Exhibit
      10.1

    
 

    7%
      SENIOR SECURED NOTE PURCHASE AGREEMENT

     

    This
      7%
      Senior Secured Note Purchase Agreement (this “Agreement”)
      is
      dated as of March 29, 2006, among VendingData Corporation, a Nevada corporation
      (the “Company”),
      and
      Bricoleur Partners, L.P., Bricoleur Enhanced, L.P., BRIC 6, L.P. and Bricoleur
      Offshore Ltd. (each, including its successors and assigns, a “Lender”
and
      collectively the “Lenders”).

     

    RECITALS

     

    A.  WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”)
      and
      Rule 506 promulgated thereunder, the Company desires to issue and sell to each
      Lender, and each Lender, severally and not jointly, desires to purchase from
      the
      Company, a 7% Senior Secured Note (“Note”)
      in the
      form of Exhibit
      A
      and
      Common Stock Purchase Warrants (“Warrant”)
      in the
      form of Exhibit
      B
      attached
      hereto entitling the Lenders to purchase up to 1,600,000 shares of Common Stock.
      

     

    B.  WHEREAS,
      concurrent with close of the purchase and sale of the Notes and Warrants under
      this Agreement, the Company will sell 2,400,000 shares of Common Stock (as
      defined below), at a price of $2.50 per share, pursuant to a certain Securities
      Purchase Agreement (“Securities
      Purchase Agreement”)
      between the Company and the accredited investors named therein (“Share
      Purchasers”),
      and,
      in addition, acquire a put option from the Lenders to sell, from time to time,
      up to $5 million of the Company’s Common Stock to the Lenders pursuant that
      certain Equity Put Agreement (“Equity
      Put Agreement”)
      of the
      same date herewith between the Company and Lenders. 

     

    AGREEMENT

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and each Lender agree as
      follows:

     

    ARTICLE
      I.

     

    DEFINITIONS

     

    1.1  Definitions.
      In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms have the meanings indicated in this Section
      1.1:

     

    “Action”
shall
      have the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person as such
      terms are used in and construed under Rule 144 under the Securities Act. With
      respect to a Lender, any investment fund or managed account that is managed
      on a
      discretionary basis by the same investment manager as such Lender will be deemed
      to be an Affiliate of such Lender. 

     

    “Balance
      Warrants”
shall
      have the meaning ascribed to such term in Section 4.11.

     

    
      
        
        

      

      
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    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday in the United States.

     

    “Closing”
means
      the Closing of the purchase and sale of the Notes and Warrants pursuant to
      Section 2.1.

     

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Lenders’ obligations to pay the Subscription Amount and (ii) the Company’s
      obligations to deliver the Notes and Warrants have been satisfied or
      waived.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.001 per share, and any other
      class
      of securities into which such securities may hereafter be reclassified or
      changed into. 

     

    “Common
      Stock Equivalents”
means
      any securities of the Company or the Subsidiaries which would entitle the holder
      thereof to acquire at any time Common Stock, including, without limitation,
      any
      debt, preferred stock, rights, options, warrants or other instrument that is
      at
      any time convertible into or exercisable or exchangeable for, or otherwise
      entitles the holder thereof to receive, Common Stock.

     

    “Company
      Counsel”
means
      Preston Gates & Ellis LLP.

     

    “Disclosure
      Schedules”
means
      the Disclosure Schedules of the Company delivered in connection with the
      Closing. 

     

    “Effective
      Date”
means
      the date that the initial Registration Statement filed by the Company pursuant
      to the Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

    


    “GAAP”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Intellectual
      Property Rights”
shall
      have the meaning ascribed to such term in Section 3.1(o).

     

    “Liens”
means
      a
      lien, charge, security interest, encumbrance, right of first refusal, preemptive
      right or other restriction.

     

    “Material
      Adverse Effect”
shall
      have the meaning assigned to such term in Section 3.1(b).

     

    
      
        
        

      

      
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    “Material
      Permits”
shall
      have the meaning ascribed to such term in Section 3.1(m).

     

    “Notes”
shall
      mean the 7% Senior Secured Notes in the form of Exhibit
      A
      attached
      hereto. 

     

    “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated the date hereof, among the Company,
      the
      Lenders and the Share Purchasers in the form of Exhibit
      C
      attached
      hereto.

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by each Lender of the Warrant Shares.
      

     

    “Required
      Approvals”
shall
      have the meaning ascribed to such term in Section 3.1(e).

     

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule. 

     

    “SEC
      Reports”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Senior
      Notes”
shall
      mean the Company’s outstanding 10% senior secured convertible notes due February
      2008 and outstanding 10% senior secured convertible notes due March
      2008.

     

    “Shareholder
      Approval”
means
      such approval as may be required by the applicable rules and regulations of
      the
      American Stock Exchange (or any successor entity) from the shareholders of
      the
      Company in accordance with Section 14 of the Exchange Act with respect to the
      Company’s issuance of the Balance Warrants. 

     

    “Shares”
means
      the 2,400,000 shares of Common Stock issued or issuable to each Share Purchaser
      pursuant to the Securities Purchase Agreement. 

     

    
      
        
        

      

      
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    “Short
      Sales”
shall
      include all “short sales” as defined in Rule 200 of Regulation SHO under the
      Exchange Act (but
      shall not be deemed to include the location and/or reservation of borrowable
      shares of Common Stock). 

     

    “Subscription
      Amount”
means,
      as to each Lender, the aggregate amount to be paid for a Notes and Warrants
      purchased hereunder as specified below such Lender’s name on the signature page
      of this Agreement and next to the heading “Subscription Amount”, in United
      States Dollars and in immediately available funds

     

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a).

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the Nasdaq Capital Market, the American
      Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
      the
      OTC Bulletin Board.

     

    “Transaction
      Documents”
means
      this Agreement, and the Notes, Warrants, Security Agreement and Registration
      Rights Agreement and any other documents or agreements executed in connection
      with the transactions contemplated hereunder.

     

    “Warrant
      Shares”
means
      the shares of Common Stock issuable upon exercise of the Warrants.

     

    ARTICLE
      II.

     

    PURCHASE
      AND SALE

     

    2.1  Closing.
      Upon
      the terms and subject to the conditions set forth herein, the Company agrees
      to
      sell, and each Lender agrees to purchase, severally and not jointly, a Note
      and
      Warrant for the Subscription Amount set forth on each respective Lender’s
      signature page attached hereto, which in the aggregate shall equal $7,000,000.
      On the Closing Date (the “Closing Date”), each Lender shall deliver to the
      Company, via wire transfer or a certified check, immediately available funds
      equal to its respective Subscription Amount, and the Company shall deliver
      to
      such Lender a duly executed Note and Warrant. Upon satisfaction of the
      conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
      offices of Preston Gates Ellis LLP, 1990 Main Street Suite 600, Irvine,
      California 92614, or such other location as the parties shall mutually agree.
      

     

    2.2  Deliveries.

     

     
      (a)  On
      or
      prior to the Closing Date, the Company shall deliver or cause to be delivered
      to
      Lenders the following:

     

    
      
        
        

      

      
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    (i)  this
      Agreement duly executed by the Company;

     

    (ii)  the
      Notes
      and Warrants duly executed by the Company;

     

    (iii)  a
      legal
      opinion of Company Counsel in the form acceptable to the Lenders in their
      reasonable discretion; 

     

    (iv)  the
      Registration Rights Agreement duly executed by the Company; 

     

    (v)  a
      Security Agreement (“Security
      Agreement”)
      in the
      form of Exhibit
      D
      attached
      hereto duly executed by the Company;

     

    (vi)  the
      delivery of the written agreements of the holders of the Senior Notes to convert
      all indebtedness outstanding under the Senior Notes not to be paid off at the
      Closing to shares of Common Stock in the form acceptable to the Lenders in
      their
      reasonable discretion; 

     

    (vii)  a
      pay-off
      statement from Lampe Conway & Co. stating the full amount due and payable as
      of the Closing Date under that certain Credit Agreement dated October 1, 2005
      between the Company, Lampe and Triage Capital Management, L.P.; 

     

    (viii)  the
      Securities Purchase Agreement duly executed by the Share Purchasers and the
      Company, and evidence that the full $6,000,000 purchase price for the common
      shares sold thereby has been received by the Company; and

     

    (ix)  the
      Equity Put Agreement duly executed by the Company.

     

    (b)  On
      or
      prior to the Closing Date, each Lender shall deliver or cause to be delivered
      to
      the Company the following:

     

    (i)  this
      Agreement duly executed by such Lender;

     

    (ii)  such
      Lender’s Subscription Amount by wire transfer or cashier’s check to the account
      designated by the Company;

     

    (iii)  the
      Registration Rights Agreement duly executed by such Lender; and

     

    (iv)  the
      Security Agreement duly executed by such Lender.

     

    2.3  Closing
      Conditions. 

     

    (a) The
      obligations of the Company hereunder in connection with the Closing are subject
      to the following conditions being met:

     

    
      
        
        

      

      
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    (i)  the
      accuracy when made and on the Closing Date of the representations and warranties
      of Lenders contained herein; 

     

    (ii)  all
      obligations, covenants and agreements of Lenders required to be performed at
      or
      prior to the Closing Date shall have been performed;
      and

     

    (iii)  the
      delivery by the Lenders of the items set forth in Section 2.2(b) of this
      Agreement.

     

    (b)  The
      obligations of each Lender hereunder in connection with the Closing are subject
      to the following conditions being met:

     

    (i)  the
      accuracy when made and on the Closing Date of the representations and warranties
      of the Company contained herein;

     

    (ii)  all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date shall have been performed; and

     

    (iii)  the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement.

     

    ARTICLE
      III.

     

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company.
      Except
      as
      set forth under the corresponding section of the disclosure schedules delivered
      to the Lenders concurrently herewith (the “Disclosure Schedules”) which
      Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
      the
      representations and warranties set forth below to each Lender:

     

    (a)  Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all the issued
      and
      outstanding shares of capital stock of each Subsidiary are validly issued and
      are fully paid, non-assessable and free of preemptive and similar rights to
      subscribe for or purchase securities. 

     

    (b)  Organization
      and Qualification.
      The
      Company and each of the Subsidiaries is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own and use its properties and assets and
      to
      carry on its business as currently conducted. Neither the Company nor any
      Subsidiary is in violation or default of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents. Each of the Company and the Subsidiaries is duly qualified
      to
      conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not
      have or reasonably be expected to result in (i) a material adverse effect on
      the
      legality, validity or enforceability of any Transaction Document, (ii) a
      material adverse effect on the Company and the Subsidiaries, taken as a whole,
      or (iii) a material adverse effect on the Company’s ability to perform in any
      material respect on a timely basis its obligations under any Transaction
      Document (any of (i), (ii) or (iii), a “Material
      Adverse Effect”)
      and no
      Proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing or seeking to revoke, limit or curtail such power and authority
      or
      qualification.

     

    
      
        
        

      

      
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    (c)  Authorization;
      Enforcement.
      Subject
      to Shareholder Approval as to the Balance Warrants only, the Company has the
      requisite corporate power and authority to enter into and to consummate the
      transactions contemplated by each of the Transaction Documents and otherwise
      to
      carry out its obligations hereunder and thereunder. The execution and delivery
      of each of the Transaction Documents by the Company and the consummation by
      it
      of the transactions contemplated hereby and thereby have been duly authorized
      by
      all necessary action on the part of the Company and no further action is
      required by the Company, its board of directors or its stockholders in
      connection therewith other than in connection with the Required Approvals.
      Each
      Transaction Document has been (or upon delivery will have been) duly executed
      by
      the Company and, when delivered in accordance with the terms hereof and thereof,
      will constitute the valid and binding obligation of the Company enforceable
      against the Company in accordance with its terms except (i) as limited by
      general equitable principles and applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors’ rights generally, (ii) as limited by laws relating to
      the availability of specific performance, injunctive relief or other equitable
      remedies and (iii) insofar as indemnification and contribution provisions may
      be
      limited by applicable law.

