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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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o
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Definitive
Proxy Statement
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x
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Definitive
Additional Materials
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o
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Soliciting
Material Under Rule 14a-12
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x
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No
fee required.
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(I)(1) and
0-11.
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USA Technologies Contact:
George
Jensen, Chairman & CEO
Stephen
P. Herbert, President & COO
e-mail: gjensen@usatech.com
sherbert@usatech.com
Phone:
(800) 633-0340
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Proxy Solicitor:
Mark
Harnett / Jeanne Carr
MacKenzie
Partners, Inc.
(212)
929-5500
USAT@mackenziepartners.com
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Investor Relations Contact:
Marlon
Nurse, Vice President
Porter,
LeVay & Rose
Phone:
(212) 564-4700
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>
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Prior
to Wednesday, October 14, 2009, we believed that the Dissidents had
supported our progress as a company and they never indicated that they
intended to engage in a disruptive proxy
contest.
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>
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On
Wednesday, October 14, 2009, Mr. Thomas called me and indicated that he
thought USAT should bring in three new independent directors. I indicated
to Mr. Thomas that we were “ahead of the curve” in this regard and had
already identified several excellent candidates. I also stated that I
thought it was appropriate to only bring in two rather than three new
directors at this time. Mr. Thomas did not object to this. I also
encouraged him send to me information on any persons who he had in mind as
director candidates.
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>
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On
Monday, October 19, 2009, USAT appointed Steve Barnhart and Jack Price as
new independent directors of the Company. From 2007 until January 2009,
Mr. Barnhart was the President and CEO of Orbitz Worldwide, Inc., a
publicly traded, online travel business. Prior thereto and since 2003, Mr.
Barnhart held various positions with Orbitz, including Chief Financial
Officer. From 1990 to 2003, Mr. Barnhart held various positions with
PepsiCo, Inc. From 2007 through March 2009, Mr. Price was President and
CEO of NovaRay Medical, Inc., a medical imaging systems business. From
2003 to 2006, Mr. Price was the President and CEO of VSM MedTech Ltd. From
1996 through 2003, Mr. Price was the President and Division Chief
Executive Officer of Philips Medical Systems, North America. Each of Mr.
Barnhart and Mr. Price has on point knowledge and experience with our
business model.
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>
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Following
our disclosure of these appointments, each of Messrs. Tirpak and Thomas
indicated to me that they were pleased with these new
directors.
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>
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On
Monday, October 26, 2009, nearly two weeks after I invited Mr. Thomas to
identify director candidates, Mr. Tirpak called me and indicated that he,
Alan Gotcher, and Peter Michel wanted to serve on the Board. I indicated
to Mr. Tirpak that USAT had recently finalized its slate of Directors for
the upcoming Annual Meeting, and that the proxy statement was being
printed. I asked Mr. Tirpak to follow up with me in writing and that I
would forward the information to our independent directors for future
consideration.
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>
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On
Friday, October 30, 2009, after our proxy statement was mailed, Mr. Tirpak
sent to the Company an official notice pursuant to our bylaws that he
intended to nominate as directors at the Annual Meeting himself, Alan
Gotcher and Peter Michel. Our counsel also received a call from his
counsel indicating that he intended to proceed with a proxy contest if
this matter could not be
resolved.
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>
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Following
receipt of the notice, we attempted to resolve this matter amicably with
the Dissidents.
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>
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On
November 16, 2009, I informed Mr. Thomas to reconsider filing a proxy
statement, and emphasized that a proxy contest would distract management
from the vital tasks that must be accomplished in order to build the
business, and could result in damage to our valuable customer
relationships. In addition, I indicated to the Dissidents that such action
would result in substantial costs and expenses to be incurred by the
Dissidents as well as by the Company.
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>
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The
Dissidents filed a preliminary proxy statement with the SEC on November
19, 2009 (the “Dissidents’ Preliminary Proxy Statement”) which contains
confusing and inaccurate information. It also omits important information.
We believe that the backgrounds and business experience of the Dissidents’
three nominees, as described in the Dissidents’ Preliminary Proxy
Statement, do not meet a threshold level we believe is required for them
to serve on our Board of Directors.
