Document:

Exhibit 10.5

 

Exhibit 10.5

AMENDMENT AND EXCHANGE AGREEMENT

          AMENDMENT AND EXCHANGE AGREEMENT (this “Agreement”), dated as of August 20, 2007, by and among
Cash Systems, Inc., a Delaware corporation, with headquarters located at 7350 Dean Martin Drive,
Suite 309, Las Vegas, NV 89139 (the “Company”), and Highbridge International LLC (the “Investor”).

          WHEREAS:

          A. The Company, the Investor and certain other investors (the “Other Investors”, and
collectively with the Investor, the “Investors”) are parties to that certain Securities Purchase
Agreement, dated as of October 6, 2006 (the “Existing Securities Purchase Agreement”), pursuant to
which, among other things, the Investors purchased from the Company (i) senior secured convertible
notes (the “Existing Notes”), which are convertible into shares of the Company’s common stock, par
value $0.001 per share (the “Common Stock”) (the Existing Notes as converted, the “Existing
Conversion Shares”), in accordance with the terms thereof and (ii) warrants (the “Existing
Warrants”), which are exercisable into shares of Common Stock (the “Existing Warrant Shares”).

          B. In connection with the execution and delivery of the Existing Securities Purchase
Agreement, the Company entered into that certain Registration Rights Agreement, dated October 6,
2006 (the “Registration Rights Agreement”), by and among the Company and the Investors, pursuant to
which the Company agreed to provide certain registration rights with respect to the Registrable
Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as
amended (the “1933 Act”), and the rules and regulations promulgated thereunder, and applicable
state securities laws.

          C. The Company and the Investor desire to enter into this Agreement, pursuant to which, among
other things, (i) the Company and the Investor shall amend and restate all of such Investor’s
Existing Notes for notes in the form attached hereto as Exhibit A (the “Notes”) which shall
be convertible into Common Stock (the “Conversion Shares”) and (ii) the Company and the Investor
shall amend and restate all of such Investor’s Existing Warrants for warrants in the form attached
hereto as Exhibit B (the “Warrants”) which shall be exercisable to acquire that number of
shares of Common Stock set forth opposite the Investor’s name in column (3) on the Securities
Schedule attached hereto (the “Warrant Shares”).

          D. The amendment and restatement of the Existing Notes for the Notes and the amendment and
restatement of the Existing Warrants for the Warrants is being made in reliance upon the exemption
from registration provided by Section 3(a)(9) of the 1933 Act.

          E. Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings ascribed to them in the Existing Securities Purchase Agreement.

          NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter
set forth, the Company and the Investor hereby agree as follows:

 

 

	 	1.	 	AMENDMENT AND RESTATEMENT OF EXISTING NOTES AND EXISTING
WARRANTS.

               (a) Amendment and Restatement of Existing Note and Existing Warrants. Subject to
satisfaction (or waiver) of the conditions set forth in Sections 5 and 6 below, at the closing
contemplated by this Agreement (the “Closing”), the Investor shall surrender to the Company its
Existing Note and its Existing Warrants and the Company shall issue and deliver to the Investor (i)
a Note in the principal amount set forth opposite the Investor’s name in column (3) of the
Securities Schedule attached hereto and (ii) the Warrants to acquire that number of Warrant Shares
as is set forth opposite the Investor’s name in column (4) on the Securities Schedule attached
hereto.

               (b) Closing Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York Time, on August 20, 2007, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 5 and 6 below (or such other time and date
as is mutually agreed to by the Company and the Investor). The Closing shall occur on the Closing
Date at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

          2. AMENDMENTS TO TRANSACTION DOCUMENTS.

               (a) Ratifications. Except as otherwise expressly provided herein, the Existing
Securities Purchase Agreement and each other Transaction Document is, and shall continue to be, in
full force and effect and is hereby ratified and confirmed in all respects, except that on and
after the Closing Date (i) all references in the Existing Securities Purchase Agreement to “this
Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Securities
Purchase Agreement shall mean the Existing Securities Purchase Agreement as amended by this
Agreement, (ii) all references in the other Transaction Documents to the “Securities Purchase
Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Securities
Purchase Agreement shall mean the Existing Securities Purchase Agreement as amended by this
Agreement, and (iii) all references in the other Transaction Documents to the “Registration Rights
Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the
Registration Rights Agreement shall mean the Registration Rights Agreement as amended by this
Agreement.

               (b) Amendment to Transaction Documents. Each of the Transaction Documents are hereby
amended as follows:

               (i) All references to “Notes” shall be amended to include additionally the Notes as
defined in this Agreement.

               (ii) All references to “Conversion Shares” shall be amended to include additionally the
Conversion Shares as defined in this Agreement.

               (iii) All references to “Warrants” shall be amended to include additionally the
Warrants as defined in this Agreement.

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               (iv) All references to “Warrant Shares” shall be amended to include additionally the
Warrant Shares as defined in this Agreement.

               (v) The defined term “Transaction Documents” is hereby amended to include this
Agreement.

               (c) Amendment to Registration Rights Agreement. 

