**Exhibit10.8**

 

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

 

**VENDINGDATA CORPORATION10% NOTE DUE NOVEMBER 22, 2003**

 
| $3,000,000 | July 25, 2003 |
|------------|--------------------|

 

FOR VALUE RECEIVED, the undersignedVendingData Corporation, a Nevada corporation (“Obligor”), hereby promises topay to the order of Mellon HBV SPV, LLC or (his/her/its) registered assigns(“Holder”) on November 22, 2003, the principal sum of Three MillionDollars ($3,000,000) and to pay interest on the unpaid principal balance hereoffrom the date hereof at a rate of 10% per annum, payable until this Note is paid off and satisfied in full.  Interest shall be calculated on the basis ofa 365/366-day year and actual days elapsed. Accrued but unpaid interest shall not be compounded.  The outstanding principal balance under thisNote and all accrued and unpaid interest shall be due and payable in a singleballoon payment on November 22, 2003. At its discretion, Obligor may, at any time, redeem the Note without penaltyupon payment of the face value of the Note and any unpaid and accrued interest.

 

Holder may convert up to 15% of the thenoutstanding principal amount of this Note, at the Holder’s option, and at anytime until this Note is paid-in-full, into shares of Obligor’s common stock(“Common Stock”) at the conversion price of $2.25 per share, (the “ConversionPrice”), subject to such adjustment or adjustments, if any, of suchConversion Price and the Common Stock issuable upon conversion.  Upon surrender of this Note, duly endorsedor assigned to Obligor, or in blank to Obligor, with the conversion noticeattached hereto, or accompanied by****aseparate written notice substantially in the form of such conversion notice,duly executed by Holder****andstating that the Holder elects to convert up to 15% of the outstandingprincipal amount of this Note, Obligor shall, as soon as practicable, deliveror cause to be delivered a certificate for the number of full shares of CommonStock issuable upon the conversion and a new promissory note representing theremaining unpaid principal amount and accrued interest.  No fractional shares will be issued onconversion, and instead of any fractional interest, Obligor shall pay a cashadjustment.  The stock certificate(s)shall be registered in the name of such Holder.  If Obligor shall, prior to the conversion or payment of this Notein full, (i) declare a dividend or make a distribution of its Common Stockpayable in shares of its Common Stock, (ii) subdivide its outstanding shares ofCommon Stock into a greater number of shares of Common Stock, (iii) combine itsoutstanding shares of Common Stock into a smaller number of shares of CommonStock, or (iv) issue any shares of

 

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capital stock of Obligor by reclassification or capital reorganizationof its Common Stock, then the conversion privilege and the Conversion Price ineffect immediately prior to such action shall be adjusted so that Holder shallbe entitled to receive the number and kind of shares of Common Stock or othercapital stock which Holder would have owned or have been entitled to receiveimmediately after such action had Holder converted this Note immediately priorto the record date in the case of (i), or the effective date in the case of(ii), (iii) or (iv).

 

This Note is being issued in connection with a Common Stock PurchaseWarrant (the “Warrant”) to purchase up to Two Hundred Twenty-Five Thousand(225,000) shares of Common Stock.  IfObligor does not redeem this Note on or before November 22, 2003, Obligorshall issue to Holder an additional 50,000 warrants with an exercise price of$2.25 per share for each $1 million in principal that remains outstanding foreach thirty (30) day period beyond November 22, 2003, subject to theadjustments described in the immediately preceding paragraph.  Exercise of certain rights under the Warrantare expressly subject to certain conditions contained therein and herein.

 

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, issueother indebtedness that has a senior ranking to this Note in priority ofpayment.  In the event any action istaken to collect or enforce the indebtedness evidenced by this Note (the“Indebtedness”) or any part thereof, Obligor agrees to pay, in addition to theprincipal and interest due and payable hereon, all costs of collecting thisNote, including reasonable attorneys’ fees and expenses. These costs shallinclude any expenses incurred by Holder in any bankruptcy, reorganization, orother insolvency proceeding.

 

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

 

The liability of Obligor under this Note (and the liability of anyendorsers of this Note) shall not be discharged, diminished or in any wayimpaired by (a) any waiver by Holder or failure to enforce or exercise rightsunder any of the terms, covenants or conditions of this Note, (b) the grantingof any renewal, indulgence, extension of time to Obligor, or any other obligorsof the Indebtedness, or (c) the addition or release of any person or entityprimarily or secondarily liable for the Indebtedness.

 

In no event shall the interest rate chargedor received hereunder at any time exceed the maximum interest rate permittedunder applicable law. Payments of interest received by Holder hereunder whichwould otherwise cause the interest rate hereunder to exceed such maximuminterest rate shall, to the extent of such excess, be deemed to be (and bedeemed to have been contracted as being) prepayments of principal and appliedas such.

 

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

 

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

 

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Time is of theessence 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:                   | August 13 , 2003 |

 

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**NOTICEOF CONVERSION**

 

**TOVENDINGDATA CORPORATION:**

 

The undersigned owner of this 10% Note due November 22, 2003 (this“Note”) hereby irrevocably exercises the option to convert up to 15% of thecurrently outstanding principal amount of this Note into shares of restrictedcommon stock of VendingData Corporation (“Common Stock”), in accordance withthe terms and conditions of this Note, and directs that the shares ofrestricted Common Stock issuable and deliverable upon conversion be issued anddelivered to the undersigned.  

 
| DATED:  |   |   |    |
|---------|--------|--------|---------|
|    |   |
| ATTEST: |   |   |    |
|    |   |
| SIGNED: |   |   | SIGNED: |   |   |
|    |   |
| BY:     |   |   | BY:     |   |   |
|    |   |   |
| ITS:    |   |   | ITS:    |   |   |

 

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