<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
HYPERCOM CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
HYPERCOM CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 1999
------------------------
To Our Stockholders:
The 1999 Annual Meeting of Stockholders of Hypercom Corporation will be
held at the Embassy Suites Phoenix-Biltmore, 2630 East Camelback Road, Phoenix,
Arizona 85016, on Tuesday, November 16, 1999, beginning at 9:00 a.m. local time.
At the meeting, stockholders will act on the following matters:
- Election of two directors, each for a term of two years;
- Approve amendments to the Hypercom Corporation 1997 Employee Stock
Purchase Plan; and
- Any other matters that properly come before the meeting.
Stockholders of record at the close of business on October 15, 1999 are
entitled to vote at the meeting or any postponement or adjournment thereof. We
have enclosed a copy of our 1999 Annual Report to Stockholders, which includes
certified financial statements, and our Proxy Statement.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit attendance to
stockholders and one guest. Registration and seating will begin at 8:00 a.m.
Parking is available at the hotel. Stockholders holding stock in brokerage
accounts ("street name" holders) will need to bring a copy of a brokerage
statement reflecting stock ownership as of the record date. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE
MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors
/s/ Peter J. Stustman
Peter J. Stutsman
Corporate Secretary
October 22, 1999
Phoenix, Arizona
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
ABOUT THE MEETING........................................... 1
What is the purpose of the annual meeting?................ 1
Who is entitled to vote?.................................. 1
Who can attend the meeting?............................... 1
What constitutes a quorum?................................ 1
How do I vote?............................................ 1
What if I vote and then change my mind?................... 2
What are the Board's recommendations?..................... 2
What vote is required to approve each item?............... 2
How much did this proxy solicitation cost?................ 2
BOARD OF DIRECTORS.......................................... 3
What is the current makeup of the Board of Directors?..... 3
Are there any Directors who are not standing for
re-election?........................................... 3
Election of Directors (Proposal No. 1).................... 3
Continuing Directors...................................... 4
How are non-employee Directors compensated?............... 4
Are employees of Hypercom paid additional compensation for
service as a Director?................................. 5
How often did the Board meet during fiscal 1999?.......... 5
What committees has the Board established?................ 5
EXECUTIVE COMPENSATION...................................... 6
Summary Compensation Table................................ 6
Options/SAR Grants in Last Fiscal Year.................... 7
Aggregated Option/SAR Exercises In Last Fiscal Year and
Fiscal Year-End
Option/SAR Values...................................... 7
Employment, Severance and Change of Control Agreements.... 8
Report of the Compensation Committee on Executive
Compensation........................................... 9
Compensation Committee Interlocks And Insider
Participation.......................................... 11
STOCK PRICE PERFORMANCE GRAPH............................... 11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 12
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT................................................ 12
CERTAIN TRANSACTIONS AND RELATIONSHIPS...................... 13
APPROVAL OF AMENDMENTS TO HYPERCOM CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN (PROPOSAL NO. 2)........ 13
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................... 16
STOCKHOLDER PROPOSALS AND NOMINATIONS....................... 16
OTHER MATTERS............................................... 17
APPENDIX A -- HYPERCOM CORPORATION 1997 EMPLOYEE STOCK
PURCHASE PLAN........................... A-1
</TABLE>
i
<PAGE> 4
HYPERCOM CORPORATION
2851 WEST KATHLEEN ROAD
PHOENIX, ARIZONA 85053
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement contains information related to the 1999 Annual
Meeting of Stockholders to be held on November 16, 1999 at 9:00 a.m. local time,
at the Embassy Suites Phoenix-Biltmore, 2630 East Camelback Road, Phoenix,
Arizona 85016, or at such other time and place to which the annual meeting may
be adjourned or postponed. THE ENCLOSED PROXY IS SOLICITED BY HYPERCOM'S BOARD
OF DIRECTORS. The proxy materials relating to the annual meeting are first being
mailed to stockholders entitled to vote at the meeting on or about October 22,
1999.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, stockholders will act upon the matters outlined in
the accompanying notice of meeting, including the election of Directors and
approval of amendments to an employee stock purchase plan. In addition,
Hypercom's management will report on the performance of Hypercom during fiscal
1999 and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date,
October 15, 1999, are entitled to receive notice of the annual meeting and to
vote the shares of common stock they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting, and each may be accompanied by one guest. Registration
and seating will begin at 8:00 a.m. Cameras, recording devices and other
electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting Hypercom to conduct its business at the annual
meeting. As of the record date, 33,197,517 shares of common stock of Hypercom
were outstanding. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of shares considered
to be present at the meeting.
HOW DO I VOTE?
You can vote on matters to come before the meeting in two ways:
1. You can attend the annual meeting and cast your vote in person; or
2. You can vote by completing, dating and signing the enclosed proxy card
and returning it in the enclosed postage-paid envelope. If you do so,
you will authorize the individuals named on the proxy
<PAGE> 5
card, referred to as the proxies, to vote your shares according to your
instructions or, if you provide no instructions, according to the
recommendation of the Board of Directors.
WHAT IF I VOTE AND THEN CHANGE MY MIND?
You may revoke your proxy at any time before it is exercised by:
- filing with the Corporate Secretary of Hypercom a notice of revocation;
or
- sending in another duly executed proxy bearing a later date; or
- attending the meeting and casting your vote in person.
Your last vote will be the vote that is counted.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
The Board recommends that you vote FOR election of the nominated slate of
Directors (see Page 3) and vote FOR the amendments to the Hypercom Corporation
1997 Employee Stock Purchase Plan (see Page 13). Unless you give other
instructions on your proxy card, the persons named as proxy holders on the proxy
card will vote in accordance with the Board's recommendations. With respect to
any other matter that properly comes before the meeting, the proxy holders will
vote as recommended by the Board of Directors or, if no recommendation is given,
in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The two nominees who receive the most votes will be
elected to the Board of Directors. A properly executed proxy marked "WITHHOLD
AUTHORITY" with respect to the election of one or more Directors will not be
voted with respect to the Director or Directors indicated, although it will be
counted for purposes of determining whether there is a quorum. A "broker
non-vote" (discussed below) will also have no effect on the outcome since only a
plurality of votes actually cast is required to elect a Director.
OTHER ITEMS. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote on
the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
EFFECT OF BROKER NON-VOTES. If your shares are held in "street name"
through a broker or other nominee, your broker or nominee may not be permitted
to exercise voting discretion under certain circumstances. Brokers have the
authority under The New York Stock Exchange rules to vote customers' unvoted
shares on certain "routine" matters, including the election of Directors. When a
broker votes its clients' unvoted shares, the shares are counted for purposes of
establishing a quorum. At the annual meeting, these shares will be counted as
voted by the broker in the election of Directors, but will not be counted for
any "non-routine" matters to be voted on, including approval of the amendments
to the Hypercom Corporation 1997 Employee Stock Purchase Plan.
HOW MUCH DID THIS PROXY SOLICITATION COST?
The costs of soliciting proxies from stockholders will be borne by
Hypercom. In addition to the solicitation of stockholders of record by mail,
proxies may be solicited by telephone, facsimile, personal contact, and similar
means by Directors, officers or employees of Hypercom, none of whom will be
specifically compensated for such activities. Hypercom will also, upon request,
reimburse brokers and other persons holding stock in their names, or in the
names of nominees, for their reasonable out-of-pocket expenses for forwarding
proxy materials to the beneficial owners of the common stock and to obtain
proxies.
2
<PAGE> 6
BOARD OF DIRECTORS
This section gives biographical information about our Directors and
describes their membership on Board committees, their attendance at meetings and
their compensation.
WHAT IS THE CURRENT MAKEUP OF THE BOARD OF DIRECTORS?
The Board presently consists of seven members. The Directors are divided
into two classes, with each class serving for a two-year period. The
stockholders elect approximately one-half of the Board of Directors each year.
ARE THERE ANY DIRECTORS WHO ARE NOT STANDING FOR RE-ELECTION?
Yes. The following Directors will retire from service on the Board of
Directors at the annual meeting and will not stand for re-election:
- Paul Wallner. Mr. Wallner is not standing for re-election because he
will be leaving Hypercom to become the vice president and chief
technology officer at a joint venture company partially owned by Hypercom
which was formed to enhance Hypercom's Voice over Internet Protocol
(VoIP) technology.
- Jairo Gonzalez. Mr. Gonzalez is not standing for re-election because he
felt he needed to devote his full-time efforts to his current job
responsibilities with Hypercom.
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
FOR TERM EXPIRING AT 2001 ANNUAL MEETING
CLASS II
At the annual meeting the two persons listed below are nominated for
election. Each nominee will be elected to serve until the 2001 Annual Meeting of
Stockholders or until his successor shall have been duly elected and qualified
or his resignation or removal, whichever first occurs.
Each of the nominees has consented to serve a two-year term. If either of
them should become unavailable to serve as a Director, the Board may designate a
substitute nominee. In that case, the persons named as proxies will vote for the
substitute nominee designated by the Board.
