Document:

NEITHER  THIS  DEBENTURE  NOR  THE  SECURITIES  INTO  WHICH  THIS  DEBENTURE  IS
CONVERTIBLE 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  INDEBTEDNESS  EVIDENCED BY THIS  INSTRUMENT  IS  SUBORDINATED  TO THE PRIOR
PAYMENT  IN FULL OF THE SENIOR  INDEBTEDNESS  (AS  DEFINED IN THE  SUBORDINATION
AGREEMENT  HEREINAFTER  REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN,
THE  SUBORDINATION  AGREEMENT  EFFECTIVE AS OF SEPTEMBER  29, 2000, BY THE MAKER
HEREOF  AND  PAYEE  NAMED  HEREIN  IN FAVOR OF  LENDER  OR THE  HOLDER OF SENIOR
INDEBTEDNESS REFERRED TO IN SUCH SUBORDINATION AGREEMENT.

                                                                      $3,000,000

                            TIDEL TECHNOLOGIES, INC.
                            6% CONVERTIBLE DEBENTURE
                              DUE SEPTEMBER 8, 2004

         THIS  DEBENTURE is the duly  authorized  and issued  debenture of Tidel
Technologies, Inc., a Delaware corporation, having a principal place of business
at 5847 San Felipe, Suite 900, Houston, Texas 77057 (the "Company"),  designated
as its 6%  Convertible  Debenture,  due  September  8,  2004,  in the  aggregate
principal amount of Three Million Dollars ($3,000,000) (the "Debenture").

         FOR VALUE  RECEIVED,  the Company  promises to pay to Acorn  Investment
Trust  on  behalf  of its  series  Acorn  Fund or its  registered  assigns  (the
"Holder"), the principal sum of Three Million Dollars ($3,000,000), on September
8, 2004 or such  earlier  date as the  Debenture  is required or permitted to be
repaid as provided  hereunder (the  "Maturity  Date") and to pay interest to the
Holder on the aggregate  unconverted and then  outstanding  principal  amount of
this  Debenture  at the rate of 6% per annum,  payable on a  quarterly  basis on
March  31,  June 30,  September  30 and  December  31 of each  year  while  such
Debenture  is  outstanding,  commencing  on the earlier to occur of a Conversion
Date (as defined  herein) for such principal  amount and December 31, 2000 (each
an "Interest  Payment  Date"),  in cash or shares of Common Stock (as defined in
Section 6). Subject to the terms and conditions  herein, the decision whether to
pay  interest  hereunder  in  shares  of  Common  Stock or cash  shall be at the
discretion of the Company. Not less than five Trading Days

<PAGE>

(as defined in Section 6) prior to each Interest Payment Date, the Company shall
provide the Holder with written notice of its election to pay interest hereunder
in cash or in shares of Common  Stock  pursuant to the terms of Section  4(a)(i)
(the  Company may  indicate in such notice that the  election  contained in such
notice  shall  continue  for later  periods  until  revised).  Failure to timely
provide  such  written  notice shall be deemed an election by the Company to pay
the interest on such Interest Payment Date in shares of Common Stock pursuant to
the terms of Section  4(a)(i).  If  interest is paid by the Company in shares of
its Common Stock,  then the number of shares of Common Stock issuable on account
of such  interest  shall equal the cash amount of such interest on such Interest
Payment Date divided by the  Conversion  Price (as defined  below) on such date.
Interest  shall be  calculated  on the basis on a 360-day  year and shall accrue
daily  commencing  on the  Original  Issue Date (as  defined in Section 6) until
payment in full of the  principal  sum,  together  with all  accrued  and unpaid
interest  and other  amounts  which may  become  due  hereunder,  has been made.
Interest hereunder will be paid to the Person (as defined in Section 6) in whose
name this  Debenture  is  registered  on the  records of the  Company  regarding
registration  and transfers of the Debenture  (the  "Debenture  Register").  All
overdue  accrued and unpaid interest to be paid in cash hereunder shall entail a
late fee at the rate of 15% per annum (or such lower maximum  amount of interest
permitted to be charged  under  applicable  law) ("Late Fee") (to accrue  daily,
from the date such interest is due  hereunder  through and including the date of
payment),  payable in cash. If such Late Fee is paid by the Company in shares of
its Common Stock,  then the number of shares of Common Stock issuable on account
of such Late Fee shall  equal the cash  amount of such Late Fee on such Late Fee
payment date divided by the Conversion Price on such date.

         This Debenture is subject to the following additional provisions:

         Section  1.  This  Debenture  is  exchangeable  for an equal  aggregate
principal  amount of a  Debenture  of  different  authorized  denominations,  as
requested by the Holder  surrendering  the same. No service  charge will be made
for such registration of transfer or exchange.

         Section 2. This Debenture has been issued subject to certain investment
representations  of the original Holder set forth in the Purchase  Agreement (as
defined in Section 6) and may be  transferred  or exchanged  only in  compliance
with  the  Purchase  Agreement.  Prior to due  presentment  to the  Company  for
transfer of this  Debenture,  the Company and any agent of the Company may treat
the Person (as  defined  in  Section  6) in whose  name this  Debenture  is duly
registered  on the  Debenture  Register  as the owner  hereof for the purpose of
receiving payment as herein provided and for all other purposes,  whether or not
this  Debenture is overdue,  and neither the Company nor any such agent shall be
affected by notice to the contrary.

         Section 3.        Events of Default.

                  (a)  "Event of  Default",  wherever  used in  Sections 3 or 4,
means any one of the following  events (whatever the reason and whether it shall
be voluntary or  involuntary  or effected by operation of law or pursuant to any
judgment,  decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):

                                       -2-

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                           (i) any default in the payment of the  principal  of,
         interest on or liquidated damages in respect of, the Debenture, free of
         any claim of  subordination,  as and when the same shall become due and
         payable  (whether  on a  Conversion  Date  or the  Maturity  Date or by
         acceleration  or  otherwise)  or,  in  the  case  of  interest  on  the
         Debenture, within 3 days of the applicable Interest Payment Date;

                           (ii) the Company shall fail to observe or perform any
         other covenant, agreement or warranty contained in, or otherwise commit
         any breach of any of the  Transaction  Documents (as defined in Section
         6), and such failure or breach shall not have been remedied within five
         days after the date on which  notice of such  failure  or breach  shall
         have been given;

                           (iii) the  Company or any of its  subsidiaries  shall
         commence,  or there shall be commenced  against the Company or any such
         subsidiary a case under any applicable bankruptcy or insolvency laws as
         now or hereafter  in effect or any  successor  thereto,  or the Company
         commences any other proceeding under any  reorganization,  arrangement,
         adjustment  of debt,  relief of  debtors,  dissolution,  insolvency  or
         liquidation or similar law of any jurisdiction whether now or hereafter
         in effect relating to the Company or any subsidiary thereof or there is
         commenced  against  the  Company  or any  subsidiary  thereof  any such
         bankruptcy,  insolvency or other proceeding  which remains  undismissed
         for a period of 60 days;  or the Company or any  subsidiary  thereof is
         adjudicated  insolvent  or  bankrupt;  or any  order of relief or other
         order approving any such case or proceeding is entered;  or the Company
         or any subsidiary  thereof  suffers any appointment of any custodian or
         the like for it or any substantial part of its property which continues
         undischarged or unstayed for a period of 60 days; or the Company or any
         subsidiary  thereof  makes a  general  assignment  for the  benefit  of
         creditors;  or the Company shall fail to pay, or shall state that it is
         unable to pay, or shall be unable to pay,  its debts  generally as they
         become  due;  or the  Company or any  subsidiary  thereof  shall call a
         meeting  of its  creditors  with a view  to  arranging  a  composition,
         adjustment  or  restructuring  of  its  debts;  or the  Company  or any
         subsidiary  thereof  shall  by any  act  or  failure  to act  expressly
         indicate  its consent to,  approval  of or  acquiescence  in any of the
         foregoing;  or any corporate or other action is taken by the Company or
         any  subsidiary  thereof  for  the  purpose  of  effecting  any  of the
         foregoing;

                           (iv)  the  Company   shall  default  in  any  of  its
         obligations under any other Debenture or any mortgage, credit agreement
         or other facility,  indenture  agreement,  factoring agreement or other
         instrument  under which  there may be issued,  or by which there may be
         secured or evidenced any  indebtedness  for borrowed money or money due
         under any long term leasing or factoring  arrangement of the Company in
         an amount exceeding  $750,000,  whether such indebtedness now exists or
         shall  hereafter  be  created  and such  default  shall  result in such
         indebtedness  becoming or being  declared due and payable  prior to the
         date on which it would otherwise become due and payable;

                                       -3-

<PAGE>

                           (v) the  Common  Stock  shall  fail to be quoted  for
         trading on the Nasdaq National Market  ("NASDAQ") or listed for trading
         on the New York Stock  Exchange,  American Stock Exchange or the Nasdaq
         SmallCap Market (each, a "Subsequent Market") for three (3) consecutive
         Trading  Days or an  aggregate of ten (10) Trading Days (which need not
         be consecutive Trading Days);

                           (vi) the  Company  shall be a party to any  Change of
         Control  Transaction  (as defined in Section 6), shall agree to sell or
         dispose  all  or in  excess  of  50% of  its  assets  in  one  or  more
         transactions  (whether  or not such sale would  constitute  a Change of
         Control  Transaction),  or shall  redeem or  repurchase  more than a de
         minimis number of shares of Common Stock or other equity  securities of
         the Company (other than redemptions of Underlying Shares (as defined in
         Section 6));

                           (vii) an Underlying Shares Registration Statement (as
         defined  in Section 6) shall not have been  declared  effective  by the
         Commission (as defined in Section 6) on or prior to the 150th day after
         the Original Issue Date;

                           (viii)  if,  during  the  Effectiveness   Period  (as
         defined in the  Registration  Rights  Agreement  (as defined in Section
         6)), the effectiveness of the Underlying Shares Registration  Statement
         lapses for any reason or the Holder  shall not be  permitted  to resell
         Registrable   Securities  (as  defined  in  the   Registration   Rights
         Agreement)  under the  Underlying  Shares  Registration  Statement,  in
         either  case,  for  more  than  five  consecutive  Trading  Days  or an
         aggregate  of  fifteen  Trading  Days  (which  need not be  consecutive
         Trading Days);

                           (ix) an Event (as defined in the Registration  Rights
         Agreement)  shall not have been cured to the satisfaction of the Holder
         prior to the  expiration of thirty days from the Event Date (as defined
         in the Registration  Rights Agreement)  relating thereto (other than an
         Event  resulting  from a failure of an Underlying  Shares  Registration
         Statement to be declared effective by the Commission on or prior to the
         180th day after the  Original  Issue  Date,  which  shall be covered by
         Section 3(a)(vii));

                           (x) the Company  shall fail for any reason to deliver
         certificates  to the  Holder  prior to the  fifth  Trading  Day after a
         Conversion  Date pursuant to and in accordance with Section 4(b) or the
         Company shall provide notice to the Holder,  including by way of public
         announcement, at any time, of its intention not to comply with requests
         for conversions of the Debenture in accordance with the terms hereof;

                           (xi) the Company shall fail for any reason to deliver
         the payment in cash  pursuant to a Buy-In (as  defined  herein)  within
         five days after notice is deemed delivered hereunder.

