Document:

exv10w4

 

EXHIBIT
10.4

July 11 2007

Mr. Thomas Liguori

Hypercom Corporation

2851 West Kathleen Road

Phoenix, Arizona 85053

	 	 	 	 	 
	 

	 	Re:
	 	Amended and Restated Employment Agreement

Dear Tom:

          On October 6, 2005, you executed a letter agreement constituting an offer of employment and
your employment agreement (“Offer of Employment Agreement”) with Hypercom Corporation (“Hypercom”
or the “Company”). Hypercom wishes to amend, replace and supersede your Offer of Employment
Agreement with this employment agreement (the “Agreement”) which will become effective upon
execution by you and Hypercom (the “Effective Date”).

	 	1.	 	Position with the Company. You will continue to serve as Senior Vice President
and Chief Financial Officer of the Company. You may be called upon to serve in other
capacities from time-to-time during your tenure with the Company. You will faithfully and
diligently perform all duties commensurate with these positions, including those duties
directed by the Company’s Chief Executive Officer (“CEO”) to whom you will report directly.
	 
	 	2.	 	Compensation. You will receive the following compensation for your services:

	 	a.	 	You will receive a minimum base salary of $315,000 per year, which may
be increased, but not decreased, at the discretion of the Company (the “Base
Salary”). The Base Salary will be paid in equal installments in accordance with
the Company’s salary payment policies as in effect from time to time, and such
salary payments will be subject to the usual withholding for income tax and other
customary deductions.
	 
	 	b.	 	Your target annual bonus compensation shall be one hundred percent
(100%) of your then-current Base Salary for each year during the term of your
employment, if the Company achieves the annual Performance Goals as solely
determined by the Board; provided that you may be entitled to receive annual bonus
compensation in an aggregate amount up to one hundred and fifty percent (150%) of
your then-current Base Salary for each year during the term of your employment if
the Board deems it consistent with the achievement of the Performance Goals for
such year. The Performance Goals, and the percentage of bonus compensation tied to
each, will be specifically defined by the Board in its sole discretion, but will
likely include some or all of the following: revenue growth, gross margin, earnings
per share, market share growth and development of the organization (the
“Performance Goals”). The determination as to whether the Company has
achieved the Performance Goals will be made by the Board in
its sole and reasonable discretion, and the bonus will be paid to you within five
(5) business days following such determination.
	 
	 	c.	 	Effective upon execution of your Offer of Employment Agreement, the
Board granted to you an option for the purchase of one hundred thousand (100,000)
shares of common stock of the Company (the “Option”) pursuant to the Company’s
Long-Term Incentive Plan with a per share exercise price equal to the closing
market price

 

 

Mr. Thomas Liguori

July 11, 2007

Page 2

	 	 	 	of a share of common stock on the date of grant. The Option vests in
1/3 increments on the first, second and third anniversaries of the date of grant.
	 
	 	d.	 	Effective upon your execution of your Offer of Employment Agreement,
the Board also granted to you fifty thousand (50,000) shares of restricted common
stock of the Company pursuant to the Long-Term Incentive Plan, restricted by
achievement of the Performance Goals to be established by the Board for fiscal
years 2006 and 2007, as follows: (i) fifty percent (50%) of the restricted common
stock, or twenty-five thousand (25,000) shares of common stock, were to vest based
upon substantial achievement of 2006 Performance Goals as determined by the Board
and (ii) the remaining fifty percent (50%) of the restricted common stock, or
twenty-five thousand (25,000) shares of common stock, will vest based upon
substantial achievement of 2007 Performance Goals as determined by the Board. The
Board determined that you did not substantially achieve the 2006 Performance Goals
and therefore you forfeited the twenty-five thousand (25,000) shares of restricted
stock referenced in clause (i) above. If the Board, in its review of the
Performance Goals, determines that you achieved a personal rating of one hundred
percent (100%) or higher in fiscal year 2007, the remaining twenty-five thousand
(25,000) shares of restricted common stock granted pursuant to this subsection (d)
shall vest. If the 2007 Performance Goals are not fully and completely achieved,
the proportion of the remaining twenty-five thousand (25,000) shares of restricted
common stock which shall vest pursuant to this subsection 2(d) shall be determined
in the Board’s sole discretion taking into account the Performance Goals achieved
for such year, in both quantitative and qualitative degree. The Company will also
provide to you a Gross-up Payment in connection with the restricted common stock
grant (but not on the cash so paid) pursuant to this subsection 2(d).
	 
	 	e.	 	You will be eligible, but not entitled, to receive additional grants of
stock options and restricted capital stock of the Company in such quantities and
subject to such conditions as the Board may determine in its sole and absolute
discretion.
	 
	 	f.	 	You covenant and agree that, as soon as practicable but in no event
more than three (3) years from the date of your Offer of Employment Agreement, you
will beneficially own, hold and retain shares of common stock of the Company equal
in value to your Base Salary for such given year (the “Minimum Ownership”);
provided, however, that this covenant shall not be construed to require you to
purchase shares of the Company’s common stock on the open market for the sole
purpose of achieving the Minimum Ownership. You also covenant and agree that
you will not sell or dispose of, or cause anyone else to sell or dispose of, any
common stock of the Company that you have received (i) as a result of this Agreement
or (ii) pursuant to any other Company compensation program, until and unless you
have achieved (and will continue to maintain following such sale or disposition) the
Minimum Ownership.
	 
	 	g.	 	You may participate in any incentive compensation plan, pension or
profit sharing plan, stock purchase plan, group benefit plan, medical plan, bonus
plan and/or other benefit plans, either currently in effect or as may be
established from time to time by

 

 

Mr. Thomas Liguori

July 11, 2007

Page 3

	 	 	 	the Board, for which you as an officer of the
Company are eligible to participate. You acknowledge that you will not be entitled
to any benefits under any discretionary plan unless actually provided to you in
accordance with such plan.
	 
	 	h.	 	You will be eligible, but not entitled, to receive such other
compensation as may from time to time be granted to you by the Board in its sole
and absolute discretion, including additional bonuses approved by the Board or the
Board’s Compensation Committee.
	 
	 	i.	 	You will be permitted to take vacations and sick leave, in accordance
with the Company’s policies and procedures as in effect for officers of the
Company.

	 	3.	 	Benefits and Employment Matters. The Company offers a comprehensive array of
employee benefit programs. Currently those programs include paid time off (“PTO”),
medical, dental and vision care, paid holidays, disability insurance, life insurance,
travel accident insurance, 401(k) Plan, Employee Stock Purchase Plan and tuition
reimbursement. Details of these programs have been provided to you by the Company. You
will accrue 19 days of PTO per year during your first through fifth year of employment.
After your fifth year, you will accrue an additional week for a total of 24 PTO days per
year. Please see the Hypercom PTO policy for details regarding this benefit. The Company
reserves the right to modify, suspend or terminate its benefit programs in its sole
discretion.
	 
	 	4.	 	Business Expenses. The Company will pay or reimburse you for all ordinary and
necessary business expenses incurred or paid by you in furtherance of the Company’s
business, in accordance with the Company’s policies and procedures.
	 
	 	5.	 	Moving Expenses. The Company provided to you a full executive moving package as
set forth in the October 2, 2005 letter regarding your Executive Moving Package. If you
resign from employment with the Company without Good Reason as provided in Section 8 at any
time within 18 months of the date of reimbursement for the move, you must reimburse the
Company the full amount of the moving package provided to you by the Company. You will not
be required to reimburse the Company for the moving package described herein if your
employment with the Company terminates for the reasons set forth in Sections 9, 10, 11 or
15.
	 
	 	6.	 	Employment at Will. You acknowledge and agree that the Company will employ you
as an “at will employee.” This means that either you or Hypercom can terminate our
employment relationship at any time for any reason or no reason. In the event that your
employment is terminated either by you or the Company, you will be entitled to receive only
that compensation due to you through the date of your resignation or termination, the
severance and other benefits provided pursuant to this Agreement and any other benefits
required by law.
	 
	 	7.	 	Termination for Cause.

	 	a.	 	The Company may terminate you for Cause, as defined below. Upon
termination for Cause, you will be entitled to receive only that compensation due
to you through the date of termination.

