Document:

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

THE  INDEBTEDNESS  EVIDENCED BY THIS  INSTRUMENT  IS  SUBORDINATED  TO THE PRIOR
PAYMENT  IN FULL OF THE SENIOR  INDEBTEDNESS  (AS  DEFINED IN THE  SUBORDINATION
AGREEMENT  HEREINAFTER  REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN,
THE  SUBORDINATION  AGREEMENT  EFFECTIVE AS OF  SEPTEMBER 8, 2000,  BY THE MAKER
HEREOF  AND  PAYEE  NAMED  HEREIN  IN FAVOR OF  LENDER  OR THE  HOLDER OF SENIOR
INDEBTEDNESS REFERRED TO IN SUCH SUBORDINATION AGREEMENT.

No. [ ]                                                                   $[   ]

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

            THIS  DEBENTURE  is one of a series of duly  authorized  and  issued
debentures  of  Tidel  Technologies,  Inc.,  a  Delaware  corporation,  having a
principal place of business at 5847 San Felipe, Suite 900, Houston,  Texas 77057
(the "Company"),  designated as its 6% Convertible Debentures,  due September 8,
2004, in the aggregate principal amount of Twenty Million Dollars  ($20,000,000)
(the "Debentures").

            FOR  VALUE  RECEIVED,  the  Company  promises  to  pay  to  Montrose
Investments Ltd. or its registered assigns (the "Holder"),  the principal sum of
[ ] ($),  on  September  8,  2004 or such  earlier  date as the  Debentures  are
required or permitted to be repaid as provided  hereunder (the "Maturity  Date")
and to pay  interest  to  the  Holder  on the  aggregate  unconverted  and  then
outstanding  principal  amount of this  Debenture  at the rate of 6% per  annum,
payable on a quarterly basis on March 31, June 30,  September 30 and December 31
of each year while such Debentures are outstanding, commencing on the earlier to
occur of a Conversion  Date (as defined  herein) for such  principal  amount and
December 31, 2000 (each an "Interest Payment Date"), in cash or shares of Common
Stock (as defined in Section 6). Subject to the terms and conditions herein, the
decision

<PAGE>

whether to pay interest  hereunder in shares of Common Stock or cash shall be at
the  discretion  of the Company.  Not less than five Trading Days (as defined in
Section 6) prior to each Interest  Payment  Date,  the Company shall provide the
Holder with written notice of its election to pay interest  hereunder in cash or
in shares of Common Stock pursuant to the terms of Section  4(a)(i) (the Company
may  indicate in such notice that the  election  contained  in such notice shall
continue  for later  periods  until  revised).  Failure to timely  provide  such
written notice shall be deemed an election by the Company to pay the interest on
such  Interest  Payment Date in shares of Common Stock  pursuant to the terms of
Section  4(a)(i).  If  interest  is paid by the  Company in shares of its Common
Stock,  then the number of shares of Common  Stock  issuable  on account of such
interest  shall equal the cash amount of such interest on such Interest  Payment
Date divided by the Conversion  Price (as defined below) on such date.  Interest
shall be  calculated  on the basis on a  360-day  year and  shall  accrue  daily
commencing on the Original Issue Date (as defined in Section 6) until payment in
full of the principal  sum,  together  with all accrued and unpaid  interest and
other amounts which may become due hereunder,  has been made. Interest hereunder
will be paid to the  Person  (as  defined  in  Section  6) in  whose  name  this
Debenture is registered on the records of the Company regarding registration and
transfers of Debentures  (the  "Debenture  Register").  All overdue  accrued and
unpaid interest to be paid in cash hereunder shall entail a late fee at the rate
of 15% per annum (or such  lower  maximum  amount of  interest  permitted  to be
charged under applicable law) ("Late Fee") (to accrue daily,  from the date such
interest is due hereunder through and including the date of payment), payable in
cash.  If such Late Fee is paid by the  Company in shares of its  Common  Stock,
then the number of shares of Common  Stock  issuable on account of such Late Fee
shall  equal the cash  amount of such  Late Fee on such  Late Fee  payment  date
divided by the Conversion Price on such date.

            This Debenture is subject to the following additional provisions:

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

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

<PAGE>

         Section 3.  Events of Default.

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

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

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

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

                     (iv) the Company  shall  default in any of its  obligations
          under any other Debenture or any mortgage,  credit  agreement or other
          facility, indenture agreement, factoring agreement or other instrument
          under which  there may be

<PAGE>

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

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

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

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

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

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

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

<PAGE>

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

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

         Section 4.  Conversion.

