Re: Employment Agreement with Hypercom Corporation
December
30, 2009
Xxxxxxxx
Xxxxxxxxx
[Address on file with Hypercom
Corporation]
Re:
Employment Agreement with Hypercom Corporation
Dear
Xxxxxxxx:
Upon
execution by you and Hypercom, this Agreement will amend and restate in its
entirety the current employment agreement, as amended to date, between you and
Hypercom Corporation (“Hypercom” or the
“Company”) with
respect to the terms of your employment with the Company, and will constitute
your employment agreement (the “Agreement”) with the
Company.
1.
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Position with the
Company. You will continue in the position of Chief
Executive Officer (CEO) and President of the Company, based at the
Company’s headquarters in Scottsdale, Arizona. You may be
called upon to serve in additional or other capacities from time-to-time
during your tenure with the Company. You will faithfully and
diligently perform all lawful duties commensurate with these positions,
including those duties directed by the Board of Directors of the Company
(the “Board”). In
addition, you will continue to serve as a director on the Board, if so
elected, so long as you remain the CEO of the
Company.
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You will
continue to work out of the Company’s headquarters Monday through Friday, which
shall be your primary place of employment except when your work necessitates
business travel. You agree that you will establish a residence within
the greater Phoenix, Arizona, metropolitan area no later than September 30,
2010.
2.
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Term. Your
employment by the Company as CEO and President will terminate on
December 30, 2012 (the “Term”), unless
you and the Company agree to renew or extend such
employment. On or before December 30, 2011, you and the
Company will review the employment relationship and at that time the
Company may, in its sole discretion, extend the Term of this Agreement
until December 30, 2014.
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3.
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Compensation. You
will receive the following compensation for your services pursuant to this
Agreement:
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(a)
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You
will receive a base salary of $450,000 per year (the “Base Salary”),
which may be adjusted upward at the discretion of the Board or downward in
the event of a Company-wide downward compensation
adjustment. Your Base Salary will be paid in equal installments
in accordance with the Company’s salary payment policies in effect from
time-to-time and such salary payments will be subject to the usual
withholding for income tax and other customary
deductions.
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(b)
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Your
total target cash compensation shall be $900,000 per year (the “Total Target Cash
Compensation”) comprising your Base Salary plus a target annual
performance bonus of one hundred percent (100%) of your current Base
Salary (the “Target Annual
Performance Bonus”). The Target Annual Performance Bonus
or some percentage or multiple of it (the “Annual Performance
Bonus Compensation”) will be paid to you if the Company achieves
the annual Performance Goals, as defined below, and as determined by the
Board; provided
that you may be entitled to receive Annual Performance Bonus
Compensation in an aggregate amount up to one hundred and fifty percent
(150%) of your current Base Salary for each year during the term of this
Agreement if the Board deems it consistent with the achievement of the
Performance Goals for such year. The Performance Goals, and the
percentage of Target Annual Performance Bonus tied to each, will be
specifically defined by the Board in its discretion, but will likely
include, but not be limited to, some or all of the following: revenue,
EBITDAS (income from operations, excluding special charges, depreciation,
amortization and stock-based compensation), gross margin, earnings per
share, market share growth and development of the organization (the “Performance
Goals”). The determination as to whether the Company has
achieved the Performance Goals will be made by the Board in its
discretion, and the Annual Performance Bonus Compensation will be paid to
you within five (5) business days following such determination, but in any
event no later than the 15th day of the third month following the
applicable bonus year.
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(c)
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Your
Total Target Cash Compensation will first be eligible for upward
adjustment in connection with the Company-wide adjustment of employee
compensation to be effective on April 1, 2010. Thereafter, your
Total Target Cash Compensation may be adjusted upward at the same time as
future Company-wide adjustments of employee compensation or as otherwise
determined in the discretion of the Board. In adjusting Total
Target Cash Compensation, the Company may choose to adjust either or both
of Base Salary and Target Annual Performance Bonus. Any such
adjustment to Total Target Cash Compensation will be linked to an
assessment of the Total Target Cash Compensation of executives in like
positions in like companies in the
U.S.
