Document:

Exhibit
10.6

 

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

10% NOTE DUE SEPTEMBER 16, 2003

 

	
  $1,000,000.00

  	
  June 18, 2003

  

 

FOR VALUE RECEIVED, the undersigned
VendingData Corporation, a Nevada corporation (“Obligor”), hereby promises to
pay to the order of Triage Capital Management, LP or (his/her/its) registered
assigns (“Holder”) on September 16, 2003, the principal sum of One Million
Dollars ($1,000,000) and to pay interest on the unpaid principal balance hereof
from 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 of
a 365/366-day year and actual days elapsed. 
Accrued but unpaid interest shall not be compounded.  The outstanding principal balance under this
Note and all accrued and unpaid interest shall be due and payable in a single
balloon payment on September 16, 2003.  At its discretion, Obligor may,
at any time, redeem the Note without penalty upon payment of the face value of
the Note and any unpaid and accrued interest.

 

If Obligor does not redeem the note on or
before September 16, 2003, Holder
may convert the then outstanding
principal amount of this
Note, at the Holder’s option, and at any time after September 16, 2003 and
until the payment of this Note,
into shares of Obligor’s common stock (the “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.  Upon surrender of this
Note, duly endorsed or assigned to Obligor, or in blank to Obligor, with the
conversion notice attached hereto, or accompanied by  a separate written notice substantially in the form of such
conversion notice, duly executed by Holder  and
stating that the Holder elects to convert this Note, or if less than the entire
principal amount hereof is to be converted (but in not less than $49,500
increments), the portion hereof to be converted.  Obligor shall, as soon as practicable, deliver or cause to be
delivered a certificate for the number of full shares of Common Stock issuable
upon the conversion and a new promissory note representing the remaining unpaid
principal amount and accrued interest. 
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 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).

 

This Note is being issued in connection with a Common Stock Purchase
Warrant (the “Warrant”) to purchase up to Fifty Thousand (50,000) shares of
Common Stock.  This Note and the Warrant
are not detachable unless and until this Note is satisfied and paid in full in
accordance herewith.  Exercise of
certain rights under the Warrant are 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, 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 interest 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 interest rate charged
or received hereunder at any time exceed the maximum interest rate permitted
under applicable law. Payments of interest received by Holder hereunder which
would otherwise cause the interest rate hereunder to exceed such maximum
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.

 

2

 

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

 

	
   

  	
  VENDINGDATA CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /S/ Stacie L. Brown

  
	
   

  	
   

  	
  Stacie L. Brown,

  
	
   

  	
   

  	
  Attorney-in-Fact for

  Steven J. Blad

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
  Date:

  	
  July 21, 2003

  

 

3

 

NOTICE
OF CONVERSION

 

TO
VENDINGDATA CORPORATION:

 

The undersigned owner of this 10% Note due September 16, 2003
(this “Note”) hereby irrevocably exercises the option to convert the currently
outstanding principal amount of this Note 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:

  	
   

  	
   

  

 

4Exhibit 10.7

 

THIS WARRANT AND THE
SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW.  THIS WARRANT 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 THIS WARRANT
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.

 

WARRANT TO PURCHASE

 

SHARES OF COMMON STOCK

 

VENDINGDATA CORPORATION

 

THIS IS TO CERTIFY THAT, for value received, Triage Capital Management,
LP (the “Holder”) is entitled, during a specified period of time as set forth
in Section 3 herein (the “Exercise Period”), to purchase from VendingData
Corporation, a Nevada corporation (the “Company”), Fifty Thousand (50,000)
fully paid and nonassessable shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), at an exercise price per share as set
forth in Section 1 herein (the “Exercise Price”) (such number of shares
and the Exercise Price being subject to adjustment as provided herein).  The term “Warrant,” as used herein, refers
to this Warrant to Purchase Shares of Common Stock, the term “Warrant Shares,”
as used herein, refers to the shares of Common Stock purchasable hereunder, and
the term “Parties,” as used herein, refers collectively to the Holder and the
Company.  This Warrant is issuable only
in connection with that certain $1,000,000 principal amount 10% Note due
September 16, 2003, dated as of the same date hereof to Holder and the
Company (as “Obligor”) (collectively hereinafter the “Note”).

