Document:

exv10w1

 

Exhibit 10.1

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (the “Agreement”), dated as of September 21, 2005 (the
“Effective Date”), is entered into among ACE CASH EXPRESS, INC., a Texas corporation
(“Purchaser”), POPULAR CASH EXPRESS, INC., a Delaware corporation (“PCE”), POPULAR
CASH EXPRESS — CALIFORNIA, INC., a California corporation (“PCEC”; PCE and PCEC are
collectively referred to herein as “Seller”), and POPULAR NORTH AMERICA, INC., a Delaware
corporation (“Shareholder”). Purchaser, Seller and Shareholder are collectively referred
to herein as the “Parties.”

     WHEREAS, Seller desires to sell, and Purchaser desires to purchase, substantially all of the
assets of Seller used or useful in or relating to the check-cashing and related business operations
conducted by Seller at the locations (the “Locations”) set forth on Schedule 1 (the
check-cashing and related business operations conducted by Seller at such Locations being referred
to herein as the “Business”), in accordance with this Agreement;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein, and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

ARTICLE 1.

PLAN OF ACQUISITION

     1.1. Acquisition of Assets.

          (a) Upon the terms and conditions stated in this Agreement, Seller hereby agrees to sell, and
Purchaser hereby agrees to acquire, all of the assets, business, properties, goodwill, and rights
of Seller of every kind and character, whether real or personal, tangible or intangible, owned or
leased, of or relating to the Business, free and clear of all Liens (as defined in Section
2.8(b)) other than Permitted Liens (as defined in Section 2.8(c)), excluding only the
Excluded Assets (as defined in Section 1.1(b)). The items being sold and purchased are
collectively referred to herein as the “Assets.” Without limiting the foregoing, the
Assets include:

     (i) All of the properties and assets described on Exhibit A attached
hereto and made a part hereof;

     (ii) All rights in any data processing systems and equipment used or useful in
the Business, including computer software, databases and related documentation
(excluding therefrom the Prime Solutions software and computer hardware (other than
computer monitors)) and all of Seller’s operational manuals (excluding therefrom,
however, manuals and operating procedures relating to Seller’s compliance with
applicable laws, orders and regulations);

     (iii) All client, customer and supplier lists related to the Business;

 

 

     (iv) All rights of Seller in and to the use of all telephone and facsimile
numbers used in or for the Business and related goodwill, including, without
limitation, the benefit of the existing telephone listings and advertising;

     (v) All furniture, fixtures and leasehold improvements used or useful in the
Business, including mailboxes;

     (vi) All rights of Seller under the contracts set forth on Exhibit B
attached hereto and made a part hereof (collectively, the “Assumed
Contracts”), including, without limitation, the Real Property Leases (as defined
in Section 2.26) and all security deposits relating to the Real Property
Leases, all personal property leases relating to the business (the “Personal
Property Leases”) and all security deposits with respect to the Personal
Property Leases and the Subleases (as defined in Section 2.27) and all
security deposits with respect to the Subleases;

     (vii) All other intangible properties and assets of the Business (except for
the Intangibles (as defined below));

     (viii) All accrued, asserted or unasserted claims of Seller against third
parties relating to the continuing operation of the Business or the Assets, but
excluding the accounts receivable that are part of the Excluded Assets;

     (ix) All prepaid expenses and deposits of or for the Business;

     (x) Customer checks cashed before a Closing Date (as hereinafter defined) with
respect to a Location that are returned unpaid and that have not been transferred to
a third-party collector; and

     (xi) All files, books and records of all kinds and forms regarding the
foregoing (except for those books and records that are identified as Excluded
Assets).

          (b) The Assets sold and acquired hereunder shall not include any of the following
(collectively, the “Excluded Assets”):

     (i) Seller’s cash on hand and bank accounts and corresponding checks;

     (ii) Seller’s proceeds of all checks cashed by Seller before a Closing Date as
part of the Business;

     (iii) Seller’s inventory of money orders, lottery tickets, bus passes,
telephone cards, credit cards, and other items for sale (other than pagers and
paging equipment);

     (iv) Seller’s prepaid postage;

     (v) Seller’s minute books and other similar corporate records;

 

 

     (vi) Except for the Assumed Contracts, Seller’s contracts, agreements, and
leases, including, without limitation, contracts for armored transport services, for
alarm systems at the Locations, for vending and other equipment and for local Yellow
Pages or other telephone book advertising (though Purchaser shall be entitled to the
benefits of existing advertising thereunder), Seller’s agreements with any money
transfer company or its affiliates and Seller’s agreements with any money order
company or its affiliates (collectively, the “Non-Assumed Contracts”);

     (vii) Seller’s vending machines;

     (viii) Seller’s accounts receivable;

     (ix) All accrued, asserted or unasserted claims of Seller against third parties
unrelated to the continuing operation of the Business or the Assets;

     (x) Seller’s fee simple title and interest in and to the real property on which
Seller’s Store #19 at 700 N.W. 79th Street, Miami, Florida 33150 is
located (the “Excluded Florida Real Property”);

     (xi) Seller’s fee simple title and interest in and to the real property located
at and known as 8980 Scranton Avenue, Houston, Texas 77057;

     (xii) All of Seller’s registered and unregistered names (including all of
Seller’s rights to any names, including “Popular Cash Express”, whether used as part
of corporate names, trademarks, trade names or otherwise), trade names, brand names,
trademarks, trade styles, service marks, trade secrets, copyrights, corporate names,
fictitious names, logos, trade dress, web sites, domain names, computer programs and
other software, know how, methods and processes of Seller used in the conduct of the
Business, all other general intangible assets and intellectual property of Seller
and the Business (collectively, the “Intangibles”);

     (xiii) All computer hardware (excluding computer monitors) at the Locations;
provided, however, that Purchaser shall assemble all such computer hardware
after each Closing and shall deliver such computer hardware to a location(s)
designated by Seller. The cost of transporting such computer hardware shall be
borne by Seller provided Seller shall have reviewed and approved the cost estimate
obtained by Purchaser for such purpose; and

     (xiv) All hardware (including, without limitation, all routers) and software
relating to the voice over internet protocol (“VOIP”) systems utilized by
Seller at the Locations operated by Seller in the State of California.

          (c) As full consideration for the Assets and for the noncompetition and nonsolicitation
agreements of Seller and Shareholder set forth in this Agreement (the “Noncompetition
Agreements”), Purchaser shall pay Seller the following amounts (collectively, the “Purchase
Price”) at each Closing (as hereinafter defined) for a Location as follows. The aggregate
Purchase Price for the acquisition of all Locations shall be $36,000,000 of which

 

 

$13,500,000 of such amount shall be in the form of cash (the “Cash Amount”) and
$22,500,000 of such amount shall be in the form of Convertible Notes (as hereinafter defined) (the
“Convertible Note Amount”), subject in each case to adjustment as set forth below:

     (i) On the first Closing Date (the “First Closing Date”), for the
Acquired Locations acquired on such First Closing Date, an amount in cash up to a
maximum of $10,000,000 (subject to adjustment as set forth in Section
1.1(c)(iii) below) equal to the sum of the amounts attributable to such Acquired
Locations on the Phased Closing Schedule (as hereinafter defined), and if such
amounts exceed $10,000,000 (subject to adjustment as set forth in Section
1.1(c)(iii) below), then the balance to be paid in the form of the execution and
delivery by Purchaser to Seller of a promissory note (a “Convertible Note”)
with a face amount equal to such excess amount. Such Convertible Note will provide
for an interest rate, right to convert into common stock of Purchaser (the
“Common Stock”) and certain other terms and conditions more particularly
described on Exhibit C attached hereto and made a part hereof, subject to
any revisions requested by the Lenders under the ACE Credit Agreement (as
hereinafter defined);

     (ii) On each Closing Date occurring after the First Closing Date, for the
Locations acquired on such Closing Date (together with Locations acquired on the
First Closing Date, the “Acquired Locations”), an amount: (A) in cash equal
to the sum of the amounts attributable to such Acquired Locations on the Phased
Closing Schedule (provided that the aggregate amount of cash paid at the First
Closing Date and all subsequent Closing Dates shall not exceed $10,000,000 (subject
to adjustment as set forth in Section 1.1(c)(iii) below)), and (B) to the
extent that the cash paid in clause (A) is insufficient to pay the amount owed for
the Locations acquired on such Closing Date, a Convertible Note with a face amount
equal to such excess amount; and

     (iii) Notwithstanding anything to the contrary in this Section 1.1(c),
in the event that, at the First Closing Date, the Convertible Note Ownership
Percentage (as defined below) is equal to or greater than five percent (5%), then
the Cash Amount portion of the Purchase Price shall be increased, and the
Convertible Note Amount portion of the Purchase Price shall be decreased, on a
dollar for dollar basis, such that the Convertible Note Ownership Percentage at the
First Closing Date is less than five percent (5%). “Convertible Note Ownership
Percentage” means the (A) the number of shares (the “Issuable Shares”) of common
stock of Purchaser which Seller would have the right to acquire upon conversion of
Convertible Notes, assuming that $22,500,000 of Convertible Notes were issued at the
First Closing Date, divided by (B) (1) the number of outstanding shares of the
common stock of Purchaser at the First Closing Date, plus (2) the number of Issuable
Shares

     1.2. Liabilities Not Assumed. Except as provided in Section 1.3 below,
Purchaser does not assume, and shall not be responsible for, the payment, performance, or discharge
of any liabilities or obligations of Seller, whether now existing or hereafter arising. Without
limiting

 

 

the preceding sentence, Seller, and not Purchaser, shall be responsible for (i) any and all
liabilities, responsibilities, expenses and obligations relating to the Business or the Assets (or
any part thereof) at an Acquired Location incurred, accruing or arising before the Closing Date
with respect to each such Acquired Location, even if not asserted until on or after such Closing
Date, (ii) any and all liabilities, responsibilities and obligations relating to the Excluded
Assets, including the Non-Assumed Contracts and all liabilities and obligations thereunder, and
(iii) any and all accrued and unperformed liabilities, responsibilities, expenses and obligation
relating to the Assumed Contracts with respect to any Acquired Location that first accrued before
the Closing Date with respect to such Acquired Location.

     1.3. Purchaser’s Liabilities. Purchaser shall pay, perform and discharge, and Seller
shall not be responsible for, the following liabilities relating to the business conducted by
Purchaser at an Acquired Location on and after the Closing Date with respect to such Acquired
Location:

          (a) All United States federal and state income tax liabilities based on the income of
Purchaser as the result of Purchaser’s operations at such Acquired Locations on and after the
applicable Closing Date with respect to such Acquired Locations.

          (b) All trade payables for such Acquired Locations first arising or accruing on and after the
applicable Closing Date with respect to such Acquired Locations.

          (c) Liabilities and obligations under the Assumed Contracts (including, without limitation,
the Real Property Leases and the Personal Property Leases) for such Acquired Locations first
arising or accruing on and after the applicable Closing Date with respect to such Acquired
Locations.

          (d) All obligations for salary and benefits due to employees of Purchaser relating to such
Acquired Locations first arising or accruing on and after the applicable Closing Date with respect
to such Acquired Locations.

          (e) All other costs and expenses incurred in the operation of the Business at each Acquired
Location first arising or accruing on or after the applicable Closing Date with respect to such
Acquired Location except to the extent they are Seller’s or Shareholder’s responsibility,
obligation or liability under the terms of this Agreement or any of the Exhibits or Schedules
hereto as executed.

     1.4. Closing. The transfer of ownership of the Assets from Seller to Purchaser as
described in this Agreement with respect to an Acquired Location shall occur as of the date
(individually, a “Closing Date” and collectively, the “Closing Dates”) set forth
for such Acquired Location on Schedule 1.4 (the “Phased Closing Schedule”).
Closings to document and evidence the transactions in this Agreement (each, a “Closing” as
to an Acquired Location and collectively, the “Closings”) shall occur pursuant to the
Phased Closing Schedule (assuming the satisfaction of the conditions set forth in Article
6). Delivery of the documents at each Closing Date may be made by telecopy and (to some
extent) in person at one or more locations agreed upon by the Parties. The original or definitive
copies of documents delivered by telecopy shall

 

 

be sent by the delivering Party to the other Party or Parties by courier within three (3)
Business Days after each Closing Date.

     1.5. Phased Closing Schedule. The Parties shall consummate the Closings pursuant to
the Phased Closing Schedule on Schedule 1.4. Seller shall deliver possession of each
Acquired Location to be delivered to Purchaser pursuant to the Phased Closing Schedule at the
beginning of business on the Closing Date identified in the Phased Closing Schedule. Upon
completion of delivery by Seller of each Acquired Location, Purchaser shall (i) pay to Seller the
Closing Amount for such Acquired Locations and (ii) execute and deliver to Seller the Convertible
Note attributable to such Acquired Locations. Purchaser’s acquisition of the Business and Assets
with respect to the Acquired Locations on a Closing Date shall be effective as of the beginning of
business on such Closing Date. Seller shall be entitled to all revenues of the Acquired Locations
transferred on a Closing Date for the period through the day before such Closing Date and Purchaser
shall be entitled to all revenues of such Acquired Locations as of such Closing Date. Seller shall
be responsible for all costs and expenses of operations at the Acquired Locations transferred on a
Closing Date through the day before such Closing Date and Purchaser shall be responsible for all
costs and expenses of operations at such Acquired Locations as of such Closing Date. The Parties
acknowledge the possibility that, due to damage to or destruction of a Location or the failure to
satisfy any or all of the conditions set forth in Section 6.1, a Location contemplated by
this Agreement to be acquired by and delivered to Purchaser on a Closing Date may not be so
acquired and delivered on such Closing Date. To the extent that there is not a Closing for a
Location as a result of the foregoing, the Parties shall proceed with the Closing as to all other
Locations to be transferred on such Closing Date pursuant to the Phased Closing Schedule and
postpone the Closing with respect to the other Locations until such time as Purchaser determines in
its reasonable discretion that Seller has repaired or replaced such damaged or destroyed Locations
or the conditions set forth in Schedule 6.1 have been satisfied, as applicable (at which
time the Closing for such other Locations shall occur in accordance with this Agreement). If such
damaged or destroyed Locations have not been repaired or replaced or if the conditions set forth in
Schedule 6.1 with respect to a Closing have not been satisfied to the reasonable
satisfaction of Purchaser on or before ninety (90) days after the scheduled Closing Date for such
Locations, Purchaser may, at its option, notify Seller in writing that it elects to terminate the
Agreement with respect to such Location (each, a “Terminated Location” and collectively,
the “Terminated Locations”), in which event Purchaser shall not acquire such Terminated
Locations and the Purchaser Price shall be reduced by the value attributable to each such
Terminated Locations on Schedule 1.4. The parties acknowledge that the inability of
Seller to obtain a landlord’s consent to the assignment of a Real Property Lease on a certain
Closing Date shall not constitute a default hereunder, provided that the total number of Locations
affected by such inability does not exceed fifteen (15).

