Document:

exv10w6

 

Exhibit 10.6

[FORM OF SECOND AMENDED AND RESTATED SENIOR SECURED

CONVERTIBLE NOTE]

THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY
REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE
LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

Cash Systems, Inc.

Second Amended and Restated Senior Secured Convertible Note

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

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

 

 

Date”), by and between each of the Buyers (as defined in the Securities Purchase Agreement)
and the Company (the “Amendment and Exchange Agreements”).

          (1) PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay to the Holder
an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued
and unpaid Late Charges, if any, on such Principal and Interest. The “Maturity Date” shall be
October 10, 2011, as may be extended at the option of the Holder (i) in the event that, and for so
long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing on
the Maturity Date (as may be extended pursuant to this Section 1) or any event that shall have
occurred and be continuing that with the passage of time and the failure to cure would result in an
Event of Default and (ii) through the date that is ten (10) Business Days after the consummation of
a Change of Control in the event that a Change of Control is publicly announced or a Change of
Control Notice (as defined in Section 5(b)) is delivered prior to the Maturity Date. Other than as
specifically permitted by the Note, the Company may not prepay any portion of the outstanding
Principal, accrued and unpaid Interest or accrued and unpaid Late Charges, if any, on Principal and
Interest.

          (2) INTEREST; INTEREST RATE. Interest on the outstanding Principal amount of this
Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day
year and actual days elapsed and shall be payable quarterly, in arrears, on January 10, April 10,
July 10 and October 10 of each year (each, an “Interest Date”), with the first Interest Date being
January 10, 2007. Interest shall be payable on each Interest Date, to the record holder of this
Note on the applicable Interest Date, in cash. Prior to the payment of Interest on an Interest
Date, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of
the Interest in the Conversion Amount in accordance with Section 3(b)(i). From and after the
occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased
to twelve percent (12.0%). Notwithstanding anything herein to the contrary, from and after the
occurrence of a Dilutive Issuance Event, the Interest Rate in effect shall be further increased by
one and a half percent (1.5%). In the event that such Event of Default is subsequently cured, the
adjustment referred to in the third sentence of this Section 2 shall cease to be effective as of
the date of such cure; provided that the Interest as calculated and unpaid at such increased rate
during the continuance of such Event of Default shall continue to apply to the extent relating to
the days after the occurrence of such Event of Default through and including the date of cure of
such Event of Default.

          (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), on the terms and conditions set
forth in this Section 3.

               (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times
on or after the Issuance Date, the Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable
shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below).
The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the
issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall
round such fraction of a share of Common Stock up to the nearest whole share. The Company shall
pay any and all taxes that may be payable with respect to the

 

 

issuance and delivery of Common Stock upon conversion of any Conversion Amount;
provided that the Company shall not be required to pay any tax that may be payable in
respect of any issuance of Common Stock to any Person other than the converting Holder or with
respect to any income tax due by the Holder with respect to such Common Stock.

               (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of
any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion
Amount by (y) the Conversion Price (the “Conversion Rate”).

                    (i) “Conversion Amount” means the sum of (A) the portion of the Principal to be converted,
redeemed or otherwise with respect to which this determination is being made, (B) accrued and
unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect
to such Principal and Interest.

                    (ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other date of
determination, $                    , subject to adjustment as provided herein.

               (c) Mechanics of Conversion.

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

 

 

                    (ii) Company’s Failure to Timely Convert. If within three (3) Trading Days after the
Company’s receipt of the facsimile copy of a Conversion Notice the Company shall fail to issue and
deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number
of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any
Conversion Amount (a “Conversion Failure ”), and if on or after such Trading Day the Holder
purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated
receiving from the Company (a “Buy-In”), then the Company shall, within five (5) Business Days
after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”),
at which point the Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) the Closing Bid Price on the Conversion Date.

                    (iii) Registration; Book-Entry. The Company shall maintain a register (the
“Register”) for the recordation of the names and addresses of the holders of each Note and the
principal amount of the Notes held by such holders (the “Registered Notes”). The entries in the
Register shall be conclusive and binding for all purposes absent manifest error. The Company and
the holders of the Notes shall treat each Person whose name is recorded in the Register as the
owner of a Note for all purposes, including, without limitation, the right to receive payments of
principal and interest hereunder, notwithstanding notice to the contrary. A Registered Note may be
assigned or sold in whole or in part only by registration of such assignment or sale on the
Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by a
Holder, the Company shall record the information contained therein in the Register and issue one or
more new Registered Notes in the same aggregate principal amount as the principal amount of the
surrendered Registered Note to the designated assignee or transferee pursuant to Section 18.
Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this
Note in accordance with the terms hereof, the Holder shall not be required to physically surrender
this Note to the Company unless (A) the full Conversion Amount represented by this Note is being
converted or (B) the Holder has provided the Company with prior written notice (which notice may be
included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this
Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late
Charges, if any, converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of
this Note upon conversion.

                    (iv) Pro Rata Conversion; Disputes. In the event that the Company receives a
Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company
can convert some, but not all, of such portions of the Notes submitted for conversion, the Company,
subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted
on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for

 

 

conversion on such date by such holder relative to the aggregate principal amount of all Notes
submitted for conversion on such date. In the event of a dispute as to the number of shares of
Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall
issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in
accordance with Section 23.

                    (v) Company’s Right of Mandatory Conversion.

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

 

 

                    (B) Pro Rata Conversion Requirement. If the Company elects to cause a
conversion of any Conversion Amount of this Note pursuant to Section 3(c)(v)(A), then it
must simultaneously take the same action in the same proportion with respect to the Other
Notes. If the Company elects a Mandatory Conversion of this Note pursuant to Section
3(c)(v)(A) (or similar provisions under the Other Notes) with respect to less than all of
the Conversion Amounts of the Notes then outstanding, then the Company shall require
conversion of a Conversion Amount from each of the holders of the Notes equal to the product
of (I) the aggregate Conversion Amount of Notes which the Company has elected to cause to be
converted pursuant to Section 3(c)(v)(A), multiplied by (II) the fraction, the numerator of
which is the sum of the aggregate Original Principal Amount of the Notes purchased by such
holder of outstanding Notes and the denominator of which is the sum of the aggregate
Original Principal Amount of the Notes purchased by all holders holding outstanding Notes
(such fraction with respect to each holder is referred to as its “Conversion Allocation
Percentage,” and such amount with respect to each holder is referred to as its “Pro Rata
Conversion Amount”); provided, however, that in the event that any holder’s Pro Rata
Conversion Amount exceeds the outstanding Principal amount of such holder’s Note, then such
excess Pro Rata Conversion Amount shall be allocated amongst the remaining holders of Notes
in accordance with the foregoing formula. In the event that the initial holder of any Notes
shall sell or otherwise transfer any of such holder’s Notes, the transferee shall be
allocated a pro rata portion of such holder’s Conversion Allocation Percentage and the Pro
Rata Conversion Amount.

               (d) Limitations on Conversions.

                    (i) Beneficial Ownership. The Company shall not effect any conversion of this Note,
and the Holder of this Note shall not have the right to convert any portion of this Note pursuant
to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together
with the Holder’s affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”)
of the number of shares of Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Note with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock which would be
issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned
by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including, without limitation, any
Other Notes or warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). For purposes of this Section 3(d)(i), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of
Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form 8-K, as the
case may be, (y) a more recent public announcement by the Company or (z) any other notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For
any reason

 

 

at any time, upon the written or oral request of the Holder, the Company shall within two (2)
Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company, including this
Note, by the Holder or its affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. By written notice to the Company, the Holder may increase or
decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until the sixty-first
(61st) day after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of Notes.

                    (ii) Principal Market Regulation. The Company shall not be obligated to issue any
shares of Common Stock upon conversion of this Note, and the Holder of this Note shall not have the
right to receive upon conversion of this Note any shares of Common Stock, if the issuance of such
shares of Common Stock would exceed the aggregate number of shares of Common Stock which the
Company may issue upon conversion or exercise, as applicable, of the Notes and Warrants without
breaching the Company’s obligations under the rules or regulations of the Principal Market, whether
or not the Company’s Common Stock is then listed on the Principal Market (the “Exchange Cap”),
except that such limitation shall not apply in the event that the Company (A) obtains the approval
of its stockholders as required by the applicable rules of the Principal Market for issuances of
Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be reasonably satisfactory to the
Required Holders. Until such approval or written opinion is obtained, no purchaser of the Notes
pursuant to the Securities Purchase Agreement (the “Purchasers”) shall be issued in the aggregate,
upon conversion or exercise, as applicable, of Notes or Warrants, shares of Common Stock in an
amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of
which is the principal amount of Notes issuable to such Purchaser pursuant to the Amendment and
Exchange Agreements on the Replacement Date and the denominator of which is the aggregate principal
amount of all Notes issuable to the Purchasers pursuant to the Amendment and Exchange Agreements on
the Replacement Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In the event
that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes, the transferee
shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the
restrictions of the prior sentence shall apply to such transferee with respect to the portion of
the Exchange Cap Allocation allocated to such transferee. In the event that any holder of Notes
shall convert all of such holder’s Notes into a number of shares of Common Stock which, in the
aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such
holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such
holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes then held by
each such holder. Without limiting the generality of the foregoing, if the Required Holders have
elected a Holder Conversion Price Adjustment Election, until such time as the Company has obtained
the approval of its stockholders as required under the rules and regulations of the Principal
Market, the aggregate number of shares of Common Stock which the Company may issue upon exercise of
the Warrants and upon conversion of the Notes, under the current rules of the Principal Market, may
not be more than Three Million Seven Hundred Fifty-Five Thousand One Hundred Fifty-Four
(3,755,154).

 

 

          (4) RIGHTS UPON EVENT OF DEFAULT.

