Document:

EXHIBIT 10.2

 

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,                      
(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”),           
(      ) 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 9% Note in the original principal amount of $                   
due August 15, 2007, dated as of the same date hereof to Holder and the Company
(as “Obligor”) (collectively hereinafter the “Note”).

 

The Note and this Warrant are issued as part of a private placement by
the Company of up to Ten Million Dollars ($10,000,000) in senior notes and
warrants to purchase up to Six Hundred Thousand (600,000) shares of Common
Stock (the “Private Placement”).

 

TERMS AND CONDITIONS

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

 

1.                                       Exercise
Price.  The Exercise Price shall be
$5.00 per share.

 

2.                                       Manner
of Exercise; Payment for Shares.

 

2.1.                              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):

 

 

2.1.1.                     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

 

2.1.2.                     Upon:  (a) 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; or (b) the surrender to the Company of Warrant Shares for
cancellation having a Fair Market Price (as defined below) on the date of
exercise equal to the aggregate Exercise Price.

 

2.2.                              For the purposes of this Warrant, the “Fair
Market Price” per Warrant Share shall mean, if the Common Stock is traded on a
national securities exchange, listed on the Nasdaq Stock Market or quoted on an
over-the-counter quotation system, the average closing or last reported sale
prices, respectively, of the Common Stock on such exchange or the Nasdaq Stock
Market or the average closing bid and asked prices on an over-the-counter
quotation system for the fifteen (15) business days before the effective date
of exercise of the net issuance election. 
If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and ask prices are not
reported, the Holder cannot elect to exercise this Warrant pursuant to Section
2.1.2(b).

 

3.                                       Issuance
of Certificates.  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 in Section 2 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.  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.

 

4.                                       Exercise
Period.  This Warrant may be
exercised any time before 2:00 p.m., Las Vegas, Nevada time, August 15,
2009.

 

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

 

5.1.                              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.

 

5.2.                              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.

 

5.3.                              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.

 

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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, (1) declare a dividend or
make a distribution of Common Stock
payable in shares of Common Stock, (2) subdivide its outstanding shares of
Common Stock, into a greater number of shares of Common Stock,
(3) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (4) 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 (1), or the effective date
in the case of (2), (3) or (4).  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.

 

7.                                       Payment
of Expenses.  The Company and the
Holder shall each be responsible for their own costs and expenses payable in
connection with:  (1) the
negotiation, preparation, execution and delivery of this Warrant and the other
agreements to be executed in connection herewith; and (2) 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.

 

9.1.                              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.

 

9.2.                              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.

 

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9.3.                              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.

 

12.                                 Registration
Rights.

 

12.1.                        Piggyback Registration Rights. 
Whenever the Company proposes to register any of its equity securities
under the Securities Act of 1933 (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.

 

12.2.                        Registration Procedure. 
Upon the request by Holder to initiate either a Piggyback 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.

 

12.3.                        Restrictions. 
Holder may not assign any of its registration rights granted under this
Section 12 unless the Company has provided its prior written consent to such
assignment and the assignment of this Warrant or the Warrant Shares, as
applicable.

 

12.4.                        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.

 

12.5.                        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

 

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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:  (1) 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 (2) 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, prospectus, 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. 
The Holder shall reimburse the Company, its affiliates, 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 limited to Holder and
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
Holder (which consent shall not be unreasonably withheld).

 

12.6.                        Indemnification by the Company. 
In connection with any registration statement in which Holder is
participating, the Company will indemnify and hold harmless Holder, 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:  (1) 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 (2) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless such untrue statement or omission is made in such
registration statement, prospectus, 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 Holder
expressly for use therein.  The Company
shall reimburse Holder, its affiliates, 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 limited to the Company and shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld).

 

12.7.                        Termination. 
The ability of Holder to initiate a Piggyback Registration shall
terminate upon the earlier to occur of: 
(1) five (5) years after the date of this Warrant; (2) the date Holder
no longer holds the Warrant Shares; or (3) the ability of Holder to sell its
Warrant Shares then owned immediately pursuant to Rule 144 of the Securities
Act.