     1.6. Basic Prorations; Utilities; Taxes. As of each Closing Date for an Acquired
Location, the personal property and real estate taxes for such Acquired Locations, the base rent
for the current month under each Real Property Lease or the Excluded Florida Real Property Lease
for such Acquired Locations and water, gas, electricity and other utilities and common area
maintenance reimbursements to the landlords under each Real Property Lease and the Excluded Florida
Real Property Lease for such Acquired Locations, except (in any case) for any tax or expense
relating to an obligation not assumed by Purchaser for such Acquired Location, shall be prorated
between Purchaser and Seller. Personal property and real estate taxes for 2005

 

 

shall be prorated on the basis of actual amounts billed for such year or, if not so billed, on
the basis of 100% of actual taxes assessed or levied in 2004, adjusted to reflect changes in
assessments or rates of taxes known to be in effect for 2005. In addition, there shall be a
proration between Purchaser and Seller as of each Closing Date for an Acquired Location with
respect to charges under other Assumed Contracts for such Acquired Locations. The items prorated
in accordance with this Section 1.6 shall be prorated, based on a daily average, in
accordance with the number of days in the month, the year, or other applicable time period within
which each Closing Date occurs (with the allocation for such Closing Date to Purchaser). The
proration payments shall be made, to the extent reasonably practicable, at or promptly after each
Closing. This Section 1.6 shall survive each Closing.

     1.7. Further Assurances. After each Closing, the Parties shall execute and deliver
such additional documents and take such additional actions as may reasonably be deemed necessary or
advisable by any Party to consummate the transactions contemplated by this Agreement and to vest
more fully in Purchaser the ownership of the Business and Assets transferred and conveyed pursuant
to this Agreement, or intended so to be.

     1.8. Assignment and Assumption of Assumed Contracts. Seller shall assign all of its
right, title and interest in and to, and Purchaser will assume, perform and discharge all of
Seller’s remaining obligations under, the Assumed Contracts with respect to each Acquired Location
from and after the Closing Date for such Acquired Location. Notwithstanding the foregoing, the
Assumed Contracts do not include, and nothing in this Agreement will be deemed to constitute an
assignment or attempted assignment of, any contract, agreement or license to which Seller is a
party if the attempted assignment without the consent of the other party thereto would constitute a
breach or affect in any way the rights of Seller thereunder and for which consent has not been
obtained (collectively, the “Excluded Contracts”). If the consent of any such other party
is not obtained on or prior to the Closing Date with respect to an Acquired Location, or an
attempted assignment on the Closing Date would be ineffective and would affect the rights of
Seller, or Purchaser as assignee, thereunder, and Purchaser agrees in its sole discretion to waive
the conditions set forth in Section 6.1(d), Seller will cooperate with Purchaser in a
reasonable arrangement designed to provide for Purchaser the economic benefits, to the extent of
Purchaser’s performance of Seller’s obligations, under each Excluded Contract and Purchaser will
continue after such Closing to use its commercially reasonable efforts to obtain consent to such
assignment.

ARTICLE 2.

REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER

     Seller and Shareholder jointly and severally represent and warrant to Purchaser as of the date
hereof and, except as otherwise specified herein, as of each Closing Date as follows:

     2.1. Organization, Good Standing and Qualification of Seller and Shareholder. PCE is
a corporation validly doing business in, and in good standing under the laws of, the State of
Delaware. PCEC is a corporation validly doing business in, and in good standing under the laws of,
the State of California. Shareholder is a corporation validly doing business in, and in good
standing under the laws of, the State of Delaware.

 

 

     2.2. Power and Authority of Seller. Seller has the requisite corporate power and
authority, and all licenses and permits from governmental authorities, to own, lease and operate
its properties and assets and to carry on its business.

     2.3. Ownership of Seller. Shareholder is the record and beneficial holder of all of
the issued and outstanding shares of capital stock of PCE. PCE is the record and beneficial holder
of all of the issued and outstanding shares of capital stock of PCEC. There are no outstanding
contracts, options, warrants, or commitments of any character whatsoever requiring the issuance,
sale or transfer of any shares of capital stock or other equity securities in Seller.

     2.4. Authority and Validity. Seller has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the other documents executed by it in
connection with this Agreement; and the execution, delivery and performance by Seller of this
Agreement and the other documents executed by it in connection with this Agreement have been duly
authorized by all necessary corporate action. Shareholder has the legal capacity to execute,
deliver and perform his obligations under this Agreement and the other documents executed by him in
connection with this Agreement.

     2.5. Binding Effect. This Agreement and the other documents executed by Seller or
Shareholder in connection with this Agreement have been duly executed and delivered by it and are
the legal, valid and binding obligations of it, enforceable in accordance with their terms, except
as may be limited by (i) bankruptcy, insolvency or other similar laws affecting creditors’ rights
generally, and (ii) equitable principles of general applicability.

     2.6. Necessary Approvals and Consents. Other than the consents, approvals and
releases of third parties described on Schedule 2.6 hereto that are being delivered by
Seller at each Closing, no authorization, consent, permit, license or approval of, or declaration,
registration or filing with, any person (including any governmental authority) is required or
advisable as a condition to or in connection with the execution, delivery or performance by Seller
or Shareholder of this Agreement or the other documents executed by either of them in connection
with this Agreement or the consummation by Seller and Shareholder of the transactions contemplated
hereby and thereby.

     2.7. No Conflict with Other Instruments. Having obtained the consents, approvals and
releases of third parties set forth on Schedule 2.6, neither the execution, delivery or
performance by Seller or Shareholder of this Agreement or the other documents executed by either of
them in connection with this Agreement nor the consummation by Seller and Shareholder of the
transactions contemplated hereby or thereby, will (with or without notice or lapse of time): (i)
violate Seller’s Articles of Incorporation or Bylaws; (ii) violate, breach, conflict with, or
constitute a default under, or permit the termination or the acceleration or maturity of, any note,
bond, indenture, mortgage, deed of trust, evidence of indebtedness, loan or lease agreement, or
other agreement or instrument, including any of the Assumed Contracts, by which Seller or
Shareholder is bound or to which the Assets are subject; (iii) result in the imposition of any
Lien, security interest, or other restriction upon any of the Assets or upon any attribute of
Seller’s ownership interest in any of the Assets; (iv) violate any judgment, order, injunction or
decree of any government or governmental authority by which Seller or Shareholder is bound or to
which the Assets are subject; or (v) violate any license, authorization or permit issued or granted
to

 

 

Seller or Shareholder by any government or governmental authority or under any law, statute,
rule, regulation or ordinance with respect to the Assets.

     2.8. Title to Assets.

          (a) Seller has good and merchantable title to all of the Assets, including those properties
and assets described on Exhibit A. On a Closing Date the representation and warranty set
forth in this Section 2.8(a) shall not apply to the Assets that have already been
transferred to Purchaser as provided in this Agreement.

          (b) The Assets are owned by Seller free and clear of any lien, claim, or encumbrance
(collectively, “Liens”), except as set forth on Schedule 2.8 hereto and except for:

     (i) Liens for taxes, assessments, or other governmental charges not yet
delinquent; and

     (ii) statutory Liens incurred in the ordinary course of business of the
Business that are not yet delinquent.

On a Closing Date, the representation and warranty set forth in this Section 2.8(b) shall
not apply to the Assets that have already been transferred to Purchaser as provided in this
Agreement.

          (c) Upon the consummation of the transactions contemplated hereby, Purchaser shall receive
good and merchantable title to the Business and the Assets, free and clear of all Liens other than
the Liens described in Subsections 2.8(b)(i) and (ii) (the “Permitted
Liens”).

          (d) Except for the rights of Seller under the Non-Assumed Contracts (which are not included in
the Assets), as of the Closing with respect to a Location Seller shall have conveyed to Purchaser,
and Purchaser will own or lease, all assets of Seller necessary to or used or useful in the conduct
of the Business as conducted by Seller immediately before the Closing Date for such Location.

     2.9. Condition of Tangible Assets. Except as set forth on Schedule 2.9, the
tangible Assets are in good operating condition and repair (except for ordinary wear and tear), are
adequate for the uses to which they are being put in the ordinary course of business of the
Business, and conform with all applicable laws, regulations and ordinances. On a Closing Date, the
representation and warranty set forth in this Section 2.9 shall not apply to the Assets
that have already been transferred to Purchaser as provided in this Agreement.

     2.10. Intellectual Property. Except as set forth on Schedule 2.10, Seller
owns (free of any Lien) the name “Popular Cash Express” and all logos, trade names and service
marks relating thereto (the “Intellectual Property”) without infringing or violating the
rights of any other person, and no consent of any other person will be required for the grant by
Seller to Purchaser of the License (as defined in Section 4.4 below). No claim has been
asserted or, to the knowledge of Seller, threatened by any person that challenges or questions
Seller’s ownership or right to use any of the Intellectual Property or challenges or questions the
validity or effectiveness of any of the Intellectual Property.

 

 

     2.11. Taxes. Subject to non-material deviations and audits, monies required to be
withheld by Seller from employees or collected from customers for income taxes, social security,
medicare and unemployment insurance taxes, and sales, excise and use taxes with respect to the
Business, and all such taxes to be paid by Seller to governmental authorities, have been collected
or withheld and paid to the respective governmental authorities, or such monies have been accrued,
reserved against and entered upon the books of Seller. All federal, state, county and local
income, gross receipts, excise, property, franchise, license, sales, use, withholding and other tax
and information returns and declarations required to have been filed before each Closing Date by
Seller with respect to the Business have been duly and timely filed, and each such return correctly
reflects the tax liability and all other information required to be reported therein. Seller has
paid in full all taxes, penalties, interest and related charges and fees with respect to the
Business to the extent such payments were or are required before and as of each Closing Date, and
Seller will pay all income taxes, payroll and employee benefits, social security, withholding,
sales, use, unemployment insurance taxes, and any and all other taxes and assessments with respect
to the Business due and payable by Seller to all city, state, county and federal taxing authorities
for periods up to and through the date immediately preceding each Closing Date. Seller does not
have any deficiency with respect to any tax period or any liability with respect to taxes or
penalties and interest thereon, or related charges and fees with respect to the Business, whether
or not assessed. No waivers or extensions of statutes of limitations or deadlines for assessments
or collection of taxes with respect to the Business are in effect. Except as described on
Schedule 2.11, there are no pending or threatened claims, assessments, proposals to assess
deficiencies or audits with respect to any taxes owed or allegedly owed by Seller with respect to
the Business, nor, to the knowledge of Seller and Shareholder, is there any basis for any such
action. The tax returns and reports of Seller with respect to the Business have never been audited
by the Internal Revenue Service or any other taxing authority. On a Closing Date, the
representations and warranties set forth in this Section 2.11 shall not apply to the
Business that has already been transferred to Purchaser as provided in this Agreement.

     2.12. Litigation and Government Claims. Except as described on Schedule 2.12,
there is no suit, claim, action or litigation, or governmental, administrative, arbitral or other
similar proceeding, investigation or inquiry (collectively, “Proceedings”), pending or, to
the knowledge of Seller or Shareholder, threatened against or affecting Seller or to which the
Business or the Assets are subject. None of the pending Proceedings set forth on Schedule
2.12 will, severally or in the aggregate, have an adverse effect on the business, results of
operations, assets, or condition, financial or otherwise, of Seller, the Business or the Assets.
Seller has delivered to Purchaser correct and complete copies of all pleadings, correspondence and
other documents relating to each Proceeding set forth on Schedule 2.12. Except as
described on Schedule 2.12, there are no Proceedings pending or, to the best knowledge of
Seller or Shareholder, threatened or contemplated or any unasserted claims (whether or not the
potential claimant may be aware of the claim) of any nature that might be asserted against Seller
regarding the Business or the Assets. None of such threatened or contemplated proceedings or
unasserted claims would, severally or in the aggregate, have an adverse effect on the business,
results of operations, assets or condition, financial or otherwise, of Seller, the Business or the
Assets. On a Closing Date, the representations and warranties set forth in this Section
2.12 shall not apply to the Business on the Assets that have already been transferred to
Purchaser as provided in this Agreement.

 

 

     2.13. Financial Information.

          (a) As set forth in Schedule 2.13, Seller has delivered to Purchaser financial
information with respect to the Business (the “Financial Statements”). The Financial
Statements have been prepared from the books and records of Seller maintained in conformity with
generally accepted accounting principles applied on a basis consistent with preceding periods and
throughout the periods involved (“GAAP”) in all material respects. The Financial
Statements present accurately and fairly, in accordance with GAAP, in all material respects the
financial information purported to be provided to Purchaser.

          (b) Seller’s books of account relating in any manner to the Business have been kept accurately
in the ordinary course of business; the transactions entered therein represent bona fide
transactions; and the revenues, expenses, assets and liabilities of Seller have been properly
recorded in such books in all material respects.

          (c) Except as described in Schedule 2.13(c), Seller has not experienced any thefts
with respect to the Business in excess of $5,000 for any one occurrence during the last two years
preceding a Closing Date.

     2.14. Solvency. Seller is not now insolvent, nor will Seller be rendered insolvent by
the occurrence of the transactions contemplated by this Agreement. In addition, immediately after
giving effect to the consummation of the transactions contemplated by this Agreement, (i) Seller
will be able to pay its debts as they become due, (ii) the property of Seller will not constitute
unreasonably small capital, and Seller will not have insufficient capital with which to conduct its
business, and (iii) taking into account pending and threatened litigation, final judgments against
Seller in actions for money damages are not reasonably anticipated to be rendered at a time when,
or in amounts such that, Seller will be unable to satisfy any such judgments promptly in accordance
with their terms. As used in this Section 2.14, “insolvent” means that the sum of the
present fair salable value of a person’s assets does not exceed its debts and other probable
liabilities, and “debts” includes any legal liability, whether matured or unmatured, liquidated or
unliquidated, absolute, fixed, or contingent, disputed or undisputed, or secured or unsecured.

     2.15. Insurance Notices. Seller has not received notice from any insurer of the
intention (whether or not subject to conditions) of any insurer to discontinue any insurance
coverage relating to the Business or any of the Assets because of the operation or condition of any
of the Assets or any of the real property leased or subleased by Seller.

