8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): March 30, 2006

VENDINGDATA CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Nevada	001-32161	91-1696010
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

6830 Spencer Street

Las Vegas, Nevada 89119

(Address of principal executive offices)

(702) 733-7195

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions.

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14d-2(b)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

Item 1.01 Entry into a Material Definitive Agreement

On March 30, 2006, VendingData Corporation (the “Company”) entered into a Senior Secured Note Purchase Agreement and a Securities Put Agreement with four investment funds managed by Bricoleur Capital Management, of San Diego, California (the “Bricoleur Funds”). The Company’s obligations under the Note Purchase Agreement will be secured by a security interest in all of the Company’s assets pursuant to a Security Agreement that will be executed by the Company and the Bricoleur Funds upon the closing of the transactions contemplated by the Note Purchase Agreement.

Pursuant to the Note Purchase Agreement, the Bricoleur Funds will purchase $7 million of 7% senior debt due March 31, 2011, and warrants to purchase 1,600,000 shares of the Company’s common stock over a five year period at an exercise price of $2.50 per share. The exercise price of the warrants and the number of shares issuable pursuant to the warrants are subject to adjustment for stock splits, dividends, and similar dilutive events. Pursuant to the Securities Put Agreement, the Bricoleur Funds have agreed to purchase up to $5 million of the Company's common stock, in increments of not less than $1,000,000, from time to time at the Company's option. The purchase price for shares sold pursuant to the Securities Put Agreement will be equal to 80% of the volume- weighted average price of the Company’s common stock on the day the Company delivers the requisite purchase notice to the Bricoleur Funds, but not in excess of $3.50 per share. All shares of common stock purchased by the Bricoleur Funds under the Securities Put Agreement will be subject to a contractual lock-up for 180 days from the date of issuance. The transactions are expected to close in April 2006.

Upon the closing of the sale of the securities described above, the Company will enter into a Registration Rights Agreement with the Bricoleur Funds. The Registration Rights Agreement requires the Company to file a selling shareholder registration statement with the Securities and Exchange Commission within thirty (30) days following the closing of the financing transactions described above, for purposes of registering the resale of the shares of the Company’s common stock issued to the Bricoleur Funds pursuant to the transaction, including shares issued under the Securities Put Agreement, and the shares issuable upon exercise of the warrants.

The net proceeds from the financing transaction described above will be used to retire senior debt and for general working capital purposes.

The foregoing description of the financing transaction and the related documents does not purport to be complete and is qualified in its entirety by reference to the Note Purchase Agreement, Securities Put Agreement, Security Agreement, and the Registration Rights Agreement, all of which are filed as exhibits to this report and are incorporated herein by reference.

Item 2.02 Results of Operations and Financial Condition

On March 30, 2006 the Company issued a press release announcing financial results for the fourth quarter and full fiscal year ended December 31, 2005. The Company also held a conference call on March 30, 2006 at 4:30 pm Eastern Time to discuss the financial results and related business matters. Copies of the press release and the conference call script are attached as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K.

The information in this Item 2.02, including the information set forth in the Company’s press release and conference call script filed as Exhibits 99.1and 99.2, respectively, to, and incorporated in, this Current Report on Form 8-K, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in Exhibits 99.1 and 99.2 furnished pursuant to this Item 2.02 shall not be incorporated by reference into any registration statement or other documents pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or into any filing or other document pursuant to the Exchange Act except as otherwise expressly stated in any such filing.

Item 2.03 Creation of a Direct Financial Obligation

On March 30, 2006, the Company entered into a Note Purchase Agreement with the Bricoleur Funds pursuant to which the Bricoleur Funds will purchase $7 million of senior debt and warrants to purchase 1,600,000 shares of the Company’s common stock. The Note Purchase Agreement and the related transactions are discussed more fully in Item 1.01 above.

Item 3.02 Unregistered Sales of Equity Securities

On March 30, 2006, the Company entered into a Securities Put Agreement with the Bricoleur Funds pursuant to which the Bricoleur Funds have agreed to purchase, from time to time, an aggregate of up to $5 million of the Company’s common stock on the terms and conditions set forth in the Securities Put Agreement. The shares will be issued in reliance upon exemptions under Section 4(2) of the Securities Act of 1933 (the “Securities Act”) and Rule 506 promulgated thereunder. The Securities Put Agreement and the related transactions are discussed more fully in Item 1.01 above.

On March 31, 2006, the Company issued 400,000 shares of its common stock to Endeavour L.P., a Washington limited partnership, for an aggregate purchase price of $600,000. The shares were issued pursuant to exemptions under Section 4(2) of the Securities Act.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

     Exhibit Number

         Description

10.1	Senior Secured Note Purchase Agreement
10.2	Securities Put Agreement
10.3	Security Agreement
10.4	Registration Rights Agreement
99.1	Press Release dated March 30, 2006
99.2	Conference Call Script dated March 30, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	VENDINGDATA CORPORATION
Dated: April 5, 2006	/s/ Mark R. Newburg Mark R. Newburg, Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Senior Secured Note Purchase Agreement
10.2	Securities Put Agreement
10.3	Security Agreement
10.4	Registration Rights Agreement
99.1	Press release dated March 30, 2006.
99.2	Script for conference call held on March 30, 2006.

EX-10.1

Exhibit 10.1

7% SENIOR SECURED NOTE PURCHASE AGREEMENT

This 7% Senior Secured Note Purchase Agreement (this “Agreement”) is dated as of March 29, 2006, 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, 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, a 7% Senior Secured Note (“Note”) in the form of Exhibit A and Common Stock Purchase Warrants (“Warrant”) in the form of Exhibit B attached hereto entitling the Lenders to purchase up to 1,600,000 shares of Common Stock.

B.WHEREAS, concurrent with close of the purchase and sale of the Notes and Warrants under this Agreement, the Company will sell 2,400,000 shares of Common Stock (as defined below), at a price of $2.50 per share, pursuant to a certain Securities Purchase Agreement (“Securities Purchase Agreement”) between the Company and the accredited investors named therein (“Share Purchasers”), and, in addition, 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 that certain Equity Put Agreement (“Equity 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

1.1Definitions. 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.

“Balance Warrants” shall have the meaning ascribed to such term in Section 4.11.

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“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).

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

“Notes” shall mean the 7% 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, the Lenders and the Share Purchasers 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 the Balance Warrants.

“Shares” means the 2,400,000 shares of Common Stock issued or issuable to each Share Purchaser pursuant to the Securities Purchase Agreement.

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“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). 

“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

2.1Closing. 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 $7,000,000. 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 and Warrant. 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.

2.2Deliveries.

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

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(i)this Agreement duly executed by the Company;

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

(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.;

(viii)the Securities Purchase Agreement duly executed by the Share Purchasers and the Company, and evidence that the full $6,000,000 purchase price for the common shares sold thereby has been received by the Company; and

(ix)the Equity 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.

2.3Closing Conditions.

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

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(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.

(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

3.1Representations 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.

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(c)Authorization; Enforcement. Subject to Shareholder Approval as to the Balance Warrants only, 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 Balance Warrants (collectively, the “Required Approvals”).

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(f)Issuance of Securities. The Notes and Warrants, subject to Shareholder Approval as to the Balance 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 and subject to Shareholder Approval as to the Balance Warrants, 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. Other than Shareholder Approval as to the Balance Warrants, 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.

(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.

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(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.

(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.

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(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.

(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.

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(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.

(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.

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

(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, subject to Shareholder Approval as to the Balance Warrants, any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

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(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.

(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.

3.2Representations 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.

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(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 Equity 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 Purchase 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 Purchase 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.

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(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.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1Transfer 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 MARCH 29, 2006 A COPY OF WHICH IS ON FILE WITH THE COMPANY.]

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(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.

4.2Furnishing 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.

4.3Integration. 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.

4.4Securities 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).

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4.5Use 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.

4.6Listing 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.

4.7Short 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.

4.8Form 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.

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4.9Dividends 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.

4.10Indebtedness. 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.

4.11Shareholder Approval. If the number of Warrant Shares plus the number of shares of Common Stock sold under the Securities Purchase Agreement equal or exceed 20% of the Company’s outstanding shares of Common Stock at Closing, then the Purchasers agree that they shall receive at the Closing Warrants representing the right to purchase their proportional share of 1,200,000 Warrants Shares and that they shall receive additional Warrants (“Balance Warrants”) to purchase the remainder of their proportional shares of the 1,600,000 Warrant Shares upon, and subject to, the approval from the shareholders of the Company in accordance with Section 14 of the Exchange Act. The Company shall file a Proxy Statement on Schedule 14A under the Exchange Act with the Commission within 20 calendar days of the date hereof, setting forth all information required with respect to the Balance Shares and the transactions contemplated hereby for the purpose of obtaining Shareholder Approval, and shall pursue such Proxy Statement through any Commission review, and shall cause such Proxy Statement to be mailed to its shareholders as required by the Exchange Act within 5 calendar days of the completion of the Commission’s review, if any, and, to hold a special meeting of its shareholders as soon as possible following its mailing. The Company shall use all reasonable efforts to obtain such Shareholder Approval.

ARTICLE V.

MISCELLANEOUS

5.1Termination.  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 April 28, 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).

5.2Fees 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.

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5.3Entire 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 all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

5.4Notices. 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 2^nd 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

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.

5.5Amendments; 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.

5.6Headings. 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.

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5.7Successors 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.

5.8No 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.

5.9Governing 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.

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

5.11Execution. 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.

5.12Severability. 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.

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5.13Rescission 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.

5.14Replacement 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.

5.15Construction. 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.

IN WITNESS WHEREOF, the parties hereto have caused this 7% 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 PURCHASERS FOLLOWS]

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BRICOLEUR PARTNERS, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Amount: $1,000,000

BRICOLEUR ENHANCED, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Amount: $2,500,000

BRIC 6, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Amount: $1,000,000

BRICOLEUR OFFSHORE LTD.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Amount: $2,500,000

EXHIBIT A

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.

$     _____________, 2006

7% SENIOR SECURED PROMISSORY NOTE

1.Obligation. For value received, VENDINGDATA CORPORATION, a Nevada corporation (“Maker”), promises to pay to __________________ ("Holder"), the Principal Amount and Interest (both as defined below) in the manner and upon the terms and conditions set forth herein.

2.Principal Amount and Interest. The principal amount (“Principal Amount”) of this Note is __________ Dollars ($_______). This Note shall bear interest on the unpaid Principal Amount at the rate of seven percent (7%) per annum (“Interest”). The entire Principal Amount hereof shall be due and payable on March 31, 2011. The accrued and unpaid Interest shall be paid in semi-annual installments, commencing on June 1, 2006 and continuing thereafter on each June 1^st and December 1^st until all amounts owing under this Note are paid in full.

3.Manner and Place of Payment. Payments of the Principal Amount and Interest shall be made in lawful money of the United States of America. Principal and Interest are payable at _______________________ or at such other place as Holder may designate in writing.

4.Prepayment. Maker shall have the right, at any time or from time to time, to prepay, in whole or in part, the unpaid Principal Amount of this Note, without penalty or premium.

5.7% Senior Secured Promissory Note; Security Agreement. This Note is being delivered under that certain 7% Senior Secured Note Purchase Agreement (“Note Purchase Agreement”) between Maker and Holder dated March 29, 2006. Maker’s obligations under this Note are subject to a security interest in the assets of Maker, pursuant to that certain Security Agreement (“Security Agreement”) dated ______, 2006 entered into between Maker and Holder.

