| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers. |
Departure of Chief
Executive Officer
On April 5, 2023,
TransAct Technologies Incorporated (the “Company”) announced that on April 4, 2023 (the “Departure Date”),
Bart C. Shuldman had stepped down as the Company’s Chief Executive Officer and as a director of the Company, effective
immediately (the “Effective Time”). Mr. Shuldman’s resignation as director is not due to any disagreement with the
Company on any matter relating to the Company’s operations, policies or practices.
In connection with
Mr. Shuldman’s departure, the Company and Mr. Shuldman entered into a Separation Agreement and General Release, dated April 20,
2023 (the “Separation Agreement”). The Separation Agreement will become effective on April 28, 2023 if it is not revoked
by Mr. Shuldman in writing on or before April 27, 2023. The Separation Agreement, in exchange for a release of claims and other agreements,
acknowledgements and representations of Mr. Shuldman set forth therein, provides for the payment of the following severance benefits
following the Departure Date that are generally consistent with the severance benefits provided for in connection with a termination
without cause under Mr. Shuldman’s Amended and Restated Employment Agreement, dated as of December 14, 2022, which was previously
filed with the SEC: (i) payment, in accordance with the Company’s regular payroll practices, of Mr. Shuldman’s base salary
for a period of two years following the Departure Date at his final base rate of $595,801 per year; (ii) $115,079 paid in equal installments
over a one-year period in accordance with the Company’s regular payroll practices, representing a pro-rated bonus for 2023 based
on Mr. Shuldman’s annual bonus target of $446,851 (75% of base salary); and (iii) if Mr. Shuldman timely elects to continue his
group health insurance pursuant to COBRA, reimbursement on an after-tax basis of Mr. Shuldman’s health insurance COBRA premiums
for continuing his health care coverage and the coverage of his dependents who were covered as of his departure date for a period of
18 months or until Mr. Shuldman becomes eligible for another employer’s group health plan during such 18-month period. In addition,
the Severance Agreement provides that (i) the Company will reimburse Mr. Shuldman up to an aggregate of $50,000 for the cost of his existing
life insurance policy through the end of the term of such policy; (ii) any vested options held by Mr. Shuldman as of the Departure Date
will remain exercisable for two years thereafter; and (iii) the Company will continue to pay for Mr. Shuldman’s required SEC filings
in connection with his ownership of Company securities for a period of two years following execution of the Separation Agreement. In
accordance with the terms of the Company’s 2014 Equity Incentive Plan, as amended and restated, and the related award agreements,
all unvested equity awards held by Mr. Shuldman were forfeited as of the Departure Date.
The foregoing description
of the Separation Agreement is a summary and is qualified in its entirety by reference to the complete terms of such agreement, which
is filed herewith as Exhibit 10.1 and incorporated by reference herein.
The Board of Directors
of the Company (the “Board”) reduced its size from seven to six directors, effective at the Effective Time, eliminating the
vacancy created by Mr. Shuldman’s departure.
Appointment of
Interim Chief Executive Officer
On April 4, 2023, the
Board appointed John M. Dillon, a Board member, to serve as interim Chief Executive Officer of the Company, effective as of the Effective
Time. In this capacity, Mr. Dillon will serve as the Company’s principal executive officer. Mr. Dillon will continue to serve on
the Board but has stepped down from his position as Audit Committee chair and from his membership on each of the committees of the Board.
The Board has elected Emanuel P. N. Hilario to replace Mr. Dillon as chair of the Audit Committee, effective as of the Effective Time.
Given Mr. Hilario’s new responsibilities as Audit Committee chair, effective as of the Effective Time, the Board elected Randall
Friedman to replace Mr. Hilario as Chair of the Compensation Committee and Haydee Ortiz Olinger to replace Mr. Friedman as chair of the
Nominating and Corporate Governance Committee.
