<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-
</TABLE>
TransAct Technologies Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
TRANSACT TECHNOLOGIES INCORPORATED
7 LASER LANE
WALLINGFORD, CONNECTICUT 06492
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 1998
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of TransAct Technologies Incorporated (the "Company"), a Delaware
corporation, will be held on Thursday, May 7, 1998, at 10:00 a.m. Eastern
Daylight Savings Time, at The Ramada Plaza Hotel, 275 Research Parkway, Meriden,
CT 06450 for the following purposes, all of which are more completely set forth
in the accompanying Proxy Statement:
(1) To consider and act upon a proposal to elect two Directors to
serve until the Annual Meeting of Shareholders in the year 2001 or until
their successors have been duly elected and qualified;
(2) To ratify the selection of Price Waterhouse LLP as independent
accountants for 1998;
(3) To approve an amendment to the 1996 Stock Plan to increase the
number of shares of Common Stock subject thereto; and
(4) To transact such other business as may legally come before the
Annual Meeting.
Shareholders of record at the close of business on March 19, 1998 are
entitled to notice of and to vote at the Annual Meeting. The transfer books will
not be closed for the Annual Meeting.
The Company's Proxy Statement, Form of Proxy and Annual Report for the
fiscal year ended December 31, 1997 are submitted herewith.
By Order of the Board of Directors,
RICHARD L. COTE
Secretary
Wallingford, Connecticut
April 3, 1998
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, THE COMPANY REQUESTS THAT YOU
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY. A RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THAT
PURPOSE. IF YOU DO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN
PERSON. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION IS APPRECIATED.
<PAGE> 3
TRANSACT TECHNOLOGIES INCORPORATED
7 LASER LANE
WALLINGFORD, CONNECTICUT 06492
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 1998
SOLICITATION AND REVOCATION OF PROXY
The following information concerning the enclosed proxy and matters to be
acted upon under the authority of such proxy is furnished to shareholders of
TransAct Technologies Incorporated (the "Company") in connection with the
solicitation by the Company of proxies to be voted at the Annual Meeting to be
held on May 7, 1998 (the "Annual Meeting").
Any shareholder who executes and returns the enclosed proxy has the power
to revoke the same anytime prior to it being voted. The shares represented by
the proxy will be voted unless the proxy is mutilated or otherwise received in
such form or at such time as to render it not votable. The proxy is in ballot
form so that a specification may be made to grant or withhold authority to vote
for the election of the Directors and to indicate separate approval or
disapproval as to each of the other matters presented to shareholders. All of
the proposals will be presented by the Board of Directors. The shares
represented by the proxy will be voted for the election of the Directors named
thereon, unless authority to do so is withheld. With respect to each proposal
presented to shareholders by the Board of Directors other than the election of
Directors, the shares represented by the proxy will be voted in accordance with
the specifications made. Where a choice is not so specified, the shares
represented by the proxy will be voted for the proposals. The Proxy Committee
consists of Messrs. Thomas R. Schwarz, Chairman, and Bart C. Shuldman, the
President and Chief Executive Officer of the Company. A majority of the shares
entitled to vote, present in person or represented by proxy, will constitute a
quorum to transact business at the Annual Meeting.
This Proxy Statement is being mailed to shareholders on or about April 3,
1998.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record on March 19, 1998 are entitled to cast one vote for
each share of common stock held by them on March 19, 1998. There were 6,313,600
shares of common stock issued and outstanding and entitled to vote at the close
of business on March 19, 1998.
On March 31, 1997, the Company's former parent, Tridex Corporation
("Tridex"), completed the pro rata distribution to its shareholders of record of
all shares of the Company previously held by it. As a result, the Company is no
longer a subsidiary of Tridex.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the beneficial ownership
of the Company's common stock as of March 19, 1998 for each person who is known
by the Company to own beneficially more than five percent of the Company's
issued and outstanding common stock, and each person who is a Director, a
nominee for Director, or an individual named in the Summary Compensation Table,
and all Directors and
<PAGE> 4
Executive Officers of the Company as a group. The persons named in such table
have furnished the information set forth opposite their respective names:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNERSHIP CLASS(2)
--------------------------- ---------- ----------
<S> <C> <C>
Thomas R. Schwarz(3)........................................ 16,037 *
Charles A. Dill(4).......................................... 8,671 *
Graham Y. Tanaka(5)......................................... 104,533 1.7%
Bart C. Shuldman(6)......................................... 57,357 *
Richard L. Cote(7).......................................... 47,846 *
David A. Ritchie(8)......................................... 7,405 *
John Cygielnik(9)........................................... 13,239 *
Michael S. Kumpf(10)........................................ 25,220 *
All Directors and Executive Officers as a group (10
persons).................................................. 305,015 4.8%
Seth M. Lukash(11).......................................... 525,319 8.3%
The Kaufmann Fund, Inc.(12)................................. 442,700 7.0%
</TABLE>
- ---------------
(1) Except as otherwise indicated, each of the persons named in the table has
sole voting power and sole investment power with respect to the shares set
forth opposite their name.
(2) An asterisk denotes beneficial ownership of less than 1%.
(3) Includes 1,000 shares deemed to be beneficially owned by Mr. Schwarz in his
capacity as trustee of a trust for the benefit of his granddaughter and
1,000 shares beneficially owned by his daughter, as to which shares he
disclaims beneficial ownership. Includes (i) 5,000 shares of restricted
stock of the Company granted under the 1996 Stock Plan which are not vested
and (ii) 2,500 shares subject to options granted under the Non-Employee
Directors' Stock Plan. Mr. Schwarz's address is 60 Westcliff Road, Weston,
Massachusetts 02193.
(4) Includes 2,500 shares subject to options granted under the Non-Employee
Directors' Stock Plan. Includes 3,814 shares deemed beneficially owned by
Mr. Dill for the benefit of his parents, as to which shares he disclaims
beneficial ownership. Mr. Dill's address is care of Gateway Associates,
8000 Maryland Avenue, Suite 1190, St. Louis, Missouri 63105.
(5) Includes 2,500 shares subject to options granted under the Non-Employee
Directors' Stock Plan. Includes 2,010 shares deemed beneficially owned by
Mr. Tanaka for the benefit of his children. Mr. Tanaka's address is care of
Tanaka Capital Management, Inc., Suite 1432, 230 Park Avenue, New York, New
York 10169.
(6) Include 38,200 shares of restricted stock of the Company not vested and
14,560 shares subject to options, granted under the 1996 Stock Plan. Mr.
Shuldman's address is care of TransAct Technologies Incorporated, 7 Laser
Lane, Wallingford, Connecticut 06492.
(7) Includes 10,600 shares of restricted stock of the Company not vested and
8,100 shares subject to options, granted under the 1996 Stock Plan. Mr.
Cote's address is care of TransAct Technologies Incorporated, 7 Laser Lane,
Wallingford, Connecticut 06492.
(8) Includes 3,000 shares of restricted stock of the Company not vested and
3,400 shares subject to options, granted under the 1996 Stock Plan. Mr.
Ritchie's address is care of TransAct Technologies Incorporated, 7 Laser
Lane, Wallingford, Connecticut 06492.
(9) Includes 5,000 shares of restricted stock of the Company not vested and
4,400 shares subject to options, granted under the 1996 Stock Plan. Mr.
Cygielnik's address is care of Magnetec Corporation, 7 Laser Lane,
Wallingford, Connecticut 06492.
(10) Includes 5,000 shares of restricted stock of the Company not vested and
4,400 shares subject to options, granted under the 1996 Stock Plan. Mr.
Kumpf's address is care of Ithaca Peripherals, a division of Magnetec
Corporation, 20 Bomax Drive, Ithaca, New York 14850.
2
<PAGE> 5
(11) Based on information provided in Schedule 13D filed pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") on February 25, 1998.
Mr. Lukash's address is care of Tridex Corporation, 61 Wilton Road,
Westport, Connecticut 06880.
(12) Based on information provided in Schedule 13G filed pursuant to the
Exchange Act on February 3, 1998. The address of The Kaufmann Fund is 140
E. 45th Street, New York, New York 10017.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
Executive Officers and persons who beneficially own more than 10% of a
registered class of the Company's equity securities ("10% Owners") to file with
the Securities and Exchange Commission ("SEC") and the NASDAQ National Market
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Directors, Executive Officers and 10%
Owners are required by SEC regulation to furnish the Company with copies of all
Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, or written representations that no other
reports were required for those persons, the Company believes that, during the
fiscal year ended December 31, 1997, all Section 16(a) filing requirements
applicable to Directors, Executive Officers and 10% Owners were complied with
except as follows: Mr. Tanaka failed to timely file two reports to report two
transaction and Mr. David A. Ritchie, an Executive Officer, failed to timely
file his initial form to report his becoming an Executive Officer.
ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, two persons are to be elected to
hold office as Directors until the Annual Meeting of Shareholders to be held in
the year 2001 or until their successors are duly elected and qualified. In the
absence of instructions to the contrary, the persons named in the enclosed form
of proxy as members of the Proxy Committee will vote such proxy "FOR" the
election of the nominees named below. Should a nominee become unavailable, which
is not anticipated, it is intended that proxies will be voted for the election
of such other person as the Board of Directors may recommend in place of such
nominee.
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTOR
Graham Y. Tanaka, 50, has been a Director of the Company since its
formation in June 1996. Mr. Tanaka has been President of Tanaka Capital
Management, Inc., an investment management firm, since 1986. From 1989 until
1996, Mr. Tanaka was a limited partner of McFarland Dewey & Co., a financial
advisor to the Company and Tridex. He is a Director of Tridex.
Richard L. Cote, 56, has been Executive Vice President, Chief Financial
Officer, Treasurer, Secretary and a Director of the Company since its formation
in June 1996. Prior thereto, he served as Senior Vice President and Chief
Financial Officer of Tridex since September 1993. Mr. Cote joined Tridex as a
Vice President in June 1993. From October 1991 to March 1993, he was a
self-employed management consultant. Previously, Mr. Cote held management
positions with Wang Laboratories, Inc., Emhart Corporation, Xerox Corporation
and Price Waterhouse LLP.
VOTE REQUIRED
The election of Messers. Tanaka and Cote as Directors of the Company
requires the affirmative vote of the holders of a plurality of the shares of
common stock present in person or represented by proxy and entitled to vote.
Abstentions by holders of such shares and broker non-votes with respect to the
election of directors will be included in determining the presence of such
quorum but will not be included in determining whether nominees have received
the vote of such plurality.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ELECTION OF
MESSRS. TANAKA AND COTE AS DIRECTORS OF THE COMPANY.
3
<PAGE> 6
INFORMATION CONCERNING DIRECTORS WHOSE TERMS WILL EXPIRE AT THE 1999 ANNUAL
MEETING
Thomas R. Schwarz, 61, Chairman of the Board, has been a Director of the
Company since its formation in June 1996. Mr. Schwarz was Chairman and Chief
Executive Officer of Grossman's Inc., a retailer of building materials, from
1990 to 1994. From 1980 to 1990, he was President, Chief Operating Officer and a
director of Dunkin' Donuts Incorporated, a food service company. Mr. Schwarz is
a Director of Tridex, Foilmark, Inc., Lebhar-Friedman Publishing Company and A&W
Restaurants.
Bart C. Shuldman, 40, has been Chief Executive Officer, President and a
Director of the Company since its formation in June 1996. He joined Magnetec as
Vice President of Sales and Marketing in April 1993 and has served as President
of Magnetec since August 1993 and President of the combined operations of Ithaca
and Magnetec since December 1995. Prior to joining Magnetec, he held several
management positions with Mars Electronics International, a division of Mars,
Incorporated, from 1989 to 1993. Most recently, he was Business Manager for the
North American Amusement, Gaming and Lottery operations. From 1979 to 1989, he
held manufacturing and sales management positions with General Electric Company.
INFORMATION CONCERNING DIRECTOR WHOSE TERM WILL EXPIRE AT THE 2000 ANNUAL
MEETING
Charles A. Dill, 58, has been a Director of the Company since its formation
in June 1996. Mr. Dill is a General Partner of Gateway Associates, a venture
capital firm. From 1991 to 1995, Mr. Dill served as President, Chief Executive
Officer and a Director of Bridge Information Systems, Inc. Mr. Dill currently
serves as a Director of Zoltek Companies, Stifel Financial Corp., Pinnacle
Automation (Alvey Systems) and DT Industries.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CORPORATE SERVICES AGREEMENT
The Company and Tridex entered into a Corporate Services Agreement (the
"Services Agreement"), under which Tridex and its subsidiaries (other than the
Company) have provided certain services, including certain employee benefit
administration, human resource and related services, administrative services,
risk management, regulatory compliance, preparation of tax returns, and certain
financial and other services to the Company, which were reimbursed at actual
cost. The Services Agreement provided for a transition by the Company to
independent corporate administrative and financial staffing. Designated Tridex
employees have been made available for stated percentages of their working time
to the Company through different dates, ending on December 31, 1997. Until March
31, 1997, pursuant to the Services Agreement, Tridex agreed to pay a portion of
the direct employment costs of Richard L. Cote, the former Senior Vice President
and Chief Financial Officer of Tridex, who now serves the Company as Executive
Vice President, Chief Financial Officer and a Director. The Company paid Tridex
approximately $103,000 during the year ended December 31, 1997 under the
Services Agreement. The Services Agreement expired on December 31, 1997.
TAX SHARING AGREEMENT
The Company and Tridex entered into a Tax Sharing Agreement (the "Tax
Agreement") which provides for the terms under which the Company is to be
included in Tridex's consolidated Federal income tax return for the period from
the Company's initial public offering until March 31, 1997. During this period,
for financial accounting purposes, the Company computed its income tax expense
or benefit as if it filed separate returns using those elements of income and
expense as reported in the Company's financial statements. To the extent that
the Company incurred losses or realized tax credits during that portion of 1997,
Tridex paid to the Company the amount of any tax reduction Tridex realized by
utilizing those losses or credits in its consolidated income tax return. In
addition, tax benefits related to certain tax carryforwards arising prior to
March 31, 1997 will be paid to Tridex as the carryforwards are realized. Any tax
deficiencies or refunds resulting from amending prior year tax returns or
examinations by the taxing authorities are the responsibility of or inure to the
benefit of the Company to the extent they relate to the Company or its
predecessor entities. For 1997, the Company paid to Tridex, net of refunds,
approximately $410,000 under the Tax Agreement.
