UNITED STATES
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): November 14, 2011

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))
 
 

 
 
 

 
 
Item 5.02. Departure of Directors or Certain Officers; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

(c)              On November 30, 2011, USA Technologies, Inc. (the “Company”) appointed Stephen P. Herbert as the Chairman of the Board of Directors and Chief Executive Officer of the Company. Mr. Herbert had been appointed as the interim Chairman of the Board of Directors and Chief Executive Officer of the Company on October 5, 2011. Mr. Herbert has been an officer and a member of the Board of Directors of the Company since 1996, and has served as President and Chief Operating Officer of the Company since 1999.

On November 30, 2011, the Company and Mr. Herbert entered into an Amended and Restated Employment and Non-Competition Agreement (the “Agreement”) that replaced his prior employment agreement with the Company. The Agreement provides for an initial term continuing through January 1, 2013, which is automatically renewed for consecutive one year periods unless terminated by either Mr. Herbert or the Company upon at least ninety days notice prior to the end of the initial term or any one year extension thereof. The Agreement continues the existing compensation and fringe benefits received by Mr. Herbert under Section 2 of his prior employment agreement except that (i) his base salary is $341,227 which is equal to the base salary under his prior employment agreement plus the amount of the annual premiums that had been paid by the Company for the car allowance and supplemental disability insurance coverage provided to him under his prior employment agreement; (ii) the car allowance and supplemental disability insurance coverage that had been provided to him under his prior employment agreement have been discontinued; and (iii) he is eligible for a cash bonus as described in the next sentence. The Agreement provides for the payment to Mr. Herbert of a cash bonus of $30,000 if the Company would achieve all of the minimum threshold performance target goals under the Fiscal Year 2012 Performance Share Plan adopted by the Board of Directors of the Company on September 15, 2011 (the “2012 Plan”), of $50,000 if the Company would achieve all of the target performance goals under the 2012 Plan, and of $75,000 if the Company would achieve all of the maximum distinguished performance target goals under the 2012 Plan.
 
The foregoing summary of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, which is filed hereto as Exhibit 10.1 and is incorporated herein by reference.
 
 
 

 
 
On December 5, 2011, the Company issued a press release announcing Mr. Herbert’s appointment as Chairman of the Board and Chief Executive Officer, a copy of which is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

Item 8.01. Other Events

On November 14, 2011, the independent directors of the Company unanimously elected Steven D. Barnhart as the Company’s first lead independent director. Mr. Barnhart has been a Director of the Company since October 2009, and also serves as Chair of the Nominating Committee and a member of the Compensation and Audit Committees. The responsibilities of the lead independent director are set forth in the Lead Independent Director Charter which was adopted by the Company in May 2011, and include presiding as chair of all executive sessions of the independent members of the Board of Directors, consulting in advance with the Chairman of the Board on the agenda and schedule of each meeting of the Board of Directors, providing input to the Chairman of the Board as to the scope and quality of information to be provided by management that is necessary or appropriate for the independent directors to effectively and responsibly perform their duties, and to act as a liaison between the independent directors and the Chairman of the Board.

Mr. Barnhart is currently Senior Vice President and Chief Financial Officer of Bally Total Fitness, a role he has held since January 2010. Previously he was Chief Executive Officer and President of Orbitz Worldwide from 2007 to January 2009, after holding other executive positions within the company since joining in 2003. Prior to Orbitz Worldwide, he worked for PepsiCo and the Pepsi Bottling Group from 1990 to 2003.

Item 9.01. Financial Statements and Exhibits

Exhibit 10.1
Amended and Restated Employment and Non- Competition Agreement between the Company and Stephen P. Herbert dated November 30, 2011
   
Exhibit 99.1
Press release of the Company dated December 5, 2011
 
 
 

 
 
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: December 5, 2011
By:
/s/ Stephen P. Herbert,  
    Stephen P. Herbert,   
    Chief Executive Officer  
       
 
 
 

 

Index to Exhibits

Exhibit No.
 
Description of Exhibit
 
       
10.1
 
Amended and Restated Employment and Non-Competition Agreement between the Company and Stephen P. Herbert dated November 30, 2011
 
       
99.1
 
 
Press release of the Company dated December 5, 2011
 


EXHIBIT 10.1
 
AMENDED AND RESTATED
 
EMPLOYMENT AND NON-COMPETITION AGREEMENT
 
Agreement made this 30th day of November, 2011, by and between STEPHEN P. HERBERT, an individual ("Herbert"), and USA TECHNOLOGIES, INC., a Pennsylvania corporation ("USA").
 
