1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 28, 1998
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to:
------------------ --------------------
Commission file number: 0-21121
-------
TRANSACT TECHNOLOGIES INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1456680
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7 LASER LANE, WALLINGFORD, CT 06492
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(203) 269-1198
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Former address:
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING MAY 1, 1998
- ----- -----------------------
COMMON STOCK,
$.01 PAR VALUE 6,307,500
2
TRANSACT TECHNOLOGIES INCORPORATED
INDEX
PART I. Financial Information: Page No.
- ------- ---------------------- --------
Item 1. Financial Statements
Consolidated condensed balance sheets as of March
28, 1998 and December 31, 1997 3
Consolidated condensed statements of income for
the three months ended March 28, 1998 and March 4
29, 1997
Consolidated condensed statements of cash flows
for the three months ended March 28, 1998 and 5
March 29, 1997
Notes to consolidated condensed financial 6
statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. Other Information:
- -------- ------------------
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
3
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 28, December 31,
(In thousands) 1998 1997
-------- --------
ASSETS: (UNAUDITED)
Current assets:
Cash and cash equivalents $ 269 $ 391
Receivables 9,920 7,235
Inventories 8,658 8,570
Other current assets 1,383 1,365
-------- --------
Total current assets 20,230 17,561
-------- --------
Plant and equipment, net 6,020 4,989
Excess of cost over fair value of net assets acquired 2,030 2,073
Other assets 99 76
-------- --------
8,149 7,138
-------- --------
$ 28,379 $ 24,699
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Bank loans payable $ 5,000 $ 300
Accounts payable 4,761 3,043
Accrued liabilities 2,613 2,780
-------- --------
Total current liabilities 12,374 6,123
-------- --------
Other liabilities 630 673
-------- --------
Shareholders' equity:
Common stock 68 68
Additional paid-in capital 14,941 14,975
Retained earnings 6,696 6,062
Unamortized restricted stock compensation (860) (942)
Cumulative translation adjustment (4) (9)
-------- --------
20,841 20,154
Less: Treasury stock, at cost, 500,000 and 200,000 shares (5,466) (2,251)
-------- --------
Total shareholders' equity 15,375 17,903
-------- --------
$ 28,379 $ 24,699
======== ========
See notes to consolidated condensed financial statements.
3
4
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
------------------------
MARCH 28, March 29,
(In thousands, except per share data) 1998 1997
-------- --------
Net sales $ 13,280 $ 14,014
Cost of sales 9,534 9,662
-------- --------
Gross profit 3,746 4,352
-------- --------
Operating expenses:
Engineering, design and product development costs 833 678
Selling, general and administrative expenses 1,874 1,841
-------- --------
2,707 2,519
-------- --------
Operating income 1,039 1,833
-------- --------
Other income (expense):
Interest expense, net (41) (8)
Other, net 9 (13)
-------- --------
(32) (21)
-------- --------
Income before income taxes 1,007 1,812
Provision for income taxes 373 725
-------- --------
Net income $ 634 $ 1,087
======== ========
Net income per common share:
Basic $ 0.10 $ 0.16
======== ========
Diluted $ 0.10 $ 0.16
======== ========
Weighted average common shares outstanding:
Basic 6,460 6,723
======== ========
Diluted 6,526 6,877
======== ========
See notes to consolidated condensed financial statements.
4
5
TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
THREE MONTHS ENDED
----------------------
MARCH 28, March 29,
(In thousands) 1998 1997
------- -------
Cash flows from operating activities:
Net income $ 634 $ 1,087
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 499 385
Loss on disposal of equipment 2 1
Changes in operating assets and liabilities:
Receivables (2,685) (3,228)
Inventory (88) (860)
Other current assets (18) (141)
Other assets (42) (21)
Accounts payable 1,718 2,070
Accrued liabilities and other liabilities (210) (187)
------- -------
Net cash used in operating activities (190) (894)
------- -------
Cash flows from investing activities:
Purchases of plant and equipment (1,425) (731)
Proceeds from sale of equipment 1 --
------- -------
Net cash used in investing activities (1,424) (731)
------- -------
Cash flows from financing activities:
Bank line of credit borrowings 5,000 1,200
Bank line of credit repayments (300) --
Purchases of treasury stock (3,215) --
Proceeds from option exercises 2 --
Tax benefit related to employee stock sales -- 376
Payment of intercompany debt -- (1,000)
------- -------
Net cash provided by financing activities 1,487 576
------- -------
Effect of exchange rate changes on cash 5 8
------- -------
Decrease in cash and cash equivalents (122) (1,041)
Cash and cash equivalents at beginning of period 391 1,041
------- -------
Cash and cash equivalents at end of period $ 269 $ --
======= =======
See notes to consolidated condensed financial statements.