               (i) The defined term “Required Registration Amount” shall be amended and restated in
its entirety as follows:

““Required Registration Amount” for the Registration Statement means 112% of the sum of (i)
the aggregate of the maximum number of Conversion Shares issued and issuable pursuant to the
Notes at the then applicable Conversion Price as of the trading day immediately preceding
the applicable date of determination and (ii) the number of Warrant Shares issued and
issuable pursuant to the Warrants as of the trading day immediately preceding the applicable
date of determination, all subject to adjustment as provided in Section 2(e) (without regard
to any limitations on conversion of the Notes or exercise of the Warrants).”

               (ii) Section 3(r) of the Registration Rights Agreement is hereby amended to add the
following:

“Notwithstanding the foregoing, if the Registration Statement is unavailable for the resale
of the Registrable Securities solely because the SEC has elected to review the Prospectus
Supplement (as defined in each of the Amendment and Exchange Agreements) (the “Amendment
Review”), the Company shall be entitled to a Grace Period solely in connection with such
Amendment Review of up to ten (10) consecutive days as an Allowable Grace Period; provided,
further, that such Grace Period shall be in lieu of any other Allowable Grace Period under
this Section 3(r) with respect to such Amendment Review.”

               (d) Amendment to Securities Purchase Agreement.

               (i) Clause (iii) of the first sentence of Section 3(l) of the Securities Purchase
Agreement is hereby amended as follows:

“(iii) had capital expenditures individually in excess of $25,000”

          3. REPRESENTATIONS AND WARRANTIES

               (a) Investor Bring Down. The Investor hereby represents and warrants to the Company
with respect to itself only as set forth in Section 2 of the Existing Securities Purchase Agreement
as if such representations and warranties were made as of the date hereof and set forth in their
entirety in this Agreement. Such representations and warranties to the transactions thereunder and
the securities issued thereby are hereby deemed for purposes of this Agreement to be references to
the transactions hereunder and the issuance of the securities hereby.

3

 

               (b) Company Bring Down. Except as set forth on the Amended and Restated Schedules
attached hereto, which shall amend and restate the Schedules attached to the Existing Securities
Purchase Agreement the Company represents and warrants to the Investor as set forth in Section 3 of
the Existing Securities Purchase Agreement, as amended by Section 2(d) above, as if such
representations and warranties were made as of the date hereof and set forth in their entirety in
this Agreement. Such representations and warranties to the transactions thereunder and the
securities issued thereby are hereby deemed for purposes of this Agreement to be references to the
transactions hereunder and the issuance of the securities hereby, references therein to “Closing
Date” being deemed references to the Closing Date as defined in Section 1(b) above, and references
to “the date hereof” being deemed references to the date of this Agreement.

               (c) Registration Statement. The Company represents and warrants to the Investors
that, immediately prior to the Closing, the Company’s registration statement on Form S-3 (File No.
333-139179) (the “Existing Registration Statement”) is effective and available for the resale of
the Existing Conversion Shares and the Existing Warrant Shares.

               (d) No Event of Default. The Company represents and warrants to the Investor that
after giving effect to the terms of this Agreement and the Other Agreements (as defined below), no
Event of Default (as defined in the Notes) shall have occurred and be continuing as of the date
hereof.

               (e) Holding Period. For the purposes of Rule 144, the Company acknowledges that the
holding period of (i) the Notes (including the corresponding Conversion Shares) may be tacked onto
the holding period of the Existing Notes and (ii) the Warrants (including the corresponding Warrant
Shares) may be tacked onto the holding period of the Existing Warrants (in the case of Cashless
Exercise (as defined in the Warrants)), and the Company agrees not to take a position contrary to
this Section 3(e). The Company’s representation, covenant and agreement set forth in this Section
3(e) shall be subject in all respects to Rule 144 and other applicable securities laws, as may be
in effect from time to time.

          4. CERTAIN COVENANTS AND AGREEMENTS; WAIVER

               (a) Best Efforts. Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 5 and 6 of this Agreement.

               (b) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York City time, on the first Business Day following the date of this Agreement, the
Company shall issue a press release and file a Current Report on Form 8-K describing the terms of
the transactions contemplated by this Agreement in the form required by the 1934 Act and attaching
the material Transaction Documents not previously filed (including, without limitation, this
Agreement, the form of the Notes and the form of the Warrants) (including all attachments, the “8-K
Filing”). From and after the filing of the 8-K Filing with the SEC, the Investor shall not be in
possession of any material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing. The Company shall not, and shall cause each of