            (a) (i)  Conversion  at Option of Holder.  This  Debenture  shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any  time and  from  time to time,  after  the  Original  Issue  Date
(subject to the limitations on conversion set forth in Section 4(a)(iv) hereof).
The Holder shall effect  conversions  at its option by delivering to the Company
of the form of  conversion  notice  attached  hereto  as  Exhibit  A (a  "Holder
Conversion Notice"), specifying therein the principal amount of Debentures to be
converted and the date on which such  conversion  is to be effected,  which date
may not be prior to the date  such  Holder  Conversion  Notice is deemed to have
been  delivered  hereunder  (a "Holder  Conversion  Date")  and shall  contain a
schedule in the form of Schedule 1 to the Holder  Conversion  Notice (as amended
on

<PAGE>

each Holder Conversion Date, the "Conversion Schedule") reflecting the remaining
principal  amount of this Debenture and all accrued and unpaid interest  thereon
subsequent to the conversion at issue. If no Holder Conversion Date is specified
in a Holder Conversion Notice, the Holder Conversion Date shall be the date that
such Holder  Conversion  Notice is deemed delivered  hereunder.  Notwithstanding
anything herein to the contrary,  a Holder  Conversion Notice shall be revocable
by a Holder at any time  prior to the  receipt by such  Holder of a  certificate
representing  the  Underlying  Shares  issuable in  connection  with such Holder
Conversion  Notice.  To  effect  conversions   hereunder  (including  conversion
pursuant to a Company  Conversion  Notice),  the Holder shall not be required to
physically  surrender  this  Debenture  to  the  Company  unless  the  aggregate
principal amount of this Debenture is so converted.  Conversions hereunder shall
have the effect of lowering the outstanding  principal  amount of this Debenture
plus  all  accrued  and  unpaid  interest  thereon  in an  amount  equal  to the
applicable  conversion,  which  shall be  evidenced  by entries set forth in the
Conversion  Schedule.  The Holder and the Company shall maintain records showing
the principal amount converted and the date of such conversions. In the event of
any dispute or  discrepancy,  the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee,  by
acceptance  of this  Debenture,  acknowledge  and agree  that,  by reason of the
provisions  of  this  paragraph,  following  conversion  of a  portion  of  this
Debenture,  the unpaid and unconverted principal amount of this Debenture may be
less than the amount stated on the face hereof.

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

<PAGE>

each Company Conversion Notice, once given, shall be irrevocable. Conversions at
the request of the Company shall be reflected in the Conversion Schedule.

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

               (iv) Certain Conversion Restrictions.

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

                    (B) A Holder may not convert Debentures or receive shares of
Common Stock as payment of interest  hereunder to the extent such  conversion or
receipt of such

<PAGE>

interest  payment  would  result  in the  Holder,  together  with any  affiliate
thereof,  beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules  promulgated  thereunder)  in excess of 9.999% of
the then  issued  and  outstanding  shares of  Common  Stock,  including  shares
issuable upon  conversion of, and payment of interest on, the Debentures held by
such Holder  after  application  of this  Section.  Since the Holder will not be
obligated  to report to the Company the number of shares of Common  Stock it may
hold at the time of a conversion hereunder, unless the conversion at issue would
result in the issuance of shares of Common Stock in excess of 9.999% of the then
outstanding  shares of Common Stock without regard to any other shares which may
be beneficially  owned by the Holder or an affiliate  thereof,  the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that  the  Holder  determines  that the  limitation  contained  in this  Section
applies,  the  determination  of  which  portion  of  the  principal  amount  of
Debentures are  convertible  shall be the  responsibility  and obligation of the
Holder.  If the Holder has delivered a Conversion  Notice for a principal amount
of Debentures  that,  without  regard to any other shares that the Holder or its
affiliates may  beneficially  own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the  conversion  for the maximum  principal  amount  permitted to be
converted on such Conversion  Date in accordance  with the periods  described in
Section  4(b) and,  at the option of the  Holder,  either  retain any  principal
amount tendered for conversion in excess of the permitted  amount  hereunder for
future  conversions or return such excess  principal  amount to the Holder.  The
provisions  of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.

                    (C) If the Common  Stock is then  listed for  trading on the
NASDAQ or the  Nasdaq  SmallCap  Market and the  Company  has not  obtained  the
Shareholder  Approval  (as  defined  below),  then the  Company may not issue in
excess of 3,456,209  shares of Common Stock (which equals  19.999% of the number
of shares of Common Stock  outstanding on the Trading Day immediately  preceding
the Original Issue Date) upon  conversions of the Debenture at a price per share
that is less than the Closing Price on the Trading Day immediately preceding the
Original Issue Date (such number of shares, the "Issuable Maximum"). Each Holder
shall be entitled to a portion of the  Issuable  Maximum  equal to the  quotient
obtained by dividing (x) the aggregate principal amount of the Debentures issued
and sold to such  Holder on the  Original  Issue  Date by (y) the  number of the
Debenture  issued and sold by the Company on the  Original  Issue  Date.  If any
Holder shall no longer hold the Debenture,  then such Holder's remaining portion
of the Issuable Maximum shall be allocated pro-rata among the remaining Holders.
If on any Conversion  Date (A) the shares of Common Stock are listed for trading
on the NASDAQ or Nasdaq SmallCap Market, (B) the Conversion Price then in effect
is such that the  aggregate  number of shares of Common Stock that would then be
issuable upon conversion in full of all then  outstanding  Debentures,  together
with any  shares  of Common  Stock  previously  issued  upon  conversion  of the
Debenture would exceed the Issuable Maximum,  and (C) the Company shall not have
previously  obtained the vote of shareholders (the "Shareholder  Approval"),  if
any, as may be required by the  applicable  rules and  regulations of the NASDAQ
(or any successor entity) applicable to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum  pursuant to the terms hereof,  then the

