-----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, EaSh57OGaB8q7RD0Sf0iyHy1slZWvti5wy1PhZsK7HvbRnqFCYSU1HdnRXtAIY5k 9YinETvaPqsD6Q9U7+NlAw== 0000950123-97-005355.txt : 19970627 0000950123-97-005355.hdr.sgml : 19970627 ACCESSION NUMBER: 0000950123-97-005355 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970626 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-07872 FILM NUMBER: 97630303 BUSINESS ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 BUSINESS PHONE: 908-964-5600 MAIL ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 FORMER COMPANY: FORMER CONFORMED NAME: SPACE ORDNANCE SYSTEMS INC DATE OF NAME CHANGE: 19740717 10-K 1 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____________ to ____________ Commission file number 1-7872 TRANSTECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-4062211 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 150 Allen Road 07938 Liberty Corner, New Jersey (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (908) 903-1600 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 (Title of class) New York Stock Exchange (Name of exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of May 30, 1997, the aggregate market value of voting stock held by nonaffiliates of the registrant based on the last sales price as reported by the New York Stock Exchange on such date was $87,857,580.00 (See Item 12) As of May 30, 1997, the registrant had 5,027,733 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The registrant's Annual Report for the fiscal year ended March 31, 1997 is incorporated by reference into Part I and II hereof. The registrant's Proxy Statement for the fiscal year ended March 31, 1997 is incorporated by reference into Part III hereof. 2 PART I ITEM 1. BUSINESS. GENERAL TransTechnology Corporation develops, manufacturers 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 rescue hoist and cargo hook systems. During 1997, 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 the consolidation and standardization of its overseas retaining ring manufacturing operations. Actions taken during 1997 to accomplish this goal included the installation of a new business information system at all of the Company's European retaining ring facilities and the commencement of closing one of the Company's two retaining ring factories in Germany. Production from this factory will be transferred primarily to the Company's U.K. manufacturing facility and the other German retaining ring manufacturing facility. Domestically, the Company commenced the process of consolidating its United States retaining ring manufacturing and distribution facilities. These actions, together with 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 fasteners to the transportation and industrial markets. The Breeze-Eastern division makes up the rescue hoist and cargo hook products segment, and is the world's leader in these systems which are sold primarily to military and civilian agencies. DISCONTINUED OPERATIONS The following entities, discontinued in the years indicated, have been classified as discontinued operations in the Company's financial statements: Lundy Technical Center (chaff) (1995), TransTechnology Electronics (1995), and TransTechnology Systems & Services (computer maintenance and service) (1995). For a more detailed description of these transactions, see "Note 2" of the "Notes to Consolidated Financial Statements" included in the Company's 1997 Annual Report on page 15 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", "Industrial Retaining Ring Company" and "Seeger, Inc.") and its Pebra hose clamp business ("Pebra"). The Seeger Group of companies, Industrial Retaining Ring Company and Seeger, Inc. design and manufacture highly engineered retaining rings for both the 1 3 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 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 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. Specialty fasteners are marketed through a combination of a direct sales force, distributors and manufacturing representatives. Such products contributed 81%, 81% and 70% of the Company's consolidated sales in 1997, 1996 and 1995, respectively. Through its MassTech product line, Breeze Industrial also manufactures tachometers and related items such as speed sensors that are used to measure rotational shaft speeds and direction, and to indicate revolutions per minute. These products are sold primarily to heavy-duty original equipment manufacturers. At March 31, 1997, the Company's Specialty Fastener Products segment backlog was $36.1 million, compared to $31.4 million at March 31, 1996. The increase is primarily the result of the acquisition of Pebra and increased backlog balances at the Company's domestic fastener operations. Substantially all of the March 31, 1997 backlog is scheduled to be shipped during fiscal 1998. RESCUE HOIST AND CARGO HOOK PRODUCTS The Company's Breeze-Eastern division ("Breeze-Eastern") specializes in the design, development and manufacture of sophisticated lifting and restraining products, principally helicopter rescue hoists, reeling machines and external hook systems. In addition, Breeze-Eastern designs, develops and manufactures winches and hoists for aircraft cargo and weapon-handling systems with applications ranging from cargo handling on fixed-wing aircraft to positioning television cameras on blimps, antenna and gear drives. Management believes that Breeze-Eastern is the industry market share leader in sales of personnel-rescue hoists and cargo hook equipment. As a pioneer of helicopter hoist technology, Breeze-Eastern continues to develop sophisticated helicopter hoist systems, including systems for the current generation of Seahawk, Chinook, Dolphin, Merlin and Super Stallion helicopters. Breeze-Eastern also supplies equipment for the United States, Japanese and European Multiple-Launch Rocket Systems which use two specialized hoists to load and unload rocket pod containers. Breeze-Eastern's external cargo-lift hook systems are original equipment on most helicopters manufactured today. These hook systems range from small 1,000-pound capacity models up to the largest 36,000-pound capacity hooks employed on the Super Stallion helicopter. Breeze-Eastern also manufactures aircraft and cargo tie-downs and electronic control boxes and components for helicopter tow boom assemblies for helicopters employed in Navy minesweeping operations. 2 4 Breeze-Eastern sells its products through an internal marketing representative and several independent sales representatives and distributors. Breeze-Eastern's product lines contributed 19%, 19% and 30% to the Company's consolidated sales in 1997, 1996 and 1995, respectively. The reduced percentage following 1995 is attributable primarily to the acquisition of the Seeger Group fastener businesses. The Rescue Hoist and Cargo Hook Product segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 1997, the backlog of unfilled orders was $32.5 million, compared to $30.9 million at March 31, 1996. The majority of the March 31, 1997 backlog is anticipated to be shipped during fiscal 1998. DEFENSE INDUSTRY SALES 9% of the Company's consolidated sales in 1997, as compared to 8% and 18% in 1996 and 1995, 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 11 of Notes to Consolidated Financial Statements included in the Company's 1997 Annual Report on page 21 which is incorporated herein by reference. COMPETITION The Company's businesses compete in some markets with entities that are larger and have substantially greater financial and technical resources than the Company. Generally, competitive factors include design capabilities, product performance and delivery and price. The Company's ability to compete successfully in such markets will depend on its ability to develop and apply technological innovations and to expand its customer base and product lines. The Company is successfully doing so both internally and through acquisitions. There can be no assurance that the Company will continue to 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 material and adverse effect on the Company's profitability. 3 5 RAW MATERIALS The various components and raw materials used by the Company to produce its products are generally available from more than one source. In those instances where only a single source for any material is available, most of such items can generally be redesigned to accommodate materials made by other suppliers. In some cases, the Company stocks an adequate supply of the single source materials for use until a new supplier can be approved. No material part of the Company's business is dependent upon a single supplier or a few suppliers the loss of which would have a materially adverse effect on the Company's consolidated financial position. EMPLOYEES As of May 30, 1997 the Company employed 1,587 persons. There were 1,395 employees associated with the Specialty Fastener Products segment, 172 with the Rescue Hoist and Cargo Hook Products segment and 20 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 1997 Annual Report on pages 22-23 and is incorporated herein by reference. FOREIGN OPERATIONS AND SALES The Company's foreign-based facilities during fiscal 1997 consisted of the Seeger-Orbis and Pebra facilities located in Germany, the Anderton facility located in the U.K. 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. Additionally, the Company had foreign-based facilities during fiscal 1996 that are treated as discontinued operations as of March 31, 1996. The Company had foreign sales of $58 million and $45.2 million in fiscal 1997 and 1996, respectively, representing 32% and 29% of the Company's consolidated sales in each of those years, respectively. The Company had export sales of $19.8 million, $16.9 million and $15.4 million in fiscal 1997, 1996 and 1995, respectively, representing 11%, 11% and 15% of the Company's consolidated sales in each of those years, respectively. The risk and profitability attendant to these sales are generally comparable to similar products sold in the United States. Sales, profits and identifiable assets attributable to the Company's foreign and domestic operations, and the identification of export sales by geographic area, are set forth in Note 13 of Notes to Consolidated Financial Statements in the Company's 1997 Annual Report on pages 22-23 and is incorporated herein by reference. ITEM 2. PROPERTIES The following table sets forth certain information concerning the Company's principal facilities for its continuing operations: 4 6
Owned or Location Use of Premises Leased Sq. Ft -------- --------------- ------ ------ Liberty Corner, New Jersey Executive Offices Leased 10,000 SPECIALTY FASTENER PRODUCTS SEGMENT - ---------------- Saltsburg, Pennsylvania Breeze Industrial offices and manufacturing plant Owned 100,000 Mountainside, New Jersey Palnut offices and manufacturing plant Owned 142,000 Irvington, New Jersey Industrial Retaining Ring manufacturing plant Owned 37,000 Somerset, New Jersey Seeger, Inc. offices and manufacturing plant Leased 104,000 Konigstein, Germany Seeger Group offices and Seeger-Orbis manufacturing plant Owned 149,000 Eichen, Germany Seeger-Orbis manufacturing plant Owned 51,000 Bingley, England Anderton offices and manufacturing plant Owned 124,000 Sao Paulo, Brazil Seeger Reno offices and manufacturing plant Owned 85,000 Frittlingen, Germany Pebra offices and manufacturing plant Owned 30,000 RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT Union, New Jersey Breeze-Eastern offices Owned 188,000 and manufacturing plant
The Company believes that such facilities are suitable and adequate for the Company's foreseeable needs and that additional space, if necessary, will be available. The Company continues to own or lease property that it no longer needs in its operations. These properties are located in California, Pennsylvania, New York, Illinois and North Carolina. In some instances, the properties are leased or subleased and in nearly all instances these properties are for sale. 5 7 ITEM 3. LEGAL PROCEEDINGS The information required has been included in Note 11 of Notes to Consolidated Financial Statements included in the Company's 1997 Annual Report on page 21 and is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 6 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock, par value $0.01, is traded on the New York Stock Exchange under the symbol TT. The following table sets forth the range of high and low closing sales prices on the New York Stock Exchange for the Common Stock for the calendar quarters indicated, as reported by the New York Stock Exchange.
High Low ---- --- Fiscal 1996 First Quarter $ 13-1/2 $ 10-3/4 Second Quarter 14-7/8 12 Third Quarter 15-1/8 11-7/8 Fourth Quarter 15 12-1/2 Fiscal 1997 First Quarter $ 19-3/4 $ 14-7/8 Second Quarter 18-5/8 17-3/8 Third Quarter 19-7/8 18 Fourth Quarter 22-7/8 19-5/8 Fiscal 1998 First Quarter $ 21-3/8 $ 20 (through May 30, 1997)
As of May 30, 1997, the number of stockholders of record of the Common Stock was 2,173. On May 30, 1997 the closing sales price of the Common Stock was $20. 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 1, September 1 and December 1, 1995, March 1, June 1, September 1 and December 1, 1996 and March 1, 1997. 7 9 ITEM 6. SELECTED FINANCIAL DATA The information required has been included in the Company's 1997 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 1997 Annual Report on pages 25-30 and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements: The information required has been included in the Company's 1997 Annual Report on pages 9-24 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 1997 Annual Report on page 23 and is incorporated herein by reference. Financial Statement Schedules: Schedule II -- Consolidated Valuation and Qualifying Accounts for years ended March 31, 1997, 1996 and 1995. Schedules required by Article 5 of Regulation S-X, other than those listed above, are omitted because of the absence of the conditions under which they are required. 8 10 INDEPENDENT AUDITORS' REPORT To the Stockholders and the Board of Directors of TransTechnology Corporation: We have audited the financial statements of TransTechnology Corporation as of March 31, 1997 and 1996, and for each of the three years in the period ended March 31, 1997, and have issued our report thereon dated May 12, 1997; such financial statements and report are included in your 1997 Annual Report and are incorporated herein by reference. Our audits also included the financial statement schedule of TransTechnology Corporation, listed in Item 14. This financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP Parsippany, New Jersey May 12, 1997 9 11 ARTHUR ANDERSEN REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of The New Seeger Group: We have audited the accompanying combined balance sheet in U.S.-Dollars of The New Seeger Group (as defined in Notes 1 and 3) as of March 31, 1996, and the related combined statements of income, shareholders' equity and cash flows for the period July 1, 1995 through March 31, 1996 which, as described in Note 3, have been prepared on the basis of accounting principles generally accepted in the United States. These financial statements are the responsibility of The New Seeger Group's management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements in U.S.-Dollars referred to above present fairly, in all material respects, the financial position of The New Seeger Group as of March 31, 1996, and the results of their operations and their cash flows for the period July 1, 1995 through March 31, 1996, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft mbH /s/ Laupenmuhlen /s/ Kugler Laupenmuhlen Kugler Wirtschaftsprufer Wirtschaftsprufer (certified auditor) (certified auditor) Eschborn/Frankfurt/M. May 28, 1996 10 12 TRANSTECHNOLOGY CORPORATION SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR YEARS ENDED MARCH 31, 1997, 1996 AND 1995 (IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING OF COSTS AND OTHER AT END DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD - ----------- ------ -------- -------- ---------- --------- 1997 Allowances for doubtful accounts and sales returns $735 $139 $246 $532 $588 1996 Allowances for doubtful accounts and sales returns $103 $468 $382 (A) $218 (A) $735 1995 Allowances for doubtful accounts and sales returns $271 $ 65 $ 23 $256 $103
(A) Amount represents balance acquired from Seeger acquisition. 11 13 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1997 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, 1997 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, 1997 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, 1997 and is incorporated herein by reference. 12 14 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, 1997 and March 31, 1996 Statements of Consolidated Operations for the years ended March 31, 1997, 1996 and 1995 Statements of Consolidated Cash Flows for the years ended March 31, 1997, 1996 and 1995 Statements of Consolidated Stockholders' Equity for the years ended March 31, 1997, 1996 and 1995 Notes to Consolidated Financial Statements Independent Auditors' Report 2. Financial Statement Schedules: Schedule II - Consolidated Valuation and Qualifying Accounts for the years ended March 31, 1997, 1996 and 1995 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 fiscal year ended March 31, 1997. 13 15 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 23, 1997 TRANSTECHNOLOGY CORPORATION By: /s/Michael J. Berthelot ---------------------------- Michael J. Berthelot, Chairman of the Board and Chief Executive Officer 14 16 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 June 23, 1997 - ----------------------------------- and Chief Executive Officer MICHAEL J. BERTHELOT (Principal Executive Officer) /s/Patrick K. Bolger President, Chief Operating Officer June 23, 1997 - ----------------------------------- and Director PATRICK K. BOLGER /s/Joseph F. Spanier Vice President, Chief Financial Officer June 23, 1997 - ----------------------------------- and Treasurer JOSEPH F. SPANIER (Principal Financial and Accounting Officer) /s/Walter Belleville Director June 17, 1997 - ----------------------------------- WALTER BELLEVILLE /s/Gideon Argov Director June 23, 1997 - ----------------------------------- GIDEON ARGOV /s/Thomas V. Chema Director June 23, 1997 - ----------------------------------- THOMAS V. CHEMA /s/James A. Lawrence Director June 23, 1997 - ----------------------------------- JAMES A. LAWRENCE /s/Michel Glouchevitch Director June 18, 1997 - ----------------------------------- MICHEL GLOUCHEVITCH
15 17 INDEX TO EXHIBITS
Page Sequentially Numbered -------- 3.1 Certificate of Incorporation of the Company.(1) -- 3.2 Bylaws of the Company.(8) -- 10.1 1996 - 1998 Incentive Compensation Plan of the Company. -- 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 Revolving Credit and Loan Agreement dated as of June 30, 1995 between the Company and the First National Bank of Boston.(7) -- 10.9 First Amendment to the Revolving Credit and Loan Agreement dated as of August 29, 1995 between the Company and the First National Bank of Boston.(8) -- 10.10 Second Amendment to the Revolving Credit and Loan Agreement dated as of October 27, 1995 between the Company and the First National Bank of Boston.(8) -- 10.11 Third Amendment to the Revolving Credit and Loan Agreement dated as of March 29, 1996 between the Company and the First National Bank of Boston.(8) -- 10.12 Fourth Amendment to the Revolving Credit and Loan Agreement dated as of December 31, 1996 between the Company and the First National Bank of Boston. -- 10.13 Fifth Amendment to the Revolving Credit and Loan Agreement dated as of March 31, 1997 between the Company and the First National Bank of Boston.(9) -- 10.14 Form of Executive Severance Agreement with Officers of the Company. -- 10.15 Form of Executive Severance Agreement with Subsidiary Presidents. -- 10.16 Form of Executive Severance Agreement with Division Presidents. -- 10.17 Form of Executive Severance Agreement with Overseas Subsidiary Managing Directors. -- 13 The Company's 1997 Annual Report. -- 21 List of Subsidiaries of the Company. -- 23 Independent Auditors' Consent. -- 27 Financial Data Schedule. --
- ---------------------- 16 18 (1) Incorporated by reference from the Company's Form 8-A Registration Statement No. 2-85599 dated February 9, 1987. -- (2) Incorporated by reference from the Company's Registration Statement on Form S-8 No. 33-87800 dated December 22, 1994. -- (3) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1995. -- (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. --
17 EX-10.1 2 INCENTIVE COMPENSATION PLAN 1 EXHIBIT 10.1 TRANSTECHNOLOGY CORPORATION FY'96-98 INCENTIVE COMPENSATION PLAN (LAST UPDATE: 10/17/96) The goal of the 1996-98 Incentive Compensation Plan is to directly align the focus and remuneration of the divisional and corporate management with that of the shareholders. This means that long term growth in the value of the business, in addition to short term profit increases, will be key considerations in awarding bonuses. That is not to say, however, that short term achievements should not be considered for the payment of bonuses or that the time frame of paying out such "Shareholder Value" based bonuses should be excessively long. Individuals receiving bonuses should have the criteria used in determining and measuring those bonuses fall within events which they can control and/or influence. Individuals, and individual business units, should be rewarded for their performance and should not be penalized for the failure of another unit, yet at the same time, at another level, it is important to recognize that we are all in this together. Incentive Compensation should be adequately high to motivate the best managers, yet not become an obstacle in the minds of shareholders that management is receiving a disproportionate award. Each of these considerations is addressed and included in this plan. The 1996-98 plan reflects the input of the corporate officers and staff, division presidents, and the Incentive Compensation Committee of the Board of Directors. THE OBJECTIVES OF THE 1996-1998 INCENTIVE COMPENSATION PLAN ("THE PLAN") ARE TO (1) RECOGNIZE THE ACHIEVEMENT OF ABOVE AVERAGE RESULTS IN THE CURRENT FISCAL YEAR; AND, (2) REWARD INCREASES IN THE VALUE OF THE ENTITY (AS DETERMINED BY THE MARKETS AND AS SHARED WITH THE SHAREHOLDERS) OVER THE LONGER TERM. These goals are consistent with the guidelines and objectives of the incentive compensation program as established by the Board of Directors. DIVISIONAL BONUS POOLS ANNUAL CASH BONUS The Plan will have two components. The first is a bonus to be paid in cash annually at the conclusion of the fiscal year end audit, as is currently done. Determination of the bonus pool amount and eligibility will be essentially unchanged from that used in the old plan. The '96-'98 Plan's bonus pool for a division staff will be 2% of BTP before the bonus, any acquisition interest, and corporate charges and .6% of that same sum for Division Presidents. The total amount of the annual cash bonus pool, however, will be reduced by the elimination of the "multiples" that were a significant portion of the '93-'95 Plan. The '93-'95 plan "multiples" were established as an incentive for the divisions to provide consistent financial performance during the difficult corporate restructuring that was accomplished 2 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 2 over the period. Now, with the corporate restructuring essentially complete, the focus of the '96-'98 Plan is to increase shareholder value, primarily through annual increases in BTP. A comparison of the bonus target criteria between the old and new plans is as follows:
CRITERIA '93-'95 '96-'98 Tactical plan operating income 35% 30% Tactical plan objectives 30% 15% Tactical plan cash flow 10% 10% Return on investment 20% 15% 10% Operating income growth 7.5% 10% 30% Productivity growth 6% 0% 5% Total 100% 100%
Consistent with the overall objective of the '96-98 Plan to increase BTP over the prior period, the "growth" criteria, operating income growth and productivity growth have been increased to provide the proper focus for the Divisions. Each individual criteria for the annual cash bonus will stand on its own merit and no bonus will be paid for the performance against the criteria that is less than 80% of the target. In the event that a "hurdle" rate, such as tactical plan targets , ROI, growth, etc are exceeded, then the relative points awarded under that criteria may exceed the amount shown above by the ratio of the actual over the target. As a result, based upon the measurable criteria, the bonus paid out could be more than 100% of the target bonus, HOWEVER, THE TOTAL BONUS POOL WILL BE LIMITED TO 200% OF TARGET. 3 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 3 An example of how a bonus could exceed 100% of the target bonus is set forth below:
