Form of Subscription Agent Agreement

1.

Rights Offering - The Company is offering (the “Rights Offering”) non-transferable rights (the “Rights”) pursuant to which the holders thereof (the “Rights Holders”) are entitled to subscribe for the Company’s common stock, no par value per share (the “Common Stock”) and warrants to purchase shares of Common Stock (the “Warrants”). Such Rights are being distributed to all shareholders of record of Common Stock (“Record Date Stockholders”) as of 5:00 p.m., New York City time, on [Ÿ], 2010 (the “Record Date”), as well as to the holders, as of the Record Date, of our warrants to purchase up to 7,285,792 shares of common stock at $2.20 per share which expire on December 31, 2011, and to two warrant holders of the Company who are entitled to participate in the Rights Offering pursuant to the terms of their warrants (collectively, “Participating Warrant Holders”). The Rights, Common Stock and Warrants are described in a prospectus dated [Ÿ], 2010 (the “Prospectus”). Capitalized terms not otherwise defined herein shall have the meaning given to them in the Prospectus.

2.

Appointment of Subscription Agent - You are hereby appointed as Subscription Agent to effect the Rights offering in accordance with the Prospectus. Each reference to you in this letter is to you in your capacity as Subscription Agent unless the context indicates otherwise.

3.

Delivery of Documents - Enclosed herewith are the following, the receipt of which you acknowledge by your execution hereof:

 

(a)

a copy of the Prospectus;

 

(b)

the form of Subscription Certificate (with instructions); and

 

(c)

resolutions adopted by the Board of Directors of the Company in connection with the Rights Offering, certified by the secretary of the Company.

4.

5.

Defective Exercise of Rights Lost Subscription Certificates - The Company shall have the absolute right to reject any defective exercise of Rights or to waive any defect in exercise. Unless requested to do so by the Company, you shall not be under any duty to give notification to holders of Subscription Certificates of any defects or irregularities in subscriptions. Subscriptions will not be deemed to have been made until any such defects or irregularities have been cured or waived within such time as the Company shall determine. You shall as soon as practicable return Subscription Certificates with the defects or irregularities which have not been cured or waived to the holder of the Rights. If any Subscription Certificate is alleged to have been lost, stolen or destroyed, you should follow the same procedures you use for lost s tock certificates representing Common Shares in your capacity as transfer agent for the Company’s Common Stock.

6.

Delivery - You shall deliver to the Company the exercised Subscription Certificates in accordance with written directions received from the Company and shall deliver to the subscribers who have duly exercised Rights at their registered addresses certificates representing the securities subscribed for as instructed on the reverse side of the Subscription Certificates.

Reports - You shall notify the Company by telephone on or before the close of business on each business day during the period commencing 5 business days after the mailing of the Rights and ending at the Expiration Date (and in the case of guaranteed deliveries ending three NGM trading days after the Expiration Date) (a ”daily notice”), which notice shall thereafter be confirmed in writing, of (i) the number of Rights exercised on the day covered by such daily notice and the name and address of each such exercising Rights Holder, (ii) the number of Rights subject to guaranteed exercises on the day covered by such daily notice, (iii) the number of Rights for which defective exercises have been received on the day covered by such daily notice, (iv) the cumulative total of the information set forth in clauses (i) through (iii) above, (v) for each soliciting broker-dealer, the number of Rights exercised indicating such broker-dealer as the broker-dealer with respect to such exercise, and (vi) such other information as the Company may reasonably request.  At or before 5:00 p.m., New York City time, on the first NGM trading day following the Expiration Date you shall certify in writing to the Company the cumulative total through the Expiration Date of all the information set forth in clauses (i) through (vi) above. You shall also maintain and update a listing of Rights Holders who have fully or partially exercised their Rights and Rights Holders who have not exercised their Rights.  You shall provide the Company or its designees with such information compiled by you pursuant to this paragraph 7 as any of them shall request.

8.

Future Instructions – With respect to notices or instructions to be provided by the Company hereunder, you may rely and act on any written instruction signed by any one or more of the following authorized officers or employees of the Company:

9.

Payment  of Expenses - The Company will pay you compensation for acting in your capacity as Subscription Agent hereunder in the amount specified in the Fee Schedule attached hereto. The Company will pay an additional fee equal to one-third of the Subscription Agent fee for each extension of the Offering, plus any out-of-pocket expenses associated with such extension.

10.

Counsel - You may consult with counsel satisfactory to you, which may be counsel to the Company, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by you hereunder in good faith and in accordance with such advice an opinion of such counsel.

11.

Indemnification - The Company covenants and agrees to indemnify and hold you harmless against any costs, expenses (including reasonable fees of legal counsel), losses or damages, which may be paid, incurred or suffered by or to which you may become subject arising from or out of, directly or indirectly, any claim or liability resulting from your actions as Subscription Agent pursuant hereto; provided that such covenant and agreement does not extend to such costs, expenses, losses and damages incurred or suffered by you as a result of, or arising out of, your own gross negligence, misconduct or bad faith or that of any employees, agents or independent contractors used by you in connection with performance of your duties as Subscription Agent hereunder.

12.

Notices - Unless otherwise provided herein, all reports, notices and other communications required or permitted to be given hereunder shall be in writing and delivered by hand or confirmed telecopy or by first class U.S. mail, postage prepaid, shall be deemed given if by hand or telecopy, upon receipt or if by U.S. mail, three business days after deposit in the U.S. mail and shall be addressed as follows

 

(a)

If to the Company, to:

 

(b)

If to you, to:

USA TECHNOLOGIES, INC.

By:

Name:

Title:

By:

Name:

Title: