Document:

exv10w2

 

Exhibit 10.2

SECURITY AGREEMENT

     SECURITY AGREEMENT, dated as of October      , 2006 (this “Agreement”) made by CASH SYSTEMS,
INC., a Delaware corporation (the “Company”), and the undersigned subsidiaries of the Company (each
a “Grantor” and collectively and together with the Company the “Grantors”), in favor of PORTSIDE
GROWTH AND OPPORTUNITY FUND, a company organized under the laws of the Cayman Islands, in its
capacity as collateral agent (in such capacity, the “Collateral Agent”) for the “Buyers” (as
defined below) party to the Securities Purchase Agreement, dated as of even date herewith (as
amended, restated or otherwise modified from time to time, the “Securities Purchase Agreement”).

W I T N E S S E T H:

     WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of Buyers
attached thereto (collectively, the “Buyers”) are parties to the Securities Purchase Agreement,
pursuant to which the Company shall be required to sell, and the Buyers shall purchase or have the
right to purchase, the “Notes” (as defined therein) issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in accordance with the terms
thereof, collectively, the “Notes”);

     WHEREAS, each of the Grantors (other than the Company) (collectively, the “Guarantors”) has
executed and delivered a Guaranty dated the date hereof (the “Guaranty”) in favor of the Collateral
Agent for the benefit of itself and the Buyers, with respect to the Company’s obligations under the
Securities Purchase Agreement, the Notes and the Transaction Documents (as defined below); and

     WHEREAS, it is a condition precedent to the Buyers purchasing the Notes pursuant to the
Securities Purchase Agreement that the Grantors shall have executed and delivered to the Collateral
Agent this Agreement providing for the grant to the Collateral Agent for the benefit of the Buyers
of a security interest in all personal property of each Grantor to secure all of the Company’s
obligations under the Securities Purchase Agreement, the Notes, the “Transaction Documents” (as
defined in the Securities Purchase Agreement) (the “Transaction Documents”) and the Guarantors’
obligations under the Guaranty;

     NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Buyers to perform under the Securities Purchase Agreement, each Grantor agrees with the
Collateral Agent, for the benefit of the Buyers, as follows:

     SECTION 1. Definitions.

     (a) Reference is hereby made to the Securities Purchase Agreement and the Notes for a
statement of the terms thereof. All terms used in this Agreement and the recitals hereto which are
defined in the Securities Purchase Agreement, the Notes or in Articles 8 or 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York (the “Code”), and which
are not otherwise defined herein shall have the same meanings herein as set forth therein;
provided that terms used herein which are defined in the Code as in effect in the State of
New York on the date hereof shall continue to have the same meaning notwithstanding

 

 

any replacement or amendment of such statute except as the Collateral Agent may otherwise
determine.

     (b) The following terms shall have the respective meanings provided for in the Code:
“Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”,
“Commodity Contracts”, “Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General
Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit
Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Security”,
“Record”, “Security Account”, “Software”, and “Supporting Obligations”.

     (c) As used in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and plural forms of
such terms:

     “Capital Stock” means (i) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated and whether or not
voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any and
all partnership, membership or other equity interests of such Person.

     “Copyright Licenses” means all licenses, contracts or other agreements, whether written or
oral, naming any Grantor as licensee or licensor and providing for the grant of any right to use or
sell any works covered by any copyright (including, without limitation, all Copyright Licenses set
forth in Schedule II hereto).

     “Copyrights” means all domestic and foreign copyrights, whether registered or not, including,
without limitation, all copyright rights throughout the universe (whether now or hereafter arising)
in any and all media (whether now or hereafter developed), in and to all original works of
authorship fixed in any tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all applications,
registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Copyright Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals thereof.

     “Event of Default” shall have the meaning set forth in the Notes.

     “Governmental Authority” means any nation or government, any Federal, state, city, town,
municipality, county, local or other political subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government.

     “Insolvency Proceeding” means any proceeding commenced by or against any Person under any
provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, or extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.

-2-

 

     “Intellectual Property” means the Copyrights, Trademarks and Patents.

     “Licenses” means the Copyright Licenses, the Trademark Licenses and the Patent Licenses.

     “Lien” means any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights).

     “Patent Licenses” means all licenses, contracts or other agreements, whether written or oral,
naming any Grantor as licensee or licensor and providing for the grant of any right to manufacture,
use or sell any invention covered by any Patent (including, without limitation, all Patent Licenses
set forth in Schedule II hereto).

     “Patents” means all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired (including, without limitation, all
domestic and foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how and formulae described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office, or in any similar
office or agency of the United States or any other country or any political subdivision thereof),
and all reissues, divisions, continuations, continuations in part and extensions or renewals
thereof.

     “Person” means an individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated organization, joint venture or other
enterprise or entity or Governmental Authority.

     “Trademark Licenses” means all licenses, contracts or other agreements, whether written or
oral, naming any Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and symbolized by any such
trademark licenses, contracts or agreements and the right to prepare for sale or lease and sell or
lease any and all Inventory now or hereafter owned by any Grantor and now or hereafter covered by
such licenses (including, without limitation, all Trademark Licenses described in Schedule
II hereto).

     “Trademarks” means all domestic and foreign trademarks, service marks, collective marks,
certification marks, trade names, business names, d/b/a’s, Internet domain names, trade styles,
designs, logos and other source or business identifiers and all general intangibles of like nature,
now or hereafter owned, adopted, acquired or used by any Grantor (including, without limitation,
all domestic and foreign trademarks, service marks, collective marks, certification marks, trade
names, business names, d/b/a’s, Internet domain names, trade styles, designs, logos and other
source or business identifiers described in Schedule II hereto), all applications,
registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office or in any similar

-3-

 

office or agency of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together with all goodwill
of the business symbolized by such marks and all customer lists, formulae and other Records of any
Grantor relating to the distribution of products and services in connection with which any of such
marks are used.

     SECTION 2. Grant of Security Interest. As collateral security for all of the
“Obligations” (as defined in Section 3 hereof), each Grantor hereby pledges and assigns to
the Collateral Agent for the benefit of the Buyers, and grants to the Collateral Agent for the
benefit of the Buyers a continuing security interest in, all personal property of each Grantor,
wherever located and whether now or hereafter existing and whether now owned or hereafter acquired,
of every kind and description, tangible or intangible (collectively, the “Collateral”), including,
without limitation, the following:

     (a) all Accounts;

     (b) all Chattel Paper (whether tangible or electronic);

     (c) the Commercial Tort Claims specified on Schedule VI hereto;

     (d) all Deposit Accounts, all cash and other property from time to time deposited therein and the monies and property in the possession or under the control of the Collateral Agent or Buyer or
any affiliate, representative, agent or correspondent of the Collateral Agent or Buyer;

     (e) all Documents;

     (f) all Equipment;

     (g) all Fixtures;

     (h) all General Intangibles (including, without limitation, all Payment Intangibles);

     (i) all Goods

     (j) all Instruments (including, without limitation, Promissory Notes and each certificated
Security);

     (k) all Inventory;

     (l) all Investment Property;

     (m) all Copyrights, Patents and Trademarks, and all Licenses;

     (n) all Letter-of-Credit Rights;

     (o) all Supporting Obligations;

-4-

 

     (p) all other tangible and intangible personal property of each Grantor (whether or not
subject to the Code), including, without limitation, all bank and other accounts and all cash and
all investments therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of any Grantor described in
the preceding clauses of this Section 2 (including, without limitation, any proceeds of
insurance thereon and all causes of action, claims and warranties now or hereafter held by each
Grantor in respect of any of the items listed above), and all books, correspondence, files and
other Records, including, without limitation, all tapes, desks, cards, Software, data and computer
programs in the possession or under the control of any Grantor or any other Person from time to
time acting for any Grantor, in each case, to the extent of such Grantors rights therein, that at
any time evidence or contain information relating to any of the property described in the preceding
clauses of this Section 2 or are otherwise necessary or helpful in the collection or
realization thereof; and

     (q) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and
all of the foregoing Collateral;

in each case howsoever any Grantor’s interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).

