Document:

Exhibit 10.38

 

"CONFIDENTIAL TREATMENT REQUESTED.
CONFIDENTIAL PORTIONS

OF THIS DOCUMENT HAVE BEEN REDACTED AND FILED
SEPARATELY

WITH THE SECURITIES AMD EXCHANGE
COMMISSION"

 

DECK-CHECKER®

DISTRIBUTION AGREEMENT

 

This
Deck-Checker® Distribution (this “Agreement”) dated the 19th day of September,
2002 is made by and between Vending Data Corporation, a Nevada Corporation,
6830 Spencer Street, Las Vegas, Nevada 89119, USA (“VDC”) and TCS Aces Pty
Limited 41-43 Dickson Avenue, Artarmon, N.S.W. 2064 Australia (“ACES”).

 

RECITALS

 

WHEREAS, VDC
is negotiating the purchase from Dolphin Advanced Technologies Pty Ltd. and
Dolphin Products Pty Ltd. (collectively “DAT”) of the technology for a Product,
which is a card scanning and verification machine;

 

WHEREAS, ACES
is the Australian subsidiary of Technical Casino Services Ltd, a company
incorporated in the United Kingdom which is the parent company of a group which
manufactures and distributes gaming equipment world wide; and

 

WHEREAS, upon
the closing of the proposed purchase and sale transaction between VDC and DAT,
VDC wishes to appoint ACES to distribute, service and maintain the Product, and
ACES wishes to accept such appointment on the following terms and conditions.

 

NOW THEREFORE,
in consideration of the mutual covenants and undertakings herein, and other
good and valuable consideration, the parties agree as follows:

 

ART. 1   DEFINITIONS

 

In this Agreement, unless the
context otherwise requires:

 

1.1                                 “Agreement” means this
agreement including all Schedules hereto.

1.2                                 “Associate” means and
includes any related corporate body of either party.

1.3                                 “Business Day” means a
day on which Wells Fargo Bank in Las Vegas, Nevada is open for business.

1.4                                 “Claims” means any
claim, action, damage, demand, loss, liability and cost and includes without
limitation, claims in tort (including negligence), contract and any claim for
consequential loss including loss of profits or damage of any kind howsoever
caused or arising.

1.5                                 “Closing” means the
closing of VDC’s purchase of the Product from DAT.

1.6                                 “Duty” means any
stamp, transaction or registration duty or similar charge imposed by any
governmental agency and include without limitation, any interest, fine,
penalty, charge or other amount imposed with respect thereto.

1.7                                 “Exclusive
Distributor” or “Exclusive Distributorship” means with respect to the
Territory, that VDC has appointed only ACES to market, sell and distribute the

 

 

Product together with providing maintenance, service and warranty
services for the Product.

1.8                                 “Force Majeure” means
any event or happening beyond the control of the affected party, which has the
effect of delaying, preventing or hindering the performance of any right or
obligation hereunder and includes without limitation fire, flood, hail, storm damage,
earthquakes, acts of God, acts of war, strikes, civil commotions, industrial
disruption, strike, lockout, labor conflicts, power or other utility failure,
materials shortage or cessation of supply.

1.9                                 “Intellectual
Property” means the patent applications, designs and trademarks and any other
industrial or intellectual property right subsisting in the Territory in
respect of the Product.

1.10                           “Law” means without
limitation, all legislation, rules, regulations, by-laws or other statutory
obligation, whether state or federal in the United States or any other state or
country, and includes all laws and codes (whether voluntary or otherwise)
pertaining to Product quality, standards and safety.

1.11                           “Marketing Program” means
ACES development and use of specific marketing incentives, tools, manuals,
advertising and promotional materials that are specifically designed for the
Product.

1.12                           “Material Breach” means any
breach under Arts. 5, 10, 11, 12, and 15 of this Agreement.

1.13                           “Patents” or “Patent Rights”
means patents and applications for patents and all patents hereafter issuing
upon such applications which validly cover the Product, or which validly cover
a process for the manufacturing of Product including any additions, divisions,
continuations, substitutions, extensions, renewals thereof obtained from time
to time.

1.14                           “Product” means all product
listed in Schedule I, as amended in writing by the parties from time to time
and shall be referred to and to be known as and distributed as the
“Deck-Checker®.”

1.15                           “Shipment” means delivery of
the Product from VDC ‘s facility to the destination specified in the purchase
order supplied to VDC and commences immediately when Product leaves the
premises of VDC or other nominated location.

1.16                           “Term” means the period
prescribed in Art 3.

1.17                           “Territory” means the World,
excluding North America and the Caribbean Islands.

1.18                           “Trademarks” means the
trademarks registered, in the Territory, by VDC and/or DAT, its licensor or
assignor with regard to the Product.

 

ART. 2                                 APPOINTMENT

 

VDC hereby appoints ACES for
the Term as its Exclusive Distributor for the Product in the Territory subject
to the terms and conditions of this Agreement, and ACES hereby accepts such
appointment.

 

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ART. 3                                 TERM

 

This Agreement
shall become effective upon the Closing, and continue through and including
December 31, 2007, or until terminated pursuant to the terms of this Agreement.

 

ART. 4                                 RELATIONSHIP BETWEEN
THE PARTIES

 

4.1                                           No Joint Venture.  The parties acknowledge and agree that ACES is a
separate and independent entity from VDC and that the relationship between the
parties is that of independent contractors. 
This Agreement shall not to be construed as creating an employment,
partnership joint venture, fiduciary or other similar relationship.  Neither party shall be liable for the debts
or obligations of the other, and neither has authority to bind the other to any
contracts.