<PAGE>

Company shall issue to the Holder  requesting a conversion a number of shares of
Common Stock equal to such Holder's  pro-rata portion (which shall be calculated
pursuant to the terms  hereof) of the Issuable  Maximum and, with respect to the
remainder of the aggregate  principal amount of the Debentures then held by such
Holder for which a conversion  in  accordance  with the  Conversion  Price would
result in an  issuance  of shares  of  Common  Stock in excess of such  Holder's
pro-rata portion (which shall be calculated pursuant to the terms hereof) of the
Issuable Maximum (the "Excess Principal"),  the converting Holder shall have the
option to require the Company to either:  (1) use its best efforts to obtain the
Shareholder Approval applicable to such issuance as soon as is possible,  but in
any event not later than the 60th day after such request, or (2) pay cash to the
converting  Holder in an amount  equal to the  Excess  Principal  as  liquidated
damages and not as penalty.  If the  converting  Holder  shall have  elected the
first  option  pursuant to the  immediately  preceding  sentence and the Company
shall have failed to obtain the Shareholder Approval on or prior to the 60th day
after such  request,  then within three days of such 60th day, the Company shall
pay cash to the  converting  Holder an amount  equal to the Excess  Principal as
liquidated  damages and not as penalty.  If the Company  fails to pay the Excess
Principal  in full  pursuant to this  Section  within  seven days after the date
payable,  the Company  will pay  interest  thereon at a rate of 15% per annum or
such lesser  maximum  amount that is permitted to be paid by applicable  law, to
the  converting  Holder,  accruing  daily  from the  Conversion  Date until such
amount,  plus all such interest  thereon,  is paid in full.  The Company and the
Holder  understand and agree that shares of Common Stock issued to and then held
by the Holder as a result of conversions of Debentures  shall not be entitled to
cast votes on any resolution to obtain Shareholder Approval pursuant hereto.

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

<PAGE>

                 (ii)  If the  Company  fails  to  deliver  to the  Holder  such
certificate or certificates pursuant to Section 4(b)(i) by the fifth Trading Day
after the  Conversion  Date,  the Company shall pay to such Holder,  in cash, as
liquidated damages and not as a penalty,  $5,000 for each Trading Day after such
fifth Trading Day until such  certificates  are delivered.  Nothing herein shall
limit a Holder's  right to pursue actual  damages or declare an Event of Default
pursuant to Section 3 herein for the Company's  failure to deliver  certificates
representing  shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies  available to
it at law or in equity  including,  without  limitation,  a decree  of  specific
performance  and/or injunctive relief. The exercise of any such rights shall not
prohibit  the  Holders  from  seeking to enforce  damages  pursuant to any other
Section hereof or under applicable law.  Further,  if the Company shall not have
delivered any cash due in respect of  conversions of Debentures or as payment of
interest  thereon by the fifth Trading Day after the Conversion Date, the Holder
may, by notice to the  Company,  require  the Company to issue  shares of Common
Stock  pursuant to Section  4(c),  except that for such  purpose the  Conversion
Price  applicable  thereto  shall be the lesser of the  Conversion  Price on the
Conversion Date and the Conversion Price on the date of such Holder demand.  Any
such shares will be subject to the provision of this Section.

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

<PAGE>

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

                (ii) If the  Company,  at any  time  while  any  Debentures  are
outstanding,  (a) shall pay a stock dividend or otherwise make a distribution or
distributions  on  shares  of its  Common  Stock or any  other  equity or equity
equivalent   securities  payable  in  shares  of  Common  Stock,  (b)  subdivide
outstanding  shares of Common Stock into a larger number of shares,  (c) combine
(including  by way of reverse  stock split)  outstanding  shares of Common Stock
into a smaller number of shares, or (d) issue by  reclassification  of shares of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price  shall be  multiplied  by a fraction of which the  numerator  shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator  shall be the number of shares of
Common Stock  outstanding after such event. Any adjustment made pursuant to this
Section  shall  become  effective  immediately  after  the  record  date for the
determination of stockholders  entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

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

                (iv) If the Company or any  subsidiary  thereof,  as  applicable
with respect to Common Stock  Equivalents (as defined below),  at any time while
any principal amount