     

    (d)  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      the issuance and sale of the Notes and Warrants and the consummation by the
      Company of the other transactions contemplated hereby and thereby do not and
      will not (i) conflict with or violate any provision of the Company’s or any
      Subsidiary’s certificate or articles of incorporation, bylaws or other
      organizational or charter documents, or (ii) conflict with, or constitute a
      default (or an event that with notice or lapse of time or both would become
      a
      default) under, result in the creation of any Lien upon any of the properties
      or
      assets of the Company or any Subsidiary, or give to others any rights of
      termination, amendment, acceleration or cancellation (with or without notice,
      lapse of time or both) of, any agreement, credit facility, debt or other
      instrument (evidencing a Company or Subsidiary debt or otherwise) or other
      understanding to which the Company or any Subsidiary is a party or by which
      any
      property or asset of the Company or any Subsidiary is bound or affected, or
      (iii) subject to the Required Approvals, conflict with or result in a violation
      of any law, rule, regulation, order, judgment, injunction, decree or other
      restriction of any court or governmental authority to which the Company or
      a
      Subsidiary is subject (including federal and state securities laws and
      regulations), or by which any property or asset of the Company or a Subsidiary
      is bound or affected.

     

    (e)  Filings,
      Consents and Approvals.
      Except
      as set forth on Schedule 3.1(e), the
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.4
      of this Agreement, (ii) the filing with the Commission of the Registration
      Statement, (iii) application(s) to each applicable Trading Market for the
      listing of the Warrant Shares for trading thereon in the time and manner
      required thereby, (iv) the filing of Form D with the Commission and such filings
      as are required to be made under applicable state securities laws; (v) the
      filing of a UCC-1 Financing Statement with the Nevada Secretary of State; and
      (vi) Shareholder Approval of the Balance Warrants (collectively, the
“Required
      Approvals”).

     

    
      
        
        

      

      
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    (f)  Issuance
      of Securities.
      The
      Notes and Warrants, subject to Shareholder Approval as to the Balance Warrants,
      are duly authorized and, when issued and paid for in accordance with the
      applicable Transaction Documents, will be duly and validly issued, fully paid
      and nonassessable, free and clear of all Liens imposed by the Company other
      than
      restrictions on transfer provided for in the Transaction Documents. The Warrant
      Shares, when issued in accordance with the terms of the Transaction Documents
      and subject to Shareholder Approval as to the Balance Warrants, will be validly
      issued, fully paid and non-assessable, free and clear of all Liens imposed
      by
      the Company other than restrictions on transfer provided for in the Transaction
      Documents. The Company has reserved from its duly authorized capital stock
      the
      Warrant Shares issuable pursuant to this Agreement.

     

    (g)  Capitalization.
      The
      capitalization of the Company is as set forth on Schedule
      3.1(g).
      No
      Person has any right of first refusal, preemptive right, right of participation,
      or any similar right to participate in the transactions contemplated by the
      Transaction Documents. Except as set forth on Schedule
      3.1(g),
      there
      are no outstanding options, warrants, script rights to subscribe to, calls
      or
      commitments of any character whatsoever relating to, or securities, rights
      or
      obligations convertible into or exercisable or exchangeable for, or giving
      any
      Person any right to subscribe for or acquire, any shares of Common Stock, or
      contracts, commitments, understandings or arrangements by which the Company
      or
      any Subsidiary is or may become bound to issue additional shares of Common
      Stock
      or Common Stock Equivalents. The issuance and sale of the Notes and Warrants
      will not obligate the Company to issue shares of Common Stock or other
      securities to any Person (other than the Lenders) and will not result in a
      right
      of any holder of Company securities to adjust the exercise, conversion, exchange
      or reset price under any of such securities. All of the outstanding shares
      of
      capital stock of the Company are validly issued, fully paid and nonassessable,
      have been issued in compliance with all federal and state securities laws,
      and
      none of such outstanding shares was issued in violation of any preemptive rights
      or similar rights to subscribe for or purchase securities. Other than
      Shareholder Approval as to the Balance Warrants, no further approval or
      authorization of any stockholder, the Board of Directors of the Company or
      others is required for the issuance and sale of the Notes and Warrants. Except
      as set forth on Schedule
      3.1(g),
      there
      are no stockholders agreements, voting agreements or other similar agreements
      with respect to the Company’s capital stock to which the Company is a party or,
      to the knowledge of the Company, between or among any of the Company’s
      stockholders.

     

    (h)  SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it under the Securities Act and the Exchange Act,
      including pursuant to Section 13(a) or 15(d) thereof, for the period commencing
      January 1, 2005 through the date hereof (the foregoing materials, including
      the
      exhibits thereto and documents incorporated by reference therein, being
      collectively referred to herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. Except
      as set forth on Schedule
      3.1(h),
      as of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, as applicable, and none
      of
      the SEC Reports, when filed, contained any untrue statement of a material fact
      or omitted to state a material fact required to be stated therein or necessary
      in order to make the statements therein, in the light of the circumstances
      under
      which they were made, not misleading. Except as set forth on Schedule
      3.1(h),
      the
      financial statements of the Company included in the SEC Reports complied in
      all
      material respects with applicable accounting requirements and the rules and
      regulations of the Commission with respect thereto as in effect at the time
      of
      filing. Except as set forth on Schedule
      3.1(h),
      such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

     

    
      
        
        

      

      
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    (i)  Material
      Changes; Undisclosed Events, Liabilities or Developments.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in a subsequent SEC Report or as
      set
      forth on Schedule
      3.1(i),
      (i)
      there has been no event, occurrence or development that has had or that could
      reasonably be expected by the Company to result in a Material Adverse Effect,
      (ii) the Company has not incurred any liabilities (contingent or otherwise)
      other than (A) trade payables and accrued expenses incurred in the ordinary
      course of business consistent with past practice and (B) liabilities not
      required to be reflected in the Company’s financial statements pursuant to GAAP
      or disclosed in filings made with the Commission, (iii) the Company has not
      altered its method of accounting, (iv) the Company has not declared or made
      any
      dividend or distribution of cash or other property to its stockholders or
      purchased, redeemed or made any agreements to purchase or redeem any shares
      of
      its capital stock and (v) the Company has not issued any equity securities
      to
      any officer, director or Affiliate, except pursuant to existing Company stock
      option plans. The Company does not have pending before the Commission any
      request for confidential treatment of information. 

     

    (j)  Litigation.
      There
      is no action, suit, inquiry, notice of violation, proceeding or investigation
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company, any Subsidiary or any of their respective properties before or by
      any
      court, arbitrator, governmental or administrative agency or regulatory authority
      (federal, state, county, local or foreign) (collectively, an “Action”)
      which
      materially adversely affects or challenges the legality, validity or
      enforceability of any of the Transaction Documents or the Notes and Warrants.
      There is no Action that has not been disclosed in the SEC Reports. The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act. 

     

    (k)  Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company which could reasonably
      be
      expected to result in a Material Adverse Effect. None of the Company’s or its
      Subsidiaries’ employees is a member of a union that relates to such employee’s
      relationship with the Company, and neither the Company or any of its
      Subsidiaries is a party to a collective bargaining agreement, and the Company
      and its Subsidiaries believe that their relationships with their employees
      are
      good. No executive officer, to the knowledge of the Company, is, or is now
      expected to be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant, and the continued employment of each such executive officer does
      not
      subject the Company or any of its Subsidiaries to any liability with respect
      to
      any of the foregoing matters. The Company and its Subsidiaries are in compliance
      with all U.S. federal, state, local and foreign laws and regulations relating
      to
      employment and employment practices, terms and conditions of employment and
      wages and hours, except where the failure to be in compliance could not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    (l)  Compliance.
      Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has been in violation of any
      statute, rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws applicable to its business
      and all such laws that affect the environment.

     

    (m)  Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not have
      or
      reasonably be expected to result in a Material Adverse Effect (“Material
      Permits”),
      and
      neither the Company nor any Subsidiary has received any notice of proceedings
      relating to the revocation or modification of any Material Permit.

     

    (n)  Title
      to Assets.
      Except
      as set forth on Schedule
      3.1(n),
      the
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to the business of the Company
      and
      the Subsidiaries and good and marketable title in all personal property owned
      by
      them that is material to the business of the Company and the Subsidiaries,
      in
      each case free and clear of all Liens, except for Liens as do not materially
      affect the value of such property and do not materially interfere with the
      use
      made and proposed to be made of such property by the Company and the
      Subsidiaries and Liens for the payment of federal, state or other taxes, the
      payment of which is neither delinquent nor subject to penalties. Any real
      property and facilities held under lease by the Company and the Subsidiaries
      are
      held by them under valid, subsisting and enforceable leases with which the
      Company and the Subsidiaries are in compliance. The security interest granted
      by
      the Company to the Lenders pursuant to the Security Agreement will be senior
      to
      any other Liens of the Company.

     

    (o)  Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      trade secrets, inventions, copyrights, licenses and other intellectual property
      rights and similar rights necessary or material for use in connection with
      their
      respective businesses as described in the SEC Reports (collectively, the
“Intellectual
      Property Rights”).
      Neither the Company nor any Subsidiary has received a notice (written or
      otherwise) that the Intellectual Property Rights used by the Company or any
      Subsidiary violates or infringes upon the rights of any Person. To the knowledge
      of the Company, all such Intellectual Property Rights are enforceable and there
      is no existing infringement by another Person of any of the Intellectual
      Property Rights. The Company and its Subsidiaries have taken reasonable security
      measures to protect the secrecy, confidentiality and value of all of their
      intellectual properties.

     

    
      
        
        

      

      
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    (p)  Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the Subscription Amount. Neither the Company nor
      any
      Subsidiary has any reason to believe that it will not be able to renew its
      existing insurance coverage as and when such coverage expires or to obtain
      similar coverage from similar insurers as may be necessary to continue its
      business without a significant increase in cost.

     

    (q)  Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $60,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company.

     

    (r)  Sarbanes-Oxley;
      Internal Accounting Controls.
      The
      Company is in material compliance with all provisions of the Sarbanes-Oxley
      Act
      of 2002 which are applicable to it as of the Closing Date. 

     

    (s)  Certain
      Fees.
      No
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by the Transaction Documents. Lenders shall have no obligation
      with
      respect to any fees or with respect to any claims made by or on behalf of other
      Persons for fees of a type contemplated in this Section that may be due in
      connection with the transactions contemplated by the Transaction Documents
      as a
      result of any action taken by the Company or its Affiliates.

     

    (t)  Private
      Placement.
      Assuming the accuracy of the Lenders representations and warranties set forth
      in
      Section 3.2, no registration under the Securities Act is required for the offer
      and sale of the Notes and Warrants by the Company to the Lenders as contemplated
      hereby. 

     

    (u)  Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately after the Closing,
      will not be or be an Affiliate of, an “investment company” within the meaning of
      the Investment Company Act of 1940, as amended. The Company shall conduct its
      business in a manner so that it will not become subject to the Investment
      Company Act.

     

    
      
        
        

      

      
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    (v)  Registration
      Rights.
      Other
      than each of the Share Purchasers and Lenders, no Person has any right to cause
      the Company to effect the registration under the Securities Act of any
      securities of the Company.

     

    (w)  Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
      Exchange Act, and the Company has taken no action designed to, or which to
      its
      knowledge is likely to have the effect of, terminating the registration of
      the
      Common Stock under the Exchange Act nor has the Company received any
      notification that the Commission is contemplating terminating such registration.
      The Company has not, in the 12 months preceding the date hereof, received notice
      from any Trading Market on which the Common Stock is or has been listed or
      quoted to the effect that the Company is not in compliance with the listing
      or
      maintenance requirements of such Trading Market. The Company is, and has no
      reason to believe that it will not in the foreseeable future continue to be,
      in
      compliance with all such listing and maintenance requirements.