                                       -4-

<PAGE>

                  (b) If any Event of Default occurs and is continuing, the full
principal  amount of this  Debenture  (and,  at the Holder's  option,  all other
Debentures  then held by the Holder),  together  with interest and other amounts
owing in  respect  thereof,  to the date of  acceleration  shall  become  at the
Holder's election,  immediately due and payable in cash,  provided,  that if the
Company  fails to pay the  amounts due as a result of an Event of Default by the
seventh  Trading Day following the  declaration  of an Event of Default in cash,
the Holder may request payment of such amounts in stock, determined by reference
to the  Conversion  Price then in effect.  The number of shares of Common  Stock
issuable in payment thereof shall be determined by dividing the aggregate amount
due to the Holder by the Conversion  Price. The aggregate amount payable upon an
Event of  Default  shall be  equal  to the sum of (i) the  Mandatory  Prepayment
Amount (as  defined  in  Section  6) plus (ii) the  product of (A) the number of
Underlying Shares issued in respect of conversions  hereunder within thirty days
of the date of a declaration  of an Event of Default and then held by the Holder
and (B) the Closing  Price (as defined in Section 6) on the date  prepayment  is
due or the date the  full  prepayment  price  is  paid,  whichever  is  greater.
Interest  shall accrue on the prepayment  amount  hereunder from the seventh day
after such  amount is due (being the date of an Event of  Default)  through  the
date of  prepayment in full thereof at the rate of 15% per annum (or such lesser
maximum amount that is permitted to be paid by applicable  law), to accrue daily
from the date such payment is due  hereunder  through and  including the date of
payment. The Debenture and Underlying Shares for which the full prepayment price
hereunder  shall  have  been  paid in  accordance  herewith  shall  promptly  be
surrendered  to or as directed by the  Company.  The Holder need not provide and
the Company hereby waives any  presentment,  demand,  protest or other notice of
any kind,  and the Holder may  immediately  and without  expiration of any grace
period  enforce any and all of its rights and remedies  hereunder  and all other
remedies available to it under applicable law. Such declaration may be rescinded
and  annulled  by  Holder  at any  time  prior  to  payment  hereunder.  No such
rescission or annulment  shall affect any subsequent  Event of Default or impair
any right consequent thereon.

         Section 4.        Conversion.

                  (a) (i) Conversion at Option of Holder.  This Debenture  shall
be convertible into shares of Common Stock at the option of the Holder, in whole
or in part at any time and from time to time,  after  the  Original  Issue  Date
(subject to the limitations on conversion set forth in Section 4(a)(iv) hereof).
The Holder shall effect  conversions  at its option by delivering to the Company
of the form of  conversion  notice  attached  hereto  as  Exhibit  A (a  "Holder
Conversion Notice"), specifying therein the principal amount of the Debenture to
be converted and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder Conversion Notice is deemed to have been
delivered hereunder (a "Holder Conversion Date") and shall contain a schedule in
the form of Schedule 1 to the Holder Conversion Notice (as amended on the Holder
Conversion Date, the "Conversion  Schedule")  reflecting the remaining principal
amount of this Debenture and all accrued and unpaid interest thereon  subsequent
to the  conversion  at issue.  If no Holder  Conversion  Date is  specified in a
Holder Conversion  Notice, the Holder Conversion Date shall be the date that the
Holder Conversion Notice is deemed delivered hereunder. Notwithstanding anything
herein to the contrary, a Holder Conversion Notice shall be revocable by

                                       -5-

<PAGE>

the  Holder at any time  prior to the  receipt  by the  Holder of a  certificate
representing  the  Underlying  Shares  issuable  in  connection  with the Holder
Conversion  Notice.  To  effect  conversions   hereunder  (including  conversion
pursuant to a Company  Conversion  Notice),  the Holder shall not be required to
physically  surrender  this  Debenture  to  the  Company  unless  the  aggregate
principal amount of this Debenture is so converted.  Conversions hereunder shall
have the effect of lowering the outstanding  principal  amount of this Debenture
plus  all  accrued  and  unpaid  interest  thereon  in an  amount  equal  to the
applicable  conversion,  which  shall be  evidenced  by entries set forth in the
Conversion  Schedule.  The Holder and the Company shall maintain records showing
the principal amount converted and the date of such conversions. In the event of
any dispute or  discrepancy,  the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee,  by
acceptance  of this  Debenture,  acknowledge  and agree  that,  by reason of the
provisions  of  this  paragraph,  following  conversion  of a  portion  of  this
Debenture,  the unpaid and unconverted principal amount of this Debenture may be
less than the amount stated on the face hereof.

                           (ii) Conversion At Option of the Company.  Subject to
the conditions of this section,  the Company may require conversions of all or a
portion of the then outstanding principal amount of the Debenture if (i) the Per
Share Market Value exceeds 150% of the then applicable  Conversion  Price for 20
Trading  Days (which  need not be  consecutive  Trading  Days) in a period of 30
consecutive  Trading  Days at any time  after  the  date on which an  Underlying
Shares  Registration  Statement shall have first been declared  effective by the
Securities and Exchange  Commission (the "Effective Date"),  (ii) the Underlying
Shares  Registration  Statement  shall have been  effective  and the  prospectus
thereunder  available  to the  Holder for the  resale of all  Underlying  Shares
issuable upon such conversion during the entire 30 Trading Day period and on the
Company  Conversion Date (as defined below) or the Underlying Shares may be sold
by the Holder subject to such conversion  without volume  limitation  under Rule
144(k)  promulgated  under the  Securities  Act, (iii) the Company has available
sufficient  unreserved and available shares of Common Stock to fulfill its share
delivery  requirements upon such conversion,  (iv) the Common Stock is listed or
quoted for trading on the NASDAQ or a Subsequent Market during the entire thirty
Trading Day calculation period described above in this subsection,  and (v) such
conversion  would not result in a  violation  of Section  4(a)(iv).  The Company
shall  exercise  its right to require  conversions  under  Section  4(a)(ii)  by
delivering to the Holder a completed  conversion  notice in the form attached as
Exhibit B (a "Company Conversion  Notice").  Each of a Company Conversion Notice
and  the  Holder  Conversion  Notice  are  sometimes  referred  to  herein  as a
Conversion  Notice.  Each Company  Conversion Notice shall specify the principal
amount of the Debenture to be converted. The date such Company Conversion Notice
is deemed to have been delivered  hereunder (a "Company  Conversion Date"). Each
of a Company Conversion Date and a Holder Conversion Date are referred to herein
as a "Conversion  Date." Subject to the Holder's  rights under Section 4(b), the
conversion  subject to each  Company  Conversion  Notice,  once given,  shall be
irrevocable. Conversions at the request of the Company shall be reflected in the
Conversion Schedule.

                           (iii)  Number  of  Underlying  Shares  Issuable  Upon
Conversion.  The number of shares of Common  Stock  issuable  upon a  conversion
hereunder shall be determined by adding

                                       -6-

<PAGE>

the sum of (i) the quotient  obtained by dividing (x) the outstanding  principal
amount of this Debenture to be converted by (y) the Conversion Price (as defined
herein),  and (ii) the amount  equal to (I) the  product of (x) the  outstanding
principal  amount of this  Debenture to be converted  and (y) the product of (1)
the  quotient  obtained  by  dividing  .06 by 360 and (2) the number of days for
which such  principal  amount was  outstanding,  divided by (II) the  Conversion
Price on the Conversion Date,  provided,  that if the Company shall have elected
to deliver the interest due on an Interest  Payment Date in cash pursuant to the
terms hereof, subsection (ii) shall not be used in the calculation of the number
of shares of Common Stock issuable upon a conversion hereunder.

                           (iv) Certain Conversion Restrictions.

                                (A) The Holder may not convert this Debenture or
receive  shares of Common  Stock as payment of interest  hereunder to the extent
such conversion or receipt of such interest  payment would result in the Holder,
together  with any  affiliate  thereof,  beneficially  owning (as  determined in
accordance  with Section  13(d) of the  Exchange  Act and the rules  promulgated
thereunder)  in excess of 4.999% of the then  issued and  outstanding  shares of
Common  Stock,  including  shares  issuable upon  conversion  of, and payment of
interest on, the Debenture held by the Holder after application of this Section.
Since the Holder  will not be  obligated  to report to the Company the number of
shares of Common Stock it may hold at the time of a conversion hereunder, unless
the  conversion  at issue would result in the issuance of shares of Common Stock
in  excess  of 4.999% of the then  outstanding  shares of Common  Stock  without
regard to any other shares which may be  beneficially  owned by the Holder or an
affiliate  thereof,  the  Holder  shall have the  authority  and  obligation  to
determine  whether the  restriction  contained  in this  Section  will limit any
particular  conversion  hereunder  and to the extent that the Holder  determines
that the limitation  contained in this Section  applies,  the  determination  of
which portion of the principal  amount of the Debenture is convertible  shall be
the  responsibility  and obligation of the Holder. If the Holder has delivered a
Conversion  Notice for a principal amount of the Debenture that,  without regard
to any other  shares that the Holder or its  affiliates  may  beneficially  own,
would result in the issuance in excess of the permitted  amount  hereunder,  the
Company shall notify the Holder of this fact and shall honor the  conversion for
the maximum  principal  amount permitted to be converted on such Conversion Date
in accordance  with the periods  described in Section 4(b) and, at the option of
the Holder, either retain any principal amount tendered for conversion in excess
of the permitted amount  hereunder for future  conversions or return such excess
principal amount to the Holder.  The provisions of this Section may be waived by
the  Holder  (but only as to itself and not to any other  Holder)  upon not less
than 61 days prior notice to the Company.  Other  Holders shall be unaffected by
any such waiver.