Notwithstanding anything herein to the contrary, the term “Collateral” shall not include in the
case of a Subsidiary of such Grantor organized under the laws of a jurisdiction other than the
United States, any of the states thereof or the District of Columbia (a “Foreign Subsidiary”), more
than 65% (or such greater percentage that, due to a change in applicable law after the date hereof,
(i) would not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary
as determined for United States federal income tax purposes to be treated as a deemed dividend to
such Foreign Subsidiary’s United States parent and (ii) would not reasonably be expected to cause
any material adverse tax consequences) of the issued and outstanding shares of Capital Stock
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) (it being understood and
agreed that the Collateral shall include 100% of the issued and outstanding shares of Capital Stock
not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) or other equity
interest of such Foreign Subsidiary).

The Grantors agree that the pledge of the shares of Capital Stock acquired by a Grantor of any and
all Persons now or hereafter existing who is a Foreign Subsidiary may be supplemented by one or
more separate pledge agreements, deeds of pledge, share charges, or other similar agreements or
instruments, executed and delivered by the relevant Grantors in favor of the Collateral Agent,
which pledge agreements will provide for the pledge of such shares of Capital Stock in accordance
with the laws of the applicable foreign jurisdiction. With respect to such shares of Capital
Stock, the Collateral Agent may, at any time and from time to time, in its sole discretion, take
actions in such foreign jurisdictions that will result in the perfection of the Lien created in
such shares of Capital Stock.

-5-

 

     SECTION 3. Security for Obligations. The security interest created hereby in the
Collateral constitutes continuing collateral security for all of the following obligations, whether
now existing or hereafter incurred (collectively, the “Obligations”):

     (a) for so long as the Notes are outstanding, (i) the payment by the Company, as and when due
and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all
amounts from time to time owing by it in respect of the Securities Purchase Agreement, the Notes
and the other Transaction Documents, and (ii) in the case of any Guarantors, the payment by such
Grantors, as and when due and payable of all “Guaranteed Obligations” under (and as defined in) the
Guaranty, including, without limitation, in both cases, (A) all principal of and interest on the
Notes (including, without limitation, all interest that accrues after the commencement of any
Insolvency Proceeding of any Grantor, whether or not the payment of such interest is unenforceable
or is not allowable due to the existence of such Insolvency Proceeding), and (B) all fees,
commissions, expense reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents; and

     (b) for so long as the Notes are outstanding, the due performance and observance by each
Grantor of all of its other obligations from time to time existing in respect of any of the
Transaction Documents, including without limitation, with respect to any conversion or redemption
rights of the Buyers under the Notes.

     SECTION 4. Representations and Warranties. Each Grantor represents and warrants as of
the date of this Agreement as follows:

     (a) Schedule I hereto sets forth (i) the exact legal name of each Grantor, and (ii)
the state of incorporation, organization or formation and the organizational identification number
of each Grantor in such state.

     (b) There is no pending or, to its knowledge, written notice threatening any action, suit,
proceeding or claim affecting any Guarantor before any governmental authority or any arbitrator, or
any order, judgment or award issued by any governmental authority or arbitrator, in each case, that
may adversely affect the grant by any Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or the exercise by the Collateral Agent of any of
its rights or remedies hereunder.

     (c) All Federal, state and local tax returns and other reports required by applicable law to
be filed by any Grantor have been filed, or extensions have been obtained, and all taxes,
assessments and other governmental charges imposed upon any Grantor or any property of any Grantor
(including, without limitation, all federal income and social security taxes on employees’ wages)
and which have become due and payable on or prior to the date hereof have been paid, except to the
extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof in accordance with generally accepted accounting principles
consistently applied (“GAAP”).

-6-

 

     (d) All Equipment, Fixtures, Goods and Inventory of each Grantor now existing are, and all
Equipment, Fixtures, Goods and Inventory of each Grantor hereafter existing will be, located and/or
based at the addresses specified therefor in Schedule III hereto, except that each Grantor
will give the Collateral Agent written notice of any change in the location of any such Collateral
within 20 days of such change, other than to locations set forth on Schedule III hereto (or
a new Schedule III delivered by Grantors to Collateral Agent from time to time) and with
respect to which the Collateral Agent has filed financing statements and otherwise fully perfected
its Liens thereon or will take such actions pursuant to Section 5(n). Each Grantor’s chief place
of business and chief executive office, the place where each Grantor keeps its Records concerning
Accounts and all originals of all Chattel Paper are located at the addresses specified therefor in
Schedule III hereto. None of the Accounts is evidenced by Promissory Notes or other
Instruments. Set forth in Schedule IV hereto is a complete and accurate list, as of the
date of this Agreement, of (i) each Promissory Note, Security and other Instrument owned by each
Grantor and (ii) each Deposit Account, Securities Account and Commodities Account of each Grantor,
together with the name and address of each institution at which each such account is maintained,
the account number for each such account and a description of the purpose of each such account.
Agreement. Within ten (10) Business Days of the execution and delivery of this Agreement,
Schedule IV hereto shall be updated to reflect the certificate numbers for the Securities.
Set forth in Schedule II hereto is a complete and correct list of each trade name used by
each Grantor and the name of, and each trade name used by, each person from which each Grantor has
acquired any substantial part of the Collateral.

     (e) Each Grantor has delivered to the Collateral Agent complete and correct copies of each
License described in Schedule II hereto, including all schedules and exhibits thereto,
which represents all of the Licenses existing on the date of this Agreement. Each such License
sets forth the entire agreement and understanding of the parties thereto relating to the subject
matter thereof, and there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby or the rights of such Grantor or any of its affiliates in
respect thereof. Each material License now existing is, and any material License entered into in
the future will be, the legal, valid and binding obligation of the parties thereto, enforceable
against such parties in accordance with its terms. No default under any material License by any
such party has occurred, nor does any defense, offset, deduction or counterclaim exist thereunder
in favor of any such party.

     (f) Each Grantor owns and controls, or otherwise possesses adequate rights to use, all
Trademarks, Patents and Copyrights, which are the only trademarks, patents, copyrights, inventions,
trade secrets, proprietary information and technology, know-how, formulae, rights of publicity
necessary to conduct its business in substantially the same manner as conducted as of the date
hereof. Schedule II hereto sets forth a true and complete list of all registered
copyrights, issued Patents, Trademarks, and Licenses annually owned or used by each Grantor as of
the date hereof. To the best knowledge of each Grantor, all such Intellectual Property of each
Grantor is subsisting and in full force and effect, has not been adjudged invalid or unenforceable,
is valid and enforceable and has not been abandoned in whole or in part. Except as set forth in
Schedule II, no such Intellectual Property is the subject of any licensing or franchising
agreement. Each Grantor has no knowledge of any conflict with the rights of others to any such
Intellectual Property and, to the best knowledge of each Grantor, each Grantor is not now
infringing or in conflict with any such rights of others in any material respect, and to the best
knowledge of each

-7-

 

Grantor, no other Person is now infringing or in conflict in any material respect with any
such properties, assets and rights owned or used by each Grantor. No Grantor has received any
notice that it is violating or has violated the trademarks, patents, copyrights, inventions, trade
secrets, proprietary information and technology, know-how, formulae, rights of publicity or other
intellectual property rights of any third party.

     (g) Each Grantor is and will be at all times the sole and exclusive owner of, or otherwise has
and will have adequate rights in, the Collateral free and clear of any Liens, except for Permitted
Liens. No effective financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office except such as (i) may have
been filed in favor of the Collateral Agent and/or the Buyers relating to this Agreement or the
other Security Documents and (ii) are described on Schedule 4(g) hereto.

     (h) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or otherwise affecting each Grantor or
any of its properties and will not result in or require the creation of any Lien, upon or with
respect to any of its properties.

