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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), effective as of January 1,
1997 ("Effective Date"), is by and between HYPERCOM CORPORATION, a Delaware
corporation ("Company"), and XXXXX XXXXXXXX ("Xxxxxxxx").
RECITALS
This Agreement establishes the terms and conditions of employment of
Xxxxx Xxxxxxxx by the Company. It supersedes all prior employment agreements
with the Company and any affiliate or predecessor. Certain capitalized terms are
defined in Section 9.6.
AGREEMENTS
In consideration of the mutual promises set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
In consideration of the mutual promises set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Employment, Duties, and Acceptance. Company and Xxxxxxxx agree that
Xxxxxxxx will be employed for the Term (as hereinafter defined), to
render exclusive full-time services to Company as Vice Chairman and
Division CEO (or such other executive position within the Hypercom
consolidated group of companies (the "Hypercom Group") as the Company
shall determine upon consultation with Xxxxxxxx). Xxxxxxxx shall
perform such duties as are consistent with his positions and as he
shall reasonably be directed to perform by Company's Board of Directors
and Chairman of the Board. Xxxxxxxx also shall be appointed to serve as
a member of the Board of Directors of Company during the Term.
2. Term. The Term of Xxxxxxxx'x employment by Company hereunder (the
"Employment Period") shall be for a period of five (5) years from the
Effective Date, subject to the termination provisions of Sections 5.1
through 5.5 hereof.
3. Compensation.
3.1 Base Compensation. During the Employment Period, for all
services rendered by Xxxxxxxx under this Agreement, Company
shall pay Xxxxxxxx an annual base salary, payable in
accordance with the customary payroll policy of Company in
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effect at the time such payment is made (or as may otherwise
be mutually agreed upon by the parties), at a rate of no less
than as provided below:
Effective Dates
October 1, 1996 - September 30, 1997 $250,000
October 1, 1997 - September 30, 1998 $260,000
October 1, 1998 - September 30, 1999 $275,000
October 1, 1999 - September 30, 2000 $300,000
Annual base compensation after September 30, 2000 shall be
determined by the Company's Board of Directors not later than
thirty days prior to such date, and shall in no event be less
than $300,000.
3.2 Stock and Stock Options.
(1) Stock and Stock Options. Xxxxxxxx is hereby granted
options ("Option ") to purchase the number of shares
of the Company's common stock at the exercise price
set forth on Schedule 1 hereto, which is the fair
market value on the date hereof. Fifty percent (50%)
of the option grants are immediately exercisable,
with the remaining 50% becoming exercisable at the
rate of 10% per year of the total shares granted (20%
per year of the remaining 50%) thereafter on each
successive anniversary date. Vesting shall terminate
upon his termination of employment. The options shall
be transferable to family members, trusts,
partnerships, foundations or other entities created
for their benefit, and to third parties, provided
that any transfer to a third party shall require the
consent of the Company, which shall not be
unreasonably withheld.
(2) Term of Stock Options. The Options shall have a term
of ten (10) years, subject to the provisions below
(the "Term"). During the Term, Xxxxxxxx may exercise
the Options to the extent he is vested. To the extent
necessary to supplement personal funds, the Company
agrees to consider in good faith granting Xxxxxxxx a
loan in amounts necessary to exercise any Option
provided for herein and/or to make any necessary
payments for income taxes incurred by Xxxxxxxx as the
result of the grant or exercise of Options under this
Section 3.2, with interest and payment dates on such
loans to be negotiated by the parties in good faith.
Said obligation to grant said loan shall terminate
upon the Company's initial public offering ("IPO") of
common stock. Xxxxxxxx may also pay the exercise
price of Options and/or any income tax withholding
requirements in common stock of the Company.