 

TERMS AND CONDITIONS

 

This Warrant is subject to the following terms, provisions,
and conditions:

 

1.                                       Exercise Price.  The Exercise Price shall be $2.25 per share.

 

2.                                       Manner
of Exercise; Issuance of Certificates; Payment for Shares.  Subject to the provisions hereof, this
Warrant may be exercised by the Holder, in whole or in part (but in not less
than 1,000 share increments): 
(a) by the surrender of this Warrant, together with an exercise
agreement in the form attached hereto (the “Exercise Agreement”), duly
completed and executed by the Holder, to the Company during normal business
hours on any business day at the Company’s principal executive offices (or such
other location as the Company may designate by notice to the Holder); and
(b) upon the payment to the Company in cash, by certified or official bank
check or by wire transfer for the account of the

 

 

Company in the amount of the
Exercise Price multiplied by the number of 
Warrant Shares for which the Warrant is being exercised.

 

The Warrant Shares so purchased shall be deemed to be
issued to the Holder, as the record owner of such Warrant Shares, as of the
close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been delivered, and
payment shall have been made for such Warrant Shares as set forth above.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) business days, after
this Warrant shall have been so exercised. 
The certificates so delivered shall be in such denominations as may be
reasonably requested by the Holder and shall be registered in the name of the
Holder or such other name as shall be designated by the Holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the Holder a new warrant representing the number of
Warrant Shares with respect to which this Warrant shall not then have been
exercised.

 

3.                                       Exercise
Period.  This Warrant may be
exercised any time before 2:00 p.m., Las Vegas, Nevada time, June 18,
2008.

 

4.                                       Redemption.  Notwithstanding anything else herein to the
contrary, this Warrant may be called and redeemed, if not previously exercised,
after the Company gives written notice to the Holder of the Company’s election
to call and redeem (the “Redemption Notice”) the Warrant and if, within thirty
(30) days of such Redemption
Notice, the Holder has not exercised the Warrant pursuant to the terms
hereof.  In the event of such
redemption, the Company must pay to the Holder consideration equal to the par
value of the shares issuable pursuant to the Warrant.

 

5.                                       Covenants
of the Company.  The Company hereby covenants and
agrees as follows:

 

(a)                                  Shares
to be Fully Paid.  All Warrant
Shares shall, upon issuance in accordance with the terms of this Warrant, be
validly issued, fully paid, and non-assessable.

 

(b)                                 Reservation
of Shares.  During the Exercise
Period, the Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient number of
shares of Common Stock to provide for the exercise of this Warrant.

 

(c)                                  Successors
and Assigns.  This Warrant shall be
binding upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company’s assets.

 

6.                                       Adjustment
Provisions. During the Exercise Period, the Exercise Price and the number
of Warrant Shares shall be subject to adjustment from time to time as provided
in this Section 6.  If the Company
shall, prior to the payment of the Note in full, (a) declare a dividend or
make a distribution of Common Stock
payable in shares of Common Stock, (b) subdivide its outstanding shares of
Common Stock, into a greater number of shares of Common Stock,
(c) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (d) issue any shares of capital stock of the
Company by reclassification or capital reorganization of its shares of Common
Stock, then the number of Warrant Shares and the Exercise Price in effect
immediately prior to such action shall be adjusted so that the Holder shall be
entitled to receive the number and kind of shares of Common Stock or other
Capital Stock which the Holder would have owned or have been entitled to
receive immediately after such action had the Holder exercised the Warrant
immediately prior to the record date in the case of (a), or the effective date
in the case of (b), (c) or (d). In the event that any adjustment of the
Exercise Price as required herein results in a fraction of a cent, such
Exercise Price shall be rounded up to the nearest cent.