5
6
TRANSACT TECHNOLOGIES INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly its financial position as of March 28, 1998, the results of its
operations and cash flows for the three months ended March 28, 1998 and
March 29, 1997. The December 31, 1997 consolidated condensed balance sheet
has been derived from the Company's audited financial statements at that
date. These interim financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 1997
included in the Company's Annual Report on Form 10-K.
The financial position and results of operations of the Company's
foreign subsidiaries are measured using local currency as the functional
currency. Assets and liabilities of such subsidiaries have been translated
at end of period exchange rates, and related revenues and expenses have
been translated at weighted average exchange rates. Transaction gains and
losses are included in other income.
The results of operations for the three months ended March 28, 1998
and March 29, 1997 are not necessarily indicative of the results to be
expected for the full year.
2. Earnings per share
Basic earnings per common share for the three months ended March 28,
1998 and March 29, 1997 were based on the weighted average number of
shares outstanding during the period. Diluted earnings per share for the
same periods were based on the weighted average number of shares after
consideration of any dilutive effect of stock options and warrants.
3. Inventories:
The components of inventory are:
March 28, December 31,
(In thousands) 1998 1997
------ ------
Raw materials and component $7,166 $7,482
parts
Work-in-process 932 588
Finished goods 560 500
------ ------
$8,658 $8,570
====== ======
4. Commitments and contingencies
The Company has a long-term purchase agreement with Okidata,
Division of Oki America, Inc., for certain printer components. Under the
terms of the agreement, the Company receives favorable pricing for volume
purchases over the life of the contract. In the event anticipated purchase
levels are not achieved, the Company would be subject to retroactive price
increases on previous purchases. Management currently anticipates
achieving purchase levels sufficient to maintain the favorable prices.
5. Significant transactions
During the three months ended March 28, 1998, the Company purchased
an additional 300,000 shares of its common stock on the open market for
approximately $3,215,000.
6
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements included in this report, including without limitation
statements in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, which are not historical facts may be deemed to
contain forward looking statements with respect to events the occurrence of
which involves risks and uncertainties, including, without limitation, the
Company's expectation regarding gross profit.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 28, 1998 COMPARED TO THREE MONTHS ENDED MARCH 29, 1997
NET SALES. Net sales into each of the Company's four vertical markets for
the current and prior year's quarter were as follows:
Three months ended Three months ended
March 28, 1998 March 29, 1997
------------------ ------------------
Point of sale $ 7,813 58.8 % $ 5,049 36.0 %
Gaming and lottery 4,188 31.6 5,002 35.7
Kiosk 451 3.4 2,473 17.7
Financial services 828 6.2 1,490 10.6
------------------ ------------------
$13,280 100.0 % $14,014 100.0 %
================== ==================
Net sales for the quarter ended March 28, 1998 decreased $734,000, or 5%, to
$13,280,000 from $14,014,000 in the prior year's quarter, due to decreased
shipments into the gaming and lottery, kiosk and financial services markets,
offset by a significant increase in the POS market.
Point of sale: Sales of the Company's POS printers increased approximately
$2,764,000, or 55%, due largely to increased international printer shipments,
including substantially more shipments of printers for use in the British post
office.
Gaming and lottery: Sales of the Company's gaming and lottery printers decreased
approximately $814,000, or 16%, from the first quarter a year ago. The overall
decrease primarily reflects a decrease of approximately $1,900,000 in shipments
of printers for use in video lottery terminals due to the proposed gaming ban in
South Carolina. This decrease was partially offset by an increase of
approximately $1,000,000 in shipments of the Company's on-line lottery printers
and spare parts. Shipments of on-line lottery printers and spares were
approximately $3,700,000, or 28% of net sales, in the current quarter, compared
to approximately $2,700,000, or 19% of net sales, in comparable prior year's
quarter.