Nominees standing for election are:
PETER J. HART, 60 DIRECTOR SINCE 1997
Since 1996, Peter J. Hart has served as a director and Vice President of
Express Card Systems, Inc., a sales company. From 1973 to 1996, Mr. Hart served
in various capacities at PricewaterhouseCoopers LLP (then Price Waterhouse LLP),
most recently as Senior Tax Partner. Mr. Hart and Mr. Irato are brothers-in-
law.
JOCK PATTON, 53 DIRECTOR SINCE 1999
Jock Patton, a private investor, joined Hypercom as a Director on January
19, 1999. From 1992 to 1997, Mr. Patton served as a director and the President
of StockVal, Inc., a registered investment advisor providing securities analysis
software and proprietary data to mutual funds, major money managers and
brokerage firms worldwide. From 1972 to 1992, Mr. Patton was a Partner in the
law firm of Streich Lang where he founded and headed the Corporate/Securities
Practice Group. Mr. Patton currently serves on the Board of Directors of JDA
Software Group, Inc. and Stuart Entertainment, Inc., both publicly-held
companies, and is Trustee of nineteen Pilgrim mutual funds with aggregate
invested assets of over $5.0 billion. Mr. Patton is also a director of several
privately-held companies, including National Airlines, Inc., a Las Vegas-based
start-up airline.
3
<PAGE> 7
Mr. Patton holds both an A.B. Degree in Political Science and a law degree from
the University of California at Berkeley.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF EACH
OF THE DIRECTOR NOMINEES.
CONTINUING DIRECTORS
FOR TERM EXPIRING AT 2000 ANNUAL MEETING
CLASS I
The following Class I Directors were elected at our 1998 Annual Meeting for
terms ending in 2000:
ALBERT A. IRATO, 61 DIRECTOR SINCE 1992
Albert A. Irato was elected Chairman of the Board of Directors effective
July 1, 1999. From October 1992 until June 30, 1999, Mr. Irato served as
Hypercom's Vice Chairman of the Board of Directors, Chief Executive Officer and
President, and the President and Chief Executive Officer of Hypercom U.S.A.,
Inc., a wholly-owned subsidiary of Hypercom responsible for POS operations in
the U.S. and Canada. From 1985 until 1992, Mr. Irato served in various
management capacities at American Express. Mr. Irato also served as Chairman of
the Board of the Electronic Funds Transfer Association headquartered in
Washington, D.C. Mr. Irato holds a B.S. from Spring Hill College and an advanced
management degree from the Darden School of the University of Virginia. Mr.
Irato and Mr. Hart are brothers-in-law.
GEORGE WALLNER, 48 DIRECTOR SINCE 1978
George Wallner was elected Chief Executive Officer and President effective
July 1, 1999. Mr. Wallner had served as Chairman of the Board of Directors since
he founded Hypercom in 1978. Mr. Wallner also serves as Hypercom's Chief
Technologist. Mr. Wallner received a degree in electrical and communications
engineering from the Kando Kalmau Technical College of Budapest, Hungary. George
Wallner is the brother of Paul Wallner.
WILLIAM E. FISHER, 53 DIRECTOR SINCE 1997
Since its inception in 1993, William E. Fisher has served as director,
Chairman of the Board, President and Chief Executive Officer of Transaction
System Architects, Inc. ("TSA"), a developer of software products and services
primarily focused on the electronic funds transfer market. From 1987 to 1993,
Mr. Fisher served in various capacities at Applied Communications, Inc., a
subsidiary of TSA, most recently as Chief Executive Officer. In addition, Mr.
Fisher currently serves as a director of West Teleservices Corp., a provider of
telecommunications services and products.
HOW ARE NON-EMPLOYEE DIRECTORS COMPENSATED?
QUARTERLY FEE: Each non-employee Director receives $1,250 each quarter for
their services as Director and for attending Board meetings and Board committee
meetings.
OPTIONS: Under our Non-Employee Director Stock Option Plan, each newly
elected non-employee Director receives an option to purchase 6,250 shares. Each
non-employee Director also receives an option to purchase 6,250 shares of common
stock each year. These option grants vest and become exercisable one year after
date of grant, permitting the holder to purchase shares at their fair market
value on the date of grant, which was $9.625 in the case of annual options
granted in 1999. Unless earlier terminated, forfeited or surrendered pursuant to
the plan, each option granted will expire on the tenth anniversary date of the
grant.
EXPENSES: Each non-employee Director is also reimbursed for reasonable
travel expenses incurred in connection with attendance at each Board and Board
committee meeting.
4
<PAGE> 8
ARE EMPLOYEES OF HYPERCOM PAID ADDITIONAL COMPENSATION FOR SERVICE AS A
DIRECTOR?
No. They are, however, reimbursed for travel and other related expenses.
HOW OFTEN DID THE BOARD MEET DURING FISCAL 1999?
The Board of Directors met five times during fiscal 1999. All members of
the Board attended more than 75% of the meetings of the Board and the committees
on which they serve.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Compensation and Audit Committees.
Hypercom does not maintain a standing nominating committee or other committee
performing similar functions. The function of nominating Directors is carried
out by the entire Board of Directors. Hypercom's Bylaws, however, provide a
procedure for you to recommend candidates for Director at an annual meeting. For
more information, see "Stockholder Proposals and Nominations" (Page 16).
<TABLE>
<CAPTION>
NAME COMPENSATION COMMITTEE AUDIT COMMITTEE
- ---- ---------------------- ---------------
<S> <C> <C>
William B. Fisher....................... X X
Peter J. Hart........................... X X
Jock Patton............................. X X
</TABLE>
COMPENSATION COMMITTEE 2 MEETINGS IN FISCAL YEAR 1999
- reviews and recommends compensation of executive officers; and
- administers Hypercom's 1997 Long-Term Incentive Plan.
AUDIT COMMITTEE 2 MEETINGS IN FISCAL YEAR 1999
- makes recommendations regarding the selection of independent auditors;
- oversees the audit and non-audit activities of both independent
accountants and Hypercom's internal audit staff;
- meets separately and privately with the independent auditors to ensure
that the scope of their activities has not been restricted and that
adequate responses to their recommendations have been received;
- receives and accepts the report of independent auditors; and
- reviews certain proposals for major transactions.
5
<PAGE> 9
EXECUTIVE COMPENSATION
This section contains charts that show the amount of compensation earned by
our Chief Executive Officer and by our four other most highly paid executive
officers. It also contains the report of the Compensation Committee explaining
the compensation philosophy for our most highly paid officers.
SUMMARY COMPENSATION TABLE
The table below sets forth information concerning the annual and long-term
compensation for services rendered in all capacities to Hypercom during the
three fiscal years ended June 30, 1999, of those persons who were, at June 30,
1999, (i) our Chief Executive Officer and (ii) our four other most highly
compensated executive officers (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) SARS ($)
- ------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
GEORGE WALLNER................ 1999 $500,000 -- -- -- --
Chairman of the Board 1998 $530,000 -- -- -- --
of Directors(2) 1997 $494,411 $156,500 -- -- $11,711(3)
ALBERT A. IRATO............... 1999 $386,769 -- -- -- --
Chief Executive Officer 1998 $356,616 -- -- -- --
and President(4) 1997 $306,260 $ 14,500 -- 257,500 --
PAUL WALLNER.................. 1999 $330,404 -- -- -- --
President of Hypercom 1998 $456,000 -- -- -- --
Network Systems 1997 $368,697 $156,500 -- -- $17,680(3)
JAIRO GONZALEZ, JR. .......... 1999 $271,077 -- -- -- --
President of Hypercom 1998 $269,181 -- -- -- --
International(5) 1997 $228,181 -- -- 1,075,000 --
THOMAS E. LINNEN.............. 1999 $191,635 -- -- 68,750 $15,385(7)
Chief Financial Officer 1998 $165,981 $ 9,450 -- -- --
(resigned effective June 1, 1997 $104,461 -- -- 81,250 --
1999)(6)
</TABLE>
- ---------------
(1) The aggregate amount of perquisites and other personal benefits, securities
or property, given to each Named Executive Officer was less than either
$50,000 or 10% of the total annual salary and bonus for that executive
during each of these years.
(2) Effective July 1, 1999, Mr. Wallner was elected Chief Executive Officer and
President and resigned his position as Chairman of the Board.
(3) Amounts reflect contributions made by Hypercom's Australian subsidiary to a
superannuation fund. This superannuation fund was dissolved by Hypercom in
fiscal 1998 and the funds were distributed to the participants.
(4) Effective July 1, 1999, Mr. Irato was elected Chairman of the Board of
Directors and resigned his position as Chief Executive Officer and
President.
(5) Effective July 1, 1999, Mr. Gonzalez became Managing Director, Global Sales
and Marketing.
(6) Mr. Linnen resigned as Chief Financial Officer effective January 19, 1999,
and directed his attention to corporate acquisitions until his resignation
from Hypercom on June 1, 1999. Jonathon Killmer joined Hypercom on January
19, 1999 as Senior Vice President and Chief Financial Officer.