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its Subsidiaries and its and each of their respective officers, directors, employees and
agents, not to, provide the Investor with any material, nonpublic information regarding the Company
or any of its Subsidiaries from and after the filing of the 8-K Filing with the SEC without the
express written consent of the Investor. If the Investor has, or believes it has, received any
such material, nonpublic information regarding the Company or any of its Subsidiaries, it shall
provide the Company with written notice thereof. The Company shall, within five (5) Trading Days
(as defined in the Notes) of receipt of such notice, make public disclosure of such material,
nonpublic information. In the event of a breach of the foregoing covenant by the Company, any of
its Subsidiaries, or any of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents, the Investor shall
have the right to make a public disclosure, in the form of a press release, public advertisement or
otherwise, of such material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees or agents. The
Investor shall not have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any such disclosure. Subject
to the foregoing, neither the Company, its Subsidiaries nor the Investor shall issue any press
releases or any other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior approval of the Investor,
to make any press release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required
by applicable law and regulations (provided that in the case of clause (i) the Investor shall be
consulted by the Company in connection with any such press release or other public disclosure prior
to its release). Without the prior written consent of the Investor, neither the Company nor any of
its Subsidiaries or affiliates shall disclose the name of the Investor in any filing, announcement,
release or otherwise other than in connection with the Registration Statement, as contemplated
pursuant to the Registration Rights Agreement, unless such disclosure is required by law,
regulation or the Principal Market.

               (c) On or before 9:30 a.m., New York City time, on the third Business Day following the date
of this Agreement, the Company shall file a prospectus supplement (the “Prospectus Supplement”) to
the Existing Registration Statement updating the disclosure to reflect this Agreement, the Notes
and the Warrants.

               (d) Fees and Expenses. The Company shall reimburse the Investor for its legal and due
diligence fees and expenses in connection with the preparation and negotiation of this Agreement
and transactions contemplated thereby (the “Investor Counsel Expense”). The Investor Counsel
Expense shall be paid by the Company whether or not the transactions contemplated by this Agreement
are consummated. Except as otherwise set forth in this Agreement, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.

          5. CONDITIONS TO COMPANY’S OBLIGATIONS HEREUNDER.

               The obligations of the Company to the Investor hereunder are subject to the satisfaction of
each of the following conditions, provided that these conditions are for the

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Company’s sole benefit and may be waived by the Company at any time in its sole discretion by
providing the Investor with prior written notice thereof:

               (a) The Investor shall have executed this Agreement and delivered the same to the Company.

               (b) The Investor shall have delivered to the Company the Investor’s Existing Note and Existing
Warrants for cancellation.

               (c) The representations and warranties of the Investor shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such
specified date) and the Investor shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Investor at or prior to the Closing Date.

          6. CONDITIONS TO INVESTOR’S OBLIGATIONS HEREUNDER.

               The obligations of the Investor hereunder are subject to the satisfaction of each of the
following conditions, provided that these conditions are for the Investor’s sole benefit and may be
waived by the Investor at any time in its sole discretion by providing the Company with prior
written notice thereof:

               (a) The Company shall have executed this Agreement and delivered the same to the Investor.

               (b) The Company shall have executed and delivered to the Investor the Notes and the Warrants
being issued to such Investor at the Closing.

               (c) Each of the Other Investors shall have (i) executed agreements identical to this Agreement
(the “Other Agreements”) (other than (i) proportional changes (the “Proportionate Changes”) in the
numbers reflecting the different dollar amount of such Investor’s Notes and the number of Warrant
Shares underlying such Investor’s Warrants and (ii) Section 4(d)), (ii) satisfied or waived all
conditions to the closings contemplated by such agreements and (iii) surrendered their Existing
Notes and Existing Warrants for Notes and Warrants identical to the Notes and Warrants of the
Investor hereunder (other than the Proportionate Changes).

               (d) The Company shall have delivered to the Company’s transfer agent, with a copy to the
Investors, Irrevocable Transfer Agent Instructions in the form of Exhibit C attached
hereto.

               (e) The Investor shall have received the opinion of Manatt, Phelps & Phillips, LLP, the
Company’s outside counsel, and Zev Kaplan, Esq., the Company’s internal general counsel, each dated
as of the Closing Date, in substantially the form of Exhibit D attached hereto.

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               (f) The Company shall have delivered to such Buyer a certificate (or a fax or pdf copy of such
certificate) evidencing the formation and good standing of the Company and each of its Subsidiaries
in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office)
of such jurisdiction, as of a date within 10 days of the Closing Date.

               (g) The Company shall have delivered to such Buyer a certificate (or a fax or pdf copy of such
certificate) evidencing the Company’s qualification as a foreign corporation and good standing
issued by the Secretary of State (or comparable office or a bring-down certificate from Corporation
Service Company) of each jurisdiction in which the Company conducts business and is required to so
qualify, as of a date within 10 days of the Closing Date.

               (h) The Company shall have delivered to the Investor a certified copy of the Certificate of
Incorporation as certified by the Secretary of State of the State of Delaware (or a fax or pdf copy
of such certificate) within ten (10) days of the Closing Date.

               (i) The Company shall have delivered to the Investor a certificate, executed by the Secretary
of the Company and dated as of the Closing Date, as to (i) the resolutions approving the
transactions contemplated hereby as adopted by the Board in a form reasonably acceptable to the
Investor, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect as of the
Closing, in the form attached hereto as Exhibit E.

