Exhibit 10.6
[FORM OF SECOND AMENDED AND RESTATED SENIOR SECURED
CONVERTIBLE NOTE]
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF
THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS
3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND,
ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE
AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
Cash Systems, Inc.
Second Amended and Restated Senior Secured Convertible Note

      Issuance Date: October 10, 2006   Original Principal Amount: U.S.
$                    

          FOR VALUE RECEIVED, Cash Systems, Inc., a Delaware corporation (the
“Company”), hereby promises to pay to [PORTSIDE GROWTH AND OPPORTUNITY FUND]
[OTHER BUYERS] or registered assigns (“Holder”) the amount set out above as the
Original Principal Amount (as reduced pursuant to the terms hereof pursuant to
redemption, conversion or otherwise, the “Principal”) when due, whether upon the
Maturity Date (as defined below), acceleration, redemption or otherwise (in each
case in accordance with the terms hereof) and to pay interest (“Interest”) on
any outstanding Principal at the rate of (x) if on or prior to June 30, 2007,
six and one-half percent (6.50%) per annum or (y) if after June 30, 2007, seven
and one-half percent (7.50%) per annum (the “Interest Rate”), from the date set
out above as the Issuance Date (the “Issuance Date”) until the same becomes due
and payable, whether upon an Interest Date (as defined below) or the Maturity
Date, acceleration, conversion, redemption or otherwise (in each case in
accordance with the terms hereof). Certain capitalized terms used herein are
defined in Section 28. This Note amends, supplements, modifies and completely
restates and supersedes the Amended and Restated Senior Secured Convertible
Notes (the “Existing Notes”) with an Original Principal Amount on August 20,
2007 of $                    , which amended and restated that certain Senior
Secured Convertible Notes, dated as of the Issuance Date, issued by the Company
to the Holder with an Original Principal Amount on the Issuance Date of
$                    , but shall not, except as specifically amended hereby or
as set forth in the Holder’s Amendment and Exchange Agreement (as defined
below), constitute a release, satisfaction or novation of any of the obligations
under the Existing Notes or any other Transaction Document (as defined in the
Securities Purchase Agreement). This Senior Secured Convertible Note (including
all Senior Secured Convertible Notes issued in exchange, transfer or replacement
hereof, this “Note”) is one of an issue of Senior Secured Convertible Notes
(collectively, the “Notes” and such other Senior Secured Convertible Notes, the
“Other Notes”) amending and restating the terms of the Existing Notes pursuant
to Section 1 of those certain Second Amendment and Exchange Agreements, dated as
of March 14, 2008 (the “Replacement

 

--------------------------------------------------------------------------------

 

Date”), by and between each of the Buyers (as defined in the Securities Purchase
Agreement) and the Company (the “Amendment and Exchange Agreements”).
          (1) PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay
to the Holder an amount in cash representing all outstanding Principal, accrued
and unpaid Interest and accrued and unpaid Late Charges, if any, on such
Principal and Interest. The “Maturity Date” shall be October 10, 2011, as may be
extended at the option of the Holder (i) in the event that, and for so long as,
an Event of Default (as defined in Section 4(a)) shall have occurred and be
continuing on the Maturity Date (as may be extended pursuant to this Section 1)
or any event that shall have occurred and be continuing that with the passage of
time and the failure to cure would result in an Event of Default and
(ii) through the date that is ten (10) Business Days after the consummation of a
Change of Control in the event that a Change of Control is publicly announced or
a Change of Control Notice (as defined in Section 5(b)) is delivered prior to
the Maturity Date. Other than as specifically permitted by the Note, the Company
may not prepay any portion of the outstanding Principal, accrued and unpaid
Interest or accrued and unpaid Late Charges, if any, on Principal and Interest.
          (2) INTEREST; INTEREST RATE. Interest on the outstanding Principal
amount of this Note shall commence accruing on the Issuance Date and shall be
computed on the basis of a 365-day year and actual days elapsed and shall be
payable quarterly, in arrears, on January 10, April 10, July 10 and October 10
of each year (each, an “Interest Date”), with the first Interest Date being
January 10, 2007. Interest shall be payable on each Interest Date, to the record
holder of this Note on the applicable Interest Date, in cash. Prior to the
payment of Interest on an Interest Date, Interest on this Note shall accrue at
the Interest Rate and be payable by way of inclusion of the Interest in the
Conversion Amount in accordance with Section 3(b)(i). From and after the
occurrence and during the continuance of an Event of Default, the Interest Rate
shall be increased to twelve percent (12.0%). Notwithstanding anything herein to
the contrary, from and after the occurrence of a Dilutive Issuance Event, the
Interest Rate in effect shall be further increased by one and a half percent
(1.5%). In the event that such Event of Default is subsequently cured, the
adjustment referred to in the third sentence of this Section 2 shall cease to be
effective as of the date of such cure; provided that the Interest as calculated
and unpaid at such increased rate during the continuance of such Event of
Default shall continue to apply to the extent relating to the days after the
occurrence of such Event of Default through and including the date of cure of
such Event of Default.
          (3) CONVERSION OF NOTES. This Note shall be convertible into shares of
the Company’s common stock, par value $0.001 per share (the “Common Stock”), on
the terms and conditions set forth in this Section 3.
               (a) Conversion Right. Subject to the provisions of Section 3(d),
at any time or times on or after the Issuance Date, the Holder shall be entitled
to convert any portion of the outstanding and unpaid Conversion Amount (as
defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the

 

--------------------------------------------------------------------------------

 

issuance and delivery of Common Stock upon conversion of any Conversion Amount;
provided that the Company shall not be required to pay any tax that may be
payable in respect of any issuance of Common Stock to any Person other than the
converting Holder or with respect to any income tax due by the Holder with
respect to such Common Stock.
               (b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the “Conversion Rate”).
                    (i) “Conversion Amount” means the sum of (A) the portion of
the Principal to be converted, redeemed or otherwise with respect to which this
determination is being made, (B) accrued and unpaid Interest with respect to
such Principal and (C) accrued and unpaid Late Charges with respect to such
Principal and Interest.
                    (ii) “Conversion Price” means, as of any Conversion Date (as
defined below) or other date of determination, $                    , subject to
adjustment as provided herein.
               (c) Mechanics of Conversion.
                    (i) Optional Conversion. To convert any Conversion Amount
into shares of Common Stock on any date (a “Conversion Date”), the Holder shall
(A) transmit by facsimile (or otherwise deliver), for receipt on or prior to
10:00 p.m., New York Time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to
the Company and (B) if required by Section 3(c)(iii), surrender this Note to a
common carrier for delivery to the Company as soon as practicable on or
following such date (or an indemnification undertaking with respect to this Note
in the case of its loss, theft or destruction). On or before the second (2nd)
Trading Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile a confirmation of receipt of such Conversion Notice
to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or
before the second (2nd) Trading Day following the date of receipt of a
Conversion Notice (the “Share Delivery Date”), the Company shall (X) provided
that the Transfer Agent is participating in the Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and deliver to the address as
specified in the Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to which the
Holder shall be entitled. If this Note is physically surrendered for conversion
as required by Section 3(c)(iii) and the outstanding Principal of this Note is
greater than the Principal portion of the Conversion Amount being converted,
then the Company shall as soon as practicable and in no event later than three
(3) Business Days after receipt of this Note and at its own expense, issue and
deliver to the holder a new Note (in accordance with Section 18(d)) representing
the outstanding Principal not converted. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion of this Note shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.

 

--------------------------------------------------------------------------------

 

                    (ii) Company’s Failure to Timely Convert. If within three
(3) Trading Days after the Company’s receipt of the facsimile copy of a
Conversion Notice the Company shall fail to issue and deliver a certificate to
the Holder or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon such holder’s
conversion of any Conversion Amount (a “Conversion Failure ”), and if on or
after such Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such conversion that the Holder anticipated receiving
from the Company (a “Buy-In”), then the Company shall, within five (5) Business
Days after the Holder’s request and in the Holder’s discretion, either (i) pay
cash to the Holder in an amount equal to the Holder’s total purchase price
(including brokerage commissions and other out-of-pocket expenses, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay cash
to the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B) the Closing
Bid Price on the Conversion Date.
                    (iii) Registration; Book-Entry. The Company shall maintain a
register (the “Register”) for the recordation of the names and addresses of the
holders of each Note and the principal amount of the Notes held by such holders
(the “Registered Notes”). The entries in the Register shall be conclusive and
binding for all purposes absent manifest error. The Company and the holders of
the Notes shall treat each Person whose name is recorded in the Register as the
owner of a Note for all purposes, including, without limitation, the right to
receive payments of principal and interest hereunder, notwithstanding notice to
the contrary. A Registered Note may be assigned or sold in whole or in part only
by registration of such assignment or sale on the Register. Upon its receipt of
a request to assign or sell all or part of any Registered Note by a Holder, the
Company shall record the information contained therein in the Register and issue
one or more new Registered Notes in the same aggregate principal amount as the
principal amount of the surrendered Registered Note to the designated assignee
or transferee pursuant to Section 18. Notwithstanding anything to the contrary
set forth herein, upon conversion of any portion of this Note in accordance with
the terms hereof, the Holder shall not be required to physically surrender this
Note to the Company unless (A) the full Conversion Amount represented by this
Note is being converted or (B) the Holder has provided the Company with prior
written notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender of this Note. The Holder and the
Company shall maintain records showing the Principal, Interest and Late Charges,
if any, converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of this Note upon conversion.
                    (iv) Pro Rata Conversion; Disputes. In the event that the
Company receives a Conversion Notice from more than one holder of Notes for the
same Conversion Date and the Company can convert some, but not all, of such
portions of the Notes submitted for conversion, the Company, subject to
Section 3(d), shall convert from each holder of Notes electing to have Notes
converted on such date a pro rata amount of such holder’s portion of its Notes
submitted for conversion based on the principal amount of Notes submitted for

