AMENDED AND RESTATED EMPLOYMENT AND NON-COMPETITION AGREEMENT
AMENDED
AND RESTATED
EMPLOYMENT
AND NON-COMPETITION AGREEMENT
Agreement
made this 11th
day of
May, 2006, by and between XXXXXX X. XXXXXX, XX., an individual ("Xxxxxx"),
and
USA TECHNOLOGIES, INC., a Pennsylvania corporation ("USA").
BACKGROUND
Xxxxxx
is
the founder as well as the Chairman and Chief Executive Officer of USA. Xxxxxx
and USA had entered into an Employment And Non-Competition Agreement dated
November 20, 1997, a First Amendment thereto dated as of June 17, 1999, a Second
Amendment thereto dated February 22, 2000, a Third Amendment thereto dated
January 16, 2002, a Fourth Amendment thereto dated April 15, 2002, a Fifth
Amendment thereto dated July 16, 2003, and a Sixth Amendment thereto dated
February 4, 2004. As more fully set forth herein, the parties desire to amend,
completely restate, and replace the foregoing agreements.
AGREEMENT
NOW,
THEREFORE, in consideration of the covenants set forth herein, and intending
to
be legally bound hereby, the parties agree as follows:
SECTION
1. Employment.
(a) USA
shall
employ Xxxxxx as Chairman and Chief Executive Officer commencing on the date
hereof and continuing through June 30, 2009 (the "Employment Period"), and
Xxxxxx hereby accepts such employment. Unless terminated by either party hereto
upon at least 60-days notice prior to end of the original Employment Period
ending June 30, 2009, or prior to the end of any one year extension of the
Employment Period, the Employment Period shall not be terminated and shall
automatically continue in full force and effect for consecutive one year
periods.
(b) During
the Employment Period, Xxxxxx shall devote his full time, energy, skills, and
attention to the business of USA, and shall not be engaged or employed in any
other business activity whatsoever, whether or not such activity is pursued
for
gain, profit or other pecuniary advantage. During the Employment Period, Xxxxxx
shall perform and discharge well and faithfully such executive management duties
for USA as shall be necessary and as otherwise may be directed by the Board
of
Directors of USA.
(c)
Nothing
contained in subparagraph 1(b) hereof shall prohibit Xxxxxx from investing
his
personal assets in businesses which do not compete with USA, where the form
or
manner of such investments will not require more than minimal services on the
part of Xxxxxx in the operation of the affairs of the business in which such
investments are made, or in which his participation is solely that of a passive
investor; or from serving as a member of boards of directors, boards of
trustees, or other governing bodies of any organization, provided that USA
approves such activities in advance; or from participating in trade
associations, charitable, civic and any similar activities of a not-for-profit,
philanthropic or eleemosynary nature; or from attending educational events
or
classes. It is understood and agreed that any such permitted activities which
shall occur during business hours shall be limited to no greater than forty
hours per year.
SECTION
2. Compensation
and Benefits
(a) In
consideration of his services rendered, commencing on the date hereof, USA
shall
pay to Xxxxxx a base salary of $325,000 per year during the Employment Period,
subject to any withholding required by law. Xxxxxx'x base salary may be
increased from time to time in the discretion of the Board of
Directors.
2
For
each
of the fiscal years ending June 30, 2007, June 30, 2008, and June 30, 2009,
Xxxxxx shall have the option to elect to have fifty percent (50%) of his base
salary paid in Common Stock of USA (“Common Stock”) rather than cash. Any such
election must be made not later than 60-days following the commencement of
each
such fiscal year by appropriate notice by Xxxxxx to USA. For the purposes of
determining the number of shares to be issued to Xxxxxx, the shares shall be
valued at the average closing bid price for the Common Stock during the 30
trading days immediately preceding
the date of any such election by Xxxxxx. If any such election is made, the
shares issuable to Xxxxxx for the fiscal year would vest ratably on a quarterly
basis. Xxxxxx acknowledges that the issuance of the shares to him represents
taxable income to him and that he (and not USA) shall be responsible for the
payment of any and all income taxes attributable to the issuance of the shares
to him. Xxxxxx shall make appropriate cash payments to USA to pay for any
withholding tax liability of USA in connection with the shares. Xxxxxx
acknowledges that the Common Stock has not been registered under the Securities
Act of 1933, as amended (the “Act”) or under any state securities law, and the
Common Stock can not be sold or transferred unless such Common Stock has been
registered under the Act or such state securities laws, or unless USA has
received an opinion of its counsel that such registration is not
required.