               (a) Event of Default. Each of the following events shall constitute an “Event of
Default”:

                    (i) the suspension from trading or failure of the Common Stock to be listed on an Eligible
Market for a period of five (5) consecutive Trading Days or for more than an aggregate of ten (10)
Trading Days in any 365-day period;

                    (ii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number
of shares of Common Stock within ten (10) Business Days after the applicable Conversion Date or (B)
notice, written or oral, to any holder of the Notes, including by way of public announcement or
through any of its agents, at any time, of its intention not to comply with a request for
conversion of any Notes into shares of Common Stock that is tendered in accordance with the
provisions of the Notes;

                    (iii) at any time following the tenth (10th) consecutive Business Day that the
Holder’s Authorized Share Allocation is less than the number of shares of Common Stock that the
Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note
(without regard to any limitations on conversion set forth in Section 3(d) or otherwise);

                    (iv) the Company’s failure to pay to the Holder any amount of Principal (including, without
limitation, any redemption payments), Interest, Late Charges or other amounts when and as due under
this Note or any other Transaction Document (as defined in the Securities Purchase Agreement) or
any other agreement, document, certificate or other instrument delivered in connection with the
transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of
a failure to pay Interest and Late Charges when and as due, in which case only if such failure
continues for a period of at least five (5) Business Days;

                    (v) the Company shall either (i) fail to pay, when due, or within any applicable grace period,
any payment with respect to any Indebtedness in excess of $250,000, individually or in the
aggregate, due to any third party, other than, with respect to unsecured Indebtedness only,
payments contested by the Company in good faith by proper proceedings and with respect to which
adequate reserves have been set aside for the payment thereof in accordance with GAAP, or otherwise
be in breach or violation of any agreement for monies owed or owing in an amount in excess of
$250,000, individually or in the aggregate, which breach or violation permits the other party
thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to
exist any other circumstance or event that would, with or without the passage of time or the giving
of notice, result in a default or event of default under any agreement binding the Company, which
default or event of default would or is likely to have a material adverse effect on the business,
operations, properties, prospects of financial condition of the Company or any of its Subsidiaries,
individually or in the aggregate;

                    (vi) the Company or any of its Subsidiaries (other than Cash Systems of Canada, Inc. at any
time while it is not required to comply with Section 14(g)),

 

 

pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or
state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary
case, (B) consents to the entry of an order for relief against it in an involuntary case, (C)
consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a
“Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in
writing that it is generally unable to pay its debts as they become due;

                    (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law
that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B)
appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the
Company or any of its Subsidiaries, other than, in each case, with respect to Cash Systems of
Canada, Inc. at any time while it is not required to comply with Section 14(g));

                    (viii) a final judgment or judgments for the payment of money aggregating in excess of
$500,000 are rendered against the Company or any of its Subsidiaries and which judgments are not,
within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within sixty (60) days after the expiration of such stay; provided, however, that
any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be
included in calculating the $500,000 amount set forth above;

                    (ix) the Company breaches any covenant or other term or condition or any material
representation or warranty of any Transaction Document, except, in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at least ten (10)
consecutive Business Days;

                    (x) any breach or failure in any respect to comply with Section 14 of this Note or failure to
meet any Financial Test set forth in Section 14(f) of this Note; or

                    (xi) any Event of Default (as defined in the Other Notes) occurs with respect to any Other
Notes.

               (b) Redemption Right. Upon the occurrence of an Event of Default with respect to this
Note or any Other Note, the Company shall within (1) Business Day deliver written notice thereof
via facsimile or e-mail and overnight courier (an “Event of Default Notice”) to the Holder. At any
time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder
becoming aware of an Event of Default, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof (the “Event of Default Redemption
Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of
this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the
Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the
greater of (i) the product of (x) the Conversion Amount to be redeemed and (y) the Redemption
Premium and (ii) the product of (A) the Conversion Rate with respect to such Conversion Amount in
effect at such time as the Holder delivers an Event of Default Redemption Notice and (B) the
greater of (1) the Closing Sale Price of the Common Stock on the date immediately preceding such
Event of Default, (2) the Closing Sale Price of the Common Stock on the date immediately after such
Event of Default and (3) the Closing Sale

 

 

Price of the Common Stock on the date the Holder delivers the Event of Default Redemption
Notice (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall
be made in accordance with the provisions of Section 12. To the extent redemptions required by
this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments
of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. The
parties hereto agree that in the event of the Company’s redemption of any portion of the Note under
this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the Holder. Accordingly, any Redemption Premium due
under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

          (5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

               (a) Assumption. The Company shall not enter into or be party to a Fundamental
Transaction unless (i)  the Successor Entity assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with the provisions of
this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental Transaction, including
agreements to deliver to each holder of Notes in exchange for such Notes a security of the
Successor Entity evidenced by a written instrument substantially similar in form and substance to
the Notes, including, without limitation, having a principal amount and interest rate equal to the
principal amounts then outstanding and the interest rates of the Notes held by such holder, having
similar conversion rights as the Notes and having similar ranking to the Notes, and satisfactory to
the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an Eligible Market.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of the Company under
this Note with the same effect as if such Successor Entity had been named as the Company herein.
Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this Note at any time
after the consummation of the Fundamental Transaction, in lieu of the shares of the Company’s
Common Stock (or other securities, cash, assets or other property) issuable upon the conversion or
redemption of the Notes prior to such Fundamental Transaction, such shares of the publicly traded
common stock (or their equivalent) of the Successor Entity (including its Parent Entity), as
adjusted in accordance with the provisions of this Note. The provisions of this Section shall
apply similarly and equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion or redemption of this Note.

               (b) Redemption Right. No sooner than fifteen (15) days nor later than ten (10) days
prior to the consummation of a Change of Control, but not prior to the public announcement of such
Change of Control, the Company shall deliver written notice thereof via

 

 

facsimile and overnight courier to the Holder (a “Change of Control Notice”). At any time
during the period beginning on the date of the Holder’s receipt of a Change of Control Notice and
ending twenty (20) Trading Days after the consummation of such Change of Control, the Holder may
require the Company to redeem all or any portion of this Note by delivering written notice thereof
(“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice
shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note
subject to redemption pursuant to this Section 5 shall be redeemed by the Company in cash at a
price equal to the greater of (i) the product of (x) the Conversion Amount being redeemed and (y)
the quotient determined by dividing (A) the greater of the Closing Sale Price of the Common Stock
immediately prior to the consummation of the Change of Control, the Closing Sale Price immediately
following the public announcement of such proposed Change of Control and the Closing Sale Price of
the Common Stock immediately prior to the public announcement of such proposed Change of Control by
(B) the Conversion Price and (ii) the product of the Conversion Amount being redeemed and the
Change of Control Premium (the “Change of Control Redemption Price”). Redemptions required by this
Section 5 shall be made in accordance with the provisions of Section 12 and shall have priority to
payments to stockholders in connection with a Change of Control. To the extent redemptions
required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 5, but subject to Section
3(d), until the Change of Control Redemption Price is paid in full, the Conversion Amount submitted
for redemption under this Section 5(c) may be converted, in whole or in part, by the Holder into
Common Stock pursuant to Section 3. The parties hereto agree that in the event of the Company’s
redemption of any portion of the Note under this Section 5(b), the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict future interest
rates and the uncertainty of the availability of a suitable substitute investment opportunity for
the Holder. Accordingly, any redemption premium due under this Section 5(b) is intended by the
parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its
investment opportunity and not as a penalty.

          (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

               (a) Purchase Rights. If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which the Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without taking into account any limitations
or restrictions on the convertibility of this Note) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights.

               (b) Other Corporate Events. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive securities or other assets with

 

 

respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall
make appropriate provision to insure that the Holder will thereafter have the right to receive upon
a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon
the consummation of such Corporate Event (without taking into account any limitations or
restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock
otherwise receivable upon such conversion, such securities or other assets received by the holders
of shares of Common Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note initially been issued with
conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a
conversion rate for such consideration commensurate with the Conversion Rate. Provision made
pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to successive Corporate
Events and shall be applied without regard to any limitations on the conversion or redemption of
this Note.

          (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

               (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on
or after the Subscription Date, the Company issues or sells, or in accordance with this Section
7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded
Security) for a consideration per share less than a price (the “Applicable Price”) equal to the
Conversion Price in effect immediately prior to such issue or sale (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the product of (A) the Conversion Price in effect
immediately prior to such Dilutive Issuance and (B) the quotient determined by dividing (1) the sum
of (I) the product derived by multiplying the Conversion Price in effect immediately prior to such
Dilutive Issuance and the number of shares of Common Stock Deemed Outstanding immediately prior to
such Dilutive Issuance plus (II) the consideration, if any, received by the Company upon such
Dilutive Issuance, by (2) the product derived by multiplying (I) the Applicable Price in effect
immediately prior to such Dilutive Issuance by (II) the number of shares of Common Stock Deemed
Outstanding immediately after such Dilutive Issuance. For purposes of determining the adjusted
Conversion Price under this Section 7(a), the following shall be applicable:

                    (i) Issuance of Options. If the Company in any manner grants or sells any Options and
the lowest price per share for which one share of Common Stock is issuable upon the exercise of any
such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon
exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i),
the “lowest price per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable
upon exercise of such Option” shall be equal to

 

 

the sum of the lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of
the Option and upon conversion or exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion Price shall be made upon the
actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock upon conversion or exchange or
exercise of such Convertible Securities.

                    (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share of Common Stock is
issuable upon such conversion or exchange or exercise thereof is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 7(a)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon such conversion or exchange or exercise” shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and
upon the conversion or exchange or exercise of such Convertible Security. No further adjustment of
the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon
conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no
further adjustment of the Conversion Price shall be made by reason of such issue or sale.

                    (iii) Change in Option Price or Rate of Conversion. If the purchase price provided
for in any Options, the additional consideration, if any, payable upon the issue, conversion,
exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities
are convertible into or exchangeable or exercisable for Common Stock changes at any time, the
Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible Securities provided
for such changed purchase price, additional consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the Subscription Date
are changed in the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Conversion Price then in effect.

