Document:

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

            

    

     

     

    10Unassociated Document

     

    Exhibit 10.1

     

    BUSINESS
FINANCING AGREEMENT

    
      
        
          
            
              	 	 	 	 
	
                      Borrower:

                    	
                      VERTRO,
      INC.

                    	
                      Lender:

                    	
                      BRIDGE
      BANK, National Association

                    
	 
      	
                      ALOT,
      INC,

                    	 
      	
                      55
      Almaden Boulevard, Suite 100

                    
	 
      	
                      5220
      Summerlin Commons Blvd, Suite 500

                      Fort
      Myers, FL 33907

                    	 
      	
                      San Jose, CA
  95113

                    
	 	 	 	 

            

          

        

      

    

    

    RECITALS:

     

    A.          Lender
and Borrower have previously entered into that certain Loan and Security
Agreement dated as of November 7, 2008
(as such agreement was amended from time to time, the “Original Credit
Agreement”).

     

    B.          Lender
and Borrower desire to amend and restate the terms and conditions of the
Original Credit Agreement in its entirety
in accordance with the terms and provisions hereof, and concurrently herewith,
Lender agrees to release its security interest in the
property of Borrower’s subsidiaries.

     

    AGREEMENT:

     

    This BUSINESS
FINANCING AGREEMENT, dated as of December 17, 2009, is made and entered into
between BRIDGE BANK, NATIONAL ASSOCIATION (“Lender”) and Vertro, Inc. a Delaware corporation,
and ALOT, Inc., a Delaware corporation (jointly and severally, the “Borrower”) on the following terms and
conditions:

     

    
      
        	
                1. 

              	
                 
      FINANCED RECEIVABLES.

              

      

    

     

    
      	
               
      

            	
              1.1

            	
              Funding Requests. Borrower may
      request that Lender finance Receivables by delivering to Lender a Funding
      Request for the Receivables for which a request for financing is made.
      Lender shall be entitled to rely on all the
      information provided by Borrower to Lender on or with the Funding
      Request. The Lender may honor Funding Requests, instructions or repayments
      given by the Borrower (if an individual) or by an Authorized
      Person.

            

    

     

    
      	
               
      

            	
              1.2

            	
              Acceptance of Receivables. Upon
      acceptance by Lender of any Receivable described in a Funding Request,
      Lender shall make an Advance to Borrower in an amount up to the Advance Rate
      multiplied by the Receivable Amount of such Receivable. Upon Lender’s
      acceptance of the Receivable and payment to Borrower of the
      Advance, the Receivable shall become a “Financed Receivable.” It shall be
      a condition to each Advance that (a) all of the representations and
      warranties set forth in Section 5 are true and correct on the date of such
      Advance as though made at and as of each such date and (b) no Default has occurred and
      is continuing, or would result from such Advance, Lender has no obligation
      to finance any Receivable and may exercise its sole discretion in
      determining whether any Receivable is an Eligible Receivable before
      financing such Receivable. In no event shall the Lender be obligated to
      make any Advance that results in an Overadvance or while any Overadvance
      is outstanding.

            

    

     

    
      	
               
      

            	
              1.3

            	
              Rights in Respect of
      Financed
      Receivables. Effective upon Lender’s payment of an Advance,
      Lender shall have the exclusive right to receive all Collections on the
      Financed Receivable. Lender shall have, with respect to any goods related
      to the
      Financed Receivable, all the rights and remedies of an unpaid seller under
      the California Uniform Commercial Code and other applicable law, including
      the rights of replevin, claim and delivery, reclamation and stoppage in
      transit.

            

    

     

    
      	
               
      

            	
              1.4

            	
              Reserve. The Reserve is a book
      balance maintained on the records of Lender and shall
      not be a segregated fund and is not the property of
      Borrower.

            

    

     

    
      	
               
      

            	
              1.5

            	
              Due Diligence. Lender
      may audit Borrower’s Receivables and any and all records pertaining to the
      Collateral, at Lender’s sole discretion and at Borrowers expense. Lender
      may at any time and from time to time contact Account Debtors and other
      persons obligated or knowledgeable in respect of Receivables to confirm
      the Receivable Amount of such Receivables, to determine whether
      Receivables constitute Eligible Receivables, and for any other purpose in
      connection with this Agreement. If any of the Collateral or Borrower’s
      books or records pertaining to the Collateral are in the possession of a
      third party, Borrower authorizes that third party to permit Lender or its
      agents to have access to perform Inspections or audits thereof and to
      respond to Lender’s requests for information concerning such Collateral
      and records.

            

    

     

    
      
        
          	 
      	
                  1

                	
                  BFA -
      RP

                

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      	
              2. 

            	
              COLLECTIONS,
      CHARGES AND REMIITTANCES.

            

    

     

    
      
        	
              	
                2.1

              	
                Collections. Subject to the Lender’s
      timely receipt of accurate application instructions from the Borrower with
      respect to the source and application of Collections. Lender shall credit
      to Collections with respect to Financed Receivables received by Lender to
      Borrower’s Account Balance within three business days of the date good
      funds are
      received. If no Default has occurred and is continuing, Lender
      agrees to credit the Refundable Reserve with the amount of Collections it
      receives with respect to Receivables other than Financed Receivables;
      provided
      that upon the
      occurrence and during the continuance of any Default, Lender may apply all
      Collections to the Obligations in such order and manner
      as Lender may determine. Lender has no duty to do any act other than to
      turnover such amounts as required above. If an item of Collections is not honored or
      Lender does not receive good funds for any reason, the amount shall be
      included in the Account Balance as if the Collections had
      not been received and Finance charges shall accrue
      thereon.

              

      

    

     

    
      
        	
              	
                2.2

              	
                Financed Receivables Activity Report.
      Within 15 days after the end of each Monthly Period, Lender shall send to
      Borrower a report covering the transactions for that Monthly Period,
      including the amount of all Financed Receivables, all Collections,
      Adjustments, Finance Charges, and other fees and charges. The accounting
      shall be deemed correct and conclusive unless Borrower makes written
      objection to Lender within 30 days after the Lender sends the accounting
      to Borrower.

              

      

    

     

    
      
        	
              	
                2.3

              	
                Reconciliations. Unless a Default has
      occurred and is continuing, Lender shall refund to Borrower after each
      Month End, the Refundable Reserve, if positive, calculated for such Month
      End, subject to
      Lender’s rights under Section 3.3 and Lender’s rights of offset and
      recoupment. If the Refundable Reserve is negative, Borrower shall
      immediately pay such amount in the same manner as set forth in Section 3.3
      for Overadvances.

              

      

    

     

    
      
        	
              	
                2.4

              	
                Adjustments. In the event of a breach of
      Sections 5 or 6, or in the event any Adjustment or dispute is asserted
      by any Account Debtor, Borrower shall promptly advise Lender and
      shall, subject to the Lender’s approval, resolve such disputes and advise
      Lender of any Adjustments; provided
      that in no case will the aggregate Adjustments made with respect to any Financed Receivable exceed
      2% of its original Receivable Amount
      unless Borrower has obtained the prior written consent of Lender. Unless
      the Advance for
      the disputed Financed Receivable is repaid in full, Lender shall have the right, at
      any time, to take possession of any rejected, returned, or recovered
      personal property. If such possession is not taken by Lender,
      Borrower is to resell it for Lender’s account at Borrower’s expense
      with the proceeds made payable to Lender. While Borrower retains
      possession of any returned goods, Borrower shall segregate said goods and
      mark them as property of
    Lender.

              

      

    

     

    
      
        	
              	
                2.5

              	
                Remittances; Lockbox Account Collection Services.
      Borrower shall (i) immediately notify, transfer and deliver to Lender all
      Collections Borrower receives, (ii) deliver to Lender a detailed cash
      receipts journal on
      Friday of each week until the lockbox is operational, and (iii)
      immediately enter into a collection
      services agreement acceptable to Lender (the “Lockbox Agreement”). Borrower shall use
      the lockbox address as the remit to and payment address
      for all of Borrower’s
      Collections and
      it will be considered an immediate Event of Default if this does not occur
      or the lockbox is not operational within 60 days of the date of this
      Agreement. All Collections received to the lockbox or
      otherwise received by Lender will be deposited to a non-interest bearing
      cash collateral account maintained with Lender and Borrower will not
      have access to that account.

              

      

    

     

    
      	
              3. 

            	
              RECOURSE
      AND OVERADVANCES.