<PAGE>

is  outstanding  under the  Debentures,  shall issue  shares of Common  Stock or
rights,  warrants,  options or other securities or debt that is convertible into
or  exchangeable  for  shares  of  Common  Stock  ("Common  Stock  Equivalents")
entitling  any Person to acquire  shares of Common  Stock,  at a price per share
less than the  Conversion  Price (if the  holder of the  Common  Stock or Common
Stock  Equivalent so issued shall at any time,  whether by operation of purchase
price adjustments, reset provisions,  floating conversion,  exercise or exchange
prices or otherwise, or due to warrants,  options or rights issued in connection
with such  issuance,  be entitled to receive  shares of Common  Stock at a price
less than the Conversion  Price,  such issuance shall be deemed to have occurred
for less than the  Conversion  Price),  then,  at the option of the Holder,  the
Conversion  Price shall be replaced  with the  conversion,  exchange or purchase
price for such Common Stock or Common  Stock  Equivalents  (including  any reset
provisions thereof) for all subsequent conversions of principal amount under the
Debentures  or such  conversions.  Such  adjustment  shall be made whenever such
Common Stock or Common Stock  Equivalents  are issued.  The Company shall notify
the Holder in writing,  no later than the Trading Day  following the issuance of
any Common Stock or Common Stock Equivalent subject to this section,  indicating
therein the applicable  issuance price, or of applicable  reset price,  exchange
price, conversion price and other pricing terms.  Notwithstanding the foregoing,
the following shall not be deemed to be Common Stock Equivalents:  (i) issuances
pursuant  to a grant or  exercise  of  stock,  warrants  or  options  which  may
hereafter be granted or exercised under any employee or director benefit plan or
compensation  program of the Company now  existing or to be  implemented  in the
future and (ii) shares of Common Stock,  for an aggregate  market price of up to
$2,000,000,  issued  as  payment  of the  purchase  price in  connection  with a
Strategic Transaction.  For purposes of this Section, a "Strategic  Transaction"
shall mean a transaction or  relationship  in which the Company issues shares of
Common  Stock to an entity  which is,  itself or through  its  subsidiaries,  an
operating  company in a business  related to the  business of the Company and in
which the Company  receives  material  benefits in addition to the investment of
funds,  but shall not  include a  transaction  in which the  Company  is issuing
securities primarily for the purpose of raising capital.

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

<PAGE>

                (vi) In case of any  reclassification of the Common Stock or any
compulsory  share exchange  pursuant to which the Common Stock is converted into
other securities,  cash or property, the Holders shall have the right thereafter
to, at their option, (A) convert the then outstanding principal amount, together
with all accrued but unpaid  interest and any other amounts then owing hereunder
in respect of this Debenture only into the shares of stock and other securities,
cash and property  receivable upon or deemed to be held by holders of the Common
Stock following such reclassification or share exchange,  and the Holders of the
Debentures  shall  be  entitled  upon  such  event to  receive  such  amount  of
securities,  cash or property  as the shares of the Common  Stock of the Company
into which the then outstanding principal amount,  together with all accrued but
unpaid  interest and any other  amounts then owing  hereunder in respect of this
Debenture could have been converted  immediately prior to such  reclassification
or share  exchange would have been entitled or (B) require the Company to prepay
the  aggregate  of its  outstanding  principal  amount of  Debentures,  plus all
interest and other amounts due and payable thereon pursuant to the terms hereof.
The  entire  prepayment  price  shall  be paid in  cash.  This  provision  shall
similarly apply to successive reclassifications or share exchanges.

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

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

                (ix) If (A) the Company  shall  declare a dividend (or any other
distribution)  on the Common  Stock;  (B) the  Company  shall  declare a special
nonrecurring  cash  dividend on or a  redemption  of the Common  Stock;  (C) the
Company  shall  authorize the granting to all holders of the Common Stock rights
or warrants to  subscribe  for or  purchase  any shares of capital  stock of any
class or of any  rights;  (D) the  approval of any  stockholders  of the Company
shall be required in connection with any  reclassification  of the Common Stock,
any  consolidation  or  merger  to which  the  Company  is a party,  any sale or
transfer  of all or  substantially  all of the  assets  of the  Company,  of any
compulsory  share  exchange  whereby the Common  Stock is  converted  into other
securities,  cash or property;  (E) the Company shall authorize the voluntary or
involuntary  dissolution,  liquidation  or  winding  up of  the  affairs  of the
Company;  then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debentures,  and shall
cause to be mailed to the Holders at their last  addresses  as they shall appear
upon the stock  books of the  Company,  at least 20  calendar  days prior to the
applicable record or effective date hereinafter  specified, a notice stating (x)
the date on which a record  is to be taken  for the  purpose  of such  dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such

<PAGE>

dividend, distributions,  redemption, rights or warrants are to be determined or
(y) the  date on  which  such  reclassification,  consolidation,  merger,  sale,
transfer or share  exchange is expected to become  effective  or close,  and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such  reclassification,  consolidation,  merger,
sale, transfer or share exchange, provided, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the  corporate  action  required to be  specified  in such  notice.  Holders are
entitled to convert  Debentures  during the 20-day period commencing the date of
such notice to the effective date of the event triggering such notice.

