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.
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.
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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.
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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 Xxxxxx 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 interest is paid in full.
6. Prepayment. USA shall have the right to prepay this Convertible Senior
Note in whole or in part, at any time, and from time to time prior to the
Maturity Date, and in its sole and absolute discretion, without incurring any
penalties or additional obligations of any kind. If, at any time, USA elects to
prepay this Convertible Senior Note in an amount less than the then outstanding
principal amount hereof, the holders of the Convertible Senior Notes to be
prepaid shall be selected by USA on a random basis. If USA elects to prepay this
Convertible Senior Note in whole or in part any time prior to the Maturity Date,
the holder hereof shall have the right to convert all of (but not less than all
of) the principal amount to be prepaid by USA into shares of Common Stock
pursuant to the terms and conditions of Section 7 hereof. Such right to convert
must be exercised within thirty (30) days following receipt by the holder hereof
from USA of notice of prepayment pursuant to this Section 6.
7. Conversion Rights.
A. Conversion. Subject to the terms and conditions hereof, the
holder hereof may convert all or any portion of the principal amount hereof at
any time, or from time to time prior to the Maturity Date, into fully-paid and
non-assessable shares of USA's Common Stock, without par value (the "Common
Stock"), subject to adjustment as provided in Section 7.F. hereof ("Conversion
Rights"). The number of shares of Common Stock to be issued upon any such
conversion shall be determined by dividing the principal amount of this
Convertible Senior Note to be converted by the Conversion Price (as defined
herein).
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B. Conversion Price. The Conversion Rights shall be exercised by
delivery to USA, prior to the Maturity Date, of this Certificate and the
completed Election To Convert Form which is attached hereto. The Conversion
Price shall be $.10 per share of Common Stock, subject to adjustment as provided
in Section 7.F. hereof ("Conversion Price").
C. Exercise. Upon the surrender of this Certificate and the
completed Election To Convert Form as aforesaid, USA shall issue and cause to be
delivered with all reasonable dispatch to, or upon the written order of, the
registered holder of this Convertible Senior Note, a certificate or certificates
for the number of full shares of Common Stock so purchased upon the exercise of
the Conversion Rights. Such certificate or certificates shall be deemed to have
been issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such Common Stock, on and as of the date of
the delivery to USA of this certificate of Senior Convertible Note (the
"Certificate") and the completed Election To Convert Form as aforesaid. If,
however, at the date of surrender of this Certificate and the completed Election
To Convert Form, the transfer books for the Common Stock, issuable upon the
exercise of the Conversion Rights, shall be closed, the certificates for the
Common Stock, in respect to which any such Conversion Rights are then exercised,
shall be issued and the owner of such Common Stock shall become a record owner
of such Common Stock on, and as of, the next date on which such books shall be
opened, and until such date USA shall be under no duty to deliver any
certificate for such Common Stock.
D. Partial Conversion. The Conversion Rights under this Convertible
Senior Note shall be exercisable, at the election of the registered holder
hereof, either in their entirety, or, from time to time, for any part of the
outstanding principal amount of this Convertible Senior Note. In the event that
the Conversion Rights are exercised prior to the Maturity Date, and with respect
to less than the entire amount of the then outstanding principal of this
Convertible Senior Note, a new certificate will be issued to such registered
holder in the amount of the remaining principal of this Convertible Senior Note.
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E. Maturity Date. All of the Conversion Rights must be exercised in
accordance with the terms hereof prior to the Maturity Date. At the Maturity
Date, any and all unexercised rights hereunder shall expire and all such
unexercised Conversion Rights shall, without any action on behalf of USA, become
null and void. The Conversion Rights shall automatically expire without any
required prior notice from USA to the holder hereof.
F. Adjustments. Pursuant to the provisions of this subsection F, the
Conversion Price shall be subject to adjustment from time to time only as set
forth hereinafter:
i. In the event that USA declares a Common Stock dividend on
the Common Stock, then the Conversion Price shall be proportionately decreased,
as of the close of business on the date of record of the said Common Stock
dividend, in proportion to such increase of outstanding shares of Common Stock.
ii. If USA shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the Conversion
Price immediately prior to such subdivision shall be proportionately decreased,
and, if USA shall at any time combine the outstanding shares of Common Stock by
recapitalization, reclassification, reverse stock split, or combination thereof,
the Conversion Price immediately prior to such combination shall be
proportionately increased. Any such adjustment to the Conversion Price shall
become effective at the close of business on the record date for such
subdivision or combination. The Conversion Price shall be proportionately
increased or decreased, as the case may be, in proportion to such increase or
decrease, as the case may be, of outstanding shares of Common Stock.
iii. Whenever the Conversion Price is adjusted as herein
provided, USA shall promptly mail to the registered holder of this Convertible
Senior Note a statement signed by an officer of USA setting forth the adjusted
Conversion Price, determined as so provided.
iv. The form of this Certificate need not be changed because
of any adjustment that is required pursuant to this Section F. However, USA may,
at any time in its sole discretion (which shall be conclusive), make any change
in the form of this Certificate that USA may deem appropriate and that does not
affect the substance hereof; and any Certificate thereafter issued, whether in
exchange or substitution for this Certificate or otherwise, may be in the form
as so changed.
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G. Reservation. There has been reserved, and USA shall at all times
keep reserved out of the authorized and unissued shares of Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of
Conversion Rights under this Convertible Senior Note. USA agrees that all shares
of Common Stock issued upon exercise of this Convertible Senior Note shall be,
at the time of delivery of the Certificates for such Common Stock, validly
issued and outstanding, fully paid and non-assessable.
H. Fractional Shares. USA shall not issue any fractional shares of
Common Stock pursuant to any conversion of this Convertible Senior Note, and
shall pay cash to the holder of this Convertible Senior Note in lieu of any such
fractional shares.