CRITERIA Actual Plan points Bonus points Tactical plan operating income 120% 30% 36% Tactical plan objectives 100% 15% 15% Tactical plan cash flow 90% 10% 9% Return on investment 20% 25% 10% 12% Operating income growth 7.5% 10% 30% 40% Productivity growth 6% 8% 5% 6.5% Total 100% 100% 118.5%
Under the above scenario, the actual bonus to be paid would be 118.5% of the respective 2% and .6% for Division staff and Presidents. The excess over 100% has no effect on the DEV portion of the bonus. ACHIEVEMENT OF CRITERIA AND CALCULATION OF THE AMOUNT OF THE BONUS POOL WILL TAKE PLACE IN LOCAL CURRENCY WITHOUT REGARD TO CONVERSION OF AMOUNTS INTO US DOLLARS. Division Presidents, who in the past received a cash bonus equal to 50% (i.e., 1%) of that paid into the staff pool, has a pool established at 30% (or .6%) of that established for the division staff. This reflects the desire to have Division Presidents rewarded more as entrepreneurs who are paid upon the sale of their business than as caretakers who complete each year and do not necessarily have the longer term goal in mind. This reduction of 40% compared to the prior years' plan is compensated for by establishing the Long Term component of the plan, as discussed below. The add-on restricted stock bonus would be reduced from the old plan's 25% to 10%. Criteria for awarding bonuses (operating income to tac plan, 20% return on equity, cash flow objectives, 15% annual operating income growth, and strategic/operational goals) are generally the same, as shown above, however, 6% annual productivity increases will become one of the "bogies" for earning annual cash bonuses. LONG TERM INCREASE IN SHAREHOLDER VALUE BONUS 4 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 4 The second bonus component will be based upon the relative contribution to increased shareholder value over a three year period as determined by the market place. This component, in essence, determines a value for each operating division based upon its Earnings before interest and taxes ("EBIT") and TTC's Price Earnings multiple ("PE"). This PE is independently established in the stock market and is a reflection of the value placed upon TTC by investors. The increase in value of the entity over the three year term of the Plan (DELTA ENTERPRISE VALUE, OR "DEV") would be determined and, to the extent that DEV exceeded a hurdle rate of return, established by the Board and commensurate with the long term financial goals of TTC, then 2.0% of that excess increase in value would be earned by the Division President, in cash, at the end of the measurement period (generally, 3/31/98 or upon a triggering event as provided on page 6 below). The '96-98 Plan therefore provides participants the opportunity to realize a bonus not only by increasing annual earnings and achieving annual operating, financial, and personal goals, but also for a achieving an increase in the value of the company as a whole as expressed by a higher PE ratio. The correlation with the PE ratio ties this portion of the bonus directly to real, long term increases in shareholder value. However, out of fairness to the individual divisions, in order to avoid a "penalty" as a result of a bear market, or the failure of another business unit, a floor PE, equal to that at the beginning of the initial measurement period for "Enterprise Value", i.e., that at 3/31/95, would be established. The ending DEV then would be determined using a PE not lower than the floor PE as established at the beginning of the '96-98 Plan. ENTERPRISE VALUE of a division will be determined by multiplying the division's BTP (with corporate fees, interest and any accrued bonuses added back) by the EBIT multiple. BTP will be that determined upon the completion of the year end certified audit. Local third party debt will be subtracted in arriving at net enterprise value, at the beginning and end of the measurement period. THE BASE YEAR EBIT MULTIPLE is derived using TTC's PE ratio based upon the average closing price for the ten days following the release of the current fiscal year end earnings (May 17, 1995) divided by the per share income from continuing operations for that fiscal year ($1.45). The resultant PE ratio is then multiplied by TTC's ratio of Net Income from continuing operations to EBIT in order to obtain the BASE EBIT multiple . For the ACTUAL TEN trading days following the release of FY'95 earnings, the PE was 8.03 times. For FY'95 net income from continuing operations was $7.385 million and EBIT was $13.673 million, 5 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 5 yielding a ratio of 54%. Multiplying this ratio times the PE of 8.03 yields a BASE EBIT multiple of 4.3. 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 TEN DAY TRADING PERIOD FOLLOWING THE END OF FISCAL 1996, THE PE RATIO WAS ACTUALLY DETERMINED TO BE 11.4. THE RATIO OF 11.4 TO THE BASE PE OF 8.03 IS 142%. THE EBIT MULTIPLE TO BE USED IN DETERMINING ENTERPRISE VALUE AT THE END OF THE FY'96 MEASUREMENT PERIOD IS 142% OF 4.3, OR 6.1. The DEV Hurdle Rate has been established at 12% by the Board of Directors. This rate is established to represent the overall return an investor would seek at the beginning of the three year measurement period. To the extent that the actual realized return only meets that expectation, no DEV bonus would be paid, as the increase in shareholder value would not be considered "above average" or "outstanding", the criteria for earning a bonus. However, to the extent that the hurdle was exceeded, then an increase in shareholder value beyond the expectations of the market has been deemed delivered, and participants in the plan will truly have earned a bonus based upon delivering increases in shareholder value. The DEV bonus payout has been established at 2% of the excess of the DEV required using the compounded hurdle rate. The "target" Enterprise Value will be determined in June, 1995. An annual statement of "Interim" Enterprise Value will be circulated amongst the divisions at the end of FY'96 and FY'97 in order to communicate progress towards the DEV goal and to provide measurement points in the event of certain events. There is no ceiling or cap placed upon the bonuses to be paid. The DEV PE floor ratio would be established as previously noted . IN THE EVENT OF THE SALE OF A DIVISION, the final Enterprise Value will be the selling price of the Division and the DEV bonus will be calculated on the difference between the final Enterprise Value and the Base Enterprise value. 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 6 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 6 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 year as if it were the final year of the Plan. Upon the end of the measurement period (the earlier of 3/31/98 or a Change in Control) 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/.31/98, upon a determination to pay the bonus in one installment, the bonus shall be paid on a date determined by the Committee, but not later than 6/30/98. Upon a determination to pay the bonus in two installments, the first installment shall be paid on a date determined by the Committee, but not later than 6/30/98, and the second installment shall be paid no later than 4/10/99. In the event the measurement period ends upon a Change in Control, upon a determination of the Committee to pay 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 Director also acts as a Division President, in recognition of the fact that the second in charge at the local operation in essence performs 7 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 7 the role of a local Division President, the Group Director shall designate the person to be treated, for purposes of this Plan, as Division President. In no instance may a Group Director receive a bonus as Group Director and Division President. 8 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 8 CORPORATE OFFICE POOLS ANNUAL CASH BONUSES The Plan will have two components. The first is a bonus to be paid in cash annually at the conclusion of the fiscal year end audit, as is currently done. The '93-'95 Plan bonus pool for the corporate office pools, combined, was 2.5% of BTP before the bonus. Under the '96-98 Plan, this pool would change to 3.75% of net after tax income from continuing operations. This change of measuring the the pool from BTP to after tax earnings and the expansion of the number of pool participants, serves as a reduction of annual cash bonuses by approximately 60%. Criteria for awarding bonuses are as set forth below:
Officers Officers Staff CRITERIA '93-'95 '96-'98 '96-98 Tactical plan operating income 35% 30% 20% Personal plan objectives 30% 15% 40% Tactical plan cash flow 10% 10% 5% Return on investment 20% 15% 10% 5% Operating income growth 7.5% 10% 30% 25% Productivity growth 6% 0% 5% 5% Total 100% 100% 100%
Each individual criteria for the annual cash bonus will stand on its own merit and no bonus will be paid for performance against the criteria that is less than 80% of the target. No bonus pool will be paid against the criteria that is less than 80% of target. As in the Division bonus program, performance in excess of 100% of goal for operating income, cash flow, return on investment, operating income and/or productivity growth may result in bonus points exceeding 100% of the target bonus. 9 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 9 In the old plan, there were two separate pools for the corporate officers/staff and other corporate staffers received subjective bonuses unaffiliated with hard targets or measurements. In the new plan, the pool has been slightly increased but the number of participants broadened. Allocations of the corporate pool are as follows: CEO 26.40% COO 17.60% EVP 14.67% CFO 13.00% VP Operations 11.30% General Counsel 7.33% Corp. Staff 9.70% ------ Total 100%
Bonus awards from the pool for non-officers would be based 40% upon the achievement of personal objectives and 60% upon the achievement of corporate goals. Personal goals must be established by department heads jointly with the participants, in writing, at the beginning of the fiscal year and made subject to review at year end, prior to recommendation of bonus payments. Corporate Officers will receive an add-on bonus in restricted stock equal to 10% of the annual cash bonus, similar to that feature in the Division's plans. Current criteria for meeting non-financial objectives and goals generally remain unchanged, although the productivity increase standard has been added to the corporate goals as a bonus criteria. 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. LONG TERM INCREASE IN SHAREHOLDER VALUE BONUS The Corporate Office will have a single DEV pool which will be based upon changes in Enterprise Value using the PE ratio calculated using the same methods as that for the Divisions applied to Net income (after tax) from continuing operations for the period. 10 INCENTIVE COMPENSATION PLAN 1996-98 AS APPROVED BY THE BOARD OF DIRECTORS JULY 12, 1995 AND AS AMENDED OCTOBER 19, 1995, JULY 24, 1996, AND OCTOBER 17, 1996 PAGE 10 There would be no adjustment to an EBIT multiplier for the Corporate Office pool. Payout procedures and timing are the same as that used in the Divisions. The DEV component of the Corporate Office pool will be paid in cash upon the conclusion of the FY'98 year end audit and the ten day stock trading period following the release of the audited earnings or, 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 DEV bonus pool, which will equal 5% of the excess DEV over the 12% hurdle rate, will be allocated in the same manner as the annual cash bonus pool as reflected above. EX-10.12 3 AMENDMENT AGREEMENT #4: REVOLVING CREDIT/T-L AGREE 1 AMENDMENT AGREEMENT NO. 4 dated as of December 31, 1996 to that certain $115,000,000 REVOLVING CREDIT AND TERM LOAN AGREEMENT This AMENDMENT AGREEMENT NO. 4 (this "Amendment"), dated as of December 31, 1996, is by and among TRANSTECHNOLOGY CORPORATION ("TransTechnology"), TRANSTECHNOLOGY SEEGER-ORBIS GMBH ("GmbH"), ANDERTON INTERNATIONAL LIMITED (formerly known as TTUK Acquisition Co. Limited) ("Limited" and, together with TransTechnology and GmbH, the "Borrowers"), THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), the other lending institutions listed on Schedule 1 (the "Banks") and Schedule 2 (the "Term B Lenders") to the Credit Agreement (as defined below), THE FIRST NATIONAL BANK OF BOSTON, acting through its London Branch and its Frankfurt Branch, as fronting bank (in such capacity, the "Fronting Bank"), THE FIRST NATIONAL BANK OF BOSTON, as issuing bank (in such capacity, the "Issuing Bank", and together with the Banks, the Term B Lenders and the Fronting Bank, the "Lenders") and THE FIRST NATIONAL BANK OF BOSTON, as Agent (in such capacity, the "Agent"). Capitalized terms used herein unless otherwise defined shall have the respective meanings set forth in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit and Term Loan Agreement dated as of June 30, 1995, as amended by Amendment Agreement No. 1 dated as of August 29, 1995, Consent and Amendment Agreement No. 2 dated as of October 27, 1995, and Amendment Agreement No. 3 as of March 29, 1996 (as so amended, the "Credit Agreement"); WHEREAS, the Borrowers have proposed reallocating the availability of the respective borrowing facilities provided for in the Credit Agreement by increasing the maximum amount of Sterling Facility Loans available by the Sterling Equivalent of $3,400,000, to an aggregate amount of the Sterling Equivalent of $6,400,000, and by correspondingly decreasing the maximum amount of Revolving Credit Loans available by $3,400,000; WHEREAS, the Borrowers have requested certain other amendments to the Credit Agreement and upon the terms and conditions hereinafter set forth, the Agent and the Lenders have agreed to such amendments; WHEREAS, the Lenders, the Agent and the Borrowers have agreed to amend the Credit Agreement as hereinafter set forth; 2 -2- 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 1.1 of the Credit Agreement is corrected by deleting the words "the most recent such balance sheet" from the seventh line of the definition of "Consolidated Current Assets". (b) Section 1.1 of the Credit Agreement is further amended by including at the end of the definition of "Consolidated Excess Cash Flow" the following: "plus (v) to the extent not otherwise deducted from Consolidated EBITDA in the calculation of Consolidated Operating Cash Flow for such period, an amount equal to the costs (including amounts payable as purchase price and fees and expenses of professional advisers) actually incurred by TransTechnology and its Subsidiaries during such fiscal period with respect to any acquisition by TransTechnology or any of its Subsidiaries of the stock of any corporation or of assets which constitute all or a substantial part of a business or division, which acquisition has been approved prior to the completion thereof by the Agent and the Lenders in writing in accordance with the provisions of this Agreement." (c) Section 1.1 of the Credit Agreement is further amended by deleting the definition of "Earnings Before Interest and Taxes" in its entirety and substituting therefor the following: "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 Current Assets pursuant to the definition thereof." (d) Section 1.1 of the Credit Agreement is further amended by deleting clause (x) from the definition of "Eligible Accounts Receivable" and substituting therefor the following new clause (x): "(x) that are not due from an account debtor located in a jurisdiction outside of the United States and Canada which the Agent shall have notified to the Borrowers as a jurisdiction from which accounts receivable would not be acceptable for inclusion as Eligible Accounts Receivable;" 3 -3- (e) Section 3.3 of the Credit Agreement is amended by deleting the amount of "$3,000,000" and substituting therefor the amount of "$6,400,000". (f) Section 3.4 of the Credit Agreement is amended by deleting the amount of "$3,000,000" and substituting therefor the amount of "$6,400,000". (g) Section 3.4 of the Credit Agreement is further amended by deleting the amount of "$11,000,000" and substituting therefor the amount of "$14,400,000". (h) The Credit Agreement is further amended by deleting Schedule 1 thereto in its entirety and substituting therefor the Schedule 1 attached hereto as Exhibit A. 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 and the Guarantors; (b) the legal opinion of Eversheds, solicitors for TransTechnology and Anderton International Limited, addressed to the Lenders and the Agent, and satisfactory in form and substance to the Agent's counsel; and (C) the legal opinion of Gerald C. Harvey, Esq., general counsel for TransTechnology, addressed to the Lenders and the Agent, dated as of the Effective Date (as defined in Section 6 of this Amendment), and satisfactory in form and substance to the Agent's counsel. SECTION 2.2. LEGALITY OF TRANSACTION. No change in applicable law shall have occurred as a consequence of which it shall have become and continue to be unlawful on the date this Amendment is to become effective (a) for the Agent or any Lender to perform any of its obligations under any of the Loan Documents or (b) for any of the Borrowers to perform any of its agreements or obligations under any of the Loan Documents. SECTION 2.3. PERFORMANCE. Each of the Borrowers shall have duly and properly performed, complied with and observed in all material respects its covenants, agreements and obligations contained in the Loan Documents required to be performed, complied with or observed by it on or prior to the date this Amendment is to become effective. No event shall have occurred on or prior to the date this Amendment is to become effective and be continuing, and no condition shall exist on the date this Amendment is to become effective which constitutes a Default or Event of Default under any of the Loan Documents. SECTION 2.4. PROCEEDINGS AND DOCUMENTS. All corporate, governmental and other proceedings in connection with the transactions contemplated by this Amendment and all instruments and documents incidental thereto shall be in form and substance reasonably satisfactory to the Agent and the Agent shall have received all such counterpart originals or certified or other copies of all such instruments and documents as the Agent shall have reasonably requested. 4 -4- SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Lenders as follows: (a) The representations and warranties of such Borrower contained in the Credit Agreement and the other Loan Documents to which it is a party were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof, except that the financial statements referred to therein shall be the financial statements of such Borrower most recently delivered to the Agent, and except as such representations and warranties are affected by the transactions contemplated hereby; (b) The execution, delivery and performance by such Borrower of this Amendment and the consummation of the transactions contemplated hereby; (I) are within the corporate powers of such Borrower and have been duly authorized by all necessary corporate action on the part of such Borrower, (ii) do not require any approval, consent of, or filing with, any governmental agency or authority, or any other person, association or entity, which bears on the validity of this Amendment and which is required by law or the regulation or rule of any agency or authority, or other person, association or entity, (iii) do not violate any provisions of any order, writ, judgment, injunction, decree, determination or award presently in effect in which such Borrower is named, or any provision of the charter documents or by-laws of such Borrower, (iv) do not result in any breach of or constitute a default under any agreement or instrument to which such Borrower is a party or to which it or any of its properties are bound, including without limitation any indenture, loan or loan agreement, lease, debt instrument or mortgage, except for such breaches and defaults which would not have a material adverse effect on such Borrower and its Subsidiaries taken as a whole, and (v) do not result in or require the creation or imposition of any mortgage, deed of trust, pledge or encumbrance of any nature upon any of the assets or properties of such Borrower; and (c) This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms, provided that (I) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors, and (ii) enforcement may be subject to general principles of equity, and the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceeding for such remedies may be brought. SECTION 4. NO OTHER AMENDMENTS. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect. SECTION 5. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 5 -5- SECTION 6. EFFECTIVE DATE. Subject to the satisfaction of the conditions precedent set forth in Section2 hereof, this Amendment shall be deemed to be effective as of the date hereof (the "Effective Date"). 6 -6- IN WITNESS WHEREOF, the undersigned have duly executed this Amendment Agreement No. 4 as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/Chandler J. Moisen -------------------------------------- Name: Chandler J. Moisen Title: Senior Vice President, Chief Financial Officer & Treasurer TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/Ulf Lennart Jemsby -------------------------------------- Name: Ulf Lennart Jemsby Title: Managing Director ANDERTON INTERNATIONAL LIMITED By: /s/Ulf Lennart Jemsby -------------------------------------- Name: Ulf Lennart Jemsby Title: Director By: /s/Michael J. Berthelot -------------------------------------- Name: Michael J. Berthelot Title: Director 7 -7- THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent, Issuing Bank and Fronting Bank By: /s/Maura Wadlinger -------------------------- Name: Maura Wadlinger Title: Vice President NATIONAL BANK OF CANADA, individually and as Co-Agent By: /s/Jack Jankovic -------------------------- Name: Jack Jankovic Title: Vice President BHF-BANK AKTIENGESELLSCHAFT By: /s/Perry Forman -------------------------- Name: Perry Forman Title: Vice President By: /s/Linda Pace -------------------------- Name: Linda Pace Title: A. V. P. 8 -8- DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH By: /s/Andrew K. Mittag -------------------------------- Name: Andrew K. Mittag Title: Vice President By: /s/Nicholas Kalogeropoulos --------------------------------- Name: Nicholas Kalogeropoulos Title: Assistant Treasurer THE FIRST NATIONAL BANK OF CHICAGO By: /s/Amy L. Golz --------------------------------- Name: Amy L. Golz Title: AVP. SUMMIT BANK By: /s/Lawrence F. Zema --------------------------------- Name: Lawrence F. Zema Title: Vice President & Regional Manager Large Corporate Group Summit Bank 9 -9- SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: /s/Scott H. Page -------------------------- Name: Scott H. Page Title: Vice President MERRILL LYNCH SENIOR FLOATING FUND RATE, INC. By: /s/Anthony R. Clemente -------------------------- Name: Anthony R. Clemente Title: Authorized Signatory 10 -10- 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 & Secretary PALNUT FASTENERS, INC. By: /s/Gerald C. Harvey ------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/Gerald C. Harvey ------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RETAINERS, INC. By: /s/Gerald C. Harvey ------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 11 -11- RANCHO TRANSTECHNOLOGY CORPORATION By: /s/Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INDUSTRIES By: /s/Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INTERNATIONAL SALES, INC. By: /s/Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 12 -12- TRANSTECHNOLOGY SEEGER INC. By: /s/Gerald C. Harvey ------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SEEGER INC. By: /s/Gerald C. Harvey ------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 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/Robert Wieremiej --------------------------------- Name: Robert Wieremiej Title: Director By: /s/Michael J. Berthelot --------------------------------- Name: Michael J. Berthelot Title: Director ANDERTON (PREDECESSORS) LIMITED By: /s/Ulf Jemsby --------------------------------- Name: Ulf Jemsby Title: Managing Director By: /s/Robert Wieremiej --------------------------------- Name: Robert Wieremiej Title: Director 14 SCHEDULE 1 EXHIBIT A THE BANKS