 

--------------------------------------------------------------------------------

 

conversion on such date by such holder relative to the aggregate principal
amount of all Notes submitted for conversion on such date. In the event of a
dispute as to the number of shares of Common Stock issuable to the Holder in
connection with a conversion of this Note, the Company shall issue to the Holder
the number of shares of Common Stock not in dispute and resolve such dispute in
accordance with Section 23.
                    (v) Company’s Right of Mandatory Conversion.
                    (A) Mandatory Conversion. If at any time from and after the
one (1) year anniversary of the Issuance Date (the “Mandatory Conversion
Eligibility Date”), (i) the Closing Sale Price of the Common Stock exceeds for
each of any twenty (20) consecutive Trading Days following the Mandatory
Conversion Eligibility Date (the “Mandatory Conversion Measuring Period”) 200%
of the Conversion Price on the Issuance Date (as adjusted for any stock splits,
stock dividends, recapitalizations, combinations, reverse stock splits or other
similar events during such period) and (ii) there shall not have been any Equity
Conditions Failure, the Company shall have the right to require the Holder to
convert all, or any portion, of the Conversion Amount then remaining under this
Note into fully paid, validly issued and nonassessable shares of Common Stock in
accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory
Conversion Date (as defined below) with respect to the Conversion Amount (a
“Mandatory Conversion”). The Company may exercise its right to require
conversion under this Section 3(c)(v)(A) by delivering within not more than
three (3) Trading Days following the end of any such Mandatory Conversion
Measuring Period a written notice thereof by facsimile and overnight courier to
all, but not less than all, of the holders of Notes and the Transfer Agent (the
“Mandatory Conversion Notice” and the date all of the holders received such
notice is referred to as the “Mandatory Conversion Notice Date”). The Mandatory
Conversion Notice shall be irrevocable. The Mandatory Conversion Notice shall
state (1) the Trading Day selected for the Mandatory Conversion in accordance
herewith, which Trading Day shall be at least twenty (20) Trading Days but not
more than sixty (60) Trading Days following the Mandatory Conversion Notice Date
(the “Mandatory Conversion Date”), (2) the aggregate Conversion Amount of the
Notes subject to mandatory conversion from all of the holders of the Notes
pursuant hereto (and analogous provisions under the Other Notes) and (3) the
number of shares of Common Stock to be issued to the Holder on the Mandatory
Conversion Date. All Conversion Amounts converted by the Holder after the
Mandatory Conversion Notice Date shall reduce the Conversion Amount of this Note
required to be converted on the Mandatory Conversion Date. The mechanics of
conversion set forth in Section 3(c) shall apply to any Mandatory Conversion as
if the Company and the Transfer Agent had received from the Holder on the
Mandatory Conversion Date a Conversion Notice with respect to the Conversion
Amount being converted pursuant to the Mandatory Conversion. Notwithstanding the
foregoing, if the Company cannot effect a Mandatory Conversion, in whole or in
part, of the Conversion Amount of this Note (such portion, the “Unconverted
Amount”) as contemplated in any Mandatory Conversion Notice due to the
limitation on conversions set forth in Section 3(d)(i), then, as of the
applicable Mandatory Conversion Date, Interest on such Unconverted Amount shall
cease to accrue and such Unconverted Amount shall be converted in accordance
with Section 3(c)(iv) on such date such conversion is permitted under
Section 3(d)(i).

 

--------------------------------------------------------------------------------

 

                    (B) Pro Rata Conversion Requirement. If the Company elects
to cause a conversion of any Conversion Amount of this Note pursuant to
Section 3(c)(v)(A), then it must simultaneously take the same action in the same
proportion with respect to the Other Notes. If the Company elects a Mandatory
Conversion of this Note pursuant to Section 3(c)(v)(A) (or similar provisions
under the Other Notes) with respect to less than all of the Conversion Amounts
of the Notes then outstanding, then the Company shall require conversion of a
Conversion Amount from each of the holders of the Notes equal to the product of
(I) the aggregate Conversion Amount of Notes which the Company has elected to
cause to be converted pursuant to Section 3(c)(v)(A), multiplied by (II) the
fraction, the numerator of which is the sum of the aggregate Original Principal
Amount of the Notes purchased by such holder of outstanding Notes and the
denominator of which is the sum of the aggregate Original Principal Amount of
the Notes purchased by all holders holding outstanding Notes (such fraction with
respect to each holder is referred to as its “Conversion Allocation Percentage,”
and such amount with respect to each holder is referred to as its “Pro Rata
Conversion Amount”); provided, however, that in the event that any holder’s Pro
Rata Conversion Amount exceeds the outstanding Principal amount of such holder’s
Note, then such excess Pro Rata Conversion Amount shall be allocated amongst the
remaining holders of Notes in accordance with the foregoing formula. In the
event that the initial holder of any Notes shall sell or otherwise transfer any
of such holder’s Notes, the transferee shall be allocated a pro rata portion of
such holder’s Conversion Allocation Percentage and the Pro Rata Conversion
Amount.
               (d) Limitations on Conversions.
                    (i) Beneficial Ownership. The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that
after giving effect to such conversion, the Holder (together with the Holder’s
affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”)
of the number of shares of Common Stock outstanding immediately after giving
effect to such conversion. For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon conversion of this
Note with respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be issuable upon
(A) conversion of the remaining, nonconverted portion of this Note beneficially
owned by the Holder or any of its affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any Other Notes or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 3(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes
of this Section 3(d)(i), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form
8-K, as the case may be, (y) a more recent public announcement by the Company or
(z) any other notice by the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. For any reason

 

--------------------------------------------------------------------------------

 

at any time, upon the written or oral request of the Holder, the Company shall
within two (2) Business Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Note, by
the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice to the
Company, the Holder may increase or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% specified in such notice; provided that
(i) any such increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Notes.
                    (ii) Principal Market Regulation. The Company shall not be
obligated to issue any shares of Common Stock upon conversion of this Note, and
the Holder of this Note shall not have the right to receive upon conversion of
this Note any shares of Common Stock, if the issuance of such shares of Common
Stock would exceed the aggregate number of shares of Common Stock which the
Company may issue upon conversion or exercise, as applicable, of the Notes and
Warrants without breaching the Company’s obligations under the rules or
regulations of the Principal Market, whether or not the Company’s Common Stock
is then listed on the Principal Market (the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company (A) obtains the
approval of its stockholders as required by the applicable rules of the
Principal Market for issuances of Common Stock in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to the
Required Holders. Until such approval or written opinion is obtained, no
purchaser of the Notes pursuant to the Securities Purchase Agreement (the
“Purchasers”) shall be issued in the aggregate, upon conversion or exercise, as
applicable, of Notes or Warrants, shares of Common Stock in an amount greater
than the product of the Exchange Cap multiplied by a fraction, the numerator of
which is the principal amount of Notes issuable to such Purchaser pursuant to
the Amendment and Exchange Agreements on the Replacement Date and the
denominator of which is the aggregate principal amount of all Notes issuable to
the Purchasers pursuant to the Amendment and Exchange Agreements on the
Replacement Date (with respect to each Purchaser, the “Exchange Cap
Allocation”). In the event that any Purchaser shall sell or otherwise transfer
any of such Purchaser’s Notes, the transferee shall be allocated a pro rata
portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the
prior sentence shall apply to such transferee with respect to the portion of the
Exchange Cap Allocation allocated to such transferee. In the event that any
holder of Notes shall convert all of such holder’s Notes into a number of shares
of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap
Allocation, then the difference between such holder’s Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal amount of the
Notes then held by each such holder. Without limiting the generality of the
foregoing, if the Required Holders have elected a Holder Conversion Price
Adjustment Election, until such time as the Company has obtained the approval of
its stockholders as required under the rules and regulations of the Principal
Market, the aggregate number of shares of Common Stock which the Company may
issue upon exercise of the Warrants and upon conversion of the Notes, under the
current rules of the Principal Market, may not be more than Three Million Seven
Hundred Fifty-Five Thousand One Hundred Fifty-Four (3,755,154).

