the applicable Acquisition Closing Date pro forma financial statements in form and substance satisfactory to the Agent evidencing such compliance, certified by the principal financial or accounting officer of TransTechnology; (f) the Agent shall have received documentation (including, without limitation, legal opinions and other documentation similar to that required to be delivered in connection with the completion of this Credit Agreement) satisfactory to it in its sole discretion granting first priority liens in its favor, on behalf of the Lenders, on the assets and, if applicable, the shares of the Target and on the assets and, if applicable, the shares of any member of the TransTechnology Group acquiring the Target's assets or shares, as the case may be; (g) if the Target's assets include any freehold interests in real property, the Agent shall have received Phase One environmental site assessments and appraisals of such real property in form and substance reasonably satisfactory to the Agent; (h) upon completion of any proposed acquisition by purchase of the shares or other equity interests of the Target, the Target shall either be merged with and into TransTechnology or one of its Subsidiaries, with TransTechnology or such Subsidiary as the surviving entity, or, if the Target continues in existence as a Subsidiary of TransTechnology or one of its Subsidiaries, it shall do so in compliance with and subject to the conditions set forth herein; (i) the Target's operating income, determined in accordance with generally accepted accounting principles, for the twelve (12) months immediately preceding the proposed Acquisition Closing Date shall be greater than zero; (k) the proposed Acquisition Closing Date shall be no later than the date two (2) years prior to the Revolving Credit Loan Maturity Date; and (l) the Agent and the Lenders shall have received reasonably detailed written notice of the proposed acquisition at least fifteen (15) Business Days' prior to the proposed Acquisition Closing Date. Arranger. BancBoston Securities, Inc. Assignment and Acceptance. See Sections 20.1.1 and 20.1.2. Balance Sheet Date. March 31, 1998. BankBoston. See the preamble to this Credit Agreement. 12 -5- Base Rate. With respect to amounts denominated in Dollars, the Dollar Base Rate; with respect to amounts denominated in Deutschmarks, the DM Base Rate; and with respect to amounts denominated in Sterling, the Sterling Base Rate, with each of the Dollar Base Rate, DM Base Rate and Sterling Base Rate being referred to herein as a "Base Rate". Base Rate Loans. Any Revolving Credit Loans and International Facility Loans bearing interest calculated by reference to a Base Rate. Borrowers. TransTechnology, GmbH and Limited, collectively, and each individually being referred to as a "Borrower". Brazilian Pledge Agreement. The Pledge of Quotas dated as of December 31, 1995, made by GmbH (as managing general partner of SO OHG) and Joao Scivoletto in favor of the Agent with respect to the share capital of the Brazilian Subsidiary, as amended and in effect from time to time. Brazilian Subsidiary. Seeger-Reno Industria e Commercio Ltda., a Brazilian corporation. Business. The businesses engaged in by TransTechnology and its Subsidiaries at the Closing Date, and businesses reasonably related or incidental thereto. Business Day. Any day (other than a Saturday or Sunday) on which banking institutions in Boston, Massachusetts, are open for the transaction of banking business and, in the case of Eurocurrency Rate Loans, DM Loans and Sterling Loans, also a day which is a Eurocurrency Business Day. Capital Assets. Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and good will); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with generally accepted accounting principles. Capital Expenditures. Amounts paid or indebtedness incurred by TransTechnology or any of its Subsidiaries in connection with the purchase or lease by TransTechnology or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with generally accepted accounting principles. Capitalized Leases. Leases (unless otherwise stated, under which TransTechnology or any of its Subsidiaries is the lessee or obligor), the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles. CERCLA. See Section 8.18. 13 -6- Charges over Shares. The Charge over Shares, dated June 30, 1995, from TTSO Inc. in favor of the Agent with respect to 65% of the share capital of Limited and the Charge over Shares, dated June 30, 1995, from Limited in favor of the Agent with respect to the entire share capital of Anderton (Predecessors) Limited, each as amended and in effect from time to time. Closing Date. The first date on which the conditions set forth in Section 12 have been satisfied and any Revolving Credit Loan or International Facility Loan are to be made or any Letter of Credit is to be issued hereunder. Code. The Internal Revenue Code of 1986. Collateral. All of the property, rights and interests of TransTechnology and its Subsidiaries that are or are intended to be subject to the security interests and mortgages created by the Security Documents. Collateral Assignment of Acquisition Agreement. Any assignment of rights under any acquisition agreement by TransTechnology or any of its Subsidiaries in favor of the Agent, for the benefit of the Lenders, in each case in form and substance satisfactory to the Lenders and the Agent. Collateral Instrument. Letters of credit, guarantees, indemnities and performance bonds in form and substance satisfactory to a Fronting Bank issued or to be issued by such Fronting Bank to or for the account of either GmbH or Limited, as the case may be, pursuant to Section 3.1 and Section 3.3, respectively. Commitment. As to any Lender, such Lender's Revolving Credit Commitment or commitment to participate in the International Facility Loans, as the case may be. Commitment Fee Rate. For each Rate Setting Period, the rate per annum set forth in the Pricing Grid under the column headed "Commitment Fee Rate" with respect to the Performance Ratio applicable to such Rate Setting Period. Compliance Certificate. The certificate delivered pursuant to Section 9.4(c). Consolidated or consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of TransTechnology and its Subsidiaries, consolidated in accordance with generally accepted accounting principles. Consolidated EBITDA. With respect to any Reference Period, Earnings Before Interest and Taxes for such Reference Period, before provision for any depreciation and amortization plus, to the extent that during such Reference Period any Approved Acquisition shall have been completed, the Earnings Before Interests and Taxes, before provision for any depreciation or amortization, attributable to the operations of the Target during the period prior to the applicable Acquisition Closing Date included in such Reference Period, but only to the extent evidenced by 14 -7- audited financial statements of the Target or as otherwise previously approved in writing by the Agent and the Majority Lenders, and all as determined in accordance with generally accepted accounting principles. Consolidated Net Income (or Deficit). The consolidated net income (or deficit) of TransTechnology and its Subsidiaries, after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles. Consolidated Net Worth. The excess of Consolidated Total Assets over Consolidated Total Liabilities, less, to the extent otherwise includable in the computation of Consolidated Net Worth, any subscriptions receivable. Consolidated Total Assets. All assets of TransTechnology and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. Consolidated Total Interest Expense. For any period, the aggregate amount of interest required to be paid or accrued by TransTechnology and its Subsidiaries during such period on all Indebtedness of TransTechnology and its Subsidiaries outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of interest in respect of Subordinated Debt or Capitalized Leases and including commitment fees, agency fees, facility fees and similar fees or expenses in connection with the borrowing of money, but excluding the non-cash amortization of fees paid with respect to the Original Credit Agreement, or pursuant to Sections 6.1 and 6.2 under the Credit Agreement on the Closing Date. Consolidated Total Liabilities. All liabilities of TransTechnology and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles and all Indebtedness of TransTechnology and its Subsidiaries, whether or not so classified. Conversion Request. A notice given by a Borrower to the Agent or a Fronting Bank, as the case may be, of such Borrower's election to convert or continue a Loan in accordance with Section 2.7. Copyright Mortgages. Any Copyright Mortgage and Security Agreements made by TransTechnology or any of its Subsidiaries in favor of the Agent and in form and substance satisfactory to the Lenders and the Agent. Counter Indemnity. Any indemnity or counter indemnity from GmbH or Limited, as the case may be, in favor of the DM Fronting Bank or the Sterling Fronting Bank, as applicable, with respect to any Collateral Instrument issued to or for the account of either GmbH or Limited, in the standard form of indemnity or counter indemnity used by such Fronting Bank or in such other form and substance as may be satisfactory to such Fronting Bank and including (without limitation) any 15 -8- letter of credit application incorporating indemnification language satisfactory to such Fronting Bank. Credit Agreement. This Amended and Restated Credit Agreement, including the Schedules and Exhibits hereto. Debentures. The Debenture dated January 3, 1996 made by Limited in favor of the Agent, and the Debenture dated June 30, 1995 made by Anderton (Predecessors) Limited in favor of the Agent, in each case as amended and in effect from time to time. Default. See Section 14.1. Deutschmarks or DM. Deutschmarks in lawful currency of the Federal Republic of Germany, or any unit of currency replacing the Deutschmark as the lawful currency of the Federal Republic of Germany in accordance with European laws or regulations. Distribution. The declaration or payment of any dividend on or in respect of any shares of any class of capital stock of TransTechnology, other than dividends payable solely in shares of common stock of TransTechnology; the purchase, redemption, or other retirement of any shares of any class of capital stock of TransTechnology, directly or indirectly through a Subsidiary of TransTechnology or otherwise; the return of capital by TransTechnology to its shareholders as such; or any other distribution on or in respect of any shares of any class of capital stock of TransTechnology. DM Base Rate. The annual rate of interest announced from time to time by the DM Fronting Bank as its "base rate" for loans denominated in Deutschmarks. DM Equivalent. On any date of determination, with respect to an amount denominated in Deutschmarks, such amount of Deutschmarks, and with respect to an amount denominated in Sterling or Dollars, the amount of Deutschmarks which could be purchased with that amount of Sterling or Dollars, as the case may be, at the spot rate of exchange quoted by the DM Fronting Bank in the Frankfurt Foreign Exchange Market at or about 11:00 a.m. (Frankfurt time) on the date of determination for the purchase of Deutschmarks with Sterling or Dollars, as the case may be. DM Eurocurrency Loan. See Section 3.1 DM Eurocurrency Rate. For any Interest Period with respect to a DM Loan, the rate of interest equal to the rate per annum (rounded upwards to the nearest 1/16 of one percent) at which the DM Fronting Bank is offered deposits in Deutschmarks two (2) Eurocurrency Business Days prior to the beginning of such Interest Period in the Frankfurt interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the DM Loan to which such Interest Period applies, 16 -9- divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. DM Facility Loans. The DM Eurocurrency Loans and the DM Overdraft Advances, collectively. DM Fronting Bank. Initially, the head office in Frankfurt, Germany, of BHF-BANK Aktiengesellschaft, in its capacity as DM Fronting Bank, and thereafter such office as may be appointed as successor DM Fronting Bank in accordance with Section 6.12.3. DM Loan. Any International Facility Loan which is denominated in Deutschmarks. DM Overdraft Advance. See Section 3.1. Dollar Base Rate. The higher of (i) the annual rate of interest announced from time to time by the Agent at its Head Office in Boston, Massachusetts, as its "base rate" for loans denominated in Dollars, and (ii) one-half of one percent (1/2%) above the Federal Funds Effective Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall mean for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three funds brokers of recognized standing selected by the Agent. Dollar Equivalent. On any date of determination, with respect to an amount denominated in Dollars, such amount of Dollars, and with respect to an amount denominated in Sterling or Deutschmarks, the amount of Dollars which could be purchased with that amount of Sterling or Deutschmarks, as the case may be, at the spot rate of exchange quoted by the Fronting Bank in the London Foreign Exchange Market at or about 11:00 a.m. (London time) on the date of determination for the purchase of Dollars with Sterling or Deutschmarks, as the case may be. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Lender designated as such in Schedule 1 hereto and thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans. 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. 17 -10- Drawdown Date. The date on which any Revolving Credit Loan or any International Facility Loan is made or is to be made, and the date on which any Loan or is converted or continued in accordance with Section 2.7, as the case may be. Earnings Before Interest and Taxes. The consolidated earnings (or loss) from the operations of TransTechnology and its Subsidiaries for any period, after all expenses and other proper charges but before payment or provision for any income taxes or interest expense for such period, determined in accordance with generally accepted accounting principles, after eliminating therefrom all non-recurring items of income (or loss) resulting from the discontinuation of operations to the extent that all assets characterized as belonging to or being employed in such operations are also excluded from Consolidated Total Assets pursuant to the definition thereof. Eligible Assignee. Any of (i) a commercial bank or finance company organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $5,000,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $500,000,000, calculated in accordance with generally accepted accounting principles; (iii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (iv) the central bank of any country which is a member of the OECD; (v) a Lender; and (vi) if, but only if, any Event of Default has occurred and is continuing, any other bank, insurance company, commercial finance company, investment fund or other financial institution or other Person approved by the Agent, such approval not to be unreasonably withheld. Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by TransTechnology or any ERISA Affiliate, other than a Multiemployer Plan. English Guarantees. The Deed of Guarantee and Indemnity, dated June 30, 1995, made by Limited in favor of the Agent, and the Deed of Guarantee of Indemnity, June 30, 1995, made by Anderton (Predecessors) Limited in favor of the Agent, each as amended and in effect from time to time. English Security Documents. The Debentures and the Charges over Shares, as in effect from time to time. Environmental Laws. See Section 8.18(a). ERISA. The Employee Retirement Income Security Act of 1974. ERISA Affiliate. Any Person which is treated as a single employer with TransTechnology under Section 414 of the Code. 18 -11- ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Eurocurrency Business Day. Any day (other than a Saturday or Sunday) on which commercial banks are open for international business (including dealings in Dollar, Deutschmark and Sterling deposits) in London, England and Frankfurt-am-Main, Germany. Eurocurrency Rate. With respect to amounts denominated in Dollars, the Eurodollar Rate; with respect to amounts denominated in Deutschmarks, the DM Eurocurrency Rate; with respect to amounts denominated in Sterling, the Sterling Eurocurrency Rate. Eurocurrency Rate Loans. Any Revolving Credit Loans and International Facility Loans bearing interest calculated by reference to a Eurocurrency Rate. Eurocurrency Reserve Rate. For any day with respect to a Eurocurrency Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. Eurodollar Lending Office. Initially, the office of each Lender designated as such in Schedule 1 hereto, and thereafter, such other office of such Lender, if any, that shall be making or maintaining Eurocurrency Rate Loans denominated in Dollars. Eurodollar Rate. For any Interest Period with respect to a Eurocurrency Rate Loan denominated in Dollars, the rate of interest equal to (i) the arithmetic average of the rates per annum for the Reference Bank (rounded upwards to the nearest 1/16 of one percent) of the rate at which the Reference Bank's Eurodollar Lending Office is offered Dollar deposits two Eurocurrency Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations of such Eurodollar Lending Office are customarily conducted, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurocurrency Rate Loan to which such Interest Period applies, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. Event of Default. See Section 14.1. Fee Letter. The letter agreement or agreements between BankBoston, the Arranger and TransTechnology dated or to be dated on or prior to the Closing Date 19 -12- with respect to the amount of certain fees payable or to be paid by the Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) under or in respect of this Credit Agreement. Foreign Subsidiaries. Those Subsidiaries of TransTechnology other than the Domestic Subsidiaries. Fronted Loans. The International Facility Loans, with each (and any portion of each) being individually a "Fronted Loan". Fronting Banks. The DM Fronting Bank and the Sterling Fronting Bank, collectively, and each individually a "Fronting Bank". Funded Indebtedness. At any time of determination, the aggregate principal amount of all funded Indebtedness for borrowed money (including, for the avoidance of doubt, all Subordinated Debt of TransTechnology and any of its Subsidiaries), plus all obligations, contingent and otherwise, to reimburse the issuer in respect of any letter of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments, plus Capitalized Leases, of TransTechnology and its Subsidiaries. Funding Account. See Section 2.8.1. generally accepted accounting principles. (i) When used in Section 11, whether directly or indirectly through reference to a capitalized term used therein, means (A) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and (B) to the extent consistent with such principles, the accounting practice of TransTechnology reflected in its financial statements for the year ended on the Balance Sheet Date, and (ii) when used in general, other than as provided above, means principles that are (A) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (B) consistently applied with past financial statements of TransTechnology adopting the same principles, provided that in each case referred to in this definition of "generally accepted accounting principles" a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. German Mortgage. The Real Estate Mortgages dated as of February 28, 1996 and May 30, 1996, together with the German Security Agreement, dated June 23, 1998, entered into by SO OHG in favor of the DM Fronting Bank, as agent for the Agent and for the benefit of the Lenders, with respect to the real property at: (a) Wiesbadener Strasse/Fischbacher Strasse, Konigstein, Germany (Folio 19-615); 20 -13- (b) Wiesbadener Strasse, Konigstein, Germany (Folio 21-699); and (c) Frittlingen, Germany (Folio 1349); as amended in effect from time to time. German Pledge Agreements. The Pledge of Shares made by TTSO Inc. in favor of the Agent with respect to the share capital of GmbH, and the pledge of Partnership Interests by GmbH in favor of the Agent with respect to its interest as managing general partner of SO OHG, in each case as amended and in effect from time to time. German Security Documents. The Pledges as to Equipment and Inventory and the Assignment of Accounts Receivable dated December 28, 1995 and June 23, 1998, by SO OHG in favor of the DM Fronting Bank, as agent for the Agent and for the benefit of the Lenders, with respect to all of the equipment, inventory and accounts receivable of SO OHG, as amended and in effect from time to time, the German Mortgage, and the German Pledge Agreements. GmbH. See the preamble to this Credit Agreement. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by TransTechnology or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Guaranties. The Parent Guaranty, the Subsidiary Guaranty and the English Guarantees. Guarantor. Each Subsidiary of TransTechnology which is a party to the Subsidiary Guaranty or the English Guarantees. Hazardous Substances. See Section 8.18(b). Indebtedness. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (i) all debt and similar monetary obligations, whether direct or indirect; (ii) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (iii) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the indebtedness 21 -14- held by such owner or otherwise, and the obligations to reimburse the issuer in respect of any letters of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments; but excluding all liabilities in respect of Operating Leases. Ineligible Securities. Securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1993 (12 U.S.C. Section 24, Seventh), as amended. Interest Payment Date. (i) As to any Base Rate Loan, the first day after the last day of the Interest Period with respect thereto; and (ii) as to any Eurocurrency Rate Loan in respect of which the Interest Period is (A) 3 months or less, the last day of such Interest Period, and (B) more than 3 months, the date that is 3 months from the first day of such Interest Period and, in addition, the last day of such Interest Period. Interest Period. With respect to each Loan, (i) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the following periods, as selected by the relevant Borrower of such Loan in a Loan Request: (A) for any Base Rate Loan, a calendar quarter, and (B) for any Eurocurrency Rate Loan, 1, 2, 3 or 6 months; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the relevant Borrower of such Loan in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) if any Interest Period with respect to a Eurocurrency Rate Loan would otherwise end on a day that is not a Eurocurrency Business Day, that Interest Period shall be extended to the next succeeding Eurocurrency Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurocurrency Business Day; (b) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day; (c) if the relevant Borrower shall fail to give notice as provided in Section 2.7, such Borrower shall be deemed to have requested a conversion of the affected Eurocurrency Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto; (d) any Interest Period relating to any Eurocurrency Rate Loan that begins on the last Eurocurrency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurocurrency Business Day of a calendar month; and 22 -15- (e) any Interest Period relating to any Eurocurrency Rate Loan that would otherwise extend beyond the Revolving Credit Loan Maturity Date shall end on the Revolving Credit Loan Maturity Date. Interest Rate Protection Documents. The documents evidencing the interest rate cap or swap arrangements entered into by TransTechnology pursuant to Section 9.15, as such arrangements and the related documents may be amended, modified, varied or supplemented from time to time. International Facility Amount. At any time of determination, the Dollar Equivalent at such time of the sum of the Total DM Facility Usage and the Total Sterling Facility Usage. International Facility Loans. The DM Facility Loans made or to be made by the DM Fronting Bank to GmbH and the Sterling Facility Loans made or to be made by the Sterling Fronting Bank to Limited, in each case pursuant to Section 3, and all liabilities of GmbH and Limited (whether contingent or otherwise) incurred or to be incurred in connection with the issuance of Collateral Instruments and delivery of Counter Indemnities pursuant to Section 3. International Facility Loan Request. See Sections 3.6 and 3.7. Investments. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (i) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (ii) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (iii) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (iv) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (ii) may be deducted when paid; and (v) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Lenders. The Lenders referred to on Schedule 1 hereto, and, unless the context otherwise requires, also the Fronting Banks and the Issuing Bank, collectively, and each individually being referred to as a "Lender". Letter of Credit. See Section 5.1.1. Letter of Credit Application. See Section 5.1.1. 23 -16- Letter of Credit Fees. See Section 5.6. Letter of Credit Participation. See Section 5.1.4. Leverage Ratio. As of any date of testing, the ratio of Funded Indebtedness outstanding at such date to Consolidated EBITDA, calculated for a Reference Period ended on the last day of the fiscal quarter ended immediately preceding such date. Limited. See the preamble to this Credit Agreement. Loan Documents. This Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, the Interest Rate Protection Documents, the Brazilian Pledge Agreement, the Counter Indemnities and the Security Documents, together with any other documents from time to time entered into and identified therein as a "Loan Document" hereunder. Loan Request. A Revolving Credit Loan Request or an International Facility Loan Request. Loans. The Revolving Credit Loans and the International Facility Loans. Majority Lenders. As of any date, so long as there is only one Lender, such Lender, and so long as there are at least two Lenders, two or more Lenders holding at least fifty-one percent (51%) of the outstanding principal amount of the Revolving Credit Notes, and if no such Notes are outstanding, two or more Lenders whose aggregate Commitments constitute at least fifty-one percent (51%) of the aggregate of the Commitments of all of the Lenders. Maximum DM Amount. The maximum principal amount of International Facility Loans denominated in Deutschmarks available to GmbH from the DM Fronting Bank, as such amount may be increased or reduced from time to time in accordance with the terms and provisions of this Credit Agreement. At the Closing Date, prior to the drawdown of any International Facility Loans, the Maximum DM Amount shall be the DM Equivalent of $10,000,000. Maximum Drawing Amount. The maximum aggregate amount that the beneficiaries may at any time draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit. Maximum International Facility Amount. The aggregate amount of the Maximum DM Amount plus the Maximum Sterling Amount. Maximum Sterling Amount. The maximum principal amount of International Facility Loans denominated in Sterling available to Limited from the Sterling Fronting Bank, as such amount may be reduced from time to time in accordance with the terms and provisions of this Credit Agreement. At the Closing 24 -17- Date, prior to the drawdown of any International Facility Loans, the Maximum Sterling Amount shall be the Sterling Equivalent of $15,000,000. Mortgaged Property. Any Real Estate which is subject to the German Mortgage, the Debentures or any other Mortgage. Mortgages. The several mortgages and deeds of trust from TransTechnology and its Subsidiaries to the Agent with respect to the fee and certain leasehold interests of TransTechnology and its Subsidiaries in the Real Estate, in each case as amended and in effect from time to time. Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by TransTechnology or any ERISA Affiliate. Net Cash Proceeds. If from a sale of assets or of equity, the cash proceeds received from such sale, net of all costs of sale, underwriting or brokerage costs, and taxes paid or payable as a result thereof by TransTechnology and its Subsidiaries, and if from the incurring of Indebtedness, the cash proceeds received from such incurring of Indebtedness, net of all costs thereof incurred and fees and all expenses payable in connection therewith, and taxes paid or payable as a result thereof, by TransTechnology and its Subsidiaries. Notes. The Revolving Credit Notes. Obligations. All indebtedness, obligations and liabilities of any of TransTechnology and its Subsidiaries to any of the Lenders and the Agent, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Credit Agreement or any of the other Loan Documents or in respect of any of the Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of Credit Applications, Letters of Credit, the Interest Rate Protection Documents, Counter Indemnities or other instruments at any time evidencing any thereof. Operating Leases. Leases (unless otherwise stated, under which TransTechnology or any of its Subsidiaries is the lessee or obligor) of any property, whether real, personal or mixed, which are not Capitalized Leases. Original Credit Agreement. See the preamble to this Credit Agreement. outstanding. With respect to any Loan or the Loans, the aggregate unpaid principal thereof as of any date of determination. Parent Guaranty. The Guaranty, dated as of June 30, 1995, made by TransTechnology in favor of the Agent, pursuant to which TransTechnology guaranties to the Lenders and the Agent the payment and performance of the Obligations of GmbH and Limited, as amended and in effect from time to time. 25 -18- Partnership Agreement. The partnership agreement of SO OHG entered into between TTSOB and GmbH, as in effect on October 27, 1995. Patent Assignment. The Patent Assignment, dated as of June 30, 1995 made by TransTechnology and its Subsidiaries in favor of the Agent, as amended and in effect from time to time, and any other Patent Assignments made by TransTechnology or any of its Subsidiaries in favor of the Agent and in form and substance satisfactory to the Lenders and the Agent. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. Perfection Certificates. The Perfection Certificates as defined in the Security Agreements. Permitted Liens. Liens, security interests and other encumbrances permitted by Section 10.2. Person. Any individual, corporation, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Placing Date. The date upon which TransTechnology shall have completed the placing of at least $80,000,000 in aggregate of Subordinated Debt. Pricing Grid. See the definition of "Applicable Margin". Projections. See Section 8.4.3. Rate Setting Period. See the definition of "Applicable Margin". Real Estate. All real property at any time owned or leased (as lessee or sublessee) by TransTechnology or any of its Subsidiaries. Record. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Loan referred to in such Note. Reference Bank. BankBoston. Reference Period. A period of four (4) consecutive fiscal quarters. Reimbursement Obligation. TransTechnology's obligation to reimburse the Agent, the Issuing Bank and the Lenders on account of any drawing under any Letter of Credit as provided in Section 5.2. Rental Obligations. All present or future obligations of TransTechnology or any of its Subsidiaries under any rental agreements or leases of real or personal property, other than (i) obligations that can be terminated by the giving of notice 26 -19- without liability to TransTechnology or such Subsidiary in excess of the liability for rent due as of the date on which such notice is given and under which no penalty or premium is paid as a result of any such termination, and (ii) obligations in respect of Capitalized Leases. Reset Date. The first Business Day of the month immediately following the month in which a Compliance Certificate is to be delivered by TransTechnology pursuant to Section 9.4(c). Revolving Credit Availability. At any time of reference thereto, the amount by which the Total Revolving Credit Commitment as in effect at such time exceeds the aggregate of (a) the outstanding amount of Revolving Credit Loans at such time (after giving effect to all amounts requested) plus (b) the sum of the Maximum Drawing Amount, all Unpaid Reimbursement Obligations and the International Facility Amount at such time. Revolving Credit Commitment. With respect to each Lender, the amount set forth on Schedule 1 hereto as the amount of such Lender's commitment to make Revolving Credit Loans to TransTechnology, to participate in the issuance, extension and renewal of Letters of Credit for the account of TransTechnology, and to indemnify the Fronting Banks in accordance with Section 6.12.2, as the same may be reduced from time to time, or if such commitment is terminated pursuant to the provisions hereof, zero. Revolving Credit Commitment Percentage. With respect to each Lender, the percentage set forth on Schedule 1 hereto as such Lender's percentage of the aggregate Revolving Credit Commitments of all of the Lenders. Revolving Credit Loan Maturity Date. July 24, 2003. Revolving Credit Loans. Revolving credit loans made or to be made by the Banks to TransTechnology pursuant to Section 2. Revolving Credit Loan Request. See Section 2.6. Revolving Credit Note Record. A Record with respect to a Revolving Credit Note. Revolving Credit Notes. See Section 2.4. Section 20 Subsidiary. A Subsidiary of the bank holding company controlling any Lender, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities. Security Agreements. The several Security Agreements, dated as of June 30, 1995, between TransTechnology and its Subsidiaries and the Agent, as amended and in effect from time to time. 27 -20- Security Documents. The Guaranties, the Security Agreements, the Mortgages, the Patent Assignments, the Trademark Assignments, the Copyright Mortgages, the German Security Documents, the English Security Documents, the Collateral Assignments of Acquisition Agreements, and the Stock Pledge Agreements, and any other documents or instruments from time to time securing any of the Obligations or evidencing such security. SO OHG. Seeger-Orbis GmbH & Co. OHG, a German general commercial 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. Sterling or pound sterling. Pounds sterling in the lawful currency of the United Kingdom of Great Britain and Northern Ireland. Sterling Base Rate. The annual rate of interest announced from time to time by the Sterling Fronting Bank as its "base rate" for loans denominated in Sterling. Sterling Equivalent. On any date of determination, with respect to an amount denominated in Sterling, such amount of Sterling, and with respect to an amount denominated in Deutschmarks or Dollars, the amount of Sterling which could be purchased with that amount of Deutschmarks or Dollars, as the case may be, at the spot rate of exchange quoted by the Sterling Fronting Bank in the London Foreign Exchange Market at or about 11:00 a.m. (London time) on the date of determination for the purchase of Sterling with Deutschmarks or Dollars, as the case may be. Sterling Eurocurrency Loan. See Section 3.3. Sterling Eurocurrency Rate. For any Interest Period with respect to a Sterling Loan, the rate of interest equal to the rate per annum (rounded upwards to the nearest 1/16 of one percent) at which the Sterling Fronting Bank is offered deposits in Sterling two (2) Eurocurrency Business Days prior to the beginning of such Interest Period in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Sterling Loan to which such Interest Period applies, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. Sterling Facility Loans. The Sterling Eurocurrency Loans and the Sterling Overdraft Advances, collectively. Sterling Fronting Bank. Initially, the London Branch of BankBoston, in its capacity as Sterling Fronting Bank; and thereafter such office as may be appointed as may be appointed as successor Sterling Fronting Bank in accordance with Section 6.12.3. 28 -21- Sterling Loan. Any International Facility Loan which is denominated in pounds Sterling. Sterling Overdraft Advance. See Section 3.3. Stock Pledge Agreements. The Stock Pledge Agreements, dated as of June 30, 1995, between TransTechnology and certain of the Guarantors on the one hand and the Agent on the other hand with respect to each of the Subsidiaries of TransTechnology, as amended and in effect from time to time. 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 the Majority Lenders and the Agent in writing. Subsidiary. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock. Subsidiary Guaranty. The Guaranty, dated as of June 30, 1995, made by each Domestic Subsidiary in favor of the Lenders and the Agent, pursuant to which each Domestic Subsidiary guaranties to the Lenders and the Agent the payment and performance of the Obligations, as amended and in effect from time to time. Survey. In relation to a Mortgaged Property, an instrument survey of such Mortgaged Property acceptable to the Agent. Title Insurance Company. Commonwealth Title Insurance Company. Title Policy. In relation to each Mortgaged Property located in the United States of America, an ALTA standard form title insurance policy issued by the Title Insurance Company (with such reinsurance or co-insurance as the Agent may require, any such reinsurance to be with direct access endorsements) in such amount as may be determined by the Agent insuring the priority of the Mortgage of such Mortgaged Property and that TransTechnology or one of its Subsidiaries holds marketable fee simple title to such Mortgaged Property, subject only to the encumbrances permitted by such Mortgage and which shall not contain exceptions for mechanics liens or persons in occupancy (except as may be permitted by such Mortgage), shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Agent in its sole discretion, and shall contain such endorsements and affirmative insurance as the Agent in its discretion may require. Total DM Facility Usage. See Section 3.1. 29 -22- Total Revolving Credit Commitment. The sum of the Revolving Credit Commitments of the Banks, as in effect from time to time, being $125,000,000 on the Closing Date. Total Shareholders' Equity. At any time of determination, the total shareholders' equity of the TransTechnology Group at such time, determined in accordance with generally accepted accounting principles. Total Sterling Facility Usage. See Section 3.3. Trademark Assignments. The Trademark Assignment dated as of June 30, 1995, made by TransTechnology and certain of its Subsidiaries in favor of the Agent, as amended and in effect from time to time, and any other Trademark Assignments made by TransTechnology or any of its other subsidiaries in favor of the Agent and in form and substance satisfactory to the Lenders and the Agent. TransTechnology Group. TransTechnology and all of its Subsidiaries on a consolidated basis. TTSO Inc. TransTechnology Seeger Inc., a Delaware corporation, formerly known as TransTechnology Seeger-Orbis Inc. TTSOB. Seeger-Orbis Beteiligungsgesellschaft mbH, a German limited liability company and a wholly-owned subsidiary of GmbH. Type. As to any Revolving Credit Loan or International Facility Loan, its nature as a Base Rate Loan or a Eurocurrency Rate Loan. Uniform Customs. With respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 or any successor version thereto adopted by the Agent in the ordinary course of its business as a letter of credit issuer and in effect at the time of issuance of such Letter of Credit. Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which TransTechnology does not reimburse the Agent and the Lenders on the date specified in, and in accordance with, Section 5.2. Voting Stock. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. 30 -23- Year 2000 Problem. See Section 8.21. 1.2. RULES OF INTERPRETATION. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein, with the term "instrument" being that defined under Article 9 of the Uniform Commercial Code. (h) Reference to a particular "Section" refers to that section of this Credit Agreement unless otherwise indicated. (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement. 2. THE REVOLVING CREDIT FACILITY. 2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in this Credit Agreement, each of the Lenders severally agrees to lend to TransTechnology and TransTechnology may borrow, repay, and reborrow from time to time between the Closing Date and the Revolving Credit Loan Maturity Date upon notice by TransTechnology to the Agent given in accordance with Section 2.6, such sums in Dollars as are requested by TransTechnology up to a maximum aggregate amount outstanding (after giving effect to all amounts requested) at any one time equal to such Lender's Revolving Credit Commitment minus such Lender's Revolving Credit Commitment Percentage of the sum of (a) the Maximum Drawing Amount, (b) all Unpaid Reimbursement 31 -24- Obligations, and (c) the International Facility Amount, provided that the sum of the outstanding amount of the Revolving Credit Loans (after giving effect to all amounts requested) plus the Maximum Drawing Amount, all Unpaid Reimbursement Obligations, and the International Facility Amount shall not at any time exceed the Total Revolving Credit Commitment. The Revolving Credit Loans shall be made pro rata in accordance with each Lender's Revolving Credit Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall constitute a representation and warranty by TransTechnology that the conditions set forth in Section 12 and Section 13, in the case of the initial Revolving Credit Loans to be made on the Closing Date, and Section 13, in the case of all other Revolving Credit Loans, have been satisfied on the date of such request. 2.2. REVOLVING CREDIT COMMITMENT FEE. TransTechnology agrees to pay to the Agent for the accounts of the Lenders in accordance with their respective Revolving Credit Commitment Percentages a commitment fee calculated at the Commitment Fee Rate per annum on the average daily amount during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date by which the Total Revolving Credit Commitment, minus the sum of (a) the Maximum Drawing Amount, (b) all Unpaid Reimbursement Obligations and (c) the Maximum International Facility Amount, exceeds the outstanding amount of Revolving Credit Loans during such calendar quarter. The revolving credit commitment fee shall be payable quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which the Revolving Credit Commitments shall terminate. 2.3. REDUCTION OF TOTAL REVOLVING CREDIT COMMITMENT. TransTechnology shall have the right at any time and from time to time upon five (5) Business Days prior written notice to the Agent to reduce by $1,000,000 or an integral multiple thereof or terminate entirely the Total Revolving Credit Commitment, whereupon the Revolving Credit Commitments of the Lenders shall be reduced pro rata in accordance with their respective Revolving Credit Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. Promptly after receiving any notice of TransTechnology delivered pursuant to this Section 2.3, the Agent will notify the Lenders of the substance thereof. Upon the effective date of any such reduction or termination, TransTechnology shall pay to the Agent for the respective accounts of the Lenders the full amount of any commitment fee then accrued on the amount of the reduction. No reduction or termination of the Revolving Credit Commitments may be reinstated. 2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be evidenced by separate promissory notes of TransTechnology in substantially the form of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing Date and completed with appropriate 32 -25- insertions. One Revolving Credit Note shall be payable to the order of each Lender in a principal amount equal to such Lender's Revolving Credit Commitment or, if less, the outstanding amount of all Revolving Credit Loans made by such Lender, plus interest accrued thereon, as set forth below. TransTechnology irrevocably authorizes each Lender to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or at the time of receipt of any payment of principal on such Lender's Revolving Credit Note, an appropriate notation on such Lender's Revolving Credit Note Record reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on such Lender's Revolving Credit Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Revolving Credit Note Record shall not limit or otherwise affect the obligations of TransTechnology hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due. 2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in Section 6.11, the Revolving Credit Loans shall bear interest as follows: (a) each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the Dollar Base Rate plus (ii) the Applicable Margin with respect to Base Rate Loans as in effect from time to time; and (b) each Eurocurrency Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the Eurodollar Rate determined for such Interest Period plus (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time. TransTechnology promises to pay interest on each Revolving Credit Loan in arrears on each Interest Payment Date with respect thereto. 