Document:

Exhibit 10.7

May 10, 2005

      I, Joseph Corso have granted  Shelron Group Inc. an extension for the SB-2
filing until June 7, 2005. If the company doesn't comply with this duration then
the company has to issue 100,000 restricted shares per every 30 days.

Best Regards,

/s/ Joseph Corso
----------------
Joseph CorsoExhibit 10.8

June 7, 2005

I, Joseph Corso have granted Shelron Group Inc. with an additional extension for
the SB-2 filing until December 31, 2005,  with no penalties  until that date. If
the company  doesn't  comply with the terms of this  additional  extension,  the
company is to issue 100,000  restricted  shares per every 30 days of delay until
the date a SB-2 is filed.

Best Regards,

/s/ Joseph Corso
----------------
Joseph CorsoExhibit
        10.1

    

    

      8%
        SENIOR SECURED NOTE PURCHASE AGREEMENT

       

      This
        8%
        Senior Secured Note Purchase Agreement (this “Agreement”)
        is
        dated as of May 1, 2006, by and among VendingData Corporation, a Nevada
        corporation (the “Company”),
        and
        Bricoleur Partners, L.P., Bricoleur Enhanced, L.P., BRIC 6, L.P. and Bricoleur
        Offshore Ltd. (each, including its successors and assigns, a “Lender”
and
        collectively the “Lenders”).

       

      RECITALS 

       

      A. WHEREAS,
        the Company and the Lenders are parties to that certain 7% Senior Secured
        Note
        Purchase Agreement, dated as of March 29, 2006 (the “Original Agreement”),
        pursuant to which the Lenders agreed to purchase, and the Company agreed
        to
        sell, certain securities of the Company, and the parties intend for this
        Agreement to supersede and replace the Original Agreement in its entirety
        

       

      B. WHEREAS,
        subject to the terms and conditions set forth in this Agreement and pursuant
        to
        Section 4(2) of the Securities Act of 1933, as amended (the “Securities
        Act”)
        and
        Rule 506 promulgated thereunder, the Company desires to issue and sell to
        each
        Lender, and each Lender, severally and not jointly, desires to purchase from
        the
        Company, an 8% Senior Secured Note (“Note”)
        in the
        form of Exhibit
        A
        and
        Common Stock Purchase Warrants (“Warrants”)
        in the
        form of Exhibit
        B
        attached
        hereto entitling the Lenders to purchase up to 3,200,000 shares of Common
        Stock.

       

      C. WHEREAS,
        concurrent with close of the purchase and sale of the Notes and Warrants
        under
        this Agreement, the Company will acquire a put option from the Lenders to
        sell,
        from time to time, up to $5 million of the Company’s Common Stock to the Lenders
        pursuant to that certain Securities Put Agreement (“Securities
        Put Agreement”)
        of the
        same date herewith between the Company and Lenders. 

       

      AGREEMENT

      

      NOW,
        THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
        and for other good and valuable consideration the receipt and adequacy of
        which
        are hereby acknowledged, the Company and each Lender agree as
        follows:

       

      ARTICLE
        I.

       

      DEFINITIONS

       

      1.1 Definitions.
        In addition to the terms defined elsewhere in this Agreement, for all purposes
        of this Agreement, the following terms have the meanings indicated in this
        Section 1.1:

       

      “Action”
shall
        have the meaning ascribed to such term in Section 3.1(j).

       

      “Affiliate”
means
        any Person that, directly or indirectly through one or more intermediaries,
        controls or is controlled by or is under common control with a Person as
        such
        terms are used in and construed under Rule 144 under the Securities Act.
        With
        respect to a Lender, any investment fund or managed account that is managed
        on a
        discretionary basis by the same investment manager as such Lender will be
        deemed
        to be an Affiliate of such Lender. 

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Business
        Day”
means
        any day except Saturday, Sunday and any day which shall be a federal legal
        holiday in the United States.

       

      “Closing”
means
        the Closing of the purchase and sale of the Notes and Warrants pursuant to
        Section 2.1.

       

      “Closing
        Date”
means
        the Trading Day when all of the Transaction Documents have been executed
        and
        delivered by the applicable parties thereto, and all conditions precedent
        to (i)
        the Lenders’ obligations to pay the Subscription Amount and (ii) the Company’s
        obligations to deliver the Notes and Warrants have been satisfied or
        waived.

       

      “Commission”
means
        the Securities and Exchange Commission.

       

      “Common
        Stock”
means
        the common stock of the Company, par value $0.001 per share, and any other
        class
        of securities into which such securities may hereafter be reclassified or
        changed into. 

       

      “Common
        Stock Equivalents”
means
        any securities of the Company or the Subsidiaries which would entitle the
        holder
        thereof to acquire at any time Common Stock, including, without limitation,
        any
        debt, preferred stock, rights, options, warrants or other instrument that
        is at
        any time convertible into or exercisable or exchangeable for, or otherwise
        entitles the holder thereof to receive, Common Stock.

       

      “Company
        Counsel”
means
        Preston Gates & Ellis LLP.

       

      “Disclosure
        Schedules”
means
        the Disclosure Schedules of the Company delivered in connection with the
        Closing. 

       

      “Effective
        Date”
means
        the date that the initial Registration Statement filed by the Company pursuant
        to the Registration Rights Agreement is first declared effective by the
        Commission.

       

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended, and the rules and regulations
        promulgated thereunder.

      

      “GAAP”
shall
        have the meaning ascribed to such term in Section 3.1(h).

       

      “Intellectual
        Property Rights”
shall
        have the meaning ascribed to such term in Section 3.1(o).

       

      “Liens”
means
        a
        lien, charge, security interest, encumbrance, right of first refusal, preemptive
        right or other restriction.

       

      “Material
        Adverse Effect”
shall
        have the meaning assigned to such term in Section 3.1(b).

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Material
        Permits”
shall
        have the meaning ascribed to such term in Section 3.1(m).

       

      “Notes”
shall
        mean the 8% Senior Secured Notes in the form of Exhibit
        A
        attached
        hereto. 

       

      “Person”
means
        an individual or corporation, partnership, trust, incorporated or unincorporated
        association, joint venture, limited liability company, joint stock company,
        government (or an agency or subdivision thereof) or other entity of any
        kind.

       

      “Proceeding”
means
        an action, claim, suit, investigation or proceeding (including, without
        limitation, an investigation or partial proceeding, such as a deposition),
        whether commenced or threatened.

       

      “Registration
        Rights Agreement”
means
        the Registration Rights Agreement, dated the date hereof, among the Company
        and
        the Lenders in the form of Exhibit
        C
        attached
        hereto.

       

      “Registration
        Statement”
means
        a
        registration statement meeting the requirements set forth in the Registration
        Rights Agreement and covering the resale by each Lender of the Warrant Shares.
        

       

      “Required
        Approvals”
shall
        have the meaning ascribed to such term in Section 3.1(e).

       

      “Rule
        144”
means
        Rule 144 promulgated by the Commission pursuant to the Securities Act, as
        such
        Rule may be amended from time to time, or any similar rule or regulation
        hereafter adopted by the Commission having substantially the same effect
        as such
        Rule. 

       

      “SEC
        Reports”
shall
        have the meaning ascribed to such term in Section 3.1(h).

       

      “Senior
        Notes”
shall
        mean the Company’s outstanding 10% senior secured convertible notes due February
        2008 and outstanding 10% senior secured convertible notes due March
        2008.

       

      “Shareholder
        Approval”
means
        such approval as may be required by the applicable rules and regulations
        of the
        American Stock Exchange (or any successor entity) from the shareholders of
        the
        Company in accordance with Section 14 of the Exchange Act with respect to
        the
        Company’s issuance of shares of its Common Stock pursuant to the Securities Put
        Agreement. 