 

--------------------------------------------------------------------------------

 

          (4) RIGHTS UPON EVENT OF DEFAULT.
               (a) Event of Default. Each of the following events shall
constitute an “Event of Default”:
                    (i) the suspension from trading or failure of the Common
Stock to be listed on an Eligible Market for a period of five (5) consecutive
Trading Days or for more than an aggregate of ten (10) Trading Days in any
365-day period;
                    (ii) the Company’s (A) failure to cure a Conversion Failure
by delivery of the required number of shares of Common Stock within ten
(10) Business Days after the applicable Conversion Date or (B) notice, written
or oral, to any holder of the Notes, including by way of public announcement or
through any of its agents, at any time, of its intention not to comply with a
request for conversion of any Notes into shares of Common Stock that is tendered
in accordance with the provisions of the Notes;
                    (iii) at any time following the tenth (10th) consecutive
Business Day that the Holder’s Authorized Share Allocation is less than the
number of shares of Common Stock that the Holder would be entitled to receive
upon a conversion of the full Conversion Amount of this Note (without regard to
any limitations on conversion set forth in Section 3(d) or otherwise);
                    (iv) the Company’s failure to pay to the Holder any amount
of Principal (including, without limitation, any redemption payments), Interest,
Late Charges or other amounts when and as due under this Note or any other
Transaction Document (as defined in the Securities Purchase Agreement) or any
other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby to which the
Holder is a party, except, in the case of a failure to pay Interest and Late
Charges when and as due, in which case only if such failure continues for a
period of at least five (5) Business Days;
                    (v) the Company shall either (i) fail to pay, when due, or
within any applicable grace period, any payment with respect to any Indebtedness
in excess of $250,000, individually or in the aggregate, due to any third party,
other than, with respect to unsecured Indebtedness only, payments contested by
the Company in good faith by proper proceedings and with respect to which
adequate reserves have been set aside for the payment thereof in accordance with
GAAP, or otherwise be in breach or violation of any agreement for monies owed or
owing in an amount in excess of $250,000, individually or in the aggregate,
which breach or violation permits the other party thereto to declare a default
or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any
other circumstance or event that would, with or without the passage of time or
the giving of notice, result in a default or event of default under any
agreement binding the Company, which default or event of default would or is
likely to have a material adverse effect on the business, operations,
properties, prospects of financial condition of the Company or any of its
Subsidiaries, individually or in the aggregate;
                    (vi) the Company or any of its Subsidiaries (other than Cash
Systems of Canada, Inc. at any time while it is not required to comply with
Section 14(g)),

 

--------------------------------------------------------------------------------

 

pursuant to or within the meaning of Title 11, U.S. Code, or any similar
Federal, foreign or state law for the relief of debtors (collectively,
“Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of
an order for relief against it in an involuntary case, (C) consents to the
appointment of a receiver, trustee, assignee, liquidator or similar official (a
“Custodian”), (D) makes a general assignment for the benefit of its creditors or
(E) admits in writing that it is generally unable to pay its debts as they
become due;
                    (vii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (A) is for relief against the Company or
any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the
Company or any of its Subsidiaries or (C) orders the liquidation of the Company
or any of its Subsidiaries, other than, in each case, with respect to Cash
Systems of Canada, Inc. at any time while it is not required to comply with
Section 14(g));
                    (viii) a final judgment or judgments for the payment of
money aggregating in excess of $500,000 are rendered against the Company or any
of its Subsidiaries and which judgments are not, within sixty (60) days after
the entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within sixty (60) days after the expiration of such stay; provided,
however, that any judgment which is covered by insurance or an indemnity from a
credit worthy party shall not be included in calculating the $500,000 amount set
forth above;
                    (ix) the Company breaches any covenant or other term or
condition or any material representation or warranty of any Transaction
Document, except, in the case of a breach of a covenant which is curable, only
if such breach continues for a period of at least ten (10) consecutive Business
Days;
                    (x) any breach or failure in any respect to comply with
Section 14 of this Note or failure to meet any Financial Test set forth in
Section 14(f) of this Note; or
                    (xi) any Event of Default (as defined in the Other Notes)
occurs with respect to any Other Notes.
               (b) Redemption Right. Upon the occurrence of an Event of Default
with respect to this Note or any Other Note, the Company shall within
(1) Business Day deliver written notice thereof via facsimile or e-mail and
overnight courier (an “Event of Default Notice”) to the Holder. At any time
after the earlier of the Holder’s receipt of an Event of Default Notice and the
Holder becoming aware of an Event of Default, the Holder may require the Company
to redeem all or any portion of this Note by delivering written notice thereof
(the “Event of Default Redemption Notice”) to the Company, which Event of
Default Redemption Notice shall indicate the portion of this Note the Holder is
electing to redeem. Each portion of this Note subject to redemption by the
Company pursuant to this Section 4(b) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount to be
redeemed and (y) the Redemption Premium and (ii) the product of (A) the
Conversion Rate with respect to such Conversion Amount in effect at such time as
the Holder delivers an Event of Default Redemption Notice and (B) the greater of
(1) the Closing Sale Price of the Common Stock on the date immediately preceding
such Event of Default, (2) the Closing Sale Price of the Common Stock on the
date immediately after such Event of Default and (3) the Closing Sale

 

--------------------------------------------------------------------------------

 

Price of the Common Stock on the date the Holder delivers the Event of Default
Redemption Notice (the “Event of Default Redemption Price”). Redemptions
required by this Section 4(b) shall be made in accordance with the provisions of
Section 12. To the extent redemptions required by this Section 4(b) are deemed
or determined by a court of competent jurisdiction to be prepayments of the Note
by the Company, such redemptions shall be deemed to be voluntary prepayments.
The parties hereto agree that in the event of the Company’s redemption of any
portion of the Note under this Section 4(b), the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any Redemption
Premium due under this Section 4(b) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty.
          (5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
               (a) Assumption. The Company shall not enter into or be party to a
Fundamental Transaction unless (i)  the Successor Entity assumes in writing all
of the obligations of the Company under this Note and the other Transaction
Documents in accordance with the provisions of this Section 5(a) pursuant to
written agreements in form and substance satisfactory to the Required Holders
and approved by the Required Holders prior to such Fundamental Transaction,
including agreements to deliver to each holder of Notes in exchange for such
Notes a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Notes, including, without
limitation, having a principal amount and interest rate equal to the principal
amounts then outstanding and the interest rates of the Notes held by such
holder, having similar conversion rights as the Notes and having similar ranking
to the Notes, and satisfactory to the Required Holders and (ii) the Successor
Entity (including its Parent Entity) is a publicly traded corporation whose
common stock is quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Note referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and shall assume all of the obligations of the Company under this Note
with the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of the Fundamental Transaction, the Successor Entity
shall deliver to the Holder confirmation that there shall be issued upon
conversion or redemption of this Note at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of the Company’s Common Stock (or
other securities, cash, assets or other property) issuable upon the conversion
or redemption of the Notes prior to such Fundamental Transaction, such shares of
the publicly traded common stock (or their equivalent) of the Successor Entity
(including its Parent Entity), as adjusted in accordance with the provisions of
this Note. The provisions of this Section shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any
limitations on the conversion or redemption of this Note.
               (b) Redemption Right. No sooner than fifteen (15) days nor later
than ten (10) days prior to the consummation of a Change of Control, but not
prior to the public announcement of such Change of Control, the Company shall
deliver written notice thereof via

 

--------------------------------------------------------------------------------

 

facsimile and overnight courier to the Holder (a “Change of Control Notice”). At
any time during the period beginning on the date of the Holder’s receipt of a
Change of Control Notice and ending twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof
(“Change of Control Redemption Notice”) to the Company, which Change of Control
Redemption Notice shall indicate the Conversion Amount the Holder is electing to
redeem. The portion of this Note subject to redemption pursuant to this
Section 5 shall be redeemed by the Company in cash at a price equal to the
greater of (i) the product of (x) the Conversion Amount being redeemed and (y)
the quotient determined by dividing (A) the greater of the Closing Sale Price of
the Common Stock immediately prior to the consummation of the Change of Control,
the Closing Sale Price immediately following the public announcement of such
proposed Change of Control and the Closing Sale Price of the Common Stock
immediately prior to the public announcement of such proposed Change of Control
by (B) the Conversion Price and (ii) the product of the Conversion Amount being
redeemed and the Change of Control Premium (the “Change of Control Redemption
Price”). Redemptions required by this Section 5 shall be made in accordance with
the provisions of Section 12 and shall have priority to payments to stockholders
in connection with a Change of Control. To the extent redemptions required by
this Section 5(b) are deemed or determined by a court of competent jurisdiction
to be prepayments of the Note by the Company, such redemptions shall be deemed
to be voluntary prepayments. Notwithstanding anything to the contrary in this
Section 5, but subject to Section 3(d), until the Change of Control Redemption
Price is paid in full, the Conversion Amount submitted for redemption under this
Section 5(c) may be converted, in whole or in part, by the Holder into Common
Stock pursuant to Section 3. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Note under this Section 5(b), the
Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 5(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.
          (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.
               (a) Purchase Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
               (b) Other Corporate Events. In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with

 

