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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UjP33JqRaN5MRbZ+gentmjveLsmv42vTZkRs8+yRr0P8WTukUdaXCcPwinsO9xNw CnuHnDVKKq9RkI8929uQ+A== 0000893220-07-002878.txt : 20070814 0000893220-07-002878.hdr.sgml : 20070814 20070814165634 ACCESSION NUMBER: 0000893220-07-002878 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070814 DATE AS OF CHANGE: 20070814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRM CORP CENTRAL INDEX KEY: 0000749254 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 930809419 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19657 FILM NUMBER: 071056312 BUSINESS ADDRESS: STREET 1: 5208 N E 122ND AVENUE CITY: PORTLAND STATE: OR ZIP: 97230-1074 BUSINESS PHONE: 5032578766 FORMER COMPANY: FORMER CONFORMED NAME: TRM COPY CENTERS CORP DATE OF NAME CHANGE: 19940411 FORMER COMPANY: FORMER CONFORMED NAME: ALL COPY CORP DATE OF NAME CHANGE: 19911216 10-Q 1 w38237e10vq.htm FORM 10-Q TRM CORPORATION e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-19657

TRM CORPORATION

(Exact name of registrant as specified in its charter)


Oregon				93-0809419

(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

5208 N.E. 122nd Avenue
Portland, Oregon 97230

(Address of principal executive offices) (Zip Code)

(503) 257-8766

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES X NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer [ ] Accelerated filer [ X ] Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES NO X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 17,193,589 shares of common stock outstanding at August 2, 2007.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 6. EXHIBITS
SIGNATURE
Employment Agreement dated August 1, 2007
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Principal Accounting Officer
Certification of Chief Executive Officer pursuant to Section 906
Certification of Chief Financial Officer pursuant to Section 906
Certification of Principal Accounting Officer pursuant to Section 906

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRM Corporation
Consolidated Balance Sheets
(Unaudited)
(In thousands)


	December 31,				June 30,
	2006				2007
Assets
Current assets:
Cash and cash equivalents		$	4,784			$	3,165
Restricted cash			—				4,384
Accounts receivable, net			4,328				5,177
Income taxes receivable			215				215
Inventories			674				894
Prepaid expenses and other			1,579				635
Deferred financing costs			5,270				191
Restricted cash – TRM Inventory Funding Trust			73,701				71,876
Assets held for sale			106,081				—

Total current assets			196,632				86,537
Equipment, less accumulated depreciation and amortization			11,646				7,834
Goodwill			16,748				16,748
Intangible assets, less accumulated amortization			585				601
Other assets			833				863

Total assets		$	226,444			$	112,583


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	5,988			$	6,479
Accrued expenses			8,811				13,862
Term loans and line of credit			99,318				1,884
TRM Inventory Funding Trust note payable			71,697				69,287
Liabilities related to assets held for sale			13,437				—

Total current liabilities			199,251				91,512


Minority interest			1,500				1,500


Commitments and contingencies (notes 10 and 11)

Shareholders’ equity:
Common stock, no par value - 50,000 shares authorized; 17,194 shares issued and outstanding (17,126 at December 31, 2006)			135,595				135,876
Additional paid-in capital			63				63
Accumulated other comprehensive income - Accumulated foreign currency translation adjustment			4,692				2,733
Accumulated deficit			(114,657	)			(119,101	)

Total shareholders’ equity			25,693				19,571

Total liabilities and shareholders’ equity		$	226,444			$	112,583

See accompanying notes to consolidated financial statements.

TRM Corporation
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)


	Three months ended								Six months ended
	June 30,								June 30,
	2006				2007				2006				2007
Sales		$	27,552			$	23,546			$	57,069			$	46,445
Less discounts			17,444				14,749				34,430				29,017

Net sales			10,108				8,797				22,639				17,428
Cost of sales:
Cost of vault cash			1,612				1,345				3,041				2,790
Other			3,701				4,684				7,945				9,126

Gross profit			4,795				2,768				11,653				5,512
Selling, general and administrative expense (including non-cash stock compensation of $795 in 2006 and $204 in 2007)			7,742				4,324				15,379				9,625
Restructuring charges (Note 12)			—				—				—				963
Equipment write-offs			11				15				56				18

Operating loss			(2,958	)			(1,571	)			(3,782	)			(5,094	)
Interest expense and amortization of debt issuance costs			1				125				1				160
Loss on early extinguishment of debt			3,104				24				3,104				4,059
Other expense (income), net			(842	)			213				(795	)			351

Loss from continuing operations before benefit from income taxes			(5,221	)			(1,933	)			(6,092	)			(9,664	)
Benefit for income taxes			(1,937	)			—				(2,203	)			—

Loss from continuing operations			(3,284	)			(1,933	)			(3,889	)			(9,664	)
Discontinued operations:
Income (loss) from operations, including gains on sales			(948	)			(280	)			(2,025	)			5,220
Provision (benefit) for income taxes			265				—				82				—

Income (loss) from discontinued operations			(1,213	)			(280	)			(2,107	)			5,220

Net loss		$	(4,497	)		$	(2,213	)		$	(5,996	)		$	(4,444	)


Weighted average common shares outstanding			17,046				17,168				16,959				17,153
Basic and diluted income (loss) per share:
Continuing operations		$	(.19	)		$	(.11	)		$	(.23	)		$	(.56	)
Discontinued operations			(.07	)			(.02	)			(.12	)			.30

Net loss		$	(.26	)		$	(.13	)		$	(.35	)		$	(.26	)

See accompanying notes to consolidated financial statements.

TRM Corporation
Consolidated Statement of Shareholders’ Equity
(Unaudited)
(In thousands)


												Accumulated
										Additional		other
	Comprehensive						Common			paid-in		comprehensive			Accumulated
	loss				Shares		Amounts			capital		income			deficit			Total

Balances, December 31, 2006						17,126	$	135,595		$	63	$	4,692		$	(114,657	)	$	25,693
Comprehensive loss:
Net loss		$	(4,444	)		—		—			—		—			(4,444	)		(4,444	)
Other comprehensive income (loss) -
Foreign currency translation adjustment:
Recognized in income			(2,622	)		—		—			—		(2,622	)		—			(2,622	)
Current period adjustment			663			—		—			—		663			—			663

Comprehensive loss		$	(6,403	)

Other capital additions						—		53			—		—			—			53
Exercise of stock options						18		25			—		—			—			25
Stock option expense						—		(9	)		—		—			—			(9	)
Restricted stock expense						—		212			—		—			—			212
Restricted shares vested						50		—			—		—			—			—

Balances, June 30, 2007						17,194	$	135,876		$	63	$	2,733		$	(119,101	)	$	19,571

See accompanying notes to consolidated financial statements.

TRM Corporation
Consolidated Statements of Cash Flows
Six months ended June 30, 2006 and 2007
(Unaudited)
(In thousands)


	2006				2007
Operating activities:
Net loss		$	(5,996	)		$	(4,444	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment charges and asset write-downs			—				2,701
Depreciation and amortization			10,412				1,941
Non-cash stock compensation			795				204
Loss on disposal of equipment			359				146
Provision for doubtful accounts			200				—
Loss on early extinguishment of debt			2,560				4,059
Gain on sale of discontinued operations			(648	)			(6,960	)
Cumulative foreign currency translation adjustments recognized in income			(1,538	)			(2,622	)
Changes in items affecting operations, net of effects of business dispositions:
Restricted cash			—				(4,384	)
Accounts receivable			1,386				(604	)
Inventories			235				(172	)
Income tax receivable			(124	)			—
Prepaid expenses and other			(140	)			1,091
Accounts payable			(624	)			786
Accrued expenses			(6,279	)			(833	)
Deferred income taxes			(2,297	)			—

Cash used in operating activities			(1,699	)			(9,091	)

Investing activities:
Proceeds from sale of equipment			24				22
Capital expenditures			(2,256	)			(41	)
Proceeds from sale of discontinued operations			4,280				103,671
Acquisition of intangible and other assets			(155	)			(294	)

Cash provided by investing activities			1,893				103,358

Financing activities:
Borrowings on notes payable			113,461				1,206
Repayment of notes payable			(105,293	)			(98,641	)
Debt financing costs			(2,917	)			—
Principal payments on capital lease obligations			(472	)			(26	)
Decrease (increase) in restricted cash – TRM Inventory Funding Trust			(14,997	)			1,825
Proceeds (repayments) of TRM Inventory Funding Trust note, net			10,529				(2,409	)
Proceeds from exercise of stock options			91				25
Other			(19	)			53

Cash provided by (used in) financing activities			383				(97,967	)

Effect of exchange rate changes			174				(1,221	)

Net increase (decrease) in cash and cash equivalents			751				(4,921	)
Beginning cash and cash equivalents, including $3,302 classified as assets held for sale at December 31, 2006			9,708				8,086

Ending cash and cash equivalents		$	10,459			$	3,165


Supplemental cash flow information:
Payments:
Cash paid for interest		$	3,848			$	1,089
Cash paid for income taxes		$	225			$	13

See accompanying notes to consolidated financial statements.

TRM Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Interim Financial Data

The consolidated financial statements of TRM Corporation and its subsidiaries included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are necessary for a fair statement of the results of the interim periods. These consolidated financial statements should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2006. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The results of operations for the periods presented are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2007.

We incurred a net loss of $120.1 million in the year ended December 31, 2006 and a loss from continuing operations of $9.7 million in the six months ended June 30, 2007. As a result of our financial performance for the three months ended September 30, 2006, we failed to meet certain financial covenants of our financing agreements with GSO Origination Funding Partners LP and other lenders. On November 20, 2006, we entered into amendments that restructured our loans and waived the failure to meet the loan covenants. Under the restructured loan agreements principal payments of $69.9 million were due in the first quarter of 2007. During January 2007, we sold our Canadian, United Kingdom and German ATM businesses and our United States photocopy business and used $98.4 million from the proceeds of those sales to make principal and interest payments under these loans, leaving a remaining balance of principal plus accrued interest of $2.0 million as of January 31, 2007. We are uncertain whether our remaining operations can generate sufficient cash to comply with the covenants of our restructured loan agreements and to pay our obligations on an ongoing basis. Because there are cross-default provisions in TRM Inventory Funding Trust’s Loan and Servicing Agreement, if we fail to comply with the covenants of our restructured loan agreements and are declared to be in default by GSO Origination Funding Partners LP and other lenders, we may be declared in default of the provisions of the Loan and Servicing Agreement as well, and the lender may be able to demand payment. These factors, among others, may indicate that we may be unable to continue as a going concern for a reasonable period of time. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should we be unable to continue as a going concern. Our continuation as a going concern is contingent upon our ability to generate sufficient cash to pay our obligations on an ongoing basis.

In connection with the sales of our ATM businesses in Canada, the United Kingdom and Germany, and our photocopy businesses in the United States and Canada in the first six months of 2007, we have made various representations and warranties and/or provided indemnities including those relating to taxation matters. Further, the sales prices may be subject to adjustment based on working capital amounts, the value of accounts receivable as of the closing

of the sales or other factors, the amounts for which have not yet been agreed upon. The purchasers may make claims against us relating to the representations or warranties or provisions for adjustment of the sales prices, and those claims could be substantial. Because we used substantially all of the net proceeds from the business sales to reduce our debt, we might not have sufficient cash to pay such claims without additional financing.

In November 2006 we announced the implementation of a corporate restructuring plan involving an initial reduction of then-existing controllable selling, general and administrative expenses of approximately 15%. Subsequent to that announcement, we have sold operations that accounted for approximately 61% of our net sales in 2006. In connection with our restructuring plan and the sales of a substantial part of our operations, we have reduced our number of employees from 364 as of December 31, 2006 to 57 as of July 31, 2007.

We expect to be able to refinance the outstanding balances under our financing agreement and have begun initial efforts to do so. However, we can provide no assurance that we will be able to do so.

If we are unable to refinance our debt, obtain additional financing to pay claims under the agreements for sales of businesses in January 2007, if necessary, or get our lenders to agree to any further forbearance from calling our loans, we might be forced to seek protection of the courts through reorganization, bankruptcy or insolvency proceedings.

Financial Statement Reclassifications

Certain financial statement reclassifications have been made to prior period amounts to conform to the current period presentation. These changes had no impact on shareholders’ equity or previously reported net income. As discussed in Note 10, we have reclassified the results of operations of our Canadian, United Kingdom and United States photocopier operations and our Canadian, United Kingdom and German ATM operations to discontinued operations for all periods presented.

