Document:

CONVERTIBLE DEBENTURE PURCHASE AGREEMENT

                                      Among

                            TIDEL TECHNOLOGIES, INC.

                                       and

                         THE INVESTORS SIGNATORY HERETO

                          Dated as of September 8, 2000

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

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

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

                                    ARTICLE I
                                PURCHASE AND SALE

            1.1    The Closing

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

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

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transfer to an account  designated  in writing by the Company for such  purpose,
and (2) an executed Registration Rights Agreement.

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

            1.2  Certain   Defined  Terms.   For  purposes  of  this  Agreement,
"Conversion  Price,"  "Original  Issue  Date" and  "Trading  Day" shall have the
meanings set forth in the  Debentures;  "Business Day" shall mean any day except
Saturday,  Sunday  and any day which  shall be a federal  legal  holiday  in the
United States or a day on which banking institutions in the State of New York or
Texas are authorized or required by law or other governmental action to close; A
"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated  association,  joint venture,  limited liability  company,  joint
stock company,  government (or an agency or subdivision thereof) or other entity
of any kind.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

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

                 (a)   Organization   and   Qualification.   The  Company  is  a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of Delaware with the requisite  corporate  power and authority
to own and use its  properties  and  assets  and to  carry  on its  business  as
currently conducted.  The Company has no subsidiaries other than as set forth in
Schedule  2.1(a)  (collectively  the  "Subsidiaries").  Except  as set  forth in
Schedule 2.1 (a), each of the  Subsidiaries is an entity,  duly  incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its  incorporation  or organization  (as  applicable),  with the
requisite  power and authority to own and use its  properties  and assets and to
carry on its  business  as  currently  conducted.  Each of the  Company  and the
Subsidiaries  is duly  qualified  to do  business  and is in good  standing as a
foreign  corporation or other entity in each jurisdiction in which the nature of
the  business  conducted  or  property  owned  by it  makes  such  qualification
necessary,  except where the failure to be so qualified or in good standing,  as
the case may be, could not,  individually  or in the  aggregate,  (x)  adversely
affect the legality,  validity or  enforceability  of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Transfer
Agent  Instructions,   the  Debentures  or  the  Warrants   (collectively,   the
"Transaction Documents"), (y) have or result in a material adverse effect on the
results of  operations,  assets,  or condition  (financial  or otherwise) of the
Company and the  Subsidiaries,  taken as a whole,  or (z)  adversely  impair the
Company's  ability to perform fully on a timely basis its obligations  under any
of the  Transaction  Documents  (any of (x),  (y) or (z),  a  "Material  Adverse
Effect").

                 (b) Authorization;  Enforcement.  The Company has the requisite
corporate

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

                 (c)  Capitalization.  The  number  of  authorized,  issued  and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except
as disclosed in Schedule  2.1(c),  the Company owns all of the Capital  Stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights,  nor is any  holder  of  the  securities  of  the  Company  entitled  to
preemptive or similar rights arising out of any agreement or understanding  with
the Company by virtue of any of the Transaction Documents. Except as a result of
the purchase and sale of the Debentures and the Warrants and except as disclosed
in Schedule 2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities,  rights or  obligations  convertible  into or  exchangeable  for, or
giving any Person any right to  subscribe  for or acquire,  any shares of Common
Stock, or contracts,  commitments,  understandings, or arrangements by which the
Company or any Subsidiary is or may become bound to issue  additional  shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock.  The issue and sale of the Shares,  Warrants or Underlying  Shares
(as hereinafter defined) will not obligate the Company to issue shares of Common
Stock or other  securities  to any Person other than the  Purchaser and will not
result in a right of any holder of Company  securities to adjust the exercise or
conversion or reset price under such securities.

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

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accordance with the Debentures and the Warrants,  the Underlying  Shares will be
duly authorized, validly issued, fully paid and nonassessable, free and clear of
all liens,  encumbrances and rights of first refusal of any kind  (collectively,
"Liens").

                 (e) No Conflicts.  The execution,  delivery and  performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  thereby do not and will not (i) conflict with or
violate any  provision  of the  Company's  or any  Subsidiary's  certificate  or
articles of  incorporation,  bylaws or other charter  documents (each as amended
through the date hereof),  or (ii) subject to obtaining  the Required  Approvals
(as defined  below),  conflict  with, or constitute a default (or an event which
with notice or lapse of time or both would become a default)  under,  or give to
others any rights of termination,  amendment, acceleration or cancellation (with
or without notice,  lapse of time or both) of, any agreement,  credit  facility,
debt or other instrument  (evidencing a Company or Subsidiary debt or otherwise)
or other  understanding  to which the Company or any Subsidiary is a party or by
which  any  property  or  asset of the  Company  or any  Subsidiary  is bound or
affected,  or (iii) result in a violation of any law, rule,  regulation,  order,
judgment,  injunction,  decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company  or a  Subsidiary  is bound or  affected;  except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate,  have or
result in a Material  Adverse  Effect.  The business of the Company is not being
conducted in violation of any law,  ordinance or regulation of any  governmental
authority,  except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.

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

                 (g) Litigation; Proceedings. There is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the knowledge of
the  Company,  threatened  against  or  affecting  the  Company  or  any  of its
Subsidiaries  or any of their  respective  properties  before  or by any  court,
arbitrator,  governmental  or  administrative  agency  or  regulatory  authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or

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

                 (h) No  Default  or  Violation.  Neither  the  Company  nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived  which,  with  notice or lapse of time or both,  would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in  violation  of, any  indenture,  loan or credit  agreement or any other
agreement  or  instrument  to  which  it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court,  arbitrator
or  governmental  body,  or  (iii)  is in  violation  of any  statute,  rule  or
regulation of any governmental  authority,  in each case of clauses (i), (ii) or
(iii)  above,  except as could not  individually  or in the  aggregate,  have or
result in a Material Adverse Effect.