                    (iv) Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If
any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to be the net amount
received by the Company therefor. If any Common Stock, Options

 

 

or Convertible Securities are issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Closing Sale Price of such securities on the date
of receipt. If any Common Stock, Options or Convertible Securities are issued to the stockholders
of the non-surviving entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any consideration other
than cash or securities will be determined jointly by the Company and the Required Holders. If
such parties are unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation Event”), the fair value of such consideration will be
determined, at the Company’s expense, within five (5) Business Days after the tenth
(10th) day following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such appraiser shall be
deemed binding upon all parties absent manifest error.

                    (v) Record Date. If the Company takes a record of the holders of Common Stock for the
purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of the issue or sale of
the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

               (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock.
If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination will be proportionately increased.

               (c) Other Events. If any event occurs of the type contemplated by the provisions of
this Section 7 but not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company’s Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.

               (d) De Minimis Adjustments. No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least $0.01 in such price;
provided, however, that any adjustment which by reason of this Section 7(d) is not required to be
made shall be carried forward and taken into account in any subsequent

 

 

adjustments under this Section 7. All calculations under this Section 7 shall be made by the
Company in good faith and shall be made to the nearest cent or to the nearest one hundredth of a
share, as applicable. No adjustment need be made for a change in the par value or no par value of
the Company’s Common Stock.

               (e) Conversion Floor Price. Until the earlier to occur of (x) the date of a Holder
Conversion Price Adjustment Election and (y) such time as the Company obtains the approval of its
stockholders as required under the rules and regulations of the Principal Market in order to allow
the Conversion Price to be less than the Conversion Floor Price (as defined below) (the “Required
Stockholder Approval”), no adjustment pursuant to Section 7(a) shall cause the Conversion Price to
be less than $[___], as adjusted for any stock dividend, stock split, stock combination,
reclassification or similar transaction (the “Conversion Floor Price”).

               (f) Holder Conversion Price Adjustment Election. At any time during the twenty-five
(25) Trading Day period following the Company’s public disclosure of its Operating Results (as
defined below) for the year ended December 31, 2007 (such announcement, the “Adjustment
Announcement”), which announcement shall occur on March 17, 2008 after 4:00 P.M. New York time, the
Required Holders may by written notice to the Company (the date of such notice, the “Holder
Conversion Price Adjustment Notice Date”) elect to cause the Conversion Price of the Notes to be
reduced, effective as of the Holder Conversion Price Adjustment Notice Date, to 120% of the
arithmetic average of the Weighted Average Price of the Common Stock for each day during the period
commencing on March 18, 2008, the first Trading Day immediately following the Adjustment
Announcement, and ending on April 15, 2008, the twentieth (20th) Trading Day after the Adjustment
Announcement (a “Holder Conversion Price Adjustment Election”).

          (8) ADDITIONAL REDEMPTIONS

               (a) Holder’s Right of Optional Redemption.

                    (i) On October 10, 2008 (the “Holder Initial Optional Redemption Date”), the Holder shall have
the right, in its sole discretion, by delivering written notice to the Company by September 10,
2008 (a “Holder Initial Redemption Notice”), to require that the Company redeem (a “Holder Initial
Redemption”) such portion of the Conversion Amount of this Note set forth in such Holder Initial
Redemption Notice (the “Holder Initial Optional Redemption Amount”), not to exceed the Maximum
Redemption Amount. The portion of this Note subject to redemption pursuant to this Section 8 shall
be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed (the
“Holder Initial Optional Redemption Price”). Redemptions required by this Section 8 shall be made
in accordance with the provisions of Section 12. Notwithstanding anything to the contrary in this
Section 8, but subject to Section 3(d), until the Holder receives the Holder Initial Optional
Redemption Price, the Holder Initial Optional Redemption Amount may be converted, in whole or in
part, by the Holder into Common Stock pursuant to Section 3, and any such conversion shall reduce
the Holder Initial Optional Redemption Amount.

                    (ii) On October 10, 2009 (the “Holder Additional Optional Redemption Date”, and together with
the Holder Initial Optional Redemption Date, the “Holder

 

 

Optional Redemption Date”), the Holder shall have the right, in its sole discretion, to
require that the Company redeem all or any portion of the Note (a “Holder Additional Redemption”,
and together with the Holder Initial Redemption, the “Holder Redemptions”) by delivering written
notice thereof to the Company by September 10, 2009 (a “Holder Additional Redemption Notice”, and
together with the Holder Initial Redemption Notice, the “Holder Redemption Notices”). The Holder
Additional Redemption Notice shall indicate the Conversion Amount the Holder is electing to have
redeemed (the “Holder Additional Optional Redemption Amount”, and together with the Holder Initial
Optional Redemption Amount, the “Holder Optional Redemption Amount”) on the Holder Additional
Optional Redemption Date. The portion of this Note subject to redemption pursuant to this Section
8 shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed
(the “Holder Additional Optional Redemption Price”, and together with the Holder Initial Optional
Redemption Price, the “Holder Optional Redemption Price”). Redemptions required by this Section 8
shall be made in accordance with the provisions of Section 12. Notwithstanding anything to the
contrary in this Section 8, but subject to Section 3(d), until the Holder receives the Holder
Additional Optional Redemption Price, the Holder Additional Optional Redemption Amount may be
converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3, and any such
conversion shall reduce the Holder Additional Optional Redemption Amount.

               (b) Company Mandatory Redemption.

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

 

 

                    (ii) Pro Rata Redemption Requirement. If the Company elects to cause a Mandatory
Redemption of this Note pursuant to Section 8(b), then it must simultaneously take the same action
in the same proportion with respect to the Other Notes.

          (9) SECURITY. This Note and the Other Notes are secured to the extent and in the
manner set forth in the Security Documents (as defined in the Securities Purchase Agreement).

          (10) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Note, and will at all times in good faith carry out all of the provisions
of this Note and take all action as may be required to protect the rights of the Holder of this
Note.

          (11) RESERVATION OF AUTHORIZED SHARES.

               (a) Reservation. The Company shall initially reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock for each of the Notes equal to 130% of the
Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date.
So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Notes, 130% of the number of shares of Common Stock as shall from
time to time be necessary to effect the conversion of all of the Notes then outstanding; provided
that at no time shall the number of shares of Common Stock so reserved be less than the number of
shares required to be reserved by the previous sentence (without regard to any limitations on
conversions) (the “Required Reserve Amount”). The initial number of shares of Common Stock
reserved for conversions of the Notes and each increase in the number of shares so reserved shall
be allocated pro rata among the holders of the Notes based on the principal amount of the Notes
held by each holder at the Closing (as defined in the Securities Purchase Agreement) or increase in
the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the
event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee
shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated
to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by
such holders.

               (b) Insufficient Authorized Shares. If at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the
Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable

 

 

after the date of the occurrence of an Authorized Share Failure, but in no event later than
sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of authorized shares of
Common Stock. In connection with such meeting, the Company shall provide each stockholder with a
proxy statement and shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its board of directors to recommend to
the stockholders that they approve such proposal.

          (12) HOLDER’S REDEMPTIONS.

               (a) Mechanics. The Company shall deliver the applicable Event of Default Redemption
Price to the Holder within five (5) Business Days after the Company’s receipt of the Holder’s Event
of Default Redemption Notice. If the Holder has submitted a Change of Control Redemption Notice in
accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption
Price to the Holder concurrently with the consummation of such Change of Control if such notice is
received prior to the consummation of such Change of Control and within five (5) Business Days
after the Company’s receipt of such notice otherwise. The Company shall deliver the Holder Initial
Optional Redemption Price on the Holder Initial Optional Redemption Date. The Company shall
deliver the Holder Additional Optional Redemption Price on the Holder Additional Optional
Redemption Date. The Company shall deliver the Mandatory Redemption Price on the Mandatory
Redemption Date. In the event of a redemption of less than all of the Conversion Amount of this
Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed.
In the event that the Company does not pay the applicable Redemption Price to the Holder within the
time period required, at any time thereafter and until the Company pays such unpaid Redemption
Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to
promptly return to the Holder all or any portion of this Note representing the Conversion Amount
that was submitted for redemption and for which the applicable Redemption Price (together with any
Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the
Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company
shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the
Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new
Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which
the Redemption Notice is voided and (B) the lowest Closing Bid Price of the Common Stock during the
period beginning on and including the date on which the Redemption Notice is delivered to the
Company and ending on and including the date on which the Redemption Notice is voided. The
Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company’s obligations to make any payments of Late Charges which have
accrued prior to the date of such notice with respect to the Conversion Amount subject to such
notice.

               (b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the
holders of the Other Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b), Section 5(b) or
Section 8 (each, an “Other Redemption Notice”), the Company shall immediately, but no later than
one (1) Business Day of its receipt thereof, forward to the Holder

 

 

by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or
more Other Redemption Notices, during the seven (7) Business Day period beginning on and including
the date which is three (3) Business Days prior to the Company’s receipt of the Holder’s Redemption
Notice and ending on and including the date which is three (3) Business Days after the Company’s
receipt of the Holder’s Redemption Notice and the Company is unable to redeem all principal,
interest and other amounts designated in such Redemption Notice and such Other Redemption Notices
received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount
from each holder of the Notes (including the Holder) based on the principal amount of the Notes
submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices
received by the Company during such seven Business Day period.

          (13) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this
Note, except as required by law, including, but not limited to, the General Corporation Law of the
State of Delaware and as expressly provided in this Note.

          (14) COVENANTS.

               (a) Rank. All payments due under this Note (A) shall rank pari passu with all Other
Notes and (B) shall be senior to all other Indebtedness of the Company and its Subsidiaries, other
than Permitted Indebtedness secured by Permitted Liens.

               (b) Incurrence of Indebtedness. So long as this Note is outstanding, the Company
shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly,
incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
evidenced by this Note and the Other Notes and (ii) other Permitted Indebtedness.