       

      “Short
        Sales”
shall
        include all “short sales” as defined in Rule 200 of Regulation SHO under the
        Exchange Act (but
        shall not be deemed to include the location and/or reservation of borrowable
        shares of Common Stock). 

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Subscription
        Amount”
means,
        as to each Lender, the aggregate amount to be paid for a Notes and Warrants
        purchased hereunder as specified below such Lender’s name on the signature page
        of this Agreement and next to the heading “Subscription Amount”, in United
        States Dollars and in immediately available funds.

       

      “Subsidiary”
means
        any subsidiary of the Company as set forth on Schedule
        3.1(a).

       

      “Trading
        Day”
means
        a
        day on which the Common Stock is traded on a Trading Market.

       

      “Trading
        Market”
means
        the following markets or exchanges on which the Common Stock is listed or
        quoted
        for trading on the date in question: the Nasdaq Capital Market, the American
        Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
        the
        OTC Bulletin Board.

       

      “Transaction
        Documents”
means
        this Agreement, and the Notes, Warrants, Security Agreement and Registration
        Rights Agreement and any other documents or agreements executed in connection
        with the transactions contemplated hereunder.

       

      “Warrant
        Shares”
means
        the shares of Common Stock issuable upon exercise of the Warrants.

       

      ARTICLE
        II.

       

      PURCHASE
        AND SALE

       

      2.1 Closing.
        Upon the terms and subject to the conditions set forth herein, the Company
        agrees to sell, and each Lender agrees to purchase, severally and not jointly,
        a
        Note and Warrant for the Subscription Amount set forth on each respective
        Lender’s signature page attached hereto, which in the aggregate shall equal
        $13,000,000. On the Closing Date (the “Closing Date”), each Lender shall
        deliver to the Company, via wire transfer or a certified check, immediately
        available funds equal to its respective Subscription Amount, and the Company
        shall deliver to such Lender a duly executed Note. Upon satisfaction of the
        conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at
        the
        offices of Preston Gates Ellis LLP, 1990 Main Street Suite 600, Irvine,
        California 92614, or such other location as the parties shall mutually agree.
        

       

      2.2 Deliveries.

       

      (a) On
        or
        prior to the Closing Date, the Company shall deliver or cause to be delivered
        to
        Lenders the following:

       

      (i) this
        Agreement duly executed by the Company;

       

      (ii) the
        Notes
        and Warrants duly executed by the Company;

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (iii) a
        legal
        opinion of Company Counsel in the form acceptable to the Lenders in their
        reasonable discretion; 

       

      (iv) the
        Registration Rights Agreement duly executed by the Company; 

       

      (v) a
        Security Agreement (“Security
        Agreement”)
        in the
        form of Exhibit
        D
        attached
        hereto duly executed by the Company;

       

      (vi) the
        delivery of the written agreements of the holders of the Senior Notes to
        convert
        all indebtedness outstanding under the Senior Notes not to be paid off at
        the
        Closing to shares of Common Stock in the form acceptable to the Lenders in
        their
        reasonable discretion; 

       

      (vii) a
        pay-off
        statement from Lampe Conway & Co. stating the full amount due and payable as
        of the Closing Date under that certain Credit Agreement dated October 1,
        2005
        between the Company, Lampe and Triage Capital Management, L.P.; and

       

      (viii) the
        Securities Put Agreement duly executed by the Company.

       

      (b) On
        or
        prior to the Closing Date, each Lender shall deliver or cause to be delivered
        to
        the Company the following:

       

      (i) this
        Agreement duly executed by such Lender;

       

      (ii) such
        Lender’s Subscription Amount by wire transfer or cashier’s check to the account
        designated by the Company;

       

      (iii) the
        Registration Rights Agreement duly executed by such Lender; and

       

      (iv) the
        Security Agreement duly executed by such Lender.

       

      2.3 Closing
        Conditions. 

       

      (a) The
        obligations of the Company hereunder in connection with the Closing are subject
        to the following conditions being met:

       

      (i) the
        accuracy when made and on the Closing Date of the representations and warranties
        of Lenders contained herein; 

       

      (ii) all
        obligations, covenants and agreements of Lenders required to be performed
        at or
        prior to the Closing Date shall have been performed;
        and

       

      (iii) the
        delivery by the Lenders of the items set forth in Section 2.2(b) of this
        Agreement.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (b) The
        obligations of each Lender hereunder in connection with the Closing are subject
        to the following conditions being met:

       

      (i) the
        accuracy when made and on the Closing Date of the representations and warranties
        of the Company contained herein;

       

      (ii) all
        obligations, covenants and agreements of the Company required to be performed
        at
        or prior to the Closing Date shall have been performed; and

       

      (iii) the
        delivery by the Company of the items set forth in Section 2.2(a) of this
        Agreement.

       

      ARTICLE
        III.

       

      REPRESENTATIONS
        AND WARRANTIES

       

      3.1 Representations
        and Warranties of the Company.
        Except
        as
        set forth under the corresponding section of the disclosure schedules delivered
        to the Lenders concurrently herewith (the “Disclosure Schedules”) which
        Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
        the
        representations and warranties set forth below to each Lender:

       

      (a) Subsidiaries.
        All of
        the direct and indirect subsidiaries of the Company are set forth on
Schedule
        3.1(a).
        The
        Company owns, directly or indirectly, all of the capital stock or other equity
        interests of each Subsidiary free and clear of any Liens, and all the issued
        and
        outstanding shares of capital stock of each Subsidiary are validly issued
        and
        are fully paid, non-assessable and free of preemptive and similar rights
        to
        subscribe for or purchase securities. 

       

      (b) Organization
        and Qualification.
        The
        Company and each of the Subsidiaries is an entity duly incorporated or otherwise
        organized, validly existing and in good standing under the laws of the
        jurisdiction of its incorporation or organization (as applicable), with the
        requisite power and authority to own and use its properties and assets and
        to
        carry on its business as currently conducted. Neither the Company nor any
        Subsidiary is in violation or default of any of the provisions of its respective
        certificate or articles of incorporation, bylaws or other organizational
        or
        charter documents. Each of the Company and the Subsidiaries is duly qualified
        to
        conduct business and is in good standing as a foreign corporation or other
        entity in each jurisdiction in which the nature of the business conducted
        or
        property owned by it makes such qualification necessary, except where the
        failure to be so qualified or in good standing, as the case may be, could
        not
        have or reasonably be expected to result in (i) a material adverse effect
        on the
        legality, validity or enforceability of any Transaction Document, (ii) a
        material adverse effect on the Company and the Subsidiaries, taken as a whole,
        or (iii) a material adverse effect on the Company’s ability to perform in any
        material respect on a timely basis its obligations under any Transaction
        Document (any of (i), (ii) or (iii), a “Material
        Adverse Effect”)
        and no
        Proceeding has been instituted in any such jurisdiction revoking, limiting
        or
        curtailing or seeking to revoke, limit or curtail such power and authority
        or
        qualification.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (c) Authorization;
        Enforcement.
        Subject
        to Shareholder Approval as to the Securities Put Agreement, the Company has
        the
        requisite corporate power and authority to enter into and to consummate the
        transactions contemplated by each of the Transaction Documents and otherwise
        to
        carry out its obligations hereunder and thereunder. The execution and delivery
        of each of the Transaction Documents by the Company and the consummation
        by it
        of the transactions contemplated hereby and thereby have been duly authorized
        by
        all necessary action on the part of the Company and no further action is
        required by the Company, its board of directors or its stockholders in
        connection therewith other than in connection with the Required Approvals.
        Each
        Transaction Document has been (or upon delivery will have been) duly executed
        by
        the Company and, when delivered in accordance with the terms hereof and thereof,
        will constitute the valid and binding obligation of the Company enforceable
        against the Company in accordance with its terms except (i) as limited by
        general equitable principles and applicable bankruptcy, insolvency,
        reorganization, moratorium and other laws of general application affecting
        enforcement of creditors’ rights generally, (ii) as limited by laws relating to
        the availability of specific performance, injunctive relief or other equitable
        remedies and (iii) insofar as indemnification and contribution provisions
        may be
        limited by applicable law.