2.6. REQUESTS FOR REVOLVING CREDIT LOANS. TransTechnology shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in writing in the form of Exhibit B hereto) of each Revolving Credit Loan requested hereunder (a "Revolving Credit Loan Request") no later than 1:00 p.m. (Boston time) (a) on the proposed Drawdown Date of any Base Rate Loan, or (b) on the third (3rd) Eurocurrency Business Day prior to the proposed Drawdown Date of any Eurocurrency Rate Loan. Each Revolving Credit Loan Request shall specify (i) the principal amount of the Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such 33 -26- Revolving Credit Loan, (iii) the Interest Period for such Revolving Credit Loan, and (iv) the Type of such Revolving Credit Loan. Promptly upon receipt of any such notice, the Agent shall notify each of the Lenders thereof. Each Revolving Credit Loan Request shall be irrevocable and binding on TransTechnology and shall obligate TransTechnology to accept the Revolving Credit Loan requested from the Lenders or, as the case may be, from the Agent on behalf of the Lenders, on the proposed Drawdown Date therefor. Each Revolving Credit Loan Request shall be in a minimum aggregate amount of $100,000, or an integral multiple thereof. 2.7. CONVERSION OPTIONS. 2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. TransTechnology may elect from time to time to convert any outstanding Revolving Credit Loan to a Revolving Credit Loan of another Type, provided that (a) with respect to any such conversion of a Revolving Credit Loan to a Base Rate Loan, TransTechnology shall give the Agent at least one (1) Business Day prior written notice of such election; (b) with respect to any such conversion of a Base Rate Loan to a Eurocurrency Rate Loan, TransTechnology shall give the Agent at least three (3) Eurocurrency Business Days prior written notice of such election; (c) with respect to any such conversion of a Eurocurrency Rate Loan into a Revolving Credit Loan of another Type, such conversion shall only be made on the last day of the Interest Period with respect thereto and (d) no Loan may be converted into a Eurocurrency Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of outstanding Revolving Credit Loans of any Type may be converted into a Revolving Credit Loan of another Type as provided herein, provided that any partial conversion shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Each Conversion Request relating to the conversion of a Revolving Credit Loan to a Eurocurrency Rate Loan shall be irrevocable by TransTechnology. 2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving Credit Loan of any Type may be continued as a Revolving Credit Loan of the same Type upon the expiration of an Interest Period with respect thereto by compliance by TransTechnology with the notice provisions contained in Section 2.7.1; provided that no Eurocurrency Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default of which officers of the Agent active upon TransTechnology's account have actual knowledge. In the event that TransTechnology fails to provide any such notice with respect to the continuation of any Eurocurrency Rate Loan as such, then such Eurocurrency Rate Loan shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto. The Agent shall notify the Lenders promptly when any such automatic conversion contemplated by this Section 2.7 is scheduled to occur. 34 -27- 2.7.3. EUROCURRENCY RATE LOANS. Any conversion to or from Eurocurrency Rate Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all Eurocurrency Rate Loans having the same Interest Period shall not be less than $5,000,000 or a whole multiple of $1,000,000 in excess thereof. 2.8 FUNDS FOR REVOLVING CREDIT LOANS. Not later than 2:00 p.m. (Boston time) on the proposed Drawdown Date of any Revolving Credit Loans, upon receipt of the documents required by Sections 12 and 13 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available in immediately available funds the amount of the requested Revolving Credit Loans by transferring such amount into TransTechnology's account with the Agent's Head Office, identified as the "TransTechnology Funding Account" (the "Funding Account"). 2.9. MATURITY OF REVOLVING CREDIT LOANS. TransTechnology promises to pay on the Revolving Credit Loan Maturity Date, and there shall become absolutely due and payable on the Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. 2.10. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing Amount, all Unpaid Reimbursement Obligations and the International Facility Amount exceeds the Total Revolving Credit Commitment then TransTechnology shall immediately pay the amount of such excess to the Agent for the respective accounts of the Lenders for application: first, to any Unpaid Reimbursement Obligations; second, to the Revolving Credit Loans; third, to the International Facility Loans; and fourth, to provide to the Agent cash collateral for Reimbursement Obligations as contemplated by Section 5.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of Revolving Credit Loans shall be allocated among the Lenders, in proportion, as nearly as practicable, to each Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each Lender's Revolving Credit Note, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. 2.11. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. TransTechnology shall have the right, at its election, to repay the outstanding amount of the Revolving Credit 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 2.11 may be made only on the last day of the Interest Period relating thereto, unless all 35 -28- costs in connection with such prepayment are paid in full simultaneously with such prepayment pursuant to Section 6.10. Each partial prepayment of the Revolving Credit Loans shall be in an integral multiple of $100,000, shall (in the case of Eurocurrency Rate Loans) 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 TransTechnology, first to the principal of Base Rate Loans, and then to the principal of Eurocurrency Rate Loans. Each partial prepayment shall be allocated among the Lenders, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Lender's Revolving Credit Note, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion. 3. INTERNATIONAL CREDIT FACILITY. 3.1. DM FACILITY LOANS. Subject to the terms and conditions set forth in this Credit Agreement, (a) the DM Fronting Bank agrees to lend to GmbH and GmbH may borrow, repay, and reborrow from time to time between the Closing Date and the Revolving Credit Loan Maturity Date either (i) upon notice by GmbH to the DM Fronting Bank given in accordance with Section 3.6, Loans in Deutschmarks for a specified Interest Period to bear interest at the rate specified in Section 3.5(c) below (the "DM Eurocurrency Loans"), or (ii) by means of overdraft advances on GmbH's DM current account with the DM Fronting Bank (the "DM Overdraft Advances"), and (b) the DM Fronting Bank agrees to issue Collateral Instruments to or for the account of GmbH upon the DM Fronting Bank's receipt of a duly-completed and executed Counter Indemnity from GmbH in respect of each such Collateral Instrument, in form and substance satisfactory to the DM Fronting Bank, provided that the aggregate amount of all liabilities of GmbH in respect of all such Counter Indemnities (whether contingent or otherwise) plus the total amount of DM Eurocurrency Loans and DM Overdraft Advances outstanding at any one time (after giving effect to all amounts requested) (such aggregate amount being referred to herein as "Total DM Facility Usage") shall not exceed the DM Equivalent at such time of $10,000,000, as such amount may be increased pursuant to the last sentence of this Section 3.1. Each request for a DM Eurocurrency Loan, each application to the DM Fronting Bank for a Collateral Instrument, and each acceptance of a DM Overdraft Advance under this Section 3.1 shall constitute a representation and warranty by GmbH that the conditions set forth in Section 12 and Section 13, in the case of the initial DM Facility Loans or Collateral Instruments (if any) to be made or issued on the Closing Date, and Section 13, in the case of all other DM Facility Loans or Collateral Instruments, have been satisfied on the date of such request or acceptance, as the case may be. In the event that prior to December 31, 1998, TransTechnology or any of its Subsidiaries shall have completed an Approved Acquisition of a Target whose principal place of business is located in Germany for an aggregate purchase price of at least $10,000,000, then the Maximum DM Amount shall be increased from the DM Equivalent of $10,000,000 to the DM Equivalent of $20,000,000 with effect from the applicable Acquisition Closing Date. 36 -29- 3.2. MANDATORY REPAYMENTS OF DM FACILITY LOANS. If at any time, for any reason whatsoever, including without limitation fluctuations in currency rates, Total DM Facility Usage exceeds by more than 5% the DM Equivalent at such time of $10,000,000, as such amount may be increased pursuant to the last sentence of Section 3.1, then GmbH shall immediately pay the excess amount for application first, to reduce the outstanding amount of DM Overdraft Advances, second, to provide to the DM Fronting Bank cash cover in respect of any outstanding Counter Indemnities in favor of the DM Fronting Bank, and third, to prepay any DM Eurocurrency Loans then outstanding. 3.3. STERLING FACILITY LOANS. Subject to the terms and conditions set forth in this Credit Agreement, (a) the Sterling Fronting Bank agrees to lend to Limited and Limited may borrow, repay, and reborrow from time to time between the Closing Date and the Revolving Credit Loan Maturity Date either (i) upon notice by Limited to the Sterling Fronting Bank given in accordance with Section 3.7, Loans in Sterling for a specified Interest Period to bear interest at the rate specified in Section 3.5(d) below (the "Sterling Eurocurrency Loans"), or (ii) by means of overdraft advances on Limited's Sterling current account with the Sterling Fronting Bank (the "Sterling Overdraft Advances"), and (b) the Sterling Fronting Bank agrees to issue Collateral Instruments to or for the account of Limited upon the Sterling Fronting Bank's receipt of a duly-completed and executed Counter Indemnity from Limited in respect of each such Collateral Instrument, in form and substance satisfactory to the Sterling Fronting Bank, provided that the aggregate amount of all liabilities of Limited in respect of all such Counter Indemnities (whether contingent or otherwise) plus the total amount of Sterling Eurocurrency Loans and Sterling Overdraft Advances outstanding at any one time (after giving effect to all amounts requested) (such aggregate amount being referred to herein as "Total Sterling Facility Usage") shall not exceed the Sterling Equivalent at such time of $15,000,000. Each request for a Sterling Eurocurrency Loan, each application to the Sterling Fronting Bank for a Collateral Instrument and each acceptance of a Sterling Overdraft Advance under this Section 3.3 shall constitute a representation and warranty by Limited that the conditions set forth in Section 12 and Section 13, in the case of the initial Sterling Facility Loans or Collateral Instruments (if any) to be made or issued on the Closing Date, and Section 13, in the case of all other Sterling Facility Loans or Collateral Instruments, have been satisfied on the date of such request or acceptance, as the case may be. 3.4. MANDATORY REPAYMENTS OF STERLING FACILITY LOANS. If at any time, for any reason whatsoever, including without limitation fluctuations in currency rates, Total Sterling Facility Usage exceeds by more than 5% the Sterling Equivalent at such time of $15,000,000, then Limited shall immediately pay the excess amount for application first, to reduce the outstanding amount of Sterling Overdraft Advances, second to provide to the Sterling Fronting Bank cash collateral in respect of any outstanding Counter Indemnities, and third, to prepay any Sterling Eurocurrency Loans then outstanding. 37 -30- 3.5. INTEREST ON INTERNATIONAL FACILITY LOANS. Except as otherwise provided in Section 6.11, the International Facility Loans shall bear interest as follows: (a) with respect to DM Overdraft Advances, interest shall be payable by GmbH on the day-to-day balance in GmbH's current account maintained with the DM Fronting Bank at a rate per annum equal to the sum of (i) the DM Base Rate plus (ii) the Applicable Margin with respect to Base Rate Loans as in effect from time to time; and shall be deducted from such current account on the last Eurocurrency Business Day of each calendar month or on such other monthly date as the DM Fronting Bank may reasonably require such payments; (b) with respect to Sterling Overdraft Advances, interest shall be payable by Limited on the day-to-day balance in Limited's current account maintained with the Sterling Fronting Bank at a rate per annum equal to the sum of (i) the Sterling Base Rate plus (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time; and shall be deducted from such current account on the last Eurocurrency Business Day of each calendar month or on such other monthly date as the Sterling Fronting Bank may reasonably require such payments; (c) each DM Eurocurrency Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the DM Eurocurrency Rate determined for such Interest Period plus (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time. GmbH promises to pay interest, in accordance with Section 6.3.2, on each DM Eurocurrency Loan in arrears on each Interest Payment Date with respect thereto; and (d) each Sterling Eurocurrency Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the Sterling Eurocurrency Rate determined for such Interest Period plus (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time. Limited promises to pay interest, in accordance with Section 6.3.2, on each Sterling Eurocurrency Loan in arrears on each Interest Payment Date with respect thereto. 3.6. REQUESTS FOR DM EUROCURRENCY LOANS. GmbH shall give to the DM Fronting Bank written notice substantially in the form of Exhibit B hereto (or telephonic notice confirmed in a writing in the form of Exhibit B hereto) of each DM Eurocurrency Loan requested hereunder (an "International Facility Loan Request") no less than two (2) Eurocurrency Business Days prior to the proposed Drawdown Date of such Eurocurrency Rate Loan. Each 38 -31- such notice shall specify (a) the principal amount of the Loan requested, (b) the proposed Drawdown Date of such Loan, (c) the Interest Period for such Loan and (d) the Type of such Loan. Each International Facility Loan Request for a DM Eurocurrency Loan shall be irrevocable and binding on GmbH and shall obligate GmbH to accept the DM Eurocurrency Loan requested on the proposed Drawdown Date therefor. Each such International Facility Loan Request shall be in a minimum aggregate amount of the DM Equivalent of $100,000 or an integral multiple thereof. 3.7. REQUESTS FOR STERLING EUROCURRENCY LOANS. Limited shall give to the Sterling Fronting Bank written notice substantially in the form of Exhibit B hereto (or telephonic notice confirmed in a writing in the form of Exhibit B hereto) of each Sterling Eurocurrency Loan requested hereunder (also referred to herein as an "International Facility Loan Request") no less than two (2) Eurocurrency Business Days prior to the proposed Drawdown Date of such Eurocurrency Rate Loan. Each such notice shall specify (a) the principal amount of the Loan requested, (b) the proposed Drawdown Date of such Loan, (c) the Interest Period for such Loan and (d) the Type of such Loan. Each International Facility Loan Request for a Sterling Eurocurrency Loan shall be irrevocable and binding on Limited and shall obligate Limited to accept the Sterling Eurocurrency Loan requested on the proposed Drawdown Date therefor. Each such International Facility Loan Request shall be in a minimum aggregate amount of the Sterling Equivalent of $100,000 or an integral multiple thereof. 3.8. EVIDENCE OF DM FACILITY LOANS. The obligations of GmbH to repay all amounts borrowed by it as DM Eurocurrency Loans and DM Overdraft Advances, all interest thereon and all other amounts payable by it in respect thereof shall be evidenced by this Credit Agreement, it being the intention of the parties hereto that GmbH's obligations with respect to the DM Facility Loans owed by it is evidenced only as stated herein and not by separate promissory notes or other instruments. 3.9. EVIDENCE OF STERLING FACILITY LOANS. The obligations of Limited to repay all amounts borrowed by it as Sterling Eurocurrency Loans and Sterling Overdraft Advances, all interest thereon and all other amounts payable by it in respect thereof shall be evidenced by this Credit Agreement, it being the intention of the parties hereto that Limited's obligations with respect to the Sterling Facility Loans owed by it is evidenced only as stated herein and not by separate promissory notes or other instruments. 3.10. MATURITY OF DM FACILITY LOANS. GmbH promises to pay on the Revolving Credit Loan Maturity Date, or such earlier date as the Total Revolving Credit Commitment shall terminate or the obligations with respect to the International Facility Loans shall be accelerated in 39 -32- accordance with Section 14, and there shall become absolutely due and payable on the Revolving Credit Loan Maturity Date or such earlier date, all of the DM Facility Loans outstanding on such date, together with any and all accrued and unpaid interest thereon, and to provide on such date cash cover satisfactory to the DM Fronting Bank for the aggregate amount of all liabilities of GmbH (whether contingent or otherwise) in respect of all Counter Indemnities in favor of the DM Fronting Bank outstanding on such date. 3.11. MATURITY OF STERLING FACILITY LOANS. Limited promises to pay on the Revolving Credit Loan Maturity Date, or such earlier date as the Total Revolving Credit Commitment shall terminate or the obligations with respect to the International Facility Loans shall be accelerated in accordance with Section 14, and there shall become absolutely due and payable on the Revolving Credit Loan Maturity Date or such earlier date, all of the Sterling Facility Loans outstanding on such date, together with any and all accrued and unpaid interest thereon, and to provide on such date cash cover satisfactory to the Sterling Fronting Bank for the aggregate amount of all liabilities of Limited (whether contingent or otherwise) in respect of all Counter Indemnities in favor of the Sterling Fronting Bank outstanding on such date. 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 DM Facility Loans and Sterling Facility Loans, as applicable 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 shall give the DM 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 DM Facility Loans which are Base Rate Loans, and four (4) Eurocurrency Business Days notice of any proposed prepayment pursuant to this Section 3.12 of DM Facility Loans which are Eurocurrency Rate Loans, in each case specifying the proposed date of prepayment of such DM 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. Limited shall give the Sterling Fronting Bank, no later than 10:00 a.m., London time, at least three (3) Eurocurrency Business days prior written notice of any proposed prepayment pursuant to this Section 3.12 of Sterling Facility Loans which are Base Rate Loans, and four (4) Eurocurrency Business Days notice of any proposed prepayment pursuant to this Section 3.12 of Sterling Facility Loans which are Eurocurrency Rate Loans, in each case specifying the proposed date of prepayment of such Sterling Facility Loans and the principal amount to be prepaid. Each such partial prepayment of the Sterling Facility Loans shall be in an integral multiple of pound sterling 50,000. Any prepayment pursuant to this Section 3.12 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 40 -33- of instruction by GmbH or Limited, as the case may be, first to outstanding interest on such International Facility Loans, second to the principal of International Facility Loans which are Base Rate Loans, third to provide to each of the Fronting Banks cash cover in respect of any outstanding Counter Indemnities in favor of such Fronting Bank, and fourth to the principal of International Facility Loans which are Eurocurrency Rate Loans. Notwithstanding anything in this Credit Agreement to the contrary, there shall be an interval of not less than two (2) weeks between each prepayment by GmbH or Limited under this Section 3.12. 3.13. DM FACILITY COMMITMENT FEE. GmbH agrees to pay to the DM Fronting Bank, for payment by it to the Agent for the accounts of the Lenders in accordance with their respective Revolving Credit Commitment Percentages, a commitment fee calculated at the Commitment Fee Rate per annum on the average daily amount during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date by which the Maximum DM Amount (as such amount may have been increased pursuant to the last sentence of Section 3.1) exceeds Total DM Facility Usage during such calendar quarter. Such DM facility commitment fee shall be payable, in the applicable amount of Deutschmarks or the Dollar Equivalent thereof on the date of such payment, quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which the Revolving Credit Commitments shall terminate. 3.14. STERLING FACILITY COMMITMENT FEE. Limited agrees to pay to the Sterling Fronting Bank, for payment by it to the Agent for the accounts of the Lenders in accordance with their respective Revolving Credit Commitment Percentages, a commitment fee calculated at the Commitment Fee Rate per annum on the average daily amount during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date by which the Maximum Sterling Amount exceeds Total Sterling Facility Usage during such calendar quarter. Such Sterling facility commitment fee shall be payable, in the applicable amount of Sterling or the Dollar Equivalent thereof on the date of such payment, quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which the Revolving Credit Commitments shall terminate. 4. MANDATORY PREPAYMENT OF LOANS. 4.1. MANDATORY PREPAYMENTS FROM ASSET SALES OR NEW DEBT. In the event that any member of the TransTechnology Group shall either (a) incur any Indebtedness after the Closing Date which is either permitted pursuant to 41 -34- Section 10.1(f) or is incurred in an amount and on terms and conditions previously agreed in writing by the Agent, or (b) sell any of its assets (other than inventory sold in the ordinary course of business) or group of related assets, whether by sale of such assets or sale of the stock of any member of the TransTechnology Group, where such asset sale is either permitted pursuant to Section 10.5.2 or is previously consented to in writing by the Agent and/or the Majority Lenders, as applicable, then as soon as practicable and in any event within thirty (30) days after the receipt by any member of the TransTechnology Group of the Net Cash Proceeds of such new Indebtedness or such asset sale, as the case may be, TransTechnology shall, or shall procure that a Subsidiary of TransTechnology shall, prepay the Loans in an amount equal to (i) 50% of the Net Cash Proceeds of such new Indebtedness, or (ii) 100% of the Net Cash Proceeds of such asset sale, but only to the extent that the aggregate amount of Net Cash Proceeds of all such asset sales received by TransTechnology and its Subsidiaries during any fiscal year ending after the date hereof exceeds $1,000,000. 4.2. MANDATORY PREPAYMENTS FROM NEW EQUITY. In the event that any member of the TransTechnology Group shall after the Closing Date sell or issue any shares of its stock, options (other than stock options awarded to employees and directors pursuant to incentive compensation plans operated by members of the TransTechnology Group) or warrants for the purchase of its stock or other equity or equity instruments, then as soon as practicable and in any event within thirty (30) days after the sale of such new equity, TransTechnology shall prepay the Loans in an amount equal to at least fifty percent (50%) of the Net Cash Proceeds to the TransTechnology Group of such sale or issuance of new equity. 4.3. APPLICATION OF PROCEEDS. All mandatory prepayments of the Loans pursuant to Sections 4.1 - 4.2 shall be applied first to repayment of Unpaid Reimbursement Obligations, second to repayment of Revolving Credit Loans which are Base Rate Loans, third to repayment of International Facility Loans which are Base Rate Loans, fourth to provide cash collateral for Reimbursement Obligations and cash cover with respect to Counter Indemnities, fifth to repayment of Revolving Credit Loans which are Eurocurrency Rate Loans, and sixth to repayment of International Facility Loans which are Eurocurrency Rate Loans. 5. LETTERS OF CREDIT. 5.1. LETTER OF CREDIT COMMITMENTS. 5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and conditions hereof and the execution and delivery by TransTechnology of a letter of credit application on the Issuing Bank's customary form (a "Letter of Credit Application"), the Issuing Bank on behalf of the Lenders and in reliance upon the agreement of the Lenders set forth in Section 5.1.4 and upon the representations and warranties of TransTechnology contained herein, agrees, in its individual capacity, to issue, extend and 42 -35- renew for the account of TransTechnology one or more standby or documentary letters of credit (individually, a "Letter of Credit"), in such form as may be requested from time to time by TransTechnology and agreed to by the Issuing Bank; provided, however, that, after giving effect to such request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed $5,000,000 at any one time, and (b) the aggregate outstanding amount of the Revolving Credit Loans, plus the Maximum Drawing Amount, plus all Unpaid Reimbursement Obligations, plus the International Facility Amount shall not exceed the Total Revolving Credit Commitment; and provided further that, after the Issuing Bank shall have received notice in writing of the occurrence of an Event of Default and until it has received written notice of the cure or waiver of such Event of Default, the Issuing Bank shall not be obliged to issue any such Letter of Credit unless the Majority Lenders shall have consented to such issuance in writing. 5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit Application shall be completed to the satisfaction of the Issuing Bank. In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement, then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern. 5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (i) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (ii) have an expiry date no later than the date which is thirty (30) days (or, if the Letter of Credit is confirmed by a confirmer or otherwise provides for one or more nominated persons, sixty (60) days) prior to the Revolving Credit Loan Maturity Date. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs. 5.1.4. REIMBURSEMENT OBLIGATIONS OF LENDERS. Each Lender severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any condition precedent other than that set forth in the proviso to this Section 5.1.4, to the extent of such Lender's Revolving Credit Commitment Percentage, to reimburse the Issuing Bank or the Agent, as the case may be, on demand for the amount of each draft paid by the Issuing Bank or the Agent under each Letter of Credit to the extent that such amount is not reimbursed by TransTechnology pursuant to Section 5.2 (such agreement for a Lender being called herein the "Letter of Credit Participation" of such Lender) provided, however, that to the extent that any Letter of Credit shall have been issued by the Issuing Bank during the continuance of an Event of Default of which the Issuing Bank had prior written notice, then the Lenders shall only be liable to reimburse the Issuing Bank or the Agent, as applicable, in accordance with this Section 5.1.4 with respect to any draft under such Letter of Credit paid by the Issuing Bank or the 43 -36- Agent and not reimbursed by TransTechnology if the issuance of such Letter of Credit shall have been approved by the Majority Lenders pursuant to and in accordance with Section 5.1.1 above. 5.1.5. PARTICIPATIONS OF LENDERS. Each such payment made by a Lender shall be treated as the purchase by such Lender of a participating interest in TransTechnology's Reimbursement Obligation under Section 5.2 in an amount equal to such payment. Each Lender shall share in accordance with its participating interest in any interest which accrues pursuant to Section 5.2. 5.2. REIMBURSEMENT OBLIGATION OF TRANSTECHNOLOGY. In order to induce the Issuing Bank to issue, extend and renew each Letter of Credit and the Lenders to participate therein, TransTechnology hereby agrees to reimburse or pay to the Agent, for the account of the Issuing Bank or (as the case may be), the Agent or the Lenders, with respect to each Letter of Credit issued, extended or renewed by the Issuing Bank hereunder, (a) except as otherwise expressly provided in Section 5.2(b) and (c), on each date that any draft presented under such Letter of Credit is honored by the Issuing Bank, or the Issuing Bank otherwise makes a payment with respect thereto, (i) the amount paid by the Issuing Bank under or with respect to such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Issuing Bank, the Agent or any Lender in connection with any payment made by the Issuing Bank or any Lender under, or with respect to, such Letter of Credit, (b) upon the reduction (but not termination) of the Total Revolving Credit Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Issuing Bank for the benefit of the Lenders, the Agent and the Issuing Bank as cash collateral for all Reimbursement Obligations, and (c) upon the termination of the Total Revolving Credit Commitment, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with Section 14, an amount equal to the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Issuing Bank for the benefit of the Lenders, the Agent and the Issuing Bank as cash collateral for all Reimbursement Obligations. Each such payment shall be made to the Agent at the Agent's Head Office (for the account of the Issuing Bank or (as the case may be) the Agent or the Lenders) in immediately available funds. Interest on any and all amounts remaining unpaid by TransTechnology under this Section 5.2 at any time from the date such amounts become due and payable (whether as stated in this Section 5.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Agent (for the account of the Issuing Bank or (as the case may be) the Agent or the Lenders) on 44 -37- demand at the rate specified in Section 6.11 for overdue principal on the Revolving Credit Loans. 5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Issuing Bank shall notify TransTechnology of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. If TransTechnology fails to make payment to the Agent as provided in Section 5.2 on or before the date that such draft is paid or other payment is made by the Issuing Bank, the Issuing Bank may at any time thereafter notify the Agent and the Lenders of the amount of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next following the receipt of such notice, each Lender shall make available to the Issuing Bank, at its Head Office, in immediately available funds, such Lender's Revolving Credit Commitment Percentage of such Unpaid Reimbursement Obligation, together with an amount equal to the product of (i) the average, computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Issuing Bank for federal funds acquired by the Issuing Bank during each day included in such period, times (ii) the amount equal to such Lender's Revolving Credit Commitment Percentage of such Unpaid Reimbursement Obligation, times (iii) a fraction, the numerator of which is the number of days that elapse from and including the date the Issuing Bank paid the draft presented for honor or otherwise made payment to the date on which such Lender's Revolving Credit Commitment Percentage of such Unpaid Reimbursement Obligation shall become immediately available to the Issuing Bank, and the denominator of which is 360. The responsibility of the Issuing Bank to TransTechnology and to the Agent and the Lenders shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. 5.4. OBLIGATIONS ABSOLUTE. TransTechnology's obligations under this Section 5 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which TransTechnology may have or have had against the Issuing Bank, the Agent, any Lender or any beneficiary of a Letter of Credit. TransTechnology further agrees with the Issuing Bank, the Agent and the Lenders that the Issuing Bank, the Agent and the Lenders shall not be responsible for, and TransTechnology's Reimbursement Obligations under Section 5.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among TransTechnology, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of TransTechnology against the beneficiary of any Letter of 45 -38- Credit or any such transferee. The Issuing Bank, the Agent and the Lenders shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. TransTechnology agrees that any action taken or omitted by any of the Issuing Bank, the Agent or any Lender under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon TransTechnology and shall not result in any liability on the part of the Issuing Bank, the Agent or any Lender to TransTechnology. 5.5. RELIANCE BY ISSUING BANK. To the extent not inconsistent with Section 5.4, the Issuing Bank shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Issuing Bank. The Issuing Bank shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Majority Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Issuing Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and all future holders of the Revolving Credit Notes or of a Letter of Credit Participation. 5.6. LETTER OF CREDIT FEE. TransTechnology shall pay a fee (in each case, a "Letter of Credit Fee") to the Issuing Bank in respect of each Letter of Credit, calculated as a percentage per annum of the face amount of such Letter of Credit equal to the sum of (a) the then Applicable Margin with respect to Eurocurrency Rate Loans, plus (b) one-quarter of one percent (0.25%), plus the Agent's customary issuance, amendment, negotiation or document examination fee. Such Letter of Credit Fees, with the exception of (i) such issuance, amendment, negotiation or document examination fees and (ii) an amount equal to one-quarter of one percent (0.25%) of the face amount of the applicable Letter of Credit, which shall be retained by the Issuing Bank for its own account, shall be for the accounts of the Lenders in accordance with their respective Revolving Credit Commitment Percentages. Such Letter of Credit Fees shall be payable quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter or portion thereof, commencing on the first such date following the date of issuance of a Letter of Credit, as well as (with respect to any applicable issuance, amendment negotiation or document examination fees) at such other time or times as such charges are customarily made by the Issuing Bank. 46 -39- 5.7. RESIGNATION OF ISSUING BANK. The Issuing Bank may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and TransTechnology. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Issuing Bank. Unless a Default or Event of Default shall have occurred and be continuing, such successor Issuing Bank shall be reasonably acceptable to TransTechnology. If no successor Issuing Bank shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Issuing Bank's giving of notice of resignation, then the retiring Issuing Bank may, on behalf of the Lenders, appoint a successor Issuing Bank, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Corporation. Upon the acceptance of any appointment as Issuing Bank hereunder by a successor Issuing Bank, such successor Issuing Bank shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Issuing Bank, and, after arranging for the replacement of, reissuance of or issuance of back-up Letters of Credit with respect to all outstanding Letters of Credit in a manner satisfactory to the Majority Lenders, the retiring Issuing Bank shall be discharged from its duties and obligations hereunder. After any retiring Issuing Bank's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Issuing Bank. 6. CERTAIN GENERAL PROVISIONS. 6.1. CLOSING AND STRUCTURING FEES. The Borrowers (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) jointly and severally agree to pay on the Closing Date (a) to the Agent for the pro rata accounts of the Lenders a closing fee in the amount agreed in the Fee Letter and (b) to the Arranger, for the Arranger's own account, a structuring fee in the amount of the structuring fee agreed in the Fee Letter. 6.2. AGENT'S FEE. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to pay to the Agent annually in advance, for the Agent's own account, on each anniversary of the Closing Date, an Agent's fee in the amount agreed in the Fee Letter. 6.3. PAYMENT PROVISIONS. 6.3.1. CURRENCY OF ACCOUNT. Dollars are the currency of account and payment for each and every sum at any time due from the Borrowers hereunder, provided that: (i) each repayment of a Loan or a part thereof shall be made in the currency in which such Loan is denominated at the time of that repayment; 47 -40- (ii) each payment in respect of a Letter of Credit shall, except as otherwise provided herein, be made in the currency in which such Letter of Credit is denominated; (iii) each payment of interest shall be made in the currency in which the sum in respect of which such interest is payable is denominated; (iv) each payment in respect of costs and expenses shall be made in the currency in which the same were incurred; and (v) any amount expressed to be payable in a currency other than Dollars shall be paid in that other currency. 6.3.2. APPLICATION OF INTEREST PAYMENTS. Interest and commissions payable by the Borrowers shall be paid as follows: (a) as to interest and commissions due with respect to the International Facility Loans, to the Fronting Banks, for the account of the respective Fronting Banks, provided that (i) to the extent that a Lender has paid to such Fronting Bank any amount in respect of any Fronted Loan pursuant to Section 6.12, interest or commissions to the extent as aforesaid on such amount of such Fronted Loan (including, without limitation, any interest accruing at rates calculated in accordance with Section 6.11) shall thereafter accrue for the account of such Lender, and (ii) the Fronting Banks shall pay all amounts of interest received by them in an amount equal to the Applicable Margin to the Agent for the account of the Lenders in the proportion of the Lenders' respective Revolving Credit Commitment Percentages; and (b) as to interest due with respect to Revolving Credit Loans, to the Agent for the account of the Lenders in the proportion of the Lenders' respective Revolving Credit Commitment Percentages. 6.3.3. JUDGMENT CURRENCY. If any sum due from a Borrower under this Credit Agreement or any order or judgment given or made in relation hereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or under such order or judgment into another currency (the "second currency") for the purpose of (i) making or filing a claim or proof against such Borrower, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation hereto, such Borrower shall indemnify and hold harmless each of the Persons to whom such sum is due from and against any loss suffered as a result of any discrepancy between (A) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (B) the rate or rates of exchange at which such Person may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. 48 -41- 6.3.4. TIME OF PAYMENT. On each date on which this Credit Agreement requires an amount to be paid by any of the Borrowers or any of the Lenders hereunder, such Borrower or, as the case may be, such Lender shall make the same available to the Agent, the DM Fronting Bank or the Sterling Fronting Bank, as the case may be, to such account as the Agent or such Fronting Bank shall have notified to any of the Borrowers or to such Lender, as the case may be. Each such payment which is made for the account of a Person other than the Agent shall be made in time to enable the Agent to make available such other Person's portion thereof for value the same day. 6.3.5. PAYMENTS BY AGENT. Where a sum is to be paid hereunder to the Agent for the account of another Person, the Agent shall not be obliged to make the same available to that other Person until the Agent has been able to establish to its satisfaction that it has actually received such sum, but if the Agent does so and it proves to be the case that the Agent has not actually received the sum it paid out, then the Person to whom such sum was so made available shall on request refund the same to the Agent, together with an amount sufficient to reimburse the Agent for any amount it may have been required to pay out by way of interest on moneys borrowed to fund the sum in question during the period beginning on the due date for payment thereof and ending on the date on which it receives the same. 6.3.6. NO OFFSET, ETC. All payments by the Borrowers hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless any of the Borrowers is compelled by law to make such deduction or withholding. If any such obligation is imposed upon a Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, such Borrower will make such deduction or withholding, will pay the full amount deducted or withheld to the applicable authority, and will also pay to the Agent, for the account of the Lenders or (as the case may be), the Issuing Bank, the applicable Fronting Bank or Banks or the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount as shall be necessary to enable the Lenders, the Issuing Bank, the applicable Fronting Bank or Banks or the Agent (as the case may be) to receive the same net amount in the same currency which the Lenders, the Issuing Bank, the applicable Fronting Bank or Banks or the Agent would have received on such due date had no such obligation been imposed upon such Borrower. Each Borrower so affected will deliver, within thirty (30) days of any such deduction or payment, to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by such Borrower hereunder or under such other Loan Document. 49 -42- 6.4. COMPUTATIONS. All computations of interest on Eurocurrency Rate Loans shall, unless otherwise expressly provided herein, be based on a 360-day year and paid for the actual number of days elapsed. All computations of interest on Base Rate Loans, commitment fees, Letter of Credit Fees or other fees shall, unless otherwise expressly provided herein, be based on a 365-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurocurrency Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Revolving Credit Loans as reflected on the Revolving Credit Note Records from time to time shall be considered correct and binding on TransTechnology unless within five (5) Business Days after receipt of any notice by the Agent or any of the Lenders of such outstanding amount, the Agent or such Lender shall notify such Borrower to the contrary. 6.5. INABILITY TO DETERMINE EUROCURRENCY RATE. In the event, prior to the commencement of any Interest Period relating to any Eurocurrency Rate Loan, (a) the DM Fronting Bank shall determine, with respect to any DM Facility Loan which is a Eurocurrency Rate Loan, (b) the Sterling Fronting Bank shall determine with respect to any Sterling Facility Loan which is Eurocurrency Rate Loan, or (c) the Agent shall determine or be notified by the Majority Lenders, with respect to any Revolving Credit Loan which is a Eurocurrency Rate Loan, that adequate and reasonable methods do not exist for ascertaining the applicable Eurocurrency Rate that would otherwise determine the rate of interest to be applicable to such Eurocurrency Rate Loan, the applicable Fronting Bank or the Agent, as the case may be, shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrowers and the Lenders) to the applicable Borrower(s) and (in the case of the Agent) to the applicable Lender(s). In such event (i) any Loan Request or Conversion Request with respect to Eurocurrency Rate Loans shall be automatically withdrawn and, to the fullest extent practicable, shall be deemed a request for Base Rate Loans, (ii) each Eurocurrency Rate Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Base Rate Loan, and (iii) the obligations of the applicable Lender(s) or, as the case may be, Fronting Bank(s) to make Eurocurrency Rate Loans shall be suspended until the Agent or, as the case may be, the applicable Fronting Bank(s), or the Majority Lenders determine that the circumstances giving rise to such suspension no longer exist, whereupon the Agent or, as the case may be, the Agent upon the instruction of the Majority Lenders or the applicable Fronting Bank(s), shall so notify the applicable Borrower(s) and (in the case of the Agent) the applicable Lender(s). 6.6. ILLEGALITY. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for any Lender or Fronting Bank to make or 50 -43- maintain Eurocurrency Rate Loans, such Lender, if so affected, shall forthwith give notice of such circumstances to TransTechnology, the Agent and the other Lenders, and such Fronting Bank, if so affected, shall forthwith give notice of such circumstances to the Borrowers and the Agent. Thereupon (i) the commitment of such Lender or Fronting Bank to make Eurocurrency Rate Loans or convert Loans of another Type to Eurocurrency Rate Loans shall forthwith be suspended, and (ii) such Lender's or Fronting Bank's Loans then outstanding as Eurocurrency Rate Loans, if any, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurocurrency Rate Loans or within such earlier period as may be required by law. The Borrowers hereby jointly and severally agree promptly to pay the Agent for the account of such Lender or Fronting Bank upon demand by such Lender or Fronting Bank, any additional amounts necessary to compensate such Lender or Fronting Bank for any costs incurred by such Lender or Fronting Bank in making any conversion in accordance with this Section 6.6, including any interest or fees payable by such Lender or Fronting Bank to lenders of funds obtained by it in order to make or maintain its Eurocurrency Rate Loans hereunder. 