UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
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|_| Preliminary Proxy Statement
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Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
USA TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[GRAPHIC OMITTED]
November 18, 2005
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of USA Technologies, Inc. to be held at 10:00 a.m., December 13, 2005, at the
Chester Valley Golf Club, 430 Swedesford Road, Malvern, Pennsylvania 19355.
In connection with the Annual Meeting, enclosed herewith is the Proxy
Statement and Proxy. We are requesting your approval of a number of proposals
that are very important to the Company's future success. Therefore, whether or
not you expect to attend the meeting in person, it is imperative that your
shares be voted at the meeting. At your earliest convenience, please complete,
date and sign the Proxy and return it in the enclosed, postage-paid envelope
furnished for that purpose.
Following the consideration of the proposals by the shareholders,
management will present a current report on the activities of the Company. At
the meeting, we will welcome your comments on or inquiries about the business of
the Company that would be of interest to shareholders generally.
I look forward to seeing you at the Annual Meeting. In the meantime,
please feel free to contact me with any questions you may have.
Sincerely,
/s/ George R. Jensen, Jr.
George R. Jensen, Jr.
Chairman and Chief Executive Officer
USA TECHNOLOGIES, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 13, 2005
-------------------------------------
To Our Shareholders:
The Annual Meeting of Shareholders of USA Technologies, Inc., a
Pennsylvania corporation (the "Company"), will be held at 10:00 a.m., December
13, 2005, at the Chester Valley Golf Club, 430 Swedesford Road, Malvern,
Pennsylvania 19355, for the following purposes:
1. The election of George R. Jensen, Jr., Stephen P. Herbert, William
W. Sellers, William L. Van Alen, Jr., Steven Katz, and Douglas M. Lurio, as
Directors;
2. To act upon a proposal to ratify the appointment of Goldstein Golub
Kessler LLP as the independent registered public accounting firm of the Company
for fiscal year 2006;
3. To act upon an amendment to increase the number of authorized shares
of Common Stock to 640,000,000; and
4. To transact such other business as may properly come before the
Annual Meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on October 31,
2005 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting and any and all adjournments thereof.
You are cordially invited to attend the meeting in person. Whether or
not you expect to attend the meeting in person, please promptly mark, sign and
date the enclosed proxy and return it in the envelope provided for that purpose.
By Order of the Board of Directors,
/s/ George R. Jensen, Jr.
George R. Jensen, Jr.
Chairman and Chief Executive Officer
USA TECHNOLOGIES, INC.
PROXY STATEMENT
SOLICITATION OF PROXY, REVOCABILITY AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
USA Technologies, Inc., a Pennsylvania corporation (the "Company"), for use at
the 2006 Annual Meeting of Shareholders (the "Annual Meeting"), to be held at
10:00 a.m., on December 13, 2005, at the Chester Valley Golf Club, 430
Swedesford Road, Malvern, Pennsylvania 19355.
Only holders of Common Stock or Series A Convertible Preferred Stock of
record at the close of business on October 31, 2005 will be entitled to notice
of and to vote at the Annual Meeting. Each share of Common Stock and Series A
Preferred Stock is entitled to one vote on all matters to come before the Annual
Meeting. On October 31, 2005, the record date for the Annual Meeting, the
Company had issued and outstanding 453,960,687 shares of Common Stock, no par
value ("Common Stock"), and 521,642 shares of Series A Convertible Preferred
Stock, no par value ("Series A Preferred Stock").
The Company's principal executive offices are located at 100 Deerfield
Lane, Suite 140, Malvern, Pennsylvania 19355. The approximate date on which this
Proxy Statement and the accompanying proxy are first being sent to shareholders
is November 18, 2005.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of
the votes entitled to be cast by the shareholders entitled to vote generally at
the Annual Meeting is necessary to constitute a quorum. Votes withheld for
director nominees and abstentions on the other proposals to be considered at the
Annual Meeting will be counted in determining whether a quorum has been reached,
but the failure to execute and return a proxy will result in a shareholder not
being considered present at the meeting. The holders of the Common Stock and
Series A Preferred Stock vote together, and not as a separate class, on all
matters to be submitted to shareholders at the Annual Meeting. If a quorum is
not present at the Annual Meeting, we expect that the Annual Meeting will be
adjourned or postponed to solicit additional proxies.
Assuming the presence of a quorum, generally the adoption of a proposal
by the shareholders requires the affirmative vote of the holders of at least a
majority of all shares casting votes in person or by proxy at the Annual
Meeting. Directors are elected by a plurality, and the six nominees who receive
the most votes will be elected. Abstentions and broker non-votes will not be
taken into account to determine the outcome of the election of directors or the
approval of any proposal. Approval of the proposal to ratify the selection of
auditors will require the affirmative vote of the holders of at least a majority
of all shares casting votes in person or by proxy at the Annual Meeting.
Approval of the proposal to increase the number of authorized shares of Common
Stock will require the affirmative vote of the holders of at least a majority of
all shares casting votes in person or by proxy at the Annual Meeting. Only
shares affirmatively voted for a proposal, including properly executed proxies
that do not contain voting instructions, will be counted as favorable votes for
that proposal. Brokers who hold shares of stock in street name for customers and
who indicate on a proxy that the broker does not have discretionary authority to
vote those shares as to a particular matter are referred to as broker non-votes.
Broker non-votes will have no effect in determining whether a proposal will be
adopted at the Annual Meeting although they would be counted as present for
purposes of determining the existence of a quorum. Abstentions as to a
particular proposal will have the same effect as votes against such proposal.
REVOCABILITY OF PROXIES
Shares represented by proxies, if properly signed and returned, will be
voted in accordance with the specifications made thereon by the shareholders.
Any proxy not specifying to the contrary will be voted in favor of the adoption
of all of the proposals referred to in the Notice of Annual Meeting and for the
six nominees for Director listed in Item 1 below. A shareholder who signs and
returns a proxy may revoke it any time before it is voted by the filing of an
instrument revoking it or a duly executed proxy bearing a later date with the
Secretary of the Company. Your mere attendance at the Annual Meeting will not
revoke your proxy.
SOLICITATION
The cost of soliciting proxies will be borne by the Company. Such
solicitation will be made by mail and may also be made on behalf of the Company
by the Company's Directors, officers or employees in person or by telephone,
facsimile transmission or telegram.