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

                 (j) SEC Documents;  Financial Statements. The Company has filed
all reports  required  to be filed by it under the  Securities  Exchange  Act of
1934,  as amended (the  "Exchange  Act"),  including,  without  limitation,  all
filings required pursuant to Sections 13(a) and 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively  referred
to  herein as the "SEC  Documents"  and,  together  with the  Schedules  to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC  Documents  prior to
the expiration of any such  extension.  As of their  respective  dates,  the SEC
Documents  complied  in all  material  respects  with  the  requirements  of the
Securities  Act  and the  Exchange  Act and the  rules  and  regulations  of the
Commission promulgated  thereunder,  and none of the SEC Documents,  when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated  therein or necessary in order to make the statements
therein,  in  light  of the  circumstances  under  which  they

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were made,  not  misleading.  All material  agreements to which the Company is a
party or to which the  property or assets of the  Company are subject  have been
filed as exhibits to the SEC  Documents as required  under the Exchange Act. The
financial  statements of the Company included in the SEC Documents comply in all
material  respects with  applicable  accounting  requirements  and the rules and
regulations of the Commission  with respect  thereto as in effect at the time of
filing.  Such  financial  statements  have  been  prepared  in  accordance  with
generally  accepted  accounting  principles applied on a consistent basis during
the periods  involved  ("GAAP"),  except as may be  otherwise  specified in such
financial  statements or the notes  thereto,  and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial,   year-end  audit  adjustments.  Since  June  30,  2000,  except  as
specifically  disclosed  in the SEC  Documents,  (a)  there  has been no  event,
occurrence or  development  that has or that could result in a Material  Adverse
Effect,  (b) the  Company  has  not  incurred  any  liabilities  (contingent  or
otherwise)  other  than (x)  liabilities  incurred  in the  ordinary  course  of
business  consistent  with past practice and (y)  liabilities not required to be
reflected in the Company's financial  statements pursuant to GAAP or required to
be  disclosed  in filings  made with the  Commission,  (c) the  Company  has not
altered its method of  accounting  or the  identity of its  auditors and (d) the
Company has not  declared or made any payment or  distribution  of cash or other
property to its  stockholders or officers or directors (other than in compliance
with existing  Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.

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

                 (l)  Certain  Fees.  Except  for  certain  fees  payable by the
Company to Value Investing  Partners,  Inc. pursuant to that certain  engagement
letter  dated  August 8,  2000,  no fees or  commissions  will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment  banker,  bank or  other  Person  with  respect  to the  transactions
contemplated  by this  Agreement.  The Purchasers  shall have no obligation with
respect to any fees or with  respect to any claims made by or on behalf of other
Persons  for  fees of a type  contemplated  in this  Section  that may be due in
connection with the  transactions  contemplated  by this Agreement.  The Company
shall indemnify and hold harmless the  Purchasers,  their  employees,  officers,
directors,  agents,  and partners,  and their  respective  Affiliates,  from and
against all claims,  losses,  damages, costs (including the costs of preparation
and  attorney's  fees) and  expenses  suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.

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

                 (n) Form S-3  Eligibility.  The Company is eligible to register
securities for

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resale under Form S-3 promulgated under the Securities Act.

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

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

                 (q) Listing and Maintenance Requirements Compliance.  Except as
set forth in the SEC Documents,  the Company has not, in the two years preceding
the date hereof,  received notice (written or oral) from the NASDAQ or any stock
exchange,  market or trading  facility on which the Common  Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, market
or trading  facility.  The Company is, and has no reason to believe that it will
not in the  foreseeable  future  continue  to be,  in  compliance  with all such
listing and maintenance requirements.

                 (r) Patents and  Trademarks.  The Company and its  Subsidiaries
have,  or have rights to use,  all  patents,  patent  applications,  trademarks,
trademark  applications,  service marks, trade names,  copyrights,  licenses and
rights  which  are  necessary  or  material  for use in  connection  with  their
respective businesses as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect  (collectively,  the  "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice  that  the  Intellectual  Property  Rights  used  by the  Company  or its
Subsidiaries  violates or infringes  upon the rights of any Person.  To the best
knowledge of the Company, all such Intellectual  Property Rights are enforceable
and  there  is no  existing  infringement  by  another  Person  of  any  of  the
Intellectual Property Rights.

                 (s) Registration Rights; Rights of Participation. Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted  or agreed to grant to any Person  any  rights  (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other  governmental  authority  which has not been  satisfied.
Except as set forth on Schedule 6(b) to the Registration  Rights  Agreement,  no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to  participate  in the  transactions  contemplated  by the
Transaction Documents.

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

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

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

                 (w)  Disclosure.  The Company  confirms that neither it nor any
other  Person  acting on its behalf has provided  any of the  Purchasers  or its
agents or counsel with any  information  that  constitutes  or might  constitute
material non-public  information.  The Company understands and confirms that the
Purchasers  shall be  relying  on the  foregoing  representations  in  effecting
transactions  in  securities  of the  Company.  All  disclosure  provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement,  furnished by or on behalf of
the Company are true and  correct and do not contain any untrue  statement  of a
material fact or omit to state any material fact  necessary in order to make the
statements  made therein,  in light of the  circumstances  under which they were
made, not misleading.

            2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other  Purchaser  represents  and  warrants  to the
Company as follows:

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

                 (b)  Investment   Intent.   Such  Purchaser  is  acquiring  the
Securities as principal for its own account for investment purposes only and not
with a view to or for  distributing  or reselling  such  Securities  or any part
thereof,  without prejudice,  however, to such Purchaser's right, subject to the
provisions of this Agreement,  the Registration Rights Agreement, the Debentures
and the Warrant, at all times to sell or otherwise dispose of all or any part of
such

<PAGE>

Securities pursuant to an effective  registration statement under the Securities
Act or  under  an  exemption  from  such  registration  and in  compliance  with
applicable  federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold the Securities for
any period of time. Such Purchaser is acquiring the Securities  hereunder in the
ordinary  course of its business.  Such Purchaser does not have any agreement or
understanding,  directly  or  indirectly,  with any  Person  to  distribute  the
Securities.

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

                 (d) Experience of such Purchaser. Such Purchaser,  either alone
or together with its  representatives,  has such knowledge,  sophistication  and
experience in business and  financial  matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.

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

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

                 (g) General Solicitation.  Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other  communication  regarding  the  Securities  published  in  any  newspaper,
magazine or similar media or broadcast over  television or radio or presented at
any seminar or any other general solicitation or general advertisement.