Xxxxxx
understands that USA has not agreed to register the Common Stock under the
Act
or any state securities laws. In
addition, the certificates representing the Common Stock shall contain such
legends, or restrictive legends, or stop transfer instructions, as shall be
required by applicable Federal or state securities laws, or as shall be
reasonably required by USA or its transfer agent.
(b) In
addition to the base salary provided for in subparagraph (a), Xxxxxx shall
be
eligible to receive such bonus or bonuses as the Board of Directors of USA
may,
in their discretion, pay to Xxxxxx from time to time based upon his performance
and/or the performance of USA. All awards in this regard may be made in cash
or
in Common Stock.
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(c) Xxxxxx
shall be entitled to be reimbursed by USA for all reasonable expenses reasonably
incurred by Xxxxxx in connection with his employment duties hereunder. Such
expenses shall include, but not be limited to, all reasonable business travel
expenses such as tolls, gasoline and mileage. Xxxxxx shall reasonably document
all requests for expense reimbursements.
(d) As
a
further incentive to Xxxxxx, USA believes it is in the best interest of USA
to
issue to Xxxxxx shares of Common Stock in the event there is a USA Transaction
(as defined below), all as more fully described in Section 3 hereof.
(e) At
the
time of the signing of this Agreement by each of USA and Xxxxxx, USA shall
issue
to Xxxxxx options to acquire up to 75,000 shares of USA Common Stock for an
exercise price of $7.50 per share (which is equal to the average
closing bid price for the Common Stock during the 30 trading days immediately
preceding the execution and delivery by USA and Xxxxxx of this
Agreement).
The
options shall vest as
follows: 25,000 on the date hereof; 25,000 on June 30, 2007; and 25,000 on
June
30, 2008.
The
options shall be exercisable at any time within five years of vesting. All
of
the terms and conditions of the options are set forth in the Option Certificate
attached hereto as Exhibit "A".
Xxxxxx
acknowledges that such options are not incentive stock options as such term
is
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
part
of an employee stock purchase plan as defined in Section 423 thereunder. As
a
result, among other things, taxable income will be realized by Xxxxxx at the
time of the exercise of any such options.
Xxxxxx
also acknowledges that neither the options nor the Common Stock underlying
the
options have been registered under the Act, or under any state securities laws,
and neither the options nor the Common Stock underlying the options can be
sold
or transferred unless such options or Common Stock have been registered under
the Act or such state securities laws, or unless USA has received an opinion
of
counsel that such registration is not required. Xxxxxx understands that USA
has
not agreed to register the options or the underlying Common Stock under the
Act
or any state securities laws.
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(f)
On the date of the execution and delivery by each of USA and Xxxxxx of this
Agreement, USA shall issue to Xxxxxx 75,000 nonvested shares of Common Stock
as a bonus. These shares shall vest as follows: 25,000 on June 1, 2006; 25,000
on January 1, 2007; and 25,000 on June 1, 2007. Xxxxxx acknowledges that the
Common Stock has not been registered under the Act or under any state securities
law, and the Common Stock can not be sold or transferred unless such Common
Stock has been registered under the Act or such state securities laws, or unless
USA has received an opinion of its counsel that such registration is not required.
Xxxxxx acknowledges that the issuance of the shares to him represents taxable
income to him and that he (and not USA) shall be responsible for the payment
of any and all income taxes attributable to the issuance of the shares to him.