     2.16. Licenses and Permits. Seller possesses all the licenses, authorizations, and
permits listed in Schedule 2.16, accurate and complete copies of which have been delivered
to Purchaser (the “Permits”). The Permits constitute all of the licenses, authorizations,
and permits necessary under law or otherwise for Seller to conduct the Business as now being
conducted and to construct, own, operate, maintain and use the Assets in the manner in which they
are now being constructed, operated, maintained and used. Each of such Permits and Seller’s rights
with respect thereto is valid and subsisting, in full force and effect, and enforceable by Seller.
Seller is in compliance in all material respects with the terms of such Permits. None of such
Permits have been or, to the knowledge of Seller or Shareholder, are threatened to be revoked,
canceled, suspended or modified. Except as expressly set forth in Schedule 2.16, Seller
makes no warranty

 

 

or representation that any of the Permits are transferable to Purchaser. On a Closing Date,
the representations and warranties set forth in this Section 2.16 shall not apply to the
Business or the Assets that have already been transferred to Purchaser as provided in this
Agreement.

     2.17. Compliance with Laws; No Judgments, Decrees, or Orders in Restraint of Business.
As conducted by Seller, the Business is in compliance with all applicable laws and regulations,
including the currency transaction reporting requirements of the Bank Secrecy Act. Seller is not a
party to or subject to any judgment, order or decree entered in any suit or proceeding brought by
any governmental authority or any other person enjoining or restricting Seller in respect of any
business practice or the acquisition of any property or the conduct of its business. On a Closing
Date, the representations and warranties set forth in this Section 2.17 shall not apply to
the Business that has already been transferred to Purchaser as provided in this Agreement.

     2.18. No Violation of Any Instrument. Seller is not in violation of or in default
under, nor has any event occurred that, with the lapse of time or the giving of notice or both,
would constitute a violation of or default under, or permit the termination or the acceleration of
maturity of, or result in the imposition of any Lien upon any property or asset of Seller pursuant
to, its Articles of Incorporation or Bylaws or any note, bond, indenture, mortgage, deed of trust,
evidence of indebtedness, agreement, judgment, order, injunction or decree to which it is a party,
by which it is bound or to which any of the Assets or the Business is subject. 

     On a Closing Date, the representations and warranties set forth in this Section 2.18 shall
not apply to the Business or the Assets that have already been transferred to Purchaser as provided
in this Agreement.

     2.19. Employee Benefit Plans. Except as listed on Schedule 2.19, Seller does
not have or maintain any pension, profit-sharing, thrift or other retirement plan, employee stock
ownership plan, deferred compensation, stock option, stock purchase, performance share, bonus or
other incentive plan, severance plan, health, group insurance or other welfare plan, or other
similar plan, agreement, policy or understanding, including any “employee benefit plan” within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), under which Seller or any other corporation or trade or business under common control
with Seller (an “ERISA Affiliate”) as determined under Sections 414(b), (c) or (m) of the Internal
Revenue Code of 1986, as amended, has any current or future obligation or liability or under which
any present or former employee of the Seller or an ERISA Affiliate has any current or future right
to benefits. Full payment has been made of all amounts that Seller is required to have paid under
the terms of all employee benefit plans as contributions to such plans, and no accumulated funding
deficiencies, whether or not waived, exist with respect to such plans. No other condition exists
that would justify the attachment of any Liens on, or any other recourse to, the Assets as a result
of the funding or administration of any employee benefit plans of Seller.

     2.20. Employee Information. Seller has completed and submitted to Purchaser a Human
Resources/Payroll Acquisition Questionnaire (the “HR Questionnaire”) and has afforded
Purchaser’s representatives an opportunity to ask questions of Seller’s representatives about the

 

 

information provided in the HR Questionnaire. Except as set forth in Schedule 2.20,
the information set forth in the HR Questionnaire is accurate and complete as of each Closing Date.

     2.21. Labor Relations. With respect to all employees of the Business:

          (a) Seller is in material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages and hours and, to the best of
Seller’s knowledge, Seller is in material compliance with all applicable laws and regulations
respecting immigration and occupation safety and health;

          (b) there is no collective bargaining agreement or other labor union contract applicable to
any employee of Seller, and no such agreement or contract has been requested;

          (c) neither Seller nor Shareholder is aware of any union organization activities or
proceedings involving any employees of Seller;

          (d) there is no unfair labor practice complaint against Seller pending before the National
Labor Relations Board or other governmental authority or, to the best of the knowledge of Seller or
Shareholder, so threatened, and Seller is not engaged in any unfair labor practice and is not aware
of any problems with employees that could have an adverse effect on the Business; and

          (e) there is no strike, labor dispute, slowdown, stoppage, or other material interference with
or impairment by labor of the Business actually pending, threatened or contemplated.

On a Closing Date, the representations and warranties set forth in this Section 2.21 shall
not apply to the Business that has already been transferred to Purchaser as provided in this
Agreement.

     2.22. Contracts with Affiliates and Others. Except as set forth on Schedule
2.22, no director or officer of Seller, nor any person who is a spouse or descendant of such
director or officer, serves as a director, officer, shareholder, partner or equity owner of any
customer or supplier of the Business.

     2.23. Significant Customers. Set forth on Schedule 2.23 is a correct and
complete list of each customer of the Business, if any, from which 10% or more of the gross
revenues of each Location was derived during the last 12 months, together with the amount (in
dollars) of gross revenues of the Business derived during such period from such customer. Neither
Seller nor Shareholder has received any notice from such customer, or has any other knowledge, that
such customer (i) has terminated or ceased, or has significantly reduced the volume or amount of,
its business with the Business or has any intent to do any of the foregoing after the Closing,
whether because of the Closing or otherwise, or (ii) will refuse to do business with Purchaser
after the Closing on substantially the same terms and conditions as it did business with Seller
before the Closing. On a Closing Date, the representations and warranties set forth in this
Section 2.23 shall not apply to Locations that have already been transferred to Purchaser
as provided in this Agreement.

 

 

     2.24. Accuracy of Information Furnished. No representation or warranty by Seller or
Shareholder in or pursuant to this Agreement contains any untrue statement of a material fact or
omits to state any material fact necessary to make the statements herein, in light of the
circumstances under which they were made, not false or misleading. To the best of the knowledge of
Seller and Shareholder, Seller and Shareholder have disclosed to Purchaser all facts known to it
and him that are material to the operations, financial condition or prospects of the Business.

     2.25. No Brokerage Fees. Neither Seller or Shareholder nor any officer, director or
employee of Seller has employed any broker or finder or incurred any liability for any brokerage
fees, or commissions or finders’ fees in connection with the transactions contemplated hereby.

     2.26. Real Property Leases. Accurate and complete copies of the real property leases
described in Schedule 2.26 (the “Real Property Leases”) have been delivered or made
available to Purchaser on or prior to the date hereof. Each Real Property Lease is valid, binding,
subsisting and enforceable. Seller has not received notice that Seller is in default under any Real
Property Lease, and there is no existing material breach, violation, default, event of default or
event, occurrence, or act that, with or without the giving of notice, lapse of time, or the
occurrence of any other event, would constitute a default under any Real Property Lease. Subject
to the consent of each landlord under each Real Property Lease (and to the extent applicable and
required, each landlord under a Base Lease (as hereinafter defined)) to the assignment of each Real
Property Lease to Purchaser (if required in such Real Property Lease), the consummation of the
transactions contemplated hereby will not affect the continuance in full force and effect of any
Real Property Lease. There is no dispute among any of the parties to each Real Property Lease,
and no penalty has been incurred with respect thereto. For the purposes of this Section
2.26 only, a material breach or combination of breaches shall mean any breach that results in
damages in excess of $2,500 as to a single breach or $25,000 as to a combination of breaches with
respect to all Real Property Leases. Seller has not received notice of any plan or intention of
any landlord or any other party to a Real Property Lease to exercise any right to cancel or
terminate a Real Property Lease in advance of its stated termination date, and Seller does not know
of any fact that would justify the exercise of such right (whether or not such notice is subject to
any applicable cure period). If any of the Real Property Leases is a sublease, the base landlord
under the base lease to which such Real Property Lease is subject (a “Base Lease”) has
previously consented to such Real Property Lease and Seller has not received notice and is not
aware of any default under such Base Lease or any plan or intention of such base landlord under
such Base Lease to cancel or terminate such Base Lease thus resulting in a cancellation or
termination of such Real Property Lease. On a Closing Date, the representations and warranties set
forth in this Section 2.26 shall not apply to any Real Property Lease that has already been
transferred to Purchaser as provided in this Agreement.

     2.27. Subleases. Accurate and complete copies of the real property subleases under
the Real Property Leases to which Seller is landlord thereunder described in Schedule 2.27
(the “Subleases”) have been delivered or made available to Purchaser on or prior to the
date hereof. Each Sublease is valid, binding, subsisting and enforceable. Seller has neither
received notice that Seller is in default under any Sublease nor given notice of default to any
subtenant under any such Sublease, and there is no existing material breach, violation, default,
event of default or event, occurrence, or act that, with or without the giving of notice lapse of
time, or the

 

 

occurrence of any other event, would constitute a default by any party under any such
Sublease. The landlord under the Real Property Lease to which the Sublease is subject has
previously consented to such Sublease. The consummation of the transactions contemplated hereby
will not affect the continuance in full force and effect of any Sublease. There is no dispute
among any of the parties to each Sublease and no penalty has been incurred with respect thereto.
For the purposes of this Section 2.27 only, a material breach or combination of breaches
shall mean any breach that results in damages in excess of $1,000 as to a single breach or $10,000
as to a combination of breaches with respect to all of the Subleases. Seller has not received
notice of any plan or intention of any subtenant under any Sublease to exercise any right to cancel
or terminate a Sublease in advance of its stated termination date, and Seller does not know of any
fact that would justify the exercise of such right (whether or not such notice is subject to any
applicable cure period). On a Closing Date, the representations and warranties set forth in this
Section 2.27 shall not apply to any Sublease that has already been transferred to Purchaser
as provided in this Agreement.

     2.28. Convertible Notes. With respect to the Convertible Notes:

          (a) PCE is an “accredited investor” (as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act of 1934, as amended (the “Securities Act”).

          (b) PCE is acquiring the Convertible Notes for PCE’s own account and not with a view to their
resale or distribution in violation of the Securities Act, the securities laws of any state or any
other applicable jurisdiction, and the Convertible Notes will not be disposed of in contravention
of the Securities Act, the securities laws of any state or any other applicable jurisdiction. Each
of Seller and Shareholder hereby acknowledges and agrees that neither the Convertible Notes nor the
shares of common stock issuable upon exercise of the Convertible Notes have been registered under
the Securities Act or under any state securities laws, and that Company is issuing the Convertible
Notes to PCE pursuant to an exemption from registration and in reliance on the representations and
warranties made herein by Seller and Shareholder.

          (c) Each of Seller and Shareholder acknowledges that the Convertible Notes and the underlying
shares of Common Stock must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available.

          (d) Each of Seller and Shareholder understands that no public market now exists for any of the
Convertible Notes and there can be no assurance that a public market will ever exist for the
Convertible Notes.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser represents and warrants to Seller and Shareholder as of the date hereof and, except
as otherwise specified herein, as of each Closing Date as follows:

     3.1. Organization and Good Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.

 

 

     3.2. Authority and Validity. Purchaser has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the other documents executed
by it in connection with this Agreement; and the execution, delivery, and performance by it of this
Agreement and the other documents executed by it in connection with this Agreement have been duly
authorized by all necessary corporate action.

     3.3. Binding Effect. This Agreement and the other documents executed by Purchaser in
connection with this Agreement have been duly executed and delivered by it and are its legal, valid
and binding obligations, enforceable against it in accordance with their terms, except as may be
limited by (i) bankruptcy, insolvency, or other similar laws affecting creditors’ rights generally,
and (ii) equitable principles of general applicability.

     3.4. Necessary Approvals and Consents. No authorization, consent, permit, license or
approval of, or declaration, registration, or filing with, any person (including any or
governmental authority) is required as a condition to the execution, delivery, or performance by
Purchaser of this Agreement or the other documents executed by Purchaser in connection with this
Agreement or the consummation by it of the transactions contemplated hereby and thereby.

     3.5. No Brokerage Fees. Neither Purchaser nor any officer, director or employee of
Purchaser has employed any broker or finder or incurred any liability for any brokerage fees or
commissions or finders’ fees in connection with the transactions contemplated hereby.

     3.6. Purchaser’s Due Diligence. Purchaser acknowledges that except as otherwise
expressly set forth in this Agreement, Purchaser is purchasing the Assets and Business in “AS IS”
condition and specifically and expressly without any warranties, representations or guarantees,
either express or implied, of any kind, nature or type whatsoever from or made on behalf of, Seller
and/or Shareholder. Purchaser further acknowledges and agrees that in entering into this
Agreement:

           (i) except as otherwise expressly set forth in this Agreement, neither Seller nor Shareholder
have made nor will either make any warranties or representation, whether express or implied, oral
or written, with respect to the Assets or the Business, their condition, value, profitability or
marketability thereof; and

           (ii) Upon or as of the Closings hereunder, Purchaser shall be deemed to have made such legal,
factual and other inquiries and investigations as Purchaser deems necessary, desirable or
appropriate with respect to the Business and the Assets and the value thereof.

ARTICLE 4.

COVENANTS

     4.1. Payment of Obligations Not Assumed. All obligations of Seller not specifically
assumed by Purchaser in this Agreement, including all liability for income taxes, sales taxes and
other taxes accruing prior to a Closing Date or relating to the purchase of the Business and the
Assets, shall be paid by Seller, and Purchaser shall have no responsibility therefor.

     4.2. Noncompetition, Nondisclosure and Nonsolicitation Agreements. Seller and
Shareholder acknowledge and agree that (i) Purchaser would not have entered into this

 

 

Agreement to purchase the Assets but for the following noncompetition, nondisclosure and
nonsolicitation covenants of Seller and Shareholder, (ii) this Section 4.2 is supported by
good and sufficient consideration, and (iii) they possess information concerning the Business and
the Assets that would enable them to injure Purchaser and diminish the value of the investment by
Purchaser in the Business and the Assets if Seller or Shareholder should engage in any business
that is competitive with the check-cashing and related businesses conducted by Purchaser.
Therefore, Seller and Shareholder hereby agree to the following:

          (a) Without the prior written consent of Purchaser, as specifically authorized or approved by
its board of directors, or except as otherwise provided in this Section 4.2, neither Seller nor
Shareholder will, directly or indirectly, engage in any business that provides the same or any
similar services or products as those included in the Business or provided by Purchaser anywhere
within a 5-mile radius of any Acquired Location as of the final Closing Date. This noncompetition
agreement shall in no event be applicable to either (i) any full service bank branch not operating
under the “Popular Cash Express” name now or hereafter owned and/or operated by Banco Popular North
America, or its affiliates or subsidiaries (including, without limitation, services provided by
Banco Popular North America or its affiliates or subsidiaries to money service business customers),
(ii) the six (6) “Popular Cash Express” limited service branches currently operated by Banco
Popular North America and identified on Schedule 4.2(a), or (iii) any Location not acquired
by Purchaser for any reason whatsoever.