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(d)
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You
will be eligible, but not entitled, to receive grants of stock options and
restricted common stock of the Company in such amounts and subject to such
conditions as the Board may determine in its sole and absolute
discretion.
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(e)
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The
Company will provide you with housing reimbursement in connection with
your business travel to the Company’s headquarters in Scottsdale, Arizona
in a reasonable amount to be determined by the Board (the “Housing
Reimbursement”); provided, however, that such
Housing Reimbursement will be in an amount comparable to the cost of a
standard apartment at [Location on file with Hypercom
Corporation] located in Scottsdale, Arizona and shall only apply to
housing costs incurred while residing in the Scottsdale, Arizona area on
business; and further
provided that such Housing Reimbursement shall terminate upon the
earlier of (1) the date that you establish a residence in the greater
Phoenix, Arizona, metropolitan area, or (2) September 30,
2010.
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(f)
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The
Company will provide you with reasonable travel reimbursement, including
one round-trip airline ticket per week between Los Angeles, California and
Phoenix, Arizona (or comparable airport locations) and transportation to
and from the airport in Los Angeles and to and from the airport in
Phoenix, consistent with the terms of the Company’s travel policies then
in effect for executive officers (the “Travel
Reimbursement”); provided, however, that such
Travel Reimbursement shall terminate upon the earlier of (1) the date that
you establish a residence within the greater Phoenix metropolitan area or
(2) September 30, 2010.
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(g)
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The
Company shall make an additional payment (a “Gross-up
Payment”) to you equal to the highest marginal applicable federal
and state taxes calculated on the total income you are required to include
on your federal and state income tax returns as a result of the Housing
Reimbursements and Travel Reimbursements pursuant to Sections 3(e) and (f)
above (but excluding the amount of income you will be required to include
as a result of the Gross-up Payment itself). Any Gross-up
Payment to be paid pursuant to this Agreement shall be timely withheld by
the Company and paid over to the applicable taxing
authorities. The Company acknowledges that you currently are a
resident of California for state income tax
purposes.
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(h)
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If
you move your primary residence from your current residence to the greater
Phoenix, Arizona, metropolitan area, the Company will provide you with a
moving expense package in accordance with the Company's standard
relocation policy for executives (the “Moving Expense
Package”). If you resign for any reason, except as a
result of a Change of Control as defined in the Definitions Section,
attached hereto, within twelve (12) months of the date of reimbursement
for the move, you must reimburse the Company the full amount of the Moving
Expense Package granted pursuant to this
Section.
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(i)
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You
may participate in any pension or profit sharing plan, stock purchase
plan, group benefit plan, medical plan, and/or other benefit plans, either
currently in effect or as may be established from time to time by the
Company, for which you as an executive officer of the Company are, and
remain, eligible to participate. (You acknowledge that you will
not be entitled to any benefits under any discretionary plan unless
actually provided to you in accordance with such
plan.)
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(j)
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You
covenant and agree that during the term of this Agreement you will comply
with the terms and conditions of the stock ownership guidelines then
applicable to the CEO position as determined by the
Board.
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(k)
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You
will be eligible for, but not entitled to receive, such other compensation
as may from time to time be granted to you by the Board in its sole and
absolute discretion, including additional bonuses approved by the Board or
the Board’s Compensation Committee.
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(l)
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You
will be permitted to take paid time off (“PTO”) in
accordance with the Company’s policies and procedures as in effect for
executive officers of the Company.
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(m)
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The
Company will pay for or reimburse you for your annual fee for membership
in the Young Presidents Organization and for your reasonable expenses
related thereto.
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4.
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Benefits and
Employment Matters. The Company offers a comprehensive
array of employee benefit programs. Currently, those programs
include PTO, medical, dental and vision care, paid holidays, disability
insurance, life insurance, travel accident insurance, 401(k) Plan,
Employee Stock Purchase Plan, and tuition
reimbursement. Details of these programs will be provided to
you. Eligibility for Company benefit programs may vary by
employee status, length of service, and by the specific benefit
program. Hypercom reserves the right to modify, suspend or
terminate its benefit programs in its sole
discretion.
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5.