 

4.2                                                       Independent Contractors.  ACES may, after obtaining the
prior, written consent of VDC, which consent may be withheld for any reason, or
no reason at all, appoint distributors, either Associate companies or
independent agents, within the Territory. 
Those distributors will operate within the provisions of this Agreement.  Either ACES or its appointed distributor
shall buy and sell the Product in its own name and on its own account.

 

ART. 5                                 OBLIGATIONS OF ACES

 

5.1                                 General Obligations. 
During the term of this Agreement, ACES shall:

(a)          promote
the interests of VDC and the Product in a commercially reasonable manner;

(b)         use
its commercially reasonable efforts to market, maintain, service and distribute
the Product and related services in the Territory in accord with the
requirements specified in this Agreement;

(c)          not,
by itself or through any Associate, manufacture the Product, directly or
indirectly, except upon the prior written consent of VDC;

(d)         not,
by itself or through any Associate, manufacture, distribute, market, sell or
promote in the Territory any product or device that is identical, similar or
competitive with the Product;

(e)          not
make any representations or give any warranties or other benefits in favor of
any proposed purchaser or lessor to the detriment of VDC beyond those given by
VDC to ACES in this Agreement.  Any
other representations and warranties that are customary in the casino industry
must be first authorized in writing by VDC;

(f)            procure
forthwith and maintain all import licenses, Product registrations, transport
permits, business licenses, gaming authority approvals and all other things
required by Law for the import, storage, sale, installation, maintenance,
service and operation of the Product in the Territory.  To the extent the above-mentioned pertain to
the corporate licensing of ACES or its appointed distributors, such costs are
to be borne by ACES or its appointed distributors.  To the extent the above-mentioned pertain to the licensing and
approval of the Product, the obligation to pay costs will be agreed on a
case-by-case basis;

 

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"CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY

WITH THE SECURITIES AND EXCHANGE
COMMISSION"

 

(g)         promote
and maintain at all times its good corporate reputation in the Territory and
ensure that its sub-distributors (if any) do likewise;

(h)         provide
VDC, on a quarterly basis, with written forecasts of its anticipated sales,
purchase requirements and firm Product orders;

(i)             maintain
an adequate stock of Product, spare parts and consumables, which, in the
reasonable opinion of ACES, is sufficient to meet customer needs (including,
with limitation, stock for projected orders, for replacement, warranty and
repair purposes and to ensure that ACES may meet its maintenance, warranty and
service obligations hereunder);

(j)             purchase
Product spare parts and consumables from VDC (or from its approved supplier)
from time to time, both for itself and for its sub-distributors (if any);

(k)          comply
with the Product storage and safety instructions at all times;

(l)             maintain
records of all consignment stock and report usage of such stock to VDC on a
quarterly basis; and

(m)       return
to VDC, upon VDC’s written instruction, damaged parts replaced under warranty.

 

5.2                                 Marketing Obligations.  ACES hereby covenants and agrees to:

(a)          use
commercially reasonable efforts to market and sell the Product and to promote,
develop and exploit the market for the Product in the Territory;

(b)         devise
and implement a Marketing Program with the purpose of promoting sales, leases
and commercial exploitation of the Product throughout the Territory;

(c)          assist
in devising promotional Product brochures and other written materials for
potential purchasers and users;

(d)         assist
in devising Product promotional videos and other promotion via the internet;

(e)          conduct
trade shows and Product demonstrations;

(f)            ensure
that all marketing materials bear the phrase or words to the effect of:

Distributed by ACES
Pty Ltd as authorised distributor of VendingData Corporation. Patent pending; and

(g)         not make marketing claims or representations inconsistent with VDC’s
Product information.

 

ART. 6                                 OBLIGATIONS OF VDC

 

During the
Term of the Agreement, VDC shall:

(a)          pay a *** royalty to ACES on the gross sales
and leases of the Product outside the Territory (the “Royalty”). VDC shall pay
the Royalty on a quarterly basis and within ten (10) Business Days of the close
of the preceding quarter.  The Royalty
specifically excludes revenue achieved by VDC on Product service contracts or
through other services rendered to VDC’s customers.

(b)         reimburse ACES *** of the monies ACES has
expended as of the effective date of this Agreement (the “Reimbursement
Amount”) for required Product approval(s) by gaming regulatory authorities
outside the Territory (the “Reimbursement Payments”).  The Reimbursement Payments shall be made only after ACES supplies
VDC with documentation that sufficiently substantiates, in

 

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"CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY

WITH THE SECURITIES AND EXCHANGE
COMMISSION"

 

VDC’s
judgment, the payments made by ACES for such required Product approval(s).  The Reimbursement Payments shall only become
due when VDC achieves revenue from the sale or rental of the Product in the
specific jurisdiction where ACES expended amounts for a required Product
approval.  Such Reimbursement Payments
shall consist of *** of VDC’s gross sales or leases in such jurisdiction, and
shall be due according to the same schedule as the Royalty, until the payment
in full of the Reimbursement Amount;

(c)          upon
receipt of Product orders from ACES, arrange for the ordered Product to be
dispatched for delivery to the location designated by ACES;

(d)         provide,
free of charge (with the exception of any associated shipping charges, which
shall be borne solely by ACES), Product upgrades of all units of the Product
owned by ACES as of the effective date of this Agreement, so that all such
units of the Product conform to the latest model specifications;

(e)          provide
ACES with all reasonable information requested by ACES as necessary for
registration, marketing and distribution of the Product;

(f)            provide
such reasonable scientific and maintenance data to the ACES with regard to the
maintenance, servicing, use and operation of the Product, as required; and

(g)         assist
ACES, subject to mutual agreement as to reasonable location, costs and timing,
in training its personnel in the Product, including without limitation, Product
maintenance and sales.

