Document:

EX-10.3

SEVERANCE AGREEMENT

This SEVERANCE AGREEMENT (this “Agreement”) is made and entered into freely and voluntarily,
by and between JOHN W. SMOLAK (hereinafter referred to as “Officer”) 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 termination
of Officer’s employment with the Company.

NOW, THEREFORE, in consideration of the acts, payments, covenants and mutual agreements herein
described and agreed to be performed, Officer and the Company agree as follows:

1. Resignation. Officer hereby resigns from all positions with the Company (including
as an officer of Hypercom and an officer or director of various subsidiaries), effective as of 3:00
p.m., Phoenix time, March 21, 2005 (the “Effective Date”).

2. Economic Terms. The Company agrees that, in consideration for Officer’s covenants
herein, Officer will be entitled to receive, through the one (1) year anniversary of the Effective
Date, continued payments aggregating $330,000, payable equally over the severance payment term, in
accordance with the Company’s normal payroll practices provided, however, that the first of such
payments shall be applied (net of tax withholding) to offset the overpayment of a bonus to Officer
relating to 2004 in the amount of $10,000. Officer acknowledges that he will not be paid any
bonus, vacation, sick or other pay during his severance payment period. In addition, Officer and
the Company acknowledge and agree that the Stock Option Agreements between them dated April 22,
2002 and July 26, 2002 (the “Options”), shall remain in effect, and ultimately terminate, in
accordance with their respective terms. For purposes of this Agreement and the Options, Officer
shall be deemed terminated without “cause”.

3. Release and Covenant Not to Sue.

(a) Each party hereby forever releases, discharges, cancels, waives, and acquits the other
party and its or his representatives (which shall include, as applicable, spouse, heirs, executors,
administrators, successors, assigns, affiliates, subsidiaries, corporate parents, agents,
directors, officers, 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
arising out of, or by reason of, any cause or matter, existing as of 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.

(b) 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, the
employment and/or termination of the employment of Officer 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), the Labor Management Relations Act (LMRA),
the Employee Retirement Income Security Act (ERISA), the Consolidated Omnibus Budget Reconciliation
Act, the Fair Labor Standards Act (FLSA), the Equal Pay Act, the Rehabilitation Act of 1973, and
the Family and Medical Leave Act of 1993, worker’s compensation laws, or any other federal, state,
or local statute, or any contract, agreement, plan or policy.

(c) Each party further covenants and agrees not to institute, nor cause to be instituted, any
legal proceeding, including filing any claim or complaint with any government agency alleging any
violation of law or public policy or seeking worker’s compensation, against the Company (or any of
its representatives) premised upon any legal theory or claim whatsoever, including without
limitation, contract, tort, wrongful discharge, personal injury, interference with contract, breach
of contract, defamation, negligence, infliction of emotional distress, fraud, or deceit, except to
enforce the terms of this Agreement.

(d) Each party acknowledges that the considerations afforded the party under this Agreement
are in full and complete satisfaction of any claims a party may have or had to the date hereof,
including any arising out of Officer’s employment with the Company or the termination thereof.

(e) The foregoing shall not apply to any conduct that constituted fraud, involved an
intentional or reckless misstatement or omission, or was not performed in good faith and in (or at
least not opposed to) the best interests of the Company.

(f) Nothing herein shall limit or modify the Company’s obligations to indemnify you and
advance expenses to you, as more fully provided in the Company’s certificate of incorporation and
bylaws.

4. Non-Competition; Non-Solicitation.

(a) For a period of one (1) year from the date hereof, Officer will not, directly or
indirectly, either as an officer, partner, owner, lender, director, adviser or consultant or in any
other capacity or through any entity:

(i) engage in the design, manufacture 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
(collectively, the “Competitive Activities”), within the Protected Territory (as defined below);
provided, that Officer 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.

(ii) solicit for hire, or hire, any person who is, or within the one (1) year period preceding
the date of such activity was, an employee of or consultant to the Company (other than as a result
of a general solicitation for employment); or

(iii) solicit any customer or supplier of the Company or otherwise attempt to induce any such
customer or supplier to discontinue or materially modify its relationship with the Company.