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Business
Expenses. The Company will pay or reimburse you for all
ordinary and necessary business expenses incurred or paid by you in
furtherance of the Company’s business, in accordance with the Company’s
policies and procedures, including, without limitation, those expenses
referred to in Sub-Section (e), (f) and (g) of Section 3. Any
reimbursement of an expense you are entitled to receive pursuant to this
Agreement will (a) be paid no later than the last day of your tax year
following the tax year in which you incurred the expense, (b) not be
affected by any other expenses that are eligible for reimbursement in any
tax year, and (c) not be subject to liquidation or exchange for
another benefit.
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6.
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Termination for Cause
or by Voluntary Resignation.
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(a)
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The
Company may terminate you for Cause, as defined below. Upon any
termination for Cause, or in the event that you voluntarily resign from
the Company, you will be entitled to receive only that compensation due
you through the date of termination or resignation, as the case may
be. Your right to exercise any vested options shall be in
accordance with the provisions of the Company’s applicable stock incentive
plan and option agreement.
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(b)
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For
purposes of this Agreement, “Cause” means if
the Board, in its reasonable and good faith discretion, determines that
you (i) have developed or pursued interests substantially adverse to the
Company, (ii) have materially breached any employment or confidentiality
agreement, (iii) have not devoted a majority of your business time,
effort and attention to the affairs of the Company (or such lesser amount
as has been agreed to in writing by the Company), (iv) are charged by
any governmental entity with any felony (excluding traffic violations)
that is reasonably determined by the Board to be true and to adversely
reflect upon the Company’s standing in the community, or (v) have engaged
in gross misconduct or other material omissions that are significantly
detrimental to the well-being of the
Company.
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7.
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Death or
Disability.
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(a)
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Except
as provided in this Sub-Section 7(a), no salary or benefits shall be
payable under this Agreement following the date of your
death. In the event of your death, any Base Salary earned by
you up to the date of your death, as well as any unreimbursed expenses or
Gross-up Payment, shall be paid to your estate or named beneficiary within
ninety (90) days following your death. In addition, the title
to any restricted common stock not governed by a conflicting agreement or
performance requirements, the vesting of which is contingent upon
continued employment with the Company, shall immediately pass to your
estate or named beneficiary.
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(b)
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If
during the term of your employment, you become so disabled or
incapacitated by reason of any physical or mental illness or any substance
or chemical dependency which renders you unable to perform the services
required of you pursuant to your employment for a continuous period of
three (3) months, then, at the option of the Board, your employment will
terminate at the end of such three (3) month period; provided that (i) the
Board exercises reasonable efforts to accommodate such disability in
accordance with the American with Disabilities Act, and (ii) during such
period of disability, incapacity or incapacity, you will be paid your Base
Salary and expenses otherwise payable to
you.
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(c)
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In
the event of your death, for a period of twelve (12) months from the date
of death the Company will pay for COBRA benefits or the equivalent for
your surviving spouse and dependents covered by the Company’s group health
plan at the time of your death. In the event of your
termination on account of disability, for a period of twelve (12) months
from the date of termination the Company will pay for COBRA benefits or
the equivalent for you, your spouse, and your dependents covered by the
Company’s group health plan at the time of
termination.
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8.
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Termination by Reason
of Company Non-Renewal or Extension of Your
Employment. In the event that the Company does not offer
to extend your employment as provided in Section 2 and, as a result, your
employment with the Company terminates upon the expiration of the Term,
then, in addition to the compensation due you through the date of your
termination of employment, you will be entitled to immediate vesting of
all your options to purchase common stock of the Company and such options
shall remain exercisable until their original expiration date, provided
that the release contemplated by Section 19 below becomes effective in
accordance with its terms on or before the thirtieth (30th) day following
the date of your termination of
employment.
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9.
