THIS NOTE AND
THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES
ACT ”), OR ANY STATE SECURITIES LAWS (“
BLUE SKY LAWS ”). SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE BLUE
SKY LAWS. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
TERMS OF THIS NOTE.
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Issuance Date:
, 2005
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Principal: U.S. $
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CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
Ace Cash Express,
Inc., a Texas corporation (the “ Company
”), for value received, promises to pay to Popular Cash
Express, Inc., a Delaware corporation, or its registered assigns,
(the “ Holder ”), the principal sum of
dollars ($___), in lawful money of the United States of America and
in immediately available funds, plus interest on the principal
amount hereof, at the annual rate of three and five-eighths percent
(3.625%), payable in accordance with the terms set forth in
Section 2 hereof.
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1.
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Definitions . Unless the context indicates
otherwise, capitalized terms used herein but not defined herein
shall have the meanings given them in the Asset Purchase Agreement.
In addition, the following terms used herein shall have the
following meanings:
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1.1
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“ Affiliate
” means, with respect to Holder, another person that directly
or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the
Holder.
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1.2
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“ Asset Purchase
Agreement ” means the Asset Purchase Agreement dated
as of
, 2005 between the Holder, the Company and Popular North America,
Inc., a Delaware corporation.
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1.3
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“ Business Day
” means any day other than Saturday, Sunday or other day on
which commercial banks in Texas are required or authorized to be
closed.
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1.4
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“ Change of
Control ” shall mean (i) any transaction or
series of related transactions as a result of which any person or
persons, including but not limited to any “person” or
“group” (as such terms are used in sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
“ Exchange Act ”)), other than the Permitted
Investors, acquires beneficial ownership (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of more than
50% of (a) the then outstanding shares of common stock of the
Company or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors ( provided ,
however , that an underwritten public offering of the
Company’s common stock registered under the Securities Act of
1933, as amended, that has been approved by a majority of the
Continuing Directors shall not be deemed to be a Change of
Control); (ii) any merger, consolidation, share exchange, sale
of assets or other reorganization to which the Company is a party
and as a result of which members of the Board of Directors in
office immediately prior to such transaction or event thereafter
constitute less than a majority of the whole Board of Directors; or
(iii) the first day on which a majority of the members of the
Board of Directors of the Company is not constituted by Continuing
Directors. As used herein, “ Continuing Directors
” shall mean as of any date of determination, the directors
of the Company on the Initial Closing Date and each other
individual becoming a director subsequent to the Closing Date whose
election, or nomination for election by the Company’s
shareholders, was approved by a vote of a majority of the
Continuing Directors as of such date, and “ Permitted
Investors ” shall mean, collectively, (i) all
officers of the Company on the Initial Closing Date, (ii) all
members of the Board of Directors of the Company on the Initial
Closing Date, (iii) Raymond C. Hemmig, (iv) Donald H.
Neustadt, (v) Marshall B. Payne, and (vi) Edward W. Rose
III.
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1.5
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“ Common Stock
” means the Company’s common stock, $.01 par value per
share.
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1.6
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“ Conversion
Date ” means the date of the Conversion Notice
delivered to the Company by the Holder in accordance with
Section 4 hereof.
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1.7
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“ Conversion
Price ” means $___ 1 per share of Common Stock, subject
to adjustment as set forth in Section 12
hereof.
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1
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This number
shall be calculated as follows and inserted into the executed Note:
equal to the product of (A) the average of the closing stock
trading prices of the Common Stock, as
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1.8
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“ Credit
Agreement ” means the First Amended and Restated
Credit Agreement, dated as of July 30, 2004, among the
Company, the lenders party thereto, and Wells Fargo Bank, National
Association, as Administration Agent, as such agreement may have
been or may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified from
time to time (including successive modifications of the
foregoing).
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1.9
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“ Interest Payment
Date ” shall mean March 31, June 30,
September 30 and December 31 of each year, commencing
December 31, 2005.
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1.10
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“ Note ”
means this Convertible Promissory Note.
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1.11
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“ Senior
Indebtedness ” means (i) all indebtedness,
liabilities and obligations of the Company, whether absolute or
contingent, now or hereafter existing, or due or to become due and
from time to time outstanding, under or pursuant to the Credit
Agreement (including, without limitation, all principal, interests,
fees, costs, expenses and indemnity obligations thereunder) and any
and all post-petition interest and costs from and after the date of
filing of a petition by or against the Company in any bankruptcy,
reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding, and (ii) all other indebtedness of the Company and
all obligations of the Company thereunder, whether outstanding on
the date of this Note or thereafter incurred, unless the instrument
under which such indebtedness is incurred expressly provides that
it is on parity or subordinated in right of payment to this
Note.
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2.
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Maturity, Payment of
Interest .
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2.1
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Maturity . Unless otherwise converted as
provided herein, the outstanding principal under this Note and
accrued and unpaid interest thereon will be due and payable in full
on demand at any time after the earlier to occur of:
(i) December 31, 2025; (ii) upon the date of a
redemption at the option of the Company in accordance with
Section 5.1 hereof; (iii) upon the date the
Company is obligated to repurchase at the option of the Holder in
accordance with Section 5.2 hereof; or (iv) upon
the date the Company is obligated to repurchase at the option of
the Holder in accordance with Section 5.4 hereof (each
a “Maturity Date”).
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2.2
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Interest . The outstanding principal balance
of this Note shall bear interest at 3.625% from the date hereof
until the earlier to occur of: (i) the conversion
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quoted on the
Nasdaq National Market, during the thirty (30) trading days
prior to the date of the Initial Closing, multiplied by
(B) one hundred thirty five percent (135%).
