Exhibit
10.40


THIS
PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION OF
A PORTION OF THIS PROMISSORY NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.  THIS PROMISSORY NOTE OR SUCH SHARES MAY NOT
BE SOLD, DISTRIBUTED, PLEDGED, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNLESS: (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAW COVERING ANY SUCH TRANSACTION
INVOLVING SAID SECURITIES; (B) THE COMPANY (DEFINED BELOW) RECEIVES AN OPINION
OF LEGAL COUNSEL FOR THE HOLDER OF SAID SECURITIES STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION AND SUCH OPINION IS IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY; OR (C) PURSUANT TO RULE 144
UNDER SUCH ACT.


 


VENDINGDATA
CORPORATION

NOTE DUE JANUARY 2, 2004


 


 


	
  $1,000,000

  	
  October 21, 2003

  



 


For Value Received, the undersigned, VendingData Corporation, a
Nevada corporation (“Obligor”), hereby promises to pay to the order of Triage
Offshore Fund, Ltd. or its registered assigns (“Holder”) on January 2, 2004,
the principal sum of One Million Dollars ($1,000,000) and to pay an interest
fee (the “Fee”) in the amount of Fifty Thousand Dollars ($50,000).  The
outstanding principal balance under this Note and the Fee shall be due and
payable in a single payment on January 2, 2004.  At its discretion, and pursuant to the terms set forth herein,
Obligor may, at any time, redeem the Note without penalty upon payment of the
face value of the Note and any unpaid portion of the Fee.


In
lieu of payment of the Fee, Holder may, at its option, and at any time until
this Note is paid-in-full, elect to waive payment of the Fee, or a portion
thereof, in exchange for shares of Obligor’s common stock (“Common Stock”) at
the conversion price of $2.25 per share, (the “Conversion Price”), subject to such adjustment or
adjustments, if any, of such Conversion Price and the Common Stock issuable
upon conversion.  If the obligor elects
to pre-pay the Note, it shall provide five (5) business days notice of the same
to the Holder.  Within three (3)
business days of Holder’s receipt of such notice, it shall notify Obligor, in
writing, of its intent to either (1) receive payment of the Fee; or (2) waive
payment of the Fee, or a portion thereof, in exchange for shares of Common
Stock.  If Obligor does not provide
Holder with written notice of its intent to pre-pay the Note, then Holder
shall, no later than December 30, 2003, notify Obligor, in writing, of Holder’s
intent to either receive payment of the Fee, or a portion thereof, or to waive
payment of the Fee in exchange for shares of Common Stock.  Upon Obligor’s receipt of the conversion
notice attached hereto, or of  a
separate written notice substantially in the form of such conversion notice,
duly executed by Holder  and
stating that the Holder elects to convert the Fee, or a portion thereof,
Obligor shall, as soon as practicable after the maturity or pre-payment of the
Note, deliver or cause to be delivered a certificate for the number of full
shares of Common Stock issuable upon the conversion.  No fractional shares will be issued on conversion, and instead of
any fractional interest, Obligor shall pay a cash adjustment.  The stock certificate(s) shall be registered
in the name of such Holder.  If Obligor
shall, prior to the conversion of the Fee or payment of this Note in full, (i)
declare a 


 

















 


dividend or make a
distribution of its Common Stock payable in shares of its Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or (iv) issue any shares of
capital stock of Obligor by reclassification or capital reorganization of its
Common Stock, then the conversion privilege and the Conversion Price in effect
immediately prior to such action shall be adjusted so that Holder shall be
entitled to receive the number and kind of shares of Common Stock or other
capital stock which Holder would have owned or have been entitled to receive
immediately after such action had Holder converted this Note immediately prior
to the record date in the case of (i), or the effective date in the case of
(ii), (iii) or (iv).


If Obligor does not
redeem this Note on or before January 2, 2004, Obligor shall issue to Holder
25,000 warrants with an exercise price of $2.25 per share for each $1 million
in principal that remains outstanding for each thirty (30) day period beyond
January 2, 2004, subject to the adjustments described in the immediately
preceding paragraph.


This Note shall be pari passu with the Obligor’s outstanding
10% partially convertible notes.


Obligor may not, without
the prior written consent of Holder, issue other indebtedness that has a senior
ranking to this Note in priority of payment. 
In the event any action is taken to collect or enforce the indebtedness
evidenced by this Note (the “Indebtedness”) or any part thereof, Obligor agrees
to pay, in addition to the principal and Fee due and payable hereon, all costs
of collecting this Note, including reasonable attorneys’ fees and expenses.
These costs shall include any expenses incurred by Holder in any bankruptcy,
reorganization, or other insolvency proceeding.


No delay or omission of
Holder in exercising any right or rights, shall operate as a waiver of such
right or any other rights. A waiver on one occasion shall not be construed as a
bar to or waiver of any right or remedy on any future occasion.


The liability of Obligor
under this Note (and the liability of any endorsers of this Note) shall not be
discharged, diminished or in any way impaired by (a) any waiver by Holder or
failure to enforce or exercise rights under any of the terms, covenants or
conditions of this Note, (b) the granting of any renewal, indulgence, extension
of time to Obligor, or any other obligors of the Indebtedness, or (c) the
addition or release of any person or entity primarily or secondarily liable for
the Indebtedness.


In
no event shall the Fee or any interest rate charged or received hereunder at any time exceed the
maximum interest rate permitted under applicable law. Payments of the Fee or
any interest received by Holder hereunder which would otherwise cause the Fee
or interest rate hereunder to exceed such maximum Fee or interest rate shall,
to the extent of such excess, be deemed to be (and be deemed to have been
contracted as being) prepayments of principal and applied as such.


This Note shall be binding
upon the undersigned and its successors and assigns and shall inure to the
benefit of Holder and its successors and assigns. Every person and entity at
any time liable for the payment of this Note hereby waives demand, presentment,
protest, notice of protest, notice of nonpayment due and all other requirements
otherwise necessary to hold them immediately liable for payment hereunder.


This Note is governed by
and shall be construed and enforced in accordance with the laws of the State of
Nevada.  Any dispute arising under this
Note shall be brought in any state of federal court of competent jurisdiction
sitting in Clark County, Nevada.


 


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Time is of the
essence with respect to all of the terms and provisions of this Note.


	
   

  	
  VendingData Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stacie L. Brown, Attorney-In-Fact for

  
	
   

  	
   

  	
  Steven J. Blad 

  President and Chief Executive Officer

  
	
   

  	
  Date:

  	
  October 21, 2003

  



 


 


 


 


3

















 


NOTICE OF CONVERSION


To VendingData Corporation:


The undersigned owner of
this Note due January 2, 2004 (this “Note”) hereby irrevocably exercises the
option to convert the Fifty Thousand Dollar ($50,000.00) interest fee into
shares of restricted common stock of VendingData Corporation (“Common Stock”),
in accordance with the terms and conditions of this Note, and directs that the
shares of restricted Common Stock issuable and deliverable upon conversion be
issued and delivered to the undersigned. 



	
  DATED:

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED:

  	
   

  	
   

  	
  SIGNED:

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  
	
  ITS:

  	
   

  	
   

  	
  ITS:

  	
   

  
						



 


 


 


 


 


 


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