ex10_1.htm


    
      

    

    Exhibit
10.1


     

    SETTLEMENT
AGREEMENT

     

    This
Settlement Agreement (the “Agreement”), dated
this 4th day
of February, 2010 (the “Effective Date”), by
and among Bradley M. Tirpak, Craig W. Thomas, Shareholder Advocates for Value
Enhancement (the foregoing individuals and entities being collectively referred
to as the “SAVE
Group”), USA Technologies, Inc., a Pennsylvania corporation (the “Company”) and the
other parties signatory hereto.

     

    WHEREAS,
the Company has filed with the Securities and Exchange Commission (the “SEC”) and mailed to
the shareholders of the Company definitive proxy materials for use in connection
with the Company’s 2009 annual meeting of shareholders (the “Annual Meeting”) to
be held, as postponed, on June 15, 2010, in which the Board of Directors of the
Company (the “Board”) has nominated
and proposed to elect candidates to serve on the Board for staggered terms (the
“Company
Proposal”);

     

    WHEREAS,
the SAVE Group has filed with the SEC and mailed to the shareholders of the
Company definitive proxy materials for use in connection with the Annual Meeting
to be held on December 15, 2009, in which the SAVE Group has proposed, among
other things, to elect Bradley M. Tirpak, Peter A. Michel and Alan J. Gotcher to
the Board as Class II Directors with each to serve as a director until the
second annual meeting of shareholders following the Annual Meeting (the “SAVE
Proposal”);

     

    WHEREAS,
the Company has solicited proxies from the shareholders of the Company to vote
for the Company Proposal, and the SAVE Group has solicited proxies from the
shareholders of the Company to vote for the SAVE Proposal (such solicitation of
proxies by the Company and the SAVE Group to vote for their respective proposals
submitted at the Annual Meeting is referred to herein as the “Proxy
Contest”);

     

    WHEREAS,
the SAVE Group filed a Complaint against the Company, George R. Jensen, Jr.,
Stephen P. Herbert, Douglas M. Lurio, Steven Katz, William L. Van Alen, Jr.,
Joel Brooks, Steven D. Barnhart and Jack E. Price in the United States District
Court for the Eastern District of Pennsylvania on December 14, 2009, which was
amended on December 17, 2009 (the “SAVE Action”),
seeking, inter alia,
(a) a declaratory judgment that the Company’s action purporting to cancel the
Annual Meeting on December 15, 2009 was null and void, (b) injunctive relief
relating thereto, and (c) costs and expenses, including reasonable attorneys’
fees;

     

    WHEREAS,
on December 18, 2009, the Company filed a Counterclaim against the SAVE Group in
the SAVE Action (the “Counterclaim”), which
alleged, inter alia,
that the SAVE Group had engaged in a materially false and misleading proxy
solicitation; and

     

    WHEREAS,
the Company and the SAVE Group have determined that the interests of the Company
and its shareholders would be best served at this time by, among other things,
amicably resolving the Proxy Contest, the SAVE Action, the Counterclaim and
the substantial expense and disruption that will continue to result therefrom,
without any admission of liability by any party or by any officer or director of
the Company, on the terms and conditions set forth in this
Agreement.

     

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


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Section
1.  Board
Size; Board Appointment; Board Composition.

     

    (a)  Effective
as of the date hereof, pursuant to resolutions adopted by the Board as of the
date hereof and attached hereto as Exhibit A (the “Settlement
Resolutions”), the Company has adopted the amendments to the By-laws
attached hereto as Exhibit B (the “By-law Amendments”),
pursuant to which, among other things, the Board increased the size of the Board
to nine (9) members.

     

    (b)  The
Company hereby agrees that the By-law Amendments shall not be repealed, amended
or modified by the Board, including by taking any other action that would have
the effect of repealing, amending or modifying a By-law Amendment, unless (i) at
least 66% of the independent directors of the corporation then in office shall
have approved such amendment, repeal or modification, and (ii) during the period
of time up to and including the June 2012 annual meeting of shareholders that
any SAVE Nominee (as defined below) is a member of the Board, at least one SAVE
Nominee approves such repeal, amendment or modification.  For purposes
of this paragraph, the term “independent directors” shall mean directors of the
Company that are independent under the independence standards applicable to the
Company under paragraph (a)(1) of Item 407 of Regulation S-K promulgated by the
SEC, as such Item may be amended from time to time or any successor
thereto.

     

    (c)  The
Company, pursuant to the Settlement Resolutions and effective as of the date
hereof, has accepted the resignation of William L. Van Alen, Jr. from the
Board.  A copy of the resignation letter of William L. Van Alen, Jr.
is attached hereto as Exhibit
C.

     

    (d)  Effective
as of the date hereof, the Board, pursuant to the Settlement Resolutions, has
(i) appointed Bradley M. Tirpak and Peter A. Michel (the “SAVE Nominees”) to
the Board, with Bradley M. Tirpak to serve as a Class II director of the Company
and Peter A. Michel to serve as a Class I director of the Company, (ii)
nominated each SAVE Nominee for election at the Annual Meeting to be held on
June 15, 2010 (the “2010 Annual Meeting”)
with Bradley M. Tirpak nominated as a Class II director with a term expiring at
the Company’s second annual meeting of shareholders after the 2010 Annual
Meeting and Peter A. Michel nominated as a Class I director with a term expiring
at the Company’s first annual meeting of shareholders after the 2010 Annual
Meeting and (iii) recommended that the shareholders of the Company vote to elect
the Company’s nominees, which shall include the SAVE Nominees, as directors at
the 2010 Annual Meeting.  In connection with the 2010 Annual Meeting,
the Company’s nominees shall consist of three Class I directors, three Class II
Directors and three Class III directors.

     

    (e)  The
composition of the Board shall consist of three (3) classes of directors, each
with staggered terms, until December 31, 2011 (the “Declassification
Date”).  Following the Declassification Date, pursuant to the
By-law Amendments, the composition of the Board shall consist of one (1) class
of directors and, upon election, all directors shall serve for one (1) year
terms, as provided in Section 3.02(a) of the Company By-laws.

     

    (f)  Only
in the event that the Company (i) does not achieve positive EBITDA (Earnings
Before Interest, Taxes, Depreciation and Amortization) (as reported in the
Company’s Consolidated Statement of Operations included in the Company’s Form
10-Q for the period ended December 31, 2010), exclusive of extraordinary items,
for the quarter ended December 31, 2010, all calculated in accordance with
generally accepted accounting principles, consistently applied, or (ii) does not
attain 100,000 connections to the network by the quarter ended December 31, 2010
or (iii) fails to file with the SEC its Form 10-Q for the period ended December
31, 2010 (inclusive of the Company’s Consolidated Statement of Operations for
such period) by February 21, 2011, the Company shall:  (A) appoint the
Third Save Nominee (as defined below) as an additional director to the Board no
later than March 1, 2011 (the “Third Appointment”);
and (B) nominate the same Third Save Nominee (as defined below) to serve as a
director, as part of the Company’s slate of directors at the annual meeting of
shareholders to be held on June 13, 2011 (the “2011 Annual Meeting”)
and recommend that shareholders of the Company vote to elect the Third Save
Nominee at the 2011 Annual Meeting (and, in both cases, such individual shall
thereafter be included in the definition of “SAVE Nominees”).  The
“Third Save
Nominee” means an individual designated by SAVE in writing to the Company
on or before February 1, 2011 (the “Third Nominee
Notice”).  Such Third Nominee Notice shall contain the name and
address of such nominee along with all information required for director
nominees under Items 401, 403 and 404 of Regulation S-K under the federal
securities laws as well as a completed directors and officers questionnaire and
SAVE agrees to thereafter provide such other information as may be reasonably
requested by the Company.  Effective as of the Third Appointment, the
Company and the Board shall cause one director who is not a SAVE Nominee to
resign or be removed as a director on the Board, and the total number of
directors shall remain at nine (9).  When appointed and elected to the
Board, the Third SAVE Nominee shall be deemed to be a “SAVE Nominee” for the
purposes of this Agreement and shall agree in writing to be bound by all of the
provisions of this Agreement binding on or applying to SAVE Nominees, including
but not limited to Sections 4(b) and 4(d) of this Agreement.