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6.Events of Default. The following shall each constitute an “Event of Default” under this Note: (i) default in the payment when due of any amount required hereunder, (ii) default in Maker’s performance of any other obligation hereunder or under the Security Agreement, the Note Purchase Agreement, the Registration Rights Agreement or the Warrant that remains uncured ten days after receipt of written notice of default, or (iii) any of the following events of bankruptcy or insolvency: (A) the Maker shall file a voluntary bankruptcy or reorganization petition under the provisions of the Federal Bankruptcy Act, any other bankruptcy or insolvency law or any other similar statute applicable to the Maker (“Bankruptcy Laws”), (B) the Maker shall consent to the filing of any bankruptcy or reorganization petition against it under any Bankruptcy Law, (C) the Maker shall make an assignment for the benefit of his creditors, (D) the Maker shall admit in writing its inability to pay its debts generally as they become due, (E) the Maker shall consent to the appointment of a receiver, trustee, or by the order of a court of competent jurisdiction, a receiver, liquidator or trustee of the Maker or of any substantial part of its property shall not have been discharged within a period of sixty (60) days, (F) by decree of such a court, the Maker shall be adjudicated bankrupt or insolvent or any substantial part of the property of the Maker shall have been sequestered and such degree shall have continued undischarged and unstayed for a period of sixty (60) days after the entry thereof, or (G) an involuntary bankruptcy reorganization petition pursuant to any Bankruptcy Law shall be filed against the Maker (and, in the case of any such petition filed pursuant to any provision of a statute which requires the approval of such petition by a court, shall be approved by such a court) and shall not be dismissed within sixty (60) days after such filing.

7.Acceleration Upon Event of Default or Change of Control. Upon the occurrence of an Event of Default specified in Section 7 above or a Change of Control (as defined below), the entire Principal Amount and all Interest shall, at the option of Holder evidenced by a written notice to Maker, become immediately due and payable, without further presentment, notice or demand for payment. For purposes of this Note, a “Change in Control” shall mean the occurrence of any of the following events: (i) a sale of all or substantially all of the assets of the Maker; (ii) a liquidation or dissolution of the Maker; (iii) a merger or consolidation in which the Maker is not the surviving corporation, unless the stockholders of the Maker immediately prior to such consolidation, merger or reorganization, own more than 50% of the Maker’s voting power immediately after such; (iv) a reverse merger in which the Maker is the surviving corporation but the shares of Common Stock and securities convertible into Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; (v) any consolidation or merger of the Maker, or any other corporate reorganization, in which the stockholders of the Maker immediately prior to such consolidation, merger or reorganization, own less than 50% of the Maker’s voting power immediately after such consolidation, merger or reorganization; or (vi) any Person other than James Crabbe becomes the owner, directly or indirectly, of securities of the Maker representing more than 50% of the combined voting power of the Maker’s then outstanding securities; provided, however, that a “Change in Control” shall not include any transaction the sole purpose of which is to change the state of the Maker’s incorporation.

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8.Expenses of Enforcement. Maker agrees to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees, as a court of competent jurisdiction shall award, which Holder shall incur in connection with any legal action or legal proceeding commenced for the collection of this Note or the exercise, preservation or enforcement of Holder’s rights and remedies thereunder.

9.Cumulative Rights and Remedies. All rights and remedies of Holder under this Note shall be cumulative and not alternative and shall be in addition to all rights and remedies available to Holder under applicable law.

10.Governing Law. This Note shall be governed by and interpreted and construed in accordance with the laws of the State of Nevada.

11.Notices and Demands. Any notice or demand which by any provision of this Note is required or provided to be given shall be in writing and shall be deemed to have been given or served sufficiently for all purposes if sent as provided in the Note Purchase Agreement or through a nationally-recognized overnight courier and simultaneously transmitted by facsimile to the following respective addresses and facsimile telephone numbers:

Maker:	VendingData Corporation.
	6830 Spencer Street
	Las Vegas, NV 89119
	Attention: Mark R. Newburg,
	President and Chief Executive Officer
	Facsimile: (702) 733-7197

or at any other address designated by Maker to Holder in writing.

Holder:	Attention:
	Facsimile:

or at any other address designated by Holder to Maker in writing, and if to an assignee of Holder, to its address as designated to Maker in writing.

IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered at las Vegas, Nevada effective as of the day and year first above written.

VENDINGDATA CORPORATION
By:
	Mark R. Newburg,
	President and Chief Executive Officer

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EXHIBIT B

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE ISSUER TO SUCH EFFECT

COMMON STOCK PURCHASE WARRANT

To Purchase ________ Shares of Common Stock of

VENDINGDATA CORPORATION

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after September __, 2006 (the “Initial Exercise Date”) and on or prior to the close of business on the fifth anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from VendingData Corporation, a Nevada corporation (the “Company”), up to _________ shares (the “Warrant Shares”) of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain 7% Senior Secured Note Purchase Agreement (the “Purchase Agreement”) dated March __, 2006 between the Company and the Holder.

Section 2.Exercise.

a)Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); and, within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3 Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

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b)Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $2.50, subject to adjustment herein (the “Exercise Price”).

c)Mechanics of Exercise.

i.Authorization of Warrant Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

ii.Delivery of Certificates Upon Exercise. Subject to the Company’s ability to issue unlegended shares upon exercise of this Warrant in compliance with the Securities Act and Holder’s acknowledgement of its compliance or intended compliance with the registration and prospectus delivery requirements of the Securities Act, certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).

iii.Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iv.No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

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v.Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

vi.Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

Section 3.CertainAdjustments.

a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

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b)Subsequent Rights Offerings. If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder of this Warrant) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP at the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b)  if the OTC Bulletin Board is the Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

c)Pro Rata Distributions. If the Company, at any time prior to the Termination Date, shall distribute to all holders of Common Stock (and not to the Holder of this Warrant) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

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d)Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in an all cash transaction, cash equal to the number of Warrant Shares multiplied by the excess, if any, of the cash paid on one share of Common Stock in such transaction over the Exercise Price. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(d) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

e)Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

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f)Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

g)Notice to Holders.

i.Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to each Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii.Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

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Section 4.Transfer of Warrant.

a)Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b)New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

c)Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d)Transfer Restrictions. The Company may require, as a condition of allowing the transfer of this Warrant (i) the opinion of counsel to the Company that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. The foregoing conditions shall not apply to any Permitted Transferee of Holder, subject to the Company’s reasonable determination that such transfer does not require registration of such transferred securities under the Securities Act. A “Permitted Transferee” means the spouse or lineal descendants of Holder, any trust for the benefit of Holder or the benefit of the spouse or lineal descendants of Holder, any corporation or partnership in which Holder, the spouse and the lineal descendants of Holder are the direct and beneficial owners of substantially all of the equity interests (provided Holder, spouse and lineal descendants agree in writing to remain the direct and beneficial owners of all such equity interests), the personal representative of Holder upon Holder’s death for purposes of administration of Holder’s estate or upon Holder’s incompetency for purposes of the protection and management of the assets of 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 Holder.

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e)Lock-Up. In addition to transfer restrictions under the Securities Act, the Holder agrees that any Warrant Shares purchased hereunder shall be subject to a lock-up for a period commencing on the date of this Warrant and expiring _____, 2006 [six months from the close of the Note Purchase Agreement] and during such period shall not be sold, assigned or otherwise disposed of by Holder except to a Permitted Transferee in accordance with subpart (d) above.

Section 5.Miscellaneous.

a)No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth herein.

b)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

d)Authorized Shares.

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e)Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

f)Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

g)Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.

h)Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

i)Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

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j)Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

k)Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

l)Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

m)Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n)Registration Rights. This Warrant and the Warrant Shares are entitled to the benefits of that certain Registration Rights Agreement dated as of even date herewith between the Company, Holder and the other signatories thereto (the “Registration Rights Agreement”). The Company shall keep a copy of the Registration Rights Agreement, and any amendments thereto, at its principal office, and shall furnish copies thereof to the Holder upon request. A holder of Warrant Shares issued upon the exercise of this Warrant, in whole or in part, shall continue to be entitled with respect to such shares to all rights to which it would have been entitled as a Holder under the Registration Rights Agreement.

o)Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

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

Dated: March __, 2006

VENDINGDATA CORPORATION
By:	/s/
	Mark R. Newburg,
	President and Chief Executive Officer

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NOTICE OF EXERCISE

TO:VENDINGDATA CORPORATION

(1)The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

_______________________________

_______________________________

_______________________________

(3) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity:    

Signature of Authorized Signatory of Investing Entity:   

Name of Authorized Signatory:                

Title of Authorized Signatory:             

Date:               

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ASSIGNMENT FORM

(To assign the foregoing Warrant, execute

this form and supply required information.

Do not use this form to exercise the Warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated: ______________, _______

Holder’s Signature:_____________________________

Holder’s Address:______________________________

______________________________

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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EX-10.2

Exhibit 10.2

SECURITIES PUT AGREEMENT

This Securities Put Agreement (this “Agreement”) is dated as of March 29, 2006, 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 “Purchaser” and collectively the “Purchasers”).

RECITALS

A.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 Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, up to $5,000,000 shares of Common Stock (as defined below), as more fully described in this Agreement.

B.WHEREAS, concurrent with close of the purchase and sale of securities under this Agreement, the Company will sell to the Purchasers $7 million of 7% Senior Secured Notes (“Notes”) pursuant to that certain Note Purchase Agreement (“Note Purchase Agreement”) of the same date herewith and, in addition, the Company will sell 2,400,000 shares of Common Stock, at a price of $2.50 per share, pursuant to a certain Securities Purchase Agreement (“Securities Purchase Agreement”) between the Company and the accredited investors named therein (“Share Purchasers”).

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 Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1Definitions.  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 Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

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

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“Change in Control” shall mean the occurrence of any of the following events: (i) a sale of all or substantially all of the assets of the Company; (ii) a liquidation or dissolution of the Company; (iii) a merger or consolidation in which the Company is not the surviving corporation, unless the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own more than 50% of the Company’s voting power immediately after such; (iv) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock and securities convertible into Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; (v) any consolidation or merger of the Company, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the Company’s voting power immediately after such consolidation, merger or reorganization; or (vi) any Person other than James Crabbe becomes the owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities; provided, however, that a “Change in Control” shall not include any transaction the sole purpose of which is to change the state of the Company’s incorporation

“Closing” means each Closing of the purchase and sale of the Subscription Shares pursuant to Section 2.1.

“Closing Date” means, as to each Closing, the date, which shall be a Business Day, designated in the relevant Subscription Notice for the Closing of the purchase and sale of the Subscription Shares set forth in such notice.

“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 each Closing.

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“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).

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

“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 Purchasers, in the form of Exhibit A attached hereto.

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Subscription 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).

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“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). 

“Subscription Amount” means, as to each Closing, the aggregate dollar amount to be paid for the Subscription Shares at the Closing as specified in the Subscription Notice.

“Subscription Commitment Amount” means, as to each Purchaser, the total amount committed by the Purchasers for the Purchase of Subscription Shares, from time to time, as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Commitment Amount”, in United States Dollars and in immediately available funds.

“Subscription Shares” means, as to each Closing, the aggregate number of shares of Common Stock to be purchased by the Purchasers.

“Subscription Notice” shall mean a written notice to the Purchasers, delivered via facsimile, setting forth the Subscription Amount that the Company requests from the Purchasers, including the Subscription Price and the Closing Date. The Company shall be entitled to send a Subscription Notice only during the fifteen Business Day period immediately following the Company’s filing with the Commission of an Annual Report on Form 10-K or 10-KSB or Quarterly Report on Form 10-Q or 10-QSB. The Company shall only send a Subscription Notice between 6:30 A.M. and 1:30 P.M. (Pacific time) on a Trading Day; provided, however, the Company shall not be entitled to send a Subscription Notice after 1:00 P.M. if it subsequently issues a press release on that same Trading Day. Unless otherwise mutually agreed by the Purchasers and the Company in writing, the Closing Date shall be no sooner than five (5) Business Days and no later than fifteen (15) Business Days after the date on which the Subscription Notice is received by the Purchasers.

“Subscription Price” means, as to each Subscription Share purchased in a Closing, eighty percent (80%) of the VWAP on the same Trading Day on which the Company delivers the Subscription Notice; provided that in no event shall the Subscription Price exceed $3.50 per Subscription Share (subject to adjustment for any stock split, reverse stock split or other similar event affecting the Common Stock after the date hereof).

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

“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 transactions contemplated by the Transaction Documents.

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“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 Registration Rights Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.

ARTICLE II.