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>
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On
Monday, November 23, 2009 the Dissidents released yet another
communication with confusing information, particularly regarding the
compensation of management. As stated in our prior shareholder letter,
over the last five years, the average cash compensation of the three
officers (CEO, President and CFO) was approximately $276,000 per year, and
the average stock award was approximately 53,000 shares of common stock
per year.
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I.
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We
are operating pursuant to a strategic plan to increase shareholder value
(the “Plan”).
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II.
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We
are experiencing improved operating results and anticipate achieving
profitability despite poor economic
conditions.
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III.
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We
have an experienced management team with the skills needed to successfully
execute the Plan.
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IV.
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Based
on the information in the Dissidents’ Preliminary Proxy Statement, it
appears that the Dissidents lack the appropriate
skills.
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V.
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The
Dissidents have not presented a plan for the Company; the lack of an
appropriate plan could destroy shareholder
value.
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·
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Generate
positive net income by quarter ending December 31,
2010.
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·
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Focus
on increasing revenues, while reducing
costs.
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·
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Continue
to develop innovative products and
services.
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1.
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Leveraging our
Existing Customers/Partners: USAT has a solid base of key customers
across multiple markets (vending, kiosk, etc.) that have deployed our
solutions. We have worked to build these relationships, drive future
deployments, and develop customized network interfaces. Our customers have
seen the benefits of our products and services first-hand and represent
the largest opportunity to scale our solution. These customers are a key
component of our plan to drive
sales.
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2.
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Focusing on
Diversifying our Customer Portfolio: USAT is driving additional
growth via expansion in 'non-vending' segments of the small ticket
unattended cashless transaction market (e.g., kiosk, laundry, car
wash).
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3.
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Expanding Distribution
in Core Markets: USAT has worked to develop a strong market
presence in the vending and energy markets. Increasing sales and
distribution to our largest customers is important to the long-term
success of the Company, but we are intently focused on building a broader
base of customers within these core markets to drive long term revenue and
value. Our efforts in this regard have led to 75 new customers in the last
quarter.
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4.
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Improving
Scalability: USAT has invested so that our products and services
(e.g., Manufacturing, Network Services, Customer Services, Technical
Support, Deployment) can handle our ever-increasing customer base and
divergent markets, and operate efficiently and effectively across broad
applications.
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5.
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Providing Innovative
Products and Services: Maintaining our market leadership is vital.
We plan to continually innovate in order to meet our customers’ existing
and future needs and to effectively differentiate and distance ourselves
from the competition.
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6.
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Leveraging
Intellectual Property: USAT has been granted 71 patents for its
work in unattended payment processing, networking and energy management
devices. In addition, we own numerous trademarks, copyrights, design
rights and trade secrets. USAT will continue to leverage this intellectual
property to add value for customers, attain an increased share of the
market, address competition and generate licensing
revenues.
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7.
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Improving Profit
Margins: As USAT works to increase overall sales and revenue, we
expect an increase in gross profits through reducing COGS and through
favorable supply agreements with
vendors.
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8.
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Increasing Our
Revenues: For the ePort product line, we are continuing to leverage
our growing and existing customer base of over 600 bottlers/operators as
of September 30, 2009. Specifically, leverage results of summarized
operational data from the over 7.4 million cashless and 29.0 million cash
transactions fed into the network on a quarterly basis from installed base
of terminals. By analyzing this data, we can better guide our customers on
how best to deploy cashless technology, thus fostering maximum ROI for our
customers and future, repeat and larger quantity orders as they roll out
to a larger population of their vending
base.
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9.
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Reducing Our Cost of
Sales: Throughout the Company’s history, it has actively sought,
through its significant investment in research and development, to reduce
the cost of its products and services. This is most recently
evidenced by the introduction of two, new lower retail priced ePort
terminals, namely the $199 Edge and the $329 G8. Just one year ago retail
pricing for our G7 was $425.
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10.
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Reducing Our Selling,
General and Administrative (SG&A) Expenses: During fiscal years
2008 and 2009, the Company initiated efforts to reduce its SG&A
expenses. In order to attempt to improve our operating results, we took
appropriate actions during the third and fourth quarters of fiscal year
2008 and, again, during the third quarter of fiscal year 2009 to reduce
our cash-based SG&A expenses. These actions consisted of staff
reductions and related costs as well as and reductions in our controllable
costs. Prior to these reductions, our cash-based SG&A expenses were
approximately $4,753,000 for the quarter ended December 31, 2007. Our
cash-based SG&A expenses for the most recently completed quarter,
ended September 30, 2009, were approximately $3,432,000, a reduction of
quarterly SG&A expenses of approximately $1,321,000 or
28%.