                                (B) The Holder may not convert the  Debenture or
receive  shares of Common  Stock as payment of interest  hereunder to the extent
such conversion or receipt of such interest  payment would result in the Holder,
together  with any  affiliate  thereof,  beneficially  owning (as  determined in
accordance  with Section  13(d) of the  Exchange  Act and the rules  promulgated
thereunder)  in excess of 9.999% of the then  issued and  outstanding  shares of
Common  Stock,  including  shares  issuable upon  conversion  of, and payment of
interest on, the Debenture held by the Holder after application of this Section.
Since the Holder will not be obligated to report to the

                                       -7-

<PAGE>

Company  the  number  of  shares  of  Common  Stock it may hold at the time of a
conversion  hereunder,  unless  the  conversion  at issue  would  result  in the
issuance of shares of Common  Stock in excess of 9.999% of the then  outstanding
shares  of  Common  Stock  without  regard  to any  other  shares  which  may be
beneficially owned by the Holder or an affiliate thereof,  the Holder shall have
the authority and obligation to determine  whether the restriction  contained in
this Section will limit any  particular  conversion  hereunder and to the extent
that  the  Holder  determines  that the  limitation  contained  in this  Section
applies,  the  determination  of which  portion of the  principal  amount of the
Debenture is  convertible  shall be the  responsibility  and  obligation  of the
Holder.  If the Holder has delivered a Conversion  Notice for a principal amount
of the Debenture that, without regard to any other shares that the Holder or its
affiliates may  beneficially  own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the  conversion  for the maximum  principal  amount  permitted to be
converted on such Conversion  Date in accordance  with the periods  described in
Section  4(b) and,  at the option of the  Holder,  either  retain any  principal
amount tendered for conversion in excess of the permitted  amount  hereunder for
future  conversions or return such excess  principal  amount to the Holder.  The
provisions  of this  Section  may be waived by the Holder (but only as to itself
and not to any  other  Holder)  upon not less than 61 days  prior  notice to the
Company. Other Holders shall be unaffected by any such waiver.

                                (C) If the  Common  Stock  is  then  listed  for
trading on the  NASDAQ or the Nasdaq  SmallCap  Market and the  Company  has not
obtained the Shareholder  Approval (as defined below),  then the Company may not
issue in excess of 3,456,209 shares of Common Stock (which equals 19.999% of the
number of shares of Common  Stock  outstanding  on the Trading  Day  immediately
preceding the Original Issue Date) upon  conversions of the Debenture at a price
per share that is less than the Closing  Price on the  Trading  Day  immediately
preceding  the  Original  Issue  Date  (such  number of  shares,  the  "Issuable
Maximum").  If on any Conversion  Date (A) the shares of Common Stock are listed
for trading on the NASDAQ or Nasdaq SmallCap  Market,  (B) the Conversion  Price
then in effect is such that the aggregate  number of shares of Common Stock that
would then be issuable upon  conversion in full of the Debenture,  together with
any shares of Common Stock  previously  issued upon  conversion of the Debenture
would exceed the Issuable Maximum, and (C) the Company shall not have previously
obtained the vote of shareholders (the "Shareholder  Approval"),  if any, as may
be  required  by the  applicable  rules and  regulations  of the  NASDAQ (or any
successor  entity)  applicable to approve the issuance of shares of Common Stock
in excess of the Issuable Maximum pursuant to the terms hereof, then the Company
shall issue to the Holder  requesting  a conversion a number of shares of Common
Stock equal to the Holder's portion of the Issuable Maximum and, with respect to
the remainder of the aggregate  principal  amount of the Debenture  then held by
the Holder for which a conversion in accordance with the Conversion  Price would
result  in an  issuance  of shares  of  Common  Stock in excess of the  Holder's
portion (which shall be calculated pursuant to the terms hereof) of the Issuable
Maximum (the "Excess Principal"), the converting Holder shall have the option to
require  the  Company  to  either:  (1) use  its  best  efforts  to  obtain  the
Shareholder Approval applicable to such issuance as soon as is possible,  but in
any event not later than the 60th day after such request, or (2) pay cash to the
converting  Holder in an amount  equal to the  Excess  Principal  as  liquidated
damages and not as penalty.  If the  converting  Holder  shall have  elected the
first option pursuant to the

                                       -8-

<PAGE>

immediately  preceding  sentence and the Company shall have failed to obtain the
Shareholder Approval on or prior to the 60th day after such request, then within
three days of such 60th day, the Company shall pay cash to the converting Holder
an  amount  equal to the  Excess  Principal  as  liquidated  damages  and not as
penalty.  If the Company  fails to pay the Excess  Principal in full pursuant to
this  Section  within  seven days after the date  payable,  the Company will pay
interest  thereon at a rate of 15% per annum or such lesser  maximum amount that
is permitted to be paid by applicable  law, to the converting  Holder,  accruing
daily  from the  Conversion  Date  until  such  amount,  plus all such  interest
thereon,  is paid in full. The Company and the Holder  understand and agree that
shares of  Common  Stock  issued  to and then held by the  Holder as a result of
conversions  of the  Debenture  shall  not be  entitled  to  cast  votes  on any
resolution to obtain Shareholder Approval pursuant hereto.

                  (b) (i) Not later than three Trading Days after any Conversion
Date, the Company will deliver to the Holder (i) a certificate  or  certificates
which shall be free of restrictive legends and trading  restrictions (other than
those required by Section  3.1(b) of the Purchase  Agreement)  representing  the
number of shares of Common  Stock  being  acquired  upon the  conversion  of the
Debenture,  and (ii) a bank check in the amount of accrued  and unpaid  interest
(if the  Company has timely  elected or is  required to pay accrued  interest in
cash),  provided,  that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon  conversion of the principal
amount of the Debenture  until the Debenture is delivered for  conversion to the
Company,  or the Holder  notifies the Company that the  Debenture has been lost,
stolen or destroyed and provides a bond (or other adequate security)  reasonably
satisfactory  to the Company to indemnify  the Company from any loss incurred by
it in connection  therewith.  The Company shall,  upon request of the Holder, if
available,  use its best  efforts to deliver  any  certificate  or  certificates
required  to be  delivered  by the  Company  under this  Section  electronically
through  the  Depository  Trust  Corporation  or  another  established  clearing
corporation  performing  similar  functions.  If in the  case of any  Conversion
Notice such  certificate or certificates  are not delivered to or as directed by
the  applicable  Holder by the fifth  Trading Day after a Conversion  Date,  the
Holder  shall be  entitled  by written  notice to the  Company at any time on or
before its receipt of such  certificate or certificates  thereafter,  to rescind
such  conversion,  in which  event the  Company  shall  immediately  return  the
certificates  representing  the principal  amount of the Debenture  tendered for
conversion.

                           (ii) If the  Company  fails to  deliver to the Holder
such  certificate  or  certificates  pursuant  to  Section  4(b)(i) by the fifth
Trading Day after the Conversion  Date, the Company shall pay to the Holder,  in
cash,  as liquidated  damages and not as a penalty,  $5,000 for each Trading Day
after such fifth  Trading Day until such  certificates  are  delivered.  Nothing
herein shall limit the  Holder's  right to pursue  actual  damages or declare an
Event of  Default  pursuant  to Section 3 herein  for the  Company's  failure to
deliver certificates  representing shares of Common Stock upon conversion within
the period  specified  herein and the Holder  shall have the right to pursue all
remedies available to it at law or in equity including,  without  limitation,  a
decree of specific  performance  and/or injunctive  relief.  The exercise of any
such  rights  shall not  prohibit  the Holder  from  seeking to enforce  damages
pursuant to any other Section hereof or under applicable

                                       -9-

<PAGE>

law. Further, if the Company shall not have delivered any cash due in respect of
conversions  of the  Debenture  or as payment of  interest  thereon by the fifth
Trading Day after the Conversion Date, the Holder may, by notice to the Company,
require the Company to issue  shares of Common Stock  pursuant to Section  4(c),
except that for such purpose the Conversion  Price  applicable  thereto shall be
the lesser of the  Conversion  Price on the  Conversion  Date and the Conversion
Price on the date of the Holder  demand.  Any such shares will be subject to the
provision of this Section.

                           (iii) In addition to any other  rights  available  to
the Holder,  if the Company fails to deliver to the Holder such  certificate  or
certificates  pursuant  to Section  4(b)(i) by the fifth  Trading  Day after the
Conversion Date, and if after such fifth Trading Day the Holder purchases (in an
open market transaction or otherwise) Common Stock to deliver in satisfaction of
a sale by the  Holder of the  Underlying  Shares  which the  Holder  anticipated
receiving upon such  conversion (a "Buy-In"),  then the Company shall (A) pay in
cash to the Holder (in addition to any  remedies  available to or elected by the
Holder) the amount by which (x) the Holder's  total  purchase  price  (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the  aggregate  number of shares of Common Stock that such Holder
anticipated  receiving from the conversion at issue multiplied by (2) the market
price of the Common  Stock at the time of the sale giving rise to such  purchase
obligation and (B) at the option of the Holder,  either reissue the Debenture in
principal  amount equal to the principal  amount of the attempted  conversion or
deliver to the Holder the number of shares of Common  Stock that would have been
issued had the Company  timely  complied  with its delivery  requirements  under
Section  4(b)(i).  For example,  if the Holder  purchases  Common Stock having a
total  purchase  price of $11,000 to cover a Buy-In with respect to an attempted
conversion  of the  Debenture  with  respect  to which the  market  price of the
Underlying  Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence,  the Company shall be required to pay
the  Holder  $1,000.  The  Holder  shall  provide  the  Company  written  notice
indicating  the  amounts  payable  to the  Holder  in  respect  of  the  Buy-In.
Notwithstanding  anything contained herein to the contrary, if a Holder requires
the  Company to make  payment  in respect of a Buy-In for the  failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company  shall not be required to pay the Holder  liquidated  damages  under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.

                  (c) (i) The  conversion  price  (the  "Conversion  Price")  in
effect on any Conversion Date shall be $9.50 (subject to adjustment  pursuant to
the terms hereof).