PURCHASE AND SALE

2.1Closing. Upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and each Purchaser agrees to purchase, severally and not jointly, the Purchaser’s pro rata share of the Subscription Shares to be purchased by the Purchasers at each Closing. Each Closing shall be for a minimum of at least one million dollars ($1,000,000) of Subscription Shares. Each Purchaser’s pro rata share of the Subscription Shares shall be determined by multiplying the Subscription Shares by a fraction the numerator of which is the Purchaser’s Subscription Commitment Amount and the denominator of which is $5,000,000. The Purchasers shall purchase the Subscription Shares at each Closing at a purchase price equal to the Subscription Price. At each Closing, each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to their portion of the Subscription Amount, and the Company shall deliver to each Purchaser their respective Subscription Shares to be issued at the Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, Closing shall occur at the offices of the Company, or such other location as the parties shall mutually agree, on the Closing Date (“Closing Date”) set forth in the Subscription Notice. Unless otherwise mutually agreed by the Purchasers and the Company in writing, the Closing Date shall be no sooner than five (5) Business Days and no later than fifteen (15) Business Days after the date on which the Subscription Notice is received by the Purchasers. The Purchasers shall have no obligation to purchase Subscription Shares after five (5) years from the date of this Agreement, or if sooner, at any time after the Purchasers have purchased an aggregate of five million dollars ($5,000,000) of Subscriptions Shares. In addition, the Purchasers shall have no obligation to purchase Subscription Shares at any time after a Change of Control. If mutually agreed by two or more Purchasers, such Purchasers may agree to adjust the relative amounts of their Subscription Commitment Amounts, Subscription Amounts or the amount of Subscription Shares to be purchased by them at any Closing, provided that the sum of such amounts is not thereby reduced.

2.2Deliveries.

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

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(i)as to the initial Closing only, this Agreement duly executed by the Company;

(ii)as to the initial Closing only, the Registration Rights Agreement duly executed by the Company;

(iii)as to the initial Closing only, a legal opinion of Company Counsel, in the form acceptable to the Purchasers in their reasonable discretion;

(iv)as to the initial Closing only, the Securities Purchase Agreement duly executed by the Share Purchasers and the Company, and evidence that the full $6,000,000 purchase price for the common shares sold thereby has been received by the Company;

(v)as to the initial Closing only, the Note Purchase Agreement duly executed by the Purchasers and the Company, and evidence that the full $7,000,000 purchase price for the Notes sold thereby has been received by the Company;

(vi)a Subscription Notice prepared and delivered in accordance herewith;

(vii)a copy of the irrevocable instructions to the Company’s transfer agent instructing the transfer agent to deliver, on an expedited basis, certificates evidencing the Subscription Shares purchased by each Purchaser hereunder registered in the name of each Purchaser;

(viii)the Disclosure Schedules, as updated as necessary; and

(ix)an Officer’s Certificate in the form acceptable to the Purchasers in their reasonable discretion.

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

(i)as to the initial Closing only, this Agreement duly executed by such Purchaser;

(ii)as to the initial Closing only, the Registration Rights Agreement duly executed by the Purchaser; and

(iii)such Purchaser’s pro rata Subscription Amount by wire transfer or cashier’s check to the account as specified by the Company.

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2.3Closing Conditions.

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

(i)the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchasers contained herein;

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

(iii)the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement; and

(iv)the Company shall have obtained Shareholder Approval.

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

(i)the accuracy of the representations and warranties of the Company contained herein as of the date of this Agreement;

(ii)the accuracy of the representations and warranties of the Company contained herein, as modified by the Disclosure Schedule delivered at such Closing, provided that any additional or different disclosure included in such Disclosure Schedule (considered collectively) do not constitute, and could not reasonably be expected to have or result in, a Material Adverse Effect.

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

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

(v)the Company shall have obtained Shareholder Approval; and

(vi)the Company is not in breach or default of any obligation, covenant or agreement under the Note Purchase Agreement, Registration Rights Agreement, the Notes, the Warrants or the Security Agreement (as the terms Notes, Warrants and Security Agreement are defined in the Note Purchase Agreement).

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ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of the Company. Except as set forth under the corresponding section of the disclosure schedules delivered to the Purchasers concurrently herewith or at any Closing (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 Purchaser as of the date hereof and as of each Closing:

(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.

(c)Authorization; Enforcement. Subject to Shareholder Approval, 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.

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(d)No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Subscription Shares 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 Subscription 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, and (vi) the Company shall have obtained Shareholder Approval (collectively, the “Required Approvals”).

(f)Issuance of the Subscription Shares. The Subscription Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents and subject to Shareholder Approval, 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 Company has reserved from its duly authorized capital stock the Subscription Shares issuable pursuant to this Agreement.

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(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 a result of the purchase and sale of the Subscription Shares or 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 Subscription Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) 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. Other than Shareholder Approval, there are 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 Subscription Shares. 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.

(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 and any Closing (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.

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(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.

(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 Subscription Shares. 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.

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(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.

(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.

(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.

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(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 aggregate 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.

(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. The Purchasers 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 Purchasers representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Subscription Shares by the Company to the Purchasers as contemplated hereby. Subject to receipt of Shareholder Approval, the issuance and sale of the Subscription Shares hereunder does not contravene the rules and regulations of the Trading Market.

(u)Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Subscription Shares, 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.

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

(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 the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Subscription Shares and the Purchasers’ ownership of the Subscription Shares.

(y)Disclosure. All disclosure furnished by or on behalf of the Company to the Purchasers 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 the Purchasers’ 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 Subscription Shares 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.

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(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.

(bb)No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Subscription Shares by any form of general solicitation or general advertising. The Company has offered the Subscription Shares for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

(cc)Acknowledgment Regarding Purchasers’ Purchase of Subscription Shares. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is 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 any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Subscription Shares. The Company further represents to each Purchaser 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.

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

(a)Organization; Authority. Such Purchaser 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 Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, 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.

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(b)Own Account. Such Purchaser understands that the Subscription Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Subscription Shares as principal for its own account and not with a view to or for distributing or reselling such Subscription Shares 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 Subscription Shares 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 Subscription Shares (this representation and warranty not limiting such Purchaser’s right to sell the Subscription 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. Such Purchaser is acquiring the Subscription Shares hereunder in the ordinary course of its business.

(c)Purchaser Status. At the time such Purchaser was offered the Subscription Shares, 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 Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

(d)Experience of Such Purchaser. Such Purchaser, 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 Subscription Shares, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Subscription Shares and, at the present time, is able to afford a complete loss of such investment.

(e)General Solicitation. Such Purchaser is not purchasing the Subscription Shares as a result of any advertisement, article, notice or other communication regarding the Subscription Shares 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 transaction contemplated hereunder or under the Note Purchase Agreement, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, engaged in any transaction, including Short Sales, in the securities of the Company since March 15, 2006(“Discussion Date”). Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Subscription Shares covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

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(g)Access to Information. Such Purchaser acknowledges that it has received and had the opportunity to review (i) copies of the SEC Reports, and (ii) the terms of the Note Purchase Agreement and Equity Put Agreement, and all exhibits thereto. Such Purchaser 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 Subscription Shares, the merits and risks of investing in the Subscription Shares, and the terms of the Note Purchase Agreement and Equity 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 Subscription Shares; 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 Subscription Shares. Such Purchaser understands that the Subscription Shares 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.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1Transfer Restrictions.

(a)The Subscription Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Subscription 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 Subscription Shares under the Securities Act.

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

(c)The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Subscription Shares in the following form:

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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 SECURITIES PUT AGREEMENT DATED MARCH 29, 2006 A COPY OF WHICH IS ON FILE WITH THE COMPANY.

(d)Notwithstanding the foregoing, any holder of Subscription Shares may transfer such securities to any Permitted Transferee who consents in a writing delivered to the Company to be bound by the applicable terms of this Agreement, 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 Purchaser, to another Purchaser or an Affiliate of a Purchaser.

4.2Furnishing of Information. As long as any Purchaser owns Subscription 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 Purchaser owns Subscription Shares, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Subscription Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Subscription Shares may reasonably request, to the extent required from time to time to enable such Person to sell such Subscription Shares without registration under the Securities Act within the requirements of the exemption provided by Rule 144.

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4.3Integration. 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 Subscription Shares in a manner that would require the registration under the Securities Act of the sale of the Subscription Shares to the Purchasers or that would be integrated with the offer or sale of the Subscription 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.

4.4Securities 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 Purchasers in their reasonable discretion. No Purchaser shall 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 any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, 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 the Purchasers with prior notice of such disclosure permitted under this subclause (ii).

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

4.6Listing 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 Subscription 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 Subscription Shares, and will take such other action as is necessary to cause all of the Subscription 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. The Company shall file a Proxy Statement on Schedule 14A under the Exchange Act with the Commission within 20 calendar days of the date hereof, setting forth all information required with respect to the transactions contemplated hereby for the purpose of obtaining Shareholder Approval, and shall pursue such Proxy Statement through any Commission review, and shall cause such Proxy Statement to be mailed to its shareholders as required by the Exchange Act within 5 calendar days of the completion of the Commission’s review, if any, and, to hold a special meeting of its shareholders as soon as possible following its mailing. The Company shall use all reasonable efforts to obtain such Shareholder Approval.

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4.7Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally and not jointly with the other Purchasers, 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 Purchaser, severally and not jointly with the other Purchasers, 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 Purchaser, severally and not jointly with the other Purchasers, 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 Purchaser will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Each Purchaser understands and acknowledges, severally and not jointly with any other Purchaser, 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 Subscription 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, no Purchaser makes any 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. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Subscription Shares covered by this Agreement.

4.8Delivery of Subscription Shares After Closing. The Company shall deliver, or cause to be delivered, the respective Subscription Shares purchased by each Purchaser to such Purchaser within 3 Trading Days of the Closing Date.

4.9Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Subscription Shares as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. 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 Subscription Shares for, sale to the Purchasers 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 Purchaser.

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ARTICLE V.

MISCELLANEOUS

5.1Fees 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 each Closing, reimburse the reasonable legal fees and expenses of counsel for the Purchasers not to exceed $25,000 for all transactions contemplated by this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Subscription Shares to the Purchasers.

5.2Entire 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 all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

5.3Notices. 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 2^nd 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
If to the Purchasers:	c/o Bricoleur Capital Management, LLC
	12230 El Camino Real, Suite 100
	San Diego, CA 92130
	Facsimile: 858-523-2010
	Attn: Robert Poole

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

5.4Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers representing not less than 51% of the Subscription Commitment Amount then remaining or, in the case of a waiver, 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.

5.5Headings. 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.

5.6Successors 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 any Purchasers 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 Purchaser may assign its rights and obligations hereunder to a Permitted Transferee in accordance with Section 4.1(d).

5.7No 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.

5.8Governing 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.

5.9Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Subscription Shares.

5.10Execution. 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.

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5.11Severability. 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.

5.12Rescission 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 Purchaser 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 Purchaser 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.

5.13Replacement of Subscription Shares. If any certificate or instrument evidencing any Subscription 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 Subscription Shares.

5.14Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers.

5.15Construction. 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.

(SIGNATURE PAGES FOLLOW)

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IN WITNESS WHEREOF, the parties hereto have caused this Securities 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

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BRICOLEUR PARTNERS, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Commitment Amount: $715,000

BRICOLEUR ENHANCED, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Commitment Amount: $1,785,000

BRIC 6, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Commitment Amount: $715,000

BRICOLEUR OFFSHORE LTD.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:	/s/ Robert Poole
	Robert Poole, Member of
	Management Board Subscription Commitment Amount: $1,785,000

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EX-10.3

Exhibit 10.3

SECURITY AGREEMENT

This Security Agreement (“Agreement”) is entered into effective as of March 29, 2006 by and between VendingData Corporation, a Nevada corporation (“Grantor”), and Bricoleur Partners, L.P., Bricoleur Enhanced, L.P., BRIC 6, L.P. and Bricoleur Offshore Ltd. (“Secured Parties”).