 

 

Mr. Thomas Liguori

July 11, 2007

Page 4

	 	b.	 	For purposes of this Agreement, “Cause” means if the Board, in
its reasonable and good faith discretion, determines that you (i) have developed or
pursued interests substantially adverse to the Company, (ii) have materially
breached any employment or confidentiality agreement, (iii) have not devoted a
majority of your business time, effort and attention to the affairs of the Company
(or such lesser amount as has been agreed to in writing by the Company), (iv) are
charged by any governmental entity with any felony (excluding traffic violations)
that is reasonably determined by the Board to be true and to adversely reflect upon
the Company’s standing in the community, or (v) have engaged in gross misconduct or
other material omissions that are significantly detrimental to the well-being of
the Company.

	 	8.	 	Termination by You Without Good Reason.

	 	a.	 	In the event that you terminate your employment with the Company
voluntarily and without Good Reason, you will be entitled to receive only that
compensation due to you through the date of such termination.
	 
	 	b.	 	Following your termination from employment without Good Reason, the
Company will make COBRA benefits available, at your expense, to you, your spouse
and your dependents covered by the Company’s group health plan at the time of
termination, in accordance with applicable law.

	 	9.	 	Termination due to Death.

	 	a.	 	In the event that your employment with the Company terminates as a
result of your death, your beneficiary will be entitled to receive only that
compensation due to you through the date of your death.
	 
	 	b.	 	For a period of twelve (12) months from the date your employment with
the Company terminates as a result of your death, the Company will pay for the
COBRA benefits available to your spouse and your dependents covered by the
Company’s group health plan at the time of termination.

	 	10.	 	Termination By You After New CEO Selected.

	 	a.	 	As of the Effective Date of this Agreement, the Company is in the
process of selecting a new CEO to succeed William Keiper. If you continue
employment with the Company through the date on which the new CEO succeeds Mr.
Keiper as the CEO of the Company, and if you then decide to terminate your
employment with the Company at any time during the “trial period,” the Company will
provide you with the separation payments and benefits described in this Section.
For the purpose of this Section, the “trial period” begins on the day on which the
new CEO succeeds Mr. Keiper as the CEO of the Company and ends on the 4-month
anniversary of this date. To receive the separation payments and benefits
described in this Section, you must continue to be employed by the Company until
the beginning of the trial period and execute the release required by Section 21 of
this Agreement. You will not be entitled to any separation payment or benefits
under this Section if the Company

 

 

Mr. Thomas Liguori

July 11, 2007

Page 5

	 	 	 	terminates your employment for Cause or has
reason to terminate your employment for Cause prior to or during the trial period.
	 
	 	b.	 	The separation payments and benefits to which you will be entitled
consist of the following:

	 	i.	 	Payment equal to one (1) year of your then-current Base Salary in
a lump sum upon the effectiveness of the release contemplated by
Section 21.
	 
	 	ii.	 	For a period of eighteen (18) months from the date of your
termination, the Company will pay for the COBRA benefits available to
you, your spouse and your dependents covered by the Company’s group
health plan at the time of termination. For purposes of this
Agreement, the date of your termination pursuant to this Section
shall be the date specified in a written notice of resignation.
	 
	 	iii.	 	A relocation allowance in an amount equal to 50% of your
then-current Base Salary. Such relocation allowance will be paid to
you in a lump sum upon the effectiveness of the release contemplated
under Section 21.
	 
	 	iv.	 	All outstanding stock options granted to you pursuant to Section
2(c) or otherwise, under all of the Company’s stock plans, to the
extent not already vested, will vest upon the effective date of your
termination.
	 
	 	v.	 	The twenty-five thousand (25,000) shares of restricted stock
granted to pursuant to Section 2(d) that are subject to restrictions
based on your attainment of the 2007 Performance Goals will become
unrestricted.

	 	c.	 	The lump sum separation payment and the relocation allowance described
in clauses (i) and (iii) above are considered “non-qualified deferred compensation”
subject to Section 409A of the Internal Revenue Code of 1986 (“Section 409A”). The
Company has determined, as a preliminary matter, that there is no applicable
exception to Section 409A. As a result, because you are a “specified employee”
under Section 409A and the lump sum separation payment and relocation allowance are
payable upon your termination of employment with the Company, Section 409A imposes
an additional 20% tax (plus interest) on these payments unless they are paid at
least six months following your termination of employment. At the time of your
termination pursuant to this Section 10, the Company will reconsider this
preliminary conclusion based on the guidance available at that time. If the
Company concludes that there is no applicable exception to the requirements of
Section 409A, the Company will pay to you the amount of your lump sum separation
payment and relocation allowance, should you become entitled to them, plus simple
interest at 6%

 

 

Mr. Thomas Liguori

July 11, 2007

Page 6

	 	 	 	per annum, on the first day of the seventh month following the
effective date of your termination of employment with the Company.