4
<PAGE> 7
PRINTER SUPPLY AGREEMENT
The Printer Supply Agreement (the "Printer Agreement"), which has an
initial term expiring on December 31, 1999, provides for the Company to sell to
Ultimate Technology Corporation ("Ultimate"), a subsidiary of Tridex, and for
Ultimate to purchase from the Company, POS printers at discounts from list
prices comparable to discounts historically offered to Ultimate as a subsidiary
under common ownership with the Company. In consideration for these favorable
price terms, the Printer Agreement requires Ultimate to purchase from the
Company at least three quarters of its total POS printer requirements. The
Company may, in its discretion, increase its list prices from time to time, and
the prices offered to Ultimate will reflect the discount rate applied to such
increased list prices. During the year ended December 31, 1997, Ultimate
purchased from the Company $2,675,000 of POS printers.
AGREEMENT REGARDING TRIDEX RIBBON DIVISION
Tridex and Magnetec Corporation, a subsidiary of the Company ("Magnetec"),
entered into an agreement regarding the transfer by Magnetec to Tridex of
substantially all of the assets used in connection with a line of business
involving the manufacture, marketing and sale of ribbon for use in certain
printers manufactured by the Company (the "Ribbon Business"). Under the
agreement, Tridex became the owner of the Ribbon Business and employs the
manufacturing and supervisory personnel required to conduct such business, and
the Company provides Tridex with space within its Wallingford, Connecticut
manufacturing facility and certain support services. As a monthly fee for the
space and support services provided to Tridex for the Ribbon Business, Tridex
pays the Company an amount equal to the direct and indirect costs incurred by
the Company to provide the space and render such services, plus certain related
costs. For the year ended December 31, 1997, Tridex paid approximately $254,000
to the Company for the provision of such space and services. The Company paid
Tridex approximately $4,000 for ribbons during 1997.
5
<PAGE> 8
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1997, the Board of Directors held nine
meetings. All Directors were present at all of the meetings of the Board of
Directors.
The Board of Directors has an Audit Committee, which held two meetings
during the year ended December 31, 1997, at which all members were present. The
Audit Committee is comprised of Messrs. Thomas R. Schwarz, Graham Y. Tanaka and
Charles A. Dill, with Mr. Dill serving as Chairman. The functions of the Audit
Committee are to recommend the firm to be appointed as independent accountants
to audit the Company's financial statements and to perform services related to
the audit, review the scope and results of the audit with the independent
accountants, review with management and the independent accountants the
Company's year-end operating results, consider the adequacy of the Company's
internal accounting and control procedures, review the non-audit services to be
performed by the independent accountants and consider the effect of such
performance on the accountants' independence, as well as such other matters
relating to the Company's financial and accounting practices as such Committee
deems appropriate.
The Board of Directors has a Compensation Committee comprised of Messrs.
Thomas R. Schwarz, Graham Y. Tanaka and Charles A. Dill, with Mr. Schwarz
serving as Chairman. The Compensation Committee has the responsibility for
reviewing and recommending the compensation arrangements for all directors and
officers of the Company, approving such arrangements for other senior level
employees and administering and taking such other action as may be required in
connection with certain compensation plans of the Company. The Compensation
Committee held two meetings during the year, at which all members were present.
The Board of Directors has a Nominating Committee which consists of the
full Board, with Mr. Tanaka as Chairman. The Nominating Committee has the
responsibility for recommending to the Board of Directors nominees for election
to the Board. The Nominating Committee will consider nominees recommended by
shareholders in accordance with proper nomination procedures specified in the
Company's By-laws, which provide for timely prior written notice to the
Secretary of the Company in proper form of a planned nomination for the Board of
Directors. All nominations by shareholders must be delivered to or mailed and
received at the principal executive offices of the Company not less than 30 nor
more than 60 days prior to the meeting at which election of Directions will take
place. The notice must set forth in writing (i) for each person proposed to be
nominated, all information relating to each such person that is required to be
disclosed in solicitations of proxies for election of directors pursuant to
Regulation 14A under the Exchange Act, including such person's written consent
to bring named in the proxy and to serving as a director, (ii) for the
shareholder giving notice, the (x) name and address of such shareholder as they
appear on the Company's books and (y) the class and number of shares of the
Company beneficially owned by such shareholder. The Nominating Committee did not
hold a meeting during the year ended December 31, 1997.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following tables set forth information concerning the compensation
earned by the Company's Chief Executive Officer and the four most highly
compensated Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ----------------------- ALL
OTHER
RESTRICTED SECURITIES COMPEN-
STOCK UNDERLYING SATION
FISCAL SALARY(1) BONUS(2) AWARDS(3) OPTIONS(4) (5)
NAME AND PRINCIPAL POSITIONS YEAR ($) ($) ($) (#) ($)
---------------------------- ------ --------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Bart C. Shuldman.................. 1997 $210,000 $67,200 $566,125 70,000 $4,137
President and Chief Executive 1996 $ 64,038 $70,000 -- 52,800 $1,085
Officer
Richard L. Cote................... 1997 $160,000 $44,800 $143,875 17,500 $3,800
Executive Vice President, Chief 1996 $ 51,923 $35,000 -- 33,000 $1,235
Financial Officer, Treasurer and
Secretary
David A. Ritchie.................. 1997 $108,922 $69,792 $ 35,625 10,000 $2,019
Executive Vice President, Sales
and Marketing
John Cygielnik.................... 1997 $108,622 $44,204 $ 59,375 2,000 $2,165
Senior Vice President -- General 1996 $ 36,014 $ 3,329 -- 20,000 $ 540
Manager (Wallingford, CT
facility)
Michael S. Kumpf.................. 1997 $129,790 $10,995 $ 59,375 2,000 $3,345
Senior Vice
President -- Engineering..... 1996 $ 42,231 $31,863 -- 20,000 $1,409
</TABLE>
- ---------------
(1) The amounts for 1996 reflect compensation paid to Messrs. Shuldman, Cote,
Cygielnik and Kumpf by the Company for the period from August 22, 1996, the
date of the Company's initial public offering, through December 31, 1996.
Mr. Ritchie was not an Executive Officer in 1996. Neither the Chief
Executive Officer nor any of the other Executive Officers named in the table
received perquisites or other personal benefits in an amount which exceeded
10% of their salary plus bonus during the fiscal year.
(2) The bonus amounts are payable pursuant to the Company's Incentive
Compensation Plan, except as follows. The bonus paid to Mr. Ritchie
represents commissions on sales by the Company. The bonus amounts paid to
Messrs. Shuldman and Cote in 1996 were paid at the discretion of the
Compensation Committee of the Board of Directors and not pursuant to the
Incentive Compensation Plan.
(3) All restricted stock awards were granted under the Company's 1996 Stock
Plan. The value of the restricted stock awards is based on the closing
market price of the Company's common stock on the date of grant. At the end
of fiscal year 1997, the number of shares of common stock subject to
restricted awards and the value of such shares, based on the closing price
of the Company's common stock on such date, were as follows: Mr. Shuldman:
38,200 shares and $424,975; Mr. Cote: 10,600 shares and $117,925; Mr.
Ritchie: 3,000 shares and $33,375; Mr. Cygielnik: 5,000 shares and $55,625;
and Mr. Kumpf: 5,000 shares and $55,625. All grants of shares of restricted
stock vest in five equal installments beginning on the first anniversary of
the date of grant, except with respect to 25,000 shares awarded to Mr.
Shuldman and 4,000 shares awarded to Mr. Cote, which vest 100% at the end of
five years from the date of grant. Currently, no dividends may be paid on
shares of the Company's common stock.
(4) All options were granted under the Company's 1996 Stock Plan.
(5) For all the Executive Officers named in the table, these amounts consist of
Company contributions under the Company's 401(k) Plan and other benefits
such as life insurance.
7
<PAGE> 10
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
------------------------------------------------------------- ---------------------
PERCENT OF TOTAL
OPTIONS GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN THE BASE PRICE EXPIRATION
NAME GRANTED(#)(2) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------------- ------------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bart C. Shuldman......... 20,000 8.8% $ 13.75 1/23/07 $173,000 $ 438,200
50,000 22.0% $16.375 8/13/07 $515,000 $1,305,000
Richard L. Cote.......... 7,500 3.3% $ 13.75 1/23/07 $ 64,875 $ 164,325
10,000 4.4% $16.375 8/13/07 $103,000 $ 261,000
David A. Ritchie......... 5,000 2.2% $ 13.75 1/23/07 $ 43,250 $ 109,550
5,000 2.2% $16.375 7/22/07 $ 51,500 $ 130,500
John Cygielnik........... 2,000 0.9% $ 13.75 1/23/07 $ 17,300 $ 43,820
Michael S. Kumpf......... 2,000 0.9% $ 13.75 1/23/07 $ 17,300 $ 43,820
</TABLE>
- ---------------
(1) The potential realizable value portion of the foregoing table illustrates
the value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compared rates
of appreciation on the Company's common stock over the term of the options.
This hypothetical value is based entirely on assumed annual growth rates of
5% and 10% in the value of the Company's stock price over the term of the
options. The assumed rates of growth were selected by the Securities and
Exchange Commission for illustration purposes only, and are not intended to
predict future stock prices, which will depend upon market conditions and
the Company's future performance and prospects. These numbers do not take
into account provisions of certain options providing for termination of the
option following termination of employment, non-transferability or vesting
over various periods.
(2) All options were granted under the Company's 1996 Stock Plan. In general,
options granted under the 1996 Plan are at an exercise price equal to 100%
of the fair market value of the common stock on the date of grant, expire
ten years from the date of grant, and become exercisable at a rate of 20%
per year on the first through fifth anniversaries of the date of grant. In
the event of a change-in-control, stock options awarded under the 1996 Stock
Plan not previously exercisable and vested shall become fully exercisable
and vested.
AGGREGATED OPTION EXERCISES IN 1997 AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT OPTIONS AT
ACQUIRED ON REALIZED FISCAL YEAR-END(#) FISCAL YEAR-END($)
NAME EXERCISE(#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Bart C. Shuldman......... 0 0 10,560/112,240 $27,720/$110,880
Richard L. Cote.......... 0 0 6,600/ 43,900 $17,325/$ 69,825
David A. Ritchie......... 0 0 2,400/ 19,600 $ 6,300/$ 25,200
John Cygielnik........... 0 0 4,000/ 18,000 $10,500/$ 36,240
Michael S. Kumpf......... 0 0 4,000/ 18,000 $10,500/$ 36,240
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Under the terms of an Employment Agreement dated July 31, 1996 between Bart
C. Shuldman and the Company, Mr. Shuldman serves as President and Chief
Executive Officer at the pleasure of the Board of Directors. Under the terms of
this agreement, Mr. Shuldman's annual base salary was $210,000 for the fiscal
year ended December 31, 1997. Effective January 1, 1998, the Compensation
Committee of the Board of Directors voted to increase his annual base salary to
$245,000. If Mr. Shuldman's employment is terminated
8
<PAGE> 11
other than for cause, Mr. Shuldman shall be entitled to continue to receive (i)
his annual base salary and all other benefits for a period of two years from the
date of termination and (ii) a pro rata portion of his annual target bonus
amount for the year of termination. If Mr. Shuldman's employment is terminated
other than for cause, or if Mr. Shuldman resigns for specified reasons, within
one year of a change in control of the Company, for a period of three years from
the date of termination Mr. Shuldman shall be entitled to receive (i) his annual
base salary and all benefits and (ii) his annual target bonus amount. In
addition, the Company shall cause the immediate vesting of all stock options
granted to Mr. Shuldman under the 1996 Stock Plan.
Under the terms of an Employment Agreement dated July 31, 1996 between
Richard L. Cote and the Company, Mr. Cote serves as Executive Vice President and
Chief Financial Officer. If Mr. Cote's employment is terminated other than for
cause, Mr. Cote shall be entitled to continue to receive his annual base salary,
a pro rata portion of the annual target bonus for the year of termination and
all benefits for one year from the date of termination. If Mr. Cote's employment
is terminated other than for cause, or if Mr. Cote resigns for specified
reasons, within one year of a change in control of the Company, Mr. Cote shall
be entitled to continue to receive his annual base salary, annual target bonus
and all benefits for a period of two years from the date of termination. In
addition, the Company shall cause the immediate vesting of all options granted
to Mr. Cote under the 1996 Stock Plan. Under the terms of this agreement, Mr.
Cote's base salary for the fiscal year ended December 31, 1997 was $160,000.
Effective January 1, 1998, the Compensation Committee of the Board of Directors
voted to increase Mr. Cote's annual base salary to $170,000.
Under the terms of Severance Agreements between the Company and each of
David A. Ritchie, John Cygielnik and Michael S. Kumpf, dated July 1, 1997,
September 10, 1996 and September 4, 1996, respectively, if Messrs. Ritchie's,
Cygielnik's or Kumpf's employment is terminated other than for cause, each
executive shall be entitled to continue to receive, for six months following the
date of termination, the annual base salary, a pro rata portion of the annual
target bonus for the year of termination and all benefits which would otherwise
have been payable to each of them. If the employment of Messrs. Ritchie,
Cygielnik or Kumpf is terminated other than for cause, or if they resign for
specified reasons, within one year of a change of control of the Company, each
shall be entitled to continue to receive his annual base salary, annual target
bonus and all benefits for a period of one year from the date of termination. In
addition, the Company shall cause the immediate vesting of all stock options
granted under the 1996 Stock Plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to requirements under Federal securities laws, the Compensation
Committee of the Company is required to provide a report on the compensation and
benefits provided to the Company's Executive Officers. The following report
describes the function and composition of the Compensation Committee, sets forth
the compensation policies and goals of the Company, and provides a description
of how compensation for Executive Officers is determined.
The Compensation Committee
There are three members of the Compensation Committee, all of whom are
outside directors: Thomas R. Schwarz, Chairman, Graham Y. Tanaka and Charles A.