Net Loss Per Share

Basic and diluted net loss per share are based on the weighted average number of shares outstanding during each period, with diluted net loss per share including the effect of potentially dilutive securities. For diluted net loss per share, the calculation includes the effect of potentially dilutive securities, unless such effect is antidilutive. For the three and six months ended June 30, 2006, our stock options and shares of unvested restricted stock were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive. For the three and six months ended June 30, 2007 our stock options, warrants and shares of unvested restricted stock were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive.

Inventories


	December 31,			June 30,
	2006			2007
	(in thousands)
Parts		$	605		$	630
ATMs held for resale			69			264

		$	674		$	894

Equipment


	December 31,				June 30,
	2006				2007
	(in thousands)
Photocopiers		$	6,771			$	—
ATMs			11,267				10,762
Furniture and fixtures			1,307				1,259
Computer equipment			7,116				6,886

			26,461				18,907
Accumulated depreciation and amortization			(14,815	)			(11,073	)

		$	11,646			$	7,834

Term Loans and Line of Credit


	December 31,			June 30,
	2006			2007
	(in thousands)
Term loans		$	92,808		$	1,884
Lines of credit			6,510			—

		$	99,318		$	1,884

As of September 30, 2006, our financial performance caused us to not be in compliance with certain covenants in our credit agreements pursuant to which we then owed $94.9 million. Our lenders had the right to seek to accelerate the loans under the operative loan documents, but they did not do so or exercise other remedies. Instead, on November 20, 2006, we entered into agreements under which they waived our defaults and agreed with us to restructure our loans. As restructured, the interest rates on our loans were increased. The increased interest cost was deferred and added to principal. In addition, the maturity dates of the loans were changed so that a total of $69.9 million was due on or before February 28, 2007. The financial covenants were modified to require achievement of certain levels of earnings before interest, taxes, depreciation and amortization and certain other non cash expenses which we refer to as adjusted EBITDA, and to limit capital expenditures. As of June 30, 2007, we were not in compliance with the adjusted EBITDA covenant. We have received waivers of the violations of our adjusted EBITDA covenant for the months of December 2006 through June 2007. In connection with the loan restructuring, we also granted warrants to the holders of our Term Loan B to purchase 3.1 million shares of our common stock at a price of $1.3638 per share. The warrants are exercisable for a period of seven years following November 20, 2006. We agreed to file a registration statement with the SEC covering the resale of the shares issuable upon the exercise of the warrants and to use our best efforts to have the registration statement declared effective by the SEC no later than May 18, 2007. However, because we filed our Annual Report on Form 10-K for 2006 and our Quarterly Report on Form 10-Q for the

first quarter of 2007 late and are currently focusing on filing timely periodic reports, we have not yet filed the registration statement. Under the terms of the registration rights agreement, the warrant holders can seek damages due to our inability to file the registration statement. We have not received any demands from the warrant holders to file the registration statement as of the date of this report; we plan to file the registration statement as soon as reasonably practicable. Because the present value of the cash flows under the terms of the revised debt instruments were less than 10% different than the present value of the remaining cash flows under the terms of the original instruments, we accounted for the restructuring of our loans as a modification of the previously outstanding debt. Accordingly, we charged to expense the legal fees we incurred and recorded the fair value of the warrants and loan fees as deferred financing costs.

We estimated the total fair value of the warrants issued to the holders of Term Loan B to be $2.8 million using the Black-Scholes valuation model. We recorded the fair value of the warrants and $1.0 million of loan fees incurred from our lenders in connection with the restructuring of our loans in November 2006 as additional deferred financing costs. These costs, together with $2.8 million of previously unamortized deferred financing costs associated with the credit facility established in June 2006, aggregated $6.6 million. In connection with the early payment of most of our debt in January 2007, substantially all of the remaining unamortized deferred financing costs were charged to expense as a loss on early extinguishment of debt in the first quarter of 2007.

Because we are uncertain whether we can comply with all of the terms of the restructured loan agreement, the balance of the loan has been classified as a current liability on our balance sheet.

As discussed further in Note 10, during the first six months of 2007 we sold our Canadian, United Kingdom and German ATM businesses and our United States and Canadian photocopy businesses and used $98.6 million from the proceeds of those sales to make principal and interest payments under our financing agreements with GSO Origination Funding Partners LP and other lenders. Following these payments, as of June 30, 2007, the only remaining balance under our term loans and line of credit was $1.9 million on our Term Loan B which is due in June 2012.

In January 2007 we entered into an amendment to our United States vault cash agreement which, among other changes, extended the facility for five years and reduced the facility size to $100 million. Because there are cross-default provisions in TRM Inventory Funding Trust’s Loan and Servicing Agreement, if we fail to comply with the covenants of our restructured loan agreements and are declared to be in default by GSO Origination Funding Partners LP and other lenders, we may be declared in default of the provisions of the Loan and Servicing Agreement as well, and the lender may be able to demand payment. Therefore, the Trust’s debt is classified as a current liability and the vault cash is classified as a current asset on our consolidated balance sheet.

Stock-based Compensation

In the first quarter of 2006, we adopted Statement of Financial Accounting Standards, or SFAS, No. 123R, “Share-Based Payment.” As a result of this adoption, we now record the grant date fair value of share-based compensation arrangements, net of estimated forfeitures, as compensation expense over the underlying service periods. In April 2006 we accelerated the vesting of certain options granted to our former President and Chief Executive Officer. We recorded non-cash compensation expense of $618,000 in connection with this action in the second quarter of 2006. Stock-based compensation expense, which is included in selling general and administrative expense during the six months ended June 30, 2006 and 2007 was as follows (in thousands):


	2006			2007
Modification of options previously granted		$	618		$	—
Amortization of:
Option grants			58			(9	)
Restricted shares			119			212

		$	795		$	203

A summary of stock option activity during the six months ended June 30, 2007 follows:


	Number of			Weighted average
	shares			exercise price
Outstanding January 1, 2007		658,125		$	6.39
Options granted		—			—
Options exercised		(20,375	)		1.59
Options forfeited		(78,125	)		9.09

Outstanding June 30, 2007		559,625			6.19

As of June 30, 2007, options to purchase 504,375 shares of common stock at a weighted average exercise price of $6.58 per share were vested and exercisable.

A summary of restricted stock activity during the six months ended June 30, 2007 follows:


	Number of
	shares
Unvested shares outstanding January 1, 2007		258,040
Shares granted		500,000
Shares vested		(50,000	)
Shares forfeited		(2,010	)

Unvested shares outstanding June 30, 2007		706,030

The fair value of the shares granted during 2007 was $1.55 per share, and they vest annually over four years.

Provision for Income Taxes

Our effective tax rate for the first six months of 2006 was 36.2%, resulting in a tax benefit attributed to continuing operations of $2.2 million. We have recorded no benefit from our losses for the first six months of 2007 because we are uncertain that we will be able to realize the benefit of our net operating loss carryforwards and future deductible amounts. As of June 30, 2007, we have net operating losses of approximately $12 million available to offset future taxable income for United States federal income tax purposes which expire in the years 2020 through 2027, and our Canadian subsidiary has net operating loss carryforwards of approximately $19 million available to offset future taxable income in Canada which expire in the years 2009 through 2016.

Segment Reporting

For the six months ended June 30, 2006, we disclosed information about two reportable segments – Automated Teller Machines (“ATM”) and Photocopy. Because of changes in our internal reporting practices, in our financial statements for the three- and nine-month periods ended September 30, 2006, we disclosed information about six reportable segments – ATM operations in the United States, Canada, the United Kingdom and Germany, and photocopy operations in the United States and Canada. Subsequent to September 30, 2006, we have sold our ATM businesses in Canada, the United Kingdom and Germany and our photocopy businesses in the United States and Canada. In the accompanying statements of operations, we have classified the results of the businesses sold as discontinued operations. As a result, we now have only one operating segment – ATM operations in the United States. Our United States ATM business owns and/or operates ATM machines, sells ATM machines and services equipment for others.

Substantially all of our revenues from continuing operations for the three and six-month periods ended June 30, 2006 and 2007 were derived from sales to customers in the United States. As of June 30, 2007, substantially all of our assets were located in the United States.

10.

Discontinued Operations and Sales of Businesses

In June 2006 we sold all of the outstanding shares of our United Kingdom photocopier subsidiary to an unrelated third party for cash.

Effective January 1, 2007, we sold substantially all of the assets of our Canadian ATM business for approximately Canadian $13.0 million (U.S. $11.1 million using exchange rates as of January 12, 2007), subject to certain adjustments. We recorded a gain on the sale of $2.4 million.

Effective January 24, 2007, we sold all of the shares of our United Kingdom ATM subsidiary that owned our ATM businesses in the United Kingdom and Germany for approximately £43.8 million (approximately $86.1 million using exchange rates as of January 24, 2007), subject to certain adjustments which have not yet been agreed upon. We recorded a gain on the sale of $6.4 million.

On January 29, 2007, we sold substantially all of the assets of our United States photocopy business for approximately $9.0 million, subject to certain adjustments. We recorded a gain on the sale of approximately $833,000.

On June 19, 2007, we sold substantially all of the assets of our Canadian photocopy business to an unrelated third party. The sales price for the assets was approximately Canadian $615,000 (approximately U.S. $571,000 using exchange rates as of June 19, 2007) in cash and assumption of liabilities, plus 50% of the cash flows from the operation of the business for seven years. We recorded a gain on the sale of approximately $29,000.

In connection with these sales, we have made various representations and warranties and/or provided indemnities, including indemnities relating to taxation matters. Further, the sales prices are subject to adjustment based on working capital amounts, the value of accounts receivable as of the closing of the sale, or other factors, the amounts for which have not yet been agreed upon. The purchasers may make claims against us relating to the representations, warranties or indemnities, or provisions for adjustment of the sales prices, and those claims could be substantial. The purchaser of our United Kingdom and German ATM businesses has asserted claims pursuant to the sales agreement, and we are disputing certain of those claims. We have recorded a liability for repayment of our best estimate of the ultimate settlement of those claims.

The aggregate of the sales prices for the businesses we sold in the first six months of 2007 was approximately $107 million, before selling costs. We used $98.6 million of the net cash proceeds of $102.4 million to make principal and interest payments on our debt. The balance was used to fund escrow deposits and deposits with our bank to collateralize outstanding letters of credit. As of June 30, 2007, $4.4 million was held by our bank as collateral for outstanding letters of credit, and is reported as restricted cash on our balance sheet.

The operations of our Canadian, United Kingdom and German ATM businesses and our Canadian, United Kingdom and United States photocopy businesses are shown as discontinued operations for the three- and six-month periods ended June 30, 2006 and 2007. Because the terms of our financing agreements required us to use substantially all of the net proceeds from the sales of businesses to pay debt, we have allocated interest expense to discontinued operations based upon the lesser of the amount repaid or debt outstanding. No general corporate overhead has been allocated to discontinued operations.

Net revenues of discontinued operations through the dates of sale (in thousands):


	Three months ended						Six months ended
	June 30,						June 30,
	2006			2007			2006			2007
Canada photocopy		$	1,128		$	577		$	2,005		$	1,102
United Kingdom photocopy			810			—			1,646			—
United States photocopy			6,004			—			11,906			1,368
Canada ATM			1,936			—			3,624			—
United Kingdom ATM			8,350			—			15,432			1,653
Germany ATM			11						11			130

		$	18,239		$	577		$	34,624		$	4,253

Pretax income (loss) from discontinued operations for the three- and six-month periods ended June 30, 2006 and 2007 through the dates of sale (in thousands):


	Three months ended June 30,
	2006										2007
					Gain on										Gain on
	Operations					sale		Total				Operations			sale					Total

Canada photocopy		$	158			$	—	$	158			$	(59	)		$	29			$	(30	)
United Kingdom photocopy			(495	)			2,186		1,691				—				—				—
United States photocopy			818				—		818				—				—				—
Canada ATM			(159	)			—		(159	)			—				(189	)			(189	)
United Kingdom ATM			(3,302	)			—		(3,302	)			—				(61	)			(61	)
Germany ATM			(154	)			—		(154	)			—				—				—

		$	(3,134	)		$	2,186	$	(948	)		$	(59	)		$	(221	)		$	(280	)


	Six months ended June 30,
	2006										2007
					Gain on										Gain on
	Operations				sale				Total		Operations				sale				Total

Canada photocopy		$	138			$	—	$	138			$	(2,975	)		$	29			$	(2,946	)
United Kingdom photocopy			(787	)			2,186		1,399				—				—				—
United States photocopy			1,420				—		1,420				398				833				1,231
Canada ATM			(171	)			—		(171	)			(113	)			2,361				2,248
United Kingdom ATM			(4,380	)			—		(4,380	)			(1,617	)			6,359				4,742
Germany ATM			(431	)			—		(431	)			(55	)			—				(55	)

		$	(4,211	)		$	2,186	$	(2,025	)		$	(4,362	)		$	9,582			$	5,220

Substantially all of the assets and liabilities of our United States photocopy business and our ATM businesses in Canada, the United Kingdom and Germany, which were sold in January 2007, are presented in the accompanying balance sheet as of December 31, 2006, as held for sale.