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Termination by the
Company Other than for Cause or by You for Good
Reason. In the event that you are involuntarily
terminated by the Company without Cause (other than as a result of your
death or disability or the Company’s non-renewal or extension of your
employment, as described in Section 8) or you terminate your employment
for Good Reason, as defined in the Definition Section, attached hereto,
and provided that the release contemplated by Section 19 below becomes
effective in accordance with its terms on or before the thirtieth (30th)
day following the date of your termination of employment, you be will be
entitled to:
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(a)
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an
amount equal to the greater of (A) one (1) year of Base Salary at the rate
then in effect or (B) the aggregate amount of Base Salary at the rate
then in effect that would be paid for the period from the date of your
termination of employment to the end of the Term had you remained employed
throughout such period, which amount will be paid in a lump sum on the
thirtieth (30th) day following the date of your termination of
employment;
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(b)
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immediate
vesting of all of your shares of restricted stock and all of your options
to purchase common stock of the Company and such options shall remain
exercisable until the expiration date of their original terms;
and
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(c)
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payment
by the Company for a period of twelve (12) months from the date of your
termination of employment for the COBRA benefits available to you, your
spouse and your dependents covered by the Company’s group health plan at
the time of your termination of
employment.
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Notwithstanding
the foregoing, this Section 9 shall not apply to a termination of your
employment to which Section 10 applies.
10.
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Termination for Other
than Cause or by You for Good Reason Following Change of
Control. If, within a period of twelve (12) months
following a Change of Control, as defined in the Definition Section,
attached hereto, you are involuntarily terminated by the Company without
Cause (other than as a result of your death or disability or the Company’s
non-renewal of your employment, as described in Section 8) or you
terminate your employment for Good Reason, and provided that the release
contemplated by Section 19 below becomes effective in accordance with its
terms on or before the thirtieth (30th) day following the date of your
termination of employment, you will be entitled
to:
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(a)
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an
amount equal to the greater of (i) eighteen (18) months of Base Salary at
the rate then in effect or (ii) the aggregate amount of Base Salary
at the rate then in effect that would be paid for the period from the date
of your termination of employment to the end of the Term had you remained
employed throughout such period, which amount will be paid in a lump sum
on the thirtieth (30th) day following the date of your termination of
employment;
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(b)
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immediate
vesting of all of your shares of restricted stock and all of your options
to purchase common stock of the Company (or its successor) and such
options shall remain exercisable until the expiration date of their
original terms;
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(c)
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payment
by the Company for a period of eighteen (18) months from the date of your
termination of employment for the COBRA benefits available to you, your
spouse and your dependents covered by the Company’s group health plan at
the time of your termination of employment;
and
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(d)
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reimbursement
by the Company of your reasonable moving expenses to relocate your primary
residence from the greater Phoenix, Arizona, metropolitan area to Malibu,
California, provided that you have previously relocated your primary
residence from Malibu, California to the greater Phoenix, Arizona,
metropolitan area, and, within a period of six (6) months following your
termination of employment covered by this Section 10, you relocate your
primary residence from the greater Phoenix, Arizona, metropolitan area to
Malibu, California and such relocation is not at the expense of a new
employer.
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11.
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Post-Employment
Obligations. Your continuing employment is subject to
the Hypercom Confidentiality, Non-Solicitation, & Non-Compete
Agreement dated January 16, 2007 which you previously executed and
delivered to the Company.
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12.
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Representations. You
acknowledge that this employment agreement is based on, and the Company is
relying upon, your representation that: (i) you are not
prohibited from entering into any employment arrangement with the Company;
(ii) you rightfully possess any and all information that has been
discussed or may be discussed with the Company in the future;
(iii) no other person or entity has any interest in such information,
arising out of any current or previous employment relationship or
otherwise; and (iv) you have the lawful right to disclose such information
to the Company, that such disclosure or any employment arrangement with
the Company will not violate the terms of any employment, non-compete,
non-solicitation, confidentiality or non-disclosure agreement, or any
other similar agreement, contract, law, code, regulation, or other rights,
obligations or prohibitions applicable to such information, and that such
information could not be considered in any way a trade secret in any
applicable jurisdiction.
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13.
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Personal Rights and
Obligations. This Agreement and all rights and
obligations hereunder are personal and will not be assignable by either
you or the Company except as provided in this Section 13, and any
purported assignment in violation thereof will be null and
void. Subject to the provisions of Section 10, any person, firm
or corporation succeeding to the business of the Company by merger,
consolidation, purchase of assets or otherwise will assume by contract or
operation of law the obligations of the Company hereunder and in such a
case you will continue to honor the terms of this Agreement with such
business substituted for the Company as the
employer.
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14.
