Document:

EX-10.8.1

 

Exhibit 10.8.1

SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT

     THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT is made and entered into as of
July 31, 2007 (“Agreement”) by and among PDG Environmental, Inc., a Delaware corporation
(“Parent”), Project Development Group, Inc., a Pennsylvania corporation (“Project”), Enviro-Tech
Abatement Services, Co., a North Carolina corporation (“Enviro-Tech”), and PDG, Inc., a
Pennsylvania corporation (“PDG”), (Parent, Project, Enviro-Tech and PDG collectively, the “Initial
Borrowers”), Flagship Restoration, Inc., a Delaware corporation (“Flagship”), and Servestec, Inc.,
a Florida corporation (Initial Borrowers, Flagship and Servestec, collectively, the “Borrowers”)
and Sky Bank, an Ohio banking institution having an office at 1 East State Street, Sharon,
Pennsylvania 16146 (“Bank”).

     WHEREAS, the Bank has provided certain loans to Borrowers pursuant to the terms of a an
Amended and Restated Credit Agreement dated as of June 9, 2006 and a Waiver and First Amendment to
Amended and Restated Loan Agreement dated as of May 15, 2007, between the Borrowers and the Bank
(together with all prior and future amendments, extensions, modifications and restatements thereof,
the “Credit Agreement”); and

     WHEREAS, the loans made in accordance with the Credit Agreement (“Loans”) are evidenced by (i)
the Facility A Note in the principal amount of $400,000, (ii) the Facility D Note in the maximum
aggregate amount of $15,000,000, and (iii) the Facility F Loans in the principal amount of $400,000
executed by Borrowers in favor of the Bank; and

     WHEREAS, the indebtedness and obligations evidenced by the Notes are secured by, among other
things, Borrowers’ inventory, accounts, accounts receivable, the proceeds and products of the
foregoing, and all other property identified in the Security Agreements executed by Borrowers in
favor of the Bank (together with all prior and future amendments, extensions, modifications and
restatements thereof, collectively the “Security Agreements”); and

     WHEREAS, the Credit Agreement, the Notes, the Security Agreements, and this Agreement, and any
and all other documents, agreements, and instruments entered into in connection with any of the
foregoing are collectively referred to as the “Loan Documents”; and

     WHEREAS, the Borrowers have requested the Bank to amend certain provisions of the Loan
Documents; and

     WHEREAS, the Bank is willing to amend certain provisions of the Loan Documents subject to the
terms and conditions set forth in this Agreement; and

     NOW THEREFORE, the parties hereto for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound, covenant and agree
as follows:

1

 

1. Affirmation of Recitals. The recitals set forth above are true and correct and
incorporated herein by reference.

2. Definitions. All capitalized terms used herein, but not otherwise defined, shall have
the meaning ascribed to such terms in the Loan Documents.

3. Amendments to Credit Agreement. Effective from and after the date hereof, the Credit
Agreement is hereby amended as follows:

          (a) The defined term “Facility D Expiry Date” shall mean June 6, 2009.

          (b) The following language shall be inserted into the Credit Agreement as Section 2.14
thereof:

“Section 2.14 Interest Rate Incentive Pricing. If, based on
the 10-Q filed with the Securities and Exchange Commission, the Debt
to Worth Ratio at the end of each fiscal quarter is equal to or less
than 2.0, then, during the subsequent fiscal quarter (and only the
subsequent fiscal quarter unless the foregoing condition is
satisfied again), interest on the Facility D Loans shall be reduced
to an annual rate equal to the Prime Rate.”

          (c) The last paragraph of Section 5.01(a) Reporting and Information Requirements is hereby
amended and restated as follows:

“In addition to the annual reports required as set forth above,
Borrower shall be required to furnish Bank with, within thirty (30)
days of the end of each month, monthly statements of income and
retained earnings (setting forth in comparative form actual
performance versus budgeted figures, including an explanation for
any significant variances between such figures) and cash flow and
balance sheets, all in reasonable detail. Borrower shall also be
required to furnish Bank with, within thirty (30) days after the end
of each quarter, an officer’s certificate as more particularly
described in Section 5.01 (c) below, stating that no Event of
Default or Potential Default exists and that Borrower is in
compliance with the financial covenants set forth in Sections 5.13,
5.14, 5.15 and 5.20. Borrower shall also be required to furnish
Bank with, within thirty (30) days of the end of each month, monthly
back-log reports and monthly job status reports, including an
explanation of any significant variances. Borrower shall be
required to furnish Bank with, within five (5) days of such filings,
a copy of all of its public filings and disclosures, including its
10K statements, 10Q statements, and interim statements.”