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

<PAGE>

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

                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

            3.1 Transfer  Restrictions.  (a) The Securities may only be disposed
of pursuant to an effective  registration  statement under the Securities Act or
pursuant to an available  exemption from or in a transaction  not subject to the
registration  requirements  of the  Securities  Act, and in compliance  with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective  registration statement or to the
Company,  except as  otherwise  set forth  herein,  the  Company may require the
transferor  thereof to provide to the Company an opinion of counsel  selected by
the  transferor,  the form and  substance of which  opinion  shall be reasonably
satisfactory  to the Company,  to the effect that such transfer does not require
registration of such  transferred  Securities under the Securities Act. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser  under this Agreement and the  Registration
Rights Agreement.

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

                        NEITHER THESE  SECURITIES NOR THE SECURITIES  INTO WHICH
            THESE   SECURITIES  ARE   [CONVERTIBLE]   [EXERCISABLE]   HAVE  BEEN
            REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
            SECURITIES  COMMISSION  OF ANY STATE IN RELIANCE  UPON AN  EXEMPTION
            FROM REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
            "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE  OFFERED OR SOLD
            EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
            SECURITIES ACT OR PURSUANT TO AN AVAILABLE  EXEMPTION  FROM, OR IN A
            TRANSACTION  NOT SUBJECT TO, THE  REGISTRATION  REQUIREMENTS  OF THE
            SECURITIES ACT AND IN ACCORDANCE  WITH APPLICABLE  STATE  SECURITIES
            LAWS.

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

<PAGE>

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

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

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

            3.4  Integration.  The  Company  shall  not,  and shall use its best
efforts to ensure that, no Affiliate of the Company shall,  sell, offer for sale
or solicit  offers to buy or otherwise  negotiate in respect of any security (as
defined in Section 2 of the  Securities  Act) that would be integrated  with the
offer or sale of the Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchasers.

            3.5 Increase in Authorized  Shares. If on any date the Company would
be,  if a  notice  of  conversion  or  exercise  (as the case may be) were to be
delivered  on such  date,  precluded  from  issuing  (a) 175% of the  number  of
Underlying  Shares as would then be issuable  upon a

<PAGE>

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

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

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

            3.7   Conversion  and  Exercise   Procedures.   The  Transfer  Agent
Instructions,  the

<PAGE>

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

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

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

                (b) Subject to Section  3.9(d) and (e),  the Company  shall not,
directly or indirectly,  offer, sell, grant any option to purchase, or otherwise
dispose of (or  announce  any offer,  sale,  grant or any option to  purchase or
other  disposition)  any  of  its  equity  or  equity-equivalent  securities  or
securities  of  any of its  Affiliates  that  are  exchangeable  or  convertible
(directly or indirectly)  for shares of Common Stock,  including the issuance of
any debt or other instrument at any time over the life thereof  convertible into
or exchangeable for Common Stock (collectively,  a "Subsequent  Placement") from
the date  hereof  until  the  expiration  of the  180th  Trading  Day  after the
Effective  Date,  unless (A) the Company  delivers to each of the  Purchasers  a
written notice (the  "Subsequent  Placement  Notice") of its intention to effect
such Subsequent  Placement,  which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder,  the Person with whom such Subsequent
Placement  shall be  effected,  and  attached  to which shall be a term sheet or
similar document relating thereto and (B) such Purchaser shall not have notified
the Company by 6:00 p.m. (New York City time) on the tenth Trading Day after its
receipt of the Subsequent  Placement Notice of its willingness to provide (or to
cause  its  sole  designee  to  provide),  subject  to  completion  of  mutually
acceptable  documentation,  financing to the Company on the same terms set forth
in the Subsequent  Placement  Notice. If the Purchasers shall fail to notify the
Company of their  intention  to enter into such  negotiations  within  such time
period, the Company may effect the Subsequent  Placement  substantially upon the
terms  and to the  Persons  (or  Affiliates  of such  Persons)  set forth in the
Subsequent  Placement  Notice;  provided,  that the  Company  shall  provide the
Purchasers with a second Subsequent  Placement Notice,  and the Purchasers shall
again have the right of first refusal set forth above in this  paragraph (a), if
the Subsequent  Placement  subject to the initial  Subsequent  Placement  Notice
shall not have been  consummated  for any  reason on the terms set forth in such
Subsequent  Placement  Notice  within thirty (30) Trading Days after the date of
the initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person)  identified in the Subsequent  Placement Notice. If the Purchasers shall
indicate a willingness to

<PAGE>

provide financing in excess of the amount set forth in the Subsequent  Placement
Notice,  then each Purchaser shall be entitled to provide financing  pursuant to
such  Subsequent  Placement  Notice  up to an amount  equal to such  Purchaser's
pro-rata portion of the aggregate  principal  amount of Debentures  purchased by
such Purchaser  under this  Agreement,  but the Company shall not be required to
accept  financing  from the  Purchasers in an amount in excess of the amount set
forth in the Subsequent Placement Notice.

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

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

                (e) The restrictions  contained in Section 3.9(a) and (b) above,
shall not  apply to (i)  issuances  pursuant  to a grant or  exercise  of stock,
warrants  or options  which may  hereafter  be granted  or  exercised  under any
employee or director  benefit  plan or  compensation  program of the Company now
existing or to be  implemented in the future and (ii) issuances of Common Stock,
for an  aggregate  market  price of up to  $2,000,000,  pursuant  to a Strategic
Transaction  (as  defined  herein).  A  "Strategic  Transaction"  shall  mean  a
transaction or  relationship  in which the Company issues shares of Common Stock
to a Person which is, itself or through its  subsidiaries,  an operating company
in a business  synergistic  with the  business  of the  Company and in which the
Company receives  material  benefits in addition to the investment of funds, but
shall not  include a  transaction  in which the  Company is  issuing  securities
primarily  for the  purpose of raising  capital  or to an entity  whose  primary
business is investing in securities.