A charge of $2.7 million is included in discontinued operations for the first six months of 2007 to write down the carrying amount of the assets of the Canadian photocopy business to their estimated fair value less cost to sell.

11.

Litigation and Potential Claims

In the ordinary course of business, we may be subject to lawsuits, investigations and claims. There are currently no material legal proceedings pending against us.

As described in Note 10, in the first six months of 2007 we sold our ATM businesses in the United Kingdom, Germany and Canada, and our photocopy businesses in the United States and Canada in four separate transactions. The total of the sales prices for the businesses we sold was approximately $107 million. In connection with these sales, we have made various representations and warranties and/or provided indemnities including those relating to taxation matters. Further, the sales prices are subject to adjustment based on working capital amounts, the value of accounts receivable as of the closing of the sale or other factors, the amounts for which have not yet been agreed upon. The purchasers may make claims against us relating to the representations, warranties or indemnities, or provisions for adjustment of the sales prices, and those claims could be substantial. The purchaser of our United Kingdom and German ATM businesses has asserted claims pursuant to the sales agreement, and we are disputing certain of those claims. We have recorded a liability for repayment of our best estimate of the ultimate settlement of those claims.

12.

Corporate Restructuring

In connection with the corporate restructuring plan we announced in November 2006 and the subsequent sales of a substantial portion of our operations, we have made significant staff reductions, including termination of substantially all of our United States field service employees. We have also vacated leased warehouse and office space occupied by the terminated employees. During the first six months of 2007 we paid severance of $167,000 to terminated employees. During the first quarter of 2007 we vacated warehouse and office space in eleven United States locations. The vacated space was leased under leases with remaining terms up to seven years. We recorded a liability of $796,000 as of March 31, 2007, which was the estimated fair value of the costs that we expect to incur without any economic benefit, and we charged that amount to expense in the first quarter of 2007. We estimated the fair value of the liability based on the discounted value of the remaining lease payments, reduced by estimated sublease payments that we reasonably expect could be obtained for use of the properties.

The costs for both severance payments and vacated leases are included in restructuring charges in our statement of operations for the six months ended June 30, 2007.

13.

New Accounting Standards

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, or FIN 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation became effective for us beginning in

2007. Our adoption of FIN 48 did not have a material impact on our results of operations, financial position or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 157, “Fair Value Measurements.” SFAS 157 establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements. This statement does not require any new fair value measurements. The statement is effective for us beginning in 2008. We anticipate no material impact on our results of operations, financial position or cash flows as a result of adopting this statement.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115,” which allows companies the option to measure certain financial instruments and other items at fair value. The provisions of SFAS No. 159 are effective for us beginning in 2008. We are currently evaluating the impact, if any, this statement will have on our financial statements.


ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q with respect to our beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance and business, including, without limitation, growth of our business (including acquisitions) constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements on management’s current expectations about future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts, and by words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan” or other similar words or expressions.

Any or all of the forward-looking statements in this report and in any other public statements we make may turn out to be wrong. This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. We discuss many of the risks and uncertainties that may impact our business in Item 1A — “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006. Because of these risks and uncertainties, our actual results may differ materially from those that might be anticipated from our forward-looking statements. Other factors beyond those referred to above could also adversely affect us. Therefore, you are cautioned not to place undue reliance on our forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.

Overview

During 2006 we operated ATM networks in the United States, United Kingdom, Canada and Germany, and we operated photocopier networks in the United States, United Kingdom and Canada. In June 2006 we sold our United Kingdom photocopy business. In January 2007 we sold our ATM businesses in the United Kingdom, Germany and Canada and our United States photocopy business. In June 2007 we sold our Canadian photocopy business. Our remaining business operates ATMs in the United States. During the first six months of 2007 our United States ATM networks had an average of 10,641 transacting ATMs compared to an average of 12,882 transacting ATMs during the first six months of 2006.

We had a $9.7 million loss from continuing operations in the first six months of 2007, including a $4.1 million loss on early extinguishment of debt. In the first six months of 2006 we had a loss from continuing operations of $3.9 million.

Our financial performance in the third quarter of 2006 caused us not to be in compliance with certain covenants in our credit facility with Wells Fargo Foothill, GSO Origination Funding

Partners LP and other lenders, and in November 2006, we entered into agreements with the lenders to restructure our loans. Under the modified agreements all but $25 million of our debt was due in the first quarter of 2007. Because of the new repayment terms, during January 2007 we sold our Canadian, United Kingdom and German ATM businesses and our United States photocopier business, and used $98.4 million from the proceeds of those sales to make principal and interest payments under our financing agreements. In June 2007 we sold our Canadian photocopy business and used $232,000 of the proceeds from that sale to make further principal and interest payments under our financing agreements. After these payments, as of June 30, 2007, we owed $1.9 million of principal and accrued interest under the credit facility. In connection with these sales, we have made various representations and warranties and/or provided indemnities. Further, the sales prices are subject to adjustment based on working capital amounts, the value of accounts receivable as of the closing of the sale or other factors, the amounts for which have not yet been agreed upon. The purchasers may make claims against us relating to the representations or warranties or provisions for adjustment of the sale prices, and those claims could be substantial. The purchaser of our United Kingdom and German ATM businesses has asserted claims pursuant to the sales agreement, and we are disputing certain of those claims. We have recorded a liability for repayment of our best estimate of the ultimate settlement of those claims. Because we used substantially all of the net proceeds from the business sales to reduce our debt, we might not have sufficient cash to pay such claims without additional financing which may not be available to us.

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006


ATM Results of Operations – Continuing Operations
	2006					2007
	Amount		%			Amount		%
	(in thousands, except operating and percentage
	data)
Transaction-based sales	$	25,521		100.0	%	$	21,520		100.0	%
Less discounts		17,444		68.4			14,749		68.5

Net transaction-based sales		8,077		31.6	%		6,771		31.5	%

Service and other sales		1,368					1,192
Sales of ATM equipment		663					834

Net sales		10,108					8,797
Cost of sales:
Cost of vault cash		1,612					1,345
Other		3,701					4,684

Gross profit	$	4,795				$	2,768


Operating data:
Average number of transacting ATMs		12,643					10,473
Withdrawal transactions		11,358,693					9,136,135
Average withdrawals per ATM per month		299					291
Average transaction-based sales per withdrawal transaction	$	2.25				$	2.36
Average discount per withdrawal transaction	$	1.54				$	1.62
Net transaction-based sales per withdrawal transaction	$	.71				$	.74

Sales

For the second quarter of 2007, sales from continuing operations decreased by $4.0 million, or 15%, to $23.5 million from $27.6 million for the second quarter of 2006.

The $4.0 million decrease in sales was a result of a $4.0 million decrease in transaction-based sales, and a $176,000 decrease in service and other sales, partially offset by a $171,000 increase in sales of ATM equipment.

The $4.0 million decrease in transaction-based sales resulted from:

	•		A 17.2% decrease in the average number of transacting ATMs in our networks, primarily as a result of attrition of the contracts acquired from eFunds Corporation in November 2004. We expect that the number of ATMs in our networks will continue to decrease during the remainder of 2007.

	•		A 2.7% decrease in average withdrawal transactions per ATM per month.

The decreases in the number of ATMs in our network and average withdrawal transaction per ATM were partially offset by:

•

A 4.9% increase in average transaction-based sales per withdrawal transaction.

The decrease in service and other sales was due to the decrease in transacting ATMs in our networks and changes to customer contracts resulting in a reduction of charges.

Sales Discounts

Sales discounts decreased to $14.7 million in the second quarter of 2007 from $17.4 million in the second quarter of 2006. Sales discounts as a percentage of transaction-based sales increased slightly to 68.5% in the second quarter of 2007 from 68.4% in the second quarter of 2006.

Cost of Sales

Although sales from continuing operations decreased by $4.0 million in the second quarter of 2007 compared to the second quarter of 2006, cost of sales increased by $716,000. As a result, cost of sales increased to 25.6% of sales in the second quarter of 2007, from 19.3% in the second quarter of the prior year.

As a result of the sale of our United States photocopy business, we determined that it would be more economical to hire third parties to perform maintenance on our equipment and on merchant’s equipment where that is our responsibility. During the first and second quarters of 2007 we transitioned our ATM maintenance function from our own field service employees to third parties. During the second quarter of 2007, our expense for third party ATM service increased by $1.2 million as compared to the same period in 2006. This increase was partially offset by a decrease of $454,000 in our cost of labor and parts attributed to our United States ATM business. As of December 31, 2006, we had 129 field service employees in the United States doing maintenance on equipment for both our ATM and photocopy businesses. As of June 30, 2007, we had terminated all of our field service employees. We expect our maintenance costs in the third and fourth quarters of 2007 to be lower than in the first two quarters as a result of the new arrangements we have put in place.

The increase in ATM maintenance costs was partially offset by a decrease in our cost of vault cash of $267,000, or 16.6%, as compared to the second quarter of 2006. The number of ATMs for which we provide cash has decreased by 6% from June 30, 2006 to June 30, 2007, and the total amount of vault cash in our system has decreased by 15.9%, to $71.9 million at June 30, 2007 from $85.5 million at June 30, 2006. In addition, the interest rate on our vault cash facility has decreased to 6.75% as of June 30, 2007 from 7.1% at June 30, 2006.

Selling, General and Administrative Expense

Selling, general and administrative expense attributed to continuing operations decreased by $3.4 million to $4.3 million in the second quarter of 2007 from $7.7 million in the second

quarter of the prior year. Selling, general and administrative expense as a percent of sales decreased to 18.4% in the second quarter of 2007 from 28.1% in the second quarter of the prior year. Specific decreases included:

	•		Amortization expense decreased by $1.3 million due to the reduction of the basis of our intangible assets as a result of impairment charges taken in the third quarter of 2006.

	•		Labor costs (excluding non-cash stock compensation expense) decreased by $1.3 million, or approximately 47%. In connection with and following the sales of businesses in January 2007 we have substantially reduced our selling, general and administrative staff, from 102 employees as of December 31, 2006, to 59 employees as of June 30, 2007.

	•		Non-cash stock compensation expense decreased by $592,000. In the second quarter of 2006, we recorded $618,000 of expense in connection with the acceleration of the vesting of options granted to our former President and Chief Executive Officer.

Loss on Early Extinguishment of Debt

In the second quarter of 2006 we refinanced our previous debt and recorded a $3.1 million loss on early extinguishment of debt consisting of the writeoff of deferred financing costs and prepayment penalties.

Other Income

Other income in the second quarter of 2006 includes currency exchange gains of $394,000 and a gain on the settlement of an interest rate cap of $173,000.

Tax Rate

Our effective tax rate for the second quarter of 2006 was 37.1%, resulting in a tax benefit attributed to continuing operations of $1.9 million. We have recorded no benefit from our losses for the second quarter of 2007 because we are uncertain that we will be able to realize the benefit of our net operating loss carryforwards and future deductible amounts.

Discontinued Operations

The operations of our Canadian, United Kingdom and German ATM businesses and our Canadian, United Kingdom and United States photocopy businesses are shown as discontinued operations in our consolidated statements of operations for the three-month periods ended June 30, 2006 and 2007. Because the terms of our financing agreements required us to use substantially all of the net proceeds from the sales of businesses in June 2006 and January 2007 to pay debt, we have allocated interest expense to discontinued operations based upon the lesser of the amount repaid or debt outstanding. No general corporate overhead has been allocated to discontinued operations.