Xxxxxx shall make appropriate cash payments to USA to pay for any withholding
tax liability of USA in connection with the shares. In addition, the certificates
representing the Common Stock shall contain such legends, or restrictive legends,
or stop transfer instructions, as shall be required by applicable Federal or
state securities laws, or as shall be reasonably required by USA or its transfer
agent.
SECTION
3. Common
Stock Rights.
A.
If at
any time after the date hereof there shall be a USA Transaction, USA shall
issue
to Xxxxxx an aggregate of 140,000 shares of Common Stock (the "Xxxxxx Stock")
subject to adjustment as provided in subparagraph B of this Section 3. At the
time of any USA Transaction, all of the shares of Xxxxxx Stock shall
automatically and without any action on Xxxxxx'x
part be
deemed to be issued and outstanding immediately prior to any such USA
Transaction, and shall be entitled to be treated as any other issued and
outstanding share of Common Stock in connection with such USA Transaction.
In
connection with a USA Transaction, USA and/or such successor or purchasing
corporation, person, or entity, as the case may be, shall recognize and
specifically provide for the Xxxxxx Stock as provided for in this Section 3.
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B. The
number of shares of Common Stock to be issued to Xxxxxx upon the occurrence
of a
USA Transaction shall be subject to adjustment from time to time only as set
forth hereinafter: (i) in case USA shall declare a Common Stock dividend on
the
Common Stock, then the number of shares shall be proportionately increased
as of
the close of business on the date of record of said Common Stock dividend in
proportion to such increase of outstanding shares of Common Stock; or (ii)
if
USA shall at any time subdivide its outstanding Common Stock by
recapitalization, reclassification or split-up thereof, the number of shares
shall be proportionately increased, and, if USA shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification,
reverse stock split, or combination thereof, the number of shares shall be
proportionately decreased. Any such adjustment to the number of shares shall
become effective at the close of business on the record date for such
subdivision or combination. All shares of Common Stock issued to Xxxxxx shall
be, at the time of delivery of the certificates for such Common Stock, validly
issued and outstanding, fully paid and non-assessable.
C.
For
purposes hereof, the term "USA Transaction" shall mean:
(i)
the
acquisition by any person, entity or group required to file (or which would
be
required to file if USA had been subject to such provisions) a Schedule 13D
or
Schedule 14d-1 promulgated under the Securities Exchange Act of 1934 ("Exchange
Act") or any acquisition by any person entitled to file (or which would be
entitled to file if USA had been subject to such provisions) a Form 13G under
the Exchange Act with respect to such acquisition of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 51%
or
more of USA's
then
outstanding voting securities entitled to vote generally in the election of
Directors (the "Outstanding Shares"); or
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(ii)
approval by the shareholders of USA of a reorganization, merger , consolidation,
liquidation , or dissolution of USA, or the sale, transfer, lease or other
disposition of all or substantially all of the assets of USA ( "Business
Combination").
(iii)
Notwithstanding subsection (ii) above, and other than in connection with a
liquidation or dissolution of USA, a Business Combination described in
subsection (ii) above shall not constitute a USA Transaction if following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Shares immediately
prior to such Business Combination beneficially own, directly or indirectly
,
more than 51% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of Directors of the entity
resulting from such business combination (including without limitation, an
entity which as a result of such transactions owns USA or all or substantially
all of USA's
assets
either directly or through one or more subsidiaries), and (B) no person owns,
directly or indirectly, 49% or more of the combined voting power of the then
outstanding voting securities of the entity resulting from such Business
Combination except to the extent that such ownership existed prior to the
Business Combination.
D.
USA
shall at its sole cost and expense, take such action as shall be required to
have the Xxxxxx Stock registered or exempted from registration under applicable
Federal and state securities laws. As a condition to the issuance by USA of
any
Xxxxxx Stock, Xxxxxx shall execute and deliver such representations, warranties,
and covenants, that may be required by applicable Federal and state securities
law, or that USA determines is reasonably necessary in connection with the
issuance of such Xxxxxx Stock. In addition, the certificates representing the
Xxxxxx Stock shall contain such legends, or restrictive legends, or stop
transfer instructions, as shall be required by applicable Federal or state
securities laws, or as shall be reasonably required by USA or its transfer
agent.
