EX-4.37 4 h22080exv4w37.txt CONVERTIBLE TERM NOTE - $100,000 EXHIBIT 4.37 THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TIDEL TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED. $100,000 CONVERTIBLE TERM NOTE NOVEMBER 25, 2003 FOR VALUE RECEIVED, TIDEL TECHNOLOGIES, INC., a Delaware corporation (the "BORROWER"), hereby promises to pay to Laidlaw Southwest, LLC, a Texas limited liability company with an address at 2900 Wilcrest, Ste. 205, Houston, Texas 77042 (the "HOLDER") or its registered assigns or successors in interest, on order, the aggregate principal sum of ONE HUNDRED THOUSAND DOLLARS ($100,000), or such lesser amount as shall equal the outstanding principal amount hereof (the "PRINCIPAL AMOUNT"), together with any accrued and unpaid interest hereon, on November 24, 2004 (the "MATURITY DATE") if not sooner paid. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in that certain Securities Purchase Agreement dated as of the date hereof between the Borrower and Laurus Master Fund, Ltd., c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the "PURCHASE AGREEMENT"). The following terms shall apply to this Note: ARTICLE I INTEREST 1.1. Interest Rate and Payment. Subject to Section 5.1 hereof, interest payable on the unpaid principal balance of this Note shall accrue at a rate per annum (the "CONTRACT RATE") equal to the "prime rate" published in The Wall Street Journal from time to time, plus two percent (2%), computed on the basis of the actual number of days elapsed and a year of 360 days. Interest shall be payable on the Maturity Date, whether by acceleration or otherwise. The prime rate shall be increased or decreased as the case may be for each increase or decrease in the prime rate in an amount equal to such increase or decrease in the prime rate; each change to be effective as of the day of the change in such rate. In no event shall the Contract Rate be less than six percent (6.00%). 1.2. Mandatory Prepayment. Upon receipt by the Borrower of $1,800,000 or more in the aggregate in additional funds from a financing as contemplated pursuant to Section 6.15 of the Purchase Agreement prior to December 1, 2004, the Borrower shall make a mandatory prepayment of the entire outstanding Principal Amount and all accrued and unpaid interest thereon and obligations relating thereto; provided, however, that the Borrower shall not have to pay any premium, as set forth in Section 2.1, at the time of such mandatory prepayment. ARTICLE II BORROWER PAYMENT OPTIONS 2.1. Optional Redemption in Cash. Subject to satisfaction of the Prepayment Conditions (as hereafter defined) and Section 2.2 hereof, the Borrower will have the option of prepaying this Note in full ("OPTIONAL REDEMPTION") by paying to the Holder a sum of money equal to one hundred and one percent (101%) of the principal amount outstanding at such time of this Note together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under this Note or the Purchase Agreement or any Related Document (as defined in the Purchase Agreement) (the "REDEMPTION AMOUNT") outstanding on the day written notice of redemption (the "NOTICE OF REDEMPTION") is given to the Holder, which Notice of Redemption shall specify the date for such Optional Redemption (the "REDEMPTION PAYMENT DATE"). A Notice of Redemption shall not be effective with respect to any portion of this Note for which the Holder has a pending election to convert pursuant to Section 3.1 and the Redemption Amount shall be determined as if such election to convert had been completed immediately prior to the date of the Notice of Redemption. The Redemption Payment Date shall not be earlier than the day after the date of the Notice of Redemption and not later than seven (7) days after the date of the Notice of Redemption. On the Redemption Payment Date, the Redemption Amount must be paid in immediately available funds to the Holder. In the event the Borrower fails to pay the Redemption Amount by the Redemption Payment Date, then such Redemption Notice will be null and void. For purposes hereof, the term "PREPAYMENT CONDITIONS" means satisfaction of each of the following: (a) the average closing bid price of the Common Stock on the Principal Market (as hereafter defined) during the twenty (20) consecutive trading days immediately prior to the Redemption Payment Date shall exceed an amount equal to three (3) times the Fixed Conversion Price (as hereafter defined), (b) the market price of the Common Stock on the Principal Market (as hereafter defined) on the Redemption Payment Date shall be supported by a price-to-earnings ratio with respect to the Common Stock and the Borrower, respectively, of not greater than twenty (20) times fully diluted earnings per share of the Common Stock, excluding extraordinary gains, (c) the average daily trading volume of the Common Stock for a period of twenty (20) consecutive trading days immediately prior to the Redemption Payment Date shall not be less than 100,000 shares, (d) the conditions set forth in 2.3(i) and 2.3(ii) hereof shall have been satisfied, and (e) the Holder shall have determined that no shareholder derivative lawsuits are then outstanding against the Borrower. For purposes hereof, the "FIXED CONVERSION PRICE" means $0.40, subject to adjustment in accordance with the terms of this Note. The Fixed Conversion Price shall also be adjusted downward immediately following the occurrence of a Specified Event (as defined below) to an amount equal to the lesser of (1) $0.40 or (2) the volume weighted average closing prices for the Common Stock on the Principal Exchange, or on any securities exchange or other securities market on which the Common Stock is then being listed or traded, for the ten (10) trading days immediately following the Borrower's public press release of its 2004 fiscal year results of operations. For purposes hereof, the term "SPECIFIED EVENT" means the occurrence of the following: (1) the Borrower's failure to attain earnings before interest, taxes, depreciation 2 and amortization for the Borrower's fiscal year ended September 30, 2004 of more than $2,000,000 and (2) at the time of the aforementioned press release, the market price of Borrower's Common Stock shall be less than $0.40. 