Warrants
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THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF
(INCLUDING RULE 144) OR AN OPINION OF COUSSEL REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
Issuer: USA Technologies, Inc.
Class of Stock: Common
Issue Date: July___, 2001
THIS WARRANT TO PURCHASE COMMON STOCK is being issued pursuant to that
certain Letter Agreement dated as of the date hereof (the "Letter Agreement")
between USA Technologies, Inc., a Pennsylvania corporation (the "Company") and
La Jolla Cove Investors, Inc., a California corporation ("Holder"). Pursuant to
the Letter Agreement, the Company hereby grants to Holder the right to purchase
500,000 shares of the company's Common Stock (the "Warrant Shares"). At the time
of the issuance of this Warrant, the Holder has wired to USA Technologies the
sum of $50,000 representing the premium to be paid for the warrants (the
"Premium"). This warrant shall expire and Holder shall no longer be able to
purchase the Warrant Shares on the one-year anniversary on which the
Registration Statement is first declared effective.
ARTICLE 1
EXERCISE
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1.1 Method of Exercise. Holder may exercise this warrant by delivering
a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company, along with a check payable to
the Company for the aggregate Exercise Price for the Warrant Shares being
purchased.
1.2 Delivery of Certificate and New Warrant Delivery of Certificate and
New Warrant. Upon the exercise by Holder of this warrant, in part or in full,
the Company shall deliver within five days to Holder a stock certificate
representing the Warrant Shares acquired and, if this warrant has not been fully
exercised and has not expired, a new warrant substantially in the form of this
warrant representing the right to acquire the portion of the Warrant Shares not
so acquired.
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1.3 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this warrant,
the Company at its expense shall execute and deliver, in lieu of this warrant, a
new warrant of like tenor.
1.4 Exercise Price. The Exercise Price for the Warrant Shares shall be
the lesser of $1.00 or 80% of the lowest closing bid price of the Common Stock
during the 20 trading days prior to exercise. Upon the exercise of the Warrant
Shares, the Exercise Price shall be further reduced pro rata to permit the
Holder to recapture the Premium (unless the Premium already has been deducted
through a reduction of any financing proceeds provided prior to exercise of the
Warrants). Except to the extent applied towards the exercise of the Warrant, the
Premium shall be non-refundable.
ARTICLE 2
ADJUSTMENT TO THE WARRANT SHARES
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The number of Warrant Shares purchasable upon the exercise of this
warrant and the Exercise Price shall be subject to adjustment from time to time
upon the occurrence of certain events, as follows:
2.1 Reclassification. In case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this warrant then,
and in any such case, the Holder, upon the exercise hereof at any time after the
consummation of such reclassification or change, shall be entitled to receive in
lieu of each Warrant Share theretofore issuable upon exercise of this warrant,
the kind and amount of shares of stock, other securities, money and/or property
received upon such reclassification or change by a holder of one share. The
provisions of this Section 2.1 shall similarly apply to successive
reclassifications or changes.
2.2 Subdivision or Combination of Shares. If the Company at any time
while this warrant remains outstanding and unexpired shall subdivide or combine
its shares, the Exercise Price shall be proportionately decreased in the case of
a subdivision or increase in the case of a combination.
2.3 Stock Dividends. If the Company, at any time while this warrant is
outstanding shall pay a dividend with respect to its shares payable in shares of
its stock, or make any other distributions of shares with respect to shares of
its stock (except any distribution provided for in Section 2.1 and Section 2.2
above), then the Exercise Price shall be adjusted, effective from and after the
date of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction, (a) the
numerator of which shall be the total number of shares outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of shares outstanding immediately after such dividend or
distribution.
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2.4 Non-Cash Dividends. If the Company at any time while this warrant
is outstanding shall pay a dividend with respect to shares payable in securities
other than shares or other non-cash property, or make any other distribution of
such securities or property with respect to shares (except any distribution
specifically provided for in Section 2.1 and Section 2.2 above), then this
warrant shall represent the right to acquire upon exercise of this warrant such
securities or property which a holder of shares would have been entitled to
receive upon such dividend or distribution, without the payment by Holder of any
additional consideration for such securities or property.