BACKGROUND
 
Herbert was appointed as the interim Chairman and Chief Executive Officer of USA on October 5, 2011, and has been the President and Chief Operating Officer of USA since 1996. Herbert and USA had entered into an Amended and Restated Employment and Non-Competition Agreement dated September 29, 2009, a First Amendment thereto dated April 14, 2011, and a Second Amendment thereto dated September 27, 2011. As more fully set forth herein, the parties desire to amend, completely restate, and replace the foregoing agreements effective as of the date hereof.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the covenants set forth herein, and intending to be legally bound hereby, the parties agree as follows:
 
SECTION 1.   Employment .
 
A.           USA shall employ Herbert as Chairman of the Board of Directors, Chief Executive Officer, and President commencing on November 29, 2011 and continuing through January 1, 2013 (the "Employment Period"), and Herbert hereby accepts such employment.  Unless terminated by either party hereto upon at least 90-days notice prior to end of the original Employment Period ending January 1, 2013, or prior to the end of any one year extension of the Employment Period, the Employment Period shall not be terminated and shall automatically continue in full force and effect for consecutive one year periods.
 
 
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B.           During the Employment Period, Herbert shall devote his full time, energy, skills, and attention to the business of USA, and shall not be engaged or employed in any other business activity whatsoever, whether or not such activity is pursued for gain, profit or other pecuniary advantage.  During the Employment Period, Herbert shall perform and discharge well and faithfully such executive management duties for USA as shall be necessary and as otherwise may be directed by the Board of Directors of USA.
 
C.       Nothing contained in subparagraph 1.B hereof shall prohibit Herbert from investing his personal assets in businesses which do not compete with USA, where the form or manner of such investments will not require more than minimal services on the part of Herbert in the operation of the affairs of the business in which such investments are made, or in which his participation is solely that of a passive investor; or from serving as a member of boards of directors, boards of trustees, or other governing bodies of any organization, provided that USA approves such activities in advance; or from participating in trade associations, charitable, civic and any similar activities of a not-for-profit, philanthropic or eleemosynary nature; or from attending educational events or classes. It is understood and agreed that any such permitted activities which shall occur during business hours shall be limited to no greater than forty hours per year.
 
SECTION 2.   Compensation and Benefits
 
A.           In consideration of his services rendered, USA shall pay to Herbert a base salary of $341,227 per year during the Employment Period, subject to any withholding required by law.  Herbert's base salary may be increased from time to time in the discretion of the Board of Directors.
 
 
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B.           In addition to the base salary provided for in subparagraph A, Herbert shall be eligible to receive such bonus or bonuses as the Board of Directors of USA may, in their discretion, pay to Herbert from time to time based upon his performance and/or the performance of USA.  All awards in this regard may be made in cash or in common stock of USA.

C.           Herbert shall be entitled to be reimbursed by USA for all reasonable expenses reasonably incurred by Herbert in connection with his employment duties hereunder.  Such expenses shall include, but not be limited to, all reasonable business expenses, including travel expenses such as tolls, gasoline and mileage. Herbert shall reasonably document all requests for expense reimbursements.
 
D.           On September 15, 2011, the Board of Directors approved the adoption of the Fiscal Year 2012 Performance Share Plan (the “2012 Plan”) pursuant to which, among other things, Herbert would be awarded common stock of USA in the event that USA achieves certain target goals during the fiscal year ending June 30, 2012 (the “Fiscal Year”) relating to the total number of connections, total revenues, operating expenses, and operating earnings. If USA shall achieve all of the minimum threshold performance target goals under the 2012 Plan during the Fiscal Year, and in addition to any other benefits otherwise payable to Herbert under the 2012 Plan, Herbert shall receive a cash bonus in the amount of $30,000. If USA shall achieve all of the target performance goals under the 2012 Plan during the Fiscal Year, and in addition to any other benefits otherwise payable to Herbert under the 2012 Plan, Herbert shall receive a cash bonus in the amount of $50,000.  If USA shall achieve all of the maximum distinguished performance target goals under the 2012 Plan during the Fiscal Year, and in addition to any other benefits otherwise payable to Herbert under the 2012 Plan, Herbert shall receive a cash bonus in the amount of $75,000. Any cash bonus paid to Herbert under this subsection D. shall be subject to applicable withholding required by law.
 
