FIRST AMENDMENT TO EMPLOYMENT AND NON-COMPETITION AGREEMENT

Exhibit 10.1

FIRST AMENDMENT TO EMPLOYMENT AND

NON-COMPETITION AGREEMENT

This First Amendment is made on the 14th day of April 2011, by and between XXXXXX X. XXXXXX, XX. ("Xxxxxx"), and USA TECHNOLOGIES, INC., a Pennsylvania corporation ("USA").

Background

USA and Xxxxxx entered into an Amended and Restated Employment and Non-Competition Agreement dated September 29, 2009 (the "Employment Agreement"). As more fully set forth herein, the parties desire to amend the Employment Agreement in certain respects.

Agreement

NOW, THEREFORE, in consideration of the covenants set forth herein, and intending to be legally bound hereby, the parties agree as follows:

1.             Amendments.

A. Subsection A. of SECTION 1. Employment of the Employment Agreement is hereby deleted and the following new Subsection A. substituted in its place:

A.           USA shall employ Xxxxxx as Chairman and Chief Executive Officer commencing on the date hereof and continuing through June 30, 2014 (the "Employment Period"), and Xxxxxx hereby accepts such employment. Unless terminated by either party hereto upon at least 90-days notice prior to the end of the original Employment Period ending June 30, 2014, 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.           Subsection E. of SECTION 2. Compensation and Benefits of the Employment Agreement is hereby deleted and the following new Subsection E. substituted in its place:

E.           On the date of the execution and delivery by each of USA and Xxxxxx of this First Amendment, USA shall issue to Xxxxxx 125,000 shares of Common Stock in recognition of Xxxxxx’x dedicated and valuable service to USA and extending the term of his Employment Agreement. These shares shall be vested 1/3 upon signing, 1/3 after one year and 1/3 after two years. The shares shall be issued pursuant to USA’s 2010 Stock Incentive Plan and shall be registered under the Securities Act of 1933, as amended, pursuant to a Form S-8 Registration Statement.

Xxxxxx acknowledges that the issuance 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 issuance of the shares. Not later than the business day following the date on which the shares are included in the taxable income of Xxxxxx, Xxxxxx shall satisfy USA’s withholding tax obligations in connection with such shares by either (a) the delivery by Xxxxxx to USA of a cash payment equal to the amount of the withholding tax obligations, or (b) the assignment and transfer by Xxxxxx to USA of that number of shares of Common Stock (which may consist of the vested shares issued hereunder as a bonus to Xxxxxx or any other shares of Common Stock owned by Xxxxxx) 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.

C.            SECTION 5.        Termination of the Employment Agreement is hereby deleted and the following new Section 5 substituted in its place:

SECTION 5.          Termination.       In addition to the notice of non-renewal of the Employment Period referred to in Section 1.A hereof and as provided in Section 13.B, Xxxxxx’x employment with USA may be terminated as follows:

A.            Voluntary Termination Without Good Reason. Xxxxxx may voluntarily terminate Xxxxxx’x employment hereunder without Good Reason (as defined below) at any time during the Employment Period effective as of the end of the 90-day period beginning on the date Xxxxxx provides USA with a signed, written notice of Xxxxxx’x termination; provided, in its sole discretion (i) USA may accept such resignation effective as of an earlier date in lieu of waiting for passage of the 90-day notice period, or (ii) during all or any part of the 90-day notice period, USA may retain Xxxxxx as an employee but modify, reduce or eliminate Xxxxxx’x duties hereunder. If Xxxxxx voluntarily terminates Xxxxxx’x employment hereunder without Good Reason, USA will pay to Xxxxxx only (i) Xxxxxx’x annual base salary earned through the date of termination, (ii) all bonuses earned and vested on or before the date of termination, and (iii) any benefits or compensation provided under the terms of any benefit plan or other provisions of this Agreement.

B.            Voluntary Termination With Good Reason.

(i)           Xxxxxx may voluntarily terminate Xxxxxx’x employment hereunder with Good Reason (as defined below) at any time during the Employment Period,  effective as of the end of the 90-day period beginning on the date Xxxxxx provides USA with a signed, written notice of Xxxxxx’x termination; provided, in its sole discretion (A) USA may accept such resignation effective as of an earlier date in lieu of waiting for passage of the 90-day notice period, or (B) during all or any part of the 90-day notice period, USA may retain Xxxxxx as an employee but modify, reduce or eliminate Xxxxxx’x duties hereunder.