     (i) No authorization or approval or other action by, and no notice to or filing with, any
governmental authority or other regulatory body, is required for (i) the grant by each Grantor, or
the perfection, of the security interest purported to be created hereby in the Collateral, or (ii)
the exercise by the Collateral Agent of any of its rights and remedies hereunder, except (except
(A) for the filing under the Uniform Commercial Code as in effect in the applicable jurisdiction of
the financing statements described in Schedule V hereto (or a new Schedule V
delivered by Grantors to Collateral Agent from time to time), all of which financing statements
have been duly filed and are in full force and effect or will be duly filed and in full force and
effect, (B) with respect to Deposit Accounts, and all cash and other property from time to time
deposited therein, for the execution of a control agreement with the depository institution with
which such account is maintained, as provided in Section 5(i), (C) with respect to
Commodity Contracts, for the execution of a control agreement with the commodity intermediary with
which such commodity contract is carried, as provided in Section 5(i), (D) with respect to
the perfection of the security interest created hereby in the United States Intellectual Property
and Licenses, for the recording of the appropriate Assignment for Security, substantially in the
form of Exhibit A hereto in the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, (E) with respect to the perfection of the security interest
created hereby in foreign Intellectual Property and Licenses, for registrations and filings in
jurisdictions located outside of the United States and covering rights in such jurisdictions
relating to such foreign Intellectual Property and Licenses, (F) with respect to the perfection of
the security interest created hereby in Titled Collateral, for the submission of an appropriate
application requesting that the Lien of the Collateral Agent be noted on the Certificate of Title
or certificate of ownership, completed and authenticated by the applicable Grantor, together with
the Certificate of Title or certificate of ownership, with respect to such Titled Collateral, to
the appropriate governmental authority, (G) with respect to the perfection of the security interest
created hereby in any Letter-of-Credit Rights, for the consent of the issuer of the applicable
letter of credit to the assignment of proceeds as provided in the Uniform Commercial Code as in
effect in the applicable jurisdiction, (H) with respect to any action that may be necessary to
obtain control of Collateral constituting Deposit Accounts, Commodity

-8-

 

Contracts, Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the
taking of such actions, and (I) the Collateral Agent having possession of all Documents, Chattel
Paper, Instruments and cash constituting Collateral (subclauses (A), (B), (C), (D), (E), (F), G),
(H) and (I), each a “Perfection Requirement” and collectively, the “Perfection
Requirements”).

     (j) This Agreement creates in favor of the Collateral Agent a legal, valid and enforceable
security interest in the Collateral, as security for the Obligations. The Perfection Requirements
result in the perfection of such security interests. Such security interests are, or in the case
of Collateral in which each Grantor obtains rights after the date hereof, will be, perfected, first
priority security interests, subject only to Permitted Liens and the Perfection Requirements and
the financing statements described in Schedule 4(g). Such recordings and filings and all
other action necessary to perfect and protect such security interest have been duly taken or will
be taken pursuant to Section 5(n), and, in the case of Collateral in which each Grantor obtains
rights after the date hereof, will be duly taken, except for the Collateral Agent’s having
possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral after the
date hereof and the other actions, filings and recordations described above, including the
Perfection Requirements.

     (k) As of the date hereof, no Grantor holds any Commercial Tort Claims or has knowledge of any
pending Commercial Tort Claims, except for such Commercial Tort Claims described in Schedule
VI.

     SECTION 5. Covenants as to the Collateral. So long as any of the Obligations shall
remain outstanding, unless the Collateral Agent shall otherwise consent in writing:

     (a) Further Assurances. Each Grantor will at its expense, at any time and from time
to time, promptly execute and deliver all further instruments and documents and take all further
action that the Collateral Agent may reasonably request in order to: (i) perfect and protect the
security interest purported to be created hereby; (ii) enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise effect
the purposes of this Agreement, including, without limitation: (A) marking conspicuously all
Chattel Paper and each License and, at the request of the Collateral Agent, each of its Records
pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral
Agent, indicating that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) delivering and pledging to the Collateral Agent pursuant to the
Pledge each Promissory Note, Security, Chattel Paper or other Instrument, now or hereafter owned by
any Grantor, duly endorsed and accompanied by executed instruments of transfer or assignment, all
in form and substance satisfactory to the Collateral Agent, (C) executing and filing (to the
extent, if any, that any Grantor’s signature is required thereon) or authenticating the filing of,
such financing or continuation statements, or amendments thereto, as may be necessary or that the
Collateral Agent may reasonably request in order to perfect and preserve the security interest
purported to be created hereby, (D) furnishing to the Collateral Agent from time to time statements
and schedules further identifying and describing the Collateral and such other reports in
connection with the Collateral in each case as the Collateral Agent may reasonably request, all in
reasonable detail, (E) if any Collateral shall be in the possession of a third party, notifying
such Person of the Collateral Agent’s security interest created hereby and obtaining a written
acknowledgment from such Person that such Person holds possession of the Collateral for the

-9-

 

benefit of the Collateral Agent, which such written acknowledgement shall be in form and
substance reasonably satisfactory to the Collateral Agent, (F) if at any time after the date
hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly notifying the Collateral
Agent in a writing signed by such Grantor setting forth a brief description of such Commercial Tort
Claim and granting to the Collateral Agent a security interest therein and in the proceeds thereof,
which writing shall incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date hereof by any Grantor
of any motor vehicle or other Equipment subject to a certificate of title or ownership (other than
a Motor Vehicle or Equipment that is subject to a purchase money security interest), causing the
Collateral Agent to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with Section 5(j)
hereof; and (H) taking all actions required by any earlier versions of the Uniform Commercial Code
or by other law, as applicable, in any relevant Uniform Commercial Code jurisdiction, or by other
law as applicable in any foreign jurisdiction.

     (b) Location of Equipment and Inventory. Each Grantor will keep the Equipment and
Inventory (i) at the locations specified therefor on Schedule III hereto, or (ii) at such
other locations set forth on Schedule III (or a new Schedule III delivered by
Grantors to Collateral Agent from time to time) and with respect to which the Collateral Agent has
filed financing statements and otherwise fully perfected its Liens thereon, or (iii) at such other
locations in the United States, provided that within 20 days following the relocation of Equipment
or Inventory to such other location or the acquisition of Equipment or Inventory, Grantor shall
deliver to the Collateral Agent a new Schedule III indicating such new locations.

     (c) Condition of Equipment. Each Grantor will maintain or cause the Equipment
(necessary or useful to its business) to be maintained and preserved in good condition, repair and
working order, ordinary wear and tear excepted, and will forthwith, or in the case of any loss or
damage to any Equipment of any Grantor within a commercially reasonable time after the occurrence
thereof, make or cause to be made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable, consistent with past practice, or which the Collateral
Agent may request to such end. Any Grantor will promptly furnish to the Collateral Agent a
statement describing in reasonable detail any such loss or damage in excess of $250,000 per
occurrence to any Equipment.

     (d) Taxes, Etc. Each Grantor agrees to pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and Inventory, except to the
extent the validity thereof is being contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the payment thereof.

     (e) Insurance.

          (i) Each Grantor will, at its own expense, maintain insurance (including, without limitation,
commercial general liability and property insurance) with respect to the Equipment and Inventory in
such amounts, against such risks, in such form and with

-10-

 

responsible and reputable insurance companies or associations as is required by any
governmental authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses similarly situated and
in any event, in amount, adequacy and scope reasonably satisfactory to the Collateral Agent. To
the extent requested by the Collateral Agent at any time and from time to time, each such policy
for liability insurance shall provide for all losses to be paid on behalf of the Collateral Agent
and any Grantor as their respective interests may appear, and each policy for property damage
insurance shall provide for all losses to be adjusted with, and paid directly to, the Collateral
Agent. To the extent requested by the Collateral Agent at any time and from time to time, each
such policy shall in addition (A) name the Collateral Agent as an additional insured party
thereunder (without any representation or warranty by or obligation upon the Collateral Agent) as
their interests may appear, (B) contain an agreement by the insurer that any loss thereunder shall
be payable to the Collateral Agent on its own account notwithstanding any action, inaction or
breach of representation or warranty by any Grantor, (C) provide that there shall be no recourse
against the Collateral Agent for payment of premiums or other amounts with respect thereto, and (D)
provide that at least 30 days’ prior written notice of cancellation, lapse, expiration or other
adverse change shall be given to the Collateral Agent by the insurer. Any Grantor will, if so
requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate policies
of such insurance and, as often as the Collateral Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Any Grantor will also, at the request
of the Collateral Agent, execute and deliver instruments of assignment of such insurance policies
and cause the respective insurers to acknowledge notice of such assignment.