                           (ii) If the Company,  at any time while the Debenture
is outstanding,  (a) shall pay a stock dividend or otherwise make a distribution
or  distributions  on shares of its Common  Stock or any other  equity or equity
equivalent   securities  payable  in  shares  of  Common  Stock,  (b)  subdivide
outstanding  shares of Common Stock into a larger number of shares,  (c) combine
(including  by way of reverse  stock split)  outstanding  shares of Common Stock
into a smaller number of shares, or (d) issue by  reclassification  of shares of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price  shall be  multiplied  by a fraction of which the  numerator  shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding

                                      -10-

<PAGE>

before such event and of which the denominator  shall be the number of shares of
Common Stock  outstanding after such event. Any adjustment made pursuant to this
Section  shall  become  effective  immediately  after  the  record  date for the
determination of stockholders  entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

                           (iii) If the Company, at any time while the Debenture
is outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holder)  entitling them to subscribe for or purchase shares of
Common  Stock at a price per share less than the Per Share  Market  Value at the
record date mentioned below,  then the Conversion Price shall be multiplied by a
fraction,  of which the denominator  shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants  plus the number of  additional  shares of Common  Stock
offered for  subscription  or purchase,  and of which the numerator shall be the
number  of  shares of the  Common  Stock  (excluding  treasury  shares,  if any)
outstanding  on the date of issuance of such rights or warrants  plus the number
of shares which the  aggregate  offering  price of the total number of shares so
offered would purchase at such Per Share Market Value.  Such adjustment shall be
made  whenever  such rights or warrants are issued,  and shall become  effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
such  right,  option or  warrant  to  purchase  shares of the  Common  Stock the
issuance of which resulted in an adjustment in the Conversion  Price pursuant to
this  Section,  if any such right,  option or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price  which it would have been (but  reflecting  any other  adjustments  in the
Conversion  Price made  pursuant to the  provisions  of this  Section  after the
issuance of such rights or warrants) had the adjustment of the Conversion  Price
made upon the  issuance of such  rights,  options or  warrants  been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock  actually  purchased  upon the exercise of such rights,  options or
warrants actually exercised.

                           (iv) If the  Company or any  subsidiary  thereof,  as
applicable with respect to Common Stock  Equivalents (as defined below),  at any
time while any principal amount is outstanding under the Debenture,  shall issue
shares of Common Stock or rights, warrants,  options or other securities or debt
that is  convertible  into or  exchangeable  for shares of Common Stock ("Common
Stock Equivalents") entitling any Person to acquire shares of Common Stock, at a
price per share  less than the  Conversion  Price (if the  holder of the  Common
Stock or Common  Stock  Equivalent  so  issued  shall at any  time,  whether  by
operation of purchase price adjustments, reset provisions,  floating conversion,
exercise or exchange prices or otherwise, or due to warrants,  options or rights
issued in connection with such issuance, be entitled to receive shares of Common
Stock at a price less than the Conversion  Price,  such issuance shall be deemed
to have occurred for less than the Conversion Price), then, at the option of the
Holder, the Conversion Price shall be replaced with the conversion,  exchange or
purchase price for such Common Stock or Common Stock Equivalents  (including any
reset  provisions  thereof) for all subsequent  conversions of principal  amount
under the Debenture or such conversions.  Such adjustment shall be made whenever
such Common Stock

                                      -11-

<PAGE>

or Common Stock  Equivalents are issued.  The Company shall notify the Holder in
writing,  no later than the Trading  Day  following  the  issuance of any Common
Stock or Common Stock Equivalent subject to this section, indicating therein the
applicable  issuance  price,  or of  applicable  reset  price,  exchange  price,
conversion  price and other pricing terms.  Notwithstanding  the foregoing,  the
following  shall not be deemed to be Common  Stock  Equivalents:  (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) shares of Common Stock,  for an aggregate  market price of up to
$2,000,000,  issued  as  payment  of the  purchase  price in  connection  with a
Strategic Transaction.  For purposes of this Section, a "Strategic  Transaction"
shall mean a transaction or  relationship  in which the Company issues shares of
Common  Stock to an entity  which is,  itself or through  its  subsidiaries,  an
operating  company in a business  related to 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.

                           (v) If the Company,  at any time while the  Debenture
is  outstanding,  shall  distribute  to all holders of Common  Stock (and not to
Holders)  evidences  of its  indebtedness  or assets or  rights or  warrants  to
subscribe  for or purchase any security,  then in each such case the  Conversion
Price at which the Debenture shall thereafter be convertible shall be determined
by multiplying the Conversion  Price in effect  immediately  prior to the record
date  fixed  for   determination  of  stockholders   entitled  to  receive  such
distribution  by a  fraction  of which  the  denominator  shall be the Per Share
Market Value  determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value on such record date less the then
fair market  value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith.  In either case the
adjustments  shall be  described  in a  statement  provided to the Holder of the
portion  of  assets  or  evidences  of   indebtedness  so  distributed  or  such
subscription  rights  applicable to one share of Common Stock.  Such  adjustment
shall be made whenever any such  distribution is made and shall become effective
immediately after the record date mentioned above.

                           (vi) In case of any  reclassification  of the  Common
Stock or any  compulsory  share  exchange  pursuant to which the Common Stock is
converted  into other  securities,  cash or property,  the Holder shall have the
right thereafter to, at their option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing  hereunder in respect of this  Debenture only into the shares of stock and
other  securities,  cash and  property  receivable  upon or deemed to be held by
holders of the Common Stock following such  reclassification  or share exchange,
and the Holders of the  Debenture  shall be entitled  upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount,  together with all
accrued  but unpaid  interest  and any other  amounts  then owing  hereunder  in
respect of this Debenture  could have been converted  immediately  prior to such
reclassification  or share  exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of the

                                      -12-

<PAGE>

Debenture,  plus all interest and other amounts due and payable thereon pursuant
to the terms hereof.  The entire  prepayment  price shall be paid in cash.  This
provision  shall  similarly  apply  to  successive  reclassifications  or  share
exchanges.

                           (vii) All calculations  under this Section 4 shall be
made to the nearest cent or the nearest  1/100th of a share, as the case may be.
No adjustments in the Conversion  Price shall be required if such  adjustment is
less than $0.01, provided,  that any adjustments which by reason of this Section
are not  required to be made shall be carried  forward and taken into account in
any subsequent adjustment.

                           (viii)  Whenever  the  Conversion  Price is  adjusted
pursuant to any of Section  4(c)(ii) - (v), the Company  shall  promptly mail to
each Holder a notice  setting forth the Conversion  Price after such  adjustment
and setting forth a brief statement of the facts requiring such adjustment.

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

                           (x) In case of any (1) merger or consolidation of the
Company  with or into  another  Person,  or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, the Holder shall have the right to (A)

                                      -13-

<PAGE>

if permitted under Section 3(b) hereof,  exercise its rights of prepayment under
Section 3(b) with  respect to such event,  (B) convert its  aggregate  principal
amount of the  Debenture  then  outstanding  into the  shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger,  consolidation or sale, and the Holder shall
be entitled  upon such event or series of related  events to receive such amount
of  securities,  cash and property as the shares of Common Stock into which such
aggregate   principal   amount  of  the  Debenture  could  have  been  converted
immediately  prior to such  merger,  consolidation  or  sales  would  have  been
entitled,  or (C) in the case of a merger  or  consolidation,  (x)  require  the
surviving  entity to issue a  convertible  debenture in an  aggregate  principal
amount equal to the aggregate principal amount of the Debenture then held by the
Holder,  plus all accrued and unpaid  interest and other amounts owing  thereon,
which newly issued a convertible debenture shall have terms identical (including
with respect to conversion) to the terms of this Debenture and shall be entitled
to all of the rights and  privileges  of the Holder of the  Debenture  set forth
herein  and  the  agreements   pursuant  to  which  the  Debenture  were  issued
(including,  without  limitation,  as such  rights  relate  to the  acquisition,
transferability,  registration  and  listing  of  such  shares  of  stock  other
securities  issuable upon conversion  thereof),  and (y) simultaneously with the
issuance  of a  convertible  debenture,  shall  have the right to  convert  such
instrument  only into shares of stock and other  securities,  cash and  property
receivable  upon or deemed to be held by holders of Common Stock  following such
merger  or  consolidation.  In the case of  clause  (C),  the  conversion  price
applicable for the newly issued  convertible  debenture  shall be based upon the
amount of  securities,  cash and property  that each share of Common Stock would
receive in such transaction and the Conversion Price in effect immediately prior
to the effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holders the right to receive the securities,  cash and property set forth in
this  Section upon any  conversion  or  redemption  following  such event.  This
provision shall similarly apply to successive such events.

                  (d) Upon a  conversion  hereunder  the  Company  shall  not be
required to issue stock  certificates  representing  fractions  of shares of the
Common Stock, but may if otherwise permitted,  make a cash payment in respect of
any final  fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the Holder
shall be  entitled  to receive,  in lieu of the final  fraction of a share,  one
whole share of Common Stock.

                  (e) The  issuance  of  certificates  for  shares of the Common
Stock on conversion of the Debenture  shall be made without charge to the Holder
thereof  for any  documentary  stamp or  similar  taxes  that may be  payable in
respect of the issue or delivery of such certificate,  provided that the Company
shall not be  required  to pay any tax that may be  payable  in  respect  of any
transfer  involved in the  issuance and  delivery of any such  certificate  upon
conversion in a name other than that of the Holder of the Debenture so converted
and the  Company  shall not be required  to issue or deliver  such  certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the  Company  the  amount of such tax or shall have  established  to the
satisfaction of the Company that such tax has been paid.

                                      -14-

<PAGE>

                  (f) Any and all notices or other  communications or deliveries
to be provided  by the Holder  hereunder,  including,  without  limitation,  any
Conversion Notice, shall be in writing and delivered  personally,  by facsimile,
sent by a nationally  recognized  overnight courier service or sent by certified
or  registered  mail,  postage  prepaid,  addressed to the Company,  at 5847 San
Felipe,  Suite  900,  Houston,  Texas  77057,  Facsimile  No.:  (713)  783-6003,
attention Chief Financial Officer,  or such other address or facsimile number as
the Company may specify for such purposes by notice to the Holders  delivered in
accordance  with this Section.  Any and all notices or other  communications  or
deliveries  to be  provided  by the  Company  hereunder  shall be in writing and
delivered  personally,  by facsimile,  sent by a nationally recognized overnight
courier  service or sent by  certified  or  registered  mail,  postage  prepaid,
addressed  to the  Holder at the  facsimile  telephone  number or address of the
Holder appearing on the books of the Company,  or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries  hereunder 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), (ii) the date
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section 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)  four days  after  deposit in the United  States
mail, (iv) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (v) upon actual receipt by the party to
whom such notice is required to be given.