    
      
         


      

      
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    (g)  In
the event that (i) any SAVE Nominee is unable to serve as a director, whether
due to death or other disability, the SAVE Group shall have the right to appoint
an individual as a replacement for such SAVE Nominee and (ii) any SAVE Nominees
are up for election at an election of directors prior to the June 2012 annual
meeting of shareholders, the Company hereby agrees to nominate such SAVE Nominee
for election at such meeting and recommend that the shareholders of the Company
vote “FOR” the SAVE Nominees.  The Company hereby agrees not to call a
special meeting of shareholders to remove any SAVE Nominee prior to the June
2012 annual meeting of shareholders.

     

    (h) In
the event that the Company (or its subsidiaries) is currently party to any
agreement providing indemnification and/or reimbursement of expenses to any
director of the Company, the Company hereby agrees to provide to each SAVE
Nominee such additional indemnification and reimbursement of expenses and shall,
concurrently with the date hereof, offer to enter into a separate agreement with
each SAVE Nominee providing such indemnification and reimbursement of
expenses.  In the event that, after the date hereof, the Company
agrees to provide to any director of the Company indemnification or advancement
of  expenses arrangements that are more favorable to such director
than what is at such time provided to any SAVE Nominee on the board of
directors, the Company shall concurrently therewith offer such more favorable
terms to such SAVE Nominee.  Each SAVE Nominee shall be entitled to
the same type and amount of consideration, including reimbursement of expenses,
for service on the Board as is provided for any other member of the Board,
including for service on any Board committee.


    
      
         


      

      
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    Section
2.  Proxy
Contest; Voting; Proxy Statement and Demand Withdrawal; Nominee
Information.

     

    (a)  The
SAVE Group hereby withdraws the notice submitted to the Company on October 30,
2009 in which it nominated Bradley M. Tirpak, Peter A. Michel and Alan J.
Gotcher as nominees for election at the Annual Meeting to be held on December
15, 2009, which withdrawal shall be irrevocable and effective as of the date
hereof.  The SAVE Group shall cease, directly or indirectly, any and
all efforts with respect to the Proxy Contest.

     

    (b)  The
SAVE Group shall promptly provide to the Company any information regarding any
SAVE Nominee reasonably requested by the Company that is required for inclusion
in any of the Company’s filings with the SEC.

     

    Section
3.  By-law
Amendments.  The Company has amended the By-laws of the Company
by adopting, effective as of the date hereof, the By-law
Amendments.

     

    Section
4.  Additional
Agreements.

     

    (a)  Committee
Participation.  The Board has, effective as of the date hereof,
appointed Bradley M. Tirpak to the Board’s Nominating Committee and Peter A.
Michel to the Board’s Audit Committee and Compensation Committee.  Up
to and including the June 2012 annual meeting of shareholders, the Company and
the Board hereby agree to maintain such committee appointments, including
appointing at least one SAVE Nominee to any committee of the Board created after
the date of this Agreement.

     

    (b)  Standstill
Agreement.  Each member of the SAVE Group and the SAVE Nominees
will not, and will cause each of its Affiliates and Associates not to, do any of
the following, directly or indirectly, without the prior written consent of the
Board for a period commencing on the date hereof and ending upon the earliest to
occur of (the “Standstill Termination
Date”): (i) December 31, 2011, (ii) any amendment, modification or repeal
of any of the By-law Amendments in violation of Section 1(b), (iii) any breach
by the Company of Section 1 or Section 4(a) of this Agreement, or (iv) the
failure, on or before thirty (30) calendar days prior to the deadline for
providing notice as set forth in Section 3.02 of the Company’s By-laws (or a
successor provision thereto), of the Company to confirm to the SAVE Group in
writing that the SAVE Nominees up for election at any shareholder meeting to be
held on or before December 31, 2011, will be nominated for election by the
Company, and that the Company shall recommend that the shareholders of the
Company vote to elect the Company’s slate, which shall include the SAVE
Nominees:

     

    (i)  collectively
acquire or seek to acquire, in the aggregate, more than ten percent (10%) of the
then outstanding Voting Securities of the Company;

     

    (ii)  solicit
proxies (or written consents), become a “participant” in a “solicitation,” as
such terms are defined in Instruction 3 of Item 4 of Schedule 14A and Rule 14a-1
of Regulation 14A, respectively, under the Exchange Act or join in or
participate in any “group” (within the meaning of Section 13(d)(3) of the
Exchange Act) soliciting proxies (or written consents) in each case with respect
to any Voting Securities of the Company in opposition to the recommendation or
proposal of the Board with respect to (A) the election of directors to the
Board, (B) any Section 14a-8 shareholder proposals to be voted on at an annual
or special meeting of shareholders, (C) the amendment of any provision of the
Company’s articles of incorporation or By-laws, or (D) a change in control of
the Company, as defined as a “USA Transaction” in Section 3.C of the Amended and
Restated Employment and Non-Competition Agreement between the Company and George
R. Jensen, Jr., dated September 24, 2009 (a “Change in
Control”);


    
      
         


      

      
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    (iii)  nominate
persons for election to, or seek to remove any person from, the Board or propose
any other business at any annual or special meeting of shareholders, or solicit
written consents to take any action that would require that notice to the
Company be provided pursuant to Section 3.02 of the Company’s
By-laws;

     

    (iv)  seek
to initiate or join in, directly or indirectly, any merger, consolidation,
recapitalization, liquidation or other business combination that would result in
a Change in Control of the Company;

     

    (v)  seek
to become officers or the Chairman of the Board of the Company;

     

    (vi)  commence,
encourage or support any derivative action in the name of the Company or any
class action against the Company with respect to any facts or events occurring
or arising prior to the date hereof; or

     

    (vii)  knowingly
take any action to (A) advise, assist, encourage or finance any person in
connection with any of the foregoing, (B) publicly suggest or announce a desire
to engage in a transaction that would result in any of the foregoing, or (C)
waive, modify or amend any provision of this Section 4(b).

     

    Notwithstanding
the foregoing, nothing in this Agreement shall prohibit or restrict any member
of the SAVE Group or SAVE Nominee from: (A) exercising his rights and fiduciary
duties as a director of the Company, (B) voting all of his Voting Securities of
the Company in his discretion, (C) complying with any disclosure or other
obligations under the rules and regulations of the SEC or other securities laws,
or (D) to the extent the Company seeks to take any actions to amend, modify or
repeal any of the By-law Amendments in violation of Section 1(b) or breach of
Section 1 or Section 4(a) of this Agreement, taking any action, either as a
director or a shareholder, otherwise prohibited by the foregoing with respect to
such action.

     

    (c)  Expenses.  Concurrently
with the execution of this Agreement, pursuant to wire instructions provided to
the Company prior to the date hereof along with copies of invoices and a
certification that the rates charged represent standard rates without premium,
the Company shall reimburse the SAVE Group and its service providers for their
actual out-of-pocket expenses incurred in connection with, and related to, the
Proxy Contest.  If any party to this Agreement brings an action or
other legal proceeding with respect to this Agreement against another party to
this Agreement, the party that is found to have been in violation of this
Agreement shall be responsible for all fees and expenses (including attorneys’
fees, costs and expenses) incurred by the prevailing party.  Except as
otherwise provided in this section, all attorneys’ fees, costs and expenses
incurred by each of the parties hereto shall be borne by such
party.