               (c) Existence of Liens. So long as this Note is outstanding, the Company shall not,
and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or
suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by the Company or any of
its Subsidiaries (collectively, “Liens”) other than Permitted Liens. Within twenty (20) days after
the Issuance Date (the “Existing Lien Release Date”), the Company shall have effected the release
of the Liens set forth on Schedule 3(ll) to the Securities Purchase Agreement (the “Existing
Liens”) and shall have taken such other actions to evidence such release as reasonably requested by
the Holder, including, without limitation the filing of UCC-3 financing statements with the
Secretary of State of Delaware.

               (d) Restricted Payments. The Company shall not, and the Company shall not permit any
of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any
payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by
way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Permitted Indebtedness (other than this Note and the Other Notes), whether by way of payment
in respect of principal of (or premium, if any) or interest on such Indebtedness, if at the time
such payment is due or is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would constitute, an Event
of Default has occurred and is continuing; provided that

 

 

notwithstanding the foregoing, no principal (or any portion thereof) of any Subordinated
Indebtedness may be paid (whether upon maturity, redemption, acceleration or otherwise) so long as
this Note is outstanding.

               (e) Restriction on Redemption and Cash Dividends. Until all of the Notes have been
converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not,
directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on
its capital stock without the prior express written consent of the Required Holders.

               (f) (i) Announcement of Operating Results. Commencing with the Fiscal Quarter ending
December 31, 2006, the Company shall publicly disclose and disseminate its operating results (the
“Operating Results”) (x) for each of the first three Fiscal Quarters of each fiscal year no later
than the forty-fifth (45th) day after the end of such Fiscal Quarter and (y) for the
fourth Fiscal Quarter of each fiscal year, no later than the ninetieth (90th) day after
the end of such Fiscal Quarter. Such Operating Results shall include the amount of the
Consolidated EBITDA and Consolidated Revenues for the preceding Fiscal Quarter, and whether the
Company has (i) Consolidated Revenues equal to or greater than the applicable Consolidated Revenue
threshold set forth in the first row of Table A of the Table of Financial Thresholds attached
hereto as Schedule I (the “Consolidated Revenue Financial Test”), and (ii) Consolidated
EBITDA equal to or greater than the applicable Consolidated EBITDA threshold set forth in the
second row of Table A of the Table of Financial Thresholds attached hereto as Schedule I
(the “Consolidated EBITDA Financial Test” and together with the Consolidated Revenue Financial
Test, the “Financial Tests”), concurrently with each such release of Operating Results, the Company
also shall provide to the holders of Notes a written certification as to the amount of the
Consolidated EBITDA and Consolidated Revenues for the applicable Fiscal Quarter. In addition, if
the Company has failed to meet any Financial Test, the foregoing written certification that the
Company provides to the holders shall also state each Financial Test that has not been met (the
portion of such notice with respect to the failure to meet a Financial Test, a “Financial Covenant
Default Notice”).

                    (ii) Concurrently with the delivery of the Financial Covenant Failure Notice to the holders,
the Company shall also make publicly available (as part of a Quarterly Report on Form 10-Q or on a
Current Report on Form 8-K, or otherwise) the Operating Results and, if the Company has failed to
meet one or more of the Financial Tests, the fact that an Event of Default has occurred under the
Notes.

               (g) Creation of New Subsidiaries. So long as the obligations of the Company under
this Note are outstanding, if the Company shall create or acquire any Subsidiary, simultaneous with
the creation or acquisition of such Subsidiary, the Company shall (i) promptly cause such
Subsidiary to become a guarantor by executing a guaranty in favor of the Holder in form and
substance reasonably acceptable to the Company, the Subsidiary and the Holder, (ii) promptly cause
such Subsidiary to become a grantor under the Security Agreement by executing a joinder to the
Security Agreement in form and substance reasonably acceptable to the Company, the Subsidiary and
the Holder, (iii) promptly cause such Subsidiary to become a pledgor by the Company and such
Subsidiary executing a pledge agreement in form and substance reasonably acceptable to the Company,
the Subsidiary and the Holder, and (iv)

 

 

promptly cause such Subsidiary to duly execute and/or deliver such opinions of counsel and
other documents, in form and substance reasonable acceptable to the Holder, as the Holder shall
reasonably request with respect thereto. In the event that at any time after the Issuance Date,
Cash Systems of Canada, Inc. commences transacting any business or owns any properties or assets in
excess of $5,000, the Company shall promptly cause Cash Systems of Canada, Inc. to comply with the
foregoing sentence.

               (h) Post-Closing Collateral Matters. Execute and deliver the documents and complete
the tasks set forth on Schedule 14(h), in each case within the time limits specified on such
schedule.

          (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to
receive such dividends paid and distributions made to the holders of Common Stock to the same
extent as if the Holder had converted this Note into Common Stock (without regard to any
limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions. Payments under the preceding sentence shall be
made concurrently with the dividend or distribution to the holders of Common Stock.

          (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting
duly called for such purpose or the written consent without a meeting of the Required Holders shall
be required for any change or amendment to this Note or the Other Notes. No consideration shall be
offered or paid to any holder of Notes to amend or consent to a waiver or modification of the Notes
unless the same consideration also is offered to all of the holders of Notes.

          (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder
without the consent of the Company, subject only to the provisions of Section 2(f) of the
Securities Purchase Agreement.

          (18) REISSUANCE OF THIS NOTE.

               (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note
to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder
a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less then the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder
representing the outstanding Principal not being transferred. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal
represented by this Note may be less than the Principal stated on the face of this Note.

               (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note,
and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon surrender and

 

 

cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

               (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes
(in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in
the aggregate the outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

               (d) Issuance of New Notes. Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii)
shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or
in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal
designated by the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining outstanding under
this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as
indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges on the Principal and Interest of this Note, if any, from the Issuance
Date.

          (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The remedies provided in this Note shall be cumulative and in addition to all other remedies
available under this Note and any of the other Transaction Documents at law or in equity (including
a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the Holder’s right to pursue actual and consequential damages for any failure by the Company to
comply with the terms of this Note. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at
law for any such breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of showing economic loss
and without any bond or other security being required.

          (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed
in the hands of an attorney for collection or enforcement or is collected or enforced through any
legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors’ rights and involving
a claim under this Note, then the Company shall pay the costs incurred by the Holder for such
collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, financial advisory fees and
attorneys’ fees and disbursements.

 

 

          (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the
Company and all the Purchasers and shall not be construed against any person as the drafter hereof.
The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.

          (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.

          (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic
calculation of the Conversion Rate or any Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within one (1) Business Day of receipt, or
deemed receipt, of the Conversion Notice or Redemption Notice or other event giving rise to such
dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon
such determination or calculation within one (1) Business Day of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within one Business
Day submit via facsimile (a) the disputed determination of the Closing Bid Price, the Closing Sale
Price or the Weighted Average Price to an independent, reputable investment bank selected by the
Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion
Rate or any Redemption Price to the Company’s independent, outside accountant. The Company, at the
Company’s expense, shall cause the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder of the results no
later than five (5) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.

     (24) NOTICES; PAYMENTS.

               (a) Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at
least twenty (20) days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with such notice being
provided to the Holder.

               (b) Payments. Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Note, such payment shall be made in lawful money of

 

 

the United States of America by a check drawn on the account of the Company and sent via
overnight courier service to such Person at such address as previously provided to the Company in
writing (which address, in the case of each of the Purchasers, shall initially be as set forth on
the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may
elect to receive a payment of cash via wire transfer of immediately available funds by providing
the Company with prior written notice setting out such request and the Holder’s wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day
which is not a Business Day, the same shall instead be due on the next succeeding day which is a
Business Day and, in the case of any Interest Date which is not the date on which this Note is paid
in full, the extension of the due date thereof shall not be taken into account for purposes of
determining the amount of Interest due on such date. Any amount of Principal or other amounts due
under the Transaction Documents which is not paid when due shall result in a late charge being
incurred and payable by the Company in an amount equal to interest on such amount at the rate of
fifteen percent (15%) per annum from the date such amount was due until the same is paid in full
(“Late Charge”).

          (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any
time owed on this Note have been paid in full, this Note shall automatically be deemed canceled,
shall be surrendered to the Company for cancellation and shall not be reissued.

          (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

          (27) GOVERNING LAW; JURISDICTION; SEVERABILITY; JURY TRIAL. This Note shall be
construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of
New York, without giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough
of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. In
the event that any provision of this Note is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of this Note. Nothing contained herein shall be deemed or
operate to preclude the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any
collateral or any other security for such obligations, or to enforce a judgment or other court
ruling in favor of the Holder. THE

 

 

COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS
NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

          (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have
the following meanings:

               (a) “Approved Stock Plan” means any employee benefit plan which has been or hereafter is
approved by the Board of Directors of the Company, pursuant to which the Company’s securities may
be issued to any employee, officer or director for services provided to the Company.

               (b) “Bloomberg” means Bloomberg Financial Markets.

               (c) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

               (d) “Change of Control” means any Fundamental Transaction other than (A) any reorganization,
recapitalization or reclassification of Common Stock, in which holders of the Company’s voting
power immediately prior to such reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other than a corporation)
of such entity or entities, or (B) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

               (e) “Change of Control Premium” means, (i) until the third anniversary of the Issuance Date,
120%, (ii) commencing on the third anniversary of the Issuance Date until the fourth anniversary of
the Issuance Date, 115%, and (iii) commencing on the fourth anniversary of the Issuance Date, 110%.

               (f) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, of such security prior
to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any

 

 

market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.

               (g) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement,
which date is the date the Company initially issued Notes pursuant to the terms of the Securities
Purchase Agreement.

               (h) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common
Stock outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time, but excluding any Common Stock owned or held by
or for the account of the Company or issuable upon conversion or exercise, as applicable, of the
Notes and the Warrants.