 

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13.                                 Expiration
Date.  This Warrant shall expire and
become null and void and of no further force or effect at 2:00 p.m. Las Vegas,
Nevada time no later than August 15, 2009.

 

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

 

	
   

  	
  VENDINGDATA CORPORATION

  a Nevada corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Steven J. Blad

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
  Date:

  	
  August    , 2004

  

 

6

 

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:

 

o                                    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 $                ;
or

 

o                                    Purchase             
shares (the “Exercised Shares”) of the Company’s common stock (“Common Stock”)
covered by the Warrant and make payment of the exercise price through the
surrender of the right to purchase             
shares of Common Stock covered by the Warrant, as permitted under Section 2.1.2(b) of the Warrant.

 

If said number of shares of Common Stock, whether purchased or
surrendered, shall not be all the shares available under the Warrant, a new
warrant is to be issued in the name of said undersigned covering the balance of
the shares available 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.EXHIBIT 10.3

 

FORM OF SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into as
of the date set forth on the signature page hereto, by and between VENDINGDATA
CORPORATION, a Nevada corporation (“Debtor”), and the parties listed on the
signature pages hereto (each a “Secured Party” and together the “Secured
Parties”).

 

WITNESSETH:

 

WHEREAS, Debtor is conducting a private placement (the “Private Placement”)
of units exempt from the registration requirements of the Securities Act of
1933, as amended (the “Securities Act”), where said units shall consist of a 9%
secured promissory note and a warrant to purchase shares of common stock (the “Units”);

 

WHEREAS, Debtor proposes to sell through the Private Placement a
minimum of Three Million Dollars ($3,000,000) and a maximum of Ten Million
Dollars ($10,000,000) in Units;

 

WHEREAS, pursuant to the Private Placement, Debtor has borrowed money
from Secured Parties in the original principal amount of up to Ten Million
Dollars ($10,000,000) pursuant to the promissory notes issued as part of the
Private Placement (the “Notes”);

 

WHEREAS, Debtor has agreed to secure its obligations arising under the
Notes, including all debts, obligations, liabilities, interest, fees, charges
and expenses arising under the Notes (the “Obligations”), by entering into this
Agreement with Secured Parties;

 

NOW, THEREFORE,
for and in consideration of the premises and mutual covenants, agreements,
understandings, undertakings, representations, warranties and promises, and
subject to the conditions hereinafter set forth, and intending to be legally
bound thereby, the parties do hereby covenant and agree that the recitals set
forth above are true and accurate and are hereby incorporated in and made a
part of this Agreement, and further covenant and agree as follows:

 

1.                                      SECURITY
INTEREST

 

Subject to the terms and conditions of this Agreement, Debtor hereby
grants to Secured Parties, as a group, a security interest in all of Debtor’s
right, title and interest in all property and interests of Debtor, tangible or
intangible, whether now or hereafter existing, wherever located (collectively,
the “Collateral”), including all:

 

1.1.                              Accounts, including but not
limited to, all accounts, all rights of Debtor to payment for goods sold or
leased or for services rendered, all accounts receivable of Debtor; all
obligations owing to Debtor evidenced by an instrument or chattel paper; all
obligations owing to Debtor of any kind or nature, including all writings, if
any, evidencing the same, including all instruments, drafts, acceptances and
chattel paper; any and all proceeds of any of the foregoing. Further included
within the term “Accounts” are all right, title and interest of Debtor in and
any security and liens with respect to any Account, and all Accounts, Documents
and Contract Rights of Debtor as defined in the Uniform Commercial Code as
enacted in the State of Nevada (the “Uniform Commercial Code”); and

 

1.2.                              Investment Property,
including all of Debtor’s investment property (as defined in the Uniform
Commercial Code) and all of Debtor’s other securities (whether certificated or
uncertificated), security entitlements, financial assets, securities accounts,
commodity contracts, and commodity accounts (as each such term is defined in
the Uniform Commercial Code), including all substitutions and additions

 

 

thereto, all dividends, distributions and sums distributable or payable
from, upon or in respect of such property, and all rights and privileges
incident to such property; and

 

1.3.                              Instruments and Chattel
Paper, including all instruments and chattel paper as defined in the Uniform
Commercial Code and all proceeds thereof; and