6.7. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Lender or Fronting Bank, the Issuing Bank, or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, such Lender's Commitment, the Loans or any payment of interest or fees payable with respect to any Loans (other than taxes based upon or measured by the income or profits of such Lender, Issuing Bank, Fronting Bank or Agent, or bank franchise taxes), but including any tax or withholding applicable to any payment to be made by a Fronting Bank to the Agent pursuant to Section 6.3.2(a), or by any Lender to the Agent for the account of a Fronting Bank pursuant to Section 6.12.2, or (b) materially change the basis of taxation (except for changes in taxes on income or profits or bank franchise taxes) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender or the Agent under this Credit Agreement or any of the other Loan Documents, or (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, 51 -44- or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of any office of any Lender (including any Fronting Bank or the Issuing Bank), and including, without limitation, any MLA costs with respect to Sterling Facility Loans or indemnification obligations of any Lender with respect thereto, or (d) impose on any Lender (including any Fronting Bank or the Issuing Bank) or the Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, the Loans, such Lender's Commitment, or any class of loans, letters of credit or commitments of which any of the Loans or such Lender's Commitment forms a part, and the result of any of the foregoing is (i) to increase the cost to any such Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Lender's Commitment or any Letter of Credit, or (ii) to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to such Lender or the Agent hereunder on account of such Lender's Commitment, any Letter of Credit or any of the Loans, or (iii) to require such Lender or the Agent to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Agent from the Borrowers hereunder, then, and in each such case, within fifteen (15) days after demand made by such Lender or Fronting Bank or (as the case may be) the Agent or the Issuing Bank at any time and from time to time and as often as the occasion therefor may arise, the Borrowers will (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) jointly and severally pay to such Lender, Fronting Bank, Agent or Issuing Bank such additional amounts as will be sufficient to compensate such Lender, Fronting Bank, Agent or Issuing Bank, as the case may be, for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum. 6.8. CAPITAL ADEQUACY. If after the date hereof any Lender (including any Fronting Bank and the Issuing Bank) or the Agent determines that (i) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for Lenders or Lender holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (ii) compliance by such Lender or the Agent or any corporation controlling such Lender, or the Agent with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Lender's, or the 52 -45- Agent's commitment with respect to any Loans or Letters of Credit to a level below that which such Lender or the Agent could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or the Agent's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Lender or (as the case may be) the Agent to be material, then such Lender or the Agent may notify the Borrowers of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, TransTechnology agrees to pay such Lender or (as the case may be) the Agent for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Lender or (as the case may be) the Agent of a certificate in accordance with Section 6.9 hereof. Each Lender and the Agent shall allocate such cost increases among its customers in good faith and on an equitable basis. 6.9. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to Sections 6.7 or 6.8 and a brief explanation of such amounts which are due, submitted by any Lender (including any Fronting Bank and the Issuing Bank) or the Agent to the Borrowers, shall be conclusive, absent manifest error, that such amounts are due and owing. 6.10. INDEMNITY. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense (including loss of anticipated profits) that such Lender may sustain or incur as a consequence of (i) default by any of the Borrowers in payment of the principal amount of or any interest on any Eurocurrency Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its Eurocurrency Rate Loans, (ii) default by any of the Borrowers in making a borrowing or conversion after such Borrower has given (or is deemed to have given) a Loan Request, notice or a Conversion Request relating thereto, or (iii) the making of any payment of a Eurocurrency Rate Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain any such Loans. 6.11. INTEREST AFTER DEFAULT. 6.11.1. OVERDUE AMOUNTS. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to the sum of (i) two percent (2%) per annum, plus (ii) the Applicable Margin with respect to Eurocurrency Rate Loans plus (iii) the Base Rate, until such amount shall be paid in full (after as well as before judgment). 53 -46- 6.11.2. AMOUNTS NOT OVERDUE. During the continuance of a Default or an Event of Default, the principal of the Revolving Credit Loans and the International Facility Loans not overdue shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived by the Majority Lenders pursuant to Section 27, bear interest at a rate per annum equal to the greater of (i) two percent (2%) above the rate of interest otherwise applicable to such Loans pursuant to Section 2.5 or Section 3.5, and (ii) the rate of interest applicable to overdue principal pursuant to Section 6.11.1. 6.12. FRONTING BANK PROVISIONS. 6.12.1. FRONTING FEE. The Borrowers jointly and severally agree to pay to the Fronting Banks for the account of the Fronting Banks a fronting fee calculated at the rate of one-quarter of one percent (1/4%) per annum on the average principal amount of Fronted Loans outstanding (including amounts requested) during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date. The fronting fee shall be payable quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which a Fronting Bank's commitment to make Fronted Loans shall terminate. 6.12.2. INDEMNITIES. Each of the Lenders severally undertakes to keep the Fronting Banks indemnified as follows: (a) Each Lender irrevocably and unconditionally undertakes to pay to the Agent for the account of each Fronting Bank, on demand made by such Fronting Bank through the Agent: (i) such Lender's Revolving Credit Commitment Percentage of each amount which is expressed to be payable by any of the Borrowers to or for the account of such Fronting Bank by way of the payment, repayment or prepayment of any International Facility Loan and which the applicable Borrower fails to pay together with interest which has accrued with respect thereto, and (ii) such additional amount as shall be necessary to reimburse such Fronting Bank for its cost of funding the amount payable by such Lender as mentioned in sub-clause (i) above during the period beginning on the date the amount was due from the applicable Borrower and ending on the date demand is made on such Lender for payment of the same, 54 -47- and agrees that neither the Fronting Banks nor the Agent shall be obliged to make any demand on or take any proceedings against any of the Borrowers or any other person before making demand on such Lender hereunder. (b) Each Lender irrevocably and unconditionally undertakes to pay to the Agent for the account of each Fronting Bank on demand made by such Fronting Bank through the Agent at any time after an Event of Default has occurred and is continuing and has not been waived, its Revolving Credit Commitment Percentage of the Dollar Equivalent on the date of such payment of any outstanding International Facility Loan made by such Fronting Bank, and any such payment shall be in satisfaction pro tanto of the undertakings of such Lender contained in clause (a) above. (c) If a Lender fails to make payment on the due date therefor of any amount due from it for the account of a Fronting Bank pursuant to clauses (a) or (b) above (a "relevant amount") then (i) such Lender shall be deemed to be Delinquent Lender pursuant to Section 16.5.3, and (ii) until such Fronting Bank has received payment of the relevant amount in full (and without prejudice to any other rights or remedies of the Agent or such Fronting Bank in respect of such failure) such Fronting Bank shall be entitled to receive any interest which such Delinquent Lender would otherwise have been entitled to receive in respect of the Loan in respect of which the relevant amount is payable and (iii) such Delinquent Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents, and, for so long as such Lender remains a Delinquent Lender under this Section 6.12.2, the determination of the Majority Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such Delinquent Lender in the Loans to the extent of such participation. (d) The Borrowers jointly and severally, irrevocably and unconditionally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany), undertake (i) to reimburse to each Lender any amount paid by such Lender pursuant to this Section 6.12.2, and such amount shall be immediately due from the Borrowers to such Lender on the day such amount is paid by such Lender to the Agent, and shall accrue interest from such date until the date of payment in full of such amount (including all accrued and unpaid interest thereon) at the rate of interest applicable to overdue principal pursuant to Section 6.11.1, and (ii) to indemnify and hold each Lender harmless against all actions, proceedings, liabilities, claims, demands, costs and expenses of whatsoever nature and howsoever occurring which such Lender may properly incur, suffer or sustain by reason of its payment of such amount, including without limitation any losses (in Dollars) arising from fluctuations in currency rates between the date of any payment to the Agent by such Lender pursuant to clauses (a) or (b) above, and the date of such Lender's receipt of payment pursuant to this clause (d). 55 -48- 6.12.3. RESIGNATION OF FRONTING BANK. The DM Fronting Bank or the Sterling Fronting Bank may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and TransTechnology. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor DM Fronting Bank or Sterling Fronting Bank, as the case may be. Unless a Default or Event of Default shall have occurred and be continuing, such successor Fronting Bank shall be reasonably acceptable to TransTechnology. If no successor Fronting Bank shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Fronting Bank's giving of notice of resignation, then the retiring Fronting Bank may, on behalf of the Banks, appoint a successor Fronting Bank, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Ratings Group, and having either the ability to fund DM Loans from a lending office located in Germany, if the retiring Fronting Bank is the DM Fronting Bank, or the ability to fund Sterling Loans from a lending office located in England, if the retiring Fronting Bank is the Sterling Fronting Bank. Upon the acceptance of any appointment as a Fronting Bank hereunder by a successor Fronting Bank, such successor Fronting Bank shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Fronting Bank, and the retiring Fronting Bank shall be discharged from its duties and obligations hereunder. After any retiring Fronting Bank's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as a Fronting Bank. 6.12.4. NOTICE TO LENDERS. Not less than once each month the Agent will notify each of the Lenders as to such Lender's balance of all Fronted Loans outstanding at such time. 6.13. LIMITS ON NUMBER OF SEPARATE EUROCURRENCY RATE LOANS. No more than ten (10) separate Eurocurrency Rate Loans (whether outstanding with respect to the Revolving Credit Loans or International Facility Loans) may be outstanding under this Credit Agreement at any one time. Notwithstanding the foregoing, during the period commencing on the Closing Date and ending on the date which is the earlier of (i) sixty (60) days after the Closing Date and (ii) the date on which the Agent notifies TransTechnology in writing that syndication of the Loans hereunder has been completed, there shall be no more than three (3) Eurocurrency Rate Loans in effect, the Interest Periods of which shall be no longer than one (1) month, and each of which shall terminate no later than the sixtieth (60th) day after the Closing Date. 7. COLLATERAL SECURITY AND GUARANTIES. 7.1. SECURITY OF BORROWERS. All of the Obligations shall be secured by a perfected first priority security interest (subject only to Permitted Liens entitled to 56 -49- priority under applicable law) in all of the assets of TransTechnology, whether now owned or hereafter acquired, pursuant to the terms of the Security Documents to which TransTechnology is a party. The Obligations of GmbH shall be secured by a security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets of GmbH and SO OHG, whether now owned or hereafter acquired, pursuant to the terms of the German Security Documents. The Obligations of Limited shall be secured by a first priority fixed and floating charge over all of the assets of Limited, whether now owned or hereafter acquired, pursuant to the terms of the Debenture. 7.2. GUARANTIES AND SECURITY OF SUBSIDIARIES. The Obligations shall also be guaranteed pursuant to the terms of the Guaranties. The obligations of each of the Guarantors shall be in turn secured by a perfected first priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets of each such Guarantor, whether now owned or hereafter acquired, pursuant to the terms of the Security Documents to which each such Guarantor is a party. 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, a Fronting Bank acting on behalf of the Agent, 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 or such Fronting Bank 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 or such Fronting Bank shall release the original certificates or other instruments delivered to it 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 57 -50- 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. 8. REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and severally represent and warrant to the Lenders and the Agent, at the Closing Date and on each Acquisition Closing Date after giving effect to the Approved Acquisition occurring thereon, as follows: 8.1. CORPORATE AUTHORITY. 8.1.1. INCORPORATION; GOOD STANDING. Each of the Borrowers and its respective Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its place of incorporation, (ii) has all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a materially adverse effect on the business, assets or financial condition of such Borrower or Subsidiary. 8.1.2. AUTHORIZATION. The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which the Borrowers or any of their Subsidiaries are or are to become a party and the transactions contemplated hereby and thereby (i) are within the corporate authority of such Person, (ii) have been duly authorized by all necessary corporate proceedings, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which any of the Borrowers or their Subsidiaries, or any of the assets of any of the Borrowers or their Subsidiaries, are subject or any judgment, order, writ, injunction, license or permit applicable to any of the Borrowers or their Subsidiaries and (iv) do not conflict with any provision of the corporate charter, bylaws or memorandum and articles of association of, or any agreement or other instrument binding upon, any of the Borrowers or their Subsidiaries. 8.1.3. ENFORCEABILITY. The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrowers or any of their Subsidiaries are or are to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 58 -51- 8.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by each of the Borrowers and their respective Subsidiaries of this Credit Agreement, the other Loan Documents and the Acquisition Documents to which any of the Borrowers or any of their Subsidiaries are or are to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained. 8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 8.3 hereto, (a) TransTechnology and its respective Subsidiaries own all of the assets reflected in the consolidated balance sheet of TransTechnology and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date) subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens, and (b) all of TransTechnology's and its respective Subsidiaries' assets are reflected in the consolidated balance sheet as at the Balance Sheet Date described in Section 8.4.1. 8.4. FINANCIAL STATEMENTS AND PROJECTIONS. 8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the Lenders a consolidated balance sheet of TransTechnology and its Subsidiaries as at the Balance Sheet Date, and a consolidated statement of income of TransTechnology and its Subsidiaries for the fiscal year then ended, certified by Deloitte & Touche LLP. Such balance sheet and statement of income have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of TransTechnology as at the close of business on the date thereof and the results of operations for the fiscal year then ended. There are no contingent liabilities of TransTechnology or any of its Subsidiaries as of such date involving material amounts, known to the officers of TransTechnology, which were not disclosed in such balance sheet and the notes related thereto. 8.4.2. PROJECTIONS. There has been furnished to each of the Lenders projections (dated July 1, 1998) of the annual operating budgets of TransTechnology and its Subsidiaries on a consolidated basis, balance sheets and cash flow statements for the 1999 to 2003 fiscal years (the "Projections"), which fairly disclose all assumptions made with respect to general economic, financial and market conditions used in their formulation. To the knowledge of TransTechnology, no facts exist that (individually or in the aggregate) would result in any material change in any of the Projections. The Projections are based upon reasonable estimates and assumptions, have been prepared on the basis of the assumptions stated therein and reflect the reasonable estimates of TransTechnology of the results of operations and other information projected therein. 59 -52- 8.5. NO MATERIAL CHANGES, ETC. (a) Since the Balance Sheet Date there has occurred no materially adverse change in the financial condition or business of TransTechnology or any of its Subsidiaries or any material assets of TransTechnology or any of its Subsidiaries as shown on or reflected in the consolidated balance sheet of TransTechnology and its Subsidiaries as at the Balance Sheet Date, or the consolidated statement of income for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of TransTechnology or any of its Subsidiaries or any material assets of TransTechnology or any of its Subsidiaries. Since the Balance Sheet Date, TransTechnology has not made any Distribution except for its regular quarterly dividend of $407,683 paid on June 1, 1998. (b) Each of the Borrowers and each of their Subsidiaries (before and after giving effect to the transactions contemplated by this Credit Agreement and the other Loan Documents) (i) is solvent, (ii) has assets having a fair value in excess of its liabilities, (iii) has assets having a fair value in excess of the amount required to pay its liabilities on existing debts as such debts become absolute and matured, and (iv) has, and expects to continue to have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection with the operation of its business as such debts mature. 8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrowers and each of their Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others. 8.7. LITIGATION. Except as set forth in Schedule 8.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or threatened against any of the Borrowers or their Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of any of the Borrowers or their Subsidiaries or materially impair the right of any of the Borrowers or their Subsidiaries to carry on business substantially as now conducted by them, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrowers and their Subsidiaries, or which question the validity of this Credit Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto. 8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Borrowers nor any of their Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of any of the Borrowers or their Subsidiaries. None of the Borrowers nor any of their Subsidiaries is a party to any contract or agreement that is in default or 60 -53- has or is expected, in the judgment of the Borrowers' officers, to have any materially adverse effect on the business of any of the Borrowers or their Subsidiaries. 8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the Borrowers nor any of their Subsidiaries is in violation of any provision of its charter documents, bylaws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, act, statute, license, rule, regulation or other law, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of any of the Borrowers or their Subsidiaries. 8.10. TAX STATUS. Except as disclosed on Schedule 8.10 hereto, each of the Borrowers and its Subsidiaries (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (ii) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (iii) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrowers know of no basis for any such claim. 8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the Borrowers nor any of their Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor are any of the Borrowers or their Subsidiaries an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. 8.13. ABSENCE OF FINANCING STATEMENTS, ETC. There is no financing statement, security agreement, chattel mortgage, real estate mortgage, lease or other document filed or recorded with any filing records, registry or other public office, or otherwise, that purports to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of any of the Borrowers or their Subsidiaries or any rights relating thereto, except with respect to Permitted Liens. 8.14. PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Agent's security interests in and charges over the Collateral. The Collateral and the Agent's rights with respect to the Collateral are not subject to 61 -54- any material setoff, claims, withholdings or other defenses. The Borrowers or their Subsidiaries, as specified in the Security Documents, are the owners of the Collateral free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. 8.15. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant to which any of the Borrowers or their Subsidiaries or any officer, director or employee of such Borrower or Subsidiary makes payments in the ordinary course of business upon terms no less favorable than such Borrowers, Subsidiaries, officers, directors or employees could obtain from third parties, none of the officers, directors, or employees of any of the Borrowers or their Subsidiaries is presently a party to any transaction with any of the Borrowers or their Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of any Borrower, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 8.16. EMPLOYEE BENEFIT PLANS. 8.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained and operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. TransTechnology has heretofore delivered to the Agent the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under Section 103(d) of ERISA, with respect to each Guaranteed Pension Plan. 8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA). TransTechnology or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of TransTechnology or such ERISA Affiliate without liability to any Person. 8.16.3. GUARANTEED PENSION PLANS. Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan. No liability to the PBGC (other than required insurance premiums, all of which 62 -55- have been paid) has been incurred by TransTechnology or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans, disregarding for this purpose the benefit liabilities and assets of any Guaranteed Pension Plan with assets in excess of benefit liabilities. 8.16.4. MULTIEMPLOYER PLANS. Other than (a) the Electronics Local 431 Pension Fund relating to employees of Seeger Inc., a Subsidiary of TransTechnology, and (b) the Western Pennsylvania Teamster and Employers Pension Fund relating to employees of TransTechnology's Breeze-Industrial division, neither TransTechnology nor any ERISA Affiliate is a member of any Multiemployer Plan. Neither TransTechnology nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither TransTechnology nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. 8.16.5. COMPLIANCE WITH EMPLOYMENT BENEFIT LAWS. Except as set forth in Schedule 8.16.5 hereto, none of the Borrowers nor any of their Subsidiaries is in violation of any material provision of any applicable pension, retirement funding or employee benefit legislation in any jurisdiction. 8.17. USE OF PROCEEDS. The proceeds of the Loans shall be used to refinance certain Indebtedness of the Borrowers under the Original Credit Agreement, to finance Approved Acquisitions and for working capital and general corporate purposes of the Borrowers. TransTechnology will obtain Letters of Credit solely for working capital and general corporate purposes. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. No portion of the proceeds of any Loans is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of (a) knowingly purchasing, or providing credit support for the purchase of, Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (b) knowingly purchasing, or providing credit support for the purchase of, during the underwriting or 63 -56- placement period, any Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (c) making, or providing credit support for the making of, payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Borrowers or any Subsidiary or other Affiliate of any of the Borrowers. 8.18. ENVIRONMENTAL COMPLIANCE. Each of the Borrowers and their Subsidiaries has taken all necessary steps to investigate the past and present condition and usage of the Real Estate and the operations conducted thereon and, based upon such diligent investigation, has determined that, except as set forth on Schedule 8.18 attached hereto: (a) none of the Borrowers, their Subsidiaries or any operator of the Real Estate or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any European Union, national, federal, state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (hereinafter "Environmental Laws"), which violation would have a material adverse effect or the business, assets or financial condition of any of the Borrowers or their Subsidiaries or the consummation of the transactions referred to in this Agreement; (b) the Borrowers and their Subsidiaries have conducted all business operations on the Real Estate and continue to operate and maintain their businesses in compliance in all material respects with all applicable Environmental Laws and any other European Union, national, federal, state and local laws, rules and regulation relating to air emissions, water discharge, noise emissions, solid, or liquid waste disposal, hazardous waste, or materials, or other environmental, health or safety matters and there are no outstanding citations, notices, or order of non-compliance issued to any of the Borrowers or their Subsidiaries, or relating to the respective businesses, assets, Real Estate, other property, leaseholds, or equipment of any of the Borrowers or their Subsidiaries under any such laws, rules or regulations; and (c) None of the Borrowers and their Subsidiaries, any Mortgaged Property and any of the other Real Estate is subject to any applicable environmental law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a 64 -57- condition to the recording of any Mortgage or to the effectiveness of any other transactions contemplated hereby. 8.19. SUBSIDIARIES, ETC. A complete and correct list of the Subsidiaries of each of the Borrowers and the jurisdictions of their incorporation as of the Closing Date is set forth on Schedule 8.19 hereto. Except as set forth on Schedule 8.19 hereto, none of the Borrowers nor any of their Subsidiaries is engaged in any joint venture or partnership with any other Person. 8.20. BANK ACCOUNTS. Schedule 8.20 sets forth the account numbers and location of all bank accounts of each of the Borrowers and their Subsidiaries. 8.21. YEAR 2000 COMPLIANCE. The Borrowers and their Subsidiaries have undertaken a review, the extent of which the Borrowers believe to be commercially reasonable, of their critical business and operational systems which could be adversely affected by, and have developed a program to address on a timely basis, the "Year 2000 Problem" (i.e., the risk that computer applications used by the Borrowers or any of their Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon such review and the implementation of such program, the Borrowers reasonably believe that the "Year 2000 Problem" will not have any materially adverse effect on the business or financial condition of the Borrowers or any of their Subsidiaries. 9. AFFIRMATIVE COVENANTS OF THE BORROWERS. Each of the Borrowers covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letters of Credit: 9.1. PUNCTUAL PAYMENT. Each of the Borrowers will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the commitment fees, the Agent's fee, the fronting fee and all other amounts provided for in this Credit Agreement and the other Loan Documents to which any of the Borrowers or their Subsidiaries is a party, all in accordance with the terms of this Credit Agreement and such other Loan Documents. 9.2. MAINTENANCE OF OFFICES. (a) TransTechnology and each of its Domestic Subsidiaries will maintain its chief executive office in Liberty Corner, New Jersey, or at such other place in the United States of America as TransTechnology shall designate upon written notice to the Agent, where notices, presentations and demands to or upon TransTechnology or such Subsidiary in respect of the Loan Documents to which TransTechnology or such Subsidiary is a party may be given or made. (b) GmbH will maintain its chief executive office in Konigstein, Germany, or at such other place in Germany as GmbH shall designate upon written notice to the Agent and the DM Fronting Bank, where notices, presentations and demands to or upon GmbH in respect of the Loan Documents to which GmbH is a party may be given or made. 65 -58- (c) Limited will maintain its registered office in Bingley, Yorkshire, or at such other place in England as Limited shall designate upon written notice to the Agent and the Sterling Fronting Bank, where notices, presentations and demands to or upon Limited in respect of the Loan Documents to which Limited is a party may be given or made. 9.3. RECORDS AND ACCOUNTS. Each of the Borrowers will, and will cause each of its Subsidiaries to, (a) if such Borrower or Subsidiary is located in the United States, keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) if such Borrower or Subsidiary is located outside the United States, keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles in the country in which such Borrower or Subsidiary, as the case may be, is located. Each of the Borrowers will maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves. 9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. Trans-Technology will deliver to each of the Lenders: (a) as soon as practicable, but in any event not later than one hundred (100) days after the end of each fiscal year of TransTechnology, the consolidated balance sheet of TransTechnology and its Subsidiaries and the consolidating balance sheet of TransTechnology and its Subsidiaries, each as at the end of such year, and the related consolidated and consolidating statements of income and consolidated statement of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated and consolidating statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and certified (as to the consolidated statements) without qualification by Deloitte & Touche LLP or by other independent certified public accountants satisfactory to the Agent, together with a written statement from such accountants to the effect that they have read a copy of this Credit Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided that such accountants shall not be liable to the Lenders for failure to obtain knowledge of any Default or Event of Default; 66 -59- (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the fiscal quarters of TransTechnology, copies of the unaudited consolidated balance sheet of TransTechnology and its Subsidiaries and the unaudited consolidating balance sheet of TransTechnology and its Subsidiaries, each as at the end of such quarter, and the related consolidated and consolidating statements of income and consolidated statement of cash flow for the portion of TransTechnology's fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of TransTechnology that the information contained in such financial statements fairly presents the financial position of TransTechnology and its Subsidiaries on the date thereof (subject to year-end adjustments); (c) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officer of TransTechnology in substantially the form of Exhibit C hereto and setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 11 and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (d) contemporaneously with the filing or mailing thereof, copies of all material filed with the Securities and Exchange Commission or sent to the stockholders of TransTechnology which is either of a financial nature or addresses the Year 2000 Problem; (e) by April 30 of each year, the annual budget of TransTechnology and its Subsidiaries for the next fiscal year; and (f) from time to time such other financial data and information (including accountants' management letters) as the Agent or any Lender may reasonably request. 9.5. NOTICES. 9.5.1. DEFAULTS. Each of the Borrowers will promptly notify the Agent and each of the Lenders in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Credit Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which any of the Borrowers or their Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, each of the Borrowers shall forthwith give written notice thereof to the Agent and each of the Lenders, describing the notice or action and the nature of the claimed default. 67 -60- 9.5.2. ENVIRONMENTAL EVENTS. Each of the Borrowers will promptly give notice to the Agent and each of the Lenders (i) of any violation of any Environmental Law that any of the Borrowers or their Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (ii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, or any federal, state or local environmental agency or board, that has the potential to materially affect the assets, liabilities, financial conditions or operations of any of the Borrowers or their Subsidiaries, or the Agent's mortgages, deeds of trust or security interests pursuant to the Security Documents. 9.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. Each of the Borrowers will, immediately upon becoming aware thereof, notify the Agent and each of the Lenders in writing of any setoff, claims (including, with respect to the Real Estate, environmental claims), withholdings or other defenses to which any of the Collateral, or the Agent's rights with respect to the Collateral, are subject. 9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. Each of the Borrowers will, and will cause each of its Subsidiaries to, give notice to the Agent and each of the Lenders in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting any of the Borrowers or their Subsidiaries or to which any of the Borrowers or their Subsidiaries is or becomes a party involving an uninsured claim against any of the Borrowers or their Subsidiaries that could reasonably be expected to have a materially adverse effect on any of the Borrowers or their Subsidiaries and stating the nature and status of such litigation or proceedings. Each of the Borrowers will, and will cause each of its Subsidiaries to, give notice to the Agent and each of the Lenders, in writing, in form and detail satisfactory to the Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against such Borrower or any of its Subsidiaries in an amount in excess of $250,000. 9.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Each of the Borrowers will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and those of its Subsidiaries. Each of the Borrowers (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of such Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (iii) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in related businesses; provided that 68 -61- nothing in this Section 9.6 shall prevent any Borrower from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of such Borrower, desirable in the conduct of its or their business and that do not in the aggregate materially adversely affect the business of any of the Borrowers and their Subsidiaries on a consolidated basis. 9.7. INSURANCE. Each of the Borrowers will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Agreements, including provisions naming the Agent as additional loss payee and providing for a minimum thirty (30) days' notice to the Agent prior to cancellation. Each of the Borrowers will, and will cause each of its Subsidiaries to, maintain insurance on the Mortgaged Properties in accordance with the terms of the Mortgages. Upon reasonable request from the Agent, the Borrowers shall furnish the Agent from time to time with information concerning the Borrowers' and their Subsidiaries' insurance, including (when requested) copies of the certificates of insurance evidencing such insurance. 9.8. TAXES. Each of the Borrowers will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if such contesting Borrower or Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided further that each of the Borrowers and its Subsidiaries will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor. 9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. 9.9.1. GENERAL. Each of the Borrowers shall permit the Lenders, through the Agent or any of the Lenders' other designated representatives, to visit and inspect any of the properties of such Borrower and any of its Subsidiaries, to examine the books of account of such Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of such Borrower and its Subsidiaries with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Agent or any Lender may reasonably request. Upon the request of the Agent, TransTechnology will 69 -62- obtain and deliver to the Agent a report of an independent collateral auditor satisfactory to the Agent (which may be affiliated with one of the Lenders) setting forth such information regarding the Collateral as the Agent may reasonably require. All such collateral value reports shall be conducted and made at the expense of TransTechnology. If an Event of Default shall have occurred and be continuing, each of the Borrowers upon the request of the Agent, will obtain and deliver to the Agent appraisal reports in form and substance and from appraisers satisfactory to the Agent, stating (i) the then current fair market, orderly liquidation and forced liquidation values of all or any portion of the equipment or real estate owned by such Borrower or any of its Subsidiaries and (ii) the then current business value of such Borrower and its Subsidiaries. All such appraisals shall be conducted and made at the expense of the Borrower obtaining and delivering such appraisal reports. 9.9.2. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default shall have occurred, the Agent may, from time to time, in its discretion for the purpose of assessing and ensuring the value of any Mortgaged Property, obtain one or more environmental assessments or audits of such Mortgaged Property prepared by a hydrogeologist, an independent engineer or other qualified consultant or expert approved by the Agent to evaluate or confirm (i) whether any Hazardous Materials are present in the soil or water at such Mortgaged Property and (ii) whether the use and operation of such Mortgaged Property complies with all Environmental Laws. Environmental assessments may include without limitation detailed visual inspections of such Mortgaged Property including any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or analyses as the Agent deems appropriate. All such environmental assessments shall be conducted at the expense of TransTechnology. 9.9.3. COMMUNICATIONS WITH ACCOUNTANTS. Each of the Borrowers authorizes the Agent and, if accompanied by the Agent, the Lenders to communicate directly with such Borrower's independent certified public accountants, provided that TransTechnology shall have received advance notice of any such communications, and authorizes such accountants to disclose to the Agent and the Lenders any and all financial statements and other supporting financial documents and schedules including copies of any management letter with respect to the business, financial condition and other affairs of such Borrower or any of its Subsidiaries. At the request of the Agent, each of the Borrowers shall deliver a letter addressed to such accountants instructing them to comply with the provisions of this Section 9.9.3. 9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of the Borrowers will, and will cause each of its Subsidiaries to, comply in all material respects with (i) the applicable laws and regulations wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its charter documents and, in the event such by-laws exist, its by-laws, (iii) all agreements and 70 -63- instruments by which it or any of its properties may be bound and (iv) all applicable decrees, orders, and judgments. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that any of the Borrowers or their Subsidiaries may fulfill any of its obligations hereunder or any of the other Loan Documents to which such Borrower or Subsidiary is a party, such Borrower will, or (as the case may be) will cause such Subsidiary to, immediately take or cause to be taken all reasonable steps within the power of such Borrower or Subsidiary to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Lenders with evidence thereof. 9.11. EMPLOYEE BENEFIT PLANS. TransTechnology will (i) promptly upon filing the same with the United States Department of Labor or Internal Revenue Service, upon request of the Agent, furnish to the Agent a copy of the most recent actuarial statement required to be submitted under Section 103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to the Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA. Each of the Borrowers and each of their Subsidiaries shall comply with all applicable pension, retirement funding or employee benefit legislation in any jurisdiction. 9.12. USE OF PROCEEDS. The proceeds of the Loans shall be used to refinance certain Indebtedness of the Borrowers under the Original Credit Agreement, to finance Approved Acquisitions, and for working capital and general corporate purposes of the Borrowers. TransTechnology will obtain Letters of Credit solely for working capital and general corporate purposes. 9.13. ADDITIONAL MORTGAGED PROPERTY. If, after the Closing Date, any of the Borrowers or their Subsidiaries acquires or leases for a term in excess of five (5) years real estate used as a manufacturing or warehouse facility, such Borrower shall, or shall, upon the request of the Agent or the Majority Lenders, cause such Subsidiary to, forthwith deliver to the Agent a fully executed mortgage or deed of trust over such real estate, in form and substance satisfactory to the Agent, together with title insurance policies, surveys, evidences of insurance with the Agent named as loss payee and additional insured, legal opinions and other documents and certificates with respect to such real estate as was required for Real Estate of such Borrower or Subsidiary as of the Closing Date. Each of the Borrowers further agrees that, following the taking of such actions with respect to such real estate, the Agent shall have for the benefit of the Lenders and the Agent a valid and enforceable first priority mortgage or deed of trust over such real estate, free and clear of all defects and encumbrances except for Permitted Liens. 9.14. BANK ACCOUNTS. Each of the Borrowers will, and will cause its Subsidiaries to, together with the employees, agents and other Persons acting on behalf of such Borrower or Subsidiary, receive and hold in trust for the Agent and the Lenders all payments constituting proceeds of accounts receivable or other 71 -64- Collateral which come into their possession or under their control and, immediately upon receipt thereof, deposit such payments in the form received, with any appropriate endorsements, in one of the accounts designated as a lockbox or central depository account on Schedule 8.20. 9.15. INTEREST RATE PROTECTION. With effect from a date no later than December 31, 1998, TransTechnology will maintain interest rate protection arrangements on terms and conditions satisfactory to the Agent with respect to a principal amount of at least $50,000,000 for a period of three (3) years from the date of implementation of such arrangements; provided that if prior to December 31, 1998, TransTechnology shall have issued at least $50,000,000 of fixed rate debt, the requirement for interest rate protection arrangements detailed in this Section 9.15 will be considered met. 9.16. FURTHER ASSURANCES. Each of the Borrowers will, and will cause each of its Subsidiaries to, cooperate with the Lenders and the Agent and execute such further instruments and documents as the Lenders or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents. 