          (d) Section 5.14 Debt to Worth Ratio is hereby amended and restated in its entirety to read as
follows:

2

 

“Borrowers shall maintain a Debt to Worth Ratio of not greater than
2.75 to 1.0 on April 30, 2007; 2.50 to 1.0 on July 31, 2007; 2.25 to
1.0 on October 31, 2007 and at the end of each fiscal quarter
thereafter. This Ratio shall be tested at the end of each fiscal
quarter.”

          (e) The last sentence of Section 5.01(f) Visitation; Audits shall be amended and restated as
follows:

“Borrower and Bank acknowledge that a field audit on the Borrowing
Base will be performed by Sisterson (or another auditor acceptable
to Bank in its sole discretion) on an annual basis, or more
frequently if so requested by Bank.

4. Collateral. The Obligations shall continue to be secured by a first priority security
interest in and lien upon all of the Borrowers’ inventory, accounts, accounts receivable, and the
proceeds and products thereof, and all of the other property that may be identified in the Security
Agreement and the Mortgage.

5. Conditions to this Agreement. The obligation of the Bank to enter into this Agreement
and to continue to make any loan or advance under the Credit Agreement is subject to the
satisfaction of the following further conditions:

     (a) This Agreement shall have been executed by the Borrower and delivered to the Bank by 5:00
p.m. (Pittsburgh, PA time) on August 2, 2007;

     (b) Corporate resolutions and other certifications by or on behalf of the Borrowers, in form
and substance required by the Bank in its sole and absolute discretion and such resolutions and
certifications shall have been delivered to the Bank by 5:00 p.m. (Pittsburgh, PA time) on August
2, 2007;

     (c) Each of the Borrowers shall bring down, as of the date hereof, each of the representations
and warranties contained in this Agreement and the Credit Agreement, respectively; and

     (d) The Borrowers shall pay to the Bank all fees provided for in Section 11 hereof by August
2, 2007.

6. Acknowledgment of No Claims. Each of the Borrowers acknowledges and agrees that it (a)
has no claims, counterclaims, setoffs, actions or causes of action of any kind or nature whatsoever
against the Bank or any of its directors, officers, employees, agents, attorneys, legal
representatives, successor or assigns, that directly or indirectly arise out of or are based upon
or in any manner connected with any Prior Related Event, (b) certifies that there is no impairment
of the validity or enforceability of this Agreement or any of the Loan Documents to which it is a
party, and (c) hereby waives and releases the same. As used herein the term “Prior Related Event”
means any transaction, event, circumstance, action, failure to act or occurrence of any
sort or type, whether known or unknown, which occurred, existed, was taken, was permitted or 

3

 

begun prior to the execution of this Agreement and occurred, existed, was taken, was permitted or begun
in accordance with, pursuant to or by virtue of any of the terms of this Agreement or any of the
Loan Documents (or prior iterations thereof), or which was related or connected in any manner,
directly or indirectly, to the loans made or secured pursuant thereto or evidenced thereby.

7. No Bankruptcy Intent. Each of the Borrowers represents and warrants that it has no
present intent (i) to file any voluntary petition under any chapter of the Bankruptcy Code, title
11 U.S.C., or in any manner seek relief, protection, reorganization, liquidation or dissolution, or
similar relief for borrowers under any other state, local, federal or other insolvency laws, either
at the present time, or at any time hereafter, or (ii) directly or indirectly to cause any
involuntary petition to be filed against any Borrower, or directly or indirectly to cause any
Borrower to become the subject of any proceedings pursuant to any other state, federal or other
insolvency law providing for the relief of borrowers, either at the present time, or at any time
hereafter, or (iii) directly or indirectly to cause any interest of any Borrower to become the
property of any bankrupt estate or the subject of any state, federal or other bankruptcy,
dissolution, liquidation or insolvency proceedings.

8. No Fraudulent Intent. Neither the execution and delivery of this Agreement, nor the
performance of any actions required hereunder or described herein is being consummated by any
Borrower with or as a result of any actual intent by such Borrower to hinder, delay or defraud any
entity to which such Borrower is not or will hereafter become indebted.

9. Extension Fee; Reimbursement of Expenses.

     On the date hereof, Borrowers shall pay Bank an extension fee of Thirty Thousand 00/100
Dollars ($30,000.00). In addition, the Borrowers, jointly and severally, agree to pay or cause to
be paid and save the Bank harmless against liability for the payment of all out-of-pocket expenses
incurred by the Bank, including without limitation, appraisals, environmental consultants,
accountants and other professional experts or independent contractor fees, costs and expenses and
fees and expenses of legal counsel (including inside counsel) (a) arising in connection with the
development, preparation, printing, execution, administration, interpretation and performance of
this Agreement and any of the Loan Documents, (b) relating to any requested amendments, waivers or
consents pursuant to the provisions hereof or thereof whether or not such are implemented, and (c)
arising in connection with the enforcement of this Agreement or any Loan Documents, including the
proof and allowability of any claim arising thereunder, whether in bankruptcy or receivership
proceedings or otherwise and monitoring and otherwise participating in any bankruptcy, receivership
or similar proceeding involving or affecting the Borrower or any other person or entity which may
have any liability for any of the obligations of the Borrower under this Agreement and the Loan
Documents.