 

2

 

7.                                       Payment
of Expenses.  The Company and the
Holder shall each be responsible for their own costs and expenses payable in
connection with:  (a) the
negotiation, preparation, execution and delivery of this Warrant and the other
agreements to be executed in connection herewith; and (b) the issuance of
certificates for Warrant Shares upon the exercise of this Warrant.  The Company shall pay any issuance tax in
connection with the issuance of certificates for Warrant Shares; provided,
however, that the Holder shall be responsible for any income or other taxes in
connection with such issuance.

 

8.                                       No
Rights or Liabilities as a Stockholder. 
This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase Warrant Shares, and no
mere enumeration herein of the rights or privileges of the Holder, shall give
rise to any liability of such Holder for the Exercise Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.

 

9.                                       Transfer,
Exchange, and Replacement of Warrant. 
This Warrant, nor any interest in this Warrant, may be sold,
distributed, assigned, offered, pledged or otherwise transferred without the
express written consent of the Company.

 

(a)                                  Exchange
of Warrants; Replacements of Warrants. 
This Warrant is exchangeable upon the surrender hereof by the Holder to
the Company at its office for a new Warrant of like tenor and date representing
in the aggregate the right to purchase the number of shares of Common Stock
purchasable hereunder, each of such new Warrants to represent the right to
purchase such number of shares of Common Stock (not to exceed the aggregate
total number purchasable hereunder) as shall be reasonably designated by the
Holder at the time of such surrender. 
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction, or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity, or security reasonably satisfactory
to it, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant.

 

(b)                                 Cancellation:
Payment of Expenses.  Upon the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Section 9, this Warrant shall be promptly
canceled by the Company.  The Company
and the Holder shall each be responsible for their own costs and expenses
payable in connection with the preparation, execution, and delivery of new
Warrants pursuant to this  Section 9.  The Holder shall be responsible for any tax which may be payable
in connection with any transfer of a certificate for Warrant Shares.

 

(c)                                  Registrar.  The Company shall maintain, at its principal
executive offices (or such other location as the Company may designate by
notice to the Holder), a registrar for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee and each prior owner
of this Warrant.

 

10.                                 Amendments.  No amendment or modification of this  Warrant
shall be deemed effective unless and until such amendment or modification is an
express writing executed by both the Parties.

 

11.                                 Governing
Law. This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of Nevada without regard to the
body of law controlling conflicts of law. The parties hereto hereby submit to
the exclusive jurisdiction of the courts located in Clark County, Nevada, with
respect to any dispute arising under this Warrant and the transactions contemplated
hereby.

 

3

 

12.                                 Registration
Rights.

 

(a)                                  Piggyback
Registration Rights.  Whenever the
Company proposes to register any of its equity securities under the Securities
Act (other than a registration on Form S-4 or Form S-8 or any successor or
similar forms) and the registration form to be used may be used for the
registration of the Warrant Shares, whether or not for sale for its own
account, the Company will give prompt written notice to Holder of its intention
to effect such a registration and will include in such registration all of the
Warrant Shares with respect to which the Company has received written request
for inclusion therein within twenty (20) days after the receipt of the
Company’s notice; provided, however, such “piggyback” registration (a
“Piggyback Registration”) shall be subject to the terms and conditions of an
underwriting agreement among the Company, Holder and the managing underwriter,
if applicable, the customary underwriter cut back provisions and the execution
of a customary standstill of not less than one hundred and eighty (180)
days.  In addition, the Company and the
managing underwriters, if applicable, shall have the right to terminate or
withdraw any registration initiated by the Company or to reduce the number of
shares proposed to be registered in view of market conditions.

 

(b)                                 Registration
Procedure.  Upon the request by
Holder to initiate either a Piggyback Registration or a Demand Registration,
the Company will use its best efforts to effect the registration of the
relevant Warrant Shares in accordance with the intended method of disposition
thereof.