     

    (d)  Each
SAVE Nominee acknowledges that he has received a copy of, and, so long as such
SAVE Nominee is a Board member, shall, as a Board member, be subject to, the
Blackout Period and Notification Policy adopted May 10, 2007, the Code of
Business Conduct and Ethics adopted April 11, 2006, and the Amendment to the
Code of Business Conduct and Ethics adopted February 4, 2010, attached hereto as
Exhibit D, as
such policies may be amended from time to time.  The Company and the
Board agree that each of the foregoing policies shall be enforced by the Company
fairly and equally with respect to each Board member and officer to which such
policy applies.  The Board hereby agrees that from the date of this
Agreement until the June 2012 annual meeting of shareholders, it shall not amend
or adopt any policy or procedure to which the Board members are subject, unless
such amendment or new policy: (i) does not conflict with the terms of this
Agreement, (ii) is reasonably determined by the Board in good faith to be in the
best interest of the shareholders, (iii) applies equally to all similarly
situated board members and (iv) is customary for publicly traded small cap
companies.


    
      
         


      

      
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    Section
5.  SAVE
Release.  Except for the obligations assumed by the Company and
its Board pursuant to this Agreement, the SAVE Group, Alan J. Gotcher and Peter
A. Michel, each for themselves and itself and for their respective family
members, predecessors, heirs, personal representatives, successors and assigns,
hereby fully, forever, irrevocably and unconditionally remise and release the
Company and (a) any subsidiary, related and affiliated companies, (b) its
predecessors, successors and assigns and (c) its current and past officers and
directors, including but not limited to George R. Jensen, Jr., Stephen P.
Herbert, Douglas M. Lurio, Steven Katz, William L. Van Alen, Jr., Joel Brooks,
Steven D. Barnhart and Jack E. Price (the “Current Company
Directors”), agents, including but not limited to MacKenzie Partners,
Inc., and employees (the Company and the persons and entities included in
subparagraphs (a) (b) and (c) are hereinafter referred to jointly and severally
as the “Company
Released Parties”) of and from any and all claims, complaints, causes of
action, suits, damages, costs, attorneys’ fees, charges, liabilities and
obligations of any kind, nature or description whatsoever, which any of them
ever had, now have or hereafter can, shall or may have, against the Company
Released Parties, whether now known or unknown, in law or in equity, in contract
or in tort, pursuant to statute or otherwise, and whether asserted or unasserted
and liquidated or unliquidated, arising out of, based upon or related to: (i)
any and all claims, counts and causes of action contained in the Complaint and
Amended Complaint filed in the SAVE Action; (ii) any and all filings made by the
Company Released Parties with the SEC between October 1, 2009 and the present;
(iii) any and all proxy solicitations or communications made by the Company
Released Parties between October 1, 2009 and the present; (iv) any and all press
releases, website releases, public statements or letters to shareholders made by
the Company Released Parties between October 1, 2009 and the present; (v) the
scheduling of the Company’s Annual Meeting of Shareholders on December 15, 2009;
(vi) the postponement of the Company’s Annual Meeting of Shareholders from
December 15, 2009 to June 15, 2010; (vii) the governance changes enacted by the
Company Released Parties effective October 19, 2009; and (viii) any other action
taken or not taken by the Company Released Parties occurring from the beginning
of time to the present.

     

    Section
6.  Company
Release.  Except for the obligations assumed by the SAVE Group
pursuant to this Agreement, (i) the Company, for itself and for (a) its
subsidiaries, related and affiliated companies, as applicable, (b) its
predecessors, successors and assigns and (c) its current and past officers and
directors, including but not limited to the Current Company Directors, agents,
including but not limited to MacKenzie Partners, Inc., and employees, and (ii)
the Current Company Directors, each for himself and his respective family
members, predecessors, heirs, personal representatives, successors and assigns,
in each case hereby fully, forever, irrevocably and unconditionally remise and
release the SAVE Group, Alan J. Gotcher and Peter A. Michel  and their
respective family members, predecessors, heirs, agents, personal
representatives, successors and assigns (collectively referred to hereinafter
jointly and severally as the “SAVE Released
Parties”) of and from any and all claims, complaints, causes of action,
suits, damages, costs, attorneys’ fees, charges, liabilities and obligations of
any kind, nature or description whatsoever, which any of them ever had, now have
or hereafter can, shall or may have, against the SAVE Released Parties, whether
now known or unknown, in law or in equity, in contract or in tort, pursuant to
statute or otherwise, and whether asserted or unasserted and liquidated or
unliquidated, arising out of, based upon or related to: (i) any and all claims,
counts and causes of action contained in the Counterclaim; (ii) any and all
filings made by the SAVE Released Parties with the SEC between October 1, 2009
and the present; (iii) any and all proxy solicitations or communications made by
the SAVE Released Parties between October 1, 2009 and the present; (iv) any and
all press releases, website releases, public statements or letters to
shareholders made by the SAVE Released Parties between October 1, 2009 and the
present; (v) the scheduling of the Company’s Annual Meeting of Shareholders on
December 15, 2009; (vi) the postponement of the Company’s Annual Meeting of
Shareholders from December 15, 2009 to June 15, 2010; (vii) the governance
changes enacted by the Company Released Parties effective October 19, 2009; and
(viii) any other action taken or not taken by the SAVE Released Parties
occurring from the beginning of time to the present.


    
      
         


      

      
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    Section
7.  Dismissal of the SAVE
Action.  Concurrently with the execution and delivery of this
Agreement, the claims, counts and causes of action contained in the Amended
Complaint and Counterclaim filed in the SAVE Action shall be dismissed by each
of the SAVE Group, on the one hand, and the Company and the Current Company
Directors, on the other hand, with prejudice.

     

    Section
8.  Representations, Warranties
and Covenants.

     

    (a)  The
members of the SAVE Group represent, warrant and covenant, each as to himself,
as follows:

     

    (i)  Each
member of the SAVE Group has the power and authority to execute, deliver and
carry out the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby.

     

    (ii)  This
Agreement has been duly and validly authorized, executed and delivered by each
member of the SAVE Group, constitutes a valid and binding obligation and
agreement of each such member and is enforceable against each such member in
accordance with its terms.

     

    (iii)  Each
member of the SAVE Group’s execution of this Agreement and the performance by
each member of the SAVE Group’s obligations hereunder does not and will not
violate any law, any order of any court or other agency of
government.

     

    (iv)  The
information provided by the SAVE Group to the Company in writing with respect to
the SAVE Nominees for inclusion in any filings by the Company with the SEC (A)
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (B) shall not contain any statement which, at the time
and in light of the circumstances under which such statement is made, will be
false or misleading with respect to any material fact, and (C) shall not omit to
state any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier filing
with the SEC.


    
      
         


      

      
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    (b)  The
Company hereby represents, warrants and covenants as follows:

     

    (i)  The
Company has the power and authority to execute, deliver and carry out the terms
and provisions of this Agreement and to consummate the transactions contemplated
hereby.

     

    (ii)  This
Agreement has been duly and validly authorized, executed and delivered by the
Company, does not require the approval of the shareholders of the Company,
constitutes a valid and binding obligation and agreement of the Company and is
enforceable against the Company in accordance with its terms.

     

    (iii)  The
Company’s execution of this Agreement and the performance by the Company of its
obligations hereunder does not and will not violate any law, any order of any
court  or other agency of government, the articles of incorporation or
by-laws of the Company, as amended, or any provision of any indenture, agreement
or other instrument to which the Company or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of, or give rise to, any
lien, charge, restriction, claim, encumbrance or adverse penalty of any nature
whatsoever pursuant to any such indenture, agreement or other
instrument.

     

    Section
9.  Specific
Performance.  Each of the members of the SAVE Group, on the one
hand, and the Company, on the other hand, acknowledges and agrees that
irreparable injury to the other party hereto would occur in the event any of the
provisions of this Agreement were not performed in accordance with its specific
terms or were otherwise breached, and that such injury would not be adequately
compensable in damages.  It is accordingly agreed that the members of
the SAVE Group, on the one hand, and the Company, on the other hand, shall each
be entitled to specific enforcement of, and injunctive relief to prevent any
violation of, the terms hereof and the other party hereto will not take any
action, directly or indirectly, in opposition to the party seeking relief on the
grounds that any other remedy or relief is available at law or in equity, and
each party further agrees to waive any requirement for the security or posting
of any bond in connection with such remedy.  In the event any party
brings an action to enforce any of the terms of this Agreement, such action
shall only be brought in the United States District Court for the Eastern
District of Pennsylvania.