            

    

     

    
      
        	
              	
                3.1

              	
                Recourse. Advances and the other
      Obligations shall be with full recourse against Borrower. If any Advance
      is not repaid in full within 90 days from the earlier of (a) invoice date, or
      (b) the date on which such Advance is made, Borrower shall Immediately pay
      the outstanding amount thereof to
Lender.

              

      

    

     

    
      
        	
              	
                3.2

              	
                Overadvances. Upon any occurrence of an
      Overadvance, Borrower shall immediately pay down the Advances to
      that, after giving effect to such payments, no Overadvance
      exists.

              

      

    

     

    
      
        	
              	
                3.3

              	
                Borrower’s Payment. When any Overadvance
      or other amount owing to Lender becomes due,
      Lender shall
      Inform Borrower of the manner of payment which may be any one or more of
      the following in Lender’s sole discretion: (a) in cash
      Immediately upon demand therefore; (b) by delivery of substitute invoices
      and a Funding Request acceptable to Lender which shall
      thereupon become Financed Receivables; (c) by deduction from or offset against the
      Refundable Reserve that would otherwise be due and
      payable to Borrower, (d) by deduction from or offset against the amount
      that otherwise would be forwarded to Borrower in respect of any
      further Advances that may be made by Lender, or (e) by any
      combination of the foregoing as Lender may from time to time choose.

              

      

    

     

    
      	
              4. 

            	
              FEES
      AND FINANCE CHARGES.

            

    

     

    
      
        	
              	
                4.1

              	
                Finance Charges. Lender may, but is not
      required to, deduct the amount of accrued Finance Charge from Collections
      received by Lender. On each Month End Borrower shall pay to Lender any accrued
      and unpaid Finance Charge as of such Month End. Lender may deduct the
      accrued Finance Charges in calculating the Refundable
    Reserve.

              

      

    

     

    
      	 
      	
              2

            	
              BFA
      - RP

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      
        	
              	
                4.2 

              	
                Fees.

              

      

    

    

    
      
        	 	
                (a)

              	
                Maintenance Fee. Within ten days after each
      Month End, Borrower shall pay to Lender the Maintenance Fee.

              

      

    

     

    
      
        	
              	
                (b)

              	
                Termination
      Fee. In the
      event this Agreement is terminated prior to the first anniversary of the
      date of this Agreement,
      Borrower shall pay the Termination Fee to Lender provided that such
      Termination Fee shall be waived
      if this Agreement is terminated in connection with Borrower’s entry
      into a financing agreement with an
      affiliate of Lender or if Lender elects to terminate without the
      occurrence or existence of an Event of Default.

              

      

    

     

    
      
        	
              	
                (c)

              	
                Facility
      Fee.
      Borrower shall pay the Facility Fee to Lender promptly
      upon the execution of this Agreement and annually thereafter on the
      anniversary of the date of this Agreement for so long as this Agreement
      remains in effect.

              

      

    

     

    
      
        	
              	
                (d)

              	
                Recovery
      Fee. If Borrower fails to remit any
      Collections to Lender as provided in Section 2.5, Borrower shall in each
      case pay to Lender the Recovery Fee for such
      Collections.

              

      

    

     

    
      	
              5.

            	
              REPRESENTATIONS AND WARRANTIES. Borrower
      represents and warrants:

            

    

     

    
      	
            	
              5.1 

            	
              With
      respect to each Financed
Receivable:

            

    

     

    
      	
            	
              (a) 

            	
              It
      is the owner with legal right to sell, transfer and
      assign it;

            

    

     

    
      	
            	
              (b) 

            	
              The
      correct Receivable Amount is on the Funding Request and is not
      disputed;

            

    

     

    
      	
            	
              (c) 

            	
              Such
      Financed Receivable is an Eligible
Receivable;

            

    

     

    
      
        	
              	
                (d)

              	
                Lender
      has the right to endorse and/ or require Borrower to endorse all payments
      received on Financed Receivables and all proceeds of Collateral;
      and

              

      

    

     

    
      
        	
              	
                (e)

              	
                No
      representation, warranty or other statement of Borrower in any certificate
      or written statement given to Lender contains any untrue statement of a
      material fact or omits to state a material fact necessary to make the
      statement contained in the certificates or statement not
      misleading.

              

      

    

     

    
      
        	
              	
                5.2

              	
                Borrower
      is duly existing and in good standing in its state of formation and
      qualified and licensed to do business in, and in good standing in, any
      state in which the conduct of its business or its ownership of property
      requires that it be
qualified.

              

      

    

     

    
      
        	
              	
                5.3

              	
                The
      execution, delivery and performance of this Agreement has been duly
      authorized, and does not conflict with Borrower’s organizational
      documents, nor constitute an Event of Default under any material agreement
      by which Borrower is bound. Borrower is not in default under any agreement
      to which or by which it is
bound.

              

      

    

     

    
      
        	
              	
                5.4

              	
                Borrower
      has good title to the Collateral and all inventory is in all material
      respects of good and marketable quality, free from material
      defects.

              

      

    

     

    
      
        	
              	
                5.5

              	
                Borrower’s
      name, form of organization, chief executive office, and the place where
      the records concerning all Financed Receivables and Collateral are kept is
      set forth at the beginning of this Agreement. Borrower is located at its
      address for notices set forth in this
Agreement.

              

      

    

     

    
      
        	
              	
                5.6

              	
                If
      Borrower owns, holds or has any Interest in, any copyrights (whether
      registered, or unregistered), patents or trademarks, and licenses of any
      of the foregoing, such interest has been specifically disclosed and
      identified to Lender in
writing.

              

      

    

     

    
      	
              6.

            	
              MISCELLANEOUS PROVISIONS. Borrower
      will:

            

    

     

    
      
        	
              	
                6.1

              	
                Maintain
      its corporate existence and good standing in its Jurisdictions of
      incorporation and maintain its qualification to do business in each
      jurisdiction necessary to Borrower’s business or
    operations.

              

      

    

     

    
      
        	
              	
                6.2

              	
                Give
      Lender at least 30 days prior written notice of changes to its name,
      organization, chief executive office or location of
    records.

              

      

    

     

    
      
        	
              	
                6.3

              	
                Pay
      all its taxes including gross payroll, withholding and sales taxes when
      due and will deliver satisfactory evidence of payment to Lender if
      requested.

              

      

    

     

    
      	 
      	
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                6.4

            	
              If
      requested, provide to Lender a written report within 10 days, if payment
      of any Financed Receivable does not occur by its due date and include the
      reasons for the delay.

            

    

     

    
      	
               
      

            	
                6.5

            	
              If
      applicable, give Lender copies of all Forms 10-K, 10-Q and 8-K (or
      equivalents) within 5 days of filing with the
      Securities and Exchange Commission, while any Financed Receivable is
      outstanding.

            

    

     

    
      	
               
      

            	
                6.6

            	
              Execute
      any further instruments and take further action as Lender requests to
      perfect or continue Lender’s security interest in the Collateral or to
      affect the purposes of this
Agreement.

            

    

     

    
      	
               
      

            	
                6.7

            	
              Provide
      Lender with a Compliance Certificate no later than 30 days following each
      quarter end or as requested by
Lender.

            

    

     

    
      	
               
      

            	
                6.8

            	
              Immediately
      notify, transfer and deliver to Lender all Collections Borrower
      receives.

            

    

     

    
      	
               
      

            	
                6.9

            	
              Not
      create, incur, assume, or be liable for any Indebtedness, other than
      Permitted Indebtedness.

            

    

     

    
      	
               
      

            	
                6.10

            	
              Immediately
      notify Lender if Borrower hereafter obtains any interest in any
      copyrights, patents, trademarks or licenses that are
      significant in value or are material to the conduct of its business or the
      value of any Financed Receivable.

            

    

     

    
      	
               
      

            	
                6.11

            	
              At
      all times when any Advances are outstanding or upon request, provide to
      Lender no later than 30 days after the end of each month the following
      with respect to Borrower’s financial condition and results of operations
      for such month and the period then ending: balance sheet, income
      statement; statement of cash flows, accounts receivable and payable aging,
      deferred revenue report, and such other matters as Lender may
      request.

            

    

     

    
      	
               
      

            	
                6.12

            	
              Maintain
      its primary depository and operating accounts with Lender and, in the case
      of any deposit accounts not maintained with Lender, grant to Lender a
      first priority perfected security interest in and ‘control’ (within the
      meaning of Section 9104 of the California Uniform Commercial Code) of such
      deposit account pursuant to documentation acceptable to
      Lender.

