AMENDED AND RESTATED EMPLOYMENT AND NON-COMPETITION AGREEMENT

 

          For example, if a USA Transaction would occur on March 1, 2008, Herbert would be entitled to 53,713 Accelerated Shares for the uncompleted Fiscal Year ending June 30, 2008 and 53,714 Accelerated Shares for the uncompleted Fiscal Year ended June 30, 2010. These Accelerated Shares would be issuable to him on and as of the occurrence of the USA Transaction. Herbert would not be entitled to any additional Shares on account of these uncompleted Fiscal Years.

 

          At the time of any USA Transaction, all of the Accelerated Shares shall automatically and without any action on Herbert’s part be deemed to be issued and outstanding immediately prior to any such USA Transaction, and shall be entitled to be treated as any other issued and outstanding share of Common Stock in connection with such USA Transaction. In connection with a USA Transaction, USA and/or such successor or purchasing corporation, person, or entity, as the case may be, shall recognize and specifically provide for the Accelerated Shares as provided for in this Section 3.C.

 

          D.     In the event that Herbert’s employment with USA is terminated by USA for Cause pursuant to Section 4.D hereof during any Fiscal Year, then the Plan shall be immediately terminated as to Herbert as of the date of such termination, and except for Shares that have already been earned by Herbert on account of any Fiscal Year that has been completed prior to the date of such termination, Herbert shall not be entitled to earn any additional Shares whatsoever under the Plan.

 

          E.     In the event that Herbert’s employment with USA shall be terminated during any Fiscal Year for any reason whatsoever other than for Cause, Herbert shall nevertheless be eligible to earn Shares under the Plan on account of the Fiscal Year during which any such termination has occurred as if he had remained employed with USA through the end of such Fiscal Year. In such event, Herbert shall not be entitled to earn any Shares on account of any Fiscal Year commencing after the date of the termination of his employment with USA. For example, if Herbert’s termination of employment would occur on March 1, 2008, Herbert would be entitled to earn Shares for the uncompleted Fiscal Year ending June 30, 2008 as if he had been an employee of USA through the end of such Fiscal Year. Herbert would not be entitled to earn any Shares on account of the Fiscal Year ending June 30, 2010.

 

          F.     Herbert acknowledges that the Shares to be issued under the Plan will not be registered under the Act, or under any state securities laws, and the Shares cannot be sold or transferred unless such Shares have been registered under the Act or such state securities laws, or unless USA has received an opinion of counsel that such registration is not required. Herbert understands that USA has not agreed to register the Shares under the Act or any state securities laws.

 

          G.     The number of Shares to be issued to Herbert under the Plan shall be subject to adjustment from time to time only as set forth hereinafter: (i) in case USA shall declare a Common Stock dividend on the Common Stock, then the number of Shares shall be proportionately increased as of the close of business on the date of record of said Common Stock dividend in proportion to such increase of outstanding shares of Common Stock; or (ii) if USA shall at any time subdivide its outstanding Common Stock by recapitalization, reclassification or split-up thereof, the number of Shares shall be proportionately increased, and, if USA shall at any time combine the outstanding shares of Common Stock by recapitalization, reclassification, reverse stock split, or combination thereof, the number of Shares shall be proportionately decreased. Any such adjustment to the number of Shares shall become effective at the close of business on the record date for such subdivision or combination.

 

          H.     Herbert shall be responsible for any and all applicable federal, state or local income and other tax withholding obligations of USA in connection with the Shares. Not later than the business day immediately following the date on which any Shares are included in the taxable income of Herbert, Herbert shall satisfy USA’s withholding tax obligations in connection with such Shares by either (a) the delivery by Herbert to USA of a cash payment in the amount of the withholding tax obligations, or (b) the assignment and transfer by Herbert to USA of that number of shares of Common Stock (which may consist of Shares or any other shares of Common Stock owned by Herbert) having a value equal to the withholding tax obligations required to be withheld by law, or (c) such other payment method that shall be satisfactory to USA.

 

          I.     The Plan shall be irrevocable by USA and represents an unconditional, absolute and fully vested obligation of USA in favor of and for the benefit of Herbert.

 

          J.     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”).

 

                 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 4. 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 12.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.

 

           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) Following the termination of Herbert’s employment, USA shall continue to pay to Herbert his annual base salary in such installments and at such times as USA pays the annual base salaries of its other executive officers. Such annual base salary shall continue to be paid to Herbert by USA for a period of time equal to the greater of (a) two years from the termination date, or (b) the period of time remaining in the Employment Period as of the date of termination;

 

                             (b) all bonuses earned or vested on or before the date of termination;

 

                             (c) any benefits or compensation provided under the terms of any benefit plan or other provisions of this Agreement; and

 

                             (d) During the two year period following the date of termination, USA shall arrange at its cost to provide Herbert with health insurance benefits substantially similar to those which Herbert is receiving immediately prior to the date of termination. Benefits otherwise receivable by Herbert pursuant to this subsection shall be reduced to the extent comparable benefits are actually received by or made available to Herbert without cost during such period following Herbert’s termination of employment (and any such benefits actually received by Herbert shall be reported to USA by Herbert).