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. Each of the Borrowers covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligations to issue, extend or renew any Letters of Credit: 10.1. RESTRICTIONS ON INDEBTEDNESS. The Borrowers will not, and will not permit any of their Subsidiaries to, create, incur, assume, guarantee, or be or remain liable, contingently or otherwise, with respect to, any Indebtedness other than: (a) Indebtedness to the Lenders and the Agent arising under any of the Loan Documents; (b) current liabilities of any of the Borrowers or their Subsidiaries incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 9.8; (d) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as 72 -65- execution is not levied thereunder or in respect of which any of the Borrowers or Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (f) Subordinated Debt not exceeding $125,000,000 in aggregate principal amount at any time outstanding; (g) obligations under Capitalized Leases not exceeding $8,000,000 in aggregate amount at any time outstanding; (h) Indebtedness incurred in connection with the acquisition after the date hereof of any real or personal property by any of the Borrowers or their Subsidiaries, provided that the aggregate principal amount of such Indebtedness of TransTechnology and its Subsidiaries shall not exceed the aggregate amount of $5,000,000 at any one time; (i) Indebtedness existing on the date hereof and listed and described on Schedule 10.1 hereto; and (j) Indebtedness of any Subsidiary of TransTechnology to TransTechnology; provided that such Indebtedness shall be evidenced by promissory notes duly executed by the obligor, and all such intercompany notes shall be pledged and delivered to the Agent and be in form and substance satisfactory to the Agent. 10.2. RESTRICTIONS ON LIENS. The Borrowers will not, and will not permit any of their Subsidiaries to, (i) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (ii) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (iii) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (iv) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (v) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; provided that the Borrowers and their Subsidiaries may create or incur or suffer to be created or incurred or to exist: 73 -66- (a) liens in favor of a Borrower on all or part of the assets of Subsidiaries of such Borrower securing Indebtedness owing by such Subsidiaries to such Borrower; (b) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties other than Mortgaged Properties to secure claims for labor, material or supplies in respect of obligations not overdue or delinquent; (c) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations; (d) liens on properties other than Mortgaged Properties in respect of judgments or awards, the Indebtedness with respect to which is permitted by Section 10.1(d); (e) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties other than Mortgaged Properties, in existence less than 120 days from the date of creation thereof in respect of obligations not overdue or delinquent; (f) encumbrances on Real Estate other than the Mortgaged Property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which a Borrower or a Subsidiary of a Borrower is a party, and other minor liens or encumbrances none of which in the opinion of the Borrowers interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrowers and their Subsidiaries, which defects do not individually or in the aggregate have a materially adverse effect on the business of any Borrower individually or of TransTechnology and its Subsidiaries on a consolidated basis; (g) liens existing on the date hereof and listed on Schedule 10.2 hereto; (h) security interests in, or purchase money mortgages on, real or personal property other than Mortgaged Properties acquired after the date hereof to secure Indebtedness of the type and amount permitted by Section 10.1(h) and incurred in connection with the acquisition of such property, which security interests or mortgages cover only the real or personal property so acquired (or comparable security interests, such as collateral assignments or retention of title agreements entered into in the ordinary course of business); (i) liens and encumbrances on each Mortgaged Property as and to the extent permitted by the Mortgage applicable thereto; and 74 -67- (j) liens in favor of the Agent for the benefit of the Lenders and the Agent under the Loan Documents. 10.3. RESTRICTIONS ON INVESTMENTS. The Borrowers will not, and will not permit any of their Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in: (a) marketable direct or guaranteed obligations of the United States of America, the Federal Republic of Germany or the United Kingdom that mature within one (1) year from the date of purchase; (b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $1,000,000,000 or, with respect to Subsidiaries of TransTechnology located outside the United States, deposit accounts with local banks having total assets in excess of $1,000,000,000 or the local currency equivalent thereof; (c) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's Investors Services, Inc., and not less than "A 1" if rated by Standard and Poor's; (d) Investments existing on the date hereof and listed on Schedule 10.3 hereto; (e) Investments with respect to Indebtedness permitted by Section 10.1(j) so long as such entities remain Subsidiaries of TransTechnology; (f) Investments consisting of the Guaranties or Investments by TransTechnology in Subsidiaries of TransTechnology existing on the Closing Date; (g) Investments consisting of promissory notes received as proceeds of asset dispositions permitted by Section 10.5.2; (h) Investments consisting of loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $250,000 in the aggregate at any time outstanding; and (i) other Investments in an aggregate amount not in excess of $100,000; provided, however, that, with the exception of demand deposits referred to in Section 10.3(b) and loans and advances referred to in Section 10.3(h), such Investments will be considered Investments permitted by this Section 10.3 only if all actions have been taken to the satisfaction of the Agent to provide to the Agent, for the benefit of the 75 -68- Lenders and the Agent, a first priority perfected security interest in all of such Investments free of all encumbrances other than Permitted Liens. 10.4. DISTRIBUTIONS. TransTechnology will not make, or permit any of its Subsidiaries to make, any Distributions except that, so long as no Default or Event of Default has occurred and is continuing or would result therefrom. TransTechnology may make Distributions with respect to each fiscal quarter commencing on or after April 1, 1998, within ninety (90) days following the end of such fiscal quarter, provided that the aggregate amount of all Distributions declared and/or paid pursuant to this Section 10.4 with respect to each Reference Period ending after the date hereof, shall not exceed twenty-five percent (25%) of Consolidated Net Income for such Reference Period. 10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. 10.5.1. MERGERS AND ACQUISITIONS. The Borrowers will not, and will not permit any of their Subsidiaries to, become a party to any merger or consolidation, to convert any of the Borrowers or their Subsidiaries from one form of corporate organization or partnership to another, or agree to or effect any asset acquisition or stock acquisition, other than: (a) the acquisition of assets (other than assets which constitutes all or a substantial part of a business or division) in the ordinary course of business consistent with the past practices of the TransTechnology Group; (b) Approved Acquisitions, subject to fulfillment of the conditions set forth in the definition thereof; (c) the merger or consolidation of one or more of the Subsidiaries of TransTechnology with and into TransTechnology; or (d) the merger, conversion or consolidation of two or more Subsidiaries of TransTechnology, 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. 10.5.2. DISPOSITION OF ASSETS. The Borrowers will not, and will not permit any of their Subsidiaries to, become a party to or agree to or effect any disposition of assets, other than: (a) the disposition of assets (other than assets which constitutes all or a substantial part of a business or division) in the ordinary course of business, consistent with the past practices of the TransTechnology Group; 76 -69- (b) the disposition of the assets listed in Schedule 10.5.2, provided that (i) such disposition is for consideration equal to or greater than the fair market value of such assets, as determined by the management of the selling member of the TransTechnology Group in its reasonable discretion and (ii) the proceeds of any such disposition shall be paid to the Agent for the account of the Lenders, to be applied against the Loans in accordance with Section 4.3; and (c) the disposition of the assets identified on the most recent balance sheet of TransTechnology and its Subsidiaries as belonging to or employed in operations identified in such balance sheet as discontinued operations of the TransTechnology Group, provided that the proceeds of any such disposition shall be paid to the Agent for the account of the Lenders, to be applied against the Loans in accordance with Section 4.3; provided, however, that in the event of any disposition of assets specifically permitted pursuant to this Section 10.5.2, the Agent shall be required, upon the request of any of the Borrowers, to release any security interest in the Agent's favor on any such assets, and the Agent is hereby authorized to release any such security interest by each of the Lenders. 10.6. SALE AND LEASEBACK. The Borrowers will not, and will not permit any of their Subsidiaries to, enter into any arrangement, directly or indirectly, whereby any Borrower or Subsidiary of a Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that any member of the TransTechnology Group intends to use for substantially the same purpose as the property being sold or transferred. 10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrowers will not, and will not permit any of their Subsidiaries to, (i) construct or install on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (ii) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause any material release (i.e., releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) of Hazardous Substances on, upon or into the Real Estate, or (iii) otherwise conduct any activity at any Real Estate or use any Real Estate in any manner that would be in material violation of any Environmental Law or bring such Real Estate in material violation of any Environmental Law. 10.8. SUBORDINATED DEBT. Without the prior written consent of the Majority Lenders and the Agent, TransTechnology will not, and will not permit any of its Subsidiaries to: (a) amend or modify the provisions of any Subordinated Debt so as to affect the subordination of such Subordinated Debt to the Obligations, or accelerate the required payment dates or the maturity of such Subordinated Debt, or impose upon TransTechnology and its Subsidiaries materially more 77 -70- onerous or restrictive covenants, events of default or remedies, or otherwise and in similar fashion adversely affect the interests of the Lenders hereunder in any material respect; or (b) make any optional payment, prepayment, redemption or repurchase of any Subordinated Debt, including without limitation any payments on account of or for any sinking fund or other similar fund for the repurchase, retirement or redemption of Subordinated Debt, other than as required by the terms thereof and in accordance with the subordination provisions applicable thereto. 10.9. EMPLOYEE BENEFIT PLANS. Neither TransTechnology nor any ERISA Affiliate will: (a) engage in any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code which could result in a material liability for TransTechnology or any of its Subsidiaries; or (b) permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, whether or not such deficiency is or may be waived; or (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a lien or encumbrance on the assets of TransTechnology or any of its Subsidiaries pursuant to Section 302(f) or Section 4068 of ERISA; or (d) permit or take any action which would result in the aggregate benefit liabilities (with the meaning of Section 4001 of ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities. 10.10. BANK ACCOUNTS. TransTechnology will not, and will not permit any of its Subsidiaries to, (i) establish any bank accounts other than those listed on Schedule 8.20 without the Agent's prior written consent, (ii) violate directly or indirectly any bank agency or lock box agreement in favor of the Agent for the benefit of the Lenders and the Agent with respect to such account, or (iii) deposit into any of the payroll accounts listed on Schedule 8.20 any amounts in excess of amounts necessary to pay current payroll obligations from such accounts. 10.11. OPERATING LEASES. The Borrowers will not, and will not permit any of their Subsidiaries to, create, incur, assume, guarantee or remain liable for, contingently or otherwise, any Rental Obligations with respect to Operating Leases in excess of an aggregate amount of $4,500,000 scheduled to become due and payable in any fiscal year. 78 -71- 10.12. SO OHG PARTNERSHIP AGREEMENT. TransTechnology will not, and will not permit any of its Subsidiaries to, amend, supplement, restate or otherwise modify the Partnership Agreement of SO OHG as in effect as of October 27, 1995, in any way which adversely affects any of the security interests created by the German Security Documents or otherwise adversely affects the interest of the Agent or any of the Lenders, without the prior written consent of the Agent, the DM Fronting Bank and the Majority Lenders. 10.13. MAINTENANCE OF BUSINESS. The Borrowers will not, and will not permit any of their Subsidiaries to, materially change the business of such Borrower or Subsidiary from the Business. 11. FINANCIAL COVENANTS OF THE BORROWERS. The Borrowers jointly and severally covenant and agree that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letters of Credit: 11.1. CONSOLIDATED EBITDA TO CONSOLIDATED TOTAL INTEREST EXPENSE. TransTechnology will not permit the ratio of Consolidated EBITDA for any Reference Period ending on or before September 30, 1999, to Consolidated Total Interest Expense for such Reference Period to be less than 3.25:1, and will not permit the ration of Consolidated EBITDA for any Reference Period ending after September 30, 1999, to Consolidated Total Interest Expense for such Reference Period to be less than 3.50:1. 11.2. DEBT TO CAPITAL RATIO. TransTechnology will not permit Funded Indebtedness, at any time, as a percentage of the sum of Funded Indebtedness and Total Shareholders' Equity at such time, to exceed 60%. 11.3. LEVERAGE RATIO. TransTechnology will not permit the Leverage Ratio at any time to exceed 3.75:1. 11.4. MINIMUM NET WORTH. TransTechnology will not permit Consolidated Net Worth at any time to be less than $97,000,000, as such amount may be increased at the end of each fiscal quarter (commencing with the fiscal quarter ending on or around December 31, 1998), for the fiscal quarter thereafter, by the addition of seventy-five percent (75%) of Consolidated Net Income earned after September 30, 1998. 11.5. CAPITAL EXPENDITURES. TransTechnology will not make, or permit any Subsidiary of TransTechnology to make, Capital Expenditures in any fiscal year that exceed in the aggregate for such fiscal year the amount set forth for such fiscal year in the chart below: 79 -72-
Fiscal Year Amount ----------- ------ Ending on March 31, 1999 $11,800,000 Ending on March 31, 2000 $12,800,000 Ending on March 31, 2001 $14,800,000 Ending on March 31, 2002 $15,800,000 and thereafter
provided that, if during any fiscal year the amount of Capital Expenditures permitted for that fiscal year is not utilized, the unutilized amount may be utilized in any subsequent fiscal year, provided, however, that the aggregate amount of (i) the unutilized portion from any one fiscal year, plus (ii) any unutilized portion previously carried forward and which remains unutilized, which may be carried forward from one fiscal year to the subsequent fiscal year shall not exceed $2,000,000. For the purposes of this Section 11.5, Capital Expenditures shall not include (a) any amounts in respect of leases in effect on the Closing Date and classified at such time as Operating Leases, which shall have been reclassified as Capitalized Leases subsequent to the Closing Date, or (b) any amounts classified in the Projections on the Closing Date as goodwill with respect to Aerospace Rivet Manufacturers Corporation, a Subsidiary of TransTechnology, which shall have been reclassified so as to fall within the definition of Capital Expenditures subsequent to the Closing Date. 12. CLOSING CONDITIONS. The obligations of the Lenders to make the initial Revolving Credit Loans, of the Fronting Banks to make the initial International Facility Loans, and of the Issuing Bank to issue any initial Letters of Credit shall be subject to the satisfaction of the following conditions precedent on or prior to the Closing Date: 12.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. The Agent shall have received a fully executed copy of each such document. 12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Lenders shall have received from TransTechnology and each of its Subsidiaries a copy, certified by a duly authorized officer of such Person to be true and complete on the Closing Date, of each of (i) its charter or other incorporation documents as in effect on such date of certification, and (ii) its by-laws as in effect on such date. 80 -73- 12.3. CORPORATE ACTION. All corporate action necessary for the valid execution, delivery and performance by TransTechnology and each of its Subsidiaries of this Credit Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders. 12.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have received from TransTechnology and each of its Subsidiaries an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of TransTechnology or such Subsidiary, and giving the name and bearing a specimen signature of each individual who shall be authorized: (i) to sign, in the name and on behalf of each of TransTechnology and such Subsidiary, each of the Loan Documents and Acquisition Documents to which TransTechnology or such Subsidiary is or is to become a party; and (ii) in the case and the Borrowers, to make Loan Requests and Conversion Requests, to apply for Letters of Credit, and to give notices and to take other action on behalf of the Borrowers under the Loan Documents. 12.5. VALIDITY OF LIENS. The Security Documents shall be effective to create in favor of the Agent a legal, valid and enforceable first (except for Permitted Liens entitled to priority under applicable law) security interest in and lien upon the Collateral. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Agent to protect and preserve such security interests shall have been duly effected. The Agent shall have received evidence thereof in form and substance satisfactory to the Agent. 12.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall have received from each of TransTechnology and its Subsidiaries a completed and fully executed Perfection Certificate and the results of UCC searches or searches of any other relevant register of charges or commercial register with respect to the Collateral, indicating no liens other than Permitted Liens and otherwise in form and substance satisfactory to the Agent. 12.7. SURVEYS. The Agent shall have received a Survey of each Mortgaged Property as to which a survey has been conducted on or prior to the date hereof. 12.8. TITLE INSURANCE. The Agent shall have received a Title Policy covering each Mortgaged Property located in the United States (or commitments to issue such policies, with all conditions to issuance of the Title Policy deleted by an authorized agent of the Title Insurance Company) together with proof of payment of all fees and premiums for such policies, from the Title Insurance Company and in amounts satisfactory to the Agent, insuring the interest of the Agent and each of the Lenders as mortgagee under the Mortgages. 12.9. LANDLORD CONSENTS. TransTechnology and its Subsidiaries shall have delivered to the Agent all consents required for the Agent to receive, as part of the Security Documents, a collateral assignment of each material leasehold of personal property, together in each case with such estoppel certificates as the Agent may request. 81 -74- 12.10. CERTIFICATES OF INSURANCE. The Agent shall have received (i) a certificate of insurance from an independent insurance broker dated as of the Closing Date, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the insurance obtained in accordance with the provisions of the Security Agreements and (ii) certified copies of all policies evidencing such insurance (or certificates therefore signed by the insurer or an agent authorized to bind the insurer). 12.11. BANK AGENCY AGREEMENTS. The Agent shall have received an agreement, in form and substance satisfactory to the Agent, from each bank at which TransTechnology or any of its Subsidiaries maintains depository accounts (including bank agency or lock box agreements) concerning the Agent's interest for the benefit of the Lenders and the Agent in such accounts. 12.12. HAZARDOUS WASTE ASSESSMENTS. The Agent shall have received hazardous waste site assessments from environmental engineers or other documentation in form and substance satisfactory to the Agent, covering all Mortgaged Property and all other real property in respect of which TransTechnology or any of its Subsidiaries may have material liability, whether contingent or otherwise, for dumping or disposal of Hazardous Substances. 12.13. SOLVENCY CERTIFICATE. Each of the Lenders shall have received an officer's certificate of TransTechnology dated as of the Closing Date as to the solvency of TransTechnology and its Subsidiaries following the consummation of the transactions contemplated herein and in form and substance satisfactory to the Lenders. 12.14. OPINIONS OF COUNSEL. Each of the Lenders and the Agent shall have received a favorable legal opinion addressed to the Lenders and the Agent, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Agent, from: (a) Hahn Loeser Parks LLP, counsel to TransTechnology and its Subsidiaries in the United States; (b) Jones, Day, Reavis & Pogue, counsel to TransTechnology and its Subsidiaries in the Federal Republic of Germany; (c) Eversheds, solicitors to Limited; and (d) if requested by the Agent such other local counsel to TransTechnology in any jurisdiction where any Collateral (including but not limited to the Mortgaged Property) is located. 12.15. PAYMENT OF FEES. TransTechnology shall have paid to the Agent the closing fee pursuant to Section 6.1 and shall have paid to the Arranger the structuring fee pursuant to Section 6.1. 82 -75- 13. CONDITIONS TO ALL BORROWINGS. The obligations of the Lenders to make any Revolving Credit Loans, of the Fronting Banks to make any International Facility Loans, and of the Issuing Bank to issue, extend or renew any Letter of Credit, in each case whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: 13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the representations and warranties of any of TransTechnology and its Subsidiaries contained in this Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such individual representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. Upon the request of the Agent, TransTechnology shall have delivered to the Agent a certificate of TransTechnology signed by an authorized officer of TransTechnology to such effect. 13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan pursuant to the provisions of this Credit Agreement, or to participate in the issuance, extension or renewal of such Letter of Credit or in the reasonable opinion of the Issuing Bank would make it illegal for the Issuing Bank to issue, extend or renew such Letter of Credit. 13.3. GOVERNMENTAL REGULATION. Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System or any other applicable regulatory or supervisory body. 13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Credit Agreement, the other Loan Documents, the Acquisition Documents and all other documents incident thereto shall be satisfactory in substance and in form to the Lenders and to the Agent and the Agent's Special Counsel, and the Lenders, the Agent and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request. 83 -76- 14. EVENTS OF DEFAULT; ACCELERATION; ETC. 14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) any of the Borrowers shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) any of the Borrowers or their Subsidiaries shall fail to pay any interest on the Loans, the commitment fee, any Letter of Credit Fee, the Agent's fee, the fronting fee, or other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) any of the Borrowers or their Subsidiaries shall fail to comply with any of its covenants contained in Section 9, 10 or 11 or any of the covenants contained in any of the Mortgages or in the Debenture; (d) any of the Borrowers or their Subsidiaries shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this Section 14.1 or those which by their terms expressly exclude any grace period for any non-compliance therewith) for fifteen (15) days after written notice of such failure has been given to TransTechnology by the Agent; (e) any representation or warranty of or any of the Borrowers or their Subsidiaries in this Credit Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (f) any of the Borrowers or their Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any Capitalized Leases, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received or in respect of any Capitalized Leases for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; (g) any of the Borrowers or their Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay 84 -77- or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of such Borrower or Subsidiary or of any substantial part of the assets of such Borrower or Subsidiary or shall commence any case or other proceeding relating to any of the Borrowers or their Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against or any of the Borrowers or their Subsidiaries and any of the Borrowers or their Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within forty-five (45) days following the filing thereof; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating any of the Borrowers or their Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any of the Borrowers or their Subsidiaries in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against any of the Borrowers or their Subsidiaries that, with other outstanding final judgments, undischarged, against the Borrowers and their Subsidiaries exceeds in the aggregate $1,000,000; (j) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded or the Agent's security interests, mortgages or liens in a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lenders (and, notwithstanding anything herein to the contrary, if any guaranty shall be cancelled, terminated, revoked or rescinded without the consent of the Lenders), or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of any of the Borrowers or their Subsidiaries party thereto or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (k) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Lenders shall have determined in their reasonable discretion that such event reasonably could 85 -78- be expected to result in liability of TransTechnology or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $250,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; (l) any of the Borrowers or their Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting any material part of its business and such order has a material adverse effect on the business or financial condition of such Borrower or Subsidiary; (m) there shall occur any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of any of the Borrowers or their Subsidiaries if such event or circumstance is not covered by business interruption insurance and would have a material adverse effect on the business or financial condition of such Borrower or Subsidiary; (n) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any of the Borrowers or their Subsidiaries if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business or financial condition of such Borrower or Subsidiary; (o) any of the Borrowers or their Subsidiaries shall be indicted for a state or federal crime, or any civil or criminal action shall otherwise have been brought against any of the Borrowers or their Subsidiaries, a punishment for which in any such case could include the forfeiture of any assets of such Borrower or Subsidiary having a fair market value in excess of $1,000,000; (p) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 25% or more of the outstanding shares of common stock of TransTechnology; or, during any period of twelve consecutive calendar months, individuals who were directors of TransTechnology on the first day of such period shall cease to constitute a majority of the board of directors of TransTechnology; 86 -79- then, and in any such event, so long as the same may be continuing, the Agent may, and upon the request of the Majority Lenders shall, by notice in writing to the Borrowers declare all amounts owing with respect to this Credit Agreement, the Loans, the Notes and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each of the Borrowers; provided that in the event of any Event of Default specified in Section 14.1(g) or 14.1(h), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Agent or any Lender. 14.2. TERMINATION OF COMMITMENT. If any one or more of the Events of Default specified in Section 14.1(g), Section 14.1(h) or Section 14.1(j) shall occur, any unused portion of the credit hereunder shall forthwith terminate and each of the Lenders (including the Fronting Banks) shall be relieved of all further obligations to make Loans to any of the Borrowers and the Issuing Bank shall be relieved of all further obligations to issue, extend or renew Letters of Credit. If any other Event of Default shall have occurred and be continuing, or if on any Drawdown Date or other date for issuing, extending or renewing any Letter of Credit the conditions precedent to the making of the Loans to be made on such Drawdown Date or (as the case may be) to issuing, extending or renewing such Letter of Credit on such other date are not satisfied the Agent may and, upon the request of the Majority Lenders, shall, by notice to the Borrowers, terminate the Commitments hereunder, and upon such notice being given such Commitments shall terminate immediately and each of the Lenders (including the Fronting Banks) shall be relieved of all further obligations to make Loans and the Issuing Bank shall be relieved of all further obligations to issue, extend or renew Letters of Credit. No termination of the Commitments shall relieve any of the Borrowers or their Subsidiaries of any of the Obligations. 14.3. REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Agent or the Majority Lenders shall have accelerated the maturity of the Loans pursuant to Section 14.1, each Lender, if owed any amount with respect to the Loans or the Reimbursement Obligations, may, with the consent of the Majority Lenders but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Lender are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Lender. No remedy herein conferred upon any Lender or the Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy herein or in any of the other Loan Documents and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under any of the other Loan Documents or now or hereafter existing at law or in equity or by statute or any other provision of law. 87 -80- 14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following the occurrence or during the continuance of any Default or Event of Default, the Agent or any Lender, as the case may be, receives any monies in connection with the enforcement of any the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent under this Credit Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Lenders may determine; provided, however, that distributions in respect of such obligations shall be made (i) pari passu among Obligations with respect to the Agent's fee payable pursuant to Section 6.2 and all other Obligations and (ii) Obligations owing to the Lenders with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Lenders pro rata; and provided, further, that the Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable; (c) Third, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Lenders and the Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of Massachusetts; and (d) Fourth, the excess, if any, shall be returned to the Borrowers or to such other Persons as are entitled thereto. 15. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Lenders to any of the Borrowers and any securities or other property of the Borrowers in the possession of such Lender may be applied to or set off by such Lender against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrowers to such Lender. Each of the Lenders agrees with each other Lender that (i) if an amount to be set off is to be applied to Indebtedness of a Borrower to such Lender, other than Indebtedness evidenced by the Notes held by 88 -81- such Lender or constituting Reimbursement Obligations owed to such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Lender or constituting Reimbursement Obligations owed to such Lender, and (ii) if such Lender shall receive from any of the Borrowers, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, or constituting Reimbursement Obligations owed to, such Lender by proceedings against any of the Borrowers at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by, or Reimbursement Obligations owed to, such Lender any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by, and Reimbursement Obligations owed to, all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it or Reimbursement Obligations owed it, its proportionate payment as contemplated by this Credit Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. 16. THE AGENT. 16.1. AUTHORIZATION. (a) The Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. (b) The relationship between the Agent and each of the Lenders is that of an independent contractor. The use of the term "Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Agent and each of the Lenders. Nothing contained in this Credit Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Agent and any of the Lenders. (c) As an independent contractor empowered by the Lenders to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Agent is nevertheless a "representative" of the Lenders, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Lenders and the Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation 89 -82- of the Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Lenders and the Agent. 16.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Credit Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrowers. Without limiting the foregoing, the Agent may appoint the Sterling Fronting Bank or any other financial institution with an office located within the United Kingdom as its agent to exercise within the United Kingdom, under the Agent's direction, any or all of the Agent's rights and duties under this Credit Agreement and the other Loan Documents, and the Agent may appoint the DM Fronting Bank or any other financial institution with an office located within Germany as its agent to exercise within Germany, under the Agent's direction, any or all of the Agent's rights and duties under this Credit Agreement and the other Loan Documents. Any Fronting Bank or other financial institution so appointed shall be entitled to the benefits of the provisions of this Section 16 and Section 17 to the same extent, and subject to the same limitations, as the Agent, for so long as such Fronting Bank or other financial institution acts in such capacity. 16.3. NO LIABILITY. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. 16.4. NO REPRESENTATIONS. The Agent shall not be responsible for the execution or validity or enforceability of this Credit Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrowers or any of their Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Notes or to inspect 90 -83- any of the properties, books or records of the Borrowers or any of their Subsidiaries. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by any of the Borrowers or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the credit worthiness or financial conditions of the Borrowers or any of their Subsidiaries. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. 16.5. PAYMENTS. 16.5.1. PAYMENTS TO AGENT. A payment by any of the Borrowers to the Agent hereunder or any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Agent agrees promptly to distribute to each Lender such Lender's pro rata share of payments received by the Agent for the account of the Lenders except as otherwise expressly provided herein or in any of the other Loan Documents. 16.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. 16.5.3. DELINQUENT LENDERS. Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Agent its pro rata share of any Loan or to purchase any Letter of Credit Participation, (ii) to make payment on the due date therefor of any amount due to any of the Fronting Banks under Section 6.12.2, or (iii) to comply with the provisions of Section 15 with respect to making dispositions and arrangements with the other Lenders, where such Lender's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a "Delinquent Lender") and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrowers, whether on account of outstanding Loans, Unpaid 91 -84- Reimbursement Obligations, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Lender hereby authorizes the Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations of the nondelinquent Lenders, the Lenders' respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. 16.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any Note or the purchaser of any Letter of Credit Participation as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. 16.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrowers as required by Section 17), and liabilities of every nature and character arising out of or related to this Credit Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent's willful misconduct or gross negligence. 16.8. AGENT AS LENDER. In its individual capacity, BankBoston shall have the same obligations and the same rights, powers and privileges in respect to its Revolving Credit Commitment and the Loans made by it, and as the holder of any of the Notes and as the purchaser of any Letter of Credit Participations, as it would have were it not also the Agent. 16.9. RESIGNATION OF AGENT. The Agent may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and TransTechnology. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Agent. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to TransTechnology. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Corporation. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become 92 -85- vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 17. EXPENSES. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to pay (i) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (ii) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Lenders (other than taxes based upon the Agent's or any Lender's net income) on or with respect to the transactions contemplated by this Credit Agreement (the Borrowers hereby agreeing to indemnify the Agent and each Lender with respect thereto), (iii) the reasonable fees, expenses and disbursements of the Agent's Special Counsel or any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (iv) the fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all title insurance premiums, asset and/or collateral examiners' and commercial finance examiners' fees and surveyor, engineering and appraisal charges, (v) any fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Agent in establishing, maintaining or handling agency accounts, lock box accounts and other accounts for the collection of any of the Collateral; (vi) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs, which attorneys may be employees of any Lender or the Agent, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Lender or the Agent in connection with (A) the enforcement of or preservation of rights under any of the Loan Documents against any of the Borrowers or their Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (B) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Lender's or the Agent's relationship with any of the Borrowers or their Subsidiaries and (vii) all reasonable fees, expenses and disbursements of any Lender or the Agent incurred in connection with UCC searches, searches of registers of charges and commercial or companies registers, UCC filings, mortgage recordings or other filings on recordings of security documents evidencing the Agent's lien on the Collateral. The covenants of this Section 17 shall survive payment or satisfaction of all other Obligations. 93 -86- 18. INDEMNIFICATION. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to indemnify and hold harmless the Agent and the Lenders from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (i) any actual or proposed use by any of the Borrowers or their Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (ii) the reversal or withdrawal of any provisional credits granted by the Agent or any Lender upon the transfer of funds from bank agency or lock box accounts or in connection with the provisional honoring of checks or other items, (iii) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of any of the Borrowers or their Subsidiaries comprised in the Collateral, (iv) any of the Borrowers or their Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents or (v) with respect to the Borrowers and their Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding. In litigation, or the preparation therefor, the Lenders and the Agent shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrowers jointly and severally agree to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrowers under this Section 18 are unenforceable for any reason, the Borrowers hereby jointly and severally agree to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this Section 18 shall survive payment or satisfaction in full of all other Obligations. 19. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of any of the Borrowers or their Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Lenders and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by any of the Lenders of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Credit Agreement or the Notes or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letter of Credit, and 94 -87- for such further time as may be otherwise expressly specified in this Credit Agreement. All statements contained in any certificate or other paper delivered to any Lender or the Agent at any time by or on behalf of TransTechnology or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by TransTechnology or such Subsidiary hereunder. 20. ASSIGNMENT AND PARTICIPATION. 20.1. CONDITIONS TO ASSIGNMENT. Except as provided herein, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations as a Lender under this Credit Agreement (including all or a portion of its Revolving Credit Commitment Percentage and Revolving Credit Commitment and the same portion of the Revolving Credit Loans at the time owing to it, the Revolving Credit Notes held by it and the same portion of its participating interest in the risk relating to any Letters of Credit or Fronted Loans); provided that (i) each of the Agent and, so long as no Default or Event of Default shall have occurred and be continuing, TransTechnology, shall have given its prior written consent to such assignment (such consent not to be unreasonably withheld), provided, further, however, that no such consent shall be required for any assignment to a Lender or an Affiliate of a Lender, (ii) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations as a Lender under this Credit Agreement, (iii) each assignment shall be in an amount that is at least $10,000,000 or a greater multiple of $5,000,000, and (iv) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of Exhibit D hereto (an "Assignment and Acceptance"), together with any Revolving Credit Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in any such Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in Section 20.3, be released from its obligations under this Credit Agreement. 20.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, the other Loan 95 -88- Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage, (b) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of TransTechnology and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by any of the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in Section 8.4 and Section 9.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Lender, the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement; (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as a Lender; (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; and (i) such assignee acknowledges that it has made arrangements with the assigning Lender satisfactory to such assignee with respect to its pro rata share of Letter of Credit Fees in respect of outstanding Letters of Credit. 