     

    Section
10.  Press
Release and Other Public Disclosures.  Immediately following
the execution and delivery of this Agreement, the Company and Shareholder
Advocates for Value Enhancement shall issue a joint press release, in such form
as approved by the Company and the SAVE Group (the “Press Release”) and
the Company shall file a Current Report on Form 8-K with the SEC disclosing and
attaching as exhibits this Agreement and the Press Release (the “Form 8-K”),
each in the form attached hereto as Exhibit
E.  None of the parties hereto will make any public statements
or issue any press release (including in any filings with the SEC or any other
regulatory or governmental agency, including any stock exchange) concerning or
relating to this Agreement, the Proxy Contest, the SAVE Action or the
Counterclaim thereto other than the statements in the Press Release and the Form
8-K without (a) in the case of the Company or any Current Company Director, the
prior written approval of a member of the SAVE Group, and (b) in the case of the
SAVE Group, the prior written approval of the Company.  Following the
execution of this Agreement and continuing through and ending on the Standstill
Termination Date, no member of the SAVE Group and no SAVE Nominee will make any
public statement or issue any press release, as a member of or on behalf of
Shareholder Advocates for Value Enhancement, concerning or relating to any
action or decision taken or made or not taken or made by the Company or the
Board.


    
      
         


      

      
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    Section
11.  No
Waiver.  Any waiver by any party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement.  The failure of a party to insist upon strict adherence to
any term of this Agreement on one or more occasion shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.

     

    Section
12.  Successors and
Assigns.  All the terms and provisions of this Agreement shall
inure to the benefit of, and shall be enforceable by and binding upon, the
heirs, personal representatives, successors and assigns of each of the parties
hereto.  No party may assign either this Agreement or any of its
rights, interest or obligations hereunder without the prior written approval of
the other parties.

     

    Section
13.  Entire
Agreement; Amendments; Interpretation and Construction.  This
Agreement, including the Exhibits hereto, contains the entire understanding of
the parties with respect to the subject matter hereof.  There are no
restrictions, agreements, promises, representations, warranties, covenants or
other undertakings other than those expressly set forth in this
Agreement.  This Agreement may be amended only by a written instrument
duly executed by the Company and the SAVE Group or their respective heirs,
personal representatives, successors or assigns.  Each of the parties
hereto acknowledges that it has been represented by counsel of its choice
throughout all negotiations that have preceded the execution of this Agreement,
and that it has executed the same with the advice of such
counsel.  Each party and its counsel cooperated and participated in
the drafting and preparation of this Agreement and the documents referred to
herein.  Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this Agreement against any party
that drafted or prepared it is of no application and is hereby expressly waived
by each of the parties hereto, and any controversy over interpretations of this
Agreement shall be decided without regard to events of drafting or
preparation.

     

    Section
14.  Headings.  The
section headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.

     

    Section
15.  Notices.  All
notices, demands and other communications to be given or delivered under, or by
reason of, the provisions of this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered by hand (with written confirmation
of receipt), (b) upon sending (on the date sent if a business day, or if not
sent on a business day, the first business day thereafter) if sent by facsimile,
with electronic confirmation thereof, provided, however, that a copy is sent on
the same day by registered mail, return receipt requested, in each case to the
appropriate mailing and facsimile addresses set forth below, (c) one (1) day
after being sent by a nationally recognized overnight carrier to the addresses
set forth below or (d) when actually delivered if sent by any other method that
results in delivery (with written confirmation of receipt):


    
      
         


      

      
        9

        
          

        

      

      
         


      

    

     

    
      	 
      	
              If
      to the Company:

            
	 	 
	 
      	
              USA
      Technologies, Inc.

            
	 
      	
              Suite
      140

            
	 
      	
              100
      Deerfield Lane

            
	 
      	
              Malvern,
      PA 19355

            
	 
      	
              Attn:

            	
              George
      R. Jensen, Jr.

            
	 
      	 
      	
              Chairman
      and Chief Executive Officer

            
	 
      	
              Facsimile:

            	
              610-989-0704

            
	 
      	 
      	 
      
	 	 	 
	 
      	
              with
      a copy to:

            
	 	 
	 
      	
              Ballard
      Spahr LLP

            
	 
      	
              1735
      Market Street

            
	 
      	
              51st
      Floor

            
	 
      	
              Philadelphia,
      PA 19103

            
	 
      	
              Attn:

            	
              Justin
      P. Klein, Esquire

            
	 
      	
              Facsimile:

            	
              215-864-9166

            
	 
      	 
      	 
      
	 
      	
              If
      to the SAVE Group (or any member thereof):

            
	 	 
	 
      	
              Shareholder
      Advocates for Value Enhancement

            
	 
      	
              c/o
      Bradley M. Tirpak

            
	 
      	
              50
      Orchard Street

            
	 
      	
              New
      York, New York 10002

            
	 
      	
              Attn:

            	
              Bradley
      M. Tirpak

            
	 
      	
              Facsimile:

            	
              +44
      207 479 7710

            
	 
      	 
      	 
      
	 
      	
              with
      a copy to:

            
	 	 
	 
      	
              Dechert
      LLP

            
	 
      	
              1095
      Avenue of the Americas

            
	 
      	
              New
      York, New York 10036-6797

            
	 
      	
              Attn:

            	
              Derek
      M. Winokur, Esquire

            
	 
      	
              Facsimile:

            	
              212-698-3599

            


    

    


    in each
case, or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth in this
section.

     

    Section
16.  Governing
Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
reference to the conflict of laws principles thereof.


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    Section
17.  Counterparts.  This
Agreement may be executed in counterparts and by facsimile or e-mail in portable
documents format (.pdf), each of which shall be an original, but all of which
together shall constitute one and the same Agreement.

     

    Section
18.  Severability.  If
any provision or clause of this Agreement or the application thereof to any
person or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, such provision or clause shall be deemed amended
to conform to applicable laws so as to be valid and enforceable, or, if it
cannot be so amended without materially altering the intention of the parties,
such provision shall be stricken, and the remaining provisions hereof will
remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby so long as the transactions contemplated hereby are not
affected in any manner materially adverse to any party.

     

    Section
19.  No
Third Party Beneficiaries.  This Agreement is solely for the
benefit of the parties hereto and is not enforceable by any other
person.

     

     

    [Remainder
of page intentionally left blank]


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the date first written above.

     

    
      	 
      	
              USA
      TECHNOLOGIES, INC.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ George R. Jensen,
Jr.

            
	 
      	
              Name:

            	
              George
      R. Jensen, Jr.

            
	 
      	
              Title:

            	
              Chairman
      and Chief Executive Officer

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Stephen P. Herbert

            
	 
      	
              Name:

            	
              Stephen
      P. Herbert

            
	 
      	
              Title:

            	
              Director

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Douglas M. Lurio

            
	 
      	
              Name:

            	
              Douglas
      M. Lurio

            
	 
      	
              Title:

            	
              Director

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Steven Katz

            
	 
      	
              Name:

            	
              Steven
      Katz

            
	 
      	
              Title:

            	
              Director

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Joel Brooks

            
	 
      	
              Name:

            	
              Joel
      Brooks

            
	 
      	
              Title:

            	
              Director

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Steven D. Barnhart

            
	 
      	
              Name:

            	
              Steven
      D. Barnhart

            
	 
      	
              Title:

            	
              Director

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Jack E. Price

            
	 
      	
              Name:

            	
              Jack
      E. Price

            
	 
      	
              Title:

            	
              Director

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Alexandra VA Frazier POA William L. Van Alen,
      Jr.