     

    (x)  Application
      of Takeover Protections.
      The
      Company and its Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s Certificate of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to any Lender as a result
      of
      such Lender and the Company fulfilling their obligations or exercising their
      rights under the Transaction Documents.

     

    (y)  Disclosure.
      All
      disclosure furnished by or on behalf of the Company to Lenders regarding the
      Company, its business and the transactions contemplated hereby, including the
      Disclosure Schedules to this Agreement, with respect to the representations
      and
      warranties made herein are true and correct with respect to such representations
      and warranties and do not contain any untrue statement of a material fact or
      omit to state any material fact necessary in order to make the statements made
      therein, in light of the circumstances under which they were made, not
      misleading. 

     

    (z)  No
      Integrated Offering.
      Assuming
      the accuracy of each Lender’s representations and warranties set forth in
      Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
      acting on its or their behalf has, directly or indirectly, made any offers
      or
      sales of any security or solicited any offers to buy any security, under
      circumstances that would cause this offering of the Notes and Warrants to be
      integrated with prior offerings by the Company for purposes of the Securities
      Act or, subject to Shareholder Approval as to the Balance Warrants, any
      applicable shareholder approval provisions of any Trading Market on which any
      of
      the securities of the Company are listed or designated.

     

    
      
        
        

      

      
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    (aa)  Tax
      Status.
      Except
      as set forth on Schedule
      3.1(aa),
      and for
      matters that would not, individually or in the aggregate, have or reasonably
      be
      expected to result in a Material Adverse Effect, the Company and each Subsidiary
      has filed all necessary federal, state and foreign income and franchise tax
      returns and has paid or accrued all taxes shown as due thereon, and the Company
      has no knowledge of a tax deficiency which has been asserted or threatened
      against the Company or any Subsidiary.

     

    (bb)  Acknowledgement
      Regarding Each Lender’s Purchase.
      The
      Company acknowledges and agrees that each Lender is acting solely in the
      capacity of an arm’s length lender with respect to the Transaction Documents and
      the transactions contemplated thereby. The Company further acknowledges that
      each Lender is not acting as a financial advisor or fiduciary of the Company
      (or
      in any similar capacity) with respect to the Transaction Documents and the
      transactions contemplated thereby and any advice given by such Lender or any
      of
      their respective representatives or agents in connection with the Transaction
      Documents and the transactions contemplated thereby is merely incidental to
      each
      Lender’s purchase of its respective Note and Warrant. The Company further
      represents to each Lender that the Company’s decision to enter into this
      Agreement and the other Transaction Documents has been based solely on the
      independent evaluation of the transactions contemplated hereby by the Company
      and its representatives.

     

    3.2  Representations
      and Warranties of Lenders.
      Each
      Lender, for itself and for no other Lender, hereby represents and warrants
      as of
      the date hereof and as of the Closing Date to the Company as
      follows:

     

    (a)  Organization;
      Authority.
      Such
      Lender is an entity duly organized, validly existing and in good standing under
      the laws of the jurisdiction of its organization with full right, corporate
      or
      partnership power and authority to enter into and to consummate the transactions
      contemplated by the Transaction Documents and otherwise to carry out its
      obligations hereunder and thereunder. The execution, delivery and performance
      by
      such Lender of the transactions contemplated by this Agreement have been duly
      authorized by all necessary corporate or similar action on the part of such
      Lender. Each Transaction Document to which it is a party has been duly executed
      by such Lender, and when delivered by such Lender in accordance with the terms
      hereof, will constitute the valid and legally binding obligation of such Lender,
      enforceable against it in accordance with its terms, except (i) as limited
      by
      general equitable principles and applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors’ rights generally, (ii) as limited by laws relating to
      the availability of specific performance, injunctive relief or other equitable
      remedies and (iii) insofar as indemnification and contribution provisions may
      be
      limited by applicable law.

     

    (b)  Own
      Account.
      Each
      Lender understands that the Note, Warrant and Warrant Shares are “restricted
      securities” and have not been registered under the Securities Act or any
      applicable state securities law and is acquiring the Note, Warrant and Warrant
      Shares as principal for its own account and not with a view to or for
      distributing or reselling such securities or any part thereof in violation
      of
      the Securities Act or any applicable state securities law, has no present
      intention of distributing any of such securities in violation of the Securities
      Act or any applicable state securities law and has no direct or indirect
      arrangement or understandings with any other persons to distribute or regarding
      the distribution of such securities (this representation and warranty not
      limiting each Lender’s right to sell the Warrant Shares pursuant to the
      Registration Statement or otherwise in compliance with applicable federal and
      state securities laws) in violation of the Securities Act or any applicable
      state securities law. Each Lender is acquiring the Note and Warrant hereunder
      in
      the ordinary course of its business.

     

    
      
        
        

      

      
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    (c)  Lender
      Status.
      At the
      time such Lender was offered the Note and Warrant, it was, and at the date
      hereof it is, an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
      (a)(3), (a)(7) or (a)(8) under the Securities Act. Such Lender is not required
      to be registered as a broker-dealer under Section 15 of the Exchange Act.


     

    (d)  Experience
      of Lenders.
      Each
      Lender, either alone or together with its representatives, has such knowledge,
      sophistication and experience in business and financial matters so as to be
      capable of evaluating the merits and risks of the prospective investment in
      the
      Note and Warrant, and has so evaluated the merits and risks of such investment.
      Each Lender is able to bear the economic risk of an investment in the Note
      and
      Warrant and, at the present time, is able to afford a complete loss of such
      investment.

     

    (e)  General
      Solicitation.
      Each
      Lender is not purchasing the Note and Warrant as a result of any advertisement,
      article, notice or other communication regarding the Note and Warrant published
      in any newspaper, magazine or similar media or broadcast over television or
      radio or presented at any seminar or any other general solicitation or general
      advertisement.

     

    (f)  Short
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than the transactions contemplated hereunder or under the Equity Put Agreement
      and except as separately disclosed by the Lenders to the Company in writing,
      each Lender has not directly or indirectly, nor has any Person acting on behalf
      of or pursuant to any understanding with such Lender, engaged in any
      transaction, including Short Sales, in the securities of the Company since
      March 15, 2006 (“Discussion
      Date”).
      Such
      Lender has maintained the confidentiality of all disclosures made to it in
      connection with this transaction (including the existence and terms of this
      transaction).

     

    (g)  Access
      to Information.
      Each
      Lender acknowledges that it has received and had the opportunity to review
      (i)
      copies of the SEC Reports, and (ii) the terms of the Securities Purchase
      Agreement, and all exhibits thereto. Each Lender further acknowledges that
      it or
      its representatives have been afforded (iii) the opportunity to ask such
      questions as it has deemed necessary of, and to receive answers from,
      representatives of the Company concerning the terms and conditions of the
      offering of the Notes and Warrants, the merits and risks of investing in the
      Notes and Warrants, and the terms of the Securities Purchase Agreement; (iv)
      access to information about the Company and the Company's financial condition,
      results of operations, business, properties, management and prospects sufficient
      to enable it to evaluate its investment in the Notes and Warrants; and (v)
      the
      opportunity to obtain such additional information which the Company possesses
      or
      can acquire without unreasonable effort or expense that is necessary to verify
      the accuracy and completeness of the information contained in the SEC
      Reports.

     

    
      
        
        

      

      
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    (h)  Restrictions
      on Notes and Warrants.
      Each
      Lender understands that the Notes and Warrants have not been registered under
      the Securities Act and may not be offered, resold, pledged or otherwise
      transferred except (a) pursuant to an exemption from registration under the
      Securities Act or pursuant to an effective registration statement in compliance
      with Section 5 under the Securities Act, (b) in accordance with all applicable
      securities laws of the states of the United States and other jurisdictions
      and
      (c) the lock-up provisions of Section 4.1(b) below.

     

    ARTICLE
      IV.

     

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions.
      

     

    (a)  The
      Notes, Warrants and Warrant Shares may only be disposed of in compliance with
      state and federal securities laws. In connection with any transfer of the Notes,
      Warrants and Warrant Shares other than pursuant to an effective registration
      statement or Rule 144, the Company may require the transferor thereof to provide
      to the Company an opinion of counsel to the Company, the form and substance
      of
      which opinion shall be reasonably satisfactory to the Company, to the effect
      that such transfer does not require registration of such transferred securities
      under the Securities Act. 

     

    (b)  In
      addition to transfer restrictions under the Securities Act, the Lenders agree
      that any Warrant Shares issued upon exercise of the Warrants shall be subject
      to
      a lock-up for a period of six months from the date of Closing and during such
      period shall not be sold, assigned or otherwise disposed of by such Lender
      except to a Permitted Transferee (as defined below) in accordance with subpart
      (d) below. 

     

    (c)  Each
      Lender agrees to the imprinting, so long as is required by this Section 4.1,
      of
      a legend on any of the Notes, Warrants and Warrant Shares in the following
      form:

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
      AS
      AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED SECURITIES” AS
      THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT. SUCH SECURITIES
      MAY
      NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE
      APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
      THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
      SATISFACTION OF COUNSEL TO THE ISSUER. [IN ADDITION, THESE SECURITIES ARE
      SUBJECT TO A CONTRACTUAL LOCK-UP THE TERMS OF WHICH ARE SET FORTH IN A NOTE
      PURCHASE AGREEMENT DATED MARCH 29, 2006 A COPY OF WHICH IS ON FILE WITH THE
      COMPANY.] 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (d) Notwithstanding
      the foregoing, any holder of a Note, Warrant or Warrant Shares may transfer
      such
      securities to any Permitted Transferee of such holder who consents in a writing
      delivered to the Company to be bound by the terms of this Agreement applicable
      to such securities, subject to the Company’s reasonable determination that such
      transfer does not require registration of such transferred securities under
      the
      Securities Act. With respect to any such holder, a “Permitted Transferee” means
      the spouse or lineal descendants of such holder, any trust for the benefit
      of
      such holder or the benefit of the spouse or lineal descendants of such holder,
      any corporation or partnership in which such holder, the spouse and the lineal
      descendants of such holder are the direct and beneficial owners of substantially
      all of the equity interests (provided such holder, spouse and lineal descendants
      agree in writing to remain the direct and beneficial owners of all such equity
      interests), the personal representative of such holder upon such holder’s death
      for purposes of administration of such holder’s estate or upon such holder’s
      incompetency for purposes of the protection and management of the assets of
      such
      holder; or for any holder that is a partnership, limited liability company,
      corporation or other entity to (i) a partner or former partner of such
      partnership, a member or former member of such limited liability company or
      a
      shareholder of such corporation, (ii) the estate of any such partner, member
      or
      shareholder, or (iii) any other Affiliate of such holder; or for any Lender,
      to
      another Lender or an Affiliate of a Lender.

     

    4.2  Furnishing
      of Information.
      As long
      as any Lender owns the Warrant or any Warrant Shares, the Company covenants
      to
      timely file (or obtain extensions in respect thereof and file within the
      applicable grace period) all reports required to be filed by the Company after
      the date hereof pursuant to the Exchange Act. As long as any Lender owns the
      Warrant or any Warrant Shares, if the Company is not required to file reports
      pursuant to the Exchange Act, it will prepare and furnish to such Lender and
      make publicly available in accordance with Rule 144(c) such information as
      is
      required for such Lender to sell the Warrant Shares under Rule 144. The Company
      further covenants that it will take such further action as each Lender may
      reasonably request, to the extent required from time to time to enable such
      Lender to sell Warrant Shares without registration under the Securities Act
      within the requirements of the exemption provided by Rule 144.