20.3. REGISTER. The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "Register") for the 96 -89- recordation of (a) the names and addresses of the Lenders, and (b) the Revolving Credit Commitment Percentages and the principal amounts of the Revolving Credit Loans owing to, and the Letter of Credit Participations and participations in the risk related to the Fronted Loans purchased by, the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrowers and the Lenders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, other than the recordations of transfers from the original Lender, the assigning Lender agrees to pay to the Agent a registration fee in the sum of $3,500. 20.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (i) record the information contained therein in the Register, and (ii) give prompt notice thereof to TransTechnology and the Lenders (other than the assigning Lender). Within five (5) Business Days after receipt of such notice, TransTechnology, at its own expense, shall execute and deliver to the Agent in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note or Notes to the order of the assigning Lender in an amount equal to the amount retained by it hereunder as a Lender. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such in Assignment and Acceptance and shall otherwise be substantially the form of the assigned Notes. Upon the request of the recipient of new Notes or the Agent, within five (5) days of issuance of such new Notes pursuant to this Section 20.4, TransTechnology shall deliver an opinion of counsel, which may be the general counsel of TransTechnology, addressed to the recipients of the new Notes and the Agent, relating to the due authorization, execution and delivery of such new Notes and the legality, validity and binding effect thereof, in form and substance satisfactory to the recipients of the new Notes, the Agent and the Agent's Special Counsel. The surrendered Notes shall be cancelled and returned to TransTechnology. 20.5. PARTICIPATIONS. Each Lender may sell participations to one or more banks or other entities in all or a portion of such Lender's rights and obligations under this Credit Agreement and the other Loan Documents; provided that (i) each such participation shall be in an amount of not less than $1,000,000, (ii) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder to the Borrowers, and (iii) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of any of the Commitments of 97 -90- such Lender as it relates to such participant, reduce the amount of any commitment fees or Letter of Credit Fees to which such participant is entitled or extend any regularly scheduled payment date for principal or interest. 20.6. DISCLOSURE. The Borrowers agree that in addition to disclosures made in accordance with standard and customary banking practices any Lender may disclose information obtained by such Lender pursuant to this Credit Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (i) to treat in confidence such information unless such information otherwise becomes public knowledge, (ii) not to disclose such information to a third party, except as required by law or legal process and (iii) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation. 20.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH TRANSTECHNOLOGY. If any assignee Lender is an Affiliate of TransTechnology, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Agent pursuant to Section 14.1 or Section 14.2, and the determination of the Majority Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to such assignee Lender's interest in any of the Loans. If any Lender sells a participating interest in any of the Loans or Reimbursement Obligations to a participant, and such participant is TransTechnology or an Affiliate of TransTechnology, then such transferor Lender shall promptly notify the Agent of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Agent pursuant to Section 14.1 or Section 14.2 to the extent that such participation is beneficially owned by TransTechnology or any Affiliate of TransTechnology, and the determination of the Majority Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Loans to the extent of such participation. 20.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Lender shall retain its rights to be indemnified pursuant to Section 17 with respect to any claims or actions arising prior to the date of such assignment. If any assignee Lender is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to TransTechnology and the Agent certification as to its exemption from deduction or withholding of any United States federal income taxes. If the Reference Bank transfers all of its interest, rights and obligations under this Credit Agreement, the Agent shall, in consultation with TransTechnology and with the consent of 98 -91- TransTechnology and the Majority Lenders, appoint another Lender to act as the Reference Bank hereunder, and in the absence of such consent the Agent shall act as Reference Bank. Anything contained in this Section 20 to the contrary notwithstanding, any Lender may at any time pledge all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents. 20.9. ASSIGNMENT BY THE BORROWERS. None of the Borrowers shall assign or transfer any of its rights or obligations under any of the Loan Documents, without the prior written consent of each of the Lenders. 20.10. SYNDICATION. The Borrowers shall provide all information reasonably requested by the Arranger in form and substance reasonably satisfactory to the Arranger to complete the syndication of BankBoston's initial Commitment, including, without limitation, all information that is reasonably available and all projections prepared by or on behalf of the Borrowers relating to the transactions contemplated hereby. The Borrowers and their respective directors, officers, employees and agents shall, at the reasonable request of the Arranger meet with potential Lenders and provide such additional information as such Persons might reasonably request. The Borrowers agree that the option to borrow Eurodollar Rate Loans under the loan facilities set forth herein prior to completion of the syndication of BankBoston's initial Commitment is subject to the provisions of the second sentence of Section 6.13. 21. NOTICES, ETC. Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail or, if either the Person giving the notice or the Person being notified is outside the United States, by registered or recorded-delivery air mail, in each case postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: (a) if to any of the Borrowers, at TransTechnology Corporation, 150 Allen Road, Liberty Corner, New Jersey 07938, U.S.A., Attention: Gerald C. Harvey, Esq., Vice President, Secretary and General Counsel, or at such other address for notice as TransTechnology shall last have furnished in writing to the Person giving the notice; (b) if to the Agent, at 100 Federal Street, Boston, Massachusetts 02110, USA, Attention: Maura C. Wadlinger, Vice President, or such other address for notice as the Agent shall last have furnished in writing to the Person giving the notice; 99 -92- (c) if to any Lender or Fronting Bank, at such Lender's or Fronting Bank's address set forth on Schedule 1 hereto, or such other address for notice as such Lender or Fronting Bank shall have last furnished in writing to the Person giving the notice; and Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile, (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof, and (iii) if sent by registered or recorded-delivery air mail, on the fifth Business Day following the mailing thereof. 22. GOVERNING LAW. THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWERS AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND EACH OF THE BORROWERS CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON IT BY MAIL AT THE ADDRESS SPECIFIED IN Section 21. IN ADDITION, ANY SUIT OR OTHER REMEDY UNDER ANY OF THE SECURITY DOCUMENTS MAY BE BROUGHT IN THE JURISDICTION IN WHICH THE RESPECTIVE COLLATERAL OR MORTGAGED PROPERTY THEREUNDER IS LOCATED. EACH OF GMBH AND LIMITED HEREBY EXPRESSLY APPOINTS TRANSTECHNOLOGY AT THE ADDRESS SPECIFIED IN Section 21 AS ITS AGENT FOR SERVICE OF PROCESS. EACH OF THE BORROWERS HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 23. HEADINGS. The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 100 -93- 24. COUNTERPARTS. This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 25. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27. 26. WAIVER OF JURY TRIAL. Each of the Borrowers hereby waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Credit Agreement, the Notes or any of the other Loan Documents, any rights or obligations hereunder or thereunder or the performance of which rights and obligations. Except as prohibited by law, each of the Borrowers hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. Each of the Borrowers (i) certifies that no representative, agent or attorney of any Lender or the Agent has represented, expressly or otherwise, that such Lender or the Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that each of the Agent and the Lenders has been induced to enter into this Credit Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein. 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. 27.1. VOTING PROCEDURES. (a) Except as set forth in clauses (b) - (f) below, any term, covenant, agreement or condition of this Agreement or any of the Loan Documents may be amended or waived and any departure therefrom may be consented to by the Majority Lenders if, but only if, such amendment, waiver or consent is in writing signed by the Majority Lenders and, in the case of an amendment (other than an amendment described in Section 27.2), by the Borrowers and, in any such event, the failure to observe, perform or discharge any such term, covenant, agreement or condition (whether such amendment is executed or such waiver or consent is given before or after such failure) shall not be construed as a breach of such term, covenant, agreement or condition or as a Default or an Event of Default. Unless otherwise 101 -94- specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. Anything herein to the contrary notwithstanding, the Majority Lenders shall have the right to waive any Default or Event of Default and the consequences hereunder of such Default or Event of Default and shall have the right to enter into an agreement with the Borrowers providing for the forbearance from the exercise of any remedies provided hereunder or under the other Loan Documents without waiving any Default or Event of Default. The making of Loans hereunder by the Lenders during the existence of a Default or Event of Default shall not be deemed to constitute a waiver of such Default or Event of Default. (b) Except as otherwise set forth in this Agreement, without the prior unanimous written consent of the Lenders, no amendment, consent or waiver shall affect the amount or extend the time of the obligation of the Lenders to make Revolving Credit Loans or extend the originally scheduled time or times of payment of the principal of any such Loan or alter the time or times of payment of interest on any such Loan or the amount of the principal thereof or the rate of interest thereon or the amount of any revolving credit commitment fee payable hereunder or permit any subordination of the principal or interest on any such Loan. (c) Except as otherwise set forth in this Agreement, without the prior unanimous written consent of the Lenders and the Fronting Banks, no amendment, consent or waiver shall affect the amount or extend the time of the obligation of the Fronting Banks to make International Facility Loans or extend the originally scheduled time or times of payment of the principal of any such Loan or alter the time or times of payment of interest on any such Loan or the amount of the principal thereof or the rate of interest thereon or the amount of the fronting fee referred to in Section 6.12.1 or permit any subordination of the principal or interest on any such Loan or alter the apportionment of any repayments or prepayment of any such Loans to which a Fronting Bank is entitled. (d) Except as otherwise set forth in this Agreement, (i) without the prior written consent of the Issuing Bank, no amendment, consent or waiver shall affect the rights or duties of the Issuing Bank, including without limitation the amount of any Letter of Credit Fees payable hereunder, (ii) without the prior written consent of a Fronting Bank, no amendment, consent or waiver shall affect the rights or duties of such Fronting Bank, including without limitation the amount of any fronting fees payable hereunder and (iii) without the prior written consent of the Agent, no amendment, consent or waiver shall affect the right or duties of the Agent, including without limitation the amount of any Agent's fees payable hereunder or the provisions of Section 16. (e) No portion of the Collateral with a book value at the time of such release which, when aggregated with the book value of all other portions of the Collateral released by the Agent in any fiscal year without the prior unanimous consent of the Lenders pursuant to this Section 27.1(e), exceeds $1,000,000, shall be released by the Agent, other than as specifically permitted by this Agreement or in the other Loan Documents, without the prior unanimous written consent of the 102 -95- Lenders for such release, provided, however, that any other release of Collateral may be agreed to by the Agent alone, unless specifically prohibited by this Agreement or any of the other Loan Agreements. (f) Neither the definition of "Majority Lenders", nor the provisions of this Section 27.1, may be amended without the prior unanimous written consent of the Lenders. 27.2. BORROWERS' CONSENT NOT REQUIRED FOR CERTAIN AMENDMENTS. Notwithstanding any provision of this Agreement or the other Loan Documents to the contrary, no consent, written or otherwise, of the Borrowers shall be necessary or required in connection with any amendment to Section 6.12.2 or Section 16 and any amendment to such provisions shall be effected solely by and among the Agent, the Fronting Banks and the Lenders (with respect to any amendment to Section 6.12.2) or the Agent and the Lenders (with respect to any amendment of Section 16), provided that no such amendment shall impose any obligation on the Borrowers. 27.3. COURSE OF DEALING. No course of dealing or delay or omission on the part of the Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon any of the Borrowers shall entitle any of the Borrowers to other or further notice or demand in similar or other circumstances. 28. SEVERABILITY. The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction. 29. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. 29.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. TransTechnology acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to TransTechnology or one or more of its Subsidiaries, in connection with this Credit Agreement or otherwise, by a Section 20 Subsidiary. TransTechnology, for itself and each of its Subsidiaries, hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and each Lender any information delivered to such Section 20 Subsidiary by TransTechnology or any of its Subsidiaries, and (b) the Agent and each Lender to share with such Section 20 Subsidiary any information delivered to the Agent or such Lender by TransTechnology or any of its Subsidiaries pursuant to this Credit Agreement, or in connection with the decision of such Lender to enter into this Credit Agreement; it being understood, in each case, that any such Section 20 Subsidiary receiving such information shall be bound by the confidentiality 103 -96- provisions of this Credit Agreement. Such authorization shall survive the payment and satisfaction in full of all of Obligations. 29.2. CONFIDENTIALITY. Each of the Lenders and the Agent agrees, on behalf of itself and each of its affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by TransTechnology or any of its Subsidiaries pursuant to this Credit Agreement that is identified by such Person as being confidential at the time the same is delivered to any of the Lenders or the Agent, provided that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this Section 29, (b) to the extent required by statute, rule, regulation or judicial process, (c) to counsel, auditors or accounts for any of the Lenders or the Agent, (d) to bank examiners or any other regulatory authority having jurisdiction over any of the Lenders or the Agent, (e) to the Agent, any Lender or any Section 20 Subsidiary, (f) in connection with any litigation to which any one or more of the Lenders, the Agent or any Section 20 Subsidiary is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, (g) to a Subsidiary or affiliate of such Lender as provided in Section 29.1 or (h) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant agrees to be bound by the provisions of Section 20.6. 29.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable law or court order, each of the Lenders and the Agent shall, prior to disclosure thereof, notify TransTechnology of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender or the Agent by such governmental agency) or pursuant to legal process, and shall consult with TransTechnology on the advisability of taking legally available steps to resist or narrow any such request. In the event that such steps are not available or effective, or are deemed inadvisable by counsel to such Lender or the Agent, as the case may be, or in the event that TransTechnology waives compliance with the provisions of this Section 29.3, such Lender or the Agent, and/or its respective representatives, as the case may be, may disclose to any tribunal only that portion of such non-public information which it is advised by counsel is legally required to be disclosed, and shall exercise reasonable efforts to obtain assurances that confidential treatment will be accorded such non-public information. 29.4. OTHER. In no event shall any Lender or the Agent be obligated or required to return any materials furnished to it or any Section 20 Subsidiary by TransTechnology or any of its Subsidiaries which such Lender, Section 20 Subsidiary or Agent is required to retain pursuant to any requirement of law or rule or regulation of any governmental agency. The obligations of each Lender under this Section 29 shall supersede and replace the obligations of such Lender under any confidentiality letter in respect of this financing signed and delivered by such Lender to TransTechnology prior to the date hereof and shall be binding upon any 104 -97- assignee of, or purchaser of any participation in, any interest in any of the Loans or Reimbursement Obligations from any Lender. 30. TRANSITIONAL ARRANGEMENTS. 30.1. ORIGINAL CREDIT AGREEMENT SUPERSEDED. This Credit Agreement shall on the Closing Date amend and restate the Original Credit Agreement in its entirety, except as provided in this Section 30. On the Closing Date, the rights and obligations of the parties evidenced by the Original Credit Agreement shall be evidenced by the Credit Agreement and the other Loan Documents, as defined herein, and the Loans as defined in the Original Credit Agreement, collectively, shall be converted to the Loans as defined herein. 30.2. INTEREST AND FEES UNDER SUPERSEDED AGREEMENT. All interest and fees and expenses, if any, owing or accruing under or in respect of the Original Credit Agreement through the Closing Date shall be calculated as of the Closing Date (prorated in the case of any fractional periods), and shall be paid in accordance with the method, for the periods, and on the dates, specified in the Original Credit Agreement, as if the Original Credit Agreement were still in effect. Commencing on the Closing Date, the commitment fee shall be payable by the Borrowers to the Agent for the account of the Lenders in accordance with Section 2.2. 105 IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier --------------------------------------- Name: Joseph F. Spanier Title: Vice President, Chief Financial Officer and Treasurer TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Managing Director ANDERTON INTERNATIONAL LIMITED By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Managing Director By: /s/ Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Director BANKBOSTON, N.A., individually and as Agent, Issuing Bank and Sterling Fronting Bank By: /s/ Maura Wadlinger --------------------------------------- Name: Maura Wadlinger Title: Vice President 106 -2- BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank By: /s/ Florian Korallus --------------------------------------- Name: Florian Korallus Title: Vice President By: /s/ Michael Leitzbach --------------------------------------- Name: Michael Leitzbach Title: Assistant Treasurer ABN AMRO BANK N.V. By: /s/ Lisa Megeaski --------------------------------------- Name: Lisa Megeaski Title: Vice President By: /s/ Michael A. Kowalczuk --------------------------------------- Name: Michael A. Kowalczuk Title: Corporate Banking Officer THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Juan J. Duarte --------------------------------------- Name: Juan J. Duarte Title: Vice President 107 THE BANK OF NEW YORK By: /s/ Jeffrey S. Witte --------------------------------------- Name: Jeffrey S. Witte Title: Vice President SUMMIT BANK By: /s/ Bruce A. Gray --------------------------------------- Name: Bruce A. Gray Title: Vice President Large Corporate Group Summit Bank EX-10.9 4 AMENDMENT AGREEMENT NO. 1 1 Exhibit 10.9 AMENDMENT AGREEMENT NO. 1 dated as of August 21, 1998 to that certain AMENDED AND RESTATED CREDIT AGREEMENT This AMENDMENT AGREEMENT NO. 1 (this "Amendment"), dated as of August 21, 1998, is by and among TRANSTECHNOLOGY CORPORATION ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GMBH ("GmbH"), ANDERTON INTERNATIONAL LIMITED ("Limited" and, together with TransTechnology and GmbH, the "Borrowers"), the Lenders listed on Schedule 1 to the Credit Agreement (as defined below), BANKBOSTON, N.A., acting through its London Branch, as Sterling Fronting Bank, BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank, BANKBOSTON, N.A., as Issuing Bank, and BANKBOSTON, N.A., as Agent for the Lenders, the Fronting Banks and the Issuing Bank (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 Amended and Restated Credit Agreement dated as of June 30, 1995, and amended and restated as of July 24, 1998 (as so amended and restated, the "Credit Agreement"); WHEREAS, the Borrowers have requested certain amendments to the Credit Agreement and upon the terms and conditions hereinafter set forth, the Agent and the Lenders have agreed to such amendments; and WHEREAS, the Lenders, 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 hereto hereby agree as follows: Section 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended with effect from the Effective Date (as defined in Section 6 of this Amendment) as follows: (a) Section 8.17 of the Credit Agreement ("Use of Proceeds") is hereby amended by deleting such section in its entirety and substituting therefor the following new Section 8.17: "8.17. USE OF PROCEEDS. The proceeds of the Loans shall be used to refinance certain Indebtedness of the Borrowers under the Original Credit Agreement, to finance Approved Acquisitions, for working capital and general corporate purposes 2 2 of the Borrowers, and to finance certain repurchases of TransTechnology's capital stock to the extent permitted under Section 10.4. TransTechnology will obtain Letters of Credit solely for working capital and general corporate purposes. Except for Loans the proceeds of which are used to finance repurchases of TransTechnology's capital stock to the extent permitted under Section 10.4(b), no portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. No portion of the proceeds of any Loans is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of (a) knowingly purchasing, or providing credit support for the purchase of, Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (b) knowingly purchasing, or providing credit support for the purchase of, during the underwriting or placement period, any Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (c) making, or providing credit support for the making of, payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Borrowers or any Subsidiary or other Affiliate of any of the Borrowers." (b) Section 9.12 of the Credit Agreement ("Use of Proceeds") is hereby amended by deleting such section in its entirety and substituting therefor the following new Section 9.12: "9.12. USE OF PROCEEDS. The proceeds of the Loans shall be used to refinance certain Indebtedness of the Borrowers under the Original Credit Agreement, to finance Approved Acquisitions, for working capital and general corporate purposes of the Borrowers and to finance certain repurchases of TransTechnology's capital stock to the extent permitted under Section 10.4(b). TransTechnology will obtain Letters of Credit solely for working capital and general corporate purposes." (c) Section 10.4 of the Credit Agreement ("Distributions") is hereby amended by deleting such section in its entirety and substituting therefor the following new Section 10.4: "10.4. DISTRIBUTIONS. TransTechnology will not make, or permit any of its Subsidiaries to make, any Distributions except that, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, (a) TransTechnology may make Distributions on outstanding shares of its capital stock with respect to each fiscal quarter commencing on or after April 1, 1998, within ninety (90) days following the end of such fiscal quarter, in an aggregate amount of all Distributions declared and/or paid pursuant to this Section 10.4(a) with respect to each Reference Period ending after the date hereof not exceeding twenty-five percent (25%) of Consolidated Net Income for such Reference Period, and (b) in addition to making Distributions permitted under Section 10.4(a), 3 3 TransTechnology may repurchase shares of its capital stock in an aggregate amount not to exceed at any time $5,000,000." 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 AMENDMENT. The Agent shall have received copies of this Amendment executed and delivered by each of the Borrowers, each of the Guarantors, and the Majority Lenders. 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. 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 and of each Guarantor contained in the Credit Agreement and the other Loan Documents to which such Borrower or Guarantor, as the case may be, is a party were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to in the representations and warranties contained in the Credit Agreement shall be the financial statements of TransTechnology and its Subsidiaries most recently delivered to the Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; 4 4 (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 any regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, 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. 5 5 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"). 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/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President, Secretary and General Counsel TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Managing Director By: /s/ Sven-Uwe Wolber --------------------------------------- Name: Sven-Uwe Wolber Title: Managing Director ANDERTON INTERNATIONAL LIMITED By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Managing Director By: /s/ Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Director 6 6 BANKBOSTON, N.A., individually and as Agent, Issuing Bank and Sterling Fronting Bank By: /s/ J. Nicholas Cole --------------------------------------- Name: J. Nicholas Cole Title: Vice President BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank By: /s/ Florian Korallus --------------------------------------- Name: Florian Korallus Title: Vice President By: /s/ Beate Ortel --------------------------------------- Name: Beate Ortel Title: Assistant Treasurer ABN AMRO BANK N.V. By: /s/ Lisa Megeaski --------------------------------------- Name: Lisa Megeaski Title: Vice President By: /s/ Donald Sutton --------------------------------------- Name: Donald Sutton Title: Vice President 7 7 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Juan J. Duarte --------------------------------------- Name: Juan J. Duarte Title: Vice President THE BANK OF NEW YORK By: /s/ Steven Castellucci --------------------------------------- Name: Steven Castellucci Title: Vice President SUMMIT BANK By: --------------------------------------- Name: Title: 8 8 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/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary PALNUT FASTENERS, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary RETAINERS, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 9 9 RANCHO TRANSTECHNOLOGY CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SSP INDUSTRIES By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 10 10 SSP INTERNATIONAL SALES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY SEEGER INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SEEGER INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TCR CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 11 11 NORCO, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 12 12 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 Lennart Jemsby --------------------------------------- Name: Ulf Lennart Jemsby Title: Managing Director By: /s/ Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Director ANDERTON (PREDECESSORS) LIMITED By: /s/ Ulf Lennart Jemsby --------------------------------------- Name: Ulf Lennart Jemsby Title: Managing Director By: /s/ Daran C. Brown --------------------------------------- Name: Daran C. Brown Title: Managing Director EX-10.10 5 AMENDMENT AGREEMENT NO. 2 1 Exhibit 10.10 AMENDMENT AGREEMENT NO. 2 dated as of November 27, 1998 to that certain AMENDED AND RESTATED CREDIT AGREEMENT This AMENDMENT AGREEMENT NO. 2 (this "Amendment"), dated as of November 27, 1998, is by and among TRANSTECHNOLOGY CORPORATION ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GmbH ("GmbH"), ANDERTON INTERNATIONAL LIMITED ("Limited" and, together with TransTechnology and GmbH, the "Borrowers"), the Lenders listed on Schedule 1 to the Credit Agreement (as defined below), BANKBOSTON, N.A., acting through its London Branch, as Sterling Fronting Bank, BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank, BANKBOSTON, N.A., as Issuing Bank, and BANKBOSTON, N.A., as Agent for the Lenders, the Fronting Banks and the Issuing Bank (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 Amended and Restated Credit Agreement dated as of June 30, 1995, and amended and restated as of July 24, 1998, and as further amended by Amendment Agreement No. 1 dated as of August 21, 1998 (as so amended and restated, the "Credit Agreement"); WHEREAS, the Borrowers have requested certain amendments to the Credit Agreement to increase the maximum amount of Revolving Credit Loans available by $20,000,000 to $145,000,000, and, upon the terms and conditions hereinafter set forth, the Agent and the Lenders have agreed to such amendments; and WHEREAS, the Lenders, 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 hereto hereby agree as follows: Section 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended with effect from the Effective Date (as defined in SECTION 7 of this Amendment) as follows: (a) Schedule 1 to the Credit Agreement is hereby deleted in its entirety and Schedule 1 attached hereto as Exhibit A is hereby substituted therefor. (b) The definition of "DM Base Rate" in SECTION 1.1 of the Credit Agreement is hereby deleted in its entirety and the following definition is hereby substituted therefor: "DM Base Rate. The annual rate of interest announced from time to time by the DM Fronting Bank as its "prime rate" for loans denominated in Deutschmarks." 2 2 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 Guarantors, and the Lenders; (b) an Amended and Restated Revolving Credit Note payable to the order of each Lender that is hereby increasing its Revolving Credit Commitment in a principal amount equal to such Lender's Revolving Credit Commitment as set forth on Schedule 1 attached as Exhibit A hereto; (c) amendments to the Mortgages set forth on Exhibit B hereto satisfactory in form and substance to the Agent's counsel in order to reflect the increase in the Total Revolving Credit Commitment contemplated hereby; and (d) the legal opinion of Gerald C. Harvey, Esq., general counsel for TransTechnology, dated as of the Effective Date (as defined in SECTION 7 of this Amendment), and satisfactory in form and substance to the Agent's counsel. Section 2.2. PAYMENT OF FEES. The Borrowers shall have paid to the Agent, the Arranger and the Lenders whose Revolving Credit Commitments are being increased pursuant to the amendment in SECTION 1 hereof, or who are assuming new Revolving Credit Commitments pursuant thereto, fees in the amounts set forth in the Fee Letter of even date herewith. Section 2.3. 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 2.4. 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. Section 2.5. 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. ASSIGNMENT AND ACCEPTANCE. (a) For the purposes of the assignments contemplated herein, the provisions of Section 20.1 of the Credit Agreement are hereby waived and the parties hereto hereby consent and agree to such assignments. (b) Each of BankBoston, N.A. and The Bank of New York (collectively, the "Assignors") hereby sells and assigns to ABN AMRO BANK N.V., The First National Bank of Chicago and Summit Bank (collectively, the "Assignees") without recourse to the Assignors, and each Assignee hereby purchases and assumes from each Assignor, a certain 3 3 percentage of each such Assignor's rights and obligations under the Credit Agreement as of the Effective Date (as defined below), including, without limitation, such percentage interest in each Assignor's Commitment as in effect on the Effective Date (as defined below), and the outstanding amount of the Loans, owing to each Assignor on the Effective Date (as defined below) and the Notes held by each Assignor (such interest being hereinafter referred to as the "Assigned Portion") such that, after giving effect to the assignments contemplated hereby, the respective Commitments and Revolving Credit Commitment Percentage of each Assignor and the respective Commitments and Revolving Credit Commitment Percentage of each Assignee (after giving effect to the increase of the aggregate amount of the Total Revolving Credit Commitment contemplated by this Amendment) shall be as set forth on Schedule 1 attached hereto. Notwithstanding any term or provision of Section 20 of the Credit Agreement to the contrary, the execution and delivery of this Amendment by each Assignor and each Assignee shall constitute an Assignment and Acceptance delivered in accordance with the Credit Agreement and shall be effective in respect of the assignments contemplated hereby. (c) Each Assignor (i) represents and warrants (as to itself only and not as to the other Assignors) that, as of the Effective Date (as defined below), its Commitment and Revolving Credit Commitment Percentage is sufficient to give effect to this Assignment and Acceptance; (ii) makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant thereto, or the attachment, perfection or priority of any security interest or mortgage, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder free and clear of any adverse claim or encumbrance created by it; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or the Guarantors or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by any of the Borrowers or the Guarantors or any other Person primarily or secondarily liable in respect of any of the Obligations of any of its obligations under the Credit Agreement or any of the other Loan Documents or any other instrument or document delivered or executed pursuant thereto; and (iv) requests that in connection with the assignments set forth herein the Borrowers exchange the Revolving Credit Notes for new Revolving Credit Notes, each dated as of the Effective Date (as defined below) and payable to the order of each Assignee in the principal amount of the Commitment set forth opposite such Assignee's name on Schedule 1 to the Credit Agreement, as amended hereby, and each such new note shall be deemed to be a "Revolving Credit Note" under the Credit Agreement. (d) Each Assignee (i) represents and warrants (as to itself only and not as to any other Assignee) that it has received a copy of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 9.4 of the Credit Agreement and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment, that it is an Eligible Assignee under the Credit Agreement and that all acts, conditions and things required to be done and performed and to have occurred prior to the execution, delivery and performance of this assignment, and to render the same the legal, valid and binding obligation of each such Assignee, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (ii) 4 4 agrees that it will, independently and without reliance upon any Assignor, the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement and the other Loan Documents; and (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, and agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Lender. (e) Upon the effectiveness of the assignment contemplated hereby, each Assignor shall return to TransTechnology its Revolving Credit Note, marked "Cancelled". 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 and of each Guarantor contained in the Credit Agreement and the other Loan Documents to which such Borrower or Guarantor, as the case may be, is a party were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to in the representations and warranties contained in the Credit Agreement shall be the financial statements of TransTechnology and its Subsidiaries most recently delivered to the Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby: (i) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval or consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity or enforceability of this Amendment and which is required by law or any regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, or any provision of the charter documents or by-laws of such Borrower, (iv) do not result in any breach of or constitute a default under any agreement or instrument to which such Borrower is a party or to which it or any of its properties are bound, including without limitation any indenture, credit or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; and (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 5 5 performance and injunctive relief may be subject to the discretion of the court before which any proceeding for such remedies may be brought. 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, this Amendment shall be deemed to be effective as of the date hereof (the "Effective Date"). Remainder of page intentionally left blank. 6 6 IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No. 2 as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier --------------------------------------- Name: Joseph F. Spanier Title: Vice President, Chief Financial Officer and Treasurer TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Managing Director ANDERTON INTERNATIONAL LIMITED By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Director By: /s/ Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Director BANKBOSTON, N.A., individually and as Agent, Issuing Bank and Sterling Fronting Bank By: /s/ Maura C. Wadlinger --------------------------------------- Name: Maura C. Wadlinger Title: Vice President 7 7 BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank By: /s/ Matthias Landskron --------------------------------------- Name: Matthias Landskron Title: Vice President By: /s/ Beate Ortel --------------------------------------- Name: Beate Ortel Title: Assistant Treasurer ABN AMRO BANK N.V. By: /s/ Lisa Megeaski --------------------------------------- Name: Lisa Megeaski Title: Vice President By: /s/ Donald Sutton --------------------------------------- Name: Donald Sutton Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Juan J. Duarte --------------------------------------- Name: Juan J. Duarte Title: Vice President 8 8 THE BANK OF NEW YORK By: /s/ Steven P. Castellucci --------------------------------------- Name: Steven P. Castellucci Title: Vice President SUMMIT BANK By: /s/ Bruce A. Gray --------------------------------------- Name: Bruce A. Gray Title: Vice President Large Corporate Group Summit Bank 9 9 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/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary PALNUT FASTENERS, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary RETAINERS, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 10 10 RANCHO TRANSTECHNOLOGY CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SSP INDUSTRIES By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 11 11 SSP INTERNATIONAL SALES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY SEEGER INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SEEGER INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TCR CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 12 12 NORCO, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 13 13 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/ Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Director ANDERTON (PREDECESSORS) LIMITED By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Director By: /s/ Daran Brown --------------------------------------- Name: Daran Brown Title: Managing Director 14 EXHIBIT A SCHEDULE 1
BANK REVOLVING CREDIT REVOLVING CREDIT COMMITMENT (INCLUDING EURODOLLAR LENDING OFFICE COMMITMENT PERCENTAGE UNLESS OTHERWISE STATED) BANKBOSTON, N.A. $44,000,000.00 30.344828% 100 Federal Street Boston, MA 02110 Attn: Maura C. Wadlinger Phone: (617) 434-6998 Fax: (617) 434-1955 ABN AMRO BANK N.V. $30,000,000.00 20.689655% 500 Park Avenue - 2nd Floor New York, NY 10022 Attn: Lisa Megeaski Phone: (212) 446-4398 Fax: (212) 446-4237 THE FIRST NATIONAL BANK OF CHICAGO $30,000,000.00 20.689655% 153 West 51st Street - Mail Suite 4000 New York, NY 10019 Attn: Randall Faust Phone: (212) 373-1276 Fax: (212) 373-1404 THE BANK OF NEW YORK $23,000,000.00 15.862069% 385 Rifle Camp Road West Paterson, NJ 07424 Attn: Stephen Castellucci Phone: (973) 357-7450 Fax: (973) 357-7705 SUMMIT BANK $18,000,000.00 12.413793% 750 Walnut Avenue Cranford, NJ 07016 Attn: Bruce Gray Phone: (908) 709-5340 Fax: (908) 709-6433 TOTAL $145,000,000.00 100.0%