SECURITY OWNERSHIP
COMMON STOCK
The following table sets forth, as of September 30, 2005, the
beneficial ownership of the Common Stock of each of the Company's directors,
executive officers and other employees named in the Summary Compensation Table
set forth below, as well as by the Company's directors and executive officers as
a group. Except as set forth below, the Company is not aware of any beneficial
owner of more than five percent of the Common Stock. Except as otherwise
indicated, the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
Number of Shares
Name and Address of Common Stock Percent of
Beneficial Owner Beneficially Owned(1) of Class(2)
- --------------------- --------------------- -----------
George R. Jensen, Jr. 10,821,000 shares(3) 1.95%
100 Deerfield Lane, Suite 140
Malvern, Pennsylvania 19355
Stephen P. Herbert 3,236,050 shares(4) *
100 Deerfield Lane, Suite 140
Malvern, Pennsylvania 19355
Haven Brock Kolls, Jr. 707,325 shares(5) *
100 Deerfield Lane, Suite 140
Malvern, Pennsylvania 19355
Adele H. Hepburn 3,382,760 shares(6) *
100 Deerfield Lane, Suite 140
Malvern, Pennsylvania 19355
Douglas M. Lurio 921,463 shares(7) *
2005 Market Street, Suite 2340
Philadelphia, Pennsylvania 19103
William W. Sellers 2,812,486 shares(8) *
701 Eagle Road
Wayne, Pennsylvania 19087
Steven Katz 535,000 shares *
440 South Main Street
Milltown, New Jersey 08850
William L. Van Alen, Jr. 3,924,955 shares(9) *
P.O. Box 727
Edgemont, Pennsylvania 19028
David M. DeMedio 357,625 shares(10) *
100 Deerfield Lane, Suite 140
Malvern, Pennsylvania 19355
All Directors and Executive
Officers As a Group (8 persons) 23,312,304 shares(11) 4.20%
- -----------
*Less than one percent (1%)
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and derives from either voting or investment
power with respect to securities. Shares of Common Stock issuable upon
conversion of the Preferred Stock, shares issuable upon the conversion of
Convertible Senior Notes, or shares of Common Stock issuable upon exercise of
warrants and options currently exercisable, or exercisable within 60 days of
September 30, 2005, are deemed to be beneficially owned for purposes hereof.
(2) On September 30, 2005 there were 449,233,378 shares of Common Stock and
521,642 shares of Preferred Stock issued and outstanding. For purposes of
computing the percentages under this table, it is assumed that all shares of
issued and outstanding Preferred Stock have been converted into 521,642 shares
of Common Stock, that all of the options to acquire Common Stock which have been
issued and are fully vested as of September 30, 2005 (or within 60-days of
September 30, 2005) have been converted into 1,784,972 shares of Common Stock.
For purposes of computing such percentages it has also been assumed that all of
the remaining Common Stock Warrants have been exercised for 31,380,145 shares of
Common Stock; that all of the Senior Notes have been converted into 72,196,765
shares of Common Stock; and that all of the accrued and unpaid dividends on the
Preferred Stock as of September 30, 2005 have been converted into 783,603 shares
of Common Stock. Therefore, 555,900,505 shares of Common Stock were treated as
issued and outstanding for purposes of computing the percentages under this
table. Does not reflect or include the shares issuable to Mr. Jensen upon a "USA
Transaction."
(3) Includes 511,000 shares of Common Stock beneficially owned by his spouse.
Does not include the right granted to Mr. Jensen under his Employment Agreement
to receive Common Stock upon the occurrence of a USA Transaction (as defined
therein). See "Executive Employment Agreements". Includes 6,000,000 shares owned
by George R. Jensen, Jr. Grantor Retained Unitrust dated July 14, 2003 over
which Mr. Jensen retains beneficial ownership.
(4) Includes 250,000 shares issuable to Mr. Herbert upon the conversion of
Senior Notes, 1,050 shares of Common Stock beneficially owned by his child,
600,000 shares of Common Stock beneficially owned by his spouse, 250,000 shares
issuable upon the conversion of Senior Notes beneficially owned by his spouse
and 250,000 shares issuable to Mr. Herbert upon the exercise of warrants.
(5) Includes 12,000 shares of Common Stock owned by Mr. Kolls' spouse, 150,000
shares issuable to his spouse upon conversion of her Senior Note.
(6) Includes 473,044 shares of Common Stock owned by her spouse, 7,875 shares
underlying Series A Preferred Stock held by her and her spouse, 2,556,923 shares
issuable upon the conversion of her Senior Notes, 58,495 shares issuable upon
the conversion of Senior Notes beneficially owned by her spouse, 212,025 shares
issuable upon the exercise of her warrants.
(7) Includes 225,000 shares issuable upon conversion of Senior Notes and
13,500 shares issuable upon exercise of warrants.
(8) Includes 17,846 shares of Common Stock owned by the Sellers Pension Plan
of which Mr. Sellers is a trustee, 4,952 shares of Common Stock owned by Sellers
Process Equipment Company of which he is a Director, 10,423 shares of Common
Stock owned by Mr. Seller's wife, 551,700 shares issuable upon conversion of his
Senior Notes and 100,000 shares issuable upon the exercise of warrants.
(9) Includes 1,300,720 shares of Common Stock issuable to Mr. Van Alen upon
conversion of his Senior Notes, 512,500 shares issuable upon the exercise of
warrants and 4,000 shares of Common Stock beneficially owned by his spouse.
(10) Includes 81,500 shares of Common Stock issuable to Mr. DeMedio upon
conversion of his Senior Notes and 75,000 shares of Common Stock issuable to Mr.
DeMedio upon the exercise of his Common Stock Options.
(11) Includes all shares of Common Stock described in footnotes (3) through
(5) and (7) through (10) above.
PREFERRED STOCK
The following table sets forth, as of September 30, 2005 the beneficial
ownership of the Preferred Stock by the Company's directors and executive
officers, the other employee named in the Summary Compensation Table set forth
below, as well as by the Company's directors and executive officers as a group.
Except as set forth below, the Company is not aware of any beneficial owner of
more than five percent of the Preferred Stock. Except as otherwise indicated,
the Company believes that the beneficial owners of the Preferred Stock listed
below, based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable.
Number of Shares
Name and Address of of Preferred Stock Percent
Beneficial Owner Beneficially Owned of Class(l)
- --------------------- ------------------ -----------
Adele H. Hepburn
100 Deerfield Lane, Suite 140
Malvern, Pennsylvania 19355 5,150 shares (2) *
All Directors and
Executive Officers
As a Group (8 persons) 0 shares *
- ------------
Less than 1%
(1) There were 521,642 shares of Preferred Stock issued and outstanding as of
September 30, 2005.