10. Notices. Any notice or other written communication required hereunder shall be in
writing and shall be deemed to have been validly delivered (a) upon deposit in the United States
mail, with proper postage prepaid, (b) by hand delivery, or (c) by overnight express mail courier,
and addressed to the party to be notified at the following address or to such other address as each
party may designate for himself or herself in writing by like notice:

4

 

	 	 	 	 	 
	To the Borrowers or any of them:	 	To the Bank:
	 
	 	 	 	 
	PDG Environmental, Inc.	 	Sky Bank
	1386 Beulah Road, Building 801	 	Commercial Loan Department
	Pittsburgh, PA 15235	 	1 East State Street
	Attention: John C. Regan	 	Sharon, PA 16146
	 

	 	Attention:
	 	Douglas K. Pyle
	with a copy to

	 	 	 	Vice President
	 
	 	 	 	 
	James D. Chiafullo, Esq.	 	with a copy to:
	Cohen & Grigsby, P.C.
	 	 	 	 
	11 Stanwix Street	 	Suzanne Ewing, Esq.
	Pittsburgh, PA 15222	 	Buchanan Ingersoll & Rooney
	 	 	20th Floor, One Oxford Centre
	 	 	Pittsburgh, PA 15219

11. Due Authority; Valid and Binding. Each of the Borrowers represents that its execution
and delivery of this Agreement and the carrying out of this Agreement and the Loan Documents to
which it is a party, as amended hereby, will not violate any provisions of the law, its articles of
incorporation or bylaws, or of any agreement or other instrument to which the it is a party or by
which it is bound or to which it is subject. Each of the Borrowers further represent that this
Agreement has been duly authorized by all necessary action and this Agreement and the Loan
Documents to which it is a party, as amended, constitute legal, valid and binding obligations of
such party, enforceable in accordance with the terms hereof.

12. Entire Agreement; Governing Law. This Agreement sets forth the entire agreement
relating to the subject matter hereof and supersedes all prior statements, agreements and
understandings, whether written or oral, relating thereto. None of the provisions hereof may be
waived, changed or terminated, except by a writing signed by the parties hereto. This Agreement
and the respective rights and obligations created hereby shall be interpreted in accordance with
and governed by the laws of the Commonwealth of Pennsylvania applicable to contracts made and to be
wholly performed within such Commonwealth. The paragraph titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and are not a part of
the agreement to the parties hereto.

13. Jurisdiction and Venue. The parties hereto agree that the United States District Court
for the Western District of Pennsylvania and the Court of Common Pleas of Allegheny County,
Pennsylvania, may have jurisdiction to hear and determine any claims or disputes as to matters
pertaining to this Agreement or any matter arising therefrom. The parties hereto hereby expressly
submit and consent in advance to such jurisdiction and venue in any proceeding commenced against
the parties in either of such courts. Notwithstanding the foregoing, the parties hereto reserve to
themselves the right to assert federal court jurisdiction based upon diversity of
citizenship or any other basis upon which such federal jurisdiction may be properly claimed and
asserted and, to such end, reserve to themselves the right to remove any action commenced in the
Court of Common Pleas of Allegheny County, Pennsylvania, to the United 

5

 

States District Court for the Western District of Pennsylvania if such removal be authorized by law.

14. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH WAIVE THEIR RIGHT TO TRIAL BY JURY IN
ANY CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT.

15. ACKNOWLEDGMENT OF DISCLOSURE AND WAIVER OF CONFESSION OF JUDGMENT RIGHTS. (a) EACH OF
THE BORROWERS HEREBY ACKNOWLEDGES AND AGREES THAT THE NOTE CONTAINS PROVISIONS UNDER WHICH THE BANK
MAY ENTER JUDGMENT BY CONFESSION AGAINST THE BORROWERS. EACH OF THE BORROWERS BEING FULLY AWARE OF
ITS RIGHTS TO PRIOR NOTICE AND A HEARING ON THE VALIDITY OF ANY JUDGMENT OR OTHER CLAIMS THAT MAY
BE ASSERTED AGAINST IT BY THE BANK HEREUNDER BEFORE JUDGMENT IS ENTERED, IT HEREBY FREELY AND
KNOWINGLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND CONSENTS TO THE BANK ENTERING JUDGMENT
AGAINST IT BY CONFESSION PURSUANT TO THE TERMS THEREOF.