Our pretax loss from discontinued operations for the second quarter of 2007 was $280,000, compared to a pretax loss of $948,000 for the second quarter of 2006. See Note 10 to our consolidated financial statements for additional information regarding our discontinued operations.

Net Loss

Our net loss for the second quarter of 2007 was $2.2 million compared to a net loss of $4.5 million for the second quarter of 2006.

Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006


ATM Results of Operations – Continuing Operations
	2006					2007
	Amount		%			Amount		%
	(in thousands, except operating and percentage
	data)
Transaction-based sales	$	51,443		100.0	%	$	42,896		100.0	%
Less discounts		34,430		66.9			29,017		67.6

Net transaction-based sales		17,013		33.1	%		13,879		32.4	%

Service and other sales		3,466					2,370
Sales of ATM equipment		2,160					1,179

Net sales		22,639					17,428
Cost of sales:
Cost of vault cash		3,041					2,790
Other		7,945					9,126

Gross profit	$	11,653				$	5,512


Operating data:
Average number of transacting ATMs		12,882					10,641
Withdrawal transactions		22,595,000					18,209,397
Average withdrawals per ATM per month		292					285
Average transaction-based sales per withdrawal transaction	$	2.28				$	2.35
Average discount per withdrawal transaction	$	1.53				$	1.59
Net transaction-based sales per withdrawal transaction	$	.75				$	.76

Sales

For the first six months of 2007, sales from continuing operations decreased by $10.6 million, or 18.6%, to $46.4 million from $57.1 million for the first six months of 2006.

The $10.6 million decrease in sales was primarily a result of an $8.5 million decrease in transaction-based sales, a $1.1 million decrease in service and other sales and a $981,000 decrease in sales of ATM equipment.

The $8.5 million decrease in transaction-based sales resulted from:

	•		A 17.4% decrease in the average number of transacting ATMs in our networks, primarily as a result of attrition of the contracts acquired from eFunds Corporation in November 2004. We expect that the number of ATMs in our networks will continue to decrease during the remainder of 2007.

	•		A 2.4% decrease in average withdrawal transactions per ATM per month.

The decreases in the number of ATMs in our network and average withdrawal transaction per ATM were partially offset by:

•

A 3.1% increase in average transaction-based sales per withdrawal transaction.

The decrease in service and other sales was due to the decrease in transacting ATMs in our networks and changes to customer contracts resulting in a reduction of charges.

The decrease in sales of ATM equipment was due to an unusually large number of ATM machines that we owned and operated that were sold to a customer during the first quarter of 2006. We continue to operate those ATMs, but they are now owned by the customer.

Sales Discounts

Sales discounts decreased to $29.0 million in the first six months of 2007 from $34.4 million in the first six months of 2006. Sales discounts as a percentage of transaction-based sales increased slightly to 67.6% in the first six months of 2007 from 66.9% in the first six months of 2006.

Cost of Sales

Although sales from continuing operations decreased by $10.6 million in the first six months of 2007 compared to the first six months of 2006, cost of sales increased by $930,000. As a result, cost of sales increased to 25.7% of sales in the first six months of 2007, from 19.3% in the first six months of the prior year.

As a result of the sale of our United States photocopy business, we determined that it would be more economical to hire third parties to perform maintenance on our equipment and on merchant’s equipment where that is our responsibility. During the first and second quarters of 2007 we transitioned our ATM maintenance function from our own field service employees to third parties. During the first six months of 2007, our expense for third party ATM service increased by $1.7 million as compared to the same period in 2006. This increase was partially offset by a decrease of $166,000 in our cost of labor and parts attributed to our United States ATM business. As of December 31, 2006, we had 129 field service employees in the United States doing maintenance on equipment for both our ATM and photocopy businesses. As of June 30, 2007, we had terminated all of our field service employees. We expect our maintenance costs in the third and fourth quarters of 2007 to be lower than in the first two quarters as a result of the new arrangements we have put in place.

The increase in ATM maintenance costs was partially offset by:

	•		A decrease in our cost of vault cash of $251,000, or 8.3%, as compared to the first six months of 2006. The decrease in the cost of vault cash is due to a reduction of the amount of vault cash in our system, which has decreased from $85.5 million at June 30, 2006 to $71.9 million at June 30, 2007.

	•		A $627,000 decrease in the cost of ATM machines sold due to the $981,000 decrease in ATM sales as compared to the first six months of 2006.

Selling, General and Administrative Expense

Selling, general and administrative expense attributed to continuing operations decreased by $5.8 million to $9.6 million in the first six months of 2007 from $15.4 million in the first six months of the prior year. Selling, general and administrative expense as a percent of sales decreased to 20.7% in the first six months of 2007 from 26.9% in the first six months of the prior year. Specific decreases included:

	•		Amortization expense decreased by $2.5 million due to the reduction of the basis of our intangible assets as a result of impairment charges taken in the third quarter of 2006.

	•		Labor costs (excluding non-cash stock compensation expense) decreased by $2.0 million, or approximately 37%. In connection with and following the sales of businesses in January 2007 we have substantially reduced our selling, general and administrative staff, from 102 employees as of December 31, 2006, to 59 employees as of June 30, 2007.

	•		Non-cash stock compensation expense decreased by $592,000. In the second quarter of 2006, we recorded $618,000 of expense in connection with the acceleration of the vesting of options granted to our former President and Chief Executive Officer.

Restructuring Charges

In connection with the corporate restructuring plan we announced in November 2006 and the subsequent sales of a substantial portion of our operations, we have made significant staff reductions, including termination by the end of May 2007 of substantially all of our United States field service employees. We have also vacated leased warehouse and office space occupied by the terminated employees. During the first six months of 2007 we paid severance of $167,000 to terminated employees. During the first six months of 2007 we vacated warehouse and office space in eleven United States locations. The vacated space was leased under leases with remaining terms up to seven years. We recorded a liability of $796,000 as of March 31, 2007, which was the estimated fair value of the costs that we expect to incur without any economic benefit, and we charged that amount to expense in the first quarter of 2007. We estimated the fair value of the liability based on the discounted value of the remaining lease

payments, reduced by estimated sublease payments that we reasonably expect could be obtained for use of the properties.

The costs for both severance payments and vacated leases are included in restructuring charges in our statement of operations for the six months ended June 30, 2007.

Loss on Early Extinguishment of Debt

In January 2007 we used $98.4 million of the net proceeds from the sales of businesses to make principal and interest payments on our term loans and line of credit. In connection with those payments we wrote off deferred financing costs of $4.1 million. In the second quarter of 2006 we refinanced our previous debt and recorded a $3.1 million loss on early extinguishment of debt consisting of the writeoff of deferred financing costs and prepayment penalties.

Other Income

Other income in the first six months of 2006 includes currency exchange gains of $337,000 and a gain on the settlement of an interest rate cap of $173,000.

Tax Rate

Discontinued Operations

On June 28, 2006, we sold all of the outstanding shares of our United Kingdom photocopier subsidiary to an unrelated third party for cash.

The operations of our Canadian, United Kingdom and German ATM businesses and our Canadian, United Kingdom and United States photocopy businesses are shown as discontinued operations in our consolidated statements of operations for the six-month periods ended June 30, 2006 and 2007. Because the terms of our financing agreements required us to use substantially all of the net proceeds from the sales of businesses in June 2006 and January 2007 to pay debt, we have allocated interest expense to discontinued operations based upon the lesser of the amount repaid or debt outstanding. No general corporate overhead has been allocated to discontinued operations.

Our pretax income from discontinued operations for the first six months of 2007 was $5.2 million, compared to a pretax loss of $2.0 million for the first six months of 2006. The pretax income from discontinued operations for the first six months of 2007 consisted of losses from operations of $4.4 million and gains on the sales of the discontinued businesses of $9.6 million. See Note 10 to our consolidated financial statements for additional information regarding our discontinued operations.

Net Loss

Our net loss for the first six months of 2007 was $4.4 million compared to a net loss of $6.0 million for the first six months of 2006.

Liquidity and Capital Resources

General

We incurred a net loss of $120.1 million in the year ended December 31, 2006. As a result of our financial performance for the three months ended September 30, 2006, we failed to meet certain financial covenants of our financing agreements with GSO Origination Funding Partners LP and other lenders. On November 20, 2006, we entered into amendments that restructured our loans and waived the failure to meet the loan covenants. Under the restructured loan agreements principal payments of $69.9 million were due in the first quarter of 2007. During January 2007 we sold our Canadian, United Kingdom and German ATM businesses and our United States photocopy business and used $98.4 million from the proceeds of those sales to make principal and interest payments under these loans, leaving a remaining balance of principal plus accrued interest of $2.0 million. We are uncertain whether our remaining operations can generate sufficient cash to comply with the covenants of our restructured loan agreements and to pay our obligations on an ongoing basis. Because there are cross-default provisions in TRM Inventory Funding Trust’s Loan and Servicing Agreement, if we fail to comply with the covenants of our restructured loan agreements and are declared to be in default by GSO Origination Funding Partners LP and other lenders, we may be declared in default of the

provisions of the Loan and Servicing Agreement as well, and the lender may be able to demand payment. These factors, among others, may indicate that we may be unable to continue as a going concern for a reasonable period of time. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should we be unable to continue as a going concern. Our continuation as a going concern is contingent upon our ability to generate sufficient cash to pay our obligations on an ongoing basis.

Our principal ongoing funding requirements are for working capital to finance our operations, fund capital expenditures and fund any claims under agreements for sales of businesses in January 2007.

During the first six months of 2007 we used $9.1 million of cash in our operating activities (including discontinued operations), compared to $1.7 million used in operating activities during the first six months of 2006. During the first six months of 2007 we received $104 million in proceeds from the sales of businesses, and we used most of those proceeds to repay debt and accrued interest. During the first six months of 2007 our capital expenditures were $41,000, down from $2.3 million in the first six months of 2006.

We had cash and cash equivalents of $3.2 million at June 30, 2007, compared to $4.8 million at December 31, 2006, and a net working capital deficit of $5.0 million at June 30, 2007 compared to a net working capital deficit of $2.6 million at December 31, 2006. As of December 31, 2006, we classified all of the assets of the businesses sold in January 2007 as current assets, because the proceeds from those sales were required to be used to pay debt classified as a current liability. This debt was substantially repaid in January 2007. Subject to the matter discussed in the next paragraph, we believe that our liquidity and capital resources are adequate for our currently anticipated needs.

In connection with the sales of our ATM businesses in the United Kingdom, Germany and Canada, and our photocopy businesses in the United States and Canada during the first six months of 2007, we have made various representations and warranties and/or provided indemnities including those relating to taxation matters. Further, the sales prices may be subject to adjustment based on working capital amounts, the value of accounts receivable as of the closing of the sale or other factors the amounts of which have not yet been agreed upon. The purchasers may make claims against us relating to the representations or warranties or provisions for adjustment of the sales prices, and those claims could be substantial. Because we used substantially all of the net proceeds from the business sales to reduce our debt, we might not have sufficient cash to pay such claims without additional financing.

We believe that as of June 30, 2007, the remaining cost of upgrading the ATMs we own to comply with new industry standards known as triple DES will be approximately $180,000. These costs will be capitalized and depreciated over the remaining life of each asset. As of June 30, 2007, approximately 93% of our owned ATMs in the United States were compliant with triple DES. We intend to complete the upgrade of our ATMs to comply with these new standards by December 31, 2007, and we expect to fund the upgrades with cash on hand and from our operations.