                (x) In case of any (1) merger or  consolidation  of the  Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on an as valued  basis) in one or a series of related
transactions,  a Holder shall have the right to (A) if permitted  under  Section
3(b) hereof,  exercise its rights of prepayment  under Section 3(b) with respect
to such event,  (B) convert its aggregate  principal  amount of Debentures  then
outstanding  into the shares of stock and other  securities,  cash and  property
receivable  upon or deemed to be held by holders of Common Stock  following such
merger, consolidation or sale, and such Holder shall be entitled upon such event
or series of  related  events to receive  such  amount of  securities,  cash and
property  as the shares of Common  Stock into  which  such  aggregate  principal
amount of Debentures could have been converted immediately prior to such merger,
consolidation or sales would have been entitled,  or (C) in the case of a merger
or  consolidation,  (x)  require  the  surviving  entity  to  issue  convertible
debentures in an aggregate  principal  amount equal to the  aggregate  principal
amount of  Debentures  then held by such  Holder,  plus all  accrued  and unpaid
interest  and other  amounts  owing  thereon,  which  newly  issued  convertible
debentures shall have terms identical  (including with respect to conversion) to
the terms of this  Debenture  and shall be  entitled  to all of the  rights  and
privileges  of a Holder  of  Debentures  set  forth  herein  and the  agreements
pursuant to which the Debentures were issued (including,  without limitation, as
such rights relate to the acquisition, transferability, registration and listing
of such shares of stock other securities issuable upon conversion thereof),  and
(y) simultaneously with the issuance of such convertible debentures,  shall have
the  right to  convert  such  instrument  only  into  shares  of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger or consolidation.  In the case of clause (C),
the  conversion  price  applicable for the newly issued  convertible  debentures
shall be based upon the amount of securities,  cash and property that each share
of Common Stock would receive in such  transaction  and the Conversion  Price in
effect  immediately  prior  to  the  effectiveness  or  closing  date  for  such
transaction.  The terms of any such merger,  sale or consolidation shall include
such  terms so as to  continue  to give the  Holders  the right to  receive  the
securities,  cash and property set forth in this Section upon any  conversion or
redemption  following  such  event.  This  provision  shall  similarly  apply to
successive such events.

            (d) Upon a conversion hereunder the Company shall not be required to
issue stock certificates  representing  fractions of shares of the Common Stock,
but may if  otherwise  permitted,  make a cash  payment  in respect of any final
fraction of a share  based on the Per Share

<PAGE>

Market Value at such time. If the Company elects not, or is unable, to make such
a cash  payment,  the Holder shall be entitled to receive,  in lieu of the final
fraction of a share, one whole share of Common Stock.

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

            (f) Any and all notices or other  communications or deliveries to be
provided by the Holders hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered  personally,  by facsimile,  sent by a
nationally  recognized  overnight  courier  service  or  sent  by  certified  or
registered mail, postage prepaid,  addressed to the Company, at 5847 San Felipe,
Suite 900, Houston, Texas 77057, Facsimile No.: (713) 783-6003,  attention Chief
Financial Officer,  or such other address or facsimile number as the Company may
specify for such purposes by notice to the Holders  delivered in accordance with
this Section.  Any and all notices or other  communications  or deliveries to be
provided by the Company hereunder shall be in writing and delivered  personally,
by facsimile,  sent by a nationally recognized overnight courier service or sent
by certified or registered mail,  postage  prepaid,  addressed to each Holder at
the facsimile  telephone number or address of such Holder appearing on the books
of the Company,  or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries  hereunder  shall be deemed given and effective on the earliest of
(i) the date of  transmission,  if such notice or communication is delivered via
facsimile at the facsimile  telephone  number specified in this Section prior to
6:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section later than 6:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United  States mail,  (iv) the Business Day
following  the  date of  mailing,  if sent by  nationally  recognized  overnight
courier service,  or (v) upon actual receipt by the party to whom such notice is
required to be given.

