EMPLOYMENT AND NON-COMPETITION AGREEMENT
Agreement made this 20th day of November, 1997, by and between XXXXXX
X. XXXXXX, XX. ("Xxxxxx"), an individual residing at 0 Xxxxx Xxxxx Xxxx, Xxxxx,
Xxxxxxxxxxxx 00000, and USA TECHNOLOGIES, Inc., a Pennsylvania corporation
("USA"), with a place of business at 000 Xxxxx Xxxxxx, Xxxxx, Xxxxxxxxxxxx
00000.
BACKGROUND
USA is in the principal business of owning and licensing unattended,
credit card activated control systems for the vending, copying, debit card and
personal computer industries. Xxxxxx is the founder as well as the President
and Chief Executive Officer of USA. Xxxxxx is currently subject to an Employment
And Non-Competition Agreement dated as of July 1, 1992, as amended by a First
Amendment thereto dated as of April 29, 1996, pursuant to which Xxxxxx is
employed by USA through June 30, 1998. The Board of Directors of USA deems it
in the best interests of USA to replace the current employment agreement with
this new agreement in order to, among other things, retain Xxxxxx as President
and Chief Executive Officer as well as to provide for appropriate incentives and
adequate compensation to him in the future.
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 President and Chief Executive Officer
commencing on the date hereof and continuing through June 30, 2000 (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, 2000, 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 (b) hereof shall be construed as
preventing Xxxxxx from investing his personal assets in businesses which do not
compete with USA, (i) where the form or manner of such investments will not
require any management duties or time, or any other substantial services or
time, on the part of Xxxxxx in connection with the businesses in which such
investments are made, or (ii) in which his participation is solely that of a
passive investor.
SECTION 2. Compensation and Benefits
(a) In consideration of his services rendered, USA shall play to Xxxxxx
a base salary of $100,000 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.
(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,
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pay to Xxxxxx from time to time.
(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 grant to Xxxxxx five percent of the issued and outstanding
shares of Common Stock of USA ("Common Stock") in the event there is a USA
Transaction (as defined below), all as more fully described in Section 4 hereof.
SECTION 3. Cancellation. As of the date hereof, all of the 7,545,000
shares of Common Stock beneficially owned by Xxxxxx are held in escrow pursuant
to the Escrow Agreement dated December 28, 1993 by and between USA, Xxxxxx, the
Escrow Depository, and certain other parties, as amended by the Modification To
Escrow Agreement dated as of October 6, 1994, and by the Second Modification To
Escrow Agreement dated as of December 30, 1996 ("Escrow Agreement"). Of such
shares, an aggregate of 4,365,000 shares are subject to such cancellation
arrangement if certain performance goals are not met by USA on or before June
30, 1998. Xxxxxx agreed to such cancellation arrangements at the request of the
Pennsylvania Securities Commission as a condition of the Commission declaring
USA's initial public offering effective in Pennsylvania. Xxxxxx may (and has in
the past decided to) cancel in advance of June 30, 1998, shares of Common Stock
which are held in the escrow arrangement and otherwise subject to cancellation.
As permitted under the Escrow Agreement, Xxxxxx hereby cancels the
4,365,000 shares of Common Stock currently subject to cancellation pursuant to
the Escrow Agreement. The remainder
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of Xxxxxx'x shares of Common Stock, being 3,180,000 shares, shall be released
from escrow and delivered to him pursuant to the terms of the Escrow Agreement.
In this regard, USA shall take all necessary action to have such remaining
shares released from the escrow arrangement. USA hereby acknowledges that the
4,365,000 shares of Common Stock being canceled by Xxxxxx are now available for
issuance by USA as deemed appropriate. In addition, the cancellation by Xxxxxx
also makes available to USA a sufficient number of unissued shares of Common
Stock to provide for all shares of Common Stock which may be required to be
issued by USA in connection with all outstanding options, purchase rights,
warrants, Series A Convertible Preferred Stock of USA ("Preferred Stock"), as
well as any unpaid and accrued dividends on such Preferred Stock.