 

ART. 7                                 ORDERING
PROCEDURE & DELIVERY

 

7.1                                 Ordering Procedure. 
ACES shall order Product (including spare parts and
consumables) from VDC.  VDC estimates,
without liability and as a guide only the following minimum orders and
estimated delivery times:

 

	
  Minimum
  units of Product per order:

  	
  one (1)

  
	
  Estimated
  delivery time for minimum order:

  	
  twelve (12)
  weeks

  

 

VDC shall advise ACES of any delivery times in excess of the estimate
above.  Once placed, such orders are
irrevocable, unless the parties agree otherwise in writing.

 

7.2                               Dispatch.  The Product shall be dispatched to such
locations as ACES directs in writing and in such packaging as agreed by ACES
and VDC from time to time.  Title to all
units of the Product remains in VDC until payment has been made in full to VDC.

 

7.3                               Documentation.  VDC shall, as soon as practicable, but
no later than upon shipment of the Product, forward copies of all invoices,
delivery notes, shipping documents and all other relevant documents specified
in the order of ACES and necessary for customs clearance.

 

ART. 8                                 STOCK
& INVENTORY LEVELS

 

ACES acknowledges that VDC will utilize ACES’ projections to determine
Product manufacturing schedules and to estimate future demand in order to
achieve high customer

 

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"CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY

WITH THE SECURITIES AND EXCHANGE
COMMISSION"

 

satisfaction.  Within one month
after the first anniversary of this Agreement, and each twelve months
thereafter, VDC and ACES will agree to a minimum sales volume to be achieved
for the succeeding twelve months.

 

ART. 9                                 DUTIES
TO INSPECT AND CONFIRM

 

9.1                               Duty
to Inspect.  Within sixty (60) days
from delivery from VDC, ACES agrees to inspect each unit of the Product and to
identify any defect, which is detectable by visual inspection and basic
operation.

 

9.2                               Defective
Product.  In the event that ACES
believes a Product is defective or otherwise non-compliant in any way, Art.
13.4 (b) shall apply.

 

ART. 10                          PAYMENT
TERMS

 

ACES shall purchase units of the Product at a price equivalent to ***
of the price at which ACES sells units of the Product to its customers.  The parties recommend a customer sale price
of *** per Product unit.  Any sale to a
customer for less than the recommended sale price is to be agreed in writing by
VDC.

 

ACES shall pay to VDC, by telegraphic transfer and in United States
dollars:

(a)          an amount equal to fifty percent (50%) of the
value of ACES order for Product (including spare parts and consumables) upon
placing such order; and

(b)         the balance upon receipt of VDC’s invoice,
which will be sent at the time of shipment to ACES of the ordered Product.

 

ART. 11                          MAINTENANCE
OF INTELLECTUAL PROPERTY RIGHTS

 

11.1                        VDC
Warranties.  VDC warrants and
represents, to the best of its knowledge, that upon the Closing, it will
possess the rights of the applicant and sole legal and sole beneficial owner
for the provisional patents described in Schedule II.

 

11.2                        Trade
Marks.  ACES may at its option, sell
and distribute the Product in the Territory exclusively under any VDC
registered trademarks and/or denomination.

 

11.3                        No
Invalidating Acts.  ACES undertakes
not to do any act that might invalidate or dilute VDC’s registration of, or
title to, VDC’s Intellectual Property rights in the Product during the Term of
this Agreement, as extended.

 

11.4                        Prior
Consent.  ACES shall not undertake
any action with respect to the registration, renewal or infringement of VDC’s
Intellectual Property rights without the prior written consent of VDC.

 

11.5                        Notification
of Infringement.  VDC shall
indemnify and hold ACES harmless against liability or expense (excluding any
consequential damages such as lost profits)

 

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resulting from
any claim or suit brought against ACES for infringement of a third party’s
intellectual property arising out of ACES’ authorized use of Product in the
Territory.  As a condition of VDC’s
indemnification obligation, ACES must:

 

(a)          promptly notify VDC in writing of any such
infringement claim or suit;

(b)         allow VDC to have control of the defense of
such infringement claim or suit including control in all negotiations relating
to settlement.  Provided however, that
VDC may not settle any claim, which creates any liability against ACES without
first obtaining ACES’ written consent; and

(c)          assist VDC, as reasonably requested, in the
defense of such claim or suit.  VDC will
reimburse ACES for agreed, reasonable out-of-pocket costs incurred in providing
such assistance.

 

11.6                        Prosecution
of Claim.  VDC may, at its sole cost
and expense, prosecute any infringement claim against third parties in the
Territory where VDC has Intellectual Property rights.  ACES will reasonably cooperate with VDC in such prosecution.

 

ART. 12                          PRODUCT
WARRANTIES

 

12.1                        VDC
Warranties.  VDC warrants that each
unit of the Product will be:

(a)          free from defects in design, material and
workmanship;

(b)         corresponds to its specifications detailed in
Schedule I;

(c)          packed and labeled in accordance with ACES
directions as to the requirements of all applicable laws in the Territory;

(d)         fit for the purpose defined in Schedule I
hereto for the period of twelve (12) months for mechanical materials and
workmanship and for six (6) months for all electrical materials and workmanship
from the date of such Product retail sale or lease into the Territory.

 

12.2                        Exclusions.  VDC’s warranty in Art. 12.1 shall not
apply in the event of:

(a)          improper use or failure to comply with
Product maintenance instructions;

(b)         faulty handling, transportation or storage of
Product;

(c)          failure to follow VDC operating or use
instructions;

(d)         unauthorized alterations or modifications to
the Product, whether by ACES, its Associate or any third party.