As used herein, the term “Protected Territory” means the entire world; provided, however, that
if (and only if) required by a final court or arbitrator’s order in order for the provisions of
this Agreement to remain valid and enforceable against Officer, “Protected Territory” shall mean
any country in which the Company does any business as of the Effective Date; provided, further,
that if (and only if) such reduced territory is not sufficient in the determination of the court or
arbitrator issuing such order, “Protected Territory” shall mean the United States, Canada, Brazil,
Chile, Argentina, Colombia, Venezuela, Mexico, European Community (including the United Kingdom),
China, Hong Kong, Taiwan, Japan, Turkey, Singapore, Russia, South Korea, Australia and Puerto Rico.

(b) Officer represents to the Company that he is willing and able to engage in businesses that
are not competing businesses hereunder and that enforcement of the restrictions set forth in this
Section 4 would not be unduly burdensome to Officer. Officer hereby agrees that the period of time
provided for in this Section 4 and other provisions and 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 Officer. Officer further agrees that
damages cannot compensate the Company in the event of a violation of this Section 4 and that, if
such violation should occur, injunctive relief shall be essential for the protection of the Company
and its successors and assigns. Accordingly, Officer hereby covenants and agrees that, in the
event any of the provisions of this Section 4 shall be violated or breached, the Company shall be
entitled to obtain injunctive relief against the party or parties violating such covenants without
bond but upon due notice, in addition to such further or other relief as may be available at equity
or law. An injunction by the Company shall not be considered an election of remedies or a waiver
of any right to assert any other remedies which the Company has at law or in equity. No waiver of
any breach or violation hereof shall be implied from forbearance or failure by the Company to take
action thereof. The prevailing party in any litigation, arbitration or similar dispute resolution
proceeding to enforce this provision will recover any and all reasonable costs and expenses,
including attorneys’ fees. Officer agrees that the period of time in which this Section 4 is in
effect shall be extended for a period equal to the duration of any breach of this Section 4 by
Officer.

(c) Officer shall take appropriate steps to ensure that his employer is aware of the
restrictions in this Section 4, and Officer expressly permits the Company to notify his employer of
such restrictions.

5. Confidentiality.

(a) It is understood that in the course of Officer’s employment with Company, Officer has
become acquainted with Company Confidential Information (as defined below). Officer 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, Officer agrees that he 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 Chairman of the Board 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) Officer shall deliver to the Company, no later than 6:00 p.m., Phoenix time, on the
Effective 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
embodying Company Confidential Information, or relating directly or indirectly to the business of
the Company, in the possession or control of Officer.

(c) "Company Confidential Information” shall mean confidential, proprietary information or
trade secrets of Company including without limitation the following: (1) employee, customer and
supplier lists and information as compiled by Company; (2) Company’s internal practices and
procedures; (3) Company’s financial condition and financial results of operation; (4) strategic
planning, manufacturing, engineering, purchasing, finance, marketing, promotion, distribution, and
selling activities; (5) inventions, designs, developments, devices, 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 Officer 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 Officer as an experienced senior
management level employee; (ii) information generally known by senior management officers within
the electronic payment solutions industry; and (iii) persons, entities, contacts or relationships
of Officer that are also generally known in the industry.

(d) Officer hereby agrees that the periods of time provided for in this Section 5 and other
provisions and restrictions set forth therein are necessary to protect the Company and its
successors and assigns in the use and employment of the goodwill of the business conducted by
Officer. Officer further agrees that damages cannot compensate the Company in the event of a
violation of this Section 5 and that, if such violation should occur, injunctive relief shall be
essential for the protection of the Company and its successors and assigns. Accordingly, Officer
hereby covenants and agrees that, in the event any of the provisions of this Section 5 shall be
materially violated or breached, the Company shall be entitled to seek to obtain injunctive relief
against the party or parties violating such covenants, without bond but upon due notice, in
addition to such further or other relief as may be available at equity or law. An injunction by
the Company shall not be considered an election of remedies or a waiver of any right to assert any
other remedies which the Company has at law or in equity. No waiver of any breach or violation
hereof shall be implied from forbearance or failure by the Company to take action thereof. The
prevailing party in any litigation, arbitration or similar dispute resolution proceeding to enforce
this provision will recover any and all reasonable costs and expenses, including attorneys’ fees.