            

    

     

    
      	
               
      

            	
                6.13

            	
              Promptly
      provide to Lender such additional information and documents regarding the
      finances, properties, business or books and records of Borrower or any guarantor or
      any other obligor as Lender may
request

            

    

     

    
      	
               
      

            	
                6.14

            	
              Not
      convey, sell, lease, transfer or otherwise dispose of (collectively, a
      ‘Transfer’) all or any part of its business or property, other
      than: (i) inter-company Transfers between Borrowers, (ii) Transfers of web
      properties or domain names in the ordinary course of business not in
      excess of Five Million Dollars ($5,000,000). provided that Lender
      maintains its perfected security interest in the proceeds of such
      Transfers; (iii) Transfers of non-exclusive licenses and similar
      arrangements for the use of the property of Borrower in the ordinary
      course of
      business; or (iv) Transfers of worn-out or obsolete equipment which
      was not financed by Lender.

            

    

     

    
      	
              7.

            	
              SECURITY INTEREST. To secure the prompt payment and
      performance to Lender of all of the Obligations, Borrower hereby grants to
      Lender a continuing security interest in the Collateral. Borrower is not
      authorized to sell, assign, transfer or otherwise convey any Collateral
      without Lender’s prior written consent, except for the permitted Transfers
      set forth in Section 6.14 or the sale of finished inventory in the
      Borrower’s usual course of business. Borrower agrees to sign any
      instruments and documents requested by Lender to evidence, perfect, or
      protect the interests of Lender in the Collateral. Borrower agrees to
      deliver to
      Lender the originals of all instruments,
      chattel paper and documents evidencing or related to Financed Receivables
      and Collateral. Borrower shall not grant or permit any lien or security in
      the Collateral or any Interest therein other than Permitted
      Liens.

            

    

     

    
      	
              8.

            	
              POWER OF ATTORNEY.
      Borrower irrevocably appoints Lender and its successors and as true
      and lawful attorney in fact, and authorizes Lender (a) to, whether or not
      there has been an Event of Default, (i) demand, collect, receive, sue, and
      give releases to any Account Debtor for the monies due or which may become
      due upon or with respect to the Receivables and to
      compromise, prosecute, or defend any action, claim, case or proceeding
      relating to the Receivables, including the filing of a claim or the voting
      of such claims in any bankruptcy case, all in Lender’s name or Borrower’s
      name, as Lender may choose; (ii) prepare, file and sign Borrower’s name on
      any notice, claim, assignment, demand, draft, or notice of or satisfaction
      of lien or mechanics’ lien or similar document; (iii) notify all Account
      Debtors with respect to the Receivables to pay Lender directly; (iv)
      receive and open all mall addressed to Borrower for the purpose of
      collecting the Receivables; (v) endorse Borrower’s name on any checks or
      other forms of payment on the Receivables; (vi) execute on behalf of
      Borrower any and all instruments, documents, financing statements and the
      like to perfect Lender’s interests in the Receivables and Collateral;
      (vii) debit any Borrower’s deposit accounts maintained with Lender for any
      and all Obligations due under this Agreement; and (viii) do all acts and
      things necessary or expedient, in furtherance of any such purposes, and
      (b) to, upon the occurrence and during the continuance of an Event of
      Default, sell, assign, transfer, pledge, compromise, or discharge the
      whole or any part of the Receivables. Upon the occurrence and continuation
      of an Event of Default, all of the power of attorney rights granted by
      Borrower to Lender hereunder shall be applicable with respect to all
      Receivables and all Collateral.

            

    

     

    
      	 
      	
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                9.

              	
                DEFAULT
      AND REMEDIES.

              

      

    

     

    
      
        	 	
                9.1

              	
                Events
      of Default.
      The occurrence of
      any one
      or more of
      the following shall constitute an Event of
      Default hereunder.

              

      

    

     

    
      	
               
      

            	
              (a)

            	
              Failure
      to Pay.
      Borrower fails to make a payment under this
  Agreement.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Lien
      Priority.
      Lender falls to have an enforceable first lien (except for any prior liens
      to which Lender has consented in writing) on or security interest in the
      Collateral.

            

    

     

    
      	
               
      

            	
              (c)

            	
              False
      Information. Borrower (or any
      guarantor) has given Lender any
      materially false or misleading information or representations
      or has failed to
      disclose any material fact relating to the subject matter
      of this Agreement.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Bankruptcy. Borrower (or any guarantor)
      files a bankruptcy petition, a bankruptcy petition is filed against
      Borrower (or any guarantor) or Borrower (or any guarantor) makes a general
      assignment for
      the benefit of
creditors.

            

    

     

    
      	
               
      

            	
              (e)

            	
              Receivers. A receiver or similar
      official is appointed for a substantial portion of Borrower’s (or any
      guarantor’s) business, or the business is
  terminated.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Judgements. Any judgments or
      arbitration awards are entered against Borrower (or any guarantor), or
      Borrower (or any guarantor) enters into any settlement agreements with
      respect to any litigation or arbitration and the aggregate amount of all
      such judgments, awards, and agreements exceeds
  $50,000.

            

    

     

    
      	
               
      

            	
              (g)

            	
              Material
      Adverse Change. A material adverse change occurs, or is
      reasonably likely to occur, in Borrower’s (or any guarantor’s) business
      condition (financial or
      otharwise), operations, properties or prospects, or ability to
      repay the credit.

            

    

     

    
      	
               
      

            	
              (h)

            	
              Cross-default. Any
      default occurs under any agreement in connection with any credit Borrower
      (or any guarantor) or any of Borrower’s related entities or affiliates has
      obtained from anyone else or which Borrower (or any guarantor) or any of
      Borrower’s related entitles or affiliates has guaranteed (other than trade
      amounts payable incurred in the ordinary course of business and not more
      than 60 days past due).

            

    

     

    
      	
               
      

            	
              (i)

            	
              Default
      under Related Documents. Any default occurs
      under any guaranty, subordination agreement, security agreement, deed of
      trust, mortgage, or other document required by or delivered in connection
      with this Agreement or any such document is no longer in
      effect.

            

    

     

    
      	
               
      

            	
              (j)

            	
              Other
      Agreements.
      Borrower (or any guarantor) or any
      of Borrower’s related entities or affiliates fails to meet the
      conditions of, or fails to perform any obligation under any other
      agreement Borrower (or any guarantor) or any of Borrower’s related
      entities or affiliates has with Lender or
      any affiliate of Lender.

            

    

     

    
      	
               
      

            	
              (k)

            	
              Chance
      of Control.
      The holders of the capital ownership of the Borrower as of the date hereof
      cease to own and control, directly and indirectly, at least 50% of the
      capital ownership of the Borrower.

            

    

     

    
      	
               
      

            	
              (l)

            	
              Other
      Breach Under Agreement.
      Borrower fails to meet the conditions of, or fails to perform any obligation under,
      any term
      of this
      Agreement not specifically referred to
above.

            

    

     

    
      	
            	
              9.2

            	
              Remedies. Upon the
      occurrence of an Event of Default, (1) without implying any obligation to
      do so, Lender may cease making Advances or extending any other financial
      accommodations to Borrower, (2) all or a portion of the Obligations shall
      be, at the option of and upon demand by Lender, or with respect to an
      Event or Default described in Section 9.1(e), automatically and without
      notice or demand, due and payable in
      full; and (3) Lender shall have and may exercise all the rights and
      remedies under this Agreement and under applicable law, including the
      rights and remedies of a secured party under the California Uniform
      Commercial Code, all the power of attorney rights described in Section 8
      with respect to all Collateral, and the right to collect, dispose of,
      sell, lease, use, and realize upon all Financed Receivables and all
      Collateral in any commercial reasonable
manner.

            

    

     

    
      	 
      	
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              10.

            	
              ACCRUAL OF INTEREST.
      All interest and finance charges
      hereunder calculated at an annual rate shall be
      based on a year of 360 days, which results in a higher effective rate of
      interest than if a
      year of 365 or 366 days were used. If any amount due under
      Section 4.2, amounts due under Section 11, and any other Obligations not
      otherwise bearing interest hereunder is not paid when due,
      such amount shall bear Interest at a per annum rate equal to the Finance
      Charge Percentage until the earlier of (i) payment in good
      funds or (ii) entry of
      a trial Judgment thereof, at which time the principal amount of any
      money judgment remaining unsatisfied shall accrue interest at the highest
      rate allowed by applicable
law.

            

    

     

    
      	
              11.

