**EXHIBIT10.1**

 

**THISPROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.  THIS PROMISSORY NOTE MAY NOT BE SOLD,DISTRIBUTED, PLEDGED, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISEDISPOSED OF UNLESS: (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCHACT AND APPLICABLE STATE SECURITIES LAW COVERING ANY SUCH TRANSACTION INVOLVINGTHIS PROMISSORY NOTE; (B) THE COMPANY (DEFINED BELOW) RECEIVES AN OPINION OFLEGAL COUNSEL FOR THE HOLDER OF THIS PROMISSORY NOTE STATING THAT SUCHTRANSACTION IS EXEMPT FROM REGISTRATION AND SUCH OPINION IS IN FORM ANDSUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY; OR (C) PURSUANT TO RULE 144UNDER SUCH ACT.**

 

**VENDINGDATA CORPORATION9% NOTE DUE AUGUST 15, 2007**

** **
| $                            |   | August    , 2004 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|

 

For Value Received, the undersigned VendingData Corporation, aNevada corporation (“Obligor”), hereby promises to pay to the order of                   or (his/her/its) registered assigns (“Holder”) on August 15, 2007 (the “PaymentDate”), the principal sum of                   Dollars ($           )and to pay interest on the unpaid principal balance hereof from the date hereofat a rate of 9% per annum, payablesemi-annually, in arrears, on June 1 and December 1, until this Noteis paid off and satisfied in full. Interest shall be calculated on the basis of a 365/366-day year andactual days elapsed.  Accrued but unpaidinterest 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 the Payment Date.  Atits discretion, Obligor may, at any time, redeem the Note prior to the PaymentDate (“Pre-Payment”).  If a Pre-Paymentoccurs on or prior to August 15, 2005, the unpaid principal balance will bemultiplied by one hundred and three percent (103%).  If a Pre-Payment occurs after August 15, 2005and prior to August 15, 2006, the unpaid principal balance will be multipliedby one hundred one and five/tenths percent (101.5%).  If a Pre-Payment occurs on or after August15, 2006, the unpaid principal shall remain at par.

 

This Note is being issued as part of a Unit consisting of a CommonStock Purchase Warrant (the “Warrant”) to purchase One Thousand Five Hundred (1,500)shares of the Obligor’s common stock (“Common Stock”) with an exercise price ofFive Dollars ($5.00) per share for each Twenty-Five Thousand Dollars ($25,000)of original principal amount of this Note.

 

This Note and the Warrant are not detachable unless and until this Noteis satisfied and paid in full in accordance herewith.  Exercise of certain rights under the Warrantare expressly subject to certain conditions contained therein and herein.

 

This Note is secured pursuant to the terms of that certain SecurityAgreement of even date herewith.  Holderagrees that all notices, demands, consents and other rights of Holder are to beexercised pursuant to that certain Security Agreement of even date herewith.

 

This Note and the Warrant are issued as part of a private placement ofup to Ten Million Dollars ($10,000,000) in senior notes and warrants (the “PrivatePlacement”).  This Note shall be *pari passu* to all of the Notes issued aspart of the Private Placement.  As long asat least fifteen percent (15%) of the

 

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original outstanding principal on the notes issuedunder the Private Placement is outstanding, Obligor hereby agrees to not issueother indebtedness that is senior in rank to this Note, or any note issuedpursuant to the Private Placement, and hereby agrees to not issue more thanFifteen Million Dollars ($15,000,000) in indebtedness (including that totalresulting from the Private Placement) unless:

 

1.                                       Obligor obtains the prior written consentfrom holders of at least two-thirds (2/3rds) of the then outstanding and unpaidprincipal on the notes issued under the Private Placement; or

 

2.                                       Obligor agrees to use the proceeds fromany such issuance of indebtedness to repay the then outstanding and unpaidprincipal on the notes issued under the Private Placement.

 

In the event any action is taken to collect or enforce this Note,Obligor agrees to pay, in addition to the principal and interest due andpayable hereon, all reasonable costs of collecting this Note, includingreasonable attorneys’ fees and expenses. These costs shall include any expensesincurred by Holder in any bankruptcy, reorganization, or other insolvencyproceeding.

 

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:  (1) any waiver by Holder orfailure to enforce or exercise rights under any of the terms, covenants orconditions of this Note; (2) the granting of any renewal, indulgence, extensionof time to Obligor, or any other obligors of the Indebtedness; or (3) theaddition or release of any person or entity primarily or secondarily liable forthe Indebtedness.

 

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

 

Holder may not assign this Note without theprior written consent of Obligor, which consent may be granted or withheld inObligor’s sole discretion.  Any purportedassignment in violation of this provision shall be void.  This Note shall be binding upon the Obligor and itssuccessors and assigns and shall inure to the benefit of Holder and itssuccessors and assigns. Every person and entity at any time liable for thepayment of this Note hereby waives demand, presentment, protest, notice ofprotest, notice of nonpayment due and all other requirements otherwisenecessary to hold them immediately 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 bebrought in any state of federal court of competent jurisdiction sitting inClark County, Nevada.

 

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

 
|     | VENDINGDATA CORPORATION |
|----------|-------------------------|
|     |                    |   |
|     |                    |   |
|     | By:                     |   |   |
| * * | * *                | *Steven J. Blad**President and Chief Executive Officer* |

 

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