--------------------------------------------------------------------------------

 

respect to or in exchange for shares of Common Stock (a “Corporate Event”), the
Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon a conversion of this Note, (i) in
addition to the shares of Common Stock receivable upon such conversion, such
securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held
by the Holder upon the consummation of such Corporate Event (without taking into
account any limitations or restrictions on the convertibility of this Note) or
(ii) in lieu of the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders of shares of
Common Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
Required Holders. The provisions of this Section shall apply similarly and
equally to successive Corporate Events and shall be applied without regard to
any limitations on the conversion or redemption of this Note.
          (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
               (a) Adjustment of Conversion Price upon Issuance of Common Stock.
If and whenever on or after the Subscription Date, the Company issues or sells,
or in accordance with this Section 7(a) is deemed to have issued or sold, any
shares of Common Stock (including the issuance or sale of shares of Common Stock
owned or held by or for the account of the Company, but excluding shares of
Common Stock deemed to have been issued or sold by the Company in connection
with any Excluded Security) for a consideration per share less than a price (the
“Applicable Price”) equal to the Conversion Price in effect immediately prior to
such issue or sale (the foregoing a “Dilutive Issuance”), then immediately after
such Dilutive Issuance, the Conversion Price then in effect shall be reduced to
an amount equal to the product of (A) the Conversion Price in effect immediately
prior to such Dilutive Issuance and (B) the quotient determined by dividing
(1) the sum of (I) the product derived by multiplying the Conversion Price in
effect immediately prior to such Dilutive Issuance and the number of shares of
Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus
(II) the consideration, if any, received by the Company upon such Dilutive
Issuance, by (2) the product derived by multiplying (I) the Applicable Price in
effect immediately prior to such Dilutive Issuance by (II) the number of shares
of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. For
purposes of determining the adjusted Conversion Price under this Section 7(a),
the following shall be applicable:
                    (i) Issuance of Options. If the Company in any manner grants
or sells any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option is less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per
share. For purposes of this Section 7(a)(i), the “lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option
or upon conversion or exchange or exercise of any Convertible Securities
issuable upon exercise of such Option” shall be equal to

 

--------------------------------------------------------------------------------

 

the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon granting or
sale of the Option, upon exercise of the Option and upon conversion or exchange
or exercise of any Convertible Security issuable upon exercise of such Option.
No further adjustment of the Conversion Price shall be made upon the actual
issuance of such share of Common Stock or of such Convertible Securities upon
the exercise of such Options or upon the actual issuance of such Common Stock
upon conversion or exchange or exercise of such Convertible Securities.
                    (ii) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon such conversion or
exchange or exercise thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section 7(a)(ii),
the “lowest price per share for which one share of Common Stock is issuable upon
such conversion or exchange or exercise” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or sale of the
Convertible Security and upon the conversion or exchange or exercise of such
Convertible Security. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such share of Common Stock upon conversion or
exchange or exercise of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 7(a), no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
                    (iii) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exchange or exercise of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable or exercisable for Common Stock changes at any time, the
Conversion Price in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 7(a)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the
Subscription Date are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Conversion Price then
in effect.
                    (iv) Calculation of Consideration Received. In case any
Option is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the net amount received by the Company therefor. If any Common Stock,
Options

 

--------------------------------------------------------------------------------

 

or Convertible Securities are issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the Closing Sale Price of such securities on the date of
receipt. If any Common Stock, Options or Convertible Securities are issued to
the stockholders of the non-surviving entity in connection with any merger in
which the Company is the surviving entity, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
“Valuation Event”), the fair value of such consideration will be determined, at
the Company’s expense, within five (5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such
appraiser shall be deemed binding upon all parties absent manifest error.
                    (v) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
               (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time on or after the
Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company at any time on or after the Subscription Date combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.
               (c) Other Events. If any event occurs of the type contemplated by
the provisions of this Section 7 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.
               (d) De Minimis Adjustments. No adjustment in the Conversion Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.01 in such price; provided, however, that any adjustment which by
reason of this Section 7(d) is not required to be made shall be carried forward
and taken into account in any subsequent

 

--------------------------------------------------------------------------------

 

adjustments under this Section 7. All calculations under this Section 7 shall be
made by the Company in good faith and shall be made to the nearest cent or to
the nearest one hundredth of a share, as applicable. No adjustment need be made
for a change in the par value or no par value of the Company’s Common Stock.
               (e) Conversion Floor Price. Until the earlier to occur of (x) the
date of a Holder Conversion Price Adjustment Election and (y) such time as the
Company obtains the approval of its stockholders as required under the rules and
regulations of the Principal Market in order to allow the Conversion Price to be
less than the Conversion Floor Price (as defined below) (the “Required
Stockholder Approval”), no adjustment pursuant to Section 7(a) shall cause the
Conversion Price to be less than $[___], as adjusted for any stock dividend,
stock split, stock combination, reclassification or similar transaction (the
“Conversion Floor Price”).
               (f) Holder Conversion Price Adjustment Election. At any time
during the twenty-five (25) Trading Day period following the Company’s public
disclosure of its Operating Results (as defined below) for the year ended
December 31, 2007 (such announcement, the “Adjustment Announcement”), which
announcement shall occur on March 17, 2008 after 4:00 P.M. New York time, the
Required Holders may by written notice to the Company (the date of such notice,
the “Holder Conversion Price Adjustment Notice Date”) elect to cause the
Conversion Price of the Notes to be reduced, effective as of the Holder
Conversion Price Adjustment Notice Date, to 120% of the arithmetic average of
the Weighted Average Price of the Common Stock for each day during the period
commencing on March 18, 2008, the first Trading Day immediately following the
Adjustment Announcement, and ending on April 15, 2008, the twentieth (20th)
Trading Day after the Adjustment Announcement (a “Holder Conversion Price
Adjustment Election”).
          (8) ADDITIONAL REDEMPTIONS
               (a) Holder’s Right of Optional Redemption.
                    (i) On October 10, 2008 (the “Holder Initial Optional
Redemption Date”), the Holder shall have the right, in its sole discretion, by
delivering written notice to the Company by September 10, 2008 (a “Holder
Initial Redemption Notice”), to require that the Company redeem (a “Holder
Initial Redemption”) such portion of the Conversion Amount of this Note set
forth in such Holder Initial Redemption Notice (the “Holder Initial Optional
Redemption Amount”), not to exceed the Maximum Redemption Amount. The portion of
this Note subject to redemption pursuant to this Section 8 shall be redeemed by
the Company in cash at a price equal to the Conversion Amount being redeemed
(the “Holder Initial Optional Redemption Price”). Redemptions required by this
Section 8 shall be made in accordance with the provisions of Section 12.
Notwithstanding anything to the contrary in this Section 8, but subject to
Section 3(d), until the Holder receives the Holder Initial Optional Redemption
Price, the Holder Initial Optional Redemption Amount may be converted, in whole
or in part, by the Holder into Common Stock pursuant to Section 3, and any such
conversion shall reduce the Holder Initial Optional Redemption Amount.
                    (ii) On October 10, 2009 (the “Holder Additional Optional
Redemption Date”, and together with the Holder Initial Optional Redemption Date,
the “Holder

 

--------------------------------------------------------------------------------

 

Optional Redemption Date”), the Holder shall have the right, in its sole
discretion, to require that the Company redeem all or any portion of the Note (a
“Holder Additional Redemption”, and together with the Holder Initial Redemption,
the “Holder Redemptions”) by delivering written notice thereof to the Company by
September 10, 2009 (a “Holder Additional Redemption Notice”, and together with
the Holder Initial Redemption Notice, the “Holder Redemption Notices”). The
Holder Additional Redemption Notice shall indicate the Conversion Amount the
Holder is electing to have redeemed (the “Holder Additional Optional Redemption
Amount”, and together with the Holder Initial Optional Redemption Amount, the
“Holder Optional Redemption Amount”) on the Holder Additional Optional
Redemption Date. The portion of this Note subject to redemption pursuant to this
Section 8 shall be redeemed by the Company in cash at a price equal to the
Conversion Amount being redeemed (the “Holder Additional Optional Redemption
Price”, and together with the Holder Initial Optional Redemption Price, the
“Holder Optional Redemption Price”). Redemptions required by this Section 8
shall be made in accordance with the provisions of Section 12. Notwithstanding
anything to the contrary in this Section 8, but subject to Section 3(d), until
the Holder receives the Holder Additional Optional Redemption Price, the Holder
Additional Optional Redemption Amount may be converted, in whole or in part, by
the Holder into Common Stock pursuant to Section 3, and any such conversion
shall reduce the Holder Additional Optional Redemption Amount.
               (b) Company Mandatory Redemption.
                    (i) If the Equity Conditions shall have been satisfied or
waived in writing by the Holder from and including the Mandatory Redemption
Notice Date (as defined below) through and including October 9, 2008 (such date
being the “Mandatory Redemption Date”), the Company shall have the right on the
Mandatory Redemption Date to redeem a portion of the Conversion Amount then
remaining under this Note, not to exceed the Maximum Redemption Amount, as
designated in the Mandatory Redemption Notice, as of the Mandatory Redemption
Date (a “Mandatory Redemption”). The portion of this Note subject to redemption
pursuant to this Section 8(b) shall be redeemed by the Company at a price equal
to the product of (x) 120% and (y) the Conversion Amount being redeemed (the
“Mandatory Redemption Price”) on the Mandatory Redemption Date. The Company may
exercise its right to require redemption under this Section 8(b) by delivering a
written notice thereof no later than September 9, 2008, by facsimile and
overnight courier to all, but not less than all, of the holders of Notes and the
Transfer Agent (the “Mandatory Redemption Notice” and the date all of the
holders received such notice is referred to as the “Mandatory Redemption Notice
Date”). The Company may deliver no more than one Mandatory Redemption Notice
hereunder and such Mandatory Redemption Notice shall be irrevocable. The
Mandatory Redemption Notice shall state the aggregate Conversion Amount of the
Notes which the Company has elected to be subject to Mandatory Redemption from
all of the holders of the Notes pursuant to this Section 8(b) (and analogous
provisions under the Other Notes). All Conversion Amounts converted by the
Holder after the Mandatory Redemption Notice Date shall reduce the Conversion
Amount of this Convertible Note required to be redeemed on the Mandatory
Redemption Date. Redemptions made pursuant to this Section 8(b) shall be made in
accordance with Section 12.