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(3) Registration Rights. Xxxxxxxx shall be granted
"piggyback" registration rights with respect to any
shares of stock of the Company that he may own to the
extent and as favorable as "piggyback" registration
rights granted to any other shareholder of the
Company. Alternatively, the Company may include the
sale of shares of stock to be issued upon exercise of
Options, or the resale of shares purchased by
Xxxxxxxx upon exercise, in a registration statement
of the Company.
(4) Accelerated Vesting; Exercisability. Xxxxxxxx'x
Options (not previously exercisable) shall become
immediately vested and exercisable in full by him or
in the case of his death, by the representative of
his estate, upon the happening of any of the
following events:
(1) Disability or Death. Xxxxxxxx'x Disability
or Xxxxxxxx'x death.
(2) Termination of Employment. Termination of
Xxxxxxxx'x employment by Company without
Cause or by Xxxxxxxx for Good Reason (as
defined below).
(3) Change in Control. A Change in Control of
the Company.
In the event of Disability or Death, termination without Cause
or resignation with or without Good Reason, the period for
exercise of Xxxxxxxx'x Options shall terminate on the earlier
of (a) ninety (90) days from the happening of such event or
(b) the expiration of ten (10) years from the date of grant.
In the event of a termination for Cause, the Options shall
terminate upon Xxxxxxxx'x termination.
3.3 Adjustment. In the event a stock dividend or split is declared
upon the Company's common stock, the shares of common stock
then subject to the Options shall be increased proportionately
without any change in the aggregate exercise price therefor.
In the event the Company's common stock is changed into or
exchanged for a different number or class of shares of capital
stock of the Company or of another corporation, whether
through a merger, reorganization, consolidation,
recapitalization, combination or exchange of shares, or stock
split, there shall be substituted for each such share of
common stock then subject to the Options the number and class
of shares of stock into which each outstanding share of
Company's common stock shall be so exchanged, all without any
change in the aggregate purchase price for the shares then
subject to the Option.
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4. Benefits and Bonus. Xxxxxxxx shall be entitled to such paid vacation,
holidays, sick leave and shall be eligible for participation in such
group insurance, hospitalization, major medical, dental, disability
insurance, profit sharing, pension, stock options, and other fringe
benefit programs as those afforded other senior executive officers of
Company. The Company agrees to provide Xxxxxxxx with an appropriate
automobile for business use, the annual lease value of which (as
determined by the "Annual Lease Value Table" provided by the Internal
Revenue Service), shall be approximately $10,000, as reasonably
adjusted hereafter for inflation. Xxxxxxxx shall also be entitled to
participate in any executive bonus plan of the Company upon the terms
and conditions of such plan.
5. Termination.
5.1 Termination upon Death. If Xxxxxxxx dies during the Term, this
Agreement shall terminate, except that the representative of
Xxxxxxxx'x estate shall be entitled to receive the
compensation herein provided for the month in which death
occurs.
5.2 Termination Upon Disability. If during the Term Xxxxxxxx
becomes Disabled, Company may at any time thereafter, by
written notice to Xxxxxxxx, terminate the Term of Xxxxxxxx'x
employment hereunder. Nothing in this Section 5.2 shall be
deemed to extend the Term. Upon such termination, Xxxxxxxx
shall be entitled to receive the compensation herein provided
for the month in which Disability occurs.
5.3 Termination For Cause. Company may at any time by ninety days
written notice to Xxxxxxxx terminate Xxxxxxxx'x employment
hereunder for Cause, provided that Xxxxxxxx shall have ten
(10) days after the notice to cure the deficiency giving rise
to the notice of termination, if it is curable within this
period. The Company need only give one opportunity to cure a
deficiency under this provision. Xxxxxxxx shall be entitled to
receive accrued and unpaid salary to the date of termination.
