Document:

CONVERTIBLE DEBENTURE PURCHASE AGREEMENT

                                      Among

                            TIDEL TECHNOLOGIES, INC.

                                       and

                         THE INVESTORS SIGNATORY HERETO

                          Dated as of September 8, 2000

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             CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"),  dated
as of September 8, 2000, among Tidel Technologies,  Inc., a Delaware corporation
(the  "Company"),  and the investors  signatory  hereto (each such investor is a
"Purchaser" and all such investors are, collectively, the "Purchasers").

            WHEREAS,  subject  to the  terms  and  conditions  set forth in this
Agreement,  the  Company  desires  to issue and sell to the  Purchasers  and the
Purchasers,  severally and not jointly,  desire to purchase from the Company, an
aggregate  principal  amount of  $20,000,000  of the  Company's  6%  Convertible
Debentures,  due September 8, 2004, which shall be in the form of Exhibit A (the
"Debentures"),  and which are  convertible  into shares of the Company's  common
stock, $ .01 par value per share (the "Common Stock").

            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 the Purchasers agree
as follows:

                                    ARTICLE I
                                PURCHASE AND SALE

            1.1   The Closing

                  (a) The Closing.  (i) Subject to the terms and  conditions set
forth in this Agreement,  the Company shall issue and sell to the Purchasers and
the Purchasers shall, severally, and not jointly,  purchase from the Company the
Debentures for an aggregate  purchase price of  $20,000,000.  The closing of the
purchase  and sale of the  Debentures  (the  "Closing")  shall take place at the
offices  of  Robinson   Silverman   Pearce  Aronsohn  &  Berman  LLP  ("Robinson
Silverman"),  1290 Avenue of the Americas, New York, New York 10104, immediately
following  the  execution  hereof or such later date as the parties shall agree.
The date of the Closing is hereinafter referred to as the "Closing Date."

                        (ii) At the Closing,  the parties shall deliver or shall
cause to be  delivered  the  following:  (A) the Company  shall  deliver to each
Purchaser:  (1)  Debentures  registered  in the  name of such  Purchaser  in the
aggregate  principal  amount  indicated  below  such  Purchaser's  name  on  the
signature page to this Agreement,  (2) a Common Stock purchase  warrant,  in the
form of Exhibit D, registered in the name of such  Purchaser,  pursuant to which
such Purchaser shall have the right to acquire shares of Common Stock,  upon the
terms and conditions set forth therein (collectively,  the "Warrants"),  (3) the
legal opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP, outside counsel
to the Company,  in the form of Exhibit C, (4) an executed  Registration  Rights
Agreement,  dated the date hereof, among the Company and the Purchasers,  in the
form of Exhibit B (the "Registration Rights Agreement"),  and (5) Transfer Agent
Instructions,  in the form of Exhibit E,  delivered to and  acknowledged  by the
Company's  transfer  agent (the  "Transfer  Agent  Instructions"),  and (B) each
Purchaser will deliver to the Company:  (1) the purchase price  indicated  below
such  Purchaser's  name on the

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signature  page to this  Agreement  in  United  States  dollars  in  immediately
available  funds by wire  transfer  to an account  designated  in writing by the
Company for such purpose, and (2) an executed Registration Rights Agreement.

                        (iii)  Notwithstanding  anything herein to the contrary,
the Company shall not sell any Securities (as defined  herein)  pursuant to this
Agreement to any Purchaser to which  Montrose  Investments  Ltd.  shall not have
previously agreed.

            1.2  Certain   Defined  Terms.   For  purposes  of  this  Agreement,
"Conversion  Price,"  "Original  Issue  Date" and  "Trading  Day" shall have the
meanings set forth in the  Debentures;  "Business Day" shall mean any day except
Saturday,  Sunday  and any day which  shall be a federal  legal  holiday  in the
United States or a day on which banking institutions in the State of New York or
Texas are authorized or required by law or other governmental action to close; A
"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.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

            2.1  Representations  and  Warranties  of the  Company.  The Company
hereby makes the following representations and warranties to the Purchasers:

                  (a)   Organization  and   Qualification.   The  Company  is  a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of Delaware with the requisite  corporate  power and authority
to own and use its  properties  and  assets  and to  carry  on its  business  as
currently conducted.  The Company has no subsidiaries other than as set forth in
Schedule  2.1(a)  (collectively  the  "Subsidiaries").  Except  as set  forth in
Schedule 2.1 (a), 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.  Each of the  Company  and the
Subsidiaries  is duly  qualified  to do  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,  individually  or in the  aggregate,  (x)  adversely
affect the legality,  validity or  enforceability  of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Transfer
Agent  Instructions,   the  Debentures  or  the  Warrants   (collectively,   the
"Transaction Documents"), (y) have or result in a material adverse effect on the
results of  operations,  assets,  or condition  (financial  or otherwise) of the
Company and the  Subsidiaries,  taken as a whole,  or (z)  adversely  impair the
Company's  ability to perform fully on a timely basis its obligations  under any
of the  Transaction  Documents  (any of (x),  (y) or (z),  a  "Material  Adverse
Effect").

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                  (b) Authorization;  Enforcement. 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  thereunder.  The execution and delivery of each of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the Company and no further  action is required by the  Company.  Each of
the  Transaction  Documents  has been duly  executed  by the Company  and,  when
delivered in accordance  with the terms hereof,  will  constitute  the valid and
binding obligation of the Company  enforceable against the Company in accordance
with its terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization,  moratorium or similar laws affecting creditors' and
contracting parties' rights generally. Neither the Company nor any Subsidiary is
in violation of any of the provisions of its respective  certificate or articles
of incorporation, by-laws or other organizational or charter documents.

                  (c)  Capitalization.  The  number of  authorized,  issued  and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except
as disclosed in Schedule  2.1(c),  the Company owns all of the Capital  Stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights,  nor is any  holder  of  the  securities  of  the  Company  entitled  to
preemptive or similar rights arising out of any agreement or understanding  with
the Company by virtue of any of the Transaction Documents. Except as a result of
the purchase and sale of the Debentures and the Warrants and except as disclosed
in Schedule 2.1(c), 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  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 securities or rights convertible or exchangeable into shares of
Common Stock.  The issue and sale of the Shares,  Warrants or Underlying  Shares
(as hereinafter defined) will not obligate the Company to issue shares of Common
Stock or other  securities  to any Person other than the  Purchaser and will not
result in a right of any holder of Company  securities to adjust the exercise or
conversion or reset price under such securities.

                  (d) Issuance of the Debentures  and the Warrants.  The Company
will  have (and  will,  at all  times  while  Debentures  and the  Warrants  are
outstanding,  maintain) an adequate reserve of duly authorized  shares of Common
Stock,  reserved for issuance to the holders of such Debentures and Warrants, to
enable it to perform its conversion,  exercise and other  obligations under this
Agreement.  Such number of reserved and  available  shares of Common Stock shall
not be less than the sum of 175% of the number of shares of Common  Stock  which
would be issuable upon (i)  conversion in full of the  Debentures  assuming such
conversion   occurred  on  the  Original  Issue  Date,  the  Debentures   remain
outstanding  for four years and all  interest is paid in shares of Common  Stock
and (ii)  exercise  in full of the  Warrants  (such  number  of shares of Common
Stock, the "Initial Minimum").  All such authorized shares of Common Stock shall
be duly reserved for issuance to the holders of the Debentures and the Warrants.
The shares of

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Common Stock issuable upon conversion of the Debentures and upon exercise of the
Warrants are  collectively  referred to herein as the  "Underlying  Shares." The
Debentures,  the Warrants and the Underlying Shares are collectively referred to
herein as, the  "Securities."  When issued in accordance with the Debentures and
the Warrants,  the Underlying  Shares will be duly  authorized,  validly issued,
fully  paid and  nonassessable,  free and clear of all liens,  encumbrances  and
rights of first refusal of any kind (collectively, "Liens").

                  (e) No Conflicts.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  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 charter  documents (each as amended
through the date hereof),  or (ii) subject to obtaining  the Required  Approvals
(as defined  below),  conflict  with, or constitute a default (or an event which
with notice or lapse of time or both would become a default)  under,  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) 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;  except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate,  have or
result in a Material  Adverse  Effect.  The business of the Company is not being
conducted in violation of any law,  ordinance or regulation of any  governmental
authority,  except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.

                  (f) Filings,  Consents and Approvals.  Neither the Company nor
any Subsidiary is 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) the filings required pursuant to Section
3.10,  (ii)  the  filing  with  the  Securities  and  Exchange  Commission  (the
"Commission")of  a registration  statement meeting the requirements set forth in
the  Registration  Rights  Agreement  and covering the resale of the  Underlying
Shares by the Purchasers (the "Underlying Shares Registration Statement"), (iii)
the  application(s) to the Nasdaq National Market (the "NASDAQ") for the listing
of the underlying  shares for trading on the NASDAQ (and with any other national
securities  exchange or market on which the Common  Stock is then listed) in the
time and manner required thereby,  (iv) applicable Blue Sky filings,  and (v) in
all other cases where the failure to obtain such consent, waiver,  authorization
or order, or to give such notice or make such filing or  registration  could not
have or result in,  individually or in the aggregate,  a Material Adverse Effect
(collectively, the "Required Approvals").

                  (g)  Litigation;   Proceedings.  There  is  no  action,  suit,
inquiry,  notice of

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violation,  proceeding  or  investigation  pending or, to the  knowledge  of the
Company,  threatened against or affecting the Company or any of its Subsidiaries
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 (i)  adversely
affects or challenges  the legality,  validity or  enforceability  of any of the
Transaction  Documents  or the  Securities  or  (ii)  could,  if  there  were an
unfavorable  decision,  individually  or in the  aggregate,  have or result in a
Material  Adverse  Effect.  Neither  the  Company  nor any  Subsidiary,  nor any
director or officer thereof,  is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary  duty. The Company does not have pending before the
Commission any request for confidential treatment of information and the Company
has no knowledge  of any  expected  such request that would be made prior to the
Effectiveness Date (as defined in the Registration Rights Agreement).  There has
not been,  and to the best of the  Company's  knowledge  there is not pending or
contemplated,  any investigation by the Commission  involving the Company or any
current or former director or officer of the Company.