(2) Ms. Hepburn is an employee of the Company.
ITEM 1
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
The shareholders are being asked to elect six directors, who will
comprise the entire Board of Directors of the Company, to serve until the next
annual meeting of shareholders or until their successors are duly elected and
qualified. All of the nominees are current members of the Board of Directors.
Although the Board of Directors has no reason to believe any of the
nominees will be unable to accept such nomination, if such should occur, proxies
will be voted (unless marked to the contrary) for such substitute person or
persons, if any, as shall be recommended by the Board of Directors. However,
proxies will not be voted for more than six Directors. Shareholders who do not
wish their shares to be voted for a particular nominee may so direct in the
space provided in the proxy card.
The Board of Directors has nominated, and recommends the election of,
the six persons listed below to serve as Directors of the Company. The following
information is furnished with respect to each nominee for election as a
Director:
Name Age Position(s) Held
- ---- --- ------------------------------
George R. Jensen, Jr. 56 Chief Executive Officer,
Chairman of the Board of Directors
Stephen P. Herbert 42 Chief Operating Officer and
President, Director
William W. Sellers (1)(2) 84 Director
William L. Van Alen, Jr. (1)(2) 72 Director
Steven Katz (1) 57 Director
Douglas M. Lurio (2) 48 Director
(1) Member of Compensation Committee
(2) Member of Audit Committee
Each Director holds office until the next Annual Meeting of
shareholders and until his successor has been elected and qualified.
George R. Jensen, Jr., has been our Chief Executive Officer and a
Director since our inception in January 1992. Mr. Jensen was Chairman, Director,
and Chief Executive Officer of American Film Technologies, Inc. ("AFT") from
1985 until 1992. AFT was in the business of creating color imaged versions of
black-and-white films. From 1979 to 1985, Mr. Jensen was Chief Executive Officer
and President of International Film Productions, Inc. Mr. Jensen was the
Executive Producer of the twelve hour miniseries, "A.D.", a $35 million dollar
production filmed in Tunisia. Procter and Gamble, Inc., the primary source of
funds, co-produced and sponsored the epic, which aired in March 1985 for five
consecutive nights on the NBC network. Mr. Jensen was also the Executive
Producer for the 1983 special for public television, "A Tribute to Princess
Grace". From 1971 to 1978, Mr. Jensen was a securities broker, primarily for the
firm of Smith Barney, Harris Upham. Mr. Jensen was chosen 1989 Entrepreneur of
the Year in the high technology category for the Philadelphia, Pennsylvania area
by Ernst & Young LLP and Inc. Magazine. Mr. Jensen received his Bachelor of
Science Degree from the University of Tennessee and is a graduate of the
Advanced Management Program at the Wharton School of the University of
Pennsylvania. Mr. Jensen is also a Director of The Noah Fund, a publicly traded
mutual fund.
Stephen P. Herbert was elected a Director in April 1996, and joined USA
on a full-time basis on May 6, 1996. Prior to joining us and since 1986, Mr.
Herbert had been employed by Pepsi-Cola, the beverage division of PepsiCo, Inc.
From 1994 to April 1996, Mr. Herbert was a Manager of Market Strategy. In such
position he was responsible for directing development of market strategy for the
vending channel and subsequently the supermarket channel for Pepsi-Cola in North
America. Prior thereto, Mr. Herbert held various sales and management positions
with Pepsi-Cola. Mr. Herbert graduated with a Bachelor of Science degree from
Louisiana State University.
William W. Sellers joined the Board of Directors of USA in May 1993.
Mr. Sellers founded The Sellers Company in 1949, which has been nationally
recognized as the leader in the design and manufacture of state-of-the-art
equipment for the paving industry. Mr. Sellers has been awarded five United
States patents and several Canadian patents pertaining to this equipment. The
Sellers Company was sold to Mechtron International in 1985. Mr. Sellers is
Chairman of the Board of Sellers Process Equipment Company, which sells products
and systems to the food and other industries. Mr. Sellers is actively involved
in his community. Mr. Sellers received his undergraduate degree from the
University of Pennsylvania.
William L. Van Alen, Jr., joined the Board of Directors of USA in May
1993. Mr. Van Alen is President of Cornerstone Entertainment, Inc., an
organization engaged in the production of feature films of which he was a
founder in 1985. Since 1996, Mr. Van Alen has been President and a Director of
The Noah Fund, a publicly traded mutual fund. Prior to 1985, Mr. Van Alen
practiced law in Pennsylvania for twenty-two years. Mr. Van Alen received his
undergraduate degree in Economics from the University of Pennsylvania and his
law degree from Villanova Law School.
Steven Katz joined the Board of Directors in May 1999. He is President
of Steven Katz & Associates, Inc., a management consulting firm specializing in
strategic planning and corporate development for technology and service-based
companies in the health care, environmental, telecommunications and Internet
markets. Mr. Katz`s prior experience includes five years with PriceWaterhouse &
Co. in audit, tax and management advisory services; two years of corporate
planning with Revlon, Inc.; five years with National Patent Development
Corporation (NPDC) in strategic planning, merger and acquisition, technology
in-licensing and out-licensing, and corporate turnaround experience as President
of three NPDC subsidiaries; and two years as a Vice President and General
Manager of a non-banking division of Citicorp, N.A. Mr. Katz is also a Director
of Health Systems Solutions Inc., Vivid Learning Systems Inc., Nanoscience
Technologies Inc. and Biophan Technologies Inc., all publicly traded companies.
Douglas M. Lurio joined the Board of Directors of USA in June 1999. Mr.
Lurio is President of Lurio & Associates, P.C., attorneys-at-law, which he
founded in 1991. He specializes in the practice of corporate and securities law.
Prior thereto, he was a partner with Dilworth, Paxson LLP. Mr. Lurio received a
Bachelor of Arts Degree in Government from Franklin & Marshall College, a Juris
Doctor Degree from Villanova Law School, and a Masters in Law (Taxation) from
Temple Law School.
Cumulative voting rights do not exist with respect to the election of
Directors. Pursuant to the Articles of Incorporation and Pennsylvania law, the
Directors of the Company are to be elected by the holders of the Common Stock
and Series A Preferred Stock voting together, with each share of Common Stock
and Series A Preferred Stock entitled to one vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION
OF ALL NOMINEES.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings
during the fiscal year ended June 30, 2005 (not including actions adopted by
unanimous consent). Each member of the Board of Directors attended at least 75%
of the aggregate number of meetings of the Board and Board Committees of which
he was a member during the 2005 fiscal year. The Company does not have a policy
with regard to Board members attendance at annual meetings. All six of our
Directors attended the 2005 Annual Meeting.