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E.
The
Xxxxxx Stock granted hereunder to Xxxxxx shall be irrevocable by USA and are
unconditional, absolute and fully vested obligations of USA. The Xxxxxx Stock
shall not be subject to any right of set off, recoupment or any other equitable
defenses by USA and shall be issued to Xxxxxx in strict accordance with their
terms. The terms and conditions of this Section 3 shall not be affected by
the
termination of Xxxxxx'x
employment with USA for any reason whatsoever, and whether or not any "cause"
exists therefore, and shall not be affected by Xxxxxx'x
breach
of this Agreement or any other agreement with USA.
F.
The
right to receive the Xxxxxx Stock shall be transferable by Xxxxxx, or by any
subsequent assignee, in whole or in part, at any time or from time to time,
by
notice to USA. As a condition precedent of such transfer, the assignee shall
execute and deliver such representations, warranties, and covenants that may
be
required by applicable Federal and state securities laws. In addition, USA
may
require that the transferor deliver to USA an opinion of counsel, acceptable
to
USA, to the effect that such transfer is permitted under and does not violate
any applicable state or Federal securities laws. The right to receive the Xxxxxx
Stock shall be transferable under and pursuant to the last will and testament
of
Xxxxxx in accordance with this subparagraph F, and the death of Xxxxxx shall
not
affect the right to receive the Xxxxxx Stock, and in such event the right to
receive the Xxxxxx Stock shall continue in full force and effect in accordance
with this Section 3.
G.
There
has
been reserved, and the Company shall at all times keep reserved out of the
authorized and unissued shares of Common Stock, a number of shares of Common
Stock sufficient to provide for the Xxxxxx Stock. The Company agrees that the
Xxxxxx Stock shall be, at the time of delivery of the certificates for such
Xxxxxx Stock, validly issued and outstanding, fully paid and
non-assessable.
8
SECTION
4. Termination.
Notwithstanding anything else contained herein, USA may terminate the employment
of Xxxxxx at any time upon notice delivered to Xxxxxx in the event that (i)
Xxxxxx commits any criminal or fraudulent act; or (ii) Xxxxxx breaches any
term
or condition of this Agreement; or (iii) Xxxxxx willfully abandons his duties
hereunder. Upon such termination neither party hereto shall have any further
duties or obligations hereunder whatsoever; provided, however, that all of
the
terms and conditions of Section 3 hereof as well as Xxxxxx'x obligations under
Sections 7 and 8 hereof shall survive any such termination.
SECTION
5. Death
and Disability.
(a) If
Xxxxxx
shall die during the Employment Period, this Agreement shall terminate as of
the
date of such death and except for all of the terms and conditions of Section
3
hereof as well as any base salary owed to or bonuses accrued to Xxxxxx as of
such date, USA shall have no further duties or obligations hereunder
whatsoever.
(b) If
USA
determines in good faith that Xxxxxx is incapacitated by accident, sickness
or
otherwise so as to render him mentally or physically incapable of performing
the
services required of him hereunder for an aggregate of ninety (90) consecutive
days, upon the expiration of such period or at any time thereafter, by action
of
USA, Xxxxxx'x employment hereunder may be terminated immediately, upon giving
him at least 30 days written notice to that effect, and upon such termination
except for any base salary or bonuses accrued as of such date neither party
hereto shall have any further duties or obligations hereunder; provided,
however, that all of the terms and conditions of Section 3 hereof as well as
Xxxxxx'x obligations under Sections 6 and 7 hereof shall survive any such
termination. USA shall be entitled to rely upon the advice and opinion of any
physician of its choosing in making any determination with respect to any such
disability. In
the
case of such termination, USA agrees to maintain existing health care and
disability benefits on behalf of Xxxxxx for a minimum of one year following
the
date of termination.