RECITALS

A.The Grantor and the Secured Parties are parties to a 7% Senior Secured Note Purchase Agreement of even date herewith (the “Note Purchase Agreement”) under which the Grantor has issued certain 7% Senior Secured Promissory Notes ( each a “Note”) of even date in favor of the Secured Parties in the aggregate original principal amount of $7,000,000.

B.As a condition to extending credit to the Grantor under the Notes, the Secured Parties have required the execution and delivery of this Agreement by the Grantor.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, Grantor hereby represents, warrants, covenants, agrees, assigns and grants as follows:

1.Definitions.

1.1Unless the context otherwise requires, terms defined in the Uniform Commercial Code of the State of Nevada (the “Uniform Commercial Code”) and not otherwise defined in this Agreement shall have the meanings defined for those terms in the Uniform Commercial Code.

1.2“Collateral” means and includes all present and future right, title and interest of Grantor in and to all of the assets of the Grantor, wherever located and whether presently owned or after acquired, including but not limited to:

a.All accounts receivable, contract rights and general intangibles, including, without limitation, all forms of payment, goodwill, license rights, bailment or leasehold interests, whether as lessor or lessee, inventions, designs, trademarks, trade styles, trade names, trade secrets, formulas, patents, patent applications, tax refunds, customer lists, business and accounting records, including all ledger account cards, computer tapes and discs and other computer information, in all cases whether now owned or hereafter created or acquired by Grantor or in which Grantor may now have or may hereafter acquire an interest;

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b.All equipment, including, without limitation, machinery, furniture, furnishings, fixtures, tools, parts, supplies and vehicles of every kind and description, whether now owned or hereafter acquired by Grantor in which Grantor may now have or may hereafter acquire an interest, and all additions, accessions, replacements, substitutions and improvements thereto and wherever located;

c.All documents, documents of title, deposit accounts, instruments, money, letters of credit and chattel paper whether now owned or hereafter acquired by Grantor;

d.All other intellectual property of Grantor, including, but not limited to, all (i) patents, patent applications and inventions and discoveries that may be patentable, (ii) all copyrights in both published works and unpublished works; and (iii) all rights in mask works, know-how, trade secrets, confidential information, customer files, software, technical information, data. process technology, plans, drawings, and blue prints; and

e.All proceeds and products of any of the foregoing, in any form, including, without limitation, proceeds of any insurance relating thereto, proceeds consisting of any of the above types of collateral, and proceeds of any tort cause of action now or hereafter in existence, and all replacements, substitutions, renewals, returns, additions, accessions, rents, royalties, issues, documents of ownership and receipts for any of the foregoing.

“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a person, whether now owned or hereafter acquired and whether arising by agreement or operation of law.

“Permitted Liens” means (i) the Security Interest, (ii) covenants, restrictions, rights, easements and minor irregularities in title which do not materially interfere with the Grantor’s business or operations as presently conducted, and (iii) Liens in existence on the date hereof and described on Exhibit B hereto.

2.Creation of Security Interest. Grantor hereby grants to Secured Parties to the extent permitted by law a security interest in and to all right, title and interest of Grantor in and to all presently existing and hereafter acquired Collateral. The security interest and pledge created by this Section 2 shall continue in effect so long as any of the Obligations (as defined below) remains unpaid.

3.Security for Obligations. This Agreement and the security interests granted herein secure the prompt payment, in full in cash, and full performance of, all obligations (“Obligations”) of the Secured Parties now or hereafter existing under the Notes or the Note Purchase Agreement.

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4.Representations, Warranties and Agreements. The Grantor hereby represents, warrants and agrees as follows:

4.1Title. The Grantor (i) has absolute title to each item of Collateral in existence on the date hereof, free and clear of all Liens except the Permitted Liens, (ii) will have, at the time the Grantor acquires any rights in the Collateral hereafter arising, absolute title to each such item of the Collateral, free and clear of all Liens except the Permitted Liens, (iii) will keep all of the Collateral free and clear of all Liens except the Permitted Liens, and (iv) will defend the Collateral against all claims or demands of all persons other than the Secured Parties. The Grantor will not sell or otherwise dispose of the Collateral or any interest therein, outside the ordinary course of business, without the prior written consent of the Secured Parties.

4.2Chief Executive Office; Identification Number. The Grantor’s chief executive office and principal place of business is located at the address set forth under its signature below. The Grantor’s federal employer identification number and organizational identification number is correctly set forth under its signature below.

4.3Location of the Collateral. As of the date hereof, the tangible Collateral is located only in the state and at the address(es) identified on Exhibit A attached hereto. The Grantor will not permit any tangible Collateral to be located in any state (and, if county filing is required, in any county) in which a financing statement covering such Collateral is required to be, but has not in fact been, filed in order to perfect the Security Interest.

4.4Changes in Name, Constituent Documents, Location. The Grantor will not change its name or its business address without giving prior written notice to the Secured Parties.

4.5Fixtures. The Grantor will not permit any tangible Collateral to become part of or to be affixed to any real property without first assuring to the reasonable satisfaction of the Secured Parties that the Security Interest will be prior and senior to any Lien then held or thereafter acquired by any mortgagee of such real property or the owner or purchaser of any interest therein.

4.6Rights to Payment. Each right to payment and each instrument, document, chattel paper and other agreement constituting or evidencing the Collateral is (or will be when arising, issued or assigned to the Secured Parties) the valid, genuine and legally enforceable obligation, subject to no defense, setoff or counterclaim (other than those arising in the ordinary course of business), of the account debtor or other obligor named therein or in the Grantor’s records pertaining thereto as being obligated to pay such obligation. The Grantor will neither agree to any material modification or amendment nor agree to any forbearance, release or cancellation of any such obligation, and will not subordinate any such right to payment to claims of other creditors of such account debtor or other obligor.

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4.7Commercial Tort Claims. Promptly upon knowledge thereof, the Grantor will deliver to the Secured Parties notice of any commercial tort claims it may bring against any person, including the name and address of each defendant, a summary of the facts, an estimate of the Grantor’s damages, copies of any complaint or demand letter submitted by the Grantor, and such other information as the Secured Parties may request. Upon request by the Secured Parties, the Grantor will grant the Secured Parties a security interest in all commercial tort claims it may have against any person.

4.8Miscellaneous Covenants. The Grantor will:

(i)keep all tangible Collateral in good repair, working order and condition, normal depreciation excepted, and will, from time to time, replace any worn, broken or defective parts thereof;

(ii)promptly pay all taxes and other governmental charges levied or assessed upon or against any Collateral or upon or against the creation, perfection or continuance of the Security Interest;

(iii)at all reasonable times, permit the Secured Parties or their representatives to examine or inspect any Collateral, wherever located, and to examine, inspect and copy the Grantor’s books and records pertaining to the Collateral and its business and financial condition and to send and discuss with account debtors and other obligors requests for verifications of amounts owed to the Grantor;

(iv)keep accurate and complete records pertaining to the Collateral and pertaining to the Grantor’s business and financial condition and submit to the Secured Parties such periodic reports concerning the Collateral and the Grantor’s business and financial condition as the Secured Parties may from time to time reasonably request;

(v)promptly notify the Secured Parties of any loss of or material damage to any Collateral or of any adverse change known to the Grantor pertaining to the prospect of payment of any sums due on or under any instrument, chattel paper, or account constituting the Collateral;

(vi)if the Secured Parties at any time so request (after the occurrence and during the continuation of an Event of Default), promptly deliver to the Secured Parties any instrument, document or chattel paper constituting the Collateral, duly endorsed or assigned by the Grantor;

(vii)at all times keep all tangible Collateral insured against risks of fire (including so-called extended coverage), theft, collision (in case of the Collateral consisting of motor vehicles) and such other risks and in such amounts as the Secured Parties may reasonably request, with any such policies containing a lender loss payable endorsement acceptable to the Secured Parties;

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(viii)from time to time execute such financing statements as the Secured Parties may reasonably require in order to perfect the Security Interest (including, without limitation, any filings with the United States Patent and Trademark Office, copyright or other intellectual property filings and any filings of financing or continuation statements under the UCC) in order to create, preserve, upgrade in rank (to the extent required hereby), perfect, confirm or validate the Security Interest or to enable the Secured Parties to obtain the full benefits of this Agreement, or to enable the Secured Parties to exercise and enforce any of its rights, powers and remedies hereunder with respect to any of the Collateral and, if any Collateral consists of a motor vehicle, execute such documents as may be required to have the Security Interest properly noted on a certificate of title;

(ix)pay when due or reimburse the Secured Parties on demand for all costs of collection of any of the Obligations and all other out-of-pocket expenses (including, in each case, all reasonable attorneys’ fees) incurred by the Secured Parties in connection with the creation, perfection, satisfaction, protection, defense or enforcement of the Security Interest or the creation, continuance, protection, defense or enforcement of this Agreement or any or all of the Obligations, including expenses incurred in any litigation or bankruptcy or insolvency proceedings;

(x)execute, deliver or endorse any and all instruments, documents, assignments, security agreements and other agreements and writings which the Secured Parties may at any time reasonably request in order to secure, protect, perfect or enforce the Security Interest and the Secured Parties’ rights under this Agreement; and

(xi)not use or keep any Collateral, or permit it to be used or kept, for any unlawful purpose or in violation of any federal, state or local law, statute or ordinance.

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4.9The Secured Parties’ Right to Take Action. The Grantor authorizes the Secured Parties to file from time to time where permitted by law, such financing statements against the Collateral described as “all of the Grantor’s personal property” as the Secured Parties deem necessary or useful to perfect the Security Interest. The Grantor will not amend any financing statements in favor of the Secured Parties, except as permitted by law. Further, if the Grantor at any time fails to perform or observe any agreement contained in Section 4.8, and if such failure continues for a period of ten (10) days after the Secured Parties give the Grantor written notice thereof (or, in the case of the agreements contained in clauses (vii) and (viii) of Section 4.8, immediately upon the occurrence of such failure, without notice or lapse of time), the Secured Parties may (but need not) perform or observe such agreement on behalf and in the name, place and stead of the Grantor (or, at the Secured Parties’ option, in the Secured Parties’ own name) and may (but need not) take any and all other actions which the Secured Parties may reasonably deem necessary to cure or correct such failure (including, without limitation, the payment of taxes, the satisfaction of security interests, liens, or encumbrances, the performance of obligations under contracts or agreements with account debtors or other obligors, the procurement and maintenance of insurance, the execution of financing statements, the endorsement of instruments, and the procurement of repairs or transportation); and, except to the extent that the effect of such payment would be to render any loan or forbearance of money usurious or otherwise illegal under any applicable law, the Grantor shall thereupon pay the Secured Parties on demand the amount of all moneys expended and all costs and expenses (including reasonable attorneys’ fees) incurred by the Secured Parties in connection with or as a result of the Secured Parties’ performance or observation of such agreements or any actions taken thereunder, together with interest thereon from the date expended or incurred by the Secured Parties at the highest rate then applicable to any of the Obligations. To facilitate the performance or observance by the Secured Parties of such agreements of the Grantor, the Grantor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Parties, or their delegate, as the attorney-in-fact of the Grantor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Grantor, any and all instruments, documents, financing statements, applications for insurance and other agreements and writings required to be obtained, executed, delivered or endorsed by the Grantor under this Section 4. The Grantor shall pay the costs of, or incidental to, any recording or filing of any financing statements, financing statement amendments or continuation statements concerning the Collateral.