Bank Address of Lending Office Revolving Credit and $30,000,000 $3,600,000 (Domestic and Eurodollar) Term A Commitment Revolver Revolver Percentage (US) (Germany) - ---------------------------------------------------------------------------------------------------------------------------- The First National Bank of 100 Federal Street 24.166667% 7,250,000.10 870,000.01 Boston Boston, MA 02110 Fax No: (+1) 617-434-6685 - ---------------------------------------------------------------------------------------------------------------------------- National Bank of One Cleveland Center 22.222222% 6,666,666.60 799,999.99 Canada 1375 East 9th Street, Suite 2430 Cleveland, OH 44114 Fax No: (216) 574-9236 - ---------------------------------------------------------------------------------------------------------------------------- BHF-Bank AG 590 Madison Avenue 15% 4,500,000.00 540,000.00 New York, NY 10022-2540 Fax No: (212) 756-5911 - ---------------------------------------------------------------------------------------------------------------------------- Dresdner Bank AG 75 Wall Street 13.611111% 4,083,333.30 490,000.00 New York Branch New York, NY 10005 and Fax No: (212) 574-0129 Grand Cayman Branch - ---------------------------------------------------------------------------------------------------------------------------- The First National 153 West 51st Street 15% 4,500,000.00 540,000.00 Bank of Chicago Mail Suite 4000 New York, NY 10019 Fax No: (212)-373-1388 - ---------------------------------------------------------------------------------------------------------------------------- Summit Bank 750 Walnut Avenue 10% 3,000,000.00 360,000.00 Cranford, NJ 07016 Fax No: (908)- 709-6433 - ----------------------------------------------------------------------------------------------------------------------------
Bank $6,400,000 $30,000,000 $8,000,000 $12,000,000 Revolver Term A Term A Term A (UK) (US) (UK) (Germany) - ------------------------------------------------------------------------------------------------- The First National Bank of 1,546,666.69 7,250,000.10 1,933,333.36 2,900,000.04 Boston - ------------------------------------------------------------------------------------------------- National Bank of 1,422,222.21 6,666,666.60 1,777,777.76 2,666,666.64 Canada - ------------------------------------------------------------------------------------------------- BHF-Bank AG 960,000.00 4,500,000.00 1,200,000.00 1,800,000.00 - ------------------------------------------------------------------------------------------------- Dresdner Bank AG 871,111.10 4,083,333.30 1,088,888.88 1,633,333.32 New York Branch and Grand Cayman Branch - ------------------------------------------------------------------------------------------------- The First National 960,000.00 4,500,000.00 1,200,000.00 1,800,000.00 Bank of Chicago - ------------------------------------------------------------------------------------------------- Summit Bank 640,000.00 3,000,000.00 800,000.00 1,200,000.00 - -------------------------------------------------------------------------------------------------
EX-10.14 4 LETTER AGREEMENT: OFFICER VERSION 1 EXHIBIT 10.14 [DATE] OFFICER VERSION Dear _____________________________: This letter agreement (the "Agreement") sets out the agreement between you (the "Executive") and TransTechnology Corporation (the "Corporation") with respect to certain severance arrangements which shall apply only in the event that a Change in Control, as hereinafter defined, of the Corporation occurs after the date hereof. 1. For purposes of this Agreement, a "Change in Control" shall mean the occurrence of any one (or more) of the following events after the date of this Agreement: a. When the Corporation acquires actual knowledge that any person, including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, is or has become the beneficial owner of shares of the Corporation with respect to which twenty percent (20%) or more of the total number of votes for the election of the Corporation's Board of Directors may be cast; b. As a result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, persons who were directors of the Corporation immediately prior to such event shall cease to constitute a majority of the Board of Directors; c. The stockholders of the Corporation shall approve an agreement providing either for a transaction in which the Corporation will cease to be an independent publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Corporation; or d. A tender offer or exchange offer is made for shares of the Corporation's common stock (other than one made by the Corporation) and shares of common stock are acquired thereunder. 2. In the event of a Change in Control of the Corporation, and the termination by the Corporation of the Executive's employment upon such Change in Control or within 24 months thereafter for reasons other than Cause, as defined in Paragraph 3 2 Date Page 2 below, or the Executive terminates his employment with the Corporation for "Good Reason," as defined in Paragraph 5 below, in connection with, or within 24 months after a Change in Control, the Corporation shall pay to the Executive an amount equal to (a) 200% of the Executive's annual salary in effect on the date of said termination ("Base Salary"), plus (b) the average of his total bonuses paid or due for each of the last 2 completed fiscal years prior to the Termination Date as defined below (or, in the event the Executive has been employed by the Corporation for less than 2 fiscal years and has received only one bonus, an amount equal to the bonus received by the Executive), plus (c) the working days pay equivalent of earned but unused vacation and sick time, plus (d) the fair market value of any accrued but unvested restricted stock and stock options outstanding as of the Executive's Termination Date, plus (e) all accrued and unpaid salary, less any governmentally required withholdings on the foregoing. As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date. Subject to Paragraph 6 below, said lump sum shall be paid in two (2) installments, the first installment to be in an amount which (x) does not, in combination with all other compensation received by the Executive in the same fiscal year, exceed the deductible limit for the Executive's compensation under Internal Revenue Code Section 162(m) and (y) subject to the preceding clause (x), is equal to the maximum aggregate amount which can be paid to the Executive without constituting Excess Parachute Payments as defined in Paragraph 6 below. The first installment shall be paid within 10 days of the Executive's last day of employment with the Corporation (said last day being hereinafter the "Termination Date") and the second installment, which shall equal the balance due to the Executive under this Agreement, shall be paid within 10 days of the close of the Corporation's fiscal year in which the first installment was paid; provided that in the event of a breach by the Corporation of this Agreement as set out in Paragraph 10 below, the aforesaid sums referenced in clauses 2(a) through (e) above shall be paid in one installment within 10 days of the exercise by the Executive of his rights under Paragraph 10. The aforesaid sums referenced in clauses 2(a) through (e) shall be in addition to all other amounts which may become payable to the Executive pursuant to other agreements and plans which the Corporation may have in force for the benefit of its executive employees and for which the Executive is eligible, including without limitation the agreements and plans referred to in paragraph 17 below; provided that any amount paid to the Executive pursuant to the Corporate Severance Pay Plan of the Corporation shall be credited against amounts due under this Agreement. The Corporation shall continue to provide the Executive for a period of 24 months from the Termination Date with life, health, and disability insurance coverage substantially identical to the coverage maintained for the Executive prior to the Termination Date. 3. For purposes of this Agreement, termination for "Cause" shall mean only the following conduct by the Executive: 3 Date Page 3 a. material breach of any provision of this Agreement; b. breach of fiduciary duty to the Corporation involving personal gain or profit; c. intentional and repeated failure to perform material stated duties; d. conviction of any felony, any crime involving moral turpitude, or any crime committed in the conduct of his or her official duties which is materially adverse to the welfare of the Corporation. The Executive shall not be deemed to have been terminated for Cause unless there shall have been delivered to the Executive a copy of a resolution adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors of the Corporation at a meeting of the Board of Directors duly called and held for the purpose (and reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board of Directors), finding that in the good faith opinion of the Board of Directors of the Corporation the Executive was guilty of conduct specified in this Paragraph 3 and specifying the particulars thereof in detail. Except in the event of a conviction as described in subparagraph 3(d), in no event will the Executive be subject to termination for Cause pursuant to this Agreement unless the Executive shall have failed to cure, correct or prevent the alleged breach or failure within thirty (30) days after such resolution has been delivered to the Executive. 4. This Agreement may be terminated by the Executive at any time upon ninety (90) days' written notice to the Corporation or upon such shorter period as may be agreed upon between the Executive and the Chairman of the Board and Chief Executive Officer of the Corporation. In the event of such termination by the Executive, the Corporation shall be obligated only to continue to pay the Executive his salary up to the date of termination, and those retirement and/or employee benefits which have been earned or become payable up to the date of termination. 5. For purposes of this Agreement, "Good Reason" shall mean the occurrence, in connection with, or within 24 months after, a Change in Control, of any of the events or conditions described in subparagraphs (a) through (g) hereof without the Executive's express written consent. Executive's right to terminate his employment pursuant to this Paragraph 5 shall not be affected by his incapacity due to physical or mental illness. a. A change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, does not represent a promotion from his status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the 4 Date Page 4 Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Executive from or failure to reappoint him to any of such positions, except in connection with the termination of his employment for (i) Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; b. A reduction by the Corporation in the Executive's Base Salary as in effect on the date of a Change in Control or as the same may be increased from time to time; c. The intention to relocate or transfer the Executive to a location outside a 50 mile radius of the location which is his primary office location as of the date immediately preceding the date of a Change in Control. d. The adverse and substantial alteration in the nature and quality of the office space from which the Executive performs his duties, including the size and location thereof, as well as the secretarial and administrative support provided to him; e. The failure by the Corporation to continue to provide the Executive with compensation and benefits provided for under this Agreement or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant, or the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; f. Any material breach by the Corporation of any provision of this Agreement; or g. The failure of the Corporation to obtain a satisfactory agreement from any successor or assignee of the Corporation to assume and agree to perform this Agreement, as contemplated in Paragraph 10 hereof. 6. If the Present Value (as defined herein) of any benefits payable under this Agreement and any other payments otherwise payable to the Executive by the Corporation (collectively referred to as "Severance Benefits") which are deemed under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") to constitute "Parachute Payments" (as defined in Section 280G), is greater than three times Executive's Base Amount (as defined herein), the Executive may elect to apply the provisions set forth below. a. In the event that any Severance Benefits to be made to the Executive by the 5 Date Page 5 Corporation, whether pursuant to this Agreement or otherwise, upon termination of the Executive's employment pursuant hereto are deemed, in the opinion of the Corporation's independent public accountants (the "Accountants") to constitute Parachute Payments, the Executive may, upon written notification by the Corporation of the determination of the Accountants, elect to receive any combination of Severance Benefits from the Corporation due to him as a result of termination which equal the maximum aggregate amount which can be paid to the Executive without constituting Excess Parachute Payments for purposes of the Code. The Executive undertakes to make such election in the event that receipt by him of amounts constituting Excess Parachute Payments will result in a net amount payable to him after taxes which is less than the amount he would be entitled to receive by making the aforesaid election. The written notification by the Corporation of any determination of the Accountants pursuant to this Paragraph 6 shall be provided to the Executive within five (5) business days of the Termination Date, and shall (i) list all Severance Benefits which are deemed to constitute Parachute Payments in the opinion of the Accountants, and (ii) contain the Corporation's opinion as to the Present Value of each of such Severance Benefits, which opinion shall be determined in consultation with the Accountants. Any election by the Executive pursuant to this paragraph shall be made by the Executive and submitted to the Corporation by the thirtieth (30th) day following the Termination Date, and the Corporation shall pay to the Executive the Severance Benefits specified in such election within five (5) business days of receipt of such election. b. In the event that the Executive does not file a written election with the Corporation pursuant to subparagraph (a) upon receipt of a written notification by the Corporation of the Accountant's determination that Severance Benefits to which the Executive is entitled upon termination constitute Excess Parachute Payments, then the Corporation shall pay the Executive all Severance Benefits due him pursuant to this Agreement or otherwise. c. For purposes of this Paragraph 6, Present Value means the value determined in accordance with the principles of Section 1274(b)(2) of the Code under the rules provided in Treasury Regulations under Section 280G of the Code, and Base Amount means the average annual compensation payable to the Executive by the Corporation and includable in the Executive's gross income for Federal income tax purposes during the shorter of the period consisting of the most recent five taxable years ending before the date of any Change in Control or the portion of such period during which the Executive was an employee. 6 Date Page 6 d. References to Code Section 280G herein are intended as references to Section 280G as added to the Code by the Tax Reform Act of 1984, Pub. L. No. 98-369, 98th Cong., 2nd Sess., and as it may be amended. e. In the event the Corporation fails to give the notification to the Executive of the determination by the Accountants as contemplated by subparagraph 6(a) hereof; or if the Accountants erroneously fail to determine the existence of Excess Parachute Payments; or in the event of any other circumstance caused by the Corporation which results in the imposition of tax pursuant to Section 4999 of the Code, then any such tax, including any penalty or interest paid by the Executive shall be reimbursed to the Executive by the Corporation. 7. All reasonable legal fees, arbitration fees, and expenses paid or incurred by the Executive relating to any dispute, controversy or claimed breach regarding this Agreement shall be paid or reimbursed by the Corporation, if the Executive is successful, or as may be determined to be appropriate by any arbitrator's award based on the relative merits of the two parties. 8. The Executive agrees that during the term of this Agreement, and for a period of two (2) years commencing the Termination Date, he will not directly or indirectly: a. Solicit, divert or take away any of the customers, business or patronage of the Corporation or its subsidiaries or affiliates; or b. Induce or attempt to influence any employee of the Corporation or its subsidiaries or affiliates to terminate his or her employment therewith. c. In the event of a breach or threatened breach of the Executive of the provisions of this Paragraph 8, the Corporation, or any duly authorized officer thereof, will be entitled to a temporary restraining order or injunction. 9. The Executive shall not, during the term of this Agreement, have any other employment (exclusive of volunteer services with not-for-profit institutions or occasional speaking engagements) except with the prior approval of the Chairman of the Board and Chief Executive Officer of the Corporation. 10. The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by an assumption agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption agreement prior to the effectiveness of any 7 Date Page 7 such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation in the same amount and on the same terms that he would be entitled to hereunder if he terminated his employment for Good Reason in connection with, or within 24 months after, a Change in Control. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by his personal or legal representatives, successors, heirs, distributees, devisees, legatees and permitted assigns. 11. This Agreement is personal to each of the parties hereto and, except as provided in Paragraph 10, neither party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party. 12. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested with postage prepaid, or delivered by next day courier service such as is offered by Federal Express and competing carriers, to the following addresses or to such other address as either party may designate by like notice. If to the Corporation, to: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 Attention: Chief Executive Officer If to the Executive, to: ---------------------------------------- ---------------------------------------- ---------------------------------------- 13. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties. 14. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 8 15. This Agreement shall, except to the extent that Federal law shall be deemed to preempt it, be governed by and construed and enforced in accordance with the laws of the State of New Jersey applicable to contracts made and performed within the State. 16. Except for injunctive relief, any dispute or controversy arising under or in connection with this Agreement, or the breach thereof, shall be settled exclusively by binding arbitration at a site in the State of New Jersey and administered by the American Arbitration Association ("AAA") in accordance with the National Rules for the Resolution of Employment Disputes of the AAA then in effect. Notwithstanding the pendency of any arbitration proceeding, the Corporation will continue to pay the Executive's full compensation in effect when the dispute, controversy, or claimed breach, arose and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was then participating, until the matter submitted to arbitration is finally resolved. Judgment may be entered on the arbitrator's award in any court having competent jurisdiction. 17. Nothing in this Agreement amends or modifies, or shall be deemed or construed to amend or modify, the terms and provisions (including the triggers and dates of payments thereunder) of any stock option granted by the Corporation to the Executive, or restricted stock agreement between the Corporation and the Executive, or the provisions of the 1992 Long Term Incentive Plan and FY'96-98 Incentive Compensation Plan. 18. Absent a Change in Control or unless extended in writing by the parties hereto, this Agreement shall expire two (2) years from the date hereof. Please signify your agreement to the terms of this Agreement by signing in the space provided below and returning one fully executed copy to the undersigned. TRANSTECHNOLOGY CORPORATION By: _______________________________ Michael J. Berthelot Chairman of the Board and Chief Executive Officer Accepted and agreed: __________________________________ Executive GH:1506 EX-10.15 5 LETTER AGREEMENT: SUBSIDIARY PRESIDENT VERSION 1 EXHIBIT 10.15 Date SUBSIDIARY PRESIDENT VERSION Name of Recipient Address Address Dear _______________: This letter agreement (the "Agreement") is made between you (the "Executive") and __________________________ (the "Employer") and sets out the agreement between the Executive and the Employer with respect to certain severance arrangements which shall apply only in the event that a Change in Control, as hereinafter defined, of TransTechnology Corporation (the "Corporation") occurs after the date hereof. 1. For purposes of this Agreement, a "Change in Control" shall mean the occurrence of any one (or more) of the following events after the date of this Agreement: a. When the Corporation acquires actual knowledge that any person, including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, is or has become the beneficial owner of shares of the Corporation with respect to which twenty percent (20%) or more of the total number of votes for the election of the Corporation's Board of Directors may be cast; b. As a result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, persons who were directors of the Corporation immediately prior to such event shall cease to constitute a majority of the Board of Directors; c. The stockholders of the Corporation shall approve an agreement providing either for a transaction in which the Corporation will cease to be an independent publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Corporation; or d. A tender offer or exchange offer is made for shares of the Corporation's common stock (other than one made by the Corporation) and shares of common stock are acquired thereunder. 