         Section 5. Put Option. On each of the 270th day and 540th day following
the Original Issue Date (each such date, a "Put Date" and the 60th day following
a Put Date, a "Put Payment Date"),  the Holder shall have the right, at its sole
discretion (the "Put Right"),  to require the Company to prepay all or a portion
of the then  outstanding  principal  amount and interest  under the Debenture by
delivering to the Company a written notice (a "Put Notice"),  specifying therein
the outstanding  principal amount and interest subject to the Put Right. Subject
to the right to deliver  shares of Common Stock as described in the  immediately
following  sentence,  not later than the Put Payment Date,  the Company will pay
and  deliver  to the  Holder  exercising  its Put  Right,  free of any  claim of
subordination,  an amount of cash (in immediately  available funds) equal to the
sum of:  (i) the  principal  amount of the  Debenture  to be  prepaid,  plus all
accrued and unpaid interest  thereon (each as indicated in the Put Notice),  and
(ii) all other amounts,  costs,  expenses and  liquidated  damages then owing in
respect of such  principal  amount (the "Put Price").  The Company may deliver a
written  notice  to the  Holder  no  later  than 20  Trading  Days  prior to the
applicable Put Date (a "Company  Notice"),  indicating therein its intention not
to pay in excess of a maximum  dollar  amount in cash as part of any  subsequent
Put Price (the  "Maximum  Cash  Amount"),  in which  case,  in response to a Put
Notice,  the Company  shall:  (i) pay to the Holder the  Maximum  Cash Amount no
later than the Put  Payment  Date and (ii)  deliver to the Holder not later than
the third Trading Day following  the  applicable  Put Date a number of shares of
Common  Stock equal to the  quotient  obtained by  dividing  (A) the  difference
between the Put Price and the Maximum  Cash Amount by (B) the average of the Per
Share  Market  Values for the five  Trading  Days  preceding  the Put Date.  The
Company's obligations to deliver shares of Common Stock pursuant to this Section
5 shall be

                                      -15-

<PAGE>

subject to the provisions of Section  4(b)(ii) and (iii) hereof.  If the Company
shall fail to timely deliver a Company Notice to the Holder, the Company will be
required to pay the entire Put Price in cash. If any portion of the cash portion
of the Put Price  shall not be paid on or prior to the Put Payment  Date,  then,
notwithstanding  anything  herein to the  contrary,  the  Holder  shall have the
right,  no later than 20 Trading Days  following the Put Payment Date, to either
(i)  rescind the Put Notice or (ii)  convert  all or a portion of the  principal
amount and interest under the Debenture previously subject to the Put Right at a
conversion  price  equal to the  lower of (A) the  Conversion  Price and (B) the
average of the Per Share Market Values  during the ten Trading Days  immediately
preceding  either the Put Payment  Date or the date the Holder  rescinds the Put
Notice, whichever is lower.

         Section 6.  Definitions.  For the purposes hereof,  the following terms
shall have the following meanings:

                  "Business Day" means 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 government action to close.

                  "Change of Control Transaction" means the occurrence of any of
(i) an  acquisition  after the date hereof by an  individual  or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective  control  (whether  through legal or  beneficial  ownership of capital
stock of the  Company,  by  contract  or  otherwise)  of in excess of 40% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's  board of directors  which is
not approved by a majority of those  individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was  approved  by a majority of the  members of the board of  directors  who are
members  on the date  hereof),  (iii)  the  merger of the  Company  with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or  more  of the  assets  of the  Company  in  one or a  series  of  related
transactions,  or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound,  providing for any of the events set
forth above in (i), (ii) or (iii).

                  "Closing  Price" means on any particular  date (a) the closing
sales price per share of Common Stock on such date on the  Subsequent  Market on
which the shares of Common  Stock are then  listed or quoted,  or if there is no
such price on such date,  then the closing sales price on the Subsequent  Market
on the date nearest  preceding  such date,  or (b) if the shares of Common Stock
are not then listed or quoted on a Subsequent  Market,  the closing  sales price
for a share of Common Stock in the NASDAQ, as reported by the National Quotation
Bureau  Incorporated  or  similar  organization  or  agency  succeeding  to  its
functions of reporting  prices) at the close of business on such date, or (c) if
the  shares of Common  Stock are not then  reported  by the  National  Quotation
Bureau  Incorporated  (or  similar  organization  or  agency  succeeding  to its
functions of reporting prices),  then the average of the "Pink Sheet" quotes for
the relevant  conversion  period,  as determined in good faith by the Holder, or
(d) if the shares of Common Stock are not then publicly traded the

                                      -16-

<PAGE>

fair  market  value of a share of Common  Stock as  determined  by an  Appraiser
selected in good faith by the Holder of a majority in interest of the  principal
amount of the Debenture then outstanding.

                  "Commission" means the Securities and Exchange Commission.

                  "Common  Stock"  means the  common  stock,  $.01 par value per
share,  of the  Company  and stock of any other class into which such shares may
hereafter have been reclassified or changed.

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
amended.

                  "Mandatory  Prepayment  Amount" for the Debenture  shall equal
the sum of (i) the greater of (A) 100% of the principal  amount of the Debenture
to be  prepaid,  plus all  accrued  and  unpaid  interest  thereon,  and (B) the
principal  amount of the  Debenture  to be prepaid,  plus all accrued and unpaid
interest thereon,  divided by the Conversion Price on (x) the date the Mandatory
Prepayment  Amount is demanded or  otherwise  due or (y) the date the  Mandatory
Prepayment Amount is paid in full, whichever is less,  multiplied by the Closing
Price on (x) the date the Mandatory  Prepayment  Amount is demanded or otherwise
due or (y) the date the Mandatory  Prepayment Amount is paid in full,  whichever
is greater, and (ii) all other amounts,  costs,  expenses and liquidated damages
due in respect of the Debenture.

                  "Original  Issue  Date"  shall  mean  the  date  of the  first
issuance of the Debenture regardless of the number of transfers of the Debenture
and regardless of the number of instruments  which may be issued to evidence the
Debenture.

                  "Per Share Market Value" means on any particular  date (a) the
closing  bid price per  share of Common  Stock on such date on the  NASDAQ or on
such  Subsequent  Market on which the shares of Common  Stock are then listed or
quoted, or if there is no such price on such date, then the closing bid price on
the NASDAQ or on such Subsequent Market on the date nearest preceding such date,
or (b) if the shares of Common Stock are not then listed or quoted on the NASDAQ
or a Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter   market,   as  reported  by  the  National   Quotation  Bureau
Incorporated or similar  organization  or agency  succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar  organization  or agency  succeeding  to its  functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period,  as  determined  in good  faith by the  Holder,  or (d) if the shares of
Common  Stock are not then  publicly  traded the fair market value of a share of
Common Stock as determined by an Appraiser  selected in good faith by the Holder
of a majority in interest of the principal amount of Notes then outstanding.

                  "Person" means a corporation,  an association,  a partnership,
organization,  a business, an individual,  a government or political subdivision
thereof or a governmental agency.

                                      -17-

<PAGE>

                  "Purchase Agreement" means the Convertible  Debenture Purchase
Agreement,  dated as of the  Original  Issue Date,  to which the Company and the
original Holder are parties,  as amended,  modified or supplemented from time to
time in accordance with its terms.

                  "Registration  Rights Agreement" means the Registration Rights
Agreement,  dated as of the  Original  Issue Date,  to which the Company and the
original Holder are parties,  as amended,  modified or supplemented from time to
time in accordance with its terms.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Trading  Day"  means (a) a day on which the  shares of Common
Stock are traded on the NASDAQ or on such Subsequent  Market on which the shares
of Common Stock are then listed or quoted,  or (b) if the shares of Common Stock
are not listed on the NASDAQ or a Subsequent  Market,  a day on which the shares
of Common Stock are traded in the  over-the-counter  market,  as reported by the
OTC Bulletin  Board,  or (c) if the shares of Common Stock are not quoted on the
OTC Bulletin  Board, a day on which the shares of Common Stock are quoted in the
over-the-counter   market  as  reported  by  the   National   Quotation   Bureau
Incorporated (or any similar  organization or agency succeeding its functions of
reporting prices);  provided,  that in the event that the shares of Common Stock
are not listed or quoted as set forth in (a),  (b) and (c) hereof,  then Trading
Day shall mean any day except a Business Day.

                  "Transaction  Documents"  shall have the  meaning set forth in
the Purchase Agreement.

                  "Underlying  Shares" means the shares of Common Stock issuable
upon  conversion of the  Debenture or as payment of interest in accordance  with
the terms hereof.

                  "Underlying   Shares    Registration    Statement"   means   a
registration  statement  meeting the  requirements set forth in the Registration
Rights  Agreement,  covering  among  other  things the resale of the  Underlying
Shares and naming the Holder as a "selling stockholder" thereunder.

         Section 7.  Notwithstanding  anything herein to the contrary,  upon the
occurrence  of an Event of  Default  under  the loan  documents  with The  Chase
Manhattan  Bank or any other  holder of a majority  of the  principal  amount of
indebtedness  of the Company or if the Company  shall not be permitted to make a
cash payment hereunder  (including,  but not limited to, liquidated  damages and
mandatory  prepayment  of  principal  and interest  hereunder)  due to a written
notice  delivered  to the Company by The Chase  Manhattan  Bank  precluding  the
Company  from making a cash  payment  then,  at the option of the  Holder,  with
respect to each such cash payment:  (i) as of the date due pursuant to the terms
hereof,  such cash payment  shall be added to the principal  amount  outstanding
under the  Debenture  held by it or (ii) the  Company  shall,  no later than the
third day  following  the date such cash  payment is due  pursuant  to the terms
hereof,  deliver to the Holder a number of shares of Common  Stock  equal to the
quotient  obtained  by dividing  (A) the amount of such cash  payment by (B) the
average of the Per Share Market  Values for the five Trading Days  preceding the
date such

                                      -18-

<PAGE>

cash payment is due pursuant to the terms hereof.  The Company's  obligations to
deliver  shares of Common Stock pursuant to subsection  (ii) of the  immediately
preceding  sentence shall be subject to the  provisions of Section  4(b)(ii) and
(iii) hereof.

         Section 8. Except as expressly  provided  herein,  no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional,  to pay the principal of, interest and liquidated damages (if
any) on,  this  Debenture  at the  time,  place,  and  rate,  and in the coin or
currency,  herein  prescribed.  This  Debenture  is a direct  obligation  of the
Company.  This  Debenture  ranks  pari passu  with all other  Debentures  now or
hereafter  issued  under  the  terms  set  forth  herein.  As long as there  are
Debentures  outstanding,  the Company shall not and shall cause it  subsidiaries
not to,  without  the  consent  of the  Holders  holding no less than 2/3 of the
outstanding  principal amount  outstanding  under the Debentures,  (i) amend its
certificate  of  incorporation,  bylaws  or  other  charter  documents  so as to
adversely  affect any rights of the Holder;  (ii) repay,  repurchase or offer to
repay,  repurchase  or  otherwise  acquire  shares of its Common  Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction  Documents;  or (iii) enter into any agreement
with respect to any of the foregoing.