(7) Amounts reflect separation pay paid to Mr. Linnen between June 1, 1999 and
July 31, 1999. Does not include the value from the continuation of vesting
of all stock options owned by Mr. Linnen through July 31, 2000. See
"Employment, Severance and Change of Control Agreements."
6
<PAGE> 10
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options to the Named Executive Officers during the fiscal year ended June 30,
1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS APPRECIATION OPTION TERM
---------------------------------------------------------------- ---------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------------ ---------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George Wallner......... -- -- -- -- -- --
Albert A. Irato........ -- -- -- -- -- --
Paul Wallner........... -- -- -- -- -- --
Jairo Gonzalez......... -- -- -- -- -- --
Thomas E. Linnen....... 68,750 4.58% $10.375 1/14/09 $448,579 $1,818,859
</TABLE>
- ---------------
(1) The options vest in five equal annual installments beginning on January 14,
2000. Mr. Linnen resigned from Hypercom on June 1, 1999, and pursuant to his
severance agreement may only exercise those options previously granted to
him that vest on or before July 31, 2000. Accordingly, only 13,750 of the
options granted to him in fiscal 1999 will vest and become exercisable
before July 31, 2000. Unless otherwise exercised, any outstanding options,
whether vested or unvested, will expire after such date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning the value of each
Named Executive Officer's unexercised options at June 30, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
ACQUIRED FISCAL YEAR-END SARS AT FISCAL YEAR-END(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George Wallner........ -- -- -- -- -- --
Albert A. Irato....... -- -- 1,171,625 77,250 $8,625,926(2) $ 244,342
Paul Wallner.......... -- -- -- -- -- --
Jairo Gonzalez........ -- -- 752,500 322,500 $2,380,158(3) $1,020,068
Thomas E. Linnen...... -- -- 47,500 102,500 $ 150,243(4) $ 106,751
</TABLE>
- ---------------
(1) Options are considered "in the money," if the fair market value of the
underlying securities exceeds the exercise price of the options. The
year-end values represent the difference between the fair market value of
the common stock subject to the options (the stock's closing price as
reported on The New York Stock Exchange was $9.563 on June 30, 1999) and the
exercise price of the options.
(2) Mr. Irato has 252,500 stock options exercisable at $0.664, 255,000 stock
options exercisable at $1.096, 260,000 stock options exercisable at $2.016,
262,500 stock options exercisable at $2.656, and 141,625 stock options
exercisable at $6.40.
(3) All stock options granted to Mr. Gonzalez are exercisable at $6.40 a share.
(4) Mr. Linnen has 68,750 stock options exercisable at $6.40 and 68,750 stock
options exercisable at $10.375.
7
<PAGE> 11
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
ALBERT A. IRATO. Hypercom employs Albert A. Irato under an agreement which
expires on December 31, 2001. In addition to information found elsewhere in this
proxy statement, this agreement provides:
- an annual base salary of $322,000, with annual adjustments up to a
maximum of $422,000; and
- an automobile allowance, participation in Hypercom's benefit plans and
certain other fringe benefits.
In addition, pursuant to the agreement effective January 1, 1997, Mr. Irato was
granted additional options, over and above options previously vested, to
purchase 257,500 shares of common stock at an exercise price of $6.40 per share.
One-half of the options vested immediately and the remaining one-half become
exercisable over five years at the rate of 20% per year beginning on January 1,
1998.
In the event Mr. Irato's employment is terminated by Hypercom without cause
or by reason of death or disability, or in the event of a change of control of
Hypercom, all options will vest immediately. In the event Mr. Irato's employment
is terminated without cause, Mr. Irato will receive for a period of one year
following termination an amount equal to his annual salary on the date of
termination. The agreement also contains a non-compete provision whereby Mr.
Irato has agreed he will not, during his employment and for one year after any
termination of employment, participate or assist in ownership or operation of
any business similar to or competitive with Hypercom. Mr. Irato may terminate
his employment with Hypercom at any time during the term.
JAIRO GONZALEZ. Hypercom employs Jairo Gonzalez under an agreement which
expires on December 31, 2001. In addition to information found elsewhere in this
proxy statement, this agreement provides:
- an annual base salary of $250,000, with annual adjustments up to a
maximum of $300,000; and
- an automobile allowance, participation in Hypercom's benefit plans and
certain other fringe benefits.
In addition, pursuant to the agreement Mr. Gonzalez was granted options to
purchase 1,075,000 shares of common stock at an exercise price of $6.40 per
share. One-half of the options vested immediately and the remaining one-half
become exercisable over five years at the rate of 20% per year beginning January
1, 1998.
In the event Mr. Gonzalez's employment is terminated by Hypercom without
cause or by reason of death or disability, or in the event of a change of
control of Hypercom, all options will vest immediately. In the event Mr.
Gonzalez's employment is terminated without cause, Mr. Gonzalez will receive for
a period of one year following termination an amount equal to his annual base
salary on the date of termination. The agreement also contains a non-compete
provision whereby Mr. Gonzalez has agreed he will not, during his employment and
for one year after any termination of employment, participate or assist in
ownership or operation of any business similar to or competitive with Hypercom.
Mr. Gonzalez may terminate his employment with Hypercom at any time during the
term.
THOMAS E. LINNEN. Hypercom and Mr. Linnen mutually agreed it was in their
best interest to bring their employment relationship to a conclusion effective
June 1, 1999. In connection with the arrangement, Hypercom and Mr. Linnen
entered into a Severance Agreement. Under the Severance Agreement, Mr. Linnen
was paid his base salary of $200,000, less all required and authorized
deductions, through July 31, 1999. Mr. Linnen was also allowed to continue his
medical and dental benefits coverage and receive other customary fringe benefits
during that period. Under the agreement, all outstanding stock options granted
to Mr. Linnen continue to vest through July 31, 2000, and he may exercise the
vested portion of such options until that time. Also in connection with his
resignation, Hypercom forgave a $50,000 loan to Mr. Linnen.
OTHER EXECUTIVE OFFICERS. Although we have no current plans to enter into
employment agreements with any other executive officer or key employee, we
intend to review the desirability of such employment agreements from time to
time in the future.
8
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Hypercom filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent specifically incorporated.
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal 1999.
WHAT IS HYPERCOM'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
Hypercom's compensation program for executive officers consists of three
key elements:
- a base salary,
- a performance-based annual bonus, and
- long-term incentives in the form of stock option grants.
The Compensation Committee believes this three-part approach best serves the
interests of Hypercom and its stockholders. As described more fully below, each
element of Hypercom's executive compensation program has a somewhat different
purpose.
The three-part approach enables Hypercom to meet the requirements of the
competitive environment in which Hypercom operates, while ensuring executive
officers are compensated in a way that advances both the short- and long-term
interests of the stockholders. Under this approach, compensation for these
officers was ultimately based upon:
- the Committee's assessment of the executive officers' performance,
- the continuing demand for superior executive talent,
- Hypercom's overall performance, and
- Hypercom's future objectives and challenges.
Hypercom's philosophy is to pay base salaries to executives that reward
these executives for ongoing performance throughout the year, enabling Hypercom
to attract, motivate and retain highly qualified executives. The annual bonus
program is based primarily on Hypercom's financial results and rewards
executives for performance. Another performance incentive is the stock option
grant, which give executives an opportunity to obtain equity in Hypercom, and
because options result in rewards to executives if Hypercom's stock price
appreciates, provide an incentive for outstanding performance in the long term.
The Board believes this mix of short- and long-term compensation components
provides a balanced approach that enables Hypercom to attract and retain
experienced executives, rewards executives for their individual and collective
contribution to Hypercom's profitability, and ensures the incentives of
Hypercom's executives are aligned with the best interests of its stockholders.
The Board's decisions concerning the specific fiscal 1999 compensation
elements for individual executive officers, including the Chief Executive
Officer, were made within this broad framework and in light of each executive
officer's level of responsibility, performance, current salary and prior-year
bonus and other compensation awards. As noted below, the Board's specific
decisions involving fiscal 1999 executive officer compensation were ultimately
based upon the Board's judgment regarding the individual executive officer's
performance, potential future contributions, and whether each payment or award
would provide an appropriate reward and incentive for such officer to sustain
and enhance Hypercom's long-term performance.
The Board typically establishes each executive's base salary at a level
designed to reflect that executive's position and responsibility within
Hypercom, to attract and retain highly qualified executives and to be
competitive with similarly situated executives at companies of similar size and
revenue levels.
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<PAGE> 13
The Board also takes into account, among other things, the individual
executive's experience and performance during the past year. Bonuses typically
are paid to executive officers based upon the Board's judgment regarding the
significance of the individual executive officer's contributions during a given
year and Hypercom's overall financial performance. During fiscal 1999, the Board
granted stock options to Mr. Linnen and other officers not named herein, in lieu
of paying cash bonuses, designed to provide such officers with incentives for
long-term performance.
HOW IS COMPENSATION USED TO FOCUS MANAGEMENT ON LONG-TERM VALUE CREATION?