 

1.4.                              General Intangibles,
including but not limited to, all general intangibles as defined in the Uniform
Commercial Code and all proceeds thereof, including without limitation, any and
all rights of Debtor to any refund of any tax assessed against Debtor or paid
by Debtor, loss carry-back tax refunds, insurance premium rebates, unearned
premiums, insurance proceeds, chooses in action, names, trade names, goodwill,
trade secrets, computer programs, computer records, data, computer software,
customer lists, patents, patent rights, patent applications, patents pending,
patent licenses or assignments, development ideas and concepts, licenses,
permits, franchises, literary rights, rights to performance, trademarks,
trademark applications, trademark rights, logos, intellectual property,
copyrights, proprietary or other processes, drawings, designs, diagrams, plans,
reports, charts, catalogs, manuals, research, literature, proposals and other
reproductions on paper or otherwise, of any and all concepts or ideas, whether
or not related to the business or operations of Debtor; and

 

1.5.                              Equipment as defined in the
Uniform Commercial Code, including but not limited to, all equipment, vehicles,
machinery, tools, furniture, fixtures, trade fixtures, parts, all tangible
personal property utilized in the conduct of Debtor’s business and all
additions, accessions, substitutions, components, and replacements thereto,
therefor and thereof and all proceeds thereof; and

 

1.6.                              Inventory as defined in the
Uniform Commercial Code, including without limitation, all raw materials and
other materials and supplies, work-in-progress and finished goods and any
products made or processed therefrom and all substances, if any, commingled
therewith or added thereto; and

 

1.7.                              All products and proceeds of
the above, including insurance proceeds.

 

2.                                      OBLIGATIONS
SECURED

 

2.1.                              Obligations Secured.  The security interest granted hereby secures
payment and performance of the Obligations under the Notes on a pari passu basis.

 

2.2.                              Seniority.  The payment of the Notes is senior to all
other obligations of Debtor whether now existing or hereinafter incurred except
for:  (1) existing asset-based borrowings
and lines of credit from commercial or financial institutions, including
Madison Leasing or Central Leasing; and (2) indebtedness approved by the prior
written consent from Secured Parties holding at least two-thirds (2/3rds) of
the then outstanding and unpaid principal on the Notes issued under the Private
Placement.  Notwithstanding the
foregoing, the limitation set forth in this Section 2.2 shall expire when less
than fifteen percent (15%) of the original outstanding principal on the Notes
issued under the Private Placement remains outstanding.

 

2.3.                              Representative of Secured
Parties.  In a acknowledgement of the
desire to act as a group in an orderly and efficient manner, Secured Parties
hereby agree that any action with respect to this Agreement on behalf of
Secured Parties may be taken only by: 
(1) the Secured Parties holding a majority of the then outstanding and
unpaid principal on the Notes issued under the Private Placement; or (2) the
person appointed by the Secured Parties holding a majority of the then
outstanding and unpaid principal on the Notes issued under the Private
Placement (in either case, a “Representative”); provided, however, each Secured
Party shall be provided with notice of any action taken by the
Representative.  Secured Parties may take
action by either written consent or at a physical or telephonic meeting at
which the Secured Parties holding a majority of the then outstanding and unpaid
principal on the Notes issued under the Private Placement is present.

 

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3.                                      DEBTOR’S
REPRESENTATIONS AND WARRANTIES

 

Debtor represents and warrants that:

 

3.1.                              Authorization.  The execution, delivery and performance of
this Agreement, the Notes and the Warrants are within Debtor’s corporate
powers, and are not in contravention of law nor of the terms of Debtor’s
Articles of Incorporation or Bylaws, as amended, nor of any indenture,
agreement or undertaking to which Debtor is a party or by which it is bound.

 

3.2.                              Place of Business.  Debtor’s principal place of business is
located at the address provided on the signature page of this Agreement, and
Debtor keeps its records concerning inventory, accounts, contract rights and
other property at that location.