     

    4.3  Integration.
      The Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Notes, Warrants
      or
      Warrant Shares in a manner that would require the registration under the
      Securities Act of the sale of the Notes, Warrants and Warrant Shares to any
      Lender or that would be integrated with the offer or sale of the Notes, Warrants
      and Warrant Shares for purposes of the rules and regulations of any Trading
      Market such that it would require shareholder approval prior to the closing
      of
      such other transaction unless shareholder approval is obtained before the
      closing of such subsequent transaction.

     

    4.4  Securities
      Laws Disclosure; Publicity. The Company shall, within one Trading Day of the
      Closing Date, issue a press release disclosing the material terms of the
      transactions contemplated hereby, and shall file a Current Report on Form 8-K
      which shall attach the Transaction Documents thereto by the fourth Business
      Day
      following the Closing Date. The press release and Form 8-K shall be acceptable
      to the Lenders in their reasonable discretion. The Lenders shall not issue
      any
      such press release or otherwise make any such public statement without the
      prior
      consent of the Company. The Company shall not publicly disclose the name of
      the
      Lenders, or include the name of any Lender in any filing with the Commission
      or
      any regulatory agency or Trading Market, without the prior written consent
      of
      such Lender, except (i) as required by federal securities law in connection
      with
      (A) any registration statement contemplated by the Registration Rights Agreement
      and (B) the filing of final Transaction Documents (including signature pages
      thereto) with the Commission and (ii) to the extent such disclosure is required
      by law or Trading Market regulations, in which case the Company shall provide
      such Lender with prior notice of such disclosure permitted under this subclause
      (ii).

     

    
      
        
        

      

      
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    4.5  Use
      of
      Proceeds. The Company shall use the net proceeds from the sale of the Notes
      and Warrants hereunder as set forth on Schedule 4.5 of the Disclosure Schedule.
      

     

    4.6  Listing
      of Common Stock.
      The
      Company hereby agrees to use best efforts to maintain the listing of the Common
      Stock on a Trading Market, and as soon as reasonably practicable following
      the
      Closing to list all of the Warrant Shares on such Trading Market. The Company
      further agrees, if the Company applies to have the Common Stock traded on any
      other Trading Market, it will include in such application all of the Warrant
      Shares, and will take such other action as is necessary to cause all of the
      Warrant Shares to be listed on such other Trading Market as promptly as
      possible. The Company will take all action reasonably necessary to continue
      the
      listing and trading of its Common Stock on a Trading Market and will comply
      in
      all respects with the Company’s reporting, filing and other obligations under
      the bylaws or rules of the Trading Market.

     

    4.7  Short
      Sales and Confidentiality After The Date Hereof. Each Lender
      covenants that neither it nor any Affiliate acting on its behalf or pursuant
      to
      any understanding with it will engage in any transactions, including any Short
      Sales, in the securities of the Company during the period commencing at the
      Discussion Time and ending at the time that the transactions contemplated by
      this Agreement are first publicly announced as described
      in
      Section 4.4.
      Each
Lender
      covenants that neither it nor any Affiliate acting on its behalf or pursuant
      to
      any understanding with it will engage in any Short Sales in the securities
      of
      the Company during the period commencing at the Discussion Time and ending
      on
      the Effective Date (“Black-out Termination Date”).
      Each
Lender
      covenants that until such time as the transactions contemplated by this
      Agreement are publicly disclosed by the Company as described in Section 4.4,
      such Lender will maintain the confidentiality of all disclosures made to it
      in
      connection with this transaction (including the existence and terms of this
      transaction). Each Lender understands and acknowledges that the Commission
      currently takes the position that coverage of short sales of shares of the
      Common Stock “against the box” prior to the Effective Date of the Registration
      Statement with the Warrant Shares is a violation of Section 5 of the Securities
      Act, as set forth in Item 65, Section A, of the Manual of Publicly Available
      Telephone Interpretations, dated July 1997, compiled by the Office of Chief
      Counsel, Division of Corporation Finance. Notwithstanding
      the foregoing, each Lender makes no representation, warranty or covenant hereby
      that it will not engage in Short Sales in the securities of the Company after
      the Black-out Termination Date. 

     

    4.8  Form
      D; Blue Sky Filings. The Company agrees to timely file a Form D with respect
      to the Notes and Warrants as required under Regulation D and to provide a copy
      thereof, promptly upon request of the Lenders. The Company shall take such
      action as the Company shall reasonably determine is necessary in order to obtain
      an exemption for, or to qualify the Notes and Warrants for, sale to Lenders
      at
      the Closing under applicable securities or “Blue Sky” laws of the states of the
      United States, and shall provide evidence of such actions promptly upon request
      of any Lender.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    4.9  Dividends
      and Redemptions. The Company shall not declare or pay any dividend or make
      any distribution on its capital stock or purchase, redeem (by direct payment,
      sinking fund or otherwise) or otherwise acquire or retire for value any of
      its
      capital stock, except that this restriction shall not apply to the repurchase
      of
      shares of Common Stock from any employee of the Company upon the cessation
      of
      his or her employment if such purchase is at the Company’s option and is at a
      price no greater than the price originally paid for these shares by the
      employee. Notwithstanding the foregoing, nothing in this Agreement shall
      prohibit the Company from conducting any dividend, asset distribution, spin-off
      or share repurchase under any arrangement with Dolphin Products Pty
      Ltd.

     

    4.10  Indebtedness.
      The Company will not create, incur, issue, assume, guarantee or otherwise become
      liable for, any indebtedness that is senior to or pari passu with the
      Notes.

     

    4.11  Shareholder
      Approval. If the number of Warrant Shares plus the number of shares of
      Common Stock sold under the Securities Purchase Agreement equal or exceed 20%
      of
      the Company’s outstanding shares of Common Stock at Closing, then the Purchasers
      agree that they shall receive at the Closing Warrants representing the right
      to
      purchase their proportional share of 1,200,000 Warrants Shares and that they
      shall receive additional Warrants (“Balance Warrants”) to purchase the remainder
      of their proportional shares of the 1,600,000 Warrant Shares upon, and subject
      to, the approval from the shareholders of the Company in accordance with Section
      14 of the Exchange Act. The Company shall file a Proxy Statement on Schedule
      14A
      under the Exchange Act with the Commission within 20 calendar days of the date
      hereof, setting forth all information required with respect to the Balance
      Shares and the transactions contemplated hereby for the purpose of obtaining
      Shareholder Approval, and shall pursue such Proxy Statement through any
      Commission review, and shall cause such Proxy Statement to be mailed to its
      shareholders as required by the Exchange Act within 5 calendar days of the
      completion of the Commission’s review, if any, and, to hold a special meeting of
      its shareholders as soon as possible following its mailing. The Company shall
      use all reasonable efforts to obtain such Shareholder Approval.

     

    ARTICLE
      V.

     

    MISCELLANEOUS

     

    5.1  Termination. 
      This Agreement may be terminated by any Lender, as to such Lender’s obligations
      hereunder only and without any effect whatsoever on the obligations between
      the
      Company and the other Lenders, or the Company by written notice to the other
      parties, if the Closing has not been consummated on or before April 28, 2006,
      provided, however, that no such termination will affect the right of any party
      to sue for any breach by the other party (or parties).

     

    5.2  Fees
      and Expenses. Except as expressly set forth in the Transaction Documents to
      the contrary, each party shall pay the fees and expenses of its advisers,
      counsel, accountants and other experts, if any, and all other expenses incurred
      by such party incident to the negotiation, preparation, execution, delivery
      and
      performance of this Agreement; provided that the Company shall, following the
      Closing, reimburse the reasonable legal fees and expenses of counsel for the
      Lenders, which shall not exceed for all transactions contemplated by this
      Agreement $25,000. The Company shall pay all transfer agent fees, stamp taxes
      and other taxes and duties levied in connection with the delivery of the Notes,
      Warrants or Warrant Shares to the Lenders.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    5.3  Entire
      Agreement. The Transaction Documents, together with the exhibits and
      schedules thereto, contain the entire understanding of the parties with respect
      to the subject matter hereof and supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.

     

    5.4  Notices.
      Any and all notices or other communications or deliveries required or permitted
      to be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
      2nd
      Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as follows:

     

    


    
      	
              If
                to the Company:

            	
              VendingData
                Corporation

            
	 	
              6830
                Spencer Street

            
	 	
              Las
                Vegas, NV 89119

            
	 	
              Facsimile:
                702-617-4737

            
	 	
              Attn:
                Mark R. Newburg, President

            
	 	
              Chief
                Executive Officer

            


    

    


    
      	
              If
                to the Lenders:

            	
              c/o
                Bricoleur Capital Management, LLC

            
	 	
              12230
                El Camino Real, Suite 100

            
	 	
              San
                Diego, CA 92130

            
	 	
              Facsimile:
                858-523-2010

            
	 	
              Attn:
                Robert Poole

            


    

    


    or
      such
      other address as either party may provide to the other in writing. 

    


    5.5  Amendments;
      Waivers.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed by the party against whom enforcement of any such waived
      provision is sought. No waiver of any default with respect to any provision,
      condition or requirement of this Agreement shall be deemed to be a continuing
      waiver in the future or a waiver of any subsequent default or a waiver of any
      other provision, condition or requirement hereof, nor shall any delay or
      omission of any party to exercise any right hereunder in any manner impair
      the
      exercise of any such right.

     

    5.6  Headings.
      The headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    5.7  Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of the parties and their successors and permitted assigns. Neither the Company
      nor the Lenders may assign this Agreement or any rights or obligations hereunder
      without the prior written consent of each the other party (other than by
      merger), except that any Lender may assign its rights and obligations hereunder,
      including any Notes, Warrants or Warrant Shares, to a Permitted Transferee
      without the Company’s prior written consent. 

     

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

     

    5.9  Governing
      Law. All questions concerning the construction, validity, enforcement and
      interpretation of the Transaction Documents shall be governed by and construed
      and enforced in accordance with the internal laws of the State of California,
      without regard to the principles of conflicts of law thereof. Each party agrees
      that all legal proceedings concerning the interpretations, enforcement and
      defense of the transactions contemplated by this Agreement and any other
      Transaction Documents (whether brought against a party hereto or its respective
      affiliates, directors, officers, shareholders, employees or agents) shall be
      commenced exclusively in the state and federal courts sitting in the San Diego,
      California. The parties hereby waive all rights to a trial by jury. If either
      party shall commence an action or proceeding to enforce any provisions of the
      Transaction Documents, then the prevailing party in such action or proceeding
      shall be reimbursed by the other party for its reasonable attorneys’ fees and
      other costs and expenses incurred with the investigation, preparation and
      prosecution of such action or proceeding.

     

    5.10  Survival.
      The representations and warranties contained herein shall survive the Closing
      and the delivery of the Notes and Warrants.

     

    5.11  Execution.
      This Agreement may be executed in two or more counterparts, all of which when
      taken together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission or by e-mail delivery of a “.pdf” format data file, such signature
      shall create a valid and binding obligation of the party executing (or on whose
      behalf such signature is executed) with the same force and effect as if such
      facsimile or “.pdf” signature page were an original thereof.

     

    5.12  Severability.
      If any term, provision, covenant or restriction of this Agreement is held by
      a
      court of competent jurisdiction to be invalid, illegal, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions set forth
      herein shall remain in full force and effect and shall in no way be affected,
      impaired or invalidated, and the parties hereto shall use their commercially
      reasonable efforts to find and employ an alternative means to achieve the same
      or substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    5.13  Rescission
      and Withdrawal Right. Notwithstanding anything to the contrary contained in
      (and without limiting any similar provisions of) any of the other Transaction
      Documents, whenever any Lender exercises a right, election, demand or option
      under a Transaction Document and the Company does not timely perform its related
      obligations within the periods therein provided, then such Lender may rescind
      or
      withdraw, in its sole discretion from time to time upon written notice to the
      Company, any relevant notice, demand or election in whole or in part without
      prejudice to its future actions and rights.