Kiosk: Kiosk printer sales decreased $2,022,000, or 82%, to $451,000 from
$2,473,000 in the prior year's quarter, which included shipments totaling
approximately $1,900,000 of the Company's thermal kiosk printers for use in a
Canadian government application.
Financial services: Sales of the Company's printers into the financial services
market decreased approximately $662,000, or 44%, primarily due to decreased
shipments of printers used in automated teller machines.
GROSS PROFIT. Gross profit decreased $606,000, or 14%, to $3,746,000 from
$4,352,000 in the prior year's quarter due primarily to lower volume of sales.
The gross margin declined to 28.2% from 31.1% largely due to lower sales volume
and an unfavorable change in sales mix. The Company expects its gross margin to
slightly increase from the first quarter level during the second half of 1998,
primarily due to projected higher sales volume and a favorable change in
product mix.
7
8
ENGINEERING, DESIGN AND PRODUCT DEVELOPMENT. Engineering, design and product
development expenses increased $155,000, or 23%, to $833,000 from $678,000 in
the three months ended March 29, 1997, and increased as a percentage of net
sales to 6.3% from 4.8%. This increase is primarily due to increased product
development and design expenses, primarily for new products in the POS and kiosk
markets, including expenses related to additional engineering staff.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased slightly by $33,000, or 2%, to $1,874,000 from $1,841,000 in
the comparable prior year's quarter. Both selling expenses and general and
administrative expenses were consistent with the prior year's. Selling, general
and administrative expenses increased as a percentage of net sales to 14.1% from
13.1%, primarily due to a lower volume of sales in the first quarter of 1998
compared to 1997.
OPERATING INCOME. Operating income decreased $794,000, or 43%, to $1,039,000
from $1,833,000 in the first quarter of 1997. Operating income as a percentage
of net sales declined to 7.8% from 13.1%, due to increased operating expenses
and lower sales volume in the first quarter of 1998 compared to 1997.
PROVISION FOR INCOME TAXES. The provision for income taxes for the quarter ended
March 28, 1998 reflects an effective tax rate of 37.0% compared to 40.0% in the
prior year's period. The decline in the Company's effective tax rate is largely
due to tax benefits derived from the establishment of a foreign sales
corporation and certain tax credits.
NET INCOME. Net income for the current quarter was $634,000, or $0.10 per share
(basic and diluted) compared to $1,087,000, or $0.16 per share (basic and
diluted) for the prior year's quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash used in operations was $190,000 and $894,000 for the three
months ended March 28, 1998 and March 29, 1997, respectively. The Company's
working capital declined to $7,856,000 at March 28, 1998 from $11,438,000 at
December 31, 1997. The current ratio also declined to 1.63 at March 28, 1998
from 2.87 at December 31, 1997. The decrease in the Company's working capital
and current ratio in the first quarter of 1998 was largely the result of
short-term financing for stock repurchases (see below) and, to a lessor extent,
for short-term working capital requirements.
During November 1997, the Board of Directors approved the repurchase of up to
500,000 shares of the Company's common stock at a price of no more than $12 per
share. As of December 31, 1997, the Company acquired 200,000 shares of its
common stock for $2,251,000. During the first quarter of 1998, the Company
repurchased the remaining 300,000 shares authorized by the Board for
approximately $3,215,000.
On August 29, 1996, the Company entered into an agreement with Fleet National
Bank ("Fleet") to provide the Company with a $5,000,000 revolving credit
facility (the "Credit Facility"). The Credit Facility bore interest on
outstanding borrowings at Fleet's prime rate and bore a commitment fee of 0.25%
on any unused portion of the Credit Facility. The Credit Facility also permitted
the Company to designate a LIBOR rate on outstanding borrowings with a margin of
1.5 percentage points over the market rate. The Credit Facility was secured by a
lien on substantially all of the assets of the Company and imposed certain
financial and other covenants.