6. No Disparagement/Confidentiality. Each party agrees that as part of the
consideration for this Agreement, they will not make disparaging or derogatory remarks, whether
oral or written, about the other party or, in the case of the Company, its officers, directors,
employees, agents, customers or suppliers. Officer agrees to keep the existence and terms of this
Agreement in strict confidence; provided, however, that Officer may disclose the existence and
terms of this Agreement to his spouse, financial advisor, and attorney, and as required by law.
The Company agrees to keep the existence and terms of this Agreement in strict confidence;
provided, however, that the Company may discuss or disclose the existence and terms of this
Agreement on a need-to-know basis or as required by law or regulation.

7. Return of Company Property. Officer shall deliver to the Company no later than
6:00 p.m., Phoenix time, on the Effective Date, Officer’s laptop computer, cellular telephone,
BlackBerry®, all access cards and keys, and any other Company property in his possession
or control. The foregoing notwithstanding, the Company’s obligation to pay any amounts to Officer
under any provision of this Agreement shall be contingent upon Officer’s compliance with this
Section 7.

8. 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.

9. Reliance. Officer warrants and represents that: (a) he has relied on his own
judgment regarding the consideration for and language of this Agreement; (b) he 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 him to execute this Agreement; and (d) this Agreement is written in a manner that
is understandable to him and he has read and understood all paragraphs of this Agreement.

10. Nature of the Agreement. This Agreement and all provisions thereof, 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.
Except for the Options, all prior agreements, commitments, or plans relating to Officer, are hereby
terminated. 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. Officer 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 Officer is not
subject to the jurisdiction of such courts of competent jurisdiction.

11. Time Period of Considering or Canceling This Agreement. Officer acknowledges that
he has been offered a period of time of at least twenty-one (21) days to consider whether to sign
this Agreement, which he has waived, and the Company agrees that Officer may cancel this Agreement
at any time during the seven (7) days following the date on which this Agreement has been signed by
all parties to this Agreement. In order to cancel or revoke this Agreement, Officer must deliver
to the Company c/o Hypercom Corporation, Attn: General Counsel, 2851 W. Kathleen Road, Phoenix,
Arizona 85053, written notice stating that Officer 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 Officer or
to provide Officer with the other benefits described in this Agreement and all contracts and
provisions modified or relinquished by the Company shall be reinstated.

12. 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.

[Signature Page Follows]

SIGNATURE PAGE TO SEVERANCE AGREEMENT

Dated this 4th day of April, 2005.

JOHN W. SMOLAK

By: /s/ John W. Smolak

	 	 	 	Officer

Dated this 4th day of April, 2005.

HYPERCOM CORPORATION

By: /s/ William Keiper

Its: Chairman and Interim CEOEX-10.4

March 21, 2005

Mr. Grant Lyon

Re: Employment Agreement

Dear Grant:

Upon execution by you, this letter will constitute your employment agreement (this
“Agreement”) with Hypercom Corporation (the “Company”).

	 	1.	 	Term. This Agreement will be effective as of March 22, 2005 and will terminate on
September 22, 2005, unless mutually extended by the parties in writing.

	 	2.	 	Position with the Company. During the term of this Agreement, you will serve as
interim Chief Financial Officer of the Company. You will faithfully and diligently perform all
duties commensurate with this position, including those duties directed by the Company’s Board
of Directors (the “Board”), as well as those set forth in the Company’s Bylaws that relate to
such position. It is expected that you will devote a majority of your weekly working hours to
this position, with you and the Company having estimated that you will spend approximately 30
hours per week on the Company’s business. You will report directly to the Chief Executive
Officer of the Company.

	 	3.	 	Compensation. You will receive a salary of $35,000 per month. Your 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 federal and state income taxes and FICA. You will not participate in any bonus plan of
the Company.

	 	4.	 	Vacation. With the concurrence of the Chief Executive Officer, you will be permitted
to take vacations and sick leave.

	 	5.	 	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.