          (ii) Reimbursement under any liability insurance maintained by any Grantor pursuant to this
Section 5(e) may be paid directly to the Person who shall have incurred liability covered
by such insurance. In the case of any loss involving damage to Equipment or Inventory, any
proceeds of insurance maintained by any Grantor pursuant to this Section 5(e) shall be paid
to the Collateral Agent (except as to which paragraph (iii) of this Section 5(e) is not
applicable), any Grantor will make or cause to be made the necessary repairs to or replacements of
such Equipment or Inventory, and any proceeds of insurance maintained by any Grantor pursuant to
this Section 5(e) shall be paid by the Collateral Agent to any Grantor as reimbursement for
the costs of such repairs or replacements.

          (iii) Following and during the continuance of an Event of Default, all insurance payments in
respect of such Equipment or Inventory shall be paid to the Collateral Agent and applied as
specified in Section 7(b) hereof.

     (f) Provisions Concerning the Accounts and the Licenses.

          (i) Each Grantor will (A) give the Collateral Agent at least 30 days’ prior written notice of
any change in such Grantor’s name, identity or organizational structure, (B) maintain its
jurisdiction of incorporation, organization or formation as set forth in Schedule I hereto,
(C) immediately notify the Collateral Agent upon obtaining an organizational identification number,
if on the date hereof such Grantor did not have such identification number, and (D) keep adequate
records concerning the Accounts and Chattel Paper and permit representatives of the Collateral
Agent during normal business hours on reasonable notice to such Grantor, to inspect and make
abstracts from such Records and Chattel Paper.

-11-

 

          (ii) Each Grantor will, except as otherwise provided in this subsection (f), continue to
collect, at its own expense, all amounts due or to become due under the Accounts. In connection
with such collections, any Grantor may (and, at the Collateral Agent’s direction, will) take such
action as any Grantor or the Collateral Agent may deem necessary or advisable to enforce collection
or performance of the Accounts; provided, however, that the Collateral Agent shall
have the right at any time, upon the occurrence and during the continuance of an Event of Default,
to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to
the Collateral Agent and to direct such account debtors or obligors to make payment of all amounts
due or to become due to any Grantor thereunder directly to the Collateral Agent or its designated
agent and, upon such notification and at the expense of any Grantor and to the extent permitted by
law, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as any Grantor might have done. After
receipt by any Grantor of a notice from the Collateral Agent that the Collateral Agent has
notified, intends to notify, or has enforced or intends to enforce any Grantor’s rights against the
account debtors or obligors under any Accounts as referred to in the proviso to the immediately
preceding sentence, (A) all amounts and proceeds (including Instruments) received by any Grantor in
respect of the Accounts shall be received in trust for the benefit of the Collateral Agent
hereunder, shall be segregated from other funds of any Grantor and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary endorsement) to be applied
as specified in Section 7(b) hereof, and (B) no Grantor will adjust, settle or compromise
the amount or payment of any Account or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent may (in its sole and absolute discretion)
direct any or all of the banks and financial institutions with which any Grantor either maintains a
Deposit Account or a lockbox or deposits the proceeds of any Accounts to send immediately to the
Collateral Agent by wire transfer (to such account as the Collateral Agent shall specify, or in
such other manner as the Collateral Agent shall direct) all or a portion of such securities, cash,
investments and other items held by such institution. Any such securities, cash, investments and
other items so received by the Collateral Agent shall be applied as specified in accordance with
Section 7(b) hereof.

          (iii) Upon the occurrence and during the continuance of any breach or default under any
material License referred to in Schedule II hereto by any party thereto other than any
Grantor, each Grantor party thereto will, promptly after obtaining knowledge thereof, give the
Collateral Agent written notice of the nature and duration thereof, specifying what action, if any,
it has taken and proposes to take with respect thereto and thereafter will take reasonable steps to
protect and preserve its rights and remedies in respect of such breach or default, or will obtain
or acquire an appropriate substitute License.

          (iv) Each Grantor will, at its expense, promptly deliver to the Collateral Agent a copy of
each notice or other communication received by it by which any other party to any material License
referred to in Schedule II hereto purports to exercise any of its rights or affect any of
its obligations thereunder, together with a copy of any reply by such Grantor thereto.

-12-

 

          (v) Each Grantor will exercise promptly and diligently each and every right which it may have
under each material License (other than any right of termination) and will duly perform and observe
in all respects all of its obligations under each material License and will take all action
reasonably necessary to maintain such Licenses in full force and effect. No Grantor will, without
the prior written consent of the Collateral Agent, cancel, terminate, amend or otherwise modify in
any respect, or waive any provision of, any material License referred to in Schedule II
hereto.

     (g) Transfers and Other Liens.

          (i) No Grantor will sell, assign (by operation of law or otherwise), lease, license, exchange
or otherwise transfer or dispose of any of the Collateral, except (A) Inventory in the ordinary
course of business, and (B) worn out or obsolete assets, not necessary to the business.

          (ii) No Grantor will create, suffer to exist or grant any Lien upon or with respect to any
Collateral other than a Permitted Lien.

     (h) Intellectual Property.

          (i) If applicable, any Grantor shall, upon the Collateral Agent’s written request, duly
execute and deliver the applicable Assignment for Security in the form attached hereto as
Exhibit A. Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full
force and effect, including, without limitation, using the proper statutory notices and markings
and using the Trademarks on each applicable trademark class of goods in order to so maintain the
Trademarks in full force and free from any claim of abandonment for non-use, and each Grantor will
not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any
Intellectual Property may become invalidated; provided, however, that so long as no
Event of Default has occurred and is continuing, no Grantor shall have an obligation to use or to
maintain any Intellectual Property (A) that relates solely to any product or work, that has been,
or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced
with Intellectual Property substantially similar to the Intellectual Property that may be abandoned
or otherwise become invalid, so long as the failure to use or maintain such Intellectual Property
does not materially adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by this Agreement or
(C) that is substantially the same as another Intellectual Property that is in full force, so long
the failure to use or maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such other Intellectual Property
is subject to the Lien and security interest created by this Agreement. Each Grantor will cause to
be taken all necessary steps in any proceeding before the United States Patent and Trademark Office
and the United States Copyright Office or any similar office or agency in any other country or
political subdivision thereof to maintain each registration of the Intellectual Property (other
than the Intellectual Property described in the proviso to the immediately preceding sentence),
including, without limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and payment of
maintenance fees, filing fees, taxes or other governmental fees. If any Intellectual Property
(other than Intellectual Property

-13-

 

described in the proviso to the first sentence of subsection (i) of this clause (h)) is
infringed, misappropriated, diluted or otherwise violated in any material respect by a third party,
each Grantor shall (x) upon learning of such infringement, misappropriation, dilution or other
violation, promptly notify the Collateral Agent and (y) to the extent any Grantor shall deem
appropriate under the circumstances, promptly sue for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and all damages for such
infringement, misappropriation, dilution or other violation, or take such other actions as such
Grantor shall deem appropriate under the circumstances to protect such Intellectual Property. Each
Grantor shall furnish to the Collateral Agent from time to time upon its request statements and
schedules further identifying and describing the Intellectual Property and Licenses and such other
reports in connection with the Intellectual Property and Licenses as the Collateral Agent may
reasonably request, all in reasonable detail and promptly upon request of the Collateral Agent,
following receipt by the Collateral Agent of any such statements, schedules or reports, each
Grantor shall modify this Agreement by amending Schedule II hereto, as the case may be, to
include any Intellectual Property and License, as the case may be, which becomes part of the
Collateral under this Agreement and shall execute and authenticate such documents and do such acts
as shall be necessary or, in the reasonable judgment of the Collateral Agent, desirable to subject
such Intellectual Property and Licenses to the Lien and security interest created by this
Agreement. Notwithstanding anything herein to the contrary, upon the occurrence and during the
continuance of an Event of Default, no Grantor may abandon or otherwise permit any Intellectual
Property to become invalid without the prior written consent of the Collateral Agent, and if any
Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, each Grantor will take such action as the Collateral Agent shall deem
appropriate under the circumstances to protect such Intellectual Property.