2.2. Occurrence of a Fundamental Event. (a) "FUNDAMENTAL EVENT" shall be deemed to have occurred if, within 90 days of the Redemption Payment Date, the Company announces any of the following transaction(s) (each, a "TRANSACTION") and all components of such Transaction are consummated within two hundred seventy (270) days of such announcement: (i) its intention to merge or consolidate, or effect any merger or consolidation of, the Company with or into another entity; (ii) its intention to effect any sale of all or substantially all of its assets in one or a series of related transactions; (iii) its intention to effect any tender offer or exchange offer (whether by the Company or another entity) pursuant to which holders of Common Stock are permitted to tender their shares for other securities, cash or property; or (iv) its intention to effect any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property. (b) If a Fundamental Event occurs, then the Company shall pay to the Holder, simultaneously with the closing of the Transaction to which such Fundamental Event relates, an amount equal to the Fundamental Event Payment (as defined below), calculated as follows: (i) The "FUNDAMENTAL EVENT PAYMENT" shall be equal to (i) the Per Share Consideration, multiplied by the Holder Share Amount, minus (ii) the Redemption Amount. (ii) The "PER SHARE CONSIDERATION" shall be the quotient of: (A) The Consideration; divided by (B) The number of shares of Common Stock outstanding immediately prior to the consummation of the Transaction, plus the Holder Share Amount. (III) THE "CONSIDERATION" shall mean (i) if the consideration paid in the Transaction is paid to the shareholders, the aggregate value of all such payments received by the shareholders of the Borrower in the Transaction; (ii) if the consideration paid in the Transaction is paid to the Borrower, the aggregate value of all consideration received by the Borrower in the Transaction. The value of any consideration not paid in cash shall be determined by an independent valuation firm as appointed by the Holder in its reasonable discretion. 3 (iv) The "HOLDER SHARE AMOUNT" shall mean (A) the principal and interest outstanding under this Note on the Redemption Payment Date, divided by (B) the Fixed Conversion Price as of the Redemption Payment Date. 2.3. No Effective Registration. Notwithstanding anything to the contrary herein, the Borrower shall not repay any part of its obligations to the Holder hereunder if (i) there fails to exist an effective current Registration Statement (as defined in the Registration Rights Agreement) covering the shares of Common Stock to be issued in connection with such payment, or (ii) an Event of Default hereunder exists and is continuing, unless such Event of Default is cured within any applicable cure period or is otherwise waived in writing by the Holder in whole or in part at the Holder's option. ARTICLE III CONVERSION RIGHTS 3.1. Holder's Conversion Rights. While any amounts are owed under this Note, including accrued interest, the Holder shall have the right, but not the obligation, to convert all or any portion of the then aggregate outstanding principal amount of this Note, together with all accrued but unpaid interest and fees due thereon, into shares of Common Stock subject to the terms and conditions set forth in this Article III (a "CONVERSION"). The Holder may exercise such right by delivery to the Borrower of a written, executed and completed notice of conversion in the form of Exhibit A hereto (a "NOTICE OF CONVERSION") not less than three (3) days prior to the date upon which such conversion shall occur. 3.2. Conversion Limitation. Notwithstanding anything contained herein to the contrary, the Holder shall not be entitled to convert pursuant to the terms of this Note an amount that would be convertible into that number of Conversion Shares (as hereafter defined) which would exceed the difference between the number of shares of Common Stock beneficially owned by such Holder or issuable upon exercise of warrants held by such Holder and 4.99% of the outstanding shares of Common Stock of the Borrower. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended and Regulation 13d-3 thereunder. The Holder may void the Conversion Share limitation described in this Section 3.2 upon 75 days prior notice to the Borrower or without any notice requirement upon an Event of Default. In addition, notwithstanding anything contained herein to the contrary, unless an Event of Default shall then exist, the Holder shall not be entitled to effect a Conversion and/or sell the Common Stock pursuant to the terms of this Note during the period commencing on December 23, 2003 and ending on December 31, 2003. 