 

12.3                        Option to
Repair.  If VDC supplies Product to
ACES in breach of any warranty in this Agreement, VDC will promptly, at its
option, repair, rectify or replace such Product.  Notwithstanding the preceding sentence, ACES may repair or
replace any defective Product at the customer location, and if it is the
subject of a proper warranty claim accepted by VDC, VDC will reimburse ACES for
its time and materials at ACES’ then current wholesale labor rates to its
casino customers and its wholesale parts costs.

 

12.4                        Warranty
to ACES Customers.  ACES shall
ensure that Product sold in the Territory is warranted to its customers in
accordance with the wording detailed in Schedule IV and as required by
Law.  ACES shall promptly inform VDC,
via facsimile

 

7

 

or email, of all warranty
claims, together with all relevant information detailing the alleged Product
defect, so that VDC and ACES may promptly evaluate and settle such warranty
claim.  ACES shall not negotiate or
settle any such claim without prior written approval from VDC.

 

12.5                        Survival
of Warranties.  All representations
and warranties contained or referred to in this Agreement or in any documents
delivered pursuant to this Agreement shall survive termination of this
Agreement.

 

ART. 13                          INDEMNIFICATION

 

13.1                        Indemnification
by VDC.  Except as provided
elsewhere in this Agreement, VDC will indemnify and hold ACES harmless against
all Claims arising directly from:

 

(a)          VDC’s non-excludable statutory liabilities
for Product under any application law, but specifically excluding those
liabilities for which ACES is or may be responsible and/or which are excluded
under this Agreement and/or for which ACES has indemnified VDC;

(b)         VDC’s breach of any warranty or representation
given to ACES as set out in this Agreement; and/or

(c)          VDC’s negligent design or manufacture of the
Product.

 

13.2                        Insurance.  VDC shall maintain Public Liability and
Product Liability insurance with minimum coverage of one million dollars
($1,000,000), such policy to note ACES as an additional insured.  VDC shall, upon ACES request, provide a
certificate of insurance, naming ACES as an additional insured.

 

13.3                        Exclusions.  Art. 13.1 shall not apply, and ACES
shall have no Claim against VDC if:

(a)          the Product Claim was caused in whole or in
part by the intentional or negligent acts or omissions of ACES, its employees,
contractors or other third party;

(b)         ACES fails to notify VDC of any Product Claim,
and such failure adversely affects or precludes VDC from defending such Product
Claim, or fails to allow VDC to conduct any respective lawsuit and/or to adjust
any such Claim; and/or

(c)          ACES recognizes or settles part or all of any
Claim without VDC’s consent.

 

13.4                        Indemnification
by ACES.  ACES will indemnify VDC
against any Claim with respect to the Product:

(a)          in connection with or arising out of any act
or omission of ACES or its employees or contractors.

(b)         Against any damage to the Product while in
transit or during storage by ACES, at ACES’ premises or during distribution
unless such Claim arises directly as a result of VDC’s negligence or
constitutes (in relation to the specific Product concerned) a breach of any
subsisting warranty in Art. 13 above.

 

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ART. 14                          LIMITATION
OF LIABILITY

 

14.1                        Exclusions.  Except as expressly provided in this
Agreement, all warranties, terms, conditions or representations whether
express, implied, statutory or otherwise are excluded.

 

14.2                        No
Liability.  VDC is not liable for
any damage to property or for any related consequential damages such as lost
profits whatsoever, whether as a result of negligence on the part of VDC or its
servants, agents or contractors or otherwise.

 

14.3                        Limitation
of Liability.  VDC shall have no
liability for any Claim relating to the Product to the extent that such Claim is
caused directly by any of the following:

(a)          any act, omission or negligence on the part
of ACES;

(b)         any failure by ACES to service, maintain or
repair the Product in accordance with VDC specifications and instructions, and
competent service, maintenance and repair standards and practices;

(c)          any Product defect arising after dispatch,
which is not a manufacturing or design defect attributable to VDC.

 

If VDC must indemnify ACES
pursuant to this Agreement, VDC’s liability shall be limited to the lower of
the cost of replacing the Product, obtaining equivalent Product or repairing
the Product.  VDC shall have no
liability for any Claim to the extent that such Claim is caused directly by any
manufacturing or design defect in the Product attributable to ACES.  In this Art. 14, any reference to VDC or
ACES means and includes their respective employees, agents, contractors or
representatives, and in the case of ACES, also includes its Product customers
and lessees.

 

ART. 15                          CONFIDENTIALITY

 

15.1                        Obligation
of Confidentiality.  The parties
undertake to maintain the confidentiality of any and all technical and
marketing information, Intellectual Property and data (collectively, the
“Confidential Information”) which they have obtained under this Agreement, and
hereby agree not to disclose or divulge such Confidential Information to others
at any time, unless that Confidential Information (or any part thereof):

 

(a)          must be disclosed by law within any part of
the Territory;

(b)         must be disclosed to governmental agencies in
connection with the registration of the Product; or

(c)          is already in the public domain other than by
breach of confidence by the recipient.

 

15.2                        Limited
Disclosure Permitted.  In the event
that ACES or VDC discloses any Confidential Information of the other, it shall:

(a)          forthwith and where possible, inform the
other of the nature and extent of any such anticipated disclosure before
disclosure occurs; and

 

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(b)         only disclose the minimum such Confidential
Information required to satisfy the requirements of the applicable Law,
registration authority or other party mandating disclosure.

 

15.3                        Written
Release.  The obligations in this
Art. 15 exclude any Confidential Information which one party provides written
authority for the other party to disclose under specific circumstances, such as
in certain cases involving promotional or marketing purposes.