(ii)           If Xxxxxx voluntarily terminates Xxxxxx’x employment hereunder with Good Reason at any time during the Employment Period, Xxxxxx will be entitled to receive the following compensation and benefits:

(a) On or before the termination of Xxxxxx’x employment, USA shall pay to Xxxxxx a lump sum equal to two years of his base salary at the time of the termination date;

(b) all bonuses earned or vested on or before the date of termination;

(c) all restricted stock awards and stock options shall become immediately vested on the date of termination; provided, however, that the foregoing shall not apply to the Xxxxxx Stock issuable to Xxxxxx pursuant to Section 3 hereof;

(d) any benefits or compensation provided under the terms of any benefit plan or other provisions of this Agreement; and

(e)  During the two year period following the date of termination,  USA shall arrange at its cost to provide Xxxxxx with health, life and disability benefits substantially similar to those which Xxxxxx is receiving immediately prior to the date of termination. Benefits otherwise receivable by Xxxxxx pursuant to this subsection shall be reduced to the extent comparable benefits are actually received by or made available to Xxxxxx without cost during such period following Xxxxxx’x termination of employment (and any such benefits actually received by Xxxxxx shall be reported to USA by Xxxxxx).

(iii)           For purposes of this Agreement, “Good Reason” means any of the following conditions, which remains uncured after the expiration of 30 days following the delivery of written notice of such condition to USA by Xxxxxx, with respect to which Xxxxxx terminates employment within 120 days after the initial existence of the condition: (A) a material breach of the terms of this Agreement by USA; (B) the assignment by USA to Xxxxxx of duties in any way materially inconsistent with Xxxxxx’x authorities, duties, responsibilities, and status, as Chief Executive Officer of USA, or a material reduction or alteration in the nature or status of Xxxxxx’x authority, duties, or responsibilities; provided, however, that a material reduction or alteration referred to in this subsection (B) shall not include any change or reduction in Xxxxxx’x authorities, duties or responsibilities resulting solely from USA becoming a private company or a subsidiary or division of another company; (C) USA reduces Xxxxxx’x annual base salary; (D) any reduction by USA in the kind or level of employee benefits to which Xxxxxx is entitled immediately prior to such reduction with the result that Xxxxxx’x overall benefit package is significantly reduced unless such failure to continue a plan, policy, practice or arrangement pertains to all plan participants generally; or (E) requiring Xxxxxx to be based at a location in excess of 50 miles from Xxxxxx’x current residence.

(iv)           As a condition to Xxxxxx receiving or continuing to receive any of the payments or benefits provided under this subsection B, Xxxxxx shall have executed and delivered  to USA (and not revoked) a release of any and all claims, suits, or causes of action against USA and its affiliates in form reasonably acceptable to USA.

C.            Termination Without Cause.

(i) USA, in its sole discretion, may terminate Xxxxxx’x employment hereunder without Cause (as defined below), at any time by giving Xxxxxx at least 30 days’ (and not more than 90 days’) prior written notice of USA’s intent to terminate Xxxxxx’x employment as of a specified date; provided, during all or any part of the remaining Employment Period, USA, in its sole discretion, may modify, reduce or eliminate Xxxxxx’x duties hereunder.

(ii) If USA terminates Xxxxxx’x employment hereunder without Cause at any time during the Employment Period, Xxxxxx will be entitled to receive the following compensation and benefits:

(a) On or before the termination of Xxxxxx’x employment, USA shall pay to Xxxxxx a lump sum equal to two years of his base salary at the time of the termination date;

(b) all bonuses earned or vested on or before the date of termination;

(c) All restricted stock awards or stock options shall become immediately vested on the date of termination; provided, however, that the foregoing shall not apply to the Xxxxxx Stock issuable to Xxxxxx pursuant to Section 3 hereof;

(d) any other benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement; and

(e) During the two year period following the date of termination,  USA shall arrange at its cost to provide Xxxxxx with health, life and disability benefits substantially similar to those which Xxxxxx is receiving immediately prior to the date of termination. Benefits otherwise receivable by Xxxxxx pursuant to this subsection shall be reduced to the extent comparable benefits are actually received by or made available to Xxxxxx without cost during such period following Xxxxxx’x termination of employment (and any such benefits actually received by Xxxxxx shall be reported to USA by Xxxxxx).