 

3.3.                              Title to Collateral.  With the exception of liens created hereunder
and liens related to certain existing asset-based borrowings and lines of
credit from Madison Leasing or Central Leasing, Debtor owns all of its personal
property and has good, clear and marketable title thereto, free and clear of
all liens and encumbrances.

 

3.4.                              Collateral and Perfection.  Neither Debtor nor, to the best of Debtor’s
knowledge, any affiliate (as such term is used in Rule 405 under the Securities
Act of 1933, as amended (“Affiliates”)) have performed any acts which might
prevent the Representative from enforcing any of the terms of this Agreement or
which would limit the Representative in any such enforcement.  No collateral is in the possession of any person
(other than Debtor) asserting any claim thereto or security interest
therein.  The security interests created
hereunder constitute valid security interests under the Uniform Commercial Code
securing the Obligations to the extent that a security interest may be created
in the Collateral.

 

4.                                      GENERAL OBLIGATIONS OF DEBTOR

 

4.1.                              Financing Statements.  Debtor agrees to execute one or more
financing statements, to pay the cost of filing the same in all public offices
wherever filing is required by applicable law to perfect a security interest or
is deemed by Secured Parties to be necessary or desirable and to execute such
other documents as Secured Parties shall reasonably request.

 

4.2.                              Insurance.  Debtor agrees to keep or cause to be kept all
the Collateral insured with coverages in amounts not less than usually carried
by one engaged in a like business.

 

4.3.                              Inspection.  Debtor will keep accurate and complete
records of the Collateral and provide Secured Parties or any of their agents
with the right to:  (1) inspect the
Collateral wherever located; (2) visit Debtor’s place or places of business;
and (3) audit, check and make extracts from any copies of books, records,
journals, orders, receipts and correspondence that relate to the Collateral or
to the general financial condition of Debtor or any Affiliate.  The rights granted to Secured Parties shall
be subject to prior written notice of five (5) business days, shall be at
reasonable intervals and shall not adversely affect, disrupt or hinder Debtor’s
operations.

 

4.4.                              Negative Pledge.  Debtor will not assign any accounts or other
Collateral to any person other than Secured Parties, nor create or permit to be
created any lien, encumbrance or security interest of any kind on any of its
accounts, contract rights or inventory other than for the benefit of Secured
Parties, nor grant or permit to be granted any corporate guaranty other than
for the benefit of Secured Parties, except in connection with:  (1) debt expressly subordinate to the
Notes; or (2) purchase price liens.

 

4.5.                              Existence; Perfection.  Debtor will maintain its corporate existence
in good standing comply with all laws and regulations of the United States or
any state or political subdivision thereof, or of any governmental authority
which may have jurisdiction over it or its business.  Debtor will not change its name, identity or
corporate structure in any manner unless it shall have given Secured Parties
prior notice

 

3

 

thereof and delivered an opinion of counsel satisfactory to Secured
Parties with respect thereto.  Debtor
will not establish or change the location of its chief executive office or its
chief place of business or except in the ordinary course of business, the
locations where it keeps or holds any Collateral or records relating thereto or
in any event change the location of any Collateral if such change would cause
the security interests hereunder to lapse or cease to be perfected.

 

4.6.                              Taxes.  Debtor will pay all real and personal property
taxes, assessments and charges as well as all franchise, income, unemployment,
old age benefit, withholding, sales and other taxes assessed against it, or
payable by it at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to its property, and will furnish
Secured Parties upon request, receipts or other evidence that deposits or
payments have been made.

 

4.7.                              Sales.  Debtor will not sell or dispose of any of its
assets, including the Collateral, except in the ordinary and usual course of
its business.

 

4.8.                              Repair.  Debtor will maintain its equipment and
property in good repair and working order.

 

4.9.                              Continuing Representations.  The warranties and representations made by
Debtor in this Agreement are continuing. 
In the event that any obligation, representation or warranty is no
longer true or correct, Debtor will immediately notify Secured Parties in
writing.