2.5 Effect of Reorganization and Asset Sales. If any (i) reorganization
or reclassification of the Common Stock (ii) consolidation or merger of the
Company with or into another corporation, or (iii) sale of all or substantially
all of the Company's operating assets to another corporation followed by a
liquidation of the Company (any such transaction shall be referred to herein as
an "Event"), is effected in such a way that holder s of common Stock are
entitled to receive securities and/or assets as a result of their Common Stock
ownership, Holder, upon exercise of this warrant, shall be entitled to receive
such shares of stock, securities or assets which Holder would have received had
it fully exercised this warrant on or prior the record date for such Event. The
Company shall not merge into or consolidate with another corporation or sell all
of its assets to another corporation for a consideration consisting primarily of
securities of such corporation, unless the successor or acquiring corporation,
as the case may be, shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this warrant to be
performed or observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide for
adjustments which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 2. The foregoing provisions shall
similarly apply to successive mergers, consolidations or sales of assets.
2.6 Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price, the number of Warrant Shares shall be adjusted, to the nearest
whole share, to the product obtained by multiplying the number of Warrant Shares
purchasable immediately prior to such adjustment by a fraction (a) the numerator
of which shall be the Exercise Price prior to the adjustment and (b) the
denominator of which shall be the Exercise Price immediately thereafter.
2.7 No Impairment. The Company shall not, by amendment of its charter
documents or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this warrant by the Company, but shall at all times
in good faith assist in carrying out all of the provisions of this warrant and
in taking all such action as may be reasonably necessary or appropriate to
protect Holder's rights hereunder against impairment. If the Company takes any
action affecting its common Stock other than as described above that adversely
affects Holder's rights under this warrant, the Exercise Price shall be adjusted
downward and the number of Warrant Shares issuable upon exercise of this warrant
shall be adjusted upward in such a manner that the aggregate Exercise Price of
this Warrant is unchanged.
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2.8 Fractional Shares. No fractional Warrant Shares shall be issuable
upon the exercise of this warrant, and the number of Warrant Shares to be issued
shall be rounded down to the nearest whole Share.
2.9 Certificate as to Adjustments. Upon any adjustment of the Exercise
Price, the Company, at its expense, shall compute such adjustment and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall,
upon written request, furnish Holder a certificate setting forth the Exercise
Price in effect upon the date thereof and the series of adjustments leading to
such Exercise Price.
2.10 No Rights of Shareholders. This warrant does not entitle Holder to
any voting rights or any other rights as a shareholder of the Company prior to
the exercise of Holder's right to purchase Warrant Shares as provide herein.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby represents and
warrants to Holder that all Warrant Shares which may be issued upon the exercise
of the purchase right represented by this warrant, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonasessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a)
to declare any dividend or distribution upon its Common Stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of Common Stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights ( and
specifying the date on which the holders of Common Stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of Common
Stock will be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as Holder holds this warrant, the
Company shall deliver to Holder promptly after mailing, copies of all notices or
other written communications to the shareholders of the Company.
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3.4 Reservation of Warrant Shares. The Company has reserved and will
keep available, out of the authorized and unissued shares of Common Stock, the
full number of shares sufficient to provide for the exercise of the rights of
purchase represented by this warrant.
3.5 Registration Rights. Holder shall have the Registration Rights set
forth in Section 5 below as well as piggy-back Registration Rights.
ARTICLE 4
REPRESENTATIONS AND COVENANTS OF THE HOLDER
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4.1 Investment Purpose. Except as set forth in Article 5, the Warrant
Shares will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and Holder has no present intention of selling
or engaging in any public distribution of the same except pursuant to a
registration or exemption from registration.
4.2 Financial Risk. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
4.3 Accredited Investor. Holder is an "accredited investor," as such
term is defined in Regulation D promulgated pursuant to the Securities Act of
1933, as amended.
ARTICLE 5
REGISTRAITON RIGHTS
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5.1 Definitions.