In November 1996, Hypercom adopted the Hypercom Corporation Long-Term
Incentive Plan to provide key employees selected by the Board an opportunity to
obtain an equity stake in Hypercom. Stock options are primarily designed to
provide such employees with strong incentives for superior long-term
performance. Exercisability of options is therefore conditioned upon the
employee's continued employment by Hypercom for periods of time specified by the
Board when these options are granted. Unexercised options are forfeited if the
employee leaves Hypercom prior to the time such options vest, or if vested upon
termination, if the employee fails to exercise them prior to the end of a stated
period following termination. In making option awards, the Board reviews the
level of awards granted to executives at other comparable companies, the awards
granted to Hypercom employees and the individual employee's specific position at
Hypercom and role in helping Hypercom to achieve its goals.
DO EXECUTIVES RECEIVE ANY OTHER BENEFITS?
Certain executives also participate in various other benefit plans,
including medical plans and a 401(k) plan, which are generally available to all
employees of Hypercom.
HOW IS HYPERCOM'S CHIEF EXECUTIVE OFFICER COMPENSATED?
Albert A. Irato, the Chief Executive Officer and President during fiscal
1999, who was elected Chairman of the Board effective July 1, 1999, received a
base salary of $386,769, an increase of 8.5% from fiscal 1998. Mr. Irato's base
salary for the year ended June 30, 1999, was established under the terms of his
employment agreement. See "Employment, Severance and Change of Control
Agreements." The Committee considered the same factors used for other executive
officers outlined above in determining Mr. Irato's bonus and any long-term
compensation. Mr. Irato did not receive a cash bonus or stock options for fiscal
1999 because Hypercom did not achieve the performance goals established by the
Committee.
HOW IS HYPERCOM ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code, adopted as part of the Revenue
Reconciliation Act of 1993, generally limits to $1 million the deduction that
can be claimed by any publicly-held corporation for compensation paid to any
"covered employee" in any taxable year beginning after December 31, 1993. The
term "covered employee" for this purpose is defined generally as the chief
executive officer and the four other highest-paid employees of the corporation.
In fiscal 1999, Hypercom did not pay compensation to any executive that was
subject to Section 162(m).
William E. Fisher
Peter J. Hart
Jock Patton
AS MEMBERS OF THE COMPENSATION
COMMITTEE
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<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hart is the brother-in-law of Mr. Irato. In addition, Mr. Hart is a
director and vice-president of Express Card Systems, a sales company which
derives a significant portion of its revenues from products sold to Hypercom.
See "Certain Transactions and Relationships."
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of (i) our
common stock, (ii) the Nasdaq Stock Index, and (iii) a selected peer group
index, from November 13, 1997 (the date of our initial public offering) through
June 30, 1999 (the end of our fiscal year). The peer group was selected on an
industry basis and includes:
<TABLE>
<S> <C> <C>
- - 3Com Corporation - CyberCash, Inc. - Checkfree Holding Corporation
- - Diebold, - Equifax Inc. - Hewlett-Packard Company
Incorporated - Transaction System Architects, Inc. - Schlumberger Limited
- - IVI Checkmate Corp. - Transaction Network Services, Inc.
- - MICROS Systems, Inc.
</TABLE>
The peer group is consistent with the peer group utilized in the 1998 Proxy
Statement, with the exception of International Verifact Inc., which combined
with Checkmate Electronics, Inc. in 1998 to form IVI Checkmate Corp.
The graph assumes that $100 was invested on November 13, 1997 in our common
stock and in each of the comparison indices, and assumes all dividends paid were
reinvested. The comparisons in the graph are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of our common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
HYPERCOM CORPORATION, THE NASDAQ STOCK INDEX AND THE PEER GROUP
LOGO
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<PAGE> 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Hypercom
officers and Directors, and persons who own more than 10% of our common stock,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Officers, Directors and greater than 10%
stockholders are required by SEC regulations to furnish Hypercom with copies of
all Section 16(a) forms they file. Based solely upon a review of the copies of
such forms furnished, or written representations that no Forms 5 were required,
Hypercom believes that during our preceding fiscal year all Section 16(a) filing
requirements applicable to its officers, Directors and greater than 10%
beneficial owners were complied with, except (1) George Wallner failed to timely
report on Form 4 the acquisition of 100 shares of common stock on November 13,
1997 (the date of Hypercom's initial public offering); (2) Messrs. Hart and
Fisher failed to timely report on Form 4 the receipt of their annual grants of
stock options pursuant to the Non-Employee Director Stock Option Plan for the
months of July 1998 and 1999; and (3) Mr. Patton inadvertently failed to timely
file on Form 4 the annual stock options granted to him as a non-employee
Director for fiscal 1999.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of September 30, 1999, the number and
percentage of outstanding shares of common stock beneficially owned by each
person known to beneficially own more than 5% of such stock, by each Director
and Named Executive Officer of Hypercom and by all Directors and executive
officers of Hypercom as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) OWNED OWNED
- ------------------------------------------ ------------ ----------
<S> <C> <C>
George Wallner.............................................. 11,450,100 34.5%
Paul Wallner................................................ 9,800,000 29.5%
Albert A. Irato(3).......................................... 1,230,000 3.6%
Jairo Gonzalez(4)........................................... 752,500 2.2%
Thomas E. Linnen(5)......................................... 61,250 *
William E. Fisher(6)........................................ 17,500 *
Peter J. Hart(6)............................................ 16,500 *
Jock Patton................................................. 1,000 *
Capucine Irrevocable 1997 Trust(4).......................... 141,625 *
All directors and executive officers as a group (14
persons).................................................. 23,471,306 66.6%
</TABLE>
- ---------------
* Represents less than 1% of our outstanding common stock.
(1) This information regarding beneficial ownership of our common stock by
certain beneficial owners and management of Hypercom is as of September 30,
1999. A person is deemed to be the beneficial owner of securities that can
be acquired within 60 days from the date set forth above through exercise of
any option, warrant, or right. Shares of common stock subject to options,
warrants, or rights currently exercisable or exercisable within 60 days are
deemed outstanding for the purpose of computing the percentage of the person
holding such options, warrants, or rights, but are not deemed outstanding
for computing the percentage of any other person. The amounts and
percentages are based upon 33,197,517 shares of common stock outstanding as
of September 30, 1999. The persons named in the table, to our knowledge,
have sole voting and sole dispositive power with respect to all shares of
common stock shown as beneficially owned by them, subject to community
property laws where applicable and the information contained in the
footnotes hereunder.
(2) The address of each of the listed stockholders is 2851 West Kathleen Road,
Phoenix, Arizona 85053.
(3) Includes 1,030,000 shares of common stock subject to options exercisable
within 60 days and 200,000 shares of common stock held by the Al A. and
Sarah D. Irato Charitable Remainder Unitrust, dated October 1, 1997, for
which Mr. Irato serves as co-trustee.
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<PAGE> 16
(4) Consists entirely of shares of common stock subject to options exercisable
within 60 days.
(5) Mr. Linnen resigned as Chief Financial Officer effective January 19, 1999
and directed his attention to corporate acquisitions for Hypercom until June
1, 1999, when Hypercom and Mr. Linnen mutually agreed it was in their best
interest to bring their employment relationship to a conclusion (See
"Employment, Severance and Change of Control Agreements"). The amount
consists entirely of shares of common stock subject to options exercisable
within 60 days.
(6) Includes 12,500 shares of common stock subject to options exercisable within
60 days.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Since the closing of the initial public offering in November 1997, all
transactions between Hypercom and its affiliated entities, executive officers,
Directors or significant stockholders are approved by a majority of the
independent Directors of Hypercom and Hypercom believes the transactions, except
the non-interest bearing loans described below, are on terms no less favorable
to Hypercom than Hypercom could obtain from non-affiliated parties.
In fiscal 1997, Hypercom made non-interest bearing loans to George Wallner,
our Chief Executive Officer and President (effective July 1, 1999), and to Paul
Wallner, the President of Hypercom Network Systems, each in the principal amount
of $750,000. As of June 30, 1999, George Wallner's and Paul Wallner's net amount
outstanding to Hypercom was $375,000 and $375,000, respectively.
Hypercom leases an approximately 20,000 square foot facility from Hypercom
Unit Trust, the beneficiaries of which are George Wallner and Paul Wallner.
During fiscal 1999, Hypercom paid $95,184 in rent and associated administrative
fees to this trust.
Peter J. Hart, a Director of Hypercom, is a director and Vice President of
Express Card Systems, Inc. ("ECS"), a sales company, which derives a significant
portion of its revenues from products sold to Hypercom. Mr. Hart's wife is the
Chairman, President and sole stockholder of ECS. The wife of Albert A. Irato,
our Chairman of the Board (effective July 1, 1999), is a Vice President of ECS.
The wives of Messrs. Hart and Irato are sisters. During fiscal 1999, ECS was
paid $246,227.37 with respect to sales of products to Hypercom.