 

5.                                      DEFAULT

 

Debtor shall be in default under this Agreement and
under any other agreement with Secured Parties upon the happening of any of the
following events or conditions, without demand or notice:

 

5.1.                              Failure of Debtor to pay
when due any Obligation, whether by maturity, acceleration or otherwise;

 

5.2.                              Failure of Debtor to
materially perform any of its agreements, warranties or representations in this
Agreement or in the Notes;

 

5.3.                              Material loss or theft,
substantial damage or destruction or unauthorized sale or encumbrance of any
material portion of the Collateral in excess of reasonably expected recoveries
under insurance policies, or the making of any levy on, or seizure or
attachment of a material portion of the Collateral; or

 

5.4.                              The occurrence of a default
under the Notes.

 

6.                                      RIGHTS OF SECURED PARTIES UPON DEFAULT

 

Through the Representative, as appointed pursuant to this Agreement,
Secured Parties shall upon the occurrence of a default hereunder and at any
time thereafter, without presentment, demand, notice, protest or advertisement
of any kind have the following rights in addition to all other rights
hereunder:

 

6.1.                              Acceleration.  Subject to the terms of the Notes, the
Representative may make all Obligations under this or any other agreement with
Debtor immediately due and payable without presentment, demand, protest, hearing
or notice of any kind and may exercise the rights of a secured party under law
or under the terms of this or any other agreement with Debtor.

 

6.2.                              Possession.  On behalf of all Secured Parties, the
Representative may:  (1) enter and take
possession of all Equipment, Inventory and other Collateral and the premises on
which they are located; (2) operate and use Debtor’s equipment, whether or not
Collateral hereunder; (3) complete work in process; (4) apply as Debtor’s
attorney-in-fact for domestic or foreign patents or other intellectual property
rights with

 

4

 

respect to inventions; (5) seek registration or assignment, foreign and
domestic, of any trademarks, trade names, styles, logos or copyrights; and (6)
sell, lease or license the Collateral to third persons or associations without
being liable to Debtor on account of any losses, damage or depreciation that
may occur as a result thereof so long as the Representative shall act
reasonably and in good faith.  The
Representative shall give Debtor and all Secured Parties at least thirty (30)
days’ notice by hand delivery at or by United States certified mail, postage
prepaid (in which event notice shall be deemed to have been given when so
delivered), to the address specified herein, of the time and place of any
public or private sale or other disposition unless the Collateral is
perishable, threatens to decline speedily in value, or is the type customarily
sold in a recognized market. Upon such sale, a Secured Party may become the
purchaser of the whole or any part of the Collateral, discharged from all
claims and free from any right of redemption. 
In case of any such sale by the Representative of all or any of said Collateral
on credit or for future delivery, property so sold may be retained by the
Representative until the selling price is paid by the purchaser.  The Representative shall incur no liability
in case of the failure of the purchaser to take up and pay for the property so
sold.  In case of any such failure, the
said property may again be sold.

 

6.3.                              Power of Attorney and
Notification.  At Debtor’s
expense and subject to the rights of the other Lenders, the Representative may
communicate with account debtors in order to verify with them to its satisfaction
the existence, amount and terms of any accounts or contract rights and also
notify account debtors that Collateral has been assigned for the benefit of the
Secured Parties and that payments shall be made directly to the Representative.  Upon request of the Representative, Debtor
will so notify such account debtors and will indicate on all billings to such
account debtors that their accounts must be paid to the Representative.  Debtor does hereby appoint the Representative
and its agents as Debtor’s attorney-in-fact: to, upon an event of default
hereunder, collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof in its own name or in the name of Debtor; to
endorse the name of Debtor upon any Note, checks, drafts, money orders, or
other instruments, documents, receipts or Collateral that may come into its
possession and to apply the same in full or part payment of any amounts owing
to Secured Parties; to sign and endorse the name of Debtor upon any documents,
instruments, drafts against account debtors, assignments, verifications and
notices in connection with Accounts, and any instrument or document relating
thereto or to Debtor’s rights therein; and to give written notice to any office
and officials of the United States Post Office to effect such change or changes
of address that all mail addressed to Debtor may be delivered directly to the
Representative.  Debtor hereby grants to
its said attorney-in-fact full power to do any and all things necessary to be
done in and about the premises as fully and effectually as Debtor might or
could do, and hereby ratifies all that its attorney-in-fact shall lawfully do
or cause to be done by virtue hereof. 
This power of attorney is coupled with an interest and is irrevocable for
the term of this Agreement for all transactions hereunder and thereafter as
long as Debtor may be indebted to Secured Parties.