 

                    (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 materially inconsistent with Herbert’s authorities, duties, responsibilities, and status, or a material reduction or alteration in the nature or status of Herbert’s authority, duties, or responsibilities; 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 a public company; (C) USA materially reduces Herbert’s rate of annual base salary below the level in effect immediately before such reduction; (D) a material 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 75 miles from Herbert’s current residence.

 

                    (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.

 

                    (ii) If USA terminates Herbert’s employment hereunder without Cause at any time during the Employment Period, Herbert will be entitled to receive the following compensation and benefits:

 

                              (a) Following the termination of Herbert’s employment, USA shall continue to pay to Herbert his annual base salary in such installments and at such times as USA pays the annual base salaries of its other executive officers. Such annual base salary shall continue to be paid to Herbert by USA for a period of time equal to the greater of (a) two years from the termination date, or (b) the period of time remaining in the Employment Period as of the date of termination;

 

                              (b) all bonuses earned or vested on or before the date of termination;

 

                              (c) any other benefit or compensation provided under the terms of any benefit plan or other provisions of this Agreement; and

 

                              (d) During the two year period following the date of termination, USA shall arrange at its cost to provide Herbert with health insurance benefits substantially similar to those which Herbert is receiving immediately prior to the date of termination. Benefits otherwise receivable by Herbert pursuant to this subsection shall be reduced to the extent comparable benefits are actually received by or made available to Herbert without cost during such period following Herbert’s termination of employment (and any such benefits actually received by Herbert shall be reported to USA by Herbert).

 

          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. If Herbert’s employment hereunder is terminated by USA for Cause, USA will be required to pay to Herbert 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 other benefit or compensation provided under the terms of any benefit plan or other provision of this Agreement.

 

                    (ii)     For purposes of this Agreement, “Cause” means any of the following have occurred or exist: (A) Herbert’s fraud, gross malfeasance, gross negligence, or willful misconduct, with respect to USA’s business; (B) Herbert’s refusal or repeated failure to follow USA’s established reasonable and lawful policies; (C) Herbert’s material breach of this Agreement; (D) Herbert’s acknowledgement or conviction of, fraud or any crime which has or could have a material detrimental effect on USA’s reputation or business; (E) any intentional misapplication by Herbert of USA’s funds, or any material act of dishonesty committed by Herbert with respect to USA's customers, business or affiliates; or (F) Herbert’s unlawful use or possession of any controlled substance or Herbert’s abuse of alcoholic beverages.

 

                    As a condition precedent to USA’s termination of Herbert’s employment for Cause under subparagraphs (B) or (C) above, USA shall provide Herbert with 30-days prior written notice of USA’s termination of Herbert’s employment for Cause under either of said subparagraphs, and Herbert shall have failed to remedy such matter within such 30 day period.

 

          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.

 

                   (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 at least 30 days before the termination date. For purposes of this Agreement, and subject to any applicable waiting period, “disabled” means if Herbert is deemed disabled for purposes of the supplemental long-term disability policy obtained and paid for by USA which is referred to Section 2.F. 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 Section 5, 6 and 7 shall survive the termination of Herbert’s employment with USA for any reason whatsoever under this Section 4.

 

          G.     Except as specifically provided otherwise herein, Herbert shall not be required to mitigate the amount of any payment provided for in this Section 4 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.

 

 

                    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.

 

                    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.

 

                    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 6. 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.

 

          SECTION 7. Remedies. Herbert acknowledges that any breach by him of the obligations set forth in Sections 5 or 6 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 5 or 6 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 8. 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.

 

          SECTION 9. 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: George R. Jensen, Jr., Chief Executive 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 10. 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 11. 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.

 

 

          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 4.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 Section 5, 6 and 7 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 12.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.

 

           SECTION 13. Special Tax Provisions.

 

          A.     Deferred Payment Date. Notwithstanding any provision to the contrary in this Agreement, no payments or benefits to which Herbert may become entitled under Section 4 or 12.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 13.A (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.

 

          B.     Excess Parachute Payment Tax Gross Up. Notwithstanding any other provision of this Agreement, if (i) there is a change in the ownership or effective control of USA or in the ownership of a substantial portion of the assets of USA (within the meaning of Code Section 280G(b)(2)(A)), and (ii) the payments and benefits otherwise to be made or provided pursuant to Section 12.B and any other payments or benefits otherwise to be paid or provided to Herbert in the nature of compensation to be received by or for the benefit of Herbert and contingent upon such event (the “Termination Payments”) create an excess parachute payment (within the meaning of Code Section 280G) that results in an excise tax payable by Herbert pursuant to the terms of Code Sections 280G and 4999 (the “Excise Tax”), then USA will reimburse Herbert, in cash, the full amount of the Excise Tax and all of Herbert’s additional state and federal income, excise and employment taxes that arise on, and are payable in respect of, this additional payment (cumulatively, the “Full Gross-Up Payment”), such that Herbert is in the same after-tax position as if he had not been subject to the Excise Tax. The Full Gross-Up Payment will be made as soon as practicable after Herbert pays the Excise Tax, but in no event later than the last day of Herbert’s taxable year that immediately follows Herbert’s taxable year in which he pays the Excise Tax.

 

          SECTION 14. 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 on October 1, 2009. 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/ George R. Jensen, Jr.
		George R. Jensen, Jr., Chief Executive Officer
		/s/ Stephen P. Herbert
		STEPHEN P. HERBERT