	 	11.	 	Termination by the Company Other than for Cause or by You for Good Reason.

	 	a.	 	In the event that you are terminated by the Company without Cause or
you terminate your employment for Good Reason, you will be entitled to an amount
equal to one (1) year of your then-current Base Salary, to be paid in the form of
salary continuation at the normal payroll intervals of the Company.
	 
	 	b.	 	The separation payment provided by paragraph (a) is considered
“non-qualified deferred compensation” that is subject to Section 409A. The Company
has determined, as a preliminary matter, that the separation payment does not
qualify for the separation pay exception or any other exception to the requirements
of Section 409A. At the time of your termination pursuant to this Section 11, the
Company will reconsider this preliminary conclusion based on the guidance available
at that time. If the Company concludes at this time that there is no applicable
exception to the requirements of Section 409A, and that the payments must be
postponed for six months following your termination of employment in order to avoid
the imposition of the additional 20% tax (plus interest), as described in Section
10(c), your payments will be postponed. The amount that would have been payable to
you during the first six months following your termination of employment with the
Company, plus simple interest at 6% per annum, will be paid to you on the first day
of the seventh month following the effective date of your termination of employment
with the Company.
	 
	 	c.	 	For a period of twelve (12) months from the date of your termination
without Cause or your resignation for Good Reason, the Company will pay for the
COBRA benefits available to you, your spouse and your dependents covered by the
Company’s group health plan at the time of termination. For purposes of this
Agreement, the date of termination of employment without Cause or resignation
for Good Reason shall be the date specified in a written notice of termination or
resignation.

	 	12.	 	Exercise of Options upon Termination.

	 	a.	 	In the event that you terminate your employment with the Company
voluntarily and without Good Reason pursuant to Section 8 or due to your death
under Section 9, you, or your beneficiary, as the case may be, will have the right
to exercise any options to purchase common stock of the Company, granted pursuant
to Section 2(c) above or otherwise, that are vested as of the date of such
termination for a period of ninety (90) days from the date of your voluntary
termination or death, as the case may be. Any options that are not vested as of
the date of your termination or death will lapse and will no longer be exercisable.
	 
	 	b.	 	In the event that you are terminated by the Company without Cause or
you terminate your employment for Good Reason pursuant to Section 11 or in the
event you are terminated by the Company without Cause or resign for Good Reason
following a Change of Control pursuant to Section 15, you will have the right to
exercise any

 

 

Mr. Thomas Liguori

July 11, 2007

Page 7

	 	 	 	options to purchase common stock of the Company, granted pursuant to
Section 2(c) above or otherwise, that are vested as of the date of such termination
for a period of one hundred eighty (180) days from the date of your termination by
the Company or resignation for Good Reason, as the case may be. Any options that
are not vested as of the date of your termination or resignation will lapse and
will no longer be exercisable.
	 
	 	c.	 	The provisions of this Section 12 override and supersede any contrary
provisions included in any Option Agreement and, to that extent, this Agreement
shall be deemed to be an amendment to such Option Agreement; provided however, that
the provisions of this Section 12 shall not extend the exercise period for any
option beyond the date on which the option expires under the terms of the
applicable Option Agreement.

	 	13.	 	Covenant Not to Compete. You agree that, during the “Restriction Period” and
in the “Restricted Area,” you will not, without the prior written consent of the Company,
directly or indirectly, for your own benefit or for, with or through any other individual,
firm, corporation, partnership or other entity, whether acting in an individual, fiduciary
or other capacity, own, manage, operate, control, advise, invest in (except as a 1% or less
shareholder of a public company), loan money to, or participate or assist in the ownership,
management, operation or control of or be associated as a director, officer, employee,
partner, consultant, advisor, creditor, agent, independent contractor or otherwise with, or
acquiesce in the use of your name by, any business enterprise that is in direct competition
with the Company or any subsidiary.
	 
	 	 	 	In addition to the foregoing, at all times during the Restriction Period, you will not,
directly or indirectly (as described above), for your benefit or for, with or through any business
enterprise, hire, employ, solicit, or otherwise encourage or entice any of the Company’s
(or subsidiary’s) employees or consultants to leave or terminate their employment with the
Company.
	 
	 	 	 	For this purpose, the “Restricted Area” means any country in the world in which Company
currently conducts business. If a court of competent jurisdiction determines that this is a larger
area than necessary to protect the Company’s business interests, the parties agree that the
Restricted Area will be the largest of the following areas that the court determines to be
reasonable: the United States of America, the states of Arizona and California, the 100-mile radius
of the office maintained by the Company where you spent most of your time while employed by the
Company pursuant to this Agreement, the 50-mile radius of the office maintained by the Company
where you spent most of your time while employed by the Company pursuant to this Agreement, the
25-mile radius of the office maintained by the Company where you spent most of your time while
employed by the Company pursuant to this Agreement, or the 10-mile radius of the office maintained
by the Company where you spent most of your time while employed by the Company pursuant to this
Agreement.
	 
	 	 	 	For this purpose, the “Restriction Period” begins on the Effective Date and ends at the end of
the 12th month following the termination of your employment with the Company for any reason (or, if
later, upon conclusion of your services as a consultant), or if a court of competent jurisdiction
concludes that 12 months is longer than necessary to protect the

 

 

Mr. Thomas Liguori

July 11, 2007

Page 8

	 	 	 	Company’s business interests, then
the parties agree that the restriction period will end at the end of the longest of the following
number of months that the court determines to be reasonable: 9, 8, 7, 6, 5, 4, 3, 2 or 1.
	 
	 	 	 	You and the Company consider the restrictions contained in this Section 13 to be reasonable
for the purpose of preserving the Company’s rights and interests. You acknowledge and agree that
the Company’s remedies at law for breach or threatened breach of any of the provisions of this
Section 13 would be inadequate. Therefore, you agree that in the event of a breach or threatened
breach by you of the provisions in this Section 13, the Company will be entitled to, in addition to
its remedies at law and without posting any bond, equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction, or any other
equitable remedy that may then be available. You further agree that you will not oppose the
Company’s request for such equitable relief.
	 
	 	14.	 	Confidential Information and Non-Disclosure. You acknowledge and agree that
you have executed and continue to be bound by the terms of the Hypercom Employee
Non-Disclosure Agreement dated October 6, 2005.
	 
	 	15.	 	Resignation Following Change of Control.

	 	a.	 	If, during the twelve (12) month period following a Change of Control,
as defined in the Definition section attached hereto, you resign for Good Reason or
the Company terminates your employment for any reason other than for “Cause,” you
will receive the following:

	 	i.	 	Payment equal to one (1) year of your then-current Base Salary in
a lump sum upon effectiveness of the release contemplated by Section
21.
	 
	 	ii.	 	For a period of eighteen (18) months from the date of your
termination, the Company will pay for the COBRA benefits available to
you, your spouse and your dependents covered by the Company’s group
health plan at the time of termination. For purposes of this
Agreement, the date of your termination pursuant to this Section
shall be the date specified in a written notice of resignation or
termination, as applicable.
	 
	 	iii.	 	A relocation allowance in an amount equal to 50% of your
then-current Base Salary if you became an employee of the Company
less than 24 months before the date of your termination of employment
pursuant to this Section. Such relocation allowance will be paid to
you in a lump sum upon the effectiveness of the release contemplated
under Section 21.
	 
	 	iv.	 	All outstanding stock options granted to you pursuant to Section
2(c), or otherwise, under all of the Company’s stock plans, to the
extent not already vested, will vest upon the effective date of your
termination pursuant to this Section.

 

 

Mr. Thomas Liguori

July 11, 2007

Page 9

	 	v.	 	All future restricted stock awards granted to you under all of the
Company’s stock plans, to the extent not already unrestricted, will
become unrestricted upon the effective date of your termination
pursuant to this Section.
	 
	 	vi.	 	All of the twenty-five thousand (25,000) shares of performance
based restricted stock granted to pursuant to Section 2(d) which are
subject to restrictions based on your attainment of the 2007
Performance Goals, and any other performance based restricted stock
awards (other than the twenty-five thousand (25,000) shares of
restricted stock that you forfeited as a result of failure to
substantially achieve the 2006 Performance Goals as described in
Section 2(d)) granted to you under all of the Company’s stock plans,
to the extent not already unrestricted, will become unrestricted upon
the effective date of your termination pursuant to this Section. The
Company will make tax gross up payments as applicable.