On January 29, 1998, the Company replaced its existing $5,000,000 Credit
Facility with a new $15,000,000 facility (the "New Credit Facility"). The New
Credit Facility, also with Fleet, provides the Company with a $5,000,000
revolving working capital facility, and a $10,000,000 revolving credit facility
that may be used for activities such as acquisitions and repurchases of the
Company's common stock. Borrowings under the $10,000,000 revolving credit
facility may, at the Company's election, be converted to a four-year term loan
commencing on June 30, 1999, the expiration date of the New Credit Facility. Any
term loan borrowings mature on June 30, 2003. Borrowings under the New Credit
Facility bear interest at Fleet's prime rate (8.50% at March 28, 1998) and bear
a commitment fee ranging from 0.25% to 0.50% on any unused portion of the New
Credit Facility. The New Credit Facility also permits the Company to designate a
LIBOR rate on outstanding borrowings with a margin ranging from 1.25 to 1.75
percentage points over the market rate, depending on the Company meeting certain
ratios. The New Credit Facility is secured by a lien on substantially all of the
assets of the
8
9
Company, imposes certain financial covenants and restricts the payment of cash
dividends and the creation of liens.
During the three months ended March 28, 1998, the Company borrowed $5,000,000
under the New Credit Facility, primarily to fund its common stock repurchases,
and to fund its short-term working capital requirements. The Company also repaid
$300,000 of borrowings during the period, with $5,000,000 outstanding at March
28, 1998.
The Company's capital expenditures were approximately $1,425,000 and $731,000
for the three months ended March 28, 1998 and March 29, 1997, respectively.
These expenditures primarily included new product tooling, computer equipment,
and factory machinery and equipment. The Company's total capital expenditures
for fiscal 1998 are expected to be approximately $3,500,000, a majority for new
product tooling.
The Company believes that cash flows generated from operations and borrowings
available under the New Credit Facility, if necessary, will provide sufficient
resources to meet the Company's working capital needs, finance its capital
expenditures and meet its liquidity requirements through December 31, 1998.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits filed herein
Exhibit 10.30 Agreement by and between the Company and
Seth M. Lukash, dated as of March 19, 1998
Exhibit 11 Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter covered by this report.
9
10
SIGNATURES
Pursuant to the requirements 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.
TRANSACT TECHNOLOGIES INCORPORATED
(Registrant)
May 11, 1998 /s/ Richard L. Cote
-------------------
Richard L. Cote
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
/s/ Steven A. DeMartino
-----------------------
Steven A. DeMartino
Corporate Controller
(Principal Accounting Officer)
10
11
EXHIBIT 10.30
AGREEMENT
This AGREEMENT (this "Agreement"), dated as of March 19, 1998, is by and
between Seth M. Lukash ("Mr. Lukash") and TransAct Technologies Incorporated, a
Delaware corporation (the "Company").
WHEREAS, Mr. Lukash owns 525,319 shares of the common stock, par value
$.01 per share, of the Company (the "Common Stock"), representing approximately
8.15% of the outstanding shares of Common Stock;
WHEREAS, Mr. Lukash and the Company have had certain publicly-disclosed
disagreements regarding the conduct of the Company's business which have had an
adverse impact on the Company and the price of the Common Stock, including the
shares of Common Stock held by Mr. Lukash, and the parties wish to resolve those
disagreements in a mutually satisfactory manner;
WHEREAS, Mr. Lukash and the Company wish to agree upon certain matters
relating to, among other things, the voting of shares of Common Stock by Mr.
Lukash;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, Mr. Lukash and the Company
hereby agree as follows:
1. Standstill. Mr. Lukash agrees that, between the date hereof and March
31, 1999, neither Mr. Lukash nor any of his "affiliates" or "associates" (as
such terms are defined in Rule 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), nor any of his agents or
representatives, will, without the prior written consent of the Company or its
Board of Directors (the "Board of Directors"): (i) make, or in any way
participate in, directly or indirectly, any "solicitation" of "proxies" (as such
terms are used in the rules of the Securities and Exchange Commission) to vote,
or seek to advise or influence any person or entity with respect to the voting
of, any voting securities of the Company; (ii) make or submit a proposal or
offer (with or without conditions) with respect to any extraordinary transaction
involving the Company or its securities or assets: (iii) form, join or in any
way participate in a "group" (as defined in Section 13(d)(3) of the Exchange
Act) in connection with any of the foregoing; (iv) otherwise act or seek to
control or influence the management, Board of Directors or policies of the
Company, provided that nothing contained herein shall be deemed to prohibit Mr.
