Exhibit 10.1
SEPARATION AGREEMENT
     This SEPARATION AGREEMENT (this “Agreement”) is made and entered into
freely and voluntarily, by and between NEIL P. HUDD (hereinafter referred to as
“Employee”) and HYPERCOM CORPORATION (hereinafter referred to collectively with
all of its subsidiaries and controlled affiliates as the “Company”).
     WHEREAS, the parties mutually wish to memorialize the terms and conditions
of the separation of Employee with the Company.
     WHEREAS, this Agreement is effective July 31, 2007 (the “Effective Date”).
     NOW, THEREFORE, in consideration of the acts, payments, covenants and
mutual agreements herein described and agreed to be performed, Employee and the
Company agree as follows:
     1. Separation. The parties have mutually agreed that it is in their
respective best interests to bring their employment relationship to an amicable
conclusion, effective as of 5:00 p.m., Phoenix, Arizona time, September 30, 2007
(the “Separation Date”). Between the Effective Date of this Agreement and the
Separation Date, Employee shall continue to faithfully and diligently perform
all duties commensurate with Employee’s current position, including those duties
directed by the Company’s Chief Executive Officer or Chief Financial Officer, to
whom Employee reports. The Company will continue Employee’s current salary and
benefits, less lawfully required withholdings, through the Separation Date
unless Employee is terminated for Cause (as defined in Section 16) or the
employee resigns from the Company. The Company will also pay Employee the cash
equivalent of Employee’s paid time off accrued as of the Separation Date.
Employee acknowledges and agrees that the Company will not pay any severance,
bonus, incentive, allowance, vacation, paid time off, sick or other pay in
addition to the consideration provided herein. Further, Employee waives any
rights granted or inferred to Employee pursuant to the “Change in Control”
letter, dated March 1, 2007, and Employee acknowledges and agrees such Change in
Control arrangement with the Company is null and void.
     2. Severance Terms. Provided Employee is not terminated for Cause, and if
Employee re-affirms this Agreement on the Separation Date, the Company agrees
that, in consideration of Employee’s promises, forbearances and covenants
contained herein, Employee will be entitled to receive the following severance
benefits from Company:
     (a) Employee will be entitled to receive $280,000, less applicable tax and
other withholding amounts, through March 31, 2008, (the “Separation Amount”)
payable in accordance with the Company’s bi-weekly payroll cycle; provided,
however, that the Company may deduct from such payments any amounts owed to the
Company by Employee, including, but not limited to, travel advances, guaranteed
credit card balances and interest, loans, unreturned or damaged equipment. The
parties acknowledge and agree that as a form of additional

 

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consideration for the Employee’s covenants herein, Employee will enter into a
three (3) month consulting arrangement with the Company or a subsidiary thereof,
to be executed between the parties under separate terms and conditions. Employee
agrees that Employee will submit all expense reports to the Company in
accordance with the Company’s policies and procedures on the Separation Date.
     (b) On January 1, 2008, Employee shall be eligible for six (6) months of
Company paid COBRA health coverage. Thereafter, coverage under COBRA will
continue at Employee’s own expense in accordance with and subject to the
limitations and requirements of COBRA.
     (c) Relocation Expenses.
          (i) As of the Separation Date, Employee is relieved of any obligation
he may have under the terms of his offer of employment dated September 8, 2005
(“Offer Letter”), the relocation letter agreement dated February 13, 2006 (the
“Relocation Letter”) or otherwise, to reimburse Company for any relocation or
related expenses previously reimbursed by Company in connection with Employee’s
move from Massachusetts to Scottsdale, Arizona in 2006.
          (ii) In the event that within twelve (12) months from the Separation
Date, Employee moves from his current residence in Scottsdale, Arizona to
Massachusetts, Company will, at Employee’s election, directly reimburse
Employee, up to $50,000, for the following moving costs actually incurred by
Employee in connection with such move (the “Moving Costs”):
               1. The costs of packing, insuring, moving, storage (for up to
three (3) months) and unpacking Employee’s household goods;
               2. The costs of shipping Employee’s automobiles;
               3. Reasonable economy class airfare for Employee and Employee
family members to Massachusetts and any other reasonable incidental relocation
expenses.
Any Moving Costs to be reimbursed by Company pursuant to this Section 2(c) shall
be reimbursed by no later than the end of calendar year 2008.
          (iii) Employee acknowledges and agrees that Company will have no
obligation to pay any Moving Costs pursuant to this Section 2 if a third party
has offered to or is responsible for payment of such Moving Costs as a result of
an offer of employment or otherwise.
     (d) Retention of Equipment. Employee shall be entitled to retain all
computer and communication equipment provided for his use as of September 30,
2007 by Company. Employee shall provide Company with a list of such equipment on
September 30, 2007. Employee shall submit such equipment to Company on, or as
soon as possible after the termination of the Consulting Agreement to allow
Company to delete any and all Company information from the equipment.
     3. Options, Restricted Stock or other Awards.