       

      (d) No
        Conflicts.
        The
        execution, delivery and performance of the Transaction Documents by the Company,
        the issuance and sale of the Notes and Warrants and the consummation by the
        Company of the other transactions contemplated hereby and thereby do not
        and
        will not (i) conflict with or violate any provision of the Company’s or any
        Subsidiary’s certificate or articles of incorporation, bylaws or other
        organizational or charter documents, or (ii) conflict with, or constitute
        a
        default (or an event that with notice or lapse of time or both would become
        a
        default) under, result in the creation of any Lien upon any of the properties
        or
        assets of the Company or any Subsidiary, or give to others any rights of
        termination, amendment, acceleration or cancellation (with or without notice,
        lapse of time or both) of, any agreement, credit facility, debt or other
        instrument (evidencing a Company or Subsidiary debt or otherwise) or other
        understanding to which the Company or any Subsidiary is a party or by which
        any
        property or asset of the Company or any Subsidiary is bound or affected,
        or
        (iii) subject to the Required Approvals, conflict with or result in a violation
        of any law, rule, regulation, order, judgment, injunction, decree or other
        restriction of any court or governmental authority to which the Company or
        a
        Subsidiary is subject (including federal and state securities laws and
        regulations), or by which any property or asset of the Company or a Subsidiary
        is bound or affected.

       

      (e) Filings,
        Consents and Approvals.
        Except
        as set forth on Schedule 3.1(e), the
        Company is not required to obtain any consent, waiver, authorization or order
        of, give any notice to, or make any filing or registration with, any court
        or
        other federal, state, local or other governmental authority or other Person
        in
        connection with the execution, delivery and performance by the Company of
        the
        Transaction Documents, other than (i) filings required pursuant to Section
        4.4
        of this Agreement, (ii) the filing with the Commission of the Registration
        Statement, (iii) application(s) to each applicable Trading Market for the
        listing of the Warrant Shares for trading thereon in the time and manner
        required thereby, (iv) the filing of Form D with the Commission and such
        filings
        as are required to be made under applicable state securities laws; (v) the
        filing of a UCC-1 Financing Statement with the Nevada Secretary of State;
        and
        (vi) Shareholder Approval of the Securities Put Agreement (collectively,
        the
“Required
        Approvals”).

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (f) Issuance
        of Securities.
        The
        Notes and Warrants are duly authorized and, when issued and paid for in
        accordance with the applicable Transaction Documents, will be duly and validly
        issued, fully paid and nonassessable, free and clear of all Liens imposed
        by the
        Company other than restrictions on transfer provided for in the Transaction
        Documents. The Warrant Shares, when issued in accordance with the terms of
        the
        Transaction Documents, will be validly issued, fully paid and non-assessable,
        free and clear of all Liens imposed by the Company other than restrictions
        on
        transfer provided for in the Transaction Documents. The Company has reserved
        from its duly authorized capital stock the Warrant Shares issuable pursuant
        to
        this Agreement.

       

      (g) Capitalization.
        The
        capitalization of the Company is as set forth on Schedule
        3.1(g).
        No
        Person has any right of first refusal, preemptive right, right of participation,
        or any similar right to participate in the transactions contemplated by the
        Transaction Documents. Except as set forth on Schedule
        3.1(g),
        there
        are no outstanding options, warrants, script rights to subscribe to, calls
        or
        commitments of any character whatsoever relating to, or securities, rights
        or
        obligations convertible into or exercisable or exchangeable for, or giving
        any
        Person any right to subscribe for or acquire, any shares of Common Stock,
        or
        contracts, commitments, understandings or arrangements by which the Company
        or
        any Subsidiary is or may become bound to issue additional shares of Common
        Stock
        or Common Stock Equivalents. The issuance and sale of the Notes and Warrants
        will not obligate the Company to issue shares of Common Stock or other
        securities to any Person (other than the Lenders) and will not result in
        a right
        of any holder of Company securities to adjust the exercise, conversion, exchange
        or reset price under any of such securities. All of the outstanding shares
        of
        capital stock of the Company are validly issued, fully paid and nonassessable,
        have been issued in compliance with all federal and state securities laws,
        and
        none of such outstanding shares was issued in violation of any preemptive
        rights
        or similar rights to subscribe for or purchase securities. No further approval
        or authorization of any stockholder, the Board of Directors of the Company
        or
        others is required for the issuance and sale of the Notes and Warrants. Except
        as set forth on Schedule
        3.1(g),
        there
        are no stockholders agreements, voting agreements or other similar agreements
        with respect to the Company’s capital stock to which the Company is a party or,
        to the knowledge of the Company, between or among any of the Company’s
        stockholders.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (h) SEC
        Reports; Financial Statements.
        The
        Company has filed all reports, schedules, forms, statements and other documents
        required to be filed by it under the Securities Act and the Exchange Act,
        including pursuant to Section 13(a) or 15(d) thereof, for the period commencing
        January 1, 2005 through the date hereof (the foregoing materials, including
        the
        exhibits thereto and documents incorporated by reference therein, being
        collectively referred to herein as the “SEC
        Reports”)
        on a
        timely basis or has received a valid extension of such time of filing and
        has
        filed any such SEC Reports prior to the expiration of any such extension.
        Except
        as set forth on Schedule
        3.1(h),
        as of
        their respective dates, the SEC Reports complied in all material respects
        with
        the requirements of the Securities Act and the Exchange Act and the rules
        and
        regulations of the Commission promulgated thereunder, as applicable, and
        none of
        the SEC Reports, when filed, contained any untrue statement of a material
        fact
        or omitted to state a material fact required to be stated therein or necessary
        in order to make the statements therein, in the light of the circumstances
        under
        which they were made, not misleading. Except as set forth on Schedule
        3.1(h),
        the
        financial statements of the Company included in the SEC Reports complied
        in all
        material respects with applicable accounting requirements and the rules and
        regulations of the Commission with respect thereto as in effect at the time
        of
        filing. Except as set forth on Schedule
        3.1(h),
        such
        financial statements have been prepared in accordance with United States
        generally accepted accounting principles applied on a consistent basis during
        the periods involved (“GAAP”),
        except as may be otherwise specified in such financial statements or the
        notes
        thereto and except that unaudited financial statements may not contain all
        footnotes required by GAAP, and fairly present in all material respects the
        financial position of the Company and its consolidated subsidiaries as of
        and
        for the dates thereof and the results of operations and cash flows for the
        periods then ended, subject, in the case of unaudited statements, to normal,
        immaterial, year-end audit adjustments.

       

      (i) Material
        Changes; Undisclosed Events, Liabilities or Developments.
        Since
        the date of the latest audited financial statements included within the SEC
        Reports, except as specifically disclosed in a subsequent SEC Report or as
        set
        forth on Schedule
        3.1(i),
        (i)
        there has been no event, occurrence or development that has had or that could
        reasonably be expected by the Company to result in a Material Adverse Effect,
        (ii) the Company has not incurred any liabilities (contingent or otherwise)
        other than (A) trade payables and accrued expenses incurred in the ordinary
        course of business consistent with past practice and (B) liabilities not
        required to be reflected in the Company’s financial statements pursuant to GAAP
        or disclosed in filings made with the Commission, (iii) the Company has not
        altered its method of accounting, (iv) the Company has not declared or made
        any
        dividend or distribution of cash or other property to its stockholders or
        purchased, redeemed or made any agreements to purchase or redeem any shares
        of
        its capital stock and (v) the Company has not issued any equity securities
        to
        any officer, director or Affiliate, except pursuant to existing Company stock
        option plans. The Company does not have pending before the Commission any
        request for confidential treatment of information. 