5.Secured Parties’ Rights Regarding Collateral

5.1At any time and from time to time, at the expense of Grantor, Secured Parties may, to the extent necessary or desirable to protect the security hereunder, but Secured Parties shall not be obligated to (a) notify obligors on the Collateral that the Collateral has been assigned as security to Secured Parties; (b) after an Event of Default (as defined below) has occurred and is continuing, at any time and from time to time request from obligors on the Collateral, in the name of Grantor or in the name of Secured Parties, information concerning the Collateral and the amounts owing thereon; and (c) after an Event of Default has occurred and is continuing, instruct obligors on the Collateral to direct their performance to Secured Parties. Secured Parties shall at all reasonable times on reasonable notice have full access to and the right to audit any and all of Grantor’s books and records pertaining to the Collateral, and to confirm and verify the value of the Collateral. Secured Parties shall be under no duty or obligation whatsoever to take any action to preserve any rights of or against any prior or other parties in connection with the Collateral, to exercise any voting rights or managerial rights with respect to any Collateral or to make or give any presentments for payment, demands for performance, notices of non-performance, protests, notices of protest, notices of dishonor or notices of any other nature whatsoever in connection with the Collateral or the Obligations. Secured Parties shall be under no duty or obligation whatsoever to take any action to protect or preserve the Collateral or any rights of Grantor therein, or to make collections or enforce payment thereon, or to participate in any foreclosure or other proceeding in connection therewith. Nothing contained herein shall constitute an assumption by Secured Parties of any of Grantor’s obligations under any contract rights unless Secured Parties shall have given written notice of Secured Parties’ intention to assume such contract rights. Grantor shall continue to be liable for performance of its obligations under such contracts rights.

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5.2Collections on the Collateral. Grantor shall have the right to use and to continue to make collections on and receive dividends and other proceeds of all of the Collateral in the ordinary course of business so long as no Event of Default shall have occurred and be continuing. Upon the occurrence and during the continuance of an Event of Default, at the option of Secured Parties, Grantor’s right to make collections on and receive proceeds of the Collateral and to use or dispose of such collections and proceeds shall terminate, and any and all proceeds and collections, including all partial or total prepayments, then held or thereafter received on or on account of the Collateral will be held or received by Grantor in trust for Secured Parties and immediately delivered in kind to Secured Parties (duly endorsed to Secured Parties, if required), to be applied to the Obligations or held as Collateral, as Secured Parties shall elect. Upon the occurrence and during the continuance of an Event of Default, Secured Parties shall have the right at all times to receive, receipt for, endorse, assign, deposit and deliver, in the name of Secured Parties or in the name of Grantor, any and all checks, notes, drafts and other instruments for the payment of money constituting proceeds of or otherwise relating to the Collateral; and Grantor hereby authorizes Secured Parties to affix, by facsimile signature or otherwise, the general or special endorsement of Grantor, in such manner as Secured Parties shall deem advisable, to any such instrument in the event the same has been delivered to or obtained by Secured Parties without appropriate endorsement, and Secured Parties and any collecting bank are hereby authorized to consider such endorsement to be a sufficient, valid and effective endorsement by Grantor, to the same extent as though it were manually executed by the duly authorized representative of Grantor, regardless of by whom or under what circumstances or by what authority such endorsement actually is affixed, without duty of inquiry or responsibility as to such matters, and Grantor hereby expressly waives demand, presentment, protest and notice of protest or dishonor and all other notices of every kind and nature with respect to any such instrument.

6.Events of Default. Grantor shall be in default under this Security Agreement upon the occurrence of the following (each an “Event of Default”):

6.1In the event of any default under a Note;

6.2On the material non-monetary breach by Grantor of any of the provisions of this Security Agreement, and with respect to any such breach which by its nature can be cured, such breach remains uncured for a period of ten (10) days from Grantor’s receipt of written notice;

6.3Any of the Grantor’s representations or warranties made herein or any statement or certificate at any time given in writing pursuant hereto or in connection herewith being false or misleading in any material respect; and

6.4There occurs any levy, attachment or seizure for any cause or reason whatsoever, upon all or any part of the Collateral (unless discharged by payment, release or fully bonded against not more than thirty (30) days after such event has occurred);

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7.Remedies.

7.1Remedies upon an Event of Default. Upon the occurrence of an Event of Default and at any time thereafter during the continuance of an Event of Default, the Secured Parties may exercise any one or more of the following rights and remedies effective immediately upon written notice to Grantor: (i) declare all unmatured Obligations to be immediately due and payable, and the same shall thereupon be immediately due and payable, without presentment or other notice or demand; (ii) exercise and enforce any or all rights and remedies available upon default to a secured party under the Uniform Commercial Code, including, but not limited to, the right to take possession of any Collateral, proceeding without judicial process or by judicial process (without a prior hearing or notice thereof, which the Grantor hereby expressly waives), and the right to sell, lease or otherwise dispose of any or all of the Collateral, and in connection therewith, the Secured Parties may require the Grantor to make the Collateral available to the Secured Parties at a place to be designated by the Secured Parties which is reasonably convenient to such parties, and if notice to the Grantor of any intended disposition of the Collateral or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given (in the manner specified in Section 7.2) at least ten (10) days prior to the date of intended disposition or other action; and (iii) exercise or enforce any or all other rights or remedies available to the Secured Parties by law or agreement against the Collateral, against the Grantor or against any other person or property.

7.2Notice of Sale. Secured Parties shall give Grantor reasonable notice of the time and place of any public sale thereof or of the time on or after which any private sale thereof is to be made. The requirement of reasonable notice conclusively shall be met if such notice is mailed, certified mail, postage prepaid, to Grantor at its address set forth on the signature page hereto or delivered or otherwise sent to Grantor, at least five business days before the date of the sale. Grantor expressly waives, to the fullest extent permitted by applicable law, any right to receive notice of any public or private sale of any Collateral or other security for the Obligations except as expressly provided for in this Section 7.2. Secured Parties shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Secured Parties may, without notice or publication, except as required by applicable law, adjourn the sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice (except as required by applicable law), be made at the time and place to which the same was so adjourned.

7.3Disposition of Proceeds of Sale. The proceeds resulting from the collection, liquidation, sale or other disposition of the Collateral shall be applied, first, to the reasonable costs and expenses (including reasonable attorneys’ fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting and liquidating the Collateral, and the like; second, to the satisfaction of all Obligations; and, third, any surplus remaining after the satisfaction of all Obligations shall be paid over to Grantor or to whomsoever may be lawfully entitled to receive such surplus.

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8.Miscellaneous.

8.1Remedies Cumulative. The rights and remedies provided under this Agreement are cumulative and may be exercised singly or concurrently, and are not exclusive of any other rights and remedies provided by law or equity.

8.2Cooperation by Grantor. If an Event of Default shall have occurred and be continuing, Grantor shall take any action which Secured Parties may request in the exercise of its rights and remedies under this Agreement in order to transfer and assign to Secured Parties or to one or more third parties as Secured Parties may designate, or to a combination of the foregoing, the Collateral for the purposes of a public or private sale. Upon the occurrence and during the continuance of an Event of Default, Grantor shall further use its best efforts to assist in obtaining any approval required by any governmental authority for any action or transaction contemplated by this Agreement.

8.3Notice. Secured Parties shall use reasonable efforts to give Grantor prior written notice of the exercise of any remedy provided for herein; provided that the failure to give such notice shall not subject Secured Parties to liability and shall not affect the validity or exercise of any remedy hereunder.

8.4Secured Parties Appointed Attorney-in-Fact. To the full extent permitted by applicable law, Grantor hereby irrevocably appoints Secured Parties as Grantor’s attorney-in-fact, effective upon and during continuance of an Event of Default, with full authority in the place and stead of Grantor, and in the name of Grantor, or otherwise, from time to time, in Secured Parties’ sole and absolute discretion to do any of the following acts or things: (a) to do all acts and things and to execute all documents necessary or advisable to perfect and continue perfected the security interests created by this Agreement and to preserve, maintain and protect the Collateral; (b) to do any and every act which Grantor is obligated to do under this Agreement; (c) to prepare, sign, file and record, in Grantor’s name, any financing statement covering the Collateral; and (d) to endorse and transfer the Collateral upon foreclosure by Secured Parties; provided, however, that Secured Parties shall be under no obligation whatsoever to take any of the foregoing actions, and Secured Parties shall have no liability or responsibility for any act or omission (other than Secured Parties’ own gross negligence or willful misconduct) taken with respect thereto. Grantor hereby agrees to repay within five business days after demand all reasonable out-of-pocket costs and expenses (including attorneys’ fees) incurred or expended by Secured Parties in exercising any right or taking any action under this Agreement.

8.5Costs and Expenses. After the occurrence and during the continuance of an Event of Default, Grantor agrees to pay to Secured Parties all reasonable costs and out-of-pocket expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Secured Parties in the enforcement or attempted enforcement of this Agreement, whether or not an action is filed in connection therewith, and in connection with any waiver or amendment of any term or provision hereof. All reasonable advances, charges, costs and expenses, including reasonable attorneys’ fees and disbursements, incurred or paid by Secured Parties in exercising any right, privilege, power or remedy conferred by this Agreement or in the enforcement or attempted enforcement thereof, shall be secured hereby and shall become a part of the Obligations and shall be due and payable to Secured Parties by Grantor on demand therefor.

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8.6Transfers and Other Liens. Grantor agrees that, except in the ordinary course of business and for fair value, it will not (a) sell, assign, exchange, transfer or otherwise dispose of, or contract to sell, assign, exchange, transfer or otherwise dispose of, or grant any option with respect to, any of the Collateral, or (b) create or permit to exist any lien upon or with respect to any of the Collateral, except for liens in favor of Secured Parties; provided, however, that nothing herein shall prohibit Grantor from entering into a purchase money security interest transaction with a third party creditor so long as the security interest granted herein or created hereby is not impaired.

8.7Other Agreements; Governing Agreement. Nothing herein shall in any way modify or limit the effect of terms or conditions set forth in any other agreement executed by Grantor or any other person in connection with the Obligations, but each and every term and condition hereof shall be in addition thereto.

8.8Counterparts; Delivery. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument. Delivery of this Agreement may be effected by telefax transmittal of signed counterparts.

8.9Understandings With Respect to Waivers and Consents. Grantor warrants and agrees that each of the waivers and consents set forth herein are made with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which Grantor otherwise may have against Secured Parties or others, or against any Collateral. If any of the waivers or consents herein are determined to be unenforceable under applicable law, such waivers and consents shall be effective to the maximum extent permitted by law.

8.10Amendments, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by Grantor herefrom (other than supplements to the Schedules hereto in accordance with the terms of this Agreement) shall in any event be effective unless the same shall be in writing and shall be effective only in the specific instance and for the specific purpose for which given.

8.11Notices. Any notice, payment, report or any other communication required or permitted to be given by one party to the other party by this Agreement shall be in writing and either (a) served personally on the other party, (b) sent by express, registered or certified first-class mail, postage prepaid, addressed to the other party at its principal business address or to such other address as the addressee shall have theretofore furnished to the other party by proper notice, (c) delivered by commercial courier to the other party, or (d) sent by telefax to the other party at its telefax number indicated next to its signature below or to such other telefax number as the party shall have theretofore furnished to the other party by proper notice, with machine confirmation of transmission.

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8.12Continuing Security Interest: Transfer of Note; Termination. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until indefeasible payment in full of the Obligations, (b) be binding upon Grantor, its successors and assigns, and (c) inure, together with the rights and remedies of Secured Parties hereunder, to the benefit of Secured Parties. Secured Parties may assign or otherwise transfer any rights in Collateral held by it to any other person, and such other person shall thereupon become vested with all the benefits in respect thereof granted to Secured Parties herein or otherwise. Nothing set forth herein is intended or shall be construed to give to any other party any right, remedy or claim under, to or in respect of this Agreement or any Collateral. Grantor’s successors and assigns shall include, without limitation, a receiver, trustee or debtor-in-possession thereof or therefor; provided that, except as otherwise permitted under the Guarantee, or any agreement between the parties, none of the rights or obligations of Grantor hereunder may be assigned or otherwise transferred without the prior written consent of Secured Parties.

