<PAGE> 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.
<PAGE> 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
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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.
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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.
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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:
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<TABLE>
<CAPTION>
Owned or
Location Use of Premises Leased Sq. Ft
-------- --------------- ------ ------
<S> <C> <C> <C>
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
</TABLE>
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.
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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.
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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.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
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)
</TABLE>
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.
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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.
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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
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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
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TRANSTECHNOLOGY CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ----------- ------ -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
(A) Amount represents balance acquired from Seeger acquisition.
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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.
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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.
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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
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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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/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
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
Sequentially
Numbered
--------
<S> <C> <C>
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. --
</TABLE>
- ----------------------
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<TABLE>
<S> <C> <C>
(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. --
</TABLE>
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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
<PAGE> 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:
<TABLE>
<CAPTION>
CRITERIA '93-'95 '96-'98
<S> <C> <C>
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%
</TABLE>
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.
<PAGE> 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:
<TABLE>
<CAPTION>
CRITERIA Actual Plan points Bonus points
<S> <C> <C> <C>
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%
</TABLE>
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
<PAGE> 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,
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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:
<TABLE>
<CAPTION>
Officers Officers Staff
CRITERIA '93-'95 '96-'98 '96-98
<S> <C> <C> <C>
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%
</TABLE>
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.
<PAGE> 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:
<TABLE>
<S> <C> <C>
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%
</TABLE>
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.
<PAGE> 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.
<PAGE> 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;
<PAGE> 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;"
<PAGE> 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.
<PAGE> 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.
<PAGE> 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").
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 14
SCHEDULE 1 EXHIBIT A
THE BANKS
<TABLE>
<CAPTION>
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)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Bank $6,400,000 $30,000,000 $8,000,000 $12,000,000
Revolver Term A Term A Term A
(UK) (US) (UK) (Germany)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 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
<PAGE> 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:
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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,
<PAGE> 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;
<PAGE> 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;
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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;
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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;
<PAGE> 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.
<PAGE> 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.
<PAGE> 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:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
<PAGE> 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.
<PAGE> 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
<PAGE> 1
EXHIBIT 13
[TRANSTECHNOLOGY CORP. LOGO]
[GRAPHIC]
Annual Report
Fiscal Year Ending
March 31, 1997
<PAGE> 2
CORPORATE OFFICE
150 Allen Road
Liberty Corner, NJ 07938
908/903-1600 Fax 908/903-1616
[PICTURE LOGO]
Photography by KAN
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
1 Selected Financial Data
2 Letter to Shareholders
6 Specialty Fastener Products
7 Rescue Hoist and Cargo Hook Products
9 Financial Information
</TABLE>
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.
<PAGE> 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.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA YEARS ENDED MARCH 31,
(In thousands except per share amounts) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET AND DIVIDEND DATA
MARKET PRICE
---------------------------------
QUARTER ENDED HIGH LOW DIVIDENDS
- --------------------------------------------------------
<S> <C> <C> <C>
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
- --------------------------------------------------------
</TABLE>
TRANSTECHNOLOGY CORPORATION
1
<PAGE> 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
<PAGE> 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
<PAGE> 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
<TABLE>
<S> <C>
International 32%
Domestic 68%
</TABLE>
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, $11 million, in order
to provide our
TRANSTECHNOLOGY CORPORATION
4
<PAGE> 7
[BAR GRAPH]
CAPITAL EXPENDITURES
($ 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 11
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
9
<PAGE> 12
Statements of Consolidated Operations
(In thousands, except share data)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- -------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
10
<PAGE> 13
Statements of Consolidated Cash Flows
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
11
<PAGE> 14
Statements of Consolidated Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
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
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
12