            
	 
      	
              Name:

            	
              William
      L. Van Alen, Jr.

            
	 
      	
              Title:

            	
              Director

            


    


    
      
         


      

      
        12

        
          

        

      

      
         


      

    

     

    
      	 
      	
              SHAREHOLDER
      ADVOCATES FOR VALUE ENHANCEMENT

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Bradley M. Tirpak

            
	 
      	
              Name:

            	
              Bradley
      M. Tirpak

            
	 
      	
              Title:

            	
              Committee
      Member

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ Craig W. Thomas

            
	 
      	
              Name:

            	
              Craig
      W. Thomas

            
	 
      	
              Title:

            	
              Committee
      Member

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              /s/ Bradley M. Tirpak

            
	 
      	
              Name:  Bradley
      M. Tirpak, individually

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              /s/ Craig W. Thomas

            
	 
      	
              Name:  Craig
      W. Thomas, individually

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              /s/ Peter A. Michel

            
	 
      	
              Name:  Peter
      A. Michel

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              /s/ Alan J. Gotcher

            
	 
      	
              Name:  Alan
      J. Gotcher

            


    


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    Exhibit
A

    Settlement
Resolutions

    


    Resolutions
to be Adopted at a Meeting of the Board of Directors

    of USA Technologies, Inc.
(the “Company”)

    


    WHEREAS,
the Board of Directors believes it is in the best interests of the Company to
enter into that certain Settlement Agreement, together with all related
schedules and releases, as of the date hereof and attached hereto as Annex A (the “Settlement
Agreement”), and to take the steps set forth in the Settlement
Agreement.

     

    NOW,
THEREFORE, in connection with the foregoing, the Board of Directors hereby
adopts the following resolutions:

     

    APPROVAL
OF SETTLEMENT AGREEMENT

     

    RESOLVED,
that the Company be, and it hereby is, authorized and empowered to enter into,
execute, deliver and perform its obligations under the Settlement Agreement,
that the Settlement Agreement is hereby approved substantially in the form
presented to the Board, that any one or more of the officers of the Company,
including without limitation, the President, any Vice President, the Secretary
or the Assistant Secretary of the Company, be, and each of them hereby is,
authorized and empowered, in the name of and on behalf of the Company, to enter
into, execute and deliver the Settlement Agreement, such approval to be
conclusively evidenced by his or their execution and delivery thereof and that
the Settlement Agreement shall be the valid obligation of and binding upon the
Company in the form and content in which it is so executed.

     

    APPOINTMENT
OF SAVE NOMINEES

     

    RESOLVED,
that Bradley M. Tirpak and Peter A. Michel (the “SAVE Nominees”) are hereby
appointed as Directors of the Company with Bradley M. Tirpak being appointed as
a director of the second class and Peter A. Michel being appointed as a director
of the first class, as described in Section 4.03(b) of the Company’s By-laws,
and until their successors shall have been duly elected and qualified, or until
their earlier resignation or removal, and shall be considered “Continuing
Directors” as such term is defined in that certain Amended and Restated
Employment and Non-Competition Agreement between the Company
and George Jensen, Jr., dated as of September 24, 2009; and
further

     

    RESOLVED,
that the SAVE Nominees shall be included in the Company’s slate of nominees in
all proxy materials delivered to shareholders in connection with the Company’s
2010 Annual Meeting to be held on June 15, 2010, and that the Board hereby
unanimously recommends that the shareholders vote “FOR” the SAVE
nominees.

     

    NEW
COMMITTEE APPOINTMENTS

     

    RESOLVED,
that Peter A. Michel has been appointed to the Audit Committee, Peter A. Michel
has been appointed to the Compensation Committee and Bradley M. Tirpak has been
appointed to the Nominating Committee.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    AMENDMENT
TO BY-LAWS

     

    RESOLVED,
that it is advisable and in the best interests of the Company to adopt, and the
Company hereby does adopt, the amendments to the By-laws as set forth in Annex B attached
hereto.

     

    AMENDMENT
TO CODE OF BUSINESS CONDUCT AND ETHICS

     

    RESOLVED,
that it is advisable and in the best interests of the Company to adopt, and the
Company hereby does adopt, the amendments to the Code of Business Conduct and
Ethics as set forth in Annex C attached
hereto.

     

    GENERAL
AUTHORIZATION

     

    RESOLVED,
that the directors and officers of the Company be, and each of them hereby is,
authorized, empowered and directed, in the name of and on behalf of the Company,
to do and perform, or cause to be done and performed, all such acts, deeds and
things to make, execute and deliver, or cause to be made, executed and
delivered, all such agreements, undertakings, documents, instruments or
certificates as each such officer or officers may deem necessary or appropriate
to effectuate or carry out fully the purpose and intent of the foregoing
resolutions.

     

    RESOLVED,
that all actions previously taken by any director, officer, employee or agent of
the Company in connection with or related to the matters set forth in or
reasonably contemplated or implied by the foregoing resolutions be, and each of
them hereby is, adopted, ratified, confirmed and approved in all respects as the
acts and deeds of the Company.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    Exhibit
B

    By-law
Amendments

    


    Amendments to Company
By-laws

    


    


    
      	
              1.

            	
              Section
      4.03(a) of the By-laws is hereby deleted in it entirety and the following
      new Section 4.03(a) substituted in its
place:

            


    

    


    
      	
               
      

            	
              “(a)
      Number. The board of directors shall consist of nine
    members.”

            


    

    


    
      	
              2.

            	
              Paragraph
      (b) of Section 4.03 of the By-laws is hereby deleted in its entirety and
      the following new paragraph shall be substituted in its
    place:

            


    

    


    
      	
               
      

            	
              “(b)
      Term of
      Office.

            


    

    


    (i)           Until
December 31, 2011 the directors shall be classified, with respect to the time
for which they severally hold office, into three classes. The initial term of
office of the directors shall be as follows: the term of directors of the first
class shall expire at the first annual meeting of shareholders following the
initial annual meeting at which such class was elected; the term of directors of
the second class shall expire at the second annual meeting of shareholders
following the initial annual meeting at which such class was elected; and the
term of directors of the third class shall expire at the third annual meeting of
shareholders following the initial annual meeting at which such class was
elected.  Except as provided in the last sentence of this Section
4.03(b)(i), at each annual meeting of shareholders following the annual meeting
of shareholders on June 15, 2010, the class of directors whose term expires at
such meeting shall be elected to hold office for a term expiring at the third
annual meeting of shareholders following the annual meeting at which such class
of directors was elected. Each director (of any class or whenever elected) shall
hold office until his or her successor has been selected and qualified, or until
his or her earlier death, resignation or removal.  The term of office
of any director whose term would otherwise extend beyond the annual meeting to
be held on or about June 15, 2012, shall expire at such annual meeting on or
about June 15, 2012 without any further action required by the
Company.

    


    (ii)          Beginning
on January 1, 2012 and thereafter, the term of office of each director shall be
one year. Each
director shall hold office until the expiration of the term for which he or she
was selected and until a successor has been selected and qualified or until his
or her earlier death, resignation or removal.  Any director who was
elected to a term of office whose term would otherwise extend beyond the annual
meeting to be held on or about June 15, 2012, shall expire at such annual
meeting on or about June 15, 2012 without any further action required by the
Company.  A decrease in the number of directors shall not have the
effect of shortening the term of any incumbent director.”


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    
      	
              3.

            	
              Section
      3.02(a) of the By-laws is hereby deleted in its entirety and the following
      new Section 3.02(a) substituted in its
place:

            


    

    


    “(a) The
board of directors shall fix and designate the annual meeting of the
shareholders to be held on or about June 15 in each calendar year, on a date no
earlier than June 8 and no later than June 30, at 10 o’clock A.M.; provided, however, the 2011
annual meeting of the shareholders shall be held on June 13, 2011. At said
annual meeting, the shareholders then entitled to vote shall elect
directors:  (a) at the annual meetings of shareholders on June 15,
2010 and on June 13, 2011, for the three classes of directors with each class
having a staggered term and shall transact such other business as may properly
be brought before the meeting; and (b) at the annual meetings of shareholders
commencing on or about June 15, 2012, and continuing thereafter, for one year
terms and shall transact such other business as may properly be brought before
the meeting.  If the annual meeting shall not have been called and
held within thirty days of the required time, any shareholder or director may
call the annual meeting at any time thereafter.”