Syndicated Credit Facility

As of September 30, 2006, our financial performance caused us to not be in compliance with certain covenants in our credit agreements pursuant to which we then owed $94.9 million. Our lenders had the right to seek to accelerate the loans under the operative loan documents, but they did not do so or exercise other remedies. Instead, on November 20, 2006, we entered into agreements under which they waived our defaults and agreed with us to restructure our loans. As restructured, the interest rates on our loans was increased. The increased interest cost was deferred and added to principal. In addition, the maturity dates of the loans were changed so that a total of $69.9 million was due on or before February 28, 2007. The financial covenants were modified to require achievement of certain levels of earnings before interest, taxes, depreciation and amortization and certain other non cash expenses which we refer to as adjusted EBITDA, and to limit capital expenditures. As of June 30, 2007, we were not in compliance with the adjusted EBITDA covenant. We have received waivers of the violations of our adjusted EBITDA covenant for the months of December 2006 through June 2007. We also granted warrants to the holders of our Term Loan B to purchase 3.1 million shares of our common stock at a price of $1.3638 per share. The warrants are exercisable for a period of seven years following November 20, 2006. We agreed to file a registration statement with the SEC covering the resale of the shares issuable upon the exercise of the warrants and to use our best efforts to have the registration statement declared effective by the SEC no later than May 18, 2007. However, because we filed our Annual Report on Form 10-K for 2006 and our Quarterly Report on Form 10-Q for the first quarter of 2007 late and are currently focusing on filing timely periodic reports, we have not yet filed the registration statement. We have not received any demands from the warrant holders to file the registration statement as of the date of this report; we plan to file the registration statement as soon as reasonably practicable. Because the present value of the cash flows under the terms of the revised debt instruments were less than 10% different than the present value of the remaining cash flows under the terms of the original instruments, we accounted for the restructuring of our loans as a modification of the previously outstanding debt. Accordingly, we charged to expense the legal fees we incurred and recorded the fair value of the warrants and loan fees as deferred financing costs.

deferred financing costs was charged to expense as a loss on early extinguishment of debt in the first quarter of 2007.

Because we are uncertain whether we can comply with all of the terms of the restructured loan agreement, the balance of the loan has been classified as a current liability on our balance sheet.

As discussed further in Note 10 to our condensed consolidated financial statements, during the first six months of 2007 we sold our Canadian, United Kingdom and German ATM businesses and our United States and Canadian photocopy businesses and used $98.6 million from the proceeds of those sales to make principal and interest payments under our financing agreements with GSO Origination Funding Partners and other lenders. Following these payments, as of June 30, 2007, the only remaining balance under our term loans and line of credit was $1.9 million on our Term Loan B which is due in June 2012.

United States Vault Cash Facility

General. In March 2000, we established a facility for funding the cash which is placed in our ATM equipment (which we refer to as “vault cash”) for our United States ATMs. As of June 30, 2007, we had access to $100 million of vault cash under the facility of which $71.9 million was being used.

Structure of the facility. The facility is based on the relationship among three primary companies. These companies are:

	•		TRM Inventory Funding Trust, or the Trust. The Trust is a Delaware business trust that was created pursuant to a deposit trust agreement among GSS Holdings, Inc. as depositor, Wilmington Trust Company as owner trustee, and TRM ATM Corporation as servicer. The majority equity holder in the Trust is Autobahn Funding Company, LLC, and the minority equity holder is GSS Holdings, Inc. Neither we, TRM ATM Corporation nor any of our other affiliates have any ownership interest in the Trust.

	•		TRM ATM Corporation, or TRM ATM. TRM ATM is one of our subsidiaries and acts as the servicer under the facility.

•

Autobahn Funding Company, LLC, or Autobahn. Autobahn is an affiliate of DZ Bank AG, Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, and is the lender under the facility. Autobahn is independent of us, TRM ATM and our other affiliates.

Operation of the facility. We obtain our vault cash under the facility pursuant to a Loan and Servicing Agreement. In accordance with that agreement, Autobahn raises funds by issuing asset-backed commercial paper. Autobahn then loans those funds to the Trust at an interest rate equal to the interest rate borne by the commercial paper plus 1.35%. The loaned funds are then deposited into an account from which, at the direction of TRM ATM acting as the servicer of the facility, they are disbursed to armored car carriers for transportation to our United States ATMs. The loaned funds are then available for withdrawal from the ATMs by the public. The cash at all times remains the property of the Trust, and the Trust is ultimately obligated to repay Autobahn.

The Trust, as borrower under the facility, and TRM ATM, as servicer, use their cash from operations, which is principally derived from ATM withdrawal and interchange fees, to fund a settlement account from which, in combination with its vault cash, TRM ATM directs repayment of the loans to the Trust, the interest on the loans, a specified return on the equity investment made by the investors in the Trust and the fees described below.

The Trust engages TRM ATM, as servicer, and other agents and contractors from time to time to perform all duties assigned under the Loan and Servicing Agreement. Under the terms of the November 2004 amendment to the facility, TRM ATM is permitted to subservice certain servicing functions to eFunds Corporation pursuant to a master services agreement related to our acquisition of the eFunds ATM business.

The Loan and Servicing Agreement contains covenants applicable to us, including a minimum tangible net worth requirement of $15 million.

Collateral and credit enhancement. The Trust’s borrowings from Autobahn are collateralized by the assets of the Trust, principally the vault cash. In addition, where the vault cash is placed in an ATM, the Trust has a security interest in all of the fees and charges earned or received with respect to that ATM until those fees are distributed to TRM ATM.

Autobahn is a party to a liquidity purchase agreement with other lenders, which ensures that the Trust continues to have funds available for the term of the agreement and that Autobahn will have the funds necessary to repay the commercial paper it issues. Each lender party to the agreement is required to have a credit rating at least as high as the credit rating of the commercial paper that Autobahn issues.

Cost of the facility. The primary costs paid in connection with the facility are:

•

Interest on the loaned funds. The loans bear interest at an interest rate equal to 1.35% plus the interest rate borne by the commercial paper that was issued to raise the funds for the loans. Interest for the six months ended June 30, 2007 was $2.4 million.

	•		Return for equity investors. Autobahn and GSS Holdings, Inc., as equity investors in the Trust, receive a return on the value of their investments, which were $1,485,000 and $15,000, respectively, as of June 30, 2007. Autobahn’s annual return is equal to 1.75% plus the interest rate borne by the commercial paper that is outstanding. GSS Holdings’ annual return is equal to 25.0%.

	•		Fees. Autobahn receives a commitment fee and TRM ATM, as servicer, and the collateral agent each receive administrative fees in connection with the facility. Autobahn’s fees for the six months ended June 30, 2007 were $93,000.

Risk of loss and insurance. Any risk with regard to the Trust or the ability of the Trust to repay the Trust’s debt resides with the Trust and with GSS Holdings as the minority equity investor and with Autobahn as the majority equity investor. TRM ATM serves only as an administrator or servicer of the Trust.

We maintained letters of credit totaling $3.8 million, or 5.5% of loans outstanding on June 30, 2007, to guarantee the performance of the servicer of the facility. The Trust’s subcontractors maintain insurance on behalf of the Trust so as to ensure the cash is safe while stored at correspondent banks, and during delivery to ATM equipment and to vault or bank storage facilities.

United Kingdom Vault Cash Facility

Before its sale in January 2007, our United Kingdom ATM business obtained vault cash under an agreement with a local bank. Vault cash obtained under the program remained the property of the bank, and was not included on our balance sheet.

Canadian Vault Cash Facility

Before its sale in January 2007, our Canadian ATM business obtained vault cash under an agreement with an armored car carrier that has a corresponding agreement with a local bank. As in our U.K. vault cash arrangement, the vault cash obtained under the Canadian program remained the property of the bank, and was not included on our balance sheet.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Contractual Commitments and Obligations

Contractual commitments and obligations as of June 30, 2007 were as follows (in thousands):


	Payments Due by Period
				July 1 –
				December 31,
Contractual obligations	Total			2007			2008-2009			2010-2011			After 2011
TRM Corporation and subsidiaries
Long-term debt		$	3,355		$	159		$	632		$	632		$	1,932
Operating leases			1,562			264			884			243			171
Purchase obligations			11,875			2,500			9,375			—			—

Total TRM Corporation and subsidiaries			16,792			2,923			10,891			875			2,103
TRM Inventory Funding Trust note payable			92,051			2,389			9,478			9,478			70,706

Total contractual cash obligations		$	108,843		$	5,312		$	20,369		$	10,353		$	72,809

The above payments include interest where applicable, with interest on variable rate obligations assumed to remain constant at the rate in effect as of June 30, 2007. The long-term debt and TRM Inventory Funding Trust note payable are shown above in accordance with their contractual terms. However, because we believe it is likely that our creditors may be able to demand payment of those debts during 2007, we have classified them as current liabilities in our consolidated balance sheet. Purchase obligations consist of a master services agreement with eFunds Corporation, which involves payment totaling at least $5 million annually over an initial term expiring in November 2009.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates as of June 30, 2007 are consistent with those discussed in our Annual Report on Form 10-K for the year ended December 31, 2006.

New Accounting Standards

In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, or FIN 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation became effective for us beginning in 2007. Our adoption of FIN 48 did not have a material impact on our results of operations, financial position or cash flows.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” SFAS 157 establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements. This statement does not require any new fair value measurements. The statement is effective for us beginning in 2008. We

anticipate no material impact on our results of operations, financial position or cash flows as a result of adopting this statement.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Standard No. 115,” which allows companies the option to measure certain financial instruments and other items at fair value. The provisions of SFAS No. 159 are effective for us beginning in 2008. We are currently evaluating the impact, if any, this statement will have on our financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates, which could impact our results of operations and financial condition. We do not hold or issue derivative commodity instruments or other financial instruments for trading purposes.

Interest Rate Risk

We invest our cash in money market accounts. The income earned from these money market accounts is subject to changes in interest rates. Interest income from continuing operations was $117,000 for the six months ended June 30, 2007, and $92,000 for the same period in 2006. If the interest rate we earned on the $7.5 million cash we had available for investment at June 30, 2007 increased or decreased by 1%, our interest income would increase or decrease by $75,000 per year.

Interest on borrowings pursuant to our syndicated loan facility is at variable rates. As of June 30, 2007 the interest rate on our $1.9 million term loan was 17.36%. If the interest rate for our borrowings under the term loan increased by 1%, our interest cost would increase by $19,000 per year.

Under our United States vault cash facility, the Trust borrows money pursuant to a note funded by the sale of commercial paper. The Trust owed $69.3 million at June 30, 2007 and $83.8 million at June 30 2006 under this arrangement. The weighted average interest rate on these borrowings at June 30, 2007 was 6.75%. Interest and fees relating to the Trust’s borrowings, which are included in cost of sales in our consolidated financial statements, totaled $1.2 million and $1.6 million for the quarters ended June 30, 2007 and 2006, respectively, and $2.5 million and $3.0 million for the six-month periods ended June 30, 2007 and 2006, respectively. If the interest rate for the Trust’s borrowings at June 30, 2007 increased by 1%, to a weighted average of 7.75%, our cost of sales would increase by $693,000 per year.

Foreign Currency Risk

During 2006, and until the sale of substantially all of our foreign operations, we were subject to foreign currency exchange rate exposure. We realized sales from, and paid the expenses of our international operations in British pounds, Canadian dollars and Euros. As a result of the sales in 2007 of substantially all of our foreign operations, substantially all of our foreign exchange rate risk has been eliminated.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities and Exchange Act of 1934 reports is recorded, processed, summarized and reported within the periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our disclosure committee appointed by such officers, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, and because we have not completed the testing of our remediation of certain material weaknesses identified as of December 31, 2006, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective at a reasonable assurance level.

Subsequent to the end of 2006, we believe that the material weaknesses in our internal control over financial reporting that we identified as of December 31, 2006 have been remediated by the following changes.

Ineffective controls over segment disclosures and impairment analysis. Beginning in the fourth quarter of 2006, each quarter our senior accounting management prepares a summary and analysis of changes in our operations, organization and financial reporting practices that might affect our operating segments or reporting units, including a conclusion on the appropriateness of the operating segments and reporting units we have identified. Further, during the first quarter of 2007, we sold or reclassified as held for sale substantially all of the assets of all but one of our business segments, greatly simplifying the analysis of changes that might affect our operating segments or reporting units. These summaries are reviewed by our Chief Financial Officer.

Inadequate staffing in the United Kingdom. In January 2007 we sold all of our operations in the United Kingdom.

However, as of August 9, 2007, the testing of the effectiveness of our remediation plan for material weaknesses in controls over segment disclosures and impairment analysis has not been completed.

Other than those as described in the three previous paragraphs, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during our most recent fiscal quarter.

PART II – OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

We failed to meet financial covenants in our credit facilities with GSO Origination Funding Partners LP and other lenders, which constitutes a default under these facilities. We describe the facilities, the default, the waiver of the default and the restructuring of the facilities in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Syndicated Credit Facility” in Part 1 of this quarterly report.