	 	b.	 	The separation payment and relocation allowance described in clauses
(i) and (iii) above are considered “non-qualified deferred compensation” subject to
Section 409A. The Company has determined, as a preliminary matter, that these
payments do not qualify for the separation pay exception or any other exception to
the requirements of Section 409A. At the time of your termination pursuant to
this Section 15, the Company will reconsider this preliminary conclusion based on
the guidance available at that time. If the Company concludes at this time that
there is no applicable exception to the requirements of Section 409A, and that the
payments must be postponed for six months following your termination of employment
in order to avoid the imposition of the additional 20% tax (plus interest), as
described in Section 10(c), your payments will be postponed. The Company will pay
to you the amount of your lump sum separation payment and relocation allowance, plus
simple interest at 6% per annum, on the first day of the seventh month following the
effective date of your termination of employment with the Company.

	 	16.	 	Personal Rights and Obligations. This Agreement and all rights and obligations
hereunder are personal and will not be assignable by either you or the Company except as
provided in this Section 16, and any purported assignment in violation thereof will be null
and void. Any person, firm or corporation succeeding to the business of the Company by
merger, consolidation, purchase of assets or otherwise will assume by contract or operation
of law the obligations of the Company hereunder and in such a case you will continue to
honor this Agreement with such business substituted for the Company as the employer.
	 
	 	17.	 	Notices. Any notice, election or communication to be given under this Letter
will be in writing and delivered in person or deposited, certified or registered, in the
United States mail, postage prepaid, addressed as follows:

 

 

Mr. Thomas Liguori

July 11, 2007

Page 10

	 	 	 	If to the Company:

	 
	 	 	 	Hypercom Corporation

2851 West Kathleen Road

Phoenix, Arizona 85053

Attn: General Counsel
	 
	 	 	 	If to you:
	 
	 	 	 	Thomas Liguori

Hypercom Corporation

2851 West Kathleen Road

Phoenix, Arizona 85053
	 
	 	 	 	or to such other addresses as the Company or you may from time to time designate by notice
hereunder. Notices will be effective upon delivery in person or upon receipt of any facsimile or
e-mail, or at midnight on the fourth business day after the date of mailing, if mailed.
	 
	 	18.	 	Entirety. Except for the Hypercom Employee Non-Disclosure Agreement, the
Indemnification Agreement between you and the Company, any other confidentiality agreement,
option awards, restricted stock awards or the Company’s policies and procedures to which
you are subject, this Agreement constitutes and embodies the full and complete
understanding and agreement of the Company and you with respect to your employment by the
Company and supersedes all prior understandings or agreements whether oral or in writing.
This Agreement may be amended only by a writing signed by you and the Company. This
Agreement may be executed in any number of counterparts, each of which will be considered a
duplicate original.
	 
	 	19.	 	Arbitration. Any controversy relating to this Agreement or relating to the
breach hereof will be settled by arbitration conducted in Phoenix, Arizona in accordance
with the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The award rendered by the arbitrator(s) will be final and judgment upon the award
rendered by the arbitrator(s) may be entered upon it in any court having jurisdiction
thereof. The arbitrator(s) will possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration. The expenses of the arbitration
will be borne by the losing party unless otherwise allocated by the arbitrator(s). This
Agreement to arbitrate will be specifically enforceable under the prevailing arbitration
law. During the continuance of any arbitration proceedings, the parties will continue to
perform their respective obligations under this Agreement. Nothing in this Agreement will
preclude the Company or any affiliate or successor from seeking equitable relief, including
injunction or specific performance, in any court having jurisdiction, in connection with
the non-compete provisions herein and any obligations of confidentiality.
	 
	 	20.	 	Governing Law. This Agreement will be governed by and interpreted in
accordance with the laws of the State of Arizona, without regard to conflict of laws
principles.
	 
	 	21.	 	Withholding and Release. You acknowledge and agree that payments made to you
hereunder may be subject to withholding. You further acknowledge and agree that payment

 

 

Mr. Thomas Liguori

July 11, 2007

Page 11

	 	 	 	of
any of the benefits to be provided to you under this Agreement following any termination of
your employment is subject to your compliance with any reasonable and lawful policies or
procedures of the Company relating to employee severances, including the execution and
delivery by you of a release reasonably satisfactory to the Company of any and all claims
that you may have against the Company or related persons, except for (i) the continuing
obligations provided herein, and (ii) for any continuing obligations of indemnification due
to you as an officer or director (or a former officer or director).
	 