          (ii) In no event shall any Grantor, either itself or through any agent, employee, licensee or
designee, file an application for the registration of any Trademark or Copyright or the issuance of
any Patent with the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, or in any similar office or agency of the United States or any country or
any political subdivision thereof unless it gives the Collateral Agent prior written notice
thereof. Upon request of the Collateral Agent, any Grantor shall execute, authenticate and deliver
any and all assignments, agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent’s security interest hereunder in such
Intellectual Property and the General Intangibles of any Grantor relating thereto or represented
thereby, and each Grantor hereby appoints the Collateral Agent its attorney-in-fact to execute
and/or authenticate and file all such writings for the foregoing purposes, all acts of such
attorney being hereby ratified and confirmed, and such power (being coupled with an interest) shall
be irrevocable until the indefeasible payment in full in cash of all of the Obligations in full.

     (i) Deposit, Commodities and Securities Accounts. Upon the Collateral Agent’s written
request and subject to Section 14(h) of the Note, each Grantor shall cause each bank and other
financial institution with an account referred to in Schedule IV hereto to execute and
deliver to the Collateral Agent a control agreement, in form and substance reasonably satisfactory
to the Collateral Agent, duly executed by each Grantor and such bank or financial institution, or
enter into other arrangements in form and substance satisfactory to the Collateral Agent, pursuant
to which such institution shall irrevocably agree, inter alia, that (i) it will
comply

-14-

 

at any time with the instructions originated by the Collateral Agent to such bank or financial
institution directing the disposition of cash, Commodity Contracts, securities, Investment Property
and other items from time to time credited to such account, without further consent of each
Grantor, which instructions the Collateral Agent will not give to such bank or other financial
institution in the absence of a continuing Event of Default, (ii) all Commodity Contracts,
securities, Investment Property and other items of each Grantor deposited with such institution
shall be subject to a perfected, first priority security interest in favor of the Collateral Agent,
(iii) any right of set off (other than recoupment of standard fees), banker’s Lien or other similar
Lien, security interest or encumbrance shall be fully waived as against the Collateral Agent, and
(iv) upon receipt of written notice from the Collateral Agent during the continuance of an Event of
Default, such bank or financial institution shall immediately send to the Collateral Agent by wire
transfer (to such account as the Collateral Agent shall specify, or in such other manner as the
Collateral Agent shall direct) all such cash, the value of any Commodity Contracts, securities,
Investment Property and other items held by it. Without the prior written consent of the
Collateral Agent, each Grantor shall not make or maintain any Deposit Account, Commodity Account or
Securities Account except for the accounts set forth in Schedule IV hereto. The provisions
of this paragraph 5(i) shall not apply to (i) Deposit Accounts for which the Collateral Agent is
the depositary and (ii) Deposit Accounts specially and exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of each Grantor’s salaried or
hourly employees.

     (j) Motor Vehicles.

          (i) Upon the Collateral Agent’s written request, each Grantor shall deliver to the Collateral
Agent originals of the certificates of title or ownership for all motor vehicles with a value in
excess of $50,000, owned by it with the Collateral Agent listed as lienholder, for the benefit of
the Buyers.

          (ii) Each Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective the
date hereof and terminating upon the termination of this Agreement, for the purpose of (A)
executing on behalf of such Grantor title or ownership applications for filing with appropriate
state agencies to enable motor vehicles now owned or hereafter acquired by such Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such applications with
such state agencies, and (C) executing such other documents and instruments on behalf of, and
taking such other action in the name of, such Grantor as the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof (including, without limitation, for the purpose of
creating in favor of the Collateral Agent a perfected Lien on the motor vehicles and exercising the
rights and remedies of the Collateral Agent hereunder). This appointment as attorney-in-fact is
coupled with an interest and is irrevocable until all of the Obligations are indefeasibly paid in
full in cash.

          (iii) Any certificates of title or ownership delivered pursuant to the terms hereof shall be
accompanied by odometer statements for each motor vehicle covered thereby.

          (iv) So long as no Event of Default shall have occurred and be continuing, upon the request of
any Grantor, the Collateral Agent shall execute and deliver to

-15-

 

any Grantor such instruments as any Grantor shall reasonably request to remove the notation of
the Collateral Agent as lienholder on any certificate of title for any motor vehicle;
provided, however, that any such instruments shall be delivered, and the release
effective, only upon receipt by the Collateral Agent of a certificate from any Grantor stating that
such motor vehicle is to be sold or has suffered a casualty loss (with title thereto in such case
passing to the casualty insurance company therefor in settlement of the claim for such loss) and
the amount that any Grantor will receive as sale proceeds or insurance proceeds. Any proceeds of
such sale or casualty loss shall be paid to the Collateral Agent hereunder immediately upon
receipt, to be applied to the Obligations then outstanding.

     (k) Control. Each Grantor hereby agrees to take any or all action that may be
necessary or that the Collateral Agent may reasonably request in order for the Collateral Agent to
obtain control in accordance with Sections 9-105 — 9-107 of the Code with respect to the following
Collateral: (i) Electronic Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit
Rights.

     (l) Inspection and Reporting. Each Grantor shall permit the Collateral Agent, or any
agent or representatives thereof or such professionals or other Persons as the Collateral Agent may
designate, during normal business hours, after reasonable notice in the absence of an Event of
Default and not more than once a year in the absence of an Event of Default, (i) to examine and
make copies of and abstracts from any Grantor’s records and books of account, (ii) to visit and
inspect its properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory and
other assets of any Grantor from time to time, (iii) to conduct audits, physical counts, appraisals
and/or valuations, examinations at the locations of any Grantor. Each Grantor shall also permit
the Collateral Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate to discuss such Grantor’s affairs, finances and
accounts with any of its directors, officers, managerial employees, independent accountants or any
of its other representatives.

     (m) Future Subsidiaries. If any Grantor shall hereafter create or acquire any
Subsidiary, simultaneously with the creation or acquisition of such Subsidiary, such Grantor shall
(i) cause such Subsidiary to become a party to this Agreement as an additional “Grantor” hereunder,
(ii) such Grantor shall deliver to Collateral Agent revised Schedules to this Agreement, as
appropriate, (iii) shall duly execute and deliver a guaranty of the Obligations in favor of the
Collateral Agent in form and substance reasonably acceptable to the Collateral Agent, and (iv)
shall duly execute and/or deliver such opinions of counsel and other documents, in form and
substance reasonably acceptable to the Collateral Agent, as the Collateral Agent shall reasonably
request with respect thereto, provided that any Grantor that acquires a subsidiary on or within two
days after the Closing Date shall have 10 Business Days in which to satisfy the requirements of
this Section 5(m).

     SECTION 6. Additional Provisions Concerning the Collateral.