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (j) Litigation.
        There
        is no action, suit, inquiry, notice of violation, proceeding or investigation
        pending or, to the knowledge of the Company, threatened against or affecting
        the
        Company, any Subsidiary or any of their respective properties before or by
        any
        court, arbitrator, governmental or administrative agency or regulatory authority
        (federal, state, county, local or foreign) (collectively, an “Action”)
        which
        materially adversely affects or challenges the legality, validity or
        enforceability of any of the Transaction Documents or the Notes and Warrants.
        There is no Action that has not been disclosed in the SEC Reports. The
        Commission has not issued any stop order or other order suspending the
        effectiveness of any registration statement filed by the Company or any
        Subsidiary under the Exchange Act or the Securities Act. 

       

      (k) Labor
        Relations.
        No
        material labor dispute exists or, to the knowledge of the Company, is imminent
        with respect to any of the employees of the Company which could reasonably
        be
        expected to result in a Material Adverse Effect. None of the Company’s or its
        Subsidiaries’ employees is a member of a union that relates to such employee’s
        relationship with the Company, and neither the Company or any of its
        Subsidiaries is a party to a collective bargaining agreement, and the Company
        and its Subsidiaries believe that their relationships with their employees
        are
        good. No executive officer, to the knowledge of the Company, is, or is now
        expected to be, in violation of any material term of any employment contract,
        confidentiality, disclosure or proprietary information agreement or
        non-competition agreement, or any other contract or agreement or any restrictive
        covenant, and the continued employment of each such executive officer does
        not
        subject the Company or any of its Subsidiaries to any liability with respect
        to
        any of the foregoing matters. The Company and its Subsidiaries are in compliance
        with all U.S. federal, state, local and foreign laws and regulations relating
        to
        employment and employment practices, terms and conditions of employment and
        wages and hours, except where the failure to be in compliance could not,
        individually or in the aggregate, reasonably be expected to have a Material
        Adverse Effect.

       

      (l) Compliance.
        Neither
        the Company nor any Subsidiary (i) is in default under or in violation of
        (and
        no event has occurred that has not been waived that, with notice or lapse
        of
        time or both, would result in a default by the Company or any Subsidiary
        under),
        nor has the Company or any Subsidiary received notice of a claim that it
        is in
        default under or that it is in violation of, any indenture, loan or credit
        agreement or any other agreement or instrument to which it is a party or
        by
        which it or any of its properties is bound (whether or not such default or
        violation has been waived), (ii) is in violation of any order of any court,
        arbitrator or governmental body, or (iii) is or has been in violation of
        any
        statute, rule or regulation of any governmental authority, including without
        limitation all foreign, federal, state and local laws applicable to its business
        and all such laws that affect the environment.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (m) Regulatory
        Permits.
        The
        Company and the Subsidiaries possess all certificates, authorizations and
        permits issued by the appropriate federal, state, local or foreign regulatory
        authorities necessary to conduct their respective businesses as described
        in the
        SEC Reports, except where the failure to possess such permits could not have
        or
        reasonably be expected to result in a Material Adverse Effect (“Material
        Permits”),
        and
        neither the Company nor any Subsidiary has received any notice of proceedings
        relating to the revocation or modification of any Material Permit.

       

      (n) Title
        to Assets.
        Except
        as set forth on Schedule
        3.1(n),
        the
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them that is material to the business of the Company
        and
        the Subsidiaries and good and marketable title in all personal property owned
        by
        them that is material to the business of the Company and the Subsidiaries,
        in
        each case free and clear of all Liens, except for Liens as do not materially
        affect the value of such property and do not materially interfere with the
        use
        made and proposed to be made of such property by the Company and the
        Subsidiaries and Liens for the payment of federal, state or other taxes,
        the
        payment of which is neither delinquent nor subject to penalties. Any real
        property and facilities held under lease by the Company and the Subsidiaries
        are
        held by them under valid, subsisting and enforceable leases with which the
        Company and the Subsidiaries are in compliance. The security interest granted
        by
        the Company to the Lenders pursuant to the Security Agreement will be senior
        to
        any other Liens of the Company.

       

      (o) Patents
        and Trademarks.
        The
        Company and the Subsidiaries have, or have rights to use, all patents, patent
        applications, trademarks, trademark applications, service marks, trade names,
        trade secrets, inventions, copyrights, licenses and other intellectual property
        rights and similar rights necessary or material for use in connection with
        their
        respective businesses as described in the SEC Reports (collectively, the
        “Intellectual
        Property Rights”).
        Neither the Company nor any Subsidiary has received a notice (written or
        otherwise) that the Intellectual Property Rights used by the Company or any
        Subsidiary violates or infringes upon the rights of any Person. To the knowledge
        of the Company, all such Intellectual Property Rights are enforceable and
        there
        is no existing infringement by another Person of any of the Intellectual
        Property Rights. The Company and its Subsidiaries have taken reasonable security
        measures to protect the secrecy, confidentiality and value of all of their
        intellectual properties.

       

      (p) Insurance.
        The
        Company and the Subsidiaries are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as are prudent
        and customary in the businesses in which the Company and the Subsidiaries
        are
        engaged, including, but not limited to, directors and officers insurance
        coverage at least equal to the Subscription Amount. Neither the Company nor
        any
        Subsidiary has any reason to believe that it will not be able to renew its
        existing insurance coverage as and when such coverage expires or to obtain
        similar coverage from similar insurers as may be necessary to continue its
        business without a significant increase in cost.

       

      
        
          
          

        

        
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      (q) Transactions
        With Affiliates and Employees.
        Except
        as set forth in the SEC Reports, none of the officers or directors of the
        Company and, to the knowledge of the Company, none of the employees of the
        Company is presently a party to any transaction with the Company or any
        Subsidiary (other than for services as employees, officers and directors),
        including any contract, agreement or other arrangement providing for the
        furnishing of services to or by, providing for rental of real or personal
        property to or from, or otherwise requiring payments to or from any officer,
        director or such employee or, to the knowledge of the Company, any entity
        in
        which any officer, director, or any such employee has a substantial interest
        or
        is an officer, director, trustee or partner, in each case in excess of $60,000
        other than (i) for payment of salary or consulting fees for services rendered,
        (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
        for
        other employee benefits, including stock option agreements under any stock
        option plan of the Company.

       

      (r) Sarbanes-Oxley;
        Internal Accounting Controls.
        The
        Company is in material compliance with all provisions of the Sarbanes-Oxley
        Act
        of 2002 which are applicable to it as of the Closing Date. 

       

      (s) Certain
        Fees.
        No
        brokerage or finder’s fees or commissions are or will be payable by the Company
        to any broker, financial advisor or consultant, finder, placement agent,
        investment banker, bank or other Person with respect to the transactions
        contemplated by the Transaction Documents. Lenders shall have no obligation
        with
        respect to any fees or with respect to any claims made by or on behalf of
        other
        Persons for fees of a type contemplated in this Section that may be due in
        connection with the transactions contemplated by the Transaction Documents
        as a
        result of any action taken by the Company or its Affiliates.

       

      (t) Private
        Placement.
        Assuming the accuracy of the Lenders representations and warranties set forth
        in
        Section 3.2, no registration under the Securities Act is required for the
        offer
        and sale of the Notes and Warrants by the Company to the Lenders as contemplated
        hereby. 