                  (h) No Default  or  Violation.  Neither  the  Company  nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived  which,  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, (ii) is in violation of any order of any court,  arbitrator
or  governmental  body,  or  (iii)  is in  violation  of any  statute,  rule  or
regulation of any governmental  authority,  in each case of clauses (i), (ii) or
(iii)  above,  except as could not  individually  or in the  aggregate,  have or
result in a Material Adverse Effect.

                  (i)   Private   Offering.   Assuming   the   accuracy  of  the
representations   and  warranties  of  the  Purchasers  set  forth  in  Sections
2.2(b)-(g),  the offer, issuance and sale of the Securities to the Purchasers as
contemplated  hereby  are  exempt  from  the  registration  requirements  of the
Securities Act of 1933, as amended (the "Securities  Act").  Neither the Company
nor any Person  acting on its behalf  has taken or is, to the  knowledge  of the
Company,  contemplating  taking any action  which could  subject  the  offering,
issuance  or sale of the  Securities  to the  registration  requirements  of the
Securities  Act including  soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.

                  (j) SEC Documents; Financial Statements. The Company has filed
all reports  required  to be filed by it under the  Securities  Exchange  Act of
1934,  as amended (the  "Exchange  Act"),  including,  without  limitation,  all
filings required pursuant to Sections 13(a) and 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively  referred
to  herein as the "SEC  Documents"  and,  together  with the  Schedules  to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC  Documents  prior to
the expiration of any such  extension.  As of their

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respective  dates, the SEC Documents  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,  and  none  of the SEC
Documents,  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 light of the circumstances under which
they were made, not misleading.  All material agreements to which the Company is
a party or to which the  property or assets of the Company are subject have been
filed as exhibits to the SEC  Documents as required  under the Exchange Act. The
financial  statements of the Company included in the SEC Documents comply 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.  Such  financial  statements  have  been  prepared  in  accordance  with
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 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.  Since  June  30,  2000,  except  as
specifically  disclosed  in the SEC  Documents,  (a)  there  has been no  event,
occurrence or  development  that has or that could result in a Material  Adverse
Effect,  (b) the  Company  has  not  incurred  any  liabilities  (contingent  or
otherwise)  other  than (x)  liabilities  incurred  in the  ordinary  course  of
business  consistent  with past practice and (y)  liabilities not required to be
reflected in the Company's financial  statements pursuant to GAAP or required to
be  disclosed  in filings  made with the  Commission,  (c) the  Company  has not
altered its method of  accounting  or the  identity of its  auditors and (d) the
Company has not  declared or made any payment or  distribution  of cash or other
property to its  stockholders or officers or directors (other than in compliance
with existing  Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.

                  (k)  Investment  Company.  The  Company is not,  and is not an
Affiliate (as defined in Rule 405 under the  Securities  Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  (l)  Certain  Fees.  Except for  certain  fees  payable by the
Company to Value Investing  Partners,  Inc. pursuant to that certain  engagement
letter  dated  August 8,  2000,  no fees or  commissions  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 this  Agreement.  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 this Agreement.  The Company
shall indemnify and hold harmless the  Purchasers,  their  employees,  officers,
directors,  agents,  and partners,  and their  respective  Affiliates,  from and
against all claims,  losses,  damages, costs (including the costs of preparation
and  attorney's  fees) and  expenses  suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.

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                  (m) Solicitation Materials. Neither the Company nor any Person
acting  on the  Company's  behalf  has  solicited  any  offer to buy or sell the
Securities by means of any form of general solicitation or advertising.

                  (n) Form S-3 Eligibility.  The Company is eligible to register
securities for resale under Form S-3 promulgated under the Securities Act.

                  (o)  Exclusivity.  The  Company  shall  not issue and sell the
Debentures to any Person other than the  Purchasers  without the specific  prior
written consent of the Purchasers.

                  (p)  Seniority.  Except as set forth in  Schedule  2.1(p),  no
indebtedness  of the  Company is senior to the  Debentures  in right of payment,
whether  with  respect  to  interest  or upon  liquidation  or  dissolution,  or
otherwise.

                  (q) Listing and Maintenance Requirements Compliance. Except as
set forth in the SEC Documents,  the Company has not, in the two years preceding
the date hereof,  received notice (written or oral) from the NASDAQ or any stock
exchange,  market or trading  facility on which the Common  Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, market
or trading  facility.  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.

                  (r) Patents and Trademarks.  The Company and its  Subsidiaries
have,  or have rights to use,  all  patents,  patent  applications,  trademarks,
trademark  applications,  service marks, trade names,  copyrights,  licenses and
rights  which  are  necessary  or  material  for use in  connection  with  their
respective businesses as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect  (collectively,  the  "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice  that  the  Intellectual  Property  Rights  used  by the  Company  or its
Subsidiaries  violates or infringes  upon the rights of any Person.  To the best
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.

                  (s) Registration  Rights;  Rights of Participation.  Except as
set forth on Schedule 6(b) to the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other  governmental  authority  which has not been  satisfied.
Except as set forth on Schedule 6(b) to the Registration  Rights  Agreement,  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.

                  (t)  Regulatory  Permits.  The  Company  and its  Subsidiaries
possess all

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certificates,  authorizations  and permits  issued by the  appropriate  federal,
state or foreign  regulatory  authorities  necessary to conduct their respective
businesses  as  described  in the SEC  Documents,  except  where the  failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("Material  Permits"),  and neither the Company nor
any such  Subsidiary  has  received  any notice of  proceedings  relating to the
revocation or modification of any Material Permit.

                  (u) Title.  The  Company  and the  Subsidiaries  have good and
marketable  title in fee  simple  to all real  property  owned by them  which is
material  to the  business  of the  Company  and its  Subsidiaries  and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its 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 interfere  with the use made and proposed to be made of such property
by the Company and its  Subsidiaries,  except for such  defects  which would not
result in a Material Adverse Effect. Any real property and facilities held under
lease  by the  Company  and its  Subsidiaries  are  held by  them  under  valid,
subsisting and enforceable  leases of which the Company and its Subsidiaries are
in material compliance and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.

                  (v) Labor  Relations.  No material labor problem exists or, to
the  knowledge of the Company,  is imminent with respect to any of the employees
of the Company.

                  (w) Disclosure.  The Company  confirms that neither it nor any
other  Person  acting on its behalf has provided  any of the  Purchasers  or its
agents or counsel with any  information  that  constitutes  or might  constitute
material non-public  information.  The Company understands and confirms that the
Purchasers  shall be  relying  on the  foregoing  representations  in  effecting
transactions  in  securities  of the  Company.  All  disclosure  provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement,  furnished by or on behalf of
the Company are true and  correct 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.

            2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other  Purchaser  represents  and  warrants  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 the requisite  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  thereunder.  The  purchase  by  such  Purchaser  of the  Securities
hereunder has been duly  authorized by all necessary  action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly  executed  by such  Purchaser,  and when

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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.

                  (b)  Investment  Intent.   Such  Purchaser  is  acquiring  the
Securities as principal for its own account for investment purposes only and not
with a view to or for  distributing  or reselling  such  Securities  or any part
thereof,  without prejudice,  however, to such Purchaser's right, subject to the
provisions of this Agreement,  the Registration Rights Agreement, the Debentures
and the Warrant, at all times to sell or otherwise dispose of all or any part of
such  Securities  pursuant  to an  effective  registration  statement  under the
Securities  Act or under an exemption from such  registration  and in compliance
with applicable  federal and state  securities  laws.  Nothing  contained herein
shall be deemed a  representation  or  warranty  by such  Purchaser  to hold the
Securities  for any period of time.  Such  Purchaser is acquiring the Securities
hereunder in the ordinary  course of its business.  Such Purchaser does not have
any  agreement  or  understanding,  directly or  indirectly,  with any Person to
distribute the Securities.

                  (c) Purchaser  Status.  At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities 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 Securities, and has so
evaluated the merits and risks of such investment.

                  (e) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an  investment in the  Securities
and, at the present time, is able to afford a complete loss of such investment.

                  (f) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure  Materials and has been afforded (i) 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  Securities  and the  merits  and  risks  of  investing  in the
Securities;  (ii) 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;  and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without  unreasonable effort or expense that is necessary to make an
informed  investment  decision with respect to the  investment and to verify the
accuracy  and  completeness  of the  information  contained  in  the  Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its  representatives or counsel shall modify,  amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the  Disclosure  Materials and the Company's  representations  and warranties
contained in the Transaction Documents.

                  (g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other  communication  regarding  the

<PAGE>

Securities  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.

                  (h) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without  registration  under
the Securities Act in a private  placement that is exempt from the  registration
provisions of the Securities Act and (ii) the  availability  of such  exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing  representations  and such Purchaser  hereby  consents to such
reliance.

                  The Company acknowledges and agrees that no Purchaser makes or
has made any  representations  or  warranties  with respect to the  transactions
contemplated hereby other than those specifically set forth in this Section 2.2.

                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

            3.1 Transfer  Restrictions.  (a) The Securities may only be disposed
of 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 compliance  with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective  registration statement or to the
Company,  except as  otherwise  set forth  herein,  the  Company may require the
transferor  thereof to provide to the Company an opinion of counsel  selected by
the  transferor,  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. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser  under this Agreement and the  Registration
Rights Agreement.

                  (b) The  Purchasers  agree  to the  imprinting,  so long as is
required by this Section 3.1(b), of the following legend on the Securities:

                        NEITHER THESE  SECURITIES NOR THE SECURITIES  INTO WHICH
            THESE   SECURITIES  ARE   [CONVERTIBLE]   [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.