8.13Release of Grantor. This Agreement and all obligations of Grantor hereunder and all security interests granted hereby shall be released and terminated when all Obligations have been indefeasibly paid in full in cash or otherwise performed. Upon such release and termination of all Obligations and the security interest granted hereunder, all rights in and to the Collateral pledged or assigned by Grantor hereunder shall automatically revert to Grantor, and Secured Parties shall return any pledged Collateral in its possession to Grantor, or to the person or persons legally entitled thereto, and shall endorse, execute, deliver, record and file all instruments and documents, and do all other acts and things, reasonably required for the return of the Collateral to Grantor, or to the person or persons legally entitled thereto, and to evidence or document the release of the interests of Secured Parties arising under this Agreement, all as reasonably requested by, and at the sole expense of, Grantor.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VENDINGDATA CORPORATION
By:	/s/
	Mark R. Newburg,
	President and Chief Executive Officer

BRICOLEUR PARTNERS, L.P.
By:	Bricoleur Capital Management, LLC, Its General Partner
By:
	Robert Poole,
	Member of Management Board

BRICOLEUR ENHANCED, L.P.
By:	Bricoleur Capital Management, LLC, Its General Partner
By:
	Robert Poole, Member of Management Board

BRIC 6, L.P.
By:	Bricoleur Capital Management, LLC, Its General Partner
By:
	Robert Poole, Member of Management Board

BRICOLEUR OFFSHORE LTD.
By:	Bricoleur Capital Management, LLC, Its Investment Adviser
By:
	Robert Poole, Member of Management Board

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Exhibit A

Location of Collateral

All Collateral is located at the Company’s facilities at:

6830 Spencer Street

Las Vegas, Nevada 89119

and

Xiaolan Town

Zhongshan City

Guangdong Province, China

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Exhibit B

Permitted Liens

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EX-10.4

Exhibit 10.4

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of March 29, 2006, among VendingData Corporation, a Nevada corporation (the “Company”), Bricoleur Partners, L.P., Bricoleur Enhanced, L.P., BRIC 6, L.P. and Bricoleur Offshore Ltd. (collectively the “Lenders”), and the several purchasers signatory hereto (each such purchaser is a “Purchaser” and collectively, the “Purchasers”).

RECI TALS

A.WHEREAS, pursuant to a Securities Purchase Agreement entered into between the Company and each Purchaser (the “Securities Purchase Agreement”), the Company will sell to the Purchasers an aggregate of 2,400,000 shares of the Company’s Common Stock (as defined below).

B.WHEREAS, concurrent with close of the purchase and sale of shares of Common Stock pursuant to the Securities Purchase Agreement, the Company will (i) sell $7 million of 7% Senior Secured Notes to the Lenders pursuant to that certain Note Purchase Agreement (“Note Purchase Agreement”) of the same date herewith between the Company and the Lenders, and, in addition, (ii) acquire a put option to sell, from time to time, up to $5 million of the Company’s Common Stock to the Lenders pursuant that certain Equity Put Agreement (“Equity Put Agreement”) of the same date herewith between the Company and the Lenders.

AGREE< u>MENT

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, the Lenders and each Purchaser agree as follows:

1.Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement shall have the meanings given such terms in the Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

“Advice” shall have the meaning set forth in Section 6(d).

“Effectiveness Date” means, with respect to the initial Registration Statement required to be filed hereunder, the 75^th calendar day following the date hereof (the 90th calendar day in the case of a “full review” by the Commission.

“Effectiveness Period” shall have the meaning set forth in Section 2.

“Filing Date” means, with respect to the initial Registration Statement required hereunder, the 30th calendar day following the Closing Date.

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“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

“Indemnified Party” shall have the meaning set forth in Section 5(c).

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

“Losses” shall have the meaning set forth in Section 5(a).

“Plan of Distribution” shall have the meaning set forth in Section 2.

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means all of (i) the Shares issuable to the Purchasers pursuant to the Securities Purchase Agreement, (ii) the shares of Common Stock underlying the common stock purchase warrant issued to the Lenders pursuant to the Note Purchase Agreement, (iii) the shares of Common Stock issuable to the Lenders from time to time pursuant to the Equity Put Agreement, and (iv) any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, a security shall no longer be a Registrable Security once it has been sold, or may be sold, without volume restrictions pursuant to Rule 144(k) or sold pursuant to a Registration Statement.

“Registration Statement” means the registration statements required to be filed hereunder, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Rule 415” means Rule 415 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 purpose and effect as such Rule.

“Rule 424” means Rule 424 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 purpose and effect as such Rule.

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“Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).

2.Shelf Registration. On or prior to the Filing Date, the Company shall prepare and file with the Commission a “Shelf” Registration Statement covering the resale of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) and shall contain substantially the “Plan of Distribution” attached hereto as Annex A, as modified by the Company as necessary to conform to comments from the Commission. Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been sold, or may be sold without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”). Within two Trading Days after the Registration Statement is declared effective, the Company shall (i) file a final Prospectus with the Commission pursuant to Rule 424 and (ii) notify the Holders via facsimile of effectiveness of the Registration Statement.

3.Registration Procedures

In connection with the Company’s registration obligations hereunder, the Company shall:

(a)Not less than five Trading Days prior to the filing of each Registration Statement and not less than two Trading Day prior to the filing of any related amendment or supplement thereto, the Company shall, (i) furnish to each Holder the selling stockholder and plan of distribution sections made a part thereof, along with any other section that specifically references a Holder, and (ii) cause its officers, directors and counsel to respond to all reasonable inquiries from the Holders as shall be necessary for each Holder to conduct a reasonable investigation within the meaning of the Securities Act. Each Holder agrees to be named in the Registration Statement and to carry out the offer and sale of Registrable Securities held by such Holder in a conformance with the Plan of Distribution attached hereto as Annex A, as modified by the Company as necessary to conform to comments from the Commission. Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) by the end of the fourth Trading Day following the date on which such Holder receives the Selling Shareholder Questionnaire and draft materials in accordance with this Section.

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(b)(i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act applicable to the Company with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

(c)Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (ii) through (iv) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (i) with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (ii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction; or (iv) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Any and all of such information contemplated by subparagraphs (i) through (iv) shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law.

(d)Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

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(e)Furnish to each Holder, without charge, at least one conformed copy of each such final Prospectus and each final amendment or supplement thereto, promptly after the filing of such documents with the Commission, for Holder’s delivery in connection with a sale of the Registrable Securities.

(f)Subject to the terms of this Agreement, the Company hereby consents to the use of each Prospectus and each amendment or supplement thereto, provided by the Company pursuant to subpart (e) above, by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).

(g)If NASDR Rule 2710 requires any broker-dealer to make a filing prior to executing a sale by a Holder, the Company shall (i) make an Issuer Filing with the NASDR, Inc. Corporate Financing Department pursuant to proposed NASDR Rule 2710(b)(10)(A)(i), (ii) respond within five Trading Days to any comments received from NASDR in connection therewith, and (iii) pay the filing fee required in connection therewith.

(h)Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

(i)If requested by the Holders, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Securities Act, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request.

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(j)Upon the occurrence of any event contemplated by this Section 3, as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (ii) through (iv) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12 month period.

(k)Comply with all applicable rules and regulations of the Commission.

(l)The Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of shares of Common Stock beneficially owned by such Holder, (ii) the natural persons thereof that have voting and dispositive control over the shares of Common Stock, and (iii) any affiliation between the Holder and either the Company’s independent accountants or any member of the NASD.

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4.Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (B) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with NASD Regulation, Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses incurred by the Company (including, without limitation, expenses of printing certificates for Registrable Securities, (iii) messenger, telephone and delivery expenses incurred by the Company, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance incurred by the Company, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

5.Indemnification

(a)Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (2) any violation by the Company of the Securities Act, Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose), (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(iv), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), or (iii) any such untrue statement, omission or violation is directly related to and primarily the result of a material breach of this Agreement or violation of law by Holder.

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(b)Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents, attorneys and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents, attorneys or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act, (y) a material breach of this Agreement or violation of law by Holder, or (z) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such information relates to such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(iv), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(c)Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that such failure shall have prejudiced the Indemnifying Party.

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An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party, in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent.

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party owing under this Section 5 (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party.

(d)Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue statement of a material fact or omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

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The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Holder.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

6.Miscellaneous

(a)Remedies. In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

(b)No Piggyback on Registrations. Except as set forth on Schedule 6(b) attached hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the initial Registration Statement other than the Registrable Securities.

(c)Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.

(d)Discontinued Disposition. Each Holder agrees by its acquisition of Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as it practicable.

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(e)Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, then the Company shall send to each Holder a written notice of such determination and, if within fifteen days after the date of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered.

(f)Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least a majority the then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.

(g)Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Securities Purchase Agreement, Note Purchase Agreement or Equity Put Agreement, as the case may be.

(h)Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights (except by merger) or obligations hereunder without the prior written consent of at least a majority of the Holders of the then-outstanding Registrable Securities. Each Holder may assign their respective rights hereunder only (i) to a Permitted Transferee (as such term is defined in the Note Purchase Agreement and Equity Put Agreement ) or (ii) in connection with the transfer of all of their Registrable Securities in the manner and to the Persons as permitted under the Securities Purchase Agreement, Note Purchase Agreement or Equity Put Agreement, as the case may be.

(i)No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

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(j)Execution and Counterparts. 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.

(k)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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 (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 this Agreement, 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..

(l)Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

(m)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.

(n)Headings. The headings in this Agreement 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.

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(o)Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

VENDINGDATA CORPORATION
By:
	Mark R. Newburg,
	President and Chief Executive Officer

BRICOLEUR PARTNERS, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:
	Robert Poole, Member of
	Management Board

BRICOLEUR ENHANCED, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:
	Robert Poole, Member of
	Management Board

BRIC 6, L.P.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:
	Robert Poole, Member of
	Management Board

BRICOLEUR OFFSHORE LTD.
By:	Bricoleur Capital Management, LLC,  Its General Partner
By:
	Robert Poole, Member of
	Management Board

[SIGNATURE PAGE OF PURCHASERS FOLLOWS]

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[SIGNATURE PAGE OF HOLDERS TO VNX RRA]

Name of Holder: __________________________

Signature of Authorized Signatory of Holder: __________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

[SIGNATURE PAGES CONTINUE]

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ANNEX A

Plan of Distribution

The selling stockholders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:

·   ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·   block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·   purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·   an exchange distribution in accordance with the rules of the applicable exchange;

·   privately negotiated transactions;

·   short sales;

·   broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

·   a combination of any such methods of sale; and

·   any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

The selling stockholders may also engage in puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades.

Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.

The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

The selling stockholders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain claims, damages and liabilities, including liabilities under the Securities Act.

The selling stockholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.

The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our common stock and activities of the selling stockholders.

16

Annex B

VendingData Corporation

Selling Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock, par value $0.001 per share (the “Common Stock”), of VendingData Corporation, a Nevada corporation (the “Company”), (the “Registrable Securities”) understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement, dated as of March _, 2006 (the “Registration Rights Agreement”), among the Company and the Holders named therein. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.

NOTICE

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it and listed below in Item 3 (unless otherwise specified under such Item 3) in the Registration Statement.

17

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

QUESTIONNAIRE

1.Name.

(a) Full Legal Name of Selling Securityholder

(b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held:

(c) Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):

2. Address for Notices to Selling Securityholder:

Telephone:___________________________________________________________________________________________

Fax:_________________________________________________________________________________________________

Contact Person:                 

3. Beneficial Ownership of Registrable Securities:

(a) Type and Number of Registrable Securities beneficially owned:

18

4. Broker-Dealer Status:

(a) Are you a broker-dealer?

Yes o No o

(b) If “yes” to Section 4(a), did you receive your Registrable Securities as compensation for investment banking services to the Company.

Yes o No o

Note: If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

(c) Are you an affiliate of a broker-dealer?

Yes  oNo o

(d) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

Yes o No o

Note: If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.

Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.

(a) Type and Amount of Other Securities beneficially owned by the Selling Securityholder:

19

6. Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

7. Relationships with the Company’s Independent Accountant:

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company’s independent accountants, Piercy Bowler Taylor & Kern, of Las Vegas , Nevada (or its predecessors or affiliates) during the past three years.

State any exceptions here:

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 7 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

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IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

Dated:	Beneficial Owner:___________________
	By:                                                                      Name: Title:

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

Daniel Donahue, Esq.

Preston Gates Ellis LLP

1900 Main Street, Suite 600

Irvine, CA 92614

Fax: 949-253-0902

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SCHEDULE 6(B)

PIGGYBACK REGISTRATIONS

The Company intends to include on the initial Registration Statement:

1.3,000,000 common shares underlying the warrants issued to the lenders pursuant to that certain credit agreement with the Company dated October 6, 2005.