       

      (u) Investment
        Company.
        The
        Company is not, and is not an Affiliate of, and immediately after the Closing,
        will not be or be an Affiliate of, an “investment company” within the meaning of
        the Investment Company Act of 1940, as amended. The Company shall conduct
        its
        business in a manner so that it will not become subject to the Investment
        Company Act.

       

      (v) Registration
        Rights.
        Other
        than each of the Lenders, no Person has any right to cause the Company to
        effect
        the registration under the Securities Act of any securities of the
        Company.

       

      
        
          
          

        

        
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      (w) Listing
        and Maintenance Requirements.
        The
        Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
        Exchange Act, and the Company has taken no action designed to, or which to
        its
        knowledge is likely to have the effect of, terminating the registration of
        the
        Common Stock under the Exchange Act nor has the Company received any
        notification that the Commission is contemplating terminating such registration.
        The Company has not, in the 12 months preceding the date hereof, received
        notice
        from any Trading Market on which the Common Stock is or has been listed or
        quoted to the effect that the Company is not in compliance with the listing
        or
        maintenance requirements of such Trading Market. The Company is, and has
        no
        reason to believe that it will not in the foreseeable future continue to
        be, in
        compliance with all such listing and maintenance requirements.

       

      (x) Application
        of Takeover Protections.
        The
        Company and its Board of Directors have taken all necessary action, if any,
        in
        order to render inapplicable any control share acquisition, business
        combination, poison pill (including any distribution under a rights agreement)
        or other similar anti-takeover provision under the Company’s Certificate of
        Incorporation (or similar charter documents) or the laws of its state of
        incorporation that is or could become applicable to any Lender as a result
        of
        such Lender and the Company fulfilling their obligations or exercising their
        rights under the Transaction Documents.

       

      (y) Disclosure.
        All
        disclosure furnished by or on behalf of the Company to Lenders regarding
        the
        Company, its business and the transactions contemplated hereby, including
        the
        Disclosure Schedules to this Agreement, with respect to the representations
        and
        warranties made herein are true and correct with respect to such representations
        and warranties and do not contain any untrue statement of a material fact
        or
        omit to state any material fact necessary in order to make the statements
        made
        therein, in light of the circumstances under which they were made, not
        misleading. 

       

      (z) No
        Integrated Offering.
        Assuming
        the accuracy of each Lender’s representations and warranties set forth in
        Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
        acting on its or their behalf has, directly or indirectly, made any offers
        or
        sales of any security or solicited any offers to buy any security, under
        circumstances that would cause this offering of the Notes and Warrants to
        be
        integrated with prior offerings by the Company for purposes of the Securities
        Act or any applicable shareholder approval provisions of any Trading Market
        on
        which any of the securities of the Company are listed or designated. 

       

      (aa) Tax
        Status.
        Except
        as set forth on Schedule
        3.1(aa),
        and for
        matters that would not, individually or in the aggregate, have or reasonably
        be
        expected to result in a Material Adverse Effect, the Company and each Subsidiary
        has filed all necessary federal, state and foreign income and franchise tax
        returns and has paid or accrued all taxes shown as due thereon, and the Company
        has no knowledge of a tax deficiency which has been asserted or threatened
        against the Company or any Subsidiary.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (bb) Acknowledgement
        Regarding Each Lender’s Purchase.
        The
        Company acknowledges and agrees that each Lender is acting solely in the
        capacity of an arm’s length lender with respect to the Transaction Documents and
        the transactions contemplated thereby. The Company further acknowledges that
        each Lender is not acting as a financial advisor or fiduciary of the Company
        (or
        in any similar capacity) with respect to the Transaction Documents and the
        transactions contemplated thereby and any advice given by such Lender or
        any of
        their respective representatives or agents in connection with the Transaction
        Documents and the transactions contemplated thereby is merely incidental
        to each
        Lender’s purchase of its respective Note and Warrant. The Company further
        represents to each Lender that the Company’s decision to enter into this
        Agreement and the other Transaction Documents has been based solely on the
        independent evaluation of the transactions contemplated hereby by the Company
        and its representatives.

       

      3.2 Representations
        and Warranties of Lenders. Each Lender, for itself and for no other Lender,
        hereby represents and warrants as of the date hereof and as of the Closing
        Date
        to the Company as follows:

       

      (a) Organization;
        Authority.
        Such
        Lender is an entity duly organized, validly existing and in good standing
        under
        the laws of the jurisdiction of its organization with full right, corporate
        or
        partnership power and authority to enter into and to consummate the transactions
        contemplated by the Transaction Documents and otherwise to carry out its
        obligations hereunder and thereunder. The execution, delivery and performance
        by
        such Lender of the transactions contemplated by this Agreement have been
        duly
        authorized by all necessary corporate or similar action on the part of such
        Lender. Each Transaction Document to which it is a party has been duly executed
        by such Lender, and when delivered by such Lender in accordance with the
        terms
        hereof, will constitute the valid and legally binding obligation of such
        Lender,
        enforceable against it in accordance with its terms, except (i) as limited
        by
        general equitable principles and applicable bankruptcy, insolvency,
        reorganization, moratorium and other laws of general application affecting
        enforcement of creditors’ rights generally, (ii) as limited by laws relating to
        the availability of specific performance, injunctive relief or other equitable
        remedies and (iii) insofar as indemnification and contribution provisions
        may be
        limited by applicable law.

       

      (b) Own
        Account.
        Each
        Lender understands that the Note, Warrant and Warrant Shares are “restricted
        securities” and have not been registered under the Securities Act or any
        applicable state securities law and is acquiring the Note, Warrant and Warrant
        Shares as principal for its own account and not with a view to or for
        distributing or reselling such securities or any part thereof in violation
        of
        the Securities Act or any applicable state securities law, has no present
        intention of distributing any of such securities in violation of the Securities
        Act or any applicable state securities law and has no direct or indirect
        arrangement or understandings with any other persons to distribute or regarding
        the distribution of such securities (this representation and warranty not
        limiting each Lender’s right to sell the Warrant Shares pursuant to the
        Registration Statement or otherwise in compliance with applicable federal
        and
        state securities laws) in violation of the Securities Act or any applicable
        state securities law. Each Lender is acquiring the Note and Warrant hereunder
        in
        the ordinary course of its business.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (c) Lender
        Status.
        At the
        time such Lender was offered the Note and Warrant, it was, and at the date
        hereof it is, an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
        (a)(3), (a)(7) or (a)(8) under the Securities Act. Such Lender is not required
        to be registered as a broker-dealer under Section 15 of the Exchange Act.
        

       

      (d) Experience
        of Lenders.
        Each
        Lender, either alone or together with its representatives, has such knowledge,
        sophistication and experience in business and financial matters so as to
        be
        capable of evaluating the merits and risks of the prospective investment
        in the
        Note and Warrant, and has so evaluated the merits and risks of such investment.
        Each Lender is able to bear the economic risk of an investment in the Note
        and
        Warrant and, at the present time, is able to afford a complete loss of such
        investment.

       

      (e) General
        Solicitation.
        Each
        Lender is not purchasing the Note and Warrant as a result of any advertisement,
        article, notice or other communication regarding the Note and Warrant published
        in any newspaper, magazine or similar media or broadcast over television
        or
        radio or presented at any seminar or any other general solicitation or general
        advertisement.

       

      (f) Short
        Sales and Confidentiality Prior To The Date Hereof.
        Other
        than the transactions contemplated hereunder or under the Securities Put
        Agreement and except as separately disclosed by the Lenders to the Company
        in
        writing, each Lender has not directly or indirectly, nor has any Person acting
        on behalf of or pursuant to any understanding with such Lender, engaged in
        any
        transaction, including Short Sales, in the securities of the Company since
        March 15, 2006 (“Discussion
        Date”).
        Such
        Lender has maintained the confidentiality of all disclosures made to it in
        connection with this transaction (including the existence and terms of this
        transaction).