               (j) The representations and warranties of the Company hereunder shall be true and correct in
all material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such
specified date) and the Company shall have performed, satisfied and complied in all respects with
the covenants, agreements and conditions required by this Agreement and the other Transaction
Documents to be performed, satisfied or complied with by the Company at or prior to the Closing
Date and after giving effect to the terms of this Agreement and the Other Agreements, no default or
Event of Default shall have occurred and be continuing as of the Closing Date. The Investor shall
have received a certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be reasonably
requested by the Investor in the form attached hereto as Exhibit F.

               (k) The Common Stock (I) shall be designated for quotation or listed on the Principal Market
and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market
from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market
or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

               (l) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities.

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               (m) The Company shall have delivered to the Investor such other documents relating to the
transactions contemplated by this Agreement as the Investor or its counsel may reasonably request.

          7. TERMINATION.

               In the event that the Closing does not occur on or before five (5) Business Days from the date
hereof, due to the Company’s or the Investor’s failure to satisfy the conditions set forth in
Sections 5 and 6 hereof (and the nonbreaching party’s failure to waive such unsatisfied
conditions(s)), the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without liability of any
party to any other party; provided, however, if this Agreement is terminated
pursuant to this Section 7, the Company shall remain obligated to reimburse the Investor for the
expenses described in Section 4(d) above. Upon such termination, the terms hereof shall be null
and void and the parties shall continue to comply with all terms and conditions of the Transaction
Documents, as in effect prior to the execution of this Agreement.

          8. MISCELLANEOUS.

               (a) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.

               (b) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

               (c) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.

               (d) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement 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. Each
party 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. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof

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to such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY 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 AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

               (e) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.

               (f) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

               (g) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

               (h) Entire Agreement; Effect on Prior Agreements; Amendments. Except for the
Transaction Documents in effect prior to this Agreement (to the extent any such Transaction
Document is not amended by this Agreement), this Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither the
Company nor the Investor makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No consideration shall be offered
or paid to any Person to amend or consent to a waiver or modification of any provision of any of
the Transaction Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Notes or holders of the Warrants, as the case may be. The
Company has not, directly or indirectly, made any agreements with any of the Investors relating to
the terms or conditions of the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents.

               (i) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an

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overnight courier service, in each case properly addressed to the party to receive the same.
The addresses and facsimile numbers for such communications shall be:

	 	 	 	 	 	 	 
	 	 	If to the Company:
	 
	 	 	 	 	 	 
	 	 	 	 	Cash Systems, Inc.

7350 Dean Martin Drive, Suite 309

Las Vegas, NV 89139
	 

	 	 	 	Telephone:
	 	(702) 987-7169
	 

	 	 	 	Facsimile:
	 	(702)987-7168
	 

	 	 	 	Attention:
	 	Andrew Cashin
	 
	 	 	 	 	 	 
	 	 	Copy to:
	 
	 	 	 	 	 	 
	 	 	 	 	Zev Kaplan

7350 Dean Martin Drive, Suite 309

Las Vegas, NV 89139
	 

	 	 	 	Telephone:
	 	(702)987-7169
	 

	 	 	 	Facsimile:
	 	(702)266-9061
	 
	 	 	 	 	 	 
	 	 	Copy to:
	 
	 	 	 	 	 	 
	 	 	 	 	Manatt, Phelps & Phillips, LLP

11355 West Olympic Boulevard

Los Angeles, CA 90064
	 

	 	 	 	Telephone:
	 	(310)312-4100
	 

	 	 	 	Facsimile:
	 	(310)312-4224
	 

	 	 	 	Attention:
	 	Barbara Polsky, Esq.

If to the Investor, to its address and facsimile number set forth in the Securities Schedule
attached hereto,

	 	 	 	 	 	 	 
	 	 	with a copy (for informational purposes only) to:
	 
	 	 	 	 	 	 
	 	 	 	 	Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022
	 

	 	 	 	Telephone:
	 	(212) 756-2000
	 

	 	 	 	Facsimile:
	 	(212) 593-5955
	 

	 	 	 	Attention:
	 	Eleazer N. Klein, Esq.

or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier

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service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an
overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

               (j) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns in accordance with the terms of
the Existing Securities Purchase Agreement.

               (k) Survival. Unless this Agreement is terminated under Section 7, the
representations and warranties of the Company and the Investor contained herein and the agreements
and covenants set forth herein shall survive the Closing.

               (l) Remedies. The Investor and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations under this Agreement,
any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees
that the Investor shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond or other security.

               (m) Indemnification. In consideration of the Investor’s execution and delivery of the
Transaction Documents, acquiring the Securities thereunder and entering into this Agreement and in
addition to all of the Company’s other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless the Investor and each other holder of the
Securities and all of their stockholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against
such Indemnitee by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by the Investor pursuant to

11

 

Section 4(c), or (iv) the status of the Investor or holder of the Securities as an investor in
the Company pursuant to the transactions contemplated by the Transaction Documents. To the extent
that the foregoing undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this Section 8(m) shall
be the same as those set forth in Section 6 of the Registration Rights Agreement.