Lukash from engaging in reasonable communications with the Board of Directors on
a reasonably periodic basis; (v) disclose any intention, plan or arrangement, or
enter into any agreement, inconsistent with the foregoing; (vi) take any action
to encourage or solicit a person to propose, or to make a
12
public announcement regarding the possibility of, a business combination or
merger involving the Company; or (vii) make any news release, or make or
participate in making any other public announcement, publication, written
statement or remarks in a public forum by himself or any other party, relating
to the Company, its subsidiaries, its customers, its personnel or its
stockholders. Mr. Lukash will promptly advise the Company of any inquiry or
proposal made to him or any of his affiliates or representatives with respect to
any of the foregoing.
2. Voting Agreement. Mr. Lukash agrees that, between the date hereof and
March 31, 1999, provided that none of non-employee members of the Board of
Directors as of the date hereof shall have ceased to be directors of the
Company, at any meeting of the stockholders of the Company, however called, and
in any action by consent of the stockholders of the Company, Mr. Lukash will
vote (or cause to be voted) any shares of Common Stock held by him (i) in favor
of any nominees as directors nominated by or on behalf of the Board of Directors
and (ii) in accordance with the recommendation of the Board of Directors on any
action, proposal or resolution that is submitted to a vote of the stockholders
of the Company with regard to the authorization of additional shares of Common
Stock to be granted pursuant to the Company's 1996 Stock Plan, provided that
such number of additional shares does not exceed the number recommended by the
Hay Group or a comparable recognized authority on compensation matters. Mr.
Lukash shall not enter into any agreement or understanding with any person or
entity to vote his shares of Common Stock or give instructions in any manner
inconsistent with this paragraph.
3. Irrevocable Proxy. If, and only if, Mr. Lukash fails to comply with the
provisions of the preceding paragraph (as determined by the Company), Mr. Lukash
hereby agrees that such failure shall result, without any further action by him,
in the irrevocable appointment of Thomas R. Schwarz, the current Chairman of the
Board of Directors, as Mr. Lukash's attorney and proxy pursuant to the
provisions of Section 212(c) of the General Corporation Law of the State of
Delaware, with full power of substitution, to vote and otherwise act (by written
consent or otherwise) with respect to such shares at any meeting of stockholders
of the Company (whether annual or special and whether or not an adjourned or
postponed meeting) or in any consent in lieu of any such meeting or otherwise.
THIS PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED WITH AN INTEREST.
Mr. Lukash hereby revokes all other proxies and powers of attorney with respect
to shares of Common Stock owned by him that may have heretofore been appointed
or granted, and no subsequent proxy or power of attorney shall be given or
written consent executed (and if given or executed, shall not be effective) by
Mr. Lukash with respect to any shares of Common Stock. All authority herein
conferred or agreed to be conferred shall survive the death or incapacity of Mr.
Lukash and any obligation of Mr. Lukash under this Agreement shall be binding
upon his heirs, personal representatives, successors and assigns.
4. Legal Remedies. (a) Mr. Lukash agrees that irreparable damage would
occur in the event any of his covenants under this Agreement was not performed
in
2
13
accordance with the terms hereof and that it is not possible for the parties to
quantify the amount of damages that the Company may incur in the event of any
such breach by Mr. Lukash. Accordingly, the parties agree that in the event of
any such breach by Mr. Lukash, the Company shall be entitled, in addition to any
other remedies to which the Company may be entitled at law or in equity or
pursuant to any other provision of this Agreement, to specific performance of
the terms hereof. Mr. Lukash hereby agrees, to the extent permitted by
applicable law, to waive the defense in any action for specific performance that
a remedy at law would be adequate and to waive any requirement for the securing
or posting of any bond in connection with such remedy.