          (b) Seller and Shareholder agree not to, directly or indirectly, solicit for employment or
employ any employee of Purchaser or its subsidiaries, or any person who was an employee of
Purchaser or its subsidiaries within 12 months prior to such solicitation or employment, or induce
or attempt to induce any employee of Purchaser or its subsidiaries to terminate such employee’s
employment.

          (c) The noncompetition agreement set forth in subsection (a) of this Section
4.2 shall terminate on the fifth anniversary of the Effective Date. The nonsolicitation
agreement set forth in subsection (b) of this Section 4.2 shall terminate on the
first anniversary of the final Closing Date.

          (d) Prior to the date hereof, Seller has had various trade secrets consisting of, but not
limited to, client lists and requirements, prospective client lists, processes, compilation of
information, records, sales procedures, marketing techniques, methods of doing business and other
confidential information (collectively, the “Trade Secrets”) which were owned by Seller and
are being acquired by Purchaser as part of the transactions contemplated hereby. Seller and
Shareholder covenant and agree that they shall not, either directly or indirectly, at any time
after each Closing Date, use for such their own benefit or the benefit of any other person, or
disclose or disseminate to any other person, any of the Trade Secrets.

          (e) For purposes of Article IV, the term “indirectly” means the performance of
services by any business or entity in which either of Seller or Shareholder either owns or
possesses more than a 5% interest in profits, losses or capital, or is a partner, or for which
Seller or Shareholder acts as officer, director, agent or representative, or to which Seller or
Shareholder provides consulting or advisory services.

 

 

     4.3. Seller’s Employees.

          (a) Seller shall terminate its employees of the Business with respect to each Acquired
Location at the close of business on the day before the Closing Date with respect to each such
Acquired Location. Seller shall have sole and absolute responsibility for any financial or other
commitments that Seller may have to any of its employees or former employees, including any and all
claims or obligations arising under any and all employment policies and procedures of Seller, under
any employee benefit plan of Seller, or under any local, state, or federal law, rule, or regulation
regarding termination of employment for any employment loss which occurs before the Closing Date
with respect to an Acquired Location or otherwise in connection with this Agreement. Seller shall
be liable to its employees and former employees for all wages, severance benefits, unpaid vacation
pay, unpaid sick and holiday pay, and other obligations of any kind whatsoever through the day
before the Closing Date with respect to an Acquired Location. Seller is responsible for resolving
any conflicts, errors or discrepancies involving its employee policies and procedures with respect
to the period of time before the Closing Date with respect to an Acquired Location.

          (b) With respect to the employees of the Business at an Acquired Location on the date of the
Closing of such Acquired Location (the “Seller Employees”), Purchaser shall (i) subject to
compliance with its hiring and other employment policies and procedures (including, without
limitation, drug-testing and background check(s)), extend an offer of employment to all Seller
Employees working at such Location (the “Store Employees”), (ii) evaluate all of the other
Seller Employees working in the field (i.e., not Store Employees or employees in the
corporate office of Seller) and supporting the Store Employees (the “Field Employees”) and,
subject to compliance with its hiring and other employment policies and procedures, extend an offer
of employment to as many Field Employees as Purchaser deems, in its sole and absolute discretion,
to be commercially reasonable, and (iii) have no obligation to extend an offer of employment to any
Seller Employees that are not either Store Employees or Field Employees (and does not intend to do
so).

          (c) Purchaser shall extend service credit to each employee of Seller with respect to the
Business at an Acquired Location who is hired by Purchaser on the date of the Closing of such
Acquired Location (a “Hired Employee”) for the full period of time each Hired Employee
worked for Seller before such Closing Date. Nevertheless, although Purchaser will base paid
vacation time due each Hired Employee upon the period of time the Hired Employee has worked both
for Seller before date of the Closing of the Acquired Location and for Purchaser on and after such
Closing Date, each Hired Employee must work for Purchaser for six (6) full months before the Hired
Employee is eligible for any paid vacation (in accordance with Purchaser’s normal vacation policy).

          (d) Hired Employees shall be employed by Purchaser solely in accordance with Purchaser’s
hiring and other employment policies and procedures, which may differ from Seller’s employment
policies and procedures.

     4.4. Grant of Limited License. Seller shall grant to Purchaser a limited,
nonexclusive, royalty free, fully paid license (the “License”) to use Intellectual Property
at each Acquired Location and, at the option of Purchaser, the ACE Cash Express store closest to
any of the

 

 

Acquired Locations described on Schedule 4.4 with a Real Property Lease that has a term
expiring prior to, and Purchaser is unable to secure an extension (upon terms acceptable to
Purchaser in its sole discretion) of such term through, December 31, 2007 (the “ACE Alternate
Locations”) (but not at any other store or other location owned or operated by Purchaser),
including all signage and point-of-sale materials at such Acquired Location or ACE Alternate
Location containing the same (the “Licensed Materials”). The License shall commence upon
the earlier of (a) the Closing Date for each Acquired Location, or (b) the date of designation by
Purchaser of an ACE Alternate Location, and in all cases shall continue for a period of not more
than three (3) years after the final Closing Date. Purchaser agrees that (i) the Licensed Materials
shall be used substantially in the same manner as used immediately prior to such Closing Date and
(ii) the License is non-transferable. Notwithstanding the foregoing, Purchaser agrees that, after
the Closing Date for a Location, Purchaser shall promptly remove or obstruct from view in a
commercially reasonable manner any usage of the logo for “BPPR” at such Location, whether in the
form of signage, store decals or otherwise and, to the extent removed, destroy such materials.

     4.5. Closure of California Store. On the first Closing Date on which Purchaser
acquires a Location located in the State of California, Seller shall close its store located at 334
S. Broadway, Los Angeles, California 90013.

ARTICLE 5.

PRE-CLOSING COVENANTS OF SELLER AND SHAREHOLDER

     Seller and Shareholder covenant with Purchaser as follows:

     5.1. Conduct and Preservation of Business. Until the Closing with respect to a
Location, (i) Seller shall conduct the Business at such Location only in the ordinary course
consistent with past practice and in compliance with all applicable laws, statutes, rules,
regulations and ordinances, and will not introduce any new method of management or operation, (ii)
each of Seller and Shareholder shall use its commercially reasonable efforts to preserve the
Business at such Location intact, to retain present customers and all other persons having business
relationships with Seller at such Location so that they will be available to Purchaser at and after
the Closing and to cause the tangible Assets at that Location to be maintained, repaired and
insured in accordance with past practices, and (iii) Seller and Shareholder shall not take any
action that might impair the Business or the Assets at such Location or take or fail to take any
action that would cause or permit the representations made in Article 2 hereof to be
inaccurate at the time of the Closing or preclude Seller or Shareholder from making such
representations and warranties at the Closing. All risk of loss arising out of casualty and all
liability to third parties, including employees, in connection with or arising out of operations of
the Business before the Closing shall be that of Seller, and Purchaser shall have no obligation or
liability therefor.

     5.2. Access. Until the Closing with respect to all Locations, Seller and Shareholder
shall (i) give Purchaser and its authorized representatives full access to the Locations, during
normal business hours upon reasonable notice and subject to safety and security procedures and
requirements, for inspection of the Assets and Business, and (ii) shall cause Seller’s officers and
other representatives to furnish Purchaser and its authorized representatives with all documents,
records and information, including operating information, with respect to the Assets and the

 

 

Business as Purchaser may from time to time reasonably request; provided,
however, that no investigation pursuant to this Section 5.2 shall affect
any representation or warranty of Seller contained in this Agreement or in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith. Any and all requests
for access and information pursuant to this Section 5.2 shall be directed to the attention of
Seller’s President, Bernard J. Flaherty at the address (or fax number) indicated in Section
8.6.

     5.3. Material Adverse Change. Prior to the Closing with respect to all Locations,
Seller and Shareholder shall promptly inform Purchaser in writing of any event or circumstance that
is or would reasonably be expected to result in a material adverse change in the Business or the
Assets or in any representation or warranty made by either of them in this Agreement becoming
untrue in any material respect. In the event of a material adverse change in the Business or the
Assets at any Location, Purchaser may elect to treat the Location as a Terminated Location and the
Purchase Price shall be reduced as described in Section 1.5. For the purposes of this
Section 5.3 only, the term “material adverse change” with respect to a Location shall
exclude a decline in gross revenues for such Location less than ten percent (10%) on an annualized
basis when compared to the gross revenues for such Location for the 12-month period ended June 30,
2005. If Purchaser elects to purchase a Location(s) subject to a material adverse change in the
Business or Assets, the purchase of that Location shall be deemed a waiver by Purchaser of its
ability to assert any claim based on the respective material adverse change, but shall not be
deemed a waiver by Purchaser of the breach of any other representation or warranty of Seller or
Shareholder, if any, contained in this Agreement.

     5.4. Approvals of Third Parties. As soon as practicable after the execution of this
Agreement, but in any event prior to the applicable Closing Date, Seller and Shareholder shall use
their best efforts to secure all necessary approvals and consents of third parties to the
consummation by them of the transactions contemplated by this Agreement.

     5.5. Hiring of Employees. Seller and Shareholder will comply with all reasonable
requests made by Purchaser for the purpose of allowing Purchaser, and will cooperate with
Purchaser’s efforts, to hire, at and after a Closing with respect to an Acquired Location, those
employees of Seller designated by Purchaser.

     5.6. Employee Compensation. Until the Closings with respect to all Locations, (i) no
increase will be made in the compensation or rate of compensation payable or to become payable to
any of the employees of Seller in the Business and (ii) no bonus, profit sharing, retirement,
insurance, death, fringe benefit, or other extraordinary or indirect compensation shall accrue, be
set aside, or be paid to, for or on behalf of any of such employees of the Business other than as
required by existing Plans as now in effect, and no Plan other than those now in effect shall be
adopted or committed to be adopted, and (iii) no loan shall be made or advanced to Shareholder or
any officer, director, employee or agent of Seller in the Business (except for reasonable travel
advances for business in accordance with past practices)

     5.7. No Transactions in Ownership Interests. Until the Closing, neither Seller nor
Shareholder shall (i) effect any amendment to any of Seller’s governing corporate documents, (ii)
cause or permit the issuance of any additional shares of capital stock or other equity or ownership
interests (or options, warrants, or other rights to acquire capital stock, or ownership interests)
of Seller, (iii) cause or permit the redemption, repurchase, or other acquisition of any shares of
capital

 

 

stock or other equity or ownership interests of Seller or (iv) declare, pay or set aside for
payment any dividend or distribution with respect to Seller’s capital stock or other equity or
ownership interests.

     5.8. Tangible Assets. Prior to the Closing with respect to all Locations, Seller will
not, and Shareholder will not permit Seller to, acquire or dispose of, or agree or commit to
acquire or dispose of, any tangible Assets (other than in the ordinary course of business
consistent with past practices) used in or for the Business without the prior written consent of
Purchaser.

     5.9. Liens or Investments. Prior to the Closing with respect to all Locations, Seller
will not, and Shareholder will not permit Seller to, (i) enter into or assume any mortgage, pledge,
conditional sale, or other title retention agreement or permit any lien, claim, or encumbrance of
any kind to attach to any of the Assets, whether now owned or hereafter acquired, or (ii) guarantee
or otherwise become contingently liable for any obligations or liabilities of any other person,
except obligations arising by reason of endorsement for collection and other similar transactions
in the usual and ordinary course of business, or make any capital contributions or investments in
any person.

     5.10. No Negotiation with Others. As long as this Agreement shall remain in effect,
neither Seller (including any officer, director or employee of Seller) nor Shareholder shall (i)
discuss, negotiate with, encourage, solicit, or accept an offer from any person other than
Purchaser to purchase all or any portion of the capital stock or other equity or ownership
interests of Seller or the Assets, (ii) otherwise dispose of all or any portion of the Business,
(iii) make any offer to effect any such transaction with any person other than Purchaser, (iv)
enter into any agreement to affect any such transaction with any person other than Purchaser, or
(v) disclose, directly or indirectly, any information not customarily disclosed to any person other
than Purchaser concerning the Business, Assets or ownership of Seller in connection with any such
proposed transaction.

     5.11. Conditions to Be Satisfied. Prior to each Closing, Seller and Shareholder shall
use commercially reasonable efforts to cause the conditions to Purchaser’s obligations to
consummate the transactions contemplated by this Agreement to be satisfied. In no event shall the
procurement of any amendment(s) to the Real Property Leases (as distinguished from the consents to
the assignments of the Real Property Leases to Purchaser) constitute a condition precedent to a
Closing.

     5.12. Assignment and Amendments to Assumed Contracts. Prior to the applicable
Closing, Seller and Shareholder shall use commercially reasonable efforts to cause the landlords
for the Real Property Leases to be acquired in connection with such Closing to (a) consent to the
assignment of such Real Property Leases to Purchaser at the relevant Closing, and (b) agree to
certain amendments to such Real Property Leases requested by Purchaser, all in a form acceptable to
Purchaser.

ARTICLE 6.

CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS

     6.1. Conditions to Obligations of Purchaser. The obligations of Purchaser under this
Agreement are subject to the fulfillment, at or prior to the first Closing Date (and as set forth

 

 

herein, on each other Closing Date), of the following conditions precedent, each of which may
be waived in writing in the sole discretion of Purchaser:

          (a) Due Diligence. The due diligence conducted by Purchaser and its representatives
in connection with the proposed transactions contemplated hereby shall not have caused Purchaser or
its representatives to become aware of any facts relating to the Business, Assets, results of
operations, condition (financial or otherwise), or prospects of the Business or the Assets which,
in the judgment of Purchaser (in its sole discretion), make it inadvisable for Purchaser to proceed
with the consummation of the transactions contemplated hereby.

          (b) Continued Truth of Representations and Warranties of Seller and Shareholder;
Compliance with Covenants and Obligations. The representations and warranties of Seller and
Shareholder shall be true on and as of each Closing Date as though such representations and
warranties were made on and as of such date (except for representations and warranties that speak
as of a certain date which shall be true and correct as of such date). Seller and Shareholder shall
have performed and complied with all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by each of them prior to
or at each Closing Date.