 

--------------------------------------------------------------------------------

 

                    (ii) Pro Rata Redemption Requirement. If the Company elects
to cause a Mandatory Redemption of this Note pursuant to Section 8(b), then it
must simultaneously take the same action in the same proportion with respect to
the Other Notes.
          (9) SECURITY. This Note and the Other Notes are secured to the extent
and in the manner set forth in the Security Documents (as defined in the
Securities Purchase Agreement).
          (10) NONCIRCUMVENTION. The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, 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
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.
          (11) RESERVATION OF AUTHORIZED SHARES.
               (a) Reservation. The Company shall initially reserve out of its
authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 130% of the Conversion Rate with respect to the Conversion
Amount of each such Note as of the Issuance Date. So long as any of the Notes
are outstanding, the Company shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Notes, 130% of the number of shares
of Common Stock as shall from time to time be necessary to effect the conversion
of all of the Notes then outstanding; provided that at no time shall the number
of shares of Common Stock so reserved be less than the number of shares required
to be reserved by the previous sentence (without regard to any limitations on
conversions) (the “Required Reserve Amount”). The initial number of shares of
Common Stock reserved for conversions of the Notes and each increase in the
number of shares so reserved shall be allocated pro rata among the holders of
the Notes based on the principal amount of the Notes held by each holder at the
Closing (as defined in the Securities Purchase Agreement) or increase in the
number of reserved shares, as the case may be (the “Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer any of
such holder’s Notes, each transferee shall be allocated a pro rata portion of
such holder’s Authorized Share Allocation. Any shares of Common Stock reserved
and allocated to any Person which ceases to hold any Notes shall be allocated to
the remaining holders of Notes, pro rata based on the principal amount of the
Notes then held by such holders.
               (b) Insufficient Authorized Shares. If at any time while any of
the Notes remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon conversion of the Notes at least a number of shares of
Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to
increase the Company’s authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for the Notes then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable

 

--------------------------------------------------------------------------------

 

after the date of the occurrence of an Authorized Share Failure, but in no event
later than sixty (60) days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its stockholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each stockholder with a proxy
statement and shall use its best efforts to solicit its stockholders’ approval
of such increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such proposal.
          (12) HOLDER’S REDEMPTIONS.
               (a) Mechanics. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Business Days after the
Company’s receipt of the Holder’s Event of Default Redemption Notice. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(b), the Company shall deliver the applicable Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change
of Control if such notice is received prior to the consummation of such Change
of Control and within five (5) Business Days after the Company’s receipt of such
notice otherwise. The Company shall deliver the Holder Initial Optional
Redemption Price on the Holder Initial Optional Redemption Date. The Company
shall deliver the Holder Additional Optional Redemption Price on the Holder
Additional Optional Redemption Date. The Company shall deliver the Mandatory
Redemption Price on the Mandatory Redemption Date. In the event of a redemption
of less than all of the Conversion Amount of this Note, the Company shall
promptly cause to be issued and delivered to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal which has
not been redeemed. In the event that the Company does not pay the applicable
Redemption Price to the Holder within the time period required, at any time
thereafter and until the Company pays such unpaid Redemption Price in full, the
Holder shall have the option, in lieu of redemption, to require the Company to
promptly return to the Holder all or any portion of this Note representing the
Conversion Amount that was submitted for redemption and for which the applicable
Redemption Price (together with any Late Charges thereon) has not been paid.
Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be
null and void with respect to such Conversion Amount, (y) the Company shall
immediately return this Note, or issue a new Note (in accordance with
Section 18(d)) to the Holder representing such Conversion Amount and (z) the
Conversion Price of this Note or such new Notes shall be adjusted to the lesser
of (A) the Conversion Price as in effect on the date on which the Redemption
Notice is voided and (B) the lowest Closing Bid Price of the Common Stock during
the period beginning on and including the date on which the Redemption Notice is
delivered to the Company and ending on and including the date on which the
Redemption Notice is voided. The Holder’s delivery of a notice voiding a
Redemption Notice and exercise of its rights following such notice shall not
affect the Company’s obligations to make any payments of Late Charges which have
accrued prior to the date of such notice with respect to the Conversion Amount
subject to such notice.
               (b) Redemption by Other Holders. Upon the Company’s receipt of
notice from any of the holders of the Other Notes for redemption or repayment as
a result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b), Section 5(b) or Section 8 (each, an
“Other Redemption Notice”), the Company shall immediately, but no later than one
(1) Business Day of its receipt thereof, forward to the Holder

 

--------------------------------------------------------------------------------

 

by facsimile a copy of such notice. If the Company receives a Redemption Notice
and one or more Other Redemption Notices, during the seven (7) Business Day
period beginning on and including the date which is three (3) Business Days
prior to the Company’s receipt of the Holder’s Redemption Notice and ending on
and including the date which is three (3) Business Days after the Company’s
receipt of the Holder’s Redemption Notice and the Company is unable to redeem
all principal, interest and other amounts designated in such Redemption Notice
and such Other Redemption Notices received during such seven (7) Business Day
period, then the Company shall redeem a pro rata amount from each holder of the
Notes (including the Holder) based on the principal amount of the Notes
submitted for redemption pursuant to such Redemption Notice and such Other
Redemption Notices received by the Company during such seven Business Day
period.
          (13) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including, but not limited to,
the General Corporation Law of the State of Delaware and as expressly provided
in this Note.
          (14) COVENANTS.
               (a) Rank. All payments due under this Note (A) shall rank pari
passu with all Other Notes and (B) shall be senior to all other Indebtedness of
the Company and its Subsidiaries, other than Permitted Indebtedness secured by
Permitted Liens.
               (b) Incurrence of Indebtedness. So long as this Note is
outstanding, the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to
exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note
and the Other Notes and (ii) other Permitted Indebtedness.
               (c) Existence of Liens. So long as this Note is outstanding, the
Company shall not, and the Company shall not permit any of its Subsidiaries to,
directly or indirectly, allow or suffer to exist any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its
Subsidiaries (collectively, “Liens”) other than Permitted Liens. Within twenty
(20) days after the Issuance Date (the “Existing Lien Release Date”), the
Company shall have effected the release of the Liens set forth on Schedule 3(ll)
to the Securities Purchase Agreement (the “Existing Liens”) and shall have taken
such other actions to evidence such release as reasonably requested by the
Holder, including, without limitation the filing of UCC-3 financing statements
with the Secretary of State of Delaware.
               (d) Restricted Payments. The Company shall not, and the Company
shall not permit any of its Subsidiaries to, directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of
cash or cash equivalents (in whole or in part, whether by way of open market
purchases, tender offers, private transactions or otherwise), all or any portion
of any Permitted Indebtedness (other than this Note and the Other Notes),
whether by way of payment in respect of principal of (or premium, if any) or
interest on such Indebtedness, if at the time such payment is due or is
otherwise made or, after giving effect to such payment, an event constituting,
or that with the passage of time and without being cured would constitute, an
Event of Default has occurred and is continuing; provided that

 