            	
              FEES, COSTS AND EXPENSES;
      INDEMNIFICATION. The Borrower will pay to Lender upon demand all
      fees, costs and expenses (including fees of attorneys and professionals
      and their costs and expenses) that Lender incurs or may from time to time
      impose in connection with any of the following: (a) preparing,
      negotiating, administering, and enforcing this Agreement or any other
      agreement executed in connection herewith, including any amendments,
      waivers or consents in connection with any of the foregoing, (b) any
      litigation or dispute (whether instituted by Lender, Borrower or any other
      person) in any way relating to the Financed Receivables, the Collateral,
      this Agreement or any other agreement executed in connection herewith or
      therewith, (c) enforcing any rights against Borrower or any guarantor, or
      any Account Debtor, (d) protecting or enforcing its
      interest in the Financed Receivables or the Collateral, (e)
      collecting the Financed Receivables and the Obligations, or (f) the
      representation of Lender in connection with any bankruptcy case or
      insolvency proceeding involving Borrower, any Financed Receivable, the
      Collateral, any Account Debtor, or any guarantor, Borrower shall indemnify
      and hold Lender harmless from and against any and all claims, actions,
      damages, costs, expenses, and liabilities of any nature whatsoever arising
      in connection with any of the
foregoing.

            

    

     

    
      	
              12.

            	
              INTEGRATION, SEVERABILITY
      WAIVER, AND CHOICE OF LAW FORUM AND VENUE. This Agreement and any
      related security or other agreements required by this Agreement,
      collectively: (a) represent the sum of the understandings and agreements
      between Lender and Borrower concerning this credit; (b) replace any prior
      oral or written agreements between Lender and Borrower concerning this
      credit; and (c) are intended by Lender and Borrower as the final, complete
      and exclusive statement of the terms agreed to by them. In the event of
      any conflict between this Agreement and any other agreements required by
      this Agreement, this Agreement will prevail. This Agreement hereby amends
      and restates in its entirety, without novation, the Original Credit
      Agreement. If any provision of this Agreement is deemed invalid by reason
      of law, this Agreement will be construed as not containing such provision
      and the remainder of the Agreement shall remain in full force and effect.
      Lender retains all of its rights, even if it makes an Advance after a
      default. If Lander waives a default, it may enforce a later default. Any
      consent or waiver under, or amendment of, this Agreement must be in
      writing, and no such consent, waiver, or amendment shall imply any
      obligation by Lender to make any subsequent consent, waiver, or amendment.
      THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
      INTERNAL LAWS OF THE STATE OF CALIFORNIA. THE PARTIES HERETO AGREE THAT
      ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT OR
      ANY OTHER RELATED DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
      AND FEDERAL COURTS LOCATED IN THE COUNTY OF SANTA CLARA, CALIFORNIA, OR,
      AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL
      INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS JURISDICTION OVER
      THE SUBJECT MATTER AND PARTIES IN CONTROVERSY. EACH PARTY HERETO WAIVES
      ANY RIGHT TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
      VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
      SUBSECTION (b) AND
      STIPULATES THAT THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
      SANTA CLARA, CALIFORNIA SHALL HAVE IN PERSONAM JURISDICTION AND VENUE OVER
      EACH SUCH PARTY FOR THE PURPOSE OF LITIGATING ANY SUCH DISPUTE,
      CONTROVERSY, OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR
      ANY OTHER RELATED DOCUMENTS. SERVICE OF PROCESS SUFFICIENT FOR PERSONAL
      JURISDICTION IN ANY ACTION AGAINST THE BORROWER MAY BE MADE BY REGISTERED
      OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS SPECIFIED FOR
      NOTICES PURSUANT TO SECTION
      13.

            

    

     

    
      	
              13.

            	
              NOTICES; TELEPHONIC AND TELEFAX
      AUTHORIZATIONS. All notices shall be given to Lender and Borrower
      at the addresses or faxes (or e-mail, if applicable) set forth on the
      signature page of this agreement and shall be deemed to have been
      delivered when actually received at the designated address, Lender may
      honor telephone, fax, e-mail or telefax instructions for Advances or
      repayments given, or purported to be given, by any one of the Authorized
      Persons. Borrower will indemnify and hold Lender harmless from all
      liability, loss, and costs in connection with any act resulting from
      telephone or telefax Instructions Lender reasonably believes are made by
      any Authorized Person. This paragraph will survive this Agreement’s
      termination, and will benefit Lender and its officers, employees, and
      agents.

            

    

     

    
      	
              14.

            	
              DEFINITIONS
      AND CONSTRUCTION.

            

    

     

    
      	
            	
              14.1

            	
              Definitions. In this
      Agreement:

            

    

     

    “Account
Balance” means at
any time the aggregate of the Receivable Amounts of all Financed Receivables at
such time, as reflected on the records maintained by Lender.

     

    “Account
Debtor” has the
meaning in the California Uniform Commercial Code and includes any person liable
on any Receivable, including without limitation, any guarantor of any Receivable
and any issuer of a letter of credit or banker’s acceptance assuring payment
thereof.

     

    
      	 
      	
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    “Adjustments” means all discounts,
allowances, disputes, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor with respect to any Financed Receivable.

     

    “Advance” means as to any Receivable,
the advance made by Lender to Borrower in respect of such Receivable pursuant to
Section 1.2.

     

    “Advance
Rate” means 80%
or such greater or lesser percentage as Lender may from time to time establish
in its sole discretion upon notice to Borrower.

     

    “Agreement” means this Business
Financing Agreement.

     

    “Authorized
Person” means any of Borrower (if
an individual) or any one of the individuals authorized to sign on behalf of
Borrower.

     

    “Cash
Reserve” means
for any Financed Receivable which has been paid in full during a Monthly Period,
the amount by which the amount(s) paid on such Financed Receivable exceeds the
Advance made on such Financed Receivable.

     

    “Collateral” means all of Borrower’s
rights and interest in any and all personal property, whether now existing or
hereafter acquired or created and wherever located, and all products and
proceeds thereof and accessions thereto, including but not limited to the
following (collectively, the “Collateral”): (a) all accounts (including health
care insurance receivables), chattel paper (including tangible and electronic
chattel paper), inventory (including all goods held for sale or lease or to be
furnished under a contract for service, and including, returns and
repossessions), equipment (including all accessions and additions thereto),
instruments (including promissory notes), investment property (including
securities and securities entitlements), documents (including negotiable
documents), deposit accounts, letter of credit rights, money, any commercial
fort claim of Borrower which is now or hereafter identified by Borrower or
Lender, general intangibles (including payment intangibles and software), goods
(including fixtures) and all of Borrower’s books and records with respect to any
of the foregoing, and the computers and equipment containing said books and
records; and (b) any and all cash proceeds and/or noncash proceeds thereof,
including without limitation, insurance proceeds, and all supporting obligations
and the security therefore or for any right to payment.

     

    “Collections” means all payments from or
on behalf of an Account Debtor with respect to Receivables.

     

    “Compliance
Certificate”
means a certificate in the form attached as Exhibit A to this
Agreement by an Authorized Person that, among other things, the representations
and warranties set forth in this Agreement are true and correct as of the date
such certificate is delivered.

     

    “Credit
Limit” means $5,000,000, which is
intended to be the maximum amount of Advances at any time
outstanding.

     

    “Default” means any Event of Default
or any event that with notice, lapse of time or otherwise would constitute an
Event of Default.

     

    “Eligible
Receivable”
means a Receivable that satisfies all of the following:

     

    
      	
            	
              (a)

            	
              The
      Receivable has bean created by Borrower in the ordinary course of
      Borrower’s business and without any obligation on the part of Borrower to
      render any further performance.

            

    

     

    
      	
            	
              (b)

            	
              There
      are no conditions which must be satisfied before Borrower is entitled to
      receive payment of the Receivable, and the Receivable does not arise from
      COD sales, consignments or guaranteed
sales.

            

    

     

    
      	
            	
              (c)

            	
              The
      Account Debtor upon the Receivable does not claim any defense to payment
      of the Receivable, whether well founded or
  otherwise.

            

    

     

    
      	
            	
              (d)

            	
              The
      Receivable is not the obligation of an Account Debtor who has asserted or
      may be reasonably expected to assert any counterclaims or offsets against
      Borrower (including offsets for any “contra accounts” owed by Borrower to
      the Account Debtor for goods purchased by Borrower or for services
      performed for Borrower with the exception of “contra accounts” owed by
      Borrower to the Account Debtor Google,
Inc.).