          (c) Governmental Approvals. As of each Closing Date, all governmental agencies,
department, bureaus, commissions and similar bodies, the consent, authorization or approval of
which is necessary, in the judgment of Purchaser, under any applicable law, rule, order or
regulation for the consummation by Seller or Shareholder of the transactions contemplated by this
Agreement on such Closing Date and the operation of the Business by Purchaser shall have consented
to, authorized, permitted or approved such transactions, in a manner acceptable to Purchaser in its
sole discretion.

          (d) Consent of Third Parties. Subject to the provisions of Section 1.6, prior
to each Closing, Seller and Shareholder shall have received all requisite consents and approvals of
all lessors and other third parties whose consent or approval is required in order for Seller and
Shareholder to consummate all of the transactions contemplated by this Agreement on such Closing
Date, including without limitation, those set forth on Schedule 2.6, in each case in a
manner acceptable to Purchaser in its sole discretion, and as of such Closing Date, such consents
and approvals shall be in full force and effect.

          (e) Adverse Proceedings. As of each Closing, no action or proceeding by or before any
court or other governmental body shall have been instituted or threatened by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement on such Closing Date or which might affect the right of Purchaser to
own the Assets or to own or operate the Business after such Closing.

          (f) Opinion of Counsel. Purchaser shall have received an opinion of Brian F. Doran,
Esq., counsel to Seller, dated as of First Closing Date, covering the matters set forth on
Exhibit D hereto.

 

 

          (g) Board Approval. On or prior to the First Closing Date, Purchaser shall have
obtained the approval of its board of directors to consummate the transactions contemplated by this
Agreement.

          (h) Closing Deliveries. Purchaser shall have received at or prior to each Closing
such documents, instruments or certificates as Purchaser may reasonably request including, without
limitation:

     (i) a Bill of Sale in substantially the form attached hereto as Exhibit E
and made a part hereof relating to the Assets at the Locations acquired at such
Closing.

     (ii) an Assignment and Assumption Agreement in substantially the form attached
hereto as Exhibit F, relating to the assignment and assumption of the
Assumed Contracts with respect to the Assumed Contracts acquired at such Closing
(the “Assumption Agreement”). If an Assumed Contract relates to more than
one Location and all of the Locations to which such Assumed Contract relates are not
Acquired Locations, the Assumption Agreement executed and delivered at each Closing
with respect to such Assumed Contract will only provide for the assignment by
Seller, and the assumption by Purchaser, of Seller’s rights and obligations under
such Assumed Contract that relate to the Acquired Locations.

     (iii) consent of the other parties to all of the Assumed Contracts relating to
the Locations acquired at such Closing (including the consents to the assignments of
the Real Property Leases to Purchaser from the landlords thereunder) and all other
consents, approvals or releases from third parties required by Purchaser.

     (iv) A certificate as to (i) the Articles of Incorporation of each of Seller
and Shareholder, (ii) the Bylaws of each of Seller and Shareholder, (iii) the
incumbency of the officer of Seller or Shareholder executing this Agreement and
other documents in connection with this Agreement on behalf of such party and (iv)
the resolutions adopted by the Board of Directors and shareholders of each of Seller
and Shareholder authorizing and approving the transactions contemplated by this
Agreement on such Closing.

     (v) A lease agreement covering the Excluded Florida Real Property (the
“Lease Agreement”) in form and substance mutually acceptable to the Parties
pursuant to which Seller will lease to Purchaser the Excluded Florida Real Property
(the “Excluded Florida Real Property Lease”) for an initial five-year term
and two five-year renewal options in exchange for total rent abatement through
December 31, 2010 and a reasonable market rent thereafter;

     (vi) A closing statement with respect to prorations relating to the Locations
acquired at such Closing;

 

 

     (vii) Consents of the Lenders under that certain First Amended and Restated
Credit Agreement dated as of July 30, 2004 (as amended, the “ACE Credit
Agreement”), among Purchaser, Wells Fargo Bank, National Association, as
Administrative Agent, Co-Lead Arranger, Joint Book Runner and Lender, JP Morgan
Chase Bank, as Syndication Agent and as a Lender, J.P. Morgan Securities, Inc., as
Joint Book Runner and Co-Lead Arranger, U.S. Bank, National Association, Bank of
America, N.A. and Union Bank of California, N.A., as Co-Documentation Agents and as
Lenders, Keybank National Association, as Senior Managing Agent and as a Lender, and
the other Lenders thereunder, to the transactions contemplated by this Agreement as
required by the ACE Credit Agreement;

     (viii) Receipt by Purchaser of the approval of its Board of Directors to the
transactions contemplated by this Agreement; and

     (ix) Estoppel letters from the subtenants under the Subleases confirming the
status of such Subleases.

     6.2. Conditions to Obligations of Seller and Shareholder. The obligations of Seller
and Shareholder under this Agreement are subject to the fulfillment, at or prior to each Closing
Date, of the following conditions precedent, each of which may be waived in writing in the sole
discretion of Seller and Shareholder:

          (a) Continued Truth of Representations and Warranties of Purchaser; Compliance with
Covenants and Obligations. The representations and warranties of Purchaser shall be true on
and as of each Closing Date as though such representations and warranties were made on and as of
such date (except for representations and warranties that speak as of a certain date which shall be
true and correct as of such date). Purchaser shall have performed and complied with all terms,
conditions, covenants, obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at each Closing Date.

          (b) Adverse Proceedings. No action or proceeding by or before any court or other
governmental body shall have been instituted or threatened by any governmental body or person
whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by
this Agreement.

          (c) Purchase Price. Purchaser shall have paid the Closing Amount portion of the
Purchase Price in cash in accordance with Section 1.1(c) hereof.

          (d) Closing Deliveries. Seller shall have received at or prior to each Closing, if
applicable:

     (i) the Assumption Agreement;

     (ii) the Convertible Note; and

     (iii) the Lease Agreement governing the Excluded Florida Real Property.

 

 

ARTICLE 7.

INDEMNIFICATION AND CERTAIN REMEDIES

     7.1. Indemnification by Seller and Shareholder. Seller and Shareholder shall jointly
and severally indemnify and hold Purchaser, and each of its officers, directors, affiliates,
employees, agents and shareholders, harmless from and against any and all losses, liabilities,
damages, costs and expenses (including reasonable attorneys’ fees) asserted against or incurred by
Purchaser, or any of its officers, directors, affiliates, employees, agents and shareholders,
resulting from or arising out of or in connection with:

          (a) any misrepresentation or breach by Seller and/or Shareholder (or both) of any warranty,
agreement or covenant contained in this Agreement or any other document executed, delivered or
furnished by Seller and/or Shareholder (or both) in connection herewith;

          (b) the failure to comply with any applicable bulk transfer laws relating to the transfer of
the Assets, to the extent the obligation to comply with such bulk transfer laws is imposed on
Seller;

          (c) income, franchise, sales, use and other taxes, including any penalties and interest with
respect thereto, of or relating to the Assets, the Business or any other assets or operations of
Seller conducted before the Closing Date for an Acquired Location;

          (d) sales, transfer and other taxes, including any penalties and interest with respect
thereto, resulting from the consummation of the transactions contemplated by this Agreement which
are by the applicable statute, regulation or ordinance the responsibility of Seller to pay;

          (e) liabilities and obligations of the Business before any Closing Date, liabilities and
obligations relating to the Excluded Assets (whether before, on or after such Closing Date), and
other liabilities and obligations of Seller or the Business not specifically assumed by Purchaser
in this Agreement;

          (f) any actual or threatened violation of or noncompliance with, or remedial obligation
arising under, any applicable federal, state, or local laws, rules or regulations, common law or
strict-liability provisions, and any judicial or administrative interpretations thereof (including
any judicial or administrative orders or judgments), relating to health, safety, industrial
hygiene, pollution or environmental matters (“Environmental Laws”) arising from any event,
condition, circumstance, activity, practice, incident, action or plan existing or occurring before
the Closing Date for an Acquired Location relating in any way to the Assets or the Business at such
Location (including the ownership, operation or use of the Assets and the conduct of the Business
before such Closing Date), including the presence of any underground storage tanks or any solid or
hazardous waste, hazardous substance, pollutant, contaminant, oil, petroleum product, commercial
product or other substance (i) which is listed, regulated or designated as toxic or hazardous, or
with respect to which remedial obligations may be imposed, under any Environmental Laws or (ii)
exposure to which may pose a health or safety hazard (“Environmental Materials”) on, in,
under or affecting all or any portion of Seller’s properties or any surrounding areas, and any
spilling, leaking, pumping, pouring, emitting, emptying,

 

 

discharging, injecting, escaping, leeching, dumping or disposing into the environment
(including the abandonment or discarding of barrels, containers, and other closed receptacles
containing any hazardous substance, pollutant or contaminant) (“Release”) or threatened
Release with respect to such underground storage tanks or Environmental Materials, and the storage,
disposal or treatment, or transportation for storage, disposal or treatment, of Environmental
Materials; but excluding any violation of or non-compliance with, or remedial obligation arising
under, any Environmental Laws that is attributable solely to a change by Purchaser in the
structure, use or condition of any of the Assets on or after such Closing Date; and

           (g) any losses or costs of defending against any claims which may be made against Purchaser by
any person claiming violations of any local, state or federal laws relating to employment,
including wages, hours, concerted activity, nondiscrimination, occupational health and safety and
the payment and withholding of taxes, where such claims arise out of circumstances occurring before
the Closing Date for an Acquired Location.

Any payment by Seller and/or Shareholder pursuant to the indemnification obligations set forth in
this Section 7.1, including any credit or offset contemplated by Section 7.6, shall
constitute a reduction of the Purchase Price.

     7.2. Indemnification by Purchaser. Purchaser shall indemnify and hold Seller and
Shareholder, and each of their respective officers, directors, affiliates, employees, agents and
shareholders, harmless from and against any and all losses, liabilities, damages, costs and
expenses (including reasonable attorneys’ fees) asserted against or incurred by Seller or
Shareholder (i) resulting from or arising out of or in connection with any misrepresentation or
breach by Purchaser of any warranty, agreement or covenant contained in this Agreement or any other
document executed, delivered or furnished by Purchaser in connection herewith, (ii) resulting from
or arising out of or in connection with the operations of Purchaser on and after the Closing Date
for an Acquired Location, other than liabilities not assumed by Purchaser herein, (iii) in
connection with the liabilities and obligations of the Business as of and after the applicable
Closing Date and any liabilities or obligations of Seller or the Business specifically assumed by
Purchaser in this Agreement, (iv) resulting from or arising out of the failure to comply with any
applicable bulk transfer laws relating to the transfer of Assets, to the extent the obligation to
comply with such bulk transfer laws is imposed on Purchaser, and (v) sales, transfer and other
taxes, including penalties and interest with respect thereto, resulting from the consummation of
the transactions contemplated by this Agreement which are by the applicable statute, regulation or
ordinance the responsibility of Purchaser to pay.

     7.3. Certain Remedies. Each Party acknowledges that a refusal without just cause by
such Party to comply with the agreements made herein will cause irreparable harm to the other Party
or Parties for which there may be no adequate remedy at law. In such circumstance, a Party or
Parties not in default at the time of such refusal shall be entitled, in addition to other remedies
at law or in equity, to specific performance of this Agreement by the Party or Parties that so
refused to comply with or breached this Agreement.

     7.4. Attorneys’ Fees. In any action or proceeding to enforce the terms of this
Agreement or the other documents executed in connection herewith, the prevailing Party or

 

 

Parties shall be entitled to recover reasonable attorneys’ fees incurred in connection with
such enforcement action or proceeding.

     7.5. Survival of Representations and Warranties. Each representation or warranty made
by any Party shall survive each Closing.

     7.6. EXPRESS NEGLIGENCE. THE INDEMNIFICATION AGREEMENTS SET FORTH IN THIS AGREEMENT
ARE INTENDED TO, AND SHALL HAVE THE EFFECT OF, INDEMNIFYING A PERSON AGAINST THE RESULTS OF ITS OWN
NEGLIGENCE, OTHER THAN GROSS NEGLIGENCE.

     7.7. Method of Asserting Claims, Etc.

          (a) If any claim or demand for which any Party or Parties (whether one or more,
“Indemnifying Parties”) would be liable to another person or persons (whether one or more,
“Indemnified Parties”) under Section 7.1 or Section 7.2 hereof is asserted
against or sought to be collected from Indemnified Parties by a third party (a “Third-Party
Claim”), Indemnified Parties shall promptly (or, in any event, within such period as may
reasonably be necessary to assure that no defense of the Indemnifying Parties will be prejudiced or
impaired) notify Indemnifying Parties of such Third-Party Claim, specifying the nature of such
Third-Party Claim, and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such Third-Party Claim) (the
“Claim Notice”). Indemnifying Parties shall have 15 days from the date on which the Claim
Notice is given, but, in any event, no longer than five days before the day on which an answer or
other pleading must be served in order to prevent a default judgment in favor of the person
asserting the Third-Party Claim (the “Notice Period”), to notify Indemnified Parties (i)
whether or not they dispute their liability to Indemnified Parties hereunder with respect to such
Third-Party claim and (ii) notwithstanding any such dispute, whether or not they desire, at their
sole cost and expense (subject to resolution of the dispute), to defend Indemnified Parties against
such Third-Party Claim.

          (b) If Indemnifying Parties dispute their liability with respect to such Third-Party Claim or
the amount thereof (whether or not Indemnifying Parties desire to defend Indemnified Parties
against such Third-Party Claim as provided in paragraphs (c) and (d) of this Section 7.7),
such dispute shall be resolved in accordance with Section 7.9 hereof. Pending the
resolution of any dispute by Indemnifying Parties of their liability with respect to any
Third-Party Claim, such Third-Party Claim shall not be settled without the prior written consent of
Indemnified Parties.

          (c) If Indemnifying Parties notify Indemnified Parties within the Notice Period that they
desire to defend Indemnified Parties against such Third-Party Claim, then, except as hereinafter
provided, Indemnifying Parties shall have the right to defend Indemnified Parties by appropriate
proceedings, which proceedings shall be promptly settled or prosecuted by them to a final
conclusion in such a manner as to avoid Indemnified Parties becoming subject to liability for any
other matter; provided, however, Indemnifying Parties shall not, without the prior written consent
of Indemnified Parties, consent to the entry of any judgment or order against Indemnified Parties
or enter into any settlement or compromise which does not include,

 

 

as an unconditional term thereof, the giving by the claimant or plaintiff to Indemnified
Parties of a release, in form and substance satisfactory to Indemnified Parties, from all liability
in respect of such Third-Party Claim. If Indemnified Parties desire to participate in, but not
control, any such defense or settlement, they may do so at their sole cost and expense. If, in the
reasonable opinion of Indemnified Parties, any such Third-Party Claim or the litigation or
resolution of any such Third-Party Claim involves an issue or matter which could have a material
adverse effect on the business, operations, assets, properties or prospects of Indemnified Parties,
including any issue under applicable Tax laws of any Indemnified Parties, then Indemnified Parties
shall have the right to control the defense or settlement of such Third-Party Claim and their costs
and expenses of defense or settlement shall be included as part of the indemnification obligation
of Indemnifying Parties hereunder; provided, however, that Indemnified Parties shall not settle
such Third-Party Claim without the prior written consent of Indemnifying Parties (which consent
shall not be reasonably withheld). If Indemnified Parties should elect to exercise such right,
Indemnifying Parties shall have the right to participate in, but not control, the defense or
settlement of such Third-Party Claim or demand at their sole cost and expense.