APPROVAL OF AMENDMENTS TO HYPERCOM CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL NO. 2)
The Board of Directors has approved, subject to stockholder approval,
amendments to the Hypercom Corporation 1997 Employee Stock Purchase Plan,
effective as of January 1, 2000. The plan was originally adopted on September 8,
1997. The proposed amendments are:
- increasing the number of Offering Periods in a calendar year from two to
four; and
- increasing the discount on the purchase price from ten percent to fifteen
percent.
The Board of Directors believes these changes will enhance Hypercom's value
by providing a more convenient and affordable way for employees to purchase and
hold Hypercom's common stock. The key provisions of the plan are summarized
below. Because it is a summary, it may not contain all the information that is
important to you. Before you decide how to vote, you should review the full text
of the plan, as amended, which is included as Appendix A.
WHAT IS THE PURPOSE OF THE PLAN?
The Board of Directors believes the plan encourages broader stock ownership
by Hypercom employees and thereby provides an incentive for employees to
contribute to the profitability and success of Hypercom. In particular, the plan
offers a convenient means for employees who might not otherwise own Hypercom's
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<PAGE> 17
common stock to purchase and hold such stock, and the plan's discounted sale
feature provides a meaningful inducement to participate.
The Board believes that employees' continuing economic interest, as
stockholders, in Hypercom's performance and success enhances the entrepreneurial
spirit of Hypercom, which can greatly contribute to long-term growth and
profitability.
WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
Any Hypercom employee is eligible to participate in the plan, except those
employees who work less than 20 hours per week or five months per year, and any
other employee who owns five percent or more of Hypercom's outstanding common
stock. Approximately 750 employees of Hypercom are currently eligible to
participate in the plan.
WHAT IS THE MAXIMUM NUMBER OF SHARES?
The maximum number of shares of common stock that may be purchased under
the plan is 625,000, subject to appropriate adjustment in the case of any
extraordinary dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, or other similar corporate transaction or event
affecting the common stock. Shares of common stock purchased from Hypercom will
be either authorized but unissued shares or treasury shares.
WHEN AND HOW CAN AN EMPLOYEE ENROLL?
An eligible employee may enroll for any three-month offering period,
commencing January 1, April 1, July 1, and October 1 of each year, by filing an
enrollment form with Hypercom before the offering period begins. After initial
enrollment in the plan, the employee is automatically reenrolled in the plan for
subsequent offering periods unless he or she files a notice of withdrawal before
the offering period begins, terminates employment, or otherwise becomes
ineligible to participate.
HOW DOES THE PLAN WORK?
Upon enrollment in the plan, the employee elects a rate at which he or she
will make payroll contributions to purchase common stock. An employee generally
elects to make contributions in an amount not less than two percent nor more
than ten percent of such employee's earnings (or such higher or lower rates as
the Board may specify), although an employee's contributions will be adjusted
downward or refunded to the extent necessary to ensure that he or she will not
purchase during any offering period common stock that has a fair market value,
as of the beginning of the offering period, in excess of $6,250 (representing an
annual limitation of $25,000). All employee contributions are made by means of
direct payroll deduction. The contribution rate elected by a participant will
continue in effect until modified by the participant.
An employee's contributions are credited to the employee's account
maintained by Hypercom. Hypercom offers employees the opportunity to purchase
common stock at a price equal to the lesser of 85% of the fair market value of
common stock at the beginning of a three-month offering period or 85% of the
fair market value of common stock at the end of the offering period.
Under either method, shares of Hypercom's common stock are purchased on a
given purchase date in the aggregate for all accounts under the plan. Shares of
common stock purchased are credited to the accounts maintained by the custodian
for each participant based upon the average cost of all shares purchased. No
interest is credited on payroll contributions pending investment in common
stock. Dividends paid on common stock credited to participants' accounts are
automatically reinvested in additional shares through purchases directly from
Hypercom.
On September 30, 1999, the last reported sale price of Hypercom's common
stock by The New York Stock Exchange was $8.00 per share.
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<PAGE> 18
WHAT ARE THE RESTRICTIONS ON THE COMMON STOCK?
Participants have the exclusive right to vote or direct the voting of
shares of common stock credited to their accounts, and are permitted to
withdraw, transfer, or sell their shares without restriction. Participants'
rights under the plan are nontransferable except pursuant to the laws of descent
and distribution.
HOW IS THE PLAN ADMINISTERED?
The plan is administered by the Board of Directors, although the Board may
delegate some or all of its administrative duties to a Board committee or a
committee of employees. The Board or committee has authority to interpret the
plan, construe terms, adopt rules and regulations, prescribe forms, and make all
determinations under the plan. If a participant is a member of a committee
administering the plan, such person may not decide any matter relating to his or
her participation in the plan.
HOW IS ENROLLMENT IN THE PLAN TERMINATED?
A participant's enrollment in the plan may be terminated at any time,
effective for payroll periods or offering periods beginning after the filing of
a notice of termination of enrollment. Enrollment will also terminate upon
termination of a participant's employment by Hypercom or any of its
subsidiaries. Upon termination of enrollment, cash amounts resulting from
previous payroll contributions will be repaid to the participant. The custodian
will continue to hold common stock for the account of such a participant until
the participant sells or withdraws the common stock, but in no event more than
one year after the participant ceases to be employed by Hypercom or any of its
subsidiaries. A participant may eliminate contributions for future payroll
periods without terminating enrollment. In that case, previous payroll
contributions held in the participant's cash account will be used to purchase
common stock at the next purchase date.
WHO PAYS TO ADMINISTER THE PLAN?
Hypercom pays the costs and expenses to administer the plan and to maintain
accounts, and pays brokerage fees and commissions for purchases. Hypercom does
not pay brokerage fees and expenses relating to sales by participants, and
participants may be charged reasonable fees by the custodian for withdrawing
share certificates and other specified services. The custodian is responsible
for furnishing account statements to participants.
CAN THE PLAN BE AMENDED OR TERMINATED?
The Board of Directors may amend or terminate the plan without further
stockholder approval, except stockholder approval must be obtained within one
year after the effectiveness of such action if required by law or regulation or
under the rules of any automated quotation system or securities exchange (such
as The New York Stock Exchange) on which the common stock is then quoted or
listed, or if stockholder approval is necessary for the plan to continue to meet
the requirements of Section 423 of the Internal Revenue Code of 1986. The plan
will continue until terminated by action of the Board, although as noted above
the number of shares authorized under the plan is limited.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN?
Rights to purchase shares under the plan are intended to constitute
"options" issued pursuant to an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code of 1986 (the "Code"). As a
result:
- No taxable income results to the participants upon the grant of a right
to purchase or upon the purchase of shares for his or her account under
the plan (although the amount of a participant's payroll contributions
under the plan will be taxable as ordinary income to the participant).
- If the participant disposes of shares less than two years after the first
day of an offering period with respect to which he or she purchased the
shares, the participant will realize ordinary income in an
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<PAGE> 19
amount equal to the fair market value of the shares on the date of
purchase minus the amount of the participant's payroll deductions used to
purchase the shares.
- If the participant holds the shares for at least two years after the
first day of an offering period with respect to which he or she purchased
the shares, then at the time the participant disposes of the shares he or
she will realize ordinary income in an amount equal to the lesser of (i)
the fair market value of the shares on the first day of the offering
period minus the amount of the participant's payroll deductions used to
purchase the shares, and (ii) the fair market value of the shares on the
date of disposition minus the amount of the participant's payroll
deductions used to purchase the shares.
- In addition, the participant will realize a long-term or short-term
capital gain or loss, as the case may be, in an amount equal to the
difference between the amount realized upon any sale of the common stock
and the participant's basis in the common stock (i.e., the purchase price
plus the amount, if any, taxed to the participant as ordinary income, as
described in the second and third bullet points above).
- If the statutory holding period described in the second and third bullet
points above are satisfied, Hypercom is not entitled to a deduction for
federal income tax purposes with respect to any discount in the sale
price of common stock applicable to such participant. If the statutory
holding period is not satisfied, Hypercom generally should be entitled to
a tax deduction in an amount equal to the amount taxed to the participant
as ordinary income.
The foregoing is only a general description of the application of federal
income tax laws to the plan. The summary does not address the effects of other
federal taxes or taxes imposed under state, local, or foreign tax laws. Because
of the complexities of the tax laws, participants are encouraged to consult a
tax advisor as to their individual circumstances.
WHAT ARE THE NEW PLAN BENEFITS?