D.           Termination With Cause.

(i)           USA may immediately terminate Xxxxxx’x employment hereunder for Cause (as defined below) at any time during the Employment Period upon delivery of written notice to Xxxxxx.

(ii)           If USA terminates Xxxxxx’x employment hereunder with Cause at any time during the Employment Period, Xxxxxx will only be entitled to receive the following compensation and benefits:

(a) On or before the termination of Xxxxxx’x employment, USA shall pay Xxxxxx his base salary through the date of termination;

(b) all bonuses earned or vested on or before the date of termination;

(c) any other benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement; and

(d) During the ninety (90) day period following the date of termination, USA shall arrange at its cost to provide Xxxxxx with health, life and disability benefits substantially similar to those which Xxxxxx is receiving immediately prior to the date of termination. Benefits otherwise receivable by Xxxxxx pursuant to this subsection shall be reduced to the extent comparable benefits are actually received by or made available to Xxxxxx without cost during such period following Xxxxxx’x termination of employment (and any such benefits actually received by Xxxxxx shall be reported to USA by Xxxxxx).

(iii) For purposes of this Agreement, “Cause” means any of the following have occurred or exist as determined by the USA Board of Directors (or its designee): (A) Xxxxxx’x fraud, gross malfeasance, or willful misconduct, with respect to USA’s business; (B) any material breach by Xxxxxx of this Agreement, which breach is not cured (if curable) by Xxxxxx within thirty (30) days after written notice of such breach is delivered to Xxxxxx by USA; (C) any willful violation by Xxxxxx of any law, rule or regulation, which violation results or could reasonably be expected to result, in material harm to the business or reputation of USA; (D) conviction of or the entry of a guilty plea or plea of no contest to any felony or to any other crime involving moral turpitude; or (E) any intentional misapplication by Xxxxxx of USA’s funds, or any material act of dishonesty committed by Xxxxxx.

E.             Termination Due to Death or Disability.

(i) Xxxxxx’x employment with USA will end upon Xxxxxx’x death. Upon Xxxxxx’x death, his designated beneficiary shall be entitled to receive the proceeds of the life insurance policy paid for by USA that is referred to in Section 2.F, and USA will pay to Xxxxxx’x personal representative only (A) Xxxxxx’x annual base salary earned through the date of death, (B) all bonuses earned and vested on or before the date of death, and (C) any benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement.

(ii) If Xxxxxx becomes disabled during the Employment Period, USA may terminate Xxxxxx’x employment under this Agreement upon giving Xxxxxx or Xxxxxx’x legal representative written notice at least 30 days before the termination date. For purposes of this Agreement, and subject to any applicable waiting period, “disabled” means if Xxxxxx is deemed disabled for purposes of the supplemental long-term disability policy obtained and paid for by USA which is referred to Section 2.G. If Xxxxxx’x employment hereunder is terminated due to Xxxxxx’x disability, USA will pay to Xxxxxx or his personal representative only (A) Xxxxxx’x annual base salary earned through the date of termination, (B) all bonuses earned and vested on or before the date of termination, and (C) any benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement. 

F.           In addition to any other terms or conditions that survive the termination of Xxxxxx’x employment with USA, all of the terms and conditions of Section 6, 7 and 8 shall survive the termination of Xxxxxx’x employment with USA for any reason whatsoever, including under this Section 5.

G.           Except as specifically provided otherwise herein, Xxxxxx shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of such payment be reduced by reason of compensation or other income Xxxxxx receives for services rendered after Xxxxxx’x termination of employment with USA.

H.           In the event Xxxxxx is terminated for any reason whatsoever other than for Cause, USA, at its expense, shall provide one year of professional outplacement services which are customary for an executive of Xxxxxx’x stature through and at the facilities of an outplacement firm.

2.           Modification.  Except as otherwise specifically set forth in Paragraph 1, the Employment Agreement shall not be amended or modified in any respect whatsoever and shall continue in full force and effect.

3.           Effective Time.  The amendments to the Employment Agreement made in Paragraph 1 hereof shall be effective from and after the date hereof.

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment on the day and year first above written.

	/s/ Xxxxxx X. Xxxxxx, Xx. XXXXXX X. XXXXXX, XX.
	USA TECHNOLOGIES, INC.
	By:	/s/ Xxxxxxx X. Xxxxxxx
		Xxxxxxx X. Xxxxxxx, President