(A) As used in this Agreement, the following terms shall have the
following meanings:
(1) "Affiliate" of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified Person.
For purposes of this definition, control of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract, securities, ownership or otherwise; and the
terms "controlling" and "controlled" have the respective meanings correlative to
the foregoing.
(2) "Commission" means the Securities and Exchange Commission.
(3) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
(3) "Prospectus" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed pursuant
to Rule 424(b) under the Securities Act, including any prospectus that discloses
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information previously omitted from a prospectus filed as part of an effective
registration statement in reliance on Rule 430A under the Securities Act)
included in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(4) "Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions by the Company of
its Common Stock and made pursuant to the Securities Act.
(5) "Registrable Securities" means the Common Stock issued (i)
upon exercise of the warrants, and (ii) in connection with any distribution,
recapitalization, stock-split, stock adjustment or reorganization of the
Company; provided, however, a share of Common Stock shall cease to be a
Registrable Security for purposes of this Agreement when it no longer is a
Restricted Security.
(6) "Registration Statement" means a registration statement of
the Company filed on an appropriate form under the Securities Act providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under the
Securities Act, including the Prospectus contained therein and forming a part
thereof, any amendments to such registration statement and supplements to such
Prospectus, and all exhibits to and other material incorporated by reference in
such registration statement and Prospectus.
(7) "Restricted Security" means any share of Common Stock issued
upon exercise of warrants except any such share that (i) has been registered
pursuant to an effective registration statement under the Securities Act and
sold in a manner contemplated by the prospectus included in such registration
statement, (ii) has been transferred in compliance with the resale provisions of
Rule 144 under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities Act (or
any successor provision thereto) or (iii) otherwise has been transferred and a
new share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company.
(8) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
5.2 Registration.
(A) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission as soon as practicable a Registration
Statement relating to the offer and sale of the Registrable Securities and shall
use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but in
no event later than one hundred and twenty days (120 days from
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the date hereof (the "Deadline"). The Company shall promptly (and, in any event,
no more than 24 hours after it receives comments from the Commission), notify
the Holder when and if it receives any comments from the Commission on the
Registration Statement and promptly forward a copy of such comments, if they are
in writing, to Holder. The Company shall notify Holder by written notice that
such Registration Statement has been declared effective by the Commission within
24 hours of such declaration by the Commission. In the event that the
Registration Statement is not declared effective by the Deadline, or if after
the Registration Statement is declared effective, such Registration Statement is
thereafter no longer effective, then the Company shall pay to Holder, in
addition to any damages incurred by the Holder as a result thereof, $5,000 for
each 30 day period or portion thereof for the first 60 days during which the
Registration Statement has not been declared effective and $7,500 for each 3 day
period or portion thereof after the 60th day it has not been declared effective.
5.3 Obligations of the Company
In connection with the registration of the Registrable Securities, the
Company shall:
(A) Promptly(i) prepare and file with the Commission such amendments
to the Registration Statement continuously effective and in compliance with the
provisions of the Securities Act applicable thereto so as to permit the
Prospectus forming part thereof to be current and useable by Holder for resale
of the Registrable Securities for a period of five (5) years from the date on
which the Registration Statement is first declared effective by the Commission
(the "Effective Time") or such shorter period that will terminate when all the
Registrable Securities covered by the Registration Statement have been sold
pursuant thereto in accordance with the plan of distribution provided in the
Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act or until such time
as the Warrant Shares are eligible for sale by the Holder under Rule 144 (the
"Registration Period") and (ii) take all lawful action such that each of (A) the
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement fo a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, not misleading and (B) the Prospectus forming part of the Registration
Statement, and any amendment or supplement thereto, does not at any time during
the Registration Statement, and any amendment or supplement thereto, does not at
any time during the Registration Period include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(B) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
to Holder and reflect in such documents all such comments as Holder (and its
counsel) reasonably may propose and (ii) furnish to Holder whose Registrable
Securities are included in the Registration Statement and its legal counsel
identified to the Company, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, one copy of
the Registration Statement, each Prospectus, and each amendment or supplement
thereto and (B) such number of copies of the Prospects and all amendments and
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supplements thereto and such other documents, as Holder may reasonably request
in order to facilitate the disposition of the Registrable Securities owned by
Holder;
(C) (i)Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as Holder reasonably request, (ii) prepare and file in such
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions.