               (n) Independent Nature of Investor’s Obligations and Rights. The obligations of the
Investor under any Transaction Document (including this Agreement) are several and not joint with
the obligations of any Other Investor, and the Investor shall not be responsible in any way for the
performance of the obligations of any Other Investor under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by the Investor pursuant
hereto, shall be deemed to constitute the Investor and Other Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Investor
and Other Investors are in any way acting in concert or as a group, and the Company will not assert
any such claim with respect to the obligations or the transactions contemplated by the Transaction
Documents and the Company acknowledges that the Investor and Other Investors are not acting in
concert or as a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges and the Investor confirms that the Investor has
independently participated in the negotiation of the transactions contemplated hereby with the
advice of its own counsel and advisors. The Investor shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of this Agreement or
out of any other Transaction Documents, and it shall not be necessary for any Other Investor to be
joined as an additional party in any proceeding for such purpose.

[Signature Page Follows]

12

 

          IN WITNESS WHEREOF, the Investor and the Company have caused their respective signature page
to this Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	COMPANY:

CASH SYSTEMS, INC.

 	 
	 	By:  	/s/ Michael Rumbolz 	 
	 	 	Name:  	Michael Rumbolz 	 
	 	 	Title:  	CEO 	 
	 

[Signature Page to Amendment and Exchange Agreement]

 

 

          IN WITNESS WHEREOF, the Investor and the Company have caused their respective signature page
to this Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	INVESTOR:

HIGHBRIDGE INTERNATIONAL LLC

 	 
	 
	 	By:  	Highbridge Capital Management, LLC 	 
	 
	 
	 	By:  	/s/ Adam J. Chill 	 
	 	 	Name:  	Adam J. Chill 	 
	 	 	Title:  	Managing Director 	 
	 

[Signature Page to Amendment and Exchange Agreement]

 

 

SECURITIES SCHEDULE

	 	 	 	 	 	 	 	 	 	 	 	 	 
	(1)	 	(2)	 	(3)	 	(4)	 	(5)
	 	 	 	 	Aggregate	 	 	 	 
	 	 	 	 	Principal	 	 	 	 
	 	 	Address and	 	Amount of	 	Number of	 	Legal Representative’s
	Investor	 	Facsimile Number	 	Notes	 	Warrant Shares	 	Address and Facsimile Number
	Portside Growth
and Opportunity
Fund

	 	c/o Ramius Capital Group, L.L.C.

666 Third Avenue, 26th Floor

New York, New York 10017

Attention: Jeffrey Smith

          Owen Littman

Facsimile: (212) 201-4802

          (212) 845-7995

Telephone: (212) 845-7955

          (212) 201-4841

Residence: Cayman Islands
	 	$	12,100,000	 	 	 	268,125	 	 	Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention: Eleazer Klein, Esq.

Facsimile: (212) 593-5955

Telephone: (212) 756-2376
	Highbridge
International LLC

	 	c/o Highbridge Capital

Management, LLC

9 West 57th Street, 27th Floor

New York, New York 10019

Attention: Ari J. Storch

          Adam J. Chill

Facsimile: (212) 751-0755

Telephone: (212) 287-4720

Residence: Cayman Islands

	 	$	4,400,000	 	 	 	97,500	 	 	 
	Highline
Capital Partners,
LP

	 	1 Rockefeller Plaza, 30th Floor

New York, NY 10020

Attention: Howard Singer

Facsimile: 212-332-2259

Telephone: 212-332-2250

	 	 	476,135	 	 	 	10,551	 	 	 
	Highline
Capital Partners
QP, LP

	 	1 Rockefeller Plaza, 30th Floor

New York, NY 10020

Attention: Howard Singer

Facsimile: 212-332-2259

Telephone: 212-332-2250

	 	 	1,470,293	 	 	 	32,580	 	 	 
	Highline
Capital
International, Ltd.

	 	1 Rockefeller Plaza, 30th Floor

New York, NY 10020

Attention: Howard Singer

Facsimile: 212-332-2259

Telephone: 212-332-2250

	 	 	3,553,572	 	 	 	78,744	 	 	 

 

 

EXHIBITS

	 	 	 
	Exhibit A

	 	Form of Note
	Exhibit B

	 	Form of Warrant
	Exhibit C

	 	Form of Irrevocable Transfer Agent Instructions
	Exhibit D

	 	Form of Opinion of Company’s Counsel
	Exhibit E

	 	Form of Secretary’s Certificate
	Exhibit F

	 	Form of Officers Certificate

SCHEDULES

	 	 	 
	Schedule 3(a)

	 	Subsidiaries
	Schedule 3(c)

	 	Issuance of Securities
	Schedule 3(d)

	 	No Conflicts
	Schedule 3(e)

	 	Consents
	Schedule 3(l)

	 	Absence of Certain Changes
	Schedule 3(p)

	 	Sarbanes-Oxley Act
	Schedule 3(r)

	 	Equity Capitalization
	Schedule 3(s)

	 	Indebtedness and Other Contracts
	Schedule 3(t)

	 	Absence of Litigation
	Schedule 3(w)

	 	Title
	Schedule 3(bb)

	 	Internal Accounting and Disclosure Controls
	Schedule 3(cc)

	 	Ranking of Notes
	Schedule 3(ll)

	 	Certain LiensExhibit 10.6

 

Exhibit 10.6

[FORM OF AMENDED AND RESTATED 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.