3.3. Procedure for Conversion. (a) In the event that the Holder elects to convert this Note into Common Stock, the Holder shall give notice of such election by delivering a Notice of Conversion to the Borrower and such Notice of Conversion shall provide a breakdown in reasonable detail of the Principal Amount, accrued interest and fees being converted. On each Conversion Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the Principal Amount, accrued interest and fees as entered in its records and shall provide written notice thereof to the Borrower within two (2) 4 business days after the Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied to the Borrower in accordance with the provisions hereof shall be deemed a Conversion Date (the "CONVERSION DATE"). (b) Pursuant to the terms of the Notice of Conversion, the Borrower shall cause the transfer agent to transmit the certificates representing the Conversion Shares to the Holder by crediting the account of the Holder's designated broker with the Depository Trust Corporation ("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within three (3) business days after receipt by the Borrower of the Notice of Conversion (the "DELIVERY DATE"). To the extent the Borrower is not eligible to use the DWAC system, the Borrower shall give instructions to the Borrower's transfer agent to deliver the certificates representing the Conversion Shares to the Holder promptly, and in no event later than the Delivery Date. In the case of the exercise of the Conversion rights set forth herein the Conversion privilege shall be deemed to have been exercised and the Conversion Shares issuable upon such Conversion shall be deemed to have been issued upon the date of receipt by the Borrower of the Notice of Conversion. The Holder shall be treated for all purposes as the record holder of such Common Stock, unless the Holder provides the Borrower written instructions to the contrary. 3.4. Conversion Mechanics. (a) Except as otherwise provided herein, the number of shares of Common Stock to be issued upon each Conversion of this Note shall be such whole number of shares of Common Stock as is equal to the quotient of that portion of the principal and interest and fees to be converted, if any, divided by the Fixed Conversion Price, subject to adjustment as provided herein (such Common Stock, the "CONVERSION SHARES"). (b) Fractional Shares. No fractional shares of Conversion Shares shall be issued upon any Conversion of this Note. In lieu of any fractional share to which Holder would otherwise be entitled, the Borrower shall pay Holder cash equal to the product of such fraction multiplied by the fair market value as of the date of Conversion of a share of Conversion Shares, as determined in good faith by the Board of Directors of the Borrower (the "BOARD"). (c) Adjustment. The Fixed Conversion Price and number and kind of shares or other securities to be issued upon conversion is subject to adjustment from time to time upon the occurrence of certain events, as follows: (i) Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. (ii) Stock Splits, Combinations and Dividends. If the shares of Common Stock outstanding at any time after the date hereof are subdivided or combined into a greater or smaller number of shares of Common Stock (other than a change in par value, from par value to no par value or from no par value to par value), or if a dividend is paid on the Common Stock in 5 shares of Common Stock, the Fixed Conversion Price or the Conversion Price, as the case may be, shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. (iii) Share Issuances. If the Borrower shall at any time prior to the conversion or repayment in full of the Principal Amount issue any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock ("EQUIVALENTS") to a person other than the Holder (except (A) pursuant to Sections 3.4(c) (i) or (ii) hereof; or (B) pursuant to options, warrants, or other obligations to issue shares outstanding on the date hereof as set forth in the Schedules to the Purchase Agreement (the "NEW SHARES") for a consideration per share or having an exercise, conversion or exchange price (the "OFFER PRICE") less than the Fixed Conversion Price in effect at the time of such issuance), then the Fixed Conversion Price shall be immediately reset to such lower Offer Price. For purposes hereof, the issuance of any security of the Borrower convertible into or exercisable or exchangeable for Common Stock shall result in an adjustment to the Fixed Conversion Price only upon the conversion, exercise or exchange of such securities. (A) In the case of the issuance of New Shares for a consideration in whole or in part for cash, the consideration received by the Borrower upon such issuance will be deemed to be the amount of cash paid therefor plus the value of any property other than cash received by the Borrower, determined as provided in subsection 3.4 (c) (iv)(B) hereof. (B) In the case of the issuance of New Shares for a consideration in whole or in part in property other than cash, the value of such property other than cash will be deemed to be the fair market value of such property as determined in good faith by the Board, irrespective of any accounting treatment. (C) In the case of the issuance of Equivalents, the aggregate maximum number of shares of New Stock deliverable upon exercise, exchange or conversion, as the case may be, of such Equivalents will be deemed to have been issued at the time such Equivalents were issued and for a consideration equal to the consideration, if