(b) Without limiting the generality of the foregoing, and in addition to
any other remedies to which the Company may be entitled at law or in equity or
pursuant to any other provision of this Agreement (but without duplication of
damages), in the event any breach of this Agreement by Mr. Lukash is, in the
judgment of the Board of Directors, a willful and material breach, the Board of
Directors may invoke the provisions of this paragraph 4(b). The Board of
Directors shall notify Mr. Lukash in writing of its determination that there has
been a willful and material breach, and shall include in its written notice a
statement of the facts constituting the alleged breach and the name of an
arbitrator designated by it (the "Company's Arbitrator"). Within three (3)
business days after his receipt of such written notice, Mr. Lukash shall
designate a second arbitrator ("Mr. Lukash's Arbitrator") by written notice to
the Board of Directors, but if he shall fail to do so within such period the
Board of Directors may designate Mr. Lukash's Arbitrator on his behalf. The
Company's Arbitrator and Mr. Lukash's Arbitrator shall attempt to agree on a
third arbitrator (the "Independent Arbitrator"), but if they are unable to do so
within three (3) business days after the designation of Mr. Lukash's Arbitrator,
then either the Company's Arbitrator or Mr. Lukash's Arbitrator may apply to the
American Arbitration Association for the selection of the Independent Arbitrator
in accordance with the Commercial Arbitration Rules of such Association. The
arbitration panel, consisting of the Company's Arbitrator, Mr. Lukash's
Arbitrator and the Independent Arbitrator (collectively, the "Arbitral Panel"),
shall conduct its proceedings in the City of New York. Within three (3) business
days after the selection of the Independent Arbitrator, the Board of Directors
shall deliver its written statement regarding the alleged breach to the Arbitral
Panel and to Mr. Lukash. Within six (6) business days after the selection of the
Independent Arbitrator, Mr. Lukash shall deliver his written response to the
Arbitral Panel and the Board of Directors. Within ten (10) business days after
the selection of the Independent Arbitrator, each of the Board of Directors and
Mr. Lukash shall present an oral summation of its position to the Arbitral Panel
in the presence of the other party. The Arbitral Panel shall issue its award
(the "Award") no later than fifteen (15) business days after the selection of
the Independent Arbitrator. The Award must be signed by not less than two
members of the Arbitral Panel. The Award shall be in writing and in the event
the Arbitral Panel determines that Mr. Lukash committed a willful and material
breach of this Agreement, he shall pay the Company damages in the amount of
$25,000 for any such breach, plus the Company's attorneys' fees and expenses
incurred in connection with the enforcement of its rights under this Agreement
and the fees and expenses of the
3
14
Independent Arbitrator, to be paid in cash not less than two (2) business days
after the rendering of the Award. The Award shall be final and binding upon the
parties hereto and judgment may be entered thereon in any court of competent
jurisdiction. Except as otherwise provided above, the fees and expenses of the
Independent Arbitrator shall be borne equally by the Company and Mr. Lukash. For
purposes of this Agreement, the term "business day" means any day that is not a
Saturday, a Sunday or other day on which banks are required or authorized by law
to be closed in the City of New York.
5. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware without regard to the
conflicts of law principles thereof.
6. Counterparts. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings between the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
IN WITNESS WHEREOF, Mr. Lukash and the Company have executed this
Agreement as of the date first above written.
/s/ Seth M. Lukash
--------------------------
Seth M. Lukash
TRANSACT TECHNOLOGIES
INCORPORATED
By: /s/ Thomas R. Schwarz
---------------------
Its: Chairman
4
1
TRANSACT TECHNOLOGIES INCORPORATED
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
THREE MONTHS ENDED
---------------------------
MARCH 28, March 29,
1998 1997
---------- ----------
NET INCOME $ 634,000 $1,087,000
========== ==========
SHARES:
Basic - Weighted average common shares outstanding 6,460,000 6,723,000
Dilutive effect of outstanding options and
warrants as determined by the treasury
stock method 66,000 154,000
---------- ----------
Dilutive - Weighted average common and
common equivalent shares outstanding 6,526,000 6,877,000
========== ==========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE:
Basic $ 0.10 $0.16 *
========== ==========
Diluted $ 0.10 $0.16 *
========== ==========
* Net income per share for the three months ended March 29, 1997 have been
calculated giving effect to SFAS 128.
5
1,000
3-MOS
DEC-31-1998
JAN-01-1998
MAR-28-1998
269
0
10,040
120
8,658
19,327
12,658
6,638
28,379
12,374
0
0
0
68
15,307
28,379
13,280
13,280
9,534
12,241
(9)
0
41
1,007
373
634
0
0
0
634
0.10
0.10