 

ART. 16                          TERMINATION
OF AGREEMENT

 

16.1                        Immediate
Termination.  Without prejudice to
any other right or remedy it may have, either party (the “Terminating Party”)
may immediately terminate this Agreement by providing written notice to the
other party (the “Defaulting Party”) if:

(a)          the Defaulting Party goes into liquidation or
bankruptcy other than for purposes of reconstruction or if any official manager
administrator, receiver or similar functionary is appointed to the Defaulting
Party;

(b)         the Defaulting Party commits a Material Breach
of the Agreement and fails to rectify such breach within thirty (30) days after
receiving written notification from the Terminating Party describing such
breach;

(c)          the Defaulting Party has its business or
business activities closed down by the executive or judicial authorities in the
Territory;

(d)         an application or order is filed with, made to
or by a court or a resolution is passed for the winding up of the Defaulting
Party or notice of intention to propose such a resolution is given;

(e)          a person holding a security interest in
assets of the Defaulting Party enters into possession of or takes control of
any of those assets or takes any steps to enter into possession or control of
any of these assets; or

(f)            it becomes unlawful for the Defaulting
Party to perform its obligations under the Agreement.

 

16.2                        Termination
of ACES.  Without prejudice to any
other right or remedy either party may have, ACES may terminate this Agreement
at any time by giving three months notice in writing of its intention to do so.

 

ART. 17                          RIGHTS
AND DUTIES OF THE PARTIES UPON TERMINATION

 

17.1                        Return/Destruction of Unsold Product.  In the event of the termination
of this Agreement for whatever reason, ACES:

(a)          may return for full credit of all amounts
paid for all Product (including spare parts and consumables) in ACES’
possession which are still originally packed and in new and resaleable
condition and not otherwise subject to a current customer order;

(b)         may destroy all Product not in a resaleable
condition unless such Product is purchased by ACES for Product maintenance,
service or warranty purposes;

(c)          shall return all consignment parts held;

 

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(d)         shall forthwith return to VDC all copies
and/or other reproductions of any kind concerning the Product, including
without limitation, technical and scientific documents, and marketing material,
excluding any technical and scientific documents necessary to provide ongoing
service and maintenance for the Product; and

(e)          shall forthwith pay all monies owing to VDC
in accordance with this Agreement.

 

ART. 18                          FORCE
MAJEURE

 

18.1                        No Liability.  Neither party shall be responsible or liable for any
delay or failure in the performance of its duties under this Agreement, if such
delay or failure shall be due to Force Majeure.

 

18.2        Prompt Notice.  Each party shall promptly notify the other in writing
of any Force Majeure situation or event affecting it and shall use its best
efforts to:

(a)   avoid or remove such causes of non-performance; and

(b)   continue performance hereunder forthwith whenever
such causes are removed.

 

18.3                        Payments Excluded.  Arts. 18.1 and 18.2 shall not apply to an obligation
to pay money under this Agreement, which is a material obligation where time is
of the essence.

 

ART. 19                          GOVERNING
LAW AND JURISDICTION

 

This Agreement shall be governed
by and construed in accordance with the laws of the State of Nevada, United
States of America, and each party submits to the non-exclusive jurisdiction of
the state and federal courts located in Las Vegas, Nevada.

 

ART. 20                          DISPUTE
RESOLUTION

 

In the event a dispute arises
between the parties, the parties shall negotiate in good faith for the purpose
of expeditiously resolving such dispute, and where they are unable to do so
within ninety (90) days, the parties may either agree to the appointment of an
arbitrator and the terms surrounding the appointment of an arbitrator or may
pursue their own course of action.

 

ART. 21                          GENERAL
PROVISIONS

 

21.1                        Interpretation.  Unless the context otherwise requires,
headings and underlinings are for convenience only and do not affect the
interpretation of this Agreement; words importing the singular include the
plural and vice versa; a reference to any thing includes a part of that thing;
a reference to a part, Article (“Art.”), Schedule (“Sch.”), clause or party is
a reference to a part of, article of, schedule of, clause of or party to, this
Agreement; a reference to a document includes an amendment or supplement to or
replacement or novation of, that document; where the day on which a thing is to
be done is not a Business Day, that thing must be done on or by the succeeding
Business Day.

 

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21.2                        Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties with respect to the
matters contemplated by this Agreement and revokes and supersedes all previous
agreements, arrangements or understandings.

 

21.3                        Variation.  Except as otherwise provided for herein,
modifications or any amendments to this Agreement (including any derogation of
this clause) shall be valid only if made in writing. Evidence as to the
contents of this Agreement may only be produced in the form of written
documents duly executed by each of the parties hereto or where this Agreement
expressly provides, by any one party.

 

21.4                        Assignment.  Other than as required for the operation
of Article 4.2, neither party may assign this Agreement or any part thereof
without the prior written consent of the other, which consent shall not be
unreasonably withheld.

 

21.5                        No
Waiver.  Failure of any party to
insist upon the strict and punctual performance of any of the provisions hereof
shall not constitute a waiver nor an estoppel against asserting the right to
require such performance.  A waiver or
estoppel in one instance shall not constitute a waiver or estoppel with respect
to a later breach, whether of similar nature or otherwise. Nothing in this
Agreement shall prevent a party from enforcing its rights by such remedies as
may be available under the law.

 

21.6                        Notices.  All notices and other communication
under this Agreement to any party shall be in writing and shall be deemed given
when delivered personally to that party, transmitted via facsimile (with
electronic confirmation) to that party at the facsimile number set forth below,
mailed by certified mail (postage prepaid return receipt requested) to that
party at the address set forth below, or delivered by Federal Express or any
similar internationally recognized express delivery service for delivery to
that party at that address:

 

	
  If to VDC:

  	
   

  
	
  Address:

  	
  6830 Spencer
  Street

  
	
   

  	
  Las Vegas,
  Nevada  89119

  
	
   

  	
  United
  States

  
	
  Facsimile:

  	
  702 733 7197

  
	
  Attention:

  	
  Mr. Steven
  J. Blad

  
	
   

  	
  President
  and Chief Executive Officer

  
	
  With a copy to:

  	
  Stacie L.
  Brown

  
	
   

  	
  Corporate
  Counsel

  
	
  If to TCS
  Aces:

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  41-43
  Dickson Avenue

  
	
   

  	
  Artarmon,
  NSW

  
	
   

  	
  Australia

  
	
  Facsimile:

  	
  612 9906
  2488

  
	
  Attention:

  	
  Mr. Bryan
  Jenkins

  
	
   

  	
  Director

  

 

12

 

21.7                        Severance.  Any provision in this Agreement which
infringes any Law shall, to the extent of the infringement, be deemed void and
severable, without affecting the validity of the remainder of the Agreement.