The Board of Directors has an Audit Committee and a Compensation
Committee.
The Audit Committee of the Board of Directors presently consists of Mr.
Van Alen (Chairman), Mr. Sellers and Mr. Lurio. It held four meetings during the
2005 fiscal year. The Audit Committee recommends the engagement of the Company's
independent accountants and is primarily responsible for approving the services
performed by the Company's independent accountants, for reviewing and evaluating
the Company's accounting principles, reviewing the independence of independent
auditors, and reviewing the adequacy and effectiveness of the Company's internal
controls. See "Report of the Audit Committee."
The Compensation Committee of the Board of Directors presently consists
of Mr. Sellers (Chairman), Mr. Katz and Mr. Van Alen. The Committee reviews and
recommends compensation and compensation changes for executives of the Company
and the Board of Directors and administers the Company's stock option and stock
grant plans. The Compensation Committee did not meet during the 2005 fiscal
year.
The Board of Directors does not have a nominating committee.
Historically our entire Board has selected nominees for election as directors.
The Board believes this process has worked well thus far particularly since it
has been the Board's practice to require unanimity of Board members with respect
to the selection of director nominees. In determining whether to elect a
director or to nominate any person for election by our shareholders, the Board
assesses the appropriate size of the Board of Directors, consistent with our
bylaws, and whether any vacancies on the Board are expected due to retirement or
otherwise. If vacancies are anticipated, or otherwise arise, the Board will
consider various potential candidates to fill each vacancy. Candidates may come
to the attention of the Board through a variety of sources, including from
current members of the Board, shareholders, or other persons. The Board of
Directors has not yet had the occasion to, but will, consider properly submitted
proposed nominations by shareholders who are not directors, officers, or
employees of the Company on the same basis as candidates proposed by any other
person. The Board will evaluate each candidate on a case-by-case basis and will
not evaluate candidates differently based on who has made the proposal.
Shareholders who wish to suggest qualified candidates should write to
the Secretary, USA Technologies, Inc., 100 Deerfield Lane, Suite 140, Malvern,
PA 19355, specifying the name of the candidates and stating in detail the
qualifications of such persons for consideration by the Board. A written
statement from the candidate consenting to be named as a candidate and, if
nominated and elected, to serve as a director should accompany any such
recommendation.
COMPENSATION OF DIRECTORS
Members of the Board of Directors receive cash and equity compensation
for serving on the Board of Directors. During fiscal year 2005, we paid each of
our four outside Directors $20,000 each for serving as a Director during the
fiscal year and $10,000 each for serving on Board Committees.
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Item 2 on Proxy Card)
The firm of Goldstein Golub Kessler LLP has been selected by the Board
of Directors to serve as the Company's independent registered public accounting
firm for fiscal year 2006. The shareholders will be asked to ratify this
appointment at the Annual Meeting. A representative of Goldstein Golub Kessler
LLP is expected to be present at the Annual Meeting and will have the
opportunity to make a statement if desired and is expected to be available to
respond to appropriate questions.
The following resolution concerning the appointment of the independent
registered public accounting firm will be presented to the shareholders at the
Annual Meeting:
RESOLVED, that the appointment by the Board of Directors of
the Company of Goldstein Golub Kessler LLP, independent
registered public accounting firm, to examine the books,
accounts and records of the Company for the fiscal year
ending June 30, 2006 is hereby ratified and approved.
The affirmative vote of a majority of the votes cast by all holders of
the outstanding shares of Common Stock and Series A Preferred Stock voting
together (with each share of Common Stock and Series A Preferred Stock entitled
to one vote) is required for ratification of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE PROPOSAL SET FORTH ABOVE.
ITEM 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION INCREASING
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Item 3 on Proxy Card)
The Company's Articles of Incorporation presently authorizes the
issuance of up to 560,000,000 shares of Common Stock. The Board of Directors has
approved a resolution which if approved by the shareholders would increase the
number of authorized shares of Common Stock to 640,000,000.
As of October 31, 2005, the number of issued and outstanding shares of
Common Stock on a fully converted basis is 559,510,452, which is slightly less
than the number of shares of Common Stock which are currently authorized
560,000,000) by the Articles of Incorporation. These shares consist of the
following:
453,960,687 shares of Common Stock actually issued and outstanding;
521,642 shares issuable upon conversion of the currently issued and outstanding
Series A Preferred Stock;
783,604 shares issuable upon conversion of the accrued and unpaid dividends on
the Series A Preferred Stock;
2,009,972 shares issuable upon exercise of outstanding options;
25,398,686 shares issuable upon exercise of outstanding warrants;
75,870,098 shares reserved for issuance upon the conversion of the outstanding
Convertible Senior Notes;
847,101 shares issuable under our agreement with Steve Illes; and
58,693 shares issuable under the 2004-B Stock Compensation Plan.
Based upon the foregoing outstanding and reserved shares, the Company
currently has 489,548 shares of Common Stock remaining available for other
purposes. The purpose of the proposed amendment is to authorize a sufficient
number of additional shares of Common Stock to provide the Company with the
flexibility to issue Common Stock for a variety of corporate purposes, such as
to raise equity capital, to issue convertible debt, to issue additional warrants
or options or to make acquisitions through the use of shares. At this time, the
Company has no such specific plans, proposals or arrangements, written or
otherwise. As of October 31, 2005, and assuming approval of this proposal, there
would be 80,489,548 shares of Common Stock eligible for future issuance. The
Board of Directors will have the authority to issue these authorized shares of
Common Stock from time to time for proper corporate purposes without further
shareholder approval unless required by applicable law. Shareholders do not have
preemptive rights with respect to the Common Stock. The issuance of Common Stock
or securities convertible into Common Stock, on other than a pro-rata basis,
would result in the dilution of a present shareholder's interest in the Company.
The Company has not proposed the increase in the authorized number of
shares with the intention of using the additional shares for anti-takeover
purposes, although the Company could theoretically use the additional shares to
make it more difficult or to discourage an attempt to acquire control of the
Company. For example, in the event of an attempt to take over control of the
Company, it may be possible for the Company to endeavor to impede the attempt by
issuing shares of the Common Stock, thereby diluting the voting power of the
other outstanding shares and increasing the potential cost to acquire control of
the Company. The proposed amendment may therefore have the effect of
discouraging unsolicited takeover attempts. The Board of Directors is not aware
of any attempt to take control of the Company and the Board of Directors has not
presented this proposal with the intent that it be utilized as a type of
anti-takeover device. At this time, the Company has no additional plans or
proposals to adopt other provisions or enter into other arrangements that may
have material anti-takeover consequences.