     

    5.14  Replacement
      of Securities. If any certificate or instrument evidencing the Notes,
      Warrants or Warrant Shares is mutilated, lost, stolen or destroyed, the Company
      shall issue or cause to be issued in exchange and substitution for and upon
      cancellation thereof (in the case of mutilation), or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction.
      The
      applicant for a new certificate or instrument under such circumstances shall
      also pay any reasonable third-party costs (including customary indemnity)
      associated with the issuance of such replacement security. 

     

    5.15  Construction.
      The parties agree that each of them and/or their respective counsel has reviewed
      and had an opportunity to revise the Transaction Documents and, therefore,
      the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this 7% Senior Secured Note
      Purchase Agreement to be duly executed by their respective authorized
      signatories as of the date first indicated above.

     

    
      
        	 	 	 
	 	
                VENDINGDATA
                  CORPORATION

              
	 
 	 
 	 
 
	 	By:  	/s/
                Mark R. Newburg
	 	
                
Mark
                R. Newburg,
	 	
                President
                  and Chief Executive Officer

              


      

      


      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASERS FOLLOWS]

      


      
        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

      

       

      
        
          	 	 	 
	 	
                  
                    BRICOLEUR
                      PARTNERS, L.P.

                  

                
	 
 	
                  By:
                    

                   

                	 Bricoleur
                  Capital Management, LLC,
 Its General Partner
	 	 	 
	 	By:  	/s/
                  Robert Poole
	 	
                  

                  Robert
                    Poole, Member of 

                
	 	
                  Management
                    Board

                   

                  Subscription
                    Amount: $1,000,000

                


        

      

      
         

      

      
        
          
            	 	 	 
	 	
                    
                      
                        BRICOLEUR
                          ENHANCED, L.P.

                      

                    

                  
	 
 	
                    By:
                      

                     

                  	 Bricoleur
                    Capital Management, LLC,
 Its General Partner
	 	 	 
	 	By:  	/s/
                    Robert Poole
	 	
                    

                    Robert
                      Poole, Member of 

                  
	 	
                    Management
                      Board

                     

                    Subscription
                      Amount: $2,500,000

                  


          

        

      

      
         

      

      
        
          
            	 	 	 
	 	
                    
                      
                        
                          BRIC
                            6, L.P.

                        

                      

                    

                  
	 
 	
                    By:
                      

                     

                  	 Bricoleur
                    Capital Management, LLC,
 Its General Partner
	 	 	 
	 	By:  	/s/
                    Robert Poole
	 	
                    

                    Robert
                      Poole, Member of 

                  
	 	
                    Management
                      Board

                     

                    Subscription
                      Amount: $1,000,000

                  


          

        

      

      
         

      

      
        
          
            	 	 	 
	 	
                    
                      BRICOLEUR
                        OFFSHORE LTD.

                    

                  
	 
 	
                    By:
                      

                     

                  	 Bricoleur
                    Capital Management, LLC,
 Its General Partner
	 	 	 
	 	By:  	/s/
                    Robert Poole
	 	
                    

                    Robert
                      Poole, Member of 

                  
	 	
                    Management
                      Board

                     

                    Subscription
                      Amount: $2,500,000

                  


          

           

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

             

            
              
                EXHIBIT
                  A 

                 

                THESE
                  SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
                  OF 1933, AS
                  AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED SECURITIES” AS
                  THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT. SUCH
                  SECURITIES MAY
                  NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
                  EXCEPT PURSUANT
                  TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
                  AND THE
                  APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
                  REGISTRATION
                  THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
                  REASONABLE
                  SATISFACTION OF COUNSEL TO THE ISSUER.

                 

                
                  	$                	
                          _____________,
                            2006

                        


                

                 

                 

                7%
                  SENIOR SECURED PROMISSORY NOTE

                 

                1.  Obligation.
                  For
                  value received, VENDINGDATA CORPORATION, a Nevada corporation (“Maker”),
                  promises to pay to __________________ ("Holder"),
                  the
                  Principal Amount and Interest (both as defined below) in the manner
                  and upon the
                  terms and conditions set forth herein.

                 

                2.  Principal
                  Amount and Interest.
                  The
                  principal amount (“Principal Amount”) of this Note is __________ Dollars
                  ($_______). This Note shall bear interest on the unpaid Principal
                  Amount at the
                  rate of seven percent (7%) per annum (“Interest”). The entire Principal Amount
                  hereof shall be due and payable on March 31, 2011. The accrued
                  and unpaid
                  Interest shall be paid in semi-annual installments, commencing
                  on June 1, 2006
                  and continuing thereafter on each June 1st
                  and
                  December 1st
                  until
                  all amounts owing under this Note are paid in full. 

                 

                3.  Manner
                  and Place of Payment.
                  Payments of the Principal Amount and Interest shall be made in
                  lawful money of
                  the United States of America. Principal and Interest are payable
                  at
                  _______________________ or at such other place as Holder may designate
                  in
                  writing. 

                 

                4.  Prepayment.
                  Maker
                  shall have the right, at any time or from time to time, to prepay,
                  in whole or
                  in part, the unpaid Principal Amount of this Note, without penalty
                  or premium.


                 

                5.  7%
                  Senior Secured Promissory Note; Security Agreement.
                  This
                  Note is being delivered under that certain 7% Senior Secured Note
                  Purchase
                  Agreement (“Note Purchase Agreement”) between Maker and Holder dated March 29,
                  2006. Maker’s obligations under this Note are subject to a security interest
                  in
                  the assets of Maker, pursuant to that certain Security Agreement
                  (“Security
                  Agreement”) dated ______, 2006 entered into between Maker and
                  Holder.

                 

                
                  
                    
                    

                  

                  
                    1

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                6.  Events
                  of Default.
                  The
                  following shall each constitute an “Event of Default” under this Note: (i)
                  default in the payment when due of any amount required hereunder,
                  (ii) default
                  in Maker’s performance of any other obligation hereunder or under the Security
                  Agreement, the Note Purchase Agreement, the Registration Rights
                  Agreement or the
                  Warrant that remains uncured ten days after receipt of written
                  notice of
                  default, or (iii) any of the following events of bankruptcy or insolvency:
                  (A) the Maker shall file a voluntary bankruptcy or reorganization
                  petition under
                  the provisions of the Federal Bankruptcy Act, any other bankruptcy
                  or insolvency
                  law or any other similar statute applicable to the Maker (“Bankruptcy Laws”),
                  (B) the Maker shall consent to the filing of any bankruptcy or
                  reorganization
                  petition against it under any Bankruptcy Law, (C) the Maker shall
                  make an
                  assignment for the benefit of his creditors, (D) the Maker shall
                  admit in
                  writing its inability to pay its debts generally as they become
                  due, (E) the
                  Maker shall consent to the appointment of a receiver, trustee,
                  or by the order
                  of a court of competent jurisdiction, a receiver, liquidator or
                  trustee of the
                  Maker or of any substantial part of its property shall not have
                  been discharged
                  within a period of sixty (60) days, (F) by decree of such a court,
                  the Maker
                  shall be adjudicated bankrupt or insolvent or any substantial part
                  of the
                  property of the Maker shall have been sequestered and such degree
                  shall have
                  continued undischarged and unstayed for a period of sixty (60)
                  days after the
                  entry thereof, or (G) an involuntary bankruptcy reorganization
                  petition pursuant
                  to any Bankruptcy Law shall be filed against the Maker (and, in
                  the case of any
                  such petition filed pursuant to any provision of a statute which
                  requires the
                  approval of such petition by a court, shall be approved by such
                  a court) and
                  shall not be dismissed within sixty (60) days after such filing.

                 

                7.  Acceleration
                  Upon Event of Default or Change of Control.
                  Upon
                  the occurrence of an Event of Default specified in Section 7 above
                  or a Change
                  of Control (as defined below), the entire Principal Amount and
                  all Interest
                  shall, at the option of Holder evidenced by a written notice to
                  Maker, become
                  immediately due and payable, without further presentment, notice
                  or demand for
                  payment. For purposes of this Note, a “Change
                  in Control” shall mean the occurrence of any of the following events: (i) a
                  sale of all or substantially all of the assets of the Maker; (ii)
                  a liquidation
                  or dissolution of the Maker; (iii) a merger or consolidation in which the
                  Maker is not the surviving corporation, unless the
                  stockholders of the Maker immediately prior to such consolidation,
                  merger or
                  reorganization, own more than 50% of the Maker’s voting power immediately after
                  such;
                  (iv) a reverse merger in which the Maker is the surviving corporation
                  but
                  the shares of Common Stock and securities convertible into Common
                  Stock
                  outstanding immediately preceding the merger are converted by virtue
                  of the
                  merger into other property, whether in the form of securities,
                  cash or
                  otherwise; (v) any
                  consolidation or merger of the Maker, or any other corporate reorganization,
                  in
                  which the stockholders of the Maker immediately prior to such consolidation,
                  merger or reorganization, own less than 50% of the Maker’s voting power
                  immediately after such consolidation, merger or reorganization;
or
                  (vi) any Person other than James Crabbe becomes the owner, directly
                  or
                  indirectly, of securities of the Maker representing more than 50%
                  of the
                  combined voting power of the Maker’s then outstanding securities; provided,
                  however,
                  that a
“Change in Control” shall not include any transaction the sole purpose of which
                  is to change the state of the Maker’s incorporation. 

                 

                
                  
                    
                    

                  

                  
                    2

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                8.  Expenses
                  of Enforcement.
                  Maker
                  agrees to pay all reasonable costs and expenses, including, without
                  limitation,
                  reasonable attorneys’ fees, as a court of competent jurisdiction shall award,
                  which Holder shall incur in connection with any legal action or
                  legal proceeding
                  commenced for the collection of this Note or the exercise, preservation
                  or
                  enforcement of Holder’s rights and remedies thereunder.

                 

                9.  Cumulative
                  Rights and Remedies.
                  All
                  rights and remedies of Holder under this Note shall be cumulative
                  and not
                  alternative and shall be in addition to all rights and remedies
                  available to
                  Holder under applicable law. 

                 

                10.  Governing
                  Law.
                  This
                  Note shall be governed by and interpreted and construed in accordance
                  with the
                  laws of the State of Nevada.

                 

                11.  Notices
                  and Demands.
                  Any
                  notice or demand which by any provision of this Note is required
                  or provided to
                  be given shall be in writing and shall be deemed to have been given
                  or served
                  sufficiently for all purposes if sent as provided in the Note Purchase
                  Agreement
                  or through a nationally-recognized overnight courier and simultaneously
                  transmitted by facsimile to the following respective addresses
                  and facsimile
                  telephone numbers:

                 

                
                  	
                          Maker:

                        	
                          VendingData
                            Corporation.

                        
	 	
                          6830
                            Spencer Street

                        
	 	
                          Las
                            Vegas, NV 89119

                        
	 	
                          Attention:
                            Mark R. Newburg,

                        
	 	
                          President
                            and Chief Executive Officer

                        
	 	
                          Facsimile:
                            (702) 733-7197

                        
	 	 


                

                


                or
                  at any
                  other address designated by Maker to Holder in writing.

                 

                
                  
                    	
                            Holder:

                          	
                            Attention:
                              

                          
	 	
                            Facsimile:
                              

                          


                  


                 

                or
                  at any
                  other address designated by Holder to Maker in writing, and if
                  to an assignee of
                  Holder, to its address as designated to Maker in writing.