            

    

     

    
      	 
      	
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              (e)

            	
              The
      Receivable represents a genuine obligation of the Account Debtor and to
      the extent any credit balances exist in favor of the Account Debtor, such
      credit balances shall be deducted in calculating the Receivable
      Amount.

            

    
 

    
      	
            	
              (f)

            	
              Borrower
      has sent an invoice to the Account Debtor in the amount of the
      Receivable.

            

    

     

    
      	
            	
              (g)

            	
              Borrower
      is not prohibited by the laws of the state where the Account Debtor is
      located from bringing an action in the courts of that state to enforce the
      Account Debtor’s obligation to pay the Receivable. Borrower has taken all
      appropriate actions to ensure access to the courts of the state where
      Account Debtor is located, including, where necessary; the filing of a
      Notice of Business Activities Report or other similar filing with the
      applicable state agency or the qualification by Borrower as a foreign
      corporation authorized to transact business in such
  state.

            

    

     

    
      	
            	
              (h)

            	
              The
      Receivable is owned by Borrower free of any title defects or any liens or
      interests of others except the security Interest in favor of Lender, and
      Lender has a perfected, first priority security interest in such
      Receivable.

            

    

     

    
      	
            	
              (i)

            	
              The
      Account Debtor on the Receivable is not any of the following: (i) an
      employee, affiliate, parent or subsidiary of Borrower, or an entity which
      has common officers or directors with Borrower, (ii) the U.S. government
      or any agency or department of the U.S. government unless Lender agrees
      in
      writing to accept the Receivable. Borrower complies with the
      procedures in the Federal Assignment of Claims Act of 1940 (41 U.S.C.§15)
      with respect to the Receivable, and the underlying contract expressly
      provides that neither the U.S. government nor any agency or department
      thereof shall have the right of set-off against Borrower; or (iii) any
      person or entity located in a foreign country unless (A) the Receivable is
      supported by an irrevocable letter of credit issued by a bank acceptable
      to Lender, and (B) If requested by Lender, the original of such letter of
      credit and/or any usance drafts drawn under such letter of credit and
      accepted by the issuing or confirming bank have been delivered to
      Lender.

            

    

     

    
      	
            	
              (j)

            	
              The
      Receivable is not in default (a Receivable will be considered in default
      if any of the following occur: (i) the Receivable is not paid within 90
      days from its invoice date; (ii) the Account Debtor obligated upon
      the Receivable suspends business, makes a general assignment for the
      benefit of creditors, or fails to pay its debts generally as they come
      due: or (iii) any petition is filed by or against the Account Debtor
      obligated upon the Receivable under any bankruptcy law or any other law or
      laws for the relief of debtors).

            

    

     

    
      	
            	
              (k)

            	
              The
      Receivable does not arise from the sale of goods which remain in
      Borrower’s possession or under Borrower’s
  control.

            

    

     

    
      	
            	
              (l)

            	
              The
      Receivable is not evidenced by a promissory note or chattel paper, nor is
      the Account Debtor obligated to Borrower under any other obligation which
      is evidenced by a promissory note.

            

    

     

    
      	
            	
              (m)

            	
              The
      Receivable is otherwise acceptable to
Lender.

            

    

     

    “Event of
Default” has the
meaning set forth in Section 9.1.

     

    “Facility
Fee” means a
payment of an annual fee equal to 0.50 (%) percentage points of the Formula
Account Balance due upon the date of this Agreement and each anniversary thereof
until this Agreement is terminated pursuant to Section 17 hereof.

     

    “Finance
Charge” means for
each Monthly Period an interest amount equal to the Finance Charge Percentage of
the average daily Account Balance outstanding during such Monthly
Period.

     

    “Finance
Charge Percentage”
means a
rate per year equal to the Prime Rate plus 2.50 (%) percentage points plus an
additional 5.00 percentage points during any period that an Event of Default has
occurred and is continuing.

     

    “Financed
Receivable” means
a Receivable for which Lander makes an Advance pursuant to a Funding
Request.

     

    “Formula
Account Balance” means the dollar amount resulting from dividing the
Credit Limit by the Advance Rate in effect at the time of
calculation.

     

    “Funding
Request” means a
writing signed by an Authorized Representative which accurately identifies the
Receivables which Lender, at its election, is being requested to finance, and
includes for each such Receivable the correct amount owed by the Account Debtor,
the name and address of the Account Debtor, the invoice number, the invoice
date and the account code in the form of the invoice schedule attached as Exhibit B hereto,
together with copies of invoices and such other supporting documentation as the
Lender may from time to time request.

     

    
      	 
      	
              8

            	
              BFA -
      RP

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    “Lender” means Bridge Bank, National
Association, and its successors and assigns.

     

    “Maintenance
Fee”
means for any Monthly Period, the amount equal to 0.20 (%) percentage points of
the average daily Account Balance for such Monthly Period; provided however, if
Borrower fails to maintain an average daily balance of at least $1,000,000 in
Borrower’s demand deposit account maintained with Lender for any Monthly Period,
such fee shall be increased to 0.40 (%) percentage points of the average daily
Account Balance effective as of such Monthly Period and for all Monthly Periods
thereafter.

     

    “Month
End” means
the last calendar day of each Monthly Period.

     

    “Monthly
Period” means
each calendar month.

     

    “Obligations” means
all liabilities and obligations of Borrower to Lender of any kind or nature,
present or future, arising under or in connection with this Agreement or under
any other document, instrument or agreement, whether or not evidenced by any
note, guarantee or other instrument, whether arising on account or by overdraft,
whether direct or indirect (including those acquired by assignment) absolute or
contingent, primary or secondary, due or to become due, now owing or hereafter
arising, and however acquired; including, without limitation, all Advances.
Finance Charges, fees, interest, expenses, professional fees and attorneys’
fees.

     

    “Overadvance” means at any time an amount
equal to the greater of the following amounts (if any): (a) the amount by which
the total amount of the Advances exceeds the Credit Limit and (b) the amount
equal to the sum of (i) the total outstanding amounts of all Advances made with
respect to Receivables which were not, or have ceased to be, Eligible
Receivables and (ii) the amount by which the total outstanding amount of all
Advances (other than those under clause (i) above)) exceeds the product of (x)
the Advance Rate and (y) the total outstanding Receivable Amounts of the
Eligible Receivables in respect of which such Advances were made.

     

    “Permitted
Indebtedness”
means:

     

    
      	
               
      

            	
              (a)

            	
              Indebtedness
      under this Agreement or that is otherwise owed to the
    Lender.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Indebtedness
      existing on the date hereof and specifically disclosed on a schedule to
      this Agreement.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Purchase
      money indebtedness (including capital leases) incurred to acquire capital
      assets in ordinary course of business and not exceeding $25,000 in total
      principal amount at any time
outstanding.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Other
      indebtedness in an aggregate amount not to exceed $25,000 at any time
      outstanding; provided that such indebtedness is junior in priority (if
      secured) to the Obligations and provided that the incurrence of such
      indebtedness does not otherwise cause and Event of Default
      hereunder.

            

    

     

    
      	
               
      

            	
              (e)

            	
              Indebtedness
      incurred in the refinancing of any indebtedness set forth in (a) through
      (d) above, provided that the principal amount thereof is not increased or
      the terms thereof are not modified to impose more burdensome terms upon
      the Borrower.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Subordinated
      Debt.

            

    

     

    
      	
               
      

            	
              (g)

            	
              Indebtedness
      to trade creditors, trade payables, accruals and accounts payable incurred
      in the ordinary course of business, and contingent liabilities arising out
      of endorsements of checks and other negotiable instruments for deposit or
      collection in the ordinary course of
business.

            

    

    
      
        	 	 	 
	
                 
      

              	
                (h)

              	
                Obligations
      to pay rentals.

              

      

    

     

    
      	
               
      

            	
              “Permitted
      Liens” means:

            

    

     

    
      	
               
      

            	
              (a)

            	
              Liens
      securing any of the indebtedness described in clauses (a) through (d) of
      the definition of Permitted
indebtedness.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Liens
      for taxes, fees, assessments or other governmental charges or levies,
      either not delinquent or being contested in good faith by appropriate
      proceedings, provided the same have no priority over any of Lender’s
      security interests.