Dill. The Compensation Committee (a) establishes the general compensation
policies for the Company; (b) approves the hiring and firing of all Executive
Officers and any staff reporting directly to the Chief Executive Officer of the
Company; and (c) approves the compensation plans and specific compensation
levels for all Executive Officers and any staff reporting directly to the Chief
Executive Officer of the Company. The Compensation Committee also approves the
issuance of all awards to employees of the Company and its subsidiaries under
the Company's 1996 Stock Plan.
Compensation Policies and Goals
The primary goals of the Company's compensation policies are to help
attract, retain, motivate and reward management of the Company and its operating
units, while, at the same time, aligning their interests closely with those of
the Company and its shareholders. The Company seeks to attract and retain
management by offering a competitive total compensation package. To align the
interests of management more closely with
9
<PAGE> 12
those of the Company as a whole and reward individual initiative and effort, the
Company seeks to promote performance-based compensation where contribution to
the Company as a whole is rewarded. Through the use of performance-based plans
that reward attainment of operating unit or Company goals, the Company seeks to
foster an attitude of teamwork. The Company also believes that the use of equity
ownership is an important tool to ensure that the efforts of management are
consistent with the objectives of its shareholders and through the use of stock
awards seeks to promote increased ownership by management of the Company.
The Compensation Committee has tried to achieve the above goals utilizing
publicly available information regarding competitive compensation. The
Compensation Committee utilizes an independent consultant to ensure that
compensation for the Company's management is competitive, meets the above-stated
objectives and is consistent for all members of management of the Company and
its operating units.
Compensation Components
At present, the compensation of the Executive Officers of the Company
consists of a combination of salary, cash bonuses, stock options, restricted
stock and participation in the Company's 401(k) plan, as well as the provision
of medical and other personal benefits typically offered to corporate
executives. The Executive Officers of the Company are parties to employment
agreements which provide for severance payments under certain circumstances.
These agreements are described under "Employment Contracts, Termination of
Employment and Change-In-Control Arrangements" for the Executive Officers listed
in the Summary Compensation Table.
Salaries: At January 1, 1997, base salaries were fixed for the subsequent
twelve months based on the Compensation Committee's assessment of competitive
base salaries. The Compensation Committee targets the Chief Executive Officer's
salary at the mean of that for the Company's peer group. For 1997, Bart C.
Shuldman, President and Chief Executive Officer of the Company, earned an annual
base salary of $210,000. Mr. Shuldman's base salary was adjusted to $245,000 for
1998.
Cash Bonuses: The Company maintains an incentive compensation plan for all
salaried employees of the Company and its operating units, including key
executives, which provides for the payment of cash bonuses. Under the plan, an
incentive target, as well as individual goals and objectives, are fixed for each
employee at the beginning of the year and bonuses are paid shortly after the end
of the year. In order to earn any incentive compensation under the plan, certain
financial goals, principally operating income for employees of operating units
and earnings per share for corporate executives, must be met. The percentage of
the incentive target to be paid varies based on the level of attainment of the
financial goals; the incentive target range is from 35% to 150%. Other
components of the award calculation include the individual incentive target,
which currently ranges from 20% to 45% of base salary for key employees, and a
rating of the participant's performance versus individual objectives during the
plan period.
For 1997, the goals for Mr. Shuldman related principally to the attainment
of a specified level of operating income and certain individual objectives. His
target bonus for 1997 was 40% of his base salary, of which he achieved 80% (or
32% of base salary) for 1997. For 1998, Mr. Shuldman's target bonus is 45% of
his base salary. For 1997, bonuses in varying amounts were paid to other plan
participants.
Stock Awards: Under the Company's 1996 Stock Plan, stock options and
restricted stock are granted by the Compensation Committee. All salaried
employees are granted an initial award of stock options on their date of hiring
for a fixed number of shares depending on their level, which vests over five
years. In each year following the initial award, eligible employees may be
granted an annual award in varying amounts depending on their level and
individual performance. During 1997, a total of 103,500 stock options were
granted to Executive Officers of the Company, of which Bart C. Shuldman received
stock options for 70,000 shares. Also, during 1997, a total of 66,800 shares of
restricted stock were granted to Executive Officers of the Company, of which Mr.
Shuldman received 38,200 shares of restricted stock.
Other Benefit Plans: Executive Officers of the Company may participate in
the Company's nondiscriminatory 401(k) Retirement Plan.
10
<PAGE> 13
The Committee strives to assure that the executive compensation serves the
best interests of the shareholders and the Company.
Compensation Committee
Thomas R. Schwarz, Chairman
Graham Y. Tanaka
Charles A. Dill
COMPENSATION OF DIRECTORS
During the year ended December 31, 1997, each outside Director of the
Company received as compensation for services rendered and expenses incurred (a)
$2,000 for each fiscal quarter served as Director, (b) $750 for each Board of
Directors' meeting attended and (c) $300 for each Board of Directors' Committee
meeting attended. Directors receive $250 for each telephonic meeting, and
Chairmen of Committees receive $600 for each Committee meeting. The Chairman
also received as compensation (a) $7,500 for each fiscal quarter served as
Chairman and (b) a grant of 5,000 restricted shares, effective April 1, 1997.
Pursuant to the terms of the Company's Non-Employee Directors' Stock Plan,
each director who is not an employee of the Company receives, beginning in 1997,
an annual grant of non-qualified options to purchase 2,500 shares of common
stock. Non-employee directors who were directors on the date of the Company's
initial public offering received non-qualified options to purchase 10,000 shares
of common stock and each non-employee director elected thereafter will receive a
non-qualified option to purchase 5,000 shares of common stock. Each option is
granted at an exercise price equal to 100% of the fair market value of the
common stock on the date of grant, expires ten years form the date of grant, and
becomes exercisable at a rate of 20% per year on the first through fifth
anniversaries of the date of grant. In the event of a change-in-control, stock
options awarded under the Non-Employee Directors' Stock Plan not previously
exercisable and vested shall become fully exercisable and vested.
11
<PAGE> 14
CORPORATE PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total return on
the Company's common stock from August 22, 1996, the effective date of its
initial public offering, through December 31, 1997, with the CRSP Total Return
Index for the NASDAQ Stock Market (US) and the NASDAQ Computer Manufacturer
Stocks. The graph assumes that $100 was invested on August 22, 1996 in each of
the Company's common stock, the CRSP Total Return Index for the NASDAQ Stock
Market (US) and the NASDAQ Computer Manufacturer Stocks and that all dividends
were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
TRANSACT TECHNOLOGIES INCORPORATED COMMON STOCK,
THE CRSP TOTAL RETURN INDEX FOR THE NASDAQ STOCK MARKET (US),
AND THE NASDAQ COMPUTER MANUFACTURER STOCKS
<TABLE>
<CAPTION>
CRSP TOTAL
TRANSACT RETURN INDEX FOR NASDAQ
TECHNOLOGIES THE NASDAQ COMPUTER
MEASUREMENT PERIOD INCORPORATED STOCK MARKET MANUFACTURER
(FISCAL YEAR COVERED) COMMON STOCK (US) STOCK
<S> <C> <C> <C>
8/22/96 100.00 100.00 100.00
12/31/96 122.06 112.69 117.96
12/31/97 130.88 138.34 142.69
</TABLE>
12
<PAGE> 15
RATIFICATION OF SELECTION OF PRICE WATERHOUSE LLP AS
INDEPENDENT ACCOUNTANTS FOR 1998
The Board of Directors has selected Price Waterhouse LLP as independent
accountants to audit the financial statements of the Company for the 1998 fiscal
year. This selection is being presented to the shareholders for ratification at
the meeting. Price Waterhouse LLP has audited the Company's financial statements
since the Company's formation.
A representative of Price Waterhouse LLP is expected to be present at the
meeting, will have the opportunity to make a statement, and is expected to be
available to respond to appropriate questions.
VOTE REQUIRED
The ratification of the selection of Price Waterhouse LLP as independent
accountants for 1998 requires the affirmative vote of a majority of the shares
of common stock present in person or represented by proxy and entitled to vote.
Abstentions by holders of such shares with respect to voting on this matter will
have the effect of a negative vote; broker non-votes with respect to voting on
this matter will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTS FOR 1998.
13
<PAGE> 16
AMENDMENT OF 1996 STOCK PLAN
The Board of Directors has unanimously adopted and recommends that the
shareholders consider and approve an amendment to the 1996 Stock Plan to
increase the number of shares of common stock which may be subject to awards
granted under the 1996 Stock Plan.
The purpose of the 1996 Stock Plan is to provide a way for the Company to
attract and retain the best available talent and encourage the highest level of
performance by employees and other persons who perform services for the Company.
By affording eligible persons the opportunity to acquire proprietary interests
in the Company and by providing them incentives to put forth maximum efforts for
the success of the Company's business, the 1996 Stock Plan is expected to serve
the best interests of the Company and its shareholders.
The 1996 Stock Plan authorizes the issuance of up to 600,000 shares of
common stock pursuant to awards granted under the 1996 Stock Plan. As of
February 27, 1998, 75,800 shares of common stock have been issued pursuant to
the grant of restricted stock awards, 9,200 shares of common stock have been
issued pursuant to the exercise of options granted under the 1996 Stock Plan,
options to purchase an additional 491,900 shares have been granted and were
outstanding under the 1996 Stock Plan. Therefore, only 23,100 shares were
available for future grants under the 1996 Stock Plan.
To assure that sufficient shares are available to provide incentives to
those employees, directors, officers and consultants of the Company and any
subsidiaries who will be responsible for the Company's future growth and
continued success, and to attract new employees, the Board of Directors has
adopted the amendment to the 1996 Stock Plan. The amendment increases by 300,000
shares, to 900,000 shares, the number of shares of common stock which may be
issued pursuant to awards granted under the 1996 Stock Plan. To become
effective, the amendment to the 1996 Stock Plan must be approved by the
Company's shareholders. If shareholder approval is not obtained, the Company may
continue to grant awards under the 1996 Stock Plan in accordance with its terms.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ADOPTION OF
THE AMENDMENT TO THE COMPANY'S 1996 STOCK PLAN.
A discussion of the material features of the 1996 Stock Plan follows, which
discussion is subject to and qualified by the complete text of the 1996 Stock
Plan.
ADOPTION
Effective July 30, 1996, the Company adopted the 1996 Stock Plan, which was
approved by Tridex, the Company's sole shareholder.
SHARES SUBJECT TO 1996 STOCK PLAN
The 1996 Stock Plan provides for the grant of awards covering a maximum of
600,000 shares of common stock (subject to adjustment in the event of stock
dividends, split-ups, recapitalizations and the like). Shares reserved for
issuance, but never issued, such as shares covered by expired or terminated
options, generally will be available for subsequent awards. Shares awarded under
the 1996 Stock Plan may be either authorized but unissued shares or issued
shares reacquired by the Company. The last sale price for the common stock as
reported by the Nasdaq National Market System on February 27, 1998 was $10.00
per share.
ADMINISTRATION
The 1996 Stock Plan is administered by the Compensation Committee of the
Board of Directors of the Company. Among other things, the Compensation
Committee has the authority to determine employees and other persons to whom
options and other awards will be granted, whether options will be designated as
incentive stock options or non-qualified options, to determine the terms of any
option agreement or other award, to interpret the 1996 Stock Plan, to prescribe,
amend and rescind rules and regulations, and to make all other determinations in
connection with the 1996 Stock Plan.
14
<PAGE> 17
ELIGIBILITY
Awards will be limited to officers and key employees of the Company and its
subsidiaries, and except in the case of incentive stock options, any other
non-employees who may provide services to the Company or its subsidiaries (all
such eligible individuals are hereinafter referred to as "employees"). The
Compensation Committee will base its selection of award recipients, and its
determination of the number of shares or units to be covered by each award, on
the employee's duties, their present and potential contributions to the
Company's success and such other factors as the Compensation Committee deems
relevant in connection with accomplishing the purposes of the 1996 Stock Plan. A
director of the Company or of a subsidiary who is not also an employee of the
Company will not be eligible to participate in the 1996 Stock Plan. As of
February 27, 1998, approximately 100 persons were eligible to participate in the
1996 Stock Plan.
The selection of participants in, and the nature and size of grants under,
the 1996 Stock Plan are wholly within the discretion of the Compensation
Committee. The Compensation Committee has made no determination regarding the
selection of particular participants to receive awards or the nature of any
awards to be made in 1998.
The table below shows the number of awards granted under the 1996 Stock
Plan to the persons or groups listed in such table during 1997.
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS SHARES OF
GRANTED RESTRICTED STOCK
NAME AND PRINCIPAL POSITIONS IN 1997(1) GRANTED IN 1997(2)
---------------------------- ---------- ------------------
<S> <C> <C>
Bart C. Shuldman............................................ 70,000 38,200
President and Chief Executive Officer
Richard L. Cote............................................. 17,500 10,600
Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
David A. Ritchie............................................ 10,000 3,000
Executive Vice President, Sales and Marketing
John Cygielnik.............................................. 2,000 5,000
Senior Vice President -- General Manager (Wallingford,
CT facility)
Michael S. Kumpf............................................ 2,000 5,000
Senior Vice President -- Engineering
All current Executive Officers as a group................... 103,500 66,800
All current directors who are not Executive Officers, as a 0 5,000
group.....................................................
All current employees, excluding Executive Officers, as a 116,500 7,000
group.....................................................
</TABLE>
- ---------------
(1) See the table "Option Grants in 1997" for information concerning option
grants.
(2) See the table "Summary Compensation Table" for information concerning grants
of restricted stock.
AWARDS UNDER THE 1996 STOCK PLAN
Awards under the 1996 Stock Plan may be granted in the form of incentive
stock options ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), non-qualified stock
options ("Non-qualified Stock Options") (unless otherwise indicated, references
herein to "Options" include both Incentive Stock Options and Non-qualified Stock
Options), stock appreciation rights accompanying Options or granted separately
("Rights"), limited stock appreciation rights accompanying Options ("Limited
Rights"), restricted shares ("Restricted Shares"), or restricted units that
entitle the holder thereof to acquire shares ("Restricted Units"). Awards may be
granted singly, in combination or in tandem and may be made in combination or in
tandem with, in replacement of, or as alternatives to, awards or grants under
any other employee plan maintained by the Company and its present and future
subsidiaries.