any, received by the Borrower upon the issuance of such Equivalents plus the maximum purchase price provided in such Equivalents (the consideration in each case to be determined in the manner provided in subsections 3.4(c)(iv)(A) and 3.4(c)(iv)(B) hereof); (D) During the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. The Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock 6 certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note. 3.5. Reorganizations, Consolidations, etc. In the event, at any time after the date hereof, of any capital reorganization, or any reclassification of the capital stock of the Borrower (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the Borrower with or into another person (other than a consolidation or merger in which the Borrower is the continuing corporation and which does not result in any change in the powers, designations, preferences and rights (or the qualifications, limitations or restrictions, if any) of the capital stock of the Borrower as amended from time to time) (any such transaction, an "EXTRAORDINARY TRANSACTION"), then all of the amounts owed under this Note shall be exercisable for the kind and number of shares of stock or other securities or property of the Borrower, or of the corporation resulting from or surviving such Extraordinary Transaction, that a holder of the number of shares of Conversion Shares deliverable (immediately prior to the effectiveness of the Extraordinary Transaction) upon conversion of the amounts owed under this Note would have been entitled to receive upon such Extraordinary Transaction. The provisions of Section 3.4(c)(iii) shall similarly apply to successive Extraordinary Transactions. The provisions of this Section 3.5 shall not be deemed Holder's consent to any transaction otherwise prohibited by the terms of the Purchase Agreement or any Related Agreement (as defined in the Purchase Agreement). ARTICLE IV EVENTS OF DEFAULT If an Event of Default (as defined below) occurs and is continuing, the Borrower's rights under Section 2.1 shall immediately cease and be of no further effect until such time as the Event of Default has been cured, or has been waived by the Holder. Upon the occurrence and continuance of an Event of Default beyond any applicable grace period, the Holder may make all sums of principal, interest and other fees then remaining unpaid hereon and all other amounts payable hereunder due and payable within five (5) days after written notice from Holder to Borrower (each occurrence being a "DEFAULT NOTICE PERIOD"). If, with respect to any Event of Default other than a payment default described in Section 4.1 below, within the Default Notice Period the Borrower cures the Event of Default in a manner acceptable to the Holder, the Event of Default will be deemed to no longer exist and any rights and remedies of Holder pertaining to such Event of Default will be of no further force or effect. After the occurrence and during the continuance of an Event of Default which has not been cured during any applicable grace period, the term "CONTRACT RATE" shall mean the greater of (a) 18% per annum or (b) the per annum rate set forth in Section 1.1 hereof. The occurrence of any of the following events is an "EVENT OF DEFAULT": 4.1. Failure to Pay Principal, Interest or other Fees. The Borrower fails to pay when due any installment of principal, interest or other fees hereon in accordance herewith, within the grace period set forth in Section 5.1 hereof or the Borrower fails to pay when due any amount 7 due under any other promissory note issued by the Borrower, within ten (10) business days following the due date for such amount. 4.2. Breach of Covenant. The Borrower breaches any material covenant or other term or condition of this Note, the Convertible Note (as defined in the Purchase Agreement) or the Purchase Agreement in any material respect. 4.3. Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein, in the Purchase Agreement, or in any Related Agreement (as defined in the Purchase Agreement) shall be materially false or misleading and shall not be cured for a period of ten (10) days after the occurrence thereof. 4.4. Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 4.5. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower. 4.6. Judgments. Except as set forth on Schedule 4.5 hereto, any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its property or other assets for more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days. 4.7. Stop Trade. An SEC stop trade order or Principal Exchange trading suspension of the Common Stock shall be in effect for 5 consecutive days or 5 days during a period of 10 consecutive days, excluding in all cases a suspension of all trading on a Principal Exchange (as defined below), provided that the Borrower shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the Common Stock on another Principal Market within 60 days of such notice. The "Principal Exchange" for the Common Stock shall include the National Quotation Bureau's Pink Sheets (so long as the Common Stock is permitted to be listed thereon in accordance with the terms of Section 6.2 of the Purchase Agreement), NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock), or any securities exchange or other securities market on which the Common Stock is then being listed or traded. 