2. In the event of a Change in Control of the Corporation, and the termination by the Employer of the Executive's employment upon such Change in Control or within 24 months thereafter for reasons other than Cause, as defined in Paragraph 3 below, 2 Date Page 2 or the Executive terminates his employment with the Employer for "Good Reason," as defined in Paragraph 5 below, in connection with, or within 24 months after a Change in Control, the Employer shall pay to the Executive an amount equal to (a) the Executive's annual salary in effect on the date of said termination ("Base Salary"), plus (b) the average of his total bonuses paid or due for each of the last 2 completed fiscal years prior to the Termination Date, as defined below (or, in the event the Executive has been employed by the Employer for less than 2 fiscal years and has received only one bonus, an amount equal to the bonus received by the Executive) plus (c) the working days pay equivalent of earned but unused vacation and sick time, plus (d) the fair market value of any accrued but unvested restricted stock and stock options outstanding as of the Executive's Termination Date, plus (e) the amount payable to the Executive under the Corporate Severance Pay Plan of the Employer plus (f) all accrued and unpaid salary, less any governmentally required withholdings on the foregoing. As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date. Subject to Paragraph 6 below, said lump sum shall be paid in two (2) installments, the first installment to be in an amount which (x) does not, in combination with all other compensation received by the Executive in the same fiscal year, exceed the deductible limit for the Executive's compensation under Internal Revenue Code Section 162(m) and (y) subject to the preceding clause (x), is equal to the maximum aggregate amount which can be paid to the Executive without constituting Excess Parachute Payments as defined in Paragraph 6 below. The first installment shall be paid within 10 days of the Executive's last day of employment with the Employer (said last day being hereinafter the "Termination Date") and the second installment, which shall equal the balance due to the Executive under this Agreement, shall be paid within 10 days of the close of the Employer's fiscal year in which the first installment was paid; provided that in the event of a breach by the Employer of this Agreement as set out in Paragraph 10 below, the aforesaid sums referenced in clauses 2(a) through (f) above shall be paid in one installment within 10 days of the exercise by the Executive of his rights under Paragraph 10. The aforesaid sums referenced in clauses 2(a) through (f) shall be in addition to all other amounts which may become payable to the Executive pursuant to other agreements and plans which the Corporation may have in force for the benefit of its executive employees and for which the Executive is eligible, including without limitation the agreements and plans referred to in paragraph 17 below. The Employer shall exercise its best efforts to provide the Executive for a period of 24 months from the Termination Date with life, health, and disability insurance coverage substantially identical to the coverage maintained for the Executive prior to the Termination Date. 3. For purposes of this Agreement, termination for "Cause" shall mean only the following conduct by the Executive: a. material breach of any provision of this Agreement; b. breach of fiduciary duty to the Employer involving personal gain or profit; c. intentional and repeated failure to perform material stated duties; 3 Date Page 3 d. conviction of any felony, any crime involving moral turpitude, or any crime committed in the conduct of his or her official duties which is materially adverse to the welfare of the Employer. The Executive shall not be deemed to have been terminated for Cause unless there shall have been delivered to the Executive a copy of a resolution adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors of the Employer at a meeting of the Board of Directors duly called and held for the purpose (and reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board of Directors), finding that in the good faith opinion of the Board of Directors of the Employer the Executive was guilty of conduct specified in this Paragraph 3 and specifying the particulars thereof in detail. Except in the event of a conviction as described in subparagraph 3(d), in no event will the Executive be subject to termination for Cause pursuant to this Agreement unless the Executive shall have failed to cure, correct or prevent the alleged breach or failure within thirty (30) days after such resolution has been delivered to the Executive. 4. This Agreement may be terminated by the Executive at any time upon ninety (90) days' written notice to the Employer or upon such shorter period as may be agreed upon between the Executive and the Chairman of the Board of the Employer. In the event of such termination by the Executive, the Employer shall be obligated only to continue to pay the Executive his salary up to the date of termination, and those retirement and/or employee benefits which have been earned or become payable up to the date of termination. 5. For purposes of this Agreement, "Good Reason" shall mean the occurrence, in connection with, or within 24 months after, a Change in Control, of any of the events or conditions described in subparagraphs (a) through (g) hereof without the Executive's express written consent. Executive's right to terminate his employment pursuant to this Paragraph 5 shall not be affected by his incapacity due to physical or mental illness. a. A change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, does not represent a promotion from his status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Executive from or failure to reappoint him to any of such positions, except in connection with the termination of his employment for (i) Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; b. A reduction by the Employer in the Executive's Base Salary as in effect on the date of a Change in Control or as the same may be increased from time to time; 4 Date Page 4 c. The intention to relocate or transfer the Executive to a location outside a 50 mile radius of the location which is his primary office location as of the date immediately preceding the date of a Change in Control. d. The adverse and substantial alteration in the nature and quality of the office space from which the Executive performs his duties, including the size and location thereof, as well as the secretarial and administrative support provided to him; e. The failure by the Employer to continue to provide the Executive with compensation and benefits provided for under this Agreement or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant, or the taking of any action by the Employer which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; f. Any material breach by the Employer of any provision of this Agreement; or g. The failure of the Corporation to obtain a satisfactory agreement from any successor or assignee of the Corporation to assume and agree to perform this Agreement, as contemplated in Paragraph 10 hereof. 6. If the Present Value (as defined herein) of any benefits payable under this Agreement and any other payments otherwise payable to the Executive by the Employer (collectively referred to as "Severance Benefits") which are deemed under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") to constitute "Parachute Payments" (as defined in Section 280G), is greater than three times Executive's Base Amount (as defined herein), the Executive may elect to apply the provisions set forth below. a. In the event that any Severance Benefits to be made to the Executive by the Employer, whether pursuant to this Agreement or otherwise, upon termination of the Executive's employment pursuant hereto are deemed, in the opinion of the Employer's independent public accountants (the "Accountants") to constitute Parachute Payments, the Executive may, upon written notification by or on behalf of the Employer of the determination of the Accountants, elect to receive any combination of Severance Benefits from the Employer due to him as a result of termination which equal the maximum aggregate amount which can be paid to the Executive without constituting Excess Parachute Payments for purposes of the Code. The Executive undertakes to make such election in the event that receipt by him of amounts constituting Excess Parachute Payments will result in a net amount payable to him after taxes which is less than the amount he would be entitled to receive by making the aforesaid election. The written notification by or on behalf of the Employer of any determination of the Accountants pursuant to this Paragraph 6 shall be provided to the Executive within five (5) business days of the Termination Date, and shall (i) list all 5 Date Page 5 Severance Benefits which are deemed to constitute Parachute Payments in the opinion of the Accountants, and (ii) contain the Employer's opinion as to the Present Value of each of such Severance Benefits, which opinion shall be determined in consultation with the Accountants. Any election by the Executive pursuant to this paragraph shall be made by the Executive and submitted to the Employer by the thirtieth (30th) day following the Termination Date, and the Employer shall pay to the Executive the Severance Benefits specified in such election within five (5) business days of receipt of such election. b. In the event that the Executive does not file a written election with the Corporation pursuant to subparagraph (a) upon receipt of a written notification by the Employer of the Accountant's determination that Severance Benefits to which the Executive is entitled upon termination constitute Excess Parachute Payments, then the Employer shall pay the Executive all Severance Benefits due him pursuant to this Agreement or otherwise. c. For purposes of this Paragraph 6, Present Value means the value determined in accordance with the principles of Section 1274(b)(2) of the Code under the rules provided in Treasury Regulations under Section 280G of the Code, and Base Amount means the average annual compensation payable to the Executive by the Employer and includable in the Executive's gross income for Federal income tax purposes during the shorter of the period consisting of the most recent five taxable years ending before the date of any Change in Control or the portion of such period during which the Executive was an employee. d. References to Code Section 280G herein are intended as references to Section 280G as added to the Code by the Tax Reform Act of 1984, Pub. L. No. 98-369, 98th Cong., 2nd Sess., and as it may be amended. e. In the event the Employer fails to give the notification to the Executive of the determination by the Accountants as contemplated by subparagraph 6(a) hereof; or if the Accountants erroneously fail to determine the existence of Excess Parachute Payments; or in the event of any other circumstance caused by the Corporation which results in the imposition of tax pursuant to Section 4999 of the Code, then any such tax, including any penalty or interest paid by the Executive shall be reimbursed to the Executive by the Employer. 7. All reasonable legal fees, arbitration fees, and expenses paid or incurred by the Executive relating to any dispute, controversy or claimed breach regarding this Agreement shall be paid or reimbursed by the Employer, if the Executive is successful, or as may be determined to be appropriate by any arbitrator's award based on the relative merits of the two parties. 8. The Executive agrees that during the term of this Agreement, and for a period of 6 Date Page 6 one (1) year commencing the Termination Date, he will not directly or indirectly: a. Solicit, divert or take away any of the customers, business or patronage of the Corporation or its subsidiaries or affiliates; or b. Induce or attempt to influence any employee of the Corporation or its subsidiaries or affiliates to terminate his or her employment therewith. c. In the event of a breach or threatened breach of the Executive of the provisions of this Paragraph 8, the Employer or the Corporation as the beneficiary of this paragraph 8, or any duly authorized officer of the Employer or the Corporation, will be entitled to a temporary restraining order or injunction. 9. The Executive shall not, during the term of this Agreement, have any other employment (exclusive of volunteer services with not-for-profit institutions or occasional speaking engagements) except with the prior approval of the Chairman of the Board. 10. The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by an assumption agreement in form and substance satisfactory to the Executive, to expressly reaffirm that the Employer shall perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession with respect to the Corporation had taken place. Failure of the Corporation to obtain such assumption agreement prior to the effectiveness of any such succession shall thereupon entitle the Executive to compensation from the Employer in the same amount and on the same terms that he would be entitled to hereunder if he terminated his employment for Good Reason in connection with, or within 24 months after, a Change in Control. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by his personal or legal representatives, successors, heirs, distributees, devisees, legatees and permitted assigns. 11. This Agreement is personal to each of the parties hereto and, except as provided in Paragraph 10, neither party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party. 12. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested with postage prepaid, or delivered by next day courier service such as is offered by Federal Express and competing carriers, to the following addresses or to such other address as either party may designate by like notice. 7 Date Page 7 If to the Employer, to: Name of Employer Address Address With a copy to: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 Attention: Chief Executive Officer If to the Executive, to: Executive Name Address Address 13. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties. 14. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 15. This Agreement shall, except to the extent that Federal law shall be deemed to preempt it, be governed by and construed and enforced in accordance with the laws of _____________ applicable to contracts made and performed within the State. 16. Except for injunctive relief, any dispute or controversy arising under or in connection with this Agreement, or the breach thereof, shall be settled exclusively by binding arbitration at a site in the State of ______________ and administered by the American Arbitration Association ("AAA") in accordance with the National Rules for the Resolution of Employment Disputes of the AAA then in effect. Notwithstanding the pendency of any arbitration proceeding, the Employer will continue to pay the Executive's full compensation in effect when the dispute, controversy, or claimed breach, arose and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was then participating, until the matter submitted to arbitration is finally resolved. Judgment may be entered on the arbitrator's award in any court having competent jurisdiction. 17. Nothing in this Agreement amends or modifies, or shall be deemed or construed to amend or modify, the terms and provisions (including the triggers and dates of payments thereunder) of any stock option granted by the Corporation and/or the 8 Employer to the Executive, or restricted stock agreement between the Corporation and the Executive, or the provisions of the 1992 Amended and Restated Long Term Incentive Plan or other incentive compensation plan for which the Employee is eligible. 18. Absent a Change in Control or unless extended in writing by the parties hereto, this Agreement shall expire _________________. Please signify your agreement to the terms of this Agreement by signing in the space provided below and returning one fully executed copy to the undersigned. NAME OF EMPLOYER By: _______________________________ Accepted and agreed: __________________________________ Name of Recipient GH:1937 EX-10.16 6 LETTER AGREEMENT: DIVISION PRESIDENT VERSION 1 EXHIBIT 10.16 [DATE] DIVISION PRESIDENT VERSION Dear ________________________: This letter agreement (the "Agreement") sets out the agreement between you (the "Executive") and TransTechnology Corporation (the "Corporation") with respect to certain severance arrangements which shall apply only in the event that a Change in Control, as hereinafter defined, of the Corporation occurs after the date hereof. 1. For purposes of this Agreement, a "Change in Control" shall mean the occurrence of any one (or more) of the following events after the date of this Agreement: a. When the Corporation acquires actual knowledge that any person, including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, is or has become the beneficial owner of shares of the Corporation with respect to which twenty percent (20%) or more of the total number of votes for the election of the Corporation's Board of Directors may be cast; b. As a result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, persons who were directors of the Corporation immediately prior to such event shall cease to constitute a majority of the Board of Directors; c. The stockholders of the Corporation shall approve an agreement providing either for a transaction in which the Corporation will cease to be an independent publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Corporation; or d. A tender offer or exchange offer is made for shares of the Corporation's common stock (other than one made by the Corporation) and shares of common stock are acquired thereunder. 2. In the event of a Change in Control of the Corporation, and the termination by the Corporation of the Executive's employment upon such Change in Control or within 24 months thereafter for reasons other than Cause, as defined in Paragraph 3 2 Date Page 2 below, or the Executive terminates his employment with the Corporation for "Good Reason," as defined in Paragraph 5 below, in connection with, or within 24 months after a Change in Control, the Corporation shall pay to the Executive an amount equal to (a) the Executive's annual salary in effect on the date of said termination ("Base Salary"), plus (b) the average of his total bonuses paid or due for each of the last 2 completed fiscal years prior to the Termination Date, as defined below (or, in the event the Executive has been employed by the Corporation for less than 2 fiscal years and has received only one bonus, an amount equal to the bonus received by the Executive) plus (c) the working days pay equivalent of earned but unused vacation and sick time, plus (d) the fair market value of any accrued but unvested restricted stock and stock options outstanding as of the Executive's Termination Date, plus (e) the amount payable to the Executive under the Corporate Severance Pay Plan of the Corporation plus (f) all accrued and unpaid salary, less any governmentally required withholdings on the foregoing. As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date. Subject to Paragraph 6 below, said lump sum shall be paid in two (2) installments, the first installment to be in an amount which (x) does not, in combination with all other compensation received by the Executive in the same fiscal year, exceed the deductible limit for the Executive's compensation under Internal Revenue Code Section 162(m) and (y) subject to the preceding clause (x), is equal to the maximum aggregate amount which can be paid to the Executive without constituting Excess Parachute Payments as defined in Paragraph 6 below. The first installment shall be paid within 10 days of the Executive's last day of employment with the Corporation (said last day being hereinafter the "Termination Date") and the second installment, which shall equal the balance due to the Executive under this Agreement, shall be paid within 10 days of the close of the Corporation's fiscal year in which the first installment was paid; provided that in the event of a breach by the Corporation of this Agreement as set out in Paragraph 10 below, the aforesaid sums referenced in clauses 2(a) through (f) above shall be paid in one installment within 10 days of the exercise by the Executive of his rights under Paragraph 10. The aforesaid sums referenced in clauses 2(a) through (f) shall be in addition to all other amounts which may become payable to the Executive pursuant to other agreements and plans which the Corporation may have in force for the benefit of its executive employees and for which the Executive is eligible, including without limitation the agreements and plans referred to in paragraph 17 below. The Corporation shall continue to provide the Executive for a period of 24 months from the Termination Date with life, health, and disability insurance coverage substantially identical to the coverage maintained for the Executive prior to the Termination Date. 3. For purposes of this Agreement, termination for "Cause" shall mean only the following conduct by the Executive: a. material breach of any provision of this Agreement; b. breach of fiduciary duty to the Corporation involving personal gain or profit; 3 Date Page 3 c. intentional and repeated failure to perform material stated duties; d. conviction of any felony, any crime involving moral turpitude, or any crime committed in the conduct of his or her official duties which is materially adverse to the welfare of the Corporation. The Executive shall not be deemed to have been terminated for Cause unless there shall have been delivered to the Executive a copy of a resolution adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors of the Corporation at a meeting of the Board of Directors duly called and held for the purpose (and reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board of Directors), finding that in the good faith opinion of the Board of Directors of the Corporation the Executive was guilty of conduct specified in this Paragraph 3 and specifying the particulars thereof in detail. Except in the event of a conviction as described in subparagraph 3(d), in no event will the Executive be subject to termination for Cause pursuant to this Agreement unless the Executive shall have failed to cure, correct or prevent the alleged breach or failure within thirty (30) days after such resolution has been delivered to the Executive. 4. This Agreement may be terminated by the Executive at any time upon ninety (90) days' written notice to the Corporation or upon such shorter period as may be agreed upon between the Executive and the Chairman of the Board and Chief Executive Officer of the Corporation. In the event of such termination by the Executive, the Corporation shall be obligated only to continue to pay the Executive his salary up to the date of termination, and those retirement and/or employee benefits which have been earned or become payable up to the date of termination. 5. For purposes of this Agreement, "Good Reason" shall mean the occurrence, in connection with, or within 24 months after, a Change in Control, of any of the events or conditions described in subparagraphs (a) through (g) hereof without the Executive's express written consent. Executive's right to terminate his employment pursuant to this Paragraph 5 shall not be affected by his incapacity due to physical or mental illness. a. A change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, does not represent a promotion from his status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Executive from or failure to reappoint him to any of such positions, except in connection with the termination of his employment for (i) Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; b. A reduction by the Corporation in the Executive's Base Salary as in effect 4 Date Page 4 on the date of a Change in Control or as the same may be increased from time to time; c. The intention to relocate or transfer the Executive to a location outside a 50 mile radius of the location which is his primary office location as of the date immediately preceding the date of a Change in Control. d. The adverse and substantial alteration in the nature and quality of the office space from which the Executive performs his duties, including the size and location thereof, as well as the secretarial and administrative support provided to him; e. The failure by the Corporation to continue to provide the Executive with compensation and benefits provided for under this Agreement or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant, or the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; f. Any material breach by the Corporation of any provision of this Agreement; or g. The failure of the Corporation to obtain a satisfactory agreement from any successor or assignee of the Corporation to assume and agree to perform this Agreement, as contemplated in Paragraph 10 hereof. 