15
<PAGE> 18
OPTIONS
Options will have terms determined by the Compensation Committee, but no
Incentive Stock Option may be granted after July 30, 2006, or have a term
exceeding ten years from the date of the grant (five years in the case of an
Incentive Stock Option granted to an employee holding 10% or more of the voting
stock of the Company). Options will become vested and exercisable at such times,
in installments or otherwise, as determined by the Compensation Committee and
set forth in a written agreement evidencing the grant of Options. The
Compensation Committee may accelerate the exercisability of any Option at any
time. In addition, the Compensation Committee may provide in any option
agreement that the Option shall become immediately exercisable in full as to all
shares of common stock remaining subject to the Option upon certain changes in
control. See "Change in Control" below.
The option price will be determined by the Compensation Committee, but in
the case of an Incentive Stock Option, the option price will not be less than
100% of the fair market value of the common stock (110% of the fair market value
in the case of an Incentive Stock Option granted to an employee holding 10% or
more of the voting stock of the Company) on the date on which the Option is
granted. Fair market value means closing price of the common stock as quoted by
the Nasdaq National Market System for the date on which the Option is granted,
or if there are no sales on such date, on the next preceding day on which there
were sales (the "Market Value").
An Option can be exercised by paying the option price either in cash, which
may be paid by check or other instrument acceptable to the Company or, subject
to the approval of the Compensation Committee, in already owned shares of common
stock, or both. Already owned shares of common stock shall be valued at the
Market Value on the date of exercise, or if there were no sales on such date, on
the next preceding day on which there were sales. The option price may also be
paid by surrendering any outstanding awards under the 1996 Stock Plan, or a
portion of the shares of common stock that otherwise would be distributed upon
exercise of the option. In addition, any amount necessary to satisfy applicable
Federal, state or local tax requirements shall be paid promptly upon
notification of the amount due.
Payment of the option price in already owned common stock contemplates
possible successive and substantially simultaneous exercises which might permit
the holder to start with a relatively small number of shares of common stock and
exercise all then exercisable options with no cash outlay. In such case, the
holder would receive that number of shares of common stock which equals the
"appreciation value" of the option (i.e., the increase in value or spread equal
to the excess of the aggregate Market Value on the exercise date of the shares
subject to the Option over the aggregate exercise price of the Option).
The Compensation Committee may, in lieu of delivering all or a portion of
the shares of common stock as to which an Option has been exercised, pay the
employee the appreciation value in cash or in shares of common stock or, in the
case of a Non-qualified Stock Option, defer payment and credit the amount of the
appreciation value to the account of the employee on the Company's books and (i)
treat the amount credited to such account as if it had been invested in the
manner from time to time determined by the Compensation Committee, with
dividends or other income thereon being deemed to have been so reinvested, or
(ii) for the Company's convenience, contribute the amount credited to such
account to a trust, which may be revocable by the Company, that would invest for
the participants in a manner determined by the Compensation Committee and set
forth in the instrument creating such trust.
Loans may be made by the Company in connection with the exercise of Options
to such option holders as the Compensation Committee, in its discretion, may
determine, subject to certain limitations in the case of Incentive Stock
Options. No loan made in connection with the exercise of Options shall exceed
the Market Value on the date of exercise of the common stock covered by the
Option, or portion thereof, exercised by the holder. Such loans will bear
interest at rates established by the Compensation Committee from time to time,
which rates may be below then current market rates (except in the case of
Incentive Stock Options), and will be for such duration and subject to such
additional terms and conditions as the Compensation Committee shall determine.
No loan shall have an initial term exceeding five years, but any such loan may
be renewable at the discretion of the Compensation Committee. Each loan will be
secured by shares of common stock having a Market Value on the date of the loan
at least equal to the principal amount of the loan.
16
<PAGE> 19
Upon, but not until, the exercise of an Option or portion thereof in
accordance with the 1996 Stock Plan, the option agreement, and such rules and
regulations as may be established by the Compensation Committee, the holder of
the exercised Option shall have the rights of a shareholder with respect to the
common stock to be issued as a result of such exercise.
RIGHTS
A Right may be awarded in connection with any Option granted under the 1996
Stock Plan, either at the time of grant or subsequently until any time prior to
the exercise, termination or expiration of the Option ("Tandem Right"). A Tandem
Right will be subject, in general, to the same terms and conditions as the
related Option and shall be exercisable only to the extent the Option is
exercisable. A right may also be awarded separately (a "Free-standing Right").
The term of each Free-standing Right shall be determined by the Compensation
Committee. Free-standing Rights will become vested and exercisable at such
times, in installments or otherwise, as determined by the Compensation Committee
and set forth in a written agreement evidencing the grant of the Free-standing
Right. The Compensation Committee may accelerate the exercisability of any
Free-standing Right at any time. In addition, the Compensation Committee may
provide in any agreement covering a Free-standing Right that the Free-standing
Right shall become immediately exercisable in full upon certain changes in
control. See "Change in Control" below. The price per share specified in a
Free-standing Right will not be less than the closing price of the common stock
averaged over a period determined by the Compensation Committee not exceeding 30
days and ending on the date of grant.
Upon exercise of a Right (subject in the case of a Tandem Right to the
surrender of the unexercised related Option or a portion thereof), the holder
will be entitled to receive cash, shares of common stock or such combination
thereof as the holder may elect, in an amount equal to the excess of the Market
Value of the common stock over the option price or the price specified in the
Right with respect to which the Right is exercised. An officer or director of
the Company may be restricted from exercising a Right for cash in certain
circumstances. The Compensation Committee shall have sole discretion as to the
timing of such payments, whether in one lump sum or in annual installments or
otherwise deferred. If neither the Right nor (in the case of a Tandem Right) the
related Option is exercised within the period of exercisability, the Right will
be deemed exercised at the end of such period, and an appropriate payment will
be made to the employee in cash.
The 1996 Stock Plan also authorizes the Compensation Committee to grant
Limited Rights with respect to all or any portion of the shares of common stock
covered by Options. Limited Rights may be exercised only during the 90 days
immediately following an occurrence of certain events involving a change in
control of the Company, but may not be exercised by an officer or director of
the Company within six months following the date of grant. See "Change in
Control" below. Limited Rights are exercisable only if, and to the extent that,
the related Option is exercisable and, in the case of a Limited Right granted in
respect of an Incentive Stock Option, only when the Market Value per share of
the common stock exceeds the option price per share. Upon exercise, the holder
of Limited Rights will receive for each share for which a Limited Right is
exercised an amount in cash equal to the excess, if any, of (A) the greater of
(x) a per share price determined by reference to the change in control event,
and (y) the highest Market Value of a share of common stock during the 90-day
period ending on the date the Limited Right is exercised, over (B) the exercise
price per share of the Option to which the Limited Right relates.
When Rights or Limited Rights are exercised, the Option to which they
relate will cease to be exercisable to the extent of the number of shares with
respect to which the Rights or Limited Rights are exercised, but will be deemed
to have been exercised for purposes of determining the number of shares
available for the grant of further awards under the 1996 Stock Plan.
RESTRICTED SHARES AND UNITS
Awards of Restricted Shares or Restricted Units may be made in lieu of or
in addition to awards of Options, Rights and Limited Rights under the 1996 Stock
Plan. At the time an award of Restricted Shares or Restricted Units is made, the
Compensation Committee will establish a period of time (the "Award Period")
applicable to such award. Awards may provide for the incremental lapse or
termination of restrictions during
17
<PAGE> 20
the Award Period or for an accelerated termination of the Award Period on
certain conditions, including an event involving a change in control of the
Company. See "Change in Control" below. The Compensation Committee may also, in
its discretion, shorten or terminate the Award Period or waive any conditions
for the lapse or termination of restrictions with respect to all or any of the
Restricted Shares or Restricted Units.
At the time an award of Restricted Shares is made, a certificate for the
number of Restricted Shares will be issued in the name of the employee without
the payment of any cash consideration by the employee, but the certificate will
be held in custody by the Company for the employee's account. The shares of
common stock evidenced by such certificate may not be sold, transferred,
otherwise disposed of or pledged prior to the termination of the Award Period.
The Compensation Committee, in its sole discretion, will determine whether cash
and stock dividends with respect to Restricted Shares will be paid currently to
the employee or withheld for the employee's account and whether and on what
terms dividends withheld may bear interest. Subject to the foregoing
restrictions, the employee will have, commencing on the date of grant, all
rights and privileges of a shareholder as to such shares of common stock.
With respect to Restricted Units, no shares of common stock will actually
be issued to an employee at the time an award of Restricted Units is made.
Rather, the Company will establish a separate account for the employee and will
record in such account the number of Restricted Units awarded to the employee.
The Compensation Committee, in its sole discretion, will determine whether to
credit to the account of, or to pay currently to, each recipient of Restricted
Units amounts equal to any cash or stock dividend paid with respect to the
common stock ("Dividend Equivalents"). The employee will be entitled to receive,
on the termination of the Award Period, one share of common stock for each
Restricted Unit with respect to which the restrictions have lapsed then credited
to the recipient's account (or, at the discretion of the Compensation Committee,
cash in lieu thereof) plus cash equal to the Dividend Equivalent credits with
respect to each such vested Restricted Unit and any interest thereon. An
employee will be entitled upon a change of control event to a payment in cash,
common stock, or a combination thereof, as determined by the Compensation
Committee, equal to the product of the number of vested Restricted Units
credited to the account of such employee multiplied by the greater of (x) the
highest market value of common stock during a 90-day period selected by the
Compensation Committee ending before 90 days after the change of control event,
and (y) a per share price determined by reference to the change of control
event. See "Change in Control" below. The Compensation Committee may, upon the
recipient's request, permit deferral of payment of vested Restricted Units and
Dividend Equivalents.
TERMINATION OF EMPLOYMENT
Upon any termination of employment of an employee for cause, all Options,
Rights and Limited Rights held by the employee under the 1996 Stock Plan will
terminate to the extent not theretofore exercised. Unless the Compensation
Committee determines otherwise, and subject to such restrictions as may be
imposed by the Code in the case of any Incentive Stock Option, if employment is
otherwise terminated, except by reason of death or total disability, an Option,
Right or Limited Right may be exercised at any time within three months (or, in
the case of retirement on or after age 55, within one year) after such
termination to the extent the employee was entitled to do so at the date of
termination of employment, but in no event later than the date on which the
Option, Right or Limited Right terminates. Subject to such restrictions as may
be imposed by the Code in the case of any Incentive Stock Option, in the case of
the death or total disability of an employee while employed or during such
three-month or one-year period following termination of employment (other than
for cause), the employee, the employee's legal guardian (unless such exercise
would disqualify an Option as an Incentive Stock Option), or the employee's
legatees, distributees or personal representatives, whichever is applicable, may
exercise an Option, Right or Limited Right to the extent the employee was
entitled to do so at the termination of employment, but in any case within a
period of one year after the employee's death or total disability as to all
shares remaining subject to the Option, Right or Limited Right and in no event
later than the date on which the Option, Right or Limited Right terminates.
Unless the Compensation Committee determines otherwise, an employee will
forfeit all rights in Restricted Shares and Restricted Units upon termination of
employment for any reason, other than death or total disability, prior to the
expiration or termination of the Award Period and the satisfaction of any other
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conditions prescribed by the Compensation Committee. In the case of the death or
total disability of an employee, all restrictions on Restricted Shares or
Restricted Units will immediately lapse.
NON-TRANSFERABILITY
Options, Rights and Limited Rights will not be transferable otherwise than
by will or the laws of descent and distribution and may be exercised during the
employee's lifetime only by the employee or the employee's guardian or legal
representative (unless exercise would disqualify an Option as an Incentive Stock
Option). Restricted Shares and Restricted Units may not be sold, transferred,
otherwise disposed of or pledged prior to the termination of the Award Period.
CHANGE IN CONTROL
For purposes of the 1996 Stock Plan, a change of control event means (i)
the first purchase of shares of common stock pursuant to a tender offer or
exchange offer (other than an offer by the Company or any of its subsidiaries)
for all, or any part of, the common stock (an "Offer"), (ii) a change in control
of the Company (as defined below), (iii) approval by the Company's shareholders
of a merger in which the Company does not survive as an independent,
publicly-owned corporation, a consolidation, or a sale, exchange or other
disposition of all or substantially all the Company's assets, or (iv) a change
in the composition of the Board of Directors during any period of two
consecutive years such that individuals who at the beginning of such period were
members of the Board of Directors cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period. A "change in control" is deemed to occur at the time of
any acquisition of voting securities of the Company by any person or group (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), but
excluding (i) the Company or any of its subsidiaries, (ii) any person who was an
officer or director of the Company on the day immediately prior to July 30,
1996, or (iii) any savings, pension or other benefits plan for the benefit of
employees of the Company or any of its subsidiaries, which theretofore did not
beneficially own voting securities representing more than 30% of the voting
power of all outstanding voting securities of the Company, if such acquisition
results in such entity, person or group owning beneficially securities
representing more than 30% of the voting power of all outstanding voting
securities of the Company. As used herein, "voting power" means ordinary voting
power for the election of directors of the Company.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The Compensation Committee may make such adjustments to the 1996 Stock
Plan, to the number and class of shares available thereunder or to any
outstanding awards as it deems appropriate to prevent dilution or enlargement of
rights, including adjustment in the event of distributions to holders of common
stock other than a normal cash dividend, changes in the outstanding common stock
by reason of stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchange of shares, separations,
reorganizations, liquidations, and the like. In the event of any offer to
holders of common stock generally relating to the acquisition of their shares,
the Compensation Committee may make such adjustments as it deems equitable in
respect of outstanding awards, including, in the Compensation Committee's
discretion, revision of outstanding awards, so that they may be exercisable for
or payable in the consideration payable in the acquisition transaction. No
adjustment shall be made in respect of an Incentive Stock Option if such
adjustment would disqualify such option as an Incentive Stock Option under
Section 422 of the Code and the Treasury Regulations thereunder. No adjustment
shall be made in the minimum number of shares with respect to which an Option
may be exercised at any time. Any fractional shares resulting from such
adjustments to any award shall be eliminated.