         Section 5. Put Option. On each of the 270th day and 540th day following
the Original Issue Date (each such date, a "Put Date" and the 60th day following
a Put Date, a "Put Payment  Date"),  the Holders shall have the right,  at their
sole  discretion  (the "Put  Right"),  to require the Company to prepay all or a
portion  of the  then  outstanding  principal  amount  and  interest  under  the
Debentures  by  delivering  to the  Company a written  notice (a "Put  Notice"),
specifying therein the outstanding  principal amount and interest subject to the
Put Right.  Subject to the right to deliver  shares of Common Stock as described
in the immediately following sentence,  not later than the Put

<PAGE>

Payment Date, the Company will pay and deliver to the Holder  exercising its Put
Right,  free of any claim of  subordination,  an amount of cash (in  immediately
available  funds) equal to the sum of: (i) the principal amount of Debentures to
be prepaid,  plus all accrued and unpaid interest  thereon (each as indicated in
the Put Notice),  and (ii) all other  amounts,  costs,  expenses and  liquidated
damages then owing in respect of such  principal  amount (the "Put Price").  The
Company  may  deliver a written  notice to the  Holders no later than 20 Trading
Days prior to the applicable Put Date (a "Company  Notice"),  indicating therein
its intention not to pay in excess of a maximum dollar amount in cash as part of
any subsequent Put Price (the "Maximum Cash Amount"), in which case, in response
to a Put Notice,  the  Company  shall:  (i) pay to the Holder the  Maximum  Cash
Amount no later  than the Put  Payment  Date and (ii)  deliver to the Holder not
later than the third Trading Day following the  applicable  Put Date a number of
shares of Common  Stock  equal to the  quotient  obtained  by  dividing  (A) the
difference  between the Put Price and the Maximum Cash Amount by (B) the average
of the Per Share Market Values for the five Trading Days preceding the Put Date.
The Company's  obligations  to deliver  shares of Common Stock  pursuant to this
Section 5 shall be  subject to the  provisions  of  Section  4(b)(ii)  and (iii)
hereof.  If the  Company  shall fail to timely  deliver a Company  Notice to the
Holders,  the Company  will be required to pay the entire Put Price in cash.  If
any  portion of the cash  portion of the Put Price shall not be paid on or prior
to the Put Payment Date, then,  notwithstanding anything herein to the contrary,
the Holder shall have the right, no later than 20 Trading Days following the Put
Payment  Date,  to either (i)  rescind  the Put Notice or (ii)  convert all or a
portion of the principal  amount and interest  under the  Debentures  previously
subject  to the Put Right at a  conversion  price  equal to the lower of (A) the
Conversion  Price and (B) the average of the Per Share Market  Values during the
ten Trading Days  immediately  preceding either the Put Payment Date or the date
the Holder rescinds the Put Notice, whichever is lower.

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

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

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

<PAGE>

Company is a party or by which it is bound,  providing for any of the events set
forth above in (i), (ii) or (iii).

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

                "Commission" means the Securities and Exchange Commission.

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

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

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

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

                "Per Share Market  Value" means on any  particular  date (a) the
closing  bid price per  share of Common  Stock on such date on the  NASDAQ or on
such  Subsequent  Market on which the shares of Common  Stock are then listed or
quoted, or if there is no such price on such date, then the closing bid price on
the NASDAQ or on such Subsequent Market on the date nearest preceding such

<PAGE>

date,  or (b) if the shares of Common Stock are not then listed or quoted on the
NASDAQ or a Subsequent Market, the closing bid price for a share of Common Stock
in the  over-the-counter  market,  as reported by the National  Quotation Bureau
Incorporated or similar  organization  or agency  succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar  organization  or agency  succeeding  to its  functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period,  as  determined  in good  faith by the  Holder,  or (d) if the shares of
Common  Stock are not then  publicly  traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the Holders
of a majority in interest of the principal amount of Notes then outstanding.

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

<PAGE>

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

         Section  12. This  Debenture  shall be  governed  by and  construed  in
accordance  with the laws of the State of New  York,  without  giving  effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably submits
to the exclusive  jurisdiction  of the state and federal  courts  sitting in the
City of New York,  Borough of  Manhattan,  for the  adjudication  of any dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein, and hereby irrevocably  waives, and agrees not to assert in
any suit, action or proceeding,  any claim that it is not personally  subject to
the  jurisdiction of any such court, or that such suit,  action or proceeding is
improper.  Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or  proceeding by receiving a copy thereof sent to the Company at the address in
effect for  notices to it under this  instrument  and agrees  that such  service
shall  constitute  good and  sufficient  service of process and notice  thereof.
Nothing  contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.

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

         Section 14. If any provision of this  Debenture is invalid,  illegal or
unenforceable,  the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and  circumstances.  If it shall be found
that any interest or other amount deemed  interest due  hereunder  shall violate
applicable laws governing  usury,  the applicable rate of interest due hereunder
shall  automatically be lowered to equal the maximum permitted rate of interest.
The Company  covenants  (to the extent that it may lawfully do so) that it shall
not at any time insist upon,  plead, or in any manner  whatsoever  claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would  prohibit  or forgive  the  Company  from paying all or any portion of the
principal of or interest on the  Debentures  as  contemplated  herein,  wherever
enacted,  now or at any time  hereafter  in  force,  or  which  may  affect  the
covenants or the performance of this  indenture,  and the Company (to the extent
it may lawfully do so) hereby  expressly waives all benefits or advantage of any
such law,  and  covenants  that it will not, by resort to any such law,  hinder,
delay or impeded the  execution

<PAGE>

of any power  herein  granted  to the  Holder,  but will  suffer  and permit the
execution of every such as though no such law has been enacted.