6. If the Present Value (as defined herein) of any benefits payable under this Agreement and any other payments otherwise payable to the Executive by the Corporation (collectively referred to as "Severance Benefits") which are deemed under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") to constitute "Parachute Payments" (as defined in Section 280G), is greater than three times Executive's Base Amount (as defined herein), the Executive may elect to apply the provisions set forth below. a. In the event that any Severance Benefits to be made to the Executive by the Corporation, whether pursuant to this Agreement or otherwise, upon termination of the Executive's employment pursuant hereto are deemed, in the opinion of the Corporation's independent public accountants (the "Accountants") to constitute Parachute Payments, the Executive may, upon written notification by the Corporation of the determination of the Accountants, elect to receive any combination of Severance Benefits from the Corporation due to him as a result of termination which equal the maximum aggregate amount which can be paid to the Executive without constituting Excess Parachute Payments for purposes of the Code. The Executive undertakes to make such election in the event that receipt by him of amounts constituting Excess Parachute Payments will result in a net amount payable to him after taxes which is less than the amount he would 5 Date Page 5 be entitled to receive by making the aforesaid election. The written notification by the Corporation of any determination of the Accountants pursuant to this Paragraph 6 shall be provided to the Executive within five (5) business days of the Termination Date, and shall (i) list all Severance Benefits which are deemed to constitute Parachute Payments in the opinion of the Accountants, and (ii) contain the Corporation's opinion as to the Present Value of each of such Severance Benefits, which opinion shall be determined in consultation with the Accountants. Any election by the Executive pursuant to this paragraph shall be made by the Executive and submitted to the Corporation by the thirtieth (30th) day following the Termination Date, and the Corporation shall pay to the Executive the Severance Benefits specified in such election within five (5) business days of receipt of such election. b. In the event that the Executive does not file a written election with the Corporation pursuant to subparagraph (a) upon receipt of a written notification by the Corporation of the Accountant's determination that Severance Benefits to which the Executive is entitled upon termination constitute Excess Parachute Payments, then the Corporation shall pay the Executive all Severance Benefits due him pursuant to this Agreement or otherwise. c. For purposes of this Paragraph 6, Present Value means the value determined in accordance with the principles of Section 1274(b)(2) of the Code under the rules provided in Treasury Regulations under Section 280G of the Code, and Base Amount means the average annual compensation payable to the Executive by the Corporation and includable in the Executive's gross income for Federal income tax purposes during the shorter of the period consisting of the most recent five taxable years ending before the date of any Change in Control or the portion of such period during which the Executive was an employee. d. References to Code Section 280G herein are intended as references to Section 280G as added to the Code by the Tax Reform Act of 1984, Pub. L. No. 98-369, 98th Cong., 2nd Sess., and as it may be amended. e. In the event the Corporation fails to give the notification to the Executive of the determination by the Accountants as contemplated by subparagraph 6(a) hereof; or if the Accountants erroneously fail to determine the existence of Excess Parachute Payments; or in the event of any other circumstance caused by the Corporation which results in the imposition of tax pursuant to Section 4999 of the Code, then any such tax, including any penalty or interest paid by the Executive shall be reimbursed to the Executive by the Corporation. 7. All reasonable legal fees, arbitration fees, and expenses paid or incurred by the Executive relating to any dispute, controversy or claimed breach regarding this Agreement shall be paid or reimbursed by the Corporation, if the Executive is 6 Date Page 6 successful, or as may be determined to be appropriate by any arbitrator's award based on the relative merits of the two parties. 8. The Executive agrees that during the term of this Agreement, and for a period of one (1) year commencing the Termination Date, he will not directly or indirectly: a. Solicit, divert or take away any of the customers, business or patronage of the Corporation or its subsidiaries or affiliates; or b. Induce or attempt to influence any employee of the Corporation or its subsidiaries or affiliates to terminate his or her employment therewith. c. In the event of a breach or threatened breach of the Executive of the provisions of this Paragraph 8, the Corporation, or any duly authorized officer thereof, will be entitled to a temporary restraining order or injunction. 9. The Executive shall not, during the term of this Agreement, have any other employment (exclusive of volunteer services with not-for-profit institutions or occasional speaking engagements) except with the prior approval of the Chairman of the Board and Chief Executive Officer of the Corporation. 10. The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by an assumption agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation in the same amount and on the same terms that he would be entitled to hereunder if he terminated his employment for Good Reason in connection with, or within 24 months after, a Change in Control. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by his personal or legal representatives, successors, heirs, distributees, devisees, legatees and permitted assigns. 11. This Agreement is personal to each of the parties hereto and, except as provided in Paragraph 10, neither party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party. 12. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested with postage prepaid, or delivered by next day courier service such as is offered by Federal Express and competing carriers, to the following addresses or to such other address as either party may designate by like notice. 7 Date Page 7 If to the Corporation, to: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 Attention: Chief Executive Officer If to the Executive, to: ---------------------------------------- ---------------------------------------- ---------------------------------------- 13. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties. 14. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 15. This Agreement shall, except to the extent that Federal law shall be deemed to preempt it, be governed by and construed and enforced in accordance with the laws of the State of New Jersey applicable to contracts made and performed within the State. 16. Except for injunctive relief, any dispute or controversy arising under or in connection with this Agreement, or the breach thereof, shall be settled exclusively by binding arbitration at a site in the State of New Jersey and administered by the American Arbitration Association ("AAA") in accordance with the National Rules for the Resolution of Employment Disputes of the AAA then in effect. Notwithstanding the pendency of any arbitration proceeding, the Corporation will continue to pay the Executive's full compensation in effect when the dispute, controversy, or claimed breach, arose and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was then participating, until the matter submitted to arbitration is finally resolved. Judgment may be entered on the arbitrator's award in any court having competent jurisdiction. 17. Nothing in this Agreement amends or modifies, or shall be deemed or construed to amend or modify, the terms and provisions (including the triggers and dates of payments thereunder) of any stock option granted by the Corporation to the Executive, or restricted stock agreement between the Corporation and the Executive, or the provisions of the 1992 Long Term Incentive Plan and FY'96-98 Incentive Compensation Plan. 8 18. Absent a Change in Control or unless extended in writing by the parties hereto, this Agreement shall expire two (2) years from the date hereof. Please signify your agreement to the terms of this Agreement by signing in the space provided below and returning one fully executed copy to the undersigned. TRANSTECHNOLOGY CORPORATION By: _______________________________ Michael J. Berthelot Chairman of the Board and Chief Executive Officer Accepted and agreed: __________________________________ Executive GH:1507 EX-10.17 7 LETTER AGREEMENT: OVERSEAS VERSION 1 EXHIBIT 10.17 Name Address OVERSEAS VERSION Dear _____________________: This letter agreement (the "Agreement") is made between you (the "Executive") and ________________________________________ (the "Employer") and sets out the agreement between the Executive and the Employer with respect to certain severance arrangements which shall apply only in the event that a Change in Control, as hereinafter defined, of TransTechnology Corporation (the "Corporation") occurs after the date hereof. 1. For purposes of this Agreement, a "Change in Control" shall mean the occurrence of any one (or more) of the following events after the date of this Agreement: a. When the Corporation acquires actual knowledge that any person, including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, is or has become the beneficial owner of shares of the Corporation with respect to which twenty percent (20%) or more of the total number of votes for the election of the Corporation's Board of Directors may be cast; b. As a result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, persons who were directors of the Corporation immediately prior to such event shall cease to constitute a majority of the Board of Directors; c. The stockholders of the Corporation shall approve an agreement providing either for a transaction in which the Corporation will cease to be an independent publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Corporation; or d. A tender offer or exchange offer is made for shares of the Corporation's common stock (other than one made by the Corporation) and shares of common stock are acquired thereunder. 2 [date] Page 2 2. In the event of a Change in Control of the Corporation, and the termination by the Employer of the Executive's employment upon such Change in Control or within 24 months thereafter for reasons other than Cause, as defined in Paragraph 3 below, or the Executive terminates his employment with the Employer for "Good Reason," as defined in Paragraph 5 below, in connection with, or within 24 months after a Change in Control, the Employer shall pay to the Executive an amount equal to (a) the Executive's annual salary in effect on the date of said termination ("Base Salary"), plus (b) the average of his total bonuses paid or due for each of the last 2 completed fiscal years prior to the Termination Date, as defined below (or, in the event the Executive has been employed by the Employer for less than 2 fiscal years and has received only one bonus, an amount equal to the bonus received by the Executive) plus (c) the working days pay equivalent of earned but unused vacation and sick time, plus (d) the fair market value of any accrued but unvested restricted stock and stock options outstanding as of the Executive's Termination Date, plus (e) the amount payable to the Executive under the Employer's severance pay policy applicable pursuant to applicable law or pursuant to any agreement between the Executive and either or both the Employer and the Corporation plus (f) all accrued and unpaid salary, less any governmentally required withholdings on the foregoing. As used in clause (d), the term "fair market value" means the closing price of the common stock of the Corporation on the New York Stock Exchange on the Termination Date. Said lump sum shall be paid within 10 days of the Executive's last day of employment with the Employer (said last day being hereinafter the "Termination Date"); provided that in the event of a breach by the Employer of this Agreement as set out in Paragraph 9 below, the aforesaid sums referenced in clauses 2(a) through (f) above shall be paid in one installment within 10 days of the exercise by the Executive of his rights under Paragraph 9. The aforesaid sums referenced in clauses 2(a) through (f) shall be reduced by all other amounts which may become payable to the Executive as a result of the employment termination under applicable law or pursuant to any agreement between the Executive and either or both the Employer and the Corporation. The Employer shall exercise its best efforts to continue to provide the Executive for a period of 24 months from the Termination Date with life, health, and disability insurance coverage substantially identical to the coverage maintained for the Executive prior to the Termination Date. 3. For purposes of this Agreement, termination for "Cause" shall mean only the following conduct by the Executive: a. material breach of any provision of this Agreement; b. breach of fiduciary duty to the Employer involving personal gain or profit; c. intentional and repeated failure to perform material stated duties; 3 [date] Page 3 d. conviction of any felony, any crime involving moral turpitude, or any crime committed in the conduct of his or her official duties which is materially adverse to the welfare of the Employer. The Executive shall not be deemed to have been terminated for Cause unless there shall have been delivered to the Executive a copy of a resolution adopted by the Board of Directors of the Employer, finding that in the good faith opinion of the Board of Directors of the Employer the Executive was guilty of conduct specified in this Paragraph 3 and specifying the particulars thereof in detail. Except in the event of a conviction as described in subparagraph 3(d), in no event will the Executive be subject to termination for Cause pursuant to this Agreement unless the Executive shall have failed to cure, correct or prevent the alleged breach or failure within thirty (30) days after such resolution has been delivered to the Executive. 4. This Agreement terminates upon the termination of the employment relationship between Executive and Employer, unless the termination of the employment relationship occurs after a Change in Control and was effected by the Employer for reasons other than Cause, or was effected by the Executive for Good Reason. 5. For purposes of this Agreement, "Good Reason" shall mean the occurrence, in connection with, or within 24 months after, a Change in Control, of any of the events or conditions described in subparagraphs (a) through (g) hereof without the Executive's express written consent. Executive's right to terminate his employment pursuant to this Paragraph 5 shall not be affected by his incapacity due to physical or mental illness. a. A change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, does not represent a promotion from his status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Executive from or failure to reappoint him to any of such positions, except in connection with the termination of his employment for (i) Cause, (ii) as a result of his death or (iii) by the Executive other than for Good Reason; b. A reduction by the Employer in the Executive's Base Salary as in effect on the date of a Change in Control or as the same may be increased from time to time; c. The intention of the Employer to relocate or transfer the Executive to a location outside a 80 kilometer radius of the location which is his primary office location as of the date immediately preceding the date of a Change in Control. 4 [date] Page 4 d. The adverse and substantial alteration in the nature and quality of the office space from which the Executive performs his duties, including the size and location thereof, as well as the secretarial and administrative support provided to him; e. The failure by the Employer to continue to provide the Executive with compensation and benefits provided for under this Agreement or benefits substantially similar to those provided under any of the employee benefit plans in which the Executive becomes a participant, or the taking of any action by the Employer which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material benefit enjoyed by him at the time of the Change in Control; f. Any material breach by the Employer of any provision of this Agreement; or g. The failure of the Employer to obtain a satisfactory agreement from any successor or assignee of the Employer to assume and agree to perform this Agreement, as contemplated in Paragraph 9 hereof. 6. All reasonable legal fees and expenses paid or incurred by the Executive relating to any dispute, controversy or claimed breach regarding this Agreement shall be paid or reimbursed by the Employer, if the Executive is successful, or as may be determined to be appropriate by any judgment or award based on the relative merits of the two parties. 7. In addition to, and not in limitation of, any obligations of confidentiality or non-competition which Executive may have under any agreement between Executive and either or both the Employer and the Corporation, or arising under applicable law, the Executive agrees that during the term of this Agreement, and for a period of one (1) year commencing the Termination Date, he will not directly or indirectly: a. Solicit, divert or take away any of the customers, business or patronage of the Employer or its subsidiaries or affiliates; or b. Induce or attempt to influence any employee of the Employer or its subsidiaries or affiliates to terminate his or her employment therewith. c. In the event of a breach or threatened breach of the Executive of the provisions of this Paragraph 7, the Employer, or any duly authorized officer thereof, will be entitled to a temporary restraining order or injunction. 8. The Executive shall not, during the term of this Agreement, have any other employment (exclusive of volunteer services with not-for-profit institutions or occasional speaking engagements) except with the prior approval of the Chairman of the Board and Chief Executive Officer of the Corporation. 5 [date] Page 5 9. The Employer will require any successor including any successor parent entity (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Employer, by an assumption agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform it if no such succession had taken place. Failure of the Employer to obtain such assumption agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Employer in the same amount and on the same terms that he would be entitled to hereunder if he terminated his employment for Good Reason in connection with, or within 24 months after, a Change in Control. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by his personal or legal representatives, successors, heirs, distributees, devisees, legatees and permitted assigns. 10. This Agreement is personal to each of the parties hereto and, except as provided in Paragraph 9, neither party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party. 11. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested with postage prepaid, or delivered by next day courier service such as is offered by Federal Express and competing carriers, to the following addresses or to such other address as either party may designate by like notice. If to the Employer, to: ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- 6 [date] Page 6 with a copy to: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 USA Attention: Chief Executive Officer If to the Executive, to: [name] __________________________________ __________________________________ __________________________________ __________________________________ 12. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties. 13. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 14. This Agreement is governed by the laws of ___________. All disputes in connection with this Agreement shall be brought exclusively before the competent court in ___________________________________________. 15. Nothing in this Agreement amends or modifies, or shall be deemed or construed to amend or modify, the terms and provisions (including the triggers and dates of payments thereunder) of any stock option granted by the Corporation and/or the Employer to the Executive. 16. Absent a Change in Control or unless extended in writing by the parties hereto, this Agreement shall expire on January 14, 1999. 7 Please signify your agreement to the terms of this Agreement by signing in the space provided below and returning one fully executed copy to the undersigned. _______________________________________ By: _____________________________ By: _____________________________ Date: _____________________________ Accepted and agreed: __________________________________ [name] Date: ____________________________ GH:1966 EX-13 8 ANNUAL REPORT 1 EXHIBIT 13 [TRANSTECHNOLOGY CORP. LOGO] [GRAPHIC] Annual Report Fiscal Year Ending March 31, 1997 2 CORPORATE OFFICE 150 Allen Road Liberty Corner, NJ 07938 908/903-1600 Fax 908/903-1616 [PICTURE LOGO] Photography by KAN
CONTENTS 1 Selected Financial Data 2 Letter to Shareholders 6 Specialty Fastener Products 7 Rescue Hoist and Cargo Hook Products 9 Financial Information
INVESTOR RELATIONS CONTACT Michael J. Berthelot Chairman of the Board and Chief Executive Officer TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07938 908/903-1600 ANNUAL MEETING The Annual Shareholders' Meeting will be held on Thursday, July 24, 1997 at the Marriott Financial Center Hotel, 85 West Street, New York, NY 10006. FORM 10-K AND ADDITIONAL INFORMATION The Company, upon request to the Investor Relations department, will provide to any shareholder a copy of the Form 10-K required to be filed with the Securities and Exchange Commission and any other available information. 3 Selected Financial Data The following table provides selected financial data with respect to the consolidated statements of operations of the Company for the fiscal years ended March 31, 1997, 1996, 1995, 1994 and 1993 and the consolidated balance sheets of the Company at the end of each such period.
SELECTED FINANCIAL DATA YEARS ENDED MARCH 31, (In thousands except per share amounts) 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------ Net sales $ 178,684 $ 158,024 $ 101,122 $ 81,873 $63,999 - ------------------------------------------------------------------------------------------------------------------ Income from continuing operations before income taxes 16,620 14,300 10,842 8,860 4,285 Provision for income taxes 6,898 5,792 3,457 3,060 962 - ------------------------------------------------------------------------------------------------------------------ Income from continuing operations 9,722 8,508 7,385 5,800 3,323 Income (loss) from discontinued operations (934) (1,134) (4,852) 1,084 1,810 - ------------------------------------------------------------------------------------------------------------------ Net income $ 8,788 $ 7,374 $ 2,533 $ 6,884 $ 5,133 Earnings (loss) per share: Income from continuing operations $ 1.92 $ 1.67 $ 1.45 $ 1.13 $ 0.65 Income (loss) from discontinued operations (0.18) (0.22) (0.95) 0.21 0.36 - ------------------------------------------------------------------------------------------------------------------ Earnings per share $ 1.74 $ 1.45 $ 0.50 $ 1.34 $ 1.01 - ------------------------------------------------------------------------------------------------------------------ Dividends declared and paid per share $ 0.26 $ 0.26 $ 0.255 $ 0.24 $ 1.56 - ------------------------------------------------------------------------------------------------------------------ Total assets $ 199,136 $ 199,367 $ 129,396 $125,857 $97,763 Long-term debt $ 67,516 $ 72,565 $ 37,021 $ 33,168 $12,387 Stockholders' equity $ 77,444 $ 72,470 $ 64,502 $ 65,953 $61,214 Book value per share $ 15.40 $ 14.21 $ 12.72 $ 12.71 $ 11.95 Shares outstanding at year-end 5,028 5,099 5,070 5,189 5,122 - ------------------------------------------------------------------------------------------------------------------
MARKET AND DIVIDEND DATA MARKET PRICE --------------------------------- QUARTER ENDED HIGH LOW DIVIDENDS - -------------------------------------------------------- June 30, 1995 $13-1/2 $10-3/4 $ .065 September 30, 1995 14-7/8 12 .065 December 31, 1995 15-1/8 11-7/8 .065 March 31, 1996 15 12-1/2 .065 - -------------------------------------------------------- June 30, 1996 19-3/4 14-7/8 .065 September 30, 1996 18-5/8 17-3/8 .065 December 31, 1996 19-7/8 18 .065 March 31, 1997 22-7/8 19-5/8 .065 - --------------------------------------------------------