            3.10 Certain  Securities Laws  Disclosures;  Publicity.  The Company
shall: (i) on the Closing Date, issue a press release  reasonably  acceptable to
the Purchasers  disclosing the transactions  contemplated hereby, (ii) file with
the  Commission a Report on Form 8-K disclosing  the  transactions  contemplated
hereby within ten Business  Days after the Closing  Date,  and (iii) timely file
with the Commission a Form D promulgated  under the Securities  Act. The Company
shall,  no less than two  Business  Days prior to the  filing of any  disclosure
required  by  clauses  (ii)

<PAGE>

and (iii) above,  provide a copy thereof to the Purchasers for their review. The
Company and the  Purchasers  shall  consult with each other in issuing any other
press  releases  or  otherwise  making  public  statements  or filings and other
communications  with the Commission or any regulatory  agency or stock market or
trading  facility  with  respect  to the  transactions  contemplated  hereby and
neither  party shall  issue any such press  release or  otherwise  make any such
public  statement,  filings or other  communications  without the prior  written
consent of the other, except that if such disclosure is required by law or stock
market  regulation,  in which  such case the  disclosing  party  shall  promptly
provide the other party with prior  notice of such public  statement,  filing or
other  communication.  Notwithstanding  the  foregoing,  the  Company  shall not
publicly  disclose  the names of the  Purchasers,  or  include  the names of the
Purchasers in any filing with the Commission,  or any regulatory agency, trading
facility or stock market  without the prior written  consent of the  Purchasers,
except  to  the  extent  such  disclosure  (but  not  any  disclosure  as to the
controlling Persons thereof) is required by law or stock market regulations,  in
which case the Company  shall provide the  Purchasers  with prior notice of such
disclosure.

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

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

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

<PAGE>

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

                                   ARTICLE IV
                                  MISCELLANEOUS

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

            4.2  Entire  Agreement;   Amendments.   The  Transaction  Documents,
together   with  the  Exhibits  and   Schedules   thereto  and  Transfer   Agent
Instructions,  contain the entire  understanding  of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written,  with respect to such  matters,  which the parties  acknowledge
have been merged into such documents, exhibits and schedules.

            4.3  Notices.  Any  and  all  notices  or  other  communications  or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (i) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this Section  prior to 6:00 p.m. (New
York City  time) on a  Business  Day,  (ii) the  Business  Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m.  (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by U.S.
nationally  recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as follows:

<PAGE>

         If to the Company:    Tidel Technologies, Inc.
                               5847 San Felipe, Suite 900
                               Houston, Texas 77057
                               Facsimile No.:  (713) 783-6003
                               Attn: Chief Financial Officer

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

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

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

            4.4  Amendments;  Waivers.  No  provision of this  Agreement  may be
waived  or  amended  except in a written  instrument  signed,  in the case of an
amendment,  by the Company and Purchasers  which have purchased no less than 2/3
of the  Debentures  hereunder or, in the case of a waiver,  by the party against
whom  enforcement  of any such waiver is sought.  No waiver of any default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed  to be a  continuing  waiver  in the  future  or a  waiver  of any  other
provision,  condition or requirement  hereof, nor shall any delay or omission of
either party to exercise any right  hereunder in any manner  impair the exercise
of any such right accruing to it thereafter.

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

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

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

            4.8  Governing  Law.  All  questions  concerning  the  construction,
validity,  enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party hereby irrevocably submits to the exclusive

<PAGE>

jurisdiction  of the state and federal  courts  sitting in the City of New York,
borough of  Manhattan,  for the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein  (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction  of any such  court,  that  such  suit,  action  or  proceeding  is
improper.  Each party hereby  irrevocably waives personal service of process and
consents  to process  being  served in any such suit,  action or  proceeding  by
mailing a copy thereof via  registered or certified  mail or overnight  delivery
(with  evidence of  delivery) to such party at the address in effect for notices
to it under this  Agreement and agrees that such service shall  constitute  good
and sufficient  service of process and notice thereof.  Nothing contained herein
shall be  deemed to limit in any way any right to serve  process  in any  manner
permitted by law.

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

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

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

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

            4.13 Independent  Nature of Purchasers'  Obligations and Rights. The
obligations of each Purchaser under any Transaction  Document is several and not
joint with the  obligations  of any other  Purchaser  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a

<PAGE>

joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers are in any way acting in concert with respect to such  obligations or
the transactions  contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently  protect and enforce its rights,  including without
limitation  the  rights  arising  out of  this  Agreement  or  out of the  other
Transaction Documents,  and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES FOLLOWS]

<PAGE>

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

                                        TIDEL TECHNOLOGIES, INC.

                                        By:_____________________________________
                                         Name:
                                         Title:

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

<PAGE>

                          MONTROSE INVESTMENTS LTD.

                          By:_____________________________________
                           Name:
                           Title:

                           Purchase Price:         $15,000,000

                           Address for Notice:

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

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

         This  Registration  Rights  Agreement  (this  "Agreement")  is made and
entered into as of September 8, 2000, among Tidel Technologies, Inc., a Delaware
corporation  (the  "Company"),  and the  investors  signatory  hereto (each such
investor  is a  "Purchaser"  and  all  such  investors  are,  collectively,  the
"Purchasers").

         This Agreement is made pursuant to the Convertible  Debenture  Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

         The Company and the Purchasers hereby agree as follows:

            1.   Definitions

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

                 "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the  direction  of the  management  and policies of such Person,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms of  "affiliated,"  "controlling"  and  "controlled"  have meanings
correlative to the foregoing.

                 "Business  Day" means any day except  Saturday,  Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York or Texas  generally are authorized or required by law or other
government actions to close.

                 "Closing Date" shall have the meaning set forth in the Purchase
Agreement.

                 "Commission"  means the  Securities  and  Exchange  Commission.

                 "Common  Stock" means the  Company's  common  stock,  $0.01 par
value,  or such  securities  in to which  that such  stock  shall  hereafter  be
reclassified.

                 "Debentures"  means the  Convertible  Debentures  issued to the
Purchasers in accordance with the Purchase Agreement.

                 "Effectiveness   Date"  means  with   respect  to  the  initial
Registration  Statement

<PAGE>

required to be filed  hereunder,  the 90th day  following  the Closing Date and,
with respect to any  additional  Registration  Statements  which may be required
pursuant to Section  3(c),  the 90th day  following  the date that notice of the
requirement  to file such  additional  Registration  Statement is provided.  If,
however,  the  Commission  fails to provide  comments  to or gives a notice that
there will be no review of the  initially  filed  Registration  Statement or any
additional  Registration  Statements within 30 days of the date of filing of the
initial Registration Statement or any additional  Registration  Statements,  the
Effectiveness  Date shall be extended by the number of days beyond 30 days until
such response is received from the Commission.

                 "Effectiveness  Period"  shall  have the  meaning  set forth in
Section 2(a).