 

 

In Witness Whereof, the parties
hereto have executed this Agreement as of the date first set forth above.

 

 

	
  VendingData Corporation,

  
	
  a Nevada corporation

  
	
   

  
	
  By:

  	
  /s/ Steven J. Blad

  	
   

  
	
   

  	
  Steven J.
  Blad

  
	
  Its:

  	
  President
  and Chief Executive Officer

  
	
   

  
	
   

  
	
  TCS ACES Pty Ltd

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Bryan Jenkins

  	
   

  
	
   

  	
  Bryan
  Jenkins

  
	
  Its:

  	
  Managing
  Director

  

 

13

 

SCHEDULE I

 

PRODUCT &
PRODUCT PERFORMANCE SPECIFICATIONS

 

 

One unit of the Product comprises:

 

(a)                        DECK-CHECKER® card scanning and
verification machine, including one output box and one roll of paper;

(b)                       Computer software for
programming the machine to accept different manufacturer’s cards, not including
the Source Code;

(c)                        Includes the annexed list of
consumables and spare parts;

(d)                       Product design Level Model No. 1
Design drawing DAT-DDC-1; Issue No. 3 1-5-2000; and

(e)                        Any
subsequent upgrade or new model.

 

 

PRODUCT
PERFORMANCE SPECIFICATIONS

 

An electromechanical device that uses optical
character verification software and hardware in combination to automatically
check one face of paper playing cards, ensuring completeness or otherwise of
individual suits in terms of the number of decks (packs) placed into the
machine by the operator. In order to perform its recognition and verification
functions, the machine must be specifically programmed for each card type by
the manufacturer or its authorized representative.

 

The device will not recognize cards that have
obscure symbols or denominations, cards that are poorly printed or printed out
of registration or die-cut in such a way as to move the recognition parameters
beyond the programmed recognition zone.

 

The device will not accept cards that are
badly damaged (either bent or torn) so as to prevent them passing freely
through the feed-slot of the hopper-loader. Because the feed mechanism is
designed to accept single cards at any one time, two or more cards that are
stuck together due to the presence of food or beverage residue will not pass
through the feed-slot.

 

The device will display on its LCD screen, or
by issuing a printed report, the status of the cards examined in terms of
completeness or otherwise e.g. Passed; Failed - extra cards, missing cards,
cards unrecognized, boxed cards.

 

Exposure to dirt, dust, moisture, vibration,
electrical interference or the permitting of extraneous light (particularly
from a fluorescent source) to enter the camera’s field of view may prevent the
proper operation of the device.

 

14

 

The device is designed to operate in a normal
office environment (humidity not exceeding 40%) and located away from devices
or equipment that emit electrical interference.

 

The device is programmed to display or print
a report showing the following information:

 

Operator #(6
digits)

Table #(6
digits)

Time

Date

Type or card
(name of manufacturer)

Game type for
which the cards will or have been used

Packs #(decks)

Cards #(total
number examined)

Seal #
(optional)

 

The device is able to examine approximately
200 cards per minute.

 

Operating power requirements are a constant
240 Volts AC at 50 Hz and a maximum 10 amps without spikes or surges.

 

Each device is supplied complete with one
out-put box with a separate lid. The out-put box is capable of being sealed for
security purposes with a tamper-evident seal (not supplied).

 

15

 

SCHEDULE II

 

INTELLECTUAL PROPERTY

 

 

A.            PATENTS

 

PCT/AU00/00150
filed 24-2-00 claiming priority from

1.                    Provisional Patent No. 1444 filed 6
July 1999

2.                    Provisional Patent No. PQ 4297
filed 24 November 1999

and
designating all countries including United States of America, Canada, Europe
and Australia (details to be advised). The parties on a case-by-case basis will
review additional countries.

 

 

B.                                    COPYRIGHT
MATERIALS

 

1.                   Operator
Training and Service Manuals

2.                   Operating
Software

3.                   Such
other documentation as VDC may provide to ACES from time to time.

 

16

 

SCHEDULE III

 

MAINTENANCE, SERVICE
& WARRANTY OBLIGATIONS

 

 

1.                                       ADEQUATE
STOCK

 

TBA

 

 

2.                                       PRODUCT
SERVICE & MAINTENANCE

 

TBA

 

 

3.                                       PRODUCT
WARRANTY

 

ACES agrees to include the
following warranty statement to all purchasers, lessees or others to whom ACES
supply the PRODUCT:

 

Subject to the warranty conditions below,
this new Product is expressly warranted VendingData Corporation (“VDC”) against
Product defects in materials and workmanship for a period of:

(a)  twelve (12) months with respect
to all mechanical materials and workmanship; and

(b)  six (6) months with respect to
all electrical materials and workmanship related thereto from the date of
original supply by ACES or its agent (“Distributor”). This warranty applies
only to an original supply from the Distributor or its agent made for other
than the purpose of resale, and is limited to, at VDC’s option, the repair or
replacement of any defective part.