--------------------------------------------------------------------------------

 

notwithstanding the foregoing, no principal (or any portion thereof) of any
Subordinated Indebtedness may be paid (whether upon maturity, redemption,
acceleration or otherwise) so long as this Note is outstanding.
               (e) Restriction on Redemption and Cash Dividends. Until all of
the Notes have been converted, redeemed or otherwise satisfied in accordance
with their terms, the Company shall not, directly or indirectly, redeem,
repurchase or declare or pay any cash dividend or distribution on its capital
stock without the prior express written consent of the Required Holders.
               (f) (i) Announcement of Operating Results. Commencing with the
Fiscal Quarter ending December 31, 2006, the Company shall publicly disclose and
disseminate its operating results (the “Operating Results”) (x) for each of the
first three Fiscal Quarters of each fiscal year no later than the forty-fifth
(45th) day after the end of such Fiscal Quarter and (y) for the fourth Fiscal
Quarter of each fiscal year, no later than the ninetieth (90th) day after the
end of such Fiscal Quarter. Such Operating Results shall include the amount of
the Consolidated EBITDA and Consolidated Revenues for the preceding Fiscal
Quarter, and whether the Company has (i) Consolidated Revenues equal to or
greater than the applicable Consolidated Revenue threshold set forth in the
first row of Table A of the Table of Financial Thresholds attached hereto as
Schedule I (the “Consolidated Revenue Financial Test”), and (ii) Consolidated
EBITDA equal to or greater than the applicable Consolidated EBITDA threshold set
forth in the second row of Table A of the Table of Financial Thresholds attached
hereto as Schedule I (the “Consolidated EBITDA Financial Test” and together with
the Consolidated Revenue Financial Test, the “Financial Tests”), concurrently
with each such release of Operating Results, the Company also shall provide to
the holders of Notes a written certification as to the amount of the
Consolidated EBITDA and Consolidated Revenues for the applicable Fiscal Quarter.
In addition, if the Company has failed to meet any Financial Test, the foregoing
written certification that the Company provides to the holders shall also state
each Financial Test that has not been met (the portion of such notice with
respect to the failure to meet a Financial Test, a “Financial Covenant Default
Notice”).
                    (ii) Concurrently with the delivery of the Financial
Covenant Failure Notice to the holders, the Company shall also make publicly
available (as part of a Quarterly Report on Form 10-Q or on a Current Report on
Form 8-K, or otherwise) the Operating Results and, if the Company has failed to
meet one or more of the Financial Tests, the fact that an Event of Default has
occurred under the Notes.
               (g) Creation of New Subsidiaries. So long as the obligations of
the Company under this Note are outstanding, if the Company shall create or
acquire any Subsidiary, simultaneous with the creation or acquisition of such
Subsidiary, the Company shall (i) promptly cause such Subsidiary to become a
guarantor by executing a guaranty in favor of the Holder in form and substance
reasonably acceptable to the Company, the Subsidiary and the Holder,
(ii) promptly cause such Subsidiary to become a grantor under the Security
Agreement by executing a joinder to the Security Agreement in form and substance
reasonably acceptable to the Company, the Subsidiary and the Holder,
(iii) promptly cause such Subsidiary to become a pledgor by the Company and such
Subsidiary executing a pledge agreement in form and substance reasonably
acceptable to the Company, the Subsidiary and the Holder, and (iv)

 

--------------------------------------------------------------------------------

 

promptly cause such Subsidiary to duly execute and/or deliver such opinions of
counsel and other documents, in form and substance reasonable acceptable to the
Holder, as the Holder shall reasonably request with respect thereto. In the
event that at any time after the Issuance Date, Cash Systems of Canada, Inc.
commences transacting any business or owns any properties or assets in excess of
$5,000, the Company shall promptly cause Cash Systems of Canada, Inc. to comply
with the foregoing sentence.
               (h) Post-Closing Collateral Matters. Execute and deliver the
documents and complete the tasks set forth on Schedule 14(h), in each case
within the time limits specified on such schedule.
          (15) PARTICIPATION. The Holder, as the holder of this Note, shall be
entitled to receive such dividends paid and distributions made to the holders of
Common Stock to the same extent as if the Holder had converted this Note into
Common Stock (without regard to any limitations on conversion herein or
elsewhere) and had held such shares of Common Stock on the record date for such
dividends and distributions. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.
          (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative
vote at a meeting duly called for such purpose or the written consent without a
meeting of the Required Holders shall be required for any change or amendment to
this Note or the Other Notes. No consideration shall be offered or paid to any
holder of Notes to amend or consent to a waiver or modification of the Notes
unless the same consideration also is offered to all of the holders of Notes.
          (17) TRANSFER. This Note may be offered, sold, assigned or transferred
by the Holder without the consent of the Company, subject only to the provisions
of Section 2(f) of the Securities Purchase Agreement.
          (18) REISSUANCE OF THIS NOTE.
               (a) Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with
Section 18(d)), registered as the Holder may request, representing the
outstanding Principal being transferred by the Holder and, if less then the
entire outstanding Principal is being transferred, a new Note (in accordance
with Section 18(d)) to the Holder representing the outstanding Principal not
being transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.
               (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and

 

--------------------------------------------------------------------------------

 

cancellation of this Note, the Company shall execute and deliver to the Holder a
new Note (in accordance with Section 18(d)) representing the outstanding
Principal.
               (c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 18(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
               (d) Issuance of New Notes. Whenever the Company is required to
issue a new Note pursuant to the terms of this Note, such new Note (i) shall be
of like tenor with this Note, (ii) shall represent, as indicated on the face of
such new Note, the Principal remaining outstanding (or in the case of a new Note
being issued pursuant to Section 18(a) or Section 18(c), the Principal
designated by the Holder which, when added to the principal represented by the
other new Notes issued in connection with such issuance, does not exceed the
Principal remaining outstanding under this Note immediately prior to such
issuance of new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent
accrued and unpaid Interest and Late Charges on the Principal and Interest of
this Note, if any, from the Issuance Date.
          (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
          (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this
Note is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors’ rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, financial advisory fees and attorneys’ fees and
disbursements.

 

--------------------------------------------------------------------------------

 

          (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Note.
          (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
          (23) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Closing Bid Price, the Closing Sale Price or the Weighted
Average Price or the arithmetic calculation of the Conversion Rate or any
Redemption Price, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within one (1) Business Day of receipt, or
deemed receipt, of the Conversion Notice or Redemption Notice or other event
giving rise to such dispute, as the case may be, to the Holder. If the Holder
and the Company are unable to agree upon such determination or calculation
within one (1) Business Day of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall, within one
Business Day submit via facsimile (a) the disputed determination of the Closing
Bid Price, the Closing Sale Price or the Weighted Average Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or
any Redemption Price to the Company’s independent, outside accountant. The
Company, at the Company’s expense, shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than five
(5) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
     (24) NOTICES; PAYMENTS.
               (a) Notices. Whenever notice is required to be given under this
Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 9(f) of the Securities Purchase Agreement. The Company shall
provide the Holder with prompt written notice of all actions taken pursuant to
this Note, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of
the Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least twenty (20) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock or (C) for determining rights
to vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder.
               (b) Payments. Whenever any payment of cash is to be made by the
Company to any Person pursuant to this Note, such payment shall be made in
lawful money of

 

--------------------------------------------------------------------------------

 

the United States of America by a check drawn on the account of the Company and
sent via overnight courier service to such Person at such address as previously
provided to the Company in writing (which address, in the case of each of the
Purchasers, shall initially be as set forth on the Schedule of Buyers attached
to the Securities Purchase Agreement); provided that the Holder may elect to
receive a payment of cash via wire transfer of immediately available funds by
providing the Company with prior written notice setting out such request and the
Holder’s wire transfer instructions. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a Business Day, the same
shall instead be due on the next succeeding day which is a Business Day and, in
the case of any Interest Date which is not the date on which this Note is paid
in full, the extension of the due date thereof shall not be taken into account
for purposes of determining the amount of Interest due on such date. Any amount
of Principal or other amounts due under the Transaction Documents which is not
paid when due shall result in a late charge being incurred and payable by the
Company in an amount equal to interest on such amount at the rate of fifteen
percent (15%) per annum from the date such amount was due until the same is paid
in full (“Late Charge”).
          (25) CANCELLATION. After all Principal, accrued Interest and other
amounts at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
          (26) WAIVER OF NOTICE. To the extent permitted by law, the Company
hereby waives demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Securities Purchase Agreement.
          (27) GOVERNING LAW; JURISDICTION; SEVERABILITY; JURY TRIAL. This Note
shall be construed and enforced in accordance with, and all questions concerning
the construction, validity, interpretation and performance of this Note shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to the Holder, to realize
on any collateral or any other security for such obligations, or to enforce a
judgment or other court ruling in favor of the Holder. THE

 

--------------------------------------------------------------------------------

 

COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.
          (28) CERTAIN DEFINITIONS. For purposes of this Note, the following
terms shall have the following meanings:
               (a) “Approved Stock Plan” means any employee benefit plan which
has been or hereafter is approved by the Board of Directors of the Company,
pursuant to which the Company’s securities may be issued to any employee,
officer or director for services provided to the Company.
               (b) “Bloomberg” means Bloomberg Financial Markets.
               (c) “Business Day” means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
               (d) “Change of Control” means any Fundamental Transaction other
than (A) any reorganization, recapitalization or reclassification of Common
Stock, in which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.
               (e) “Change of Control Premium” means, (i) until the third
anniversary of the Issuance Date, 120%, (ii) commencing on the third anniversary
of the Issuance Date until the fourth anniversary of the Issuance Date, 115%,
and (iii) commencing on the fourth anniversary of the Issuance Date, 110%.
               (f) “Closing Bid Price” and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any

 