     (a) To the maximum extent permitted by applicable law, and for the purpose of taking any
action that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, each Grantor hereby (i) authorizes the Collateral Agent to execute any such agreements,
instruments or other documents in such Grantor’s name and to file

-16-

 

such agreements, instruments or other documents in such Grantor’s name and in any appropriate
filing office, (ii) authorizes the Collateral Agent at any time and from time to time to file, one
or more financing or continuation statements, and amendments thereto, relating to the Collateral
(including, without limitation, any such financing statements that (A) describe the Collateral as
“all assets” or “all personal property” (or words of similar effect) or that describe or identify
the Collateral by type or in any other manner as the Collateral Agent may determine regardless of
whether any particular asset of such Grantor falls within the scope of Article 9 of the Uniform
Commercial Code or whether any particular asset of such Grantor constitutes part of the Collateral,
and (B) contain any other information required by Part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing statement, continuation statement or
amendment, including, without limitation, whether such Grantor is an organization, the type of
organization and any organizational identification number issued to such Grantor) and (iii)
ratifies such authorization to the extent that the Collateral Agent has filed any such financing or
continuation statements, or amendments thereto, prior to the date hereof. A photocopy or other
reproduction of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.

     (b) Each Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and
proxy, with full authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Collateral Agent’s discretion, so long as an Event of
Default shall have occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of
this Agreement (subject to the rights of each Grantor under Section 5 hereof), including,
without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other instruments, documents
and chattel paper in connection with clause (i) or (ii) above, (iv) to file any claims or take any
action or institute any proceedings which the Collateral Agent may deem necessary or desirable for
the collection of any Collateral or otherwise to enforce the rights of the Collateral Agent and the
Buyers with respect to any Collateral, and (v) to execute assignments, licenses and other documents
to enforce the rights of the Collateral Agent and the Buyers with respect to any Collateral. This
power is coupled with an interest and is irrevocable until all of the Obligations are indefeasibly
paid in full in cash.

     (c) For the purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, and for no other purpose, each Grantor hereby grants to the Collateral Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to any Grantor) to use, assign, license or sublicense any Intellectual Property
now owned or hereafter acquired by such Grantor, wherever the same may be located, including in
such license reasonable access to all media in which any of the licensed items may be recorded or
stored and to all computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the Securities Purchase
Agreement that limit the right of any Grantor to dispose of its property, and Section 5(g)
and Section 5(h) hereof, so long as no Event of Default shall have occurred and be
continuing, any Grantor may exploit, use, enjoy, protect, license, sublicense,

-17-

 

assign, sell, dispose of or take other actions with respect to the Intellectual Property in
the ordinary course of its business. In furtherance of the foregoing, unless an Event of Default
shall have occurred and be continuing, the Collateral Agent shall from time to time, upon the
request of any Grantor, execute and deliver any instruments, certificates or other documents, in
the form so requested, which such Grantor shall have certified are appropriate (in such Grantor’s
judgment) to allow it to take any action permitted above (including relinquishment of the license
provided pursuant to this clause (c) as to any Intellectual Property). Further, upon the
indefeasible payment in full in cash of all of the Obligations, the Collateral Agent (subject to
Section 10(e) hereof) shall release and reassign to any Grantor all of the Collateral
Agent’s right, title and interest in and to the Intellectual Property, and the Licenses, all
without recourse, representation or warranty whatsoever. The exercise of rights and remedies
hereunder by the Collateral Agent shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by each Grantor in accordance with the second sentence of this
clause (c). Each Grantor hereby releases the Collateral Agent from any claims, causes of action
and demands at any time arising out of or with respect to any actions taken or omitted to be taken
by the Collateral Agent under the powers of attorney granted herein other than actions taken or
omitted to be taken through the Collateral Agent’s gross negligence or willful misconduct, as
determined by a final determination of a court of competent jurisdiction.

     (d) If any Grantor fails to perform any agreement or obligation contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the
name of such Grantor or the Collateral Agent, and the expenses of the Collateral Agent incurred in
connection therewith shall be payable by such Grantor pursuant to Section 8 hereof and
shall be secured by the Collateral.

     (e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.

     (f) Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under
the Licenses and otherwise with respect to any of the Collateral to the extent set forth therein to
perform all of its obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not
release any Grantor from any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Collateral Agent shall not have any obligation or liability by reason of
this Agreement under the Licenses or with respect to any of the other Collateral, nor shall the
Collateral Agent be obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned hereunder.

-18-

 

     SECTION 7. Remedies Upon Event of Default. If any Event of Default shall have
occurred and be continuing:

     (a) The Collateral Agent may exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party upon default under the Code (whether or not the Code applies to the
affected Collateral), and also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent’s name or into the name of its nominee or nominees
(to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the
benefit of the Collateral Agent, all payments made thereon, give all consents, waivers and
ratifications in respect thereof and otherwise act with respect thereto as though it were the
outright owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it will
at its expense and upon request of the Collateral Agent forthwith, assemble all or part of its
respective Collateral as directed by the Collateral Agent and make it available to the Collateral
Agent at a place or places to be designated by the Collateral Agent that is reasonably convenient
to both parties, and the Collateral Agent may enter into and occupy any premises owned or leased by
any Grantor where the Collateral or any part thereof is located or assembled for a reasonable
period in order to effectuate the Collateral Agent’s rights and remedies hereunder or under law,
without obligation to any Grantor in respect of such occupation, and (iii) without notice except as
specified below and without any obligation to prepare or process the Collateral for sale, (A) sell
the Collateral or any part thereof in one or more parcels at public or private sale, at any of the
Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable
and/or (B) lease, license or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice
of sale or any other disposition of its respective Collateral shall be required by law, at least
ten (10) days’ notice to any Grantor of the time and place of any public sale or the time after
which any private sale or other disposition of its respective Collateral is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale
or other disposition of any Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Each Grantor hereby waives any claims against the Collateral
Agent and the Buyers arising by reason of the fact that the price at which its respective
Collateral may have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the Obligations, even if the
Collateral Agent accepts the first offer received and does not offer such Collateral to more than
one offeree, and waives all rights that any Grantor may have to require that all or any part of
such Collateral be marshaled upon any sale (public or private) thereof. Each Grantor hereby
acknowledges that (i) any such sale of its respective Collateral by the Collateral Agent shall be
made without warranty, (ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in clauses (i) and (ii)
above shall not adversely affect the commercial reasonableness of any such sale of Collateral. In
addition to the foregoing, (1) upon written notice to any Grantor from the Collateral Agent after
and during the continuance of an Event of Default, such Grantor shall cease any use of the
Intellectual Property or any trademark, patent or copyright similar thereto for any purpose
described in such notice; (2) the Collateral Agent may, at any time and from

-19-

 

time to time after and during the continuance of an Event of Default, upon 10 days’ prior
notice to such Grantor, license, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or
terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion
determine; and (3) the Collateral Agent may, at any time, pursuant to the authority granted in
Section 6 hereof (such authority being effective upon the occurrence and during the
continuance of an Event of Default), execute and deliver on behalf of such Grantor, one or more
instruments of assignment of the Intellectual Property (or any application or registration
thereof), in form suitable for filing, recording or registration in any country.

     (b) Any cash held by the Collateral Agent as Collateral and all Cash Proceeds received by the
Collateral Agent in respect of any sale of or collection from, or other realization upon, all or
any part of the Collateral shall be applied (after payment of any amounts payable to the Collateral
Agent pursuant to Section 8 hereof) by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with the provisions of
the Securities Purchase Agreement. Any surplus of such cash or Cash Proceeds held by the
Collateral Agent and remaining after the indefeasible payment in full in cash of all of the
Obligations shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a
court of competent jurisdiction shall direct.

     (c) In the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent and the Buyers are legally entitled,
each Grantor shall be liable for the deficiency, together with interest thereon at the highest rate
specified in the Notes for interest on overdue principal thereof or such other rate as shall be
fixed by applicable law, together with the costs of collection and the reasonable fees, costs,
expenses and other client charges of any attorneys employed by the Collateral Agent to collect such
deficiency.

     (d) Each Grantor hereby acknowledges that if the Collateral Agent complies with any applicable
state, provincial, or federal law requirements in connection with a disposition of the Collateral,
such compliance will not adversely affect the commercial reasonableness of any sale or other
disposition of the Collateral.