<PAGE>

                  The  Underlying  Shares shall not contain the legend set forth
above nor any other legend if the  conversion  of  Debentures or the exercise of
the Warrants,  as the case may be, occurs at any time while an Underlying Shares
Registration  Statement is effective  under the  Securities Act or the holder is
relying  on Rule 144  promulgated  under  the  Securities  Act  ("Rule  144") in
connection with the resale of such Underlying  Shares,  or in the event there is
not an effective Underlying Shares Registration  Statement,  and Rule 144 is not
then available for resale of the Underlying  Shares, at such time as such legend
is not required under  applicable  requirements of the Securities Act (including
judicial   interpretations  and  pronouncements  issued  by  the  staff  of  the
Commission).  The Company  shall  cause its  counsel to issue the legal  opinion
included in the Transfer Agent  Instructions to the Company's  transfer agent on
the date that an Underlying Shares Registration  Statement is declared effective
by the Commission  (such date, the  "Effective  Date").  The Company agrees that
following  the  Effective  Date,  it will,  no later  than  three  Trading  Days
following  the  delivery  by a  Purchaser  to the  Company of a  certificate  or
certificates  representing  Underlying Shares issued with a restrictive  legend,
deliver to such Purchaser certificates representing such Underlying Shares which
shall be free from all restrictive  and other legends.  The Company may not make
any notation on its records or give  instructions  to any transfer  agent of the
Company which enlarge the restrictions of transfer set forth in this Section.

            3.2  Acknowledgment of Dilution.  The Company  acknowledges that the
issuance of  Underlying  Shares upon the  conversion of the  Debentures  and the
exercise of the Warrants  will result in dilution of the  outstanding  shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further  acknowledges that its obligation to issue Underlying Shares
upon   conversion  of  the  Debenture  and  the  exercise  of  the  Warrants  is
unconditional  and  absolute,  subject  to  the  limitations  set  forth  in the
Debentures or the Warrants,  as the case may be, regardless of the effect of any
such dilution.

            3.3  Furnishing  of  Information.  As  long  as the  Purchasers  own
Securities,  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 Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports  pursuant to such sections,  it will
prepare and furnish to the Purchasers and make publicly  available in accordance
with Rule 144(c)  promulgated  under the Securities  Act such  information as is
required for the  Purchasers to sell the Securities  under Rule 144  promulgated
under the Securities Act. The Company  further  covenants that it will take such
further action as any holder of Securities may  reasonably  request,  all to the
extent  required  from time to time to  enable  such  Person to sell  Underlying
Shares  without  registration  under the Securities Act within the limitation of
the  exemptions  provided  by Rule 144  promulgated  under the  Securities  Act,
including causing its attorneys to render and deliver any legal opinion required
in  order  to  permit a  Purchaser  to  receive  Underlying  Shares  free of all
restrictive  legends and to subsequently  sell Underlying  Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice  having
a similar effect. Upon the request of any such Person, the Company shall deliver
to such  Person a  written  certification  of a duly  authorized  officer  as to
whether it has complied with such requirements.

<PAGE>

            3.4  Integration.  The  Company  shall  not,  and shall use its best
efforts to ensure that, no Affiliate of the Company shall,  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 Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchasers.

            3.5 Increase in Authorized  Shares. If on any date the Company would
be,  if a  notice  of  conversion  or  exercise  (as the case may be) were to be
delivered  on such  date,  precluded  from  issuing  (a) 175% of the  number  of
Underlying  Shares as would then be issuable  upon a  conversion  in full of the
Debentures  and (b) the number of  Underlying  Shares  issuable upon exercise in
full of the Warrants (the "Current  Required  Minimum"),  in either case, due to
the unavailability of a sufficient number of authorized but unissued or reserved
shares of  Common  Stock,  then the  Board of  Directors  of the  Company  shall
promptly  prepare and mail to the  stockholders  of the Company proxy  materials
requesting  authorization  to amend the  Company's  certificate  or  articles of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least such number of shares as reasonably requested
by the Purchasers in order to provide for such number of authorized and unissued
shares of Common  Stock to  enable  the  Company  to comply  with its  issuance,
conversion  exercise and reservation of shares  obligations as set forth in this
Agreement,  the Debentures and the Warrants (the sum of (x) the number of shares
of Common Stock then  outstanding  plus all shares of Common Stock issuable upon
exercise of all outstanding options,  warrants and convertible instruments,  and
(y) the Current Required Minimum,  shall be a reasonable  number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such  increase,  (b) recommend to and otherwise use its best efforts to promptly
and duly obtain  stockholder  approval to carry out such resolutions (and hold a
special  meeting of the  stockholders  no later than the earlier to occur of the
sixtieth  (60th) day after  delivery  of the proxy  materials  relating  to such
meeting and the ninetieth  (90th) day after request by a holder of Securities to
issue the number of Underlying  Shares in accordance  with the terms hereof) and
(c) within five (5) Business Days of obtaining such  stockholder  authorization,
file an  appropriate  amendment  to the  Company's  certificate  or  articles of
incorporation to evidence such increase.

            3.6  Reservation and Listing of Underlying  Shares.  (a) The Company
shall (i) in the time and manner required by any national  securities  exchange,
market,  trading or quotation facility on which the Common Stock is then traded,
prepare and file with such  national  securities  exchange,  market,  trading or
quotation facility on which the Common Stock is then traded an additional shares
listing  application  covering a number of shares of Common  Stock  which is not
less than the  Initial  Minimum,  (ii) take all steps  necessary  to cause  such
shares  of  Common  Stock  to be  approved  for  listing  on any  such  national
securities exchange, market or trading or quotation facility on which the Common
Stock is then listed as soon as possible  thereafter,  and (iii)  provide to the
Purchasers evidence of such listing,  and the Company shall maintain the listing
of its Common Stock thereon.  If the number of Underlying  Shares  issuable upon
(x)  conversion in full of the then  outstanding  Debentures and (y) exercise in
full of the  then  unexercised  portion  of the  Warrants,  exceeds  eighty-five
percent (85%) of the number of

<PAGE>

Underlying  Shares  previously  listed on account thereof with any such required
exchanges, then the Company shall take the necessary actions to immediately list
a number of Underlying  Shares as equals no less than the then Current  Required
Minimum.

                  (b) The Company  shall  maintain a reserve of shares of Common
Stock for issuance upon  conversion of the  Debentures in full and upon exercise
in full of the Warrants in accordance with this Agreement, in such amount as may
be required to fulfill its obligations in full under the Transaction  Documents,
which reserve shall equal no less than the then Current Required Minimum.

            3.7   Conversion  and  Exercise   Procedures.   The  Transfer  Agent
Instructions,  the Conversion Notice (as defined in the Debentures) and the Form
of Election to Purchase (as defined in the Warrants)  sets forth the totality of
the procedures with respect to the conversion of the Debentures and the exercise
of the Warrants,  including the form of legal opinion, if necessary,  that shall
be rendered  to the  Company's  transfer  agent and such other  information  and
instructions as may be reasonably  necessary to enable the Purchasers to convert
their Debentures and their Warrants, as the case may be.

            3.8 Conversion and Exercise  Obligations of the Company. The Company
shall honor  conversions  of the  Debentures  and  exercises of the Warrants and
shall  deliver  Underlying  Shares  in  accordance  with the  respective  terms,
conditions and time periods set forth in the Debentures .

            3.9 Subsequent Financing;  Limitation on Registrations.  (a) Subject
to Section 3.9(d) and (e), from the date hereof through the ninetieth (90th) day
following the Effective Date, the Company will not offer, sell, grant any option
to purchase,  or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its or its Affiliates' equity or
equity  equivalent  securities  (including  the  issuance  of any  debt or other
instrument at any time over the life thereof  convertible  into or  exchangeable
for Common Stock.

                  (b) Subject to Section  3.9(d) and (e), the Company shall not,
directly or indirectly,  offer, sell, grant any option to purchase, or otherwise
dispose of (or  announce  any offer,  sale,  grant or any option to  purchase or
other  disposition)  any  of  its  equity  or  equity-equivalent  securities  or
securities  of  any of its  Affiliates  that  are  exchangeable  or  convertible
(directly or indirectly)  for shares of Common Stock,  including the issuance of
any debt or other instrument at any time over the life thereof  convertible into
or exchangeable for Common Stock (collectively,  a "Subsequent  Placement") from
the date  hereof  until  the  expiration  of the  180th  Trading  Day  after the
Effective  Date,  unless (A) the Company  delivers to each of the  Purchasers  a
written notice (the  "Subsequent  Placement  Notice") of its intention to effect
such Subsequent  Placement,  which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder,  the Person with whom such Subsequent
Placement  shall be  effected,  and  attached  to which shall be a term sheet or
similar document relating thereto and (B) such Purchaser shall not have notified
the Company by 6:00 p.m. (New York City time) on the tenth Trading Day after its
receipt of the Subsequent  Placement Notice of its willingness to

<PAGE>

provide (or to cause its sole  designee to provide),  subject to  completion  of
mutually  acceptable  documentation,  financing to the Company on the same terms
set forth in the Subsequent  Placement  Notice.  If the Purchasers shall fail to
notify the Company of their  intention  to enter into such  negotiations  within
such time period, the Company may effect the Subsequent Placement  substantially
upon the terms and to the Persons (or  Affiliates  of such Persons) set forth in
the Subsequent  Placement Notice;  provided,  that the Company shall provide the
Purchasers with a second Subsequent  Placement Notice,  and the Purchasers shall
again have the right of first refusal set forth above in this  paragraph (a), if
the Subsequent  Placement  subject to the initial  Subsequent  Placement  Notice
shall not have been  consummated  for any  reason on the terms set forth in such
Subsequent  Placement  Notice  within thirty (30) Trading Days after the date of
the initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person)  identified in the Subsequent  Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the  Subsequent  Placement  Notice,  then each  Purchaser  shall be  entitled to
provide financing  pursuant to such Subsequent  Placement Notice up to an amount
equal to such Purchaser's  pro-rata portion of the aggregate principal amount of
Debentures  purchased by such Purchaser  under this  Agreement,  but the Company
shall not be required to accept  financing  from the  Purchasers in an amount in
excess of the amount set forth in the Subsequent Placement Notice.