8. No Rights Prior to Issuance of Common Stock. The holder of this
Convertible Senior Note shall not be entitled to any of the rights of a
shareholder of USA prior to the date of issuance of the Common Stock by USA
pursuant to any conversion of this Convertible Senior Note or any exercise of
the Purchase Rights.
9. Registration Rights. As set forth above, neither this Convertible
Senior Note nor the Common Stock into which this Convertible Senior Note is
convertible shall be registered under the Act or any state securities laws, and
shall constitute restricted securities as defined under Rule 144 promulgated
under the Act. Notwithstanding the foregoing, following the issuance of this
Convertible Senior Note, and not later than January 12, 2006, USA shall, at its
expense, file, and thereafter use its best efforts to have declared effective, a
registration statement under the Act covering the resale of the Common Stock
underlying this Convertible Senior Note. Thereafter, USA shall use its best
efforts to keep the registration statement current and effective through
November 30, 2006.
10. Securities Laws. As a condition to the issuance of any Common Stock
pursuant to this Convertible Senior Note, the holder of such Common Stock shall
execute and deliver such representations, warranties, and covenants, as may be
required by applicable federal and state securities laws, 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.
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11. Choice of Law. This Convertible Senior Note shall be construed and
enforced in accordance with, and governed by, the laws of the Commonwealth of
Pennsylvania without regard to Pennsylvania"s conflict of laws provisions.
12. Choice of Forum. Lender irrevocably consents and agrees that any legal
action or proceeding against USA or brought by Xxxxxx, under, arising out of, or
in any manner relating to, this Convertible Senior Note, shall be brought solely
and exclusively in the Court of Common Pleas of the Commonwealth of Pennsylvania
located in the County of Philadelphia, Pennsylvania, or in the United States
District Court for the Eastern District of Pennsylvania, located in
Philadelphia, Pennsylvania. Lender expressly and irrevocably consents to the
personal jurisdiction of such Courts in any such action or proceeding, and
waives any claim or defense in any such action or proceeding based upon any
alleged lack of personal jurisdiction, improper venue, or forum non conveniens.
13. Waiver. No failure or delay on the part of the Lender to insist on
strict performance of USA"s obligations hereunder or to exercise any remedy
shall constitute a waiver of the Lender"s rights in that or any other instance.
No waiver of any of the Lender"s rights shall be effective unless in writing,
and the waiver of a default of any instance of non-compliance shall be limited
to its express terms and shall not extend to any other default or instance of
non-compliance.
14. Lost, Mutilated Certificate. In case this Certificate shall become
mutilated, lost, stolen or destroyed, USA shall issue, in exchange and
substitution for, and upon cancellation of, the mutilated certificate, or in
lieu of, and in substitution for, the Certificate that is lost, stolen, or
destroyed, a new Certificate of like tenor, and representing an equivalent right
or interest, but only upon receipt of evidence satisfactory to USA of the loss,
theft or destruction of such certificate, and indemnity, if requested, also
satisfactory to USA.
15. Illegality. Any part of this Convertible Senior Note found to be
illegal, invalid or unenforceable for any reason whatsoever shall not affect the
validity, legality or enforceability of the remainder hereof.
16. Usury. If the effective interest rate on this Convertible Senior Note
would otherwise violate any applicable usury law, then the interest rate shall
be reduced to the maximum permissible rate, and any payment received by the
Lender in excess of the maximum permissible rate shall be treated as a
prepayment of the principal of this Convertible Senior Note.
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17. Expenses. USA agrees to reimburse Lender for all costs and expenses,
including reasonable attorneys' fees, incurred by the Lender and relating to the
enforcement of this Convertible Senior Note.
18. Subscription Agreement. This Convertible Senior Note has been issued
by USA pursuant to, and subject to the terms of, the Subscription Agreement
between USA and Lender, dated ___________, 2005, the terms of which are
incorporated herein by reference. Pursuant thereto, this Convertible Senior Note
was automatically issued in exchange for the 2005-H Bridge Note of the identical
principal amount.
19. Assigns, Etc. This Convertible Senior Note shall be binding upon USA"s
successors and assigns, and, subject to Section 3 hereof, shall inure to the
benefit of each holder of this Convertible Senior Note and such holder"s
successors, endorsees and assigns.
Intending to be legally bound, USA has caused this Convertible Senior Note
to be executed in its corporate name, by its duly authorized representatives,
and to be dated as of the date and year first above written.
USA TECHNOLOGIES, INC.
By:
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Xxxxxx X. Xxxxxx, Xx.,
Chief Executive Officer
By:
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Xxxxxxx X. Xxxxxxx,
Secretary
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USA TECHNOLOGIES, INC.
000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Xx.,
Chief Executive Officer
ELECTION TO CONVERT FORM
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The undersigned hereby irrevocably elects to exercise the rights of
conversion represented by the attached Convertible Senior Note Certificate No.
2006-A-___ of USA. The undersigned desires to convert $ of the principal amount
of the attached Certificate into shares of Common Stock, all as provided for
therein, and tenders herewith the original Convertible Senior Note, all in
accordance with the Certificate. The undersigned requests that a certificate
representing such shares of Common Stock be issued to, and registered in the
name of, the undersigned and delivered to the undersigned at the address set
forth below. If less than the entire principal amount of the Convertible Senior
Note represented by the attached Certificate has been converted, then a new
Convertible Senior Note Certificate, in the amount of the remaining principal of
the Convertible Senior Note, shall be issued to, and registered in the name of,
the undersigned and delivered to the undersigned at the address set forth below.
Dated: , 20 Signature:
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Print Name:
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Print Address:
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