         Section 9. This  Debenture  shall not  entitle the Holder to any of the
rights of a stockholder of the Company,  including without limitation, the right
to vote, to receive dividends and other distributions,  or to receive any notice
of, or to attend,  meetings  of  stockholders  or any other  proceedings  of the
Company,  unless  and to the extent  converted  into  shares of Common  Stock in
accordance with the terms hereof.

         Section  10. If this  Debenture  shall be  mutilated,  lost,  stolen or
destroyed,  the Company shall execute and deliver,  in exchange and substitution
for  and  upon  cancellation  of a  mutilated  Debenture,  or in  lieu  of or in
substitution for a lost, stolen or destroyed debenture,  a new Debenture for the
principal amount of this Debenture so mutilated,  lost,  stolen or destroyed but
only upon  receipt  of  evidence  of such  loss,  theft or  destruction  of such
Debenture,  and of the  ownership  hereof,  and  indemnity,  if  requested,  all
reasonably satisfactory to the Company.

         Section  11.  Except as set forth in  Schedule  2.1(p) to the  Purchase
Agreement,  no  indebtedness of the Company is senior to this Debenture in right
of payment,  whether with respect to interest,  damages or upon  liquidation  or
dissolution  or  otherwise.  The Company will not and will not permit any of its
subsidiaries to, directly or indirectly,  enter into, create,  incur,  assume or
suffer to exist any  indebtedness  of any kind, on or with respect to any of its
property or assets now owned or hereafter  acquired or any  interest  therein or
any income or profits  therefrom  that is senior in any respect to the Company's
obligations under the Debenture.

         Section  12. This  Debenture  shall be  governed  by and  construed  in
accordance  with the laws of the State of New  York,  without  giving  effect to
conflicts of laws thereof. The Company and the Holder 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

                                      -19-

<PAGE>

herein,  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,  or that such suit,  action or  proceeding  is
improper.  Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or  proceeding by receiving a copy thereof sent to the Company at the address in
effect for  notices to it under this  instrument  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.

         Section  13. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture  shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this  Debenture.  The failure of the Company or the Holder to insist upon strict
adherence to any term of this  Debenture on one or more  occasions  shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict  adherence to that term or any other term of this  Debenture.  Any waiver
must be in writing.

         Section 14. If any provision of this  Debenture is invalid,  illegal or
unenforceable,  the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and  circumstances.  If it shall be found
that any interest or other amount deemed  interest due  hereunder  shall violate
applicable laws governing  usury,  the applicable rate of interest due hereunder
shall  automatically be lowered to equal the maximum permitted rate of interest.
The Company  covenants  (to the extent that it may lawfully do so) that it shall
not at any time insist upon,  plead, or in any manner  whatsoever  claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would  prohibit  or forgive  the  Company  from paying all or any portion of the
principal  of or interest on the  Debenture  as  contemplated  herein,  wherever
enacted,  now or at any time  hereafter  in  force,  or  which  may  affect  the
covenants or the performance of this  indenture,  and the Company (to the extent
it may lawfully do so) hereby  expressly waives all benefits or advantage of any
such law,  and  covenants  that it will not, by resort to any such law,  hinder,
delay or impeded the  execution of any power herein  granted to the Holder,  but
will  suffer and permit  the  execution  of every such as though no such law has
been enacted.

         Section 15. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business  Day,  such payment shall be made on the next
succeeding Business Day.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGE FOLLOWS]

                                      -20-

<PAGE>

         IN WITNESS WHEREOF,  the Company has caused this Convertible  Debenture
to be duly  executed  by a duly  authorized  officer as of the date first  above
indicated.

                                     TIDEL TECHNOLOGIES, INC.

                                     By: ___________________________________
                                     Name:    James T. Rash
                                     Title:   President and Chief Executive
                                              Officer

<PAGE>

                                    EXHIBIT A

                           NOTICE OF HOLDER CONVERSION

(To be Executed by the Registered Holder
in order to Convert the Debenture)

The undersigned  hereby elects to convert the attached  Debenture into shares of
common  stock,  $.01  par  value  per  share  (the  "Common  Stock"),  of  Tidel
Technologies, Inc. (the "Company") according to the conditions hereof, as of the
date  written  below.  If shares are to be issued in the name of a person  other
than the  undersigned,  the undersigned will pay all transfer taxes payable with
respect  thereto and is delivering  herewith such  certificates  and opinions as
reasonably  requested  by the Company in  accordance  therewith.  No fee will be
charged to the holder for any  conversion,  except for such transfer  taxes,  if
any.

Conversion calculations:           ---------------------------------------------
                                   Date to Effect Conversion

                                   ---------------------------------------------
                                   Principal Amount of Debenture to be Converted

                                   ---------------------------------------------
                                   Number of shares of Common Stock to be Issued

                                   Payment of Interest in Kind  / /  Yes  / / No
                                       If yes, $ _______ of Interest Accrued on
                                       Account of Conversion at Issue

                                   ---------------------------------------------
                                   Applicable Conversion Price

                                   ---------------------------------------------
                                   Signature

                                   ---------------------------------------------
                                   Name

                                   ---------------------------------------------
                                   Address

<PAGE>

                                    EXHIBIT B

                          NOTICE OF COMPANY CONVERSION

(To be Executed by the Company
in order to convert the Debenture)

The  undersigned  in the  name and on  behalf  of Tidel  Technologies,  Inc.,  a
Delaware  company (the  "Company"),  hereby notifies the addressee hereof of its
election to exercise its right to convert the principal  amount of the Debenture
set forth  below,  into  shares of Common  Stock,  par value $.01 per share (the
"Common Stock"),  of the Company,  according to the conditions hereof, as of the
date  written  below.  No fee will be charged to the Holder for any  conversion,
except for such transfer  taxes, if any, which may be incurred by the Company if
shares  are to be issued in the name of a person  other  than in the name of the
addressee.

Conversion calculations:          ______________________________________________
                                  Date to Effect Conversion

                                   ---------------------------------------------
                                   Principal Amount of Debenture to be Converted

                                   ---------------------------------------------
                                   Number of shares of Common Stock to be Issued

                                   Payment of Interest in Kind  / /  Yes  / / No
                                       If yes, $ _______ of Interest Accrued on
                                       Account of Conversion at Issue

                                   ---------------------------------------------
                                   Applicable Conversion Price

                                   ---------------------------------------------
                                   Signature

                                   ---------------------------------------------
                                   Name

                                   ---------------------------------------------
                                   Address

<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

6%  Convertible  Debenture,  due September 8, 2004,  in the aggregate  principal
amount of $3,000,000 issued by Tidel Technologies, Inc. This Conversion Schedule
reflects  conversions  made under  Section  4(a)(i)  and  4(a)(ii)  of the above
referenced Debenture.

                                          Dated:

                               Aggregate
                               Principal
                               Amount
                               Remaining
Date of        Amount of       Subsequent to
Conversion     Conversion      Conversion       Company Attest    Holder AttestNEITHER THESE  SECURITIES  NOR THE  SECURITIES  INTO WHICH THESE  SECURITIES ARE
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 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 THE REGISTRATION  REQUIREMENTS  THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.

                            TIDEL TECHNOLOGIES, INC.

                                     WARRANT

                                                       Dated: September 29, 2000

         Tidel  Technologies,  Inc.,  a Delaware  corporation  (the  "Company"),
hereby certifies that, for value received,  Acorn Investment Trust, on behalf of
its series Acorn Fund or its registered assigns ("Holder"), is entitled, subject
to the terms set forth  below,  to  purchase  from the  Company up to a total of
63,158 shares of common stock, $.01 par value per share (the "Common Stock"), of
the  Company  (each such  share,  a "Warrant  Share"  and all such  shares,  the
"Warrant  Shares")  at an exercise  price equal to $9.80 per share (as  adjusted
from time to time as provided in Section 8, the "Exercise  Price"),  at any time
and from time to time from and after the date hereof and  through and  including
September 8, 2005 (the  "Expiration  Date"),  and subject to the following terms
and conditions:

         1.  Registration  of Warrant.  The Company shall register this Warrant,
upon records to be  maintained  by the Company for that  purpose  (the  "Warrant
Register"),  in the name of the  record  Holder  hereof  from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise  hereof or any  distribution to the
Holder,  and for all other  purposes,  and the Company  shall not be affected by
notice to the contrary.

         2.       Registration of Transfers and Exchanges.

                  (a) The Company shall  register the transfer of any portion of
this Warrant in the Warrant Register,  upon surrender of this Warrant,  with the
Form of Assignment  attached  hereto duly completed and signed,  to the Transfer
Agent or to the  Company at its address for notice set forth in Section 12. Upon
any such  registration  or transfer,  a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant,  a "New Warrant"),
evidencing the

<PAGE>

portion of this Warrant so  transferred  shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the  transferring  Holder.  The acceptance of the New
Warrant  by the  transferee  thereof  shall be  deemed  the  acceptance  of such
transferee of all of the rights and obligations of a holder of a Warrant.

                  (b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the  Company at its  address for notice set forth in
Section 12 for one or more New  Warrants,  evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased  hereunder.
Any such New Warrant will be dated the date of such exchange.

         3.       Duration and Exercise of Warrants.

                  (a) This Warrant shall be exercisable by the registered Holder
on any business day before 6:00 P.M.,  New York City time,  at any time and from
time to time on or after the date hereof to and including the  Expiration  Date.
At 6:00 P.M.,  New York City time on the  Expiration  Date,  the portion of this
Warrant not  exercised  prior  thereto shall be and become void and of no value.
Prior to the Expiration  Date, the Company may not call or otherwise redeem this
Warrant.

                  (b) Upon  delivery  of a duly  completed  and  signed  Form of
Election to Purchase  attached  hereto (and the grid attached hereto as Annex A)
duly completed and signed, to the Company at its address for notice set forth in
Section 12 and upon payment of the Exercise  Price  multiplied  by the number of
Warrant  Shares  that the Holder  intends to purchase  hereunder,  in the manner
provided  hereunder,  all as  specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business days
after the Date of Exercise (as defined  herein)) issue or cause to be issued and
cause to be  delivered  to or upon the  written  order of the Holder and in such
name or names as the Holder may designate,  a certificate for the Warrant Shares
issuable upon such exercise,  free of  restrictive  legends except (i) either in
the event that a  registration  statement  covering  the  resale of the  Warrant
Shares and naming the  Holder as a selling  stockholder  thereunder  is not then
effective  or the  Warrant  Shares are not freely  transferable  without  volume
restrictions  pursuant to Rule 144(k)  promulgated  under the  Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued  pursuant  to a written  agreement  between the  original  Holder and the
Company,  as required by such agreement.  Any person so designated by the Holder
to receive  Warrant  Shares  shall be deemed to have become  holder of record of
such  Warrant  Shares as of the Date of  Exercise of this  Warrant.  The Company
shall, upon request of the Holder, if available, use its best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar functions.