TERMINATION AND AMENDMENT
The Board may suspend, terminate, modify or amend the 1996 Stock Plan
provided, however, that any amendment that would increase the aggregate number
of shares of common stock that may be issued, materially increase the benefits
accruing to participants, or materially modify the requirements as to
eligibility
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<PAGE> 22
for participation will be subject to the approval of the Company's shareholders
to the extent required by Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act, applicable law or any other governing rules or regulations, except
that any such increase or modification that may result from adjustments
authorized as described in the preceding paragraph does not require such
approval. No suspension, termination, modification or amendment of the 1996
Stock Plan may, without the consent of an employee, adversely affect the
employee's rights under an award theretofore granted.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code, and the existing regulations
thereunder, certain anticipated Federal income tax consequences with respect to
the several types of awards are described below.
Non-Qualified Stock Options
There will be no Federal income tax consequences to either the employee or
the Company on the grant of a Non-qualified Stock Option. Upon the exercise of a
Non-qualified Stock Option using cash only in payment, or upon such exercise of
an Incentive Stock Option that does not qualify for the tax treatment described
below under "Incentive Stock Options", the employee has taxable ordinary income
equal to the excess of the fair market value of the shares of common stock
received on the exercise date over the option price of the shares. The
employee's aggregate tax basis for the shares of common stock received upon
exercise of the Option will be equal to the amount taken into ordinary income by
the employee plus the amount of cash paid by the employee upon exercise of the
Option. Upon exercise of a Non-qualified Stock Option using shares of common
stock already held by the employee in whole or partial payment, or upon such
exercise of an Incentive Stock Option that does not qualify for the tax
treatment described below under "Incentive Stock Options", the employee has
taxable ordinary income equal to the fair market value of the common stock less
the amount of cash, if any, paid by the employee in payment of a portion of the
purchase price plus the fair market value of the common stock surrendered as
payment of the purchase price. The employee's aggregate tax basis for any shares
of common stock received in addition to the number of shares surrendered upon
exercise of the Option will be equal to the amount taken into ordinary income by
the employee plus the amount of any cash paid by the employee upon exercise of
the Option. (This discussion assumes that the shares surrendered were not
previously acquired by exercising an Incentive Stock Option, or if so, were held
for the required period; otherwise, gain would be realized upon surrender.) The
Company will be entitled to a Federal income tax deduction in an amount equal to
the amount taken into income by the employee, and the Company will be required
to comply with applicable Federal income tax withholding requirements with
respect to the amount taken into income by the employee. Upon a subsequent sale
or taxable exchange of shares acquired upon exercise of an Option, the employee
will recognize long-term or short-term capital gain or loss equal to the
difference between the amount realized on the sale and the tax basis of such
shares.
Incentive Stock Options
No income is recognized by the employee when an Incentive Stock Option is
granted or exercised. If the common stock obtained upon exercise is sold more
than one year after exercise and two years after grant, the difference between
the option price and the amount realized on the sale is taxable to the employee
as a capital gain. The Company is not entitled to a deduction as a result of the
grant or exercise of an Incentive Stock Option or the sale of the stock acquired
upon exercise if the stock is held by the employee for the requisite periods.
If, however, the stock acquired upon exercise of an Incentive Stock Option
is sold less than one year after exercise or less than two years after grant, an
amount equal to the lesser of (i) the difference between the fair market value
on the date of exercise and the option price or (ii) the amount realized on the
sale is taxable to the employee as ordinary income, and the Company is entitled
to a corresponding deduction. The excess of the amount realized on the sale over
the fair market value on the date of exercise, if any, is taxable as a capital
gain.
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The excess of the fair market value of the stock over the option price on
the date of exercise of an Incentive Stock Option is generally included in the
employee's alternative minimum taxable income, which, in certain instances, may
result in an alternative minimum tax. Liability for the alternative minimum tax
is complex and depends upon an individual's overall tax situation.
Exercise of Options with Common Stock
An employee may, with the consent of the Compensation Committee, be
permitted to deliver common stock already owned in payment of the option price.
For any shares of common stock so delivered, an amount equal to the fair market
value thereof on the date tendered will be credited against the option price.
In the event common stock is used to pay the option price, gain or loss is
not normally recognized in connection with such exchange (although in the case
of a Non-qualified Stock Option, the employee will still have taxable ordinary
income equal to the excess of the fair market value of the shares of common
stock received upon exercise over the option price of such shares). To the
extent that the number of shares of stock received on exercise does not exceed
the number of shares surrendered, the employee's basis in these shares is equal
to the basis of the stock surrendered and the employee's holding period therefor
is the same holding period as for the stock surrendered. To the extent the
employee receives an amount of shares in excess of the number of shares
surrendered, the employee's basis in such additional shares is zero (plus any
cash paid in connection with the exercise) and the holding period for such
additional shares will begin from the date of such exchange.
If common stock acquired upon the exercise of an Incentive Stock Option is
delivered in payment of the option price upon the exercise of a second Incentive
Stock Option before the common stock was held for the requisite holding periods,
then the common stock so delivered will not be accorded tax-free treatment. As a
result, the employee generally will be required to recognize ordinary income at
the time of delivery equal to the difference between the fair market value of
the common stock on the date of exercise of the first Option and the option
price of the first Option. If the fair market value of the common stock on the
date of delivery is lower than the fair market value on the date of exercise of
the first Option, then the ordinary income generally will be measured by the
difference between the fair market value of the common stock on the date of
delivery and the option price of the first Option.
Rights
There will be no Federal income tax consequences to either the employee or
the Company on the grant of a Right or Limited Right or during the period that
the unexercised Right or Limited Right remains outstanding. On the exercise of a
Right or Limited Right, the amount that the employee is paid, whether in common
stock or cash, is taxable to the employee as ordinary income and the Company is
entitled to a corresponding deduction.
Restricted Shares and Units
An employee will not realize taxable income and the Company will not be
entitled to a deduction upon the grant of Restricted Shares, until the shares
are no longer subject to a substantial risk of forfeiture (as defined in the
Code), at which time the employee will realize taxable ordinary income in an
amount equal to the fair market value for such number of shares of common stock
at that time, and the Company will be entitled to a deduction in the same
amount. However, an employee may make an election to recognize taxable ordinary
income in the year the Restricted Shares are awarded in an amount equal to their
fair market value at the time of the award, determined without regard to the
restrictions and, in that event, the Company will be entitled to a deduction in
such year in the same amount.
An employee receiving Restricted Units will not have taxable income when
the Restricted Units or the Dividend Equivalents are credited to the employee's
account. The employee will recognize ordinary income equal to the fair market
value of the common stock delivered (or the amount of cash paid in lieu of such
shares) plus the amount of cash credited to the employee's account as Dividend
Equivalents when the shares
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and/or cash are delivered or paid. The Company will generally be entitled to a
deduction for the year in which and to the extent that the employee has ordinary
income.
Section 162(m)
Under Section 162(m) of the Code, the Company is not entitled to a Federal
income tax deduction for compensation in excess of $1 million paid in any year
to its Chief Executive Officer and its four other most highly compensated
Executive Officers, subject to certain exceptions. Compensation that qualifies
as "performance-based" under Section 162(m) is exempt from this limitation. The
1996 Stock Plan does not qualify for the performance-based exemption under
Section 162(m).
Parachute Payments
Certain payments and benefits under the 1996 Stock Plan which result from a
change of control, including the acceleration of vesting of any portion of an
Option or related Right, the exercise of a Limited Right, a termination of
restrictions on Restricted Stock or Restricted Units, or a payment made in
exchange for a Restricted Unit, may be treated as "parachute payments" as
defined in the Code if, when combined with all other payments and benefits
related to the change of control, such payments and benefits exceed three times
an employee's base salary. Any such parachute payments may be non-deductible to
the Company, in whole or in part, and may subject the employee to a
non-deductible 20% Federal excise tax on all or a portion of such payment (in
addition to other taxes ordinarily payable).
Tax Withholding
The 1996 Stock Plan provides that (i) the Company may withhold from any
cash distribution the amount of any taxes required to be withheld therefrom, and
(ii) upon the distribution of common stock to an employee, the Company may
require the employee to pay to it the amount of any taxes required to be
withheld on such distribution or permit shares of common stock previously owned
by the employee or that would otherwise be distributed to the employee to be
used to satisfy any such tax requirements.
VOTE REQUIRED
The adoption of the amendment to the 1996 Stock Plan requires the
affirmative vote of a majority of the shares of common stock present in person
or represented by proxy and entitled to vote. Abstentions by holders of such
shares with respect to voting on this matter will have the effect of a negative
vote; broker non-votes with respect to voting on this matter will have no effect
on the outcome of the vote.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ADOPTION OF
THE AMENDMENT TO THE COMPANY'S 1996 STOCK PLAN.
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SECURITY HOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals for inclusion in the 1999 Proxy Statement and form of
proxy for the Annual Meeting of Shareholders to be held in 1999 must be received
by the Secretary of the Company on or before December 4, 1997. If the date of
the next Annual Meeting is subsequently advanced by more than thirty calendar
days or delayed by more than ninety calendar days from the date such meeting is
scheduled to be held under the Company's By-laws, the Company will inform
shareholders of such change and the date by which proposals of shareholders must
be received. It is suggested that such proposals be sent by Certified
Mail - Return Receipt Requested.
ANNUAL REPORT
A COPY OF THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION ANNUAL REPORT ON
FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, WILL BE
FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST. REQUESTS
SHOULD BE ADDRESSED TO: TRANSACT TECHNOLOGIES INCORPORATED, SHAREHOLDER
RELATIONS DEPARTMENT, 7 LASER LANE, WALLINGFORD, CONNECTICUT 06492.
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GENERAL
The accompanying proxy will be voted as specified thereon. Unless otherwise
specified, proxies will be voted for the Directors nominated by the Board of
Directors, for ratification of the selection of Price Waterhouse LLP as
independent accountants for 1998 and for the proposed amendment to the Company's
1996 Stock Plan as set forth in this Proxy Statement. The Board of Directors is
not aware of any matter which is to be presented for action at the Annual
Meeting other than the matters set forth herein. Should any other matter
requiring a vote of the shareholders arise, the proxies confer upon the Proxy
Committee the authority to vote in respect of any such other matter in
accordance with the recommendation of the Board of Directors.
A shareholder who has given a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by (i) giving written notice of revocation to the
Secretary of the Company, (ii) properly submitting to the Company a duly
executed proxy bearing a later date, or (iii) voting in person at the Annual
Meeting. All written notices of revocation and other communications with respect
to revocation of proxies should be addressed to the Company, as follows:
TransAct Technologies Incorporated, 7 Laser Lane, Wallingford, Connecticut
06492, Attention: Corporate Secretary. A proxy appointment will not be revoked
by death or supervening incapacity of the shareholder executing the proxy
unless, before the shares are voted, notice of such death or incapacity is filed
with the Company's Corporate Secretary or other person responsible for
tabulating votes on behalf of the Company.
The cost of preparing, assembling and mailing this proxy material will be
borne by the Company. The Company may solicit proxies otherwise than by use of
the mail, in that certain officers and regular employees of the Company, without
additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies. The Company will also request persons, firms and
corporations holding shares in their names, or owned by others, to send this
proxy material to and obtain proxies from such beneficial owners and will
reimburse such holders for their reasonable expenses in doing so.
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. PROMPT RESPONSE IS HELPFUL
AND YOUR COOPERATION IS APPRECIATED.
April 3, 1998
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APPENDIX
Filed Pursuant to Instruction 3 to Item 10 of Regulation 14A under the 1934 Act
TransAct Technologies Incorporated
1996 STOCK PLAN
Effective: July 30, 1996
As Amended May 7, 1998
1. PURPOSE
TransAct Technologies Incorporated (the "Company") desires to attract and
retain the best available talent and encourage the highest level of performance
by employees and other persons who perform services for the Company in order to
serve the best interests of the Company and stockholders. By affording eligible
persons the opportunity to acquire proprietary interests in the Company and by
providing them incentives to put forth maximum efforts for the success of the
Company's business, the TransAct Technologies Incorporated 1996 Stock Plan (the
"1996 Plan") is expected to contribute to the attainment of those objectives.
2. SCOPE AND DURATION
Awards under the 1996 Plan may be granted in the form of incentive stock
options ("incentive stock options") as provided in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), in the form of non-qualified
stock options ("non-qualified options") (unless otherwise indicated, references
in the 1996 Plan to "options" include incentive stock options and non-qualified
options), in the form of shares of the common stock, par value $.01 per share,
of the Company (the "Common Stock") that are restricted as provided in paragraph
11 ("restricted shares"), in the form of units to acquire shares of Common Stock
that are restricted as provided in paragraph 11 ("restricted units") or in the
form of stock appreciation rights ("rights") or limited stock appreciation
rights ("limited rights"). The maximum aggregate number of shares of Common
Stock as to which awards may be granted from time to time under the 1996 Plan is
900,000 shares. The shares available may be in whole or in part, as the Board of
Directors of the Company (the "Board of Directors") shall from time to time
determine, authorized but unissued shares or issued shares reacquired by the
Company. Unless otherwise provided by the Compensation Committee, shares covered
by expired or terminated options and forfeited restricted shares or restricted
units will be available for subsequent awards under the 1996 Plan, except to the
extent prohibited by Rule 16b-3, as amended, or any successor provision thereto
("Rule 16b-3"), or other applicable rules under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Any shares issued by the
Company in respect of the assumption or substitution of outstanding awards from
a corporation or other business entity by the Company shall not
<PAGE> 28
reduce the number of shares available for awards under the 1996 Plan. No
incentive stock option shall be granted more than 10 years after the Effective
Date.
3. ADMINISTRATION
The 1996 Plan shall be administered by the Compensation Committee of the
Board of Directors, consisting of not less than two members who shall qualify to
administer the 1996 Plan as contemplated by Rule 16b-3 (unless Rule 16b-3 shall
permit fewer than two members to so qualify); provided, however, that, with
respect to individual participants who are not subject to Section 16(b) of the
Exchange Act, the Compensation Committee of the Board of Directors may delegate
authority to administer the 1996 Plan to another committee of directors which
committee may include directors who do not meet the standards set forth
immediately above. Unless the context otherwise requires, the term "Committee"
shall refer to both the Compensation Committee and any other committee of
directors to whom authority have been delegated.