Amended and Restated Senior Secured Convertible Note

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

          FOR VALUE RECEIVED, Cash Systems, Inc., a Delaware corporation (the “Company”), hereby
promises to pay to [PORTSIDE GROWTH AND OPPORTUNITY FUND] [OTHER BUYERS] or registered assigns
(“Holder”) the amount set out above as the Original Principal Amount (as reduced pursuant to the
terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether
upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in
accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at
the rate of (x) if on or prior to June 30, 2007, six and one-half percent (6.50%) per annum or (y)
if after June 30, 2007, seven and one-half percent (7.50%) per annum (the “Interest Rate”), from
the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and
payable, whether upon an Interest Date (as defined below) or the Maturity Date, acceleration,
conversion, redemption or otherwise (in each case in accordance with the terms hereof). Certain
capitalized terms used herein are defined in Section 28. This Note amends, supplements, modifies
and completely restates and supersedes the Senior Secured Convertible Notes, dated as of the
Issuance Date (the “Existing Notes”), issued by the Company to the Holder with an Original
Principal Amount of $                    , but shall not, except as specifically amended hereby or as set forth
in the Holder’s Amendment and Exchange Agreement (as defined below), constitute a release,
satisfaction or

 

 

novation of any of the obligations under the Existing Notes or any other Transaction Document
(as defined in the Securities Purchase Agreement). This Senior Secured Convertible Note (including
all Senior Secured Convertible Notes issued in exchange, transfer or replacement hereof, this
“Note”) is one of an issue of Senior Secured Convertible Notes (collectively, the “Notes” and such
other Senior Secured Convertible Notes, the “Other Notes”) amending and restating the terms of the
Existing Notes pursuant to Section 1 of those certain Amendment and Exchange Agreements, dated as
of August 20, 2007 (the “Replacement Date”), by and between each of the Buyers (as defined in the
Securities Purchase Agreement) and the Company (the “Amendment and Exchange Agreements”).

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

          (2) INTEREST; INTEREST RATE. Interest on the outstanding Principal amount of this
Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day
year and actual days elapsed and shall be payable quarterly, in arrears, on January 10, April 10,
July 10 and October 10 of each year (each, an “Interest Date”), with the first Interest Date being
January 10, 2007. Interest shall be payable on each Interest Date, to the record holder of this
Note on the applicable Interest Date, in cash. Prior to the payment of Interest on an Interest
Date, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of
the Interest in the Conversion Amount in accordance with Section 3(b)(i). From and after the
occurrence and during the continuance of an Event of Default 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.

 

 

          (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 Financial Test set forth in Section 14(f) of this Note; or

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

               (b) Redemption Right. Upon the occurrence of an Event of Default with respect to this
Note or any Other Note, the Company shall within (1) Business Day deliver written notice thereof
via facsimile or e-mail and overnight courier (an “Event of Default Notice”) to the Holder. At any
time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder
becoming aware of an Event of Default, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof (the “Event of Default Redemption
Notice”) to the Company, which Event of Default Redemption

 

 

Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion
of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed
by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount to
be redeemed and (y) the Redemption Premium and (ii) the product of (A) the Conversion Rate with
respect to such Conversion Amount in effect at such time as the Holder delivers an Event of Default
Redemption Notice and (B) the greater of (1) the Closing Sale Price of the Common Stock on the date
immediately preceding such Event of Default, (2) the Closing Sale Price of the Common Stock on the
date immediately after such Event of Default and (3) the Closing Sale Price of the Common Stock on
the date the Holder delivers the Event of Default Redemption Notice (the “Event of Default
Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 12. To the extent redemptions required by this Section 4(b) are deemed or
determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. The parties hereto agree that in the
event of the Company’s redemption of any portion of the Note under this Section 4(b), the Holder’s
damages would be uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any Redemption Premium due under this Section 4(b) is
intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual
loss of its investment opportunity and not as a penalty.

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

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

 

 

traded common stock (or their equivalent) of the Successor Entity (including its Parent
Entity), as adjusted in accordance with the provisions of this Note. The provisions of this
Section shall apply similarly and equally to successive Fundamental Transactions and shall be
applied without regard to any limitations on the conversion or redemption of this Note.