     (e) The Collateral Agent shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such collateral security
or other assurances of payment in any particular order, and all of the Collateral Agent’s rights
hereunder and in respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To the extent that
any Grantor lawfully may, each Grantor hereby agrees that it will not invoke any law relating to
the marshaling of collateral which might cause delay in or impede the enforcement of the Collateral
Agent’s rights under this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any of the Obligations
is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each
Grantor hereby irrevocably waives the benefits of all such laws.

-20-

 

     SECTION 8. Indemnity and Expenses.

     (a) Each Grantor agrees, jointly and severally, to defend, protect, indemnify and hold the
Collateral Agent and each of the Buyers, jointly and severally, harmless from and against any and
all claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses, and disbursements of such
Person’s counsel) to the extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except to the extent resulting from
such Person’s gross negligence or willful misconduct, as determined by a final judgment of a court
of competent jurisdiction.

     (b) Each Grantor agrees, jointly and severally, to pay to the Collateral Agent upon demand the
amount of any and all costs and expenses, including the reasonable fees, costs, expenses and
disbursements of counsel for the Collateral Agent and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Collateral Agent), which the
Collateral Agent may incur in connection with (i) the preparation, negotiation, execution,
delivery, recordation, administration, amendment, waiver or other modification or termination of
this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the
rights of the Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or observe
any of the provisions hereof.

     SECTION 9. Notices, Etc. All notices and other communications provided for hereunder
shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied, e-mailed or delivered, if to any Grantor that is a Foreign Subsidiary at
the address of the Company, if to any Grantor that is not a Foreign Subsidiary at its address below
and if to the Collateral Agent to it, at its address specified on the signature pages below; or as
to any such Person, at such other address as shall be designated by such Person in a written notice
to all other parties hereto complying as to delivery with the terms of this Section 9. All
such notices and other communications shall be effective (a) if sent by certified mail, return
receipt requested, when received or three days after deposited in the mails, whichever occurs
first, (b) if telecopied or e-mailed, when transmitted (during normal business hours) and
confirmation is received, and otherwise, the day after the notice or communication was transmitted
and confirmation is received, or (c) if delivered in person, upon delivery. For the avoidance of
doubt, the Foreign Subsidiaries, as Grantors, hereby appoint the Company as its agent for receipt
of service of process and all notices and other communications in the United States at the address
specified below.

SECTION 10. Miscellaneous.

     (a) No amendment of any provision of this Agreement shall be effective unless it is in writing
and signed by each Grantor and the Collateral Agent, and no waiver of any provision of this
Agreement, and no consent to any departure by each Grantor therefrom, shall be effective unless it
is in writing and signed by each Grantor and the Collateral Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given.

-21-

 

     (b) No failure on the part of the Collateral Agent to exercise, and no delay in exercising,
any right hereunder or under any of the other Transaction Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of the Collateral
Agent or any Buyer provided herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent or any Buyer under any of the other Transaction Documents against any party
thereto are not conditional or contingent on any attempt by such Person to exercise any of its
rights under any of the other Transaction Documents against such party or against any other Person,
including but not limited to, any Grantor.

     (c) Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

     (d) This Agreement shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full in cash of the Obligations,
and (ii) be binding on each Grantor and all other Persons who become bound as debtor to this
Agreement in accordance with Section 9-203(d) of the Code and shall inure, together with all rights
and remedies of the Collateral Agent and the Buyers hereunder, to the benefit of the Collateral
Agent and the Buyers and their respective permitted successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence, without notice to any
Grantor, the Collateral Agent and the Buyers may assign or otherwise transfer their rights and
obligations under this Agreement and any of the other Transaction Documents, to any other Person
and such other Person shall thereupon become vested with all of the benefits in respect thereof
granted to the Collateral Agent and the Buyers herein or otherwise. Upon any such assignment or
transfer, all references in this Agreement to the Collateral Agent or any such Buyer shall mean the
assignee of the Collateral Agent or such Buyer. None of the rights or obligations of any Grantor
hereunder may be assigned or otherwise transferred without the prior written consent of the
Collateral Agent, and any such assignment or transfer without the consent of the Collateral Agent
shall be null and void.

     (e) Upon the indefeasible payment in full in cash of the Obligations, (i) this Agreement and
the security interests created hereby shall terminate and all rights to the Collateral shall revert
to the respective Grantor that granted such security interests hereunder, and (ii) the Collateral
Agent will, upon any Grantor’s request and at such Grantor’s expense, (A) return to such Grantor
such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to
the terms hereof, and (B) execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination, all without any representation, warranty or
recourse whatsoever.

     (f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST

-22-

 

CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

     (g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

     (h) EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL
AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, ORAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.

     (i) Each Grantor irrevocably consents to the service of process of any of the aforesaid courts
in any such action, suit or proceeding by the mailing of copies thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to any Grantor at its address
provided herein, such service to become effective 10 days after such mailing.

     (j) Nothing contained herein shall affect the right of the Collateral Agent to serve process
in any other manner permitted by law or commence legal proceedings or otherwise proceed against any
Grantor or any property of any Grantor in any other jurisdiction.

     (k) Each Grantor irrevocably and unconditionally waives any right it may have to claim or
recover in any legal action, suit or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.

     (l) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

-23-

 

     (m) This Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an original, but all of which
taken together constitute one in the same Agreement.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-24-

 

     IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its
officer thereunto duly authorized, as of the date first above written.

	 	 	 	 	 	 	 
	 	 	CASH SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Facsimile:	 	 

	 	 	 	 	 
	ACCEPTED BY:	 	 
	 
	 	 	 	 
	PORTSIDE GROWTH & OPPORTUNITY FUND,	 	 
	as Collateral Agent	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Facsimile:	 	 
	 

	 	Email:exv10w3

 

[FORM OF SENIOR SECURED CONVERTIBLE NOTE]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, 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.

Senior Secured Convertible Note

			
	Issuance Date: October ___, 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 six and one-half percent (6.50%) 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). 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 issued pursuant to the
Securities Purchase Agreement (as defined below) on the Closing Date (collectively, the “Notes” and
such other Senior Secured Convertible Notes, the “Other Notes”). Certain capitalized terms used
herein are defined in Section 28.

 

 

     (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 or a Registration Rights Failure, the
Interest Rate shall be increased to twelve percent (12.0%). In the event that such Event of
Default or Registration Rights Failure, as applicable, is subsequently cured, the adjustment
referred to in the preceding sentence 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 or Registration Rights failure, as applicable, shall continue to apply to
the extent relating to the days after the occurrence of such Event of Default or Registration
Rights Failure through and including the date of cure of such Event of Default or Registration
Rights Failure. From and after the failure (an “Interest Test Failure”) of the Company to meet one
or more Interest Tests (as defined in Section 14(f)), and so long as no Event of Default or a
Registration Rights Failure has occurred and is continuing, the Interest Rate shall be increased to
seven and one-half percent (7.50%) (the “Interest Test Failure Rate”) as of the first day of the
Fiscal Quarter immediately succeeding the Fiscal Quarter in which the Interest Test Failure
occurred. As of the end of the second (2nd) succeeding Fiscal Quarter during which the
Interest Tests are met (the “Interest Cure Date”) following an Interest Test Failure, and so long
as no Event of Default or a Registration Rights Failure has occurred and is continuing, the
adjustment referred to in the preceding sentence shall cease to be effective as of the Interest
Cure Date; provided that the Interest as calculated and unpaid at the Interest Test Failure Rate
shall continue to apply to the extent relating to the days prior to the Interest Cure Date.

 

 

     (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, $8.00, 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 (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 issued to such
Purchaser pursuant to the Securities Purchase Agreement on the Closing Date and the denominator of
which is the aggregate principal amount of all Notes issued to the Purchasers pursuant to the
Securities Purchase Agreement on the Closing 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.