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     (a) Employee agrees that the May 8, 2006 grant of an option for Employee to
acquire 20,000 shares of Company stock at a price of $10.59 per share is hereby
canceled.
     (b) Employee also agrees that the 50,000 shares of restricted stock granted
to Employee pursuant to Section 2(d) of the Offer Letter have never been earned
and will be automatically forfeited upon execution of this Agreement.
     (c) Except as set forth in Section 3(a) of this Agreement, those options
granted under the 1997 Long-Term Incentive Plan, the 2000 Broad Based Incentive
Plan and the Nonemployee Directors’ Stock Option Plan, which have vested on or
prior to the Separation Date shall be considered vested options (the “Vested
Options”) as of the Separation Date under the applicable award or granting
agreement or instrument notwithstanding any provision to the contrary in any
such award or granting agreement or instrument.
     (d) In addition, Employee is entitled to the 17,432 shares of restricted
stock granted pursuant to the Relocation Letter. Any remaining grants Employee
may have been entitled to pursuant to the Relocation Letter shall be deemed as
unearned and will be automatically forfeited upon execution of this Agreement.
In addition, Company shall make a Gross-up Payment to Employee relating to these
shares equal to 42% of the value of the stock grant includable in Employee’s net
income for tax purposes (without regard to the Gross-up Payment) to cover
Employee’s federal and state tax liability relating to the stock grant. Any
Gross-up Payment to be paid pursuant to this Agreement shall be payable by
Company upon thirty (30) days of written notice of the payment and amount due;
provided however that in no event will such payment be made after the close of
the calendar year in which Employee remits payment of the taxes that give rise
to the Gross-up Payment.
     (e) Except as provided in Sections 3(c) and 3(d), Employee shall forfeit
all unvested options, other unvested awards of stock (including restricted
stock), and any and all other forms of incentive compensation, as of the
Separation Date. For purposes of this Agreement, the options and restricted
stock, Employee shall be deemed terminated without Cause. The options,
restricted stock and any other unvested awards, shall cease to vest as of the
Separation Date and Employee shall have ninety (90) days following the
Separation Date to exercise any options which were vested as of the Separation
Date.
     4. Release and Covenant Not to Sue. Each party hereby forever releases,
discharges, cancels, waives, and acquits the other party and its or Employee’s
current or former representatives (which shall include, as applicable, spouse,
heirs, executors, administrators, successors, assigns, affiliates, subsidiaries,
corporate parents, agents, directors, employees, owners, attorneys) of and from
any and all rights, claims, demands, causes of action, obligations, damages,
penalties, fees, costs, expenses, and liability of any nature whatsoever,
whether in law or equity, which a party has, had or may hereafter have against
it or Employee arising out of, or by reason of, any cause or matter, existing
from the beginning of time through the date of execution of this Agreement,
WHETHER KNOWN TO THE PARTY AT THE TIME OF EXECUTION OF THIS AGREEMENT OR NOT,
other than for breach of this Agreement.
     This FULL WAIVER OF ALL CLAIMS includes, without limitation, attorney’s
fees, any claims, demands, or causes of action arising out of, or relating in
any manner whatsoever to,