ITEM 6. EXHIBITS

(a) Exhibits

	2.1		Asset Purchase Agreement dated June 19, 2007, between TRM (Canada) Corporation and TRM Multitech Services Inc. (incorporated herein by reference to Exhibit 2.1 of Form 10-Q for the period ended March 31, 2007).

	3.1(a)		Amendments to the Restated Articles of Incorporation (incorporated herein by reference to Exhibit 3.1(a) of Form 10-K for the fiscal year ended June 30, 1998).

	3.1(b)		Restated Articles of Incorporation (incorporated herein by reference to Exhibit 3.1(b) of Form 10-K for the fiscal year ended June 30, 1998).

	3.2		Restated Bylaws (incorporated herein by reference to Exhibit 3.2 of Form 10-K for the fiscal year ended June 30, 1998).

	4.1		Specimen Stock Certificate (incorporated herein by reference to Exhibit 4.1 of Form S-3/A filed on August 25, 2004 [No. 333-116748]).

	4.2		Investors’ Rights Agreement (incorporated herein by reference to Exhibit 4.1 of Form 8-K dated July 9, 1998).

	4.3		Articles V, VI and VII of the Restated Articles of Incorporation, as amended (See Exhibit 3.1).

	4.4		Articles I, II, V, VII and X of the Restated Bylaws (See Exhibit 3.2).

10.6	(a)	Employment Agreement dated August 1, 2007 by and between TRM Corporation and Michael Dolan.
	(b)	Employment Agreement dated August 12, 2005 by and between TRM Corporation and Daniel E. O’Brien (incorporated herein by reference to Exhibit 10.7(f) of Form 10-Q for the period ended June 30, 2005).
	(c)	Retainer Agreement dated May 31, 2007 by and between TRM Corporation and Jeffrey F. Brotman (incorporated herein by reference to Exhibit 10.6(b) of Form 10-Q for the period ended March 31, 2007).
	(d)	Employment Agreement dated May 21, 2007, by and between TRM Corporation and Richard B. Stern (incorporated herein by reference to Exhibit 10.6(c) of Form 10-Q for the period ended March 31, 2007).

	(e)		Consulting Agreement dated December 12, 2006, by and between TRM Corporation and Danial J. Tierney (incorporated herein by reference to Exhibit 10.6(d) of Form 10-K for the year ended December 31, 2006).
	(f)		Severance Agreement dated December 12, 2006 by and between TRM Corporation and Danial J. Tierney (incorporated herein by reference to Exhibit 10.6(e) of Form 10-K for the year ended December 31, 2006).
	(g)		Retainer Agreement dated May 3, 2006 by and between TRM Corporation and Amy B. Krallman (incorporated herein by reference to Exhibit 10.7(j) of Form 10-Q filed for the quarter ended March 1, 2006).

	31.1		Certification of Chief Executive Officer of TRM Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2		Certification of Chief Financial Officer of TRM Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.3		Certification of Principal Accounting Officer of TRM Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1		Certification of Chief Executive Officer of TRM Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

	32.2		Certification of Chief Financial Officer of TRM Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

	32.3		Certification of Principal Accounting Officer of TRM Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	TRM CORPORATION
Date: August 14, 2007	By:	/s/ Jon S. Pitcher
		Jon S. Pitcher
		Principal Accounting Officer

EX-10.6(A) 2 w38237exv10w6xay.htm EMPLOYMENT AGREEMENT DATED AUGUST 1, 2007 exv10w6xay

Exhibit 10.6(a)

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made as of this 1^st day of August 2007, by and between TRM Corporation, an Oregon corporation (hereinafter called “Company”), and Michael Dolan, an individual residing in New Jersey (hereinafter called “Executive”).

W I T N E S S E T H:

Company wishes to employ Executive and Executive wishes to be in the employ of Company on the terms and conditions contained in this Agreement.

WHEREAS, due to Company’s desire to employ Executive as Chief Financial Officer and to gain the protections and benefits contained in this Employment Agreement, Company and Executive agree to the covenants and restrictions contained herein;

WHEREAS, due to Executive’s desire to serve as Chief Financial Officer and the protections and benefits contained in this Employment Agreement (“Agreement”), Executive agrees to the covenants and restrictions contained herein;

NOW, THEREFORE, in consideration of the facts, mutual promises and covenants contained herein and intending to be legally bound hereby, Company and Executive agree as follows:

1. Definitions. As used herein, the following terms shall have the meanings set forth below unless the context otherwise requires.

“Affiliate” shall mean a person or entity who or which (i) with respect to any entity, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such entity; or (ii) with respect to Executive, is a parent, spouse, child or issue of Executive, including persons in an adopted or step relationship.

“Annual Bonus” shall mean the bonus payment(s) available to Executive at the sole discretion of the majority of the Board of Directors or the Compensation Committee, as set forth in Section 5(b), as such amount may be adjusted from time to time.

“Base Salary” shall mean the annual rate of compensation set forth in Section 5(a), as such amount may be adjusted from time to time.

“Board” shall mean the Board of Directors of Company.

“Business” shall mean the business conducted by Company or any Subsidiary or corporate parent thereof or entity sharing a common corporate parent with the Company on the date of execution of this Agreement, including business activities in developmental stages, business activities which may be developed by the Company, or by any Subsidiary or corporate parent thereof or entity sharing a common corporate parent with the Company, during the period of Executive’s employment by Company, and all other business activities which flow from a reasonable expansion of any of the foregoing during Executive’s employment with the Company and about which Executive had or has constructive or actual knowledge.

“Cause” shall include any one or more of the following:

(a) Executive breaches or neglects the material and substantial duties that Executive is required to perform under the terms of this Agreement, including if Executive performs his duties in an incompetent manner, after written notice of the breach or neglect and thirty (30) days to cure such breach or neglect;

(b) The reasonable belief of a majority of the Board of Directors that Executive has committed a crime of moral turpitude or has entered a plea of nolo contendere (or similar plea) to a charge of such an offense;

(c) Executive uses alcohol in an inappropriate manner or any unlawful controlled substance while performing his duties under this Agreement and such use materially interferes with the performance of Executive’s duties under this Agreement;

(d) Executive commits any act of criminal fraud, material dishonesty or misappropriation relating to or involving the Company;

(e) Executive violates a rule(s), regulation(s), policy(ies) or plan(s) governing Executive performance or express direction(s) of the Board;

(f) Executive engages in the unauthorized disclosure of Confidential Information; or

(g) Executive acts in a manner that is contrary to the best interest of the Company after he is given written notice of his actions, as well as 30 days to cure.

“Change of Control” shall be deemed to have occurred upon the earliest to occur of the following events:

(h) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets (including in the Company’s subsidiaries) of the Company and its subsidiaries taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act);

(i) the adoption of a plan relating to the liquidation or dissolution of the Company;

(j) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “Person” (as that term is used in Section 13(d)(3) of the Exchange Act), becomes the “Beneficial Owner” (as that term is used in Section 13(d)(3) of the Exchange Act), directly or indirectly, of more than 35% of the Voting Stock of the Company;

(k) the Company consolidates or merges with or into another Person or any Person consolidates or merges with or into the Company, in either case under this clause (D), in one transaction or a series of related transactions in which immediately after the consummation thereof Persons Beneficially Owning, directly or indirectly, Voting Stock representing in the aggregate a majority of the total voting power of the Voting Stock of the Company immediately prior to such consummation do not Beneficially Own, directly or indirectly, Voting Stock representing a majority of the total voting power of the Voting Stock of the Company or the surviving or transferee Person; or

(l) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors.

“Commencement Date” shall have the meaning specified in Section 4 hereof.

“Confidential Information” shall have the meaning specified in Section 12(b) hereof.

“Disability” shall mean Executive’s inability, for a period of thirteen (13) consecutive weeks, or a cumulative period of 120 business days (i.e., Mondays through Fridays, exclusive of days on which Company is generally closed for a holiday) out of a consecutive period of twelve (12) months, to perform the essential duties of Executive’s position, due to a disability as that term is defined in the American With Disabilities Act.

“Restricted Area” shall have the meaning specified in Section 12(a)(i) hereof.

“Restricted Period A” shall have the meaning specified in Section 12(a) hereof.

“Restricted Period B” shall have the meaning specified in Section 12(b) hereof.

“Subsidiary” shall mean any company in which Company owns directly or indirectly 50% or more of the Voting Stock or 50% or more of the equity; or any other venture in which it owns either 50% or more of the voting rights or 50% or more of the equity.

“Term of Employment” shall mean the period specified in Section 4 hereof as the same may be terminated in accordance with this Agreement.

2. Employment. Company hereby employs Executive as Chief Financial Officer and Executive hereby accepts employment by Company for the period and upon the terms and conditions specified in this Agreement.

3. Office and Duties.

(a) Executive shall serve as the Chief Financial Officer of Company. In such capacity, Executive shall render such services as are necessary and desirable to protect and advance the best interests of Company, acting, in all instances, under the supervision of and in accordance with the policies set by the Chief Executive Officer and Board of Directors. As Chief Financial Officer, Executive shall be responsible for managing the day-to-day operations of the financial departments and financial reporting of the business and shall have the responsibility and authority, subject to policies set by and with the approval of the Chief Executive Officer, to implement the policies and directives of the Company, all subject to the provisions of any operating budget or budgets as may be approved from time to time by the Chief Executive Officer and subject to the By-Laws of the Company. Executive shall perform any other duties reasonably required by the Chief Executive Officer or Board of Directors and reasonably related to his responsibilities as Chief Financial Officer.

(b) For as long as Executive shall remain an Executive of Company, Executive’s entire working time, energy, skill and best efforts shall be devoted to the performance of Executive’s duties hereunder in a manner which will faithfully and diligently further the business and interests of Company. Executive may engage in charitable, civic, fraternal, trade and professional association activities that do not interfere or compete with Executive’s obligations to Company, but Executive shall not work for any other for-profit business without obtaining the prior written approval of the Chief Executive Officer.

4. Term. Executive shall be employed by Company for a Term of Employment (the “Initial Term”), commencing August 1, 2007 (the “Commencement Date”), and ending on August 1, 2008, unless sooner terminated as hereinafter provided. However, at the end of the Initial Term on August 1, 2008, the Term of Employment and this Employment Agreement will be automatically extended for consecutive one (1) year terms (“Additional Term”) unless not later than thirty (30) days prior to August 1, 2008, or thirty (30) days prior to any successive anniversary of that date, either party gives written notice that it does not wish to extend this Employment Agreement. During any Additional Term, this Agreement and Executive’s employment can be terminated in accordance with Sections 7 — 10 below.

5. Compensation and Benefits.

(a) For all of the service rendered by Executive to Company, Executive shall receive Base Compensation at the gross annual rate of two hundred thousand USD ($200,000.00), payable in installments in accordance with Company’s regular payroll practices in effect from time to time. The Base Compensation shall be reviewed annually, on or around the anniversary date of the Commencement Date of this Agreement to ascertain, in the sole discretion of the Board or the Compensation Committee, the amount, if at all, the Executive’s Base Compensation should be increased.

(b) In addition to the foregoing compensation, Executive is eligible to receive an Annual Bonus which shall be targeted at 35% of Base Compensation each fiscal year. The ultimate amount of such Annual Bonus shall, however, be in an amount, as shall be recommended by the President and CEO, and approved by the Board of Directors or the Compensation Committee of the Board, in their sole discretion. Upon completion of Executive’s first year of employment, Executive will be given a guaranteed bonus of $70,000, as long as Executive is actively employed by Company at that time. Thereafter, the Annual Bonus shall be payable at the Company’s sole discretion, either in a single lump-sum payment, or such other installments as shall be recommended by the President and CEO, and approved by the Board of Directors or the Compensation Committee of the Board. To be eligible for the Annual Bonus, Executive must be actively employed by the Company on the last day of the relevant fiscal year.

(c) Executive will be granted 30,000 options to purchase shares of common stock of the Company pursuant to the Company’s Stock Option Plans (the “Stock Options”), to vest over four years, with acceleration of vesting upon a Change of Control.