 
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In the event of the occurrence of a USA Transaction during the Fiscal Year, and provided that Herbert is an employee of USA on the date of such USA Transaction, Herbert shall be entitled to receive on the date of the USA Transaction a cash bonus under this subsection D. in the amount of $50,000 as if USA had achieved all of the target performance goals under the 2012 Plan during the Fiscal Year. In the event that Herbert’s employment with USA would be terminated by USA during the Fiscal Year for Cause (as defined in Section 3), or if Herbert would resign his employment with USA during the Fiscal Year for any reason other than for Good Reason (as defined in Section 3), then Herbert would not be entitled to receive any cash bonus under this subsection D. In the event that Herbert’s employment with USA would be terminated by USA during the Fiscal Year for any reason whatsoever other than for Cause (as defined in Section 3), or if Herbert’s employment with USA would be terminated by Herbert during the Fiscal Year for Good Reason (as defined in Section 3), then Herbert shall be entitled to receive on the date of such termination a cash bonus under this subsection D. in the amount of $50,000 as if USA had achieved all of the target performance goals under the 2012 Plan during the Fiscal Year. If Herbert’s employment with USA would be terminated during the Fiscal Year as a result of death or disability, then Herbert would nevertheless be eligible to earn a cash bonus under the provisions of the first paragraph of this subsection D. as if he had remained employed with USA through the end of the Fiscal Year.
 
E.           During the Employment Period, USA shall obtain and pay the premiums for, a term life insurance policy on Herbert’s life in the face amount of $1,500,000. During the Employment Period, Herbert shall designate the beneficiary of the policy. If Herbert shall die during the Employment Period, the proceeds of the policy shall be paid to his designated beneficiary. Herbert agrees to cooperate with the insurance company and USA in connection with the issuance of the policy.  Herbert agrees that he will submit to examinations by such practicing medical doctors selected by USA or the insurance company upon receipt of written request from USA or the insurance company to do so.
 
 
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F.           During the Employment Period, and in addition to the other benefits provided to Herbert hereunder, Herbert shall be entitled to participate in and be covered by all standard fringe and employee benefits made available to other employees of USA. These current benefits include medical and dental insurance, paid vacation and holidays, a 401(k) plan, and a long-term group disability plan.
 
SECTION 3. Termination.   In addition to the notice of non-renewal of the Employment Period referred to in Section 1.A hereof and as provided in Section 11.B, Herbert’s employment with USA may be terminated as follows:
 
A.             Voluntary Termination Without Good Reason .   Herbert may voluntarily terminate Herbert’s employment hereunder without Good Reason (as defined below) at any time during the Employment Period effective as of the end of the 90-day period beginning on the date Herbert provides USA with a signed, written notice of Herbert’s termination; provided, in its sole discretion (i) USA may accept such resignation effective as of an earlier date in lieu of waiting for passage of the 90-day notice period, or (ii) during all or any part of the 90-day notice period, USA may retain Herbert as an employee but modify, reduce or eliminate Herbert’s duties hereunder. If Herbert voluntarily terminates Herbert’s employment hereunder without Good Reason, USA will pay to Herbert only (i) Herbert’s annual base salary earned through the date of termination, (ii) all bonuses earned and vested on or before the date of termination, and (iii) any benefits or compensation provided under the terms of any benefit plan or other provisions of this Agreement .
 
 
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B.            Voluntary Termination With Good Reason .
 
(i)           Herbert may voluntarily terminate Herbert’s employment hereunder with Good Reason (as defined below) at any time during the Employment Period,  effective as of the end of the 90-day period beginning on the date Herbert provides USA with a signed, written notice of Herbert’s termination; provided, in its sole discretion (A) USA may accept such resignation effective as of an earlier date in lieu of waiting for passage of the 90-day notice period, or (B) during all or any part of the 90-day notice period, USA may retain Herbert as an employee but modify, reduce or eliminate Herbert’s duties hereunder.
 
(ii)           If Herbert voluntarily terminates Herbert’s employment hereunder with Good Reason at any time during the Employment Period, Herbert will be entitled to receive the following compensation and benefits:
 
 
(a)
On or before the termination of Herbert’s employment, USA shall pay to Herbert a lump sum equal to two years of his base salary at the time of the termination date;
   
(b)
all bonuses earned or vested on or before the date of termination;
   
(c)
all restricted stock awards and stock options shall become immediately vested on the date of termination; and
   
(d)
any other benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement.
 