The Company cannot now determine the number of shares to be purchased in
the future under the plan by the Named Executive Officers, all current executive
officers as a group, or all other employees as a group.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENTS TO THE HYPERCOM CORPORATION 1997 EMPLOYEE STOCK PURCHASE PLAN.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected PricewaterhouseCoopers LLP as Hypercom's independent auditors for the
transition period from July 1, 1999 to December 31, 1999, and for the fiscal
year ending December 31, 2000. PricewaterhouseCoopers LLP began auditing
Hypercom's financial statements with the then fiscal year ended June 30, 1995.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
annual meeting, will have the opportunity to make a statement if they wish to do
so and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS AND NOMINATIONS
STOCKHOLDER PROPOSALS FOR THE 2000 PROXY STATEMENT. Any stockholder
satisfying the Securities and Exchange Commission ("SEC") requirements and
wishing to submit a proposal to be included in our proxy statement for the 2000
Annual Meeting of Stockholders should submit the proposal in writing to the
Corporate Secretary, 2851 West Kathleen Road, Phoenix, Arizona 85053. Generally,
such notice would have to be received by June 24, 2000 in order to be considered
for inclusion in the proxy statement. However, Hypercom recently changed its
fiscal year from June 30 to December 31. Accordingly, we anticipate our 2000
Annual Meeting of Stockholders to be held on or about May 18, 2000. In order to
provide our stockholders with the opportunity to submit proposals to be
considered for inclusion in our proxy statement, the deadline for
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<PAGE> 20
submitting such proposals is January 19, 2000 (which is 120 days prior to the
anticipated date of our 2000 Annual Meeting of Stockholders).
DIRECTOR NOMINEES OR OTHER BUSINESS FOR PRESENTATION AT THE 2000 ANNUAL
MEETING. Under Hypercom's Bylaws, if you wish to nominate Directors or bring
other business before the stockholders at the 2000 Annual Meeting of
Stockholders:
- You must be a stockholder of record at the time of giving notice and be
entitled to vote at the meeting of stockholders to which the notice
relates.
- You must notify the Corporate Secretary in writing no later than January
19, 2000, which is 120 days prior to the anticipated date of our 2000
Annual Meeting of Stockholders.
- Your notice must contain the specific information required in our Bylaws,
which requires the following information:
-- a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the
annual meeting, or in the case of Director nominees, all arrangements
or understanding between the stockholders and each nominee and any
other person or persons pursuant to which the nominee or nominees are
to be considered by the stockholders;
-- the name and record address of such stockholder;
-- the class or series and number of shares of capital stock of Hypercom
that are owned beneficially or of record by such stockholder;
-- a description of all arrangements or understandings between such
stockholder and other persons or persons (including their names) in
connection with the proposal of such business by such stockholder and
any material interest of such stockholder in such business, or in the
case of Director nominees, all information required by the SEC's
rules and regulations and Hypercom's Bylaws; and
-- a representation that such stockholder intends to appear in person or
by proxy at the annual meeting to bring such business before the
meeting.
A nomination or other proposal will be disregarded if it does not comply
with the above procedures and any additional requirements set forth in our
Bylaws. Please note these requirements relate only to the matters you wish to
bring before your fellow stockholders at an annual meeting. They are separate
from the SEC's requirements to have your proposal included in our proxy
statement.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not
intend to present at the annual meeting any matters other than those described
herein and does not presently know of any matters that will be presented by
other parties. If any other matter is properly brought before the meeting for
action by stockholders, proxies in the enclosed form returned to Hypercom will
be voted in accordance with the recommendation of the Board of Directors or, in
the absence of such a recommendation, in accordance with the judgment of the
proxy holder.
HYPERCOM CORPORATION
Peter J. Stutsman
Corporate Secretary
October 22, 1999
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<PAGE> 21
APPENDIX A
HYPERCOM CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
(As amended, effective as of January 1, 2000, subject to stockholder approval)
1. PURPOSE. The purpose of this 1997 Employee Stock Purchase Plan (the
"Plan") is to encourage stock ownership by employees of Hypercom Corporation
(the "Company") and its Subsidiaries and thereby provide employees with an
incentive to contribute to the profitability and success of the Company. The
Plan is intended to qualify as an "employee stock purchase plan" under Section
423 of the Code and will be maintained for the exclusive benefit of eligible
employees of the Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, in addition to the terms defined
in Section 1, terms are defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means the account maintained on behalf of the
Participant by either by the Company or the Custodian for the purpose of
holding cash contributions pending investment in Stock.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Custodian" means Merrill Lynch or the successor thereto as may be
appointed by the Board.
(e) "Earnings" means a Participant's salary or wages for services
performed for the Company and its Subsidiaries and received by a
Participant for services rendered during a specified pay period, excluding
bonuses.
(f) "Enrollment Period" means the two-week period immediately prior to
each Offering Period.
(g) "Fair Market Value" means the fair market value of the Stock
determined by such methods or procedures as may be established from time to
time by the Board in good faith, or if the Company's Stock is publicly
traded, the closing price of the Stock on the relevant date as reported on
the New York Stock Exchange (or any national securities exchange or
quotation system on which the Stock is then listed), or if there were sales
on that date the closing price on the next preceding date for which a
closing price was reported.
(h) "Offering Period" means the period beginning January 1, 2000, and
every three months thereafter.
(i) "Participant" means an employee of the Company or a Subsidiary who
is participating in the Plan.
(j) "Purchase Date" means the last day of each Offering Period or the
next preceding day on which a trading price for the Company's Stock is
reported if the last day of any Offering Period is a day on which the
Company's Stock is not traded.
(k) "Purchase Right" means a Participant's option to purchase shares
which is deemed to be outstanding during a Offering Period. A Purchase
Right represents an "option" as such term is used under Section 423 of the
Code.
(l) "Stock" means the common stock of the Company.
(m) "Stock Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding Stock acquired upon
investment under the Plan.
(n) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain as set forth
in Code Section 424(f).
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<PAGE> 22
3. ADMINISTRATION.
(a) Board Administration. The Plan will be administered by the Board. The
Board may delegate its administrative duties and authority (other than authority
to amend the Plan) to any Board committee or to any officers or employees or
committee thereof as the Board may designate (in which case references to the
Board will be deemed to mean the administrator to which such duties and
authority have been delegated). The Board will have full authority to adopt,
amend, suspend, waive, and rescind such rules and regulations and appoint such
agents as it may deem necessary or advisable to administer the Plan, to correct
any defect or supply any omission or reconcile any inconsistency in the Plan and
to construe and interpret the Plan and rules and regulations thereunder, to
furnish to the Custodian such information as the Custodian may require, and to
make all other decisions and determinations under the Plan (including
determinations relating to eligibility). No person acting in connection with the
administration of the Plan will, in that capacity, participate in deciding any
matter relating to his or her participation in the Plan.
(b) The Custodian. The Custodian will act as custodian under the Plan, and
will perform such duties as are set forth in the Plan and in any agreement
between the Company and the Custodian. The Custodian will establish and
maintain, as agent for Participants, Cash and Stock Accounts and any other
subaccounts as may be necessary or desirable for administration of the Plan.
(c) Waivers. The Board may waive or modify any requirement that a notice
or election be made or filed under the Plan a specified period in advance in an
individual case or by adopting a rule or regulation under the Plan, without
amending the Plan.
(d) Other Administrative Provisions. The Company will furnish information
from its records as directed by the Board, and such records, including a
Participant's Earnings, will be conclusive on all persons unless determined by
the Board to be incorrect. Each Participant and other person claiming benefits
under the Plan must furnish to the Company in writing an up-to-date mailing
address and any other information as the Board or Custodian may reasonably
request. Any communication, statement, or notice mailed with postage prepaid to
any such Participant or other person at the last mailing address filed with the
Company will be deemed sufficiently given when mailed and will be binding upon
the named recipient. The Plan will be administered on a reasonable and
nondiscriminatory basis and uniform rules will apply to all persons similarly
situated. All Participants will have equal rights and privileges (subject to the
terms of the Plan) with respect to Purchase Right outstanding during any given
Offering Period.
4. STOCK SUBJECT TO PLAN. Subject to adjustment as provided below, the
total number of shares of Stock reserved and available for issuance or which may
be otherwise acquired upon exercise of Purchase Rights under the Plan will be
625,000. Any shares of Stock delivered by the Company under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. The number and kind of such shares of Stock subject to the Plan will be
proportionately adjusted, as determined by the Board, in the event of any
extraordinary dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, or other similar corporate transaction or event
affecting the Stock.
5. ENROLLMENT AND CONTRIBUTIONS.
(a) Eligibility. An employee of the Company, or a Subsidiary that has
elected with the Company's consent to participate in the Plan, may be enrolled
in the Plan for any Offering Period if such employee is employed by the Company
or a Subsidiary on the first day of the Offering Period, unless one of the
following applies to the employee:
(i) Such person is customarily employed by the Company or a Subsidiary
for 20 hours or less a week or for not more than five months in any
calendar year; or
(ii) Such person would, immediately upon enrollment, be deemed to own,
for purposes of Section 423(b)(3) of the Code, an aggregate of five percent
or more of the total combined voting power or value of all outstanding
shares of all classes of the Company or any Subsidiary.