(d) If Executive’s employment is terminated by the Company at any time within three months before, or twelve months after the occurrence of a Change in Control (except for cause), (i) all Stock Options granted to Executive by Company, which pursuant to the terms of the applicable plan vest upon a Change in Control, shall vest upon the date of Executive’s employment termination, (ii) if employment is terminated within the first year of employment Company shall pay Executive an amount equal to one (1) year base pay plus the guaranteed bonus described in paragraph 5(b) if the same shall not have been paid prior thereto, thereafter, Company shall pay Executive an amount equal to two (2) years base pay, in each case so long as Executive executes and does not revoke a Separation Agreement and General Release Agreement acceptable to Company which will be substantially in the terms and form attached hereto as Exhibit “A”. Except as otherwise specifically set forth in this Section 5(c), all Base Compensation, Annual Bonus, additional bonus, and any other compensation and benefits provided herein shall cease at the time of such termination, subject to the terms of any benefit or compensation plans then in force and applicable to Executive, and Company shall have no liability or obligation hereunder by reason of such termination.

(e) Executive agrees and acknowledges that his employment and the other protections and benefits of this Agreement are full, adequate and sufficient consideration for the restrictions and obligations set forth in Sections 11 and 12 of this Agreement.

6. Fringe Benefits. As an inducement to Executive to continue employment hereunder, and in consideration of Executive’s covenants under this Agreement, Executive shall be eligible for the benefits set forth below (the “Fringe Benefits”) during the Term of Employment:

(a) Executive shall be eligible to participate in any health, life, accident or disability insurance, sick leave or other benefit plans or programs made available to other similarly situated Executives of Company on terms at least equal to those available to other similarly situated Executives of Company as long as the plans and programs are kept in force by Company and provided that Executive meets the eligibility requirements and other terms, conditions and

restrictions of the respective plans and programs, with the understanding that the Company will keep in force throughout the Term of this Agreement health, life, accident and disability insurance and sick leave benefits equal to or greater than those in effect at the Commencement Date.

(b) Executive shall be entitled to four (4) weeks paid vacation during each year, subject to Company’s generally applicable policies relating to vacations, and excluding standard Company holidays.

7. Disability. If Executive suffers a Disability as that term is defined in Section 1 herein, the Company may terminate Executive’s employment relationship with Company at any time thereafter (after the expiration of time periods described in the definition of “Disability” in Section 1) by giving Executive thirty (30) days written notice of termination. Thereafter, Company shall have no obligation to Executive for Base Compensation, Annual Bonus, Fringe Benefits or any other form of compensation or benefit to Executive, except as otherwise required by law or by benefit plans provided at Company expense, other than (a) amounts of Base Compensation accrued through the date of termination, (b) vested Stock Options, and (c) reimbursement of appropriately documented expenses incurred by Executive before the termination of employment, to the extent that Executive would have been entitled to such reimbursement but for the termination of employment.

8. Death. If Executive dies during the Term of Employment, the Term of Employment and Executive’s employment with Company shall terminate as of the date of Executive’s death. Company shall have no obligation to Executive or Executive’s estate for Base Compensation, Annual Bonus, Fringe Benefits or any other form of compensation or benefit, except as otherwise required by law or by benefit plans provided at Company expense, other than (a) amounts of Base Compensation that have accrued through the date of Executive’s death, (b) vested Stock Options, and (c) reimbursement of appropriately documented expenses incurred by Executive before the termination of employment, to the extent that Executive would have been entitled to such reimbursement but for the termination of employment.

9. Termination for Cause. Company may terminate Executive’s employment relationship with Company at any time for Cause as that term is defined in Section 1 herein, effective not less than ten (10) days after written notice of such termination. Upon the effective date of termination of Executive under this Section 9, Company shall have no obligation to Executive for Base Compensation, Annual Bonus, Fringe Benefits, or any other form of compensation or benefits other than (a) amounts of Base Compensation, and vested Stock Options accrued through the effective date of termination, and (b) reimbursement of appropriately documented expenses incurred by Executive before the written notice of termination of employment, to the extent that Executive would have been entitled to such reimbursement but for the termination of employment. In such event, Executive will be entitled to elect to continue participation in any health, life, accident or disability insurance plans of the Company at Executive’s expense if plans allow for continuation at no cost to the Company.

10. Termination without Cause.

(a) Company may terminate Executive’s employment relationship with Company at any time without Cause upon thirty (30) days written notice. Notwithstanding termination of Executive under this Section 10, if employment is terminated within the first year of employment Company shall pay Executive an amount equal to one (1) year base pay, thereafter, Company shall pay Executive an amount equal to two (2) years base pay and Executive shall be entitled to receive all vested Stock Options (all of which will fully vest upon such termination), so long as Executive executes and does not revoke a Separation Agreement and General Release Agreement acceptable to Company which will be substantially in the terms and form attached hereto as Exhibit “A”.

(b) Executive may terminate his employment with Company for any or no reason, upon thirty (30) days written notice. If such notice is provided by Executive, Employer, in its sole discretion, may waive the notice period or any portion thereof, with pay (Base Compensation, only) to Executive for the remaining notice period. Upon termination by Executive of his employment under the provisions of this Subsection 10(b), the Company shall have no obligation to Executive for Base Compensation, Annual Bonus, Fringe Benefits or any other form of compensation or benefits other than (a) amounts of Base Compensation, vested Stock Options accrued through the effective date of termination, and (b) reimbursement of appropriately documented expenses incurred by Executive before the termination of employment, to the extent that Executive would have been entitled to such reimbursement but for his termination of his employment.

(c) Termination of Executive’s employment pursuant to Sections 7 through 10 shall release the Company of all its liabilities and obligations under this Agreement, except as expressly provided in Sections 7 through 10. Termination of Executive’s employment pursuant to these Sections shall not, however, release Executive from Executive’s obligations and restrictions as stated in Sections 11 and 12 of this Agreement.

(d) Executive shall not be entitled to any payment or benefit under any Company severance plan other than as reflected herein under Section 10, practice or policy, if any, in effect at or after the time of Executive’s termination since this Agreement supersedes all such plans, practices and policies.

11. Company Property. All advertising, sales, manufacturers’ and other materials or articles or information, including without limitation data processing reports, computer programs, software, customer information and records, business records, price lists or information, samples, or any other materials or data of any kind physically furnished to Executive by Company or developed by Executive on behalf of Company or at Company’s direction or for Company’s use or otherwise in connection with Executive’s employment hereunder, are and shall remain the sole property of Company, including in each case all copies thereof in any medium, including computer tapes and other forms of information storage. If Company requests the return of such materials at any time during or at or after the termination of Executive’s employment, Executive shall deliver all copies of the same to Company immediately.

12. Noncompetition, Trade Secrets, Etc. Executive hereby acknowledges that, during and solely as a result of his employment by Company, Executive has had and will have access to Confidential Information as that term is defined herein. In consideration of such special and unique opportunities afforded by Company to Executive as a result of Executive’s employment and the other benefits referred to within this Agreement, the Executive hereby agrees as follows:

(a) From the date hereof until twenty-four (24) months following the termination of Executive’s employment with Company, for any or no reason, whether initiated by Executive or Company, (“Restricted Period A”);

(i) Executive shall not, for his own benefit or the benefit of any third party, directly or indirectly engage in (as a principal, shareholder, partner, director, officer, agent, Executive, consultant or otherwise) or be financially interested in any business operating within the United States, the United Kingdom or Canada (the “Restricted Area”), which provides consumer convenience services materially the same as the services Company provides to third parties, or any other business activities which are materially the same as and which are in direct competition with the Business, or with any business activities carried on by Company or being planned by Company, at the time of the termination of Executive’s employment, or any other business activities which are materially the same as the Business for any of the Company’s past, present or prospective clients, customers or accounts; provided however, nothing contained in this Section 12 shall prevent Executive from holding for investment less than five percent (5%) of any class of equity securities of a company whose securities are publicly traded on a national securities exchange or in a national market system.

(ii) Induce or attempt to influence any Executive, customer, independent contractor or supplier of Company to terminate employment or any other relationship with Company. During the Restricted Period, while Executive is still employed by the Company, Executive shall not, directly or indirectly, disclose or otherwise communicate to any of the clients, customers or accounts of Company, its Affiliates or any Subsidiary thereof that he has been terminated, is considering terminating or has decided to terminate employment with Company.

(b) From the date hereof until twenty-four (24) months following the termination of Executive’s employment with the Company, for any or no reason, whether initiated by Executive or Company (“Restricted Period B”), Executive shall not use for Executive’s personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association, or company other than Company, any “Confidential Information” which term shall mean any information regarding the business methods, business policies, policies, procedures, techniques, research or development projects or results, historical or projected financial information, budgets, trade secrets, or other knowledge or processes of or developed by Company or any names and addresses of customers or clients or any data on or relating to past, present or prospective Company customers or clients or any other confidential information relating to or dealing with the business operations or activities of Company, made known to Executive or learned or acquired by Executive while in the employ of Company. Confidential Information shall not include (1) information unrelated to the Company which was lawfully received by Executive free of restriction from another source having the right to so furnish such Confidential Information; or (2)

information after it has become generally available to the public or to industry competitors without breach of this Agreement by the Executive; or (3) information which at the time of disclosure to the Executive was known to the Executive to be free of restriction as evidenced by documentation from the Company which the Executive possesses, or (4) information which Company agrees in writing is free of such restrictions. All memoranda, notes, lists, records, files, documents and other papers and other like items (and all copies, extracts and summaries thereof) made or compiled by Executive or made available to Executive concerning the business of Company shall be Company’s property and shall be delivered to Company promptly upon the termination of Executive’s employment with Company or at any other time on request. The foregoing provisions of this Subsection 12(b) shall apply during and for a period of two (2) years after Executive is an Executive of Company and shall be in addition to (and not a limitation of) any legally applicable protections of Company’s interest in confidential information, trade secrets and the like. At the termination of Executive’s employment with Company, Executive shall return to Company all copies of Confidential Information in any medium, including computer tapes and other forms of data storage.

(c) Any and all writings, inventions, improvements, processes, procedures and/or techniques which Executive may make, conceive, discover or develop, either solely or jointly with any other person or persons, at any time when Executive is an Executive of Company, whether or not during working hours and whether or not at the request or upon the suggestion of Company, which relate to or are useful in connection with the Business or with any business now or hereafter carried on or contemplated by Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of Company. Executive shall make full disclosure to Company of all such writings, inventions, improvements, processes, procedures and techniques, and shall do everything necessary or desirable to vest the absolute title thereto in Company. Executive shall write and prepare all specifications and procedures regarding such inventions, improvements, processes, procedures and techniques and otherwise aid and assist Company so that Company can prepare and present applications for copyright or Letters Patent therefor and can secure such copyright or Letters Patent wherever possible, as well as reissues, renewals, and extensions thereof, and can obtain the record title to such copyright or patents so that Company shall be the sole and absolute owner thereof in all countries in which it may desire to have copyright or patent protection. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques.

(d) Executive acknowledges that the restrictions contained in the foregoing Subsections in view of the nature of the business in which Company is engaged, are reasonable and necessary in order to protect the legitimate interests of Company, that their enforcement will not impose a hardship on Executive or significantly impair Executive’s ability to earn a livelihood, and that any violation thereof would result in irreparable injuries to Company. Executive and Company acknowledge that, in the event either party believes the other party has violated any of the terms of this Agreement, the other party shall be entitled to seek from any court of competent jurisdiction, without attempting arbitration, preliminary and permanent injunctive relief.

(e) If the Restricted Periods or the Restricted Area specified above should be adjudged unreasonable in any proceeding, then the period of time shall be reduced by such amount or the area shall be reduced by the elimination of such portion or both such reductions shall be made

so that such restrictions may be enforced for such time and in such area as is adjudged to be reasonable. If Executive violates any of the restrictions contained in the foregoing Subsections, the relevant Restricted Period shall be extended by a period equal to the length of time from the commencement of any such violation until such time as such violation shall be cured by Executive to the satisfaction of Company. Executive hereby expressly consents to the jurisdiction of any court within the Eastern District of Pennsylvania for the purpose of seeking a preliminary or permanent injunction as described above in Section 12(d), and agrees to accept service of process by certified mail return receipt requested relating to any such proceeding. Company may supply a copy of Section 12 of this Agreement to any future or prospective employer of Executive or to any person to whom Executive has supplied information if Company determines in good faith that there is a reasonable likelihood that Executive has violated or will violate such Section.

13. Prior Agreements. Executive represents to Company that there are no restrictions, agreements or understandings, oral or written, to which Executive is a party or by which Executive is bound that prevent or make unlawful Executive’s execution or performance of this Agreement.

14. Miscellaneous.

(a) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

(b) Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of such jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman.