The Committee shall have plenary authority in its discretion, subject to
and not inconsistent with the express provisions of the 1996 Plan to grant
options, to determine the purchase price of the shares of Common Stock covered
by each option, the term of each option, the persons to whom, and the time or
times at which options shall be granted, and the number of shares to be covered
by each option; to designate options as incentive stock options or non-qualified
options and to determine which options shall be accompanied by rights and
limited rights; to grant rights and to determine the terms and conditions
applicable to such rights; to grant restricted shares and restricted units and
to determine the term of the restricted period and other conditions applicable
to such shares or units, the persons to whom, and the time or times at which,
restricted shares or restricted units shall be granted and the number of shares
or units to be covered by each grant; to interpret the 1996 Plan; to prescribe,
amend and rescind rules and regulations relating to the 1996 Plan; to determine
the terms and provisions of the option and rights agreements (which need not be
identical) and the restricted share and restricted units agreements (which need
not be identical) entered into in connection with awards under the 1996 Plan;
and to make all other determinations deemed necessary or advisable for the
administration of the 1996 Plan. The Committee may delegate to one or more of
its members or to one or more agents such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the 1996 Plan.
The Committee may employ attorneys, consultants, accountants or other
persons and the Committee, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all persons who have
received awards, the Company and all other interested persons. No member or
agent of the Committee shall be personally liable for
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any action, determination or interpretation taken or made in good faith with
respect to the 1996 Plan or awards made thereunder, and all members and agents
of the Committee shall be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
4. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING AWARDS
Awards will be limited to officers and other key employees of the Company
and its subsidiaries, and except in the case of incentive stock options, any
other non-employees who may provide services to the Company or its subsidiaries
(all such persons being hereinafter referred to as "employees"). In determining
the employees to whom awards shall be granted and the number of shares or units
to be covered by each award, the Committee shall take into account the nature of
the employees' duties, their present and potential contributions to the success
of the Company and such other factors as it shall deem relevant in connection
with accomplishing the purposes of the 1996 Plan. A director of the Company or
of a subsidiary who is not also an employee of the Company (or deemed to be an
employee of the Company as provided above) will not be eligible to receive an
award.
Awards may be granted singly, in combination or in tandem and may be made
in combination or in tandem with, in replacement of, or as alternatives to,
awards or grants under any other employee plan maintained by the Company, its
present and future subsidiaries. An employee who has been granted an award or
awards under the 1996 Plan may be granted an additional award or awards, subject
to such limitations as may be imposed by the Code on the grant of incentive
stock options. No award of incentive stock options shall result in the aggregate
fair market value of Common Stock with respect to which incentive stock options
are exercisable for the first time by any employee during any calendar year
(determined at the time the incentive stock option is granted) exceeding
$100,000. The Committee, in its sole discretion, may grant to an employee who
has been granted an award under the 1996 Plan or any other employee plan
maintained by the Company or its subsidiaries, or any predecessors or successors
thereto, in exchange for the surrender and cancellation of such award, a new
award in the same or a different form and containing such terms, including
without limitation a price which is different (either higher or lower) than any
price provided in the award so surrendered and cancelled, as the Committee may
deem appropriate.
5. OPTION PRICE
The purchase price of the Common Stock covered by each option shall be
determined by the Committee, but in the case of an incentive stock option shall
not be less than 100% of the fair market value (110% in the case of a 10%
shareholder of the Company) of the Common Stock on the date the option is
granted, which shall be deemed to equal the closing price of the Common Stock as
quoted by NASDAQ (the "Market Value") for the date on which the option is
granted, or if there are no sales on such date, on the next preceding day on
which there were sales. The Committee shall
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determine the date on which an option is granted, provided that such date is
consistent with the Code and any applicable rules or regulations thereunder. In
the absence of such determination, the date on which the Committee adopts a
resolution granting an option shall be considered the date on which such option
is granted, provided the employee to whom the option is granted is promptly
notified of the grant and an option agreement is duly executed as of the date of
the resolution. The purchase price of the Common Stock covered by each option
shall also be applicable in connection with the exercise of any related right or
limited right. The purchase price shall be subject to adjustment as provided in
paragraph 14.
6. TERMS OF OPTIONS
The term of each incentive stock option granted under the 1996 Plan shall
not be more than 10 years (5 years in the case of a 10% shareholder of the
Company) from the date of grant, as the Committee shall determine, subject to
earlier termination as provided in paragraphs 12 and 13. The term of each
non-qualified stock option granted under the 1996 Plan shall be such period of
time as the Committee shall determine, subject to earlier termination as
provided in paragraphs 12 and 13.
7. EXERCISE OF OPTIONS; LOANS
(a) Subject to the provisions of the 1996 Plan, an option granted under
the 1996 Plan shall become vested as determined by the Committee. The Committee
may, in its discretion, determine as a condition of any option, that all or a
stated percentage of the options shall become exercisable, in installments or
otherwise, only after completion of a specified service requirement. The
Committee may also, in its discretion, accelerate the exercisability of any
option at any time and provide, in any option agreement, that the option shall
become immediately exercisable as to all shares of Common Stock remaining
subject to the option on or following either (i) the first purchase of shares of
Common Stock pursuant to a tender offer or exchange offer (other than an offer
by the Company or any of its subsidiaries) for all, or any part of, the Common
Stock ("Offer"), (ii) a change in control of the Company (as defined in this
paragraph), (iii) approval by the Company's stockholders of a merger in which
the Company does not survive as an independent, publicly owned corporation, a
consolidation, or a sale, exchange or other disposition of all or substantially
all the Company's assets, or (iv) a change in the composition of the Board of
Directors during any period of two consecutive years such that individuals who
at the beginning of such period were members of the Board of Directors cease for
any reason to constitute at least a majority thereof, unless the election, or
the nomination for election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period (the date upon which an
event described in clause (i), (ii), (iii) or (iv) of this paragraph 7(a) occurs
shall be referred to herein as an "acceleration date"). A "change in control" is
deemed to occur at the time of any acquisition of voting securities of the
Company by any person or group (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), but excluding (i) the
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Company or any of its subsidiaries, (ii) any person who was an officer or
director of the Company on the day immediately prior to the Effective Date
hereof, or (iii) any savings, pension or other benefits plan for the benefit of
employees of the Company or any of its subsidiaries, which theretofore did not
beneficially own voting securities representing more than 30% of the voting
power of all outstanding voting securities of the Company, if such acquisition
results in such entity, person or group owning beneficially securities
representing more than 30% of the voting power of all outstanding voting
securities of the Company. As used herein, "voting power" means ordinary voting
power for the election of directors of the Company.
(b) An option may be exercised at any time or from time to time (subject,
in the case of an incentive stock option, to such restrictions as may be imposed
by the Code), as to any or all full shares as to which the option has become
exercisable. Notwithstanding the foregoing provision, no option may be exercised
without the prior consent of the Committee by an employee who is subject to
Section 16(b) of the Exchange Act until the expiration of six months from the
date of the grant of the option.
(c) The purchase price of the shares as to which an option is exercised
shall be paid in full at the time of exercise; payment may be made in cash,
which may be paid by check, or other instrument acceptable to the Company, or,
with the consent of the Committee, in shares of the Common Stock, valued at the
Market Value on the date of exercise, or if there were no sales on such date, on
the next preceding day on which there were sales or (if permitted by the
Committee and subject to such terms and conditions as it may determine) by
surrender of outstanding awards under the 1996 Plan In addition, any amount
necessary to satisfy applicable federal, state or local tax requirements shall
be paid promptly upon notification of the amount due. The Committee may permit
such amount to be paid in shares of Common Stock previously owned by the
employee, or a portion of the shares of Common Stock that otherwise would be
distributed to such employee upon exercise of the option, or a combination of
cash and shares of such Common Stock.
(d) Except as provided in paragraphs 12 and 13, no option may be exercised
at any time unless the holder thereof is then an employee of or performing
services for the Company or one of its subsidiaries. For this purpose,
"subsidiary" shall include, as under Treasury Regulations Section 1.421-7(h) (3)
and (4), Example (3), any corporation that is a subsidiary of the Company during
the entire portion of the requisite period of employment during which it is the
employer of the holder.
(e) The Committee, in its sole discretion, may elect, in lieu of
delivering all or a portion of the shares of Common Stock as to which an option
has been exercised, if the fair market value of the Common Stock exceeds the
exercise price of the option (i) to pay the employee in cash or in shares of
Common Stock, or a combination of cash and Common Stock, an amount equal to the
excess of (A) the Market Value on the exercise date of the shares of Common
Stock as to which such option has been exercised, or if there were no sales on
such date, on the next preceding day on which there were sales
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over (B) the option price, or (ii) in the case of an option which is a
non-qualified option, to defer payment and to credit the amount of such excess
on the Company's books for the account of the optionee and either (a) to treat
the amount in such account as if it had been invested in the manner from time to
time determined by the Committee, with dividends or other income therein being
deemed to have been so reinvested or (b) for the Company's convenience, to
contribute the amount credited to such account to a trust, which may be
revocable by the Company, for investment in the manner from time to time
determined by the Committee and set forth in the instrument creating such trust;
provided, however, that, to the extent required by Rule 16b-3 or other
applicable rules under Section 16(b) of the Exchange Act, in order to perfect
the exemption provided thereunder for cash settlements of stock appreciation
rights, the Committee shall not exercise its discretion to grant cash to any
employee who is subject to the provisions of Section 16(b) of the Exchange Act
unless the exercise occurs during any period commencing on the third business
day following the date of release for publication of any annual or quarterly
summary statements of the Company's sales and earnings and ending on the twelfth
business day following such date (a "Window Period"). The Committee's election
pursuant to this subparagraph shall be made by giving written notice of such
election to the employee (or other person exercising the option). Shares of
Common Stock paid pursuant to this subparagraph will be valued at the Market
Value on the exercise date, or if there were no sales on such date, on the next
preceding day on which there were sales.
(f) Subject to any terms and conditions that the Committee may determine
in respect of the exercise of options involving the surrender of outstanding
awards, upon, but not until, the exercise of an option or portion thereof in
accordance with the 1996 Plan, the option agreement and such rules and
regulations as may be established by the Committee, the holder thereof shall
have the rights of a stockholder with respect to the shares issued as a result
of such exercise.
(g) The Company may make loans to such option holders as the Committee, in
its discretion, may determine (including a holder who is a director or officer
of the Company) in connection with the exercise of options granted under the
1996 Plan; provided, however, that the Committee shall not authorize the making
of any loan where the possession of such discretion or the making of such loan
would result in a "modification" (as defined in Section 424 of the Code) of any
incentive stock option. Such loans shall be subject to the following terms and
conditions and such other terms and conditions as the Committee shall determine
not inconsistent with the 1996 Plan. Such loans shall bear interest at such
rates as the Committee shall determine from time to time, which rates may be
below then current market rates (except in the case of incentive stock options).
In no event may any such loan exceed the fair market value, at the date of
exercise, of the shares covered by the option, or portion thereof, exercised by
the holder. No loan shall have an initial term exceeding five years, but any
such loan may be renewable at the discretion of the Committee. When a loan shall
have been made, shares of Common Stock having a fair market value at least equal
to the principal amount of the loan shall be pledged by the holder to the
Company as security for payment of the
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<PAGE> 33
unpaid balance of the loan. Every loan shall comply with all applicable laws,
regulations and rules of the Board of Governors of the Federal Reserve System
and any other governmental agency having jurisdiction.
8. AWARD AND EXERCISE OF RIGHTS
(a) A right may be awarded by the Committee in connection with any option
granted under the 1996 Plan (a "tandem right"), either at the time the option is
granted or thereafter at any time prior to the exercise, termination or
expiration of the option. A right may also be awarded separately (a
"free-standing right"). Each tandem right shall be subject to the same terms and
conditions as the related option and shall be exercisable only to the extent the
option is exercisable.
The term of each freestanding right granted under the 1996 Plan shall be
such period of time as the Committee shall determine. Subject to the provisions
of the 1996 Plan, such right shall become vested as determined by the Committee.
Prior to becoming 100% vested, each freestanding right shall become exercisable,
in installments or otherwise, as the Committee shall determine. The Committee
may also, in its discretion, accelerate the exercisability of any freestanding
right at any time and provide, in the agreement covering a freestanding right,
that the right shall become immediately exercisable on or following an
acceleration date (as defined in paragraph 7(a)).
No right shall be exercisable by an employee who is subject to the
provisions of Section 16(b) of the Exchange Act without the prior consent of the
Committee prior to the expiration of six months from the date the right is
awarded (and then, as to a tandem right, only to the extent the related option
is exercisable). Notwithstanding the foregoing, no right shall be exercisable by
an employee who is subject to the provisions of Section 16(b) of the Exchange
Act without the prior consent of the Committee prior to the expiration of one
year from the date of the initial sale of shares of Common Stock of the Company
to the public.
(b) A right shall entitle the employee upon exercise in accordance with
its terms (subject, in the case of a tandem right, to the surrender unexercised
of the related option or any portion or portions thereof which the employee from
time to time determines to surrender for this purpose) to receive, subject to
the provisions of the 1996 Plan and such rules and regulations as from time to
time may be established by the Committee, a payment having an aggregate value
equal to (A) the excess of (i) the fair market value on the exercise date of one
share over (ii) the option price per share, in the case of a tandem right, or
the price per share specified in the terms of the right, in the case of a
freestanding right, times (B) the number of shares with respect to which the
right shall have been exercised. The payment shall be made in the form of all
cash, all shares of Common Stock, or a combination thereof, as elected by the
employee, provided that, unless otherwise approved by the Committee, the
election by an employee who is subject to the provisions of Section 16(b) of the
Exchange Act to receive all or a part of a payment in cash, as well as the
exercise by the employee of the right for cash,
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<PAGE> 34
shall be made only during a Window Period (as defined in paragraph 7(e) hereof);
and provided further, that the Committee shall have sole discretion to consent
to or disapprove the election of an officer or director to receive all or part
of a payment in cash (which consent or disapproval may be given at any time
after the election to which it relates). The price per share specified in a
freestanding right shall be determined by the Committee but in no event shall be
less than the average of the daily closing prices for the Common Stock as
reported by NASDAQ during a period determined by the Committee in its sole
discretion that shall consist of any trading day or any number of consecutive
trading days, not exceeding 30, during the period of 30 trading days ending on
the trading day immediately preceding the date the right is granted, provided
that, in the absence of a different determination by the Committee, the price
per share shall be determined on the basis of a period consisting of 30 trading
days. Such price shall be subject to adjustment as provided in paragraph 14. The
Committee shall determine the date on which a freestanding right is granted. In
the absence of such determination, the date on which the Committee adopts a
resolution granting such right shall be considered the date of grant, provided
the employee is promptly notified of the grant and an agreement is duly executed
as of the date of the resolution.