                 

                IN
                  WITNESS WHEREOF, Maker has caused this Note to be executed and
                  delivered at las
                  Vegas, Nevada effective as of the day and year first above written.

                 

                
                  	 	 	 
	 	VENDINGDATA
                          CORPORATION
	 
 	 
 	 
 
	 	By:  	 
	 	
                          

                          Mark
                            R. Newburg,

                        
	 	President
                          and Chief Executive Officer


                

                


                
                  
                    
                    

                  

                  
                    3

                    
                      

                    

                  

                  
                    
                    

                  

                  
                     

                    
                      EXHIBIT
                        B

                       

                      NEITHER
                        THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY
                        IS EXERCISABLE HAVE
                        BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
                        OR THE SECURITIES
                        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
                        REGISTRATION UNDER
                        THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
                        MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
                        REGISTRATION
                        STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
                        EXEMPTION FROM,
                        OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
                        OF THE
                        SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
                        LAWS AS
                        EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE ISSUER TO
                        SUCH
                        EFFECT

                      


                      COMMON
                        STOCK PURCHASE WARRANT

                      


                      To
                        Purchase ________ Shares of Common Stock of

                       

                      VENDINGDATA
                        CORPORATION

                       

                      THIS
                        COMMON STOCK PURCHASE WARRANT (the “Warrant”)
                        certifies that, for value received, _____________ (the “Holder”),
                        is
                        entitled, upon the terms and subject to the limitations on
                        exercise and the
                        conditions hereinafter set forth, at any time on or after
                        September __, 2006
                        (the “Initial
                        Exercise Date”)
                        and on
                        or prior to the close of business on the fifth anniversary
                        of the Initial
                        Exercise Date (the “Termination
                        Date”)
                        but
                        not thereafter, to subscribe for and purchase from VendingData
                        Corporation, a
                        Nevada corporation (the “Company”),
                        up to
                        _________ shares (the “Warrant
                        Shares”)
                        of
                        Common Stock, par value $0.001 per share, of the Company
                        (the “Common
                        Stock”).
                        The
                        purchase price of one share of Common Stock under this Warrant
                        shall be equal to
                        the Exercise Price, as defined in Section 2(b). 

                       

                      Section
                        1. Definitions.
                        Capitalized terms used and not otherwise defined herein shall
                        have the meanings
                        set forth in that certain 7% Senior Secured Note Purchase
                        Agreement (the
“Purchase
                        Agreement”)
                        dated
                        March __, 2006 between the Company and the Holder.

                       

                      Section
                        2. Exercise.

                       

                      a)  Exercise
                        of Warrant.
                        Exercise of the purchase rights represented by this Warrant
                        may be made, in
                        whole or in part, at any time or times on or after the Initial
                        Exercise Date and
                        on or before the Termination Date by delivery to the Company
                        of a duly executed
                        facsimile copy of the Notice of Exercise Form annexed hereto
                        (or such other
                        office or agency of the Company as it may designate by notice
                        in writing to the
                        registered Holder at the address of such Holder appearing
                        on the books of the
                        Company); and, within 3 Trading Days of the date said Notice
                        of Exercise is
                        delivered to the Company, the Company shall have received
                        payment of the
                        aggregate Exercise Price of the shares thereby purchased
                        by wire transfer or
                        cashier’s check drawn on a United States bank. Notwithstanding anything
                        herein
                        to the contrary, the Holder shall not be required to physically
                        surrender this
                        Warrant to the Company until the Holder has purchased all
                        of the Warrant Shares
                        available hereunder and the Warrant has been exercised in
                        full, in which case,
                        the Holder shall surrender this Warrant to the Company for
                        cancellation within 3
                        Trading Days of the date the final Notice of Exercise is
                        delivered to the
                        Company. Partial exercises of this Warrant resulting in purchases
                        of a portion
                        of the total number of Warrant Shares available hereunder
                        shall have the effect
                        of lowering the outstanding number of Warrant Shares purchasable
                        hereunder in an
                        amount equal to the applicable number of Warrant Shares purchased.
                        The Holder
                        and the Company shall maintain records showing the number
                        of Warrant Shares
                        purchased and the date of such purchases. The Holder and
                        any assignee, by
                        acceptance of this Warrant, acknowledge and agree that, by
                        reason of the
                        provisions of this paragraph, following the purchase of a
                        portion of the Warrant
                        Shares hereunder, the number of Warrant Shares available
                        for purchase hereunder
                        at any given time may be less than the amount stated on the
                        face
                        hereof.

                       

                      
                        
                          
                          

                        

                        
                          1

                          
                            

                          

                        

                        
                          
                          

                        

                      

                       

                      b)  Exercise
                        Price.
                        The
                        exercise price per share of the Common Stock under this Warrant
                        shall be
$2.50,
                        subject to adjustment herein (the “Exercise
                        Price”).

                       

                      c)  Mechanics
                        of Exercise.
                        

                       

                      i.  Authorization
                        of Warrant Shares.
                        The
                        Company covenants that all Warrant Shares which may be issued
                        upon the exercise
                        of the purchase rights represented by this Warrant will,
                        upon exercise of the
                        purchase rights represented by this Warrant, be duly authorized,
                        validly issued,
                        fully paid and nonassessable and free from all taxes, liens
                        and charges created
                        by the Company in respect of the issue thereof (other than
                        taxes in respect of
                        any transfer occurring contemporaneously with such issue).


                       

                      ii.  Delivery
                        of Certificates Upon Exercise.
                        Subject
                        to the Company’s ability to issue unlegended shares upon exercise of this
                        Warrant in compliance with the Securities Act and Holder’s acknowledgement of
                        its compliance or intended compliance with the registration
                        and prospectus
                        delivery requirements of the Securities Act, certificates
                        for shares purchased
                        hereunder shall be transmitted by the transfer agent of the
                        Company to the
                        Holder by crediting the account of the Holder’s prime broker with the Depository
                        Trust Company through its Deposit Withdrawal Agent Commission
                        (“DWAC”)
                        system
                        if the Company is a participant in such system, and otherwise
                        by physical
                        delivery to the address specified by the Holder in the Notice
                        of Exercise within
                        3 Trading Days from the delivery to the Company of the Notice
                        of Exercise Form,
                        surrender of this Warrant (if required) and payment of the
                        aggregate Exercise
                        Price as set forth above (“Warrant
                        Share Delivery Date”).
                        

                       

                      iii.  Delivery
                        of New Warrants Upon Exercise.
                        If this
                        Warrant shall have been exercised in part, the Company shall,
                        at the request of
                        a Holder and upon surrender of this Warrant certificate,
                        at the time of delivery
                        of the certificate or certificates representing Warrant Shares,
                        deliver to
                        Holder a new Warrant evidencing the rights of Holder to purchase
                        the unpurchased
                        Warrant Shares called for by this Warrant, which new Warrant
                        shall in all other
                        respects be identical with this Warrant.

                       

                      iv.  No
                        Fractional Shares or Scrip.
                        No
                        fractional shares or scrip representing fractional shares
                        shall be issued upon
                        the exercise of this Warrant. As to any fraction of a share
                        which Holder would
                        otherwise be entitled to purchase upon such exercise, the
                        Company shall at its
                        election, either pay a cash adjustment in respect of such
                        final fraction in an
                        amount equal to such fraction multiplied by the Exercise
                        Price or round up to
                        the next whole share.

                       

                      
                        
                          
                          

                        

                        
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                      v.  Charges,
                        Taxes and Expenses.
                        Issuance of certificates for Warrant Shares shall be made
                        without charge to the
                        Holder for any issue or transfer tax or other incidental
                        expense in respect of
                        the issuance of such certificate, all of which taxes and
                        expenses shall be paid
                        by the Company, and such certificates shall be issued in
                        the name of the Holder
                        or in such name or names as may be directed by the Holder;
provided,
                        however,
                        that in
                        the event certificates for Warrant Shares are to be issued
                        in a name other than
                        the name of the Holder, this Warrant when surrendered for
                        exercise shall be
                        accompanied by the Assignment Form attached hereto duly executed
                        by the Holder;
                        and the Company may require, as a condition thereto, the
                        payment of a sum
                        sufficient to reimburse it for any transfer tax incidental
                        thereto.

                       

                      vi.  Closing
                        of Books.
                        The
                        Company will not close its stockholder books or records in
                        any manner which
                        prevents the timely exercise of this Warrant, pursuant to
                        the terms
                        hereof.

                       

                      Section
                        3. Certain Adjustments.

                       

                      a)  Stock
                        Dividends and Splits.
                        If the
                        Company, at any time while this Warrant is outstanding: (A)
                        pays a stock
                        dividend or otherwise make a distribution or distributions
                        on shares of its
                        Common Stock or any other equity or equity equivalent securities
                        payable in
                        shares of Common Stock (which, for avoidance of doubt, shall
                        not include any
                        shares of Common Stock issued by the Company upon exercise
                        of this Warrant), (B)
                        subdivides outstanding shares of Common Stock into a larger
                        number of shares,
                        (C) combines (including by way of reverse stock split) outstanding
                        shares of
                        Common Stock into a smaller number of shares, or (D) issues
                        by reclassification
                        of shares of the Common Stock any shares of capital stock
                        of the Company, then
                        in each case the Exercise Price shall be multiplied by a
                        fraction of which the
                        numerator shall be the number of shares of Common Stock (excluding
                        treasury
                        shares, if any) outstanding immediately before such event
                        and of which the
                        denominator shall be the number of shares of Common Stock
                        outstanding
                        immediately after such event and the number of shares issuable
                        upon exercise of
                        this Warrant shall be proportionately adjusted. Any adjustment
                        made pursuant to
                        this Section 3(a) shall become effective immediately after
                        the record date for
                        the determination of stockholders entitled to receive such
                        dividend or
                        distribution and shall become effective immediately after
                        the effective date in
                        the case of a subdivision, combination or re-classification.

                       

                      
                        
                          
                          

                        

                        
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                      b)  Subsequent
                        Rights Offerings.
                        If the
                        Company, at any time while the Warrant is outstanding, shall
                        issue rights,
                        options or warrants to all holders of Common Stock (and not
                        to the Holder of
                        this Warrant) entitling them to subscribe for or purchase
                        shares of Common Stock
                        at a price per share less than the VWAP at the record date
                        mentioned below, then
                        the Exercise Price shall be multiplied by a fraction, of
                        which the denominator
                        shall be the number of shares of the Common Stock outstanding
                        on the date of
                        issuance of such rights or warrants plus the number of additional
                        shares of
                        Common Stock offered for subscription or purchase, and of
                        which the numerator
                        shall be the number of shares of the Common Stock outstanding
                        on the date of
                        issuance of such rights or warrants plus the number of shares
                        which the
                        aggregate offering price of the total number of shares so
                        offered (assuming
                        receipt by the Company in full of all consideration payable
                        upon exercise of
                        such rights, options or warrants) would purchase at such
                        VWAP. Such adjustment
                        shall be made whenever such rights or warrants are issued,
                        and shall become
                        effective immediately after the record date for the determination
                        of
                        stockholders entitled to receive such rights, options or
                        warrants. “VWAP”
means,
                        for any date, the price determined by the first of the following
                        clauses that
                        applies: (a) if the Common Stock is then listed or quoted
                        on a Trading Market,
                        the daily volume weighted average price of the Common Stock
                        for such date (or
                        the nearest preceding date) on the Trading Market on which
                        the Common Stock is
                        then listed or quoted for trading as reported by Bloomberg
                        Financial L.P. (based
                        on a Trading Day from 9:30 a.m. (New York City time) to 4:02
                        p.m. (New York City
                        time); (b)  if the OTC Bulletin Board is the Trading Market, the volume
                        weighted average price of the Common Stock for such date
                        (or the nearest
                        preceding date) on the OTC Bulletin Board; (c) if the Common
                        Stock is not then
                        quoted for trading on the OTC Bulletin Board and if prices
                        for the Common Stock
                        are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
                        similar organization or agency succeeding to its functions
                        of reporting prices),
                        the most recent bid price per share of the Common Stock so
                        reported; or
                        (d) in all other cases, the fair market value of a share of Common
                        Stock as
                        determined by an independent appraiser selected in good faith
                        by the Holder and
                        reasonably acceptable to the Company.