--------------------------------------------------------------------------------

 

market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or
the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price,
as the case may be, of such security on such date shall be the fair market value
as mutually determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 23. All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
               (g) “Closing Date” shall have the meaning set forth in the
Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.
               (h) “Common Stock Deemed Outstanding” means, at any given time,
the number of shares of Common Stock outstanding at such time, plus the number
of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i)
and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities
are actually exercisable at such time, but excluding any Common Stock owned or
held by or for the account of the Company or issuable upon conversion or
exercise, as applicable, of the Notes and the Warrants.
               (i) “Consolidated EBITDA” means, for any period, Consolidated Net
Income for such period (without giving effect to any extraordinary gains or
losses) adjusted by adding thereto (in each case to the extent deducted in
determining Consolidated Net Income for such period), without duplication, the
amount of (i) total interest expense (subtracting therefrom any interest income)
(inclusive of amortization of deferred financing fees and other original issue
discount and banking fees and charges (e.g., letter of credit fees and
commitment fees) including those arising from any beneficial conversion feature
of the Notes) of the Company and its Subsidiaries determined on a consolidated
basis for such period, (ii) provision for taxes based on income and foreign
withholding taxes for the Company and its Subsidiaries determined on a
consolidated basis for such period, (iii) all depreciation and amortization
expense of the Company and its Subsidiaries determined on a consolidated basis
for such period, (iv) all non-cash stock compensation expenses of the Company
(i.e., expenses paid through the issuance of equity interests of Company, or
options therefor, rather than in cash) incurred during such period (except to
the extent any such expense will require a cash payment in a future period) and
(v) provision for non-recurring expenses in an aggregate amount not exceeding
$2,000,000 for the period commencing on the Issuance Date and continuing so long
as any Notes remain outstanding.
               (j) “Consolidated Net Income” means, for any period, the net
income (or loss) of the Company and its Subsidiaries for such period, determined
on a consolidated basis (after any deduction for minority interests); provided,
however, that to the extent any portion of the commodity inventory of the
Company and its Subsidiaries is valued pursuant to GAAP at the end of any period
at the lower of cost or market value, then the net income for such period will
be increased by the amount of any unrealized gains which the Company or any of
its Subsidiaries would have recognized if such commodity inventory had been
valued at market value in accordance with GAAP.

 

--------------------------------------------------------------------------------

 

               (k) “Consolidated Revenues” means, for any period, the total
consolidated revenues of the Company and its Subsidiaries for such period, as
determined in accordance with GAAP consistent with past practices.
               (l) Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
               (m) “Convertible Securities” means any stock or securities (other
than Options) directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
               (n) “Dilutive Issuance Event” means the occurrence of any of the
following Dilutive Issuances: (i) to the extent the Holder Conversion Price
Adjustment Election has occurred, any Dilutive Issuance with a consideration
paid per share of Common Stock (as determined pursuant to Section 7(a) hereof)
less than 100% of the Conversion Price on the Holder Conversion Price Adjustment
Notice Date (as adjusted for any stock splits, stock dividends,
recapitalizations, combinations, reverse stock splits or other similar events
during such period), or (ii) otherwise, any Dilutive Issuance with a
consideration paid per share of Common Stock (as determined pursuant to Section
7(a) hereof) less than 80% of the Conversion Price on the Replacement Date (as
adjusted for any stock splits, stock dividends, recapitalizations, combinations,
reverse stock splits or other similar events during such period).
               (o) “Eligible Market” means the Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange, The Nasdaq Global Select
Market or The Nasdaq Capital Market.
               (p) “Equity Conditions” means each of the following conditions:
(i) on each day during the period beginning three (3) months prior to the
applicable date of determination and ending on and including the applicable date
of determination (the “Equity Conditions Measuring Period”), all shares of
Common Stock issuable upon conversion of the Notes and exercise of the Warrants
shall be eligible for sale without restriction and without the need for
registration under any applicable federal or state securities laws; (ii) during
the Equity Conditions Measuring Period the Common Stock is designated for
quotation on the Principal Market or any other Eligible Market and shall not
have been suspended from trading on such exchange or market (other than
suspensions of not more than two (2) days and occurring prior to the applicable
date of determination due to business announcements by the Company) nor shall
delisting or suspension by such exchange or market been threatened or pending
either (A) in writing by such exchange or market or (B) by falling below the
then effective minimum listing maintenance requirements of such exchange or
market; (iii) during the Equity Conditions Measuring Period, the Company shall
have delivered Conversion Shares upon conversion of the Notes and Warrant Shares
upon exercise of the Warrants to the holders on a timely basis as set forth in
Section 2(c)(ii) hereof (and analogous provisions under the Other Notes) and
Sections

 

--------------------------------------------------------------------------------

 

2(a) of the Warrants; (iv) any applicable shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating Section 3(d) hereof and the rules or regulations of the Principal
Market or any other applicable Eligible Market; (v) during the six (6) month
period ending on and including the date immediately preceding the applicable
date of determination, the Company shall not have failed to timely make any
payments within five (5) Business Days of when such payment is due pursuant to
any Transaction Document; (vi) during the Equity Conditions Measuring Period,
there shall not have occurred either (A) the public announcement of a pending,
proposed or intended Fundamental Transaction which has not been abandoned,
terminated or consummated, or (B) an Event of Default or (C) an event that with
the passage of time or giving of notice would constitute an Event of Default;
(vii) the Company shall have no knowledge of any fact that would cause any
shares of Common Stock issuable upon conversion of the Notes and shares of
Common Stock issuable upon exercise of the Warrants not to be eligible for sale
without the requirement to be in compliance with Rule 144(c)(1) and otherwise
without restriction or limitation pursuant to Rule 144 and any applicable state
securities laws; and (viii) the Company otherwise shall have been in material
compliance with and shall not have materially breached any provision, covenant,
representation or warranty of any Transaction Document.
               (q) “Equity Conditions Failure” means that on any day during the
period commencing ten (10) Trading Days prior to the applicable Mandatory
Conversion Notice Date through the applicable Mandatory Conversion Date, the
Equity Conditions have not been satisfied (or waived in writing by the Holder).
               (r) “Excluded Securities” means any Common Stock issued or
issuable: (i) (x) in connection with any Approved Stock Plan to the extent such
Common Stock would not result in a Dilutive Issuance or (y) in connection with
any Approved Stock Plan, which Common Stock would result in a Dilutive Issuance,
provided, that such Common Stock does not exceed 300,000 shares of Common Stock
in the aggregate during the immediately preceding twelve (12) month period;
(ii) upon conversion of the Notes or the exercise of the Warrants;
(iii) pursuant to a bona fide firm commitment underwritten public offering with
a nationally recognized underwriter which generates gross proceeds to the
Company in excess of $20,000,000 (other than an “at-the-market offering” as
defined in Rule 415(a)(4) under the 1933 Act and “equity lines”); (iv) upon
conversion of any Options or Convertible Securities which are outstanding on the
day immediately preceding the Subscription Date, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Subscription Date; and (v) in connection with mergers, acquisitions,
strategic business partnerships or joint ventures, in each case with
non-affiliated third parties and otherwise on an arm’s-length basis, the primary
purpose of which, in the reasonable judgment of the Company’s Board of
Directors, is not to raise additional capital.
               (s) “Fiscal Quarter” means each of the fiscal quarters adopted by
the Company for financial reporting purposes that correspond to the Company’s
fiscal year as of the date hereof that ends on December 31.
               (t) “Fundamental Transaction” means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person or Persons, if the

 

--------------------------------------------------------------------------------

 

holders of the Voting Stock (not including any shares of Voting Stock held by
the Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such consolidation or merger) immediately prior to
such consolidation or merger shall hold or have the right to direct the voting
of less than 50% of the Voting Stock or such voting securities of such other
surviving Person immediately following such transaction, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Voting Stock (not including any shares of Voting Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock or (vi) any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.
               (u) “GAAP” means United States generally accepted accounting
principles, consistently applied.
               (v) “Indebtedness” of any Person means, without duplication
(i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken
or assumed as the deferred purchase price of property or services, including
(without limitation) “capital leases” in accordance with generally accepted
accounting principles (other than trade payables entered into in the ordinary
course of business), (iii) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (iv) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (v) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (vi) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (vii) all indebtedness referred to in clauses
(i) through (vi) above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (viii) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.

 

--------------------------------------------------------------------------------

 

               (w) “Maximum Redemption Amount” means such portion this Note
equal to the product of (i) $12.1 million and (ii) the quotient of (x) the
Principal of this Note outstanding immediately following the Replacement Date
and (y) the principal amount of all the Notes outstanding immediately following
the Replacement Date.
               (x) “Options” means any rights, warrants or options to subscribe
for or purchase shares of Common Stock or Convertible Securities.
               (y) “Parent Entity” of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
               (z) “Permitted Indebtedness” means (i) Indebtedness incurred by
the Company that is made expressly subordinate in right of payment to the
Indebtedness evidenced by this Note, as reflected in a written agreement
acceptable to the Holder and approved by the Holder in writing, and which
Indebtedness does not provide at any time for (1) the payment, prepayment,
repayment, repurchase or defeasance, directly or indirectly, of any principal or
premium, if any, thereon until ninety-one (91) days after the Maturity Date or
later and (2) total interest and fees at a rate in excess of six and one-half
percent (6.50%) per annum (such Indebtedness, the “Subordinated Indebtedness”);
provided, however, that any Subordinated Indebtedness incurred in connection
with the repayment of the Notes shall not be limited by clause (2) of the
foregoing, (ii) Indebtedness secured by Permitted Liens (other than the Existing
Liens), (iii) Indebtedness under this Note and the Other Notes, and
(iv) extensions, refinancings and renewals of any items in clauses (i) through
(ii) above, provided that the principal amount is not increased or the terms
modified to impose more burdensome terms upon the Company or its Subsidiaries,
as the case may be.
               (aa) “Permitted Liens” means (i) any Lien for taxes not yet due
or delinquent or being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen’s liens, mechanics’ liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment
(as defined in the Security Agreement) acquired or held by the Company or any of
its Subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such
equipment, or (B) existing on such equipment at the time of its acquisition,
provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment, (v) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (i) and (iv) above, provided
that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed or refinanced does not increase, (vi) Liens securing the
Company’s obligations under the Notes; (vii) leases or subleases and licenses
and sublicenses granted to others in the ordinary

