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EXHIBIT 10.8
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 XXXXXX X. XXXXX ("Irato").
RECITALS
This Agreement establishes the terms and conditions of employment of Xx
Xxxxx by the Company. It supersedes all prior employment agreements with the
Company and any affiliate or predecessor, except with respect to stock and stock
option grants, which shall remain in full force and effect hereunder. 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:
1. Employment, Duties, and Acceptance. Company and Irato agree that Irato
will be employed for the Term (as hereinafter defined), to render
exclusive full-time services to Company as Vice Chairman and Chief
Executive Officer (or such other executive position within the Hypercom
consolidated group of companies (the "Hypercom Group") as the Company
shall determine upon consultation with Irato). Irato 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. Irato also shall be appointed to serve as a member of the
Board of Directors of Company during the Term.
2. Term. The Term of Irato's 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 Irato under this Agreement, Company shall
pay Irato an annual base salary, payable in accordance with
the customary payroll policy of Company in 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:
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Effective Dates
October 1, 1996 - September 30, 1997 $322,000
October 1, 1997 - September 30, 1998 $372,000
October 1, 1998 - September 30, 1999 $392,000
October 1, 1999 - September 30, 2000 $422,000
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 $422,000.
3.2 Stock and Stock Options.
(1) Stock and Stock Options. Pursuant to an agreement
with the Company's predecessor dated August 31, 1992,
and amended January 1, 1994 (the "Prior Agreement")
which the Company assumes, Irato has been granted (i)
280,000 shares of common stock, and (ii)
non-qualified options (the "Existing Options") to
purchase additional shares of the Company's common
stock, in the amounts and at the exercise prices set
forth on Schedule 1 hereto, which is the fair market
value on the date of grant, and upon the terms set
forth in the Prior Agreement. All such option grants,
to the extent not already vested, will vest on June
30, 1997. By this Agreement, the Company hereby
grants to Irato non-qualified options (the "New
Options") to acquire an additional 206,000 shares of
common stock, at the exercise price set forth on
Schedule I, which is the fair market value on the
date hereof. Fifty percent (50%) of the New Options
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, with all such options vesting on
January 1, 2002. Vesting shall terminate upon his
termination of employment. The Existing Options and
the New Options are collectively referred to as the
"Options." 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 New Options. The New Options shall have a
term of ten (10) years from the date of grant,
subject to the provisions below (the "Term"). During
the Term, Irato may exercise the New Options, to the
extent he is vested. To the extent necessary to
supplement personal funds, the Company agrees to
consider in good faith granting Irato a loan in
amounts necessary to exercise any New Option provided
for herein and/or to make any necessary payments for
income taxes incurred by Irato as the result of the
grant or exercise of New Options under this Section
3.2, with interest
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and payment dates on such loans to be negotiated by
the parties in good faith. This obligation shall
terminate upon the Company's initial public offering
("IPO") of common stock. Irato may also pay the
exercise price of New Options and/or any income tax
withholding requirements in common stock of the
Company.
(3) Registration Rights. Irato 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 Irato
upon exercise, in a registration statement of the
Company.
(4) Accelerated Vesting; Exercisability. Irato's New
Options (not previously exercisable) shall become
immediately 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. Irato's Disability or
Irato's death.
(2) Termination of Employment. Termination of
Irato's employment by Company without Cause
or by Irato 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 Irato's New 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 New Options shall
terminate upon Irato's 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 New 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 New Options the
number and class of shares of stock into which each
outstanding share of
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Company's common stock shall be so exchanged, all without any
change in the aggregate purchase price for the shares then
subject to the New Option.
4. Benefits and Bonus. Irato 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 Irato 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. Irato 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 Irato dies during the Term, this
Agreement shall terminate, except that the representative of
Irato's 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 Irato becomes
Disabled, Company may at any time thereafter, by written
notice to Irato, terminate the Term of Irato's employment
hereunder. Nothing in this Section 5.2 shall be deemed to
extend the Term. Upon such termination, Irato 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 Irato terminate Irato's employment hereunder
for Cause, provided that Irato 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. Irato shall be entitled to receive accrued and
unpaid salary to the date of termination.