	 	22.	 	No Elections. You do not have any right to make any election regarding the
time or form of any payment due under this Agreement.
	 
	 	23.	 	Compliant Operation and Interpretation. This Agreement shall be operated in
compliance with Section 409A and each provision of this Agreement shall be interpreted, to
the extent possible, to comply with Section 409A.
	 
	 	24.	 	Miscellaneous Payment Provision. If payment of any amount under this Agreement
is not made, in whole or in part, due to a dispute between you and the Company, the payment
shall be made in accordance with Treas. Reg. § 1.409A-3(g), as applicable.

Very Truly Yours,

	 	 	 	 	 
	 

	 	/s/ Daniel Diethelm
 

Chairman of the Board
	 	 
	 
	 	 	 	 
	ACCEPTED AND AGREED:	 	 
	 
	 	 	 	 
	 

	 	/s/ Thomas Liguori
 

Thomas Liguori
	 	 
	 
	 	 	 	 
	 

	 	Date: July 11, 2007	 	 

 

 

Mr. Thomas Liguori

July 11, 2007

Page 12

Definitions

     “Change of Control” means and includes each of the following:

     (1) there shall be consummated any consolidation or merger of the Company in which the Company
is not the continuing or surviving entity, or pursuant to which common stock would be converted
into cash, securities or other property, other than a merger of the Company in which the holders of
the Company’s common stock immediately prior to the merger have at least 80% ownership of
beneficial interest of common stock or other voting securities of the surviving entity immediately
after the merger;

     (2) there shall be consummated any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of assets or earning power aggregating more than 40% of the
assets or earning power of the Company and its subsidiaries (taken as a whole), other than pursuant
to a sale-leaseback, structured finance or other form of financing transaction;

     (3) the stockholders of the Company shall approve any plan or proposal for liquidation or
dissolution of the Company; or

     (4) during any period of two consecutive years, individuals who at the beginning of such
period constituted a majority of the Board shall fail to constitute a majority thereof, unless the
election, or the nomination for election by the Company’s stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office who were directors
at the beginning of the period.

     “Good Reason” means a termination of your employment within one hundred twenty (120)
days following the occurrence of one or more of the following circumstances without your consent:

     (1) a material diminution in your authority, duties or responsibilities;

     (2) a material diminution in your base compensation; or

     (3) a material change in the geographic location of your principal office.

     You must provide written notice to the Company of the existence of the Good Reason condition
described in paragraphs (1)–(3) above within ninety (90) days of the initial existence of the
condition. Notwithstanding anything to the contrary, an event described in paragraphs (1)-(3)
above will not constitute Good Reason if, within thirty (30) days after you give the Company notice
of the occurrence or existence of an event that you believe constitutes Good Reason, the Company
has fully corrected such event.

     “Termination of Employment” means any termination of your employment or separation
from service with the Company as defined in Treas. Reg. § 1.409A-1(h).<PAGE>

EXHIBIT 10.1

                         UNIVERSAL DETECTION TECHNOLOGY

                                  July 5, 2007

Innovative Marketing, Inc.
2895 South Federal Highway
Delrey Beach, FL 33483

         Re: Rescission of Stock Agreement
             -----------------------------

Dear Sir:

         This letter will serve to memorialize the agreement between Universal
Detection Technology ("UDT") and Innovative Marketing, Inc. ("IMI") to
immediately rescind and terminate the Stock Agreement dated January 18, 2007, by
and between UDT and IMI. Accordingly, the entire amount of the "inventory
credits" under the Agreement shall be deemed canceled and terminated, and the
60,000,000 shares of common stock of UDT issued to IMI shall be returned and
canceled. The Agreement shall be of no further force or effect. UDT shall issue
a press release and 8K describing the rescission of the Agreement.

         Kindly acknowledge your agreement with the foregoing, by signing the
acknowledgment below and returning a copy of this letter to me.

                                                  Very Truly Yours,

                                                  Universal Detection Technology

                                                  /s/ Jacques Tizabi
                                                  ------------------
                                                  By: Jacques Tizabi
                                                  Title: CEO

Agreed and Accepted:

Innovative Marketing, Inc.

/s/_______________________

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