5.4 Termination by Company Without Cause or by Xxxxxxxx for Good
Reason. If Xxxxxxxx'x employment hereunder shall be terminated
by the Company without Cause or by Xxxxxxxx for Good Reason,
Company shall pay to Xxxxxxxx, as liquidated damages and not
as a penalty, for a period of one year following termination,
an amount equal to Xxxxxxxx'x annual base compensation on the
date of termination under Section 3.1 hereof payable in
accordance with and at the times set forth in the Company's
normal salary policies, provided, however, that in the event
that all or substantially all of the stock of Company or the
assets of Company are sold during the period in which payments
are being made, then in that instance, the remaining amounts
payable under this provision shall be paid to
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Xxxxxxxx in a lump sum on the first business day immediately
subsequent to the date of the closing of such sale.
5.5 Voluntary Termination. In the event Xxxxxxxx voluntarily
terminates his employment with Company during or after the
Term, Xxxxxxxx shall be entitled to receive accrued and unpaid
salary to the date of termination.
5.6 Release. The Company's obligation to make any payments
hereunder, other than salary payments due through the date of
termination, shall be subject to receipt by the Company from
Xxxxxxxx of a release in form and substance acceptable to the
Company of all obligations or liabilities of the Company to
him except those arising under this Article 5, pursuant to any
stock option grants (including those herein) or under COBRA.
6. Non-Competition.
6.1 Covenant. Xxxxxxxx hereby covenants and agrees that he will
not, during the term hereof and for one year after any
termination of employment:
(a) Directly or indirectly participate or assist in the
ownership, management, operation or control of any business
similar to or competitive with the Company; provided, however,
that Xxxxxxxx may own, directly or indirectly, solely as an
investment, securities of any person which are traded on any
national securities exchange or in the over the counter market
if Xxxxxxxx (x) is not a controlling person of, or a member of
a group which controls, such person or (y) does not, directly
or indirectly, own 1% or more of any class of securities of
such person; or
(b) Directly or indirectly solicit for employment any person
who is, or within the six month period preceding the date of
such solicitation was, an employee of Company (other than as a
result of a general solicitation for employment); or
(c) Call on or directly or indirectly solicit or divert or
take away from Company or any affiliate of Company any person,
firm, corporation, or other entity who is a customer or
supplier of Company.
6.2 Acknowledgment; Relief for Violation. Xxxxxxxx hereby agrees
that the period of time provided for in this Section 6 and the
territorial restrictions and other provisions and restrictions
set forth herein are reasonable and necessary to protect
Company and its successors and assigns. Xxxxxxxx further
agrees that damages cannot compensate Company in the event of
a violation of this Section 6 and that, if such violation
should occur, injunctive relief shall be essential for the
protection of Company and its successors and assigns.
Accordingly, Xxxxxxxx hereby covenants and agrees that, in the
event any of the provisions of this Section 6 shall be
violated or breached, Company shall be entitled to obtain
injunctive relief
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against the party or parties violating such covenants, without
bond but upon due notice, in addition to such further or other
relief as may be available at equity or law. Obtainment of
such an injunction by Company shall not be considered an
election of remedies or a waiver of any right to assert any
other remedies which Company has at law or in equity. No
waiver of any breach or violation hereof shall be implied from
forbearance or failure by Company to take action thereof.
6.3 Severability. The Company hereby agrees that, if any provision
with respect to this Section 6 shall be adjudicated to be
invalid or unenforceable, such provision shall be deleted from
this Agreement, but such deletion is to apply only with
respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made; provided,
however, that to the extent any provision hereof is deemed
unenforceable by virtue of its scope in terms of area or
length of time, but may be made enforceable by limitations
thereon, Xxxxxxxx agrees that the same shall be enforceable to
the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which the enforcement
is sought.
6.4 Disclosure. Xxxxxxxx hereby agrees that upon the commencement
by Xxxxxxxx of employment with any third party during the
period in which the terms of this Section 6 are in effect,
Xxxxxxxx shall promptly disclose to each such new employer the
terms of this Section 6. Xxxxxxxx further agrees and
authorizes the Company to notify others, including customers
of the Company and any such future employers of Xxxxxxxx, of
the terms of this Section 6 and of Xxxxxxxx'x obligations
hereunder.