SECTION 4. Five Percent Rights.
A. If at any time after the date hereof there shall be a USA
Transaction, USA shall issue to Xxxxxx that number of shares of Common Stock as
shall when issued to him equal five percent (5%) of all the then issued and
outstanding shares of Common Stock (the "Rights"). At the time of any USA
Transaction, all of the shares of Common Stock underlying the Rights 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 Rights and the
Common Stock underlying the Rights as provided for in this Section 4.
B. The number of shares of Common Stock to be issued to Xxxxxx shall be
calculated on a fully converted and diluted basis, and in this regard, all
outstanding options, warrants, purchase
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rights, Preferred Stock (and accrued dividends thereon), or any other securities
or rights whatsoever that are exercisable or convertible into shares of Common
Stock shall be considered to have been converted and/or exercised into shares
of Common Stock on and as of the date of issuance to Xxxxxx of the Common Stock
underlying the Rights. 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 of at least fifty-one percent (51%) or more of
USA's then outstanding voting securities entitled to vote generally in the
election of Directors (the "Outstanding Shares") 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, Schedule 14D-1, or Schedule 13G promulgated
under the Securities Exchange Act of 1934 ("Exchange Act") in connection with
such beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act); or
(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
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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 rmore 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. If there is a USA Transaction, USA shall at its sole cost and
expense, take such action as shall be required to have any shares of Common
Stock to be issued to Xxxxxx pursuant to the Rights to be registered or exempted
from registration under applicable Federal and state securities laws. As a
condition to the issuance by USA of any Common Stock pursuant to the Rights,
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 Common Stock. 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.
E. The Rights granted hereunder to Xxxxxx shall be irrevocable by USA
and are unconditional, absolute and fully vested obligations of USA. The Rights
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 4 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
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other agreement with USA.
F. The Rights 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 of the Rights is permitted under and does not violate
any applicable state or Federal securities laws.
G. If a USA Transaction shall occur at a time when there would not be a
sufficient number of authorized but unissued shares of Common Stock to satisfy
USA's obligations hereunder, then USA shall as a condition of such USA
Transaction promptly take any and all appropriate action to make available a
sufficient number of shares of Common Stock. In the alternative, USA shall
structure the USA Transaction so that Xxxxxx shall receive the same amount and
type of consideration in connection with the USA Transaction as any other holder
of Common Stock, and as if all the shares of Common Stock underlying the Rights
had actually been issued to Xxxxxx by USA at the time of the USA Transaction.
SECTION 5. 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 4 hereof as
well as Xxxxxx'x obligations under Sections
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7 and 8 hereof shall survive any such termination.
SECTION 6. 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 4 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 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 4 hereof as
well as Xxxxxx'x obligations under Sections 7 and 8 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.
SECTION 7. 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,
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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.
(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
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(including all copies) at any time whatsoever, Xxxxxx shall immediately deliver
the same to USA.
SECTION 8. 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.
SECTION 9. Remedies. Xxxxxx acknowledges that any breach by him of the
obligations set forth in Sections 7 or 8 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 7 or 8 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.
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SECTION 10. 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 11. 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:
To USA:
USA Technologies, Inc.
000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Secretary
To Xxxxxx,
Xx. Xxxxxx X. Xxxxxx, Xx.
0 Xxxxx Xxxxx Xxxx
Xxxxx, 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 12. 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 13. 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.
SECTION 14. 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 4 hereof may be assigned
in whole or in part, and from time to time, by Xxxxxx or his assignees all as
permitted in Section 4.F. hereof.
SECTION 15. 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 Restated
Employment and Non-Competition Agreement dated as of July 1, 1992, as well as
the First Amendment thereto dated as of April 29, 1996, between Xxxxxx and USA,
and such agreements shall be void and of no further force or effect. This
Agreement may only be modified by an agreement in writing executed by both USA
and Xxxxxx.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
USA TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx, Secretary
/s/ Xxxxxx X. Xxxxxx Xx.
--------------------------------
Xxxxxx X. Xxxxxx Xx.
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