            

    

     

    
      
        
          	 
      	
                  9

                	
                  BFA
      - RP

                

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (c)

            	
              Liens
      (i) upon or in any equipment which was not financed by Lender acquired or
      held by Borrower to secure the purchase price of such equipment or
      indebtedness incurred solely for the purpose of financing the acquisition
      of such equipment, or (ii) existing on such equipment at the time of its
      acquisition, provided that the lien is confined solely to the property so
      acquired and improvements thereon, and the proceeds of such
      equipment;

            

    

     

    
      	
               
      

            	
              (d)

            	
              Liens
      incurred in connection with the extension, renewal or refinancing of the
      indebtedness described in clause (e) of the definition of Permitted
      indebtedness, provided that any extension, renewal or replacement lien
      shall be limited to the property encumbered by the existing lien and the
      principal amount of the indebtedness being extended, renewed or refinanced
      does not increase.

            

    

     

    
      	
               
      

            	
              (e)

            	
              Liens
      securing Subordinated Debt.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Liens
      arising from judgments that do not give rise to an Event of Default under
      Section 9.1(f).

            

    

     

    “Prime
Rate” means the
greater of 4.00% per year or the variable per annum rate of interest most
recently announced by Lender as its “Prime Rate,” Lender may price loans to its
customers at, above, or below the Prime Rate, Any change in the Prime Rate shall
take effect at the opening of business on the day specified In the public
announcement of a change in Lender’s Prime Rate.

     

    “Recovery
Fee” means for
each item of Collections which the Borrower has failed to remit as required by
the Agreement, a fee equal to the lesser of $5,000 or 5% of the amount of such
item, but in no case less than $1,000.

     

    “Receivable
Amount” means as
to any Receivable, the Receivable Amount due from the Account Debtor after
deducting all discounts, credits, offsets, payments or other deductions of any
neturo whatsoever, whether or not claimed by the Account Debtor.

     

    “Receivables“ means Borrower’s rights to
payment arising in the ordinary course of Borrower’s business, including
accounts, chattel paper, instruments, contract rights, documents, general
intangibles, letters of credit, drafts, and bankers acceptances.

     

    “Refundable
Reserve” means
for any Month End:

     

    
      	
               
      

            	
              (a)

            	
              The
      sum of (i) the total of the Cash Reserves as to all Financed Receivables
      as of such Month End and (ii) the amount of Collections received by Lender
      during the Monthly Period with respect to Receivables other than Financed
      Receivables and not previously remitted to
  Borrower,

            

    

     

    minus

     

    
      	
               
      

            	
              (b)

            	
              The
      total for that Monthly Period ending on such Month End
  of:

            

    

     

    
      	
               
      

            	
              (i)

            	
              Maintenance
      Fee, Facility Fee, and Recovery
Fees;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Finance
      Charges;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              Adjustments;

            

    

     

    
      	
               
      

            	
              (iv)

            	
              Any
      outstanding Overadvance Amounts;

            

    

     

    
      	
               
      

            	
              (v)

            	
              all
      amounts due, including professional fees and expenses, as set forth in
      Section 11 for which oral or written demand has been made by Lender to
      Borrower during that Monthly Period to the extent Lender has agreed to
      accept payment thereof by deduction from the Refundable Reserve;
      and

            

    

     

    
      	
               
      

            	
              (vi)

            	
              all
      amounts collected by Borrower on Financed Receivables during the Monthly
      Period and not remitted to Lender.

            

    

     

    “Reserve” means as to any Financed
Receivable the amount by which the Receivable Amount of the Financed Receivable
exceeds the Advance on that Financed Receivable.

     

    “Reserve
Percentage” means
100% less the Advance Rate.

     

    
      	 
      	
              10

            	
              BFA
      - RP

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Subordinated
Debt” means
indebtedness of Borrower that is expressly subordinated to the indebtedness of
Borrower owed to Lender pursuant to a subordination agreement satisfactory in
form and substance to Lender.

     

    “Termination
Fee” means a payment equal to
1.00% of the Formula Account Balance.

     

    
      	
               
      

            	
              14.2

            	
              Construction:

            

    

     

    
      	
               
      

            	
              (a)

            	
              In
      this Agreement: (i) references to the plural include the singular and to
      the singular include the plural; (ii) references to any gender include any
      other gender; (iii) the terms “Include” and “including” are not limiting;
      (iv) the term “or” has the inclusive meaning represented by the phrase
      “and/or,” (v) unless otherwise specified, section and subsection
      references are to this Agreement, and (vi) any reference to any statute,
      law, or regulation shall include all amendments thereto and revisions
      thereof.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Neither
      this Agreement nor any uncertainty or ambiguity herein shall be construed
      or resolved using any presumption against either Borrower or Lender,
      whether under any rule of construction or otherwise. On the contrary, this
      Agreement has bean reviewed by each party hereto and their respective
      counsel. In case of any ambiguity or uncertainty, this Agreement shall be
      construed and interpreted according to the ordinary meaning of the words
      used to accomplish fairly the purposes and intentions of all parties
      hereto.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Titles
      and section headings used in this Agreement are for convenience only and
      shall not be used in interpreting this
  Agreement.

            

    

     

    
      	
              15.

            	
              JURY TRIAL WAIVER. THE
      UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
      CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.
      TO THE EXTENT PERMITTED BY LAW, EACH PARTY. AFTER CONSULTING (OR HAVING
      HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE,
      KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES,
      WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT
      OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR
      AGREEMENT BETWEEN THE UNDERSIGNED
PARTIES.

            

    

     

    
      	
              16.

            	
              JUDICIAL
      REFERENCE PROVISION.

            

    

     

    
      	
               
      

            	
              16.1

            	
              In
      the event the Jury Trial Waiver set forth above is not enforceable, the
      parties elect to proceed under this Judicial Reference
      Provision.

            

    

     

    
      	
               
      

            	
              16.2

            	
              With
      the exception of the items specified in Section 16.3 below, any
      controversy, dispute or claim (each, a “Claim”)
      between the parties arising out of or relating to this Agreement or any
      other document, instrument or agreement between the undersigned parties
      (collectively in this Section, the “Loan
      Documents”), will be resolved by a reference proceeding in
      California in accordance with the provisions of Sections 638 at seq. of
      the California Code of Civil Procedure (“CCP”), or
      their successor sections, which shall constitute the exclusive remedy for
      the resolution of any Claim, including whether the Claim is subject to the
      reference proceeding. Except as otherwise provided in the Loan Documents,
      venue for the reference proceeding will be in the state or federal court
      in the county or district where the real property involved in the action.
      If any, is located or in the state or federal court in the county or
      district where venue is otherwise appropriate under applicable law (the
      “Court”)

            

    

     

    
      	
               
      

            	
              16.3

            	
              The
      matters that shall not be subject to a reference are the following: (i)
      nonjudicial foreclosure of any security interests in real or personal
      property, (ii) exercise of self-help remedies (including, without
      limitation, set-off), (iii) appointment of a receiver and (iv) temporary,
      provisional or ancillary remedies (including, without limitation, writs of
      attachment, writs of possession, temporary restraining orders or
      preliminary injunctions). This reference provision does not limit the
      right of any party to exercise or oppose any of the rights and remedies
      described in clauses (i) and (ii) or to seek or oppose from a court of
      competent jurisdiction any of the items described in clauses (iii) and
      (iv). The exercise of, or opposition to, any of those items does not waive
      the right of any party to a reference pursuant to this reference provision
      as provided herein.

            

    

     

    
      	
               
      

            	
              16.4

            	
              The
      referee shall be a retired judge or justice selected by mutual written
      agreement of the parties. If the parties do not agree within ten (10) days
      of a written request to do so by any party, then, upon request of any
      party, the referee shall be selected by the Presiding Judge of the Court
      (or his or her representative). A request for appointment of a referee may
      be heard on an ex parte or expedited basis, and the parties agree that
      irreparable harm would result if ex parte relief is not granted. Pursuant
      to CCP § 170.6, each party shall have one peremptory challenge to the
      referee selected by the Presiding Judge of the Court (or his or her
      representative).

            

    

     

    
      	
               
      

            	
              16.5

            	
              The
      parties agree that time is of the essence in conducting the reference
      proceedings. Accordingly, the referee shall be requested, subject to
      change in the time periods specified herein for good cause shown, to (i)
      set the matter for a status and trial-setting conference within fifteen
      (15) days after the date of selection of the referee, (ii) if practicable,
      try all issues of law or fact within one hundred twenty (120) days after
      the date of the conference and (iii) report a statement of decision with
      in twenty (20) days after the matter has been submitted for
      decision.