15 EXHIBIT B 1. First Amendment to Open-End Mortgage (Open-End Mortgage Deed and Security Agreement) - Norco, Inc.'s Connecticut property 2. Second Amendment to Open-End Mortgage, Assignment of Leases and Security Agreement - TransTechnology Corporation's Pennsylvania property 3. Second Amendment to First Mortgage, Assignment of Leases and Security Agreement - TransTechnology Corporation's Mountainside, New Jersey property 4. Second Amendment to First Mortgage, Assignment of Leases and Security Agreement - TransTechnology Corporation's Union, New Jersey property 5. Second Amendment to First Mortgage, Assignment of Leases and Security Agreement - Retainers, Inc.'s New Jersey property EX-10.11 6 AMENDMENT AGREEMENT NO. 3 1 Exhibit 10.11 AMENDMENT AGREEMENT NO. 3 dated as of December 23, 1998 to that certain AMENDED AND RESTATED CREDIT AGREEMENT This AMENDMENT AGREEMENT NO. 3 (this "Amendment"), dated as of December 23, 1998, is by and among TRANSTECHNOLOGY CORPORATION ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GmbH ("GmbH"), ANDERTON INTERNATIONAL LIMITED ("Limited" and, together with TransTechnology and GmbH, the "Borrowers"), the Lenders listed on Schedule 1 to the Credit Agreement (as defined below), BANKBOSTON, N.A., acting through its London Branch, as Sterling Fronting Bank, BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank, BANKBOSTON, N.A., as Issuing Bank, and BANKBOSTON, N.A., as Agent for the Lenders, the Fronting Banks and the Issuing Bank (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 Amended and Restated Credit Agreement dated as of June 30, 1995, and amended and restated as of July 24, 1998, and as further amended by Amendment Agreement No. 1 dated as of August 21, 1998, and as further amended by Amendment Agreement No. 2 dated as of November 27, 1998 (as so amended and restated, the "Credit Agreement"); WHEREAS, the Borrowers have requested certain amendments to the Credit Agreement to extend the time permitted to enter into interest rate protection arrangements satisfactory to the Agent, and, upon the terms and conditions hereinafter set forth, the Agent and the Lenders have agreed to such amendments; and WHEREAS, the Lenders, 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 hereto hereby agree as follows: Section 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended with effect from the Effective Date (as defined in SECTION 6 of this Amendment) as follows: (a) INTEREST RATE PROTECTION. SECTION 9.15 of the Credit Agreement is hereby amended by deleting the phrase "December 31, 1998" wherever such phrase appears in said Section 9.15 and substituting in lieu thereof the phrase "April 30, 1999". 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. This Amendment shall have been executed and delivered by each of the Borrowers, the Guarantors, and the Majority Lenders to the Agent. 2 -2- 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. 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 and of each Guarantor contained in the Credit Agreement and the other Loan Documents to which such Borrower or Guarantor, as the case may be, is a party were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to in the representations and warranties contained in the Credit Agreement shall be the financial statements of TransTechnology and its Subsidiaries most recently delivered to the Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby: (i) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval or consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity or enforceability of this Amendment and which is required by law or any regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, or any provision of the charter documents or by-laws of such Borrower, (iv) do not result in any breach of or constitute a default under any agreement or instrument to which such Borrower is a party or to which it or any of its properties are bound, including without limitation any indenture, credit or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; and 3 -3- (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"). Remainder of page intentionally left blank. 4 -4- IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No. 3 as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier --------------------------------------- Name: Joseph F. Spanier Title: Vice President, Chief Financial Officer and Treasurer TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Managing Director ANDERTON INTERNATIONAL LIMITED By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Director By: /s/ Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Director BANKBOSTON, N.A., individually and as Agent, Issuing Bank and Sterling Fronting Bank By: /s/ Maura Wadlinger --------------------------------------- Name: Maura Wadlinger Title: Vice President 5 -5- BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank By: --------------------------------------- Name: Title: By: --------------------------------------- Name: --------------------------------------- Title: ABN AMRO BANK N.V. By: /s/ Lisa Megeaski --------------------------------------- Name: Lisa Megeaski Title: Vice President By: /s/ Michael A. Kowalczuk --------------------------------------- Name: Michael A. Kowalczuk Title: Assistant Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Juan J. Duarte --------------------------------------- Name: Juan J. Duarte Title: Vice President 6 -6- THE BANK OF NEW YORK By: /s/ Steven P. Castellucci --------------------------------------- Name: Steven P. Castellucci Title: Vice President SUMMIT BANK By: --------------------------------------- Name: Title: 7 -7- 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/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary PALNUT FASTENERS, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary RETAINERS, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 8 -8- RANCHO TRANSTECHNOLOGY CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SSP INDUSTRIES By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 9 -9- SSP INTERNATIONAL SALES, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TRANSTECHNOLOGY SEEGER INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary SEEGER INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary TCR CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 10 -10- NORCO, INC. By: /s/ Gerald C. Harvey --------------------------------------- Name: Gerald C. Harvey Title: Vice President and Secretary 11 -11- 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/ Michael J. Berthelot --------------------------------------- Name: Michael J. Berthelot Title: Director ANDERTON (PREDECESSORS) LIMITED By: /s/ Ulf Jemsby --------------------------------------- Name: Ulf Jemsby Title: Director By: /s/ Daran Brown --------------------------------------- Name: Daran Brown Title: Managing Director EX-10.22 7 CONSULTING AGREEMENT 1 Exhibit 10.22 CONSULTING AGREEMENT with John Dalton This Agreement is made as of the 4th day of May, 1999, between TransTechnology Corporation, a Delaware corporation (the "Corporation") and John Dalton ("Consultant") pursuant to which the Corporation agrees to engage Consultant's services upon the terms and conditions set out below. NOW, THEREFORE, the parties agree as follows: 1. Engagement. The Corporation hereby engages Consultant, and Consultant hereby accepts this engagement, to act as an advisor to the Corporation commencing on the date hereof and continuing until the termination of this Agreement in accordance with Paragraph 4 hereof. Consultant acknowledges that the Corporation has relied upon Consultant's representations with respect to his training, skills and experience, and his legal ability to perform this Agreement, as the basis for entering into this Agreement. 2. Duties. Consultant agrees that from and after the date hereof, from time to time as requested by the Corporation, he shall furnish advice and recommendations with respect to matters and or areas within the scope of his experience and expertise and as specifically communicated from time to time by the Corporation to Consultant. Subject to the provisions of Paragraph 3 hereof, when furnishing such services Consultant shall confer with officers and employees of the Corporation as may be designated from time to time by the Corporation with respect to particular problems presented; shall give reasonable study to the same; and shall furnish his recommendations with respect thereto. The Corporation shall provide Consultant with such assistance as shall be reasonably necessary for the performance of the Consultant's functions assigned by the Corporation to Consultant from time to time. 3. Performance. In the performance of his responsibilities, Consultant: (a) Shall devote such time as shall be necessary to carry out diligently and in good faith his duties under this Agreement but not have any fixed working hours or be required to maintain an office at the Corporation or at any other specific location; (b) Shall not be required to work full-time for the Corporation during the period of this Agreement or to work nights or holidays; (c ) Shall determine the manner in which the services contemplated by this Agreement shall be carried out. 4. Term. This Agreement shall commence May 1, 1999 and shall expire April 30, 2000, provided that this Agreement may be extended upon the mutual written agreement of the parties. This Agreement may be terminated by the Corporation at any time upon thirty (30) days' notice in the event of the failure of the Consultant substantially to perform the responsibilities contemplated by Paragraph 3 of this Agreement. This Agreement shall immediately terminate upon the death or disability of Consultant. 1 2 5. Compensation; Reimbursement; No Fringe Benefits. (a) In consideration for the consulting services rendered by the Consultant pursuant to this Agreement, Consultant shall be paid during the term of this Agreement the sum of $50,000 payable in twelve equal monthly installments due on the 1st of each month. (b) Consultant shall receive reimbursement for reasonable and substantiated travel and out-of-pocket expenses related to consultation rendered hereunder provided that in all cases such expenses shall have received prior written approval from an officer of the Corporation and are incurred in accordance with the "Employee Business and Travel Expense" policy of the Corporation as in effect from time to time. (c ) Consultant shall not be entitled to receive any fringe benefits provided by the Corporation, including without limitation hospitalization/medical coverage and shall not qualify as an employee of the Corporation for purposes of workmen's compensation. 6. Confidentiality. During the term of this Agreement and thereafter, Consultant shall keep confidential and refrain from using for the benefit of Consultant or of any party other than the Corporation, or disclosing to others, any and all proprietary and/or confidential information owned, held or used by the Corporation, including without limitation, know-how regarding the design and production of any of the products of the Corporation, the customer base and details of relations between the Corporation and its customers, strategic planning of the Corporation and its marketing strategies in use or under consideration. 7. No Conflict. Consultant represents and warrants that (a) Consultant is free to render the services contemplated by this Agreement to the Corporation, (b) such services do not and will not conflict with any agreement to which the Consultant is a party or any other obligation by which Consultant is bound, (c) all services hereunder shall be rendered in a manner which complies with applicable laws and regulations, and (d) at no time will Consultant use for the benefit of the Corporation or disclose to the Corporation any information which he has received from a third party and as to which he is bound by a continuing obligation of confidentiality. 8. Independent Contractor. It is the intention of the parties that Consultant shall have the status of an independent contractor. As such Consultant shall be responsible for (a) the proper and timely payment of all taxes due on compensation paid pursuant to this Agreement and (b) expenses incurred in his business and not reimbursable pursuant to Paragraph 5 above. Consultant shall have no authority to enter into any agreement on behalf of the Corporation or otherwise to bind the Corporation in any way. 9. Assignment of Rights. Consultant hereby transfers and conveys to the Corporation all right, title and interest in any documented concept, product and/or process, patentable, copyrightable or otherwise proprietary in nature, conceived or otherwise developed by Consultant in the performance of this Agreement. Consultant shall cooperate with the Corporation, including by executing all such documents requested by the Corporation, to enable the Corporation to patent, copyright or otherwise perfect the Corporation's right, title and interest in any such concept, product and/or process, the costs for same to be borne by the Corporation. Consultant acknowledges that all materials developed by Consultant in the performance of his services under this Agreement, regardless of the medium in which set out or stored, and including without 2 3 limitation documents, calculations, drawings, notes, models and samples, shall be the property of the Corporation, whether or not delivered to the Corporation, and shall, together with any materials furnished to Consultant by the Corporation, be delivered to the Corporation upon request, and, in any event, upon termination of this Agreement. 10. Miscellaneous. 10.1 All notices required to be given hereunder shall be in writing and shall be deemed given when mailed, postage prepaid, registered or certified mail, return receipt requested, addressed to Corporation at its principal office and addressed to Consultant at the address set out in Schedule A or such other address as Consultant may designate by notice given pursuant to this Paragraph 10.1. 10.2 The construction and performance of this Agreement shall be governed by the laws of the State of New Jersey. Consultant acknowledges that the Corporation shall be entitled to injunctive relief in the event of the breach or threatened breach of any provision of Paragraph 6, Confidentiality, and/or Paragraph 9, Assignment of Rights. 10.3 This Agreement shall be binding upon and shall inure to the benefit of the Corporation and Consultant. Consultant shall not assign all or any portion of this Agreement, or delegate to a third party any obligation relating to the performance of the services contemplated by this Agreement, except upon the specific written consent of an officer of the Corporation. 10.4 This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge Is sought. 10.5 Consultant shall submit a report within five working days of the end of each quarter detailing consulting activities conducted on behalf of the Corporation including without limitation meeting reports and correspondence. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. TRANSTECHNOLOGY CORPORATION By /s/ Michael J. Berthelot ---------------------------------------- Michael J. Berthelot Chairman of the Board, President and Chief Executive Officer /s/ John Dalton ---------------------------------------- John Dalton 3 EX-10.23 8 1999-2001 INCENTIVE COMPENSATION PLAN 1 Exhibit 10.23 TRANSTECHNOLOGY CORPORATION FY'99-01 INCENTIVE COMPENSATION PLAN - DEV PLAN (APPROVED: 4/16/98) The goal of the 1999-2001 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 1999-01 plan reflects the input of the corporate officers and staff, division presidents, and the Incentive and Compensation Committee of the Board of Directors. THE OBJECTIVE OF THE 1999-2001 DEV PLAN ("THE DEV PLAN") IS TO RECOGNIZE AND REWARD MEMBERS OF THE TTC MANAGEMENT TEAM, AT DEEPER LEVELS THAN PREVIOUS PLANS, FOR 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. THE FY99-01 DEV PLAN DIFFERS LITTLE FROM THE FY96-98 DEV PLAN, WITH THREE MAJOR EXCEPTIONS. FIRST, PARTICIPATION IN THE FY99-01 DEV PLAN HAS BEEN EXPANDED TO INCLUDE DIVISION PRESIDENT DIRECT REPORTS, WHO WERE NOT INCLUDED IN THE PRIOR PLAN. SECOND, STOCK OPTIONS WILL BE AWARDED TO ALL PARTICIPANTS IN THE FY99-01 DEV PLAN. STOCK OPTIONS WERE NOT CONSIDERED PART OF THE PRIOR DEV PLAN. AS A RESULT, THE NUMBER OF PARTICIPANTS IN THE DEV BONUS POOL WILL RISE TO 80 FROM FY98'S 29. EVEN MORE IMPORTANTLY, THE NUMBER OF TTC EMPLOYEES RECEIVING STOCK OPTIONS WILL INCREASE FROM 11 IN FY98 TO 80 STARTING IN FY99. WE BELIEVE THAT THIS EXPANDED POOL OF PARTICIPANTS IN THE DEV AND OPTION PLANS WILL FURTHER INCREASE FOCUS ON INCREASING SHAREHOLDER VALUE. THIRD, THE MEASUREMENT PERIOD, WHICH HAD BEEN THE TEN TRADING DAYS FOLLOWING THE RELEASE OF FISCAL YEAR END EARNINGS, HAS BEEN LENGTHENED TO INCLUDE THE ENTIRE FOURTH QUARTER OF THE FISCAL YEAR THROUGH THE TEN DAYS FOLLOWING THE RELEASE OF FISCAL YEAR END EARNINGS. THIS LENGTHENED PERIOD IS EXPECTED TO REMOVE THE VOLATILITY ASSOCIATED WITH SUCH A NARROW MEASUREMENT PERIOD. 2 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 2 DIVISIONAL DEV BONUS POOLS The DEV Bonus is based upon the relative contribution of each division 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 1.0% of that excess increase in value would be earned by the Division President AND 1% WOULD BE EARNED BY THE DIVISION PRESIDENT'S DIRECT REPORTS IN THE AGGREGATE. THESE AMOUNTS WOULD BE PAID in cash AND THROUGH THE INCREASE IN VALUE OF STOCK OPTIONS AWARDED AS PART OF THIS DEV PLAN, at the end of the measurement period (generally, 3/31/01 or upon a triggering event as provided on page 6 below). The '99-01 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 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 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 3/31/98, 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 '99-01 Plan. ENTERPRISE VALUE of a division will be determined by multiplying the division's OPERATING INCOME by the EBIT multiple. OPERATING INCOME 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 base year EBIT multiple is derived using TTC's PE ratio based upon the average closing price for the PERIOD COMMENCING ON 1/1/98 AND ENDING ten days following the release of the current fiscal year end earnings (MAY 13, 1998) (THE "MEASUREMENT PERIOD") divided by the per share income from continuing operations for that fiscal year ($2.11). The resultant PE ratio is then multiplied by TTC's ratio of Net Income from 3 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 3 continuing operations to EBIT in order to obtain the base EBIT multiple . For the actual measurement period of FY"98 earnings, the PE was 13.545 times. For FY'98 net income from continuing operations was $11.99 million and EBIT was $20.153 million, yielding a ratio of 0.595%. Multiplying this ratio times the PE of 13.545 yields a base EBIT multiple of 8.0593. For plan years following the establishment of the base EBIT multiple, each year's respective PE ratio will be compared to the base year's PE ratio, and the relative percentage of current year PE to base year PE will then be multiplied times the Base year EBIT multiple, yielding a current year EBIT multiple. For example, at the conclusion of the MEASUREMENT period following the end of Fiscal 1999, the PE ratio was actually determined to be ___. The ratio of ___ to the base PE of ___ is ___%. The EBIT multiple to be used in determining Enterprise Value at the end of the FY'99 measurement period is ___% of ___, or ___. The DEV Hurdle Rate has been established at 15% 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, AND REPRESENTS OUR TARGETED ROI GOAL. 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 the DEV required using the compounded hurdle rate. The "target" Enterprise Value will be determined in June, 1998. An annual statement of "Interim" Enterprise Value will be circulated amongst the divisions at the end of FY'99 and FY'00 in order to communicate progress towards the DEV goal and to provide measurement points in the event of certain events. UNDER THE FY99-01 DEV PLAN, STOCK OPTIONS WILL BE GRANTED TO ALL DEV PARTICIPANTS. AT TARGET, IT IS ESTIMATED THAT THESE OPTIONS WILL PROVIDE 45% OF THE DEV's VALUE. IN ORDER TO RETAIN CERTAIN ATTRIBUTES OF THE OPTIONS, THEY WILL BE AWARDED IN THE FOLLOWING MANNER. AT 4/16/98 APPROXIMATELY 60,000 OPTIONS WILL BE AWARDED TO ALL OF THE PARTICIPANTS IN THE PLAN. THIS AMOUNT REPRESENTS 1/3 OF THE AGGREGATE 180,000 SHARES WHICH WILL BE ALLOCATED TO THE PLAN (BASED UPON THE CURRENT NUMBER OF 4 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 4 DIVISION WITHIN TTC - ACQUISITIONS WOULD REQUIRE ADDITIONAL SHARES TO BE ALLOCATED). THESE 4/1/98 OPTIONS ARE FULLY EARNED BY THE INDIVIDUALS, THE EXERCISE PRICE IS CERTAIN (THAT OF THE MARKET CLOSE ON THE DAY PRIOR TO AWARD), THE NUMBER OF SHARES IS FIXED AND CERTAIN, AND THE VESTING SCHEDULE (3 YEARS FROM THE GRANT DATE) IS ESTABLISHED. ALTHOUGH THESE WILL BE DEFINED AS COMPENSATORY OPTIONS, THE COMPENSATION AMOUNT WILL BE ZERO (DIFFERENCE BETWEEN THE EXERCISE PRICE AND THE STOCK PRICE ON THE AWARD DATE). ALL FUTURE APPRECIATION IN THE OPTION VALUE WILL ACCRUE TO THE PARTICIPANT AND WILL NOT BE REFLECTED AS COMPENSATION ON TT's BOOKS. IT WILL BE TTC's INTENTION TO HAVE THESE OPTIONS QUALIFIED AS INCENTIVE STOCK OPTIONS UNDER THE INTERNAL REVENUE CODE TO THE EXTENT POSSIBLE. AT 6/1/99 EVERY DIVISION WILL GO THROUGH A DEV VALUATION USING THE AVERAGE PE FOR THE PERIOD 1/1/99 - 6/1/99 TO DETERMINE THE VALUE OF THE DIVISION, WITH THE BEGINNING PE AS A FLOOR. FOR THOSE DIVISIONS THAT ACHIEVE A 15% INCREASE IN VALUE OVER THE BEGINNING VALUATION, ADDITIONAL OPTIONS WILL BE GRANTED, WITH THE EXERCISE PRICE EQUAL TO THE STOCK PRICE CLOSE ON THE DAY PRIOR TO GRANT. THESE OPTIONS WILL VEST IN TWO YEARS. LIKE THE OPTIONS IN 1998, THESE WILL BE COMPENSATORY OPTIONS BUT NO COMPENSATION EXPENSE WILL BE RECOGNIZED AND THEY WILL BE SUBJECT TO NO FURTHER CONDITIONS OTHER THAN VESTING AS NOTED IN THE PREVIOUS SENTENCE. THE NUMBER OF OPTIONS GRANTED PER DIVISION WILL BE THE SAME AS THAT GRANTED AT 4/16/98, HOWEVER, THE ALLOCATION OF THE AWARD AMONGST THE PARTICIPANTS WITHIN EACH DIVISION MAY BE CHANGED BY THE DIVISION PRESIDENT. SIMILARLY, THE INCENTIVE AND COMPENSATION COMMITTEE MAY, AT ITS DISCRETION, AWARD ADDITIONAL OPTIONS TO DIVISIONS WHICH MET THE 15% HURDLE WHICH WOULD OTHERWISE NOT HAVE BEEN AWARDED BECAUSE OTHER DIVISIONS FAILED TO ACHIEVE THE HURDLE, SO LONG AS THE TOTAL AMOUNT OF 60,000 OPTIONS SHARES PER YEAR ARE NOT EXCEEDED. AT 6/1/00, EVERY DIVISION WILL ONCE AGAIN GO THROUGH A DEV VALUATION USING THE PE FOR THE PERIOD 1/1/00 - 6/1/00 TO DETERMINE THE VALUE OF THE DIVISION, WITH THE BEGINNING PE AS A FLOOR. FOR THOSE DIVISIONS THAT ACHIEVE A 15% INCREASE IN VALUE, COMPOUNDED FOR TWO YEARS, OVER THE BEGINNING VALUATION, ADDITIONAL OPTIONS WILL BE GRANTED, WITH THE EXERCISE PRICE EQUAL TO THE CLOSING STOCK PRICE ON THE DAY PRIOR TO GRANT. THESE OPTIONS WILL VEST IN ONE YEAR. THE NUMBER OF OPTIONS GRANTED PER DIVISION WILL BE THE SAME AS THAT GRANTED AT 4/16/98, HOWEVER, THE ALLOCATION OF THE AWARD AMONGST THE PARTICIPANTS WITHIN EACH DIVISION MAY BE CHANGED BY THE DIVISION PRESIDENT. SIMILARLY, THE 5 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 5 INCENTIVE AND COMPENSATION COMMITTEE MAY, AT ITS DISCRETION, AWARD ADDITIONAL OPTIONS TO DIVISIONS WHICH MET THE 15% HURDLE WHICH WOULD OTHERWISE NOT HAVE BEEN AWARDED BECAUSE OTHER DIVISIONS FAILED TO ACHIEVE THE HURDLE, SO LONG AS THE TOTAL AMOUNT OF 60,000 OPTIONS SHARES PER YEAR ARE NOT EXCEEDED. LIKE THE OPTIONS IN 1998 AND 1999, THESE WILL BE COMPENSATORY OPTIONS BUT NO COMPENSATION EXPENSE WILL BE RECOGNIZED. AT THIS POINT, ALL 180,000 OPTION SHARES MAY HAVE BEEN AWARDED. AT 6/1/01, FOLLOWING THE RELEASE OF THE FY01 EARNINGS AND THE CALCULATION OF THE OVERALL INCREASE IN DEV FOR THE COMPANY AND EACH DIVISION, THE ACTUAL DEV BONUS AWARD WILL BE CALCULATED ON A DIVISION BY DIVISION BASIS. IN THE INSTANCE WHERE A DEV BONUS HAS BEEN EARNED OVER THE THREE YEAR PERIOD, THE AMOUNT OF THE BONUS PER PARTICIPANT WILL BE DETERMINED AND THE VALUE OF THE STOCK OPTIONS AWARDED THEM UNDER THIS PROGRAM WILL BE SUBTRACTED FROM THAT AMOUNT, YIELDING THE AMOUNT OF THE DEV TO BE PAID IN CASH. A CASH PAYMENT WILL BE MADE IN JUNE, 2001 FOR THIS AMOUNT, IN ACCORDANCE WITH OUR PAST POLICY. AS SHAREHOLDER APPROVAL IS NOT BEING SOUGHT FOR THIS BONUS PLAN, THE TIMING OF THE PAYMENT COULD BE AFFECTED BY THE $1 MILLION LIMIT ON DEDUCTIBLE COMPENSATION, AS DISCUSSED MORE FULLY BELOW. IN THE INSTANCE WHERE INADEQUATE SHARES ARE AVAILABLE UNDER THE COMPANY'S LONG TERM INCENTIVE PLAN, THEN NO OPTIONS WILL BE AWARDED THAT EXCEED THAT AMOUNT, HOWEVER, THE RESULT WILL BE, AT THE CONCLUSION OF THE PLAN, THAT A HIGHER CASH PAYOUT WILL BE MADE. IN THOSE CASES WHERE NO DEV IS EARNED, ALL OPTIONS PREVIOUSLY AWARDED WILL HAVE BECOME FULLY VESTED. ANY ANNUAL CASH BONUS EARNED IN FY01 BY PARTICIPANTS WHO HAD RECEIVED OPTIONS UNDER THIS PROGRAM IN PRIOR YEARS, AND WHO HAD NOT EARNED THE DEV BONUS, WILL BE REDUCED BY THE AMOUNT OF APPRECIATION IN VALUE OF THE OPTIONS SO GRANTED. BECAUSE CASH PAYMENTS REQUIRED UNDER THE FY99-01 DEV PLAN WILL BE CHARGED AGAINST EPS, IT IS IMPORTANT THAT QUARTERLY ACCRUALS FOR THE DEV BE MADE. THE CORPORATE OFFICE HAS ISSUED INSTRUCTIONS AT THE TIME OF PREPARING TACTICAL PLANS AND QUARTERLY REVIEWS AS TO THE AMOUNT TO BE ACCRUED BY EACH DIVISION FOR THE DEV, BASED UPON THEIR RESPECTIVE THREE YEAR FORECASTS AND CERTAIN ASSUMPTIONS. 6 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 6 BASED UPON A FINANCIAL ANALYSIS, IF EVERY DIVISION EARNED THE DEV AT 3/31/01, IF WE HIT ALL OF OUR FINANCIAL GOALS, AND IF OUR STOCK PRICE TRACKED OUR OPERATING RESULTS AT THE SAME PE (13) OVER THE THREE YEARS, THEN THE OPTION PORTION OF THE DEV WILL BE 44%, OR $4.6 MILLION, AND THE CASH PORTION WILL BE $5.9 MILLION, OR 56%. THE MORE SLOWLY THE STOCK PRICE MOVES TOWARDS THE TARGET PRICE OF $72 PER SHARE, THE GREATER THE PORTION OF THE DEV REALIZED IN OPTIONS, AND THE LOWER THE CASH PORTION AND THE RESULTANT EARNINGS CHARGE. AT TARGET, THIS DEV PLAN WOULD PAY OUT $10 MILLION TO PARTICIPANTS IN STOCK AND CASH, AND RESULT IN EARNINGS CHARGES AGGREGATING $.53 PER SHARE OVER THE THREE YEAR PERIOD. AT TARGET, OVER $300 MILLION OF VALUE WILL HAVE BEEN CREATED AND EARNINGS PER SHARE FOR THE THREE YEARS WOULD AGGREGATE $12.50 PER SHARE. THE DEV BONUS PAYOUT THEN WOULD EQUAL LESS THAN 3% OF THE VALUE CREATED AND 4% OF AGGREGATE EPS OVER THE PERIOD. 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. EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH, 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). IN THE EVENT OF A CHANGE IN CONTROL RESULTING FROM THE SALE OF ALL OR SUBSTANTIALLY ALL THE ASSETS OF OR MERGER WITH 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 7 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 7 year as if it were the final year of the Plan. In the event of termination for cause, all benefits which might be payable under the DEV plan are forfeited. Upon the end of the measurement period (the earlier of 3/31/01 or a Change in Control) ANY CASH PAYMENT REQUIRED FROM the bonus pool under the resultant DEV calculation will be paid out in either one or two installments, as hereinafter provided, upon the determination of the Incentives and Compensation Committee of the Board of Directors (the "Committee"). In the event the measurement period ends on 3/31/01, upon a determination to pay the bonus in one installment, THE CASH PORTION OF THE DEV bonus shall be paid on a date determined by the Committee, but not later than 6/30/01. Upon a determination to pay THE CASH PORTION OF the bonus in two installments, the first installment shall be paid on a date determined by the Committee, but not later than 6/30/01, and the second installment shall be paid no later than 4/10/02. In the event the measurement period ends upon a Change in Control, upon a determination of the Committee to pay THE CASH PORTION OF the bonus in one installment, the bonus will be paid within ten days of the Change in Control. If paid in two installments, the first installment will be paid within ten days of the Change in Control and the second installment will be paid within ten days of the close of the Corporation's fiscal year in which the first installment was paid. 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 President 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 President shall designate the person to be treated, for purposes of this Plan, as Division President. In no instance may a Group President receive a bonus as Group President and Division President. 8 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 8 CORPORATE OFFICE DEV POOLS For purposes of this plan, if at any time a Corporate Officer assumes a position making him or her eligible for consideration under the Divisional Bonus Pools, during such time he or she shall not participate in any Corporate Bonus Pool. The Corporate Office will have two DEV pools 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. In the event that TTC has increased its equity capital outstanding, either by the sale of additional shares of stock or by using stock in an acquisition, the amount of net proceeds received from said stock offering, or value assigned thereto in an acquisition, will be subtracted from the increased Enterprise Value in determining the DEV. There would be no adjustment to an EBIT multiplier for the Corporate Office pool. Payout procedures, stock option grants and timing of payments 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'01 year end audit and the measurement period following the release of the audited earnings or otherwise in accordance with the payout procedures outlined in the Division DEV Bonus Plan. In the event of a Change in Control, as defined in the Long Term Incentive Compensation Plan, payment will be made within ten days of the Change in Control occurring. The Corporate Office DEV bonus pools WILL BE ESTABLISHED AT 2.5% AND .5% FOR CORPORATE OFFICERS AND CORPORATE STAFF, RESPECTIVELY, of the excess DEV over the 15% hurdle rate. The DEV bonus will be allocated to corporate officers as reflected below: CEO 28.00% COO 17.50% CFO 13.50% General Counsel 7.50% Ass't Secretary 3.00%
9 INCENTIVE COMPENSATION PLAN 1999-01 AS APPROVED BY THE BOARD OF DIRECTORS APRIL 16, 1998 PAGE 9 Pres - Dom. Ind. Prod. 12.00% Future Officer Positions 18.50% ----- Total 100%
ALLOCATIONS OF OPTIONS AND CASH DEV PERCENTAGES TO MEMBERS OF THE CORPORATE STAFF WILL BE BASED UPON A SCHEDULE PREPARED AT THE BEGINNING OF THE FY99-01 PLAN (4/16/98). OPTION GRANTS MAY BE MODIFIED ACROSS PARTICIPANTS FROM YEAR TO YEAR SIMILAR TO THE PROCEDURE IN EFFECT FOR DIVISIONS, AND, LIKEWISE, THE INCENTIVE AND COMPENSATION COMMITTEE MAY, IN ITS DISCRETION, AWARD ADDITIONAL "UNEARNED" OPTIONS TO CORPORATE POOL PARTICIPANTS. EX-10.25 9 FORM OF STOCK OPTION AGREEMENT 1 Exhibit 10.25 TRANSTECHNOLOGY CORPORATION NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT This Agreement dated as of _________________ (the "Agreement") between TransTechnology Corporation, a Delaware corporation (the "Company"), and_________________________________________________________________________ ("Optionee"). WHEREAS, pursuant to the TransTechnology Corporation 1998 Non-Employee Directors" Stock Option Plan (the "Plan"), the Board of Directors and shareholders have authorized the granting to Optionee of options to purchase shares of common stock ($0.01 par value, per share) of the Company (the 'shares") upon the terms and conditions hereinafter stated. NOW, THEREFORE, in consideration of the covenants herein set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Shares and Price. The Company grants to Optionee the right to purchase, upon and subject to the terms and conditions herein stated and the terms and conditions of the Plan, __________________ Shares, at the purchase price of $______ per share (the "Options"). The purchase price is payable in accordance with Paragraph 5 hereof. 2. Term of Option. The Options shall expire five (5) years from the date hereof. 3. Exercisability. The Options shall be exercisable beginning on the first anniversary of the date hereof; provided, however, that during each of the three years beginning June 17, 1999 and ending June 16, 2002, the Optionee shall not be permitted to acquire more than 5,000 Shares through the exercise of the Options and/or any other options granted during the Initial Term (from June 1, 1998 through June 16, 2001), with the exception of Options granted under Section 5.5 of the Plan. 4. Partial Exercise. Subject to the provisions hereof, the Options may be exercised in whole or in part in accordance with Paragraph 5 hereof at any time after becoming exercisable, but not later than the date the Options expire. 5. Exercise and Payment of Purchase Price. The Options may only be exercised by delivery to the Company of a written notice of exercise, in form acceptable to the Company, stating the number of Shares then being purchased hereunder and a check made payable to the Company, or cash, in the amount of the purchase price of such Shares. At the discretion of the Board of Directors, the Options may be exercised with Shares of the Company owned by the Optionee at the time of exercise or issuable to the Optionee upon exercise of the Options, in either case with such Shares having a market value equal to the product of the purchase price at the date of exercise and the number of Shares with respect to which such Options are thereby exercised. 6. Termination of Service as a Director. If Optionee ceases to be a director of the Company for any reason other than his death, Optionee shall have the right to 2 exercise the Options to the extent, but only to the extent, that the Options were exercisable and had not previously been exercised at the date of such termination of service, until the first to occur of: (i) the date that is 90 days from the date of such termination or (ii) the date the Options expire pursuant to Paragraph 2 hereof. 7. Death of Optionee and No Assignment. The Options shall not be assignable or transferable except by will or by the laws of descent and distribution and shall be exercisable during the Optionee's lifetime only by the Optionee. In the event of the Optionee's death, the permitted successors to the Optionee's rights hereunder may exercise the Options, to the extent, but only to the extent, that the Optionee was entitled to exercise the Options at the date of Optionee's death, until the first to occur of (i) the date that is one year from the date of the Optionee's death, or (ii) the date such Options expire pursuant to Paragraph 2 hereof. 8. Change of Control. In the event of a Change of Control, as defined in the Plan, (except if the Board of Directors of the Company provides otherwise prior to the Change of Control as permitted under the Plan), the Options shall become immediately exercisable; provided, however, that in no event shall the Options become exercisable prior to the date that is six months from the date hereof. 9. No Rights as Stockholder. Optionee shall have no rights as a stockholder with respect to the Shares covered by the Options until the date of the issuance of stock certificates representing the Shares acquired pursuant to the exercise of the Options. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificates are issued pursuant to the exercise of the Options. 10. Modification and Termination. The rights of Optionee are subject to modification and termination in certain events as provided in the Plan. 11. Shares Purchased for Investment. Optionee represents and agrees that if Optionee exercises the Options in whole or in part, Optionee shall acquire the Shares upon such exercise for the purpose of investment and not with a view to their resale or distribution. The Company reserves the right to include a legend on each certificate representing shares subject to the Options, stating in effect that such Shares have not been registered under the Securities Act of 1933 (the "Act"), as amended, and may not be transferred without registration under the Act or an exemption therefrom. 12. This Agreement Subject to Plan. Optionee acknowledges that Optionee has read and understands the Plan. This Agreement is made pursuant to the provisions of the Plan, and is intended, and shall be interpreted in a manner, to comply therewith. Any provision hereof inconsistent with the Plan shall be superseded and governed by the Plan. The provisions of the Plan are incorporated herein by this reference. 13. Governing Law. To the extent not preempted by Federal law, this Agreement shall be construed in accordance with and shall be governed by the laws of the State of Delaware. 14. Notices. Any notices or other communication required or permitted hereunder shall be sufficiently given if delivered personally or sent by registered or certified mail, 3 postage prepaid, to the Company at its corporate headquarters, and to the Optionee at the last address maintained for such person in the records of the Company, or to such other address as shall be furnished in writing by either party to the other party, and shall be deemed to have been given as of the date so delivered or deposited in the United States mail, as the case may be. IN WITNESS WHEREOF, the parties hereto have executed the Agreement effective as of the date first written above. TRANSTECHNOLOGY CORPORATION ("Company") ____________________________________________ Michael J. Berthelot Chairman, President and Chief Executive Officer ("Optionee") ____________________________________________ Optionee Name Grant Number: _______ EX-13 10 1999 ANNUAL REPORT 1 Exhibit 13 [GRAPHIC OMITTED] Annual Report Fiscal Year Ended March 31, 1999 [LOGO]TransTechnology corporation engineered products for global partners(TM) 2 TABLE OF CONTENTS: 1 Selected Financial Data 2 Letter to Shareholders 4 Domestic and International Industrial Products 6 Aerospace Products 8 Financial Information [The following tables were depicted as bar graphs in the printed material.]
Net Sales ($ in Millions) ----------------------------------------------------- 1995 1996 1997 1998 1999 101.1 158.0 178.7 204.0 228.0 Income From Continuing Operations ($ in Millions) ----------------------------------------------------- 1995 1996 1997 1998 1999 7.4 8.5 9.7 12.0 14.6 Diluted Income Per Share From Continuing Operations (in Dollars) ----------------------------------------------------- 1995 1996 1997 1998 1999 1.44 1.66 1.87 2.11 2.30 Capital Expenditures ($ in Millions) ----------------------------------------------------- 1995 1996 1997 1998 1999 5.0 6.5 5.5 8.7 14.8
[The following tables were depicted as pie charts in the printed material.]
1999 Net Fastener Sales Allocation by Market Type ------------------------------------------------- Aerospace 2% Consumer/Durables 3% Industrial Machinery 11% Heavy Truck OEM 24% Automotive OEM 26% Distribution 34% 1999 Net Sales Allocation by Market Type ---------------------------------------- Aerospace 22% Consumer/Durables 3% Industrial Machinery 9% Heavy Truck OEM 19% Automotive OEM 20% Distribution 27%
On cover: Retaining rings as they enter plating process. 3 Selected Financial Data The following table provides selected financial data with respect to the consolidated statements of operations of the Company for the five fiscal years ended March 31, 1999, and the consolidated balance sheets of the Company at the end of each such year.
SELECTED FINANCIAL DATA Years ended March 31, (In thousands, except per share amounts 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Net sales $ 228,006 $ 203,928 $ 178,684 $ 158,024 $ 101,122 - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 24,294 20,153 16,620 14,300 10,842 Provision for income taxes 9,704 8,162 6,898 5,792 3,457 - ------------------------------------------------------------------------------------------------------------------- Income from continuing operations 14,590 11,991 9,722 8,508 7,385 Loss from discontinued operations -- (924) (934) (1,134) (4,852) - ------------------------------------------------------------------------------------------------------------------- Income before extraordinary charge 14,590 11,067 8,788 7,374 2,533 Extraordinary charge for refinancing of debt (781) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------- Net income $ 13,809 $ 11,067 $ 8,788 $ 7,374 $ 2,533 - ------------------------------------------------------------------------------------------------------------------- Earnings (loss) per share: Basic: Income from continuing operations $ 2.33 $ 2.17 $ 1.92 $ 1.67 $ 1.45 Loss from discontinued operations -- (0.17) (0.18) (0.22) (0.95) Extraordinary charge for refinancing of debt (0.12) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------- Net income per share $ 2.21 $ 2.00 $ 1.74 $ 1.45 $ 0.50 - ------------------------------------------------------------------------------------------------------------------- Diluted: Income from continuing operations $ 2.30 $ 2.11 $ 1.87 $ 1.66 $ 1.44 Loss from discontinued operations -- (0.16) (0.18) (0.22) (0.95) Extraordinary charge for refinancing of debt (0.12) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------- Net income per share $ 2.18 $ 1.95 $ 1.69 $ 1.44 $ 0.49 - ------------------------------------------------------------------------------------------------------------------- Dividends declared and paid per share $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.255 - ------------------------------------------------------------------------------------------------------------------- Total assets $ 279,720 $ 236,073 $ 199,136 $ 199,367 $ 129,396 Long-term debt $ 102,463 $ 51,350 $ 67,516 $ 72,565 $ 37,021 Stockholders' equity $ 123,710 $ 115,832 $ 77,444 $ 72,470 $ 64,502 Book value per share $ 20.25 $ 18.47 $ 15.40 $ 14.21 $ 12.72 Shares outstanding at year-end 6,108 6,272 5,028 5,099 5,070 - -------------------------------------------------------------------------------------------------------------------
MARKET AND DIVIDEND DATA
Market Price --------------------------------------------------- Quarter Ended High Low Dividends - ------------------------------------------------------------------------------------------------------------------- June 30, 1997 $ 22-7/8 $ 19-7/8 $ .065 September 30, 1997 26-11/16 22-3/4 .065 December 31, 1997 28-5/16 26 .065 March 31, 1998 30-5/16 25-1/2 .065 - ------------------------------------------------------------------------------------------------------------------- June 30, 1998 30-5/8 25-9/16 .065 September 30, 1998 27-1/8 20-1/4 .065 December 31, 1998 23-11/16 18-9/16 .065 March 31, 1999 20-3/4 16-1/2 .065 - -------------------------------------------------------------------------------------------------------------------
1999 ANNUAL REPORT 1 4 Fellow Shareholders: [PHOTO OMITTED] Michael J. Berthelot We are pleased to report that the fiscal year ended March 31, 1999, was the seventh consecutive year of growth for our company, with sales up 12% and income and earnings per share before an extraordinary item up 32% and 18% respectively. The year began with a flurry of activity. In June we added a new product to our line of specialty fasteners with the acquisition of Aerospace Rivet Manufacturers Corporation, a Los Angeles- based manufacturer of rivets and bolts for use in the aerospace industry. In July, we acquired NORCO Inc. of Ridgefield, Connecticut, the world's leading maker of rods used to hold open aircraft engine nacelles during inspection and maintenance. Each of these acquisitions made a contribution to 1999's results, and we expect them to grow and prosper even more in the future. At the end of the second quarter, uncertainty in the economic cycle led us to cut back employment levels, eliminate non-essential spending, and reduce inventory and working capital. Those programs continued through the fourth quarter. Since the beginning of the third quarter our headcount is down 10% and, since the beginning of the fourth quarter, we have lowered our inventory $5.6 million. We believe the continuance of these measures will help prepare us for any further downside changes in the economy and will increase cash generation. Our focus on lower operating costs and higher operating efficiencies makes our fastener segment one of the most profitable in the field, with fiscal 1999 operating and EBITDA (earnings before interest, taxes, depreciation and amortization) margins of 14.8% and 19.7%, respectively. In a field of eight publicly traded companies reporting segment results for fasteners for calendar 1998, our fiscal 1999 EBITDA margin ranked second. The 1999 fiscal year was a challenging one. On the downside, the U.S. manufacturing economy was weak for the first three quarters of our fiscal year, and economic chaos reigned in Brazil for most of the year. England slid into recession for the better part of the year and Germany's growth slowed to a crawl as the year drew to an end. On the upside, three more of our facilities became QS 9000 quality certified, and two achieved ISO14001 environmental certification. We placed new presidents at four of our divisions. We completed the largest capital spending program in the company's history. We surveyed every one of our over 1,750 employees as to their quality of work life, and sampled the top 20 customers at each of our divisions as to customer satisfaction. Programs to capitalize on opportunities were implemented following each survey. At year end, our financial results, while satisfying in one regard, left us with the knowledge that we can do much better. Our charge for fiscal 2000 is to capitalize on the opportunities in those divisions which are improving efficiencies and gaining market share while driving out costs. Our primary objective is to improve the operating results of our domestic retaining ring division, which has been a drag on our results for the past two fiscal years. Combined with uncertainty as to the economies of Germany and Great Britain, the domestic retaining ring business is our biggest risk for fiscal 2000. 2 TRANSTECHNOLOGY CORPORATION 5 Our commitment to achieving our stated goals by the year 2001 remains strong. Progress was made toward our goals of $500 million in revenues (up 12% in fiscal 1999); number one or two market positions in our product lines (NORCO's addition gave us another number one market share position); a 7% net income margin (up to 6.4% before an extraordinary item in 1999 from 1998's 5.4%); 15% annual increases in EPS (up 18% on 11% more shares in 1999); 35% debt to total capitalization (at 45% on March 31, 1999, from a 49% peak following the acquisitions); and a dividend not higher than 25% of income (at $.26, 12%). As we get nearer to fiscal 2001, it is clear that some of these may truly be stretch goals. We believe, however, that they remain achievable. We are, of course, disappointed by the disconnect between the price of our company's shares and the intrinsic value of our company. Value is related to the fundamental, long-term cash- generation capacity of a business. The price of a share, however, is dependent upon many things, including net inflows of funds into mutual funds and alternative investments. As painful as we find the decline in our share price to be, we in management cannot obsess with the day-to-day price of our shares; to a large degree, it is out of our control. We can, however, focus our efforts on increasing the value of our business, by increasing sales, by increasing profitability, and by increasing the return on our invested capital. Increasing shareholder value is our main endeavor, and it is value which is our driver, not the daily price quote. We are firm in our belief that the market price of our shares and the value of our business will realign themselves. We are pleased to welcome John H. Dalton, former Secretary of the Navy, to our Board of Directors. He will be a valuable source of guidance and support to us in the future. I cannot quantify the pride and gratitude I feel in being permitted to lead this company. Every one of our 1,750 employees around the world contributes every day to our results. As I travel and meet them, and see what they do, I cannot help but be impressed with their knowledge, commitment, and desire to do their best. I thank each of them for their support and hard work this past year. Our Board of Directors continues to provide the best possible counsel and guidance, and I find it an irreplaceable source of advice and information. I thank the members of our Board for their commitment this past year. And most importantly, I thank you, the shareholders, who have placed your trust, confidence, and resources in our hands. We appreciate your support, and look forward to continued growth in the future. /s/ Michael J. Berthelot Michael J. Berthelot Chairman, President and Chief Executive Officer [The following table was depicted as a pie chart in the printed material.]