4.8. Failure to Deliver Common Stock or Replacement Note. The Borrower's failure to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note, or if required, a replacement Note if such failure to timely deliver Common Stock shall not be cured within two (2) Business Days or such failure to deliver a replacement Note is not cured within seven (7) Business Days. 8 ARTICLE V DEFAULT RELATED PROVISIONS 5.1. Payment Grace Period. The Borrower shall have a three (3) business day grace period to pay any monetary amounts due under this Note or the Purchase Agreement or any Related Document, after which grace period the default Contract Rate set forth in the first paragraph of Article IV hereof shall apply to the monetary amounts due. 5.2. Conversion Privileges. The Conversion privileges set forth in Article III shall remain in full force and effect immediately from the date hereof and until this Note is paid in full. ARTICLE VI MISCELLANEOUS 6.1. Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 6.2. Notices. Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Borrower at the address provided in the Purchase Agreement executed in connection herewith, with a copy to Olshan Grundman Frome Rosenzweig & Wolosky LLP, 505 Park Avenue, New York, New York 10022, Attn: Adam W. Finerman, Esq., facsimile number (212) 755-1787 and to the Holder at the address provided in the Purchase Agreement for such Holder, or at such other address as the Borrower or the Holder may designate by ten days advance written notice to the other parties hereto. A Notice of Conversion shall be deemed given when made to the Borrower pursuant to the Purchase Agreement. 6.3. Amendment Provision. The term "NOTE" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument issued pursuant to Section 3.3 hereof, as it may be amended or supplemented. 6.4. Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of the Purchase Agreement. 6.5. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws. Any 9 action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower's obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court order in favor of Holder. 6.6. Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and the remainder, if any, refunded to the Borrower. 6.7. Subordination. To induce Laurus to enter into the Purchase Agreement and the Related Agreements and to extend financial accommodations in accordance with the terms thereof, the Borrower and Holder hereby acknowledge that the debt created hereunder is and shall be expressly junior and subordinated in right of payment to all indebtedness evidenced by the Convertible Note and any other Purchaser Debt (as defined in the Purchase Agreement, excluding, however, from the definition of Purchaser Debt the convertible term note, dated as of the date hereof, made by the Borrower (as Payor) in favor of Laurus (as Payee) (the "Additional Note")) that remains outstanding or payable (the "Senior Debt"). The Borrower and Holder hereby acknowledge that the debt evidenced hereby shall be pari passu in right of payment to the indebtedness evidenced by the Additional Note. Neither the Borrower nor the Holder shall, as applicable, make any payment in respect of the debt created hereunder, accelerate the maturity thereof or exercise any rights or remedies to recover any amounts due in respect thereof until such time as the Senior Debt shall have been paid in full. To enable Laurus, as holder of the Senior Debt, to assert and enforce its rights hereunder, Laurus is hereby appointed attorney in fact for Holder with full power to act in place and stead of Holder, including the right to make, present, file and vote such proofs of claim against the Borrower on account of all or any part of the debt created hereunder as Laurus may deem advisable and to receive and collect any and all dividends and/or other payments thereon and to apply the same on account of the Senior Debt. Each of the Borrower and Holder shall execute and deliver such instruments as may be requested by Laurus to enforce any and all of the Senior Debt and effectuate the aforesaid power of attorney. Notwithstanding the foregoing, nothing contained in this Section 6.7 shall prohibit (a) the Holder from exercising its conversion rights under Article III hereof or (b) the Borrower from making the mandatory prepayment under Section 1.2 hereof. 10 6.8. Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other. [Balance of page intentionally left blank; signature page follows.] 11 IN WITNESS WHEREOF, each Borrower has caused this Convertible Term Note to be signed in its name effective as of this 25th day of November, 2003. TIDEL TECHNOLOGIES, INC. By: /s/ James T. Rash ----------------------------- Name: James T. Rash Title: CEO WITNESS: /s/ Leonard L. Carr -------------------------- ACCEPTED & AGREED: LAIDLAW SOUTHWEST, LLC By: /s/ James T. Rash ---------------------- Name: James T. Rash Title: Managing Director WITNESS: /s/ Leonard L. Carr -------------------------- 12 EXHIBIT A NOTICE OF CONVERSION (To be executed by the Holder in order to convert all or part of the Note into Common Stock [Name and Address of Holder] The Undersigned hereby elects to convert $_________ of the principal due on the Maturity Date under the Convertible Term Note issued by TIDEL TECHNOLOGIES, INC. dated _________ __, 2003 by delivery of Shares of Common Stock of TIDEL TECHNOLOGIES, INC. on and subject to the conditions set forth in Article III of such Note. (A) Date of Conversion: _______________________ (B) Shares To Be Delivered: _______________________ Date: ____________ By:______________________________ Name:____________________________ Title:___________________________ 13