22

EX-99.1

Exhibit 99.1

Press Release Source: VendingData(TM) Corporation

VendingData(TM) Corporation Reports Full Year and Fourth Quarter 2005 Financial Results

Thursday March 30, 4:00 pm ET

LAS VEGAS, March 30 /PRNewswire-FirstCall/ -- VendingData(TM) Corporation (Amex: VNX - News) today reported financial results for its fiscal year and fourth quarter ended December 31, 2005. Gross revenues for the full year 2005 totaled $3.1 million, compared to $3.4 million for the year ended December 31, 2004. Sales declined as a result of the discontinuation of the SecureDrop® product line, disrupted sales of the PokerOne(TM) product line as a result of a patent lawsuit, and delays in the timing of the jurisdictional reviews of the RandomPlus(TM) shuffler and a delay in Deck Checker sales activity. Gross revenues were further offset by sales returns and allowances which totaled $739,000 during 2005 due to contracts recorded in prior periods, primarily 2003, 2004, and early 2005, which allowed for product return at the customer's discretion. This type of sales contract was discontinued in Q2, 2005. Revenues by product line in 2005 consisted of shuffler sales of $1.3 million, shuffler rentals of $279,000, Deck Checker(TM) sales of $861,000, Deck Checker(TM) rentals of $241,000 and SecureDrop® sales of $130,000 and consumables of $279,000.

(The Company reported a net loss for 2005 of $17.6 million or $1.03 per share compared to a net loss of $9.5 million or $0.55 per share in 2004. The increase in net loss was primarily due to a $3.1 million inventory write down, $2.2 million increase in general and administrative costs driven by legal and regulatory costs, a $640,000 increase in interest expense and a $739,000 revenue reversal for merchandise sales recognized during 2004 and returned during 2005.

VendingData's gross margin on revenue for the year ended December 31, 2005 was $(2.3) million, excluding the impact of the inventory write down of $3.1 million compared to the gross margin on revenue for the year ended December 31, 2004 of $(134,000). The decrease in gross margin net of the inventory write down reflected the additional costs of deploying complimentary version upgrades of the PokerOne(TM) product to those customers that purchased or leased version 1 and version 2 of this product, and the costs associated with the accelerated rollout of the RandomPlus. The manufacturing of products in China is expected to continue to reduce cost of sales on a per unit basis through the first half of 2006 as the company identifies more efficiency and optimizes vendors in China. These efforts should result in further improvements in the cost of manufacturing.

Selling, general and administrative expenses (SG&A) increased by $2.2 million or 31 percent over the prior year to $9.2 million in 2005, primarily due to $1.9 million increase in legal and regulatory costs due to defense of the patent lawsuits and legal/regulatory issues pertaining to former senior management, a $638,000 increase in payroll related to the expensing of stock options, and a $530,000 increase in consulting expenses related to the management change in March 2005. Additionally the Company had a $355,000 increase in depreciation related to the write off of leasehold improvements on the prior China manufacturing facility, a $133,000 increase in financial advisory costs, which were offset by a $1.1 million decrease in other expenses.

Interest expenses in 2005 increased by $640,000 to $1.6 million, reflecting the debt service related to the Company's previously outstanding 9% senior secured notes, the currently outstanding 10% senior secured convertible notes and the $5 million line of credit.

Cash and equivalents on December 31, 2005 were approximately flat with year-end 2004 at $935,000. Accounts receivable (trade) was consistent with last year at $1.6 million. Inventories decreased by $3.1 million to $3.0 million at year-end 2005 due to the inventory write off of $3.1 million. Total liabilities increased by $11.0 million during the year to $19.5 million due to an increase in notes payable slightly offset by a reduction in current liabilities.

Revenues for the fourth quarter were $941,000, an increase of $443,000 from prior year's fourth quarter of $499,000 and compares to third quarter 2005 revenues of $319,000. The Company's revenue increased as a result of sales of our two new shuffler products, PokerOne(TM) and RandomPlus(TM) as well as increased DeckChecker activity. During the quarter, the sales returns and allowances were $428,000 due to contracts recorded in prior periods, primarily 2003, 2004 and early 2005 which allowed for product return at the customer's discretion. This type of sales contract was discontinued in Q2 2005.

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The Company reported a net loss applicable to common stockholders of $5.8 million or $(0.34) per share for the fourth quarter of 2005 compared to a net loss of $2.8 million or $(0.16) for the fourth quarter 2004 and a loss of $5.9 million or $(0.35) per share for the third quarter 2005. VendingData's gross profit during the fourth quarter totaled ($2.6) million due to the additional costs of deploying complimentary version upgrades of the PokerOne(TM) product to those customers that purchased version 1 and version 2 of this product, and the costs associated with the rollout of the RandomPlus. The Company expects its gross margin to improve as it benefits from lower costs associated with the transfer of its manufacturing operations to its new facilities in China and as economies of scale are achieved through increased unit production.

The Company's SG&A for the fourth quarter decreased by approximately $188,000 over the prior year's fourth quarter to $1.9 million. The decrease primarily reflects savings in general office expenses and the initial impact of cost cutting initiatives.

Mark Newburg, Vending Data's president and CEO, commented, "Over the past few months we have focused on stabilizing the business, improving company accounting practices, and relocating the China-based manufacturing facility. We have achieved dramatic improvements in product quality, introduced a consistent upgrade cycle for the current product line, expanded the product line with leading-edge intellectual property and increased our addressable market, and made significant positive progress on two patent infringement suits. As of today, with working capital pressures relieved, this current quarter brings an even brighter picture. We have negotiated a very significant distribution agreement with one of the leading players in Macau as well as the rest of Asia, and are seeing very positive signs for revenue generation in the international market as well as continued growth domestically. While we more than doubled revenues sequentially during the fourth quarter off of a very small base, it our objective to continue that trend over the next several quarters and anticipate achieving a cash flow neutral to positive position during the year without further need of financing.

QUARTER HIGHLIGHTS AND RECENT DEVELOPMENTS

VendingData(TM) Corporation Enters Into Agreements For An $18 Million Private Placement Offering

On March 30, 2006, VendingData entered into agreements for an $18 million private placement consisting of $7 million 7% senior notes due March 31, 2011, a $6 million equity component consisting of 2.4 million common shares priced at $2.50, and an optional 5 year facility of $5 million which will be funded by common shares to be priced at a 20 percent discount to the price of VendingData(TM) stock on the day of the draw downs. VendingData(TM) Corporation intends to use the proceeds from the private placement to retire the company's current credit line, to pay off all of the company's senior secured debt and for general corporate purposes.

VendingData(TM) Corporation Signs Distribution Contract

February 2006, VendingData(TM) entered into a distribution agreement with a technology company based in Hong Kong and Macau. The distribution agreement has an initial three year term, with rollover provisions, and provides exclusive distribution rights for the VendingData(TM) high frequency RFID casino chip for certain Southeast Asia casino properties and non-exclusive distribution rights elsewhere in Asia. VendingData(TM) expects the relationship with the distributor to generate a minimum of $9 million dollars of retail sales of the RFID chip over the initial three-year term of the agreement.

VendingData(TM) acquired Dolphin Products' IP including global distribution rights to high frequency RFID-Enabled Casino Chip Technology

VendingData(TM) entered into a patent purchase agreement dated October 1, 2005 with Dolphin Products pursuant to which Dolphin Products agreed to sell VendingData(TM) its high frequency (13.56 MHz) RFID Chip within a Casino Chip technology and related patents in exchange for $750,000 in cash and 1,000,000 shares of VendingData(TM) common stock. On February 27, 2006, VendingData(TM) entered into a licensing and manufacturing agreement with Dolphin Products Pty Limited, of Melbourne, Australia. Pursuant to the agreement, Dolphin has received the exclusive rights to manufacture VendingData(TM)'s RFID chip product. The agreement has a term of 10 years.

2

VendingData(TM) Corporation's received Nevada Gaming Control Board and GLI approval for its next generation multi-deck shuffler, RandomPlus(TM)

During October 2005, VendingData(TM) received approval from Nevada Gaming Control Board and Gaming Laboratories International ("GLI") for its RandomPlus(TM) shuffler, the Company's next generation version of its multi-deck Random Ejection shuffler, in the following jurisdictions: California (tribal), Arizona (tribal), Washington (state & tribal, Indiana (state), Iowa (state & tribal), Minnesota (tribal), Missouri (state), and Wisconsin (tribal).

Restatement and inventory write down

On November 1, 2005, the VendingData(TM) management concluded, after consultation with the company's independent auditors, that a material charge was required for a write-down of obsolete inventory. As a result the Company has taken a charge for third quarter 2005 resulting from inventory obsolescence of approximately $2.7 million in order to write-down inventory consisting of first-generation Random Ejection Shuffler, which has been replaced by the next-generation RandomPlus(TM) Shuffler, and the SecureDrop® product line, which the Company has decided to discontinue. Inventories net of these write-downs during the period totaled $4.9 million. Total liabilities were approximately flat with the prior quarter at $17.3 million versus an increase of approximately $9 million over the prior year third quarter. The year over year increase in total liabilities reflects the issuance of $10 million of additional senior secured convertible notes in February 2005 and March 2005.

Current Shuffle Master Litigation status

PokerOne(TM) -- On December 28, 2005, the United States Court of Appeals granted its appeal and formally vacated an order previously obtained by Shuffle Master, Inc. to preliminarily enjoin VendingData(TM) from selling its PokerOne(TM) shuffling and dealing machine. The order was originally issued by the United States District Court, District of Nevada, on November 30, 2004. However, on March 4, 2005, VendingData(TM) convinced the Federal Circuit to stay the order pending appeal. The Federal Circuit's decision disposes of the injunction and opens the door for VendingData to seek damages from Shuffle Master for the period it was wrongfully enjoined.

On October 10, 2005, VendingData(TM) announced its new management team VendingData(TM) formally welcomed its new executive management team as well as three new members to its Board of Directors.

The Team:

Mark Newburg -- President and CEO of VendingData(TM)

Arnaldo Galassi -- Chief Financial officer

Peter Zee -- Vice President of Engineering and Manufacturing

Simon Herbert -- Vice President of Sales.

Tori Abajian -- Vice President of Operations

Michelle Glenn -- Vice President of Marketing.

General Paul Harvey -- Board of Directors (Chairman of the Compliance Committee)

Vincent DiVito -- Board of Directors (Chairman of the Audit Committee)

Robert Miodunski -- Board of Directors (Compliance and Audit Committees)

CONFERENCE CALL

VendingData(TM) has scheduled a conference call to discuss fourth quarter and full year 2005 financial results with the investment community for 4:30 p.m. (ET) today.

Conference Call Details:

Date/Time: Thursday, March 30, 2006-4:30 p.m. (ET)

Telephone Number: 866-271-5140

International Dial-In Number: 617-213-8893

Participant Pass code: 18575623

Internet Access: www.vendingdata.com or

www.streetevents.com

3

It is recommended that participants phone-in at least 10 minutes before the call is scheduled to begin. A replay of the conference call in its entirety will be available approximately one hour after its completion for 7 days by dialing 888-286-8010 (U.S.), 617-801-6888 (International) and entering the pass code 92396380, and on the Internet at www.streetevents.com.