 
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(iii)           For purposes of this Agreement, “Good Reason” means any of the following conditions, which remains uncured after the expiration of 30 days following the delivery of written notice of such condition to USA by Herbert, with respect to which Herbert terminates employment within 120 days after the initial existence of the condition: (A) a material breach of the terms of this Agreement by USA; (B) the assignment by USA to Herbert of duties in any way materially inconsistent with Herbert’s authorities, duties, responsibilities, and status, as Chief Executive Officer of USA, or a material reduction or alteration in the nature or status of Herbert’s authority, duties, or responsibilities as Chief Executive Officer; provided, however, that a material reduction or alteration referred to in this subsection (B) shall not include any change or reduction in Herbert’s authorities, duties or responsibilities resulting solely from USA becoming a private company or a subsidiary or division of another company; (C) USA reduces Herbert’s annual base salary; (D) any reduction by USA in the kind or level of employee benefits to which Herbert is entitled immediately prior to such reduction with the result that Herbert’s overall benefit package is significantly reduced unless such failure to continue a plan, policy, practice or arrangement pertains to all plan participants generally; or (E) requiring Herbert to be based at a location in excess of 50 miles from Herbert’s current residence. For the avoidance of doubt, Good Reason shall not include or mean if at any time in the future, the office of the Chairman of the Board of Directors of USA is held by an individual other than Herbert.
 
(iv)           As a condition to Herbert receiving or continuing to receive any of the payments or benefits provided under this subsection B, Herbert shall have executed and delivered  to USA (and not revoked) a release of any and all claims, suits, or causes of action against USA and its affiliates in form reasonably acceptable to USA.
 
C.            Termination Without Cause .
 
(i)       USA, in its sole discretion, may terminate Herbert’s employment hereunder without Cause (as defined below), at any time by giving Herbert at least 30 days’ (and not more than 90 days’) prior written notice of USA’s intent to terminate Herbert’s employment as of a specified date; provided, during all or any part of the remaining Employment Period, USA, in its sole discretion, may modify, reduce or eliminate Herbert’s duties hereunder.
 
 
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(ii)     If USA terminates Herbert’s employment hereunder without Cause at any time during the Employment Period, or if Herbert’s employment is terminated upon the expiration of the Employment Period as a result of USA providing a notice of non-renewal to Herbert pursuant to Section 1.A hereof, Herbert will be entitled to receive the following compensation and benefits:
 
(a)
On or before the termination of Herbert’s employment, USA shall pay to Herbert a lump sum equal to two years of his base salary at the time of the termination date;
   
(b)
all bonuses earned or vested on or before the date of termination;
   
(c)
All restricted stock awards or stock options shall become immediately vested on the date of termination; and
   
(d)
any other benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement.
 
D.            Termination With Cause .
(i)           USA may immediately terminate Herbert’s employment hereunder for Cause (as defined below) at any time during the Employment Period upon delivery of written notice to Herbert.
 
(ii)           If USA terminates Herbert’s employment hereunder with Cause at any time during the Employment Period, Herbert will only be entitled to receive the following compensation and benefits:
 
(a)
On or before the termination of Herbert’s employment, USA shall pay Herbert his base salary through the date of termination;
   
(b)
all bonuses earned or vested on or before the date of termination; and
   
(c)
any other benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement.
 
 
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(iii)     For purposes of this Agreement, “Cause” means any of the following have occurred or exist as determined by the USA Board of Directors (or its designee): (A) Herbert’s fraud, gross malfeasance, or willful misconduct, with respect to USA’s business; (B) any material breach by Herbert of this Agreement, which breach is not cured (if curable) by Herbert within thirty (30) days after written notice of such breach is delivered to Herbert by USA; (C) any willful violation by Herbert of any law, rule or regulation, which violation results or could reasonably be expected to result, in material harm to the business or reputation of USA; (D) conviction of or the entry of a guilty plea or plea of no contest to any felony or to any other crime involving moral turpitude; or ( E ) any intentional misapplication by Herbert of USA’s funds, or any material act of dishonesty committed by Herbert.
 