<PAGE> 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
<PAGE> 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
<PAGE> 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):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
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)
------- --------
</TABLE>
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):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Inventory $ 429 $ 529
Property 6,577 8,039
Other assets 611 1,412
------ ------
Assets held for sale $7,617 $9,980
------ ------
</TABLE>
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
<PAGE> 18
4. INVENTORIES
Inventories at March 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
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
------- -------
</TABLE>
5. INCOME TAXES
The components of total income (loss) from operations (including continuing and
discontinued operations) before income taxes were (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Domestic $12,167 $ 8,124 $ 3,694
Foreign 2,856 3,642 (723)
------- ------- -------
Total $15,023 $11,766 $ 2,971
------- ------- -------
</TABLE>
The provision for income taxes is summarized below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
Currently
payable:
<S> <C> <C> <C>
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
------ ------ ----
</TABLE>
The provision (benefit) for income taxes is allocated between continuing and
discontinued operations as summarized below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Continuing $ 6,898 $ 5,792 $ 3,457
Discontinued (663) (1,400) (3,019)
------- ------- -------
Total $ 6,235 $ 4,392 $ 438
------- ------- -------
</TABLE>
The consolidated effective tax rates for continuing operations differ from the
federal statutory rates as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
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%
---- ---- ----
</TABLE>
The following is an analysis of accumulated deferred income taxes (in
thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
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
------- ------
</TABLE>
Summary - accumulated deferred income taxes (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net current assets $ 4,293 $1,037
Net noncurrent (liabilities) assets (1,069) 2,771
------- ------
Total $ 3,224 $3,808
------- ------
</TABLE>
TRANSTECHNOLOGY CORPORATION
16
<PAGE> 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):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
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
------- -------
</TABLE>
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
<PAGE> 20
Debt maturities (in thousands):
<TABLE>
<S> <C>
1998 (current) $ 5,907
1999 5,852
2000 7,180
2001 8,588
2002 30,373
Thereafter 15,523
-------
Total $73,423
-------
</TABLE>
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:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
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
</TABLE>
TRANSTECHNOLOGY CORPORATION
18
<PAGE> 21
For options outstanding and exercisable at March 31, 1997, the exercise price
ranges and average remaining lives were:
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C>
$ 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
------- ----------
</TABLE>
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):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
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
--- ----- ----
</TABLE>
The accumulated postretirement benefit obligation and funded status at March 31
were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
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)
------- -------
</TABLE>
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
<PAGE> 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):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Service cost $ 49 $ 40
Interest cost 436 343
Net deferral and amortization 43 34
---- ----
Net periodic pension cost $528 $417
---- ----
</TABLE>
The following table sets forth the funded status of the plans at March 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
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
------ -------
</TABLE>
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:
<TABLE>
<CAPTION>
NOTIONAL
AMOUNT RECEIVE PAY
(IN THOUSANDS) MATURITIES RATE(1) RATE
<S> <C> <C> <C> <C>
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%
</TABLE>
(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):
<TABLE>
<CAPTION>
1997 1996
------------------- ---------------
BUY SELL BUY SELL
<S> <C> <C> <C> <C>
Currency
Deutsche Mark $ 96 $11,992 $1,015 $--
Pound sterling -- 1,459 -- --
------- ------- ------ ----
$ 96 $13,451 $1,015 $--
------- ------- ------ ----
</TABLE>
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):
<TABLE>
<CAPTION>
1997 1996
(PAY) RECEIVE (PAY) RECEIVE
<S> <C> <C>
Interest rate swap
agreements $ (240) $(1,397)
Forward foreign
exchange agreements 1,329 30
</TABLE>
TRANSTECHNOLOGY CORPORATION
20
<PAGE> 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):
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
<S> <C>
1998 $ 2,669
1999 2,117
2000 1,032
2001 604
2002 489
Thereafter 132
---------
Total $ 7,043
---------
</TABLE>
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
<PAGE> 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.
<TABLE>
<CAPTION>
DEPRECIATION/
FISCAL OPERATING CAPITAL AMORTIZATION IDENTIFIABLE
(IN THOUSANDS) YEAR SALES PROFIT(1) EXPENDITURES(2) EXPENSE(2) ASSETS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(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):
<TABLE>
<CAPTION>
LOCATION 1997 1996 1995
<S> <C> <C> <C>
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
---------------------------------
</TABLE>
TRANSTECHNOLOGY CORPORATION
22
<PAGE> 25
Results set forth below for international operations represent sales and
operating income of foreign-based Company operations (in thousands):
<TABLE>
<CAPTION>
1997 1996
Net sales:
<S> <C> <C>
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
-------------------------
</TABLE>
(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)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
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
---------------------------------------------------------------------
</TABLE>
(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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 34
150 Allen Road
Liberty Corner, New Jersey 07938
908/903-1600
fax 908/903-1616
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES
OF TRANSTECHNOLOGY CORPORATION
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation
-------------
<S> <C>
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
</TABLE>
<PAGE> 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
<TABLE> <S> <C>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,540
<SECURITIES> 0
<RECEIVABLES> 28,392
<ALLOWANCES> 588
<INVENTORY> 50,677
<CURRENT-ASSETS> 97,385
<PP&E> 82,207
<DEPRECIATION> 23,594
<TOTAL-ASSETS> 199,136
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0
0
<COMMON> 53
<OTHER-SE> 6,291
<TOTAL-LIABILITY-AND-EQUITY> 199,136
<SALES> 178,684
<TOTAL-REVENUES> 181,206
<CGS> 122,480
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 139
<INTEREST-EXPENSE> 6,797
<INCOME-PRETAX> 16,620
<INCOME-TAX> 6,898
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<EPS-PRIMARY> 1.74
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