               (b) Redemption Right. No sooner than fifteen (15) days nor later than ten (10) days
prior to the consummation of a Change of Control, but not prior to the public announcement of such
Change of Control, the Company shall deliver written notice thereof via facsimile and overnight
courier to the Holder (a “Change of Control Notice”). At any time during the period beginning on
the date of the Holder’s receipt of a Change of Control Notice and ending twenty (20) Trading Days
after the consummation of such Change of Control, the Holder may require the Company to redeem all
or any portion of this Note by delivering written notice thereof (“Change of Control Redemption
Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant
to this Section 5 shall be redeemed by the Company in cash at a price equal to the greater of (i)
the product of (x) the Conversion Amount being redeemed and (y) the quotient determined by dividing
(A) the greater of the Closing Sale Price of the Common Stock immediately prior to the consummation
of the Change of Control, the Closing Sale Price immediately following the public announcement of
such proposed Change of Control and the Closing Sale Price of the Common Stock immediately prior to
the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) the
product of the Conversion Amount being redeemed and the Change of Control Premium (the “Change of
Control Redemption Price”). Redemptions required by this Section 5 shall be made in accordance
with the provisions of Section 12 and shall have priority to payments to stockholders in connection
with a Change of Control. To the extent redemptions required by this Section 5(b) are deemed or
determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary
in this Section 5, but subject to Section 3(d), until the Change of Control Redemption Price is
paid in full, the Conversion Amount submitted for redemption under this Section 5(c) may be
converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. The parties
hereto agree that in the event of the Company’s redemption of any portion of the Note under this
Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due
under this Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

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

               (a) Purchase Rights. If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which the Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without

 

 

taking into account any limitations or restrictions on the convertibility of this Note)
immediately before the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.

               (b) Other Corporate Events. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon
the consummation of such Corporate Event (without taking into account any limitations or
restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock
otherwise receivable upon such conversion, such securities or other assets received by the holders
of shares of Common Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note initially been issued with
conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a
conversion rate for such consideration commensurate with the Conversion Rate. Provision made
pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to successive Corporate
Events and shall be applied without regard to any limitations on the conversion or redemption of
this Note.

          (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

               (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on
or after the Subscription Date 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) ADDITIONAL REDEMPTIONS

               (a) Holder’s Right of Optional Redemption.

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

                    (ii) On October 10, 2009 (the “Holder Additional Optional Redemption Date”, and together with
the Holder Initial Optional Redemption Date, the “Holder Optional Redemption Date”), the Holder
shall have the right, in its sole discretion, to require that the Company redeem all or any portion
of the Note (a “Holder Additional Redemption”, and together with the Holder Initial Redemption, the
“Holder Redemptions”) by delivering written notice thereof to the Company by September 10, 2009 (a
“Holder Additional Redemption Notice”, and together with the Holder Initial Redemption Notice, the
“Holder Redemption Notices”). The Holder Additional Redemption Notice shall indicate the

 

 

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

               (b) Company Mandatory Redemption.

                    (i) If the Equity Conditions shall have been satisfied or waived in writing by the Holder from
and including the Mandatory Redemption Notice Date (as defined below) through and including October
10, 2008 (such date being the “Mandatory Redemption Date”), the Company shall have the right on the
Mandatory Redemption Date to redeem a portion of the Conversion Amount then remaining under this
Note, not to exceed the Maximum Redemption Amount, as designated in the Mandatory Redemption
Notice, as of the Mandatory Redemption Date (a “Mandatory Redemption”). The portion of this Note
subject to redemption pursuant to this Section 8(b) shall be redeemed by the Company at a price
equal to the product of (x) 130% and (y) the Conversion Amount being redeemed (the “Mandatory
Redemption Price”) on the Mandatory Redemption Date. The Company may exercise its right to require
redemption under this Section 8(b) by delivering a written notice thereof no later than September
10, 2008, by facsimile and overnight courier to all, but not less than all, of the holders of Notes
and the Transfer Agent (the “Mandatory Redemption Notice” and the date all of the holders received
such notice is referred to as the “Mandatory Redemption Notice Date”). The Company may deliver no
more than one Mandatory Redemption Notice hereunder and such Mandatory Redemption Notice shall be
irrevocable. The Mandatory Redemption Notice shall state the aggregate Conversion Amount of the
Notes which the Company has elected to be subject to Mandatory Redemption from all of the holders
of the Notes pursuant to this Section 8(b) (and analogous provisions under the Other Notes). All
Conversion Amounts converted by the Holder after the Mandatory Redemption Notice Date shall reduce
the Conversion Amount of this Convertible Note required to be redeemed on the Mandatory Redemption
Date. Redemptions made pursuant to this Section 8(b) shall be made in accordance with Section 12.

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

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

 

 

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

          (11) RESERVATION OF AUTHORIZED SHARES.

               (a) Reservation. The Company shall initially reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock for each of the Notes equal to 112% 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, 112% of the number of shares of Common Stock as shall from
time to time be necessary to effect the conversion of all of the Notes then outstanding; provided
that at no time shall the number of shares of Common Stock so reserved be less than the number of
shares required to be reserved by the previous sentence (without regard to any limitations on
conversions) (the “Required Reserve Amount”). The initial number of shares of Common Stock
reserved for conversions of the Notes and each increase in the number of shares so reserved shall
be allocated pro rata among the holders of the Notes based on the principal amount of the Notes
held by each holder at the Closing (as defined in the Securities Purchase Agreement) or increase in
the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the
event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee
shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated
to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by
such holders.

               (b) Insufficient Authorized Shares. If at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the
Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in
the number of authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board
of directors to recommend to the stockholders that they approve such proposal.

 

 

          (12) HOLDER’S REDEMPTIONS.