(c) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when personally delivered, on the day specified for delivery when deposited with a recognized national or regional courier service for delivery to the intended addressee or two (2) days following the day when deposited in the United States mails, first class postage prepaid, addressed as set forth below:

(i) If to Executive:
Michael Dolan

(ii) If to Company:
      Angela C. Childers
      Director of Human Resources
      TRM Corporation
      5208 NE 122^nd Ave
      Portland, Oregon 97230

In addition, notice by mail shall be by air mail if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section for the giving of notice.

(d) Binding Nature of Agreement. This Agreement shall be binding upon Company and shall inure to the benefit of Company, its present and future Subsidiaries, Affiliates, successors and assigns including any transferee of the business operation, as a going concern, in which Executive is employed and shall be binding upon Executive, Executive’s heirs and personal representatives. None of the rights or obligations of Executive hereunder may be assigned or delegated, except that in the event of Executive’s death or Disability, any rights of Executive hereunder shall be transferred to Executive’s estate or personal representative, as the case may be. Company may assign its rights and obligations under this Agreement in whole or in part to any one or more Affiliates or successors, but no such assignment shall relieve Company of its obligations to Executive if any such assignee fails to perform such obligations.

(e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

(f) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

(g) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the employment of Executive by Company, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing. Notwithstanding the foregoing, nothing herein shall limit the application of any generally applicable Company policy, practice, plan or the terms of any manual or handbook applicable to Company’s Executives generally, except to the extent the foregoing directly conflict with this Agreement, in which case the terms of this Agreement shall prevail.

(h) Section Headings. The Section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.

(i) Number of Days. Except as otherwise provided herein, for example, in the context of vacation days, in computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday.

(j) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate.

(k) Dispute Resolution. In the event of any disagreement of any nature whatsoever between the parties to this Employment Agreement in any way relating to this Employment Agreement, except for the ability of the parties to seek a preliminary or permanent injunction as described above, which need not be discussed between the parties or arbitrated, the parties shall meet to attempt to resolve such disagreement. In the event of their failure to do so within fifteen (15) days or such longer period of time as shall be mutually agreed upon by the parties, either party may serve notice in writing upon the other party requesting arbitration, which notice shall specify in reasonable detail the nature of the dispute. Any arbitration under this Section shall be held in Philadelphia, Pennsylvania or such other place as shall be mutually agreed to by the parties, and conducted in accordance with the procedures set forth hereafter and, to the extent not inconsistent with this Section, in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association in effect on the date of this Agreement. Company shall have the right and remedy to ask the arbitrator to require Executive to account for any pay over to Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of Section 12, and Executive shall account for and pay over such amounts to Company upon the arbitrator’s determination thereof.

(i) Any arbitration under this Section shall be before an arbitrator who shall be experienced in the area of employment law. The arbitrator shall be selected by the parties from lists provided by the American Arbitration Association. The parties agree to exchange all relevant documents prior to any hearing, and further agree that any dispute over such exchange may be submitted to the arbitrator for decision, which decision shall be binding on the parties. The parties further agree to exchange hearing exhibits and designations of witnesses to be called at the hearing at least ten (10) calendar days before any hearing as a party may not offer at the hearing as part of its direct case any witness, evidence or document not so disclosed, unless such witness(es), evidence or document(s) became available and/or known to the party who wishes to introduce such witness(es), evidence and/or document(s) within the ten (10) calendar days prior to the arbitration, and such witness(es), evidence or document(s) is immediately provided to the arbitrator and the other party, or unless the evidence is for rebuttal or impeachment purposes and its need was not anticipated or foreseen before the hearing.

(ii) Within 60 days of the production of all documents, evidence and witness list as outlined in the preceding section, the arbitrator shall conduct the arbitration hearing. Each party will have one day to present its case, unless, upon request the arbitrator determines that more or less time is appropriate. Within 30 days of the arbitration hearing, the arbitrator shall render a decision in writing to each party.

(iii) Any arbitration award must (i) be rendered in accordance with applicable law as described in this Employment Agreement and (ii) be set forth in a written decision which sets forth the reasons (including, without limitation, the conclusions of fact and/or law) upon which such award is rendered. Judgment upon an arbitration award may be rendered in any court of competent jurisdiction or application may be made to any such state or federal court of competent jurisdiction for judicial acceptance of an order to enforcement of an arbitration award, as the case may be. Any arbitration award shall be final and binding on the parties. Once an issue has been arbitrated pursuant hereto, the decision of the arbitrator shall be res judicata with respect to such issue.

(iv) The arbitrator shall have the power to issue subpoenas compelling testimony and/or the production of documents from any person whether or not a party hereto, which subpoenas shall be enforceable in all courts of competent jurisdiction in the Eastern District of Pennsylvania. In addition, the arbitrator and attorney-of-record shall have the power to request through the above-mentioned courts of competent jurisdiction the taking of depositions from any person, not a party or a director, officer, executive, employee or agent of a party, who cannot be subpoenaed or is unable to attend the arbitration, whose testimony the arbitrator deems both important and relevant to the resolution of the issues presented for arbitration.

(v) The cost of the arbitration and all attorney fees shall be borne by the parties in such proportion as the arbitrator shall direct, with such arbitrator to give due consideration to the fault of the parties.

(vi) Notwithstanding the foregoing, the parties need not arbitrate any request for preliminary or permanent injunctive relief, such relief may be brought by either party in any state or federal court in the Eastern District of Pennsylvania. Such litigation will toll the Restricted Periods beginning on the alleged date of Executive’s violation until the date the dispute is resolved.

(l) Jurisdiction of Courts. Any legal suit, action, claim, proceeding or investigation arising out of or relating to Sections 11 or 12 of this Agreement may be instituted in any state or federal court in the Eastern District of Pennsylvania, and each of the parties hereto waives any objection which party may now or hereafter have to such venue of any such suit, action, claim, proceeding or investigation, and irrevocably submits to the jurisdiction of any such court. Any and all service of process and any other notice in any such suit, action, claim, proceeding or investigation shall be effective against any party if given by registered or certified mail, return receipt requested, or by any other means of mail which requires a signed receipt, postage prepaid, mailed to such party as herein provided. If for any reason such service of process by mail is ineffective, then Company shall be deemed to have appointed Jodi T. Plavner, Esquire, Wolf,

Block, Schorr and Solis-Cohen LLP, 1650 Arch Street, 22nd Floor, Philadelphia, Pennsylvania 19103, as the authorized agent of Company to accept and acknowledge, on behalf of Company, service of any and all process which may be served in any such suit, action, claim, proceeding or investigation. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against any other party in any jurisdiction other than Pennsylvania.

(m) Survival. All provisions of this agreement which by their terms survive the termination of Executive’s employment with Company, including without limitation the covenants of Executive set forth in Sections 11 and 12 and the obligations of Company to make any post-termination payments under this Agreement, shall survive termination of Executive’s employment by Company and shall remain in full force and effect thereafter in accordance with their terms.

IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement in Philadelphia, Pennsylvania as of the date first above written.


TRM Corporation

By:	/s/ Richard B. Stern
	Name:	Richard B. Stern
	Title:	President and CEO


	Executive

	/s/ Michael Dolan
	Michael Dolan

ATTACHMENT “A”
SAMPLE RELEASE AGREEMENT

1. In consideration for your General Release and the covenants and agreements expressed herein and in the Employment Agreement, the Company, intending to be legally bound, agrees to pay you (___) months of severance and the other severance payments, less taxes and other deductions required by law, as stated in Section ___of the attached Employment Agreement.

2. In consideration of the receipt of the Company’s payments set forth in Section of the attached Employment Agreement, you, intending to be legally bound, agree to release and forever discharge the Company and its related or affiliated companies and Subsidiaries, and each of their past, present and future officers, directors, attorneys, employees, executives, owners and agents, and their respective successors and assigns (collectively, the “Releasees”), jointly and severally, from any and all actions, complaints, charges, causes of action, lawsuits or claims of any kind (collectively, “Claims”), known or unknown, which you, your heirs, agents, successors or assigns ever had, now have or hereafter may have against the Releasees arising heretofore out of any matter, occurrence or event existing or occurring prior to the execution hereof, including, without limitation: any claims relating to or arising out of your employment with and/or termination of employment by the Company and/or any of its related and/or affiliated companies or Subsidiaries; any claims for unpaid or withheld wages, severance, benefits, bonuses, commissions and/or other compensation of any kind; any claims for attorneys’ fees, costs or expenses; any claims of discrimination and/or harassment based on age, sex, race, religion, color, creed, disability, handicap, citizenship, national origin, ancestry, sexual preference or orientation, or any other factor prohibited by Federal, State or Local law (such as the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Pennsylvania Human Relations Act) any claims for retaliation and/or any whistleblower claims; and/or any other statutory or common law claims, now existing or hereinafter recognized, including, but not limited to, breach of contract, libel, slander, fraud, wrongful discharge, promissory estoppel, equitable estoppel and misrepresentation.

3. The General Release does not apply to any claims to enforce this Release Agreement or to any claims arising out of any matter, occurrence or event occurring after the execution of this Release Agreement.

4. You acknowledge and agree that the Company’s payment under Section 1 above is not required by any policy or plan and constitutes adequate consideration to support this Release Agreement, as well as your covenants and agreements within the Employment Agreement.

5. You agree and represent that:

(a) You have read carefully the terms of this Release Agreement;

(b) You have had an opportunity to and have been encouraged to review this Release Agreement with an attorney;

(d) You were given as much time as you needed to determine whether you wished to enter into this Release Agreement;

(e) The entry into and execution of this Release Agreement is your own free and voluntary act without compulsion of any kind;

(f) No promise or inducement not expressed herein has been made to you; and

(g) You have adequate information to make a knowing and voluntary waiver.

After delivering a signed copy of this Release Agreement to the Company, attention of the undersigned, you may revoke such acceptance by delivering a letter of revocation to the Company, attention of the undersigned, within seven (7) days thereafter (the “Revocation Period”). This Release Agreement shall become effective on the day following the expiration of the Revocation Period if you have not exercised the revocation right as indicated in the preceding sentence. If you exercise the revocation right, neither you nor the Company shall have any obligation hereunder.

* * *

If you agree with the terms set forth above, please sign this Agreement indicating that you understand, agree with and intend to be bound by such terms.

We wish you the best in the future.


		Sincerely,

		By:

		Dated:

UNDERSTOOD AND AGREED,
INTENDING TO BE LEGALLY BOUND:





Date


Witness

EX-31.1 3 w38237exv31w1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER exv31w1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14a AND 15d-14a
OF THE SECURITIES AND EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Richard B. Stern, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of TRM Corporation;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-31.2 4 w38237exv31w2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER exv31w2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14a AND 15d-14a
OF THE SECURITIES AND EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Michael J. Dolan, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of TRM Corporation;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-31.3 5 w38237exv31w3.htm CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER exv31w3

Exhibit 31.3

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO RULES 13a-14a AND 15d-14a
OF THE SECURITIES AND EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Jon S. Pitcher, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of TRM Corporation;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-32.1 6 w38237exv32w1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 exv32w1

Exhibit 32.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
OF TRM CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Richard B. Stern, Chief Executive Officer of TRM Corporation (the “Company”), hereby certify that the accompanying Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2007 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: August 14, 2007		/s/ Richard B. Stern

		Richard B. Stern
		Chief Executive Officer

EX-32.2 7 w38237exv32w2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 exv32w2

Exhibit 32.2

CERTIFICATION OF
CHIEF FINANCIAL OFFICER
OF TRM CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Michael J. Dolan, Chief Financial Officer of TRM Corporation (the “Company”), hereby certify that the accompanying Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2007 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: August 14, 2007		/s/ Michael J. Dolan

		Michael J. Dolan
		Chief Financial Officer

EX-32.3 8 w38237exv32w3.htm CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER PURSUANT TO SECTION 906 exv32w3

Exhibit 32.3

CERTIFICATION OF
PRINCIPAL ACCOUNTING OFFICER
OF TRM CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Jon S. Pitcher, Principal Accounting Officer of TRM Corporation (the “Company”), hereby certify that the accompanying Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2007 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: August 14, 2007		/s/ Jon S. Pitcher

		Jon S. Pitcher
		Principal Accounting Officer

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Date: August 14, 2007

/s/ Richard B. Stern

Richard B. Stern

Chief Executive Officer