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<PAGE> 23
The Company will notify an employee of the date as of which he or she is
eligible to enroll in the Plan, and will make available to each eligible
employee the necessary enrollment forms. Notwithstanding the above, any
individual who is employed by the Company or a Subsidiary and who is not a U.S.
citizen and does not reside in the U.S. ("Nonresident Alien") is not eligible to
participate in the Plan if the laws of the country in which the Nonresident
Alien resides make the offer to purchase Stock or the delivery of Stock under
the Plan impractical. Additionally, the offer to purchase Stock and the delivery
of Stock under the Plan is effective for any employee of the Company or a
Subsidiary who is a Nonresident Alien only after the Company has complied with
the applicable laws of the country in which the Nonresident Alien resides.
(b) Initial Enrollment. An employee who is eligible under Section 5(a) (or
who will become eligible on or before a given Offering Period) may, after
receiving current information about the Plan, initially enroll in the Plan by
executing and filing with the Company's Human Resources Department a properly
completed enrollment form, including the employee's election as to the rate of
payroll contributions for the Offering Period. To be effective for any Offering
Period, such enrollment form must be filed during the Enrollment Period
immediately preceding such Offering Period.
(c) Automatic Re-enrollment for Subsequent Offering Periods. A Participant
whose enrollment in, and payroll contributions under, the Plan continues
throughout a Offering Period will automatically be re-enrolled in the Plan for
the next Offering Period unless (i) the Participant terminates enrollment before
the next Offering Period in accordance with Section 7(a), or (ii) on the last
day of the relevant Enrollment Period he or she is ineligible to participate
under Section 5(a). The initial rate of payroll contributions for a Participant
who is automatically re-enrolled for a Offering Period will be the same as the
rate of payroll contribution in effect at the end of the preceding Offering
Period, unless the Participant files a new enrollment form during the Enrollment
Period immediately preceding such Offering Period designating a different rate
of payroll contributions.
(d) Payroll Contributions. A Participant will make contributions under the
Plan by means of payroll deductions from each payroll period which ends during
the Offering Period, at the rate elected by the Participant in his or her
enrollment form filed during the Enrollment Period immediately preceding such
Offering Period (except that such rate may be changed during the Offering Period
to the extent permitted below). The rate of payroll contributions elected by a
Participant may not be less than two percent (2%) nor more than ten percent
(10%) of the Participant's Earnings for each payroll period, and only whole
percentages may be elected; provided, however, that the Board may specify a
lower minimum rate and higher maximum rate, subject to Section 8(c).
Notwithstanding the above, a Participant's payroll contributions will be
adjusted downward by the Company as necessary to ensure that the limit on the
amount of Stock purchased with respect to a Offering Period set forth in Section
6(a)(iii) is not exceeded. A Participant may elect to increase, decrease, or
discontinue payroll contributions for a future Offering Period by filing a new
enrollment form during the Enrollment Period immediately preceding such Offering
Period designating a different rate of payroll contributions. In addition, a
Participant may elect to decrease or discontinue payroll contributions during a
Offering Period by filing a new enrollment form, such change to be effective for
the next payroll after the Participant's new enrollment form is received.
(e) Crediting Payroll Contributions to Cash Accounts. All payroll
contributions by a Participant under the Plan will be credited to a Cash Account
maintained either by the Company or by the Custodian on behalf of the
Participant. The Company or the Custodian will credit payroll contributions to
each Participant's Cash Account upon receipt by the Company or the Custodian
based upon information provided by the Company identifying the amount of payroll
contribution. The Company will deposit into a separate account, or deposit with
the Custodian an amount equal to the aggregate payroll contributions for the
Offering Period (not otherwise repaid to Participant under Section 7(b)) on or
before the Purchase Date for such Offering Period.
(f) No Interest on Cash Accounts. No interest will be credited or payable
by the Company on payroll contributions or by The Company or the Custodian on
cash balances in Participant's Cash Accounts pending investment in Stock.
A-3
<PAGE> 24
6. PURCHASES OF STOCK.
(a) Purchase Rights. Enrollment in the Plan for any Offering Period by a
Participant will constitute a grant by the Company of a Purchase Right to such
Participant for such Offering Period. Each Purchase Right will be subject to the
following terms:
(i) The Purchase prices at which Stock will be purchased under a
Purchase Right will be as specified in Section 6(c).
(ii) Except as limited in (iii) below, the number of shares of Stock
that may be purchased upon exercise of the Purchase Right for a Offering
Period will equal the number of shares (including fractional shares) that
can be purchased at the purchase price specified in Section 6(c) with the
aggregate amount credited to the Participant's Cash Account as of the
Purchase Date.
(iii) The number of shares of Stock subject to a Participant's
Purchase Right for any Offering Period will not exceed the number derived
by dividing $6,250 by 100% of the Fair Market Value of one share of Stock
on the first day of the Offering Period for the Offering Period.
(iv) The Purchase Right will be automatically exercised on the
Purchase Date for the Offering Period.
(v) Payments by a Participant for Stock purchased under a Purchase
Right will be made only through payroll deduction in accordance with
Section 5(d) and (e).
(vi) The Purchase Right will expire on the earlier of the Purchase
Date for the Offering Period or the date on which the Participant's
enrollment in the Plan terminates.
(b) Purchase of Stock. At or as promptly as practicable after the Purchase
Date for a Offering Period, amounts credited to each Participant's Cash Account
as of such Purchase Date will be applied by the Custodian to the purchase of
shares of Stock, in accordance with the terms of the Plan. Shares of Stock will
be purchased by the Custodian from the Company. Shares sold by the Company may
be authorized but unissued shares or treasury shares, as permitted under Section
4. The Custodian will aggregate the amounts in all Cash Accounts when purchasing
Stock, and shares purchased will be allocated to each Participant's Stock
Account in proportion to the cash amounts withdrawn from such Participant's Cash
Account. Upon completion of purchases in respect of a Purchase Date (which will
be completed in not more than 30 days after the Purchase Date), all shares of
Stock so purchased for a Participant will be credited to the Participant's Stock
Account.
(c) Purchase Price. The purchase price of each share of Stock purchased in
respect of a Purchase Date will equal 85% of the lesser of (i) the Fair Market
Value of a share of Stock on the first day of the Offering Period or (ii) the
Fair Market Value of a share of Stock on the Purchase Date.
(d) Dividend Reinvestment; Other Distributions. Cash dividends on any
Stock credited to a Participant's Stock Account will be automatically reinvested
in additional shares of Stock; such amounts will not be available in the form of
cash to Participants. All cash dividends paid on Stock credited to Participant's
Stock Accounts will be paid over by the Company to the Custodian at the dividend
payment date. The Custodian will aggregate all purchase of Stock in connection
with dividend reinvestment for a given dividend payment date. Purchases of Stock
for purposes of dividend reinvestment will be made as promptly as practicable
(but not more than 30 days) after a dividend payment date. The Custodian will
make such purchases, as directed by the Board directly from the Company at 100%
of the Fair Market Value of a share of Stock on the dividend payment date. Any
shares of Stock distributed as a dividend or distribution in respect of shares
of Stock or in connection with a split of the Stock credited to a Participant's
Stock Account will be credited to such Account.
(e) Withdrawals and Transfers. Shares of Stock may be withdrawn from a
Participant's Stock Account, in which case one or more certificates for whole
shares may be issued in the name of, and delivered to, the Participant, with
such Participant receiving cash in lieu of fractional shares based on the Fair
Market Value of a share of Stock on the date of withdrawal. Alternatively, whole
shares of Stock may be withdrawn from a Participant's Stock Account by means of
a transfer to a broker-dealer or financial institution that
A-4
<PAGE> 25
maintains an account for the Participant, together with the transfer of cash in
lieu of fractional shares based on the Fair Market Value of a share of Stock on
the date of withdrawal. Participants may not designate any other person to
receive shares of Stock withdrawn or transferred under the Plan. A Participant
seeking to withdraw or transfer shares of Stock must give instructions to the
Custodian in such manner and form as may be prescribed by the Custodian, which
instructions will be acted upon as promptly as practicable. Withdrawals and
transfers will be subject to any fees imposed in accordance with Section 8(a).
(f) Excess Account Balances. If any amounts remain in a Cash Account
following a Purchase Date as a result of the limitation set forth in Section
6(a)(iii), such amounts will be returned to the Participant by the Custodian as
promptly as practicable.
7. TERMINATION AND DISTRIBUTIONS.
(a) Termination of Enrollment. A Participant's enrollment in the Plan will
terminate upon (i) the beginning of any payroll period or Offering Period that
begins after he or she files a written notice of termination of enrollment with
the Company, provided that such Participant will continue to be deemed to be
enrolled with respect to any completed Offering Period for which purchases have
not been completed, (ii) such time as the Participant becomes ineligible to
participate under Section 5(a) of the Plan, or (iii) the termination of the
Participant's employment by the Company and its Subsidiaries. An employee whose
enrollment in the Plan terminates may again enroll in the Plan as of any
subsequent Offering Period that is at least 90 days after such termination of
enrollment if he or she satisfies the eligibility requirements of Section 5(a)
as of such Offering Period. A Participant's election to discontinue payroll
contributions will not constitute a termination of enrollment.