(D) As promptly as practicable after becoming aware of such event
notify Holder of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to Holder may reasonably
request;
(E) As promptly as practicable after becoming aware of such event,
notify Holder of the issuance by the Commission of any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time and take all lawful action to effect the withdrawal, recession or
removal of such stop order or other suspension;
(F) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(G) Cooperate with Holder who holds Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as Holder reasonably may request
and registered in such names as Holder may request; and, within three (3)
business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement ) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(H) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by Holder of its Registrable Securities
in accordance with the intended methods therefore provided in the Prospectus
which are customary under the circumstances; and
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(I) (i) Make reasonably available for inspection by Holder, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by Holder or an such underwriter,
attorney, accountant or agent in connection with the Registration Statement, in
each case, as is customary for similar due diligence examinations; provided,
however, that all records information and documents that are designated in
writing by the Company, in good faith as confidential, proprietary or containing
any material nonpublic information shall be kept confidential by such Investors
and any such underwriter, attorney, accountant or agent (pursuant to an
appropriate confidentiality agreement in the case of any such holder or agent),
unless such disclosure is made pursuant to judicial process in a court
proceeding (after first giving the Company an opportunity promptly to seek a
protective order or otherwise limit the scope of the information sought to be
disclosed) or is required by law, or such records, information or documents
become available to the public generally or through a third party not in
violation of an accompanying obligation of confidentiality; and provided,
further, that, if the foregoing inspection and information gathering would
otherwise disrupt the Company's conduct of its business, such inspection and
information gathering shall, to the maximum extent possible, be coordinated on
behalf of the majority in interst of Investors and other parties. All costs and
expenses of the Holder's inspection and due diligence shall be borne by the
Holder.
5.4 Obligations of Holder.
In connection with the registration of the Registrable Securities,
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with sush registration as the Company may reasonably request.
5.5 Expenses of Registration.
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 5, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
5.6 Indemnification and Contribution.
(A) Indemnification by the Company. The Company shall indemnify and
hold harmless Holder and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and
directors and each person who controls Holder or underwriter within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an
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"Indemnified Person") from and against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or an omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, not misleading, or arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus or an omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
the Company hereby agrees to reimburse such Indemnified Person for al reasonable
legal and other expenses incurred by them in connection with investigating or
defending any such action or claim as and when such expenses are incurred;
provided, however, that the Company shall not be liable to any such Indemnified
Person in any such case to the extent that any such loss, claim damage or
liability arises out of or is based upon (i) an untrue statement or alleged
untrue statement made in, or an omission or alleged omission from, such
Registration Statement or Prospectus in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Person
expressly for use therein or (ii) the use by the Indemnified Person of an
outdated or defective Prospectus after the Company has provided to such
Indemnified Person an updated Prospectus correcting the untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss claim damage or liability.
(B) Indemnification by the Investors and Underwriters. Holder agrees
and each underwriter, if any, which facilitates the disposition of Registrable
Securities shall agree, severally and not jointly, to (i) indemnify and hold
harmless the Company, its directors (including any person who, with his or her
consent, is named in the Registration Statement as a director nominee of the
Company), its officers who sign any Registration Statement and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required ot be stated therein or necessary to make the statement therein (in
light of the circumstances under which they were made, in the case of the
Prospectus), not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such holder or underwriter expressly for use
therein; provided, however, that Holder shall not be liable under this Section
5.6(B) of any amount in excess of the net proceeds paid to holder in respect of
shares sold by it and (ii) reimburse the Company for any legal or other expenses
incurred by the Company in connection with investigating or defending any such
action or claim as such expenses are incurred.