                  (c) Except for (x) Underlying  Shares,  (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered,  and securities of the Company permitted pursuant to Section 6(c) of
the  Registration  Rights Agreement to be registered,  in the Underlying  Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to Section 3.9 (e), the Company
shall not,  for a period of not less than  ninety  (90)  Trading  Days after the
Effective Date, without the prior written consent of the Purchasers (i) issue or
sell any of its or any of its Affiliates' equity or equity-equivalent securities
pursuant to Regulation S promulgated  under the Securities Act, or (ii) register
any  securities  of the  Company.  Any days  after  the  Effective  Date  that a
Purchaser  is unable to sell  Underlying  Shares  under  the  Underlying  Shares
Registration Statement shall be added to such ninety (90) Trading Day period.

                  (d) With  respect to Section  3.9(a) and (b),  the ninety (90)
and one hundred and eighty (180)  Trading Day periods  shall be extended for the
number of Trading  Days during  such  period (A) in which  trading in the Common
Stock is suspended by any securities  exchange or market or quotation  system on
which the Common Stock is then listed, or (B) during which the Underlying Shares
Registration  Statement is not  effective,  or (C) during  which the  prospectus
included in the Underlying Shares Registration  Statement may not be used by the
holders thereof for the resale of Underlying Shares.

                  (e) The  restrictions  contained  in  Section  3.9(a)  and (b)
above,  shall not apply to (i)  issuances  pursuant  to a grant or  exercise  of
stock, warrants or options which may hereafter be granted or exercised under any
employee or director  benefit  plan or  compensation  program of the Company now
existing or to be  implemented in the future and (ii) issuances of Common Stock,
for an  aggregate  market  price of up to  $2,000,000,  pursuant  to a Strategic
Transaction  (as

<PAGE>

defined  herein).  A  "Strategic   Transaction"  shall  mean  a  transaction  or
relationship  in which the  Company  issues  shares of Common  Stock to a Person
which is, itself or through its subsidiaries, an operating company in a business
synergistic  with the business of the Company and in which the Company  receives
material  benefits in addition to the investment of funds, but shall not include
a  transaction  in which the  Company is issuing  securities  primarily  for the
purpose of raising  capital or to an entity whose primary  business is investing
in securities.

            3.10 Certain  Securities Laws  Disclosures;  Publicity.  The Company
shall: (i) on the Closing Date, issue a press release  reasonably  acceptable to
the Purchasers  disclosing the transactions  contemplated hereby, (ii) file with
the  Commission a Report on Form 8-K disclosing  the  transactions  contemplated
hereby within ten Business  Days after the Closing  Date,  and (iii) timely file
with the Commission a Form D promulgated  under the Securities  Act. The Company
shall,  no less than two  Business  Days prior to the  filing of any  disclosure
required  by  clauses  (ii) and  (iii)  above,  provide  a copy  thereof  to the
Purchasers for their review.  The Company and the Purchasers  shall consult with
each other in issuing  any other  press  releases  or  otherwise  making  public
statements  or  filings  and other  communications  with the  Commission  or any
regulatory  agency or stock  market or  trading  facility  with  respect  to the
transactions  contemplated  hereby and neither  party shall issue any such press
release  or  otherwise  make  any  such  public  statement,   filings  or  other
communications  without the prior written  consent of the other,  except that if
such  disclosure  is required by law or stock market  regulation,  in which such
case the  disclosing  party  shall  promptly  provide the other party with prior
notice of such public statement, filing or other communication.  Notwithstanding
the  foregoing,  the  Company  shall  not  publicly  disclose  the  names of the
Purchasers,  or  include  the names of the  Purchasers  in any  filing  with the
Commission,  or any regulatory agency,  trading facility or stock market without
the  prior  written  consent  of  the  Purchasers,  except  to the  extent  such
disclosure  (but not any disclosure as to the  controlling  Persons  thereof) is
required by law or stock  market  regulations,  in which case the Company  shall
provide the Purchasers with prior notice of such disclosure.

            3.11 Transfer of Intellectual  Property Rights. Except in connection
with  the sale of all or  substantially  all of the  assets  of the  Company  or
licensing  arrangements  in the ordinary course of the Company's  business,  the
Company  shall not  transfer,  sell or  otherwise  dispose  of any  Intellectual
Property  Rights,  or allow any of the  Intellectual  Property  Rights to become
subject to any Liens,  or fail to renew such  Intellectual  Property  Rights (if
renewable  and it would  otherwise  lapse if not  renewed),  without  the  prior
written consent of the Purchasers.

            3.12 Use of Proceeds.  Except as set forth in Schedule  3.12 hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital  purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade  payables in the ordinary  course of
the Company's  business and prior  practices),  to redeem any Company  equity or
equity-equivalent securities or to settle any outstanding litigation.

            3.13  Reimbursement.  If  any  Purchaser  becomes  involved  in  any
capacity in any action,  proceeding or  investigation  brought by or against any
Person,  including stockholders of the Company,  solely as a result of acquiring
the Securities  under this Agreement,  the Company will

<PAGE>

reimburse such Purchaser for its reasonable legal and other expenses (including,
but not  limited  to,  the cost of any  investigation,  preparation  or  travel)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
reimbursement  obligations  of the  Company  under  this  paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company  solely as a result of acquiring  the  Securities  under
this Agreement.

            3.14 Certain Trading Restrictions. Each Purchaser agrees that during
the five Trading Days preceding each Put Date (as defined in the  Debentures) it
shall not enter into any Short Sales (as defined  herein).  For purposes of this
Section 3.14, a "Short Sale" by a Purchaser shall mean a sale of Common Stock by
such  Purchaser  that is marked as a short  sale and that is made at a time when
there is no  equivalent  offsetting  long  position in Common  Stock held by the
Purchaser. For purposes of determining whether there is an equivalent offsetting
long  position in Common Stock held by a Purchaser,  Underlying  Shares that are
issuable on  exercise  of the  Warrants or  conversion  of the  Debentures  on a
Trading Day shall be deemed to be held long by such  Purchaser  on such  Trading
Day.

                                   ARTICLE IV
                                  MISCELLANEOUS

            4.1 Fees and Expenses.  At the Closing,  the Company shall reimburse
the Purchasers for their legal fees and expenses incurred in connection with the
preparation and  negotiation of the Transaction  Documents by paying to Robinson
Silverman  $25,000  for  the  preparation  and  negotiation  of the  Transaction
Documents.  The amount contemplated by the immediately  preceding sentence shall
be retained by the  Purchasers  and shall not be delivered to the Company at the
Closing.  Other than the amount contemplated herein, and except as otherwise set
forth in the Registration  Rights  Agreement,  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. The Company
shall pay all stamp and other  taxes and duties  levied in  connection  with the
issuance of the Securities

            4.2  Entire  Agreement;   Amendments.   The  Transaction  Documents,
together   with  the  Exhibits  and   Schedules   thereto  and  Transfer   Agent
Instructions,  contain the entire  understanding  of the parties with respect to
the subject matter hereof and supersede all prior

<PAGE>

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

            4.3  Notices.  Any  and  all  notices  or  other  communications  or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (i) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this Section  prior to 6:00 p.m. (New
York City  time) on a  Business  Day,  (ii) the  Business  Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m.  (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by U.S.
nationally  recognized overnight courier service, or (iv) 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:    Tidel Technologies, Inc.
                                  5847 San Felipe, Suite 900
                                  Houston, Texas 77057
                                  Facsimile No.:  (713) 783-6003
                                  Attn: Chief Financial Officer

            With copies to:       Olshan Grundman Frome Rosenzweig & Wolosky LLP
                                  505 Park Avenue
                                  New York, New York 10022
                                  Facsimile No.: (212) 755-1467
                                  Attn: David J. Adler

            If to a Purchaser:    To  the   address   set   forth   under   such
                                  Purchaser's   name  on  the  signature   pages
                                  hereto.

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.

            4.4  Amendments;  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 Purchasers  which have purchased no less than 2/3
of the  Debentures  hereunder or, in the case of a waiver,  by the party against
whom  enforcement  of any such waiver 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  other
provision,  condition or requirement  hereof, nor shall any delay or omission of
either party to exercise any right  hereunder in any manner  impair the exercise
of any such right accruing to it thereafter.

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

<PAGE>

            4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without  the prior  written  consent of the  Purchasers.  Except as set forth in
Section  3.1(a),  the  Purchasers  may not assign this  Agreement  or any of the
rights or  obligations  hereunder  without  the  consent  of the  Company.  This
provision  shall not limit  any  Purchaser's  right to  transfer  securities  or
transfer or assign rights under the Registration Rights Agreement.

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

            4.8  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
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party hereby irrevocably submits to the exclusive  jurisdiction of the state and
federal  courts sitting in the City of New York,  borough of Manhattan,  for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit,  action or  proceeding  is improper.  Each party  hereby  irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding  by mailing a copy thereof via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this  Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

            4.9  Survival.  The  representations,   warranties,  agreements  and
covenants contained herein shall survive the Closing and the delivery,  exercise
and conversion of the Warrants or the Debentures, as the case may be.

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

            4.11 Severability. In case any one or more of the provisions of this
Agreement  shall be invalid or  unenforceable  in any respect,  the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be  affecting  or impaired  thereby and

<PAGE>

the parties will attempt to agree upon a valid and  enforceable  provision which
shall  be  a  reasonable  substitute  therefor,  and  upon  so  agreeing,  shall
incorporate such substitute provision in this Agreement.

            4.12 Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  will be entitled to specific  performance of the  obligations of the
Company under the Transaction Documents.  The parties hereto agree that monetary
damages may not be adequate  compensation for any loss incurred by reason of any
breach of its obligations  described in the foregoing sentence and hereby agrees
to waive in any action  for  specific  performance  of any such  obligation  the
defense that a remedy at law would be adequate.

            4.13 Independent  Nature of Purchasers'  Obligations and Rights. The
obligations of each Purchaser under any Transaction  Document is several and not
joint with the  obligations  of any other  Purchaser  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
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 with respect to such  obligations or
the transactions  contemplated by the Transaction Document. 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.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES FOLLOWS]

<PAGE>

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

                                         TIDEL TECHNOLOGIES, INC.