             (d)  (i) If Indemnifying Parties elect not to defend Indemnified Parties against such
Third-Party claim, whether by not giving Indemnified Parties timely notice as provided above or
otherwise, then the amount of any such Third-Party Claim, or if the same be defended by
Indemnifying Parties or by Indemnified Parties (but none of Indemnified Parties shall have any
obligation to defend any such Third-Party Claim), then that portion thereof as to which such
defense is unsuccessful, in each case, shall be conclusively deemed to be a liability of
Indemnifying Parties hereunder, unless Indemnifying Parties shall have disputed their liability to
Indemnified Parties, as provided in paragraphs (a) and (b) of this Section 7.7, in which
event such dispute shall be resolved as provided in Section 7.9 hereof.

     (ii) If Indemnified Parties should have a claim against Indemnifying Parties hereunder that
does not involve a Third-Party Claim or that continues after resolution of a Third-Party Claim,
Indemnified Parties shall promptly give a notice with respect to such claim to Indemnifying Parties
(which shall be deemed to have the same effect under Section 7.7(a) hereof as a Claim
Notice). If Indemnifying Parties dispute their liability with respect to such claim, such dispute
shall be resolved in accordance with Section 7.9 hereof; if Indemnifying Parties do not
notify Indemnified Parties within the 15-day Notice Period that they dispute such claim, the amount
of such claim shall be conclusively deemed a liability of Indemnifying Parties hereunder.

     7.8. Payment. Upon the determination of their liability under Section 7.7 or
Section 7.9 hereof, Indemnifying Parties shall pay to Indemnified Parties, within ten days
after such determination, the amount of such liability to be indemnified hereunder. Upon the
payment in full of any claim, the person making payment shall be subrogated to the rights of
Indemnified Parties against any other person with respect to the subject matter of such claim.

 

 

     7.9. Arbitration.

          (a) Any and all disputes under this Agreement shall be resolved or settled by arbitration
before a single arbitrator pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by any Party giving written notice to each other Party to
a dispute that such dispute has been referred to arbitration under this Section 7.9. The
arbitration shall be conducted in Dallas, Texas. The arbitrator shall be selected by the joint
agreement of the parties to the dispute, but if they do not so agree within twenty (20) days after
the date of the notice referred to in the preceding sentence, the selection shall be made pursuant
to the rules of, from the panels of arbitrators maintained by, the American Arbitration
Association. Any award rendered by the arbitrator shall be conclusive and binding upon the Parties
and must be accompanied by a written opinion of the arbitrator giving the reasons for the award.
This provision for arbitration shall be specifically enforceable by the Parties, and judgment on
the arbitration award may be entered and enforced in any court having jurisdiction over the Parties
or their respective assets, it being the intent of the Parties that the arbitration provisions
hereof be enforced to the fullest extent permitted by applicable law. Each Party shall pay its own
expenses of arbitration (including those of its own counsel and witnesses), and the expenses of the
arbitrator shall be shared equally; provided, however, that if in the opinion of the arbitrator any
claim for indemnification or any defense or objection thereto was unreasonable, the arbitrator may
assess, as part of his award, all or any part of the arbitration expenses of the other party to the
dispute (including reasonable attorneys’ fees) and of the arbitrator against the party raising such
unreasonable claim, defense, or objection.

          (b) Nothing contained in this Section 7.9 shall prevent the parties to a dispute from
settling any dispute by mutual agreement at any time. Further, nothing in this Section 7.9
shall limit the rights of the Parties otherwise described in this Agreement to exercise self-help
remedies, such as offset, or to obtain provisional, ancillary, or equitable remedies, such as
injunctive relief for specific performance.

     7.10. Nonexclusive Remedies. Notwithstanding anything to the contrary in this
Agreement, the rights and remedies provided in this Article 7 shall not be exclusive of any
other rights or remedies afforded to any Party, whether by contract, at law or in equity. The
rights and remedies provided in this Agreement are cumulative, and the exercise of any one right or
remedy by any Party shall not preclude or constitute a waiver of its right to exercise any or all
other rights or remedies to which it is entitled.

ARTICLE 8.

MISCELLANEOUS

     8.1. Expenses. Each Party shall pay its own expenses incurred in connection with this
Agreement and the other documents in connection herewith and the transactions contemplated hereby
and thereby. Seller shall pay any and all charges imposed by other parties to the Assumed
Contracts to process requests for consents to the assignment of such Assumed Contracts or estoppel
letters.

     8.2. Reliance. Notwithstanding the investigations conducted, and the opportunities to
investigate and to verify afforded, by each Party hereunder, each Party agrees that the other Party

 

 

or Parties are entitled to rely upon the representations and warranties of that Party made in
this Agreement and the other documents executed, delivered or furnished in connection herewith.

     8.3. Definitions of Knowledge. References herein to the “knowledge” or “the best of
the knowledge” of Seller or Shareholder with respect to (as a qualification of) their respective
representations and warranties herein (to the extent expressly stated herein) shall have the
following meanings:

           (a) With respect to Shareholder, his actual present consciousness and recollection of the
facts set forth in or underlying each such representation or warranty, and his investigation of
matters for the purpose of the transactions contemplated by this Agreement, in each case as a
reasonably prudent person; and

           (b) with respect to Seller, its management’s actual and present consciousness and recollection
of the facts underlying each such representation and warranty, assuming the performance by each
member of the Seller’s management of his managerial obligations in the business and operations of
Seller and his investigation of matters for the purpose of the transactions contemplated by this
Agreement, in each case as a reasonably prudent person.

     8.4. Entire Agreement. This Agreement, the Exhibits and Schedules hereto, and the
other documents executed or delivered pursuant hereto contain the complete agreement among the
Parties with respect to the transactions contemplated hereby and supersede all prior agreements and
understandings among the Parties with respect to such transactions. Section and other headings are
for reference only and shall not affect the interpretation or construction of this Agreement. The
Parties have not made any representations or warranties except as expressly set forth in this
Agreement, the Exhibits, the Schedules, or in any other document executed, delivered or furnished
in connection herewith.

     8.5. Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, and such counterparts together
shall constitute only one original.

     8.6. Notices. All notices, demands, requests and other communications that may be or
are required to be given, made, sent by any Party to any other Party pursuant to this Agreement
shall be in writing and shall be delivered personally, delivered by courier, or mailed by first
class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by
telecopy, addressed as follows:

	 	 	 	 	 
	 

	 	If to Seller:
	 	Popular Cash Express, Inc.
	 

	 	 	 	Popular Cash Express – California, Inc.
	 

	 	 	 	c/o Bernard J. Flaherty
	 

	 	 	 	9600 West Bryn Mawr
	 

	 	 	 	Rosemont, IL 60018
	 

	 	 	 	Fax: 847-994-6835

 

 

	 	 	 	 	 
	 

	 	With a copy to
	 	Brian F. Doran, Esq.
	 

	 	 	 	c/o Banco Popular North America
	 

	 	 	 	120 Broadway-15th Floor
	 

	 	 	 	New York, NY 10271
	 

	 	 	 	Fax: 212-417-6602
	 
	 	 	 	 
	 

	 	If to Purchaser:
	 	ACE Cash Express, Inc
	 

	 	 	 	c/o Walter E. Evans
	 

	 	 	 	1231 Greenway Drive, Suite 600
	 

	 	 	 	Irving, TX 75038
	 

	 	 	 	Fax: 972-582-1426
	 
	 	 	 	 
	 

	 	If to Shareholder:
	 	 Popular North America, Inc.
	 

	 	 	 	c/o Banco Popular North America
	 

	 	 	 	120 Broadway – 15th Floor
	 

	 	 	 	New York, New York 10271
	 

	 	 	 	Attention: Brian F. Doran, Esq.
	 

	 	 	 	Fax: 212-417-6602

Each Party may designate by notice in writing a new address to which any notice, demand, request or
communication may thereafter be so given, made, or sent. Each notice, demand, request or
communication that is mailed, delivered or transmitted in the manner described above shall be
deemed sufficiently given, made, sent and received for all purposes at such time as it is delivered
to or received by the addressee (with the return receipt, the delivery receipt, the affidavit of
courier, or (with respect to a telecopy) the confirmation being deemed conclusive evidence of such
delivery or receipt) or at such time as delivery or receipt is refused by the addressee upon
presentation.

     8.7. Successors and Assigns. This Agreement and the rights, interests and obligations
hereunder shall be binding upon and shall inure to the benefits of the Parties and their respective
heirs, personal representatives, successors and permitted assigns. No Party may assign its or his
rights or obligations under this Agreement without the prior written consent of the other Parties;
any purported assignment without that consent shall be void. No Hired Employee shall be a
beneficiary of any of the Parties’ covenants or obligations under this Agreement.

     8.8. Applicable Law, Venue and Jurisdiction. The laws of the State of Texas shall
govern this Agreement, its terms and conditions, the interpretation hereof, and the rights and
obligations of the Parties hereunder. Any action at law or in equity brought to interpret or
enforce this Agreement or any other document executed or delivered in connection herewith shall be
brought and prosecuted to final adjudication in federal or state courts located in Dallas County,
Texas, and the Parties consent to the jurisdiction of such Texas state and federal courts and agree
to the validity of service of process in any such action by registered or certified mail, return
receipt requested.

     8.9. Amendment; Waiver and Other Action. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Party or Parties against

 

 

which enforcement of the amendment, modification or supplement is sought. No waiver of
compliance with any provision or condition hereof, and no consent provided for herein, will be
effective unless evidenced by an instrument in writing duly executed by the Party sought to be
charged therewith. No failure on the part of either Party to exercise, and no delay in exercising,
any of its rights hereunder will operate as a waiver thereof, nor will any single or partial
exercise by any Party of any right preclude any other or future exercise thereof or the exercise of
any other right.

     8.10. Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable, such provision shall be fully severable, and this Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable provision were never a part hereof; the
remaining provisions hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such illegal, invalid or unenforceable provision, may be
possible and be legal, valid or enforceable.

     8.11. Certain Defined Terms. When used in this Agreement, (i) “include” and
“including” shall not signify any limitation or restriction, (ii) “hereof,”
“herein,” “hereby” and similar terms shall be deemed references to this Agreement
as a whole, (iii) “person” shall include natural persons, entities of any kind, and
governmental authorities, (iv) “Section,” “Exhibit” and “Schedule” shall
refer to a Section, an Exhibit and a Schedule, respectively, of or to this Agreement, unless
otherwise stated and (v) “Business Day” shall mean any Monday through Friday other than any
such day that banks are authorized to be closed in the State of Texas. Pronouns referring to any
gender shall be deemed references to each other gender as appropriate.

     8.12. Confidentiality. At all times after the Effective Date, each of the Parties
will hold, and will cause its officers, representatives, brokers, attorneys, advisers and
affiliates and such affiliates’ respective officers, representatives, brokers, attorneys, advisers
and affiliates to hold, in confidence and not disclose to other persons for any reason whatsoever
this Agreement, the terms hereof, or the transactions contemplated hereby (collectively, the
“Information”), except to the extent (i) necessary for such Party to consummate and give
full effect to the transactions contemplated hereby, (ii) such Information is otherwise available
from third persons without restriction on its further disclosure or is required by order of any
court or by law or by any regulatory agency to which any Party is subject or in connection with any
civil or administrative proceeding (each Party agreeing to give prior notice, to the extent
practicable, to the other party of any required disclosure of the Information to or before any
court or regulatory agency or in any civil or administrative proceeding), or (iii) such Information
is or becomes publicly known other than through actions, direct or indirect, of the other party
hereto, any of its officers, representatives, brokers, attorneys, advisers or affiliates, or any of
such affiliates, respective officers, representatives, brokers, attorneys, advisers or affiliates,
or any affiliate of any of them. Any Party intending to issue a press release regarding the
transactions contemplated under this Agreement shall provide to the other Party, before issuing
such press release, a draft of such press release and a reasonable opportunity to provide comments
thereto. This Section 8.12 shall survive any and all Closings or the termination of this
Agreement.

 

 

     8.13. Negotiated Agreement. All of the Parties have participated in the negotiation
and drafting of this Agreement. In the event of any ambiguity or question of intent or
interpretation arising regarding this Agreement, no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this
Agreement.

     8.14. No Third-Party Beneficiary. Nothing herein is intended to or shall be construed
to confer upon or give to any person other than the Parties and their successors or permitted
assigns any rights or remedies under or by reason of this Agreement.

     8.15. Termination. This Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the first Closing in the following manner:

          (a) by mutual written consent of Seller and Purchaser; or

          (b) by either Seller or Purchaser, if the First Closing Date shall not have occurred on or
before October 31, 2005, unless such failure to close shall be due to a breach of this Agreement by
the Party seeking to terminate this Agreement pursuant to Section 8.15(b); or

          (c) by either Seller or Purchaser, if there shall be any statute, rule, or regulation that
makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or a
governmental authority shall have issued an order, decree, or ruling or taken any other action
permanently restraining, enjoining, or otherwise prohibiting the consummation of the transactions
contemplated hereby, and such order, decree, ruling, or other action shall have become final and
nonappealable; or

          (d) by Seller, if (i) any of the representations and warranties of Purchaser contained in this
Agreement shall not be true and correct, when made or at any time prior to the first Closing Date
as if made at and as of such time, or (ii) Purchaser shall have failed to fulfill any of its
obligations under this Agreement; or

          (e) by Purchaser, if (i) any of the representations and warranties of Seller contained in this
Agreement shall not be true and correct when made or at any time prior to the first Closing as if
made at and as of such time, or (ii) Seller shall have failed to fulfill any of its obligations
under this Agreement.

     8.16. Effect of Termination. In the event of the termination of this Agreement
pursuant to Section 8.15 by Seller or Purchaser, written notice thereof shall forthwith be
given to the other Party specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall terminate and the transactions contemplated hereby shall be
abandoned and of no further force and effect.