               (i) “Consolidated EBITDA” means, for any period, Consolidated Net Income for such period
(without giving effect to any extraordinary gains or losses) adjusted by adding thereto (in each
case to the extent deducted in determining Consolidated Net Income for such period), without
duplication, the amount of (i) total interest expense (subtracting therefrom any interest income)
(inclusive of amortization of deferred financing fees and other original issue discount and banking
fees and charges (e.g., letter of credit fees and commitment fees) including those arising
from any beneficial conversion feature of the Notes) of the Company and its Subsidiaries determined
on a consolidated basis for such period, (ii) provision for taxes based on income and foreign
withholding taxes for the Company and its Subsidiaries determined on a consolidated basis for such
period, (iii) all depreciation and amortization expense of the Company and its Subsidiaries
determined on a consolidated basis for such period, (iv) all non-cash stock compensation expenses
of the Company (i.e., expenses paid through the issuance of equity interests of Company, or options
therefor, rather than in cash) incurred during such period (except to the extent any such expense
will require a cash payment in a future period) and (v) provision for non-recurring expenses in an
aggregate amount not exceeding $2,000,000 for the period commencing on the Issuance Date and
continuing so long as any Notes remain outstanding.

               (j) “Consolidated Net Income” means, for any period, the net income (or loss) of the Company
and its Subsidiaries for such period, determined on a consolidated basis (after any deduction for
minority interests); provided, however, that to the extent any portion of the commodity inventory
of the Company and its Subsidiaries is valued pursuant to GAAP at the end of any period at the
lower of cost or market value, then the net income for such period will be increased by the amount
of any unrealized gains which the Company or any of its Subsidiaries would have recognized if such
commodity inventory had been valued at market value in accordance with GAAP.

 

 

               (k) “Consolidated Revenues” means, for any period, the total consolidated revenues of the
Company and its Subsidiaries for such period, as determined in accordance with GAAP consistent with
past practices.

               (l) Contingent Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.

               (m) “Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.

               (n) “Dilutive Issuance Event” means the occurrence of any of the following Dilutive Issuances:
(i) to the extent the Holder Conversion Price Adjustment Election has occurred, any Dilutive
Issuance with a consideration paid per share of Common Stock (as determined pursuant to Section
7(a) hereof) less than 100% of the Conversion Price on the Holder Conversion Price Adjustment
Notice Date (as adjusted for any stock splits, stock dividends, recapitalizations, combinations,
reverse stock splits or other similar events during such period), or (ii) otherwise, any Dilutive
Issuance with a consideration paid per share of Common Stock (as determined pursuant to Section
7(a) hereof) less than 80% of the Conversion Price on the Replacement Date (as adjusted for any
stock splits, stock dividends, recapitalizations, combinations, reverse stock splits or other
similar events during such period).

               (o) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the
American Stock Exchange, The Nasdaq Global Select Market or The Nasdaq Capital Market.

               (p) “Equity Conditions” means each of the following conditions: (i) on each day during the
period beginning three (3) months prior to the applicable date of determination and ending on and
including the applicable date of determination (the “Equity Conditions Measuring Period”), all
shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants shall be
eligible for sale without restriction and without the need for registration under any applicable
federal or state securities laws; (ii) during the Equity Conditions Measuring Period the Common
Stock is designated for quotation on the Principal Market or any other Eligible Market and shall
not have been suspended from trading on such exchange or market (other than suspensions of not more
than two (2) days and occurring prior to the applicable date of determination due to business
announcements by the Company) nor shall delisting or suspension by such exchange or market been
threatened or pending either (A) in writing by such exchange or market or (B) by falling below the
then effective minimum listing maintenance requirements of such exchange or market; (iii) during
the Equity Conditions Measuring Period, the Company shall have delivered Conversion Shares upon
conversion of the Notes and Warrant Shares upon exercise of the Warrants to the holders on a timely
basis as set forth in Section 2(c)(ii) hereof (and analogous provisions under the Other Notes) and
Sections

 

 

2(a) of the Warrants; (iv) any applicable shares of Common Stock to be issued in connection
with the event requiring determination may be issued in full without violating Section 3(d) hereof
and the rules or regulations of the Principal Market or any other applicable Eligible Market; (v)
during the six (6) month period ending on and including the date immediately preceding the
applicable date of determination, the Company shall not have failed to timely make any payments
within five (5) Business Days of when such payment is due pursuant to any Transaction Document;
(vi) during the Equity Conditions Measuring Period, there shall not have occurred either (A) the
public announcement of a pending, proposed or intended Fundamental Transaction which has not been
abandoned, terminated or consummated, or (B) an Event of Default or (C) an event that with the
passage of time or giving of notice would constitute an Event of Default; (vii) the Company shall
have no knowledge of any fact that would cause any shares of Common Stock issuable upon conversion
of the Notes and shares of Common Stock issuable upon exercise of the Warrants not to be eligible
for sale without the requirement to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144 and any applicable state securities laws; and (viii)
the Company otherwise shall have been in material compliance with and shall not have materially
breached any provision, covenant, representation or warranty of any Transaction Document.

               (q) “Equity Conditions Failure” means that on any day during the period commencing ten (10)
Trading Days prior to the applicable Mandatory Conversion Notice Date through the applicable
Mandatory Conversion Date, the Equity Conditions have not been satisfied (or waived in writing by
the Holder).

               (r) “Excluded Securities” means any Common Stock issued or issuable: (i) (x) in connection
with any Approved Stock Plan to the extent such Common Stock would not result in a Dilutive
Issuance or (y) in connection with any Approved Stock Plan, which Common Stock would result in a
Dilutive Issuance, provided, that such Common Stock does not exceed 300,000 shares of Common Stock
in the aggregate during the immediately preceding twelve (12) month period; (ii) upon conversion of
the Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized underwriter which generates gross
proceeds to the Company in excess of $20,000,000 (other than an “at-the-market offering” as defined
in Rule 415(a)(4) under the 1933 Act and “equity lines”); (iv) upon conversion of any Options or
Convertible Securities which are outstanding on the day immediately preceding the Subscription
Date, provided that the terms of such Options or Convertible Securities are not amended, modified
or changed on or after the Subscription Date; and (v) in connection with mergers, acquisitions,
strategic business partnerships or joint ventures, in each case with non-affiliated third parties
and otherwise on an arm’s-length basis, the primary purpose of which, in the reasonable judgment of
the Company’s Board of Directors, is not to raise additional capital.

               (s) “Fiscal Quarter” means each of the fiscal quarters adopted by the Company for financial
reporting purposes that correspond to the Company’s fiscal year as of the date hereof that ends on
December 31.

               (t) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person or Persons, if the

 

 

holders of the Voting Stock (not including any shares of Voting Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making or party to, such
consolidation or merger) immediately prior to such consolidation or merger shall hold or have the
right to direct the voting of less than 50% of the Voting Stock or such voting securities of such
other surviving Person immediately following such transaction, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or assets of the Company
to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that
is accepted by the holders of more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the Person or Persons making or party to, or
associated or affiliated with the Persons making or party to, such purchase, tender or exchange
offer), or (iv) consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the outstanding shares of
Voting Stock (not including any shares of Voting Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify
its Common Stock or (vi) any “person” or “group” (as these terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting
power represented by issued and outstanding Common Stock.

               (u) “GAAP” means United States generally accepted accounting principles, consistently applied.

               (v) “Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed
money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) “capital leases” in accordance with generally
accepted accounting principles (other than trade payables entered into in the ordinary course of
business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (v) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (vi) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness
referred to in clauses (i) through (vi) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness, and (viii) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to
in clauses (i) through (vii) above.

 

 

               (w) “Maximum Redemption Amount” means such portion this Note equal to the product of (i) $12.1
million and (ii) the quotient of (x) the Principal of this Note outstanding immediately following
the Replacement Date and (y) the principal amount of all the Notes outstanding immediately
following the Replacement Date.

               (x) “Options” means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.

               (y) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

               (z) “Permitted Indebtedness” means (i) Indebtedness incurred by the Company that is made
expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected
in a written agreement acceptable to the Holder and approved by the Holder in writing, and which
Indebtedness does not provide at any time for (1) the payment, prepayment, repayment, repurchase or
defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one
(91) days after the Maturity Date or later and (2) total interest and fees at a rate in excess of
six and one-half percent (6.50%) per annum (such Indebtedness, the “Subordinated Indebtedness”);
provided, however, that any Subordinated Indebtedness incurred in connection with the repayment of
the Notes shall not be limited by clause (2) of the foregoing, (ii) Indebtedness secured by
Permitted Liens (other than the Existing Liens), (iii) Indebtedness under this Note and the Other
Notes, and (iv) extensions, refinancings and renewals of any items in clauses (i) through (ii)
above, provided that the principal amount is not increased or the terms modified to impose more
burdensome terms upon the Company or its Subsidiaries, as the case may be.

               (aa) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or delinquent, (iii)
any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other
similar liens, arising in the ordinary course of business with respect to a liability that is not
yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv)
Liens (A) upon or in any equipment (as defined in the Security Agreement) acquired or held by the
Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B)
existing on such equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of such equipment,
(v) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (i) and (iv) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and
the principal amount of the Indebtedness being extended, renewed or refinanced does not increase,
(vi) Liens securing the Company’s obligations under the Notes; (vii) leases or subleases and
licenses and sublicenses granted to others in the ordinary

 

 

course of the Company’s business, not interfering in any material respect with the business of
the Company and its Subsidiaries taken as a whole, (viii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of custom duties in connection with the
importation of goods, (ix) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Section 4(a)(vii), (x) Liens created in favor of certain
financial institutions to secure the Company’s obligations under its automated teller machine cash
agreements, (xi) Liens created in favor of credit card processors on accounts designated under the
Company’s credit processing arrangements, and (xii) prior to the Existing Lien Release Date, the
Existing Liens.

     
          (bb) “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a government
or any department or agency thereof.

               (cc) “Principal Market” means The Nasdaq Global Market.

               (dd) “Redemption Notices” means, collectively, the Event of Default Redemption Notices, the
Change of Control Redemption Notices, the Mandatory Redemption Notice, the Holder Initial
Redemption Notice and the Holder Additional Redemption Notice, each of the foregoing, individually,
a Redemption Notice.

               (ee) “Redemption Premium” means (i) in the case of the Events of Default described in Section
4(a)(i) — (v) and (viii) — (xi), 120% or (ii) in the case of the Events of Default described in
Section 4(a)(vi) — (vii), 100%.