                       

                      c)  Pro
                        Rata Distributions.
                        If the
                        Company, at any time prior to the Termination Date, shall
                        distribute to all
                        holders of Common Stock (and not to the Holder of this Warrant)
                        evidences of its
                        indebtedness or assets (including cash and cash dividends)
                        or rights or warrants
                        to subscribe for or purchase any security other than the
                        Common Stock, then in
                        each such case the Exercise Price shall be adjusted by multiplying
                        the Exercise
                        Price in effect immediately prior to the record date fixed
                        for determination of
                        stockholders entitled to receive such distribution by a fraction
                        of which the
                        denominator shall be the VWAP determined as of the record
                        date mentioned above,
                        and of which the numerator shall be such VWAP on such record
                        date less the then
                        per share fair market value at such record date of the portion
                        of such assets or
                        evidence of indebtedness so distributed applicable to one
                        outstanding share of
                        the Common Stock as determined by the Board of Directors
                        in good faith. In
                        either case the adjustments shall be described in a statement
                        provided to the
                        Holder of the portion of assets or evidences of indebtedness
                        so distributed or
                        such subscription rights applicable to one share of Common
                        Stock. Such
                        adjustment shall be made whenever any such distribution is
                        made and shall become
                        effective immediately after the record date mentioned above.

                       

                      
                        
                          
                          

                        

                        
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                      d)  Fundamental
                        Transaction.
                        If, at
                        any time while this Warrant is outstanding, (A) the Company
                        effects any merger
                        or consolidation of the Company with or into another Person,
                        (B) the Company
                        effects any sale of all or substantially all of its assets
                        in one or a series of
                        related transactions, (C) any tender offer or exchange offer
                        (whether by the
                        Company or another Person) is completed pursuant to which
                        holders of Common
                        Stock are permitted to tender or exchange their shares for
                        other securities,
                        cash or property, or (D) the Company effects any reclassification
                        of the Common
                        Stock or any compulsory share exchange pursuant to which
                        the Common Stock is
                        effectively converted into or exchanged for other securities,
                        cash or property
                        (in any such case, a “Fundamental
                        Transaction”),
                        then,
                        upon any subsequent exercise of this Warrant, the Holder
                        shall have the right to
                        receive, for each Warrant Share that would have been issuable
                        upon such exercise
                        immediately prior to the occurrence of such Fundamental Transaction,
                        at the
                        option of the Holder, (a) upon exercise of this Warrant,
                        the number of shares of
                        Common Stock of the successor or acquiring corporation or
                        of the Company, if it
                        is the surviving corporation, and any additional consideration
                        (the
“Alternate
                        Consideration”)
                        receivable upon or as a result of such reorganization, reclassification,
                        merger,
                        consolidation or disposition of assets by a Holder of the
                        number of shares of
                        Common Stock for which this Warrant is exercisable immediately
                        prior to such
                        event or (b) if the Company is acquired in an all cash transaction,
                        cash equal
                        to the number of Warrant Shares multiplied by the excess,
                        if any, of the cash
                        paid on one share of Common Stock in such transaction over
                        the Exercise Price.
                        For purposes of any such exercise, the determination of the
                        Exercise Price shall
                        be appropriately adjusted to apply to such Alternate Consideration
                        based on the
                        amount of Alternate Consideration issuable in respect of
                        one share of Common
                        Stock in such Fundamental Transaction, and the Company shall
                        apportion the
                        Exercise Price among the Alternate Consideration in a reasonable
                        manner
                        reflecting the relative value of any different components
                        of the Alternate
                        Consideration. If holders of Common Stock are given any choice
                        as to the
                        securities, cash or property to be received in a Fundamental
                        Transaction, then
                        the Holder shall be given the same choice as to the Alternate
                        Consideration it
                        receives upon any exercise of this Warrant following such
                        Fundamental
                        Transaction. To the extent necessary to effectuate the foregoing
                        provisions, any
                        successor to the Company or surviving entity in such Fundamental
                        Transaction
                        shall issue to the Holder a new warrant consistent with the
                        foregoing provisions
                        and evidencing the Holder’s right to exercise such warrant into Alternate
                        Consideration. The terms of any agreement pursuant to which
                        a Fundamental
                        Transaction is effected shall include terms requiring any
                        such successor or
                        surviving entity to comply with the provisions of this Section
                        3(d) and insuring
                        that this Warrant (or any such replacement security) will
                        be similarly adjusted
                        upon any subsequent transaction analogous to a Fundamental
                        Transaction.

                       

                      e)  Calculations.
                        All
                        calculations under this Section 3 shall be made to the nearest
                        cent or the
                        nearest 1/100th of a share, as the case may be. For purposes
                        of this Section 3,
                        the number of shares of Common Stock deemed to be issued
                        and outstanding as of a
                        given date shall be the sum of the number of shares of Common
                        Stock (excluding
                        treasury shares, if any) issued and outstanding.

                       


                      
                        
                          
                          

                        

                        
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                      f)  Voluntary
                        Adjustment By Company.
                        The
                        Company may at any time during the term of this Warrant reduce
                        the then current
                        Exercise Price to any amount and for any period of time deemed
                        appropriate by
                        the Board of Directors of the Company.

                       

                      g)  Notice
                        to Holders.
                        

                       

                      i.  Adjustment
                        to Exercise Price.
                        Whenever the Exercise Price is adjusted pursuant to any provision
                        of this
                        Section 3, the Company shall promptly mail to each Holder
                        a notice setting forth
                        the Exercise Price after such adjustment and setting forth
                        a brief statement of
                        the facts requiring such adjustment. 

                       

                      ii.  Notice
                        to Allow Exercise by Holder.
                        If (A)
                        the Company shall declare a dividend (or any other distribution
                        in whatever
                        form) on the Common Stock; (B) the Company shall declare
                        a special nonrecurring
                        cash dividend on or a redemption of the Common Stock; (C)
                        the Company shall
                        authorize the granting to all holders of the Common Stock
                        rights or warrants to
                        subscribe for or purchase any shares of capital stock of
                        any class or of any
                        rights; (D) the approval of any stockholders of the Company
                        shall be required in
                        connection with any reclassification of the Common Stock,
                        any consolidation or
                        merger to which the Company is a party, any sale or transfer
                        of all or
                        substantially all of the assets of the Company, of any compulsory
                        share exchange
                        whereby the Common Stock is converted into other securities,
                        cash or property;
                        (E) the Company shall authorize the voluntary or involuntary
                        dissolution,
                        liquidation or winding up of the affairs of the Company;
                        then, in each case, the
                        Company shall cause to be mailed to the Holder at its last
                        address as it shall
                        appear upon the Warrant Register of the Company, at least
                        20 calendar days prior
                        to the applicable record or effective date hereinafter specified,
                        a notice
                        stating (x) the date on which a record is to be taken for
                        the purpose of such
                        dividend, distribution, redemption, rights or warrants, or
                        if a record is not to
                        be taken, the date as of which the holders of the Common
                        Stock of record to be
                        entitled to such dividend, distributions, redemption, rights
                        or warrants are to
                        be determined or (y) the date on which such reclassification,
                        consolidation,
                        merger, sale, transfer or share exchange is expected to become
                        effective or
                        close, and the date as of which it is expected that holders
                        of the Common Stock
                        of record shall be entitled to exchange their shares of the
                        Common Stock for
                        securities, cash or other property deliverable upon such
                        reclassification,
                        consolidation, merger, sale, transfer or share exchange;
                        provided that the
                        failure to mail such notice or any defect therein or in the
                        mailing thereof
                        shall not affect the validity of the corporate action required
                        to be specified
                        in such notice. 

                       

                      
                        
                          
                          

                        

                        
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                      Section
                        4. Transfer
                        of Warrant.

                       

                      a)  Transferability.
                        Subject
                        to compliance with any applicable securities laws and the
                        conditions set forth
                        in Section 4(d) hereof, this Warrant and all rights hereunder
                        (including,
                        without limitation, any registration rights) are transferable,
                        in whole or in
                        part, upon surrender of this Warrant at the principal office
                        of the Company or
                        its designated agent, together with a written assignment
                        of this Warrant
                        substantially in the form attached hereto duly executed by
                        the Holder or its
                        agent or attorney and funds sufficient to pay any transfer
                        taxes payable upon
                        the making of such transfer. Upon such surrender and, if
                        required, such payment,
                        the Company shall execute and deliver a new Warrant or Warrants
                        in the name of
                        the assignee or assignees and in the denomination or denominations
                        specified in
                        such instrument of assignment, and shall issue to the assignor
                        a new Warrant
                        evidencing the portion of this Warrant not so assigned, and
                        this Warrant shall
                        promptly be cancelled. A Warrant, if properly assigned, may
                        be exercised by a
                        new holder for the purchase of Warrant Shares without having
                        a new Warrant
                        issued. 

                       

                      b)  New
                        Warrants.
                        This
                        Warrant may be divided or combined with other Warrants upon
                        presentation hereof
                        at the aforesaid office of the Company, together with a written
                        notice
                        specifying the names and denominations in which new Warrants
                        are to be issued,
                        signed by the Holder or its agent or attorney. Subject to
                        compliance with
                        Section 4(a), as to any transfer which may be involved in
                        such division or
                        combination, the Company shall execute and deliver a new
                        Warrant or Warrants in
                        exchange for the Warrant or Warrants to be divided or combined
                        in accordance
                        with such notice.

                       

                      c)  Warrant
                        Register.
                        The
                        Company shall register this Warrant, upon records to be maintained
                        by the
                        Company for that purpose (the “Warrant
                        Register”),
                        in
                        the name of the record Holder hereof from time to time. The
                        Company may deem and
                        treat the registered Holder of this Warrant as the absolute
                        owner hereof for the
                        purpose of any exercise hereof or any distribution to the
                        Holder, and for all
                        other purposes, absent actual notice to the contrary.

                       

                      d)  Transfer
                        Restrictions.
                        The
                        Company may require, as a condition of allowing the transfer
                        of this Warrant (i)
                        the opinion of counsel to the Company that such transfer
                        may be made
                        without
                        registration under
                        the
                        Securities Act and under applicable state securities or blue
                        sky laws, and (ii)
                        that the holder or transferee execute and deliver to the
                        Company an investment
                        letter in form and substance acceptable to the Company and
                        (iii) that the
                        transferee be an “accredited
                        investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
                        (a)(8)
                        promulgated under the Securities Act or a “qualified institutional buyer” as
                        defined in Rule 144A(a) under the Securities Act. The foregoing
                        conditions shall
                        not apply to any Permitted Transferee of Holder, subject
                        to the Company’s
                        reasonable determination that such transfer does not require
                        registration of
                        such transferred securities under the Securities Act. A “Permitted Transferee”
means the spouse or lineal descendants of Holder, any trust
                        for the benefit of
                        Holder or the benefit of the spouse or lineal descendants
                        of Holder, any
                        corporation or partnership in which Holder, the spouse and
                        the lineal
                        descendants of Holder are the direct and beneficial owners
                        of substantially all
                        of the equity interests (provided Holder, spouse and lineal
                        descendants agree in
                        writing to remain the direct and beneficial owners of all
                        such equity
                        interests), the personal representative of Holder upon Holder’s death for
                        purposes of administration of Holder’s estate or upon Holder’s incompetency for
                        purposes of the protection and management of the assets of
                        Holder; or for any
                        Holder that is a partnership, limited liability company,
                        corporation or other
                        entity to (i) a partner or former partner of such partnership,
                        a member or
                        former member of such limited liability company or a shareholder
                        of such
                        corporation, (ii) the estate of any such partner, member
                        or shareholder, or
                        (iii) any other Affiliate of Holder. 

