10% CONVERTIBLE SENIOR NOTE
No. 2006-A-___
$_________
DATED: January 6, 2006
FOR
VALUE RECEIVED, the undersigned, USA Technologies, Inc., a
Pennsylvania
corporation ("USA"),
hereby promises to pay to the order of
_______________________ ("Lender"), at _________________________,
or at such
other place as the
Lender may
designate in writing, the principal sum of
________________
Dollars ($_______),
together with interest
(computed on the
basis of a 360-day
year of twelve 30-day
months) from the date hereof on the
outstanding principal
balance hereof, to be fixed at a rate equal to 10%
per
annum, in accordance with the following terms:
1.
Principal Amount. The
principal amount of this 10% Convertible Senior
Note ("Convertible
Senior Note") shall be due and payable on December 31, 2010,
at which time all unpaid interest that has accrued on the
Convertible
Senior
Note shall also be due and payable ("Maturity Date"). USA shall not
be required
to pay to the holder hereof any principal amount of this
Convertible Senior Note
which has been
converted into shares
of Common Stock of USA
("Common Stock")
pursuant to Section 7 hereof.
2.
Interest. Interest on the outstanding principal balance of this
Convertible Senior
Note shall accrue at
the rate of 10% per annum and shall be
payable quarterly in arrears on March 31, June 30, September 30,
and December 31
of each year until the Maturity Date, commencing on the date hereof.
From and
after the date of any
conversion of the
principal amount of
this Convertible
Senior Note pursuant to Section 7 hereof, no interest shall accrue
on the amount
of principal which has
been so converted. USA
shall pay any unpaid and accrued
interest on any principal amount of this Convertible Senior Note which has been
converted into Common
Stock pursuant to Section 7 hereof
through the date
of
such conversion,
payable by USA to the
holder hereof on the quarterly payment
date immediately following the date of conversion.
3.
Restrictive Legend. Neither this Convertible Senior Note nor the
Common
Stock into which this
Convertible Senior
Note may be converted
may be offered
for sale or sold, or
otherwise transferred in any transaction which would
constitute a sale thereof within the meaning of the
Securities Act of
1933, as
amended (the "Act"),
unless: (i) such
security has been
registered
for sale
under the Act and registered or qualified under applicable state
securities laws
relating to the
offer and sale of securities; or (ii) exemptions from the
registration
requirements of the
Act and the
registration
or qualification
requirements of all such state securities laws are available, and
USA shall have
received an opinion of counsel reasonably satisfactory to USA that the
proposed
sale or other disposition of such securities may be effected without
registration under
the Act and would not result in any violation of any
applicable securities
laws relating to the
registration or
qualification
of
securities for sale.
<PAGE>
4.
Subordination.
A. Senior Debt. The indebtedness (including unpaid principal of,
and
interest on, this Convertible Senior Note as well as all other
obligations and
liabilities of USA to Lender hereunder) evidenced in this Convertible Senior
Note is subordinated
to the prior
payment, when due, of the principal of,
premium, if any, and
interest on, all "Senior Indebtedness" (as defined
below)
of USA as follows:
Upon distribution of
assets in a liquidation or dissolution
of USA, or in bankruptcy, reorganization, insolvency, receivership or similar
proceedings relating to USA, the Lender shall not be entitled to
receive payment
until the holders
of Senior Indebtedness are paid in full. Until a payment
default occurs
with respect to any Senior Indebtedness, all payments of
principal and interest due to Lender under this Convertible Senior
Note shall be
made in accordance with this Convertible Senior Note. Upon the
occurrence of any
payment default with respect to any Senior Indebtedness, and upon
written notice
thereof to USA and
Lender by any
holder of such
Senior Indebtedness or its
representative, no
payments of principal or interest on this Convertible Senior
Note shall be made by
USA until such
payment default has been cured to the
satisfaction of the holder of such Senior Indebtedness or waived by
such holder,
provided, however,
that if, during the
180-day period
following such default,
the holder of
Senior Indebtedness does not accelerate its loan, commence
foreclosure
proceedings or otherwise undertake to act on such default, then
USA
shall be required to continue making payments under this Convertible Senior
Note, including any
that had not been made during such 180-day period. In the
event that any Bank Or Other Financial Institution so requires, the
Lender shall
execute, upon request
of USA, any inter-creditor or subordination agreement(s)
with any such Bank Or Other Financial Institution on terms not
materially more
adverse to the Lender than the subordination terms contained in
this Convertible
Senior Note.