 

(c)                                  Restrictions.  The registration rights granted under this
Section 12 are expressly subject to the following terms and
conditions:  (a) Holder, along with other investors in the
Offering, as a group, shall each be entitled to initiate only two (2)  Piggyback
Registrations; and (b) Holder may not assign any of its rights granted under
this Section 12.

 

(d)                                 Fees.  The Company shall pay all Registration
Expenses relating to any registration of the Warrant Shares hereunder.  “Registration Expenses” shall mean all
reasonable fees and expenses incident to the Company’s performance of or compliance
with this Section 12. Notwithstanding the foregoing, Holder shall pay any
and all underwriting discounts, commissions and transfer taxes attributable to
the Warrant Shares and the fees of Holder’s own counsel in connection with the
sale of the Warrant Shares.

 

(e)                                  Cooperation;
Indemnification by Holder.  In
connection with any registration statement in which Holder is participating,
Holder will furnish to the Company in writing such information and documents as
the Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify and
hold harmless the Company, its affiliates and their respective officers,
directors, employees and affiliates against any losses, claims, damages,
liabilities, joint or several, to which such parties may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon:  (a) any untrue or alleged untrue statement of a material fact
contained in the registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto or in any application; or (b)
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is made in such registration
statement, any such prospectus or preliminary prospectus or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information prepared and furnished to the Company by such holder
expressly for use therein, and such holder will reimburse the Company, its
affiliates and their respective officers, directors, employees and affiliates
for any legal or any other expenses incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however,
that the obligation to indemnify will be individual to Holder and will be
limited to the net amount of proceeds received by Holder from the sale of the
Warrant Shares pursuant to such registration statement.

 

4

 

(f)                                    Termination.  The ability of Holder to initiate a
Piggyback Registration shall terminate upon the earlier to occur of:  (a) three (3) years after the date of this
Warrant; (b) the date Holder no longer holds the Warrant Shares; (c) the
exercise by Holder of the two (2) Piggyback Registrations granted by
Section 12; or (d) the ability of Holder to sell its Warrant Shares then
owned immediately pursuant to Rule 144 of the Securities Act.

 

13. 13.               Expiration Date.  This Warrant shall expire and become null
and void and of no further force or effect at 5:00 p.m. Las Vegas, Nevada time
no later than June 18, 2008.

 

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

 

 

	
   

  	
  VENDINGDATA CORPORATION

  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  Stacie L. Brown   7/21/03

  
	
   

  	
   

  	
  Stacie L. Brown,

  
	
   

  	
   

  	
  Attorney-in-Fact for

  Steven J. Blad

  
	
   

  	
   

  	
  President and Chief
  Executive Officer

  
	
   

  	
  Date:

  	
  June 18, 2003

  

 

5

 

EXERCISE AGREEMENT

 

TO:                            VENDINGDATA
CORPORATION (THE “COMPANY”)

 

The undersigned, pursuant to the provisions set forth in the attached
Warrant to Purchase Shares of Common Stock (the “Warrant”) hereby irrevocably
elects and agrees to purchase
                      
shares (the “Exercised Shares”) of the Company’s common stock (“Common Stock”)
covered by the Warrant and makes payment herewith in full therefore at the
price per share provided by the Warrant in cash or by certified or official
bank check in the amount of $                                 .  If said number of shares of Common Stock
shall not be all the shares purchasable under the Warrant, a new warrant is to
be issued in the name of said undersigned covering the balance of the shares
purchasable thereunder less any fraction of a share paid in cash.  Please issue a certificate or certificates
for the Exercised Shares in the name of and pay any cash for any fractional
share to:

 

 

	
   

  	
  NAME:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SIGNATURE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DATED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ADDRESS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NOTE:

  	
  The above signature
  should correspond exactly with the name on the face of the Warrant.

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