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

                 "Filing  Date" means the 30th day  following  the Closing  Date
and,  with  respect  to any  additional  Registration  Statements  which  may be
required  pursuant to Section 3(c),  the 30th day following the date that notice
of the requirement to file such additional Registration Statement is provided.

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

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

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

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

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

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

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

                 "Registrable  Securities"  means (i) the shares of Common Stock
issuable  upon

<PAGE>

conversion  in full of the  Debentures,  and (ii) the  shares  of  Common  Stock
issuable upon exercise in full of the Warrants.

                 "Registration   Statement"   means  the  initial   registration
statement  to be filed  hereunder  and any  additional  registration  statements
contemplated  by  Section  3(c),   including  (in  each  case)  the  Prospectus,
amendments  and  supplements  to  such  registration  statement  or  Prospectus,
including pre- and  post-effective  amendments,  all exhibits  thereto,  and all
material  incorporated by reference or deemed to be incorporated by reference in
such registration statement.

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

                 "Rule  415"  means  Rule  415  promulgated  by  the  Commission
pursuant to the  Securities  Act, as such Rule may be amended from time to time,
or any similar rule or regulation  hereafter  adopted by the  Commission  having
substantially the same effect as such Rule.

                 "Rule  424"  means  Rule  424  promulgated  by  the  Commission
pursuant to the  Securities  Act, as such Rule may be amended from time to time,
or any similar rule or regulation  hereafter  adopted by the  Commission  having
substantially the same effect as such Rule.

                 "Securities  Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.

                 "Special Counsel" means one special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.

                 "Warrants"  shall have the  meaning  set forth in the  Purchase
Agreement.

         2.      Shelf Registration

                 (a) On or prior to each Filing Date,  the Company shall prepare
and file with the  Commission  a "Shelf"  Registration  Statement  covering  the
resale of all Registrable  Securities for an offering to be made on a continuous
basis  pursuant to Rule 415.  The  Registration  Statement  shall be on Form S-3
(except  if the  Company  is not  then  eligible  to  register  for  resale  the
Registrable  Securities on Form S-3, in which case such registration shall be on
another  appropriate form and shall contain (except if otherwise directed by the
Holders)  the "Plan of  Distribution"  attached  hereto as Annex A. The  Company
shall use its best  efforts to cause the  Registration  Statement to be declared
effective  under the  Securities  Act as promptly  as possible  after the filing
thereof,  but in any event prior to the  Effectiveness  Date,  and shall use its
best efforts to keep such Registration  Statement  continuously  effective under
the  Securities  Act until the date which is two years  after the date that such
Registration  Statement is declared  effective by the Commission or such earlier
date when all Registrable Securities covered by such

<PAGE>

Registration Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(k) (the "Effectiveness Period").

                 (b) The initial  Registration  State ment to be filed hereunder
shall  include  (but not be limited to) a number of shares of Common Stock equal
to no less than the sum of (i) 200% of the  number  of  shares  of Common  Stock
issuable upon conversion in full of the principal amount of Debentures issued on
such  Closing  Date,  assuming no interest is paid thereon in cash and that such
Debentures remain  outstanding for four years and that such conversion  occurred
at a price equal to the Conversion Price (as defined in the Debentures) and (ii)
the  number of shares of Common  Stock  issuable  upon  exercise  in full of the
Warrants issued as of the Closing Date.

                 (c) If (a) a Registration Statement is not filed on or prior to
its Filing  Date (if the  Company  files  such  Registration  Statement  without
affording  the  Holder  the  opportunity  to review  and  comment on the same as
required  by  Section  3(a)  hereof,  the  Company  shall  not be deemed to have
satisfied this clause (a)), or (b) the Company fails to file with the Commission
a request for  acceleration in accordance  with Rule 461  promulgated  under the
Securities  Act,  within  five days of the date  that the  Company  is  notified
(orally  or  in  writing,  whichever  is  earlier)  by  the  Commission  that  a
Registration Statement will not be "reviewed," or not subject to further review,
or (c) a Registration Statement filed hereunder is not declared effective by the
Commission on or prior to its  Effectiveness  Date, or (d) after a  Registration
Statement  is  filed  with  and  declared  effective  by  the  Commission,  such
Registration  Statement ceases to be effective as to all Registrable  Securities
to which it is  required  to relate at any time prior to the  expiration  of the
Effectiveness  Period  without  being  succeeded  within ten Business Days by an
amendment  to  such  Registration  Statement  or  by a  subsequent  Registration
Statement filed with and declared effective by the Commission, or (e) the Common
Stock shall be delisted or suspended from trading on the Nasdaq  National Market
("NASDAQ")  or the New York Stock  Exchange,  American  Stock  Exchange,  or the
Nasdaq SmallCap Market (each, a "Subsequent Market") for more than three Trading
Days (which need not be  consecutive  Trading  Days),  or (f) the  conversion or
exercise  rights of the Holders  pursuant to the  Debentures  and  Warrants  are
suspended for any reason, or (g) an amendment to a Registration Statement is not
filed by the  Company  with  the  Commission  within  ten  Business  Days of the
Commission's  notifying the Company that such amendment is required in order for
such Registration  Statement to be declared effective,  or (h) the Company fails
to respond as  promptly  as  reasonably  possible,  and in any event  within ten
Business Days, to any comments  received from the Commission with respect to the
Registration  Statement  or any  amendment  thereto  (any such failure or breach
being  referred to as an "Event," and for purposes of clauses (a),  (c), (f) the
date on which such Event occurs, or for purposes of clause (b) the date on which
such five day period is  exceeded,  or for  purposes of clauses (d), (g) and (h)
the date which such ten  Business  Day-period  is  exceeded,  or for purposes of
clause (e) the date on which such three Trading  Day-period  is exceeded,  being
referred to as "Event  Date"),  then,  on each such Event Date and every monthly
anniversary  thereof  until the  applicable  Event is cured  (each such date,  a
"Liquidated  Damages  Date"),  the Company shall pay to each Holder an amount in
cash, as liquidated damages and not as a penalty,  equal to 2.0% of the purchase
price paid by such Holder  pursuant to the  Purchase  Agreement.  If the Company
fails to pay any  liquidated  damages  pursuant  to this  Section in full within
seven days after the date  payable,  the Company will pay interest  thereon at a
rate of 15%