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the employment and/or termination of the employment of Employee by the Company,
such as, BUT NOT LIMITED TO, any charge, claim, lawsuit or other proceeding
arising under the Civil Rights Act of 1866, 1964, 1991, Title VII as amended by
the Civil Rights Act of 1991, the Americans with Disabilities Act, the Age
Discrimination in Employment Act (ADEA), as amended by the Older Worker
Protection Act, the Labor Management Relations Act (LMRA), the Employee
Retirement Income Security Act (ERISA), the Consolidated Omnibus Budget
Reconciliation Act (COBRA), the Fair Labor Standards Act (FLSA) (to the extent
permitted by law), the Equal Pay Act, the Rehabilitation Act of 1973, and the
Family and Medical Leave Act of 1993 (to the extent permitted by law), the
Arizona Employment Protection Act, Arizona’s Payment of Wages statute, Arizona’s
worker’s compensation laws, Arizona common law, tort laws, or any other federal,
state, or local statute, or any contract, agreement, plan or policy.
     This Section 4 specifically includes any claims arising under the Offer
Letter (other than for payment of Employee’s base salary and benefits through
the Separation Date), the Relocation Letter, or the Change in Control letter, as
well as any written or oral amendments or supplements thereto. Employee
acknowledges that he is not entitled to receive any cash or other bonus
compensation for Company’s current fiscal year, or other previous fiscal years.
     The foregoing provisions of this Section 4 shall not apply to any conduct
on the part of Employee that constituted fraud, involved an intentional or
reckless misstatement or omission, or a criminal act, or was not performed in
good faith and in (or at least not opposed to) the best interests of the
Company.
     5. Non-Competition; Non-Solicitation.
     (a) Non-Competition. In further consideration of the consideration provided
in Section 2 and the other agreements and covenants of the Company contained
herein, Employee agrees that during the remainder of his employment and until
December 31, 2008, Employee will not, directly or indirectly, either as an
employee, partner, owner, lender, director, advisor or consultant or in any
other capacity or through any entity: engage in the design, manufacture,
marketing or sale of electronic payment solutions, including point of sale/point
of transaction terminals, peripheral devices, transaction networking devices,
transaction management systems and application software, and related support and
services currently offered, sold or under development by the Company
(collectively, the “Competitive Activities”), within the Protected Territory (as
defined below); provided, that Employee may own stock in the Company and less
than 1% of any other publicly traded company engaged in any or all of the
Competitive Activities;
     As used herein, the term “Protected Territory” means any country in which
the Company is doing business at the time of the Separation Date.
     (b) Non-Solicitation. Employee further covenants and agrees that during the
remainder of his employment and until December 31, 2008, Employee will not,
directly or indirectly, either as an employee, partner, owner, lender, director,
advisor or consultant or in any other capacity or through any entity:

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               (i) solicit, accept business from, call upon, handle, deliver
products or render services to any customer or client of the Company with whom
Employee, alone or in conjunction with others, has corresponded, talked,
solicited, provided services or products to, or otherwise entered into or
pursued a business relationship at the time of Employee’s separation or until
December 31, 2008, for the purpose of selling such customer or client the same,
similar, or related services or products that Employee provided on behalf of the
Company;
               (ii) solicit, encourage, induce, or convince any Business
Associate (as defined below) to end, reduce, or change his/her/its relationship
with the Company;
               (iii) engage in any oral, written, electronic or other
communication regarding the Company or the Competitive Activities with any
officer, director, employee, representative, agent or affiliate of VeriFone
Holdings, Inc., Ingenico S.A., Thales, NCR Corporation, MICROS Systems, Inc.,
SAGEM Monetal and Gemalto N.V.; or
               (iv) attend or participate in any trade shows at which POS
terminal products are exhibited or featured.
     As used herein, the term “Business Associate” means any individual or
entity doing business with or rendering services to the Company at the time of
Employee’s separation or until December 31, 2008, including customers or
clients, employees, investors, independent contractors, vendors, suppliers, or
joint venture partners.
     (c) Employee hereby acknowledges and agrees that the restrictions set forth
in this Section 5 are reasonable in both scope and time, are agreed to in
exchange for valuable consideration to which he would otherwise not be entitled,
and do not unduly restrict his ability to earn a living. Employee further
acknowledges and agrees that the restrictions set forth herein are reasonable
and necessary to protect the Company and its successors and assigns in the use
and employment of the goodwill of the business conducted by the Company.
     6. Confidentiality.
     (a) It is understood that in the course of Employee’s employment with
Company, Employee has become acquainted with Company Confidential Information
(as defined below). Employee recognizes that Company Confidential Information
has been developed or acquired at great expense, is proprietary to the Company,
and is and shall remain the exclusive property of the Company. Accordingly,
Employee agrees that Employee will not disclose to others, copy, make any use
of, or remove from Company’s premises any Company Confidential Information
without the express written consent of the Chief Executive Officer of the
Company, until such time as Company Confidential Information becomes generally
known, or readily ascertainable by proper means by persons unrelated to the
Company that are not bound by an obligation of confidentiality.
     (b) Employee shall deliver to the Company, no later than 5:00 p.m., Phoenix
time, on the Separation Date, the originals and all copies (including, but not
limited to, any electronic versions or copies) of any and all materials,
documents, notes, manuals, or lists containing or