                                         By: /s/ James T. Rash
                                            ------------------------------------
                                            Name:  James T. Rash
                                            Title: Chief Executive Officer

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

<PAGE>

                               MONTROSE INVESTMENTS LTD.

                               By: /s/ William E. Rose
                                  ---------------------------------------------
                                  Name:  William E. Rose
                                  Title: Authorized Signatory

                               Purchase Price:         $15,000,000

                               Address for Notice:

                               Montrose Investments Ltd.
                               c/o HBK Investments L.P.
                               300 Crescent Court, Suite 700
                               Dallas, Texas  75201
                               Facsimile: (214) 758-1221
                               Attn: Jeff Estes and Kim Rozman

      With copies to:          Robinson Silverman Pearce Aronsohn & Berman LLP
                               1290 Avenue of the Americas
                               New York, NY  10104
                               Facsimile No.:  (212) 541-4630 and (212) 541-1432
                               Attn: Eric L. Cohen, Esq.CONVERTIBLE DEBENTURE PURCHASE AGREEMENT

                                      Among

                            TIDEL TECHNOLOGIES, INC.

                                       and

                          THE INVESTOR SIGNATORY HERETO

                         Dated as of September 29, 2000

<PAGE>

         CONVERTIBLE  DEBENTURE PURCHASE AGREEMENT (this "Agreement"),  dated as
of September 29, 2000, among Tidel  Technologies,  Inc., a Delaware  corporation
(the "Company"), and the investor signatory hereto ("Purchaser").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement,  the  Company  desires  to issue  and sell to the  Purchaser  and the
Purchaser desires to purchase from the Company, an aggregate principal amount of
$3,000,000 of the Company's 6%  Convertible  Debentures,  due September 8, 2004,
which  shall be in the form of  Exhibit  A (the  "Debentures"),  and  which  are
convertible into shares of the Company's common stock, $ .01 par value per share
(the "Common Stock").

         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 the Purchaser agree
as follows:

                                    ARTICLE I
                                PURCHASE AND SALE

         1.1      The Closing

                  (a) The Closing.  (i) Subject to the terms and  conditions set
forth in this  Agreement,  the Company shall issue and sell to the Purchaser and
the Purchaser  shall  purchase from the Company the  Debentures for an aggregate
purchase  price of  $3,000,000.  The  closing  of the  purchase  and sale of the
Debentures  (the  "Closing")  shall take place at the offices of Olshan Grundman
Frome  Rosenzweig  & Wolosky LLP, 505 Park  Avenue,  New York,  New York,  10022
("OGFR&W"), immediately following the execution hereof or such later date as the
parties shall agree.  The date of the Closing is hereinafter  referred to as the
"Closing Date."

                        (ii) At the Closing,  the parties shall deliver or shall
cause to be  delivered  the  following:  (A) the  Company  shall  deliver to the
Purchaser:  (1)  Debentures  registered  in the  name  of the  Purchaser  in the
aggregate principal amount indicated below the Purchaser's name on the signature
page to this  Agreement,  (2) a Common Stock  purchase  warrant,  in the form of
Exhibit  D,  registered  in the name of the  Purchaser,  pursuant  to which  the
Purchaser shall have the right to acquire shares of Common Stock, upon the terms
and conditions set forth therein (collectively,  the "Warrants"),  (3) the legal
opinion of OGFR&W, outside counsel to the Company, in the form of Exhibit C, (4)
an executed  Registration  Rights  Agreement,  dated the date hereof,  among the
Company and the Purchaser,  in the form of Exhibit B (the  "Registration  Rights
Agreement"),  and (5)  Transfer  Agent  Instructions,  in the form of Exhibit E,
delivered to and  acknowledged  by the Company's  transfer  agent (the "Transfer
Agent Instructions"), and (B) the Purchaser will deliver to the Company: (1) the
purchase price  indicated  below the  Purchaser's  name on the signature page to
this Agreement in United States dollars in immediately  available  funds by wire
transfer to an account  designated  in writing by the Company for such  purpose,
and (2) an executed Registration Rights Agreement.

<PAGE>

         1.2 Certain Defined Terms. For purposes of this Agreement,  "Conversion
Price,"  "Original  Issue Date" and  "Trading  Day" shall have the  meanings set
forth in the  Debentures;  "Business  Day" shall  mean any day except  Saturday,
Sunday and any day which shall be a federal  legal  holiday in the United States
or a day on which  banking  institutions  in the  State of New York or Texas are
authorized or required by law or other  governmental  action to close;  "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.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

         2.1 Representations  and Warranties of the Company.  The Company hereby
makes the following representations and warranties to the Purchaser:

                  (a)   Organization  and   Qualification.   The  Company  is  a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of Delaware with the requisite  corporate  power and authority
to own and use its  properties  and  assets  and to  carry  on its  business  as
currently conducted.  The Company has no subsidiaries other than as set forth in
Schedule  2.1(a)  (collectively  the  "Subsidiaries").  Except  as set  forth in
Schedule 2.1 (a), 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.  Each of the  Company  and the
Subsidiaries  is duly  qualified  to do  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,  individually  or in the  aggregate,  (x)  adversely
affect the legality,  validity or  enforceability  of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Transfer
Agent  Instructions,   the  Debentures  or  the  Warrants   (collectively,   the
"Transaction Documents"), (y) have or result in a material adverse effect on the
results of  operations,  assets,  or condition  (financial  or otherwise) of the
Company and the  Subsidiaries,  taken as a whole,  or (z)  adversely  impair the
Company's  ability to perform fully on a timely basis its obligations  under any
of the  Transaction  Documents  (any of (x),  (y) or (z),  a  "Material  Adverse
Effect").

                  (b) Authorization;  Enforcement. 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  thereunder.  The execution and delivery of each of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the Company and no further  action is required by the  Company.  Each of
the  Transaction  Documents  has been duly  executed  by the Company  and,  when
delivered in accordance with the terms hereof,

                                       -2-

<PAGE>

will  constitute  the valid and binding  obligation  of the Company  enforceable
against the Company in accordance with its terms except as enforceability may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
similar laws affecting  creditors' and contracting  parties'  rights  generally.
Neither the Company nor any  Subsidiary is in violation of any of the provisions
of its  respective  certificate or articles of  incorporation,  by-laws or other
organizational or charter documents.

                  (c)  Capitalization.  The  number of  authorized,  issued  and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except
as disclosed in Schedule  2.1(c),  the Company owns all of the Capital  Stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights,  nor is any  holder  of  the  securities  of  the  Company  entitled  to
preemptive or similar rights arising out of any agreement or understanding  with
the Company by virtue of any of the Transaction Documents. Except as a result of
the purchase and sale of the Debentures and the Warrants and except as disclosed
in Schedule 2.1(c), 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  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 securities or rights convertible or exchangeable into shares of
Common Stock.  The issue and sale of the Shares,  Warrants or Underlying  Shares
(as hereinafter defined) will not obligate the Company to issue shares of Common
Stock or other  securities  to any Person other than the  Purchaser and will not
result in a right of any holder of Company  securities to adjust the exercise or
conversion or reset price under such securities.

                  (d) Issuance of the Debentures  and the Warrants.  The Company
will  have (and  will,  at all  times  while  Debentures  and the  Warrants  are
outstanding,  maintain) an adequate reserve of duly authorized  shares of Common
Stock,  reserved for issuance to the holders of such Debentures and Warrants, to
enable it to perform its conversion,  exercise and other  obligations under this
Agreement.  Such number of reserved and  available  shares of Common Stock shall
not be less than the sum of 175% of the number of shares of Common  Stock  which
would be issuable upon (I)  conversion in full of the  Debentures  assuming such
conversion   occurred  on  the  Original  Issue  Date,  the  Debentures   remain
outstanding  for four years and all  interest is paid in shares of Common  Stock
and (ii)  exercise  in full of the  Warrants  (such  number  of shares of Common
Stock, the "Initial Minimum").  All such authorized shares of Common Stock shall
be duly reserved for issuance to the holders of the Debentures and the Warrants.
The shares of Common Stock  issuable upon  conversion of the Debentures and upon
exercise of the Warrants are collectively  referred to herein as the "Underlying
Shares." The Debentures, the Warrants and the Underlying Shares are collectively
referred  to herein as, the  "Securities".  When issued in  accordance  with the
Debentures  and the Warrants,  the  Underlying  Shares will be duly  authorized,
validly  issued,  fully  paid and  nonassessable,  free and clear of all  liens,
encumbrances and rights of first refusal of any kind (collectively, "Liens").

                                       -3-

<PAGE>

                  (e) No Conflicts.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  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 charter  documents (each as amended
through the date hereof),  or (ii) subject to obtaining  the Required  Approvals
(as defined  below),  conflict  with, or constitute a default (or an event which
with notice or lapse of time or both would become a default)  under,  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) result in a violation of any law, rule,  regulation,  order,
judgment,  injunction, decree or other restriction of any court or govern-mental
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;  except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate,  have or
result in a Material  Adverse  Effect.  The business of the Company is not being
conducted in violation of any law,  ordinance or regulation of any  governmental
authority,  except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.

                  (f) Filings,  Consents and Approvals.  Neither the Company nor
any Subsidiary is 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 govern-mental authority or other Person in
connection  with the execution,  delivery and  performance by the Company of the
Transaction  Documents,  other than (I) the filings required pursuant to Section
3.10,  (ii)  the  filing  with  the  Securities  and  Exchange  Commission  (the
"Commission")of  a registration  statement meeting the requirements set forth in
the  Registration  Rights  Agreement  and covering the resale of the  Underlying
Shares by the Purchaser (the "Underlying Shares Registration Statement"),  (iii)
the  application(s) to the Nasdaq National Market (the "NASDAQ") for the listing
of the underlying  shares for trading on the NASDAQ (and with any other national
securities  exchange or market on which the Common  Stock is then listed) in the
time and manner required thereby,  (iv) applicable Blue Sky filings,  and (v) in
all other cases where the failure to obtain such consent, waiver,  authorization
or order, or to give such notice or make such filing or  registration  could not
have or result in,  individually or in the aggregate,  a Material Adverse Effect
(collectively, the "Required Approvals").