6.5 Extension. Xxxxxxxx hereby agrees that the period of time in
which this Section 6 is in effect shall be extended for a
period equal to the duration of any breach of this Section 6
by Xxxxxxxx.
6.6 Survival of Non-Competition. The provisions of this Section 6
will survive any termination of this Agreement.
6.7 Enforcement. Xxxxxxxx agrees to pay any and all reasonable
costs and expenses, including attorneys' fees, incurred by the
Company in enforcing this Section 6 so long as Company
prevails on the same.
7. Confidentiality and Nondisclosure.
7.1 Covenant. It is understood that in the course of Xxxxxxxx'x
employment with Company, Xxxxxxxx will become acquainted with
Company Confidential Information (as defined below). Xxxxxxxx
recognizes that Company Confidential Information has been
developed or acquired at great expense, is proprietary to
Company, and is and shall remain the exclusive property of
Company. Accordingly, Xxxxxxxx agrees that he will not,
without the express written consent
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of Company, during Xxxxxxxx'x employment with Company and
thereafter or until such time as Company Confidential
Information becomes generally known, or readily ascertainable
by proper means, by persons unrelated to Company, disclose to
others, copy, make any use of, or remove from Company's
premises any Company Confidential Information, except as
Xxxxxxxx'x duties may specifically require. In the event of
dispute or litigation, Xxxxxxxx shall have the burden of proof
by clear and convincing evidence that the Company Confidential
Information has become generally known, or readily
ascertainable by proper means, by persons unrelated to
Company.
As used herein, "Company Confidential Information" shall mean
confidential, proprietary information or trade secrets of
Company including without limitation the following: (1)
customer lists and customer information as compiled by
Company; (2) Company's internal practices and procedures; (3)
Company's financial condition and financial results of
operation to the extent not generally available to the public;
(4) supply of materials information, including sources and
costs; (5) information relating to designs or other subject
matter related to Company's business, strategic planning,
manufacturing, engineering, purchasing, finance, marketing,
promotion, distribution, and selling activities, whether now
existing, or acquired, developed, or made available anytime in
the future to Company; (6) all information which Xxxxxxxx has
a reasonable basis to consider confidential or which is
treated by Company as confidential; and (7) any and all
information having independent economic value to Company that
is not generally known to, and not readily ascertainable by
proper means by, persons who can obtain economic value from
its disclosure or use. Xxxxxxxx acknowledges that such
information is Company Confidential Information whether
disclosed to or learned by Xxxxxxxx or originated by Xxxxxxxx
during employment by Company. In the event that information is
not clearly and obviously publicly available, all information
about Company shall be presumed to be confidential.
7.2 Acknowledgment; Relief for Violation. Xxxxxxxx agrees that
damages cannot compensate Company in the event of a violation
of this Section 7 and that, if such violation should occur,
injunctive relief shall be essential for the protection of
Company and its successors and assigns. Accordingly, Xxxxxxxx
hereby covenants and agrees that, in the event any of the
provisions of this Section 7 shall be violated or breached,
Company shall be entitled to obtain injunctive relief against
the party or parties violating such covenants, without bond
but upon due notice, in addition to such further or other
relief as may be available at equity or law. Obtainment of
such an injunction by Company shall not be considered an
election of remedies or a waiver of any right to assert any
other remedies which Company has at law or in equity. No
waiver of any breach or violation hereof shall be implied from
forbearance or failure by Company to take action thereof.
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7.3 Disclosure. Xxxxxxxx hereby agrees that upon the commencement
by Xxxxxxxx of employment with any third party during the
period in which the terms of this Section 7 are in effect,
Xxxxxxxx shall promptly disclose to each such new employer the
terms of this Section 7. Xxxxxxxx further agrees and
authorizes the Company to notify others, including customers
of the Company and any such future employers of Xxxxxxxx, of
the terms of this Section 7 and of Xxxxxxxx'x obligations
hereunder.