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

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGE FOLLOWS]

<PAGE>

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

                                       TIDEL TECHNOLOGIES, INC.

                                       By:______________________________________
                                          Name:
                                          Title:

<PAGE>

                                    EXHIBIT A

                           NOTICE OF HOLDER CONVERSION

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

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

Conversion calculations:          ______________________________________________
                                  Date to Effect Conversion

                                  ______________________________________________
                                  Principal Amount of Debentures to be Converted

                                  ______________________________________________
                                  Number of shares of Common Stock to be Issued

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

                                  ______________________________________________
                                  Applicable Conversion Price

                                  ______________________________________________
                                  Signature

                                  ______________________________________________
                                  Name

                                  ______________________________________________
                                  Address

<PAGE>

                                    EXHIBIT B

                          NOTICE OF COMPANY CONVERSION

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

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

Conversion calculations:          ______________________________________________
                                  Date to Effect Conversion

                                  ______________________________________________
                                  Principal Amount of Debentures to be Converted

                                  ______________________________________________
                                  Number of shares of Common Stock to be Issued

                                  Payment of Interest in Kind  / / Yes   / / No

                                      If yes, $ _______ of Interest Accrued on
                                      Account of Conversion at Issue

                                  ______________________________________________
                                  Applicable Conversion Price

                                  ______________________________________________
                                  Signature

                                  ______________________________________________
                                  Name

                                  ______________________________________________
                                  Address

<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

6% Convertible  Debentures,  due September 8 , 2004, in the aggregate  principal
amount  of  $15,000,000  issued  by Tidel  Technologies,  Inc.  This  Conversion
Schedule  reflects  conversions  made under Section  4(a)(i) and 4(a)(ii) of the
above referenced Debentures.

                                     Dated:

<TABLE>
<CAPTION>

<S>                    <C>            <C>               <C>                <C>
                       Amount of      Aggregate
Date of Conversion     Conversion     Principal         Company Attest     Holder Attest
                                      Amount
                                      Remaining
                                      Subsequent to
                                      Conversion
</TABLE>NEITHER THESE  SECURITIES  NOR THE  SECURITIES  INTO WHICH THESE  SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),
AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE
REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN  AVAILABLE
EXEMPTION FROM THE REGISTRATION  REQUIREMENTS  THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.

                            TIDEL TECHNOLOGIES, INC.

                                     WARRANT

Warrant No. 1                                           Dated: September 8, 2000

            Tidel  Technologies,  Inc., a Delaware  corporation (the "Company"),
hereby  certifies that, for value  received,  Montrose  Investments  Ltd. or its
registered  assigns  ("Holder"),  is  entitled,  subject  to the terms set forth
below,  to purchase  from the Company up to a total of 315,789  shares of common
stock, $.01 par value per share (the "Common Stock"),  of the Company (each such
share,  a "Warrant  Share" and all such  shares,  the  "Warrant  Shares")  at an
exercise  price  equal to $9.80  per  share  (as  adjusted  from time to time as
provided in Section 8, the "Exercise Price"),  at any time and from time to time
from and after the date hereof and through and including  September 8, 2005 (the
"Expiration Date"), and subject to the following terms and conditions:

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

            2. Registration of Transfers and Exchanges.

               (a) The Company  shall  register  the  transfer of any portion of
this Warrant in the Warrant Register,  upon surrender of this Warrant,  with the
Form of Assignment  attached  hereto duly completed and signed,  to the Transfer
Agent or to the  Company at its

<PAGE>

address  for notice  set forth in  Section  12.  Upon any such  registration  or
transfer,  a new warrant to purchase Common Stock, in substantially  the form of
this Warrant (any such new warrant, a "New Warrant"),  evidencing the portion of
this Warrant so transferred  shall be issued to the transferee and a New Warrant
evidencing  the remaining  portion of this Warrant not so  transferred,  if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee  thereof shall be deemed the acceptance of such transferee of all
of the rights and obligations of a holder of a Warrant.

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

            3. Duration and Exercise of Warrants.

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

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

               A "Date of  Exercise"  means the date on which the Company  shall
have

<PAGE>

received (i) the Form of Election to Purchase  completed  and duly  signed,  and
(ii) payment of the Exercise Price for the number of Warrant Shares so indicated
by the Holder to be purchased.