                  (g)  Litigation;   Proceedings.  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 or any of
its Subsidiaries 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 (I)
adversely affects or challenges the legality,  validity or enforceability of any
of the  Transaction  Documents or the Securities or (ii) could, if there were an
unfavorable  decision,  individually  or in the  aggregate,  have or result in a
Material  Adverse  Effect.  Neither  the  Company  nor any  Subsidiary,  nor any
director or officer thereof, is or

                                       -4-

<PAGE>

has been  the  subject  of any  Action  involving  a claim  of  violation  of or
liability  under  federal  or  state  securities  laws or a claim of  breach  of
fiduciary  duty.  The Company does not have pending  before the  Commission  any
request  for  confidential  treatment  of  information  and the  Company  has no
knowledge  of any  expected  such  request  that  would  be  made  prior  to the
Effectiveness Date (as defined in the Registration Rights Agreement).  There has
not been,  and to the best of the  Company's  knowledge  there is not pending or
contemplated,  any investigation by the Commission  involving the Company or any
current or former director or officer of the Company.

                  (h) No Default  or  Violation.  Neither  the  Company  nor any
Subsidiary (I) is in default under or in violation of (and no event has occurred
which has not been waived  which,  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, (ii) is in violation of any order of any court,  arbitrator
or  governmental  body,  or  (iii)  is in  violation  of any  statute,  rule  or
regulation of any governmental  authority,  in each case of clauses (i), (ii) or
(iii)  above,  except as could not  individually  or in the  aggregate,  have or
result in a Material Adverse Effect.

                  (i)   Private   Offering.   Assuming   the   accuracy  of  the
representations   and   warranties  of  the  Purchaser  set  forth  in  Sections
2.2(b)-(g),  the offer,  issuance and sale of the Securities to the Purchaser as
contemplated  hereby  are  exempt  from  the  registration  requirements  of the
Securities Act of 1933, as amended (the "Securities  Act").  Neither the Company
nor any Person  acting on its behalf  has taken or is, to the  knowledge  of the
Company,  contemplating  taking any action  which could  subject  the  offering,
issuance  or sale of the  Securities  to the  registration  requirements  of the
Securities  Act including  soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.

(j) SEC  Documents;  Financial  Statements.  The  Company  has filed all reports
required to be filed by it under the Securities Exchange Act of 1934, as amended
(the  "Exchange  Act"),  including,  without  limitation,  all filings  required
pursuant to Sections  13(a) and 15(d) thereof,  for the two years  preceding the
date hereof (or such  shorter  period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein as
the "SEC  Documents"  and,  together with the Schedules to this  Agreement,  the
"Disclosure  Materials") on a timely basis or has received a valid  extension of
such time of filing and has filed any such SEC Documents prior to the expiration
of any such extension.  As of their respective dates, the SEC Documents 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,  and none of the SEC  Documents,  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 light of
the  circumstances  under which they were made,  not  misleading.  All  material
agreements to which the Company is a party or to which the property or assets of
the  Company are subject  have been filed as  exhibits to the SEC  Documents  as
required  under the  Exchange  Act.  The  financial  statements  of the  Company
included in the SEC Documents comply in all material respects with

                                       -5-

<PAGE>

applicable  accounting  requirements  and  the  rules  and  regulations  of  the
Commission  with  respect  thereto  as in  effect  at the time of  filing.  Such
financial  statements have been prepared in accordance  with 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 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.  Since  June  30,  2000,  except  as  specifically
disclosed  in the SEC  Documents,  (a) there has been no  event,  occurrence  or
development that has or that could result in a Material Adverse Effect,  (b) the
Company has not incurred any  liabilities  (contingent or otherwise)  other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y)  liabilities  not  required to be  reflected  in the  Company's
financial  statements  pursuant to GAAP or required to be  disclosed  in filings
made  with the  Commission,  (c) the  Company  has not  altered  its  method  of
accounting  or the identity of its auditors and (d) the Company has not declared
or  made  any  payment  or  distribution  of  cash  or  other  property  to  its
stockholders  or officers or directors  (other than in compliance  with existing
Company  stock option  plans) with respect to its capital  stock,  or purchased,
redeemed  (or made any  agreements  to  purchase  or  redeem)  any shares of its
capital stock.

                  (k)  Investment  Company.  The  Company is not,  and is not an
Affiliate (as defined in Rule 405 under the  Securities  Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  (l)  Certain  Fees.  Except for  certain  fees  payable by the
Company to Value Investing  Partners,  no fees or commissions 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 this  Agreement.  The Purchaser  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 this Agreement.  The Company
shall  indemnify  and hold  harmless the  Purchaser,  its  employees,  officers,
trustees, agents, and partners, and its Affiliates, from and against all claims,
losses,  damages, costs (including the costs of preparation and attorney's fees)
and expenses  suffered in respect of any such claimed or existing  fees, as such
fees and expenses are incurred.

                  (m) Solicitation Materials. Neither the Company nor any Person
acting  on the  Company's  behalf  has  solicited  any  offer to buy or sell the
Securities by means of any form of general solicitation or advertising.

                  (n) Form S-3 Eligibility.  The Company is eligible to register
securities for resale under Form S-3 promulgated under the Securities Act.

                  (o)  Exclusivity.  The  Company  shall  not issue and sell the
Debentures  to any Person other than the  Purchaser  without the specific  prior
written consent of the Purchaser.

                                       -6-

<PAGE>

                  (p)  Seniority.  Except as set forth in  Schedule  2.1(p),  no
indebtedness  of the  Company is senior to the  Debentures  in right of payment,
whether  with  respect  to  interest  or upon  liquidation  or  dissolution,  or
otherwise.

                  (q) Listing and Maintenance Requirements Compliance. Except as
set forth in the SEC Documents,  the Company has not, in the two years preceding
the date hereof,  received notice (written or oral) from the NASDAQ or any stock
exchange,  market or trading  facility on which the Common  Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, market
or trading  facility.  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.

                  (r) Patents and Trademarks.  The Company and its  Subsidiaries
have,  or have rights to use,  all  patents,  patent  applications,  trademarks,
trademark  applications,  service marks, trade names,  copyrights,  licenses and
rights  which  are  necessary  or  material  for use in  connection  with  their
respective businesses as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect  (collectively,  the  "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice  that  the  Intellectual  Property  Rights  used  by the  Company  or its
Subsidiaries  violates or infringes  upon the rights of any Person.  To the best
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.

                  (s) Registration  Rights;  Rights of Participation.  Except as
set forth on Schedule 6(b) to the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other  governmental  authority  which has not been  satisfied.
Except as set forth on Schedule 6(b) to the Registration  Rights  Agreement,  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.

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

                  (u) Title.  The  Company  and the  Subsidiaries  have good and
marketable  title in fee  simple  to all real  property  owned by them  which is
material  to the  business  of the  Company  and its  Subsidiaries  and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its 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 interfere  with the use made and proposed to be made of such property
by the Company and its  Subsidiaries,  except for

                                       -7-

<PAGE>

such  defects  which  would not result in a Material  Adverse  Effect.  Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the Company
and its  Subsidiaries  are in material  compliance and do not interfere with the
use made and proposed to be made of such  property and  buildings by the Company
and its Subsidiaries.

                  (v) Labor  Relations.  No material labor problem exists or, to
the  knowledge of the Company,  is imminent with respect to any of the employees
of the Company.

                  (w) Disclosure.  The Company  confirms that neither it nor any
other Person  acting on its behalf has  provided the  Purchaser or its agents or
counsel with any  information  that  constitutes  or might  constitute  material
non-public information.  The Company understands and confirms that the Purchaser
shall be relying on the foregoing  representations in effecting  transactions in
securities of the Company.  All disclosure  provided to the Purchaser  regarding
the Company, its business and the transactions  contemplated  hereby,  including
the  Schedules to this  Agreement,  furnished by or on behalf of the Company are
true and correct 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.

         2.2  Representations  and  Warranties of the  Purchaser.  The Purchaser
hereby for itself represents and warrants to the Company as follows:

                  (a) Organization;  Authority. The Purchaser is a Massachusetts
business trust duly organized,  validly  existing and in good standing under the
laws the state of Massachusetts  with the requisite power and authority to enter
into  and  to  consummate  the  transactions  contemplated  by  the  Transaction
Documents and otherwise to carry out its obligations thereunder. The purchase by
the  Purchaser  of the  Securities  hereunder  has been duly  authorized  by all
necessary  action on the part of the  Purchaser.  Each of this Agreement and the
Registration Rights Agreement has been duly executed by the Purchaser,  and when
delivered by the Purchaser in accordance with the terms hereof,  will constitute
the valid and legally binding obligation of the Purchaser,  enforceable  against
it in accordance with its terms.

                  (b)  Investment   Intent.   The  Purchaser  is  acquiring  the
Securities as principal for its own account for investment purposes only and not
with a view to or for  distributing  or reselling  such  Securities  or any part
thereof,  without prejudice,  however, to the Purchaser's right,  subject to the
provisions of this Agreement,  the Registration Rights Agreement, the Debentures
and the Warrant, at all times to sell or otherwise dispose of all or any part of
such  Securities  pursuant  to an  effective  registration  statement  under the
Securities  Act or under an exemption from such  registration  and in compliance
with applicable  federal and state  securities  laws.  Nothing  contained herein
shall be  deemed a  representation  or  warranty  by the  Purchaser  to hold the
Securities  for any period of time.  The Purchaser is acquiring  the  Securities
hereunder in the ordinary course of its

                                       -8-

<PAGE>

business.  The Purchaser does not have any agreement or understanding,  directly
or indirectly, with any Person to distribute the Securities.

                  (c)  Purchaser  Status.  At the time the Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.

                  (d) Experience of the Purchaser.  The 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 Securities, and has so
evaluated the merits and risks of such investment.

                  (e) Ability of the Purchaser to Bear Risk of  Investment.  The
Purchaser is able to bear the economic risk of an  investment in the  Securities
and, at the pre-sent time, is able to afford a complete loss of such investment.