                  A "Date of Exercise" means the date on which the Company shall
have  received (i) the Form of Election to Purchase  completed  and duly signed,
and (ii)  payment of the  Exercise  Price for the  number of  Warrant  Shares so
indicated by the Holder to be purchased.

                                       -2-

<PAGE>

                  (c) This Warrant shall be exercisable,  either in its entirety
or, from time to time, for a portion of the number of Warrant Shares.

         4.  Piggyback  Registration  Rights.  This  Warrant  is  subject to the
piggyback  registration  rights granted under the Registration  Rights Agreement
and such piggyback  registration rights shall continue until all of the Holder's
Warrant  Shares  have been sold in  accordance  with an  effective  registration
statement or upon the  Expiration  Date.  The Company will pay all  registration
expenses in connection therewith.

         5. Payment of Taxes.  The Company will pay all documentary  stamp taxes
attributable  to the  issuance  of  Warrant  Shares  upon the  exercise  of this
Warrant;  provided,  however,  that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any  certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring  this Warrant or receiving  Warrant
Shares upon exercise hereof.

         6. Replacement of Warrant.  If this Warrant is mutilated,  lost, stolen
or  destroyed,  the Company  shall  issue or cause to be issued in exchange  and
substitution for and upon  cancellation  hereof,  or in lieu of and substitution
for this Warrant,  a New Warrant,  but only upon receipt of evidence  reasonably
satisfactory to the Company of such loss, theft or destruction and indemnity, if
requested,  satisfactory  to  it.  Applicants  for  a  New  Warrant  under  such
circumstances  shall also  comply  with such other  reasonable  regulations  and
procedures and pay such other reasonable charges as the Company may prescribe.

         7. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep  available out of the aggregate of its authorized but
unissued  Common  Stock,  solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein  provided,  the number of Warrant
Shares which are then issuable and deliverable  upon the exercise of this entire
Warrant,  free from preemptive  rights or any other actual  contingent  purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions  of Section 8). The Company  covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable  Exercise  Price in  accordance  with the terms  hereof,  be duly and
validly authorized, issued and fully paid and nonassessable.

         8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon  exercise of this Warrant are subject to  adjustment  from time to
time as set forth in this Section 8.

                  (a)  If the  Company,  at  any  time  while  this  Warrant  is
outstanding,  (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding  preferred  stock  as of the  date  hereof  which  contain  a stated
dividend rate) or otherwise make a distribution  or  distributions  on shares of
its Common  Stock or on any other  class of capital  stock  payable in shares of
Common Stock,  (ii) subdivide  outstanding  shares of Common Stock into a larger
number of shares,  or (iii)  combine  outstanding  shares of Common Stock into a
smaller number of shares, the Exercise Price

                                       -3-

<PAGE>

shall be multiplied by a fraction of which the numerator  shall be the number of
shares of Common Stock (excluding  treasury shares,  if any) outstanding  before
such event and of which the denominator  shall be the number of shares of Common
Stock  (excluding  treasury shares,  if any)  outstanding  after such event. Any
adjustment  made  pursuant to this Section  shall become  effective  immediately
after the record date for the determination of stockholders  entitled to receive
such dividend or distribution and shall become effective  immediately  after the
effective date in the case of a subdivision or  combination,  and shall apply to
successive subdivisions and combinations.

                  (b) In case of any reclassification of the Common Stock or any
compulsory  share exchange  pursuant to which the Common Stock is converted into
other  securities,  cash or  property,  then the  Holder  shall  have the  right
thereafter  to  exercise  this  Warrant  only into the shares of stock and other
securities  and  property  receivable  upon or deemed to be held by  holders  of
Common Stock following such  reclassification or share exchange,  and the Holder
shall be  entitled  upon such  event to receive  such  amount of  securities  or
property  equal to the  amount of Warrant  Shares  such  Holder  would have been
entitled to had such Holder  exercised  this Warrant  immediately  prior to such
reclassification  or share exchange.  The terms of any such  reclassification or
share  exchange shall include such terms so as to continue to give to the Holder
the right to receive the  securities  or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.

                  (c)  If the  Company,  at  any  time  while  this  Warrant  is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant)  evidences of its  indebtedness or assets or rights or warrants
to  subscribe  for or purchase  any  security  (excluding  those  referred to in
Sections 8(a), (b) and (d)),  then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect  immediately prior to the
record date fixed for  determination  of  stockholders  entitled to receive such
distribution by a fraction of which the denominator  shall be the Exercise Price
determined  as of the record date  mentioned  above,  and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's  independent  certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").

                  (d) If the Company or any  subsidiary  thereof,  as applicable
with respect to Common Stock  Equivalents (as defined below),  at any time while
this  Warrant is  outstanding,  shall  issue  shares of Common  Stock or rights,
warrants,  options  or other  securities  or debt that are  convertible  into or
exchangeable  for shares of Common Stock "Common Stock  Equivalents",  entitling
any Person to acquire  shares of Common Stock at a price per share less than the
Exercise Price (if the holder of the Common Stock or Common Stock  Equivalent so
issued shall at any time,  whether by operation of purchase  price  adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants,  options or rights issued in connection  with such issuance,
be entitled to receive  shares of Common Stock at a price less than the Exercise
Price, such issuance shall be deemed to have occurred for less than the Exercise
Price),  then,  at the sole option of the Holder,  the  Exercise  Price shall be
adjusted to mirror the conversion, exchange or purchase

                                       -4-

<PAGE>

price  for  such  Common  Stock  Equivalents  (including  any  reset  provisions
thereof),  provided,  that for purposes hereof,  all shares of Common Stock that
are issuable upon conversion,  exercise or exchange of Common Stock  Equivalents
shall be deemed outstanding  immediately after the issuance of such Common Stock
Equivalents.  Such adjustment shall be made whenever such shares of Common Stock
or Common Stock  Equivalents  are issued.  Notwithstanding  the  foregoing,  the
following  shall not be deemed to be Common  Stock  Equivalents:  (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) shares of Common Stock,  for an aggregate  market price of up to
$2,000,000,  issued  as  payment  of the  purchase  price in  connection  with a
Strategic Transaction.  For purposes of this Section, a "Strategic  Transaction"
shall mean a transaction or  relationship  in which the Company issues shares of
Common  Stock to an entity  which is,  itself or through  its  subsidiaries,  an
operating  company in a business  related to 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.

                  (e) In case of any (1) merger or  consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value  basis) in one or a series of related
transactions,  the Holder shall have the right  thereafter  to (A) exercise this
Warrant  for the  shares  of stock  and  other  securities,  cash  and  property
receivable  upon or deemed to be held by holders of Common Stock  following such
merger,  consolidation or sale, and the Holder shall be entitled upon such event
or series of  related  events to receive  such  amount of  securities,  cash and
property as the Common  Stock for which this Warrant  could have been  exercised
immediately  prior to such  merger,  consolidation  or  sales  would  have  been
entitled  or (B) in the case of a  merger  or  consolidation,  (x)  require  the
surviving  entity to issue common stock  purchase  warrants  equal to the number
Warrant Shares to which this Warrant then permits,  which newly warrant shall be
identical  to this  Warrant,  and (y)  simultaneously  with the issuance of such
warrant,  the  Holder of such  warrant  shall  have the right to  exercise  such
warrant  only  into  shares of stock and  other  securities,  cash and  property
receivable  upon or deemed to be held by holders of Common Stock  following such
merger or  consolidation  or (C) require the surviving  entity from such merger,
acquisition  or business  combination  to pay to the Holder,  in cash, the Black
Scholes value of this Warrant. In the case of clause (B), the exercise price for
such new warrant shall be based upon the amount of securities, cash and property
that each  share of Common  Stock  would  receive  in such  transaction  and the
Exercise Price of this Warrant immediately prior to the effectiveness or closing
date for such transaction.  The terms of any such merger,  sale or consolidation
shall  include such terms so as continue to give the Holder the right to receive
the securities,  cash and property set forth in this Section upon any conversion
or redemption  following such event.  This provision  shall  similarly  apply to
successive such events.

                  (f) For the purposes of this Section 8, the following  clauses
shall also be applicable:

                                       -5-

<PAGE>

                           (i) Record  Date.  In case the  Company  shall take a
record of the holders of its Common Stock for the purpose of entitling  them (A)
to  receive a  dividend  or other  distribution  payable  in Common  Stock or in
securities  convertible or  exchangeable  into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into  shares of Common  Stock,  then such  record date shall be deemed to be the
date of the  issue or sale of the  shares of  Common  Stock  deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution  or the  date of the  granting  of such  right of  subscription  or
purchase, as the case may be.

                           (ii) Treasury Shares.  The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company,  and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

                  (g) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.

                  (h)  Whenever  the  Exercise  Price is  adjusted  pursuant  to
Section  8(c)  above,  the Holder,  after  receipt of the  determination  by the
Appraiser,  shall have the right to select an additional  appraiser (which shall
be a nationally  recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments  recommended by each of the Appraiser
and such appraiser.  The Holder shall promptly mail or cause to be mailed to the
Company,  a notice  setting forth the Exercise  Price after such  adjustment and
setting forth a brief  statement of the facts  requiring such  adjustment.  Such
adjustment  shall become effective  immediately  after the record date mentioned
above.