	 	6.	 	No Employee Benefits. Notwithstanding anything to the contrary in this Agreement,
the Company will not provide, and you will not be entitled to receive, any employee benefits,
including, without limitation, medical benefits, retirement benefits or other fringe benefits
(except as provided in Paragraphs 4 and 5 above) or any options to purchase the Company’s
stock or other equity grants. Without limiting the generality of the preceding sentence, the
Company will not be obligated to provide any employee benefits to you despite your eligibility
to participate in any of the Company’s employee benefit programs, whether such participation
would be of little or no additional cost to the Company. Except as provided in Paragraphs 4
and 5 above, you hereby acknowledge and agree to not participate in any of the Company’s
employee benefit programs and agree to execute any and all documents and take such further
action necessary to effectuate the intent of the parties under this Paragraph 6. However, as
a Company executive officer, you will be covered by the Company’s director and officer
liability insurance policies.

7. Termination for Cause or by Voluntary Resignation.

	 	(a)	 	The Company may terminate you for Cause, as defined below. Upon any
termination for Cause, or in the event that you voluntarily resign from the Company,
you will be entitled to receive only that compensation due you through the date of
termination or resignation, as the case may be.

	 	(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 or otherwise failed to satisfactorily discharge your duties,
(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 with or convicted of a felony, or (v) have engaged in
activities or omissions that are detrimental to the well-being of the Company.

8. Death or Disability.

	 	(a)	 	If during the term of this Agreement you die, then this Agreement will
terminate and your estate will be entitled to receive the compensation due you through
September 22, 2005 (or the date of your death if this Agreement is mutually extended by
the parties past September 22, 2005).

	 	(b)	 	If during the term of this Agreement you become so disabled or incapacitated by
reason of any physical or mental illness or any drug or alcohol addiction so as to be
unable to perform the services required of you pursuant to this Agreement for a
continuous period of one month, then, at the option of the Company, this Agreement will
terminate at the end of such one month period, provided that during such period of
disability or incapacity, you will be paid the full salary and expenses otherwise
payable to you.

	 	9.	 	Termination by the Company Other than for Cause. In the event that you are
terminated without Cause, or in the event a new Chief Financial Officer is hired by the
Company, you will be entitled to receive the compensation due you through September 22, 2005
(or the date of termination if this Agreement is mutually extended by the parties past
September 22, 2005) upon effectiveness of the release contemplated by Paragraph 16 below.

	 	10.	 	Confidential Information and Non-Disclosure. You hereby agree to execute and deliver
to the Company the Hypercom Employee Non-Disclosure Agreement attached hereto as Exhibit
A.

	 	11.	 	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 Paragraph 11, 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.

	 	12.	 	Notices. Any notice, election or communication to be given under this Agreement will
be in writing and delivered in person or deposited, certified or registered, in the United
States mail, postage prepaid, addressed as follows:

If to the Company:

Hypercom Corporation

2851 West Kathleen Road

Phoenix, Arizona 85053

Attn: General Counsel

If to you:

Grant Lyon

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.

	 	13.	 	Entire Agreement. Except for the Hypercom Employee Non-Disclosure Agreement attached
hereto as Exhibit A 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.

	 	14.	 	Arbitration. Any controversy relating to this Agreement or relating to the breach
hereof will be settled by arbitration conducted in Phoenix, Arizona in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in effect. The
award rendered by the arbitrator(s) will be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof. The
arbitrator(s) will possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration. The expenses of the arbitration will be borne by the losing
party unless otherwise allocated by the arbitrator(s). This agreement to arbitrate will be
specifically enforceable under the prevailing arbitration law. During the continuance of any
arbitration proceedings, the parties will continue to perform their respective obligations
under this Agreement. Nothing in this Agreement will preclude the Company or any affiliate or
successor from seeking equitable relief, including injunction or specific performance, in any
court having jurisdiction, in connection with any obligations of confidentiality.

	 	15.	 	Governing Law. This Agreement will be governed by and interpreted in accordance with
the laws of the State of Arizona.

	 	16.	 	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 of
any compensation 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 you as an officer (or a
former officer).

Very truly yours,

/s/ C. S. Alexander

	 	 	 	Christopher S. Alexander

Chief Executive Officer

ACCEPTED:

/s/ Grant Lyon

Grant Lyon

Date: March 21, 2005

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