E.               Termination Due to Death or Disability .
 
(i)      Herbert’s employment with USA will end upon Herbert’s death. Upon Herbert’s death, his designated beneficiary shall be entitled to receive the proceeds of the life insurance policy paid for by USA that is referred to in Section 2.E, and USA will pay to Herbert’s personal representative only (A) Herbert’s annual base salary earned through the date of death, (B) all bonuses earned and vested on or before the date of death, and (C) any benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement.
 
 
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(ii)      If Herbert becomes disabled during the Employment Period, USA may terminate Herbert’s employment under this Agreement upon giving Herbert or Herbert’s legal representative written notice upon the expiration of or at any time following the ninety (90) day period referred to in the next sentence and at least 30 days before the termination date. For purposes of this Agreement, “disabled” means if USA shall determine in good faith that Herbert is incapacitated by accident, sickness or otherwise so as to render him mentally or physically incapable of performing the services required of him hereunder for an aggregate of ninety (90) consecutive days, and USA shall be entitled to rely upon the advice and opinion of any physician of its choosing in making any determination with respect to any such disability. If Herbert’s employment hereunder is terminated due to Herbert’s disability, USA will pay to Herbert or his personal representative only (A) Herbert’s annual base salary earned through the date of termination, (B) all bonuses earned and vested on or before the date of termination, and (C) any benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement. 
 
F.           In addition to any other terms or conditions that survive the termination of Herbert’s employment with USA, all of the terms and conditions of Sections 4, 5 and 6 shall survive the termination of Herbert’s employment with USA for any reason whatsoever, including under this Section 3.
 
G.           Except as specifically provided otherwise herein, Herbert shall not be required to mitigate the amount of any payment provided for in this Section 3 by seeking other employment or otherwise, nor shall the amount of such payment be reduced by reason of compensation or other income Herbert receives for services rendered after Herbert’s termination of employment with USA.
 
 
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SECTION 4.   Business Secrets .
 
A.           Except in connection with his duties hereunder, Herbert shall not, directly or indirectly, at any time from and after the date hereof, and whether or not the Employment Period has terminated, or whether or not Herbert’s employment has terminated for any reason whatsoever, make any use of, exploit, disclose, or divulge to any other person, firm or corporation, any confidential information, including but not limited to, proprietary information, trade secret, business secret, documents, process, procedures, know-how, data, marketing information, marketing method, marketing means, software information, intellectual property, special arrangement, or any other confidential information concerning the business or policies of USA, or concerning USA’s customers, clients, accounts or suppliers, that Herbert learned as a result of, in connection with, through his employment with, or through his affiliation with USA, whether or not pursuant to this Agreement, and whether prior to or after the date hereof, but not information that can be shown through documentary evidence to be in the public domain, or information that falls into the public domain, unless such information falls into the public domain by Herbert’s direct or indirect disclosure or other acts. Herbert agrees to use his best endeavors to prevent the unauthorized disclosure or publication of confidential information and not to copy nor remove confidential information from USA’s premises, whether physically or electronically, without the express written permission of USA.
 
B.           From and after the date hereof, except in connection with his duties hereunder, and for a two (2) year period following the termination of the Employment Period, or for a two (2) year period following the termination of Herbert's employment hereunder if earlier, Herbert shall not solicit, or divert business from, or serve, or sell to, any customer or account of USA of which Herbert is or becomes aware, or with which Herbert has had personal contact as a result of, in connection with, through his employment with, or through his affiliation with USA, whether or not pursuant to this Agreement and whether prior to or after the date hereof.
 
 
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C.           All documents, data, know-how, designs, inventions, names, marketing information, marketing method, marketing means, materials, software programs, hardware, configurations, information, data processing reports, lists and sales analyses, price lists or information, or any other materials or data of any kind furnished to Herbert by USA, or by USA’s customers, clients, accounts, or suppliers, or developed by Herbert on behalf of USA or at USA's direction or for USA's use, or otherwise devised, developed, created, or invented in connection with Herbert's employment hereunder or his affiliation with USA (whether or not during normal working hours), are and shall remain the sole and exclusive property of USA, and Herbert shall have no right or interest whatsoever thereto, including but not limited to, any copyright or patent interest whatsoever. If USA requests the return of any such items (including all copies) at any time whatsoever, Herbert shall immediately deliver the same to USA.
 