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pursuant to Section 4.1
hereof; or (ii) the Maturity Date. Interest shall be computed
on the basis of a year of a 360-day year comprised of twelve 30-day
months. Interest shall be paid quarterly in arrears on each
Interest Payment Date. If the principal balance of this Note is not
paid by the Maturity Date, it shall accrue interest until paid in
full.
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3.
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Subordination
. The indebtedness
evidenced by this Note, and the payment of principal of, premium,
if any, and interest on the Notes (including with respect to any
repurchase of the Notes) is hereby expressly subordinated in right
of payment to Senior Indebtedness. So long as any default by the
Company has occurred under any instrument or agreement evidencing
any Senior Indebtedness, no payment shall be made in respect of
this Note until, in the case of a payment default, upon the date on
which such default is cured or waived and, in the case of a
non-payment default, the earlier of the date on which such
non-payment default is cured or waived or 179 calendar days after
the date on which the applicable payment blockage notice is
received by the Company, unless a payment default has occurred and
is continuing, including as a result of the acceleration of the
maturity of any Senior Indebtedness. After a payment blockage
notice is given for a non-payment default, no new period of payment
blockage for a non-payment default may be commenced unless and
until three hundred sixty (360) calendar days have elapsed since
the effectiveness of the immediately prior payment blockage notice
and all scheduled payments of principal, premium, if any and
interest on this Note that have come due have been paid in full in
cash. Nothing in this Section 3 hereof shall prohibit
conversion of this Note pursuant to Section 4 hereof. Upon
any distribution to the creditors of the Company upon any total or
partial liquidation, dissolution or winding up of the Company or in
any bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, whether
voluntary or involuntary, or assignment for the benefit of
creditors or any marshalling of the Company’s assets or
liabilities, the holders of Senior Indebtedness shall be entitled
to be indefeasibly paid in full in cash before the Holder shall be
entitled to receive any payment. In the event the Holder obtains
any payment in violation of the terms of subordination contained
herein, such funds shall be held in trust for the holders of Senior
Indebtedness and paid to them or their representatives upon
request. The Holder may not commence any action or proceeding
against the Company to recover all or any part of this Note unless
(a) a representative of the lenders under the Credit Agreement
shall (i) also join in bringing any proceedings against the
Company or (ii) request the Holder to file a claim in any such
proceeding or (iii) the Senior Indebtedness has been
indefeasibly paid in fill in cash. If any payment or other transfer
to any holder of Senior Indebtedness is held to constitute a
preference or voidable transfer under applicable state or federal
laws, or if for any other reason any holder of Senior Indebtedness
is required to refund such payment to the payor thereof or to pay
the amount thereof to any other Person or to reconvey any property
transferred, such payment or other transfer to such holder of
Senior Indebtedness shall not constitute a release of the Holder
from any liability or obligations hereunder, and the Holder agrees
and acknowledges that the
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subordination provided in this
Section 3 shall continue to be effective or shall be
reinstated, as the case may be, to the extent of any such payment
or payments or other transfer. No action or inaction taken by any
holders of any Senior Indebtedness shall in any manner impair the
obligations of the Holder or affect the rights of any holder of any
Senior Indebtedness in respect of the subordination provided in
this Section 3 .
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4.
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Conversion of the Note
. This Note shall be
convertible according to the following terms:
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4.1.
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Conversion . Subject to Section 5.1
hereof, the Holder is entitled, at the Holder’s option to
convert this Note, plus accrued and unpaid interest, if any, up to,
but excluding, the Conversion Date into fully paid and
nonassessable shares of Common Stock at the Conversion Price in
effect at the time of such conversion.
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4.2.
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Mechanics of Conversion
. To effect a conversion
pursuant to Section 4.1 hereof, the Holder shall
surrender this Note, duly endorsed, at the principal offices of the
Company or any transfer agent for the Company together with a
conversion notice (a “ Conversion Notice
”) in the Form of Exhibit A hereto. The Company
shall promptly, as soon as practicable (but in no event later than
five (5) Business Days) after receipt of such notice, issue
and deliver at such office to the Holder a certificate or
certificates for the number of shares of Common Stock, to which
such Holder shall be entitled as aforesaid. No fractional shares of
Common Stock shall be issued upon conversion of this Note. In lieu
of any fractional shares to which the Holder would otherwise be
entitled, the Company shall pay cash equal to such fraction
multiplied by the effective Conversion Price.
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4.3.
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Effect of Conversion
. By delivering the
shares of Common Stock and the cash payment in lieu of any
fractional shares to the Holder or such Holder’s nominee or
nominees, the Company shall have satisfied in full its obligation
with respect to such Note, and upon such delivery, accrued and
unpaid Interest, if any, with respect to such Note shall be deemed
to be paid in full rather than canceled, extinguished or forfeited,
and such amounts shall no longer accrue with respect to the
Note.
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4.4.
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Restrictions on
Conversion .
A Note in respect of which the Holder has delivered a repurchase
notice under Section 5.2 or 5.4 hereof may not
thereafter be converted, unless the Company defaults on its
obligation to repurchase the Notes under Section 5.2 or
5.4 hereof.
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5.
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Optional Redemption and Repurchase
at the Option of the Holder .
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5.1.
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Redemption at the Option of the
Company .
The Note shall not be redeemable before December 31, 2010. At
any time on or after December 31, 2010, and
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from time to time thereafter, the
Company may redeem the Note in whole or in part for cash at a
redemption price equal to 100% of the principal amount of the Note,
plus accrued and unpaid interest, if any, to, but not including,
the Redemption Date (defined below) by delivering a written notice
of redemption (the “ Redemption Notice ”)
at least thirty (30) calendar days but not more than ninety
(90) calendar days before the date of redemption specified
therein (the “ Redemption Date ”) to the
Holder at the Holder’s address designated in
Section 8 hereof. Upon receipt of the Redemption
Notic
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