                  (i)      If:

                                 (i)     the  Company  shall  declare a dividend
                                         (or  any  other  distribution)  on  its
                                         Common Stock; or

                                 (ii)    the  Company  shall  declare  a special
                                         nonrecurring  cash  dividend  on  or  a
                                         redemption of its Common Stock; or

                                 (iii)   the   Company   shall   authorize   the
                                         granting  to all  holders of the Common
                                         Stock  rights or warrants to  subscribe
                                         for or  purchase  any shares of capital
                                         stock of any class or of any rights; or

                                 (iv)    the approval of any stockholders of the
                                         Company shall be required in connection
                                         with any reclassification of the Common
                                         Stock,  any  consolidation or merger to
                                         which the Company is a party,  any sale
                                         or transfer of all or substantially all
                                         of the  assets of the  Company,  or any
                                         compulsory share

                                       -6-

<PAGE>

                                         exchange  whereby  the Common  Stock is
                                         converted into other  securities,  cash
                                         or property; or

                                 (v)     the   Company   shall   authorize   the
                                         voluntary  dissolution,  liquidation or
                                         winding  up  of  the   affairs  of  the
                                         Company,

then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register,  at least 20 calendar days prior
to the  applicable  record or effective  date  hereinafter  specified,  a notice
stating  (x) the date on which a record is to be taken for the  purpose  of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken,  the date as of which  the  holders  of  Common  Stock of record to be
entitled to such dividend, distributions,  redemption, rights or warrants are to
be  determined  or (y) the date on which such  reclassification,  consolidation,
merger,  sale,  transfer or share  exchange is expected to become  effective  or
close,  and the date as of which it is expected  that holders of Common Stock of
record  shall  be  entitled  to  exchange  their  shares  of  Common  Stock  for
securities,  cash or other  property  deliverable  upon  such  reclassification,
consolidation,  merger, sale, transfer, share exchange, dissolution, liquidation
or winding up;  provided,  however,  that the failure to mail such notice or any
defect  therein or in the mailing  thereof  shall not affect the validity of the
corporate action required to be specified in such notice.

         9. Payment of Exercise  Price.  The Holder shall pay the Exercise Price
in one of the following manners:

            (a) Cash  Exercise.  The Holder may  deliver  immediately  available
funds; or

            (b) Cashless Exercise.  The Holder may surrender this Warrant to the
Company together with a notice of cashless exercise,  in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:

                X = Y [(A-B)/A] where:
                X = the number of Warrant Shares to be issued
                to the Holder.

                Y = the  number of  Warrant  Shares  with  respect to
                which this Warrant is being exercised.

                A = the  average of the  closing  sale  prices of the
                Common   Stock   for  the  five  (5)   trading   days
                immediately  prior to (but not including) the Date of
                Exercise.

                B = the Exercise Price.

                                       -7-

<PAGE>

For purposes of Rule 144  promulgated  under the Securities Act, it is intended,
understood  and  acknowledged  that the  Warrant  Shares  issued  in a  cashless
exercise  transaction  shall be deemed to have been acquired by the Holder,  and
the  holding  period  for the  Warrant  Shares  shall  be  deemed  to have  been
commenced, on the issue date.

         10.      Certain Exercise Restrictions.

                  (a) A Holder may not exercise  this Warrant to the extent such
exercise  would  result in the  Holder,  together  with any  affiliate  thereof,
beneficially  owning (as  determined  in  accordance  with Section  13(d) of the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act") and the rules
promulgated  thereunder) in excess of 4.999% of the then issued and  outstanding
shares of Common Stock, including shares issuable upon such exercise and held by
such Holder  after  application  of this  Section.  Since the Holder will not be
obligated  to report to the Company the number of shares of Common  Stock it may
hold at the time of an exercise  hereunder,  unless the  exercise at issue would
result in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding  shares of Common Stock without regard to any other shares which may
be beneficially  owned by the Holder or an affiliate  thereof,  the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular  exercise  hereunder and to the extent
that  the  Holder  determines  that the  limitation  contained  in this  Section
applies, the determination of which portion of this Warrant is exercisable shall
be the  responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election  to Purchase  for a number of Warrant  Shares  that,  without
regard to any other shares that the Holder or its  affiliates  may  beneficially
own, would result in the issuance in excess of the permitted  amount  hereunder,
the Company  shall  notify the Holder of this fact and shall honor the  exercise
for the maximum  portion of this Warrant  permitted to be exercised on such Date
of Exercise in accordance with the periods  described  herein and, at the option
of the Holder,  either keep the portion of the Warrant  tendered for exercise in
excess of the permitted  amount  hereunder  for future  exercises or return such
excess portion of the Warrant to the Holder.  The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other  Holder)  upon
not less  than 61 days  prior  notice to the  Company.  Other  Holders  shall be
unaffected by any such waiver.

                  (b) A Holder may not exercise  this Warrant to the extent such
exercise  would  result in the  Holder,  together  with any  affiliate  thereof,
beneficially  owning (as  determined  in  accordance  with Section  13(d) of the
Exchange Act and the rules  promulgated  thereunder)  in excess of 9.999% of the
then issued and outstanding  shares of Common Stock,  including  shares issuable
upon such  exercise and held by such Holder after  application  of this Section.
Since the Holder  will not be  obligated  to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,  unless
the  exercise at issue would result in the issuance of shares of Common Stock in
excess of 9.999% of the then  outstanding  shares of Common Stock without regard
to any  other  shares  which  may be  beneficially  owned  by the  Holder  or an
affiliate  thereof,  the  Holder  shall have the  authority  and  obligation  to
determine  whether the  restriction  contained  in this  Section  will limit any
particular  exercise hereunder and to the extent that the Holder determines that
the limitation  contained in this Section  applies,  the  determination of which
portion of this Warrant is

                                       -8-

<PAGE>

exercisable  shall be the  responsibility  and obligation of the Holder.  If the
Holder has  delivered a Form of  Election  to  Purchase  for a number of Warrant
Shares  that,  without  regard  to any  other  shares  that  the  Holder  or its
affiliates may  beneficially  own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the exercise for the maximum portion of this Warrant permitted to be
exercised  on such Date of Exercise  in  accordance  with the periods  described
herein and, at the option of the Holder,  either keep the portion of the Warrant
tendered for exercise in excess of the  permitted  amount  hereunder  for future
exercises  or return  such  excess  portion of the  Warrant to the  Holder.  The
provisions  of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.

         11.  Fractional  Shares.  The Company shall not be required to issue or
cause to be issued  fractional  Warrant  Shares on the exercise of this Warrant.
The number of full Warrant  Shares which shall be issuable  upon the exercise of
this Warrant shall be computed on the basis of the  aggregate  number of Warrant
Shares purchasable on exercise of this Warrant so presented.  If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this  Warrant,  the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.

         12. Notices.  Any and all notices or other communications or deliveries
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 6:30 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
Section  later than 6:30 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 nationally recognized overnight courier service,
or (iv) upon  actual  receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
5847 San Felipe,  Suite 900, Houston,  Texas 77057,  facsimile:  (713) 783-6003,
attention Chief Financial  Officer,  or (ii) if to the Holder,  to the Holder at
the address or facsimile  number appearing on the Warrant Register or such other
address  or  facsimile  number as the  Holder  may  provide  to the  Company  in
accordance with this Section.

         13. Warrant Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon thirty days' notice to the Holder,  the Company may appoint a new
warrant agent.  Any corporation  into which the Company or any new warrant agent
may be merged or any corporation  resulting from any  consolidation to which the
Company or any new warrant  agent shall be a party or any  corporation  to which
the  Company  or  any  new  warrant  agent  transfers  substantially  all of its
corporate trust or shareholders  services  business shall be a successor warrant
agent under this Warrant  without any further act.  Any such  successor  warrant
agent shall  promptly  cause  notice of its  succession  as warrant  agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

                                       -9-

<PAGE>

         14.      Miscellaneous.

                  (a) This Warrant  shall be binding on and inure to the benefit
of the parties hereto and their respective  successors and assigns. This Warrant
may be amended  only in writing  signed by the  Company and the Holder and their
successors and assigns.

                  (b) Subject to Section 14(a),  above,  nothing in this Warrant
shall be construed to give to any person or  corporation  other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant  shall inure to the sole and  exclusive  benefit of the Company and
the Holder.

                  (c) The corporate  laws of the State of Delaware  shall govern
all issues  concerning the relative rights of the Company and its  stockholders.
All other  questions  concerning the  construction,  validity,  enforcement  and
interpretation  of this Warrant  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.  The Company and the Holder hereby
irrevocably submit 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,  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,  or that such suit,
action or  proceeding  is  improper.  Each of the Company and the Holder  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit,  action or  proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this  instrument
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.

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

                  (e) In case any one or more of the  provisions of this Warrant
shall  be  invalid  or   unenforceable   in  any   respect,   the  validity  and
enforceability  of the remaining  terms and provisions of this Warrant shall not
in any way be affected or impaired  thereby and the parties will attempt in good
faith  to  agree  upon a  valid  and  enforceable  provision  which  shall  be a
commercially  reasonable  substitute  therefor,  and  upon  so  agreeing,  shall
incorporate such substitute provision in this Warrant.

                                      -10-

<PAGE>

         IN WITNESS  WHEREOF,  the Company  has caused  this  Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                              TIDEL TECHNOLOGIES, INC.

                              By:_____________________________________
                              Name:    James T. Rash
                              Title:   President and Chief Executive Officer

<PAGE>

                          FORM OF ELECTION TO PURCHASE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

To Tidel Technologies, Inc.:

         The undersigned  hereby  irrevocably  elects to purchase  _____________
shares of common stock,  $.01 par value per share, of Tidel  Technologies,  Inc.
(the "Common Stock") and , if such Holder is not utilizing the cashless exercise
provisions  set forth in this  Warrant,  encloses  herewith  $________  in cash,
certified or official bank check or checks,  which sum  represents the aggregate
Exercise  Price (as defined in the  Warrant)  for the number of shares of Common
Stock to which this Form of  Election  to Purchase  relates,  together  with any
applicable taxes payable by the undersigned pursuant to the Warrant.

         The  undersigned  requests that  certificates  for the shares of Common
Stock issuable upon this exercise be issued in the name of

                                   PLEASE INSERT SOCIAL SECURITY OR
                                   TAX IDENTIFICATION NUMBER

                                   -----------------------------------------

--------------------------------------------------------------------------------
                         (Please print name and address)

Dated:            ,             Name of Holder:

                                     (Print)______________________________

                                     (By:)_______________________________
                                     (Name:)
                                     (Title:)
                                     (Signature must conform in all respects to
                                     name of holder as specified on the face of
                                     the Warrant)

<PAGE>

                               FORM OF ASSIGNMENT

           [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto  ________________________________  the  right  represented  by  the  within
Warrant to purchase  ____________  shares of Common Stock of Tidel Technologies,
Inc. to which the within Warrant relates and appoints  ________________ attorney
to transfer said right on the books of Tidel Technologies,  Inc. with full power
of substitution in the premises.

Dated:

---------------, ----

                             ---------------------------------------
                             (Signature must conform in all respects to name of
                             holder as specified on the face of the Warrant)

                             ---------------------------------------
                             Address of Transferee

                             ---------------------------------------

                             ---------------------------------------

In the presence of:

--------------------------

<PAGE>

                                     Annex A

             Number of Warrant                            Number of Warrant
            Shares Available to    Number of Warrant     Shares Remaining to
Date           be Exercised        Shares Exercised         be Exercised

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