     (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 Default 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 through the first (1st) anniversary of the Issuance 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 (the “New Issuance Price”) 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 New Issuance Price. If and whenever on or after the first (1st)
anniversary of the Issuance 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) in a Dilutive Issuance, then immediately after such Dilutive Issuance, the Conversion
Price then in effect shall be reduced to an amount equal 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.

     (8) HOLDER’S RIGHT OF OPTIONAL REDEMPTION. On October 10, 2009 (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 Redemption”) by delivering written notice
thereof to the Company by October 9, 2009 (a “Holder Redemption Notice”). The Holder Redemption
Notice shall indicate the Conversion Amount the Holder is electing to have redeemed (the “Holder
Optional Redemption Amount”) on the Holder 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 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 Optional Redemption Price, the Holder 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 Optional Redemption Amount.

     (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 Optional Redemption Price on the Holder
Optional 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, Consolidated Revenues and Consolidated Total Debt 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 Interest Test”), (ii)
Consolidated Revenues equal to or greater than the applicable Consolidated Revenue threshold set
forth in the first row of Table B of the Table of Financial Thresholds attached hereto as
Schedule I (the “Consolidated Revenue Default Test”), (iii) 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
Interest Test”), (iv) Consolidated EBITDA equal to or greater than the applicable Consolidated
EBITDA threshold set forth in the second row of Table B of the Table of Financial Thresholds
attached hereto as Schedule I (the “Consolidated EBITDA Default Test”), (v) from and after
the Fiscal Quarter ending March 31, 2008, achieved a Consolidated Total Debt to EBITDA Ratio equal
to or less than the applicable Consolidated Total Debt to EBITDA threshold set forth in the third
row of Table A of the Table of Financial Thresholds attached hereto as Schedule I (the
“Consolidated Total Debt to EBITDA Interest Test”, and together with the Consolidated EBITDA
Interest Test and the Consolidated Revenue Interest Test, the “Interest Tests”) and (vi) from and
after the Fiscal Quarter ending March 31, 2008, achieved a Consolidated Total Debt to EBITDA Ratio
equal to or less than the applicable Consolidated Total Debt to EBITDA threshold set forth in the
third row of Table B of the Table of Financial Thresholds attached hereto as Schedule I
(the “Consolidated Total Debt to EBITDA Default Test” and together with the Consolidated EBITDA
Default Test and Consolidated Revenue Default Test, the “Default 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, Consolidated Revenues and Consolidated
Total Debt for the applicable Fiscal Quarter. In addition, if the Company has failed to meet any
Interest Test or Default Test (collectively, the “Financial Tests”), 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 Default Test, a
“Financial Covenant Default Notice” and the portion of such notice with respect to the failure to
meet an Interest Test, a “Insufficient Interest Test Notice”).

               (ii) Concurrently with the delivery of the Financial Covenant Failure Notice or Insufficient
Interest Test Notice, as applicable, 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, (x) if the Company has failed to meet one or more of the Interest Tests, the
fact that the Interest under the Notes has automatically increased to the Interest Test Failure
Rate and/or (y) if the Company has failed to meet the one or more of the Default 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 Total Debt to EBITDA Ratio” means, for any Fiscal Quarter, the ratio of (i)
Consolidated Total Debt for such Fiscal Quarter to (ii) the Consolidated EBITDA for the trailing
twelve month period ending with such Fiscal Quarter.

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

               (m) “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.

               (n) “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.

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

               (p) “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.

               (q) “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”), either
(x) the Registration Statement filed pursuant to the Registration Rights Agreement shall be
effective and available for the resale of all remaining Registrable Securities in accordance with
the terms of the Registration Rights Agreement or (y) 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 (x) the
Registration Statements required pursuant to the Registration Rights Agreement not to be effective
and available for the resale of all remaining Registrable Securities in accordance with the terms
of the Registration Rights Agreement or (y) 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 restriction pursuant to Rule 144(k) 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.

               (r) “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).

               (s) “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.

 

 

               (t) “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.

               (u) “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.

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

               (w) “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.

               (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 and the Holder 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 and the Holder Optional Redemption Price, each of the foregoing,
individually, a Redemption Price.

               (gg) “Registration Rights Agreement” means that certain registration rights agreement dated as
of the Subscription Date by and among the Company and the initial holders of the Notes relating to,
among other things, the registration of the resale of the Common Stock issuable upon conversion of
the Notes and exercise of the Warrants.

               (hh) “Registration Rights Failure” means the failure of the applicable Registration Statement
required to be filed pursuant to the Registration Rights Agreement to be declared effective by the
SEC on or prior to the date that is sixty (60) days after the applicable Effectiveness Deadline (as
defined in the Registration Rights Agreement), or, while the applicable Registration Statement is
required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of
all of such holder’s Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability
continues for a period of ten (10) consecutive days or for more than an aggregate of thirty (30)
days in any 365-day period (other than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));

 

 

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

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

               (kk) “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.

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

               (mm) “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.

               (nn) “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.

               (oo) “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).

               (pp) “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).

               (qq) “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.

               (rr) “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 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 [INSERT NAME OF
TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with
the Transfer Agent Instructions dated October ___, 2006 from the Company and acknowledged and agreed
to by [INSERT NAME OF TRANSFER AGENT].

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	CASH SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

 

 

Schedule I

Table of Financial Thresholds

Table A Interest Tests

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	 
	 	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Each
	 	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	Fiscal
	 	 	December	 	March 31,	 	June 30,	 	September	 	December	 	March 31,	 	June 30,	 	September	 	December	 	Quarter
	 	 	31, 2006	 	2007	 	2007	 	30, 2007	 	31, 2007	 	2008	 	2008	 	30, 2008	 	31, 2008	 	Thereafter
	Consolidated Revenue
	 	$22.0 million	 	$22.0 million	 	$22.0 million	 	$22.0 million	 	$22.0 million	 	$24.0 million	 	$24.0 million	 	$24.0 million	 	$24.0 million	 	$24.0 million
	Consolidated EBITDA
	 	$750,000	 	$1.0 million	 	$1.5 million	 	$1.75 million	 	$2.0 million	 	$2.0 million	 	$2.0 million	 	$2.25 million	 	$2.25 million	 	$2.5 million
	Total Debt to
EBITDA Ratio
	 	N/A	 	 	N/A	 	 	 	N/A	 	 	 	N/A	 	 	 	N/A	 	 	 	4.5	 	 	 	4.25	 	 	 	4.0	 	 	 	3.75	 	 	 	3.75	 

Table B Default Tests

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	Fiscal	 	 
	 	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Quarter	 	Each
	 	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	Fiscal
	 	 	December	 	March 31,	 	June 30,	 	September	 	December	 	March 31,	 	June 30,	 	September	 	December	 	Quarter
	 	 	31, 2006	 	2007	 	2007	 	30, 2007	 	31, 2007	 	2008	 	2008	 	30, 2008	 	31, 2008	 	Thereafter
	Consolidated Revenue
	 	$20.0 million	 	$20.0 million	 	$20.0 million	 	$20.0 million	 	$20.0 million	 	$22.0 million	 	$22.0 million	 	$22.0 million	 	$22.0 million	 	$22.0 million
	Consolidated EBITDA
	 	$250,000	 	$500,000	 	$1.0 million	 	$1.25 million	 	$1.5 million	 	$1.5 million	 	$1.5 million	 	$1.75 million	 	$1.75 million	 	$2.0 million
	Total Debt to
EBITDA Ratio
	 	N/A	 	N/A	 	 	N/A	 	 	 	N/A	 	 	 	N/A	 	 	 	4.75	 	 	 	4.5	 	 	 	4.25	 	 	 	4.0	 	 	 	4.0	 

 

 

Schedule 14(h)

          1. No later than twenty (20) Business Days after the Closing Date, the Company shall cause 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 two (2) Business Days after the Closing Date, the Company shall cause 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 the date that is twenty (20) Business Days following the
Closing Date, 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 (excluding 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 the date that is twenty (20) Business
Days following the Closing Date, 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.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]