Exhibit 4.28
SAMPLE
10% CONVERTIBLE SENIOR NOTE
No. 2004 B-
$____________ DATED: ________ __ , 2004
FOR VALUE RECEIVED, the undersigned, USA Technologies, Inc., a
Pennsylvania corporation ("USA"), hereby promises to pay to the order of
("Lender"), at _________________________ , or at such other place as the Lender
may designate in writing, the principal sum of Dollars ($ ), 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, 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 June 30, 2007 at
which time all unpaid interest which 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.
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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 any distribution of its 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 then, 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 the 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 has not accelerated its loan,
commenced foreclosure proceedings or otherwise undertaken to act on such default
then USA shall be required to continue making payments under the Convertible
Senior Note, including any which had not been paid during such 180 day period.
In the event that any Bank Or Other Financial Institution at any time so
requires, the Lender shall execute, upon request of USA, any intercreditor or
subordination agreement(s) with any such Bank Or Other Financial Institution on
terms not materially more adverse to the Lender then the subordination terms
contained in this Convertible Senior Note.
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B. Definitions. "Senior Indebtedness" means (a) all direct or
indirect, 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 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.
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 the Convertible Senior Note, or (vi) any "other
indebtedness" which is subordinated to all indebtedness to which the Convertible
Senior Note is subordinated in substantially like terms as the Convertible
Senior Note which such "other indebtedness" shall be treated as equal with the
indebtedness evidenced by this Convertible 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 an employee benefit
plan, including an individual retirement account, which is subject to the
provisions of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, insurance company, or registered investment
adviser.
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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 shall be voluntary or involuntary or be 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 USA"s making an assignment 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. 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
commencing from the date of the occurrence of an Event of Default until 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
a rate of 1% per month, cumulative and compounding until all accrued and unpaid
principal and interest is paid in full.
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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 USA elects to prepay this
Convertible Senior Note at any time in an amount less than the then entire
remaining 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).
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 that 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 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.
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D. Partial Conversion. The Conversion Rights represented by the
Convertible Senior Note shall be exercisable, at the election of the registered
holder hereof, either as an entirety, or from time to time for any part of the
outstanding principal amount of this Convertible Senior Note, and in the event
that the Conversion Rights are exercised with respect to less than the entire
then outstanding principal amount of this Convertible Senior Note, at any time
prior to the Maturity Date, a new certificate will be issued to such registered
holder in the remaining principal amount of this Convertible Senior Note.
E. Maturity Date. All of the Conversion Rights must be exercised in
accordance with the terms hereof prior to the Maturity Date. At and after 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. USA shall not be required to provide notice to the holder hereof
of the expiration of the Conversion Rights hereunder, and the Conversion Rights
shall automatically expire without any required prior notice from USA.
F. Adjustments. Subject and 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 case USA shall declare 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 said Common Stock dividend in
proportion to such increase of outstanding shares of Common Stock.
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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. This form of Certificate need not be changed because of
any adjustment which 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.
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 the
Conversion Rights represented by 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.
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8. No Right. 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, USA shall, at its expense, file with the Securities and
Exchange Commission no later than February 18, 2005, 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.
USA shall use its best efforts to keep the registration statement current and
effective through the earlier of (i) June 30, 2007; or (ii) the date on which
the Common Stock underlying the Convertible Senior Note becomes eligible for
resale by the holder thereof under Rule 144(k) promulgated under the Act.
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, that may be
required by applicable federal and state securities law, 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.
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.
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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 any waiver of any 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 Convertible Senior Note
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 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 such
loss, theft or destruction of such certificate and indemnity, if requested, also
satisfactory to USA.
15. Illegality. Any provision hereof 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, relating to the
enforcement of this Convertible Senior Note.
18. Subscription Agreement. This Convertible Senior Note has been issued
by USA pursuant to the terms of the Subscription Agreement between USA and
Lender dated of even date herewith, the terms of which are incorporated herein
by reference.
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:
-------------------------------------
Xxxxxx X. Xxxxxx, Xx.,
Chief Executive Officer
By:
-------------------------------------
Xxxxxxx X. Xxxxxxx,
Secretary
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USA TECHNOLOGIES, INC.
000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Xx.,
Chief Executive Officer
ELECTION TO CONVERT FORM
The undersigned hereby irrevocably elects to exercise the rights of
conversion represented by the attached Convertible Senior Note Certificate No.
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 shall 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 remaining principal amount 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:______________________________
Print Name:_____________________________
Print Address:__________________________
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