    


    
      	
              4.

            	
              The
      following new language is hereby added after the first sentence of Section
      3.03(a) of the By-laws:

            


    

    


    “Special
meetings of the shareholders may also be called by the holders of at least 20%
of the combined voting power of the then outstanding shares entitled to vote at
the particular meeting; provided, however, that a special meeting may not be
called by any shareholder or shareholders for the purpose of electing or
removing any director or directors of the corporation.  Upon request
in writing sent by registered mail to the chairman of the board of directors or
chief executive officer of the corporation by any shareholder or shareholders
entitled to call a special meeting of the shareholders pursuant to this Section
3.03(a), the board of directors shall determine a place and time for such
meeting, which time shall not be less than ninety (90) nor more than one hundred
and twenty (120) days after the receipt of such request, and a record date for
the determination of shareholders entitled to vote at such meeting in the manner
set forth in Section 3.12 hereof.  Following such receipt, it shall be
the duty of the secretary of the corporation to cause notice to be given to the
shareholders entitled to vote at such meeting, in the manner set forth in
Section 2.03 hereof, that a meeting will be held at the time and place so
determined.”

    


    
      	
              5.

            	
              The
      following new paragraph is hereby added after the existing paragraph of
      Section 8.08 of the By-laws:

            


    

    


    “Notwithstanding
subsection (ii) of the first sentence of the foregoing paragraph of this Section
8.08, the board of directors shall not take any action to amend, repeal or
modify the following provisions of these By-laws, or make any other amendments
to the By-laws that would have the effect of amending, repealing or modifying
such provisions, unless (i) at least 66% of the independent directors of the
Company then in office shall have approved such amendment, repeal or
modification, and (ii) during the period of time up to and including the June
2012 annual meeting of shareholders that any SAVE Nominee (as defined below) is
a member of the Board, at least one SAVE Nominee approved such repeal, amendment
or modification: Section 3.02(a); Section 4.03(a); Section 4.03(b); the second,
third and fourth sentences of Section 3.03(a); and this sentence of Section
8.08.  For purposes of this paragraph, the term “independent
directors” shall mean directors of the corporation that are independent under
the independence standards applicable to the corporation under paragraph (a)(1)
of Item 407 of Regulation S-K promulgated by the Securities and Exchange
Commission as such Item may be amended from time to time or any successor
thereto.  “SAVE Nominee” shall mean any member of the board of
directors of the Company who was originally appointed or selected for nomination
by the Shareholder Advocates for Value Enhancement pursuant to that certain
Settlement Agreement, dated February 4, 2010, by and among the Company and the
other parties thereto.”


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    Exhibit
C

    Resignation
Letter

    


    [Letterhead
of William Van Alen, Jr.]

    


    USA
Technologies, Inc.

    Suite
140

    100
Deerfield Lane

    Malvern,
PA 19355

    


    February
4, 2010

    


    To the
Corporate Secretary of USA Technologies, Inc.:

    


    I hereby
resign from the Board of Directors of USA Technologies, Inc. and all committees
thereof effective immediately.

    


    Sincerely,

    


    


    William
Van Alen, Jr.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    Exhibit
D

    


    


    USA
TECHNOLOGIES, INC.

    AMENDMENT
TO CODE OF BUSINESS CONDUCT AND ETHICS

    


    This
Amendment to Code of Conduct And Ethics (this “Amendment”) applies to all
non-employee members of USA Technologies, Inc.’s (“USAT”) Board of Directors,
referred to hereinafter as “you” or as “Outside Directors”. This Amendment shall
supplement Section 10 Confidentiality of
USAT’s Code of Business Conduct and Ethics that was adopted by the Board of
Directors of USAT on April 11, 2006 (the “Code”). As supplemented by the policy
set forth in this Amendment, all of the provisions of the Code shall remain in
full force and effect.

    


    With the
exception of information that is publicly available, information concerning USAT
or its business (including, but not limited to, the information described in the
next paragraph) that is entrusted to or obtained by a Director by reason of his
or her position as a Director of USAT should be considered and constitute
confidential information.

    


    Confidential
information includes, among other things, the following items that have not been
made publicly available by USAT:

    


    
      •   non-public
information concerning USAT’s business plans, strategies and
practices

      •   non-public
information about USAT’s transactions, products and services

      •   non-public
financial information and analyses

      •   non-public
information about competitors, financial institutions, business partners,
customers (including customer lists), clients, employees and USAT’s dealings
with them

      •   non-public
pricing, quoting and investment information, policies, procedures, practices and
plans

      •   non-public
performance measures for products or processes and the methods used to derive
those measures

      •   non-public
information about discussions and deliberations relating to business issues and
decisions, between and among employees, officers and
Directors



    Outside
Directors shall not contact or communicate with the Company’s customers,
suppliers or business partners without prior written Board
approval.

    


    


    Effective
Date: February 4, 2010


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    Exhibit
E

    Joint
Press Release

    and Form
8-K

    


    


    
    

    News
Release

    For
Immediate Release

    


    
      	
              USA Technologies Contact:

            	
              Investor Relations
  Contact:

            
	
              George
      Jensen, Chairman & CEO

            	
              Marlon
      Nurse, Vice President

            
	
              Stephen
      P. Herbert, President & COO

            	
              Porter,
      LeVay & Rose, Inc.

            
	
              e-mail:
      sherbert@usatech.com

            	
              Phone:
      (212) 564-4700

            
	
              Phone:
      (800) 633-0340

            	 
      
	 
      	 
      
	
              SAVE
      Contact:

            	 
      
	
              Bradley
      Tirpak, Committee Member

            	 
      
	
              e-mail:
      brad@Tirpak.com

            	 
      
	
              Phone:
      917-482-8229

            	 
      


    

    


    


    USA
TECHNOLOGIES AND SAVE ANNOUNCE

    SETTLEMENT
OF PROXY CONTEST

    


    


    MALVERN, PA and NEW YORK, NY,
February 5, 2010 - USA Technologies, Inc. (NASDAQ:USAT), a leading
supplier of networked devices and wireless non-cash transactions, associated
financial/network services and energy management, and Shareholder Advocates for
Value Enhancement (“SAVE”) announced today that they have reached an agreement
to settle the proxy contest related to the Company’s 2010 annual meeting of
shareholders originally scheduled for December 15, 2009 and postponed until June
15, 2010.

    


    Under the
terms of the settlement agreement, the Board has been increased from eight to
nine members, and Bradley M. Tirpak and Peter A. Michel, as nominees of SAVE,
have been appointed to serve as directors. In addition, SAVE has the right to
appoint a third director to the Board if the Company does not achieve positive
earnings before interest, taxes, depreciation and amortization in the quarter
ending December 31, 2010 and have at least 100,000 connections to its network as
of December 31, 2010. Immediately prior to the signing of the settlement
agreement, William L. Van Alen, Jr., resigned as a director. Mr. Van Alen had
served as a director of the Company since 1993.

    


    In
connection with the settlement agreement, the Board has approved several
corporate governance changes, including declassifying the Board of Directors
effective January 1, 2012 and allowing shareholders to call special shareholder
meetings in certain circumstances.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    George
Jensen, Chairman and CEO of USA Technologies said, “Reaching this agreement, we
believe, serves the best interests of the Company, its customers and its
shareholders. We look forward to working productively with the new members of
the Board as we work to achieve our strategic plan.”

    


    Mr.
Jensen added, “I would like to personally thank Bill Van Alen for his dedicated
service to the Company as a member of our Board of Directors since 1993. Bill
has been a valuable resource to our Board and the Company and we are grateful
for his significant contributions to the Company.”