D.     All documents, data, know-how, designs, products, ideas, equipment, inventions, names, devices, marketing information, marketing method, marketing means, materials, software programs, hardware, configurations, information, or any other materials or data of any kind developed by Herbert on behalf of USA or at its direction or for USA's use, or otherwise devised, developed, created, or invented in connection with Herbert’s employment with USA or Herbert’s affiliation with USA (whether or not during normal working hours), and whether before or after the date of this Agreement, are and shall remain the sole and exclusive property of USA, and Herbert agrees to apprise USA of the existence of such, and Herbert does not and shall not have any right, title,  or interest whatsoever thereto.  Herbert hereby acknowledges that all such rights to intellectual property shall belong exclusively to USA and not to Herbert. Any and all rights of ownership in connection with any of the foregoing shall belong solely to USA, and all copyright, patent, trademark, or similar rights or interests shall be the sole and exclusive property of USA.  Herbert  hereby assigns, transfers, and conveys to USA all of Herbert’s right, title and interest in and to any and all such inventions, discoveries, improvements, modifications and other intellectual property rights to effectuate, confirm, or evidence such assignment, transfer and conveyance, including but not limited to, executing and delivering any and all applicable forms, documents, or applications required under any applicable copyright, patent, trademark, or other law, rule or regulation.
 
 
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E.     At any and all times from and after the date hereof, and for a two (2) year period following the termination of Herbert’s employment with USA for any reason whatsoever, Herbert shall not (a) directly or indirectly, attempt to hire, or hire, any person employed by USA; or (b) directly or indirectly, interfere with USA's relations with any person employed by it.
 
SECTION 5.   Restrictive Covenant .   From and after the date hereof, and for a two  (2) year period following the termination of the Employment Period, or for a two (2) year period following the termination of Herbert's employment hereunder if earlier, Herbert shall be prohibited from competing in all fifty states of the United States, and in each foreign country, possession, or territory in which USA is engaged in or actively pursuing business as of the termination or at any time during the preceding twelve month period, with the business of USA as presently or as hereinafter conducted, including but not limited to,  the ownership or licensing or development of a cashless system which controls, monitors, and/or networks devices, including beverage vending machines.  For the purposes hereof, the term "competing" shall mean acting, directly or indirectly, as a partner, principal, stockholder, joint venturer, associate, independent contractor, creditor of, consultant, trustee, lessor to, sublessor to, employee or agent of, or to have any other involvement with, any person, firm, corporation, or other business organization which is engaged in the businesses described in this Section.
 
 
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SECTION 6.   Remedies .   Herbert acknowledges that any breach by him of the obligations set forth in Sections 4 or 5 hereof would substantially and materially impair and irreparably harm USA's business and goodwill; that such impairment and harm would be difficult to measure; and, therefore, total compensation in solely monetary terms would be inadequate.  Consequently, Herbert agrees that in the event of any breach or any threatened breach by Herbert of any of the provisions of Sections 4 or 5 hereof, USA shall be entitled in addition to monetary damages or other remedies, to equitable relief, including injunctive relief, and to the payment by Herbert of all costs and expenses incurred by USA in enforcing the provisions thereof, including attorneys' fees.  The remedies granted to USA in this Agreement are cumulative and are in addition to remedies otherwise available to USA at law or in equity.
 
SECTION 7.   Waiver of Breach .   The waiver by USA of a breach of any provision of this Agreement by Herbert shall not operate or be construed as a waiver of any other or subsequent breach by Herbert of such or any other provision.
 
 
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SECTION 8.   Notices .   All notices required or permitted hereunder shall be in writing and shall be sent by certified or registered mail, return receipt requested, postage prepaid, as follows:
 
 
To USA:

USA Technologies, Inc.
100 Deerfield Lane, Suite 140
Malvern, Pennsylvania 19355
Attn: David M. DeMedio, Chief Financial Officer

To Herbert:

Mr. Stephen P. Herbert
28 Briar Road
Strafford, Pennsylvania 19087

or to such other address as either of them may designate in a written notice served upon the other party in the manner provided herein.  All notices required or permitted hereunder shall be deemed duly given and received on the second day next succeeding the date of mailing.
 
SECTION 9.   Severability .   If any term or provision of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of any such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.  If any of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, scope, activity or subject, it shall be construed by limiting and reducing it, so as to be valid and enforceable to the extent compatible with the applicable law.
 
SECTION 10.   Governing Law .   The implementation and interpretation of this Agreement shall be governed by and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to its conflict of laws rules.
 
 
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SECTION 11.   Binding Effect and Assignability .
 