       

      (g) Access
        to Information.
        Each
        Lender acknowledges that it has received and had the opportunity to review
        (i)
        copies of the SEC Reports, and (ii) the terms of the Securities Put Agreement,
        and all exhibits thereto. Each Lender further acknowledges that it or its
        representatives have been afforded (iii) the opportunity to ask such questions
        as it has deemed necessary of, and to receive answers from, representatives
        of
        the Company concerning the terms and conditions of the offering of the Notes
        and
        Warrants, the merits and risks of investing in the Notes and Warrants, and
        the
        terms of the Securities Put Agreement; (iv) access to information about the
        Company and the Company's financial condition, results of operations, business,
        properties, management and prospects sufficient to enable it to evaluate
        its
        investment in the Notes and Warrants; and (v) the opportunity to obtain such
        additional information which the Company possesses or can acquire without
        unreasonable effort or expense that is necessary to verify the accuracy and
        completeness of the information contained in the SEC Reports.

       

      (h) Restrictions
        on Notes and Warrants.
        Each
        Lender understands that the Notes and Warrants have not been registered under
        the Securities Act and may not be offered, resold, pledged or otherwise
        transferred except (a) pursuant to an exemption from registration under the
        Securities Act or pursuant to an effective registration statement in compliance
        with Section 5 under the Securities Act, (b) in accordance with all applicable
        securities laws of the states of the United States and other jurisdictions
        and
        (c) the lock-up provisions of Section 4.1(b) below.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        IV.

       

      OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1 Transfer
        Restrictions. 

       

      (a) The
        Notes, Warrants and Warrant Shares may only be disposed of in compliance
        with
        state and federal securities laws. In connection with any transfer of the
        Notes,
        Warrants and Warrant Shares other than pursuant to an effective registration
        statement or Rule 144, the Company may require the transferor thereof to
        provide
        to the Company an opinion of counsel to the Company, the form and substance
        of
        which opinion shall be reasonably satisfactory to the Company, to the effect
        that such transfer does not require registration of such transferred securities
        under the Securities Act. 

       

      (b) In
        addition to transfer restrictions under the Securities Act, the Lenders agree
        that any Warrant Shares issued upon exercise of the Warrants shall be subject
        to
        a lock-up for a period of six months from the date of Closing and during
        such
        period shall not be sold, assigned or otherwise disposed of by such Lender
        except to a Permitted Transferee (as defined below) in accordance with subpart
        (d) below. 

       

      (c) Each
        Lender agrees to the imprinting, so long as is required by this Section 4.1,
        of
        a legend on any of the Notes, Warrants and Warrant Shares in the following
        form:

       

      THESE
        SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
        AS
        AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED SECURITIES” AS
        THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT. SUCH SECURITIES
        MAY
        NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
        TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE
        APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
        THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
        SATISFACTION OF COUNSEL TO THE ISSUER. [IN ADDITION, THESE SECURITIES ARE
        SUBJECT TO A CONTRACTUAL LOCK-UP THE TERMS OF WHICH ARE SET FORTH IN A NOTE
        PURCHASE AGREEMENT DATED MAY 1, 2006 A COPY OF WHICH IS ON FILE WITH THE
        COMPANY.] 

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (d) Notwithstanding
        the foregoing, any holder of a Note, Warrant or Warrant Shares may transfer
        such
        securities to any Permitted Transferee of such holder who consents in a writing
        delivered to the Company to be bound by the terms of this Agreement applicable
        to such securities, subject to the Company’s reasonable determination that such
        transfer does not require registration of such transferred securities under
        the
        Securities Act. With respect to any such holder, a “Permitted Transferee” means
        the spouse or lineal descendants of such holder, any trust for the benefit
        of
        such holder or the benefit of the spouse or lineal descendants of such holder,
        any corporation or partnership in which such holder, the spouse and the lineal
        descendants of such holder are the direct and beneficial owners of substantially
        all of the equity interests (provided such holder, spouse and lineal descendants
        agree in writing to remain the direct and beneficial owners of all such equity
        interests), the personal representative of such holder upon such holder’s death
        for purposes of administration of such holder’s estate or upon such holder’s
        incompetency for purposes of the protection and management of the assets
        of such
        holder; or for any holder that is a partnership, limited liability company,
        corporation or other entity to (i) a partner or former partner of such
        partnership, a member or former member of such limited liability company
        or a
        shareholder of such corporation, (ii) the estate of any such partner, member
        or
        shareholder, or (iii) any other Affiliate of such holder; or for any Lender,
        to
        another Lender or an Affiliate of a Lender.

       

      4.2 Furnishing
        of Information. As long as any Lender owns the Warrant or any Warrant
        Shares, the Company covenants to timely file (or obtain extensions in respect
        thereof and file within the applicable grace period) all reports required
        to be
        filed by the Company after the date hereof pursuant to the Exchange Act.
        As long
        as any Lender owns the Warrant or any Warrant Shares, if the Company is not
        required to file reports pursuant to the Exchange Act, it will prepare and
        furnish to such Lender and make publicly available in accordance with Rule
        144(c) such information as is required for such Lender to sell the Warrant
        Shares under Rule 144. The Company further covenants that it will take such
        further action as each Lender may reasonably request, to the extent required
        from time to time to enable such Lender to sell Warrant Shares without
        registration under the Securities Act within the requirements of the exemption
        provided by Rule 144.

       

      4.3 Integration.
        The Company shall not sell, offer for sale or solicit offers to buy or otherwise
        negotiate in respect of any security (as defined in Section 2 of the Securities
        Act) that would be integrated with the offer or sale of the Notes, Warrants
        or
        Warrant Shares in a manner that would require the registration under the
        Securities Act of the sale of the Notes, Warrants and Warrant Shares to any
        Lender or that would be integrated with the offer or sale of the Notes, Warrants
        and Warrant Shares for purposes of the rules and regulations of any Trading
        Market such that it would require shareholder approval prior to the closing
        of
        such other transaction unless shareholder approval is obtained before the
        closing of such subsequent transaction.

       

      
        
          
          

        

        
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      4.4 Securities
        Laws Disclosure; Publicity. The Company shall, within one Trading Day of the
        Closing Date, issue a press release disclosing the material terms of the
        transactions contemplated hereby, and shall file a Current Report on Form
        8-K
        which shall attach the Transaction Documents thereto by the fourth Business
        Day
        following the Closing Date. The press release and Form 8-K shall be acceptable
        to the Lenders in their reasonable discretion. The Lenders shall not issue
        any
        such press release or otherwise make any such public statement without the
        prior
        consent of the Company. The Company shall not publicly disclose the name
        of the
        Lenders, or include the name of any Lender in any filing with the Commission
        or
        any regulatory agency or Trading Market, without the prior written consent
        of
        such Lender, except (i) as required by federal securities law in connection
        with
        (A) any registration statement contemplated by the Registration Rights Agreement
        and (B) the filing of final Transaction Documents (including signature pages
        thereto) with the Commission and (ii) to the extent such disclosure is required
        by law or Trading Market regulations, in which case the Company shall provide
        such Lender with prior notice of such disclosure permitted under this subclause
        (ii).

       

      4.5 Use
        of
        Proceeds. The Company shall use the net proceeds from the sale of the Notes
        and Warrants hereunder as set forth on Schedule 4.5 of the Disclosure Schedule.
        