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·
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Quarter
ended March 31, 2010 – Connections to the network are anticipated to be
71,000 by the end of the quarter.
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·
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Quarter
ended June 30, 2010 – Connections to the network are anticipated to be
81,000 by the end of the quarter
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·
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Quarter
ended September 30, 2010 – Connections to the network are anticipated to
be 95,000 by the end of the
quarter.
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·
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Quarter
ended December 31, 2010 – Connections to the network are anticipated to be
114,000 by the end of the quarter with reported positive net
income.
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·
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Maintenance
of our position as a market leader with approximately 57,000 devices
connected to our network;
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·
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Launched
the innovative ePort G8™ and ePort EDGE™, both lower-cost and more
efficient cashless payment products
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·
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Maintaining
a diversified and global base of over 600 customers as of September 30,
2009 with the strength to increase market adoption, and the addition of 75
new ePort customers since June 30,
2009;
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·
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Completed
a successful rights offering, netting more than $13 million earlier this
year in the worst economic market in
decades;
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·
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Increased
the installed base of devices connected to the USALive® Network by 36% to
57,000 in the first quarter of fiscal 2010 compared to the first quarter
of fiscal 2009. This followed a 37% year-over-year increase in installed
base in fiscal 2009 compared with fiscal
2008.
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·
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Increased
the number of transactions processed, which in the first quarter of fiscal
2010 increased to 7.4 million, a 57% year-over-year quarterly increase;
this was on top of a 97% year-over-year increase in fiscal year 2009
versus fiscal year 2008 when transactions processed reached 22.3
million.
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·
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Increased
the dollar value of transactions processed for the first quarter of fiscal
year 2010 by 26% to $14.6 million over first quarter of fiscal year
2009.
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·
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Improved
gross margins in the first quarter of fiscal year 2010 to 32% from 30% a
year ago. This was in addition to improvements in fiscal year 2009 when
gross margins improved to 24% from 21% in fiscal year
2008.
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·
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Reduced
our SG&A expenses in the first quarter of fiscal year 2010 by 20% from
a year ago. This was in addition to a 19% reduction in SG&A expenses
in fiscal year 2009 compared with fiscal year
2008.
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·
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Drove
our revenues in the first quarter of fiscal year 2010 to $3.8 million, the
highest level in five quarters. Fiscal fourth quarter 2009 revenues of
$3.6 million were the strongest quarterly revenue for the fiscal 2009
year.
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·
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Substantially
reduced operating expenses in fiscal year 2009 by approximately 28%, or
$16.8 million, compared with $20.6 million in fiscal year 2008. The
Company further reduced operating expenses by 19% to $4 million for the
first quarter of fiscal year 2010, compared to $4.9 million in the first
quarter of fiscal year 2009.
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·
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Recently
negotiated an amendment to a contract with one of our largest and most
important suppliers, which is expected to result in immediate and
significant new gross profits. If this contract had been in place for the
quarter ended September 30, 2009, gross profits would have been
approximately 34% rather than 27%.
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·
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A
management team with industry expertise, market knowledge, ability to
forge unique customer relationships and technological expertise to create
and roll out products; and
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·
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An
independent and highly qualified Board of Directors with industry and
management experience to complement and oversee the Company’s strategic
and innovative objectives; and
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·
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Our
various Directors who possess specific industry expertise and an in-depth
knowledge of our business model;
and
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·
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Our
Directors who possess extensive operating experience that includes a track
record of success.
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·
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PCI and SOX
Compliance: The Company is subject to rigorous compliance standards
promulgated by the credit card industry. This includes the
Payment Card Industry (PCI) and Data Security Standard (DSS). In addition,
as a publicly traded company, USAT must also comply with the requirements
of the federal securities laws and the Sarbanes-Oxley Act of 2002. The PCI
standards affect many areas of the enterprise, from basic business
process, to separation of duties, to data encryption. Achieving these PCI
standards is also demanded by our
customers.
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·
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Customer Care:
We provide comprehensive customer care from technical support, to
customers in the field, to handling of consumer calls on behalf of our
customers. Customer Support is available
24/7.