    


    Bradley
Tirpak, a member of SAVE, said “With this settlement, we believe the Company has
taken a significant step forward in improving its corporate
governance.  Peter and I believe in the Company and its products and
look forward to working constructively with the Board and management to enhance
shareholder value.”

    


    As part
of the settlement agreement, SAVE has withdrawn its director nominees for
consideration at the 2010 annual meeting of shareholders and the pending
litigation between the Company and SAVE has been dismissed. In addition, SAVE
has agreed to a broad standstill extending through December 31,
2011.

    


    As part
of the settlement agreement, the Company reimbursed SAVE for actual
out-of-pocket expenses incurred in connection with the proxy contest. The
Company will file the full text of the settlement agreement today with the
Securities and Exchange Commission as an exhibit to the Company’s Current Report
on Form 8-K.

    


    About USA
Technologies

    USA
Technologies (www.usatech.com) is a
leader in the networking of wireless non-cash transactions, associated
financial/network services and energy management.  USA Technologies
provides networked credit card and other non-cash systems in the vending,
commercial laundry, hospitality and digital imaging industries. The Company has
agreements with AT&T, Visa, MasterCard, Compass and others.

    


    About
SAVE

    Shareholder
Advocates for Value Enhancement (SAVE) is an independent group of investors in
the Company whose members, Bradley M. Tirpak and Craig W. Thomas, are committed
to enhancing long-term value for the Company’s shareholders.

    


    


    Forward-looking
Statements

    "Safe
Harbor" statement under the Private Securities Litigation Reform Act of 1995:
All statements other than statements of historical fact included in this
release, including without limitation the financial position, business strategy
and the plans and objectives of the Company's management for future operations,
are forward-looking statements. When used in this release, words such as
"anticipate", "believe", "estimate", "expect", "intend", and similar
expressions, as they relate to the Company or its management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors, including but not limited to,
business, financial market and economic conditions, including but not limited
to, the ability of the Company to retain key customers from whom a significant
portion of its revenues is derived; the ability of the Company to compete with
its competitors to obtain market share; the ability of the Company to estimate,
anticipate, or control its cash and non-cash expenses, costs, or charges; or the
ability of the Company to obtain widespread and continued commercial acceptance
of it products or services. Readers are cautioned not to place undue reliance on
these forward-looking statements. Any forward-looking statement made by us in
this release speaks only as of the date of this letter. Unless required by law,
the Company does not undertake to release publicly any revisions to these
forward-looking statements to reflect future events or circumstances or to
reflect the occurrence of unanticipated events.

     

    
      
         


      

      
        2 


        
          

        

      

      
         


      

    


    SECURITIES
AND EXCHANGE COMMISSION

    Washington,
D.C. 20549

    


    
      
        

      



    FORM
8-K

    


    Current
Report Pursuant to Section 13 or 15(d) of

    The
Securities Exchange Act of 1934

    


    
      
        

      

    

     

    Date of
report (Date of earliest event reported): February 4, 2010

    


    USA
TECHNOLOGIES, INC.

    (Exact
name of registrant as specified in its charter)

    


    
      	
              Pennsylvania

            	 
      	
              001-33365

            	 
      	
              23-2679963

            
	 
      	 
      	 
      	 
      	 
      
	
              (State
      or other jurisdiction of incorporation or organization)

            	 
      	
              (Commission
      File Number)

            	 
      	
              (I.R.S.
      Employer Identification No.)

            


    

    


    100
Deerfield Lane, Suite 140

    Malvern,
Pennsylvania 19355

    (Address
of principal executive offices and zip code)

    


    Registrant’s
telephone number, including area code: 610-989-0340

    


    n/a

    Former
name or former address, if changed since last report

    


    


    Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:

    


    
      	
               
      

            	
              o

            	
              Written
      communications pursuant to Rule 425 under the Securities Act (17 CFR
      230.425)

            


    

    


    
      	
               
      

            	
              o

            	
              Soliciting
      material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)

            


    

    


    
      	
               
      

            	
              o

            	
              Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
      240.14d-2(b))

            


    

    


    
      	
               
      

            	
              o

            	
              Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
      240.13e-4(c))

            


    


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    Item
1.01 Entry into a Material Definitive Agreement

    


    On
February 4, 2010, USA Technologies, Inc. (the “Company”), and Shareholder
Advocates For Value Enhancement, Bradley M. Tirpak, and Craig W. Thomas (jointly
and severally, the “SAVE Group”), and each of the directors of the Company,
entered into a Settlement Agreement (the “Settlement Agreement”) to settle the
proxy contest pertaining to the election of directors to the Company’s Board of
Directors (the “Board”) at the Company’s annual meeting of shareholders
originally scheduled for December 15, 2009 and to be held, as postponed, on June
15, 2010 (the “2010 Annual Meeting”).

    


    Pursuant
to the Settlement Agreement, among other things:

    


    -              The
size of the Board was increased from 8 to 9 members creating a vacancy on the
Board.

    


    -              The
Company accepted the resignation of William L. Van Alen, Jr., as a director
effective February 4, 2010, resulting in another vacancy on the
Board.

    


    -              Peter
A. Michel and Bradley M. Tirpak, nominees of the SAVE Group, were appointed by
the Board to fill the two vacancies. The Board also appointed Mr. Tirpak to
serve on the Nominating Committee and appointed Mr. Michel to serve on the Audit
Committee and the Compensation Committee.

    


    -              If
the Company does not (i) achieve positive earnings before interest, taxes,
depreciation and amortization (“EBITDA”) in the quarter ending December 31, 2010
and (ii) have at least 100,000 connections to its network as of December 31,
2010, the SAVE Group shall have the right to name a third nominee to serve on
the Board, and the Company shall cause one director who is not a SAVE Group
nominee to resign or be removed as a director, and the number of directors shall
remain at nine.

    


    -              The
Company amended certain provisions of its By-Laws, as further set forth under
item 5.03 below.  The Company agreed that such By-law amendments shall
not be repealed, amended or modified by the Board unless (i) at least 66% of the
independent directors of the corporation then in office shall have approved such
amendment, repeal or modification, and (ii) during the period of time up to and
including the June 2012 annual meeting of shareholders that any SAVE Nominee is
a member of the Board, at least one SAVE Nominee approves such repeal, amendment
or modification.


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    -              At
the 2010 Annual Meeting to be held on June 15, 2010, the Company will nominate
three classes of directors consisting of three Class I directors, three Class II
directors, and three Class III directors. Mr. Michel shall be nominated as a
Class I director and Mr. Tirpak shall be nominated as a Class II director. The
initial term of the Class I directors shall be one year, the initial term of the
Class II directors shall be two years, and the initial term of the Class III
directors shall be three years.

    


    -              At
the 2011 annual meeting of shareholders, only the three Class I directors shall
be elected.

    


    -              At
the 2012 annual meeting of shareholders, all of the directors of the Company
shall stand for election as one class (notwithstanding the initial term of the
Class III directors or the Class I directors elected at the 2011 annual
meeting), the composition of the board shall consist of only one class of
directors and upon election, all directors shall serve for one year
terms.

    


    -              The
SAVE Group has irrevocably withdrawn the notice to the Company of the intention
to nominate three individuals at the 2010 Annual Meeting, and has agreed to
immediately cease all efforts related to their proxy solicitation with respect
to the 2010 Annual Meeting.