The resolution to be considered by the shareholders at the Annual
Meeting reads as follows:
RESOLVED, that Paragraph (A) Classes of Stock of Article 4 of
the Articles of Incorporation of the Company shall be amended
and restated to read in full as follows:
(A) Classes of Stock. The aggregate number of shares which the
corporation shall have authority to issue is 641,800,000
shares, consisting of 640,000,000 shares of Common Stock,
without par value, and 1,800,000 shares of Series Preferred
Stock, without par value.
Shareholder approval of this proposal is required under Pennsylvania
law and the Articles of Incorporation. Approval of the amendment to the
Company's Articles of Incorporation increasing the number of authorized shares
of Common Stock requires the affirmative vote of a majority of all votes cast by
the holders of outstanding shares of Common Stock and Series A Preferred Stock
voting together (with each share of Common Stock and Series A Preferred Stock
entitled to one vote). If this proposal is adopted, it will become effective
upon filing of Articles of Amendment with the Department of State of the
Commonwealth of Pennsylvania which the Company anticipates filing immediately
following the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF
SHARES OF COMMON STOCK.
EXECUTIVE OFFICERS OF THE COMPANY
Our executive officers are as follows:
Name Age Position(s) Held
- ---- --- ----------------
George R. Jensen, Jr. 56 Chief Executive Officer,
Chairman of the Board of Directors
Stephen P. Herbert 42 Chief Operating Officer and
President, Director
Haven Brock Kolls, Jr. 40 Senior Vice President - Research
And Development
David M. DeMedio 34 Chief Financial Officer
Certain information concerning the foregoing executive officers who are
also directors of the Company is set forth elsewhere in this Proxy Statement.
See "Item 1- Election of Directors." The following description contains certain
information concerning the foregoing executive officers who are not also
directors of the Company.
Haven Brock Kolls, Jr., joined USA Technologies on a full-time basis in
May 1994 and was elected an executive officer in August 1994. From January 1992
to April 1994, Mr. Kolls was Director of Engineering for International Trade
Agency, Inc., an engineering firm specializing in the development of control
systems and management software packages for use in the vending machine
industry. Mr. Kolls was an electrical engineer for Plateau Inc. from 1988 to
December 1992. His responsibilities included mechanical and electrical
computer-aided engineering, digital electronic hardware design, circuit board
design and layout, fabrication of system prototypes and software development.
Mr. Kolls is a graduate of the University of Tennessee with a Bachelor of
Science Degree in Engineering.
David M. DeMedio joined USA Technologies on a full-time basis in March
1999 as Controller. In the Summer of 2001, Mr. DeMedio was promoted to Director
of Financial Services where he was responsible for the sales and financial data
reporting to customers, the Company's turnkey banking services and maintaining
and developing relationships with credit card processors and card associations.
In July 2003, Mr. DeMedio served as interim Chief Financial Officer through
April, 2004. From April, 2004 until April 12, 2005, Mr. DeMedio served as Vice
President - Financial & Data Services. On April 12, 2005, he was appointed as
the Company's Chief Financial Officer. From 1996 to March 1999, prior to joining
the Company, Mr. DeMedio had been employed by Elko, Fischer, Cunnane and
Associates, LLC as a supervisor in its' accounting and auditing and consulting
practice. Prior thereto, Mr. DeMedio held various accounting positions with
Intelligent Electronics, Inc., a multi-billion reseller of computer hardware and
configuration services. Mr. DeMedio graduated with a Bachelor of Science in
Business Administration from Shippensburg University and is a Certified Public
Accountant.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during the fiscal years ended June
30, 2003, June 30, 2004 and June 30, 2005 to each of the executive officers and
employee of the Company named below:
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------------------------------- -----------------------------
Securities
Fiscal Other Annual Restricted Underlying
Name and Principal Position Year Salary Bonus(1) Compensation(2) Stock Awards($) Options(#)
- --------------------------- ---- ------ ------------ -------------- -------------- ----------
George R. Jensen, Jr. 2005 $250,000 -- $ 17,875 -- --
Chief Executive Officer & 2004 $217,500 $4,870,000(3) $ 17,875 -- --
Chairman of the Board 2003 $189,038 $250,000 $223,211 -- --
Stephen P. Herbert 2005 $231,923 -- $ 17,875 -- --
Chief Operating Officer & 2004 $192,692 $225,000 $ 17,875 -- --
President 2003 $183,854 $225,000 $185,317 -- --
H. Brock Kolls 2005 $165,000 $110,000 $ 11,917 -- --
Senior Vice-President, 2004 $156,923 $60,000 $ 63,205 -- --
Research & Development 2003 $150,000 $25,000 $ 64,493 -- --
Adele H. Hepburn 2005 $130,000 -- -- -- --
Director of Investor 2004 $130,000 $167,075 -- -- --
Relations 2003 $ 91,000 $282,382 -- -- --
David M. DeMedio 2005 $131,689 $11,000 $ 7,800 -- 300,000
Chief Financial Officer (4)
(1) Fiscal year 2005, includes: a $110,000 cash bonus for Mr. Kolls and cash
bonuses totaling $11,000 for Mr. DeMedio. Fiscal year 2004 includes: 10,500,000
shares valued at $0.44 per share, in connection with the amendment of his
employment agreement, and a $250,000 cash bonus for Mr. Jensen; a $225,000 cash
bonus for Mr. Herbert; a $60,000 cash bonus for Mr. Kolls; and a cashless
exercise of 470,750 warrants into 470,750 shares valued at $0.10 per share and a
$120,000 cash bonus for Ms. Hepburn. For fiscal year 2003 includes: a $100,000
Senior Note due 2005, including 2,000,000 shares valued at $0.20, and $150,000
cash bonus for Mr. Jensen; a $100,000 Senior Note due 2005, 200,000 shares
valued at $0.20 and a $125,000 cash bonus for Mr. Herbert; a $25,000 cash bonus
for Mr. Kolls; and a $100,000 Senior Note due 2005, including 200,000 shares
valued at $0.20 a share, $41,095 Senior Note due 2004, and a $100,000 cash bonus
for Ms. Hepburn.