9
SECTION
6. Business
Secrets.
(a) Except
in
connection with his duties hereunder, Xxxxxx shall not, directly or indirectly,
at any time from and after the date hereof, and for a one (1) year period
following the termination of the Employment Period, or for a one (1) year period
following the termination of Xxxxxx'x employment hereunder if earlier, make
any
use of, exploit, disclose, or divulge to any other person, firm or corporation,
any trade or business secret, customer or supplier information, documents,
know-how, data, marketing information, method or means, or any other
confidential (i.e. not already otherwise disseminated to or available to the
public) information concerning the business or policies of USA, that Xxxxxx
learned as a result of, in connection with, through his employment with, or
through his affiliation with USA, whether or not pursuant to this
Agreement.
(b) From
and
after the date hereof, except in connection with his duties hereunder, and
for a
one (1) year period following the termination of the Employment Period, or
for a
one (1) year period following the termination of Xxxxxx'x employment hereunder
if earlier, Xxxxxx shall not solicit, or divert business from, or serve, or
sell
to, any customer or account of USA of which Xxxxxx is or becomes aware, or
with
which Xxxxxx has had personal contact as a result of, in connection with,
through his employment with, or through his affiliation with USA, whether or
not
pursuant to this Agreement. Notwithstanding the prior sentence, following the
termination of Xxxxxx'x
employment with USA, Xxxxxx shall be permitted to sell products to customers
or
accounts of USA, provided such products are not competitive with, or similar
to,
any products of USA, whether such products are offered now or at any time in
the
future by USA.
10
(c) All
documents, data, know-how, designs, inventions, names, marketing information,
method or means, materials, software programs, hardware, configurations,
information, data processing reports, lists and sales analyses, price lists
or
information, or any other materials or data of any kind furnished to Xxxxxx
by
USA, or developed by Xxxxxx on behalf of USA or at USA's direction or for USA's
use, or otherwise devised, developed, created, or invented in connection with
Xxxxxx'x employment hereunder or his affiliation with USA, are and shall remain
the sole and exclusive property of USA, and Xxxxxx shall have no right or
interest whatsoever thereto, including but not limited to, any copyright or
patent interest whatsoever. If USA requests the return of any such items
(including all copies) at any time whatsoever, Xxxxxx shall immediately deliver
the same to USA.
(d)
All
documents, data, know-how, designs, products, ideas, equipment, inventions,
names, devices, marketing information, method or means, materials, software
programs, hardware, configurations, information, or any other materials or
data
of any kind developed by Xxxxxx on behalf of USA or at its direction or for
USA's use, or otherwise devised, developed, created, or invented in connection
with Xxxxxx’x employment with USA or Xxxxxx’x affiliation with USA, and whether
before or after the date of this Agreement, are and shall remain the sole and
exclusive property of USA, and Xxxxxx has and shall have no right or interest
whatsoever thereto. Xxxxxx hereby agrees to and affirms the work-for-hire
doctrine and acknowledges that all such rights to intellectual property shall
belong exclusively to USA and not to Xxxxxx. Any and all rights of ownership
in
connection with any of the foregoing shall belong solely to USA, and all
copyright, patent, trademark, or similar rights or interests shall be the sole
and exclusive property of USA. Xxxxxx hereby assigns, transfers, and conveys
to
USA all of Xxxxxx’x right, title and interest in and to any and all such
inventions, discoveries, improvements, modifications and other intellectual
property rights and agrees to take all such actions as may be required by USA
at
any time and with respect to any such invention, discovery, improvement,
modification or other intellectual property rights to confirm or evidence such
assignment, transfer and conveyance. At USA's direction and request, Xxxxxx
shall execute and deliver any and all forms, documents, or applications required
under any applicable copyright, patent, trademark, or other law, rule or
regulation.
11
SECTION
7. Restrictive
Covenant.