               (ff) “Redemption Prices” means, collectively, the Event of Default Redemption Price, Change of
Control Redemption Price, the Mandatory Redemption Price, the Holder Initial Optional Redemption
Price and the Holder Additional Optional Redemption Price, each of the foregoing, individually, a
Redemption Price.

               (gg) “Required Holders” means the holders of Notes representing at least two-thirds
(2/3rd) of the aggregate principal amount of the Notes then outstanding.

               (hh) “SEC” means the United States Securities and Exchange Commission.

               (ii) “Securities Purchase Agreement” means that certain securities purchase agreement dated as
of the Subscription Date by and among the Company and the initial holders of the Notes pursuant to
which the Company issued the Notes, as amended from time to time in accordance with its terms,
including, without limitation, pursuant to the Amendment and Exchange Agreements.

               (jj) “Subscription Date” means October 6, 2006.

               (kk) “Subsidiary” means any entity in which the Company, directly or indirectly, owns any of
the capital stock or holds an equity or similar interest. For purposes of this Note, the joint
venture entered into between the Company, Bally Gaming, Inc. and Scotch Twist, Inc. shall not be
considered a Subsidiary.

 

 

               (ll) “Successor Entity” means the Person, which may be the Company, formed by, resulting from
or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded entity whose common
stock or equivalent equity security is quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person’s Parent Entity.

               (mm) “Trading Day” means any day on which the Common Stock is traded on the Principal Market,
or, if the Principal Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is then traded;
provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York Time).

               (nn) “Voting Stock” of a Person means capital stock of such Person of the class or classes
pursuant to which the holders thereof have the general voting power to elect, or the general power
to appoint, at least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency).

               (oo) “Warrants” has the meaning ascribed to such term in the Securities Purchase Agreement,
and shall include all warrants issued in exchange therefor or replacement thereof.

               (pp) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period beginning
at 9:30:01 a.m., New York Time (or such other time as the Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading) as reported by Bloomberg
through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as such market publicly announces is the official open of trading), and ending at
4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official
close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Weighted Average Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and the Holder are
unable to agree upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 23. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.

 

 

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

[Signature Page Follows]

 

 

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

	 	 	 	 	 
	 	CASH SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

EXHIBIT I

CASH SYSTEMS, INC.

CONVERSION NOTICE

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

	 	 	 	 	 	 	 	 	 
	 	 	Date of Conversion:

	 
	 	 	 	 	 	 	 	 
	 	 	Aggregate Conversion Amount to be converted:

	 
	 	 	 	 	 	 	 	 
	Please confirm the following information:
	 
	 	 	 	 	 	 	 	 
	 	 	Conversion Price:

	 
	 	 	 	 	 	 	 	 
	 	 	Number of shares of Common Stock to be issued:

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

	 	 	

	 	 	

	 	 	

	 	 	

	 
	 	 	 	 	 	 	 	 
	 	 	Facsimile
Number:   

	 
	 	 	 	 	 	 	 	 
	 	 	Authorization:

	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Dated:
	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Account Number:

	 	 	     (if electronic book entry transfer)
	 
	 	 	 	 	 	 	 	 
	 	 	Transaction Code Number:

	 	 	     (if electronic book entry transfer)

 

 

ACKNOWLEDGMENT

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

	 	 	 	 	 
	 	CASH SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

Schedule I

Table of Financial Thresholds

Table A Financial Tests

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

 

 

Schedule 14(h)

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

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

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

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

          3. (a) If at any time after November 7, 2006, the average daily balance of any account of the
Company that is not subject to an account control agreement in favor of the Collateral Agent
exceeds $250,000 during any calendar month (including the calendar month in which the Closing Date
occurs), the Company shall, within twenty (20) Business Days following the last day of such
calendar month, deliver to the Collateral Agent an account control agreement, in form and substance
reasonably satisfactory to the Collateral Agent, duly executed by the Company and the depositary
bank in which such account is maintained.

               (b) Notwithstanding anything to the contrary contained in clause (a) above, and without
limiting any of the foregoing, if at any time on or after November 7, 2006, the total aggregate
amount of the Company’s cash that is not subject to a control agreement in favor of the Collateral
Agent exceeds $1,000,000 (the “Maximum Free Cash Amount”), the Company shall within two (2)
Business Days following such date, transfer to an account subject

 

 

to an account agreement in favor of the Collateral Agent an amount sufficient to reduce the
total aggregate amount of the Company’s cash that is not subject to an account control agreement in
favor of the Collateral Agent to an amount not in excess of the Maximum Free Cash Amount.exv10w7

 

Exhibit 10.7

[FORM OF SECOND AMENDED AND RESTATED WARRANT]

THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

CASH SYSTEMS, INC.

Second Amended and Restated Warrant To Purchase Common Stock

Warrant No.:                     

Number of Shares of Common Stock:                    

Date of Issuance: October 10, 2006 (“Issuance Date”)

          Cash Systems, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [PORTSIDE
GROWTH AND OPPORTUNITY FUND] [OTHER BUYERS], the registered holder hereof or its permitted assigns
(the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase
Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or
replacement hereof, the “Warrant”), at any time or times on or after the date hereof but not after
11:59 p.m., New York time, on the Expiration Date (as defined below), [          ] ([          
]) fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”).
Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 14. This Warrant amends, supplements, modifies and completely restates and
supersedes the Amended and Restated Warrants (the “Existing Warrants,” which amended and restated
the warrants, dated as of the Issuance Date (the “Existing Warrants”), issued by the Company to the
Holder for the exercise of [          ] shares of Common Stock, but shall not, except as
specifically amended hereby or as set forth in the Holder’s Second Amendment and Exchange Agreement
(as defined below), constitute a release, satisfaction or novation of any of the obligations under
the Existing Warrants or any other Transaction Document (as defined in the Securities Purchase
Agreement). This Warrant is one of an issue of Warrants to Purchase Common Stock (the “SPA
Warrants”) amending and restating the terms of the Existing Warrants pursuant to Section 1 of those
certain Second Amendment and Exchange Agreements, dated as of March 14, 2008 (the “Replacement
Date”), by and between each of the Buyers (as defined in the Securities Purchase Agreement) and the
Company (the “Second Amendment and Exchange Agreements”).

          1. EXERCISE OF WARRANT.

          (a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this Warrant may
be exercised by the Holder on any day on or after the date hereof, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as Exhibit A (the
“Exercise Notice”), of the Holder’s election to exercise this Warrant and (ii) (A) payment to
the

 

 

Company of an amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in
cash or by wire transfer of immediately available funds or (B) by notifying the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)).
The Holder shall not be required to deliver the original Warrant in order to effect an
exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than
all of the Warrant Shares shall have the same effect as cancellation of the original Warrant
and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. On or before the second (2nd) Business Day following the date on which the
Company has received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise) (the “Exercise Delivery Documents”), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to
the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third
(3rd) Trading Day following the date on which the Company has received all of the
Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that
the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such aggregate number of
Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission
system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company’s share register in the name of the
Holder or its designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the
Holder shall be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date
such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If this Warrant is submitted
in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three (3) Business Days after any exercise and at its own expense, issue a
new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the
number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.
The Company shall pay any and all taxes which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.

          (b) Exercise Price. For purposes of this Warrant, “Exercise Price” means
$                    , subject to adjustment as provided herein; provided, that if the Required
Holders make a Holder Conversion Price Adjustment Election (as defined in the SPA Securities),
the Exercise Price shall be reduced to the Conversion Price resulting from

-2-

 

the Holder Conversion Price Adjustment Election pursuant to Section 7(f) of the SPA
Securities.

          (c) Company’s Failure to Timely Deliver Securities. If the Company shall fail
for any reason or for no reason to issue to the Holder within five (5) Business Days of
receipt of the Exercise Delivery Documents, a certificate for the number of shares of Common
Stock to which the Holder is entitled and register such shares of Common Stock on the
Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this
Warrant, then, in addition to all other remedies available to the Holder, the Company shall
pay in cash to the Holder on each day after such fifth (5th) Business Day that the
issuance of such shares of Common Stock is not timely effected an amount equal to 1.0% of the
product of (A) the sum of the number of shares of Common Stock not issued to the Holder on a
timely basis and to which the Holder is entitled and (B) the Weighted Average Price of the shares of Common Stock on the Trading Day immediately preceding the last possible date which
the Company could have issued such shares of Common Stock to the Holder without violating
Section 1(a). In addition to the foregoing, if within three (3) Trading Days after the
Company’s receipt of the facsimile copy of a Exercise Notice the Company shall fail to issue
and deliver a certificate to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder,
and if on or after such Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares
of Common Stock issuable upon such exercise that the Holder anticipated receiving from the
Company (a “Buy-In”), then the Company shall, within five (5) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
to the Holder’s total purchase price (including brokerage commissions, if any) for the shares
of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to
deliver such certificate (and to issue such Warrant Shares) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates representing such
Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the
Weighted Average Price on the date of exercise.

          (d) Cashless Exercise. Notwithstanding anything contained herein to the
contrary, if a registration statement covering the resale of the Warrant Shares that are the
subject of the Exercise Notice by the Holder pursuant to the 1933 Act (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable Warrant Shares, the
Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula (a “Cashless
Exercise”):

-3-

 

	 	 	 	 	 	 	 
	 

	 	Net Number =
	 	(A x B) — (A x C)

                B
	 	 
	 
	 	 	 	 	 	 
	 	 	For purposes of the foregoing formula:	 	 

	 	 	 	A= the total number of shares with respect to which
this Warrant is then being exercised.
	 
	 	 	 	B= the Weighted Average Price of the shares of Common
Stock (as reported by Bloomberg) on the date immediately
      preceding
the date of the Exercise Notice.
	 
	 	 	 	C= the Exercise Price then in effect for
the applicable Warrant Shares at the time of such
exercise.

          (e) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to
the Holder the number of Warrant Shares that are not disputed and resolve such dispute in
accordance with Section 12.

          (f) Limitations on Exercises; Beneficial Ownership.