                  (f) Access to Information.  The Purchaser acknowledges that it
has reviewed the Disclosure  Materials and has been afforded (I) 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  Securities  and the  merits  and  risks  of  investing  in the
Securities;  (ii) access to  information  about the  Company  and the  Company's
financial condition, results of operations,  business,  proper-ties,  management
and prospects sufficient to enable it to evaluate its investment;  and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without  unreasonable effort or expense that is necessary to make an
informed  investment  decision with respect to the  investment and to verify the
accuracy  and  completeness  of the  information  contained  in  the  Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of the Purchaser or its representatives or counsel shall modify, amend or
affect the Purchaser's right to rely on the truth,  accuracy and completeness of
the  Disclosure  Materials  and the  Company's  representations  and  warranties
contained in the Transaction Documents.

                  (g) General Solicitation.  The Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other  communication  regarding  the  Securities  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.

                  (h) Reliance.  The Purchaser understands and acknowledges that
(I) the Securities are being offered and sold to it without  registration  under
the Securities Act in a private  placement that is exempt from the  registration
provisions of the Securities Act and (ii) the  availability  of such  exemption,
depends  in  part  on,  and  the  Company   will  rely  upon  the  accuracy  and
truth-fulness  of,  the  foregoing  representations  and  the  Purchaser  hereby
consents to such reliance.

                                       -9-

<PAGE>

                  The Company  acknowledges  and agrees that the Purchaser  does
not make and has not made any  representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 2.2.

                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

         3.1 Transfer  Restrictions.  (a) The Securities may only be disposed of
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 compliance  with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective  registration statement or to the
Company,  except as  otherwise  set forth  herein,  the  Company may require the
transferor  thereof to provide to the Company an opinion of counsel  selected by
the  transferor,  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. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of the Purchaser under this Agreement and the Registration
Rights Agreement.

                  (b) The  Purchaser  agrees  to the  imprinting,  so long as is
required by this Section 3.1(b), of the following legend on the Securities:

                  NEITHER THESE  SECURITIES NOR THE SECURITIES  INTO WHICH THESE
         SECURITIES ARE  [CONVERTIBLE]  [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.

                  The  Underlying  Shares shall not contain the legend set forth
above nor any other legend if the  conversion  of  Debentures or the exercise of
the Warrants,  as the case may be, occurs at any time while an Underlying Shares
Registration  Statement is effective  under the  Securities Act or the holder is
relying  on Rule 144  promulgated  under  the  Securities  Act  ("Rule  144") in
connection with the resale of such Underlying  Shares,  or in the event there is
not an effective Underlying Shares Registration  Statement,  and Rule 144 is not
then available for resale of the Underlying  Shares, at such time as such legend
is not required under  applicable  requirements of the Securities Act (including
judicial   interpretations  and  pronouncements  issued  by  the  staff  of  the
Commission). The

                                      -10-

<PAGE>

Company  shall  cause its  counsel to issue the legal  opinion  included  in the
Transfer Agent  Instructions to the Company's transfer agent on the date that an
Underlying Shares Registration Statement is declared effective by the Commission
(such date,  the  "Effective  Date").  The Company  agrees  that  following  the
Effective Date, it will, no later than three Trading Days following the delivery
by the Purchaser to the Company of a certificate  or  certificates  representing
Underlying  Shares  issued with a restrictive  legend,  deliver to the Purchaser
certificates  representing  such Underlying  Shares which shall be free from all
restrictive  and other  legends.  The Company  may not make any  notation on its
records or give  instructions to any transfer agent of the Company which enlarge
the restrictions of transfer set forth in this Section.

         3.2  Acknowledgment  of  Dilution.  The Company  acknowledges  that the
issuance of  Underlying  Shares upon the  conversion of the  Debentures  and the
exercise of the Warrants  will result in dilution of the  outstanding  shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further  acknowledges that its obligation to issue Underlying Shares
upon   conversion  of  the  Debenture  and  the  exercise  of  the  Warrants  is
unconditional  and  absolute,  subject  to  the  limitations  set  forth  in the
Debentures or the Warrants,  as the case may be, regardless of the effect of any
such dilution.

         3.3  Furnishing  of   Information.   As  long  as  the  Purchaser  owns
Securities,  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 Section
13(a) or 15(d) of the Exchange Act. As long as the Purchaser owns Securities, if
the Company is not required to file reports  pursuant to such sections,  it will
prepare and furnish to the Purchaser  and make publicly  available in accordance
with Rule 144(c)  promulgated  under the Securities  Act such  information as is
required for the  Purchaser to sell the  Securities  under Rule 144  promulgated
under the Securities Act. The Company  further  covenants that it will take such
further action as any holder of Securities may  reasonably  request,  all to the
extent  required  from time to time to  enable  such  Person to sell  Underlying
Shares  without  registration  under the Securities Act within the limitation of
the  exemptions  provided  by Rule 144  promulgated  under the  Securities  Act,
including causing its attorneys to render and deliver any legal opinion required
in  order  to  permit a  Purchaser  to  receive  Underlying  Shares  free of all
restrictive  legends and to subsequently  sell Underlying  Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice  having
a similar effect. Upon the request of any such Person, the Company shall deliver
to such  Person a  written  certification  of a duly  authorized  officer  as to
whether it has complied with such requirements.

            3.4  Integration.  The  Company  shall  not,  and shall use its best
efforts to ensure that, no Affiliate of the Company shall,  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 Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchaser.

         3.5 Increase in Authorized Shares. If on any date the Company would be,
if a notice of  conversion or exercise (as the case may be) were to be delivered
on such date, precluded from

                                      -11-

<PAGE>

issuing  (a) 175% of the number of  Underlying  Shares as would then be issuable
upon a conversion  in full of the  Debentures  and (b) the number of  Underlying
Shares  issuable upon  exercise in full of the Warrants  (the "Current  Required
Minimum"),  in either case, due to the  unavailability of a sufficient number of
authorized  but unissued or reserved  shares of Common Stock,  then the Board of
Directors of the Company shall promptly  prepare and mail to the stockholders of
the Company  proxy  materials  requesting  authorization  to amend the Company's
certificate  or articles of  incorporation  to increase  the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as  reasonably  requested  by the  Purchaser in order to provide for such
number of authorized  and unissued  shares of Common Stock to enable the Company
to comply with its  issuance,  conversion  exercise  and  reservation  of shares
obligations as set forth in this Agreement, the Debentures and the Warrants (the
sum of (x) the number of shares of Common Stock then outstanding plus all shares
of Common Stock issuable upon exercise of all outstanding options,  warrants and
convertible  instruments,  and (y) the  Current  Required  Minimum,  shall  be a
reasonable  number). In connection  therewith,  the Board of Directors shall (a)
adopt  proper  resolutions  authorizing  such  increase,  (b)  recommend  to and
otherwise use its best efforts to promptly and duly obtain stockholder  approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later than the earlier to occur of the sixtieth (60th) day after delivery of the
proxy  materials  relating to such  meeting and the  ninetieth  (90th) day after
request by a holder of Securities  to issue the number of  Underlying  Shares in
accordance  with the terms  hereof)  and (c) within  five (5)  Business  Days of
obtaining such stockholder  authorization,  file an appropriate amendment to the
Company's certificate or articles of incorporation to evidence such increase.

         3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
(I) in the time and manner required by any national securities exchange, market,
trading or quotation facility on which the Common Stock is then traded,  prepare
and file with such national securities  exchange,  market,  trading or quotation
facility on which the Common Stock is then traded an additional  shares  listing
application  covering a number of shares of Common  Stock which is not less than
the  Initial  Minimum,  (ii) take all steps  necessary  to cause such  shares of
Common  Stock  to be  approved  for  listing  on any  such  national  securities
exchange,  market or trading or quotation  facility on which the Common Stock is
then listed as soon as possible  thereafter,  and (iii) provide to the Purchaser
evidence of such  listing,  and the Company  shall  maintain  the listing of its
Common Stock  thereon.  If the number of  Underlying  Shares  issuable  upon (x)
conversion in full of the then  outstanding  Debentures and (y) exercise in full
of the then unexercised  portion of the Warrants,  exceeds  eighty-five  percent
(85%) of the number of Underlying  Shares  previously  listed on account thereof
with any such  required  exchanges,  then the Company  shall take the  necessary
actions to immediately list a number of Underlying Shares as equals no less than
the then Current Required Minimum.

                  (b) The Company  shall  maintain a reserve of shares of Common
Stock for issuance upon  conversion of the  Debentures in full and upon exercise
in full of the Warrants in accordance with this Agreement, in such amount as may
be required to fulfill its obligations in full under the Transaction  Documents,
which reserve shall equal no less than the then Current Required Minimum.

                                      -12-

<PAGE>

         3.7   Conversion   and  Exercise   Procedures.   The   Transfer   Agent
Instructions,  the Conversion Notice (as defined in the Debentures) and the Form
of Election to Purchase (as defined in the Warrants)  sets forth the totality of
the procedures with respect to the conversion of the Debentures and the exercise
of the Warrants,  including the form of legal opinion, if necessary,  that shall
be rendered  to the  Company's  transfer  agent and such other  information  and
instructions  as may be reasonably  necessary to enable the Purchaser to convert
their Debentures and their Warrants, as the case may be.

         3.8  Conversion and Exercise  Obligations  of the Company.  The Company
shall honor  conversions  of the  Debentures  and  exercises of the Warrants and
shall  deliver  Underlying  Shares  in  accordance  with the  respective  terms,
conditions and time periods set forth in the Debentures.

