SEVERANCE AGREEMENT

SEVERANCE AGREEMENT

This SEVERANCE AGREEMENT (this “Agreement”) is made and entered into freely and voluntarily, by and between JOHN W. SMOLAK (hereinafter referred to as “Officer”) and HYPERCOM CORPORATION (hereinafter referred to collectively with all of its subsidiaries and controlled affiliates as the "Company”).

WHEREAS, the parties mutually wish to memorialize the terms and conditions of the termination of Officer’s employment with the Company.

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

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

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

3. Release and Covenant Not to Sue.

(a) Each party hereby forever releases, discharges, cancels, waives, and acquits the other party and its or his representatives (which shall include, as applicable, spouse, heirs, executors, administrators, successors, assigns, affiliates, subsidiaries, corporate parents, agents, directors, officers, owners, attorneys) of and from any and all rights, claims, demands, causes of action, obligations, damages, penalties, fees, costs, expenses, and liability of any nature whatsoever, whether in law or equity, which a party has, had or may hereafter have against it arising out of, or by reason of, any cause or matter, existing as of the date of execution of this Agreement, WHETHER KNOWN TO THE PARTY AT THE TIME OF EXECUTION OF THIS AGREEMENT OR NOT, other than for breach of this Agreement.

(b) This FULL WAIVER OF ALL CLAIMS includes, without limitation, attorney’s fees, any claims, demands, or causes of action arising out of, or relating in any manner whatsoever to, the employment and/or termination of the employment of Officer by the Company, such as, BUT NOT LIMITED TO, any charge, claim, lawsuit or other proceeding arising under the Civil Rights Act of 1866, 1964, 1991, Title VII as amended by the Civil Rights Act of 1991, the Americans with Disabilities Act, the Age Discrimination in Employment Act (ADEA), the Labor Management Relations Act (LMRA), the Employee Retirement Income Security Act (ERISA), the Consolidated Omnibus Budget Reconciliation Act, the Fair Labor Standards Act (FLSA), the Equal Pay Act, the Rehabilitation Act of 1973, and the Family and Medical Leave Act of 1993, worker’s compensation laws, or any other federal, state, or local statute, or any contract, agreement, plan or policy.

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

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

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

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

4. Non-Competition; Non-Solicitation.

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

(i) engage in the design, manufacture or sale of electronic payment solutions, including point of sale/point of transaction terminals, peripheral devices, transaction networking devices, transaction management systems and application software, and related support and services (collectively, the “Competitive Activities”), within the Protected Territory (as defined below); provided, that Officer may own stock in the Company and less than 1% of any other publicly traded company engaged in any or all of the Competitive Activities.

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

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

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

(b) Officer represents to the Company that he is willing and able to engage in businesses that are not competing businesses hereunder and that enforcement of the restrictions set forth in this Section 4 would not be unduly burdensome to Officer. Officer hereby agrees that the period of time provided for in this Section 4 and other provisions and restrictions set forth herein are reasonable