USA TECHNOLOGIES, INC.
                                200 PLANT AVENUE
                            WAYNE, PENNSYLVANIA 19087



                                January 12, 2000



Mr. Robert G. McGarrah
c/o USA Technologies, Inc.
200 Plant Avenue
Wayne, PA 19087


Dear Bob:

         This is to acknowledge and confirm the following terms of our
Consulting Agreement. The term of this agreement shall be for a six month
period, from February 1, 2000 through July 31, 2000.

         (1) During the term hereof, you shall provide such business consulting
services to the Company as shall be requested from time to time by the Company.

         (2) It is understood and agreed that none of the services to be
rendered by you on behalf of the Company shall be in connection with the offer
or sale of any securities of the Company in a capital raising transaction or
directly or indirectly promoting or maintaining a market for the Company's
securities.

         (3) Compensation

             (a) The Company shall issue to you in your individual name, in full
payment for the consulting services to be rendered by you a total of 10,000
shares of fully vested, nonassessable, free trading Common Stock of the

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Company. Upon the effective date of the registration statement described in
Paragraph 3(b) below, the Company shall issue such stock to you. This issuance
of the Company's stock shall be the only consideration that you are entitled to
under this Consulting Agreement.

             (b) Promptly after the date of this Consulting Agreement, the
Company will cause a registration statement on Form S-8 to be filed with the
Securities and Exchange Commission for the purpose of registering 10,000 shares
of Common Stock of the Company issuable to you pursuant to Paragraph 3(a) above.

         (4) You also hereby represent that you are not prohibited from
entering into this Consulting Agreement or from performing your obligations
hereunder by any law, regulation, contract, decree, order or agreement.

         (5) You and the Company hereby acknowledge that you are an independent
contractor. In this regard, you shall not hold yourself out as, nor shall you
take any action from which others might infer that you are a partner, agent or
joint venturer of the Company.

         (6) You will not directly or indirectly disclose to any other person,
firm or corporation, nor use for your own benefit during or after the term of
this Consulting Agreement, any trade secrets or other information designated as
confidential by the Company which is acquired by you in the course of performing
services hereunder. Trade secrets can include, but are not limited to, products
or services under development, production methods and processes, sources of
supply, customer lists, marketing plans, information concerning the filing or
pendency of patent applications and information concerning the issuance of any
securities of the Company. You hereby agree that all inventions, technology,
software, or developments made by or developed by you in whole or in part, shall
be considered work made for hire and the sole property of the Company and you
shall not have any right, title or interest thereto whatsoever. The foregoing
shall cover all derivative works thereto.

         (7) This Consulting Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof; provided however, that
nothing herein shall affect or modify the Non-Disclosure and Non-Competition
Agreement previously entered into between you and the Company, and such
agreement shall remain in full force and effect in accordance with its terms,

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and supersedes and cancels any prior communications, understandings and
agreements between the parties. This Consulting Agreement cannot be modified or
changed, nor can any of its provisions be waived, except by written agreement
signed by all parties.

         (8) This Consulting Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania. Any dispute arising out of this Consulting
Agreement shall be adjudicated in the courts of the Commonwealth of Pennsylvania
or in the federal courts located within the Commonwealth of Pennsylvania.

         Please indicate your acceptance of the terms of this Consulting
Agreement by signing below where indicated and returning it to me.


                                                       USA TECHNOLOGIES, INC.



                                              By:      /s/ Stephen P. Herbert
                                                       -------------------------
                                                       Stephen P. Herbert,
                                                       President

ACCEPTED:


    /s/ Robert McGarrah
    -------------------
    Robert McGarrah


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