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embodying Company Confidential Information, or relating directly or indirectly
to the business of the Company, in the possession or control of Employee.
     (c) “Company Confidential Information” shall mean confidential, proprietary
information or trade secrets of Company including without limitation the
following: (1) employee, customer, distributor and supplier lists and related
information as compiled by or on behalf of the Company; (2) Company’s internal
practices and procedures; (3) Company’s financial condition and financial
results of operation; (4) strategic planning, merger and acquisition activities,
manufacturing, engineering, purchasing, finance, marketing, promotion,
recruiting, human resources, distribution, and selling activities;
(5) inventions, designs, developments, devices, software, source code, object
code, firmware, methods and processes related to the business of the Company
(whether or not patentable or reduced to practice); (6) except as required by
law, the terms and conditions of this agreement, as well as negotiations and
circumstances leading up to it; (7) all other information which Employee has a
reasonable basis to consider confidential or which is treated by Company as
confidential; and (8) all information having independent economic value to
Company that is not generally known to, and not readily ascertainable by proper
means by, persons who can obtain economic value from its disclosure or use.
Notwithstanding the foregoing provisions, the following shall not be considered
“Company Confidential Information”: (i) the general skills of the Employee as an
experienced management level employee; and (ii) information generally known
within the electronic payment solutions industry due to no breach of this
Section 6 by Employee.
     (d) Employee agrees that during the period of time that Sections 5 and 6 of
this Agreement is in effect, Employee shall take appropriate steps to ensure
that each employer or potential employer of Employee, or any person or entity
with whom Employee plans to enter into a business relationship, is aware of the
restrictions in Sections 5 and 6. Employee further expressly permits the Company
to notify each such employer or potential employer of such restrictions.
     7. No Disparagement/Confidential Agreement. Employee and the Company’s
officers, directors and executive-level employees agree that as part of the
consideration for this Agreement, they will not make publicly disparaging or
derogatory remarks, whether oral or written, about the other party or, in the
case of the Company, about its officers, directors, employees, agents,
customers, suppliers, products and services. Except for Employee’s restrictive
covenant obligations, which Employee is required to share with his employers,
prospective employers, and business associates, Employee agrees to keep the
existence and remaining terms of this Agreement in strict confidence; provided,
however, that Employee may disclose the existence and remaining terms of this
Agreement to Employee’s spouse, financial advisor, attorney, and as required by
law. Except for Employee’s restrictive covenant obligations, the Company agrees
to keep the existence and remaining terms of this Agreement in strict
confidence; provided, however, that the Company may discuss or disclose the
existence and remaining terms of this Agreement on a need-to-know basis or as
required by law or regulation.
     8. Return of Company Property. Except as provided in Section 2(d), Employee
shall deliver to the Company in good working condition no later than 5:00 p.m.,
Phoenix time, on the Separation Date, all access cards and keys, and any other
Company property in Employee’s

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possession or control. The Separation Amount shall be offset by the cost of any
unreturned or damaged property.
     9. No Admission of Liability. Nothing contained in this Agreement shall be
construed in any manner as an admission by any party that they have violated any
statute, law or regulation, or breached any contract or agreement.
     10. Reliance. Employee warrants and represents that: (a) Employee has
relied on Employee’s own judgment regarding the consideration for and language
of this Agreement; (b) Employee has been given a reasonable period of time to
consider this Agreement, has been advised to consult with counsel of his own
choosing before signing this Agreement, and has consulted with counsel or
voluntarily elected not to consult with independent counsel; (c) the Company has
not in any way coerced or unduly influenced Employee to execute this Agreement;
and (d) this Agreement is written in a manner that is understandable to Employee
and Employee has read and understood all paragraphs of this Agreement.
     11. Nature of the Agreement; Jurisdiction. This Agreement and all
provisions hereof, including all representations and promises contained herein,
are contractual and not a mere recital and shall continue in permanent force and
effect. This Agreement and all attachments constitute the sole and entire
agreement of the parties with respect to the subject matter hereof and there are
no agreements of any nature whatsoever between the parties hereto except as
expressly stated herein. This Agreement may not be modified or changed unless
done so in writing, signed by both parties. In the event that any portion of
this Agreement is found to be unenforceable for any reason whatsoever, the
unenforceable provision shall be considered to be severable, and the remainder
of the Agreement shall continue to be in full force and effect. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Arizona without regard to choice of law principles. Employee hereby:
(a) irrevocably submits to the exclusive jurisdiction of the courts of the State
of Arizona located in the County of Maricopa over any suit, action or other
proceeding arising in connection with this Agreement or the subject matter
hereof, and (b) waives and agrees not to assert in any such suit, action or
proceeding, any claim that Employee is not subject to the jurisdiction of such
courts of competent jurisdiction.
     12. Time Period For Considering or Canceling This Agreement. Employee has
the right to consult an attorney before signing this Agreement. Employee
acknowledges that Employee has been offered a period of time of at least 21 days
to consider whether to sign this Agreement, which Employee has waived, and the
Company agrees that Employee may cancel this Agreement at any time during the
seven days following the date on which this Agreement has been signed by
Employee. In order to cancel or revoke this Agreement, Employee must deliver to
the Company c/o Hypercom Corporation, Attn: General Counsel, 2851 W. Kathleen
Road, Phoenix, Arizona 85053, written notice stating that Employee is canceling
or revoking this Agreement. If this Agreement is timely cancelled or revoked,
none of the provisions of this Agreement shall be effective or enforceable and
the Company shall not be obligated to make the payments to Employee or to
provide Employee with the other benefits described in this Agreement and all
contracts and provisions modified or relinquished by the Company shall be
reinstated.

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     13. General Matters. This Agreement may not be assigned by one party
without the prior express written consent of the other party. This Agreement may
be executed by the parties in multiple counterparts, each of which shall be
deemed to be an original, but all such counterparts shall constitute one and the
same instrument. The parties acknowledge that: (a) each and every provision of
this Agreement shall be construed as though both parties participated equally in
the drafting of same; and (b) any rule of construction that a document shall be
construed against the drafting party shall not be applicable to this Agreement.
The provisions of this Agreement shall survive so long as necessary to carry out
the intentions of the parties expressed in this Agreement.
     14. Injustice Relief; Attorneys’ Fees. If Employee breaches the covenants
in this Agreement, irreparable injury will result to the Company and its remedy
at law for damages will be inadequate. As a result, the Company shall be
entitled to an injunction to restrain the continuing breach by Employee, or any
other persons or entities acting for or with Employee, without the necessity of
proving actual damages or posting any bond or other security, in addition to any
other rights and remedies which the Company may have at law or in equity. The
prevailing party in any legal action relating or touching upon this Agreement is
entitled to recover reasonable attorneys’ fees and costs.
     15. Continuing Cooperation. Provided the Company reimburses Employee for
any reasonable and necessary out-of-pocket expenses, Employee will fully
cooperate with the Company and its legal counsel in connection with any action,
proceeding, or dispute arising out of matters with which Employee was directly
or indirectly involved while serving as an Employee of the Company. This
cooperation includes meeting with, and providing information to, the Company and
its legal counsel, maintaining the confidentiality of any past or future
privileged communications with the Company’s legal counsel, and being available
to testify truthfully by affidavit, in depositions, or in any other forum on
behalf of the Company.
     16. Termination for Cause.
     (a) The Company may terminate Employee for Cause, as defined below. Upon
termination for Cause, Employee will be entitled to receive only that
compensation due to Employee through the date of termination.
     (b) For purposes of this Agreement, “Cause” means if the Company’s Board of
Directors, in its reasonable and good faith discretion, determines that Employee
(i) developed or pursued interests substantially adverse to the Company;
(ii) materially breached any confidentiality agreement with the Company;
(iii) has not devoted a majority of Employee’s business time, effort and
attention to the affairs of the Company (or such lesser amount as has been
agreed to in writing by the Company); (iv) is charged by any governmental entity
with any felony (excluding traffic violations) that is reasonably determined by
the Board of Directors to be true and to adversely reflect upon the Company’s
standing in the community; or (v) engaged in gross misconduct or other material
omissions that are significantly detrimental to the well-being of the Company.

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Dated this 31st day of July, 2007.

            NEIL P. HUDD
                          /s/ Neil P. Hudd                  Employee           
Dated this 31st day of July, 2007.     HYPERCOM CORPORATION
      By:                  /s/ William Keiper       Name:   William Keiper     
       

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RE-AFFIRMATION:
By signing below, I reaffirm the terms and conditions of this Agreement and
specifically acknowledge that the release of claims set forth in Section 4 is
extended through the Separation Date.

             
 
  Re-Affirmation Date:                  
 
  NEIL P. HUDD        
 
                     
 
  Employee        

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