(2) Represents cash payments authorized to reimburse certain executive officers
for tax payments incurred from the award of a previous bonus as well as car
allowance payments.
(3) Prior to July 2003, Mr. Jensen's employment agreement provided that upon the
occurrence of a USA Transaction he would receive that number of shares equal to
seven percent of all of the then issued and outstanding shares on a fully
converted basis. During July 2003, the Company and Mr. Jensen agreed to amend
Mr. Jensen's employment agreement so that upon the occurrence of a USA
Transaction he would receive only 14,000,000 shares. Under the new amended
agreement, the 14,000,000 shares became subject to dilution (i.e., did not
increase in order to reflect subsequent issuances by the Company of its shares).
Under the prior agreement, the number of shares to be issued to Mr.
Jensen was not subject to dilution (i.e., would be increased in order to reflect
subsequent issuances by the Company of its shares) and was based upon the actual
total number of shares outstanding at the time of a USA Transaction. For
example, if a USA Transaction occurred while there were 475,000,000 shares then
outstanding on a fully converted basis, Mr. Jensen would have received
33,250,000 shares under his prior agreement rather than the fixed number of
14,000,000 shares under his new amended agreement. During July 2003, the Company
issued to Mr. Jensen an aggregate of 10,500,000 shares of restricted Common
Stock, 2,500,000 shares of which were issued as compensation to Mr. Jensen, and
8,000,000 shares of which were issued to Mr. Jensen in connection with the
employment agreement amendment described above. In accordance with generally
accepted accounting principles, the Company was required to value all of these
shares at $.44 per share or an aggregate of $4,620,000.
(4) Employment as Chief Financial Officer commenced on April 12, 2005.
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
- --------------------------------------------------------------------------------
Number of Percent of Exercise Expiration
Securities total options base price date
Underlying granted to ($/share)
Options granted employees in
Name (#) fiscal year
- --------------------------------------------------------------------------------
David M. DeMedio 300,000 (1) 100% $.20 (2)
(1) Conditioned upon Mr. DeMedio's employment, the options vest at a
rate of 37,500 per three-month period commencing on July 31, 2005 for an
aggregate of 300,000 options on April 30, 2007.
(2) The options expire two years from the date of vesting.
TOTAL OPTIONS EXERCISED IN FISCAL YEAR ENDED JUNE 30, 2005 AND YEAR END VALUES
The following table gives information for options exercised by an
executive officer and an employee in fiscal year 2005, and the number of options
held by the executive officer and the employee at fiscal year end:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End($)
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------
Adele H. Hepburn 0 0 77,000/0 0
David M. DeMedio 0 0 0/300,000 0
- --------------------------------------------------------------------------------------------------
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Jensen
that expires June 30, 2007 and is automatically renewed from year to year
thereafter, unless canceled by Mr. Jensen or the Company. The agreement provides
for an annual base salary of $250,000 effective January 1, 2004. Mr. Jensen is
entitled to receive such bonus or bonuses, as may be awarded to him by the Board
of Directors. In determining whether to pay such a bonus, the Board would use
its subjective discretion. The Agreement requires Mr. Jensen to devote his full
time and attention to the business and affairs of the Company, and obligates him
not to engage in any investments or activities which would compete with the
Company during the term of the Agreement and for a period of one year
thereafter.
The agreement also grants to Mr. Jensen in the event a "USA
Transaction" (as defined below) occurs after the date thereof an aggregate of
14,000,000 shares of Common Stock subject to adjustment for stock splits or
combinations ("Jensen shares"). The Jensen Shares have not been reserved for
issuance by the Company and are not reflected or included in the number of
issued and outstanding shares of the Company on a fully diluted basis in this
Proxy Statement. Mr. Jensen is not required to pay any additional consideration
for the Jensen Shares. At the time of any USA Transaction, all of the Jensen
Shares are automatically deemed to be issued and outstanding immediately prior
to any USA Transaction, and are entitled to be treated as any other issued and
outstanding shares of Common Stock in connection with such USA Transaction.
The term USA Transaction is defined as (i) the acquisition of fifty-one
percent or more of the then outstanding voting securities entitled to vote
generally in the election of Directors of the Company by any person, entity or
group, or (ii) the approval by the shareholders of the Company of a
reorganization, merger, consolidation, liquidation, or dissolution of the
Company, or the sale, transfer, lease or other disposition of all or
substantially all of the assets of the Company. The Jensen Shares are
irrevocable and fully vested, have no expiration date, and will not be affected
by the termination of Mr. Jensen's employment with the Company for any reason
whatsoever. If a USA Transaction shall occur at a time when there are not a
sufficient number of authorized but unissued shares of Common Stock, then the
Company shall as a condition of such USA Transaction promptly take any and all
appropriate action to make available a sufficient number of shares of Common
Stock. In the alternative, the Company may structure the USA Transaction so that
Mr. Jensen would receive the same amount and type of consideration in connection
with the USA Transaction as any other holder of Common Stock.
The Company has entered into an employment agreement with Mr. Herbert
that expires on June 30, 2007 and is automatically renewed from year to year
thereafter, unless canceled by Mr. Herbert or the Company. The Agreement
provides for an annual base salary of $230,000 per year effective January 1,
2004. Mr. Herbert is entitled to receive such bonus or bonuses as the Board of
Directors may award to him. The Agreement requires Mr. Herbert to devote his
full time and attention to the business and affairs of the Company and obligates
him not to engage in any investments or activities which would compete with the
Company during the term of the agreement and for a period of one year
thereafter. In the event that a USA Transaction (as defined in Mr. Jensen's
employment agreement) shall occur, then Mr. Herbert has the right to terminate
his agreement upon 30 days notice to USA.
Mr. Kolls has entered into an employment agreement with the Company
that expires on June 30, 2006 and is automatically renewed from year to year
thereafter unless canceled by Mr. Kolls or the Company. The agreement provides
for an annual base salary of $165,000 per year effective January 1, 2004. Mr.
Kolls is entitled to a payment of $5,000 upon each of the following: (i) filing
of a new patent application by USA for which he is listed as the inventor; (ii)
granting of any such patent application; and (iii) issuance of a patent for any
patent application that had been filed prior to April 20, 2004. Mr. Kolls is
also entitled to receive such bonus or bonuses, as may be awarded to him by the
Board of Directors. The Agreement requires Mr. Kolls to devote his full time and
attention to the business and affairs of the Company, and obligates him not to
engage in any investments or activities which would compete with the Company
during the term of his agreement and for a period of one year thereafter. In the
event that a USA Transaction (as defined in Mr. Jensen's employment agreement)
shall occur, then Mr. Kolls has the right to terminate his agreement upon 30
days notice to USA. During December 2004, Mr. Kolls agreed to extend the
expiration date of his employment agreement from June 30, 2005 to June 30, 2006,
and in accordance with his employment agreement received an incentive cash
payment from USA of $70,000.
