Document:

STOCK PURCHASE AGREEMENT

      This Stock Purchase Agreement is made this 9th day of January 2006, by and
between USA TECHNOLOGIES, INC., a Pennsylvania corporation ("USA" or "Company"),
and Rationalwave OnShore Equity Fund, L.P. ("Buyer").

                                   BACKGROUND
                                   ----------

      As more  fully set forth  herein,  Buyer has  purchased  from the  Company
4,000,000 shares of Common Stock of USA (the  "Securities")  for $.10 per share,
for an aggregate of $400,000.

                                    AGREEMENT
                                    ---------

      NOW  THEREFORE,  intending to be legally bound hereby,  the parties hereto
agree as follows:

      1.  SUBSCRIPTION.  Buyer hereby  purchases the Securities from the Company
and the Company hereby sells and issues the Securities to Buyer. In full payment
for the  Securities,  Buyer has  delivered to USA a check payable to USA or wire
transfer  of  immediately  available  funds in the amount of  $400,000.  USA has
delivered to Buyer a  certificate  representing  4,000,000  shares of USA Common
Stock duly registered in the name of Buyer.

      No later than January 12, 2006, USA shall at its cost and expense  prepare
and file and  thereafter  use its best efforts to have  declared  effective,  an
appropriate  Registration  Statement with the Securities and Exchange Commission
("SEC")  registering  all of the  Securities  for resale by the holder under the
Securities Act of 1933, as amended ("Act"). The registration  statement shall be
prepared as a "shelf"  registration  statement  under Rule 415,  and the Company
shall  use its  best  efforts  to have  the  registration  statement  maintained
effective  until the earlier of (i) one year from the date  hereof,  or (ii) the
date  that  all  of the  Securities  are  resold  pursuant  to the  registration
statement or otherwise.

      2.  VERIFICATION  OF  STATUS  AS  "ACCREDITED   INVESTOR".   Buyer  hereby
represents to USA that it qualifies as an "accredited  investor" as such term is
defined in Rule 501 promulgated  under the Act because Buyer is a corporation or
partnership not formed for the specific purpose of acquiring the Securities with
total assets in excess of $5,000,000.

<PAGE>

      3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes
the following representations and warranties to Buyer:

            (a) Issuance of Securities.  The issuance of the Securities has been
duly authorized by USA, and are validly issued, fully paid and non-assessable.

            (b)  Corporate  Organization.  The  Company  is a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
Commonwealth of Pennsylvania,  with all requisite power, authority and licensing
to own,  operate and lease its properties and carry on its business as now being
conducted.

            (c) Authority. The execution and delivery of this Agreement, and the
consummation of the transactions  contemplated  hereby have been duly authorized
by the Board of Directors of the Company and no other  corporate  proceedings on
the part of the Company are  necessary to authorize  this  Agreement or to carry
out the transactions contemplated hereby.

      4.  REPRESENTATIONS BY BUYER. Buyer represents and warrants to the Company
as follows:

            (a) Buyer has received,  read and understands the provisions of each
      of the  following:  (i) the  Company's  Annual Report on Form 10-K for the
      fiscal year ended June 30, 2005; (ii) the Company's Current Report on Form
      8-K filed with the  Commission on September 28, 2005;  (iii) the Company's
      Quarterly  Report on Form 10-Q for the quarter  ended  September 30, 2005;
      (iv) the  Company's  Registration  Statement  on Form S-1  filed  with the
      Commission  on May 13, 2005 (File No.  333-124078);  (v) the risk  factors
      incorporated  by reference  herein in Section  4(i)  hereof;  and (vi) the
      definitive  proxy  statement of the Company filed with the SEC on November
      17, 2005. Buyer  understands that all of the foregoing  together with this
      Subscription   Agreement   shall  be  referred  to  herein  as   "Offering
      Materials".

            (b)  Buyer  has  relied  only  upon the  information  presented  and
      contained in the Offering Materials.  Buyer has had the opportunity to ask
      of the  person or  persons  acting on  behalf of the  Company  any and all
      relevant questions in connection with any aspect of the Company including,
      but not limited to, the Securities  offered by the Offering  Materials and
      has received  answers  which it considers to be  reasonably  responsive to
      such  questions.  Buyer has had the  opportunity to verify the accuracy of
      the information contained in the Offering Materials.

<PAGE>

            (c) Buyer  understands  that it is  subscribing  for the  Securities
      without being  furnished any  literature or prospectus in connection  with
      the offering of the Securities other than the Offering Materials, and that
      the offering of the  Securities  presented in the Offering  Materials will
      not have been  scrutinized  by the  securities  administrator  or  similar
      bureau, agency, or department of the state of his residence.

            (d)  Buyer  understands  (i)  that  the  Securities  have  not  been
      registered  under the Act or registered or qualified  under the securities
      laws of the state of  domicile  of Buyer;  (ii) that  except as  otherwise
      provided  herein,  Buyer  has no right to  require  such  registration  or
      qualification;  and (iii) that therefore Buyer must bear the economic risk
      of the investment for an indefinite  period of time because the Securities
      may not be sold unless so  registered  or qualified or unless an exemption
      from such registration and qualification is available.