1999 Net Sales Domestic vs. International Operations ------------------------------------- International 25% Domestic 75%
1999 ANNUAL REPORT 3 6 Domestic and International Industrial Products TransTechnology Corporation derives almost 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, the company has 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 various industries, ranging from automotive and heavy truck manufacturing to computer disk drives, toys, cameras, appliances and plumbing applications. 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 unique applications for its products in new industries around the globe. The Palnut Company Single and multi-thread fasteners for automotive and industrial applications [GRAPHIC OMITTED] RETAINING RINGS TransTechnology is the world's largest manufacturer of retaining rings, with operations in the United States, Germany, England, and Brazil selling products under the brand names "Seeger" (Germany and Brazil), "Anderton" (United Kingdom), and "Waldes/IRR" (United States). Retaining rings are highly engineered, usually to a customer's exacting specifications, and are used in transmissions, drive trains, steering and braking systems on automobiles, trucks, and off-road equipment. They also find application in industrial equipment, computers, photographic equipment, marine applications, and almost any situation where axial retention of mechanical parts on shafts or in bores is required. Breeze Industrial Products V-Band clamp for OEM applications [GRAPHIC OMITTED] STAINLESS STEEL HOSE CLAMPS TransTechnology, through its Breeze Industrial Products and Pebra divisions, manufactures the most comprehensive line of worm-drive and T-Bolt/V-Band clamps in the world. Breeze(R) and Pebra stainless steel clamps are well known for their quality and engineering. Breeze(R) T-Bolt and Constant-Torque(R) clamp products are used in diesel engine, heavy truck, marine and off-road equipment applications throughout the world. Breeze(R) is a certified supplier to Caterpillar, Paccar, and many other heavy equipment manufacturers. Breeze(R) "Aero-Seal(R)", "Euro-Seal(R)" and "Power-Seal(R)" clamps are supplied through major distributors to the industrial, hardware, automotive, marine and retail markets for use in repair, maintenance and overhaul applications, and are used by many manufacturers of industrial and consumer products. Pebra brand clamps are supplied to both the European heavy truck and equipment markets and to industrial product manufacturers. 4 TRANSTECHNOLOGY CORPORATION 7 [GRAPHIC OMITTED] TCR Shift rail for manual transmissions [GRAPHIC OMITTED] ASSEMBLY FASTENERS TransTechnology's Palnut division is one of the leading manufacturers of assembly fasteners in the United States, supplying Palnut(R) highly engineered fastening devices to the automotive, toy, appliance and electronics industries. Products include lock nuts, push-nuts, u-nuts, and a variety of single and multi-threaded stainless and high-carbon steel fasteners. Palnut products are sold worldwide directly to original equipment manufacturers (OEM) as well as through industrial distributors. EXTERNALLY THREADED AND SPECIALTY MACHINED PRODUCTS TCR Corporation, designs and manufactures sophisticated externally threaded fastening devices and custom industrial components, combining its expertise in cold forging and machining technologies. TCR products are used by industrial customers worldwide, with key market groups including the automotive, hydraulic and recreational product industries. TransTechnology's Aerospace Rivet Manufacturers Corporation (ARM), acquired in 1998, produces premium solid rivets and threaded fasteners for the aerospace industry. Materials used in these fasteners include aluminum alloys, monel, titanium, A-286, stainless steel, and other specialty alloys. All of ARM's products are manufactured for the aerospace industry and meet quality approvals for Boeing D1-9000 and Mil-I-45208. ARM Solid rivets and threaded fasteners for aerospace applications [GRAPHIC OMITTED] 1999 ANNUAL REPORT 5 8 [PHOTO OMITTED] Norco hold open rods on Boeing-B777 9 Aerospace Products TransTechnology's Breeze-Eastern division is the world's leading designer and manufacturer of sophisticated helicopter rescue hoists, cargo winches and cargo hook systems. These complex, highly engineered systems add significantly to the versatility of an aircraft for a relatively small cost. The equipment is used the world over by military and civilian agencies to save lives, complete missions, and transport cargo. Most helicopter manufacturers today, including Agusta, Bell, Boeing, Eurocopter, MD Helicopters, Sikorsky and GKN-Westland specify Breeze-Eastern's systems as standard equipment on their aircraft because of Breeze-Eastern's record for performance, safety, reliability, durability, and service. Innovation and new product development remain an important focus at Breeze-Eastern, one reason why its products will be found on the new V-22 Osprey tiltrotor vertical take-off and landing aircraft due into full production in 1999 for the U.S. Marine Corps, the Sikorsky UH-60Q Blackhawk MEDEVAC helicopter for the U.S. Army, the EHI Cormorant Search and Rescue helicopter for the Canadian National Defense Forces and the Agusta A-109 (Power) utility helicopter. Breeze-Eastern also designs and manufactures handling systems for weapons platforms and motion control actuation systems for civilian and military aircraft. Norco Inc., acquired in 1998, is the global leader in the design and manufacture of mechanical components and systems such as hold open rods, quick connect/disconnect locking systems, helicopter blade restraint systems, latch assemblies, safety locks, and application-specific mechanical systems. Its power transmission line of products include rollnuts, rollnut longspan assemblies, ball reversers, ball oscillators, FlenNut assemblies and other application-specific linear motion assemblies. During the company's successful history of servicing the commercial and defense aviation industry, Norco has forged special relationships with several original equipment manufacturers. These relationships enable Norco to work in collaboration with its customers not only during the early design stage, but also throughout the life-cycle of each manufacturing program. The Company's aircraft building customers, include Airbus, Boeing, McDonnell Douglas (now Boeing), Lockheed Martin and Northrop Grumman. Norco also sells to aircraft system suppliers such as BF Goodrich Aerospace Structures (cowlings), Short Brothers plc. (nacelles), and GKN-Westland Aerospace Structures (composite doors on the Airbus A-340, CRJ700 and C27J). 1999 ANNUAL REPORT 7 10 Consolidated Balance Sheets (In thousands, except share data)
March 31, ASSETS 1999 1998 ======================================================================================================================= CURRENT ASSETS: Cash and cash equivalents $ 2,255 $ 2,960 Accounts receivable (net of allowance for doubtful accounts of $240 and $556 in 1999 and 1998, respectively) 36,323 33,244 Notes and other receivables 658 5,086 Inventories 58,668 53,985 Prepaid expenses and other current assets 1,702 1,022 Deferred income taxes 1,295 2,773 - ----------------------------------------------------------------------------------------------------------------------- Total current assets 100,901 99,070 - ----------------------------------------------------------------------------------------------------------------------- PROPERTY: Land 12,564 11,002 Buildings 21,654 19,747 Machinery and equipment 67,381 54,315 Furniture and fixtures 9,075 7,381 Leasehold improvements 727 536 - ----------------------------------------------------------------------------------------------------------------------- Total 111,401 92,981 Less accumulated depreciation and amortization 35,017 29,295 - ----------------------------------------------------------------------------------------------------------------------- Property - net 76,384 63,686 - ----------------------------------------------------------------------------------------------------------------------- OTHER ASSETS: Notes receivable 3,694 7,181 Costs in excess of net assets of acquired businesses (net of accumulated amortization of $7,002 and $5,115 in 1999 and 1998, respectively) 76,731 45,094 Other 22,010 21,042 - ----------------------------------------------------------------------------------------------------------------------- Total other assets 102,435 73,317 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 279,720 $ 236,073 ======================================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY ======================================================================================================================= CURRENT LIABILITIES: Current portion of long-term debt $ 46 $ 12,137 Accounts payable - trade 14,247 14,694 Accrued compensation 6,161 9,764 Accrued income taxes 765 332 Other current liabilities 8,588 11,154 - ----------------------------------------------------------------------------------------------------------------------- Total current liabilities 29,807 48,081 - ----------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS 102,463 51,350 - ----------------------------------------------------------------------------------------------------------------------- OTHER LONG-TERM LIABILITIES 23,740 20,810 - ----------------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Notes 11 and 12) - ----------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Preferred stock - authorized, 300,000 shares; none issued Common stock - authorized, 14,700,000 shares of $.01 par value; issued, 6,653,855 and 6,564,079 shares in 1999 and 1998, respectively 67 66 Additional paid-in capital 77,246 75,959 Retained earnings 58,721 46,537 Accumulated other comprehensive loss (3,021) (2,495) Unearned compensation (239) (236) - ---------------------------------------------------------------------------------------------------------------------- 132,774 119,831 Less treasury stock, at cost - 546,213 and 292,054 shares in 1999 and 1998, respectively (9,064) (3,999) - ----------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 123,710 115,832 - ----------------------------------------------------------------------------------------------------------------------- TOTAL $ 279,720 $ 236,073 =======================================================================================================================
See notes to consolidated financial statements. 8 TransTechnology Corporation 11 Statements of Consolidated Operations (In thousands, except share data)
Years ended March 31, 1999 1998 1997 ===================================================================================================== Net sales $ 228,006 $ 203,928 $ 178,684 Cost of sales 156,090 137,820 122,480 - ----------------------------------------------------------------------------------------------------- Gross profit 71,916 66,108 56,204 General, administrative and selling expenses 46,552 40,187 35,309 Interest expense 6,938 7,228 6,797 Interest income (412) (1,020) (1,202) Other income - net (6,362) (440) (1,320) Allowance for possible loss on notes receivable 906 -- -- - ----------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 24,294 20,153 16,620 Provision for income taxes 9,704 8,162 6,898 - ----------------------------------------------------------------------------------------------------- Income from continuing operations 14,590 11,991 9,722 Loss from disposal of discontinued operations (net of applicable tax benefits of $1,301 and $663 for 1998 and 1997, respectively) -- (924) (934) - ----------------------------------------------------------------------------------------------------- Income before extraordinary charge 14,590 11,067 8,788 Extraordinary charge for refinancing of debt (net of applicable tax benefit of $532) (781) -- -- - ----------------------------------------------------------------------------------------------------- Net income $ 13,809 $ 11,067 $ 8,788 - ----------------------------------------------------------------------------------------------------- Earnings (loss) per share: Basic: Income from continuing operations $ 2.33 $ 2.17 $ 1.92 Loss from disposal of discontinued operations -- (0.17) (0.18) Extraordinary charge for refinancing of debt (0.12) -- -- - ----------------------------------------------------------------------------------------------------- Net income per share $ 2.21 $ 2.00 $ 1.74 - ----------------------------------------------------------------------------------------------------- Diluted: Income from continuing operations $ 2.30 $ 2.11 $ 1.87 Loss from disposal of discontinued operations -- (0.16) (0.18) Extraordinary charge for refinancing of debt (0.12) -- -- - ----------------------------------------------------------------------------------------------------- Net income per share $ 2.18 $ 1.95 $ 1.69 - ----------------------------------------------------------------------------------------------------- Weighted - average basic shares outstanding 6,249,000 5,520,000 5,064,000 Weighted - average diluted shares outstanding 6,341,000 5,689,000 5,196,000
See notes to consolidated financial statements. 1999 ANNUAL REPORT 9 12 Statements of Consolidated Cash Flows (In thousands)
Years ended March 31, 1999 1998 1997 ============================================================================================================= Cash flows from operating activities: Net income $ 13,809 $ 11,067 $ 8,788 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary charge for refinancing of debt 781 -- -- Gain on sale of marketable securities (1,082) -- -- Depreciation and amortization 10,802 9,054 7,406 Provision for losses on accounts and notes receivable 803 537 139 (Gain) loss on sale or disposal of fixed assets and discontinued businesses (28) 1,087 64 Changes in assets and liabilities - excluding the effects of acquisitions and dispositions: Decrease (increase) in accounts receivable 1,073 (2,732) (620) Decrease (increase) in inventories 2,266 (2,685) 191 Decrease (increase) in other assets 1,888 (3,330) (191) (Decrease) increase in accounts payable (2,604) 1,770 (3,650) (Decrease) increase in accrued compensation (3,603) 2,989 553 Increase (decrease) in income taxes payable 686 (1,300) 242 (Decrease) increase in other liabilities (6,115) 2,751) 1,385 - ------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 18,676 19,208 14,307 - ------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Business acquisitions (43,901) (34,774) (3,602) Capital expenditures (14,759) (8,745) (5,477) Proceeds from sale of fixed assets and discontinued businesses 502 2,144 2,705 Proceeds from sale of marketable securities 2,024 -- -- Decrease in notes and other receivables 3,128 1,954 1,119 - ------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (53,006) (39,421) (5,255) - ------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term borrowings 159,089 68,400 40,105 Payments on long-term debt (119,942) (78,336) (45,273) Proceeds from issuance of stock under stock option plan 1,157 2,213 365 Stock offering proceeds -- 26,908 -- Proceeds from foreign exchange contracts -- 2,036 -- Treasury stock purchases (4,926) -- (1,625) Dividends paid (1,625) (1,467) (1,318) - ------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 33,753 19,754 (7,746) - ------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (128) (121) (128) (Decrease) increase in cash and cash equivalents (705) (580) 1,178 Cash and cash equivalents at beginning of year 2,960 3,540 2,362 - ------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 2,255 $ 2,960 $ 3,540 - ------------------------------------------------------------------------------------------------------------- Supplemental information: Interest payments $ 7,130 $ 7,647 $ 6,708 Income tax payments $ 5,177 $ 5,988 $ 3,810 - -----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 10 TRANSTECHNOLOGY CORPORATION 13 Statements of Consolidated Stockholders' Equity (In thousands, except share data)
Accumulated Years ended Common Stock Treasury Stock Additional Other Total March 31, 1999, --------------- --------------- Paid-In Retained Comprehensive Unearned Comprehensive 1998 and 1997 Shares Amount Shares Amount Capital Earnings Income (loss) Compensation Income - ---------------------------------------------------------------------------------------------------------------------- ------------- BALANCE, MARCH 31, 1996 5,276,463 $53 (177,500) $(2,155) $46,188 $ 29,467 $ (774) $(309) Net income -- -- -- -- -- 8,788 -- -- $ 8,788 Other comprehensive income: Currency translation adjustment (net of taxes of $753) -- -- -- -- -- -- (1,061) -- (1,061) Unrealized investment holding losses (net of taxes of $201) -- -- -- -- -- -- (283) -- (283) Cash dividends ($.26 per share) -- -- -- -- -- (1,318) -- -- -- Purchase of treasury stock -- -- (100,000) (1,625) -- -- -- -- -- Issuance of stock under stock option plan 30,381 -- -- -- 365 -- -- -- -- Issuance of stock under bonus plan 10,127 -- (11,737) (159) 192 -- -- 75 -- - ---------------------------------------------------------------------------------------------------------------------- ------------- BALANCE, MARCH 31, 1997 5,316,971 53 (289,237) (3,939) 46,745 36,937 (2,118) (234) $ 7,444 ======== Net income -- -- -- -- -- 11,067 -- $ 11,067 Other comprehensive income: Currency translation adjustment (net of taxes of $331) -- -- -- -- -- -- (487) -- (487) Unrealized investment holding gains (net of taxes of $75) -- -- -- -- -- -- 110 -- 110 Cash dividends ($.26 per share) -- -- -- -- -- (1,467) -- -- -- Public sale of common stock, net of expenses 1,063,900 11 -- -- 26,897 -- -- -- -- Issuance of stock under stock option plan 178,416 2 -- -- 2,211 -- -- -- -- Issuance of stock under bonus plan 4,792 -- (2,817) (60) 106 -- -- (2) -- - ---------------------------------------------------------------------------------------------------------------------- ------------- BALANCE, MARCH 31, 1998 6,564,079 66 (292,054) (3,999) 75,959 46,537 (2,495) (236) $ 10,690 ============= Net income -- -- -- -- -- 13,809 -- -- $ 13,809 Other comprehensive income: Currency translation adjustment (net of taxes of $467) -- -- -- -- -- -- (701) -- (701) Unrealized investment holding gains (net of taxes of $117) -- -- -- -- -- -- 175 -- 175 Cash dividends ($.26 per share) -- -- -- -- -- (1,625) -- -- -- Purchase of treasury stock -- -- (248,700) (4,926) -- -- -- -- -- Issuance of stock under stock option plan 84,714 1 -- -- 1,156 -- -- -- -- Issuance of stock under bonus plan 5,062 -- (5,459) (139) 131 -- -- (3) -- - ---------------------------------------------------------------------------------------------------------------------- ------------- BALANCE, MARCH 31, 1999 6,653,855 $ 67 (546,213) $(9,064) $77,246 $ 58,721 $(3,021) $ (239) $ 13,283 ====================================================================================================================== =============
See notes to consolidated financial statements. 1999 ANNUAL REPORT 11 14 Notes to Consolidated Financial Statements. 1. SUMMARY OF ACCOUNTING PRINCIPLES Business - TransTechnology Corporation (the "Company") develops, manufactures and sells a wide range of products in two industry segments, Specialty Fastener Products and Aerospace Products. The Company has manufacturing facilities located in the United States, Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment produces highly engineered precision metal retaining rings, gear driven band fasteners, circlips, custom cold-formed parts, rivets and other threaded and non-threaded assembly fasteners primarily for the automotive, heavy truck, industrial, aerospace and consumer/durables markets and accounted for approximately 78% of the Company's consolidated 1999 net sales. Through its Aerospace Products Segment, the Company develops, manufactures, sells and services a complete line of sophisticated lifting and restraining products--principally performance critical helicopter rescue hoist and cargo hook systems, winches and hoists for aircraft and weapons systems and aircraft engine compartment hold open rods, actuators and other motion control devices. This segment accounted for approximately 22% of the Company's consolidated 1999 net sales. Use of Estimates - The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 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. Investments in less than 20% owned companies are accounted for by the cost method. 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. Accounts receivable from the United States Government represent billed receivables and substantially all amounts are expected to be collected within one year. Losses on contracts are recorded 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. Inventories - Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Cost includes material, labor and manufacturing overhead costs. Property and Related Depreciation and Amortization - Property is recorded at cost. Provisions for depreciation are made on a straight-line basis over the estimated useful lives of depreciable assets ranging from three to thirty years. Amortization of leasehold improvements is computed on a straight-line basis over the shorter of the estimated useful lives of the improvements or the terms of the leases. The Company reviews property and equipment and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. It has been determined that no impairment loss needs to be recognized for such assets. Costs in Excess of Net Assets of Acquired Businesses - The difference between the purchase price and the fair value of the net assets of acquired businesses is included in the accompanying Consolidated Balance Sheets under the caption "Costs in excess of net assets of acquired businesses" and is being amortized over 40 years. The Company 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 are being amortized, are in excess of the recorded asset amount. 12 TRANSTECHNOLOGY CORPORATION 15 Earnings per Share ("EPS") - The computation of basic EPS is based on the weighted-average number of common shares outstanding. The computation of diluted EPS assumes the foregoing and, in addition, the exercise of all stock options using the treasury stock method. The components of the denominator for basic earnings per common share and diluted earnings per common share are reconciled as follows:
1999 1998 1997 Basic earnings per common share: Weighted-average common shares outstanding 6,249,000 5,520,000 5,064,000 ================================ Diluted earnings per common share: Weighted-average common shares outstanding 6,249,000 5,520,000 5,064,000 Stock options 92,000 169,000 132,000 -------------------------------- Denominator for diluted earnings per common share 6,341,000 5,689,000 5,196,000 ================================
Options to purchase 169,774, shares of common stock at prices between $22.9375 and $27.8750 were outstanding during 1999 but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares. During 1998 and 1997, all options to purchase common stock were included in the computation of diluted EPS. 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 $2.4 million, $2.1 million and $2.0 million in 1999, 1998 and 1997, respectively. Included in these amounts were expenditures of $1.2 million, $1.1 million and $0.8 million in 1999, 1998 and 1997, respectively, which represent costs related to research and development activities. Foreign Currency Translation - The assets and liabilities of the Company's international operations, have been translated into U.S. dollars at year-end exchange rates, with resulting translation gains and losses accumulated as a separate component of Accumulated Other Comprehensive Income (Loss). Income and expense items are converted into U.S. dollars at average rates of exchange prevailing during the year. The Company treated its operation in Brazil as highly inflationary, where the functional currency was the U.S. dollar until the end of the third quarter of fiscal 1999. Effective December 28, 1998, the Brazilian operation ceased to be considered highly inflationary by the Company and the Brazilian Real is now the functional currency. Income Taxes - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Investments - On March 1, 1994, the Company received shares of Mace Security International common stock, valued at $3.4 million, as partial consideration for the sale of a division. In March 1997, the Company recorded a $2.6 million pretax charge to continuing operations to write-down the carrying value of these shares to their current market value as the decline in value of these shares was determined to be other than temporary. During the fourth quarter of fiscal 1999, the Company sold all of these shares for $2.0 million and realized a pretax gain of $1.1 million. 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 financing and investment transactions denominated in foreign currencies and purchase commitments and certain foreign currency denominated long-term debt. Gains and losses on the investing and financing transactions are included in other income - net. Gains and losses on the foreign currency purchase commitment transactions are included in the cost of the underlying purchases. New Accounting Standards - In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued and is effective for the Company for its fiscal year ending March 31, 2002. SFAS No. 133 requires that all derivative instruments be measured at fair value and recognized in the balance sheet as either assets or liabilities. The Company is currently evaluating the impact this pronouncement will have on its consolidated financial statements. Reclassifications - Certain reclassifications have been made to prior years' financial statements to conform to the 1999 presentation. 1999 ANNUAL REPORT 13 16 2. DISCONTINUED OPERATIONS During fiscal 1998 and 1997, the Company recorded after tax costs of $0.9 million in both years for the disposal of previously discontinued and sold operations. These costs represent adjustments to previous estimates related primarily to legal and environmental matters. Included in Other Assets at March 31, 1999 and 1998, were assets held for sale related to discontinued operations of $5,224 and $5,442, respectively. 3. ACQUISITIONS On July 28, 1998, the Company acquired all of the outstanding stock of NORCO, Inc. ("NORCO") for $17.7 million in cash, including direct acquisition costs, and other contingent consideration. NORCO, located in Ridgefield, Connecticut, produces aircraft engine compartment hold open rods, actuators and other motion control devices for the aerospace industry. On June 29, 1998, the Company acquired all of the outstanding stock of Aerospace Rivet Manufacturers Corporation ("ARM") for $26.2 million in cash, including direct acquisition costs, and other contingent consideration. ARM, located in Santa Fe Springs, California, produces rivets and externally threaded fasteners for the aerospace industry. On April 17, 1997, the Company acquired all of the outstanding stock of TCR Corporation for $32.6 million in cash plus direct acquisition costs, and other contingent consideration. TCR Corporation, located in Minneapolis, Minnesota, produces cold forged and other externally threaded fasteners and related products for the automotive, heavy vehicle, marine and industrial markets. The following is a summary of the assets acquired and the liabilities assumed (in thousands):
1999 1998 Current assets $ 12,723 $ 5,862 Long-term assets 37,944 34,449 Liabilities assumed (6,766) (5,537) --------------------- Cash paid including acquisition costs $ 43,901 $ 34,774 =====================
The following summarizes the Company's pro forma information as if the acquisitions of ARM and NORCO had occurred at the beginning of the periods presented. The pro forma results give effect to the amortization of goodwill and additional depreciation and the effects on interest expense and taxes (in thousands):
1999 1998 Net sales $239,142 $236,684 =================== Income from continuing operations $ 14,617 $ 12,789 =================== Net income $ 13,836 $ 11,865 =================== Basic earnings per share $ 2.21 $ 2.15 =================== Diluted earnings per share $ 2.18 $ 2.09 ===================
The above pro forma information does not purport to be indicative of the financial results which actually would have occurred had the acquisitions been made at the beginning of the period presented or subsequent to that date. On June 18, 1996 the Company acquired the Pebra hose clamp business from Pebra GmbH Paul Braun i.K. for approximately $3.6 million in cash including direct acquisition costs. Pebra manufactures heavy duty hose clamps primarily for use in the manufacture of heavy trucks in Europe. 4. INVENTORIES Inventories at March 31, consisted of the following (in thousands):
1999 1998 Finished goods $ 23,592 $ 22,515 Work in process 11,403 11,330 Purchased and manufactured parts 23,673 20,140 -------------------- Total $ 58,668 $ 53,985 ====================
14 TRANSTECHNOLOGY CORPORATION 17 5. INCOME TAXES The components of total income (loss) from operations (including continuing and discontinued operations and extraordinary items) before income taxes were (in thousands):
1999 1998 1997 Domestic $ 23,689 $ 17,068 $ 12,167 Foreign (708) 860 2,856 ------------------------------------------- Total $ 22,981 $ 17,928 $ 15,023 ===========================================
The provision for income taxes is summarized below (in thousands):
1999 1998 1997 Currently payable: Federal $ 3,771 $ 4,325 $ 3,549 Foreign -- 77 42 State 587 808 975 ------------------------------------------- 4,358 5,210 4,566 Deferred 4,814 1,651 1,669 ------------------------------------------- Total $ 9,172 $ 6,861 $ 6,235 ===========================================
The provision (benefit) for income taxes is allocated between continuing and discontinued operations and extraordinary items as summarized below (in thousands):
1999 1998 1997 Continuing $ 9,704 $ 8,162 $ 6,898 Discontinued -- (1,301) (663) Extraordinary (532) -- -- ------------------------------------------- Total $ 9,172 $ 6,861 $ 6,235 ===========================================
The consolidated effective tax rates for continuing operations differ from the federal statutory rates as follows (in thousands):
1999 1998 1997 Statutory federal rate 35.0% 35.0% 35.0% State income taxes after federal income tax 4.9 4.8 4.5 Earnings of the foreign sales corporation (3.4) (2.4) (2.0) Amortization of purchase adjustments not deductible for tax purposes 2.3 1.6 -- Foreign rate differential 1.0 -- 2.4 Other 0.2 1.5 1.6 ------------------------------------------- Consolidated effective tax rate 40.0% 40.5% 41.5% ===========================================
The following is an analysis of accumulated deferred income taxes (in thousands):
1999 1998 Assets: Current: Inventory $ 309 $ 1,008 Net operating loss carryforward 328 681 Other 658 1,084 --------------------- Total current 1,295 2,773 ===================== Noncurrent: Environmental 602 852 Accrued liabilities 2,412 1,572 Investment 617 1,062 Net operating loss carryforward 1,411 984 Other 1,715 1,623 --------------------- Total noncurrent 6,757 6,093 --------------------- Total assets $ 8,052 $ 8,866 ===================== Liabilities: Property $ 11,217 $ 10,145 Other 732 578 --------------------- Total liabilities $ 11,949 $ 10,723 =====================
Summary of deferred income taxes (in thousands):
1999 1998 Net current assets $ 1,295 $ 2,773 Net noncurrent liabilities (5,192) (4,630) --------------------- Total $ (3,897) $ (1,857) =====================
1999 ANNUAL REPORT 15 18 6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS Long-term debt payable to banks and others, including current maturities, at March 31 consisted of the following (in thousands):
1999 1998 Credit agreement - 6.12% $101,440 $ -- Credit agreement - 7.75% 400 -- Credit agreement - 8.50% -- 2,676 Term loan - 6.85% -- 36,099 Term loan - 9.79% -- 24,000 Other 669 712 ------------------------- 102,509 63,487 Less current maturities 46 12,137 ------------------------- Total $102,463 $ 51,350 =========================
Credit Agreement - Effective July 24, 1998, the Company's credit facility was increased from $115.0 million to $125.0 million and was amended to eliminate the Term A and Term B loans, as well as, the asset based lending requirement of the prior loan agreement. The loan maturity date and all principal payments due were extended until July 23, 2003, at which time the principal is due in full. The primary purpose for the increase in the credit facility was to accommodate the ARM and NORCO acquisitions on June 29, 1998 and July 28, 1998, respectively. Effective November 27, 1998, the Company's credit facility was amended to increase the amount available from $125.0 million to $145.0 million in order to continue to have borrowing capacity for additional acquisition activity. The credit agreement provides for revolving credit (the "Revolver") for both domestic and international borrowings, as well as letters of credit. The credit facility is provided by a group of commercial banks and is secured by all of the Company's assets. The amount of the revolving bank credit line commitment available for international credit is $25.0 million and $5.0 million is available for letters of credit. As of March 31, 1999, the Company's debt consisted of $80.4 million of borrowings under the domestic revolving credit line, $21.4 million of borrowings under the international credit line and $0.7 million of other borrowings. Outstanding letters of credit under the credit line at March 31, 1999 were $0.1 million. Interest on the Revolver is tied to the primary bank's prime rate, or at the Company's option, the London Interbank Offered Rate ("LIBOR"), plus a margin that varies depending upon the Company's achievement of certain operating and financial goals. At March 31, 1999, $101.4 million of the Company's outstanding borrowings utilized LIBOR, of which, $7.7 million and $13.7 million were payable in Deutsche mark and Pound sterling, respectively. The credit facility requires the Company to have interest rate protection on a minimum of $50.0 million of its variable rate debt effective April 30, 1999. Interest rate protection is generally arranged by means of interest rate swap agreements. The credit agreement also limits the Company's ability to pay dividends to 25% of net income and restricts capital expenditures to a range of $11.8 million to $15.8 million annually, and contains 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 (in thousands): 2000 $ 46 2001 47 2002 49 2003 50 2004 101,891 Thereafter 426 ----------- Total $ 102,509 ===========
16 TRANSTECHNOLOGY CORPORATION 19 7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS The Company maintains the amended and restated 1992 long-term incentive plan (the "1992 Plan") and the 1998 non-employee directors stock option plan (the "1998 Plan"). Under the terms of the 1992 Plan, 800,000 of the Company's common shares may be granted as stock options or awarded as restricted stock to officers, directors and certain employees of the Company through September 2002. Option exercise prices equal the fair market value of the common shares at their grant dates. Options expire not later than five years after the date of grant. Options granted to directors and to officers and employees with the annual yearly cash bonus vest ratably over three years beginning one year after the date of the grant; options granted to officers and employees awarded as part of a three-year long-term bonus plan vest at the end of the three-year plan period. Restricted stock is payable in equivalent number of common shares. The shares are distributable in a single installment and, with respect to officers and employees, restrictions lapse ratably over a three-year period from the date of the award, and with respect to directors, the restrictions lapse after one year. Under the terms of the 1998 Plan, non-employee directors are entitled to receive a matching option for each share of the Company's common stock that they purchase on the open market, with the strike price of the option being the purchase price of the share, up to a maximum of 5,000 options in any twelve month period or 15,000 options over a three-year period. Options granted under the 1998 Plan vest on the first anniversary of the grant, provided that the optionee may not acquire by exercise of the options more than 5,000 shares in any one year. Options expire not later than five years after the date of the grant. The Company continues to apply the accounting standards set forth in APB No. 25. However, disclosures are required of pro forma net income and earnings per share as if the Company had adopted the accounting provisions of SFAS No. 123. Based on Black-Scholes values, pro forma net income for 1999, 1998 and 1997 would be $14.0 million, $11.0 million and $8.7 million, respectively; pro forma earnings per common share for 1999, 1998 and 1997 would be $2.24, $1.93 and $1.73, respectively. The following table summarizes stock option activity over the past three years under the plans:
Weighted- Average Number Exercise of Shares Price Outstanding at March 31, 1996 408,596 $ 12.62 Granted 97,000 16.85 Exercised (30,381) 12.04 Canceled or expired (11,001) 12.55 -------- Outstanding at March 31, 1997 464,214 13.54 Granted 96,000 21.07 Exercised (178,416) 12.41 Canceled or expired (8,000) 15.00 -------- Outstanding at March 31, 1998 373,798 15.63 Granted 181,156 26.92 Exercised (84,714) 13.03 Canceled or expired (32,194) 23.81 -------- Outstanding at March 31, 1999 438,046 17.66 ======== Options exercisable at March 31, 1997 264,211 12.26 Options exercisable at March 31, 1998 201,130 13.87 Options exercisable at March 31, 1999 197,417 14.74
In 1999, 1998 and 1997 the Company awarded restricted stock totaling 5,062 shares, 4,792 shares and 10,127 shares, respectively. The weighted-average fair value of this restricted stock was $25.33, $22.14 and $17.25 in 1999, 1998 and 1997, respectively. The expense recorded in 1999, 1998 and 1997 for restricted stock was $107,000, $60,000 and $159,000, respectively. The weighted-average Black-Scholes value per option granted in 1999, 1998 and 1997 was $21.59, $19.75 and $13.55, respectively. The following weighted-average assumptions were used in the Black-Scholes option pricing model for options granted in 1999, 1998 and 1997:
1999 1998 1997 Dividend yield 1.4% 1.0% 1.4% Volatility 24.0% 25.0% 29.0% Risk-free interest rate 5.5% 6.0% 6.2% Expected term of options (in years) 4.0 4.0 4.0
For options outstanding and exercisable at March 31, 1999, the weighted-average exercise price ranges and remaining lives were:
Options Outstanding Options Exercisable ------------------------------------------------- ------------------------------- Number Weighted- Weighted- Number Weighted- Range of Outstanding Average Average Exercisable Average Exercise at Remaining Exercise at Exercise Prices March 31, 1999 Life Price March 31, 1999 Price $ 9-14 73,272 1 $ 11.70 66,084 $ 12.97 15-19 132,000 1 16.03 107,666 15.82 20-28 232,774 4 25.25 23,667 21.59 ------- ------- ------- ------- 438,046 2 $ 17.66 197,417 $ 14.74 ======= ======= ======= =======
1999 ANNUAL REPORT 17 20 8. EMPLOYEE BENEFIT PLANS The Company has three defined contribution plans covering substantially all domestic employees. Contributions are based on certain percentages of an employee's eligible compensation. Expenses related to these plans were $ 2.5 million, $2.8 million and $2.5 million in 1999, 1998 and 1997, respectively. The Company provides postretirement benefits to union employees at one of the Company's divisions. The Company continues to fund these benefits on a pay-as-you-go basis. In addition, the Company maintains several defined benefit retirement plans for certain non-U.S. employees. Funding policies are based upon local statutes. (In thousands)
Postretirement Pension Benefits Benefits ------------------------------------------------ Year Ended March 31, Year Ended March 31, ------------------------------------------------ 1999 1998 1997 1999 1998 1997 Components of net periodic benefit cost: Service cost $ 402 $ 409 $ 374 $ 2 $ 2 $ 3 Interest cost 835 841 868 69 72 79 Expected return on plan assets (573) (439) (366) -- -- -- Amortization of net gain 43 43 -- -- -- -- ------------------------------------------------ Net periodic benefit cost $ 707 $ 854 $ 876 $71 $74 $82 ================================================ Weighted-average assumptions as of March 31: Discount rate 6.00% 6.88% 7.63% 7.00% 7.00% 7.50% Expected return on plan assets 7.00% 8.00% 8.00% -- -- -- Rate of compensation increase 3.25% 3.50% 4.25% 4.00% 4.00% 4.00%
Postretirement Pension Benefits Benefits ------------------------------------------------- Year Ended March 31, Year Ended March 31, ------------------------------------------------- 1999 1998 1999 1998 Change in benefit obligation: Benefit obligation at beginning of year $ 12,191 $ 11,485 $ 1,054 $ 1,010 Service cost 402 409 2 2 Interest cost 835 841 69 72 Plan participants' contributions 136 130 -- -- Amendments -- -- -- 67 Actuarial gain 1,169 413 2 -- Benefits paid (792) (719) (103) (97) Effect of foreign exchange (239) (368) -- -- ------------------------------------------------- Benefit obligation at end of year $ 13,702 $ 12,191 $ 1,024 $ 1,054 =================================================
Postretirement Pension Benefits Benefits ------------------------------------------------- Year Ended March 31, Year Ended March 31, ------------------------------------------------- 1999 1998 1999 1998 Change in plan assets: Fair value of plan assets at beginning of year $ 7,116 $ 5,337 $ -- $ -- Actual return on plan assets 591 1,396 -- -- Employer contribution 313 389 103 97 Plan participants' contributions 136 130 -- -- Benefits paid (318) (268) (103) (97) Effect of foreign exchange (273) 132 -- -- ------------------------------------------------- Fair value of plan assets at end of year $ 7,565 $ 7,116 $ -- $ -- =================================================
Postretirement Pension Benefits Benefits ------------------------------------------------- Year Ended March 31, Year Ended March 31, ------------------------------------------------- 1999 1998 1999 1998 Reconciliation of funded status: Funded status $ (6,137) $ (5,075) $(1,024) $(1,054) Unrecognized actuarial loss (gain) 502 (614) 63 63 Unrecognized prior service cost 564 628 -- -- ------------------------------------------------- Accrued liability $ (5,071) $ (5,061) $ (961) $ (991) =================================================
18 TRANSTECHNOLOGY CORPORATION 21 The assumed health care cost trend rates used for measurement purposes were 10.0% and 11.0% for 1999 and 1998, respectively, decreasing 0.5% each year to 6.0% in 2007 and beyond, for substantially all participants. Under the Plan the actuarially determined effect of a one-percentage point change in the assumed health care cost trend would have the following effects (in thousands):
One One Percentage Percentage Point Point Increase Decrease Effect on total of service and interest cost components $10 $(13) Effect on accumulated postretirement benefit obligation 154 (185)
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:
Notional Amount Receive Pay (in thousands) Maturities Rate(1) Rate March 31, 1998 $25,000 8/98 5.65% 6.54% DM9,981 12/98 3.53 4.57
(1) Based on three-month LIBOR Foreign Currency Exchange Agreements - The Company enters into forward foreign currency agreements to hedge foreign currency financing transactions. Realized and unrealized gains and losses arising from forward currency contracts are recognized as adjustments to the gains and losses resulting from the underlying hedged transactions. In addition, the Company enters into forward currency contracts to hedge certain foreign currency purchase commitments. Gains and losses from these transactions are included in the cost of the underlying purchases. The table below summarizes by currency the contractual amounts of the Company's foreign exchange contracts at March 31, 1999 and 1998. The "Buy" amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies, and the "Sell" amounts represent the U.S. dollar equivalent to sell foreign currencies (in thousands):
1999 1998 --------------------------------------- Buy Sell Buy Sell Currency Deutsche mark $ 546 $12,439 $ -- $16,405 Pound sterling -- 2,556 3,677 8,507 --------------------------------------- $ 546 $14,995 $3,677 $24,912 =======================================
Fair Value of Financial Instruments - The fair values of cash and cash equivalents, receivables and notes receivable approximate their carrying values due to the short-term nature of the instruments. The fair value of the Company's long-term notes receivable 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 to terminate the agreements at March 31, based upon quoted market prices as provided by financial institutions which are counterparties to the agreements and were as follows (in thousands):
1999 1998 (Pay) receive (Pay) receive Interest rate swap agreements $ -- $ (141) Forward foreign exchange agreements 626 20
10. EXTRAORDINARY ITEM In fiscal 1999, the Company recognized an extraordinary charge of $0.8 million, net of tax, to write off the remaining deferred loan fees associated with the early extinguishment of the Company's indebtedness pursuant to its revised and amended revolving credit facility. (See Note 6). 11. COMMITMENTS Rent expense under operating leases for the years ended March 31, 1999, 1998, and 1997 was $3.2 million, $2.3 million and $2.3 million, respectively. 1999 ANNUAL REPORT 19 22 The Company and its subsidiaries have minimum rental commitments under noncancellable operating leases as follows (in thousands): 2000 $ 2,252 2001 1,638 2002 1,299 2003 529 2004 7 -------- Total $ 5,725 ========
12. CONTINGENCIES Environmental Matters- During the fourth quarter of fiscal 1999, the Company reached an agreement with the Pennsylvania Department of Environmental Protection ("PaDEP") under which the Company will pay $0.4 million for past costs, future oversight expenses and in full settlement of claims made by PaDEP related to the environmental remediation at a site in Pennsylvania which continues to be owned although the related business has been sold. The Company has provided for this amount in its accrual for environmental liabilities. The Company must present an environmental cleanup plan for a portion of the site following the execution of the PaDEP agreement, which is in the form of a Consent Order, and agreement. A second Consent Order is contemplated by December 1, 2000 for another portion of the site, and a third Consent Order for the remainder of the site is contemplated by October 1, 2002. The Company is also in the process of finalizing the documentation of an agreed settlement with the Federal government under which the government will pay 50% of the environmental response costs associated with a portion of the site. At March 31, 1999, the Company's cleanup reserve was $1.5 million based on the net present value of future expected cleanup costs. In addition, the Company settled for a recovery of a portion of cleanup costs with its insurance carriers for approximately $5.1 million (net) which is included in Other income-net. The Company expects that remediation at the Pennsylvania site will not be completed for several years. The Company also continues to participate in environmental assessments and remediation work at ten other locations, which include operating facilities, facilities for sale, and previously owned facilities. The Company estimates that its potential cost for implementing corrective action at these sites will not exceed $0.2 million payable over the next several years, and has provided for the estimated costs in its accrual for environmental liabilities. In addition, the Company has been named as a potentially responsible party in seven environmental proceedings pending in several other states in which it is alleged that the Company was a generator of waste that was sent to landfills and other treatment facilities and, as to several sites, it is alleged that the Company was an owner or operator. Such properties generally relate to businesses, which have been sold or discontinued. 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, and the costs allocated among the potentially responsible parties. Litigation- The Company is also engaged in various other legal proceedings incidental to its business. It is the opinion of management that, after taking into consideration information furnished by its counsel, the above matters will have no material effect on the Company's consolidated financial position or the results of the Company's operations in future periods. 13. SEGMENT AND GEOGRAPHIC INFORMATION The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, in fiscal 1999, which resulted in no significant change in the way the Company reports information about its operating segments. The Company's two business segments have separate management teams that report operating results regularly which are reviewed by the chief operating decision makers of the Company. Certain businesses have been aggregated into the same reportable segment because they have similar products and services, production processes, types of customers and distribution methods and their long-term financial performance is affected by similar economic conditions. The Company has two reportable segments: Specialty Fastener Products and Aerospace Products. The Specialty Fastener Products segment develops, manufactures and sells primarily gear-driven band fasteners, circlips, threaded and non-threaded assembly fasteners, rivets, retaining rings and custom cold forged parts for the marine, auto, consumer/durables, aircraft, heavy equipment and industrial machinery markets. The Aerospace Products segment develops, manufactures and sells primarily lifting, control, and restraint devices--principally helicopter rescue hoists and external hook systems, winches and hoists for aircraft and weapons-handling systems, aircraft tie-downs, engine compartment hold open rods, actuators and other motion control devices. 20 TRANSTECHNOLOGY CORPORATION 23 The accounting policies of the segments are the same as those described in the summary of accounting principles. The Company evaluates performance based on operating profit of the respective segments. Operating profit is net sales less operating expenses. General corporate expenses, interest and income taxes have not been deducted in determining operating profit. Assets, depreciation and amortization and capital expenditures are those identifiable to a particular segment by their use. Approximately 10%, 11% and 9% of net sales in 1999, 1998 and 1997, respectively, were derived from sales to the United States Government and its prime contractors which are attributable primarily to Aerospace Products.