A.           The rights and obligations of both parties under this Agreement shall inure to the benefit of and shall be binding upon their personal representatives, heirs, successors and assigns.  This Agreement, or  any  part thereof, may not be assigned by Herbert.
 
B.            At the time of the consummation of a USA Transaction, and as a condition thereof, USA shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of USA expressly to assume and agree to perform this Agreement to the same extent that USA would be required to perform it if no such USA Transaction had taken place. Failure of USA to obtain an assumption of this Agreement at or prior to the consummation of such USA Transaction shall result in the termination of Herbert’s employment on the date of the consummation of the USA Transaction. In the event of the termination of Herbert’s employment, Herbert shall receive from USA all of the compensation and benefits described in subparagraphs (a), (b), (c), and (d) of Section 3.C (ii) as if Herbert’s employment had been terminated by USA without Cause on the date of the consummation of the USA Transaction. In addition to any other terms or conditions that survive the termination of Herbert’s employment with USA, all of the terms and conditions of Sections 4, 5 and 6 shall survive the termination of Herbert’s employment with USA. Except as specifically provided otherwise herein, Herbert shall not be required to mitigate the amount of any payment provided for in this Section 11.B by seeking other employment or otherwise, nor shall the amount of such payment be reduced by reason of compensation or other income Herbert receives for services rendered after Herbert’s termination of employment with USA. As used in this Agreement, USA shall mean USA and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement, by operation of law or otherwise.
 
 
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      C.           For purposes of this Agreement, the term "USA Transaction" shall mean:
 
(i)      the acquisition by any person, entity or group required to file (or which  would be required to file if USA had been subject to such provisions) a Schedule 13D or Schedule 14d-1 promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or any acquisition by any person entitled to file (or which would be entitled to file if USA had been subject to such provisions) a Form 13G under the Exchange Act with respect to such acquisition of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 51% or more of  USA’s then outstanding voting securities entitled to vote generally in the election of  Directors (the "Outstanding Shares"); or
 
(ii)           a change in the composition of the Board of Directors of USA over a period of twelve (12) months or less such that the Continuing Directors (as defined below) fail to constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to USA), where the term “Continuing Director” means at any date a member of the Board (i) who was a member of the Board on the date of the execution of this Agreement or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; or
 
 (iii)      approval by the shareholders of USA of a reorganization, merger, consolidation,  liquidation, or dissolution of USA,  or the sale, transfer, lease or  other  disposition of all or substantially all of the assets of USA ( "Business Combination").
 
 
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Notwithstanding subsection (iii) above, and other than in connection with a liquidation or dissolution of USA, a  Business Combination described in subsection  (iii)  above shall not constitute  a USA Transaction if   following such Business Combination,  (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Shares immediately prior to such Business Combination beneficially own, directly or indirectly , more than  51% of   the combined voting power of  the then outstanding voting securities entitled to vote generally in the election of Directors  of the entity resulting from such business combination  (including without limitation, an entity which as a result of such transactions owns  USA or all or substantially all of USA’s assets either directly or through one or more subsidiaries), and  (B) no person owns, directly or indirectly, 49% or more of the  combined voting  power of  the then outstanding voting  securities of the entity resulting from such Business Combination  except to the extent that such ownership existed prior to the Business Combination.
 
SECTION 12.   Special Tax Provision .     Notwithstanding any provision to the contrary in this Agreement, no payments or benefits to which Herbert may become entitled under Section 3 or 11.B of this Agreement shall be made or provided to him prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of his “separation from service” with the Company (as determined in accordance with the provisions of Code Section 409A and the Treasury Regulations thereunder) or (ii) the date of his death, if Herbert is deemed at the time of such separation from service to be a “key employee” within the meaning of that term under Code Section 416(i) and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Section 12 (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to Herbert in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
 
 
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SECTION 13.   Entire Agreement .   This Agreement constitutes the entire agreement with respect to the subject matter hereof between the parties hereto and there are no other agreements between the parties relating to the subject matter hereof.  This Agreement completely replaces and supersedes the prior employment agreements entered into between Herbert and USA. This Agreement shall become effective from and after the date hereof. This Agreement may only be modified by an agreement in writing executed by both USA and Herbert.
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
 
 
USA TECHNOLOGIES, INC.
 