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·
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Consultative
Selling: Our direct sales and marketing team of eight individuals
is required to address our customers at the financial and operational
level. This requires our team to possess a firm understanding of
technology and network/financial services, have a firm understanding of
the manner in which our customers’ businesses operate, and how cashless
capability will impact results.
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·
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Delivery of Complex
Financial and Network Services: The ePort Connect Service is the
most comprehensive service of its kind. The service is a highly
complex, “high touch” service which allows customers to rapidly mobilize
cashless capability in unattended, small ticket
markets.
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·
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Innovation: The
Company has invested heavily, and continues to invest, in innovation
to stimulate adoption by providing additional value/ROI
to customers through the continuous improvement of its products and
services. This is essential to both open up the markets we have targeted,
and maintain the Company’s position as dominant share leader as the market
expands.
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·
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Global Development and
Manufacturing: The Company has leveraged offshore development and
manufacturing in order to accelerate the time to market, reduce
development costs, and drive down cost of goods to our
customers.
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·
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Depth
of experience;
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·
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Relevance
of such experience to the Company’s
business;
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·
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Record
of prior success; and
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·
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Ability
to govern in a manner that does not disrupt the Company’s business and
operations.
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Sincerely,
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George
R. Jensen, Jr.
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Chief
Executive Officer
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If
you have any questions, require assistance with voting your
WHITE
proxy card, or need additional copies of the
USA
Technologies’ proxy materials, please contact:
105
Madison Avenue
New
York, NY 10016
105
Madison Avenue
New
York, NY 10016
USAT@mackenziepartners.com
(212)
929-5500 (Call Collect)
Or
TOLL-FREE
(800) 322-2885
Your
Vote is important, no matter how many or how few shares you
own!
To
vote, please sign, date and return the enclosed WHITE proxy
card
by mailing it in the enclosed pre-addressed, stamped
envelope.
We
encourage you to disregard and not return any blue
cards
that you receive
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PROXY
VOTING INSTRUCTIONS
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INTERNET -
Access “www.voteproxy.com” and follow the
on-screen instructions. Have your proxy card available when you
access the web page, and use the Company Number and Account Number shown
on your proxy card.
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COMPANY
NUMBER
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||
Vote
online until 11:59 PM EST the day before the meeting.
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ACCOUNT
NUMBER
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MAIL - Sign, date and mail
your proxy card in the envelope provided as soon as
possible.
IN
PERSON -
You may vote your shares in person by attending the Annual
Meeting.
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NOTICE
OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting,
proxy statement, proxy card and annual report on Form 10-K are available
at –
http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=14591
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”
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Please
detach along perforated line and mail in the envelope provided IF you are not
voting via the Internet.
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”
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¢20830300000000000000
8
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121509
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FOR
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AGAINST
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ABSTAIN
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||||
1,
2 & 3. Election of Directors of Classes I, II and
III:
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4.
Ratification of the appointment of McGladrey & Pullen, LLP as the
independent registered public accounting firm of the Company for fiscal
year ending June 30, 2010.
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£
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£
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£
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5. Approval of 2010 Stock Incentive Plan |
£
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£
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£
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NOMINEES:
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||||||
£ FOR ALL
NOMINEES
£ WITHHOLD
AUTHORITY FOR ALL NOMINEES
£ FOR ALL EXCEPT (See
instructions below)
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Stephen D.
Barnhart Class I
Director
Jack
E. Price
Class I Director
William
L. Van Alen, Jr. Class II Director
Steven
Katz
Class II Director
Joel
Brooks
Class II Director
George
R. Jensen, Jr. Class III
Director
Stephen
P. Herbert
Class III Director
Douglas M.
Lurio
Class III Director
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6.
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.
This
proxy when properly executed will be voted in the manner directed by
the undersigned. If no contrary direction is made, this proxy will be
voted "FOR" all of the proposals set forth herein, including all the
nominees listed in Items 1, 2 and 3 (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.
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INSTRUCTIONS: To withhold
authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and
fill in the circle next to each nominee you wish to withhold, as shown
here: ˜
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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.
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To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
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£
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Signature
of Shareholder
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Date:
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Signature
of Shareholder
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Date:
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¢
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Note: Please
sign exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
|
¢
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