Operating Depreciation/ Fiscal Net Profit Capital Amortization Identifiable (In thousands) Year Sales (loss)(1) Expenditures Expense(2) Assets - ---------------------------------------------------------------------------------------------------------------- Specialty Fastener 1999 $177,837 $ 26,284 $13,652 $ 8,812 $205,206 Products 1998 168,469 26,177 7,935 7,801 178,331 1997 144,197 24,040 4,715 5,881 140,960 - ---------------------------------------------------------------------------------------------------------------- Aerospace Products 1999 50,169 12,080 728 991 51,883 1998 35,459 9,285 469 544 25,540 1997 34,487 7,483 618 645 26,146 - ---------------------------------------------------------------------------------------------------------------- Total segments 1999 228,006 38,364 14,380 9,803 257,089 1998 203,928 35,462 8,404 8,345 203,871 1997 178,684 31,523 5,333 6,526 167,106 - ---------------------------------------------------------------------------------------------------------------- Corporate 1999 -- (13,243)(3) 379 999 22,631 1998 -- (9,119) 341 709 32,202 1997 -- (9,253) 144 825 32,030 - ---------------------------------------------------------------------------------------------------------------- Corporate interest and 1999 -- 6,111(4) -- -- -- other income-net 1998 -- 1,038 -- -- -- 1997 -- 1,147 -- -- -- - ---------------------------------------------------------------------------------------------------------------- Interest expense 1999 -- (6,938) -- -- -- 1998 -- (7,228) -- -- -- 1997 -- (6,797) -- -- -- - ---------------------------------------------------------------------------------------------------------------- Consolidated 1999 228,006 24,294 14,759 10,802 279,720 1998 203,928 20,153 8,745 9,054 236,073 1997 178,684 16,620 5,477 7,351 199,136 - ----------------------------------------------------------------------------------------------------------------
(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 depreciation/amortization expense from discontinued operations is excluded from the above schedule. (3) Corporate expense for 1999 includes a $0.9 million pretax charge to the allowance for notes receivable, and a $1.5 million pretax incentive compensation award. (4) Corporate interest and other income for 1999 includes a pretax net gain of $5.1 million for settlement of litigation claims against its insurance carriers for environmental matters and a $1.1 million gain on sale of marketable securities. Export sales are defined as sales to customers in foreign countries by the Company's domestic operations. Export sales amounted to the following (in thousands):
Location 1999 1998 1997 Western Europe $15,680 $ 7,980 $ 8,349 Canada 9,170 7,095 6,316 Pacific and Far East 3,344 2,296 3,027 Mexico, Central and South America 2,267 2,556 1,751 Middle East 415 194 194 Other 275 158 156 ----------------------------------- Total $31,151 $20,279 $19,793 ===================================
1999 ANNUAL REPORT 21 24 Results set forth below for international operations represent sales and operating income of domestic and foreign based subsidiaries based on the location the product was shipped from (in thousands):
1999 1998 1997 Net sales: Domestic operations $ 171,302 $ 146,682 $ 120,655 International operations (1) 56,704 57,246 58,029 ------------------------------------------- Net sales $ 228,006 $ 203,928 $ 178,684 =========================================== Operating income: Domestic operations $ 34,621 $ 30,808 $ 24,991 International operations (1) 3,743 4,654 6,532 ------------------------------------------- Operating income 38,364 35,462 31,523 Interest expense (6,938) (7,228) (6,797) Corporate expense and other (7,132) (8,081) (8,106) ------------------------------------------- Income from continuing operations before taxes $ 24,294 $ 20,153 $ 16,620 =========================================== Identifiable assets: Domestic operations $ 193,690 $ 136,347 $ 94,794 International operations (1) 63,399 67,524 72,312 Corporate 22,631 32,202 32,030 ------------------------------------------- Total assets $ 279,720 $ 236,073 $ 199,136 ===========================================
(1) International operations are primarily located in Europe and Brazil. 14. UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
First Second Third Fourth Quarter Quarter Quarter Quarter Total 1999 Net sales $ 51,483 $ 56,368 $ 57,863 $ 62,292 $ 228,006 Gross profit 16,900 17,949 18,078 18,989 71,916 Income before extraordinary charge 3,202 2,208 3,643 5,537(1) 14,590 Extraordinary charge for refinancing of debt -- (781) -- -- (781) --------------------------------------------------------------------------------- Net income $ 3,202 $ 1,427 $ 3,643 $ 5,537 $ 13,809 ================================================================================= Basic earnings (loss) per share: Income before extraordinary charge $ 0.51 $ 0.35 $ 0.58 $ 0.90 $ 2.33 Extraordinary charge for refinancing of debt -- (0.12) -- -- (0.12) --------------------------------------------------------------------------------- Net income $ 0.51 $ 0.23 $ 0.58 $ 0.90 $ 2.21 ================================================================================= Diluted earnings (loss) per share: Income before extraordinary charge $ 0.50 $ 0.34 $ 0.58 $ 0.89 $ 2.30 Extraordinary charge for refinancing of debt -- (0.12) -- -- (0.12) --------------------------------------------------------------------------------- Net income $ 0.50 $ 0.22 $ 0.58 $ 0.89 $ 2.18 ================================================================================= 1998 Net sales $ 49,923 $ 50,013 $ 48,452 $ 55,540 $ 203,928 Gross profit 15,348 15,933 16,454 18,373 66,108 Income from continuing operations 2,367 2,387 3,314 3,923 11,991 Loss from discontinued operations (102) (125) (161) (536) (924) --------------------------------------------------------------------------------- Net income $ 2,265 $ 2,262 $ 3,153 $ 3,387 $ 11,067 ================================================================================= Basic earnings (loss) per share: Income from continuing operations $ 0.47 $ 0.47 $ 0.58 $ 0.63 $ 2.17 Loss from discontinued operations (0.02) (0.02) (0.03) (0.09) (0.17) --------------------------------------------------------------------------------- Net income $ 0.45 $ 0.45 $ 0.55 $ 0.54 $ 2.00 ================================================================================= Diluted earnings (loss) per share: Income from continuing operations $ 0.46 $ 0.45 $ 0.57 $ 0.61 $ 2.11 Loss from discontinued operations (0.02) (0.02) (0.03) (0.08) (0.16) --------------------------------------------------------------------------------- Net income $ 0.44 $ 0.43 $ 0.54 $ 0.53 $ 1.95 =================================================================================
(1) Income before extraordinary charge for the quarter ended March 31, 1999, includes a pretax net gain of $5.1 million for an insurance settlement and a $1.1 million pretax gain on sale of marketable securities. 22 TRANSTECHNOLOGY CORPORATION 25 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, 1999 and 1998, and the related statements of consolidated operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of TransTechnology Corporation and subsidiaries at March 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1999 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Parsippany, New Jersey May 12, 1999 1999 ANNUAL REPORT 23 26 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. Sales in 1999 were $228.0 million, an increase of $24.1 million or 12% from 1998, compared with a $25.2 million or a 14% increase from 1997 to 1998. Gross profit in 1999 increased $5.8 million or 9% from 1998, compared with an increase of $9.9 million or 18% from 1997 to 1998. Operating profit for 1999 was $38.4 million, an increase of $2.9 million or 8% from 1998, compared with an increase of $3.9 million or 12% from 1997 to 1998. Income from continuing operations before income taxes in 1999 was affected by a $5.1 million net gain from the settlement of litigation relative to claims against its insurance carriers for environmental matters and a $1.1 million gain from the sale of marketable securities. Changes in sales, operating profit and new orders are discussed below by segment, and additional information regarding industry segments is contained in Note 13 of the Notes to Consolidated Financial Statements. Net income, including an extraordinary charge in 1999, was $13.8 million or $2.18 per diluted share compared to $11.1 million, including discontinued operations, or $ 1.95 per diluted share in 1998. Changes in net income were affected by operating profit, as discussed in the Business Segment sections below, discontinued operations, and an extraordinary charge as discussed in the sections below. During the first half of 1999 the Company made two acquisitions. On June 29, 1998, the Company acquired all of the outstanding stock of Aerospace Rivet Manufacturers Corporation ("ARM") for $26.2 million in cash including direct acquisition costs, and other contingent consideration. ARM, located in Santa Fe Springs, California, produces rivets and externally threaded fasteners. On July 28, 1998, the Company acquired all of the outstanding stock of NORCO, Inc. ("NORCO") for $17.7 million in cash including direct acquisition costs and other contingent consideration. NORCO, located in Ridgefield, Connecticut, produces engine compartment hold open rods, actuators and other motion control devices for the aerospace industry. During the first half of 1999, the Company incurred an extraordinary charge for early extinguishment of debt in the amount of $0.8 million after tax. The early debt extinguishment enabled the Company to expand its credit facility in order to accommodate the ARM and NORCO acquisitions, as well as to simplify its debt structure as more fully described in the discussion of Liquidity and Capital Resources. During 1999, the Company recorded a charge for the possible loss on notes receivable in the amount of $0.9 million before tax. This provision related to notes receivable due from the sale of a previously discontinued company. During the fourth quarter of 1999, the Company realized a gain from the disposition of its stock in Mace Security International Inc. in the amount of $1.1 million, as well as an additional gain of $5.1 million relating to the settlement of environmental claims with its insurance carriers. The Company's loss from discontinued operations net of applicable tax benefits was $0.9 million in both 1998 and 1997. 24 TRANSTECHNOLOGY CORPORATION 27 Interest expense decreased by $0.3 million in 1999 from 1998 primarily due to lower interest rates. Interest expense increased $0.4 million in 1998 from 1997 primarily as a result of increased bank borrowings related to the acquisition of TCR Corporation in April, 1997. New orders received during 1999 totaled $220.9 million, an increase of $14.0 million or 7% from 1998. New orders received during 1998 totaled $206.9 million, an increase of $30.4 million or 17% from 1997. At March 31, 1999, total backlog of unfilled orders was $89.7 million compared to $75.9 million and $66.5 million at March 3l, 1998 and 1997, respectively. New orders and backlog by industry segment are discussed below. SPECIALTY FASTENER PRODUCTS SEGMENT 1999 COMPARED WITH 1998 Sales for the Specialty Fastener Products segment were $177.8 million in 1999, an increase of $9.4 million or 6% from 1998. The increase in sales was primarily due to the acquisition of ARM on June 29, 1998. Domestic fastener sales were otherwise generally flat as compared to 1998 sales. Sales of the European hose clamp division were lower reflecting mainly the loss of one major customer, which had been anticipated. Sales from the Brazilian retaining ring operation were also reduced compared to 1998 due to the currency devaluation as well as economic difficulties experienced in Brazil during 1999. Domestic retaining ring sales were also lower compared to 1998 due to a loss in market share suffered during the consolidation of two plants in New Jersey earlier in the year. Operating profit for the Specialty Fastener Products segment was $26.3 million in 1999, an increase of $0.1 million compared to 1998. Increased operating profit generated by the ARM acquisition was essentially offset by the lower sales and resulting lower operating profit as discussed above from the domestic and Brazilian retaining ring divisions as well as the European hose clamp division. Lower operating profit also was experienced at the domestic hose clamp division due to increased price competition and a change in product mix resulting in lower absorption of overhead. In 1999, new orders in the Specialty Fastener Products segment were $171.5 million, virtually the same as 1998. Increased orders stemming from the ARM acquisition were offset as were sales for the period due to the reasons discussed above. Backlog of unfilled orders was $45.9 million at March 31, 1999, compared to $43.5 million at March 31, 1998. SPECIALTY FASTENER PRODUCTS SEGMENT 1998 COMPARED WITH 1997 Sales for the Specialty Fastener Products segment were $168.5 million in 1998, an increase of $24.3 million or 17% from 1997. The increase in sales was primarily due to the inclusion of almost a full year of TCR Corporation operations in 1998 and overall increased volume of domestic and European gear-driven fasteners in 1998 as compared to 1997. Specialty Fastener sales were negatively impacted in 1998 by unfavorable currency exchange rates affecting the Company's European retaining ring businesses and price reductions due to the continued consolidation of major European distributors. Domestic retaining ring sales were down primarily as a result of operational problems associated with the consolidation of the Company's domestic retaining ring businesses. Operating profit for the Specialty Fastener Products segment was $26.2 million in 1998, an increase of $2.1 million or 9% from 1997. The primary factor contributing to the segment's increased operating profit in 1998 was the TCR Corporation acquisition, as well as the domestic and European gear-driven fasteners sales increases over the prior year as mentioned above. These increases were partially offset by unfavorable, unhedged, intercompany foreign exchange transactions, lower margins for European retaining rings due to the distributor consolidation, inefficiencies resulting from work moved to the UK from the closed German facility and the stronger dollar versus Deutsche mark compared to 1997. In 1998, new orders in the Specialty Fastener Products segment increased $30.4 million or 17% from 1997. The primary reasons for the increase were the same as those noted in the paragraph above relative to the increase in sales. Backlog of unfilled orders were $43.5 million at March 31, 1998, compared to $34.0 million at March 31, 1997. 1999 ANNUAL REPORT 25 28 AEROSPACE PRODUCTS SEGMENT 1999 COMPARED WITH 1998 Sales for the Aerospace Products segment were $50.2 million in 1999, an increase of $14.7 million or 41% from 1998. The increase was primarily due to the acquisition of NORCO on July 28, 1998. Sales of rescue hoist and cargo hook products were also higher for 1999 mainly due to the timing of program sales such as the Boeing V-22 program which were developed in prior years from continuing research and development efforts. The Aerospace Products segment reported an operating profit of $12.1 million in 1999, an increase of $2.8 million or 30% from 1998. The increase was primarily due to the increased sales and operating profit generated by the NORCO acquisition. In 1999 new orders in the Aerospace Products segment increased by $14.0 million or 40% from 1998. This increase was again primarily due to the NORCO acquisition. New orders for rescue hoist and cargo hooks were also up slightly. At March 31, 1999, the backlog of unfilled orders was $43.8 million, compared to $32.4 million at March 31, 1998. AEROSPACE PRODUCTS SEGMENT 1998 COMPARED WITH 1997 Sales for the Aerospace Products segment were $35.5 million in 1998, an increase of $l.0 million or 3% from 1997. The increase was primarily due to customer timing and placement of new orders. The Aerospace Products segment reported an operating profit of $9.3 million in 1998, an increase of $1.8 million or 24% from 1997. The increase was primarily due to product mix, plant operating efficiency improvements, higher sales volume and tight inventory management. In 1998 new orders in the Aerospace Products segment decreased by $0.8 million or 2% from 1997. This decrease was primarily due to customer orders. At March 31, 1998, the backlog of unfilled orders was $32.4 million, compared to $32.5 million at March 31, 1997. YEAR 2000 READINESS The Company has been addressing the Year 2000 issue since 1997 and has been monitoring the progress made at each business unit. The Year 2000 problem relates to the method that computer programs use to specify a date. In order to save space in computer data storage, many programs in the past have been written with two digits for the year specification instead of four digits. The two-digit date field can make it difficult for computer programs to distinguish between years such as 1900 and 2000, and therefore can cause malfunctions in computer operations. Such malfunctions could interfere with any date sensitive processes, which exist in most computer operations, as well as any equipment, which uses semiconductor, or "embedded" chip technology. Similar system malfunctions could also occur at third party supplier locations and consequently create delivery and service problems for the Company. The Company has taken steps to have all of its computer systems and facilities in compliance with the Year 2000 date requirement before that date is reached. Thus far, the Company has reviewed its facilities and internal computer systems at all locations for compliance and identified all critical systems in need of correction. The correction and testing of all critical systems has progressed substantially and is scheduled for completion by September 1999. The approximate level of completion at each business unit presently varies between eighty and ninety-five percent based on current information available. The Company generally does not sell products that are Year 2000 affected, however, it does sell test equipment, which is presently Year 2000 compliant, and is providing retrofit compliant programs to customers with older equipment. The Company has also taken steps to review Year 2000 compliance by its major vendors and customers. Survey results have been received and are being reviewed and updated on a continuing basis. Based on information received to date, there are no expected interruptions from critical customers or vendors. The cost of Year 2000 compliance is expected to be $0.5 million of which $0.3 million has already been incurred and $0.2 million is anticipated to be incurred during fiscal year 2000. The total cost capitalized for Year 2000 compliance is expected to be less than $0.1 million. 26 TRANSTECHNOLOGY CORPORATION 29 As a precaution against unforeseen Year 2000 problems, the Company has considered contingency plans including alternative automated and manual backup methods. Other contingency plans which the Company is considering include the outsourcing and sharing of computer processing requirements. Based on the present and contingent planning assessment, the Company believes that the "worst-case" scenario for the Year 2000 problem is in the category of outside third party services and supplies. Certain government and utility provided services are not generally available from alternative sources. Should such services become unavailable there would be a likelihood of manufacturing interruptions and resulting adverse financial consequences to the Company. Based on the information obtained to date, the Company does not believe that there will be any significant interruptions in systems that will adversely affect the Company relative to the Year 2000 issue. The Company is not, however, able to identify or control all external Year 2000 issues which may exist at third-party levels or provide contingency plans for all possible future events. Assessments of future events and other forward-looking assessments may be adversely affected by subsequent findings and test results that could have a material impact on the Company's financial condition and results of operations. EURO CURRENCY Effective January 1, 1999, eleven countries comprising the European Union established fixed foreign currency exchange rates and adopted a common currency unit designated as the "Euro". The Euro has since become publicly traded and may be used in commerce during the transition period which is scheduled to end January 1, 2002, at which time a Euro denominated currency is scheduled to be issued and is intended to replace those currencies of the eleven member countries. The transition to the Euro has not resulted in problems for the Company to date, and is not expected to have any material adverse impact on the Company's future operations. NEW ACCOUNTING STANDARDS In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued and is effective for the Company for its fiscal year ending March 31, 2002. SFAS No. 133 requires that all derivative instruments be measured at fair value and recognized in the balance sheet as either assets or liabilities. The Company is currently evaluating the impact this pronouncement will have on its consolidated financial statements. ACQUISITIONS On July 28, 1998, the Company acquired all of the outstanding stock of NORCO, Inc. for $17.7 million in cash, including direct acquisition costs, and other contingent consideration. NORCO, Inc., located in Ridgefield, Connecticut, produces aircraft engine compartment hold open rods, actuators and other motion control devices. On June 29, 1998, the Company acquired all of the outstanding stock of Aerospace Rivet Manufacturers Corporation ("ARM") for $26.2 million in cash, including direct acquisition costs, and other contingent consideration. ARM, located in Santa Fe Springs, California, produces rivets and externally threaded fasteners. On April 17, 1997, the Company acquired all of the outstanding stock of TCR Corporation for $32.6 million in cash plus direct acquisition costs, and other contingent consideration. TCR Corporation, located in Minneapolis, Minnesota, produces cold forged and other externally threaded fasteners and related products for the automotive, heavy vehicle, marine and industrial markets. On June 18, 1996, the Company acquired the Pebra hose clamp business from Pebra GmbH Paul Braun i.K. for approximately $3.6 million in cash including direct acquisition costs. Pebra manufactures heavy duty hose clamps primarily for use in the manufacture of heavy trucks in Europe. DISCONTINUED OPERATIONS During fiscal 1998 and 1997, the Company recorded after tax costs of $0.9 million in both years for the disposal of previously discontinued and sold operations. These costs represent adjustments to previous estimates related primarily to legal and environmental matters. Liquidity and Capital Resources The Company's debt-to-capitalization ratio was 45%, 35%, and 49% as of March 31, 1999, 1998 and 1997, respectively. The current ratio at March 31, 1999, was 3.39, compared to 2.06, and 2.35 at March 31, 1998 and 1997, respectively. Working capital was $71.1 million at March 31, 1999, up $20.1 million from 1998 and $19.6 from 1997. 1999 ANNUAL REPORT 27 30 Effective July 24, 1998, the Company's credit facility was increased from $115.0 million to $125.0 million and was amended to eliminate the Term A and Term B loans, as well as the asset based lending requirement of the prior loan agreement. The loan maturity date and all principal payments due were extended until July 23, 2003, at which time the principal is due in full. The primary purpose for the increase in the credit facility was to accommodate the ARM and NORCO acquisitions on June 29, 1998 and July 28, 1998, respectively. Effective November 27, 1998, the Company's credit facility was amended to increase the amount available from $125.0 million to $145.0 million in order to continue to have borrowing capacity for additional acquisition activity. The credit agreement provides for revolving credit (the "Revolver") for both domestic and international borrowings, as well as, for letters of credit. The credit facility is provided by a group of commercial banks and is secured by all of the Company's assets. The amount of the revolving bank credit line commitment available for international credit is $25.0 million and $5.0 million is available for letters of credit. As of March 31, 1999, the Company's debt consisted of $80.4 million of borrowings under the domestic revolving credit line, $21.4 million of borrowings under the international credit line and $0.7 million of other borrowings. Outstanding letters of credit under the credit line at March 31, 1999 were $0.1 million. Interest on the Revolver is tied to the primary bank's prime rate, or at the Company's option, the London Interbank Offered Rate ("LIBOR"), plus a margin that varies depending upon the Company's achievement of certain operating and financial goals. At March 31, 1999, $101.4 million of the Company's outstanding borrowings utilized LIBOR, of which, $7.7 million and $13.7 million were payable in Deutsche marks and Pounds sterling, respectively. The credit facility requires the Company to have interest rate protection on a minimum of $50.0 million of its variable rate debt effective April 30, 1999. Interest rate protection is generally arranged by means of interest rate swap agreements. The credit agreement limits the Company's ability to pay dividends to 25% of net income and restricts capital expenditures to a range of $11.8 million to $15.8 million annually, and contains other customary financial covenants. The Company purchased 249,000 shares of treasury stock during 1999 for $4.9 million. Treasury stock purchases are made in the open market or in negotiated transactions when opportunities are deemed to arise. Purchases of treasury stock are limited by the terms of the Company's credit agreement. Management believes that the Company's anticipated cash flow from operations, combined with the bank credit agreement described above, will be sufficient to support working capital requirements, capital expenditures and dividend payments at their current or expected levels. Capital expenditures in 1999 were $14.8 million compared with $8.7 million in 1998 and $5.5 million in 1997, with capital expenditures for the Specialty Fastener Products Segment being much larger than those required by the Aerospace Products Segment. MARKET RISK The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates and interest rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company enters into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates and interest rates. The counterparties are major financial institutions. The Company enters into forward exchange contracts principally to hedge the currency fluctuations in transactions denominated in foreign currencies, thereby limiting the Company's risk that would otherwise result from changes in exchange rates. During 1999, the principal transactions hedged were intercompany loans, intercompany purchases and trade flows. Gains and losses on forward foreign exchange contracts and the offsetting gains and losses on hedged transactions are reflected in the income statement. 28 TRANSTECHNOLOGY CORPORATION 31 At March 31, 1999, the Company had outstanding forward foreign exchange contracts to purchase and sell $15.5 million of various currencies (principally Deutsche marks and Pounds sterling). At March 31, 1999, if all forward contracts were closed out, the Company would receive approximately $0.6 million (the difference between the fair value of all outstanding contracts and the contract amounts). A 10% fluctuation in exchange rates for these currencies would change the fair value by $1.3 million. However, since these contracts hedge foreign currency denominated transactions, any change in the fair value of the contracts would be offset by changes in the underlying value of the transaction being hedged. The Company enters into interest rate swap agreements to manage its exposure to interest rate changes. The swaps involve the exchange of fixed and variable interest rate payments without exchanging the notional principal amount. Payments or receipts on the swap agreements are recorded as adjustments to interest expense. At March 31,1999 the Company had no outstanding interest rate swap agreements. CONTINGENCIES Environmental Matters- During the fourth quarter of fiscal 1999 the Company reached an agreement with the Pennsylvania Department of Environmental Protection ("PaDEP") under which the Company will pay $0.4 million for past costs, future oversight expenses and in full settlement of claims made by PaDEP related to the environmental remediation at a site in Pennsylvania which continues to be owned although the related business has been sold. The Company has provided for this amount in its accrual for environmental liabilities. The Company must present an environmental cleanup plan for a portion of the site following the execution of the PaDEP agreement, which is in the form of a Consent Order and agreement. A Second Consent Order is contemplated by December 1, 2000 for another portion of the site, and a third Consent Order for the remainder of the site is contemplated by October 1, 2002. The Company is also in the process of finalizing the documentation of an agreed settlement with the Federal government under which the government will pay 50% of the environmental response costs associated with a portion of the site. At March 31, 1999 the Company's cleanup reserve was $ 1.5 million based on the net present value of future expected cleanup costs. In addition, the Company settled for a recovery of a portion of cleanup costs with its insurance carriers for approximately $5.1 million (net) which is included in Other income-net. The Company expects that remediation at the Pennsylvania site will not be completed for several years. The Company also continues to participate in environmental assessments and remediation work at ten other locations, which include operating facilities, facilities for sale, and previously owned facilities. The Company estimates that its potential cost for implementing corrective action at these sites will not exceed $0.2 million payable over the next several years, and has provided for the estimated costs in its accrual for environmental liabilities. In addition, the Company has been named as a potentially responsible party in seven environmental proceedings pending in several other states in which it is alleged that the Company was a generator of waste that was sent to landfills and other treatment facilities and, as to several sites, it is alleged that the Company was an owner or operator. Such properties generally relate to businesses, which have been sold or discontinued. 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, a method of remediation selected and approved by the relevant state authorities, and the costs allocated among the potentially responsible parties. Litigation- The Company is also engaged in various other legal proceedings incidental to its business. It is the opinion of management that, after taking into consideration information furnished by its counsel, the above matters will have no material effect on the Company's consolidated financial position or the results of the Company's operations in future periods. 1999 ANNUAL REPORT 29 32 Board of Directors and Corporate Officers [PHOTO OMITTED] Board of Directors From left to right: James A. Lawrence, John H. Dalton, Walter Belleville, Michel Glouchevitch, Thomas V. Chema, William J. Recker and Michael J. Berthelot (not pictured, Gideon Argov) [PHOTO OMITTED] Corporate Officers From left to right: Robert L.G. White, President Aerospace Products Group; Gerald C. Harvey, VP, Secretary and General Counsel; Ulf Jemsby, President International Industrial Products Group; Joseph F. Spanier, VP, CFO and Treasurer; Monica Aguirre, Assistant Secretary; Michael J. Berthelot, Chairman, President and CEO; Robert Tunno, President Domestic Industrial Products Group 30 TRANSTECHNOLOGY CORPORATION 33 DIRECTORS * Gideon Argov Chairman of the Board, President and Chief Executive Officer Kollmorgen Corporation *+ Walter Belleville Chairman of the Board ATI Machinery, Inc. @ Michael J. Berthelot Chairman of the Board, President and Chief Executive Officer TransTechnology Corporation @+ Thomas V. Chema Partner Arter & Hadden John H. Dalton Former Secretary of the Navy +@ Michel Glouchevitch Managing Director Triumph Capital Group *+ James A. Lawrence Executive Vice President and Chief Financial Officer General Mills, Inc. William J. Recker Chairman of the Board Gretag Imaging Group Inc. * Audit Committee @ Nominating Committee + Incentives & Compensation Committee CORPORATE OFFICERS Michael J. Berthelot Chairman of the Board, President and Chief Executive Officer Joseph F. Spanier Vice President, Chief Financial Officer and Treasurer Gerald C. Harvey Vice President, Secretary and General Counsel Robert L. G. White President Aerospace Products Group Robert Tunno President Domestic Industrial Products Group Ulf Jemsby President International Industrial Products Group Monica Aguirre Assistant Secretary COUNSEL Hahn, Loeser & Parks Cleveland, Ohio AUDITORS Deloitte & Touche LLP Parsippany, New Jersey TRANSFER AGENT AND REGISTRAR Boston EquiServe, L.P. Canton, Massachusetts OPERATIONAL GROUPS Domestic Industrial Products Group Aerospace Rivet Manufacturers Corporation (ARM) Solid rivets and threaded fasteners 17425 Railroad Street City of Industry, CA 91744-1026 626/646-2150 Fax 626/646-2166 www.aerospacefasteners.com Michael Rott - President Breeze Industrial Products Gear-driven band fasteners 100 Aero-Seal Drive Saltsburg, PA 15681-9594 724/639-3571 Fax 724/639-3020 www.breezeclamps.com Thomas G. Watson - President Pebra Products Division Gear-driven band fasteners Werk 4, Hauptstra(beta)e 2/1 78628 Frittlingen, Germany 49/7426 949 20 Fax 49/7426 949 224 The Palnut Company Single and multi-thread fasteners 152 Glen Road Mountainside, NJ 07092-2997 908/233-3300 Fax 908/233-6566 www.palnut.com Stanley E. Erman - President TCR Corporation Cold forged and machined products 1600 67th Avenue North Minneapolis, MN 55430-1755 612/560-2200 Fax 612/561-0949 John Funk - President Waldes/Industrial Retaining Ring (IRR) Multi-sized retaining rings and assembly tools 70 East Willow Street Millburn, NJ 07041-9998 973/376-3892 Fax 973/926-4699 www.waldes.com Peter J. Lowe - President 34 International Industrial Products Group Seeger-Orbis GmbH Retaining rings and circlips Wiesbadener Stra(beta)e 243 D-61462 Konigstein, Germany 49/6174 2050 Fax 49/6174 205 100 www.smueller@seeger-orbis.de Sven-Uwe Wolber - Managing Director Anderton International Ltd. Retaining rings and circlips Ferncliffe Road Bingley, West Yorkshire England BD16 2PL 44/1274 782 200 Fax 44/1274 771 900 Daran Brown - Managing Director TransTechnology Brasil Ltda. Retaining rings and circlips Av. Prestes Maia 230 Diadema, Sao Paulo Brazil 09930-270 55/11 713 3133 Fax: 55/11 713 4412 www.seegerreno.com.br Serge Zerey - Managing Director Aerospace Products Group Breeze-Eastern Lifting and restraint products 700 Liberty Avenue Union, NJ 07083-8198 908/686-4000 Fax 908/686-9292 www.breeze-eastern.com Robert L. G. White - President Norco, Inc. Hold open rods and mechanical systems 139 Ethan Allen Highway Ridgefield, CT 06877-6294 203/544-8301 Fax: 203/544-7121 www.norcoinc.com Surin M. Malhotra - President 35 Investor Relations Contact Michael J. Berthelot Chairman of the Board, President and Chief Executive Officer TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 908/903-1600 Fax 908/903-1616 www.transtechnology.com Annual Meeting The Annual Shareholders' Meeting will be held on Thursday, July 15, 1999 at the Somerset Hills Hotel 200 Liberty Corner Road Warren, New Jersey 07059 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. 36 [LOGO]TransTechnology corporation engineered products for global partners(TM) 150 Allen Road Liberty Corner, New Jersey 07938 908 / 903-1600 Fax 908 / 903-1616 www.transtechnology.com EX-21 11 LIST OF SUBSIDIARIES 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY --------------------------- LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES OF TRANSTECHNOLOGY CORPORATION
Jurisdiction of Incorporation Aerospace Rivet Manufacturers Corporation California Anderton (Predecessors) Limited England Electronic Connections and Assemblies, Inc. Delaware Industrial Retaining Ring Company New Jersey NORCO, Inc. Connecticut Palnut Fasteners, Inc. Delaware Rancho TransTechnology Corporation California Retainers, Inc. New Jersey Seeger Inc. Delaware Seeger-Orbis Beteiligungsgesellschaft GmbH Germany Seeger-Orbis GmbH & Co. OHG Germany Seeger Reno Industria e Comercio Ltd. Brazil SSP Industries California SSP International Sales, Inc. California TCR Corporation Minnesota TransTechnology (GB) Limited (f/k/a) Anderton International Limited England TransTechnology Acquisition Corporation Delaware TransTechnology Aerospace, Inc. California 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-27 12 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAR-31-1999 MAR-31-1999 2,255 0 36,323 240 58,668 100,901 111,401 35,017 279,720 29,807 102,509 0 0 67 12,324 279,720 228,006 234,780 156,090 54,396 0 803 6,938 24,294 9,704 14,590 0 (781) 0 13,809 2.21 2.18
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