 

--------------------------------------------------------------------------------

 

course of the Company’s business, not interfering in any material respect with
the business of the Company and its Subsidiaries taken as a whole, (viii) Liens
in favor of customs and revenue authorities arising as a matter of law to secure
payments of custom duties in connection with the importation of goods,
(ix) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 4(a)(vii), (x) Liens created in
favor of certain financial institutions to secure the Company’s obligations
under its automated teller machine cash agreements, (xi) Liens created in favor
of credit card processors on accounts designated under the Company’s credit
processing arrangements, and (xii) prior to the Existing Lien Release Date, the
Existing Liens.
                (bb) “Person” means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
               (cc) “Principal Market” means The Nasdaq Global Market.
               (dd) “Redemption Notices” means, collectively, the Event of
Default Redemption Notices, the Change of Control Redemption Notices, the
Mandatory Redemption Notice, the Holder Initial Redemption Notice and the Holder
Additional Redemption Notice, each of the foregoing, individually, a Redemption
Notice.
               (ee) “Redemption Premium” means (i) in the case of the Events of
Default described in Section 4(a)(i) — (v) and (viii) — (xi), 120% or (ii) in
the case of the Events of Default described in Section 4(a)(vi) — (vii), 100%.
               (ff) “Redemption Prices” means, collectively, the Event of
Default Redemption Price, Change of Control Redemption Price, the Mandatory
Redemption Price, the Holder Initial Optional Redemption Price and the Holder
Additional Optional Redemption Price, each of the foregoing, individually, a
Redemption Price.
               (gg) “Required Holders” means the holders of Notes representing
at least two-thirds (2/3rd) of the aggregate principal amount of the Notes then
outstanding.
               (hh) “SEC” means the United States Securities and Exchange
Commission.
               (ii) “Securities Purchase Agreement” means that certain
securities purchase agreement dated as of the Subscription Date by and among the
Company and the initial holders of the Notes pursuant to which the Company
issued the Notes, as amended from time to time in accordance with its terms,
including, without limitation, pursuant to the Amendment and Exchange
Agreements.
               (jj) “Subscription Date” means October 6, 2006.
               (kk) “Subsidiary” means any entity in which the Company, directly
or indirectly, owns any of the capital stock or holds an equity or similar
interest. For purposes of this Note, the joint venture entered into between the
Company, Bally Gaming, Inc. and Scotch Twist, Inc. shall not be considered a
Subsidiary.

 

--------------------------------------------------------------------------------

 

               (ll) “Successor Entity” means the Person, which may be the
Company, formed by, resulting from or surviving any Fundamental Transaction or
the Person with which such Fundamental Transaction shall have been made,
provided that if such Person is not a publicly traded entity whose common stock
or equivalent equity security is quoted or listed for trading on an Eligible
Market, Successor Entity shall mean such Person’s Parent Entity.
               (mm) “Trading Day” means any day on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading market for the Common Stock, then on the principal securities exchange
or securities market on which the Common Stock is then traded; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).
               (nn) “Voting Stock” of a Person means capital stock of such
Person of the class or classes pursuant to which the holders thereof have the
general voting power to elect, or the general power to appoint, at least a
majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
               (oo) “Warrants” has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.
               (pp) “Weighted Average Price” means, for any security as of any
date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg through its “Volume at Price” functions, or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as such market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
market publicly announces is the official close of trading) as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Weighted Average Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Weighted Average Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 23. All such
determinations to be appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the applicable calculation
period.

 

--------------------------------------------------------------------------------

 

               (29) DISCLOSURE. Upon receipt or delivery by the Company of any
notice in accordance with the terms of this Note, unless the Company has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its Subsidiaries, the
Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, nonpublic information on a Current Report on
Form 8-K or otherwise. In the event that the Company believes that a notice
contains material, nonpublic information, relating to the Company or its
Subsidiaries, the Company shall indicate to the Holder contemporaneously with
delivery of such notice, and in the absence of any such indication, the Holder
shall be allowed to presume that all matters relating to such notice do not
constitute material, nonpublic information relating to the Company or its
Subsidiaries.
[Signature Page Follows]

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as
of the Issuance Date set out above.

            CASH SYSTEMS, INC.
      By:           Name:           Title:        

 

--------------------------------------------------------------------------------

 

EXHIBIT I
CASH SYSTEMS, INC.
CONVERSION NOTICE
Reference is made to the Second Amended and Restated Senior Secured Convertible
Note (the “Note”) issued to the undersigned by Cash Systems, Inc. (the
“Company”). In accordance with and pursuant to the Note, the undersigned hereby
elects to convert the Conversion Amount (as defined in the Note) of the Note
indicated below into shares of Common Stock par value $0.001 per share (the
“Common Stock”) of the Company, as of the date specified below.

                      Date of Conversion:

 
                    Aggregate Conversion Amount to be converted:

 
                Please confirm the following information:
 
                    Conversion Price:

 
                    Number of shares of Common Stock to be issued:

 
                Please issue the Common Stock into which the Note is being
converted in the following name and to the following address:
 
                    Issue to:

   

   

   

   

 
                    Facsimile Number:  

 
                    Authorization:

 
               
 
      By:    
 
               
 
          Title:    
 
               
Dated:
   
 
                    Account Number:

         (if electronic book entry transfer)
 
                    Transaction Code Number:

         (if electronic book entry transfer)

 

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENT
          The Company hereby acknowledges this Conversion Notice and hereby
directs Computershare Trust Company, N.A. to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
March 14, 2008 from the Company and acknowledged and agreed to by Computershare
Trust Company, N.A.

            CASH SYSTEMS, INC.
      By:           Name:           Title:        

 

--------------------------------------------------------------------------------

 

Schedule I
Table of Financial Thresholds
Table A Financial Tests

                  Fiscal   Fiscal         Quarter   Quarter   Each     ending  
ending   Fiscal     March 31,   June 30,   Quarter     2009   June 30, 2009  
Thereafter
Consolidated Revenue
  $22.0 million   $22.0 million   $22.0 million
Consolidated EBITDA
  $0.25 million   $0.5 million   $1.00 million

 

--------------------------------------------------------------------------------

 

Schedule 14(h)
          1. No later than November 7, 2006, the Company shall have caused to be
filed the UCC-3 termination statements necessary to terminate the following
UCC-1 financing statements existing as of the date hereof and deliver to the
Collateral Agent the acknowledgement filings of such UCC termination statements:

                      Jurisdiction   Initial Debtor   Secured Party   of Filing
  Filing Number
Cash Systems, Inc.
  VIRTUALFUND.COM, INC.   DE   11805790  
Cash Systems, Inc.
  VIRTUALFUND.COM, INC.   MN   20012247115
Cash Systems, Inc.
  Diebold Incorporated   MN   20012257839

          2. No later than October 12, 2006, the Company shall have caused to be
filed the UCC-3 termination statements necessary to terminate the following
UCC-1 financing statements existing as of the date hereof and deliver to the
Collateral Agent the acknowledgement filings of such UCC termination statements:

                      Jurisdiction   Initial Debtor   Secured Party   of Filing
  Filing Number
Cash Systems, Inc.
  Fidelity Bank   DE   32063413
Cash Systems, Inc.
  Fidelity Bank   MN   2110443
Cash Systems, Inc.
  Fidelity Bank   MN   2173634
Cash Systems, Inc.
  Fidelity Bank   MN   2236807

          3. (a) If at any time after November 7, 2006, the average daily
balance of any account of the Company that is not subject to an account control
agreement in favor of the Collateral Agent exceeds $250,000 during any calendar
month (including the calendar month in which the Closing Date occurs), the
Company shall, within twenty (20) Business Days following the last day of such
calendar month, deliver to the Collateral Agent an account control agreement, in
form and substance reasonably satisfactory to the Collateral Agent, duly
executed by the Company and the depositary bank in which such account is
maintained.
               (b) Notwithstanding anything to the contrary contained in clause
(a) above, and without limiting any of the foregoing, if at any time on or after
November 7, 2006, the total aggregate amount of the Company’s cash that is not
subject to a control agreement in favor of the Collateral Agent exceeds
$1,000,000 (the “Maximum Free Cash Amount”), the Company shall within two (2)
Business Days following such date, transfer to an account subject

 

--------------------------------------------------------------------------------

 

to an account agreement in favor of the Collateral Agent an amount sufficient to
reduce the total aggregate amount of the Company’s cash that is not subject to
an account control agreement in favor of the Collateral Agent to an amount not
in excess of the Maximum Free Cash Amount.