    


    -              Through
December 31, 2011 (or an earlier date upon the occurrence of certain events),
each member of the SAVE Group and the SAVE Group nominees to the Board will not,
directly or indirectly, take certain actions, including any of the following
without the consent of the Board: (i) collectively acquire or seek to acquire,
in the aggregate, more than ten percent (10%) of the then outstanding voting
securities of the Company; (ii) solicit proxies, become a participant in a
solicitation, or join in or participate in any group soliciting proxies in each
case with respect to any voting securities of the Company in opposition to the
recommendation or proposal of the Board with respect to the election of
directors, any shareholder proposals to be voted on at an annual or special
meeting of shareholders, the amendment of any provision of the Company’s
articles of incorporation or By-laws, or a change in control of the Company;
(iii) nominate persons for election to, or seek to remove any person from, the
Board or propose any other business at any annual or special meeting of
shareholders; (iv) seek to initiate or join in, directly or indirectly, any
merger, consolidation, recapitalization, liquidation or other business
combination that would result in a change in control of the Company; or (v) seek
to become officers or the Chairman of the Board of the Company; provided,
however, that the Settlement Agreement shall not prevent any member of the SAVE
Group or any SAVE Group nominees from, among other things, exercising his rights
and fiduciary duties as a director or voting any Company shares owned by him in
his discretion.


    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    -              The
Company and the SAVE Group agreed to a mutual release of claims, including those
arising in respect of, or in connection with, the proxy contest relating to the
2010 Annual Meeting.

    


    -              The
Company and the SAVE Group voluntarily dismissed with prejudice the litigation
pending in the United States District Court for the Eastern District of
Pennsylvania entitled Bradley M. Tirpak and Craig
W. Thomas d/b/a Shareholder Advocates For Value Enhancement vs. USA
Technologies, Inc., et al., Civil Action No. 09-5920.

    


    -              The
Company reimbursed the SAVE Group for actual out-of-pocket expenses in the
aggregate amount of $1,160,441 incurred in connection with the proxy contest of
which $450,000 will be contributed by the Company’s insurance
carrier.

    


    A copy of
the Settlement Agreement is filed with this Form 8-K and attached hereto as
Exhibit 10.1. The foregoing description of the Settlement Agreement is qualified
in its entirety by reference to the full text of the Settlement Agreement, which
is incorporated herein by reference. On February 5, 2010, the Company and SAVE
issued a joint press release announcing the signing of the Settlement Agreement.
A copy of the press release is filed with this Form 8—K and attached hereto as
Exhibit 99.1.

    


    Item
5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers

    


    (b) William L. Van Alen,
Jr., resigned as a director of the Company effective February 4, 2010. Mr. Van
Alen had served on the Board since 1993, and had been a member of the Audit
Committee and Compensation Committee of the Board of Directors.

    


    (d) On February 4, 2010,
pursuant to the Settlement Agreement, the Board appointed Bradley M. Tirpak and
Peter A. Michel as directors of the Company. Mr. Tirpak was appointed to serve
on the Nominating Committee and Mr. Michel was appointed to serve on the Audit
Committee and Compensation Committee.


    
      
         


      

      
        6

        
          

        

      

      
         


      

    


    Messrs.
Tirpak and Michel will, for their service on the Board and committees of the
Board, receive the same compensation payable by the Company to its other
non-employee directors for their service on the Board and committees and will be
provided with the same indemnification/reimbursement of expenses made available
by the Company to its other non-employee directors.

    


    Pursuant
to the Settlement Agreement, the Board has agreed to nominate Mr. Michel as a
Class I director and Mr. Tirpak as a Class II director for election at the 2010
Annual Meeting, and recommend that the shareholders vote to elect them. As
described in the Settlement Agreement and in Item 1.01 above, the SAVE Group and
Mr. Michel have also agreed to certain other arrangements, including the
standstill provisions described in Section 1.01.

    


    As
described in the Settlement Agreement and in Item 1.01 above, the Company
reimbursed the SAVE Group for their actual out-of-pocket expenses incurred in
connection with the proxy contest, a portion of which will be contributed by the
Company’s insurance carrier.

    


    Item
5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year

    


    (a) On
February 4, 2010, the Board approved various amendments to the Company’s Bylaws
which became effective immediately. These amendments include the
following:

    


    -              increasing
the number of individuals serving on the Board from eight to nine.

    


    -              providing
that the Board shall consist of one class of directors after December 31, 2011,
and that the term of office of any director whose term would otherwise extend
beyond the 2012 annual meeting of shareholders of the Company shall expire at
such annual meeting.

    


    -              providing
that the 2010 Annual Meeting shall be held on June 15, 2010, the 2011 annual
meeting shall be held on June 13, 2011, and thereafter each annual meeting shall
be held on a date to be set by the Board which shall be no earlier than June 8
and no later than June 30 of each calendar year. The annual meeting shall be
held to elect directors and to transact such other business as may be properly
brought before the annual meeting.


    
      
         


      

      
        7

        
          

        

      

      
         


      

    


    -              providing
that in addition to the Chairman, Chief Executive Officer, and Board of
Directors, special shareholder meetings may also be called by the holders of at
least 20% of the combined voting power of the then outstanding shares entitled
to vote at such meeting; provided, that a special shareholder’s meeting may not
be called by any shareholder or shareholders for the purpose of electing or
removing any director or directors of the Company.

    


    -              providing
that the Bylaw amendments adopted by the Board as part of the Settlement
Agreement may not be amended, repealed or modified by the board of directors
unless at least 66% of the independent directors shall have approved such
amendment, repeal or modification and, through the date of the 2012 annual
meeting of shareholders, if a SAVE Group nominee is then serving on the Board,
unless at least one SAVE Group nominee shall also have approved such amendment,
repeal or modification.

    


    The
foregoing summary is qualified in its entirety by reference to the full
amendments to the Bylaws which are attached as Exhibit 3(ii) to this Form 8-K
and are incorporated herein by reference.

    


    Item
5.05. Amendments to the Registrant’s Code of Ethics or Waiver of a Provision of
the Code of Ethics

    


    On
February 4, 2010, the Company approved an amendment (the “Amendment”) to its
Code of Business Conduct and Ethics which had been adopted on April 11, 2006
(the “Code”). The Amendment clarifies and amends the definition of confidential
information set forth in the Code. The Amendment also states that non-employee
directors of the Company are prohibited from contacting or communicating with
the Company’s customers, suppliers or business partners without prior written
approval of the Board of Directors of the Company. The foregoing summary is
qualified by reference to the Amendment which is attached as Exhibit “D” to the
Settlement Agreement which is attached as Exhibit 10.1 to this Form
8-K.

    


    Item
9.01. Financial Statements and Exhibits

    


    
      	
              Exhibit
      3(ii)

            	
              Amendments
      to Bylaws effective February 4,
2010

            


    

    


    
      	
              Exhibit
      10.1

            	
              Settlement
      Agreement dated February 4, 2010 by and among USA Technologies, Inc.,
      Shareholder Advocates For Value Enhancement, Bradley M. Tirpak, Craig W.
      Thomas, and certain other parties

            


    

    


    
      	
              Exhibit
      99.1

            	
              Press
      Release dated February 5, 2010

            


    


    
      
         


      

      
        8

        
          

        

      

      
         


      

    


    SIGNATURES

    


    Pursuant
to the Securities Exchange Act of 1934, the Company has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.

     

    
      	 
      	
              USA
      TECHNOLOGIES, INC.

            
	 
      	 
      	 
      
	
              Dated:
      February 5, 2010

            	
              By:

            	
              /s/ George R. Jensen,
      Jr.

            
	 
      	 
      	
              George
      R. Jensen, Jr.,

            
	 
      	 
      	
              Chief
      Executive Officer

            


    


    
      
         


      

      
        9

        
          

        

      

      
         


      

    


    Index to
Exhibits

    


    
      	
              Exhibit
      No.

            	
              Description of
      Exhibit

            


    

    


    
      	
              3(ii)

            	
              Amendments
      to Bylaws effective February 4,
2010

            


    

     

    
      	
              10.1

            	
              Settlement
      Agreement dated February 4, 2010 by and among USA Technologies, Inc.,
      Shareholder Advocates For Value Enhancement, Bradley M. Tirpak, Craig W.
      Thomas, and certain other parties

            


    

     

    
      	
              99.1

            	
              Press
      Release dated February 5, 2010

            


    

     

     

    10