Ms. Hepburn has entered into an employment agreement with the Company
that expires on June 30, 2006 and is automatically renewed from year to year
thereafter unless canceled by Ms. Hepburn or the Company. The agreement provides
for an annual base salary of $130,000 per year effective January 1, 2004. Ms.
Hepburn is also entitled to receive such bonus or bonuses as the Board of
Directors may award to her. The Agreement requires Ms. Hepburn to devote her
full time and attention to the business and affairs of the Company, and
obligates her not to engage in any investments or activities which would compete
with the Company during the term of the agreement and for a period of one year
thereafter.
Mr. DeMedio has entered into an employment agreement with the Company,
which expires on April 30, 2006, and is automatically renewed from year to year
thereafter unless cancelled by Mr. DeMedio or the Company. The agreement
provides for a base annual salary of $155,000 and discretionary bonuses. Mr.
DeMedio was also granted options to purchase up to 300,000 shares of Common
Stock of the Company at $.20 per share. The options vest ratably over a two-year
period and are exercisable at any time during the two-year period following
vesting. The agreement requires Mr. DeMedio to devote his full-time and
attention to the business and affairs of the Company, and obligates him not to
engage in any investments or activities that would compete with the Company
during the term of his agreement and for a period of one year thereafter.
Effective April 8, 2005, Mary West Young resigned as Senior Vice
President and Chief Financial Officer of the Company. Effective April 12, 2005,
the Company appointed David M. DeMedio as Chief Financial Officer.
REPORT OF THE AUDIT COMMITTEE
MEMBERSHIP AND ROLE OF THE AUDIT COMMITTEE
The Audit Committee of the Company's Board of Directors (the "Audit
Committee") consists of three outside directors, currently Messrs. Sellers, Van
Alen, and Lurio, appointed by the Board of Directors. Each member of the Audit
Committee other than Mr. Lurio is independent as defined under the National
Association of Securities Dealers' listing standards. The Audit Committee is
governed by a written charter adopted and approved by the Board of Directors.
The Board of Directors has determined that the Company does not have an audit
committee financial expert (as defined under the rules of the Securities and
Exchange Commission) serving on its audit committee. Although the Company
believes that the current members of the audit committee have sufficient
knowledge, background, and experience to fulfill their responsibilities, the
Company realizes the importance of having a financial expert serve on its audit
committee, and plans to nominate a member to serve in this capacity before June
30, 2006.
REVIEW OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED
JUNE 30, 2005
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended June 30, 2005 with the
Company's management. The Audit Committee also discussed with Goldstein Golub
Kessler LLP, the Company's independent registered public accounting firm, the
matters required to be discussed by Statement on Auditing Standards No. 61
`Communication with Audit Committees'.The Audit Committee has also received the
written disclosures from Goldstein Golub Kessler LLP relating to their
independence as required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee has
discussed with Goldstein Golub Kessler LLP the independence of that firm. The
Audit Committee has also considered whether the provision of non-audit services
by Goldstein Golub Kessler LLP is compatible with maintaining Goldstein Golub
Kessler LLP's independence.
Based on the Audit Committee's reviews and discussions noted above, the
Audit Committee recommended to the Board of Directors that the Company's
consolidated audited financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2005, for filing with the
Securities and Exchange Commission.
Audit Committee
------------------------------
Mr. William L. Van Alen (Chairman)
Mr. William W. Sellers
Mr. Douglas M. Lurio
AUDIT AND NON-AUDIT FEES
Effective July 7, 2005, the Company dismissed Ernst & Young LLP as the Company's
independent registered public accounting firm and engaged Goldstein Golub
Kessler LLP as the Company's new independent registered public accounting firm.
Ernst & Young LLP served as the Company's independent registered public
accounting firm during the fiscal year ended June 30, 2004. Ernst & Young LLP
reviewed the Company's quarterly financial statements for the first, second, and
third quarters of the fiscal year ended June 30, 2005. Accordingly, the Company
was billed for professional services rendered by each of Ernst & Young LLP and
Goldstein Golub Kessler LLP in connection with the fiscal year ended June 30,
2005.
During the fiscal years ended June 30, 2005 and 2004, fees in connection with
services rendered by Ernst & Young LLP were as set forth below:
Fiscal 2004 Fiscal 2005
----------- -----------
Audit Fees $299,869 $177,839
Audit-Related Fees -- --
Tax Fees $ 65,321 $ 80,314
All Other Fees -- --
-------- --------
TOTAL $365,190 $258,153
During the fiscal year ended June 30, 2005, fees in connection with services
rendered by Goldstein Golub Kessler LLP were as set forth below:
Fiscal 2005
-----------
Audit Fees $100,000
Audit-Related Fees --
Tax Fees --
All Other Fees --
--------
TOTAL $100,000
Audit fees consisted of fees for the audit of our annual financial statements
and review of quarterly financial statements as well as services normally
provided in connection with statutory and regulatory filings or engagements,
consents and assistance with and review of Company documents filed with the
Securities and Exchange Commission.
Tax fees consisted primarily of fees for tax compliance, tax advice and tax
planning services.
There were no fees categorized as Audit-related or Other fees during fiscal
years 2004 and 2005.
Goldstein Golub Kessler LLP had a relationship with American Express Tax and
Business Services Inc. ("TBS") through September 30,2005, from which it leased
auditing staff who were full time, permanent employees of TBS and through which
its partners provide non-audit services. Beginning October 1, 2005, Goldstein
Golub Kessler LLP has such a continuing relationship with RSM McGladrey, Inc. As
a result of these arrangements, Goldstein Golub Kessler LLP has no full time
employees and therefore, none of the audit services performed were provided by
permanent full-time employees of Goldstein Golub Kessler LLP. Goldstein Golub
Kessler LLP manages and supervises the audit and audit staff, and is exclusively
responsible for the opinion rendered in connection with its examination.