(i) The Company shall not effect the exercise of this Warrant, and the
Holder shall not have the right to exercise this Warrant, to the extent that
after giving effect to such exercise, such Person (together with such
Person’s affiliates) would beneficially own in excess of 4.99% the “Maximum
Percentage”) of the shares of Common Stock outstanding immediately after
giving effect to such exercise. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude shares of
Common Stock which would be issuable upon (x) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and
its affiliates and (y) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially
owned by such Person and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For
purposes of this Warrant, in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form
10-KSB, Form 10-Q, Form 10-QSB, Current Report on

-4-

 

Form 8-K or other public filing with the Securities and Exchange Commission
(“SEC”) as the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent setting
forth the number of shares of Common Stock outstanding. For any reason at
any time, upon the written or oral request of the Holder, the Company shall
within two (2) Business Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company by the
Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written notice to the
Company, the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the
Company.

(ii) Principal Market Regulation. The Company shall not be
obligated to issue any shares of Common Stock upon exercise of this Warrant
and the Holder shall not have the right to receive upon exercise of this
Warrant any shares of Common Stock, if the issuance of such shares of Common
Stock would exceed the aggregate number of shares of Common Stock which the
Company may issue upon exercise of this Warrant (including, as applicable,
any shares of Common Stock issued upon conversion of the SPA Securities)
without breaching the Company’s obligations under the rules or regulations
of the Principal Market, whether or not the Company’s Common Stock is then
listed on the Principal Market (the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company (A) obtains the
approval of its stockholders as required by the applicable rules of the
Principal Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders. Until such approval or written
opinion is obtained, no Holder shall be issued, upon exercise or conversion,
as applicable, of any SPA Warrants or SPA Securities, shares of Common Stock
in an amount greater than the product of the Exchange Cap multiplied by a
fraction, the numerator of which is the total number of shares of Common
Stock issuable to such Holder pursuant to the Second Amendment and Exchange
Agreement on the Replacement Date and the denominator of which is the
aggregate number of shares of Common Stock issuable to the Holders pursuant
to the Second Amendment and Exchange Agreement on the Replacement Date (with
respect to each Holder, the “Exchange Cap Allocation”). In the event that
any Holder shall sell or otherwise transfer any of such Holder’s SPA
Warrants, the transferee shall be allocated a pro rata portion of such
Holder’s Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the

-5-

 

Exchange Cap Allocation allocated to such transferee. In the event that any
Holder of SPA Warrants shall exercise all of such Holder’s SPA Warrants into
a number of shares of Common Stock which, in the aggregate, is less than
such Holder’s Exchange Cap Allocation, then the difference between such
Holder’s Exchange Cap Allocation and the number of shares of Common Stock
actually issued to such Holder shall be allocated to the respective Exchange
Cap Allocations of the remaining Holders of SPA Warrants on a pro rata basis
in proportion to the shares of Common Stock underlying the SPA Warrants then
held by each such Holder. In the event that the Company is prohibited from
issuing any Warrant Shares for which an Exercise Notice has been received as
a result of the operation of this Section 1(f)(ii), the Company shall pay
cash in exchange for cancellation of such Warrant Shares, at a price per
Warrant Share equal to the difference between the Closing Sale Price and the
Exercise Price as of the date of the attempted exercise. Without limiting
the generality of the foregoing, if the Required Holders have elected a
Holder Conversion Price Adjustment Election (as defined in the SPA
Securities), until such time as the Company obtains the approval of its
Stockholders as required under the rules and regulations of the Principal
Market, the aggregate number of shares of Common Stock which the Company may
issue upon exercise of this Warrant and upon conversion of the SPA
Securities, under the current rules of the Principal Market, may not be more
than Three Million Seven Hundred Fifty-Five Thousand One Hundred Fifty-Four
(3,755,154).

          (g) Insufficient Authorized Shares. If at any time while this Warrant remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares
of Common Stock to satisfy its obligation to reserve for issuance upon exercise of this
Warrant at least a number of shares of Common Stock equal to 130% (the “Required Reserve
Amount”) of the number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of this Warrant then outstanding (an “Authorized Share Failure”),
then the Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the
Required Reserve Amount for this Warrant then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of
such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the
approval of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each stockholder with a proxy statement and shall
use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders
that they approve such proposal.

-6-

 

     2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:

          (a) Adjustment upon Issuance of shares of Common Stock. If and whenever on or
after the Subscription Date, the Company issues or sells, or in accordance with this Section 2
is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued by the Company in connection with any
Excluded Securities (as defined in the SPA Securities) for a consideration per share (the “New
Issuance Price”) less than a price (the “Applicable Price”) equal to the Exercise Price in
effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a
“Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then
in effect shall be reduced to an amount equal to the product of (A) the Exercise Price in
effect immediately prior to such Dilutive Issuance and (B) the quotient determined by dividing
(1) the sum of (I) the product derived by multiplying the Exercise Price in effect immediately
prior to such Dilutive Issuance and the number of shares of Common Stock Deemed Outstanding
immediately prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the
Exercise Price in effect immediately prior to such Dilutive Issuance by (II) the number of shares of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. Upon each
such adjustment of the Exercise Price hereunder, the number of Warrant Shares shall be
adjusted to the number of shares of Common Stock determined by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of Warrant Shares acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment. For purposes of determining the
adjusted Exercise Price under this Section 2(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants any
Options and the lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by
the Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 2(a)(i), the “lowest price
per share for which one share of Common Stock is issuable upon exercise of
such Options or upon conversion, exercise or exchange of such Convertible
Securities issuable upon exercise of any such Option” shall be equal to the
sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price or
number of Warrant

-7-

 

Shares shall be made upon the actual issuance of such shares of Common Stock
or of such Convertible Securities upon the exercise of such Options or upon
the actual issuance of such shares of Common Stock upon conversion, exercise
or exchange of such Convertible Securities.

(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 2(a)(ii), the “lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange thereof” shall
be equal to the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common Stock upon
the issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security. No further adjustment of
the Exercise Price or number of Warrant Shares shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the Exercise Price
or number of Warrant Shares shall be made by reason of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion, exercise or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exercisable or exchangeable for shares of Common Stock increases or
decreases at any time, the Exercise Price and the number of Warrant Shares
in effect at the time of such increase or decrease shall be adjusted to the
Exercise Price and the number of Warrant Shares which would have been in
effect at such time had such Options or Convertible Securities provided for
such increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 2(a)(iii),
if the terms of any Option or Convertible Security that was outstanding as
of the date of issuance of this Warrant are increased or decreased in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued
as of the date of such increase or decrease. No adjustment pursuant to this
Section 2(a) shall be made if such adjustment would result in an increase of
the

-8-

 

Exercise Price then in effect or a decrease in the number of Warrant Shares.

(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for a consideration of $0.01. If
any shares of Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by the
Company therefor. If any shares of Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the
amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Company will be the Weighted Average Price of such security on the date of
receipt. If any shares of Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other
than cash or securities will be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within ten
(10) days after the occurrence of an event requiring valuation (the
“Valuation Event”), the fair value of such consideration will be determined
within five (5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such
appraiser shall be final and binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the Company.

(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.

-9-

 

          (b) Adjustment upon Subdivision or Combination of Common Stock. If the Company
at any time on or after the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the Subscription Date
combines (by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination will be proportionately increased and the number
of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective at the close of business on the date the subdivision or combination
becomes effective.

          (c) Other Events. If any event occurs of the type contemplated by the provisions
of this Section 2 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights
of the Holder; provided that no such adjustment pursuant to this Section 2(c) will increase
the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.

          (d) De Minimis Adjustments. No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease of at least $0.01 in
such price; provided, however, that any adjustment which by reason of this Section 7(d) is not
required to be made shall be carried forward and taken into account in any subsequent
adjustments under this Section 7. All calculations under this Section 7 shall be made by the
Company in good faith and shall be made to the nearest cent or to the nearest one hundredth of
a share, as applicable. No adjustment need be made for a change in the par value or no par
value of the Company’s Common Stock.

          (e) Floor Price. Until the earlier to occur of (x) the date of a Holder
Conversion Price Adjustment Election and (y) such time as the Company obtains the approval of
its stockholders as required under the rules and regulations of the Principal Market in order
to allow the Exercise Price to be less than the Exercise Floor Price (as defined below) (the
“Required Stockholder Approval”), no adjustment pursuant to Section 2(a) or 2(d) shall cause
the Exercise Price to be less than $___, as adjusted for any stock dividend, stock split,
stock combination, reclassification or similar transaction (the “Exercise Floor Price”).

          3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares
of Common Stock, by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a dividend, spin
off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:

-10-

 

          (a) any Exercise Price in effect immediately prior to the close of business on the record
date fixed for the determination of holders of shares of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such record date, to a
price determined by multiplying such Exercise Price by a fraction of which (i) the numerator
shall be the Weighted Average Price of the shares of Common Stock on the Trading Day
immediately preceding such record date minus the value of the Distribution (as determined in
good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and
(ii) the denominator shall be the Weighted Average Price of the shares of Common Stock on the
Trading Day immediately preceding such record date; and

          (b) the number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock entitled to
receive the Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding paragraph (a); provided that in the event that the Distribution is of
shares of Common Stock (or common stock) (“Other Shares of Common Stock”) of a company whose
common shares are traded on a national securities exchange or a national automated quotation
system, then the Holder may elect to receive a warrant to purchase Other Shares of Common
Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be exercisable into the
number of shares of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such
record date and with an aggregate exercise price equal to the product of the amount by which
the exercise price of this Warrant was decreased with respect to the Distribution pursuant to
the terms of the immediately preceding paragraph (a) and the number of Warrant Shares
calculated in accordance with the first part of this paragraph (b).

     4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

          (a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above,
if at any time the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to
any limitations on the exercise of this Warrant) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights.