       
 
By:
/s/ David M. DeMedio  
    David M. DeMedio  
    Chief Financial Officer  
       
       
    /s/ Stephen P. Herbert  
    STEPHEN P. HERBERT  
       
19
 

EXHIBIT 99.1
 
 
GRAPHIC
 
 
FOR IMMEDIATE RELEASE
 
Investor Contact:
Press Contact:
Joe Hassett
Katie Nicolai Kennedy
Senior Vice President
Account Executive
Gregory FCA
Gregory FCA
610-228-2110
610-228-2128
joeh@gregcomm.com
katiek@gregcomm.com
 
USA Technologies, Inc. Names Stephen P. Herbert Chairman and Chief Executive Officer
 
MALVERN, PA, December 5, 2011 -- USA Technologies, Inc . (NASDAQ: USAT), a leader of wireless, cashless payment and M2M telemetry solutions for self-serve, small-ticket retailing industries, announced today that Stephen P. Herbert, 48, has been appointed Chief Executive Officer (CEO) and Chairman of the Company’s Board of Directors, effective immediately.
 
Mr. Herbert joined the Company in 1996 and served as a member of the Company’s Board of Directors since that time.  He was appointed and served as President and Chief Operating Officer since 1999. As President, he oversaw all operations of the Company including network operations, sales, marketing, research and development and manufacturing. He was named Interim Chairman and CEO in October 2011.
 
Prior to joining USA Technologies, Steve had been employed by The Pepsi-Cola Company, the beverage division of PepsiCo, Inc., where he held several management positions in operations, sales and marketing. In his final assignment he was responsible for the development of market strategy for the vending and retail channels for Pepsi-Cola in North America. He graduated with a Bachelor of Science degree from Louisiana State University.
 
“I’m grateful for the opportunity to serve the shareholders, customers and employees of USA Technologies in this new capacity at an important inflection point in the Company’s history,” says Mr. Herbert. “Over the past several years the Company has significantly increased revenue in conjunction with reducing its losses. I’ll be intently focused on bottom-line-oriented accountability for the leadership of USA Technologies in order attempt to drive the Company toward profitability.”
 
Mr. Herbert continued, “Bringing greater value to USAT customers and shareholders is at the top of my priorities as the Company’s Chairman and Chief Executive Officer. Over the past several years the Company has achieved significant growth in the areas of revenue, gross profit dollars, transactions handled by the Company’s network, as well as connections and customers on its network.  We must continue those significant business achievements, while more aggressively scrutinizing operating expenses so that USA Technologies becomes a sustainable, profitable business that would deliver increased shareholder value, quarter-in and quarter-out while providing maximum value to customers. We intend to provide greater accountability to shareholders and plan to upgrade investor communications to be more transparent and accessible.”
 
 
 

 
 
“Importantly, we are challenging ourselves to improve and innovate our already leading-edge products and services to better meet the current and future needs of the customers and markets we serve.    These initiatives are ongoing and intended to demonstrate our commitment to creating greater shareholder value,” Mr. Herbert said.
 
Steven Barnhart, independent director of USA Technologies, added, “USA Technologies is a leader in our industry because of our superior quality products and services, and our unique turn-key solution. We are the partner of choice for the leading companies in our industry, including some of the world’s largest payment processors, technology and wireless service providers and vending companies. In his role as President and Chief Operating Officer, Steve was instrumental in architecting and driving the strategy that got us to this position. As a result, the Board of Directors of USA Technologies believes that Steve has the in-depth knowledge of the business to build on our leadership, and to credibly communicate our progress, growth and development to shareholders.”
 
About USA Technologies:
 
USA Technologies 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 been granted 79 patents and has agreements with Verizon, Visa, Compass, Crane and others. Visit our website at www.usatech.com .
 
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, anticipated connections to our network, 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, the ability of the Company to retain key customers from whom a significant portion of its revenues is derived; whether the Company’s customers continue to operate or commence operating ePorts received under the Jumpstart program or otherwise at levels currently anticipated by the Company; the ability of the Company to compete with its competitors to obtain market share; the ability of the Company to obtain widespread commercial acceptance of it products; whether the recent significant increase in the interchange fees to be charged by Visa and MasterCard for small ticket debit card transactions would adversely affect our business, including our revenues, gross profits, and anticipated future connections to our network; whether not accepting any debit cards with interchange fees that are higher than the rates provided under the Visa Agreement would adversely affect our business, including our revenues, gross profits, and anticipated future connections to our network; and whether the Company's existing or anticipated customers purchase ePort devices in the future at levels currently anticipated by the Company. 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 release. 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.

 
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