AUDIT COMMITTEE PRE-APPROVAL POLICY
The Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent registered public accounting firm
on a case-by-case basis.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of Common Stock, to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock. Executive officers, directors
and ten percent stockholders are required by SEC regulations to furnish the
Company with a copy of all Section 16(a) forms ("Forms 3, 4, and 5") that they
file. To the Company's knowledge, based solely on a review of copies of the
Forms 3, 4 and 5 furnished to the Company, except as set forth below, all
applicable Section 16(a) filing requirements were complied with.
Stephen P. Herbert did not timely report 1 transaction and filed 1 late
report; William Van Alen, Jr. did not timely report 7 transactions and filed 2
late reports; and William W. Sellers did not timely report 1 transaction and
filed 1 late report.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 2005, the Company incurred
charges to Lurio & Associates, P.C., of which Mr. Lurio is President and a
shareholder, for professional fees of approximately $284,000 for legal services
rendered to the Company by such law firm. Mr. Lurio is a Director of the
Company. As of June 30, 2005, the Company had accrued approximately $25,000 for
these services. During fiscal year 2005, Mr. Lurio extended $15,000 and $30,000
of his 2005 and 2006 Senior Notes, respectively, into the 2008 and 2009 Senior
Notes, respectively.
During the fiscal year ended June 30, 2005, the Company incurred
charges of approximately $72,600 in connection with consulting services provided
by Steven Katz, a Director of the Company. As of June 30, 2005, the Company had
accrued approximately $72,600 for these services.
During fiscal year 2005, William Van Alen, Jr., a Director, purchased
333,333 shares of Common Stock at $.15 per share, or $50,000, as part of the
2005-D Private Placement. Mr. Van Alen also received warrants to purchase
333,333 shares of Common Stock at $.15 per share exercisable at any time prior
to December 31, 2005, pursuant to his investment in this offering. No value was
assigned to these warrants. Mr. Van Alen also purchased senior notes in the
principal amount of $103,405 as part of the 2004-B Senior Note offering and
extended $30,000 of his 2006 Senior Notes to 2009 Senior Notes.
During fiscal year 2005, William Sellers, a Director, invested $14,337
as part of the 2004-B Senior Note offering and extended $50,000 of his 2006
Senior Notes to 2009 Senior Notes.
During fiscal year 2005, David DeMedio, Chief Financial Officer,
invested $1,900 as part of the 2004-B Senior Note offering.
Our Code of Business Conduct and Ethics prohibits us from entering into
any related party transaction with an officer or director where such transaction
would interfere with the exercise of the independent judgment of such officer or
director or materially impair the performance of the responsibilities of any
such officer or director.
SHAREHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals submitted pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for inclusion
in the Company's proxy statement for its 2007 Annual Meeting of Shareholders
must be received by the Secretary of the Company at the principal offices of the
Company no later than July 25, 2006.
Written notice of proposals of shareholders submitted for consideration
at the 2007 Annual Meeting but not for inclusion in the proxy statement must
have been received by the Company on or before October 7, 2006 in order to be
considered timely for purposes of Rule 14a-4 under the Exchange Act. The persons
designated in the Company's proxy card will be granted discretionary voting
authority with respect to any shareholder proposal with respect to which the
Company does not receive timely notice.
GENERAL INFORMATION
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the Notice of Annual Meeting,
but if any matters are properly presented, it is the intention of the persons
named in the enclosed form of proxy to vote on such matters in accordance with
their best judgment to the same extent as the person signing the proxy would be
entitled to vote.
Shareholders who desire to have their shares voted at the Annual
Meeting are requested to mark, sign, and date the enclosed proxy and return it
promptly in the enclosed postage-paid envelope. Shareholders may revoke their
proxies at any time prior to the Annual Meeting and shareholders who are present
at the Annual Meeting may revoke their proxies and vote, if they so desire, in
person.
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission, for the fiscal year ended June 30, 2005 may
be obtained, free of charge, by any shareholder by writing or calling Investor
Relations Department, USA Technologies, Inc., 100 Deerfield Lane, Suite 140,
Malvern, Pennsylvania 19355, telephone (610) 989-0340.
By Order of the Board of Directors,
/s/ George R. Jensen, Jr.
November 18, 2005 GEORGE R. JENSEN, JR.
Chairman and Chief Executive Officer
USA TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS -
ANNUAL MEETING OF SHAREHOLDERS - December 13, 2005
The undersigned, revoking all prior proxies, hereby appoint(s) George
R. Jensen, Jr., and Stephen P. Herbert, or either of them, with full power of
substitution, as proxies to represent and vote, as designated below, all shares
of Common Stock and Series A Preferred Stock of USA Technologies, Inc., held of
record by the undersigned at the close of business on October 31, 2005, at the
Annual Meeting of Shareholders to be held on December 13, 2005, and at any
adjournment thereof.
This proxy when properly executed will be voted in the manner directed
on the reverse side hereof by the undersigned. If no contrary direction is made,
this proxy will be voted "FOR" all of the proposals set forth on the reverse
side hereof, including all the nominees listed in Item 1 (or, if any such
nominees should be unable to accept such nomination, for such other substitute
person or persons as may be recommended by the Board of Directors), and in
accordance with the proxies' best judgment upon other matters properly coming
before the Annual Meeting and any adjournments thereof.
Please date and sign exactly as your name appears below. In the case of
joint holders, each should sign. If the signor is a corporation or partnership,
sign in full the corporate or partnership name by an authorized officer or
partner. When signing as attorney, executor, trustee, officer, partner, etc.,
give full title.
Dated: _____________, 2005
- ------------------------------------------
Signature
- ------------------------------------------
Signature
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
IF YOU SIGN THIS PROXY WITHOUT OTHERWISE MARKING THE FORM, THIS PROXY WILL BE
VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS ON ALL MATTERS TO BE CONSIDERED
AT THE ANNUAL MEETING.
[SEE REVERSE SIDE]
1. The election of George R. Jensen, Jr., Stephen P. Herbert, William
W. Sellers, William L. Van Alen, Jr., Steven Katz and Douglas M.
Lurio, as Directors.
___ FOR ALL NOMINEES ___ WITHHOLD AUTHORITY
(If you wish to withhold authority to vote for one or more but less
than all of the nominees named above, so indicate on the line provided
below.)
-------------------------------------------
2. Ratification of the appointment of Goldstein Golub Kessler LLP as
the independent registered public accounting firm of the Company for fiscal year
ending June 30, 2006.
___ FOR ___ AGAINST ___ ABSTAIN
3. The proposal to increase the authorized shares of Common Stock to
640,000,000.
___ FOR ___ AGAINST ___ ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting and any
adjournment thereof.