          (b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless (i)  the Successor Entity assumes in writing all of the
obligations of the Company under this Warrant and the other Transaction

 - 11 - 

 

Documents in accordance with the provisions of this Section (4)(b) pursuant to written
agreements in form and substance satisfactory to the Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including agreements to deliver to
each holder of the SPA Warrants in exchange for such Warrants a security of the Successor
Entity evidenced by a written instrument substantially similar in form and substance to this
Warrant, including, without limitation, an adjusted exercise price equal to the value for the
shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable
for a corresponding number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an Eligible
Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be
issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) issuable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of the publicly traded Common Stock (or its equivalent) of the
Successor Entity (including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders
of shares of Common Stock are entitled to receive securities or other assets with respect to
or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right to receive upon
an exercise of this Warrant at any time after the consummation of the Fundamental Transaction
but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable upon the exercise of this Warrant prior
to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription rights) which the
Holder would have been entitled to receive upon the happening of such Fundamental Transaction
had this Warrant been exercised immediately prior to such Fundamental Transaction. Provision
made pursuant to the preceding sentence shall be in a form and substance reasonably
satisfactory to the Holder. The provisions of this Section shall apply similarly and equally
to successive Fundamental Transactions and Corporate Events and shall be applied without
regard to any limitations on the exercise of this Warrant.

          (c) Notwithstanding the foregoing, in the event of a Fundamental Transaction, at the
request of the Holder delivered before the forty-fifth (45th) day after the

 - 12 - 

 

consummation of such Fundamental Transaction, the Company (or the Successor Entity) shall
purchase this Warrant from the Holder by paying to the Holder, within ten (10) Business Days
after such request (or, if later, on the effective date of the Fundamental Transaction), cash
in an amount equal to the Black Scholes value of the remaining unexercised portion of this
Warrant on the date of such Fundamental Transaction calculated using the Black Scholes Option
Pricing Model.

     5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, and will at all times in good faith carry out all the provisions
of this Warrant and take all action as may be required to protect the rights of the Holder.
Without limiting the generality of the foregoing, the Company (i) shall not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price
then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon
the exercise of this Warrant and (iii) shall, so long as any of the SPA Warrants are outstanding,
take all action necessary to reserve and keep available out of its authorized and unissued shares
of Common Stock, solely for the purpose of effecting the exercise of the SPA Warrants, 130% of the
number of shares of Common Stock as shall from time to time be necessary to effect the exercise of
the SPA Warrants then outstanding (without regard to any limitations on exercise.

     6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities
are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other information given to the
shareholders of the Company generally, contemporaneously with the giving thereof to the
shareholders.

     7. REISSUANCE OF WARRANTS.

          (a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as
the Holder may request, representing the right to purchase the

 - 13 - 

 

number of Warrant Shares being transferred by the Holder and, if less than the total
number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in
accordance with Section 7(d)) to the Holder representing the right to purchase the number of
Warrant Shares not being transferred.

          (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.

          (c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase
the number of Warrant Shares then underlying this Warrant, and each such new Warrant will
represent the right to purchase such portion of such Warrant Shares as is designated by the
Holder at the time of such surrender; provided, however, that no Warrants for fractional
            shares of Common Stock shall be given.

          (d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor
with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the
right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new
Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated
by the Holder which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number of Warrant
Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the
face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.

     8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at
least fifteen (15) days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect
to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of shares of Common Stock (other than
Excluded Securities) or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such information shall be made
known to the public prior to or in conjunction with such notice being provided to the Holder.

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     9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the Required Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon exercise of any SPA
Warrant without the written consent of the Holder. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants then outstanding.

     10. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

     11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and all the Buyers and shall not be construed against any person as the drafter hereof.
The headings of this Warrant are for convenience of reference and shall not form part of, or affect
the interpretation of, this Warrant.

     12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two (2)
Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by the Holder or (b)
the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside
accountant. The Company shall cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the Company and the Holder of
the results no later than ten Business Days from the time it receives the disputed determinations
or calculations. Such investment bank’s or accountant’s determination or calculation, as the case
may be, shall be binding upon all parties absent demonstrable error.

     13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant and the other Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing herein shall limit the right of
the Holder right to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach or threatened
breach, the holder of this Warrant shall be entitled, in addition to all

 - 15 - 

 

other available remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.

          (a) TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company, except as may otherwise be required by Section 2(f) of the
Securities Purchase Agreement.

     14.
CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:

          (a) “1933 Act” means the Securities Act of 1933, as amended.

          (b) “Bloomberg” means Bloomberg Financial Markets.

          (c) “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to remain closed.

          (d) “Closing Sale Price” means, for any security as of any date, the last closing trade
price for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not designate the
closing trade price then the last trade price of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last trade price of such security on the
principal securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last trade price of such security
in the over-the-counter market on the electronic bulletin board for such security as reported
by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation
Bureau, Inc.). If the Closing Sale Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Closing Sale Price of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder. If the Company
and the Holder are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 12. All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.

          (e) “Common Stock” means (i) the Company’s shares of Common Stock, par value $0.001 per
share, and (ii) any share capital into which such Common Stock shall have been changed or any
share capital resulting from a reclassification of such Common Stock.

          (f) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of
Common Stock actually outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of
whether the Options or Convertible Securities are actually

 - 16 - 

 

exercisable at such time, but excluding any shares of Common Stock owned or held by or
for the account of the Company or issuable upon exercise of the SPA Warrants.

          (g) “Convertible Securities” means any stock or securities (other than Options) directly
or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

          (h) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., The
NASDAQ Global Select Market or The NASDAQ Capital Market.

          (i) “Expiration Date” means the date sixty (60) months after the Issuance Date or, if
such date falls on a day other than a Business Day or on which trading does not take place on
the Principal Market (a “Holiday”), the next date that is not a Holiday.

          (j) “Fundamental Transaction” means that the Company shall, directly or indirectly, in
one or more related transactions, (i) consolidate or merge with or into (whether or not the
Company is the surviving corporation) another Person or Persons, if the holders of the Voting
Stock (not including any shares of Voting Stock held by the Person or Persons making or party
to, or associated or affiliated with the Persons making or party to, such consolidation or
merger) immediately prior to such consolidation or merger shall hold or have the right to
direct the voting of less than 50% of the Voting Stock or such voting securities of such other
surviving Person immediately following such transaction, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or assets of the
Company to another Person, or (iii) allow another Person to make a purchase, tender or
exchange offer that is accepted by the holders of more than the 50% of the outstanding shares
of Voting Stock (not including any shares of Voting Stock held by the Person or Persons making
or party to, or associated or affiliated with the Persons making or party to, such purchase,
tender or exchange offer), or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires more than the
50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held
by the other Person or other Persons making or party to, or associated or affiliated with the
other Persons making or party to, such stock purchase agreement or other business
combination), (v) reorganize, recapitalize or reclassify its Common Stock or (vi) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) is or shall become the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

          (k) “Options” means any rights, warrants or options to subscribe for or purchase shares
of Common Stock or Convertible Securities.

          (l) “Parent Entity” of a Person means an entity that, directly or indirectly, controls
the applicable Person and whose common stock or equivalent equity

 - 17 - 

 

security is quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental Transaction.

          (m) “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

          (n) “Principal Market” means The NASDAQ Global Market.

          (o) “Required Holders” means the holders of the SPA Warrants representing at least
two-thirds of shares of Common Stock underlying the SPA Warrants then outstanding.

          (p) “Securities Purchase Agreement” means that certain securities purchase agreement
dated as of the Subscription Date by and among the Company and the initial holders of the
Warrants pursuant to which the Company issued the Warrants, as amended from time to time in
accordance with its terms, including, without limitation, pursuant to the Second Amendment and
Exchange Agreements.

          (q) “SPA Securities” means the Second Amended and Restated Notes issued pursuant to the
Second Amendment and Exchange Agreements.

          (r) “Subscription Date” means October 6, 2006.

          (s) “Successor Entity” means the Person (or, if so elected by the Required Holders, the
Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the
Person (or, if so elected by the Required Holders, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.

          (t) “Trading Day” means any day on which the Common Stock are traded on the Principal
Market, or, if the Principal Market is not the principal trading market for the Common Stock,
then on the principal securities exchange or securities market on which the Common Stock are
then traded; provided that “Trading Day” shall not include any day on which the Common Stock
are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock are suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).

          (u) “Voting Stock” of a Person means capital stock of such Person of the class or classes
pursuant to which the holders thereof have the general voting power to elect, or the general
power to appoint, at least a majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not at the time capital stock of any other class or classes
shall have or might have voting power by reason of the happening of any contingency).

 - 18 - 

 

          (v) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period
beginning at 9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City time,
as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as reported
by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the “pink sheets” by
Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Required Holders. If the Company and the Required
Holders are unable to agree upon the fair market value of the such security, then such dispute
shall be resolved pursuant to Section 12 with the term “Weighted Average Price” being
substituted for the term “Exercise Price.” All such determinations shall be appropriately
adjusted for any share dividend, share split or other similar transaction during such period.

[Signature Page Follows]

 - 19 - 

 

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

	 	 	 	 	 	 	 
	 	 	CASH SYSTEMS, INC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 

 

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

CASH SYSTEMS, INC.

     The undersigned holder hereby exercises the right to purchase                                          of the shares
of Common Stock (“Warrant Shares”) of Cash Systems, Inc., a Delaware corporation (the “Company”),
evidenced by the attached Second Amended and Restated Warrant to Purchase Common Stock (the
“Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective
meanings set forth in the Warrant.

     1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be
made as:

                               a “Cash Exercise” with respect to
                                        
Warrant Shares; and/or

                               a “Cashless Exercise” with respect to
                                         Warrant
Shares.

     2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the
Aggregate Exercise Price in the sum of $                                         to the Company in accordance with the
terms of the Warrant.

     3. Delivery of Warrant Shares. The Company shall deliver to the holder                      Warrant
Shares in accordance with the terms of the Warrant.

Date:                           ,           

	 	 	 
	 
	 	 
	

 

          Name of Registered Holder
	 	 

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

 

 

ACKNOWLEDGMENT

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

	 	 	 	 	 	 	 
	 	 	CASH SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:

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