            

    

     

    
      	 
      	
              11

            	
              BFA
      - RP

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              16.6

            	
              The
      referee will have power to expand or limit the amount and duration of
      discovery. The referee may set or extend discovery deadlines or cutoffs
      for good cause, including a party’s failure to provide requested discovery
      for any reason whatsoever. Unless otherwise ordered based upon good cause
      shown, no party shall be entitled to “priority” in conducting discovery,
      depositions may be taken by either party upon seven (7) days written
      notice, and all other discovery shall be responded to within fifteen (15)
      days after service. All disputes relating to discovery which cannot be
      resolved by the parties shall be submitted to the referee whose decision
      shall be final and binding.

            

    

     

    
      	
               
      

            	
              16.7

            	
              Except
      as expressly set forth herein, the referee shall determine the manner in
      which the reference proceeding is conducted including the time and place
      of hearings, the order of presentation of evidence, and all other
      questions that arise with respect to the course of the reference
      proceeding. All proceedings and hearings conducted before the referee,
      except for trial, shall be conducted without a court reporter, except that
      when any party so requests, a court reporter will be used at any hearing
      conducted before the referee, and the referee will be provided a courtesy
      copy of the transcript. The party making such a request shall have the
      obligation to arrange for and pay the court reporter. Subject to the
      referee’s power to award costs to the prevailing party, the parties will
      equally share the cost of the referee and the court reporter at
      trial.

            

    

     

    
      	
               
      

            	
              16.8

            	
              The
      referee shall be required to determine all issues in accordance with
      existing case law and the statutory laws of the State of California. The
      rules of evidence applicable to proceedings at law in the State of
      California will be applicable to the reference proceeding. The referee
      shall be empowered to enter equitable as well as legal relief, enter
      equitable orders that will be binding on the parties and rule on any
      motion which would be authorized in a court proceeding, including without
      limitation motions for summary judgment or summary adjudication. The
      referee shall issue a
      decision at the close of the reference proceeding which
      disposes of all claims of the parties that are the subject of the
      reference. Pursuant to CCP § 644, such decision shall be entered by the
      Court as a Judgment or an order in the same manner as if the action had
      been tried by the Court and any such decision will be final, binding and
      conclusive. The parties reserve the right to appeal from the final
      judgment or order or from any appealable decision or order entered by the
      referee. The parties reserve the right to findings of fact, conclusions of
      laws, a written statement of decision, and the right to move for a new
      trial or a
      different judgment, which new trial, if granted, is also to
      be a reference proceeding under this
provision.

            

    

     

    
      	
               
      

            	
              16.9

            	
              If
      the enabling legislation which provides for appointment of a referee is
      repealed (and no successor statute is enacted), any dispute between the
      parties that would otherwise be determined by reference procedure will be
      resolved and determined by arbitration. The arbitration will be conducted
      by
      a
      retired judge or justice, in accordance with the California
      Arbitration Act §1280 through §1294.2 of the CCP as amended from time to
      time. The limitations with respect to discovery set forth above shall
      apply to any such arbitration
proceeding.

            

    

     

    
      	
               
      

            	
              16.10

            	
              THE
      PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS
      RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND
      NOT BY A JURY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
      WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND
      VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS
      REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM
      BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANYWAY RELATED TO, THIS
      AGREEMENT OR THE OTHER LOAN
DOCUMENTS.

            

    

     

    
      	
              17.

            	
              JOINT AND SEVERAL
      LIABILITY OF BORROWERS;
      WAIVER OF CERTAIN
DEFENSES.

            

    

     

    (a) 
  Independent
obligation. Each Borrower, jointly and severally, promises to pay
and perform as and for its own indebtedness and obligation, (i) the due and
punctual payment of the
obligations hereunder. In each case when and as the same shall become due
and payable, whether at maturity, pursuant to a mandatory prepayment
requirement, by acceleration, as herein provided or otherwise; and (ii) the punctual and faithful performance,
keeping, observance, and fulfillment of all of the agreements, conditions,
covenants, and other obligations of Borrowers contained in this Agreement or
otherwise with any other obligation with respect to the obligations hereunder.
The obligations of each Borrower under this Agreement is a direct, primary,
separate, and independent obligation of such Borrower, is not in whole or in part a surety
relationship, is absolute and unconditional, and is not dependent in whole or in
part upon the
obligations of any other Borrower. Each Borrower agrees that it is jointly and
severally liable to Lender for the entire amount of the obligations hereunder,
and that a separate action may be brought against such Borrower whether such
action is brought against any other Borrower or any guarantor or whether any
other Borrower or any such guarantor is joined in such action. Each Borrower
agrees that its liability hereunder shall be immediate and shall not be
contingent upon the exercise or enforcement by Lender of whatever remedies they
may have against any other Borrower or any guarantor, or the
enforcement of any lien or realization upon any security Lender may at any time
possess. Each Borrower agrees that any release which may be given by Lender to
the other Borrower or any guarantor shall not also constitute a release such
Borrower. Each Borrower consents and agrees that Lender Shall be under no
obligation to marshal any assets of any other Borrower or any guarantor in favor
of such Borrower or against or in payment of any or all of the obligations
hereunder.

     

    
      	 
      	
              12

            	
              BFA
      - RP

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (b) Waivers. To the
maximum extent permitted by applicable law, each Borrower hereby:

    

    (i)
Notices. Waives; (A) notice of any Advances or other financial accommodations
made or extended under this Agreement, or the creation or existence of any
obligations hereunder; (B) notice of the amount of the obligations hereunder,
subject, however, to every Borrower’s right to make inquiry of Lender to
ascertain the amount of the obligations hereunder at any reasonable time; (C)
notice of any adverse change in the financial condition of any Borrower, of any
change in value, or the release of any Collateral, or of any other fact that
might increase any Borrower’s risk hereunder; (D) notice of presentment for
payment, demand, protest and notice thereof as to any instrument; (E) notice of
any Default; and (F) all other notices (except if such notice is specifically
required to be given to such Borrower under any Credit Document to which such
Borrower is a party) and demands to which such Borrower might otherwise be
entitled;

    

    (ii)
Suretyship and Other Rights and Defenses. Waives; (A) any rights to assert
against Lender any defense (legal or equitable), set-off, counterclaim, or claim
which such Borrower may now or at any time hereafter have against any other
Borrower; (B) any defense, set-off counterclaim or claim, of any kind or nature,
arising directly or indirectly from the present or future lack or perfection,
sufficiency, validity, or enforceability of the obligations hereunder or any
security therefor; (C) any defense arising by reason of any claim or defense
based upon an election of remedies by Lender, including any defense based upon
an election of remedies by Lender under the provisions of Section 580c and 726
of the California Code of Civil Procedure, or any similar law of California or
any other jurisdiction; (D) any defense based on any alteration, impairment or
release of the obligations hereunder or any security therefor, whether or not
resulting from any act or failure to act by Lender; and (E) any right to require
Lender to institute suit against any other Borrower or to exhaust any rights and
remedies which Lender has or may have against any other Borrower;

    

    (iii)
Subrogation. Waives; (A) any right of subrogation such Borrower has or may have
as against the other Borrower with respect to the obligations hereunder; (B) any
right to proceed against the other Borrower, now or hereafter, for contribution,
indemnity, reimbursement, or any other suretyship rights and claims
(irrespective of whether direct or indirect, liquidated or contingent), with
respect to the obligations hereunder; and (C) any right to proceed or to seek
recourse against or with respect to any property or asset of the other Borrower
and hereby agrees that, in light of the waivers contained in this clause,
such  Borrower shall not be a “creditor” (as that term is defined in Title
11 of the United States Code or otherwise) of the other Borrower, whether for
the purposes of the application of Sections 547 or 550 of Title 11 of the United
States code or otherwise); and

    

    (iv)
Statutory Rights. WAIVES, WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR
OTHER PROVISION SET FORTH IN THIS SECTION, ANY AND ALL BENEFITS OR DEFENSES
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE
SECTIONS 2787 to 2855, AND CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a,
580b, 580c, 580d, and 726.

    

    (c) Consent to Alterations and
Releases.  Each Borrower
consents and agrees that, without notice to or by such Borrower and without
affecting or impairing the obligations of such Borrower hereunder, Lender may,
by action or inaction, compromise or settle, extend the period of duration or
the time for the payment, or discharge the performance of , or may refuse to or
otherwise not enforce, or may , by action or inaction, release all or any one or
more parties to, any one or more of this Agreement or may grant other
indulgences to any Borrower in respect thereof, or may agree to amend or modify
in any manner and at any time (or from time to time) any one or more of this
Agreement, or may, by action or inaction, release or substitute any guarantor,
if any, of the obligations hereunder, or may enforce, exchange, release, or
waive, by action or inaction, any security for the obligations hereunder or any
guaranty of the obligations hereunder, or any portion thereof.

