Document:

Exhibit
10.8

 

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 NOVEMBER 22, 2003

 

	
  $3,000,000

  	
  July 25, 2003

  

 

FOR VALUE RECEIVED, the undersigned
VendingData Corporation, a Nevada corporation (“Obligor”), hereby promises to
pay to the order of Mellon HBV SPV, LLC or (his/her/its) registered assigns
(“Holder”) on November 22, 2003, the principal sum of Three Million
Dollars ($3,000,000) 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 November 22, 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.

 

Holder may convert up to 15% of the then
outstanding principal amount of this Note, at the Holder’s option, and at any
time 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 “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 up to 15% of the outstanding
principal amount of this Note, 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 Two Hundred Twenty-Five Thousand
(225,000) shares of Common Stock.  If
Obligor does not redeem this Note on or before November 22, 2003, Obligor
shall 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 for
each thirty (30) day period beyond November 22, 2003, subject to the
adjustments described in the immediately preceding paragraph.  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, Attorney-in-Fact for

  
	
   

  	
   

  	
  Steven J. Blad

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
  Date:

  	
  August 13 , 2003

  

 

3

 

NOTICE
OF CONVERSION

 

TO
VENDINGDATA 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 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 10.9

 

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, Mellon HBV SPV, LLC (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”), Two Hundred Twenty-Five
Thousand (225,000) 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 $3,000,000
principal amount 10% Note due November 22, 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, July 24, 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 July 24, 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, Attorney-in-Fact for

  
	
   

  	
   

  	
  Steven J. Blad

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
  Date:

  	
  August  13 , 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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