<PAGE>

per  annum  (or such  lesser  maximum  amount  that is  permitted  to be paid by
applicable  law) to the  Holder,  accruing  daily from the date such  liquidated
damages are due until such amounts,  plus all such interest thereon, are paid in
full.  The  liquidated  damages  pursuant to the terms  hereof  shall apply on a
pro-rata  basis  for any  portion  of a month  prior  to the  cure of an  Event.
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 pay  liquidated  damages  or other
payments  hereunder in cash 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 each Holder,  with respect to each Liquidated Damages Date: (i)
such liquidated damages or other payments shall be added to the principal amount
outstanding  under the Debentures held by it or (ii) the Company shall, no later
than the third day following the Liquidated Damages Date, deliver to such Holder
a number of shares of Common  Stock equal to the  quotient  obtained by dividing
(A) the amount of such  liquidated  damages or other payments by (B) the average
of the Per Share  Market  Values  (as  defined in the  Debentures)  for the five
Trading Days preceding the Liquidated Damages Date. 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) of the Debentures.

         3.      Registration Procedures

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

                 (a) Not less than five  Business  Days  prior to the  filing of
each  Registration  Statement  or any related  Prospectus  or any  amendment  or
supplement  thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference),  the Company shall, (i) furnish to the
Holders and their Special  Counsel copies of all such  documents  proposed to be
filed,   which  documents  (other  than  those  incorporated  or  deemed  to  be
incorporated  by  reference)  will be subject to the review of such  Holders and
their Special  Counsel,  and (ii) cause its officers and directors,  counsel and
independent  certified public  accountants to respond to such inquiries as shall
be  necessary,  in the  reasonable  opinion of  respective  counsel to conduct a
reasonable  investigation  within the meaning of the Securities Act. The Company
shall  not  file  the  Registration  Statement  or any  such  Prospectus  or any
amendments  or  supplements  thereto to which the  Holders of a majority  of the
Registrable  Securities  and their  Special  Counsel  shall  reasonably  object,
provided,  the Company is notified  of such  objection  no later than 3 Business
Days after the Holders have been so furnished copies of such documents.

                 (b) (i) Prepare and file with the Commission  such  amendments,
including  post-effective  amendments,  to the  Registration  Statement  and the
Prospectus  used  in  connection  therewith  as may be  necessary  to  keep  the
Registration  Statement  continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such  additional  Registration  Statements in order to register for resale under
the Securities  Act all of the  Registrable  Securities;  (ii) cause the related
Prospectus to be amended or

<PAGE>

supplemented by any required  Prospectus  supplement,  and as so supplemented or
amended  to be  filed  pursuant  to Rule  424;  (iii)  respond  as  promptly  as
reasonably possible,  and in any event within ten Business Days, to any comments
received from the Commission with respect to the  Registration  Statement or any
amendment  thereto and as promptly as  reasonably  possible  provide the Holders
true and  complete  copies  of all  correspondence  from  and to the  Commission
relating to the Registration Statement; and (iv) comply in all material respects
with the  provisions of the  Securities Act and the Exchange Act with respect to
the  disposition  of all  Registrable  Securities  covered  by the  Registration
Statement  during the applicable  period in accordance with the intended methods
of disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.

                 (c) File  additional  Registration  Statements if the number of
Registrable Securities at any time exceeds 85% of the number of shares of Common
Stock then registered in all their existing Registration Statements hereunder.

                 (d) Notify the Holders of Registrable Securities to be sold and
their Special  Counsel as promptly as reasonably  possible  (and, in the case of
(i)(A)  below,  not less than five  Business  Days prior to such filing) and (if
requested by any such  Person)  confirm such notice in writing no later than one
Business  Day  following  the day (i)(A)  when a  Prospectus  or any  Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission  notifies the Company whether there will be
a "review" of such Registration  Statement and whenever the Commission  comments
in writing on such  Registration  Statement  (the Company shall provide true and
complete  copies  thereof  and  all  written  responses  thereto  to each of the
Holders);   and  (C)  with  respect  to  the   Registration   Statement  or  any
post-effective  amendment,  when  the  same has  become  effective;  (ii) of any
request by the Commission or any other Federal or state  governmental  authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional  information;  (iii) of the  issuance by the  Commission  of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable  Securities or the initiation of any Proceedings for that
purpose;  (iv) if at any time any of the  representations  and warranties of the
Company  contained in any  agreement  contemplated  hereby ceases to be true and
correct in all  material  respects;  (v) of the  receipt  by the  Company of any
notification  with respect to the suspension of the  qualification  or exemption
from  qualification  of  any of  the  Registrable  Securities  for  sale  in any
jurisdiction,  or the  initiation  or  threatening  of any  Proceeding  for such
purpose;  and (vi) of the  occurrence of any event or passage of time that makes
the financial  statements included in the Registration  Statement ineligible for
inclusion  therein  or any  statement  made  in the  Registration  Statement  or
Prospectus or any document  incorporated or deemed to be incorporated therein by
reference  untrue in any material  respect or that requires any revisions to the
Registration  Statement,  Prospectus or other  documents so that, in the case of
the  Registration  Statement or the Prospectus,  as the case may be, it will not
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading.

                 (e) Promptly  deliver to each Holder and their Special Counsel,
without

<PAGE>

charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus)  and each  amendment  or  supplement  thereto  as such  Persons  may
reasonably  request.  The Company hereby  consents to the use of such Prospectus
and each  amendment  or  supplement  thereto by each of the  selling  Holders in
connection with the offering and sale of the Registrable  Securities  covered by
such Prospectus and any amendment or supplement thereto.

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

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

                 (h) Upon the  occurrence of any event  contemplated  by Section
3(d)(vi), as promptly as reasonably possible, prepare a supplement or amendment,
including  a  post-effective  amendment,  to  the  Registration  Statement  or a
supplement to the related  Prospectus or any document  incorporated or deemed to
be incorporated  therein by reference,  and file any other required  document so
that,  as  thereafter  delivered,  neither the  Registration  Statement nor such
Prospectus will contain an untrue  statement of a material fact or omit to state
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein,  in light of the circumstances  under which they were made,
not misleading.