If upon exercise of a right the employee is to receive a portion of the
payment in shares of Common Stock, the number of shares received shall be
determined by dividing such portion by the fair market value of a share on the
exercise date. The number of shares received may not exceed the number of shares
covered by any option or portion thereof surrendered. Cash will be paid in lieu
of any fractional share.
No payment will be required from the employee upon exercise of a right,
except that any amount necessary to satisfy applicable federal, state or local
tax requirements shall be withheld or paid promptly upon notification of the
amount due and prior to or concurrently with delivery of cash or a certificate
representing shares. The Committee may permit such amount to be paid in shares
of Common Stock previously owned by the employee, or a portion of the shares of
Common Stock that otherwise would be distributed to such employee upon exercise
of the right, or a combination of cash and shares of such Common Stock.
(c) For purposes of this paragraph 8, the fair market value of a share on
any particular date shall mean the Market Value of such share on such date, or
if there are no sales on such date, on the next preceding day on which there
were sales; provided, however, that with respect to exercises of rights by an
employee who is subject to the provisions of Section 16(b) of the Exchange Act
during any Window Period, the Committee may prescribe, by rule of general
application, such other measure of fair market value per share as the Committee
may, in its discretion, determine but not in excess of the highest sale price of
the Common Stock during such Window Period and, in the case of rights that
relate to an incentive stock option, not in excess of the maximum amount that
would be permissible under Section 422 of the Code and the Treasury Regulations
thereunder without disqualifying such option as an incentive stock option under
Section 422.
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(d) Upon exercise of a tandem right, the number of shares subject to
exercise under the related option shall automatically be reduced by the number
of shares represented by the option or portion thereof surrendered.
(e) A right related to an incentive stock option may only be exercised if
the fair market value of a share of Common Stock on the exercise date exceeds
the option price.
(f) Whether payments to employees upon exercise of tandem rights related
to non-qualified options or of freestanding rights are made in cash, shares of
Common Stock or a combination thereof, the Committee shall have sole discretion
as to timing of the payments, whether in one lump sum or in annual installments
or otherwise deferred, which deferred payments may in the Committee's sole
discretion (i) bear amounts equivalent to interest or cash dividends, (ii) be
treated as invested in the manner from time to time determined by the Committee,
with dividends or other income thereon being deemed to have been so reinvested,
or (iii) for the convenience of the Company, contributed to a trust, which may
be revocable by the Company or subject to the claims of its creditors, for
investment in the manner from time to time determined by the Committee and set
forth in the instrument creating such trust, all as the Committee shall
determine.
(g) If a freestanding right is not exercised, or neither a tandem right
nor the related option is exercised, before the end of the day on which the
right ceases to be exercisable and the fair market value of a share on such date
exceeds (i) the option price per share in the case of a tandem right or (ii) the
price per share specified in the terms of the right in the case of a
freestanding right, such right shall be deemed exercised and a payment in the
amount prescribed by subparagraph 8(b), less any applicable taxes, shall be paid
to the employee in cash.
9. AWARD AND EXERCISE OF LIMITED RIGHTS
(a) A limited right may be awarded by the Committee in connection with any
option granted under the 1996 Plan with respect to all or some of the shares of
Common Stock covered by such related option. A limited right may be granted
either at the time the option is granted or thereafter at any time prior to the
exercise, termination or expiration of the option. A limited right may be
granted to an employee irrespective of whether such employee is being granted or
has been granted a right under paragraph 8 hereof. A limited right may be
exercised only during the ninety-day period beginning on an acceleration date
(as defined in paragraph 7(a)). In addition, each limited right shall be
exercisable only if, and to the extent that, the related option is exercisable
and, in the case of a limited right granted in respect of an incentive stock
option, only when the fair market value per share of the Common Stock exceeds
the option price per share. Upon exercise of a limited right, such related
option shall cease to be exercisable to the extent of the shares of Common Stock
with respect to which such limited right is exercised. Upon the exercise or
termination of a related option, the limited right with respect to
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<PAGE> 36
such related option shall terminate to the extent of the shares of Common Stock
with respect to which the related option was exercised or terminated.
(b) Upon the exercise of limited rights, the holder thereof shall receive
in cash whichever of the following amounts is applicable:
(i) in the case of an exercise of limited rights by reason of the
occurrence of an Offer (as defined in paragraph 7(a) (i)), an amount equal to
the Offer Spread (as defined in paragraph 9(d));
(ii) in the case of an exercise of limited rights by reason of an
acquisition of Common Stock described in paragraph 7(a) (ii), an amount equal to
the Acquisition Spread (as defined in paragraph 9(h) hereof);
(iii) in the case of an exercise of limited rights by reason of an event
described in paragraph 7(a) (iii), an amount equal to the Merger Spread (as
defined in paragraph 9(f) hereof); or
(iv) in the case of an exercise of limited rights by reason of a change in
the composition of the Board of Directors as described in paragraph 7(a) (iv),
an amount equal to the Spread (as defined in paragraph 9(i) hereof).
Notwithstanding the foregoing, in the case of a limited right granted in
respect of an incentive stock option, the holder may not receive an amount in
excess of such amount as will enable such option to qualify as an incentive
stock option.
(c) The term "Offer Price per Share" as used in this paragraph 9 shall
mean, with respect to the exercise of any limited right by reason of the
occurrence of an Offer, the greater of (i) the highest price per share of Common
Stock paid in any Offer, which Offer is in effect at any time during the
ninety-day period ending on the date on which such limited right is exercised,
or (ii) the highest fair market value per share of Common Stock during such
ninety-day period. Any securities or property which are part or all of the
consideration paid for shares of Common Stock in the Offer shall be valued in
determining the Offer Price per Share at the higher of (A) the valuation placed
on such securities or property by the corporation, person or other entity making
such Offer or (B) the valuation placed on such securities or property by the
Committee.
(d) The term "Offer Spread" as used in this paragraph 9 shall mean an
amount equal to the product computed by multiplying (i) the excess of (A) the
Offer Price per Share over (B) the option price per share of Common Stock at
which the related option is exercisable, by (ii) the number of shares of Common
Stock with respect to which such limited right is being exercised.
(e) The term "Merger Price per Share" as used in this paragraph 9 shall
mean, with respect to the exercise of any limited right by reason of an event
described in paragraph 7(a) (iii), the greater of (i) the fixed or formula price
for the acquisition of
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<PAGE> 37
shares of Common Stock occurring pursuant to such event if such fixed or formula
price is determinable on the date on which such limited right is exercised, and
(ii) the highest fair market value per share of Common Stock during the
ninety-day period ending on the date on which such limited right is exercised.
Any securities or property which are part or all of the consideration paid for
shares of Common Stock pursuant to such event shall be valued in determining the
Merger Price per Share at the higher of (A) the valuation placed on such
securities or property by the corporation, person or other entity which is a
party with the Company to such event or (B) the valuation placed on such
securities or property by the Committee.
(f) The term "Merger Spread" as used in this paragraph 9 shall mean an
amount equal to the product computed by multiplying (i) the excess of (A) the
Merger Price per Share over (B) the option price per share of Common Stock at
which the related option is exercisable, by (ii) the number of shares of Common
Stock with respect to which such limited right is being exercised.
(g) The term "Acquisition Price per Share" as used in this paragraph 9
shall mean, with respect to the exercise of any limited right by reason of an
acquisition of Common Stock described in paragraph 7(a) (ii), the greater of (i)
the highest price per share stated on the Schedule 13D or any amendment thereto
filed by the holder of 30% or more of the Company's voting power which gives
rise to the exercise of such limited right, and (ii) the highest fair market
value per share of Common Stock during the ninety-day period ending on the date
the limited right is exercised.
(h) The term "Acquisition Spread" as used in this paragraph 9 shall mean
an amount equal to the product computed by multiplying (i) the excess of (A) the
Acquisition Price per Share over (B) the option price per share of Common Stock
at which the related option is exercisable, by (ii) the number of shares of
Common Stock with respect to which such limited right is being exercised.
(i) The term "Spread" as used in this paragraph 9 shall mean, with respect
to the exercise of any limited right by reason of a change in the composition of
the Board described in paragraph 7(a) (iv), an amount equal to the product
computed by multiplying (i) the excess of (A) the highest fair market value per
share of Common Stock during the ninety-day period ending on the date the
limited right is exercised over (B) the option price per share of Common Stock
at which the related option is exercisable, by (ii) the number of shares of
Common Stock with respect to which the limited right is being exercised.
(j) Notwithstanding any other provision of the 1996 Plan, rights granted
pursuant to paragraph 8 may not be exercised to the extent that any limited
rights granted with respect to the same option are then exercisable.
(k) For purposes of this paragraph 9, "fair market value per share of
Common Stock" for any day shall mean the Market Value for such day (or if there
were no sales on such day, on the next preceding day on which there were sales).
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10. NON-TRANSFERABILITY OF OPTIONS AND RIGHTS
Options, rights and limited rights granted under the 1996 Plan shall not
be transferable otherwise than by will or the laws of descent and distribution,
or pursuant to a qualified domestic relations order as defined by Section 414(p)
of the Code. Options, rights and limited rights may be exercised during the
lifetime of the employee only by the employee or by the employee's guardian or
legal representative (unless such exercise would disqualify an option as an
incentive stock option).
11. AWARD AND DELIVERY OF RESTRICTED SHARES OR RESTRICTED UNITS
(a) At the time an award of restricted shares or restricted units is made,
the Committee shall establish a period of time (the "Restricted Period")
applicable to such award. Each award of restricted shares or restricted units
may have a different Restricted Period. The Committee may, in its sole
discretion, at the time an award is made, prescribe conditions for the
incremental lapse of restrictions during the Restricted Period, for the lapse or
termination of restrictions upon the satisfaction of other conditions in
addition to or other than the expiration of the Restricted Period with respect
to all or any portion of the restricted shares or restricted units and provide
for the lapse of all restrictions with respect to all restricted shares or
restricted units covered by the award upon the occurrence of an acceleration
date as defined in paragraph 7(a). The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any conditions
for the lapse or termination of restrictions with respect to all or any portion
of the restricted shares or restricted units. Notwithstanding the foregoing, all
restrictions shall lapse or terminate with respect to all restricted shares or
restricted units upon death or total disability (as defined in paragraph 13).
(b) Upon the grant of an award of restricted shares, a stock certificate
representing a number of shares of Common Stock equal to the number of
restricted shares granted to an employee shall be registered in the employee's
name but shall be held in custody by the Company for the employee's account. The
employee shall generally have the rights and privileges of a stockholder as to
such restricted shares, including the right to vote such restricted shares,
except that, subject to the provisions of paragraph 12, the following
restrictions shall apply: (i) the employee shall not be entitled to delivery of
the certificate until the expiration or termination of the Restricted Period and
the satisfaction of any other conditions prescribed by the Committee; (ii) none
of the restricted shares may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the Restricted Period and until the
satisfaction of any other conditions prescribed by the Committee; and (iii) all
of the restricted shares shall be forfeited and all rights of the employee to
such restricted shares shall terminate without further obligation on the part of
the Company unless the employee has remained an employee of the Company or any
of its subsidiaries or any combination thereof until the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee applicable to such restricted shares. At
the discretion of the Committee, cash and stock dividends with respect to the
restricted
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<PAGE> 39
shares may be either currently paid or withheld by the Company for the
employee's account subject to the expiration or termination of the Restricted
Period and the satisfaction of any other conditions prescribed by the Committee,
and interest may be paid on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Committee. Upon the forfeiture of any
restricted shares, such forfeited restricted shares and any cash or stock
dividends withheld for the employee's account shall be transferred to the
Company without further action by the employee. The employee shall have the same
rights and privileges, and be subject to the same restrictions, with respect to
any shares received pursuant to paragraph 14.
(c) Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee or at such
earlier time as provided for in paragraph 12, the restrictions applicable to the
restricted shares shall lapse and a stock certificate for the number of shares
of Common Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, except any that may be imposed by law,
to the employee or the employee's beneficiary or estate, as the case may be. The
Company shall not be required to deliver any fractional share of Common Stock
but will pay, in lieu thereof, the fair market value (determined as of the date
the restrictions lapse) of such fractional share to the employee or the
employee's beneficiary or estate, as the case may be. No payment will be
required from the employee upon the issuance or delivery of any restricted
shares, except that any amount necessary to satisfy applicable federal, state or
local tax requirements shall be withheld or paid promptly upon notification of
the amount due and prior to or concurrently with the issuance or delivery of a
certificate representing such shares. The Committee may permit such amount to be
paid in (i) shares of Common Stock previously owned by the employee, (ii) a
portion of the shares of Common Stock that otherwise would be distributed to
such employee upon the lapse of the restrictions applicable to the restricted
shares, or (iii) a combination of cash and shares of such Common Stock;
provided, however, unless otherwise approved by the Committee, that an election
by an employee subject to Section 16(b) of the Exchange Act to use shares of
Common Stock described in clause (ii) above to satisfy any federal, state or
local tax requirement shall be made only during a Window Period (as defined in
paragraph 7(e) hereof), and provided further that the Committee shall have sole
discretion to consent to or disapprove of any such election (which consent or
disapproval may be given at any time after the election to which it relates).