     (b) EACH OF THE BORROWERS ALSO ACKNOWLEDGES AND AGREES THAT THE NOTE CONTAINS PROVISIONS UNDER
WHICH THE BANK, TO THE EXTENT PERMITTED BY APPLICABLE LAW MAY, AFTER ENTRY OF JUDGMENT AND WITHOUT
EITHER NOTICE OR A HEARING, ATTACH, LEVY OR OTHERWISE SEIZE PROPERTY OF THE BORROWERS IN FULL OR
PARTIAL PAYMENT OF THE JUDGMENT, BEING FULLY AWARE OF ITS RIGHTS AFTER JUDGMENT IS ENTERED
(INCLUDING, WITHOUT LIMITATION, THE RIGHT TO MOVE TO OPEN OR STRIKE THE JUDGMENT), EACH OF THE
BORROWERS HEREBY FREELY, KNOWINGLY AND INTELLIGENTLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND
CONSENTS TO THE BANK’S TAKING SUCH ACTIONS AS MAY BE PERMITTED UNDER APPLICABLE STATE AND FEDERAL
LAW WITHOUT PRIOR NOTICE TO IT.

16. Time is of the Essence. Time shall be of the strictest essence in the performance of
each and every one of the Borrowers’ obligations hereunder including, without limitation, the
obligations to make payments to the Bank, to furnish information to the Bank and to comply with all
reporting information.

17. No Waiver of Rights under the Loan Documents. The Bank expressly reserves any and all
rights and remedies available to it under this Agreement, the Loan Documents, any other agreement
or at law or in equity or otherwise. No failure to exercise, or delay by the Bank in exercising
any right, power or privilege hereunder or under any of the Loan Documents shall preclude any other
or further exercise thereof, or the exercise of any other right, power or privilege. The rights
and remedies provided in this Agreement and the Loan Documents are cumulative and not exhaustive of
each other or of any right or remedy provided by law or equity or otherwise. No notice to or demand
upon any Borrower in any instance shall, in itself, entitle

6

 

any Borrower to constitute a waiver of any right of the Bank to take any other or further action in
any circumstance without notice or demand.

18. No Commitment. This Agreement is not intended as a commitment by the Bank to modify
the Loan Documents in any respect or otherwise, except to the extent expressly set forth herein,
and the Bank hereby specifically confirms that it makes no such commitment and specifically advises
that no action should be taken by any Borrower based upon any understanding that such a commitment
exists or on any expectation that any such commitment will be made in the future.

19. No Third Party Beneficiaries. This Agreement is made for the sole benefit and
protection of the Bank and the Borrowers and their respective successors and permitted assigns. By
execution of this Agreement, the Bank does not intend to assume and is not hereby assuming any
obligation to any third party. No third party shall be or shall be deemed a beneficiary of this
Agreement.

20. Marshalling; Payments Set Aside. The Bank shall not be under any obligation to
marshall any assets in favor of any Borrower or any other person or against or in payment of any or
all of the Obligations. To the extent that a payment or payments are made to the Bank or the Bank
enforces any of its liens, and such payment or payments or the proceeds of such enforcement or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Borrowers, or any of them, a trustee, receiver or any other person under any law including, without
limitation, any bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of any such restoration, the obligation or part thereof and any lien relating thereto
originally intended to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement had not occurred.

21. Voluntary Agreement. Each of the Borrowers represents and warrants that it is
represented by legal counsel of its choice and that it has consulted with counsel regarding this
Agreement, that it is fully aware of the terms contained herein and that it has voluntarily and
without coercion or duress of any kind entered into this Agreement.

22. Severability. In case any one or more of the provisions of this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or impaired thereby, and
such invalid, illegal or unenforceable provision shall be deemed modified to the extent necessary
to render it valid while most nearly preserving its original intent.

23. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall constitute one and the same
instrument.

24. Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit
of the Borrowers and the Bank and their respective heirs, successors and assigns; provided,
however, that the Borrowers may not assign any of their rights or duties
hereunder without the prior written consent of the Bank.

7

 

[SIGNATURES APPEAR ON THE NEXT PAGE.]

8

 

     WITNESS the due execution hereof with the intent to be legally bound.

	 	 	 	 	 	 	 
	ATTEST:	 	PDG ENVIRONMENTAL, INC.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	/s/ John C. Regan
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	PROJECT DEVELOPMENT GROUP, INC.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	/s/ John C. Regan
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	ENVIRO-TECH ABATEMENT
SERVICES, CO.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	/s/ John C. Regan
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	PDG, INC.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	/s/ John C. Regan
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	FLAGSHIP RESTORATION, INC.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	/s/ John C. Regan
	 

	 	 
	 	 	 	 

9

 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	SERVESTEC, INC.
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	SKY BANK
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	/s/ Douglas K. Pyle
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	Douglas K. Pyle, Vice President

10exv10w1

 

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

 

 

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.

-2-

 

     (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,

-3-

 

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

-5-

 

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.

-7-

 

     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.

-8-

 

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	 	 	 	 

-10-

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