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

                 4. Registration Expenses. All fees and expenses incident to the
performance  of or compliance  with this Agreement by the Company shall be borne
by the Company  whether or not any  Registrable  Securities are sold pursuant to
the Registration  Statement.  The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including,  without  limitation,  fees and expenses (A) with respect to filings
required  to be made  with the  NASDAQ  and any  Subsequent  Market on which the
Common Stock is then listed for trading,  and (B) in compliance  with applicable
state  securities  or Blue Sky laws  (including,  without  limitation,  fees and
disbursements   of  counsel  for  the  Company  in  connection   with  Blue  Sky
qualifications or exemptions of the Registrable  Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of

<PAGE>

such  jurisdictions  as  requested  by the  Holders)),  (ii)  printing  expenses
(including,   without   limitation,   expenses  of  printing   certificates  for
Registrable  Securities and of printing prospectuses  requested by the Holders),
(iii) messenger,  telephone and delivery expenses of the Company,  (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders and
(v) fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement.

         5.      Indemnification

                 (a)   Indemnification  by  the  Company.   The  Company  shall,
notwithstanding  any termination of this Agreement,  indemnify and hold harmless
each Holder,  the officers,  directors,  agents,  brokers (including brokers who
offer and sell  Registrable  Securities  as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them,  each Person who controls any such Holder (within
the meaning of Section 15 of the  Securities  Act or Section 20 of the  Exchange
Act) and the officers,  directors, agents and employees of each such controlling
Person,  to the fullest extent permitted by applicable law, from and against any
and  all  losses,  claims,  damages,  liabilities,   costs  (including,  without
limitation,   costs  of   preparation   and   attorneys'   fees)  and   expenses
(collectively,  "Losses"), as incurred, arising out of or relating to any untrue
or alleged  untrue  statement of a material fact  contained in the  Registration
Statement,  any  Prospectus  or any form of  prospectus  or in any  amendment or
supplement  thereto  or in any  preliminary  prospectus,  or  arising  out of or
relating to any omission or alleged  omission of a material  fact required to be
stated therein or necessary to make the  statements  therein (in the case of any
Prospectus  or form  of  prospectus  or  supplement  thereto,  in  light  of the
circumstances under which they were made) not misleading,  except to the extent,
but only to the extent,  that (1) such untrue  statements or omissions are based
solely  upon  information  regarding  such  Holder  furnished  in writing to the
Company by such Holder  expressly  for use  therein,  or to the extent that such
information  relates  to  such  Holder  or  such  Holder's  proposed  method  of
distribution of Registrable  Securities and was reviewed and expressly  approved
in writing by such Holder expressly for use in the Registration Statement,  such
Prospectus or such form of Prospectus or in any amendment or supplement  thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi),  the use by such Holder of an outdated  or  defective  Prospectus
after the Company has  notified  such Holder in writing that the  Prospectus  is
outdated  or  defective  and prior to the  receipt by such  Holder of the Advice
contemplated  in Section 6(e). The Company shall notify the Holders  promptly of
the  institution,  threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.

                 (b)  Indemnification by Holders.  Each Holder shall,  severally
and not  jointly,  indemnify  and hold  harmless  the  Company,  its  directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent  permitted by applicable law, from and against all Losses (as
determined by a court of competent  jurisdiction in a final judgment not subject
to appeal or  review)  arising  solely  out of or based  solely  upon any untrue
statement  of a material  fact  contained  in any  Registration  Statement,  any
Prospectus, or any form of prospectus, or in any

<PAGE>

amendment or supplement  thereto,  or arising solely out of or based solely upon
any omission of a material  fact  required to be stated  therein or necessary to
make the  statements  therein  not  misleading  to the  extent,  but only to the
extent,  that such untrue  statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in such Registration Statement or such Prospectus or to the extent that (1) such
untrue statements or omissions are based solely upon information  regarding such
Holder  furnished  in writing to the  Company by such Holder  expressly  for use
therein,  or to the extent that such information  relates to such Holder or such
Holder's  proposed  method of  distribution  of  Registrable  Securities and was
reviewed and expressly  approved in writing by such Holder  expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement  thereto or (2) in the case of an occurrence of an event
of the type  specified  in Section  3(d)(ii)-(vi),  the use by such Holder of an
outdated or defective  Prospectus  after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice  contemplated  in Section  6(e). In no event shall the
liability of any selling  Holder  hereunder be greater in amount than the dollar
amount  of the  net  proceeds  received  by such  Holder  upon  the  sale of the
Registrable Securities giving rise to such indemnification obligation.

                 (c) Conduct of Indemnification  Proceedings.  If any Proceeding
shall be brought or asserted against any Person entitled to indemnity  hereunder
(an  "Indemnified  Party"),  such  Indemnified  Party shall promptly  notify the
Person from whom indemnity is sought (the "Indemnifying  Party") in writing, and
the  Indemnifying  Party  shall  assume  the  defense  thereof,   including  the
employment of counsel  reasonably  satisfactory to the Indemnified Party and the
payment of all fees and expenses  incurred in connection  with defense  thereof;
provided,  that the failure of any  Indemnified  Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this  Agreement,  except  (and  only) to the  extent  that it  shall be  finally
determined  by a court of competent  jurisdiction  (which  determination  is not
subject to appeal or further  review) that such failure  shall have  proximately
and materially adversely prejudiced the Indemnifying Party.

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

<PAGE>

written consent of the Indemnified  Party,  effect any settlement of any pending
Proceeding  in respect of which any  Indemnified  Party is a party,  unless such
settlement includes an unconditional  release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.

                  All fees and  expenses  of the  Indemnified  Party  (including
reasonable  fees  and  expenses  to  the  extent  incurred  in  connection  with
investigating   or  preparing  to  defend  such   Proceeding  in  a  manner  not
inconsistent  with this  Section)  shall be paid to the  Indemnified  Party,  as
incurred, within ten Business Days of written notice thereof to the Indemnifying
Party  (regardless  of whether it is ultimately  determined  that an Indemnified
Party  is  not  entitled  to  indemnification  hereunder;   provided,  that  the
Indemnifying  Party may require such Indemnified Party to undertake to reimburse
all such fees and  expenses  to the extent it is finally  judicially  determined
that such Indemnified Party is not entitled to indemnification hereunder).