TRANSTECHNOLOGY CORPORATION 1 4 Fellow Shareholders: [PHOTO OF MICHAEL J. BERTHELOT] [BAR GRAPH] NET SALES ($ IN MILLIONS) 1993 63,999 1994 81,873 1995 101,122 1996 158,024 1997 178,684 [BAR GRAPH] INCOME PER SHARE FROM CONTINUING OPERATIONS (IN DOLLARS) 1993 0.65 1994 1.13 1995 1.45 1996 1.67 1997 1.92 On behalf of the entire management team of your company, I am pleased to report to you that the fiscal year ended March 31, 1997 was the fifth consecutive year of improved results, with sales up 13% to $178 million, income from continuing operations rising 14% to $9.7 million, and earnings per share from continuing operations achieving another 15% increase to $1.92 per share. Reaching these financial and operational milestones required the hard work and effort of each of the more than 1,400 persons who make up our company. From the Board of Directors and my fellow shareholders, I extend our thanks and a "well done" to each and every TransTechnology employee who helped us establish a new level of performance this past fiscal year. In 1992, when our management team was charged with the responsibility and opportunity to rebuild TransTechnology, we set out a simple strategy which we continue to follow to this day. Our operational strategy is to manufacture industrial components used by other manufacturers in the production of their finished goods; to achieve economies of scale and market leadership by being number one or two, on a global basis, in each product line we manufacture, and to improve our operational efficiency, productivity, and profitability by continuously improving our operations on every level. In 1992 we stated that our first five-year revenue and earnings goals were to achieve $200 million in revenues and earn $2 per share. With $1.92 per share in income from continuing operations for the 1997 fiscal year and the April acquisition of TCR Corporation, which raised our annualized revenues to above $200 million, we achieved 96% of our earnings goal and 100% of our revenue goal for this five year period. Last year, in anticipation of reaching the 1997 goals, new revenue and operating income goals were established for the five-year term ending on March 31, 2001. Those goals include revenues of TRANSTECHNOLOGY CORPORATION 2 5 $500 million, a net income margin of 7%, continuing earnings per share growth of 15% per year, 15% return on equity, a debt to total capitalization ratio of 35%, and productivity improvements of 6% per year. Our strategic and tactical plans for the next four years are focused on these goals, and your management team is committed to attaining them. Fiscal 1997 was a challenging year in many respects. As the year began, we expected the decline in the heavy truck production rate to lower the demand for our specialty fasteners. The management team and employees at our Breeze Industrial worm gear clamp business, the division most reliant upon the heavy truck market, pulled together and redirected their efforts at new market segments. As a result, Breeze Industrial posted its fifteenth consecutive year of increased revenues and operating income despite a 20% decline in their largest market! Every employee at Breeze Industrial should take great pride in this accomplishment, from the management team that pointed the way to the shop floor workers who unselfishly put in the effort to reach ever higher levels of production. Their achievement is one replicated by few other specialty fastener manufacturers this past year. In fiscal 1997, as in fiscal 1996, our Breeze Eastern division, which manufactures rescue hoists and cargo hooks for helicopters and weapon systems, achieved higher sales and operating income, with a 13% increase in sales and a 52% increase in operating income. In addition to these outstanding financial results, Breeze Eastern has regained its position as the leader in its market and has established a new level of customer service based upon focused user groups, advanced customer training, and fast repair and overhaul turnaround. The division's success is both a compliment to and recognition of the hard work and dedication of a workforce and management team that refused to give up when times were bleak and financial results much poorer. We are very proud of the accomplishments of the men and women of Breeze Eastern. The weakest performing unit in the company was the retaining ring business we acquired in fiscal 1996. The economy in Europe continued to be weak through the year, and as a result, our German and UK fastener operations struggled through de-stocking by their major distribution customers and lower than anticipated automotive and truck OEM orders. This weakness was [BAR GRAPH] INCOME FROM CONTINUING OPERATIONS ($ IN THOUSANDS) 1993 3,323 1994 5,800 1995 7,385 1996 8,508 1997 9,722 TRANSTECHNOLOGY CORPORATION 3 6 exacerbated by the very strong dollar, which further penalized the weaker results. If the exchange rate, Deutsche Mark to U.S. dollar, had remained constant from June 1995 when we purchased the German business through the end of fiscal 1997, the German unit would have realized sales 8% higher than actually reported. [PIE GRAPH] 1997 NET SALES DOMESTIC VS. INTERNATIONAL OPERATIONS International 32% Domestic 68%
We have several projects underway at our European operations which are expected to lower their operating and manufacturing costs and make them more productive and competitive on a global basis. In fiscal 1997 new management information systems were installed at our operations in the UK and Germany. The closing of our factory in Eichen, Germany should be completed in October 1997, with the work currently performed there being transferred to our UK and Konigstein, Germany, facilities. These two projects are expected to increase substantially the throughput and productivity at each location. We expect to begin to see the financial benefits of these projects in the second half of fiscal 1998. In April 1997 we acquired Minneapolis-based TCR Corporation, a manufacturer of specially designed externally threaded fastening devices and other specialty machined products. With over $23 million of sales and a high level of profitability in calendar 1996, the management team and employees of TCR are expected to contribute to TransTechnology's earnings and cash flow in fiscal 1998. We welcome the 175 hardworking and dedicated people at TCR to the TransTechnology family. Our main objectives for fiscal 1998 include the completion of the internal projects noted above, as well as several others aimed at lowering our manufacturing and operating costs, improving our efficiency and productivity, and allowing us to grow revenues organically by increasing our market share for existing and newly developed products. We expect to divest unused or unproductive assets in fiscal 1998 and to use the proceeds, as well as internally generated cash, to reduce our debt. We are increasing our resources allocated to engineering new products for specific customers and for fiscal 1998 have approved one of our largest capital spending budgets, $11 million, in order to provide our TRANSTECHNOLOGY CORPORATION 4 7 [BAR GRAPH] CAPITAL EXPENDITURES ($ IN THOUSANDS) 1993 5,514 1994 4,973 1995 5,033 1996 6,471 1997 5,477 manufacturing facilities the resources and tools they need to implement these projects. The fiscal 1998 training and education budget is the highest it has been in the last five years, as we invest in the development of our people as much as we improve our equipment. We will continue to pursue improving the quality of our products and processes. Although two of our units have already achieved ISO-9000 certification, we expect every unit to receive either QS-9000 or ISO-9000 during fiscal 1998. We plan to continue to seek out highly focused acquisitions of strategically complementary manufacturing operations. We anticipate that fiscal 1998 will be a year of further achievement toward each of our goals of 2001. On behalf of the Board of Directors and the management team, I would like to thank you, the owners of our company, for your support and confidence these past five years. It is our overriding goal to increase shareholder value, and our every action and decision is made in pursuit of that obligation. I extend to each of you my personal thanks for allowing me the opportunity to serve TransTechnology with a talented and dedicated management team and Board of Directors. We will approach the new fiscal year, and the years beyond, with the same determination and focus that have provided us the path to success over the past five years. /s/ Michael J. Berthelot Michael J. Berthelot Chairman and Chief Executive Officer TRANSTECHNOLOGY CORPORATION 5 8 SPECIALTY FASTENER PRODUCTS TransTechnology Corporation derives over 80% of its revenues from the manufacture and sale of specialty fasteners, and is the seventh largest fastener manufacturer in the United States. Operating in small niches within the $8 billion domestic and $30 billion global fastener markets, the company operates under some of the most well known brand names in the world and is an acknowledged market leader in each of its product lines. The company's specialty fastener products are used in a myriad of industries, ranging from automotive and heavy truck manufacturing to computer disk drives, toys, 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 new applications for its products in new industries throughout the globe. [PIE GRAPH] 1977 FASTENER SALES ALLOCATION BY MARKET TYPE DISTRIBUTION 44% HEAVY TRUCK OEM 21% AUTOMOTIVE OEM 21% INDUSTRIAL MACHINERY 11% CONSUMER/DURABLES 3% [GRAPHIC] Seeger Group's retaining ring. 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-ORBIS" (Germany), "SEEGER-RENO" (Brazil), "ANDERTON" (United Kingdom), "WALDES/TRUARC" (United States) and "INDUSTRIAL RETAINING RING" (United States). Retaining rings are highly engineered, usually to a customer's exacting specifications, and are used in transmissions, drive trains, 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 movement on a shaft must be restricted. GEAR DRIVEN BAND FASTENERS TransTechnology's BREEZE INDUSTRIAL PRODUCTS division is the only full-line manufacturer of gear driven band clamps in the world. Breeze(R) 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 is a certified supplier to Caterpillar, International Harvester, and many other heavy equipment manufacturers. Breeze "Aero-Seal(R)", "Euro-Seal(R)" and "Power-Seal(R)" clamps are found in hardware, automotive and retail stores for use in repair, maintenance and overhaul applications, and are used by many manufacturers of industrial and consumer products. [GRAPHIC] Breeze Industrial's Aero-Seal(R) Clamp TRANSTECHNOLOGY CORPORATION 6 9 [GRAPHIC] The Palnut Company's U-nut. ASSEMBLY FASTENERS TransTechnology's Palnut division is one of the leading manufacturers of assembly fasteners in the United States, supplying Palnut(R) highly engineered custom fastening devices primarily to the automotive industry. Lock nuts, push-nuts, u-nuts, and a variety of single and multi-threaded stainless and high-carbon steel fasteners are provided to the toy, appliance, and lighting industries for use in assembling products. [GRAPHIC] TCR's D-Module stud. EXTERNALLY THREADED AND SPECIALTY MACHINED PRODUCTS TCR Corporation, acquired in April, 1997, 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. RESCUE HOIST AND CARGO HOOK PRODUCTS [GRAPHIC] Breeze Eastern's rescue hoist. TransTechnology's Breeze Eastern division is the world's leading designer and manufacturer of sophisticated helicopter rescue hoists and cargo hook systems. These complex, highly engineered systems add significantly to the versatility of an aircraft for a relatively small cost. They are used around the world by military and civilian agencies to save lives, complete missions, and transport cargo. Most helicopter manufacturers today, including Sikorsky, Bell, Aerospatiale, and Agusta specify Breeze Eastern's systems as standard equipment on their aircraft because of Breeze Eastern's record for safety, reliability, durability, and service. 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 vertical take-off and landing aircraft due into production in 1999 for the U.S. Marine Corps. Breeze Eastern also manufactures handling systems for weapons platforms and motion control actuation devices for civilian and military aircraft. TRANSTECHNOLOGY CORPORATION 7 10 Board of Directors and Corporate Officers [PHOTO OF BOARD OF DIRECTORS] BOARD OF DIRECTORS Back row: Gideon Argov, James A. Lawrence, Michel Glouchevitch, Walter Belleville Center row: Thomas V. Chema, Patrick K. Bolger Center front: Michael J. Berthelot [PHOTO OF CORPORATE OFFICERS] CORPORATE OFFICERS From left to right: Joseph F. Spanier, VP and CFO; Gerald C. Harvey, VP, Secretary and General Counsel; Michael J. Berthelot, Chairman and CEO; Chandler J. Moisen, Executive VP; Monica Aguirre, Assistant Secretary; Patrick K. Bolger, President and COO; Winston Lau, VP of Operations. TRANSTECHNOLOGY CORPORATION 8 11 Consolidated Balance Sheets (In thousands, except share data)
MARCH 31, ASSETS 1997 1996 - ----------------------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 3,540 $ 2,362 Accounts receivable (net of allowance for doubtful accounts of $588 and $735 in 1997 and 1996, respectively) 28,392 28,368 Notes receivable 1,838 1,258 Inventories 50,677 50,551 Prepaid expenses and other current assets 1,028 1,726 Deferred income taxes 4,293 1,037 Assets held for sale 7,617 9,980 - ----------------------------------------------------------------------------------------------------------- Total current assets 97,385 95,282 - ----------------------------------------------------------------------------------------------------------- PROPERTY: Land 12,272 12,616 Buildings 20,636 20,523 Machinery and equipment 42,760 39,600 Furniture and fixtures 6,349 5,398 Leasehold improvements 190 189 - ----------------------------------------------------------------------------------------------------------- Total 82,207 78,326 Less accumulated depreciation and amortization 23,594 17,749 - ----------------------------------------------------------------------------------------------------------- Property - net 58,613 60,577 - ----------------------------------------------------------------------------------------------------------- OTHER ASSETS: Notes receivable 11,125 12,824 Costs in excess of net assets of acquired businesses (net of accumulated amortization of $3,869 and $3,308 in 1997 and 1996, respectively) 18,878 16,411 Other 13,135 14,273 - ----------------------------------------------------------------------------------------------------------- Total other assets 43,138 43,508 - ----------------------------------------------------------------------------------------------------------- TOTAL $ 199,136 $ 199,367 - ----------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Current portion of long-term debt $ 5,907 $ 6,026 Accounts payable - trade 11,050 14,719 Accrued compensation 6,845 6,473 Accrued income taxes 1,632 1,415 Other current liabilities 12,844 9,301 - ----------------------------------------------------------------------------------------------------------- Total current liabilities 38,278 37,934 - ----------------------------------------------------------------------------------------------------------- LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS 67,516 72,565 - ----------------------------------------------------------------------------------------------------------- OTHER LONG-TERM LIABILITIES 15,898 16,398 - ----------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES - ----------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Preferred stock - authorized, 300,000 shares; none issued Common stock - authorized, 14,700,000 shares of $.01 par value; issued, 5,316,971 and 5,276,463 shares in 1997 and 1996, respectively 53 53 Additional paid-in capital 46,745 46,188 Retained earnings 36,937 29,467 Other stockholders' equity (2,352) (1,083) - ----------------------------------------------------------------------------------------------------------- 81,383 74,625 Less treasury stock, at cost - 289,237 and 177,500 shares in 1997 and 1996, respectively (3,939) (2,155) - ----------------------------------------------------------------------------------------------------------- Total stockholders' equity 77,444 72,470 - ----------------------------------------------------------------------------------------------------------- TOTAL $ 199,136 $ 199,367 - -----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. TRANSTECHNOLOGY CORPORATION 9 12 Statements of Consolidated Operations (In thousands, except share data)
YEARS ENDED MARCH 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------------- Net sales $ 178,684 $ 158,024 $ 101,122 Cost of sales 122,480 107,426 71,968 - ------------------------------------------------------------------------------------------------- Gross profit 56,204 50,598 29,154 General, administrative and selling expenses 35,309 31,812 17,051 Interest expense 6,797 6,316 2,831 Interest income (1,202) (1,010) (760) Royalty and other income (1,320) (820) (810) - ------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 16,620 14,300 10,842 Provision for income taxes 6,898 5,792 3,457 - ------------------------------------------------------------------------------------------------- Income from continuing operations 9,722 8,508 7,385 Discontinued operations: Loss from operations (net of applicable tax benefits of $323 and $1,619 for 1996 and 1995, respectively) -- (517) (2,602) Loss from disposal (net of applicable tax benefits of $663, $1,077 and $1,400 for 1997, 1996 and 1995, respectively) (934) (617) (2,250) - ------------------------------------------------------------------------------------------------- Net income $ 8,788 $ 7,374 $ 2,533 - ------------------------------------------------------------------------------------------------- Earnings per share: Income from continuing operations $ 1.92 $ 1.67 $ 1.45 Loss from discontinued operations (0.18) (0.22) (0.95) - ------------------------------------------------------------------------------------------------- Income per share $ 1.74 $ 1.45 $ 0.50 - ------------------------------------------------------------------------------------------------- Number of shares used in computation of per share information 5,064,000 5,093,000 5,109,000 - -------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. TRANSTECHNOLOGY CORPORATION 10 13 Statements of Consolidated Cash Flows (In thousands)
YEARS ENDED MARCH 31, 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 8,788 $ 7,374 $ 2,533 Adjustments to reconcile net income to net cash provided by operating activities: Loss recognized on write down of marketable securities -- 2,613 -- Depreciation and amortization 7,406 6,027 5,349 Provision for losses on accounts receivable 139 468 65 Loss (gain) on sale or disposal of fixed assets and discontinued businesses 64 (307) 704 Change in assets and liabilities - net of acquisitions and dispositions: (Increase) decrease in accounts receivable (620) 4,290 (2,672) Decrease (increase) in inventories 191 (6,098) 5,595 Decrease (increase) in assets held for sale 262 (1,915) (3,672) (Increase) decrease in other assets (453) 4,825 (2,521) (Decrease) increase in accounts payable (3,650) 462 3,211 Increase in accrued compensation 553 2,226 1,041 Increase (decrease) in income tax payable 242 (676) (121) Increase (decrease) in other liabilities 1,385 (8,577) (2,043) - ----------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 14,307 10,712 7,469 - ----------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Business acquisitions (3,602) (45,594) (15,952) Capital expenditures (5,477) (6,471) (5,033) Proceeds from sale of fixed assets and discontinued business 2,705 8,111 6,977 Decrease in notes receivable 1,119 1,055 2,515 - ----------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (5,255) (42,899) (11,493) - ----------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term borrowings 40,105 107,363 42,019 Payments on long-term debt (45,273) (73,156) (36,289) Proceeds from issuance of stock under stock option plan 365 188 202 Treasury stock purchases (1,625) (65) (2,090) Dividends paid (1,318) (1,325) (1,301) - ----------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (7,746) 33,005 2,541 - ----------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (128) -- -- Increase (decrease) in cash and cash equivalents 1,178 818 (1,483) Cash and cash equivalents at beginning of year 2,362 1,544 3,027 - ----------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 3,540 $ 2,362 $ 1,544 - ----------------------------------------------------------------------------------------------------------------- Supplemental information: Interest payments $ 6,606 $ 5,036 $ 3,054 Income tax payments $ 3,810 $ 1,989 $ 1,573 - -----------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. TRANSTECHNOLOGY CORPORATION 11 14 Statements of Consolidated Stockholders' Equity (In thousands, except share data)
YEARS ENDED ADDITIONAL OTHER MARCH 31, 1997, COMMON STOCK TREASURY STOCK PAID-IN RETAINED STOCKHOLDERS' 1996 AND 1995 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1994 5,189,104 $52 -- $ -- $45,283 $ 22,186 $ (1,568) $ 65,953 Net income -- -- -- -- -- 2,533 -- 2,533 Cash dividends ($.255 per share) -- -- -- -- -- (1,301) -- (1,301) Purchase of treasury stock -- -- (172,500) (2,090) -- -- -- (2,090) Issuance of stock under stock option plan 24,789 -- -- -- 202 -- -- 202 Issuance of stock under incentive bonus plan - net 28,423 -- -- -- 317 -- (122) 195 Foreign translation adjustments -- -- -- -- -- -- 54 54 Unrealized investment holding losses -- -- -- -- -- -- (1,044) (1,044) - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1995 5,242,316 52 (172,500) (2,090) 45,802 23,418 (2,680) 64,502 Net income -- -- -- -- -- 7,374 -- 7,374 Cash dividends ($.26 per share) -- -- -- -- -- (1,325) -- (1,325) Purchase of treasury stock -- -- (5,000) (65) -- -- -- (65) Issuance of stock under stock option plan 20,308 1 -- -- 187 -- -- 188 Issuance of stock under incentive bonus plan - net 13,839 -- -- -- 199 -- (122) 77 Foreign translation adjustments -- -- -- -- -- -- (894) (894) Realized investment holding losses -- -- -- -- -- -- 2,613 2,613 - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1996 5,276,463 53 (177,500) (2,155) 46,188 29,467 (1,083) 72,470 Net income -- -- -- -- -- 8,788 -- 8,788 Cash dividends ($.26 per share) -- -- -- -- -- (1,318) -- (1,318) Purchase of treasury stock -- -- (100,000) (1,625) -- -- -- (1,625) Issuance of stock under stock option plan 30,381 -- -- -- 365 -- -- 365 Issuance of stock under incentive bonus plan - net 10,127 -- (11,737) (159) 192 -- 75 108 Foreign translation adjustments -- -- -- -- -- -- (1,061) (1,061) Unrealized investment holding losses -- -- -- -- -- -- (283) (283) - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, MARCH 31, 1997 5,316,971 $53 (289,237) $ (3,939) $46,745 $ 36,937 $ (2,352) $ 77,444 - ---------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. TRANSTECHNOLOGY CORPORATION 12 15 Notes to Consolidated Financial Statements 1. SUMMARY OF ACCOUNTING PRINCIPLES TransTechnology Corporation (the "Company") develops, manufactures and sells a wide range of products in two industry segments, Specialty Fastener Products and Rescue Hoist and Cargo Hook Products. The Company has manufacturing facilities located in the United States, Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment produces highly engineered precision metal retaining rings, clamps, circlips and other fasteners primarily for the automotive, heavy truck, industrial and toy markets and accounted for approximately 81% of the Company's consolidated 1997 net sales. Through its Rescue Hoist and Cargo Hook Products Segment, the Company develops, manufactures, sells and services a complete line of sophisticated lifting and restraining products - principally helicopter rescue hoist and cargo hook systems, and winches and hoists for aircraft and weapons systems, and accounted for approximately 19% of the Company's consolidated 1997 net sales. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation - The accompanying consolidated financial statements include the accounts of TransTechnology Corporation and its subsidiaries, all of which are wholly-owned. Intercompany balances and transactions are eliminated in consolidation. Related Party - Research Industries Incorporated owns approximately 22% of the Company's outstanding common stock. Two former directors of the Company are the only shareholders of Research Industries Incorporated and each of these directors had a consulting contract with the Company that expired during fiscal 1995. During fiscal 1995, the Company expensed and paid $.7 million for these contracts. Accounting for Contracts - All of the Company's contracts are firm fixed-price. Sales and cost of sales on such contracts are recorded as deliveries are made. Losses on contracts are recorded as they are identified. Cash and Cash Equivalents - The Company considers all highly liquid investments with a maturity at date of acquisition of three months or less to be cash equivalents. Accounts Receivable - Accounts receivable from the United States Government represent billed receivables and substantially all amounts are expected to be collected within one year. The Company has no amounts billed under retainage provisions of contracts. Inventories - Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Cost includes material, labor and manufacturing overhead costs. Property and Related Depreciation and Amortization - Provisions for depreciation are made on a straight-line basis over the estimated useful lives of depreciable assets ranging from three to thirty years. Amortization of leasehold improvements is computed on a straight-line basis over the shorter of the estimated useful lives of the improvements or the terms of the leases. In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was issued. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for TRANSTECHNOLOGY CORPORATION 13 16 impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During 1997 the Company adopted this statement and determined that no impairment loss need be recognized for applicable 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, or shorter periods where deemed appropriate. The Company has determined that there is no impairment in value since projected future operating results on an undiscounted basis through the period such costs in excess of net assets of acquired businesses are being amortized are expected to be sufficient to absorb the amortization. Earnings per Share - Earnings per share are based on the weighted average number of common shares and, if dilutive, common stock equivalents (stock options) outstanding during each year. Research and Development and Engineering Costs - Research and development and engineering costs in support of active products, which are charged to expense when incurred, amounted to $2 million, $1.7 million and $1.4 million in 1997, 1996 and 1995, respectively. Included in these amounts were expenditures of $0.8 million, $0.9 million and $0.4 million in 1997, 1996 and 1995, respectively, which represent costs related to research and development activities. Foreign Currency Translation - Pursuant to Statement of Financial Accounting Standards No. 52, the assets and liabilities of the Company's international operations, other than the operations located in a highly inflationary country, have been translated into U.S. dollars at year-end exchange rates, with resulting translation gains and losses accumulated as a separate component of other stockholders' equity. Income and expense items are converted into U.S. dollars at average rates of exchange prevailing during the year. Translation adjustments of the operation located in a country with a highly inflationary economy, are included as a component of operating income. Income Taxes - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Investments - On March 1, 1994, the Company received 465,000 shares of Mace Security International common stock, valued at $3.4 million, as partial consideration for the sale of a division. In the fourth quarter of 1996, the Company recorded a $2.6 million 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. Gross unrealized holding losses of $0.3 million were reported as a reduction of other stockholders' equity in the March 31, 1997 balance sheet. 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 purchase commitments and certain foreign denominated long-term debt. Gains and losses on these instruments are included in other income/expense. New Accounting Standards - In February 1997, the Financial Accounting Standards Board adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share," which establishes standards for computing and presenting earnings per share. This statement is effective for the Company's fiscal year ending March 31, 1998. The Company believes that the effect of implementing this standard will result in a basic earnings per share amount which will not be materially different from primary earnings per share as currently reported. Reclassifications - Certain reclassifications have been made to prior years to conform to the 1997 presentation. TRANSTECHNOLOGY CORPORATION 14 17 2. DISCONTINUED OPERATIONS In June 1995 and January 1996, the Company sold the domestic and European portions of its computer graphics service operations, respectively, in two separate transactions to two different buyers. These businesses operated under the name TransTechnology Systems & Services and were classified as discontinued operations in March 1995. The sale of the domestic portion for $0.7 million in cash and $0.6 million in notes receivable was for book value, and the sale of the European portion for $0.1 million in cash and $0.2 million in notes receivable resulted in an after-tax gain on disposal of $0.1 million in 1996. Additional after-tax disposal costs of $0.2 million were recorded in 1997 in connection with these sales. In August 1995, the Company sold its Electronics division for $4.4 million in cash and $9.6 million in notes receivable. The sale of this operation resulted in an after-tax gain on disposal of $0.2 million. In March 1995, the Company sold substantially all of the assets and business of its chaff products operation for $6.7 million in cash. The sale of this operation resulted in an after-tax loss on disposal of $0.4 million. Additional after-tax disposal costs of $0.2 million were recorded in 1996 in connection with the sale. The Company retained the chaff avionics product line and negotiated its sale separately in May 1995 for $0.3 million in cash and $0.7 million in notes receivable, resulting in an after-tax charge of $0.4 million. In the fourth quarter of 1996, the Company recorded an after-tax charge of $0.4 million to record the anticipated loss on the sale of the facility that was formerly used by this operation. Additional after-tax disposal costs of $0.1 million were recorded in 1997 related to the final sale of this facility. Additional after-tax costs of $0.6 million, $0.7 million and $1.9 million were recorded in 1997, 1996 and 1995, respectively, in connection with other previously discontinued and sold operations. These additional costs represent adjustments to previous estimates related primarily to legal and environmental matters. Operating results of the discontinued businesses were as follows (in thousands):
1996 1995 Total sales $ 7,951 $ 35,515 ------- -------- Loss before income taxes $ (840) $ (4,221) Income tax benefit 323 1,619 ------- -------- Loss from operations $ (517) $ (2,602) ------- --------
The loss from operations includes interest expense of $0.2 million and $0.5 million in 1996 and 1995, respectively. Assets held for sale at March 31, 1997 and 1996 were as follows (in thousands):
1997 1996 Inventory $ 429 $ 529 Property 6,577 8,039 Other assets 611 1,412 ------ ------ Assets held for sale $7,617 $9,980 ------ ------
3. ACQUISITIONS On June 18, 1996, the Company acquired the Pebra hose clamp business from Pebra GmbH Paul Braun i.K. for approximately $3 million in cash plus direct acquisition costs. Pebra manufactures heavy duty hose clamps primarily for use in the manufacture of heavy trucks in Europe. On June 30, 1995, the Company acquired the Seeger Group of companies from a unit of AB SKF of Goteborg, Sweden for approximately $43 million in cash plus direct acquisition costs and the assumption of trade debts and accrued expenses. The Seeger Group, headquartered in Konigstein, Germany, manufactures circlips, snap rings and retaining rings. Effective August 31, 1994, the Company acquired all of the outstanding capital stock of Industrial Retaining Ring Company and its affiliated companies for a total purchase price of $15.3 million in cash and the assumption of liabilities. Industrial Retaining Ring Company manufactures retaining rings and clips used primarily in the heavy equipment and industrial machinery industries. TRANSTECHNOLOGY CORPORATION 15 18 4. INVENTORIES Inventories at March 31 consisted of the following (in thousands):
1997 1996 Finished goods $21,897 $22,645 Work in process 10,335 9,326 Purchased and manufactured parts 18,445 18,580 ------- ------- Total $50,677 $50,551 ------- -------
5. INCOME TAXES The components of total income (loss) from operations (including continuing and discontinued operations) before income taxes were (in thousands):
1997 1996 1995 Domestic $12,167 $ 8,124 $ 3,694 Foreign 2,856 3,642 (723) ------- ------- ------- Total $15,023 $11,766 $ 2,971 ------- ------- -------
The provision for income taxes is summarized below (in thousands):
1997 1996 1995 Currently payable: Domestic $3,549 $1,813 $140 Foreign 42 656 -- State 975 517 208 ------ ------ ---- 4,566 2,986 348 Deferred 1,669 1,406 90 ------ ------ ---- Total $6,235 $4,392 $438 ------ ------ ----
The provision (benefit) for income taxes is allocated between continuing and discontinued operations as summarized below (in thousands):
1997 1996 1995 Continuing $ 6,898 $ 5,792 $ 3,457 Discontinued (663) (1,400) (3,019) ------- ------- ------- Total $ 6,235 $ 4,392 $ 438 ------- ------- -------
The consolidated effective tax rates for continuing operations differ from the federal statutory rates as follows:
1997 1996 1995 Statutory federal rate 35.0% 34.0% 34.0% State income taxes after federal income tax 4.5 3.6 4.6 Earnings of the foreign sales corporation (2.0) (2.6) (2.6) Amortization of purchase adjustments not deductible for tax purposes -- 1.9 1.0 Revision of prior years' tax accruals -- -- (5.1) Foreign rate differential 2.4 2.6 -- Other 1.6 1.0 -- ---- ---- ---- Consolidated effective tax rate 41.5% 40.5% 31.9% ---- ---- ----
The following is an analysis of accumulated deferred income taxes (in thousands):
1997 1996 Assets: Current: Inventory $ 2,025 $ 969 Net operating loss 650 -- Tax basis in excess of book basis on disposal of subsidiary 640 -- Other 978 68 ------- ------ Total current 4,293 1,037 ------- ------ Noncurrent: Environmental 917 1,067 Purchase accounting adjustments 2,068 3,820 Investment 1,128 1,049 Net operating loss 1,618 -- Other -- 737 ------- ------ Total noncurrent 5,731 6,673 ------- ------ Total assets $10,024 $7,710 ------- ------ Liabilities: Noncurrent: Depreciation $ 3,765 $1,200 Purchase accounting adjustments 2,097 2,097 Other 938 605 ------- ------ Total liabilities $ 6,800 $3,902 ------- ------
Summary - accumulated deferred income taxes (in thousands):
1997 1996 Net current assets $ 4,293 $1,037 Net noncurrent (liabilities) assets (1,069) 2,771 ------- ------ Total $ 3,224 $3,808 ------- ------
TRANSTECHNOLOGY CORPORATION 16 19 6.LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS Long-term debt payable, including current maturities, at March 31 consisted of the following (in thousands):
1997 1996 Credit agreement - 7.580% $22,825 $ -- Credit agreement - 7.965% -- 21,420 Term loan - 7.50% 25,289 -- Term loan - 7.804% -- 31,320 Term loan - 9.79% 24,500 25,000 Other 809 851 ------- ------- 73,423 78,591 Less current maturities 5,907 6,026 ------- ------- Total $67,516 $72,565 ------- -------
Credit Agreement - At March 31, 1997, the Company's debt consisted of $16.7 million of borrowings under a revolving credit line, $6.1 million of borrowings under international lines of credit, a $25.3 million term loan, a $24.5 million term loan and $0.8 million of other borrowings. The revolving bank credit line commitment as amended on December 31, 1996 is $30 million, will be available to the Company through December 31, 2000 and is subject to a borrowing base formula. The agreement provides for borrowings and letters of credit based on collateralized accounts receivable and inventory. In addition, all of the remaining assets of the Company and its subsidiaries are included as collateral. Letters of credit, which are included in the borrowing base formula, are limited to $5 million. Letters of credit under the line at March 31, 1997 were $0.1 million. The total commitment from the international lines of credit as amended on December 31, 1996 is $10 million and has the same availability and collateral as the revolving credit line, but is not subject to a borrowing base formula. Interest on the revolver and international lines of credit are tied to the primary bank's prime rate, or, at the Company's option, the London Interbank Offered Rate (LIBOR) plus a margin that varies depending upon the Company's achievement of certain operating and financial goals. The $25.3 million (which includes $7.6 million and $6.3 million payable in Deutsche Mark and pound sterling, respectively) and $24.5 million term loans are with the same lenders as the revolving and international lines of credit, are secured by the same collateral, and are due and payable on March 31, and June 30, 2002, respectively. The $25.3 million term loan had an additional $15 million available through March 1997 for future acquisitions. Quarterly principal payments on the $25.3 million term loan of $1.4 million, with escalations to $1.8 million and $2.8 million in June 1999 and June 2000, respectively, began on December 31, 1995, and are due and payable on the last day of each quarter through December 31, 2000. Interest on the $25.3 million term loan is tied to the lending bank's prime rate, or LIBOR, plus a margin that varies, depending on the Company's achievement of certain operating and financial goals. Principal payments on the $24.5 million term loan of $0.5 million are due and payable annually beginning on June 30, 1996 through June 30, 2000, with final balloon payments of $7.5 million and $15 million due and payable on June 30, 2001 and June 30, 2002, respectively. Interest on the $24.5 million term loan accrues at the primary lending bank's prime rate plus two percentage points. The agreement also gives the Company the option of using LIBOR plus three and one-quarter percentage points. At March 31, 1997, the Company had $49.9 million of borrowings utilizing LIBOR. The agreement as amended March 31, 1997, provides for additional term loans of $20 million. The credit facility limits the Company's ability to pay dividends to 25% of net income and restricts capital expenditures to $9 million annually, as well as containing other customary financial covenants. Other - Other long-term debt is comprised principally of an obligation due under a collateralized borrowing arrangement with a fixed interest rate of 3% due December 2004 and loans on life insurance policies owned by the Company with a fixed interest rate of 5%. TRANSTECHNOLOGY CORPORATION 17 20 Debt maturities (in thousands): 1998 (current) $ 5,907 1999 5,852 2000 7,180 2001 8,588 2002 30,373 Thereafter 15,523 ------- Total $73,423 -------
7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS Under the terms of the Company's amended and restated 1992 long-term incentive plan, 570 thousand 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 market price of the common shares at their grant dates. Options expire not later than five years after the date of the grant. Options granted vest ratably over three years beginning one year after the date of grant. Restricted stock is payable in equivalent number of common shares; the shares are distributable in a single installment and vest ratably over a three year period from the date of the award. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," in October 1995. Under SFAS No. 123, companies can either continue to account for stock compensation plans pursuant to existing accounting standards or elect to expense the value derived from using an option pricing model such as Black-Scholes. The Company will continue to apply existing accounting standards. However, SFAS No. 123 requires disclosure of pro forma net income and earnings per share as if the Company had adopted the expensing provisions of SFAS No. 123. Based on Black-Scholes values, pro forma net income for 1997 and 1996 would be $8.7 million and $7.4 million, respectively; pro forma earnings per common share for 1997 and 1996 would be $1.73 and $1.45, respectively. The following table summarizes stock option activity over the past two years under the plan:
WEIGHTED- AVERAGE NUMBER EXERCISE OF SHARES PRICE Outstanding at April 1, 1995 375,015 $12.37 Granted 109,000 12.40 Exercised (20,308) 9.22 Canceled or expired (55,111) 13.12 ------- 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 ------- Options exercisable at March 31, 1996 177,253 11.97 Options exercisable at March 31, 1997 264,211 12.26
In 1997 and 1996, the Company awarded restricted stock totaling 6,435 and 18,267 shares, respectively. The weighted-average fair value of this restricted stock was $17.25 and $13.33 in 1997 and 1996, respectively. The expense recorded in 1997 and 1996 for restricted stock awards was $159 thousand and $122 thousand, respectively. The weighted-average Black-Scholes value per option granted in 1997 and 1996 was $13.55 and $10.28, respectively. The following weighted-average assumptions were used in the Black-Scholes option pricing model for options granted in 1997 and 1996:
1997 1996 Dividend yield 1.4% 2.0% Volatility 29.0% 25.0% Risk-free interest rate 6.2% 5.7% Expected term of options (in years) 4 4
TRANSTECHNOLOGY CORPORATION 18 21 For options outstanding and exercisable at March 31, 1997, the exercise price ranges and average remaining lives were:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------- -------------------------- NUMBER WEIGHTED- WEIGHTED- NUMBER WEIGHTED- RANGE OF OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE EXERCISE AT REMAINING EXERCISE AT EXERCISE PRICES MARCH 31, 1997 LIFE PRICE MARCH 31, 1997 PRICE $ 9 to $14 232,214 2 $11.24 174,213 $ 10.77 $15 to $19 232,000 3 15.85 89,998 15.13 ------- -------- ------ ---------- ---------- 464,214 3 $13.54 264,211 $ 12.26 ------- ----------
8. EMPLOYEE BENEFIT PLANS The Company has an incentive bonus plan which provides for cash payments to selected employees based upon formulas approved by the Board of Directors. Provisions for awards under the plan approximated $1.6 million, $1.7 million and $1.2 million in 1997, 1996 and 1995, respectively. The Company has two defined contribution plans covering substantially all domestic employees. Contributions are based on certain percentages of an employee's eligible compensation. Expenses related to these plans were $2.5 million, $2.2 million and $1.6 million in 1997, 1996 and 1995, 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. The components of net postretirement benefit cost for the years ended March 31 were as follows (in thousands):
1997 1996 1995 Service cost (benefits earned during the year) $ 3 $ 88 $ 94 Interest cost on projected postretirement benefit obligation 79 168 168 Amortization of transition obligation -- 101 101 Amortization of net gain -- (10) -- --- ----- ---- Total postretirement benefit cost $82 $ 347 $363 --- ----- ----
The accumulated postretirement benefit obligation and funded status at March 31 were as follows (in thousands):
1997 1996 Accumulated postretirement benefit obligation: Retirees $ (920) $ (774) Fully eligible plan participants (20) (365) Other active plan participants (70) (1,161) ------- ------- Accumulated postretirement benefit obligation in excess of plan assets (1,010) (2,300) Unrecognized net gain (6) (217) Unrecognized transition obligation -- 1,724 ------- ------- Accrued postretirement benefit liability $(1,016) $ (793) ------- -------
As of March 31, 1997 the Plan was amended reducing the remaining service lives of participants and limiting certain benefits provided by the Plan. The curtailment resulted in an additional 1997 expense of approximately $530 thousand. Accrued postretirement benefit cost is included in other liabilities on the balance sheet. The assumed health care cost trend rates used for measurement purposes was 12% for 1997 and 1996, trending down 1% each year to 10% in 1999 and then decreasing .5% each year to 6.0% in 2007 and beyond, for substantially all participants. The weighted-average discount rate used was 7.5% at March 31, 1997 and 1996. A 1% increase in health care trend rate would increase the annual expense by approximately 12.2% for the year ended March 31, 1997 and accumulated postretirement benefit obligation by approximately 13.6% at March 31, 1997. TRANSTECHNOLOGY CORPORATION 19 22 In addition, the Company maintains several defined benefit retirement plans for certain non-U.S. employees. Funding policies are based on local statutes. Net periodic pension cost for the plans for the years ended March 31 includes the following (in thousands):
1997 1996 Service cost $ 49 $ 40 Interest cost 436 343 Net deferral and amortization 43 34 ---- ---- Net periodic pension cost $528 $417 ---- ----
The following table sets forth the funded status of the plans at March 31 (in thousands):
1997 1996 Total accumulated benefit obligation $5,408 $ 6,370 ------ ------- Projected benefit obligation $5,489 $ 6,615 Unrecognized net gain (loss) 75 (245) ------ ------- Unfunded accrued pension cost (included in other long-term liabilities) $5,564 $ 6,370 ------ -------
In determining the projected benefit obligation, the discount rates were 7.25% and 7.5% at March 31, 1997 and 1996, respectively, and the rates of salary increases were 2.5% and 3% in 1997 and 1996, respectively. 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, 1997 $25,000 8/98 5.56% 6.54% DM12,648 12/98 3.31% 4.57% March 31, 1996 $25,000 8/98 5.88% 6.54% DM15,313 12/98 3.36% 4.57%
(1) Based on three-month LIBOR Foreign Currency Exchange Agreements - The Company enters into forward foreign currency agreements to hedge foreign currency denominated debt instruments. 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, 1997. 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):
1997 1996 ------------------- --------------- BUY SELL BUY SELL Currency Deutsche Mark $ 96 $11,992 $1,015 $-- Pound sterling -- 1,459 -- -- ------- ------- ------ ---- $ 96 $13,451 $1,015 $-- ------- ------- ------ ----
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, 1997 based upon quoted market prices as provided by financial institutions which are counterparties to the agreements and were as follows (in thousands):
1997 1996 (PAY) RECEIVE (PAY) RECEIVE Interest rate swap agreements $ (240) $(1,397) Forward foreign exchange agreements 1,329 30
TRANSTECHNOLOGY CORPORATION 20 23 10. COMMITMENTS Rent expense under operating leases, net of subleases, for the years ended March 31, 1997, 1996, and 1995 was $2.3 million, $2.0 million and $1.8 million, respectively. The Company has no material capital leases. The Company and its subsidiaries have minimum rental commitments under noncancellable operating leases (relating primarily to leased buildings) which are as follows (in thousands):
YEAR ENDING MARCH 31, 1998 $ 2,669 1999 2,117 2000 1,032 2001 604 2002 489 Thereafter 132 --------- Total $ 7,043 ---------
Included in the above amounts is the aggregate lease commitment associated with the Company's former corporate office which has been subleased. Future sublease rentals receivable at March 31, 1997 totalled $0.6 million. Other long-term liabilities at March 31, 1997 include a $0.1 million obligation associated with the lease which expires in July 1998. 11. CONTINGENCIES ENVIRONMENTAL MATTERS. The Company has commenced environmental site assessments and cleanup feasibility studies to determine the presence, extent and sources of any environmental contamination at a site in Pennsylvania which continues to be owned although the related business has been sold. Although no governmental action requiring remediation has been taken at this time, the Company is working in cooperation with the relevant state authority and any remedial work required to be performed would be subject to its approval. A design report for implementation of a portion of a remedy at the Pennsylvania site has been prepared and submitted to the state. At March 31, 1997, the balance of the Company's cleanup reserve was $2.1 million payable over the next several years. In addition, the Company is pursuing recovery of a portion of cleanup costs in litigation with several of its insurance carriers. The Company expects that remediation work at the Pennsylvania site will not be completed until fiscal 2000. The Company also continues to participate in environmental assessments and remediation work at twelve 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 $1.0 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 five 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. 12. SUBSEQUENT EVENTS On April 17, 1997, the Company acquired all of the outstanding stock of TCR Corporation for $32.6 cash million plus other contingent consideration. TCR, located in Minneapolis, produces externally threaded fasteners and related products for the automotive, heavy vehicle, marine and industrial markets. TCR sales were approximately $23 million for calendar year 1996. The acquisition was financed by a term loan under the Company's credit agreement resulting in increased annual principal payments of approximately $3.4 million beginning June 1997. TRANSTECHNOLOGY CORPORATION 21 24 13. SEGMENT AND GEOGRAPHIC INFORMATION The Company develops, manufactures and sells, primarily, specialty fastener products and rescue hoist and cargo hook products. Specialty Fastener Products include gear-driven band fasteners, threaded fasteners and retaining rings for the marine, auto, toy, aircraft, heavy equipment and industrial machinery industries. Rescue Hoist and Cargo Hook Products include lifting, control, and restraint devices - principally helicopter rescue hoists and external hook systems, winches and hoists for aircraft and weapon-handling systems, and aircraft and cargo tie-downs. Operating profit is net sales less operating expenses. General corporate expenses, interest and income taxes have not been deducted in determining operating profit. Assets, depreciation and amortization, and capital expenditures are those identifiable to a particular segment by their use. Approximately 9%, 8% and 18% of sales from continuing operations in 1997, 1996 and 1995, respectively, were derived from sales to the United States Government and its prime contractors which are attributable primarily to the Rescue Hoist and Cargo Hook Products Segment.