    

    
      	
              18.

            	
              TERM AND TERMINATION.
        Borrower and Lender each have the right to terminate
      the financing of Receivables under this Agreement at any time upon notice
      to the other; provided that until all transactions entered into and
      Obligations incurred hereunder or in connection herewith have been
      completed and satisfied in full, (a) no such termination shall affect
      Lender’s security interest in the Financed Receivables and other
      Collateral and (b) Lender’s rights and remedies hereunder shall survive
      any such termination.  Notwithstanding the foregoing, the
      obligations of Borrower to indemnity Lender with respect to the expenses,
      damages, losses, costs and liabilities described in Section 11 shall
      survive until all applicable statute of limitations periods with respect
      to actions that may be brought against Lender have run.  Upon
      any such termination, Borrower shall, upon demand by Lender, immediately
      repay all Advances then
outstanding.

            

    

    

    
      	
              19.

            	
              OTHER AGREEMENTS. (i)
      Any security agreements, liens and/or security interests securing payment
      of any obligations of Borrower owing to Lender or its affiliates also
      secure the Obligations, and are valid and subsisting  and are
      not adversely affected by execution of this Agreement, except for the
      release of Lender’s security interest in the personal property of
      Borrower’s subsidiaries, which shall be released promptly following the
      effectiveness of this Agreement. An Event of Default under this Agreement
      constitutes a default under other outstanding agreements between Borrower
      and Lender or its affiliates; (ii) Lender reserves the right to issue
      press releases, advertisements, and other promotional materials describing
      any successful outcome of services provided on Borrower’s behalf. Borrower
      agree that Lender shall have the right to identify Borrower by name in
      those materials.

            

    

     

    
      	 
      	
              13

            	
              BFA
      - RP

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, Borrower and Lender have executed this Agreement on the day and
year above written.

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  BORROWER:

                                	 
      	
                                  LENDER:

                                	 
      
	 
      	 
      	 
      	 
      
	
                                  VERTRO,
      INC.

                                	 
      	
                                  BRIDGE BANK, NATIONAL ASSOCIATION

                                	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                                  By

                                	
                                  /s/
      John B. Pisaris

                                	 
      	
                                  By

                                	
                                  /s/
      Sarah Henderson

                                	 
      
	
                                  Name:

                                	
                                  John
      B. Pisaris

                                	 
      	
                                  Name:

                                	
                                  Sarah
      Henderson

                                	 
      
	
                                  Title:

                                	
                                  General
      Counsel

                                	 
      	
                                  Title:

                                	
                                  Vice
      President

                                	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                                  Address for
      Notices:

                                	 
      	
                                  Address for
      Notices:

                                	 
      
	
                                  5220
      Summerlin Commons Blvd, Suite 500

                                	 
      	
                                  55
      Almaden Blvd,

                                	 
      
	
                                  Fort
      Myers, FL 33907

                                	 
      	
                                  San
      Jose, CA 95113

                                	 
      
	
                                  Fax:

                                	 
      	
                                  Fax:
      (408) 423-8510

                                	 
      

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    BORROWER:

    

    ALOT,
INC.

    

    
      
        
          
            
              
                	
                        By

                      	
                        /s/
      John B. Pisaris

                      
	
                        Name:

                      	
                        John
      B. Pisaris

                      
	
                        Title:

                      	
                        General
      Counsel

                      

              

            

          

        

      

    

    

    Address for
Notices:

    5220
Summerlin Commons Blvd, Suite 500

    Fort
Myers, FL 33907

    Fax:

     

    
      	 
      	
              14

            	
              BFA
      - RP

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit A

     

    COMPLIANCE
CERTIFICATE

    

    
      	
              TO: 

            	
              BRIDGE
      BANK, NATIONAL ASSOCIATION (the
“Lender”)

            

    

    

    
      	
              FROM: 

            	
              VERTRO,
      INC. AND ALOT, INC. (jointly and severally the
  “Borrower”)

            

    

    

    The
undersigned authorized officer of ________________ hereby certifies that in
accordance with the terms and conditions of the Business Financing Agreement
between Borrower and Lender (the “Agreement”), (i) Borrower is in complete
compliance for the period ending ________________ with all required covenants
except as noted below and (ii) all representations and warranties of Borrower
stated in the Agreement are true and correct as of the date hereof. Attached
herewith are the required documents supporting the above certification. The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or
footnotes.

     

    Please
indicate compliance status by circling Yes/No under “Complies”
column.

    

    
      
        
          
            
              	
                      Reporting
      Covenant

                    	 	
                      Required

                    	 	 	 	
                      Complies

                    
	 	 	 	 	 	 	 
	
                      Consolidated
      monthly financial statements, and A/R & A/P Agings

                    	 	
                      Within
      30 days of the end of each calendar month

                    	 	
                      Yes

                    	 	
                      No

                    
	 	 	 	 	 	 	 
	
                      Compliance
      Certificate

                    	 	
                      Within
      30 days of the end of each quarter

                    	 	
                      Yes

                    	 	
                      No

                    
	 	 	 	 	 	 	 
	
                      Cash
      Receipts Journal

                    	 	
                      Weekly
      lockbox is functioning

                    	 	
                      Yes

                    	 	
                      No

                    
	 	 	 	 	 	 	 
	
                      10K
      and 10Q reports

                    	 	
                      Within
      5 days of SEC filing dates (where applicable)

                    	 	
                      Yes

                    	 	
                      No

                    

            

          

        

      

    

    

    
      
        
          	
                  Financial Covenant

                	 
      	
                  Required

                	 
      	
                  Actual

                	 
      	
                  Complies

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  N/A

                	
                    

                	 
      	
                    

                	 
      	
                    

                	 
      

        

      

    

    

    Deposits

    Deposits
held at Bridge Bank: $______________________

    Deposits
held outside of Bridge Bank: $________________

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	
                                                      Comments Regarding
      Exceptions: See
      Attached.

                                                    	 
      	 
      	 
      
	 
      	 
      	
                                                      BANK
      USE ONLY

                                                    
	 	 	  	 
	 
      	
                                                       
      

                                                    	
                                                      Received by:

                                                    	 
      
	
                                                      Sincerely,

                                                    	 
      	 
      	
                                                      AUTHORIZED SIGNER

                                                    
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                                      Date:

                                                    	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                                      Verified:

                                                    	 
      
	
                                                      SIGNATURE

                                                    	 
      	 
      	
                                                      AUTHORIZED SIGNER

                                                    
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                                      Date:

                                                    	 
      
	
                                                      TITLE

                                                    	 
      	
                                                       
      

                                                    	    
      

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            	 
      	 
      	
                                                    Compliance Status

                                                  	
                                                    Yes         No         

                                                  
	 
      	 
      	 
      	 
      
	
                                                    DATE

                                                  	 
      	 
      	 
      

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit B

     

    FUNDING
REQUEST

    (RECEIVABLES
ADVANCE)

    

    
      
        
          	
                  To:

                	
                  Bridge Bank, National
      Association

                

        

      

    

    

    
      
        
          	
                  Fax:

                	
                  (408) 423-8514

                
	 
      	 
      
	
                  Date:

                	
                    

                

        

      

    

    

    
      
        
          	
                  From:

                	
                  VERTRO,
      INC.

                
	 
      	
                  ALOT, INC.

                
	 
      	
                  Borrower’s
      Name

                
	 
      	 
      
	 
      	
                    

                
	 
      	
                  Authorized
      Signature

                
	 
      	 
      
	 
      	
                    

                
	 
      	
                  Authorized
      Signer’s Name (please print)

                
	 
      	 
      
	 
      	
                    

                
	 
      	
                  Phone
      Number

                

        

      

    

    

    
      
        
          
            	
                    To
      Account #

                  	
                      

                  

          

        

      

    

    

    Borrower
hereby requests funding in the Gross amount of $ _________________ representing
a Net advance in the amount of $ ___________________ in accordance with the
attached invoices. Each invoice shall indicate the correct amount owed by the
Account Debtor, the name and address of the Account Debtor, the invoice number,
and the invoice date.

    

    Borrower
hereby authorizes Lender to rely on facsimile stamp signatures and treat them as
authorized by Borrower for the purpose of requesting Advances.

    

    All
representations and warranties of Borrower stated in the Business Financing
Agreement are true, correct and complete in all material respects as of the date
of this Funding Request; provided that those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of such
date.

    

    Capitalized
terms used herein and not otherwise defined have the meanings set forth in the
Business Financing Agreement.

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