(d) In the case of an award of restricted units, no shares of Common Stock
shall be issued at the time the award is made, and the Company shall not be
required to set aside a fund for the payment of any such award. At the
discretion of the Committee, cash and stock dividends with respect to the Common
Stock ("Dividend Equivalents") may be currently paid or withheld by the Company
for the employee's account subject to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions prescribed by the
Committee, and interest may be paid on the amount of cash dividends withheld at
a rate and subject to such terms as determined by the Committee.
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Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee or at such
earlier time as provided for in paragraph 12, the Company shall deliver to the
employee or the employee's beneficiary or estate, as the case may be, one share
of Common Stock for each restricted unit with respect to which the restrictions
have lapsed ("vested unit"), and cash equal to any Dividend Equivalents credited
with respect to each such vested unit and any interest thereon; provided,
however, that the Committee may, in its sole discretion, elect to pay cash or
part cash and part Common Stock in lieu of delivering only Common Stock for
vested units. If a cash payment is made in lieu of delivering Common Stock, the
amount of such cash payment shall be equal to the Market Value for the date on
which the Restricted Period lapsed with respect to such vested unit, or if there
are no sales on such date, on the next preceding day on which there were sales.
No payment will be required from the employee upon the award of any restricted
units, the crediting or payment of any Dividend Equivalents, or the delivery of
Common Stock or the payment of cash in respect of vested units, except that any
amount necessary to satisfy applicable federal, state or local tax requirements
shall be withheld or paid promptly upon notification of the amount due. The
Committee may permit such amount to be paid in (i) shares of Common Stock
previously owned by the employee, (ii) a portion of the shares of Common Stock
that otherwise would be distributed to such employee in respect of vested units,
or (iii) a combination of cash and shares of such Common Stock; provided,
however, unless otherwise approved by the Committee, that an election by an
employee subject to Section 16(b) of the Exchange Act to use the shares of
Common Stock described in clause (ii) above to satisfy any federal, state or
local tax requirement shall be made only during a Window Period (as defined in
paragraph 7(e) hereof); and provided further that the Committee shall have sole
discretion to consent to or disapprove of any such election (which consent or
disapproval may be given at any time after the election to which it relates).
Upon the occurrence of an acceleration date (as defined in paragraph
7(a)), all outstanding vested units (including any restricted units whose
restrictions have lapsed as a result of the occurrence of such acceleration
date) and credited Dividend Equivalents shall be payable as soon as practicable
but in no event later than 90 days after such acceleration date in cash, in
shares of Common Stock, or part in cash and part in Common Stock, as the
Committee, in its sole discretion, shall determine. To the extent that an
employee receives cash in payment for his vested units, such employee shall
receive an amount equal to the product of (i) the number of vested units
credited to such employee's account for which such employee is receiving payment
in cash times (ii) the Multiplication Factor (as defined below). To the extent
that an employee receives Common Stock in payment for his vested units, such
employee shall receive the number of shares of Common Stock determined by
dividing (i) the product of (x) the number of vested units credited to such
employee's account for which such employee is receiving payment in Common Stock
times (z) the Multiplication Factor, by (ii) the fair market value per share of
the Common Stock as of the day preceding the payment date. "Multiplication
Factor" shall mean (i) in the event of the occurrence of an Offer as defined in
paragraph 7(a) (i), the Offer Price per Share as modified below, (ii) in the
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case of an acquisition of Common Stock described in paragraph 7(a) (ii), the
Acquisition Price per Share as modified below, (iii) in the case of an event
described in paragraph 7(a) (iii), the Merger Price per Share as modified below,
or (iv) in the case of a change in the composition of the Board of Directors as
described in paragraph 7(a) (iv), the highest fair market value per share of the
Common Stock for any day during the applicable ninety-day period described
below. For purposes of the preceding sentence, (i) the applicable ninety-day
period described in paragraphs 9(c), (e) and (g) and in clause (iv) above shall
mean the ninety-day period ending on or within 89 days following an acceleration
date which the Committee, in its sole discretion, shall select and (ii) fair
market value per share of the Common Stock shall mean the Market Value.
(e) The restricted unit award agreement may permit an employee to request
that the payment of vested units (and Dividend Equivalents and the interest
thereon with respect to such vested units) be deferred beyond the payment date
specified in the agreement. The Committee shall, in its sole discretion,
determine whether to permit such deferment and to specify the terms and
conditions, which are not inconsistent with the 1996 Plan, to be contained in
the agreement. In the event of such deferment, the Committee may determine that
interest shall be credited annually on the Dividend Equivalents, at a rate to be
determined by the Committee. The Committee may also determine to compound such
interest.
12. TERMINATION OF EMPLOYMENT
Unless otherwise determined by the Committee, and subject to such
restrictions as may be imposed by the Code in the case of any incentive stock
options, in the event that the employment of an employee to whom an option,
right or limited right has been granted under the 1996 Plan shall be terminated
(except as set forth in paragraph 13), such option, right or limited right may,
employee was entitled to do so at the termination of his employment) at any time
within three months after such termination, or, in the case of an employee who
voluntarily resigns from active employment at or after age 55 within one year
after such termination, but in no case later than the date on which the option,
right or limited right terminates; provided, however, that any option, right or
limited right held by an employee whose employment is terminated for Cause shall
forthwith terminate, to the extent not theretofore exercised.
"Cause" shall mean: (1) any action or inaction by the employee that
constitutes larceny, fraud, gross negligence, a willful or negligent
misrepresentation to the directors or officers of the Company, their successors
or assigns, a crime involving moral turpitude; or (2) the refusal of the
employee to follow the reasonable and lawful written instructions of the
President or the Board of Directors of the Company with respect to the services
to be rendered and the manner of rendering such services by employee provided
such refusal is material and repetitive and is not justified or excused by
actions taken by the Company in violation of any written agreement between the
Company and the employee, and with respect to the first two refusals employee
has been given reasonable written notice and explanation thereof and reasonable
opportunity to cure and
15
<PAGE> 42
no cure has been effected within a reasonable time after such notice. Unless
otherwise determined by the Committee, if an employee to whom restricted shares
or restricted units have been granted ceases to be an employee of the Company or
of a subsidiary prior to the end of the Restricted Period and the satisfaction
of any other conditions prescribed by the Committee for any reason other than
death or total disability (as defined in paragraph 13), the employee shall
immediately forfeit all restricted shares and restricted units. Awards granted
under the 1996 Plan shall not be affected by any change of duties or position so
long as the holder continues to be an employee of the Company or any of its
subsidiaries. Any option, right, limited right, restricted share or restricted
unit agreement, or any rules and regulations relating to the 1996 Plan, may
contain such provisions as the Committee shall approve with reference to the
determination of the date employment terminates and the effect of leaves of
absence. Any such rules and regulations with reference to any option agreement
shall be consistent with the provisions of the Code and any applicable rules and
regulations thereunder. Nothing in the 1996 Plan or in any award granted
pursuant to the 1996 Plan shall confer upon any employee any right to continue
in the employ of the Company or any of its subsidiaries or interfere in any way
with the right of the Company or any such subsidiary to terminate such
employment at any time.
Notwithstanding anything else in the 1996 Plan to the contrary, if the
corporation employing an individual to whom an option, right, limited right,
restricted unit or restricted share has been granted under the 1996 Plan ceases
to be a subsidiary of the Company, then the Committee may provide that service
with such employer or its direct or indirect or subsidiaries in any capacity
shall be considered employment with the Company for purposes of the 1996 Plan.
13. DEATH OR TOTAL DISABILITY OF EMPLOYEE
If an employee to whom an option, right or limited right has been granted
under the 1996 Plan shall die or suffer a "total disability" while employed by
the Company or its subsidiaries or within three months (or, in the case of an
employee who voluntarily resigns from active employment at or after age 55,
within one year) after the termination of such employment (other than
termination for cause), such option, right or limited right may be exercised, to
the extent that the employee was entitled to do so at the termination of
employment (including by reason of death or total disability), as set forth
herein (subject to the restrictions set forth in paragraphs 8 and 9 with respect
to persons subject to Section 16(b) of the Exchange Act) by the employee, the
legal guardian of the employee (unless such exercise would disqualify an option
as an incentive stock option), a legatee or legatees of the employee under the
employee's last will, or by the employee's personal representatives or
distributees, whichever is applicable, at any time within one year after the
date of the employee's death or total disability, but in no case later than the
date on which the option, right or limited right terminates. For purposes
hereof, "total disability" is defined as the permanent inability of an employee,
as a result of accident or sickness, to perform any and every duty pertaining to
such employee's
16
<PAGE> 43
occupation or employment for which the employee is suited by reason of the
employee's previous training, education and experience.
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
Notwithstanding any other provision of the 1996 Plan, the Committee may at
any time, in its sole discretion, make or provide for such adjustments to the
1996 Plan, to the number and class of shares available thereunder or to any
outstanding options, rights, restricted shares or restricted units as it may
deem appropriate to prevent dilution or enlargement of rights, including
adjustments in the event of distributions to holders of Common Stock other than
a normal cash dividend, changes in the outstanding Common Stock by reason of
stock dividends, split-ups, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations, reorganizations, liquidations
and the like. In the event of any offer to holders of Common Stock generally
relating to the acquisition of their shares, the Committee may, in its sole
discretion, make any adjustment as it deems equitable in respect of outstanding
options, rights, limited rights and restricted units, including in the
Committee's discretion revision of outstanding options, rights, limited rights
and restricted units so that they may be exercisable for or payable in the
consideration payable in the acquisition transaction. Any such determination by
the Committee shall be conclusive. No adjustment shall be made in respect of an
incentive stock option if such adjustment would disqualify such option as an
incentive stock option under Section 422 of the Code and the Treasury
Regulations thereunder. No adjustment shall be made in the minimum number of
shares with respect to which an option may be exercised at any time. Any
fractional shares resulting from such adjustments to options, rights, limited
rights or restricted units shall be eliminated.
15. EFFECTIVE DATE
The 1996 Plan shall be effective as of July 30, 1996, (the "Effective
Date"), provided that the adoption of the 1996 Plan shall have been approved by
the stockholders of the Company. The Committee thereafter may, in its
discretion, grant awards under the 1996 Plan, the grant, exercise or payment of
which shall be expressly subject to the conditions that, to the extent required
at the time of grant, exercise or payment, (i) if the Company deems it necessary
or desirable, a Registration Statement under the Securities Act of 1933 with
respect to such shares shall be effective, and (ii) any requisite approval or
consent of any governmental authority of any kind having jurisdiction over
awards granted under the 1996 Plan shall be obtained.
16. TERMINATION AND AMENDMENT
The Board of Directors of the Company may suspend, terminate, modify or
amend the 1996 Plan, provided that any amendment that would increase the
aggregate number of shares that may be issued under the 1996 Plan, materially
increase the benefits accruing to participants under the 1996 Plan, or
materially modify the requirements as to eligibility for participation in the
1996 Plan shall be subject to the
17
<PAGE> 44
approval of the Company's stockholders to the extent required by Rule 16b-3,
applicable law or any other governing rules or regulations, except that any such
increase or modification that may result from adjustments authorized by
paragraph 14 does not require such approval. If the 1996 Plan is terminated, the
terms of the 1996 Plan shall, notwithstanding such termination, continue to
apply to awards granted prior to such termination. In addition, no suspension,
termination, modification or amendment of the 1996 Plan may, without the consent
of the employee to whom an award shall theretofore have been granted, adversely
affect the rights of such employee under such award.
17. WRITTEN AGREEMENTS
Each award of options, rights, limited rights, restricted shares or
restricted units shall be evidenced by a written agreement, executed by the
employee and the Company, which shall contain such restrictions, terms and
conditions as the Committee may require.
18. EFFECT ON OTHER STOCK PLANS
The adoption of the 1996 Plan shall have no effect on awards made or to be
made pursuant to other stock plans covering employees of the Company or its
subsidiaries, or any predecessors or successors thereto.
18
<PAGE> 45
TRANSACT TECHNOLOGIES INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TRANSACT
TECHNOLOGIES INCORPORATED
The undersigned shareholder of TransAct Technologies Incorporated (the
"Company"), does hereby nominate, constitute and appoint Thomas R. Schwarz and
Bart C. Shuldman, or either of them, with full power to act alone, my true and
lawful attorney with full power of substitution, for me and in my name, place
and stead to vote all of the shares of Common Stock of the Company standing in
my name on its books on March 19, 1998, at the Annual Meeting of its
shareholders to be held at The Ramada Plaza Hotel, 275 Research Parkway,
Meriden, CT 06450 on Thursday, May 7, 1998 at 10:00 a.m., or at any adjournment
thereof, with all powers the undersigned would possess if personally present as
follows:
(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 46
PLEASE SIGN, DATE AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
TRANSACT TECHNOLOGIES INCORPORATED
MAY 7, 1998
<TABLE>
<CAPTION>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
PLEASE MARK YOUR
A /X/ VOTE AS IN THIS
EXAMPLE.
<S> <C> <C>
FOR WITHHOLD
ALL NOMINEES FOR ALL NOMINEES NOMINEES: Graham Y. Tanaka
1. ELECTION OF Richard L. Cote
DIRECTORS. / / / /
FOR ALL NOMINEES EXCEPT:
- ------------------------------------------------
To withhold authority to vote for any individual
nominee, write that nominee's name in the space
above.
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S><C> <C> <C> <C>
2. RATIFICATION of selection of Price / / / / / /
Waterhouse LLP as independent accountants
for 1998.
3. APPROVAL of amendment to Company's 1996 / / / / / /
Stock Plan to increase the number of shares of
Common Stock subject thereto.
4. In their discretion, the Proxies, or either of them, are authorized to vote upon such
other business as may properly come before the meeting.
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED ON BEHALF OF THE UNDERSIGNED
AS DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
SIGNATURE DATE SIGNATURE DATE
------------------ ------- ----------------- --------
(SIGNATURE IF HELD JOINTLY)
NOTE: Please sign exactly as name appears on the mailing label. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If signing on behalf of a corporation, please sign the full
corporate name by president or other authorized officer. If signing on
behalf of a partnership, please sign the partnership names by authorized
person.