         3.9 Certain Securities Laws Disclosures;  Publicity. The Company shall:
(I) on the Closing  Date,  issue a press  release  reasonably  acceptable to the
Purchaser  disclosing the transactions  contemplated  hereby, (ii) file with the
Commission a Report on Form 8-K disclosing the transactions  contemplated hereby
within ten Business Days after the Closing Date,  and (iii) timely file with the
Commission a Form D promulgated  under the Securities Act. The Company shall, no
less than two Business  Days prior to the filing of any  disclosure  required by
clauses (ii) and (iii) above,  provide a copy thereof to the  Purchaser  for its
review.  The Company and the Purchaser  shall consult with each other in issuing
any other press  releases or otherwise  making public  statements or filings and
other  communications  with the  Commission  or any  regulatory  agency or stock
market or trading facility with respect to the transactions  contemplated hereby
and neither party shall issue any such press release or otherwise  make any such
public  statement,  filings or other  communications  without the prior  written
consent of the other, except that if such disclosure is required by law or stock
market  regulation,  in which  such case the  disclosing  party  shall  promptly
provide the other party with prior  notice of such public  statement,  filing or
other  communication.  Notwithstanding  the  foregoing,  the  Company  shall not
publicly  disclose  the  name  of the  Purchaser,  or  include  the  name of the
Purchaser in any filing with the Commission,  or any regulatory agency,  trading
facility or stock market  without the prior  written  consent of the  Purchaser,
except  to  the  extent  such  disclosure  (but  not  any  disclosure  as to the
controlling Persons thereof) is required by law or stock market regulations,  in
which case the Company  shall  provide the  Purchaser  with prior notice of such
disclosure.

         3.10 Transfer of  Intellectual  Property  Rights.  Except in connection
with  the sale of all or  substantially  all of the  assets  of the  Company  or
licensing  arrangements  in the ordinary course of the Company's  business,  the
Company  shall not  transfer,  sell or  otherwise  dispose  of any  Intellectual
Property  Rights,  or allow any of the  Intellectual  Property  Rights to become
subject to any Liens,  or fail to renew such  Intellectual  Property  Rights (if
renewable  and it would  otherwise  lapse if not  renewed),  without  the  prior
written consent of the Purchaser.

         3.11 Use of Proceeds.  Except as set forth in Schedule 3.11 hereto, the
Company shall use the net proceeds from the sale of the Securities hereunder for
working  capital  purposes  and not for the  satisfaction  of any portion of the
Company's debt (other than payment of trade  payables in the

                                      -13-

<PAGE>

ordinary course of the Company's  business and prior  practices),  to redeem any
Company  equity or  equity-equivalent  securities  or to settle any  outstanding
litigation.

         3.12  Reimbursement.  If the Purchaser becomes involved in any capacity
in any action,  proceeding  or  investigation  brought by or against any Person,
including  stockholders  of the  Company,  solely as a result of  acquiring  the
Securities  under this  Agreement,  the Company will reimburse the Purchaser for
its reasonable legal and other expenses (including, but not limited to, the cost
of any investigation,  preparation or travel) incurred in connection  therewith,
as such  expenses are incurred.  The  reimbursement  obligations  of the Company
under this paragraph shall be in addition to any liability which the Company may
otherwise  have,  shall  extend  upon  the  same  terms  and  conditions  to any
Affiliates of the Purchaser who are actually named in such action, proceeding or
investigation,  and  partners,  directors,  agents,  employees  and  controlling
persons (if any), as the case may be, of the  Purchaser and any such  Affiliate,
and shall be binding upon and inure to the benefit of any  successors,  assigns,
heirs and personal  representatives  of the Company,  the Purchaser and any such
Affiliate  and any such  Person.  The  Company  also  agrees  that  neither  the
Purchaser nor any such Affiliates,  partners,  directors,  agents,  employees or
controlling  persons  shall  have any  liability  to the  Company  or any Person
asserting  claims on behalf of or in right of the Company  solely as a result of
acquiring the Securities under this Agreement.

         3.13 Certain Trading Restrictions. The Purchaser agrees that during the
five  Trading Days  preceding  each Put Date (as defined in the  Debentures)  it
shall not enter into any Short Sales (as defined  herein).  For purposes of this
Section 3.13, a "Short Sale" by the Purchaser  shall mean a sale of Common Stock
by the Purchaser  that is marked as a short sale and that is made at a time when
there is no  equivalent  offsetting  long  position in Common  Stock held by the
Purchaser. For purposes of determining whether there is an equivalent offsetting
long position in Common Stock held by the Purchaser,  Underlying Shares that are
issuable on  exercise  of the  Warrants or  conversion  of the  Debentures  on a
Trading  Day shall be deemed to be held long by the  Purchaser  on such  Trading
Day.

                                   ARTICLE IV
                                  MISCELLANEOUS

         4.1 Fees and Expenses.  At the Closing, the Company shall reimburse the
Purchaser  for its legal  fees and  expenses  incurred  in  connection  with the
preparation and negotiation of the Transaction Documents by paying to Bell, Boyd
& Lloyd LLC $3,000.00 for the  negotiation  of the  Transaction  Documents.  The
amount  contemplated by the immediately  preceding sentence shall be retained by
the  Purchaser  and shall not be delivered to the Company at the Closing.  Other
than the amount  contemplated  herein,  and except as otherwise set forth in the
Registration Rights Agreement, 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.  The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Securities.

                                      -14-

<PAGE>

         4.2 Entire Agreement;  Amendments. The Transaction Documents,  together
with the Exhibits and Schedules thereto and Transfer Agent Instructions, 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.

         4.3 Notices.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (I) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section  prior to 6:00 p.m.  (New York City
time) on a Business Day,  (ii) the Business Day after the date of  transmission,
if such notice or  communication  is delivered  via  facsimile at the  facsimile
telephone number specified in this Agreement later than 6:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by U.S. nationally
recognized  overnight courier service,  or (iv) 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:      Tidel Technologies, Inc.
                                 5847 San Felipe, Suite 900
                                 Houston, Texas 77057
                                 Facsimile No.:  (713) 783-6003
                                 Attn: Chief Financial Officer

         With copies to:         Olshan Grundman Frome Rosenzweig & Wolosky LLP
                                 505 Park Avenue
                                 New York, New York 10022
                                 Facsimile No.: (212) 755-1467
                                 Attn: David J. Adler

         If to the Purchaser:    To the address set forth under the  Purchaser's
                                 name on the signature page hereto.

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.

         4.4 Amendments;  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  Purchaser  or, in the case of a  waiver,  by the party
against whom enforcement of any such waiver 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 other
provision,  condition or requirement  hereof, nor shall any delay or omission of
either party to exercise any right  hereunder in any manner  impair the exercise
of any such right accruing to it thereafter.

                                      -15-

<PAGE>

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

         4.6  Successors and Assigns.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without  the prior  written  consent  of the  Purchaser.  Except as set forth in
Section 3.1(a), the Purchaser may not assign this Agreement or any of the rights
or  obligations  hereunder  without the consent of the Company.  This  provision
shall not limit the  Purchaser's  right to  transfer  securities  or transfer or
assign rights under the Registration Rights Agreement.

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

         4.8 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 New
York,  without regard to the principles of conflicts of law thereof.  Each party
hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the  state and
federal  courts sitting in the City of New York,  borough of Manhattan,  for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit,  action or  proceeding  is improper.  Each party  hereby  irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding  by mailing a copy thereof via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this  Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

         4.9 Survival. The representations, warranties, agreements and covenants
contained  herein  shall  survive  the Closing and the  delivery,  exercise  and
conversion of the Warrants or the Debentures, as the case may be.

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

                                      -16-

<PAGE>

         4.11  Severability.  In case any one or more of the  provisions of this
Agreement  shall be invalid or  unenforceable  in any respect,  the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be  affecting  or impaired  thereby and the parties  will  attempt to
agree  upon a valid  and  enforceable  provision  which  shall  be a  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Agreement.

         4.12  Remedies.  In addition to being  entitled to exercise  all rights
provided herein or granted by law, including recovery of damages,  the Purchaser
will be entitled to specific performance of the obligations of the Company under
the Transaction  Documents.  The parties hereto agree that monetary  damages may
not be adequate  compensation  for any loss  incurred by reason of any breach of
its obligations  described in the foregoing  sentence and hereby agrees to waive
in any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

         4.13 Independent Nature of Purchaser's  Obligations and Rights. Nothing
contained  herein or in any  Transaction  Document,  and no action  taken by the
Purchaser  pursuant  thereto,  shall be deemed to constitute  the Purchaser as a
partnership,  an  association,  a joint venture or any other kind of entity,  or
create a  presumption  that the  Purchaser  is in any way acting in concert with
respect to such obligations or the transactions  contemplated by the Transaction
Document.  The 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  the  Purchaser  to be  joined  as an  additional  party  in  any
proceeding for such purpose.

         4.14  Non-Liability  of  Trustees  and  Shareholders.  A  copy  of  the
Declaration  of Trust of the  Purchaser  is on file  with the  Secretary  of The
Commonwealth of Massachusetts, and notice is hereby given that this agreement is
executed on behalf of the Purchaser by officers of the Purchaser as officers and
not  individually.  All obligations of the Purchaser  hereunder shall be binding
only upon the assets of the Purchaser (or the  appropriate  series  thereof) and
shall not be binding upon any trustee,  officer,  employee, agent or shareholder
of the Purchaser. Neither the authorization of any action by the Trustees of the
Purchaser nor the execution of this  agreement on behalf of the Purchaser  shall
impose any liability upon any trustee, officer or shareholder of the Purchaser.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES FOLLOWS]

                                      -17-

<PAGE>

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

                                   TIDEL TECHNOLOGIES, INC.

                                   By:   /s/ James T. Rash
                                         --------------------------------------
                                   Name:  James T. Rash
                                   Title: President and Chief Executive Officer

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

<PAGE>

                                   ACORN INVESTMENT TRUST
                                   on behalf of its series Acorn Fund

                                   By:   /s/ Kenneth A. Kalina
                                         --------------------------------------
                                         Name: Kenneth A. Kalina
                                         Title: Assistant Treasurer

                                   Purchase Price:            $3,000,000

                                   Address for Notice:

                                   Acorn Investment Trust
                                   on behalf of its series Acorn Fund
                                   227 W. Monroe St., #3000
                                   Chicago, IL 60606
                                   Facsimile: 312-634-1919
                                   Attn: Treasurer

         With copies to:           Bell, Boyd & Lloyd LLC
                                   Three First National Plaza, #3300
                                   Chicago, IL 60602
                                   Facsimile: 312-372-2098
                                   Attn: Janet D. Olsen

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