 

6.4.                              Application of Proceeds.  Any and all proceeds of any Collateral
realized or obtained by Representative upon exercise of the rights and remedies
hereunder, shall be applied as follows:

 

6.4.1.                     Toward the payment of any and all costs and expenses,
fees and commission and taxes of such sale, collection or other realization
incurred by the Representative or any Secured Party:

 

6.4.2.                     With respect to any surplus remaining after
application of proceeds as provided in Section 6.4.1, toward the payment of the
Obligations on a pro rata basis, and any costs, fees or expenses incurred in
connection with the administration, collection or enforcement thereof,
including, without limitation, reasonable attorney’s fees and other
professionals’ out of pocket costs and fees, until payment and satisfaction in
full thereof; and

 

6.4.3.                     With respect to any surplus remaining after
application of proceeds as provided in Section 6.4.2 above, shall be paid to
Debtor, or its successors or assigns, or to whomsoever may be lawfully entitled
to receive the same.

 

5

 

7.                                      DEBTOR’S
OBLIGATION TO PAY EXPENSES

 

In the event the Representative is the prevailing party in any action
brought to enforced the rights of Secured Parties hereunder, Debtor shall pay
to the Representative on demand any and all reasonable  expenses
(including, but not limited to, a collection charge on all accounts collected,
all reasonable  attorney’s fees and expenses, and
all other expenses of like or unlike nature) that may be incurred or paid by
the Representative or Secured Parties to obtain or enforce payment of any
account against the account debtor, Debtor or any guarantor or surety of or in
the prosecution or defense of any action or concerning any matter growing out
of or connected with the subject matter of this Agreement, the Obligations,
such Collateral or the rights or interests of Secured Parties therein or
thereto.  All such expenses may be added
to the principal amount of any indebtedness owed by Debtor to Secured Parties
and shall constitute part of such Obligations secured hereby.

 

8.                                      WAIVERS

 

Debtor waives demand, presentment, protest, notice of nonpayment and
all other notices.  No delay or omission
by the Representative in exercising any rights shall operate as a waiver of
such right or any other right.  Waiver on
any one occasion shall not be construed as a bar to or waiver of any right or
remedy on any future occasion.  The
rights and remedies of Secured Parties, whether evidenced hereby or by any
other agreement, instrument or paper, shall be cumulative and may be exercised
singularly or concurrently.

 

9.                                      FURTHER
ASSURANCES

 

Debtor, at its own expense, shall do, make, execute and deliver all
such additional and further acts, deeds, assurances, documents, instruments and
certificates as the Representative may reasonably require, including, without
limitation:  (1) executing, delivering
and filing financial statements and continuation statements under the Uniform
Commercial Code as applicable in any relevant jurisdiction; (2) obtaining
governmental and other third party consents and approvals; and (3) obtaining
waivers from mortgagees and landlords.

 

10.                               CHOICE OF LAW

 

THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS (AND NOT THE LAW OF CONFLICTS) OF THE
STATE OF NEVADA.  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 AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

11.                               WAIVER OF JURY TRIAL

 

DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WTTH
THIS AGREEMENT OR THE NOTES OR THE RELATIONSHIP ESTABLISHED HEREUNDER,
THEREUNDER.

 

[Signature page follows]

 

6

 

IN WITNESS WHEREOF, the parties hereto have signed
this Agreement as of the         day of                 
2004.

 

	
  “DEBTOR”

  	
   

  	
  ADDRESS

  
	
   

  	
   

  
	
  VENDINGDATA
  CORPORATION,

  a Nevada
  corporation

  	
  6830 Spencer Street

  
	
   

  	
  Las Vegas, Nevada 89119

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Steven J. Blad

  	
  TELEPHONE:

  	
  702-733-7195

  
	
  Its:

  	
  President
  and Chief Executive Officer

  	
  FACSIMILE:

  	
  702-733-7197

  
							

 

	
  “SECURED PARTIES”

  	
   

  	
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8

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