About VendingData(TM) Corporation

VendingData(TM) Corporation is a Las Vegas-based developer, manufacturer and distributor of innovative products for the gaming industry. The company's products include the Deck Checker(TM), PokerOne(TM) and Random Ejection Shuffler(TM) lines, which are installed in various casinos throughout the United States. VendingData(TM)'s newest innovative products include the ChipWasher(TM) and high-frequency RFID Casino Chips. The company's customers include mega-gaming corporations such as Caesars Entertainment, MGM Mirage, Station Casinos, and Boyd Gaming as well as major casinos such as The Venetian, Foxwoods Resort Casino and the world's largest poker room, Commerce Casino. International customers include casinos in Argentina, China, Columbia, Korea, Macau, Malaysia, Peru, United Kingdom, and Uruguay. Visit the VendingData Web site at http://www.vendingdata.com

This release contains forward-looking statements. Such statements reflect and are subject to risks and uncertainties that could cause actual results to differ materially from expectations. Factors that could cause actual results to differ materially from expectations include, but are not limited to, the following the success of the transition of our manufacturing and assembly to China, changes in the level of consumer or commercial acceptance of the Company's existing products and new products as introduced; competitive advances; acceleration and/or deceleration of various product development and roll out schedules; higher than expected manufacturing, service, selling, administrative, product development and/or roll out costs; current and/or unanticipated future litigation; regulatory and jurisdictional issues involving VendingData(TM) Corporation or its products specifically, and for the gaming industry in general; general and casino industry economic conditions; the financial health of the Company's casino and distributor customers both nationally and internationally; and the risks and factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including, but not limited to the company's Form 10- QSB for the quarter ended December 31, 2004, and, once filed, the Company's Annual Report on form 10-KSB for the year ended December 31, 2004.

Contacts:	Company Contact:	or Investor Contact:
	Arnaldo Galassi	Yvonne L. Zappulla
	CFO & VP Finance	Managing Director
	VendingData(TM) Corporation	Wall Street Consultants Corp.
	702-733-7195	212-681-4108
	Agalassi@vendingdata.com	Yvonne@WallStreetIR.com

4

VENDINGDATA CORPORATION

Statements of Operations

	Three Months Ended Dec 31,						Twelve Months Ended Dec 30,
	2005			2004			2005			2004
Revenues:
Sales	$	647,788		$	372,290		$	2,302,484		$	2,648,684
Rental		103,194			107,539			519,635			616,714
Other		190,711			18,845			278,619			171,162
Gross revenue		941,693			498,674			3,100,738			3,436,560
Sales returns and allowances		(428,423	)		--			(739,263	)		--
		513,270			498,674			2,361,475			3,436,560
Operating costs and expenses:
Cost of sales		3,124,784			522,311			4,667,200			3,570,070
Inventory write down		484,556			--			3,068,846			--
Selling, general and administrative		2,046,405			2,241,012			9,220,636			7,046,005
Research and development		324,510			277,995			1,394,006			1,423,096
		5,980,255			3,041,318			18,350,708			12,039,171
Loss from operations		(5,466,985	)		(2,542,644	)		(15,989,233	)		(8,602,611	)
Interest expense, including $15,063 and $31,974 to related parties		369,461			228,704			1,577,996			935,589
Net loss	$	(5,836,446	)	$	(2,771,348	)	$	(17,567,230	)	$	(9,538,200	)
Basic and Diluted loss per share	$	(0.34	)	$	(0.16	)	$	(1.03	)	$	(0.55	)
Weighted average shares outstanding		17,291,458			17,198,198			17,050,398			17,187,664

5

VENDINGDATA CORPORATION

Balance Sheet

	December 31,			December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	935,243		$	924,802
Current portion of accounts receivable, trade net of allowance for uncollectables of $276,420 and 125,530		1,550,559			1,596,017
Due from affiliate		4,098			25,000
Other receivables		113,557			121,969
Inventories		3,045,334			6,124,171
Total Current Assets		5,648,791			8,791,959
Equipment rented to customers, net of accumulated depreciation of $228,032 and $316,245		146,527			400,594
Property and Equipment, at cost, net of accumulated depreciation of $2,408,234 and $1,859,206		585,431			923,459
Intangible assets, at cost, net of accumulated amortization of $836,281 and $288,203		1,862,268			1,129,644
Due from affiliate		--			118,800
Accounts receivable, trade, net of current portion, less unamortized discount		600,430			1,264,914
Deferred expenses		748,171			753,030
Deposits		759,653			980,216
	$	10,351,271		$	14,362,616
Current liabilities:
Capital leases payable, current portion	$	471,269		$	1,941,445
Accounts payable		1,836,234			1,240,767
Accrued expenses		794,203			427,199
Deferred revenues, current portion		52,248			239,680
Short-term debt		4,050,000			238,250
Customer deposits		81,859			193,615
Total current liabilities		7,285,812			4,280,865
Deferred revenues, net of current portion		161,335			198,585
Notes payable, net of current portion		11,654,500			3,250,000
Capital leases payable, net of current portion		421,975			893,244
		19,523,622			8,622,694
Stockholders' equity deficiency:
Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding Common stock, $.001 par value, 55,000,000 shares authorized, 17,483,269 and 17,312,058 shares issued and outstanding		-- 18,142			-- 17,200
Additional paid-in capital		66,763,192			59,843,270
Treasury Stock 448,053 shares at cost		(846,820	)		0
Deferred Expense		(3,419,088	)		(183,074	)
Deficit		(71,687,777	)		(53,743,174	)
Total stockholders' equity (deficiency)		(9,172,351	)		5,739,923
Total liabilities and stockholders' equity (deficiency)	$	10,351,271		$	14,362,617

Source: VendingData(TM) Corporation

6

EX-99.2

Exhibit 99.2

Fourth Quarter and Full Year 2005 Financial Report - March 30, 2005, 4:30pm ET

Call-in information:	U.S. Speakers and Investors - 866-271-5140
	International Speakers and Investors - 617-213-8893
	Speaker Pass Code - 82119815
	Investor Pass Code - 18575623
Replay information:	U.S. - 888-286-8010
	International - 617-801-6888
	Pass Code -92396380

CCBN support person - Shanya - 781-794-4056

Conference Call Script

INTRODUCTION

Zappulla:Good afternoon and thank you for joining us for VendingData Corporations’ fourth quarter and full year 2005 financial results conference call. I am Yvonne Zappulla of Wall Street Consultants Corp., Vending Data’s investor relations consultant.The fourth quarter financial report press release was issued through PRNewswire today just after the market close. The press release and the Power Point slide presentation that we will be referring to during this call are available on the home page of the company’s website under NEWS and EVENTS at www.vendingdata.com as well as through CCBN which is broadcasting the conference call. An archive copy of this call will be available for review one hour after its completion on both CCBN and VendingData’s websites. Before we begin, I would like to state the following:

1

During this call, the management of VendingData Corporation may make comments about future expectations, plans and prospects, which could constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. These risks and uncertainties include, but are not limited to, those described in the Press release, the Company's filings with the Securities and Exchange Commission Form 10-KSB and forms 10QSB

With us today is Mark Newburg, president and CEO of VendingData who will be conducting the question and answer portion of this conference call. During the Q&A Mark will be joined by Peter Zee, VP of Manufacturing, Simon Herbert, VP of Sales, and Bill Purton, CEO of Dolphin Products and the designer and manufacturer of VendingData’s high frequency RFID casino chip and will be manufacturing the RFID chip on behalf of VendingData.

I’d now like to turn the call over to Arnie Galassi, VendingData’s Chief Financial Officer who will review the quarter and full year financial results and update us on the current operations of the company.

ARNIE:  Thank you Yvonne and thank you all for joining us this afternoon.  

Before I discuss the 4^th Quarter and full year results, I would like to briefly review the financing we announced this morning regarding our entering into agreements for an $18 million private placement of common stock and debt with Bricoleur Capital Management, of San Diego. As reported, we entered into a definitive Note Purchase Agreement whereby the Bricoleur funds have agreed to purchase $7 million of 7% senior debt - due March 31, 2011 with 1.6 million detachable warrants exercisable for 5 years at $2.50 per share. Pursuant to a separate definitive agreement entered into between the Company and four Bricoleur funds, the Bricoleur funds have agreed to purchase up to $5 million of the Company’s common stock, from time to time at the Company’s option not to exceed a share price of $3.50. The Company also reached an agreement in principle, and expects to reach a definitive agreement shortly for the placement of 2.4 million common shares at a price of $2.50 per share for the gross proceeds of $6 million. All placements will close in April 2006.

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Of the aggregate $18 million of net proceeds, approximately $5 million will be used to retire the Company’s current credit line and approximately $6 million will be used to pay off all of the Company’s senior secured debt. The remainder of the funds available from the offering will be used for general corporate purposes. The Company’s remaining $6 million of convertible debt is expected to be converted to equity at the terms included in the Note of $1.65 per share.

One other piece of business that we will make you aware of is that we have secured purchase orders from two Macau casinos for 44 units of our Deck Checker product. 22 for Galaxy Entertainment Group Limited and 22 from Sociedade de Jogos de Macau more commonly referred to as SJM - a subsidiary of Stanley Ho’s business group. This is the second purchase of Deck Checkers for SJM. The revenue associated with these purchase orders is expected to be included in the Company’s first quarter results and exceeds the number of Deck CheckersÔ sold in all of 2005. We see this trend continuing in 2006, but we can discuss this further in the Q&A section.

I will now discuss the VendingData financials.

VendingData generated gross revenues for full year 2005 of $3.1 million, compared to $3.4 million for the year ended December 31, 2004. The decrease in revenues was the result of the discontinuation of the SecureDrop product line, the disruption in the sales of the PokerOne shuffler given the patent lawsuit, and delays in the timing of the jurisdictional reviews of the RandomPlus shuffler. Revenue breakdown for the year was the following; Shufflers represented 51% of sales during 2005 and Deck Checker represented approximately 36% of revenues.

The Company reported a net loss applicable to common stockholders of $17.6 million or a loss of $1.03 per share, compared to a net loss of $9.5 million or a loss of $0.55 per share in 2004. The increase in net loss was primarily due to a $3.1 million inventory write down, a $2 million increase in legal expenses, a $640,000 increase in interest expense, and $739,000 revenue reversal for merchandise sold during 2004. We anticipate the bulk of these costs will be significantly reduced during 2006 as we move forward from the legal cases and incur less interest expense as a result of our financing.

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The cost of goods sold during 2005 was $4.7 million, excluding the $3.1 million inventory write down. This represents a 31 percent increase over the prior year, which is due to the additional costs in deploying new versions of the PokerOne and the rollout of the RandomPlus. We expect these costs to fall as we normalize our service costs during 2006. We should also realize additional savings during 2006 on our vendor relationships and manufacturing efficiencies in China.

The Company’s SG&A expenditures for full year 2005 increased by 31 percent to $9.2 million primarily due to a $1.9 million increase in legal expenses, a $638,000 increase in payroll related to the expensing of stock options and a $530,000 increase in consulting expenses related to the management change in March 2005.

Research and development costs were essentially flat with 2004 at $1.4 million, however we do expect these costs to increase by approximately 15% during 2006 as we develop enhancements to the current shuffler line and develop new products for 2006 release including the ChipWasher.

Cash and cash equivalents on December 31, 2005 were basically flat with last year at $925,000. The company’s receivables also remained unchanged from last year at $1.6 million. Inventory levels were cut in half during 2005 to $3.0 million reflecting the write down of obsolete inventory. Total liabilities during 2005 were $19.5 million, approximately $12 million of which are the senior secured convertible notes that were issued during the first quarter of the year. Interest expense during 2005 totaled $1.6 million.

Gross revenues for the fourth quarter 2005 were $941,693 and compares to fourth quarter 2004 revenues of 498,764 and third quarter 2005 revenues of $319,000.

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The Company reported a net loss applicable to common stock holders of $5.8 million or $0.34 per share for the fourth quarter of 2005 compared to a net loss of $5.9 million or $0.35 per share for the third quarter 2005.

The Company’s SG&A for the fourth quarter decreased by approximately $200,000 over prior year’s fourth quarter of $2.2 million.

With that I will now turn it over to Mark and open the conference call to questions .

Operator.

After Q & A

Galassi:I would like to thank our shareholders for taking time out of their day to attend this call. It is our intention to make 2006 a breakout/banner year for VendingData. Thus far we have recorded some milestones in distribution relationships, contract announcements and beneficial financing terms. However, the true measure of our success rests in the profitability of this company. It is our goal to not only demonstrate positive sequential numbers and positive year over year comparisons, but to achieve positive cash flow and earnings as well surpassing margin levels achieved in the past. We are looking forward to our next call.

Thank you

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