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

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

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

<PAGE>

         6.      Miscellaneous

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

                 (b) No Inconsistent Agreements.  Neither the Company nor any of
its  subsidiaries has entered,  as of the date hereof,  nor shall the Company or
any of its subsidiaries,  on or after the date of this Agreement, enter into any
agreement with respect to its securities that would have the effect of impairing
the rights granted to the Holders in this Agreement or otherwise  conflicts with
the provisions  hereof.  Except as and to the extent  specified in Schedule 6(b)
hereto,  neither the Company nor any of its subsidiaries has previously  entered
into any agreement  granting any registration  rights with respect to any of its
securities to any Person that have not been satisfied in full.

                 (c) No Piggyback on Registrations.  Except as and to the extent
specified in Schedule  6(b) hereto,  neither the Company nor any of its security
holders  (other than the Holders in such capacity  pursuant  hereto) may include
securities  of  the  Company  in  the  Registration  Statement  other  than  the
Registrable  Securities,  and the Company  shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.

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

                 (e)  Discontinued  Disposition.   Each  Holder  agrees  by  its
acquisition of such  Registrable  Securities that, upon receipt of a notice from
the Company of the  occurrence  of any event of the kind  described  in Sections
3(d)(ii),  3(d)(iii),  3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will forthwith
discontinue  disposition of such  Registrable  Securities under the Registration
Statement  until  such  Holder's  receipt  of the  copies  of  the  supplemented
Prospectus and/or amended Registration  Statement  contemplated by Section 3(h),
or until it is advised in writing (the  "Advice") by the Company that the use of
the  applicable  Prospectus  may be resumed,  and, in either case,  has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated  by reference in such  Prospectus or Registration  Statement.
The Company may provide  appropriate  stop orders to enforce the  provisions  of
this paragraph.

                 (f)  Piggy-Back  Registrations.  If  at  any  time  during  the
Effectiveness Period

<PAGE>

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

                 (g)  Notices.  Any and all notices or other  communications  or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (i) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this Section  prior to 6:00 p.m. (New
York City  time) on a  Business  Day,  (ii) the  Business  Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m.  (New York City time) on
such date,  (iii) the Business  Day  following  the date of mailing,  if sent by
nationally  recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as follows:

         If to the Company:       Tidel Technologies, Inc.
                                  5847 San Felipe, Suite 900
                                  Houston, Texas 77057
                                  Facsimile No.:  (713) 783-6003
                                  Attn: Chief Financial Officer

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

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

         If to any other Person who is then the registered Holder:

                                  To the address of such Holder as it appears in
                                  the stock transfer books of the Company

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

<PAGE>

                 (h) Successors and Assigns.  This Agreement  shall inure to the
benefit of and be binding upon the successors  and permitted  assigns of each of
the parties and shall inure to the benefit of each  Holder.  The Company may not
assign its rights or obligations  hereunder without the prior written consent of
each Holder.  Each Holder may assign their  respective  rights  hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.

                 (i) Counterparts.  This Agreement may be executed in any number
of  counterparts,  each of  which  when so  executed  shall be  deemed  to be an
original  and, all of which taken  together  shall  constitute  one and the same
Agreement.   In  the  event  that  any   signature  is  delivered  by  facsimile
transmission,  such  signature  shall create a valid  binding  obligation of the
party  executing  (or on whose behalf such  signature is executed) the same with
the same  force and  effect as if such  facsimile  signature  were the  original
thereof.

                 (j) Governing Law. All questions  concerning the  construction,
validity,  enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party hereby irrevocably submits to the exclusive  jurisdiction of the state and
federal  courts sitting in the City of New York,  borough of Manhattan,  for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed  herein,  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit,  action or  proceeding  is improper.  Each party  hereby  irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding by mailing a copy thereof to such party at the
address in effect for  notices to it under this  Agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

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

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

                 (m)   Headings.   The  headings  in  this   Agreement  are  for
convenience  of  reference  only and  shall not limit or  otherwise  affect  the
meaning hereof.

<PAGE>

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

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                           SIGNATURE PAGES TO FOLLOW]

<PAGE>

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

                                        TIDEL TECHNOLOGIES, INC.

                                        By:_____________________________________
                                           Name:
                                           Title:

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES OF PURCHASER TO FOLLOW]

<PAGE>

                              MONTROSE INVESTMENTS LTD.

                              By:_____________________________________
                               Name:
                               Title:

                               Address for Notice:

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

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

<PAGE>

                                                                         Annex A

                              Plan of Distribution

         The  Selling  Stockholders  and any of their  pledgees,  assignees  and
successors-in-interest  may, from time to time,  sell any or all of their shares
of Common Stock on any stock exchange,  market or trading  facility on which the
shares  are traded or in private  transactions.  These  sales may be at fixed or
negotiated  prices.  The  Selling  Stockholders  may  use any one or more of the
following methods when selling shares:

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

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

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

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

o        privately negotiated transactions;

o        short sales;

o        broker-dealers  may  agree  with  the  Selling  Stockholders  to sell a
         specified number of such shares at a stipulated price per share;

o        a combination of any such methods of sale; and

o        any other method permitted pursuant to applicable law.

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

         The Selling  Stockholders  may also  engage in short sales  against the
box,  puts and calls and other  transactions  in  securities  of the  Company or
derivatives  of Company  securities and may sell or deliver shares in connection
with these  trades.  The Selling  Stockholders  may pledge their shares to their
brokers  under  the  margin  provisions  of  customer  agreements.  If a Selling
Stockholder  defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.  The Selling  Stockholders have advised the Company
that they have not entered into any agreements,  understandings  or arrangements
with any underwriters or broker-dealers regarding the sale of their shares other
than ordinary  course  brokerage  arrangements,  nor is there an  underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
Selling Stockholders.

<PAGE>

         Broker-dealers  engaged by the  Selling  Stockholders  may  arrange for
other  brokers-dealers  to  participate  in sales.  Broker-dealers  may  receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares,  from the purchaser) in amounts to be
negotiated.  The  Selling  Stockholders  do not  expect  these  commissions  and
discounts to exceed what is customary in the types of transactions involved.

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

         The Company is required  to pay all fees and  expenses  incident to the
registration of the shares,  including fees and  disbursements of counsel to the
Selling   Stockholders.   The  Company  has  agreed  to  indemnify  the  Selling
Stockholders against certain losses, claims, damages and liabilities,  including
liabilities under the Securities Act.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}]]