B. Definitions.
"Senior Indebtedness"
means (a) all direct or indirect, and
contingent or certain,
indebtedness
of any type,
kind or nature
(present or
future) created,
incurred or assumed by USA with respect to any present or
future Bank Or Other Financial Institution, or (b) any indebtedness created,
incurred, or assumed, by USA, and secured by a lien on any assets
of USA. Senior
Debt, as described in the prior sentence, shall be deemed to exist whether
such
indebtedness is or is not specifically designated by USA as being "Senior
Debt"
in its defining instruments.
2
<PAGE>
Notwithstanding anything herein to the contrary, Senior
Indebtedness
does not include
(i) unsecured accounts payable to trade creditors of USA
incurred in the ordinary course of business, (ii) any debt owed by USA to
any
officer, director or
stockholder of USA,
(iii) any obligation of USA issued or
contracted for as payment in consideration of the purchase by USA
of the capital
stock or substantially
all of the assets of another person, or in consideration
for the merger or consolidation with respect to which USA was a
party, (iv) any
operating lease
obligations of USA,
(v) any other
indebtedness which, by
its
terms, is subordinated to this Senior Note, or (vi) any
"other
indebtedness"
which is subordinated to all indebtedness to which this Senior Note is
subordinated in
substantially like
terms as this Senior Note, and which "other
indebtedness" shall be treated as equal with the indebtedness
evidenced by this
Senior Note.
"Bank Or
Other Financial
Institution" means a
bank as defined in Section
3(a)(2) of the Act, whether acting in its individual or fiduciary
capacity; an
insurance company as defined in Section 2(a)13 of the Act; an
investment company
registered under the Investment Company Act of 1940, or a business
development
company as defined in Section 2(a)(48) of that Act; a Small
Business
Investment
Company licensed by
the Small Business
Administration;
or a bank,
insurance
company, or registered
investment
adviser, which, as a plan fiduciary, as
defined in Section 3(21) of the Employee Retirement Income Security
Act of 1974,
makes the investment decision in an employee benefit plan, including an
individual retirement account, which is subject to the provisions
of such Act.
5. Event
of Default. An "Event
of Default" under this Convertible Senior
Note means the occurrence of any of the following events (whether
the reason for
such Event of Default is voluntary or involuntary, and effected by operation of
law or pursuant to any judgment, decree or order of any court or
any order, rule
or regulation of any administrative or governmental body): (i)
nonpayment of any
principal or interest installment, when and as due, hereunder which
is not cured
by USA within thirty (30) days after the due date; (ii) any other breach of the
terms hereof which is not cured by USA within thirty (30) days
after notice from
Lender; (iii) the institution of any proceedings by or against USA
under any law
relating to
bankruptcy,
insolvency,
reorganization
or other form of debtor
relief, or the making of an assignment, by USA, for the benefit of
creditors, or
the appointment
of a receiver, trustee, conservator or other judicial
representative for USA or any of its respective properties, or the
admission, in
writing, by USA, of its inability to pay its debts generally as
they become due;
or (iv) any default by USA under any agreement for borrowed money,
which default
continues after
expiration of the applicable notice and grace period,
if any,
provided in the
agreement, and which
permits the holder
thereof to accelerate
the indebtedness due thereunder.
3
<PAGE>
Upon the
occurrence of an Event of Default, the entire principal,
and any
accrued interest due hereunder, shall accelerate and become
immediately due and
payable without presentation, demand, protest or further demand or
notice of any
kind, all of which are expressly waived by USA, and Lender shall
thereupon have
all rights and remedies provided hereunder or otherwise
available at law or
in
equity. The
period of time, between the date of occurrence of an Event of
Default and the date such default is cured, shall be referred to as
the "Default
Period."""During any
Default Period,
any late interest or
principal payments
will accrue interest
at the rate of 1% per month, cumulative and compounding,
until all accrued and unpaid principal and