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

               (b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the
holders of the Other Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b), Section 5(b) or
Section 8 (each, an “Other Redemption Notice”), the Company shall immediately, but no later than
one (1) Business Day of its receipt thereof, forward to the Holder by facsimile a copy of such
notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices,
during the seven (7) Business Day period beginning on and including the date which is three (3)
Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and
including the date which is three (3) Business Days after the Company’s receipt of the Holder’s
Redemption Notice and the Company is unable to redeem all principal, interest and other amounts
designated in such Redemption Notice and such Other Redemption Notices received during such seven
(7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the
Notes (including the Holder)

 

 

based on the principal amount of the Notes submitted for redemption pursuant to such
Redemption Notice and such Other Redemption Notices received by the Company during such seven
Business Day period.

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

          (14) COVENANTS.

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

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

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

               (d) Restricted Payments. The Company shall not, and the Company shall not permit any
of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any
payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by
way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Permitted Indebtedness (other than this Note and the Other Notes), whether by way of payment
in respect of principal of (or premium, if any) or interest on such Indebtedness, if at the time
such payment is due or is otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being cured would constitute, an Event
of Default has occurred and is continuing; provided that notwithstanding the foregoing, no
principal (or any portion thereof) of any Subordinated Indebtedness may be paid (whether upon
maturity, redemption, acceleration or otherwise) so long as this Note is outstanding.

               (e) Restriction on Redemption and Cash Dividends. Until all of the Notes have been
converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not,
directly or indirectly, redeem, repurchase or declare or pay any cash

 

 

dividend or distribution on its capital stock without the prior express written consent of the
Required Holders.

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

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

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

 

 

reasonably request with respect thereto. In the event that at any time after the Issuance
Date, Cash Systems of Canada, Inc. commences transacting any business or owns any properties or
assets in excess of $5,000, the Company shall promptly cause Cash Systems of Canada, Inc. to comply
with the foregoing sentence.

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

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

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

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

          (18) REISSUANCE OF THIS NOTE.

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

               (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note,
and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon surrender and cancellation of
this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with
Section 18(d)) representing the outstanding Principal.

 

 

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

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

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

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

          (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the
Company and all the Purchasers and shall not be construed against any person as

 

 

the drafter hereof. The headings of this Note are for convenience of reference and shall not
form part of, or affect the interpretation of, this Note.

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

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

          (24) NOTICES; PAYMENTS.

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

               (b) Payments. Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier service to such
Person at such address as previously provided to the Company

 

 

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

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

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

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

 

 

DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION
CONTEMPLATED HEREBY.

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

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

               (b) “Bloomberg” means Bloomberg Financial Markets.

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

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

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

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

 

 

be calculated for a security on a particular date on any of the foregoing bases, the Closing
Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.

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

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

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

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

 

 

               (k) “Consolidated 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) “Maximum Redemption Amount” means such portion this Note equal to the product of (i) $8
million and (ii) the quotient of (x) the Principal of this Note outstanding immediately following
the Replacement Date and (y) the principal amount of all the Notes outstanding immediately
following the Replacement Date.

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

               (z) “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.

               (aa) “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.

               (bb) “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.

               (cc) “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.

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

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

               (ff) “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%.

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

               (hh) “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, as amended from time to time in accordance with its terms,
including, without limitation, pursuant to the Amendment and Exchange Agreements.

               (ii) “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));

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

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

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

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

               (nn) “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.

               (oo) “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.

               (pp) “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).

               (qq) “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).

               (rr) “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.

 

 

               (ss) “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 Computershare Trust
Company, N.A. to issue the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated August 20, 2007 from the Company and acknowledged and agreed to
by Computershare Trust Company, N.A.

	 	 	 	 	 
	 	CASH SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

Schedule I

Table of Financial Thresholds

Table A Financial Tests

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Fiscal Quarter	 	Fiscal Quarter	 	Fiscal Quarter	 	Fiscal Quarter	 	Fiscal Quarter	 	Fiscal Quarter	 	Fiscal Quarter	 	Each
	 	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	ending	 	Fiscal Quarter
	 	 	June 30, 2007	 	September 30, 2007	 	December 31, 2007	 	March 31, 2008	 	June 30, 2008	 	September 30, 2008	 	December 31, 2008	 	Thereafter
	Consolidated Revenue
	 	$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
	 	$0.25 million	 	$0.25 million	 	$0.25 million	 	$0.5 million	 	$1.0 million	 	$1.25 million	 	$1.50 million	 	$1.75 million
	Total Debt to
EBITDA Ratio
	 	N/A	 	N/A	 	N/A	 	N/A	 	N/A	 	N/A	 	N/A	 	4.75

 

 

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 (including the calendar month in which the Closing Date occurs), the Company shall, within
twenty (20) Business Days following the last day of such calendar month, deliver to the Collateral
Agent an account control agreement, in form and substance reasonably satisfactory to the Collateral
Agent, duly executed by the Company and the depositary bank in which such account is maintained.

               (b) Notwithstanding anything to the contrary contained in clause (a) above, and without
limiting any of the foregoing, if at any time on or after 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.

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