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

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

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

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

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

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

               (a)  If  the   Company,   at  any  time  while  this  Warrant  is
outstanding,  (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding  preferred  stock  as of the  date  hereof  which  contain  a stated
dividend rate) or otherwise make a distribution  or  distributions  on shares of
its Common  Stock or on any other  class of capital  stock

<PAGE>

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

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

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

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

<PAGE>

a price less than the  Exercise  Price,  such  issuance  shall be deemed to have
occurred  for less than the  Exercise  Price),  then,  at the sole option of the
Holder, the Exercise Price shall be adjusted to mirror the conversion,  exchange
or  purchase  price  for such  Common  Stock  Equivalents  (including  any reset
provisions  thereof),  provided,  that for purposes hereof, all shares of Common
Stock that are issuable  upon  conversion,  exercise or exchange of Common Stock
Equivalents shall be deemed  outstanding  immediately after the issuance of such
Common Stock Equivalents.  Such adjustment shall be made whenever such shares of
Common  Stock or  Common  Stock  Equivalents  are  issued.  Notwithstanding  the
foregoing, the following shall not be deemed to be Common Stock Equivalents: (i)
issuances  pursuant to a grant or exercise of stock,  warrants or options  which
may  hereafter  be granted or exercised  under any employee or director  benefit
plan or compensation program of the Company now existing or to be implemented in
the future and (ii) shares of Common Stock,  for an aggregate market price of up
to  $2,000,000,  issued as payment of the purchase  price in  connection  with a
Strategic Transaction.  For purposes of this Section, a "Strategic  Transaction"
shall mean a transaction or  relationship  in which the Company issues shares of
Common  Stock to an entity  which is,  itself or through  its  subsidiaries,  an
operating  company in a business  related to the  business of the Company and in
which the Company  receives  material  benefits in addition to the investment of
funds,  but shall not  include a  transaction  in which the  Company  is issuing
securities primarily for the purpose of raising capital.

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

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

<PAGE>

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

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

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

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

               (i) If:

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

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

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

                            (iv)   the  approval  of  any  stockholders  of  the
                                   Company shall be required in connection  with
                                   any reclassification of the Common Stock, any

<PAGE>

                                   consolidation  or merger to which the Company
                                   is a party,  any sale or  transfer  of all or
                                   substantially   all  of  the  assets  of  the
                                   Company,  or any  compulsory  share  exchange
                                   whereby the Common  Stock is  converted  into
                                   other securities, cash or property; or

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

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

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

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

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

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

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

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

                   B = the Exercise Price.

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

            10. Certain Exercise Restrictions.

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

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

<PAGE>

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

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

            12.  Notices.  Any  and  all  notices  or  other  communications  or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile  telephone  number specified in this
Section  prior to 6:30 p.m.  (New York City  time) on a business  day,  (ii) the
business day after the date of transmission,  if such notice or communication is
delivered  via  facsimile at the facsimile  telephone  number  specified in this
Section  later than 6:30 p.m.  (New York City time) on any date and earlier than
11:59 p.m.  (New York City time) on such date,  (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon  actual  receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
5847 San Felipe,  Suite 900, Houston,  Texas 77057,  facsimile:  (713) 783-6003,
attention Chief Financial  Officer,  or (ii) if to the Holder,  to the Holder at
the address or facsimile  number appearing on the Warrant Register or such other
address  or  facsimile  number as the  Holder  may  provide  to the  Company  in
accordance with this Section.

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

<PAGE>

postage  prepaid)  to the Holder at the  Holder's  last  address as shown on the
Warrant Register.

            14. Miscellaneous.

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

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

               (c) The corporate  laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its  stockholders.  All
other  questions   concerning  the  construction,   validity,   enforcement  and
interpretation  of this Warrant  shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the  principles  of conflicts of law thereof.  The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York,  borough of Manhattan,  for the adjudication of
any  dispute  hereunder  or in  connection  herewith  or  with  any  transaction
contemplated  hereby or discussed herein,  and hereby  irrevocably  waives,  and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally  subject to the  jurisdiction  of any such court,  or that such suit,
action or  proceeding  is  improper.  Each of the Company and the Holder  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit,  action or  proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this  instrument
and agrees that such service shall  constitute  good and  sufficient  service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.

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

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

<PAGE>

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

                                  TIDEL TECHNOLOGIES, INC.

                                  By:_____________________________________
                                   Name:
                                   Title:

<PAGE>

                          FORM OF ELECTION TO PURCHASE

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

To Tidel Technologies, Inc.:

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

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

                                         PLEASE INSERT SOCIAL SECURITY
OR
                                         TAX IDENTIFICATION NUMBER

                         (Please print name and address)

Dated:                  ,                Name of Holder:
      ------------------  -----

                                                                         (Print)

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

<PAGE>

                               FORM OF ASSIGNMENT

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

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

Dated:

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

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

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

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

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

In the presence of:

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

<PAGE>

                                     Annex A

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

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