Mr. Dillon, 73, has served
as a director of the Company since 2011. Mr. Dillon has been the Chairman of the Board of Directors of Aerospike, the world’s first
flash-optimized database and the fastest database at scale, since January 2022 and served as CEO of Aerospike from January 2015 to January
2022. Prior to joining Aerospike, Mr. Dillon served as CEO of Engine Yard, Inc., the leading cloud platform for automating and developing
Ruby on Rails and PHP applications, from 2009 to 2014. He served as CEO for Navis, Inc., a private company specializing in software systems
for operating large marine container terminals and distribution centers, from 2002 to 2008. Before Navis, he also served as CEO for Salesforce.com
and President and CEO of Hyperion Solutions. He began his career as a Systems Engineer for EDS (Electronic Data Systems) and then moved
into a variety of sales management positions for various high-tech companies, including Oracle Corporation. Mr. Dillon holds a Bachelor’s
degree in Engineering from the United States Naval Academy and an MBA from Golden Gate University. He served on active duty in the nuclear
submarine service for five years before beginning his civilian career.
There is no arrangement
or understanding between Mr. Dillon and any other person pursuant to which Mr. Dillon has been appointed as interim Chief Executive Officer.
There are no family relationships between Mr. Dillon and any of the Company’s other directors or executive officers, and Mr. Dillon
is not a party to any transaction, or any proposed transaction, required to be disclosed pursuant to Item 404(a) of Regulation S-K.
In connection with
Mr. Dillon’s appointment as interim Chief Executive Officer, the Company and Mr. Dillon entered into a letter agreement, dated
April 24, 2023 (the “Interim CEO Agreement”). The Interim CEO Agreement provides for at-will employment effective as of April
4, 2023 and entitles Mr. Dillon to the following compensation and benefits:
| · | A
base salary in the annualized amount of $600,000; |
| · | Eligibility
for a target annual bonus of $200,000, based on achievement of certain financial and strategic
objectives and subject to certain eligibility criteria, pro-rated for the portion of the
2023 fiscal year for which Mr. Dillon serves as interim Chief Executive Officer; |
| · | Eligibility, subject to availability of sufficient shares under the Company’s 2014 Equity Incentive
Plan, as amended and restated (the “Plan”), and approval of the Compensation Committee of the Board, and on the terms (including
vesting terms) and subject to the conditions to be set forth in related award agreements, for a one-time award under the Plan of (a) stock-settled,
service-based RSUs valued at $370,000 on the date of grant under a Black-Scholes valuation model and (b) options to purchase Company common
stock valued at $370,000 on the date of grant under a Black-Scholes valuation; and |
| · | Eligibility
to participate in all employee benefit plans, policies and programs of the Company applicable
to senior executives, vacation time in accordance with the Company’s policies as in
effect from time to time, and reimbursement of reasonable and documented business, travel
and entertainment expenses incurred in the performance of Mr. Dillon’s duties as interim
Chief Executive Officer in accordance with the Company’s expense reimbursement policy. |
In
the Interim CEO Agreement, Mr. Dillon has agreed to provide at least 60 days’ notice prior to any resignation. Pursuant to the
Interim CEO Agreement, Mr. Dillon has agreed to enter into a Confidential Information and Intellectual Property Agreement (the “CIIP
Agreement”) with the Company, attached as an exhibit to the Interim CEO Agreement, which provides for certain confidentiality, non-competition,
non-solicitation and intellectual property assignment covenants). In the event of a termination without cause or due to death or disability
before the payment of the annual bonus, Mr. Dillon will be eligible for (i) a pro-rated bonus based on the portion of the period from
the Effective Date through December 31, 2023 for which Mr. Dillon was employed as Chief Executive Officer, payable at the time that annual
bonuses are paid to other executives and based on a determination made by the Compensation Committee as to whether certain financial
performance metrics and performance criteria, if any, were achieved and (ii) if the Company does not waive the non-competition provisions
in the CIIP Agreement, payment of 50% of his base salary for the duration of the one-year non-competition period.
The
foregoing summary of the Interim CEO Agreement is qualified in its entirety by reference to the full text of the Interim CEO Agreement,
which is filed herewith as Exhibit 10.2 and incorporated herein by reference.