 

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

	 	 	 	 	 	 	 
	 	 	SELLER:	 	 
	 
	 	 	 	 	 	 
	 	 	POPULAR CASH EXPRESS, INC.	 	 
	 	 	POPULAR CASH EXPRESS–CALIFORNIA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By :
	 	/s/ BERNARD J. FLAHERTY	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name : Bernard J. Flaherty	 	 
	 

	 	 	 	Title : President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 	 	ACE CASH EXPRESS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By :
	 	/s/ WILLIAM S. MCCALMONT	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name : William S. McCalmont	 	 
	 

	 	 	 	Title : Executive Vice President and CFO	 	 

SHAREHOLDER:

POPULAR NORTH AMERICA, INC.

	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	By :

	 	/s/ ROBERTO R. HERENCIA	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name : Roberto R. Herencia	 	 	 	 
	 

	 	Title : Executive Vice Presidentexv10w2

 

Exhibit 10.2

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS (“BLUE SKY
LAWS”). SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY
LAWS. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE.

			
	 
	 	 
	Issuance Date:                     , 2005
	 	Principal:  U.S. $                    

 

CONVERTIBLE SUBORDINATED PROMISSORY NOTE

     Ace Cash Express, Inc., a Texas corporation (the “Company”), for value received, promises to
pay to Popular Cash Express, Inc., a Delaware corporation, or its registered assigns, (the
“Holder”), the principal sum of                      dollars ($___), in lawful money of the United States
of America and in immediately available funds, plus interest on the principal amount hereof, at the
annual rate of three and five-eighths percent (3.625%), payable in accordance with the terms set
forth in Section 2 hereof.

	 	1.	 	Definitions. Unless the context indicates otherwise, capitalized terms
used herein but not defined herein shall have the meanings given them in the Asset
Purchase Agreement. In addition, the following terms used herein shall have the
following meanings:

	 	1.1	 	“Affiliate” means, with respect to Holder, another person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Holder.
	 
	 	1.2	 	“Asset Purchase Agreement” means the Asset Purchase Agreement
dated as of                     , 2005 between the Holder, the Company and Popular North
America, Inc., a Delaware corporation.

 

 

	 	1.3	 	“Business Day” means any day other than Saturday, Sunday or other
day on which commercial banks in Texas are required or authorized to be closed.
	 
	 	1.4	 	“Change of Control” shall mean (i) any transaction or series of
related transactions as a result of which any person or persons, including but
not limited to any “person” or “group” (as such terms are used in sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), other than the Permitted Investors, acquires beneficial ownership
(as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of more than
50% of (a) the then outstanding shares of common stock of the Company or (b) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (provided,
however, that an underwritten public offering of the Company’s common
stock registered under the Securities Act of 1933, as amended, that has been
approved by a majority of the Continuing Directors shall not be deemed to be a
Change of Control); (ii) any merger, consolidation, share exchange, sale of
assets or other reorganization to which the Company is a party and as a result
of which members of the Board of Directors in office immediately prior to such
transaction or event thereafter constitute less than a majority of the whole
Board of Directors; or (iii) the first day on which a majority of the members of
the Board of Directors of the Company is not constituted by Continuing
Directors. As used herein, “Continuing Directors” shall mean as of any
date of determination, the directors of the Company on the Initial Closing Date
and each other individual becoming a director subsequent to the Closing Date
whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of a majority of the Continuing Directors as of such date,
and “Permitted Investors” shall mean, collectively, (i) all officers of
the Company on the Initial Closing Date, (ii) all members of the Board of
Directors of the Company on the Initial Closing Date, (iii) Raymond C. Hemmig,
(iv) Donald H. Neustadt, (v) Marshall B. Payne, and (vi) Edward W. Rose III.
	 
	 	1.5	 	“Common Stock” means the Company’s common stock, $.01 par value
per share.
	 
	 	1.6	 	“Conversion Date” means the date of the Conversion Notice
delivered to the Company by the Holder in accordance with Section 4
hereof.
	 
	 	1.7	 	“Conversion Price” means $___1 per share of Common
Stock, subject to adjustment as set forth in Section 12 hereof.

 

			
	1	 	This number shall be calculated as follows and
inserted into the executed Note: equal to the product of (A) the average of
the closing stock trading prices of the Common Stock, as 

2

 

	 	1.8	 	“Credit Agreement” means the First Amended and Restated Credit
Agreement, dated as of July 30, 2004, among the Company, the lenders party
thereto, and Wells Fargo Bank, National Association, as Administration Agent, as
such agreement may have been or may be amended, renewed, extended, substituted,
refinanced, restructured, replaced, supplemented or otherwise modified from time
to time (including successive modifications of the foregoing).
	 
	 	1.9	 	“Interest Payment Date” shall mean March 31, June 30, September
30 and December 31 of each year, commencing December 31, 2005.
	 
	 	1.10	 	“Note” means this Convertible Promissory Note.
	 
	 	1.11	 	“Senior Indebtedness” means (i) all indebtedness, liabilities and
obligations of the Company, whether absolute or contingent, now or hereafter
existing, or due or to become due and from time to time outstanding, under or
pursuant to the Credit Agreement (including, without limitation, all principal,
interests, fees, costs, expenses and indemnity obligations thereunder) and any
and all post-petition interest and costs from and after the date of filing of a
petition by or against the Company in any bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding, and (ii) all other indebtedness of the Company and
all obligations of the Company thereunder, whether outstanding on the date of
this Note or thereafter incurred, unless the instrument under which such
indebtedness is incurred expressly provides that it is on parity or subordinated
in right of payment to this Note.

	 	2.	 	Maturity, Payment of Interest.

	 	2.1	 	Maturity. Unless otherwise converted as provided herein,
the outstanding principal under this Note and accrued and unpaid interest
thereon will be due and payable in full on demand at any time after the earlier
to occur of: (i) December 31, 2025; (ii) upon the date of a redemption at the
option of the Company in accordance with Section 5.1 hereof; (iii) upon
the date the Company is obligated to repurchase at the option of the Holder in
accordance with Section 5.2 hereof; or (iv) upon the date the Company is
obligated to repurchase at the option of the Holder in accordance with
Section 5.4 hereof (each a “Maturity Date”).
	 
	 	2.2	 	Interest. The outstanding principal balance of this Note
shall bear interest at 3.625% from the date hereof until the earlier to occur of: (i) the conversion

 

			
	 	 	quoted on the Nasdaq
National Market, during the thirty (30) trading days prior to the date of the
Initial Closing, multiplied by (B) one hundred thirty five percent (135%).

3

 

	 	 	 	pursuant to Section 4.1 hereof; or (ii) the
Maturity Date. Interest shall be computed on the basis of a year of a 360-day
year comprised of twelve 30-day months. Interest shall be paid quarterly in
arrears on each Interest Payment Date. If the principal balance of this Note is
not paid by the Maturity Date, it shall accrue interest until paid in full.

	 	3.	 	Subordination. The indebtedness evidenced by this Note, and the payment
of principal of, premium, if any, and interest on the Notes (including with respect to
any repurchase of the Notes) is hereby expressly subordinated in right of payment to
Senior Indebtedness. So long as any default by the Company has occurred under any
instrument or agreement evidencing any Senior Indebtedness, no payment shall be made in
respect of this Note until, in the case of a payment default, upon the date on which
such default is cured or waived and, in the case of a non-payment default, the earlier
of the date on which such non-payment default is cured or waived or 179 calendar days
after the date on which the applicable payment blockage notice is received by the
Company, unless a payment default has occurred and is continuing, including as a result
of the acceleration of the maturity of any Senior Indebtedness. After a payment
blockage notice is given for a non-payment default, no new period of payment blockage
for a non-payment default may be commenced unless and until three hundred sixty (360)
calendar days have elapsed since the effectiveness of the immediately prior payment
blockage notice and all scheduled payments of principal, premium, if any and interest
on this Note that have come due have been paid in full in cash. Nothing in this
Section 3 hereof shall prohibit conversion of this Note pursuant to Section
4 hereof. Upon any distribution to the creditors of the Company upon any total or
partial liquidation, dissolution or winding up of the Company or in any bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the Company
or its property, whether voluntary or involuntary, or assignment for the benefit of
creditors or any marshalling of the Company’s assets or liabilities, the holders of
Senior Indebtedness shall be entitled to be indefeasibly paid in full in cash before
the Holder shall be entitled to receive any payment. In the event the Holder obtains
any payment in violation of the terms of subordination contained herein, such funds
shall be held in trust for the holders of Senior Indebtedness and paid to them or their
representatives upon request. The Holder may not commence any action or proceeding
against the Company to recover all or any part of this Note unless (a) a representative
of the lenders under the Credit Agreement shall (i) also join in bringing any
proceedings against the Company or (ii) request the Holder to file a claim in any such
proceeding or (iii) the Senior Indebtedness has been indefeasibly paid in fill in cash.
If any payment or other transfer to any holder of Senior Indebtedness is held to
constitute a preference or voidable transfer under applicable state or federal laws, or
if for any other reason any holder of Senior Indebtedness is required to refund such
payment to the payor thereof or to pay the amount thereof to any other Person or to
reconvey any property transferred, such payment or other transfer to such holder of
Senior Indebtedness shall not constitute a release of the Holder from any liability
or obligations hereunder, and the Holder agrees and acknowledges that the

4

 

	 	 	 	subordination provided in this Section 3 shall continue to be effective or
shall be reinstated, as the case may be, to the extent of any such payment or
payments or other transfer. No action or inaction taken by any holders of any Senior
Indebtedness shall in any manner impair the obligations of the Holder or affect the
rights of any holder of any Senior Indebtedness in respect of the subordination
provided in this Section 3.

	 	4.	 	Conversion of the Note. This Note shall be convertible according to the
following terms:

	 	4.1.	 	Conversion. Subject to Section 5.1 hereof, the
Holder is entitled, at the Holder’s option to convert this Note, plus accrued
and unpaid interest, if any, up to, but excluding, the Conversion Date into
fully paid and nonassessable shares of Common Stock at the Conversion Price in
effect at the time of such conversion.
	 
	 	4.2.	 	Mechanics of Conversion. To effect a conversion pursuant
to Section 4.1 hereof, the Holder shall surrender this Note, duly
endorsed, at the principal offices of the Company or any transfer agent for the
Company together with a conversion notice (a “Conversion Notice”) in the Form of
Exhibit A hereto. The Company shall promptly, as soon as practicable
(but in no event later than five (5) Business Days) after receipt of such
notice, issue and deliver at such office to the Holder a certificate or
certificates for the number of shares of Common Stock, to which such Holder
shall be entitled as aforesaid. No fractional shares of Common Stock shall be
issued upon conversion of this Note. In lieu of any fractional shares to which
the Holder would otherwise be entitled, the Company shall pay cash equal to such
fraction multiplied by the effective Conversion Price.
	 
	 	4.3.	 	Effect of Conversion. By delivering the shares of Common
Stock and the cash payment in lieu of any fractional shares to the Holder or
such Holder’s nominee or nominees, the Company shall have satisfied in full its
obligation with respect to such Note, and upon such delivery, accrued and unpaid
Interest, if any, with respect to such Note shall be deemed to be paid in full
rather than canceled, extinguished or forfeited, and such amounts shall no
longer accrue with respect to the Note.
	 
	 	4.4.	 	Restrictions on Conversion. A Note in respect of which
the Holder has delivered a repurchase notice under Section 5.2 or
5.4 hereof may not thereafter be converted, unless the Company defaults
on its obligation to repurchase the Notes under Section 5.2 or
5.4 hereof.

	 	5.	 	Optional Redemption and Repurchase at the Option of the Holder.

	 	5.1.	 	Redemption at the Option of the Company. The Note shall
not be redeemable before December 31, 2010. At any time on or after December
31, 2010, and

5

 

	 	 	 	from time to time thereafter, the Company may redeem the Note in
whole or in part for cash at a redemption price equal to 100% of the principal
amount of the Note, plus accrued and unpaid interest, if any, to, but not
including, the Redemption Date (defined below) by delivering a written notice of
redemption (the “Redemption Notice”) at least thirty (30) calendar days but not
more than ninety (90) calendar days before the date of redemption specified
therein (the “Redemption Date”) to the Holder at the Holder’s address designated
in Section 8 hereof. Upon receipt of the Redemption Notice, the Holder
shall have the opportunity of converting the Note by providing a Conversion
Notice in accordance with Section 4 hereof within ten (10) calendar days
of receipt of the Redemption Notice. If the Holder elects not to convert the
Note in accordance with Section 4 hereof or fails to deliver a
Conversion Notice to the Company within such ten (10) calendar day period, the
Holder’s right to convert the Note shall be suspended unless and until the
Company fails to redeem the Notes on the Redemption Date. In the case where the
Note is called for partial redemption (a) the suspension of the Holder’s right
to convert shall apply only to the portion of the Note being called for
redemption by the Company, and (b) upon redemption, the Company shall execute
and deliver to the Holder, without charge to the Holder, a new Note in an
aggregate principal amount equal to the unredeemed portion of the original Note.
	 
	 	5.2.	 	Purchase by the Company at the Option of the Holder.
On December 31, 2010 or, if such date is not a Business Day, the next Business
Day thereafter (the “Repurchase Date”), at the option of the Holder upon
delivery of a notice of repurchase (the “Repurchase Notice”) to the Company in
accordance with this Section 5.2, the Company shall become obligated to
repurchase, at the option of the Holder, this Note and all other Notes
outstanding issued in connection with the Asset Purchase Agreement at a
repurchase price equal to 100% of the principal amount of the Notes plus
accrued and unpaid interest, if any, to, but not including, the Repurchase
Date. The Repurchase Notice shall be mailed at least ninety (90) calendar days
but not more than one-hundred twenty (120) calendar days before the Repurchase
Date to the Company at the Company’s address designated in Section 8
hereof.
	 
	 	5.3.	 	Effect on Note. Delivery of payment to the Holder or
such Holder’s nominee or nominees upon a redemption by the Company in accordance
with Section 5.1 hereof or a repurchase by the Company at the option of
the Holder in accordance with Sections 5.2 and 5.4 hereof shall
satisfy in full the Company’s obligation with respect to such Note, and upon
such delivery,
accrued and unpaid interest, if any, with respect to such Note shall be
deemed to be paid in full rather than canceled, extinguished or forfeited,
and such amounts shall no longer accrue with respect to the Note, or in the
case of a partial redemption by the Company, the redeemed portion of the
Note.

