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 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).


                                       4
<PAGE>

            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.

                                       5
<PAGE>


            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.


                                       6
<PAGE>

            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.


                                       7
<PAGE>

      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 Lender, 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.


                                       8
<PAGE>

      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:
                                             -----------------------------------
                                             George R. Jensen, Jr.,
                                             Chief Executive Officer


                                         By:
                                             -----------------------------------
                                             Stephen P. Herbert,
                                             Secretary


                                       9
<PAGE>

USA TECHNOLOGIES, INC.
100 Deerfield Lane
Suite 140
Malvern, Pennsylvania  19355
Attn:  George R. Jensen, Jr.,
       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.
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:
       -------------    --                          ----------------------------

                                         Print Name:
                                                     ---------------------------

                                         Print Address:
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