Exhibit 10.31
AMENDED AND
RESTATED
EMPLOYMENT AND NON-COMPETITION
AGREEMENT
Agreement
made this 24th day of September, 2009, by and between STEPHEN P.
HERBERT, an individual (“Herbert”), and USA
TECHNOLOGIES, INC., a Pennsylvania corporation
(“USA”).
BACKGROUND
Herbert
is the President and Chief Operating Officer of USA. Herbert and
USA had entered into an Amended and Restated Employment And
Non-Competition Agreement dated May 11, 2006, a First Amendment
thereto dated as of March 13, 2007, and a Second Amendment thereto
dated September 22, 2008. As more fully set forth herein, the
parties desire to amend, completely restate, and replace the
foregoing agreements effective October 1, 2009.
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 Herbert as President and Chief Operating Officer
commencing on October 1, 2009 and continuing through September 30,
2012 (the “Employment Period”), and Herbert 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 September 30, 2012, 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, Herbert 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, Herbert 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 Herbert 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 Herbert 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, USA shall pay to Herbert a
base salary of $320,000 per year during the Employment Period,
subject to any withholding required by law. Herbert’s 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, Herbert
shall be eligible to receive such bonus or bonuses as the Board of
Directors of USA may, in their discretion, pay to Herbert 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.
C. Herbert
shall be entitled to be reimbursed by USA for all reasonable
expenses reasonably incurred by Herbert in connection with his
employment duties hereunder. Such expenses shall include, but not
be limited to, all reasonable business expenses, including travel
expenses such as tolls, gasoline and mileage. Herbert shall
reasonably document all requests for expense
reimbursements.
D. On
the date of the execution and delivery by each of USA and Herbert
of this Agreement, USA shall issue to Herbert 9,000 shares of
Common Stock as a bonus. These shares shall vest as follows: 3,000
on October 1, 2009; 3,000 on April 1, 2010; and 3,000 on October 1,
2010. The shares shall be issued pursuant to USA’s 2008 Stock
Incentive Plan and shall be registered under the Securities Act of
1933, as amended, pursuant to a Form S-8 Registration Statement.
Herbert acknowledges that the vesting of the shares will represent
taxable income to him and that he (and not USA) shall be
responsible for the payment of any and all income or other taxes
(including any withholding tax obligations of USA) attributable to
the vesting of the shares. Not later than the business day
following the date on which any of the shares are included in the
taxable income of Herbert, Herbert shall satisfy USA’s
withholding tax obligations in connection with such shares by
either (a) the delivery by Herbert to USA of a cash payment equal
to the amount of the withholding tax obligations, or (b) the
assignment and transfer by Herbert to USA of that number of shares
of Common Stock (which may consist of the vested shares issued
hereunder as a bonus to Herbert or any other shares of Common Stock
owned by Herbert) having a value equal to the withholding tax
obligations required to be withheld by law, or (c) such other
payment method that shall be satisfactory to USA.
E. During
the Employment Period, USA shall obtain and pay the premiums for, a
term life insurance policy on Herbert’s life in the face
amount of $1,500,000. During the Employment Period, Herbert shall
designate the beneficiary of the policy. If Herbert shall die
during the Employment Period, the proceeds of the policy shall be
paid to his designated beneficiary. Herbert agrees to cooperate
with the insurance company and USA in connection with the issuance
of the policy. Herbert agrees that he will submit to examinations
by such practicing medical doctors selected by USA or the insurance
company upon receipt of written request from USA or the insurance
company to do so.
F. During
the Employment Period, USA shall obtain and pay the premiums for, a
supplemental long-term disability policy covering Herbert over and
above the existing long-term group disability plan of USA. If
Herbert shall become disabled during the Employment Period, the
supplemental policy would provide Herbert with monthly payments of
up to 65% of Herbert’s base salary through age sixty-five.
Herbert agrees to cooperate with the insurance company and USA in
connection with the issuance of the policy. Herbert agrees that he
will submit to examinations by such practicing medical doctors
selected by USA or the insurance company upon receipt of written
request from USA or the insurance company to do so.
G. During
the Employment Period, USA shall pay to Herbert an automobile
allowance in the amount of $17,875 per annum, payable in equal
bi-monthly installments of $774.79.
H. During
the Employment Period, and in addition to the other benefits
provided to Herbert hereunder, Herbert shall be entitled to
participate in and be covered by all standard fringe and employee
benefits made available to other employees of USA. These current
benefits include medical and dental insurance, paid vacation and
holidays, a 401(k) plan, and a long-term group disability
plan.
SECTION 3. Long-Term Equity Compensation Program
.
A. On
February 12, 2007, USA adopted the Long-Term Equity Incentive
Program (the “Plan”). The Plan covers each of the
fiscal years of USA ending June 30, 2007, June 30, 2008, and June
30, 2010 (severally, “Fiscal Year” and collectively,
“Fiscal Years”). Pursuant to the Plan, Herbert is
entitled to earn shares of Common Stock of USA
(“Shares”) based upon the achievement by USA of certain
target goals during each Fiscal Year. The target goals and the
number of Shares to be earned by Herbert during any Fiscal Year are
set forth in the minutes of the USA Board of Directors meeting held
on February 12, 2007.