 

This warranty shall not cover damage,
malfunction or failure arising from accident, misuse or misapplication,
improper or unauthorised repair, neglect, modification or use of unauthorised
replacement parts or accessories, software or interfacing supplied by the
customer, or improper voltage. The warranty shall be void if the rating label
or serial number is removed or altered.

 

VDC is not and shall not be liable for any
loss or damage to any person or entity arising directly or indirectly as a
result of:

(a)       Any Product defect
including without limitation, any defect causing or contributing to personal
injury or death, loss of profits or consequential damage of any sort;

(b)       Product misuse including
without limitation, failure to properly comply with recommended Product
operating, maintenance and servicing procedures;

 

17

 

(c)        Any other claim, action,
damage, demand, liability, fine or cost including without limitation, those
with respect to negligence, personal injury or death; and

(d)       Any act, neglect or default arising
after the Product left its manufacturer including without limitation, Product
tampering or damage.

 

This warranty expressly excludes VDC from
liability for negligence or for incidental, consequential, indirect or special
damages, including without limitation, loss of actual or anticipated revenue or
loss of business or custom of any kind.

 

This warranty is in addition to other
warranties express or implied, under any applicable mandatory statute (such as
the Trade Practices Act 1974).

 

18Exhibit 10.39

 

AMENDED ESCROW AGREEMENT

 

                This Agreement, dated the        day of            , 2003 by and between VendingData Corporation, a Nevada
corporation (“Customer”) and Wells Fargo Bank Minnesota, National Association
(“Escrow Agent”)

                1.             Receipt
of Escrow Funds.  Escrow
Agent shall receive funds via bank draft, cashier’s check or wire transfer (the
“Escrow Funds”) from time to time from Philadelphia Brokerage Corporation
(“PBC”) on behalf of Customer or directly from subscribers for Customer’s shares,
in each instance in connection with that certain offering of up to 5,000,000
shares of Customer’s common stock as set forth in that certain Registration
Statement on Form SB-2, as filed with the Securities and Exchange
Commission on  September 25, 2003, as the same may be amended from
time to time (SEC File No. 333-109115).

                2.             Investments.  The Escrow Funds shall be deposited by the
Escrow Agent in a noninterest-bearing account according to Section 4.

                3.             Interest.  The Escrow Funds shall be placed in a
noninterest-bearing account.

                4.             Disbursement of
Funds.  Escrow Agent shall
transfer the Escrow Funds or portions thereof to the Customer upon the joint
written instructions of Customer and PBC. 
If the minimum offering is not achieved within 90 days of the date of
the prospectus (unless extended by Customer and PBC), all subscription funds
will be returned on the next business day or as soon as possible after the
offering is terminated to investors without interest or deduction of fees.  Escrow Agent is not responsible and does not
warrant, convey or guarantee in any form or manner that the disbursed Escrow
Funds will be used by Customer for the purposes herein stated or stated
elsewhere.

                5.             Duty of the Escrow
Agent.  The sole duty of
Escrow Agent is to receive the Escrow Funds and hold the same pending
disbursement pursuant to Section 4 of the Escrow Agreement. Escrow Agent
is not responsible for ensuring that Customer is using the Escrow Funds for any
stated or express purposes. Escrow Agent is not responsible for accounting or
maintaining any records other than to document the wires and funds received and
Escrow Funds disbursed.

                6.             Documents.  The Escrow Agent may conclusively rely upon
and shall be protected in acting upon any statement, certificate, notice,
request, consent, order or other document believed by it to be genuine and to
have been signed or presented by the proper party or parties. The Escrow Agent
shall have no duty or liability to verify any such statement, certificate,
notice, request, consent, or order or other document and its sole
responsibility shall be to act only as expressly set forth in this Escrow
Agreement. The Escrow Agent shall be under no obligation to institute or defend
any action, suit or proceeding in connection with this Escrow Agreement unless
first indemnified to its satisfaction by the Customer.

                7.             Fees.  Escrow Agent is entitled to compensation in
accordance with “Schedule A” attached hereto and incorporated herein by
reference and shall be payable by Customer. Escrow

 

 

Agent may in its
discretion deduct said fees from the funds to be disbursed to Customer after
receipt of joint instructions to disburse pursuant to Section 4 hereof, if
said compensation is not paid by Customer.

                8.             Tax Related Terms.

                                (a)           Tax
Reporting.  No interest will
be earned from the investment of the Escrow Funds as such funds will be held in
a noninterest-bearing account.

                                (b)           Certification
of Tax Identification Number. 
Customer agrees to provide the Escrow Agent with certified tax identification
numbers by furnishing appropriate forms W-9 or W-8 and other forms and
documents that the Escrow Agent may reasonably request.  Customer hereto understand that if such tax
reporting documentation is not so certified to the Escrow Agent, the Escrow
Agent may be required by the Internal Revenue Code of 1986, as amended, to
withhold a portion of any interest or other income earned on the investment of
monies or other property held by the Escrow Agent pursuant to this Agreement.

                                (c)           Taxes.  Customer agree to indemnify and hold the
Escrow Agent harmless from and against any taxes, additions for late payment,
interest, penalties and other expenses that may be assessed against the Escrow
Agent on or with respect to any payment or other activities under this
Agreement.

                9.             Indemnification of
Escrow Agent.  The Customer
hereby indemnifies and holds harmless the Escrow Agent from and against, any
and all loss, liability, cost, damage and expense, including, without
limitation, reasonable counsel fees, which the Escrow Agent may suffer or incur
by reason of any action, claim or proceeding brought against the Escrow Agent
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates unless such action, claim or proceeding is the
result of the willful misconduct of the Escrow Agent. The Escrow Agent may
consult counsel in respect of any question arising under the Escrow Agreement
and the Escrow Agent shall not be liable for any acting taken or omitted in
good faith upon advice of such counsel.

