Exhibit 10.3


    
      
        

      

      Exhibit
        10.3

      CASH
        COLLATERAL DEPOSIT LETTER

      


      As
        of:
        January 12, 2006

      


      Laurus
        Master Fund, Ltd.

      825
        Third
        Avenue

      New
        York,
        New York 10022

      


      Ladies
        and Gentlemen:

      


      Reference
        is hereby made to the following agreements, as each is amended, modified
        or
        supplemented from time to time: (i) that certain Exercise and Conversion
        Agreement by and among Sentinel Technologies, Inc., a Delaware corporation
        (“STI”),
        Sentinel Operating, L.P., a Texas limited partnership (“Sentinel”),
        Tidel
        Technologies, Inc. (“Tidel”)
        and
        Laurus Master Fund, Ltd. (“Laurus”),
        dated
        as of the date hereof (the “Exercise
        Agreement”);
        (ii)
        that certain Stock Redemption Agreement by and between Tidel and Laurus,
        dated
        as of the date hereof (the “Redemption
        Agreement”);
        and(iii) that certain Cash Collateral Deposit Letter, dated as of December
        31,
        2005 by and among Laurus, Tidel and the other Tidel Entities (as that term
        is
        defined therein) (the “ATM
        Closing Cash Collateral Letter,”
and
        together with the Exercise Agreement, the Redemption Agreement and any and
        all
        other agreements related to any of the foregoing documents, collectively,
        the
“Laurus
        Documents”).

      


      Pursuant
        to the ATM Closing Cash Collateral Deposit Letter, the Tidel Entities deposited
        $8,200,000 with Laurus, to be subject to a true-up adjustment (the “Adjustment”)
        on
        January 3, 2006 in accordance with the terms of the ATM Closing Cash Collateral
        Deposit Letter, which true-up never occurred. As of the date hereof, the
        amount
        of Collateral Deposit (as that term is defined in the ATM Closing Cash
        Collateral Deposit Letter) is $8,200,000. Following the application by Laurus
        of
        the Collateral Deposit to certain of the Obligations (as that term is defined
        in
        the ATM Closing Cash Collateral Deposit Letter) and the conversion of the
        notes
        pursuant to the terms of the Exercise Agreement, Laurus agrees that the
        following notes have been indefeasibly repaid as of the date hereof: (a)
        2003
        Convertible Note, (b) $1,500,000 Note and (c) $600,000 Note (as such terms
        are
        defined in the ATM Closing Cash Collateral Deposit Letter) and no further
        amounts are due on account of such notes. 

      


      As
        collateral security for the payment of remaining monetary amounts and all
        covenants and duties regarding such amounts, of any kind or nature, present
        or
        future, whether or not evidenced by any note, agreement or other instrument,
        arising under the Laurus Documents (the “Secured
        Obligations”),
        the
        Tidel Entities acknowledge that $5,400,000 will be on deposit with Laurus
        which
        is the sum of (a) $5,330,507 which represents the remaining amount under
        the ATM
        Closing Cash Collateral Deposit Letter plus
        (b)
        $69,493 which represents the Adjustment and shall be wired by Tidel to Laurus
        on
        January 13, 2006 (the deposit described in clauses (a) and (b) to be hereinafter
        referred to as the “TACC
        Closing Collateral Deposit”).
        The
        TACC Closing Collateral Deposit shall be held pursuant to the terms of this
        letter. This deposit of the TACC Closing Collateral Deposit shall not constitute
        a redemption of any note or other instrument made by any Tidel Entity in
        favor
        of Laurus. The TACC Closing Collateral Deposit shall be held in an interest
        bearing deposit account for the benefit of Tidel, with all interest earned
        by
        Laurus thereon being added to the principal amount of the TACC Closing
        Collateral Deposit.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Laurus
        and its successors and assigns may, without demand of performance or
        advertisement or notice of any kind to or upon any Tidel Entity (each of
        which
        demands, advertisements and/or notices are hereby expressly waived), immediately
        upon a default by any Tidel Entity in any payment obligation due and owing
        to
        Laurus under any of the Laurus Documents, appropriate and apply all or any
        part
        of the TACC Closing Collateral Deposit to the payment in whole or in part,
        in
        such order as Laurus may elect, of the Secured Obligations until the Secured
        Obligations have been indefeasibly paid in full. Further, Tidel may instruct
        Laurus in writing to apply any part of the TACC Closing Collateral Deposit
        to
        any payment obligation then due and owing to Laurus under the Redemption
        Agreement or the Exercise Agreement. In the event that any Secured Obligation
        remains outstanding after giving effect to any application of the TACC Closing
        Collateral Deposit, Tidel shall be liable for any deficiency.

      


      When
        all
        of the Secured Obligations have been paid and/or are otherwise indefeasibly
        paid
        in full and the Laurus Documents irrevocably terminated, any sums still on
        deposit hereunder shall, unless Laurus is instructed by a court of competent
        jurisdiction to the contrary, be returned to Tidel.

      


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      This
        letter agreement shall be binding upon and inure to the benefit of the parties
        hereto and their respective successors and assigns and shall be governed
        by and
        construed in accordance with the laws of the State of New York.

      


      
        	
                Very
                  truly yours,

              
	 	 	 
	
                Tidel
                  Technologies, Inc.

              
	 	 	 
	
                By:

              	  /s/
                Jerrell G. Clay	 
	 	
                Name:
                  Jerrell G. Clay

              	 
	 	
                Title:
                  Director

              	 


      

       

       

      AGREED:


      
        
          
            
              

                
                  	
                          Tidel
                            Engineering, L.P.

                        	 	
                          Tidel
                            Cash Systems, Inc.

                        
	 	
                          By:

                        	
                          Tidel
                            Cash Systems, Inc.,

                        	 	
                          By:

                        	 /s/
                          Leonard Carr
	 	 	
                          its
                            managing general partner

                        	 	 	
                          Name:
                            Leonard Carr

                        
	 	 	 	 	 	
                          Title:
                            Vice President & Secretary

                        
	 	 	
                          By:

                        	/s/
                          Leonard Carr	 	 	 
	 	 	
                          Name:
                            Leonard Carr

                        	 	 	 
	 	 	
                          Title:
                            Vice President & Secretary

                        	 	 	 
	 	 	 	 	 	 
	
                          Tidel
                            Services, Inc.

                        	 	
                          AnyCard
                            International, Inc.

                        
	 	 	 
	
                          By:

                        	 /s/
                          Leonard Carr	 	
                          By:

                        	 /s/
                          Leonard Carr
	 	
                          Name:
                            Leonard Carr

                        	 	 	
                          Name: Leonard
                            Carr

                        
	 	
                          Title:
                            Vice President & Secretary

                        	 	 	
                          Title:
                            Vice President & Secretary

                        
	 	 	 	 	 
	 	 	 	 	 


                

                


                
                  	
                          ACCEPTED:

                        
	
                          LAURUS
                            MASTER FUND, LTD.

                        
	 
	 	 	 
	
                          By:

                        	 /s/
                          Eugene Grin	 
	 	
                          Name:
                            Eugene Grin

                        	 
	 	
                          Title:
                            Director