       

      4.6 Listing
        of Common Stock.
        The
        Company hereby agrees to use best efforts to maintain the listing of the
        Common
        Stock on a Trading Market, and as soon as reasonably practicable following
        the
        Closing to list all of the Warrant Shares on such Trading Market. The Company
        further agrees, if the Company applies to have the Common Stock traded on
        any
        other Trading Market, it will include in such application all of the Warrant
        Shares, and will take such other action as is necessary to cause all of the
        Warrant Shares to be listed on such other Trading Market as promptly as
        possible. The Company will take all action reasonably necessary to continue
        the
        listing and trading of its Common Stock on a Trading Market and will comply
        in
        all respects with the Company’s reporting, filing and other obligations under
        the bylaws or rules of the Trading Market.

       

      4.7 Short
        Sales and Confidentiality After The Date Hereof. Each Lender
        covenants that neither it nor any Affiliate acting on its behalf or pursuant
        to
        any understanding with it will engage in any transactions, including any
        Short
        Sales, in the securities of the Company during the period commencing at the
        Discussion Time and ending at the time that the transactions contemplated
        by
        this Agreement are first publicly announced as described
        in
        Section 4.4.
        Each
Lender
        covenants that neither it nor any Affiliate acting on its behalf or pursuant
        to
        any understanding with it will engage in any Short Sales in the securities
        of
        the Company during the period commencing at the Discussion Time and ending
        on
        the Effective Date (“Black-out Termination Date”).
        Each
Lender
        covenants that until such time as the transactions contemplated by this
        Agreement are publicly disclosed by the Company as described in Section 4.4,
        such Lender will maintain the confidentiality of all disclosures made to
        it in
        connection with this transaction (including the existence and terms of this
        transaction). Each Lender understands and acknowledges that the Commission
        currently takes the position that coverage of short sales of shares of the
        Common Stock “against the box” prior to the Effective Date of the Registration
        Statement with the Warrant Shares is a violation of Section 5 of the Securities
        Act, as set forth in Item 65, Section A, of the Manual of Publicly Available
        Telephone Interpretations, dated July 1997, compiled by the Office of Chief
        Counsel, Division of Corporation Finance. Notwithstanding
        the foregoing, each Lender makes no representation, warranty or covenant
        hereby
        that it will not engage in Short Sales in the securities of the Company after
        the Black-out Termination Date. 

      
        
          
          

        

        
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      4.8 Form
        D; Blue Sky Filings. The Company agrees to timely file a Form D with respect
        to the Notes and Warrants as required under Regulation D and to provide a
        copy
        thereof, promptly upon request of the Lenders. The Company shall take such
        action as the Company shall reasonably determine is necessary in order to
        obtain
        an exemption for, or to qualify the Notes and Warrants for, sale to Lenders
        at
        the Closing under applicable securities or “Blue Sky” laws of the states of the
        United States, and shall provide evidence of such actions promptly upon request
        of any Lender.

       

      4.9 Dividends
        and Redemptions. The Company shall not declare or pay any dividend or make
        any distribution on its capital stock or purchase, redeem (by direct payment,
        sinking fund or otherwise) or otherwise acquire or retire for value any of
        its
        capital stock, except that this restriction shall not apply to the repurchase
        of
        shares of Common Stock from any employee of the Company upon the cessation
        of
        his or her employment if such purchase is at the Company’s option and is at a
        price no greater than the price originally paid for these shares by the
        employee. Notwithstanding the foregoing, nothing in this Agreement shall
        prohibit the Company from conducting any dividend, asset distribution, spin-off
        or share repurchase under any arrangement with Dolphin Products Pty
        Ltd.

       

      4.10 Indebtedness.
        The Company will not create, incur, issue, assume, guarantee or otherwise
        become
        liable for, any indebtedness that is senior to or pari passu with the
        Notes.

       

      4.11 Debt
        Service. The Company agrees that as long as any principal balance remains
        outstanding under the Notes, 50% of the net proceeds from all of the following
        will be used to reduce the principal balance of the Notes: (i) sales of the
        Company’s assets (other than sales of inventory in the ordinary course of
        business); (ii) amounts received by the Company pursuant to settlement
        agreements or similar arrangements relating to litigation (excluding amounts
        awarded to reimburse the Company for costs); and (iii) sales of equity
        securities of the Company for cash consideration after the Closing Date
        (excluding proceeds received from (x) the sale of the first 1,000,000 shares
        of
        Common Stock or Common Stock Equivalents, calculated in the aggregate, issued
        after the Closing Date in a private placement transaction or series of
        transactions, (y) the exercise of warrants and options outstanding on the
        Closing Date, and (z) the exercise of options issued after the Closing Date
        to
        the Company’s employees and directors). Payments made pursuant to this Section
        4.11 shall be applied dollar for dollar against scheduled principal payments
        on
        the Notes. Notwithstanding the foregoing, the Company shall not be required
        to
        apply such amounts to the Notes unless the net proceeds received by the Company
        with respect to the transaction in question equals or exceeds $50,000.

       

      4.12 Reduction
        in Number of Warrants. If at any time prior to the first anniversary of the
        Closing Date, the aggregate outstanding principal balance of the Notes is
        reduced to $7,000,000 or less, the parties agree that 800,000 Warrants, in
        the
        aggregate, will be cancelled. If the principal balance under the Notes is
        reduced to $7,000,000 or less by the second anniversary of the Closing Date,
        400,000 Warrants will be cancelled; and if the principal balance of the Notes
        is
        reduced to $7,000,000 or less by the third anniversary of the Closing Date,
        200,000 Warrants will be cancelled. The cancellation of Warrants pursuant
        to
        this Section 4.12 shall be effected (i) pro rata among all Lenders based
        on the
        number of Warrants issued to the Lenders at the Closing, and (ii) automatically
        and immediately upon the Company’s delivery of payment or other effective
        reduction of principal amount of the Notes without need of any other notice
        by
        or action on the part of any party. 

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        V.

       

      MISCELLANEOUS

       

      5.1 Termination. 
        This Agreement may be terminated by any Lender, as to such Lender’s obligations
        hereunder only and without any effect whatsoever on the obligations between
        the
        Company and the other Lenders, or the Company by written notice to the other
        parties, if the Closing has not been consummated on or before __________,
        2006,
provided, however, that no such termination will affect the right
        of any party to sue for any breach by the other party (or parties).

       

      5.2 Fees
        and Expenses. Except as expressly set forth in the Transaction Documents to
        the contrary, each party shall pay the fees and expenses of its advisers,
        counsel, accountants and other experts, if any, and all other expenses incurred
        by such party incident to the negotiation, preparation, execution, delivery
        and
        performance of this Agreement; provided that the Company shall, following
        the
        Closing, reimburse the reasonable legal fees and expenses of counsel for
        the
        Lenders, which shall not exceed for all transactions contemplated by this
        Agreement $25,000. The Company shall pay all transfer agent fees, stamp taxes
        and other taxes and duties levied in connection with the delivery of the
        Notes,
        Warrants or Warrant Shares to the Lenders.

       

      5.3 Entire
        Agreement. The Transaction Documents, together with the exhibits and
        schedules thereto, contain the entire understanding of the parties with respect
        to the subject matter hereof and supersede and replace in their entirety
        all
        prior agreements and understandings, oral or written, with respect to such
        matters, including specifically the Original Agreement, which the parties
        acknowledge have been merged into such documents, exhibits and
        schedules.