                       

                      
                        
                          
                          

                        

                        
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                      e)  Lock-Up.
                        In
                        addition to transfer restrictions under the Securities Act,
                        the Holder agrees
                        that any Warrant Shares purchased hereunder shall be subject
                        to a lock-up for a
                        period commencing on the date of this Warrant and expiring
                        _____, 2006 [six
                        months from the close of the Note Purchase Agreement] and
                        during such period
                        shall not be sold, assigned or otherwise disposed of by Holder
                        except to a
                        Permitted Transferee in accordance with subpart (d) above.

                       

                      Section
                        5. Miscellaneous.

                       

                      a)  No
                        Rights as Shareholder Until Exercise.
                        This
                        Warrant does not entitle the Holder to any voting rights
                        or other rights as a
                        shareholder of the Company prior to the exercise hereof as
                        set forth herein.


                       

                      b)  Loss,
                        Theft, Destruction or Mutilation of Warrant.
                        The
                        Company covenants that upon receipt by the Company of evidence
                        reasonably
                        satisfactory to it of the loss, theft, destruction or mutilation
                        of this Warrant
                        or any stock certificate relating to the Warrant Shares,
                        and in case of loss,
                        theft or destruction, of indemnity or security reasonably
                        satisfactory to it
                        (which, in the case of the Warrant, shall not include the
                        posting of any bond),
                        and upon surrender and cancellation of such Warrant or stock
                        certificate, if
                        mutilated, the Company will make and deliver a new Warrant
                        or stock certificate
                        of like tenor and dated as of such cancellation, in lieu
                        of such Warrant or
                        stock certificate.

                       

                      c)  Saturdays,
                        Sundays, Holidays, etc.
                        If the
                        last or appointed day for the taking of any action or the
                        expiration of any
                        right required or granted herein shall not be a Business
                        Day, then such action
                        may be taken or such right may be exercised on the next succeeding
                        Business
                        Day.

                       

                      d)  Authorized
                        Shares.
                        

                       

                      The
                        Company covenants that during the period the Warrant is outstanding,
                        it will
                        reserve from its authorized and unissued Common Stock a sufficient
                        number of
                        shares to provide for the issuance of the Warrant Shares
                        upon the exercise of
                        any purchase rights under this Warrant. The Company further
                        covenants that its
                        issuance of this Warrant shall constitute full authority
                        to its officers who are
                        charged with the duty of executing stock certificates to
                        execute and issue the
                        necessary certificates for the Warrant Shares upon the exercise
                        of the purchase
                        rights under this Warrant. The Company will take all such
                        reasonable action as
                        may be necessary to assure that such Warrant Shares may be
                        issued as provided
                        herein without violation of any applicable law or regulation,
                        or of any
                        requirements of the Trading Market upon which the Common
                        Stock may be listed.


                       

                      
                        
                          
                          

                        

                        
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                      Except
                        and to the extent as waived or consented to by the Holder,
                        the Company shall not
                        by any action, including, without limitation, amending its
                        certificate of
                        incorporation or through any reorganization, transfer of
                        assets, consolidation,
                        merger, dissolution, issue or sale of securities or any other
                        voluntary action,
                        avoid or seek to avoid the observance or performance of any
                        of the terms of this
                        Warrant, but will at all times in good faith assist in the
                        carrying out of all
                        such terms and in the taking of all such actions as may be
                        necessary or
                        appropriate to protect the rights of Holder as set forth
                        in this Warrant against
                        impairment. Without limiting the generality of the foregoing,
                        the Company will
                        (a) not increase the par value of any Warrant Shares above
                        the amount payable
                        therefor upon such exercise immediately prior to such increase
                        in par value, (b)
                        take all such action as may be necessary or appropriate in
                        order that the
                        Company may validly and legally issue fully paid and nonassessable
                        Warrant
                        Shares upon the exercise of this Warrant, and (c) use commercially
                        reasonable
                        efforts to obtain all such authorizations, exemptions or
                        consents from any
                        public regulatory body having jurisdiction thereof as may
                        be necessary to enable
                        the Company to perform its obligations under this Warrant.

                       

                      Before
                        taking any action which would result in an adjustment in
                        the number of Warrant
                        Shares for which this Warrant is exercisable or in the Exercise
                        Price, the
                        Company shall obtain all such authorizations or exemptions
                        thereof, or consents
                        thereto, as may be necessary from any public regulatory body
                        or bodies having
                        jurisdiction thereof.

                       

                      e)  Jurisdiction.
                        All
                        questions concerning the construction, validity, enforcement
                        and interpretation
                        of this Warrant shall be determined in accordance with the
                        provisions of the
                        Purchase Agreement.

                       

                      f)  Restrictions.
                        The
                        Holder acknowledges that the Warrant Shares acquired upon
                        the exercise of this
                        Warrant, if not registered, will have restrictions upon resale
                        imposed by state
                        and federal securities laws.

                       

                      g)  Nonwaiver
                        and Expenses.
                        No
                        course of dealing or any delay or failure to exercise any
                        right hereunder on the
                        part of Holder shall operate as a waiver of such right or
                        otherwise prejudice
                        Holder’s rights, powers or remedies, notwithstanding the fact that
                        all rights
                        hereunder terminate on the Termination Date. 

                       

                      h)  Notices.
                        Any
                        notice, request or other document required or permitted to
                        be given or delivered
                        to the Holder by the Company shall be delivered in accordance
                        with the notice
                        provisions of the Purchase Agreement.

                       

                      i)  Limitation
                        of Liability.
                        No
                        provision hereof, in the absence of any affirmative action
                        by Holder to exercise
                        this Warrant to purchase Warrant Shares, and no enumeration
                        herein of the rights
                        or privileges of Holder, shall give rise to any liability
                        of Holder for the
                        purchase price of any Common Stock or as a stockholder of
                        the Company, whether
                        such liability is asserted by the Company or by creditors
                        of the
                        Company.

                       

                      
                        
                          
                          

                        

                        
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                      j)  Remedies.
                        Holder,
                        in addition to being entitled to exercise all rights granted
                        by law, including
                        recovery of damages, will be entitled to specific performance
                        of its rights
                        under this Warrant. The Company agrees that monetary damages
                        would not be
                        adequate compensation for any loss incurred by reason of
                        a breach by it of the
                        provisions of this Warrant and hereby agrees to waive and
                        not to assert the
                        defense in any action for specific performance that a remedy
                        at law would be
                        adequate.

                       

                      k)  Successors
                        and Assigns.
                        Subject
                        to applicable securities laws, this Warrant and the rights
                        and obligations
                        evidenced hereby shall inure to the benefit of and be binding
                        upon the
                        successors of the Company and the successors and permitted
                        assigns of Holder.
                        The provisions of this Warrant are intended to be for the
                        benefit of all Holders
                        from time to time of this Warrant and shall be enforceable
                        by any such Holder or
                        holder of Warrant Shares.

                       

                      l)  Amendment.
                        This
                        Warrant may be modified or amended or the provisions hereof
                        waived with the
                        written consent of the Company and the Holder.

                       

                      m)  Severability.
                        Wherever possible, each provision of this Warrant shall be
                        interpreted in such
                        manner as to be effective and valid under applicable law,
                        but if any provision
                        of this Warrant shall be prohibited by or invalid under applicable
                        law, such
                        provision shall be ineffective to the extent of such prohibition
                        or invalidity,
                        without invalidating the remainder of such provisions or
                        the remaining
                        provisions of this Warrant.

                       

                      n)  Registration
                        Rights. This
                        Warrant and the Warrant Shares are entitled to the benefits
                        of that certain
                        Registration Rights Agreement dated as of even date herewith
                        between the
                        Company, Holder and the other signatories thereto (the “Registration Rights
                        Agreement”). The Company shall keep a copy of the Registration Rights
                        Agreement,
                        and any amendments thereto, at its principal office, and
                        shall furnish copies
                        thereof to the Holder upon request. A holder of Warrant Shares
                        issued upon the
                        exercise of this Warrant, in whole or in part, shall continue
                        to be entitled
                        with respect to such shares to all rights to which it would
                        have been entitled
                        as a Holder under the Registration Rights Agreement.

                       

                      o)  Headings.
                        The
                        headings used in this Warrant are for the convenience of
                        reference only and
                        shall not, for any purpose, be deemed a part of this Warrant.

                       

                      ********************


                      
                        
                          
                          

                        

                        
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                      IN
                        WITNESS WHEREOF, the Company has caused this Warrant to be
                        executed by its
                        officer thereunto duly authorized.

                       

                      


                      Dated:
                        March __, 2006

                       

                      
                        	 	 	 
	 	VENDINGDATA
                                CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                                
Mark
                                R. Newburg,
	 	
                                President
                                  and Chief Executive Officer

                              


                      

                       

                      
                        
                          
                          

                        

                        
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                      NOTICE
                        OF EXERCISE

                      


                      TO: VENDINGDATA
                        CORPORATION

                      


                      (1)  The
                        undersigned hereby elects to purchase ________ Warrant Shares
                        of the Company
                        pursuant to the terms of the attached Warrant (only if exercised
                        in full), and
                        tenders herewith payment of the exercise price in full, together
                        with all
                        applicable transfer taxes, if any.

                       

                      (2)  Please
                        issue a certificate or certificates representing said Warrant
                        Shares in the name
                        of the undersigned or in such other name as is specified
                        below:

                       

                      _______________________________

                       

                      


                      The
                        Warrant Shares shall be delivered to the following DWAC Account
                        Number or by
                        physical delivery of a certificate to:

                      


                      _______________________________

                       

                      _______________________________

                       

                      _______________________________

                      


                      (3)
                        Accredited
                        Investor.
                        The
                        undersigned is an “accredited investor” as defined in Regulation D promulgated
                        under the Securities Act of 1933, as amended.

                      


                      [SIGNATURE
                        OF HOLDER]

                       

                      Name
                        of
                        Investing Entity:                       

                      Signature
                        of Authorized Signatory of Investing Entity:   
                                           

                      Name
                        of
                        Authorized Signatory:      
                             

                      Title
                        of
                        Authorized Signatory:       
                       

                      Date:    
                                                         
     

                       

                      
                        
                          
                          

                        

                        
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                      ASSIGNMENT
                        FORM

                      


                      (To
                        assign the foregoing Warrant, execute

                      this
                        form
                        and supply required information. 

                      Do
                        not
                        use this form to exercise the Warrant.)

                      


                      


                      


                      FOR
                        VALUE
                        RECEIVED, [____] all of or [_______] shares of the foregoing
                        Warrant and all
                        rights evidenced thereby are hereby assigned to

                       

                      


                      _______________________________________________
                        whose address is

                      


                      _______________________________________________________________.

                      


                      


                      


                      _______________________________________________________________

                      


                      Dated:
                        ______________, _______

                      


                      


                      Holder’s
                        Signature: _____________________________

                      


                      Holder’s
                        Address: ______________________________

                       

                      ______________________________

                      


                      


                      


                      Signature
                        Guaranteed: ___________________________________________

                      


                      


                      NOTE:
                        The
                        signature to this Assignment Form must correspond with the
                        name as it appears on
                        the face of the Warrant, without alteration or enlargement
                        or any change
                        whatsoever, and must be guaranteed by a bank or trust company.
                        Officers of
                        corporations and those acting in a fiduciary or other representative
                        capacity
                        should file proper evidence of authority to assign the foregoing
                        Warrant.

                       

                      
                        
                          
                          

                        

                        
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