7.4 Survival of Non-Competition. The provisions of this Section 7
will survive any termination of this Agreement.
7.5 Return of Company Materials and Company Confidential
Information. Upon Termination, Xxxxxxxx shall promptly deliver
to Employer the originals and all copies of any and all
materials, documents, notes, manuals, or lists containing or
embodying Company Confidential Information, or relating
directly or indirectly to the business of Company, in the
possession or control of Xxxxxxxx.
7.6 Enforcement. Xxxxxxxx agrees to pay any and all reasonable
costs and expenses, including attorneys' fees, incurred by
Company in enforcing this Section 7 so long as Company
prevails on the same.
8. Indemnification. Company shall indemnify and defend Xxxxxxxx if
Xxxxxxxx is made a party, or threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of the
fact that Xxxxxxxx is or was an officer or director of Company or any
of its affiliates, in which capacity Xxxxxxxx is or was serving,
against expenses (including reasonable attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit, or proceeding to the
fullest extent and in the manner set forth in and permitted by the
general corporation law of the State of Delaware, and any other
applicable law, as from time to time in effect.
9. Other Provisions.
9.1 Applicable Currency. Unless otherwise specifically stated, all
dollar amounts set forth in this Agreement are US dollars.
9.2 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with
respect thereto, including any agreements, written or oral,
regarding existing or potential profits or stock interests in
the Company or any predecessor or affiliate.
9.3 Waivers and Amendments. This Agreement my be amended,
modified, superseded, canceled, renewed, or extended, and the
terms and conditions hereof
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may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising
any right, power, or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party
of any right, power, or privilege hereunder, nor any single or
partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege hereunder.
9.4 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Arizona without
regard to conflicts of laws principles.
9.5 Arbitration. Any controversy or claim arising out of, or
relating to, this Agreement or the breach thereof, shall be
promptly settled by arbitration in accordance with the rules
then obtaining of the American Arbitration Association, and
judgment upon the award rendered may be entered in any court
having jurisdiction thereof. It is expressly understood that
the arbitrator shall have the authority to grant legal and
equitable relief, including both the authority to grant legal
and equitable relief, including both temporary restraints and
preliminary injunctive relief to the same extent as could a
court of competent jurisdiction, and that the arbitrator is
empowered to order either side to fully cooperate in promptly
resolving any controversies or claims under this Agreement. In
the event that Company terminates Xxxxxxxx for Cause as
provided for in Section 5.3, and in the further event that
Xxxxxxxx promptly initiates arbitration proceedings to contest
that termination as not properly for a Cause set forth in that
Section 5.3, for a period of up to a maximum of six (6) months
pending the outcome of that arbitration (notwithstanding the
provisions of that Section 5.3), Company shall continue to pay
to Xxxxxxxx the compensation provided under Section 3.1 and
shall continue to provide to Xxxxxxxx the benefits set forth
in Section 4, and, in turn, Xxxxxxxx shall be subject to the
provisions of Articles 6 and 7.
9.6 Definitions. The terms "Disability," "Change in Control" and
"Cause" (and derivations thereof) shall have the meaning
ascribed to them in the Company's Long-Term Incentive Plan.
"Good Reason" shall mean the removal of Xxxxxxxx from all
executive-level positions within the Hypercom Group or the
assignment to him of duties inconsistent with an
executive-level position.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HYPERCOM CORPORATION, a Delaware
corporation
By: /s/ Xxxxxx Xxxxxxx
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Name:
---------------------------
Title:
--------------------------
___________________________________
XXXXX XXXXXXXX
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SCHEDULE 1
Number of Securities Exercise Price
Date of Grant Underlying Options Granted Per Share
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January 1, 1997 860,000 $8.00
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