       

      5.4 Notices.
        Any and all notices or other communications or deliveries required or permitted
        to be provided hereunder shall be in writing and shall be deemed given and
        effective on the earliest of (a) the date of transmission, if such notice
        or
        communication is delivered via facsimile at the facsimile number set forth
        on
        the signature pages attached hereto prior to 5:30 p.m. (New York City time)
        on a
        Trading Day, (b) the next Trading Day after the date of transmission, if
        such
        notice or communication is delivered via facsimile at the facsimile number
        set
        forth on the signature pages attached hereto on a day that is not a Trading
        Day
        or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
        2nd
        Trading
        Day following the date of mailing, if sent by U.S. nationally recognized
        overnight courier service, or (d) upon actual receipt by the party to whom
        such
        notice is required to be given. The address for such notices and communications
        shall be as follows:

      

      
        	
                If
                  to the Company:

              	
                VendingData
                  Corporation

              
	 	
                6830
                  Spencer Street

              
	 	
                Las
                  Vegas, NV 89119

              
	 	
                Facsimile:
                  702-617-4737

              
	 	
                Attn:
                  Mark R. Newburg, President

              
	 	
                Chief
                  Executive Officer

              

      

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      

      
        	 	 
	 	 
	
                If
                  to the Lenders:

              	
                c/o
                  Bricoleur Capital Management, LLC

              
	 	
                12230
                  El Camino Real, Suite 100

              
	 	
                San
                  Diego, CA 92130

              
	 	
                Facsimile:
                  858-523-2010

              
	 	
                Attn:
                  Robert Poole

              

      

       

      or
        such
        other address as either party may provide to the other in writing. 

      

      5.5 Amendments;
        Waivers. No provision of this Agreement may be waived or amended except in
        a
        written instrument signed by the party against whom enforcement of any such
        waived provision is sought. No waiver of any default with respect to any
        provision, condition or requirement of this Agreement shall be deemed to
        be a
        continuing waiver in the future or a waiver of any subsequent default or
        a
        waiver of any other provision, condition or requirement hereof, nor shall
        any
        delay or omission of any party to exercise any right hereunder in any manner
        impair the exercise of any such right.

       

      5.6 Headings.
        The headings herein are for convenience only, do not constitute a part of
        this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof.

       

      5.7 Successors
        and Assigns. This Agreement shall be binding upon and inure to the benefit
        of the parties and their successors and permitted assigns. Neither the Company
        nor the Lenders may assign this Agreement or any rights or obligations hereunder
        without the prior written consent of each the other party (other than by
        merger), except that any Lender may assign its rights and obligations hereunder,
        including any Notes, Warrants or Warrant Shares, to a Permitted Transferee
        without the Company’s prior written consent. 

       

      5.8 No
        Third-Party Beneficiaries. This Agreement is intended for the benefit of the
        parties hereto and their respective successors and permitted assigns and
        is not
        for the benefit of, nor may any provision hereof be enforced by, any other
        Person.

       

      5.9 Governing
        Law. All questions concerning the construction, validity, enforcement and
        interpretation of the Transaction Documents shall be governed by and construed
        and enforced in accordance with the internal laws of the State of California,
        without regard to the principles of conflicts of law thereof. Each party
        agrees
        that all legal proceedings concerning the interpretations, enforcement and
        defense of the transactions contemplated by this Agreement and any other
        Transaction Documents (whether brought against a party hereto or its respective
        affiliates, directors, officers, shareholders, employees or agents) shall
        be
        commenced exclusively in the state and federal courts sitting in the San
        Diego,
        California. The parties hereby waive all rights to a trial by jury. If either
        party shall commence an action or proceeding to enforce any provisions of
        the
        Transaction Documents, then the prevailing party in such action or proceeding
        shall be reimbursed by the other party for its reasonable attorneys’ fees and
        other costs and expenses incurred with the investigation, preparation and
        prosecution of such action or proceeding.

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      5.10 Survival.
        The representations and warranties contained herein shall survive the Closing
        and the delivery of the Notes and Warrants.

       

      5.11 Execution.
        This Agreement may be executed in two or more counterparts, all of which
        when
        taken together shall be considered one and the same agreement and shall become
        effective when counterparts have been signed by each party and delivered
        to the
        other party, it being understood that both parties need not sign the same
        counterpart. In the event that any signature is delivered by facsimile
        transmission or by e-mail delivery of a “.pdf” format data file, such signature
        shall create a valid and binding obligation of the party executing (or on
        whose
        behalf such signature is executed) with the same force and effect as if such
        facsimile or “.pdf” signature page were an original thereof.

       

      5.12 Severability.
        If any term, provision, covenant or restriction of this Agreement is held
        by a
        court of competent jurisdiction to be invalid, illegal, void or unenforceable,
        the remainder of the terms, provisions, covenants and restrictions set forth
        herein shall remain in full force and effect and shall in no way be affected,
        impaired or invalidated, and the parties hereto shall use their commercially
        reasonable efforts to find and employ an alternative means to achieve the
        same
        or substantially the same result as that contemplated by such term, provision,
        covenant or restriction. It is hereby stipulated and declared to be the
        intention of the parties that they would have executed the remaining terms,
        provisions, covenants and restrictions without including any of such that
        may be
        hereafter declared invalid, illegal, void or unenforceable.

       

      5.13 Rescission
        and Withdrawal Right. Notwithstanding anything to the contrary contained in
        (and without limiting any similar provisions of) any of the other Transaction
        Documents, whenever any Lender exercises a right, election, demand or option
        under a Transaction Document and the Company does not timely perform its
        related
        obligations within the periods therein provided, then such Lender may rescind
        or
        withdraw, in its sole discretion from time to time upon written notice to
        the
        Company, any relevant notice, demand or election in whole or in part without
        prejudice to its future actions and rights.

       

      5.14 Replacement
        of Securities. If any certificate or instrument evidencing the Notes,
        Warrants or Warrant Shares is mutilated, lost, stolen or destroyed, the Company
        shall issue or cause to be issued in exchange and substitution for and upon
        cancellation thereof (in the case of mutilation), or in lieu of and substitution
        therefor, a new certificate or instrument, but only upon receipt of evidence
        reasonably satisfactory to the Company of such loss, theft or destruction.
        The
        applicant for a new certificate or instrument under such circumstances shall
        also pay any reasonable third-party costs (including customary indemnity)
        associated with the issuance of such replacement security. 

       

      5.15 Construction.
        The parties agree that each of them and/or their respective counsel has reviewed
        and had an opportunity to revise the Transaction Documents and, therefore,
        the
        normal rule of construction to the effect that any ambiguities are to be
        resolved against the drafting party shall not be employed in the interpretation
        of the Transaction Documents or any amendments hereto.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the parties hereto have caused this 8% Senior Secured Note
        Purchase Agreement to be duly executed by their respective authorized
        signatories as of the date first indicated above.

       

       

      VENDINGDATA
        CORPORATION

      

      

      By:      /s/
        Mark R. Newburg                        

                
Mark
        R.
        Newburg,

      President
        and Chief Executive Officer

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR LENDERS FOLLOWS]

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      

      BRICOLEUR
        PARTNERS, L.P.

      

      By:
        Bricoleur Capital Management, LLC,

      Its
        General Partner

      

      By:     /s/
        Robert Poole               

      Robert
        Poole, Member of 

      Management
        Board

      

      Subscription
        Amount: $0

      

      

      BRICOLEUR
        ENHANCED, L.P.

      

      By:
        Bricoleur Capital Management, LLC,

      Its
        General Partner

      

      By:     /s/
        Robert Poole                       

      Robert
        Poole, Member of 

      Management
        Board

      

      Subscription
        Amount: $6,000,000

      

      BRIC
        6, L.P.

      

      By:
        Bricoleur Capital Management, LLC,

      Its
        General Partner

      

      By:     /s/
        Robert Poole               

      Robert
        Poole, Member of 

      Management
        Board

      

      Subscription
        Amount: $0

      

      

      BRICOLEUR
        OFFSHORE LTD.

      

      By:
        Bricoleur Capital Management, LLC,

      Its
        Investment Adviser

      

      By:     /s/
        Robert Poole                       

      Robert
        Poole, Member of

      Management
        Board

      

      Subscription
        Amount: $7,000,000

      
        
          
          

        

        
          24

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