DEPRECIATION/ FISCAL OPERATING CAPITAL AMORTIZATION IDENTIFIABLE (IN THOUSANDS) YEAR SALES PROFIT(1) EXPENDITURES(2) EXPENSE(2) ASSETS - ------------------------------------------------------------------------------------------------------------------ Specialty fastener 1997 $ 144,197 $ 24,040 $4,715 $ 5,881 $140,960 products 1996 127,487 23,702 5,171 4,710 138,001 1995 71,103 16,500 3,193 1,906 60,986 - ------------------------------------------------------------------------------------------------------------------ Rescue hoist and 1997 34,487 7,483 618 645 26,146 cargo hook products 1996 30,537 4,928 901 756 26,334 1995 30,019 160 469 605 24,493 - ------------------------------------------------------------------------------------------------------------------ Total segments 1997 178,684 31,523 5,333 6,526 167,106 1996 158,024 28,630 6,072 5,466 164,335 1995 101,122 16,660 3,662 2,511 85,479 - ------------------------------------------------------------------------------------------------------------------ Corporate 1997 -- (9,253) 144 825 32,030 1996 -- (8,987) 399 438 35,032 1995 -- (3,882) 64 260 43,917 - ------------------------------------------------------------------------------------------------------------------ Corporate interest 1997 -- 1,147 -- -- -- and other income 1996 -- 973 -- -- -- 1995 -- 895 -- -- -- - ------------------------------------------------------------------------------------------------------------------ Interest expense 1997 -- (6,797) -- -- -- 1996 -- (6,316) -- -- -- 1995 -- (2,831) -- -- -- - ------------------------------------------------------------------------------------------------------------------ Consolidated 1997 $ 178,684 $ 16,620 $5,477 $ 7,351 $199,136 1996 158,024 14,300 6,471 5,904 199,367 1995 101,122 10,842 3,726 2,771 129,396 - ------------------------------------------------------------------------------------------------------------------
(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 interest and other income earned at the corporate level are included in the corporate section. Interest expense is also separately reported. The amount of the "Consolidated" line represents "Income from Continuing Operations Before Income Taxes." Loss from discontinued operations is not included. (2) The capital expenditures and depreciation/amortization expense from discontinued operations are excluded from the above schedule. In 1997, 1996 and 1995, the Company had revenues from export sales as follows (in thousands):
LOCATION 1997 1996 1995 Western Europe $ 8,349 $ 7,230 $ 6,641 Canada 6,316 6,323 5,896 Pacific and Far East 3,027 2,312 1,638 Mexico, Central and South America 1,751 851 1,015 Middle East 194 167 114 Other 156 22 136 --------------------------------- Total $19,793 $16,905 $15,440 ---------------------------------
TRANSTECHNOLOGY CORPORATION 22 25 Results set forth below for international operations represent sales and operating income of foreign-based Company operations (in thousands):
1997 1996 Net sales: Domestic operations $ 120,655 $ 112,860 International operations (1) 58,029 45,164 ------------------------- Net sales $ 178,684 $ 158,024 ------------------------- Operating income: Domestic operations $ 24,991 $ 22,454 International operations (1) 6,532 6,176 ------------------------- Operating income 31,523 28,630 Interest expense (6,797) (6,316) Corporate expense and other (8,106) (8,014) ------------------------- Income from continuing operations before tax $ 16,620 $ 14,300 ------------------------- Identifiable assets: Domestic operations $ 94,794 $ 96,944 International operations (1) 72,312 67,391 Corporate 32,030 35,032 ------------------------- Total assets $ 199,136 $ 199,367 -------------------------
(1) International operations are primarily located in Europe. Prior to 1996 the Company had no significant international operations. 14. UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL 1997 Net sales $ 44,640 $ 43,580 $ 42,851 $ 47,613 $ 178,684 Gross profit 13,701 12,496 13,990 16,017 56,204 Income from continuing operations 2,097 1,727 3,020 2,878 9,722 Loss from discontinued operations (269) (206) (199) (260) (934) --------------------------------------------------------------------- Net income $ 1,828 $ 1,521 $ 2,821 $ 2,618 $ 8,788 --------------------------------------------------------------------- Earnings (loss) per share (a): Income from continuing operations $ 0.41 $ 0.34 $ 0.60 $ 0.55 $ 1.92 Loss from discontinued operations (0.05) (0.04) (0.04) (0.05) (0.18) --------------------------------------------------------------------- Net income $ 0.36 $ 0.30 $ 0.56 $ 0.50 $ 1.74 --------------------------------------------------------------------- 1996 Net sales $ 26,207 $ 43,861 $ 41,087 $ 46,869 $ 158,024 Gross profit 8,268 11,889 13,818 16,623 50,598 Income from continuing operations 1,733 1,343 2,793 2,639 8,508 Loss from discontinued operations (172) (149) (447) (366) (1,134) --------------------------------------------------------------------- Net income $ 1,561 $ 1,194 $ 2,346 $ 2,273 $ 7,374 --------------------------------------------------------------------- Earnings (loss) per share: Income from continuing operations $ 0.34 $ 0.26 $ 0.55 $ 0.52 $ 1.67 Loss from discontinued operations (0.03) (0.03) (0.09) (0.07) (0.22) --------------------------------------------------------------------- Net income $ 0.31 $ 0.23 $ 0.46 $ 0.45 $ 1.45 ---------------------------------------------------------------------
(a) Calculation of earnings per share for the quarter ended March 31, 1997 includes common stock equivalents of approximately 170,000 shares relating to stock options. TRANSTECHNOLOGY CORPORATION 23 26 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, 1997 and 1996, and the related statements of consolidated operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997. 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 did not audit the financial statements of The New Seeger Group (whose members are consolidated subsidiaries) for the period ended March 31, 1996, which statements reflect total assets and total revenues constituting 32% and 28%, respectively, of the related consolidated totals for the year. These statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for The New Seeger Group for the period ended March 31, 1996, is based solely on the report of such other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of TransTechnology Corporation and subsidiaries at March 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1997 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Parsippany, New Jersey May 12, 1997 TRANSTECHNOLOGY CORPORATION 24 27 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 from continuing operations in 1997 were $178.7 million, an increase of $20.7 million or 13% from 1996, compared with a $56.9 million or 56% increase from 1995 to 1996. Gross profit in 1997 increased $5.6 million or 11% from 1996, compared with an increase of $21.4 million or 74% from 1995 to 1996. Operating profit from continuing operations for 1997 was $31.5 million, an increase of $2.9 million or 10% from 1996, compared with an increase of $12 million or 72% from 1995 to 1996. Changes in sales, operating profit and new orders from continuing operations are discussed below by segment, and additional information regarding industry segments is contained in Note 13 of the Notes to Consolidated Financial Statements. Net income, including discontinued operations, for 1997 was $8.8 million or $1.74 per share compared to $7.4 million or $1.45 per share in 1996. These changes in net income were affected both by operating profit, as discussed in the Business Segment sections below, and by discontinued operations, as discussed in the Discontinued Operations section below. Net losses from discontinued operations, including disposal losses, were $0.9 million or $.18 per share in 1997 and $1.1 million or $.22 per share in 1996. In the first quarter of 1997 the Company acquired the Pebra hose clamp business as discussed below in the Acquisitions section and the Business Segment section. Excluding corporate expense allocations of $0.3 million to a discontinued operation in 1996 and a $2.6 million fourth quarter 1996 pre-tax charge to continuing operations to write down the carrying value of equity securities acquired from the sale of its tear gas division to their current market value when the decline in value of those securities was determined to be other than temporary, general corporate expense increased in 1997 by approximately $2.5 million or 38% over 1996. This increase was primarily due to the Company accruing, as corporate expense, approximately $1 million in 1997 relating to the long-term incentive plan which the Company expects to pay in early fiscal 1999, increased business development costs, the relocation of the corporate office out of an operating division's building, and increased staffing. Interest expense increased $0.5 million in 1997 from 1996 and $3.5 million in 1996 from 1995 primarily as a result of increased bank borrowings related to the acquisition of the Seeger Group of companies, as further discussed below in the Liquidity and Capital Resources section. TRANSTECHNOLOGY CORPORATION 25 28 New orders received during 1997 totaled $192.1 million, an increase of $29.5 million or 18% from 1996. New orders received during 1996 totaled $162.6 million, an increase of $58.1 million or 56% from 1995. At March 31, 1997, total backlog of unfilled orders was $66.5 million compared to $62.3 million and $34.4 million at March 31, 1996 and 1995, respectively. New orders and backlog by industry segment are discussed below. In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which the Company adopted during fiscal 1997 with no material impact on the carrying values of the assets covered by this standard. Also in 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which requires companies to measure employee stock compensation plans based on the fair value method of accounting or to continue to apply APB No. 25, "Accounting for Stock Issued to Employees," and provide pro forma footnote disclosures under the fair value method in SFAS No. 123. The Company will continue to apply the principles of APB No. 25 and has provided pro forma fair value disclosures in Note 7 of the Notes to Consolidated Financial Statements. In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which establishes standards for computing and presenting earnings per share. This statement is effective for the Company's fiscal year ending March 31, 1998. The Company believes that the effect of implementing this standard will result in a basic earnings per share amount which will not be materially different from primary earnings per share as currently reported. SPECIALTY FASTENER PRODUCTS SEGMENT 1997 COMPARED WITH 1996 Sales for the Specialty Fastener Products segment were $144.2 million in 1997, an increase of $16.7 million or 13% from 1996. The increase in sales was primarily due to the inclusion of twelve months of Seeger group operations in 1997 versus nine months of operations in 1996; the inclusion of nine months of operations of the Pebra hose clamp business in 1997; and overall increased volume of domestic gear-driven fasteners in 1997 as compared to 1996. Additionally, specialty fastener sales were negatively impacted in 1997 by a weakened economy in Europe and a stronger dollar versus Deutsche Mark as compared to last year. Operating profit for the Specialty Fastener Products segment was $24 million in 1997, an increase of $0.3 million or 1% from 1996. The primary factors contributing to the segment's increased operating profit in 1997 were the sales increases over the prior year as mentioned above, which were offset by lower margins in Europe; the result of excess capacity which increased competition, lowered sales, and resulted in lower factory operating efficiencies; and the stronger dollar versus Deutsche Mark. In 1997, new orders in the Specialty Fastener Products segment increased $33.1 million or 27% from 1996. 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 was $36.1 million at March 31, 1997 compared to $31.4 million at March 31, 1996. During 1997 the Company began the consolidation and standardization of its overseas retaining ring manufacturing operations by completing the installation of a new business information system and commencing the closing of one of its two TRANSTECHNOLOGY CORPORATION 26 29 retaining ring factories in Germany. Production from this factory will be transferred primarily to the Company's UK manufacturing facility. Additionally, commencing in 1997 and continuing through 1998, the Company will pursue the process of consolidating its domestic retaining ring manufacturing and distribution facilities. 1996 COMPARED WITH 1995 Sales for the Specialty Fastener Products segment were $127.5 million in 1996, an increase of $56.4 million or 79% from 1995. The increase in sales was primarily due to the inclusion of nine months of Seeger Group operations in 1996, and to a lesser extent, the inclusion of twelve months of Industrial Retaining Ring Company operations in 1996 versus eight months in 1995, and increased industrial and heavy truck OEM demand for gear-driven band fasteners in fiscal 1996. Operating profit for the Specialty Fastener Products segment was $23.7 million in 1996, an increase of $7.2 million, or 44%, from 1995. The primary factors contributing to the segment's increased operating profit in 1996 were the same as those noted in the preceding paragraph relative to the increase in sales. In 1996, new orders in the Specialty Fastener Products segment increased $48.8 million or 66% from 1995. The primary reasons for the increase were the same as those noted in the paragraph above relative to the increase in sales. Backlog of unfilled orders was $31.4 million at March 31, 1996, compared to $12.7 million at March 31, 1995. RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT 1997 COMPARED WITH 1996 Sales for the Rescue Hoist and Cargo Hook Products segment were $34.5 million in 1997, an increase of $4 million or 13% from 1996. This increase included both the rescue hoist systems and related spare parts and tie-down product lines, and was offset by lower cargo hook sales in 1997 as compared to 1996. These increases and decreases in sales were primarily due to customer timing and placement of new orders. The Rescue Hoist and Cargo Hook Products segment reported an operating profit of $7.5 million in 1997, an increase of $2.6 million or 52% from 1996. The increase was primarily due to plant operating efficiency improvements, higher sales volume and product mix, and inventory utilization improvements. In 1997 new orders in the Rescue Hoist and Cargo Hook Products segment decreased by $3.6 million or 9% from 1996. This decrease was primarily due to customer timing of order placement and an unusually high level of orders in 1996. At March 31, 1997, the backlog of unfilled orders was $32.5 million, compared to $30.9 million at March 31, 1996. 1996 COMPARED WITH 1995 Sales for the Rescue Hoist and Cargo Hook Products segment were $30.5 million in 1996, an increase of $0.5 million or 2% from 1995. All three product lines in this segment, rescue hoists and related spare parts, cargo hooks, and tie-downs, had little change in sales from 1995 levels. The Rescue Hoist and Cargo Hook Products segment reported an operating profit of $4.9 million in 1996, compared to $0.2 million in 1995. This improvement was accomplished primarily because of higher plant operating efficiencies, price adjustments and better inventory utilization. In 1996 new orders in the Rescue Hoist and Cargo Hook Products segment increased by $9.3 million or 31% from 1995. This increase, led by the rescue hoist product line, was primarily due to increased marketing efforts and customer timing of order placement. At March 31, 1996, the backlog of unfilled orders was $30.9 million, compared to $21.8 million at March 31, 1995. TRANSTECHNOLOGY CORPORATION 27 30 ACQUISITIONS In the first quarter of 1997 the Company acquired the Pebra hose clamp business from Pebra GmbH Paul Braun i.K. for approximately $3 million in cash plus direct acquisition costs. Pebra is located in Frittlingen, Germany and manufactures heavy duty hose clamps primarily for use in the production of heavy trucks in Europe. In 1996 the Company acquired the Seeger Group of companies from a unit of AB SKF of Goteborg, Sweden for approximately $43 million in cash plus direct acquisition costs and the assumption of trade debt and accrued expenses. The Seeger Group, headquartered in Konigstein, Germany, manufactures circlips, snap rings and retaining rings primarily used in the production of automobiles, trucks, industrial equipment and appliances. The Seeger Group operated under the trade names "Seeger", "Anderton", and "Waldes" at its manufacturing facilities located in Germany, the UK, Brazil and the U.S.A. In 1995 the Company acquired all of the outstanding capital stock of Industrial Retaining Ring Company and its affiliated companies for a total purchase price of $15.3 million in cash and the assumption of liabilities. Industrial Retaining Ring Company manufactures retaining rings and clips used primarily in the heavy equipment and industrial machinery industries. On April 17, 1997, the Company acquired all of the outstanding stock of TCR Corporation for $32.6 million in cash plus other contingent consideration. Located in Minneapolis, TCR produces externally threaded fasteners and related products for the automotive, heavy vehicle, marine and industrial markets. TCR's sales for the year ended December 31, 1996, were approximately $23 million. DISCONTINUED OPERATIONS In 1996 the Company sold the domestic and European portions of its computer graphics service operations, respectively, in two separate transactions to two different buyers. These businesses operated under the name TransTechnology Systems & Services and were classified as discontinued operations in 1995. The sale of the domestic portion for $0.7 million in cash and $0.6 million in notes receivable was for book value, and the sale of the European portion for $0.1 million in cash and $0.2 million in notes receivable resulted in an after-tax gain on disposal of $0.1 million in 1996. Additional after-tax disposal costs of $0.2 million were recorded in 1997 in connection with these sales. Also in 1996, the Company sold its Electronics division for $4.4 million in cash and $9.6 million in notes receivable. The sale of this operation resulted in an after-tax gain on disposal of $0.2 million. In 1995 the Company sold substantially all of the assets and business of its chaff products operation for $6.7 million in cash. The sale of this operation resulted in an after-tax loss on disposal of $0.4 million. Additional after-tax disposal costs of $0.2 million were recorded in 1996 in connection with the sale. The Company retained the chaff avionics product line and negotiated its sale separately in 1996 for $0.3 million in cash and $0.7 million in notes receivable, resulting in an after-tax gain on disposal of $0.4 million. In the fourth quarter of 1996, the Company recorded an after-tax charge of $0.4 million to record the anticipated loss on the sale of the facility that was formerly used by this operation which was subsequently sold in the first quarter of 1997. Additional after-tax disposal costs of $0.1 million were recorded in 1997 related to the final sale of this facility. TRANSTECHNOLOGY CORPORATION 28 31 Additional after-tax costs of $0.6 million, $0.7 million and $1.9 million were recorded in 1997, 1996 and 1995, respectively, in connection with other previously discontinued and sold operations. These additional costs represent adjustments to previous estimates related primarily to environmental and legal matters. LIQUIDITY AND CAPITAL RESOURCES The Company's debt-to-capitalization ratio was 49%, 52% and 38% as of March 31, 1997, 1996 and 1995, respectively. The current ratio at March 31, 1997, was 2.54, compared to 2.51 and 3.25 at March 31, 1996 and 1995, respectively. Working capital was $59.1 million at March 31, 1997, up $1.8 million from 1996 and $6 million from 1995. At March 31, 1997, the Company's debt consisted of $16.7 million of borrowings under a revolving credit line ("the Revolver"), $6.1 million of borrowings under international lines of credit ("the International Lines of Credit"), a $25.3 million term loan ("Term loan A"), a $24.5 million term loan ("Term Loan B") and $0.8 million of other borrowings. The Revolver commitment, as amended on December 31, 1996, of $30 million will be available to the Company through December 31, 2000 and is subject to a borrowing base formula. The Company's credit agreement with a group of commercial banks provides for borrowings and letters of credit based on collateralized accounts receivable and inventory. In addition, all of the remaining assets of the Company and its subsidiaries are included as collateral. Letters of credit, which are included in the borrowing base formula, are limited to $5 million. Letters of credit under the line at March 31, 1997 were $0.1 million. The total commitment under the International Lines of Credit, as amended on December 31, 1996, is $10 million and subject to the same availability and collateral as the revolver, but is not subject to a borrowing base formula. Interest on the Revolver and International Lines of Credit 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. As of March, 31, 1997, the availability under Term Loan A was increased by $20 million giving the Company a total of $35 million available for acquisitions. $32.6 million of this amount was used by the Company on April 17, 1997 to acquire all of the outstanding stock of TCR Corporation. Term Loans A and B are with the same lenders and are secured by the same collateral as the Revolver and International Lines of Credit and are due and payable on March 31 and June 30, 2002, respectively. Subsequent to the acquisition of TCR Corporation and related debt increase of $32.6 million on April 17, 1997, quarterly principal payments on Term Loan A are $2.2 million and begin on June 30, 1997, with escalations to $3 million, $3.2 million and $4 million in June 1998, 1999 and 2000, respectively. Interest on Term Loan A is tied to the lending bank's prime rate, or LIBOR, plus a margin that varies depending on the Company's achievement of certain operating and financial goals. Annual principal payments on Term Loan B of $0.5 million are due through June 30, 2000, with final balloon payments of $7.5 million and $15 million due on June 30, 2001 and 2002, respectively. Interest on Term Loan B accrues at the primary lending bank's prime rate plus two percentage points. The credit agreement also gives the Company the option of using LIBOR plus three and one-quarter percentage points. At March 31, 1997, $49.9 million of the Company's outstanding borrowings utilized LIBOR. TRANSTECHNOLOGY CORPORATION 29 32 As of March 31, 1997, the Company's credit agreement was amended to increase the capital expenditures limitation to $9 million annually. Additionally, the credit agreement contains other customary financial covenants including a limit on the Company's ability to pay dividends at 25% of net income. Through March 31, 1996, the Company purchased 177,500 shares of the Company's common stock under a 1994 authorization at an aggregate cost of $2.2 million. In 1997 the Company obtained a special authorization and purchased 100,000 shares of the Company's common stock from a private estate at an aggregate price of $1.6 million. In 1997 the Company completed the sale of a facility formerly used by the chaff products operation for $2.1 million, the proceeds of which were used to reduce the Company's Revolver. 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 1997 were $5.5 million as compared with $6.5 million in 1996, with capital expenditures for the fastener segment being much larger than those required by the rescue hoist and cargo hook segment. The Company is subject to various contingencies related to land and groundwater contamination at several facilities. Expenditures made pursuant to the remediation and restoration of these sites approximated $1.1 million in 1997 and $1.3 million in 1996. These expenditures are primarily of a non-recurring nature and are not capitalized. These matters are described further in Note 11 of the Notes to Consolidated Financial Statements. The Company expects similar expenditures in 1998 to be in the same range. Management believes that, after taking into consideration information provided by counsel, the resolution of these matters will not have a material adverse effect on the Company's liquidity. Additionally, management believes that the Company's cash flow from operations, combined with the bank credit agreement described above, will be sufficient to cover such future expenditures. TRANSTECHNOLOGY CORPORATION 30 33 DIRECTORS * Gideon Argov Chairman of the Board, President and Chief Executive Officer Kollmorgen Corporation (High-performance motion control systems) *+ Walter Belleville Chairman and Chief Executive Officer ATI Machinery, Inc. (Heavy machinery) # Michael J. Berthelot Chairman of the Board and Chief Executive Officer TransTechnology Corporation Patrick K. Bolger President and Chief Operating Officer TransTechnology Corporation #+ Thomas V. Chema Partner, Arter & Hadden (Telecommunications consulting) + Michel Glouchevitch Managing Director Triumph Capital Group *# James A. Lawrence Executive Vice President and Chief Financial Officer Northwest Airlines * Audit Committee # Nominating Committee + Incentives & Compensation Committee COUNSEL Hahn, Loeser & Parks Cleveland, Ohio AUDITORS Deloitte & Touche LLP Parsippany, New Jersey TRANSFER AGENT AND REGISTRAR Wachovia Bank & Trust Co., N.A. Winston-Salem, North Carolina CORPORATE OFFICERS Michael J. Berthelot Chairman of the Board and Chief Executive Officer Patrick K. Bolger President and Chief Operating Officer Joseph F. Spanier Vice President, Chief Financial Officer and Treasurer Chandler J. Moisen Executive Vice President Gerald C. Harvey Vice President, Secretary and General Counsel Winston Lau Vice President of Operations Monica Aguirre Assistant Secretary OPERATIONAL GROUPS SPECIALTY FASTENERS BREEZE INDUSTRIAL PRODUCTS Gear-driven band fasteners 100 Aero-Seal Drive Saltsburg, PA 15681-9594 412/639-3571 Fax 412/639-3020 Robert Tunno - Division President THE PALNUT COMPANY Single and multi-thread fasteners 152 Glen Road Mountainside, NJ 07092-2997 908/233-3300 Fax 908/233-6566 Winston Lau - Division President INDUSTRIAL RETAINING RING (IRR) Multi-sized retaining rings 57 Cordier Street Irvington, NJ 07111-4035 201/926-5000 Fax 201/926-4699 SEEGER INC. (WALDES/TRUARC) Retaining rings and assembly tools 500 Memorial Drive Somerset, NJ 08875 908/469-7999 Fax 908/469-2413 THE SEEGER GROUP Retaining rings and circlips Wiesbadener Strasse 243 D-61462 Konigstein, Germany 49/6174 2050 Fax 49/6174 205 100 Ulf Jemsby - Managing Director SEEGER-ORBIS GmbH Konigstein, Germany Ulf Jemsby - Managing Director PEBRA GmbH BRAUN Frittlingen, Germany ANDERTON INTERNATIONAL LTD. Bingley, West Yorkshire, England SEEGER-RENO INDUSTRIA E COMERCIO LTD. Sao Paulo, Brazil Joan Scivoletto - Managing Director TCR CORPORATION Cold forged and machined products 1600 67th Avenue North Minneapolis, MN 55430 612/560-2200 Fax 612/561-0949 John Funk - Division President RESCUE HOISTS AND CARGO HOOKS BREEZE-EASTERN Lifting and restraint products 700 Liberty Avenue Union, NJ 07083-4115 908/686-4000 Fax 908/686-9292 Robert White - Division President 34 150 Allen Road Liberty Corner, New Jersey 07938 908/903-1600 fax 908/903-1616 EX-21 9 SUBSIDIARIES 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES OF TRANSTECHNOLOGY CORPORATION
Jurisdiction of Incorporation ------------- Anderton (Predecessors) Limited (formerly Anderton International Ltd.) England Anderton International Limited (formerly TTUK Acquisition Co. Ltd.) England Electronic Connections and Assemblies, Inc. Delaware Industrial Retaining Ring Company New Jersey Palnut Fasteners, Inc. Delaware Rancho TransTechnology Corporation California Retainers, Inc. New Jersey Seeger Inc. DBA Seeger of New Jersey Company Delaware Seeger-Orbis Beteiligungsgesellschaft GmbH Germany Seeger-Orbis GmbH & Co. OHG Germany Seeger Reno Industria e Comercio Ltd. Brazil SSP Industries California SSP International Sales, Inc. California TransTechnology Acquisition Corporation Delaware TransTechnology Australasia Pty. Ltd. Australia TransTechnology (Europe) Ltd. England TransTechnology International Corporation Virgin Islands TransTechnology Seeger Inc. Delaware TransTechnology Seeger-Orbis GmbH Germany TransTechnology Systems & Services, Inc. Michigan
EX-23 10 INDEPENDENT AUDITORS' CONSENT 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 33-19390, Post-Effective Amendment No. 1 to Registration Statement No. 2-84205, Registration Statement No. 33-59546, and Registration Statement No. 33-878000 on Forms S-8, and this Annual Report on Form 10-K of TransTechnology Corporation for the year ended March 31, 1997, of our report dated May 12, 1997. /s/Deloitte & Touche LLP Parsippany, New Jersey June 25, 1997 EX-27 11 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAR-31-1997 MAR-31-1997 3,540 0 28,392 588 50,677 97,385 82,207 23,594 199,136 38,278 73,423 0 0 53 6,291 199,136 178,684 181,206 122,480 42,106 0 139 6,797 16,620 6,898 9,722 (934) 0 0 8,788 1.74 1.74
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