6

 

	 	5.4.	 	Change of Control. If a Change of Control shall occur at
any time, then the Holder shall have the right to require that the Company
repurchase, at the option of the Holder, this Note and all other Notes
outstanding issued in connection with the Asset Purchase Agreement at a
repurchase price equal to 100% of the principal amount of the Notes plus accrued
and unpaid interest, if any, to but not including the repurchase date. Within
fifteen (15) calendar days following a Change of Control, the Company shall send
a notice to the Holder containing the instructions and materials necessary to
enable the Holder to elect this option. The repurchase date shall be set by the
Company, and shall be no earlier than thirty (30) calendar days nor later than
sixty (60) calendar days from the date the notice is mailed.

	 	6.	 	Defaults and Remedies.

	 	6.1.	 	Events of Default. The following events shall be
considered events of default (“Events of Default”) with respect to the Note:

	 	(a)	 	The Company shall fail to make the payment of any
interest or principal on the Note when the same becomes due and payable
at its Interest Payment Date, with respect to any interest, or its
Maturity Date, with respect to any principal, and (in the case of
interest, but not principal) such failure continues for a period of
fifteen (15) calendar days after written notice of default is given to
the Company by the Holder demanding a cure of such default.
	 
	 	(b)	 	The Company shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its
debts as they become due, or shall file a voluntary petition for
bankruptcy, or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, dissolution or
similar relief under any present or future statute, law or regulation,
or shall file any answer admitting the material allegations of a
petition filed against the Company in any such proceeding, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver
or liquidator of the Company, or of all or any substantial part of the
properties of the Company, or the Company or its respective directors or
majority shareholders shall take any action looking to the dissolution
or liquidation of the Company; or
	 
	 	(c)	 	Within thirty (30) calendar days after the
commencement of any proceeding against the Company seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law
or regulation, such proceeding shall not have been dismissed or, within
thirty (30)

7

 

	 	 	 	calendar days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of
the Company or of all or any substantial part of the properties of the
Company, such appointment shall not have been vacated.
	 
	 	(d)	 	The Company’s failure to cure a breach of its
obligation under Section 4.2 hereof to issue and deliver
promptly certificates for shares of Common Stock upon conversion.

	 	6.2.	 	Remedies. Upon the occurrence of an Event of Default
under Section 6.1(a) or 6.1(d) hereof, at the option and upon
the declaration of the Holder, and upon the occurrence of an Event of Default
under Section 6.1(b) or 6.1(c) hereof automatically and without
any declaration of the Holder, (i) the entire unpaid principal and accrued and
unpaid interest on the Note shall, without presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived, be forthwith due
and payable, and (ii) the Holder may, immediately and without expiration of any
period of grace, enforce payment of all amounts due and owing under such Note
and exercise any and all other remedies granted to it at law, in equity, or
otherwise.
	 
	 	6.3.	 	Set Off. In addition to and not in limitation of any
rights of set off that the Holder may now or hereafter have under applicable
law, the Holder, upon the occurrence and during the continuation of any Event of
Default, is hereby authorized at any time or from time to time, to set off and
to appropriate and apply any and all deposits and any other indebtedness at any
time held or owing by the Holder to or for the credit or the account of the
Company against and on account of the obligations and liabilities of the Company
to the Holder under this Note and all other claims of any nature or description
arising out of or connected with this Note, irrespective of whether or not the
Holder shall have made any demand hereunder and although said obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.

	 	7.	 	Attorneys’ Fees and Costs. If any amount is not paid as and when due
hereunder, the Company agrees to pay all costs of collection and reasonable attorneys’
fees which the Holder may incur.
	 
	 	8.	 	Notices. Unless otherwise provided herein, all notices, requests,
instructions or consents required or permitted under this Note shall be in writing and
will be deemed given (i) when delivered personally; (ii) when sent by confirmed
facsimile; (iii) three (3) Business Days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) two (2) Business
Days after deposit with an

8

 

	 	 	 	internationally recognized commercial overnight carrier
specifying next-day delivery, with written verification of receipt. All communications
shall be addressed as follows:

If to the Company:

Ace Cash Express, Inc.

1231 Greenway Drive, Suite 600

Irving, Texas 75038

Attn: General Counsel

Fax: (972) 582-1426

If to the Holder:

                                        

                                        

                                        

Attn:                    

Fax:

	 	9.	 	Asset Purchase Agreement. This Note is one of the Notes referred to in
the Asset Purchase Agreement and is subject in all respects to the rights and
obligations, including without limitation amendment or waiver, provided therein.
	 
	 	10.	 	Assumption; Assignment. This Note shall be binding upon and inure to
the benefit of the Company and the Holder and their respective successors and assigns,
except that (1) neither the Holder nor the Company may assign or transfer any of its
rights or obligations under this Note without the prior written consent of the other
party (except that the Holder may assign or transfer any of its rights or obligations
to its Affiliates without the prior written consent of the Company), which consent may
not be unreasonably withheld and (2) the Holder may not sell or transfer this Note or
the shares of Common Stock issuable upon conversion of the Note except in conformity
with the requirements of the legend on the first page of this Note. Prior to the
consummation of any Change of Control, the Company shall secure from any person
purchasing the Company’s assets or Common Stock or any successor resulting from such
Change of Control (in each case, an “Acquirer”) a written agreement by the Acquirer to
assume the obligations under this Note or deliver to the Holder a security of the
Acquirer evidenced by a written instrument substantially similar in form and substance
to the Note, including, without limitation, having a principal amount and
interest rate equal to the principal amounts and the interest rate of the Note. Any
purported assignment or transfer in breach of this Section 10 shall be of no
force and effect.

9

 

	 	11.	 	Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed in all respects by the laws of the State of
Texas, without regard to principles of conflicts of law.
	 
	 	12.	 	Conversion Price Adjustment.

	 	12.1.	 	The Company will adjust the Conversion Price if (without
duplication):

	 	(1)	 	Stock Dividends, Combinations, Stock Splits
and Reclassifications: The Company (a) pays a dividend or other
distribution in shares of Common Stock to all holders of Common Stock,
(b) subdivides its outstanding Common Stock into a greater number of
shares, (c) combines its outstanding Common Stock into a smaller number
of shares or (d) reclassifies its outstanding Common Stock, the
Conversion Price in effect immediately prior thereto shall be adjusted
so that the Holder thereafter shall be entitled to receive the number of
shares of Common Stock which the Holder would have owned or been
entitled to receive had the Holder converted the Note at the then
applicable Conversion Price immediately prior to the happening of such
event. An adjustment made pursuant to this Clause (1) shall become
effective immediately after the effective date in the case of
subdivision, combination or reclassification, and shall become effective
immediately after the record date in the case of a dividend or
distribution, provided, however, that the Conversion Price shall be
readjusted to the extent that the dividend or distribution is not
effected.
	 
	 	(2)	 	Distributions of Indebtedness, Securities or
Assets: The Company distributes to all or substantially all holders
of Common Stock any shares of capital stock of the Company (other than
Common Stock) or evidences of its indebtedness, other securities or
other assets, or shall distribute to all or substantially all holders of
Common Stock, rights, warrants or options to subscribe for or purchase
any of its securities (excluding (i) dividends, distributions,
subdivisions and combinations referred to in clause (1) above and (ii)
dividends and distributions paid in cash referred to in Clause (4)
below), then in each such case the Conversion Price shall be decreased
so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such
distribution by a fraction, (a) the numerator of which shall be the
closing sales price of the Common Stock on the record date for the
determination of holders of Common
Stock entitled to receive such distribution minus the fair market
value on such record date (as determined in good faith on a reasonable
basis by the Board of Directors, whose determination shall be
conclusive) of the portion of the capital stock or evidences of
indebtedness, securities

10

 

	 	 	 	or assets so distributed or of such rights,
warrants or options, in each case applicable to one share of Common
Stock, and (b) the denominator of which shall be the closing sales
price on such record date, such adjustment to become effective
immediately after the record date for such distribution; provided that
if the numerator of the foregoing fraction is less than $1.00
(including a negative amount), then in lieu of the foregoing
adjustment, adequate provision shall be made so that the Holder shall
have the right to receive upon conversion, in addition to the cash and
Common Stock issuable upon such conversion, the distribution the
Holder would have received had the Holder converted the Note into
Common Stock at the then applicable Conversion Price immediately prior
to the record date for such distribution; provided further that no
adjustment under this Clause (2) will be made if the Holder is
entitled to participate in the distribution on substantially the same
terms as holders of the Common Stock as if the Holder had converted
the Note into Common Stock immediately prior to such distribution at
the then applicable Conversion Price;
	 
	 	(3)	 	Tender or Exchange Offers: The Company or
any subsidiary of the Company makes a payment in respect of a tender or
exchange offer to holders of Common Stock where the cash and other
consideration included in the payment per share exceeds the closing
sales price of the Common Stock on the last trading day on which tenders
or exchanges may be made pursuant to the tender or exchange offer (as it
may be amended) (the “Offer Expiration Time”), the Conversion Price
shall be decreased so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
Offer Expiration Time by a fraction, (a) the numerator of which shall be
the number of shares of Common Stock outstanding (including any tendered
or exchanged shares) at the Offer Expiration Time multiplied by the
closing sales price of the Common Stock on the trading day upon which
the Offer Expiration Time occurs, and (b) the denominator of which shall
be the sum of (i) the fair market value (as determined in good faith on
a reasonable basis by the Board of Directors, whose determination shall
be conclusive) of the aggregate consideration payable to holders of
Common Stock based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares of Common Stock
validly tendered or exchanged and not withdrawn as of the Offer
Expiration Time (the
            shares deemed so accepted up to any such maximum being referred to as
the “Purchased Shares”) and (ii) the product of the number of shares
of Common Stock outstanding (less any Purchased Shares) at the Offer
Expiration Time and the closing sales price of the Common

11

 

	 	 	 	Stock on the
trading day on which the Offer Expiration Time occurs, such adjustment
to become effective immediately prior to the opening of business on
the day following the Offer Expiration Time.
	 
	 	(4)	 	Cash Distributions: The Company declares
a cash dividend or cash distribution to all or substantially all of the
holders of Common Stock, the Conversion Price shall be decreased so that
the Conversion Price equals the price determined by multiplying the
Conversion Price in effect immediately prior to the record date for such
dividend or distribution by a fraction, (a) the numerator of which shall
be the average of the closing sales prices of the Common Stock for the
three consecutive trading days ending on the trading day immediately
preceding the record date for such dividend or distribution (the
“Pre-Dividend Sale Price”), minus the full amount of the dividend or
distribution to the extent payable in cash applicable to one share of
Common Stock, and (b) the denominator of which shall be the Pre-Dividend
Sale Price, such adjustment to become effective immediately after the
record date for such dividend or distribution; provided that if the
numerator of the foregoing fraction is less than $1.00 (including a
negative amount), then in lieu of the foregoing adjustment, adequate
provision shall be made so that the Holder shall have the right to
receive upon conversion, in addition to the cash and Common Stock
issuable upon such conversion, the amount of cash the Holder would have
received had the Holder converted the Note into Common Stock at the then
applicable Conversion Price immediately prior to the record date for
such cash dividend or cash distribution. If such cash dividend or cash
distribution is not effected, or is only effected in part, the
Conversion Price shall again be adjusted to be the Conversion Price that
would then be in effect to the extent such dividend or distribution had
not been effected.

	 	12.2.	 	If the Company reclassifies its Common Stock or the Company is
a party to a consolidation, merger, share exchange, sale of all or substantially
all of its or our properties and assets or other similar transaction or series
of transactions, in each case pursuant to which the holders of the shares of
Common Stock become entitled to receive (a) any shares of capital stock,
partnership interests, membership interests, or other shares, interests,
participations or other equivalents (however designated and of any class) in the
capital of, or other ownership interests in, any person (“Shares”), (b) cash,
(c) securities, or (d) other assets or property with respect to or in exchange
for Common Stock,
then at the effective time of the transaction, the Holder’s right to convert
the Note into cash and shares of Common Stock will be changed into a right to
convert such Notes into the kind and amount of Shares, cash, securities and
other assets or property that such Holder would have received if such Holder

12

 

	 	 	 	had converted the Note solely into shares of the Common Stock at the then
applicable Conversion Price immediately prior to the effective date of such
transaction. If the Company’s shareholders have a right of election as to
the kind or amount of Shares, cash, securities or other assets or property
receivable upon such reclassification, consolidation, merger, share exchange,
sale or similar transaction or series of transactions, the Holder shall have
the right to elect to convert the Note into the kind and amount of Shares,
cash, securities or other property receivable by the Company’s shareholders
that exercised such election or the kind and amount of cash, securities or
other property by the Company’s shareholders that did not exercise such
election. In connection with the consummation of any transaction subject to
this Section 12.2, the Company shall use its commercially reasonable
efforts to obtain from each person whose Shares, cash, securities or other
assets or property will be issued, delivered or paid to the holders of Common
Stock (other than the Company), a Note Supplement or other document in a form
substantially similar hereto and executed and delivered to the Holder,
whereby such person expressly assumes the obligations to deliver to the
Holder such Shares, cash, securities or other assets or property, as, in
accordance with this Section 12.2 and all other obligations and
liabilities under this Note
	 
	 	12.3.	 	The Conversion Price will not be adjusted for the issuance of
the Common Stock (or securities convertible into or exchangeable for the Common
Stock), except as described above.

[signature page follows]

13

 

	 	 	 	 	 	 	 
	 	 	ACE CASH EXPRESS, INC.	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	By:
	 	William S. McCalmont	 	 
	 

	 	Its:
	 	Executive Vice President and Chief Financial Officer	 	 

14

 

EXHIBIT A

TO CONVERTIBLE PROMISSORY NOTE

NOTICE OF CONVERSION

To: ACE CASH EXPRESS, INC.

	(1)	 	The undersigned hereby elects to convert the attached Convertible Promissory Note pursuant to
the terms of the attached Convertible Promissory Note. The undersigned desires to convert the
entire outstanding principal amount, plus accrued and unpaid interest, if any, up to, but not
including, the Conversion Date

	(2)	 	In converting such Convertible Promissory Note, the undersigned hereby confirms and
acknowledges that the shares of Common Stock (as defined in the Convertible Promissory Note)
are being acquired solely for the account of the undersigned and not as a nominee for any
other party, and for investment, and that the undersigned will not offer, sell, or otherwise
dispose of any such shares of Common Stock except under circumstances that will not result in
a violation of the Securities Act of 1933, as amended, or any state or foreign securities laws
or unless pursuant to Rule 144 of such Securities Act.

	(3)	 	Please issue a certificate or certificates representing said shares of Common Stock in the
name of the undersigned or in such other name as is specified below:

	 	 	 
	 

	 	 
	 

	 	Print Name
	 
	 	 
	 

	 	 
	 

	 	Sign Name
	 
	 	 
	 

	 	 
	 

	 	Date (the “Conversion Date”)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}]]