      Although  the Company has agreed to use its best  efforts to register  for
      resale the Securities with the Securities and Exchange Commission,  and to
      use its best  efforts  to keep such  registration  statement  current  and
      effective, there can be no assurance that such efforts will be successful.
      In any such event, the Securities would not be registered for resale under
      the Act, and could only be sold by the holder in reliance upon  exemptions
      from registration under the Act.

            (e) Subject to being resold  pursuant to an  effective  registration
      statement,  the Securities are being purchased for Buyer's own account for
      investment  purposes only and not for the interest of any other person and
      are not being  purchased  with a view to or for the resale,  distribution,
      subdivision or fractionalization thereof. Although the Common Stock of USA
      is currently traded on the OTC Bulletin Board under the symbol USTT, Buyer
      also  understands  that there may not be any  established  public  trading
      market for the sale of the Securities.

            (f) Buyer recognizes that the purchase of the Securities  involves a
      high  degree of risk  including  those  special  risks set forth under the
      caption "Risk  Factors" and "Forward  Looking  Statements" in the Form S-1
      Registration Statement of the Company (File No. 333-124078) filed with the
      Securities  and  Exchange  Commission  on May 13,  2005,  all of which are
      incorporated herein by reference.

<PAGE>

            (g)  Subject  to the  registration  rights  set forth  above,  Buyer
      understands  that its right to transfer the Securities  will be restricted
      as  set  forth  on  the  stock  certificates.  Such  restrictions  include
      provisions  against  transfer  unless such transfer is not in violation of
      the  Act,  or  applicable  state   securities  laws  (including   investor
      suitability  standards).  Buyer is familiar with  Regulation M promulgated
      under the Act and agrees to comply with its obligations thereunder.

            (h)  All  information  which  Buyer  has  provided  to  the  Company
      including,  but  not  limited  to,  its  tax  identification  number,  its
      financial  position,  and  status  as  an  accredited  investor,  and  its
      knowledge of financial and business matters is true,  correct and complete
      as of the  date of  execution  of this  Stock  Purchase  Agreement.  Buyer
      understands   that  USA  will  rely  in  a   material   degree   upon  the
      representations contained herein.

            (i) Buyer  maintains  a  principal  place of business at the address
      shown on the signature  page of this Stock  Purchase  Agreement,  at which
      address Buyer has subscribed for the Shares.

            (j) Buyer  understands that legends may be placed on any certificate
      representing the Securities substantially to the following effect:

THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES STATUTES AND
REGULATIONS.  SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT  FOR SUCH SHARES  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR
APPLICABLE STATE SECURITIES  STATUTES AND  REGULATIONS,  UNLESS,  IN THE OPINION
(WHICH  SHALL BE IN FORM  AND  SUBSTANCE  SATISFACTORY  TO THE  CORPORATION)  OF
COUNSEL SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.

            (k)  The  execution  and  delivery  of  this   Agreement,   and  the
      consummation  of  the  transactions  contemplated  hereby  has  been  duly
      authorized by Buyer.

<PAGE>

      5. SURVIVAL OF  REPRESENTATIONS,  WARRANTIES,  COVENANTS,  AGREEMENTS  AND
REMEDIES. Except as specifically provided otherwise herein, all representations,
warranties,  covenants,  agreements  and remedies of the parties  hereto,  shall
survive the date hereof.

      6. ENTIRE AGREEMENT.  This Agreement  constitutes the entire understanding
and  agreement  between the  parties  hereto  with  respect to the  transactions
contemplated  herein,  supersedes  all  prior  and  contemporaneous  agreements,
understandings,  negotiations and discussions,  whether oral or written,  of the
parties, and there have been no warranties, representations or promises, written
or oral, made by any of the parties hereto except as herein  expressly set forth
herein.

      7. BINDING  AGREEMENT.  This Agreement  shall be binding upon and inure to
the benefit of the parties hereto, as well as their respective  heirs,  personal
representatives,  successors and assigns but no party may assign its obligations
hereunder.

      8.  PENNSYLVANIA  LAW  CONTROLS.  This  Agreement  shall be  construed  in
accordance  with  and  shall be  governed  by the  laws of the  Commonwealth  of
Pennsylvania without regard to its conflicts of law rules.

      IN WITNESS  WHEREOF,  the parties  hereto have executed and delivered this
Stock Purchase Agreement on the date first above written.

                                     BUYER:
                     RATIONALWAVE ONSHORE EQUITY FUND, L.P.

Witness: /s/ D.Schafer                       /s/ Mark Rosenblatt
         -----------------------------       -----------------------------------
                                             Print Name: Mark Rosenblatt
                                             Title:

                                             Address:

                                             Rationalwave Associates
                                             230 Park Rd., Suite 928
                                             NY, NY 10169

                                             Tax Identification Number:
                                             41-2077424

                                         USA TECHNOLOGIES, INC.

                                         By: /s/ George R. Jensen, Jr.
                                                 -------------------------------
                                                 George R. Jensen, Jr.,
                                                 Chief Executive Officer10% 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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