5.4 Termination by Company Without Cause or by Irato for Good
Reason. If Irato's employment hereunder shall be terminated by
the Company without Cause or by Irato for Good Reason, Company
shall pay to Irato, as liquidated damages and not as a
penalty, for a period of one year following termination, an
amount equal to Irato's 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
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amounts payable under this provision shall be paid to Irato 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 Irato voluntarily
terminates his employment with Company during or after the
Term, Irato 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
Irato 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. Irato 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 Irato 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 Irato (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. Irato 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. Irato 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, Irato
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 against
the party or
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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, Irato 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. Irato hereby agrees that upon the commencement by
Irato of employment with any third party during the period in
which the terms of this Section 6 are in effect, Irato shall
promptly disclose to each such new employer the terms of this
Section 6. Irato further agrees and authorizes the Company to
notify others, including customers of the Company and any such
future employers of Irato, of the terms of this Section 6 and
of Irato's obligations hereunder.
6.5 Extension. Irato 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 Irato.
6.6 Survival of Non-Competition. The provisions of this Section 6
will survive any termination of this Agreement.
6.7 Enforcement. Irato agrees to pay any and all reasonable costs
and expenses, including attorneys' fees, incurred by the
Company in enforcing this Section 6.
7. Confidentiality and Nondisclosure.
7.1 Covenant. It is understood that in the course of Irato's
employment with Company, Irato will become acquainted with
Company Confidential Information (as defined below). Irato
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, Irato agrees that he will not, without
the express written consent of Company, during Irato's
employment with Company and thereafter or until such time as
Company Confidential Information becomes generally known, or
readily ascertainable by
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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
Irato's duties may specifically require. In the event of
dispute or litigation, Irato 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 Irato 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. Irato acknowledges that such information is
Company Confidential Information whether disclosed to or
learned by Irato or originated by Irato 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. Irato 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, Irato
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.
7.3 Disclosure. Irato hereby agrees that upon the commencement by
Irato of employment with any third party during the period in
which the terms of this Section 7 are in effect, Irato shall
promptly disclose to each such new employer
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the terms of this Section 7. Irato further agrees and
authorizes the Company to notify others, including customers
of the Company and any such future employers of Irato, of the
terms of this Section 7 and of Irato's 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, Irato 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 Irato.
7.6 Enforcement. Irato agrees to pay any and all reasonable costs
and expenses, including attorneys' fees, incurred by Company
in enforcing this Section 7.
8. Indemnification. Company shall indemnify and defend Irato if Irato 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
Irato is or was an officer or director of Company or any of its
affiliates, in which capacity Irato 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 (except as reflected herein) all prior
agreements, written or oral, with respect thereto.
9.3 Waivers and Amendments. This Agreement my be amended,
modified, superseded, canceled, renewed, or extended, and the
terms and conditions hereof 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.
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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 Irato for Cause as provided
for in Section 5.3, and in the further event that Irato
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 Irato the compensation provided under Section 3.1 and shall
continue to provide to Irato the benefits set forth in Section
4, and, in turn, Irato 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 Irato 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
----------------------------
Name: Xxxxxx Xxxxxxx
--------------------------
Title: Chairman
-------------------------
/s/ Xxxxxx X. Xxxxx
--------------------------------
XXXXXX X. XXXXX
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SCHEDULE 1
Existing Stock Options
Number of Securities Exercise Price
Date of Grant Underlying Options Granted Per Share
------------- -------------------------- ---------
June 30, 1992 202,000 $ .83
June 30, 1993 204,000 $1.37
June 30, 1994 208,000 $2.52
January 1, 1995 210,000 $3.32
New Stock Options
Number of Securities Exercise Price
Date of Grant Underlying Options Granted Per Share
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January 1, 1997 206,000* $8.00
* The 206,000 specific stock options are specifically excluded from the terms
and conditions of the prior employment agreement which have not been
extinguished by this Employment Agreement with respect to stock and stock
option grants.
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