(b) Distribution. As soon as practicable after a Participant's enrollment
in the Plan terminates, amounts in the Participant's Cash Account which resulted
from payroll contributions will be repaid to the Participant. If amounts
credited to the Participant's Cash Account have not yet been deposited by the
Company with the Custodian, the Company rather than the Custodian will make the
repayment to the Participant. The Custodian will continue to maintain the
Participant's Stock Account for the Participant until the earlier of such time
as the Participant directs the sale of all Stock in the Account, withdraws, or
transfers all Stock in the Account, or one year after the Participant ceases to
be employed by the Company and its Subsidiaries. If a Participant's termination
of enrollment results from his or her death, all amounts payable will be paid to
his or her estate.
8. GENERAL.
(a) Costs. Costs and expenses incurred in the administration of the Plan
and maintenance of Accounts will be paid by the Company, to the extent provided
in this Section 8(a). Any brokerage fees and commissions for the purchase of
Stock under the Plan (including Stock purchased upon reinvestment of dividends
and distributions) will be paid by the Company, but any brokerage fees and
commissions for the sale of Stock under the Plan by a Participant will be borne
by such Participant. The rate at which such fees and commissions will be charged
to Participants will be determined by the Custodian or any broker-dealer used by
the Custodian (including an affiliate of the Custodian), and communicated from
time to time to Participants. In addition, the Custodian may impose or pass
through a reasonable fee for the withdrawal of Stock in the form of stock
certificates (as permitted under Section 6(e)), and reasonable fees for other
services unrelated to the purchase of Stock under the Plan, to the extent
approved in writing by the Company and communicated to Participants.
(b) Statements to Participants. The Custodian will reflect payroll
contributions, purchases, sales, and withdrawals and transfers of shares of
Stock and other Plan transactions by appropriate adjustments to the
Participant's Accounts. The Custodian will, not less frequently than
semi-annually, provide or cause to be provided a written statement to the
Participant showing the transactions in his or her Accounts and the date
thereof, the number of shares of Stock purchased or sold, the aggregate purchase
price paid or sales price received, the purchase or sales price per share, the
brokerage fees and commissions paid (if any), the total shares held for the
Participant's Stock Account (computed to at least three decimal places), and
other information.
A-5
<PAGE> 26
(c) Compliance with Section 423. It is the intent of the Company that this
Plan comply in all respects with applicable requirements of Section 423 of the
Code and regulations thereunder. Accordingly, if any provision of this Plan does
not comply with such requirements, such provision will be construed or deemed
amended to the extent necessary to conform to such requirements.
9. GENERAL PROVISIONS.
(a) Compliance With Legal and Other Requirements. The Plan, the granting
and exercising of Purchase Rights hereunder, and the other obligations of the
Company and the Custodian under the Plan will be subject to all applicable
federal and state laws, rules, and regulations, and to such approvals by any
regulatory or governmental agency as may be required. Additionally, the granting
and exercising of Purchase Rights hereunder shall be subject to all applicable
laws of the country in which employees of the Company and a Subsidiary who are
nonresident aliens and who are eligible to participate in the Plan reside. The
Company may, in its discretion, postpone the issuance or delivery of Stock upon
exercise of Purchase Rights until completion of such registration or
qualification of such Stock or other required action under any federal or state
law, rule, or regulation, or the laws of any country in which employees of the
Company and a Subsidiary who are nonresident aliens and who are eligible to
participate in the Plan reside, or other required action with respect to any
automated quotation system or stock exchange upon which the Stock or other
Company securities are designated or listed, or compliance with any other
contractual obligation of the Company, as the Company may consider appropriate,
and may require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations.
(b) Limits on Encumbering Rights. No right or interest of a Participant
under the Plan, including any Purchase Right, may be pledged, encumbered, or
hypothecated to or in favor of any party, subject to any lien, obligation, or
liability of such Participant, or otherwise assigned, transferred, or disposed
of except pursuant to the laws of descent or distribution, and any right of a
Participant under the Plan will be exercisable during the Participant's lifetime
only by the Participant.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken hereunder, including the grant of a Purchase Right, will be construed as
giving any employee the right to be retained in the employ of the Company or any
of its Subsidiaries, nor will it interfere in any way with the right of the
Company or any of its Subsidiaries to terminate any employee's employment at any
time.
(d) Taxes. The Company or any Subsidiary is authorized to withhold from
any payment to be made to a Participant, including any payroll and other
payments not related to the Plan, amounts of withholding and other taxes due in
connection with any transaction under the Plan, and a Participant's enrollment
in the Plan will be deemed to constitute his or her consent to such withholding.
In addition, Participants may be required to advise the Company of sales and
other dispositions of Stock acquired under the plan in order to permit the
Company to comply with tax laws and to claim any tax deductions to which the
Company may be entitled with respect to the Plan. (This provision and other Plan
provisions do not set forth an explanation of the tax consequences to
Participants under the Plan. A brief summary of the tax consequences will be
included in disclosure documents to be separately furnished to Participants.)
(e) Changes to the Plan. The Board may amend, alter, suspend, discontinue,
or terminate the Plan without the consent of shareholders or Participants,
except that any such action will be subject to the approval of the Company's
shareholders within one year after such Board action if such shareholder
approval is required by any federal or state law or regulation or the rules of
any automated quotation system or stock exchange on which the Stock may then be
quoted or listed, or if such shareholder approval is necessary in order for the
Plan to continue to meet the requirements of Section 423 of the Code, and the
Board may otherwise, in its discretion, determine to submit other such actions
to shareholders for approval; provided, however, that, without the consent of an
affected Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially and adversely affect the rights of such
Participant with respect to outstanding Purchase Rights relating to any Offering
Period that has been completed prior to such Board action. The foregoing
notwithstanding, upon termination of the Plan the Board may elect to
A-6
<PAGE> 27
terminate all outstanding Purchase Rights at such time as the Board may
designate; in the event of such termination of any Purchase Right prior to its
exercise, all amounts contributed to the Plan which remain in a Participant's
Cash Account will be returned to the Participant (without interest) as promptly
as practicable.
(f) No Rights to Participate; No Shareholder Rights. No Participant or
employee will have any claim to participate in the Plan with respect to Offering
Periods that have not commenced, and the Company will have no obligation to
continue the Plan. No Purchase Right will confer on any Participant any of the
rights of a shareholder of the Company unless and until Stock is duly issued or
transferred and delivered to the Participant (or credited to the Participant's
Stock Account).
(g) Fractional Shares. Unless otherwise determined by the Board, purchases
of Stock under the Plan executed by the Custodian may result in the crediting of
fractional shares of Stock to the Participant's Stock Account. Such fractional
shares will be computed to at least three decimal places. Fractional shares will
not, however, be issued by the Company, and certificates representing fractional
shares will not be delivered to Participants under any circumstances.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval will be
construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
(i) Plan Year. The Plan will operate on a plan year that ends December 31
in each year.
(j) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan will be determined in accordance
with the laws of the State of Arizona, without giving effect to principles of
conflicts of laws, and applicable federal law.
(k) Effective Date. The Plan will become effective at such time as the
Plan has been approved by shareholders of the Company, at a meeting thereof, by
a vote sufficient to meet the requirements of Section 423(b)(2) of the Code.
A-7
<PAGE> 28
PROXY PROXY
HYPERCOM CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 16, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George Wallner and Peter J. Stutsman and
each of them, proxies, with power of substitution, acting unanimously and
voting or if only one is present and voting then that one, to vote the shares
of stock of Hypercom Corporation which the undersigned is entitled to vote, at
the Annual Meeting of Stockholders to be held at the Embassy Suites, 2630 East
Camelback Road, Phoenix, Arizona 85016, on Tuesday, November 16, 1999 at 9:00
a.m., Arizona time, and at any adjournment or adjournments thereof, with all
the powers the undersigned would possess if present.
IF YOU RETURN YOUR PROPERLY EXECUTED PROXY, WE WILL VOTE YOUR SHARES AS YOU
DIRECT. IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR
SHARES, WE WILL VOTE THEM FOR PROPOSALS 1 AND 2 AND IN THE DISCRETION OF THE
PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE
AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
<PAGE> 29
HYPERCOM CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS:
NOMINEES: 01-PETER J. HART, 02-JACK PALLON For Withhold For All
INSTRUCTION: To withhold authority to vote All All Except
for any one or more management nominee, [ ] [ ] [ ]
write the nominee's name.
- ---------------------------------------------
2. Approval of amendments to Hypercom Corporation For Against Abstain
1997 Employee Stock Purchase Plan. [ ] [ ] [ ]
3. In their discretion, the proxies are authorized
to vote upon all other matters that properly
may be presented at the meeting.
Address Change? Mark Box and indicate change [ ]
on the address label to the left.
</TABLE>
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such shares at said meeting or any adjournment thereof
Dated , 1999
-------------------
Signature
-----------------------------------------------------
Signature (if held jointly
------------------------------------
Please sign EXACTLY as your name appears hereon. When signing
as attorney, executor, administrator, trustee or guardian,
please give your full title as such. If more than one trustee,
all should sign. If shares are held jointly, both owners must
sign.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