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Board
Service. You agree that you will not serve as a member
of the board of directors of any for-profit company other than Hypercom
and one other for-profit company for the first eighteen (18) months of the
Term, and thereafter you may serve as a director of other for-profit
entities, provided that your service on all such boards other than
Hypercom, including related travel, does not require more than five
percent (5%) of your total available business related time. You
may serve as a member of the board of directors of any not-for-profit
entity at any time during the Term, provided that your service on such
board and all other for-profit or not-for-profit boards other than
Hypercom, including related travel, does not require more than five
percent (5%) of your total available business related
time. Except as provided above in this Section 14, your service
as a member of the board of directors of any for-profit or not-for-profit
entity other than the Company will require the prior consent of the Board,
which shall not be unreasonably
withheld.
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15.
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Notices. Any
notice, election or communication to be given hereunder will be in writing
and delivered in person or deposited, certified or registered, in the
United States mail, postage prepaid, addressed as
follows:
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If to the
Company:
Hypercom
Corporation
0000 X.
Xxxxxxxx Xxxxx, Xxxxx 000
Scottsdale,
Arizona 85260
Attn: General
Counsel
If to
you:
Xxxxxxxx
Xxxxxxxxx
[Address on file with Hypercom
Corporation]
or to
such other addresses as the Company or you may from time to time designate by
notice hereunder. Notices will be effective upon delivery in person
or upon receipt of any facsimile or e-mail, or at midnight on the fourth
business day after the date of mailing, if mailed.
16.
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Entire
Agreement. Except for your Hypercom Employee
Confidentiality, Non-Solicitation & Non-Compete Agreement dated
January 16, 2007, the Company’s stock incentive plans or any other
incentive plan and related forms of equity award agreement governing
equity incentive, and the Company’s policies and procedures to which you
are subject, this Agreement constitutes and embodies the full and complete
understanding and agreement of the Company and you with respect to your
employment by the Company and supersedes all prior understandings or
agreements whether oral or written. This Agreement may be
amended only by a writing signed by you and the Company. This
Agreement may be executed in any number of counterparts, each of which
will be considered a duplicate
original.
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17.
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Arbitration. Any
controversy relating to this Agreement or relating to the breach hereof
will be settled by arbitration conducted in Phoenix, Arizona in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The award rendered by the
arbitrator(s) will be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction
thereof. The arbitrator(s) will possess the powers to issue
mandatory orders and restraining orders in connection with such
arbitration. The expenses of the arbitration will be borne by
the losing party unless otherwise allocated by the
arbitrator(s). This agreement to arbitrate will be specifically
enforceable under the prevailing arbitration law. During the
continuance of any arbitration proceedings, the parties will continue to
perform their respective obligations under this
Agreement. Nothing in this Agreement will preclude the Company
or any affiliate or successor from seeking equitable relief, including
injunction or specific performance, in any court having jurisdiction, in
connection with any obligations of
confidentiality.
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18.
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Governing
Law. This Agreement will be governed by and interpreted
in accordance with the laws of the State of
Arizona.
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19.
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Withholding and
Release. You hereby acknowledge that you have carefully
reviewed the provisions of this Agreement and agree that the provisions
are fair and equitable, and that they are necessary and reasonable in
order to protect the Company and its affiliates in the conduct of their
business. You acknowledge and agree that payments made to you
hereunder may be subject to applicable withholding. You further
acknowledge and agree that payment of any compensation to be provided to
you following any termination of your employment is subject to your
compliance with any reasonable and lawful policies or procedures of the
Company relating to employee severances, including the execution and
delivery by you of a release reasonably satisfactory to the Company of any
and all claims that you may have against the Company or related persons,
except for (i) any continuing obligations required by law or provided
herein, and (ii) for any continuing obligations of indemnification due you
as an officer or director (or a former officer or
director).
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20. Code Section
409A.
(a)
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Notwithstanding
anything set forth in this Agreement to the contrary, no amount payable
pursuant to this Agreement on account of your termination of employment
with the Company which constitutes a “Deferral of
Compensation” within the meaning of the Treasury Regulations issued
pursuant to Section 409A of the Code (the “Section 409A
Regulations”) shall be paid unless and until you have incurred a
“Separation From
Service” within the meaning of the Section 409A
Regulations. Furthermore, to the extent that you are a “Specified
Employee” within the meaning of the Section 409A Regulations as of
the date of your Separation From Service, no amount that constitutes a
deferral of compensation which is payable on account of your Separation
From Service will be paid to you before the date (the “Delayed Payment
Date”) which is first day of the seventh month after the date of
your Separation From Service or, if earlier, the date of your death
following such Separation From Service. All such amounts that
would, but for this Section, become payable prior to the Delayed Payment
Date will be accumulated and paid on the Delayed Payment
Date.
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(b)
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The
Company intends that income provided to you pursuant to this Agreement
will not be subject to taxation under Section 409A of the
Code. The provisions of this Agreement will be interpreted and
construed in favor of satisfying any applicable requirements of
Section 409A of the Code. However, the Company does not
guarantee any particular tax effect for income provided to you pursuant to
this Agreement. In any event, except for the Company’s
responsibility to withhold applicable income and employment taxes from
compensation paid or provided to you, the Company will not be responsible
for the payment of any applicable taxes on compensation paid or provided
to you pursuant to this Agreement.
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(c)
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Under
no circumstances may the time or schedule of any payment made or benefit
provided pursuant to this Agreement be accelerated or subject to a further
deferral except as otherwise permitted or required pursuant to regulations
and other guidance issued pursuant to Section 409A of the
Code.
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(d)
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You
do not have any right to make any election regarding the time or form of
any payment due under this
Agreement.
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We look
forward to continuing to work with you to fully enable your and our
shareholders’ mutual success.
Sincerely,
/s/ Xxxxxx
Xxxxx
Xxxxxx
Xxxxx
Chairman
of the Board
Accepted
and Agreed:
/s/ Xxxxxxxx
Xxxxxxxxx
Xxxxxxxx
Xxxxxxxxx
Date:
December
30th,
2009
Definitions
Applicable to
Employment
Agreement, Dated December 30, 2009
Between Xxxxxxxx Xxxxxxxxx
and Hypercom Corporation
“Change of Control”
means and includes each of the following:
(1) the
acquisition of beneficial ownership, directly or indirectly, of securities
having 50% or more of the combined voting power of the Company’s then
outstanding securities by any “Unrelated Person” or “Unrelated Persons” acting
in concert with one another either at one time or over a series of
purchases. For purposes of this definition, the term “Person” shall mean
and include any individual, partnership, joint venture, association, trust,
corporation, or other entity (including a “Group” as referred to
in Section 13(d)(3) of the Securities Exchange Act of 1934. For
purposes of this Section, the term “Unrelated Person”
shall mean and include any Person other than the Company, or an employee benefit
plan of the Company, or any officer, director, or 10% or more shareholder of the
Company as of the date of this Agreement
(2) the
consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving entity, or pursuant to which common stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of the Company’s common stock immediately
prior to the merger have at least 50% ownership of beneficial interest of common
stock or other voting securities of the surviving entity immediately after the
merger;
(3) the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its subsidiaries
(taken as a whole), other than pursuant to a sale-leaseback, structured finance
or other form of financing transaction;
(4) the
stockholders of the Company shall approve any plan or proposal for liquidation
or dissolution of the Company; or
(5) during
any period of two consecutive years, individuals who at the beginning of such
period constituted a majority of the Board shall fail to constitute 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.
“Good Reason” means,
without your consent:
(1) you
suffer a reduction in position or a material adverse change in your functions,
duties or responsibilities;
(2) your
Base Salary is reduced by the Company or there is a material reduction in your
current benefits (other than a reduction in your Base Salary or benefits as part
of overall reduction applicable to all or substantially all other officers);
or
(3) you
are required by the Company to reside other than in Maricopa County, Arizona, or
in Malibu, California;
provided,
however, that your voluntary termination of employment with the Company will not
be deemed for Good Reason unless (i) you have notified the Board in writing,
within ninety (90) days following the first occurrence of any of the foregoing
conditions, of the occurrence of such condition, (ii) the Company has failed to
correct such condition within thirty (30) days following the date of such
notice, and (iii) you terminate your employment with the Company within six (6)
months following the first occurrence of such condition.