B. Except
as provided in Subsections C or E, Herbert must be an employee of
USA as of the last day of any Fiscal Year in order to earn any
Shares on account of such Fiscal Year. Any Shares that are earned
by Herbert as of the completion of any Fiscal Year shall be fully
and irrevocably vested and issuable to Herbert by USA. Except as
provided in Subsection C, the issuance to Herbert by USA of any
Shares earned by Herbert under the Plan shall occur as soon as
practicable after the completion of the audited financial
statements of USA for the completed Fiscal Year.
C. In
the event of the occurrence of a USA Transaction (as defined in
subsection J below) during any Fiscal Year, and provided that
Herbert is an employee of USA on the date of such USA Transaction,
Herbert shall be awarded Shares (the “Accelerated
Shares”) for each of the Fiscal Years that have not yet been
completed as of the date of such USA Transaction. The number of
Accelerated Shares shall be as follows: 53,713 for the Fiscal Year
ending June 30, 2007; 53,713 for the Fiscal Year ending June 30,
2008; and 53,714 for the Fiscal Year ending June 20, 2009. The
award of Accelerated Shares to Herbert shall be in lieu of all
Shares otherwise issuable to Herbert under the Plan for any
uncompleted Fiscal Year, and Herbert shall not be entitled to earn
any additional Shares under the Plan on account of any such
uncompleted Fiscal Year.
For
example, if a USA Transaction would occur on March 1, 2008, Herbert
would be entitled to 53,713 Accelerated Shares for the uncompleted
Fiscal Year ending June 30, 2008 and 53,714 Accelerated Shares for
the uncompleted Fiscal Year ended June 30, 2010. These Accelerated
Shares would be issuable to him on and as of the occurrence of the
USA Transaction. Herbert would not be entitled to any additional
Shares on account of these uncompleted Fiscal Years.
At
the time of any USA Transaction, all of the Accelerated Shares
shall automatically and without any action on Herbert’s 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 Accelerated Shares as provided for in this Section
3.C.
D. In
the event that Herbert’s employment with USA is terminated by
USA for Cause pursuant to Section 4.D hereof during any Fiscal
Year, then the Plan shall be immediately terminated as to Herbert
as of the date of such termination, and except for Shares that have
already been earned by Herbert on account of any Fiscal Year that
has been completed prior to the date of such termination, Herbert
shall not be entitled to earn any additional Shares whatsoever
under the Plan.
E. In
the event that Herbert’s employment with USA shall be
terminated during any Fiscal Year for any reason whatsoever other
than for Cause, Herbert shall nevertheless be eligible to earn
Shares under the Plan on account of the Fiscal Year during which
any such termination has occurred as if he had remained employed
with USA through the end of such Fiscal Year. In such event,
Herbert shall not be entitled to earn any Shares on account of any
Fiscal Year commencing after the date of the termination of his
employment with USA. For example, if Herbert’s termination of
employment would occur on March 1, 2008, Herbert would be entitled
to earn Shares for the uncompleted Fiscal Year ending June 30, 2008
as if he had been an employee of USA through the end of such Fiscal
Year. Herbert would not be entitled to earn any Shares on account
of the Fiscal Year ending June 30, 2010.
F. Herbert
acknowledges that the Shares to be issued under the Plan will not
be registered under the Act, or under any state securities laws,
and the Shares cannot be sold or transferred unless such Shares
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. Herbert understands that USA has not
agreed to register the Shares under the Act or any state securities
laws.
G. The
number of Shares to be issued to Herbert under the Plan 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.
H. Herbert
shall be responsible for any and all applicable federal, state or
local income and other tax withholding obligations of USA in
connection with the Shares. Not later than the business day
immediately following the date on which any Shares are included in
the taxable income of Herbert, Herbert shall satisfy USA’s
withholding tax obligations in connection with such Shares by
either (a) the delivery by Herbert to USA of a cash payment in the
amount of the withholding tax obligations, or (b) the assignment
and transfer by Herbert to USA of that number of shares of Common
Stock (which may consist of Shares or any other shares of Common
Stock owned by Herbert) having a value equal to the withholding tax
obligations required to be withheld by law, or (c) such other
payment method that shall be satisfactory to USA.
I. The
Plan shall be irrevocable by USA and represents an unconditional,
absolute and fully vested obligation of USA in favor of and for the
benefit of Herbert.
J. For
purposes of this Agreement, 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
(ii)
a change in the composition of the Board of Directors of USA over a
period of twelve (12) months or less such that the Continuing
Directors (as defined below) fail to constitute a majority of the
Board (or, if applicable, the Board of Directors of a successor
corporation to USA), where the term “Continuing
Director” means at any date a member of the Board
(i) who was a member of the Board on the date of the execution
of this Agreement or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or
election or whose election to the Board was recommended or endorsed
by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; or
(iii)
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”).
Notwithstanding
subsection (iii) above, and other than in connection with a
liquidation or dissolution of USA, a Business Combination described
in subsection (iii) 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.
SECTION 4. Termination . In addition to the notice of
non-ren
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