(C) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 5.6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being
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sought (each, a "Claim"), the Indemnified Party promptly shall notify the party
against whom indemnification pursuant to this Section 5.6 is being sought (the
"Indemnifying Party") of the commencement thereof: but the omission to so notify
the Indemnifying Party shall not relieve it from any liability that it otherwise
may have to the Indemnifying Party, except to the extent that the Indemnifying
Party is materially prejudiced and forfeits substantive rights and defenses by
reason of such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of -pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, costs and expenses, (y) the Indemnified Party and the
Indemnifying Party shall reasonably have concluded that representation of the
Indemnified Party by the Indemnifying Party by the same Legal counsel would not
be appropriate due to actual or, as reasonably determined by legal counsel to
the Indemnified Party, potentially differing interests between such parties in
the conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnified Party shall not,
without the prior written consent of the Indemnifying Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not included an unconditional release of the
Indemnifying Party from all liabilities with respect to such Claim or judgment.
(D) Contribution. If the indemnification provided for this Section
5.6 is unavailable to or insufficient to hold harmless as Indemnified Person
under subsection (A) or (B) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations.
(E) Notwithstanding any other provision of this Section 5.6, in no
event shall any (i) Holder be required to undertake liability to any person
under this Section 5.6 for any amounts in excess of the dollar amount of the
proceeds to be received by Holder from the sale of Holder's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any
11
Person hereunder for any amounts in excess of the aggregate discount, commission
or other compensation payable to such underwriter with respect to the
Registrable Securities underwritten by it and distributed pursuant to the
Registration Statement.
(F) The obligations of the Company under this Section 5.6 shall be
in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 5.6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
5.7 Assignment.
Subject to compliance with all applicable securities laws, the rights
to the Company register Registrable Securities pursuant to this Agreement shall
be automatically assigned by Holder to any transferee of all or any portion of
such Registrable Securities (or all or any portion of the warrant) only if (a)
Holder agrees in writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment, (b) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (i) the name and
address if such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
ARTICLE 6
MISCELLANEOUS
6.1 Transfer Procedure. Holder agrees that unless there is in effect a
registration statement under the Securities Act covering the proposed transfer
of all or part of this warrant, prior to any such proposed transfer the Holder
shall give written notice thereof to the Company (a "Transfer Notice"). Each
Transfer Notice shall describe the manner and circumstances of the proposed
transfer in reasonable detail and, if the company so requests, shall be
accompanied by an opinion of legal counsel, in a form reasonably satisfactory to
the Company, to the effect that the proposed transfer may be effected without
registration under the Act.
6.2 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed if to Holder, at such Holder's address set forth on the signature page
hereof or at such other address as such Holder shall have furnished to the
Company in writing, or if to the Company, to the following address:
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Mr. Geoge R. Jensen, Jr.
USA Technologies, Inc.
200 Plant Avenue
Wayne, PA 19087
or at such other address as the Company shall have furnished to Holder. Each
such notice or other communication shall for all purposes of this agreement be
treated as effective or having been given when delivered of delivered
personally, or, if sent by mail, at the earliest of its receipt or five days
after the same has been deposited in a regularly maintained receptacle for the
deposit of the United States mail addressed and mailed as aforesaid.
6.3 Waiver. This warrant and any term hereof maybe changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
6.4 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys fees.
6.5 Governing Law. This warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
it's principles regarding conflicts of law.
"COMPANY"
USA Technologies, Inc.
By:____________________________
Title:___________________________
"HOLDER"
LA JOLLA COVE INVESTORS, INC
By:_____________________________
Title:____________________________
Address:
Suite 200
7817 Herschel Avenue
La Jolla, California 92037
Facsimile No. (858) 551-0987
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APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ______ shares of the
Common Stock of _____________________________________ pursuant to the terms of
the attached warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate of certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
------------------------------------
(Name)
-------------------------------------
-------------------------------------
(Address)
3. The undersigned makes the representations and covenants set forth in
Article 4 of the warrant agreement, a copy of which is attached hereto.
------------------------------------
(Signature)
----------------------
(Date)
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