From and
after the date hereof, and for a one (1) year period following the termination
of the Employment Period, or for a one (1) year period following the termination
of Xxxxxx'x employment hereunder if earlier, Xxxxxx shall be prohibited from
competing in the United States with the business of USA as presently or as
hereinafter conducted, including but not limited to the ownership and licensing
of unattended, credit card activated control systems in the vending, copying,
debit card, or personal computer industries. For the purposes hereof, the term
"competing" shall mean acting, directly or indirectly, as a partner, principal,
stockholder, joint venturer, associate, independent contractor, creditor of,
consultant, trustee, lessor to, sublessor to, employee or agent of, or to have
any other involvement with, any person, firm, corporation, or other business
organization which is engaged in the businesses described in this
Section.
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SECTION
8. Remedies.
Xxxxxx
acknowledges that any breach by him of the obligations set forth in Sections
6
or 7 hereof would substantially and materially impair and irreparably harm
USA's
business and goodwill; that such impairment and harm would be difficult to
measure; and, therefore, total compensation in solely monetary terms would
be
inadequate. Consequently, Xxxxxx agrees that in the event of any breach or
any
threatened breach by Xxxxxx of any of the provisions of Section 6 or 7 hereof,
USA shall be entitled in addition to monetary damages or other remedies, to
equitable relief, including injunctive relief, and to the payment by Xxxxxx
of
all costs and expenses incurred by USA in enforcing the provisions thereof,
including attorneys' fees. The remedies granted to USA in this Agreement are
cumulative and are in addition to remedies otherwise available to USA at law
or
in equity.
SECTION
9. Waiver
of Breach.
The
waiver by USA of a breach of any provision of this Agreement by Xxxxxx shall
not
operate or be construed as a waiver of any other or subsequent breach by Xxxxxx
of such or any other provision.
SECTION
10. Notices.
All
notices required or permitted hereunder shall be in writing and shall be sent
by
certified or registered mail, return receipt requested, postage prepaid, as
follows:
13
To
USA:
USA
Technologies, Inc.
000
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxxxxxx 00000
Attn:
Xxxxxxx X. Xxxxxxx, President
To
Xxxxxx:
Xx.
Xxxxxx X. Xxxxxx, Xx.
000
Xxxxxx Xxxxx
Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
or
to
such other address as either of them may designate in a written notice served
upon the other party in the manner provided herein. All notices required or
permitted hereunder shall be deemed duly given and received on the second day
next succeeding the date of mailing.
SECTION
11. Severability.
If any
term or provision of this Agreement or the application thereof to any person
or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Agreement or the application of any such term or provision to persons
or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law. If any
of
the provisions contained in this Agreement shall for any reason be held to
be
excessively broad as to duration, scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be valid and enforceable to
the
extent compatible with the applicable law.
SECTION
12. Governing
Law.
The
implementation and interpretation of this Agreement shall be governed by and
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
regard to its conflict of laws rules.
14
SECTION
13. Binding
Effect and Assignability.
The
rights and obligations of both parties under this Agreement shall inure to
the
benefit of and shall be binding upon their personal representatives, heirs,
successors and assigns. This Agreement, or any part thereof, may not be assigned
by Xxxxxx; provided, however, that the Rights described in Section 3 hereof
may
be assigned in whole or in part, and from time to time, by Xxxxxx or his
assignees all as permitted in Section 3. F. hereof.
SECTION
14. Entire
Agreement.
This
Agreement constitutes the entire agreement with respect to the subject matter
hereof between the parties hereto and there are no other agreements between
the
parties relating to the subject matter hereof. This Agreement completely
replaces and supersedes the prior employment agreements entered into between
Xxxxxx and USA. This Agreement may only be modified by an agreement in writing
executed by both USA and Xxxxxx.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first above written.
| USA TECHNOLOGIES, INC. | ||
| |
|
|
| By: | ||
|
Xxxxxxx X. Xxxxxxx, President |
||
|
XXXXXX X. XXXXXX, XX. |
||
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