                10.           Notices.  All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) on the date of service if served personally on the
party to whom notice is to be given, (b) on the day of transmission if sent by
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission,
(c) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service maintained by the United States Postal Service, or
(d) on the fifth day after mailing, if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid, and
properly addressed, return receipt requested, to the party as follows:

 

2

 

	
  If to Customer:

  	
   

  	
  VendingData Corporation 

  6830 South Spencer Street 

  Las Vegas, Nevada 89119

  	
   

  
	
   

  	
   

  	
  Attn:

  	
  John R. Spina

  Chief Financial Officer

  	
   

  
	
   

  	
   

  	
  Phone:

  	
  (702) 733-7195

  	
   

  
	
   

  	
   

  	
  Fax:

  	
  (702) 733-7197

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If to Philadelphia Brokerage
  Corporation:

  	
   

  	
  Philadelphia Brokerage Corporation 

  992 Old Eagle School Road 

  Suite 915 Wayne, PA 19087

  	
   

  
	
   

  	
   

  	
  Attn:

  	
  Bernadette Pucillo 

  Operations Manager

  	
   

  
	
   

  	
   

  	
  Phone:

  	
  (610) 975-9990

  	
   

  
	
   

  	
   

  	
  Fax:

  	
  (610) 975-9993

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If to Escrow Agent:

  	
   

  	
  Wells Fargo Bank Minnesota, N.A. 

  Attn: 

  MAC N9303-110 

  Sixth Street and Marquette Avenue 

  Minneapolis, MN 55479

  	
   

  
	
   

  	
   

  	
  Phone:

  	
  (   )    -

  	
   

  
	
   

  	
   

  	
  Fax:

  	
  (   )    -

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wires to Escrow Agent should be directed to the
  following:

  	
   

  	
  Wells Fargo Bank Minnesota, National Association 

  ABA #121000248 

  Trust Clearing Account # 

  	
   

  
	
   

  	
   

  	
  For Credit to:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Escrow Account

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

Any
party may change its address for purposes of this paragraph by giving the other
party written notice of the new address in the manner set forth above.

                11.           Successors and Assigns.  Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent to the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect. 
This Agreement shall inure to the benefit of and shall be binding upon
the successors and permitted assigns of the parties hereto.

                12.           Governing Law;
Jurisdiction.  This Agreement
shall be construed, performed, and enforced in accordance with, and governed
by, the internal laws of the State of Minnesota, without giving effect to the
principles of conflicts of laws thereof. 
Each party hereby consents to

 

3

 

the
personal jurisdiction and venue of any United States District Court for the
District of Minnesota located in Hennepin County, Minnesota.

                13.           Severability.  In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be null,
void, or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in
full force and effect.

                14.           Amendments; Waivers.  This Agreement may be amended or modified,
and any of the terms, covenants, representations, warranties, or conditions
hereof may be waived, only by a written instrument executed by the parties
hereto, or in the case of a waiver, by the party waiving compliance.  Any waiver by any party of any condition, or
of the breach of any provision, term, covenant, representation, or warranty
contained in this Agreement, in any one or more instances, shall not be deemed
to be nor construed as further or continuing waiver of any such condition, or
of the breach of any other provision, term, covenant, representation, or
warranty of this Agreement.

                15.           Entire Agreement.  This Agreement contains the entire
understanding among the parties hereto with respect to the escrow contemplated
hereby and supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such escrow.

                16.           Section Headings.  The section headings in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.

                17.           Counterparts.  This agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.

                18.           Resignation.  Escrow Agent may resign upon 30 days advance
written notice to the Customer.  If a
successor Escrow Agent is not appointed within the 30-day period following such
notice, Escrow Agent may petition any court of competent jurisdiction to name a
successor Escrow Agent.

[Signature page follows]

 

 

4

 

                In
Witness Whereof, the
parties hereto have caused this Agreement to be executed the day and year first
set forth above.

	
   

  	
  VendingData
  Corporation,

  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wells
  Fargo Bank Minnesota, National Association

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  

 

 

 

5

 

 

 

EXHIBIT A

ESCROW FEE SCHEDULE

 

 

	
  ACCEPTANCE
  FEE:

  	
   

  	
  $2,000.00

  	
   

  

 

For
initial services including examination of the Escrow Agreement and all
supporting documents this is a one-time fee payable upon the opening of the account.

	
  ADMINISTRATION
  FEE:

  	
   

  	
  $2,500.00

  	
   

  

 

An
annual charge or any portion of a 12-month period thereof.  This fee is payable upon the opening of the account and annually
thereafter.  This charge is not prorated
for the first year.  There is an additional $250 annual charge for each sub
account opened.

	
  TRANSACTION FEE:

  	
   

  	
  $

  	
   

  	
   

  
	
  Wire transfer of funds

  	
   

  	
  $

  	
  25.00

  	
   

  
	
  Other transfer of funds (ie. checks, internal
  account transfers)

  	
   

  	
  $

  	
  10.00

  	
   

  
	
  Asset transactions
  (purchases/sales/calls/deposit/withdrawls, etc.)

  	
   

  	
  $

  	
  20.00

  	
   

  

 

No
charge for Wells Fargo Fund transactions other than those disclosed in the Fund
Prospectus.

EXTRAORDINARY SERVICES:

For any
services other than those covered by the aforementioned, a special per hour
charge will be made commensurate with the character of the service, time
required and responsibility involved. 
Such services include but are not limited to excessive administrative
time, attendance at closings, specialized reports (eg. tax reporting) and record-keeping,
unusual certifications, etc.

	
  1099-Tax reporting

  	
   

  	
  $15.00 per report

  
	
  Other Tax reporting

  	
   

  	
  per hour charge

  

 

 

 

 

 

6

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