TIDEL TECHNOLOGIES INC
SUBORDINATION AGREEMENT
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>SUBORDINATION AGREEMENT
<TEXT>


                             SUBORDINATION AGREEMENT

            THIS SUBORDINATION AGREEMENT (this "Agreement"),  executed effective
as of the 8th day of September,  2000, is made by MONTROSE  INVESTMENTS  LTD., a
Cayman Islands exempt company ("Subordinated  Creditor"), and TIDEL ENGINEERING,
L.P., a Delaware limited partnership ("Borrower"),  TIDEL TECHNOLOGIES,  INC., a
Delaware  corporation  ("Parent" or "Debtor"),  in favor of THE CHASE  MANHATTAN
BANK, a New York state banking  corporation,  together with its  successors  and
assigns ("Lender").

                              W I T N E S S E T H:

            WHEREAS, on April 1, 1999, Lender, Borrower, and Parent entered into
that certain  Credit  Agreement  (including  any and all presently  existing and
hereafter entered into amendments,  modifications and restatements  thereof, the
"Credit  Agreement")  pursuant to which Lender agreed to make loans and advances
(collectively  the "Loans") to Borrower and Parent in accordance  with the terms
thereof;

            WHEREAS,  the Loans are evidenced by that certain  Revolving  Credit
Note of even date with the Credit  Agreement,  in the stated principal amount of
$7,000,000.00,  and  that  certain  Term  Note  of even  date  with  the  Credit
Agreement, in the stated principal amount of $544,000.00,  each bearing interest
and being payable to the order of Lender as therein provided (together with each
renewal,  extension,  modification,  rearrangement  thereof and  replacement and
substitution therefor, collectively, the "Notes");

            WHEREAS, Debtor is indebted to Subordinated Creditor and/or may from
time to time  become  indebted  to  Subordinated  Creditor  for other or further
indebtedness,  liabilities or obligations.  All such indebtedness now owing, and
all other  indebtedness,  liabilities or  obligations of Debtor to  Subordinated
Creditor,  now or hereafter  existing  (whether  created directly or acquired by
assignment or otherwise;  whether evidenced by a note, open account, application
for letter of credit,  or otherwise;  whether  absolute or  contingent;  whether
joint,  several  or  independent;   whether  arising  by  operation  of  law  or
otherwise),  including,  without limitation, that certain loan from Subordinated
Creditor to Debtor evidenced by that one certain 6% Convertible  Debenture,  due
September 8, 2004,  dated September 8, 2000 in the original  principal amount of
FIFTEEN MILLION AND NO/100THS  DOLLARS  ($15,000,000)  ("Subordinated  Note") as
same may be renewed, consolidated, amended, extended, or otherwise modified plus
interest and  premiums,  if any,  thereon and other  amounts  payable in respect
thereof are hereinafter  referred to as the "Subordinated  Debt" of Subordinated
Creditor; and

            WHEREAS,  it is a condition  precedent to the making of the Loans to
Borrower  and  Parent by Lender  pursuant  to the Notes  executed  by Parent and
Borrower,  as maker  or  borrower,  and the  making  by  Lender  of any  further
financial  accommodation to Borrower and Parent that  Subordinated  Creditor and
Debtor shall have executed and delivered this Agreement to Lender.

            NOW,  THEREFORE,  in  consideration  of the premises and in order to
induce Lender to make the Loans,  Subordinated  Creditor and Debtor hereby agree
as follows:

            SECTION 1.  Agreement  to  Subordinate.  Subordinated  Creditor  and
Debtor  agree that the payment of the  principal  of, and  interest  on, and all
other amounts owing in respect of the  Subordinated  Debt is and shall be hereby
expressly  subordinated,  to the extent and in the manner hereinafter set forth,
to the prior payment in full of all indebtedness, liabilities and obligations of
the  Borrower  and Debtor  under the Notes or any other  document or  instrument
evidencing,  securing,  guaranteeing  or in any  way  pertaining  to  the  Loans
(collectively  the  "Loan  Documents"),  and all  other  indebtedness  owing  by
Borrower and/or



<PAGE>

Parent to Lender  howsoever  evidenced  (such  documents  evidencing,  securing,
guaranteeing,  or pertaining to such other indebtedness are also included within
the  definition  of the "Loan  Documents"),  whether now or hereafter  existing,
whether for principal,  interest (including without limitation interest accruing
after the  commencement of any proceeding  referred to in Section 3), or whether
fees,   expenses  or  otherwise   (all  such   obligations   being  the  "Senior
Indebtedness").

            SECTION 2. A. No Payment on the Subordinated Debt.

            (i) Unless and until all Senior  Indebtedness  has been paid in full
and no commitment is in existence to advance or create Senior Indebtedness:

                   (A) except as provided  in 2.B and 2.C,  no payment  shall be
            made by Debtor, directly or indirectly,  in respect of the principal
            of, or interest or premium on, or otherwise owing in respect of, the
            Subordinated Debt, and

                   (B) except as provided in 2.B and 2.C,  Subordinated Creditor
            shall not ask, demand, sue for, take any action to enforce,  take or
            receive,  directly or indirectly,  in cash or other property  (other
            than  Common  Stock),  by  sale,  set-off  or in  any  other  manner
            whatsoever  any  moneys  which may now or  hereafter  be owing  with
            respect to the Subordinated Debt.

Notwithstanding the foregoing,  Subordinated  Creditor may demand, sue for, take
any  action,  or  commence  proceedings  to  enforce  the  following  so long as
Subordinated Creditor does not breach its agreements in Section 4, below:

            (X)  Debtor's   obligations   and   agreements  in  respect  of  the
            Subordinated  Debt  or  under  the  Subordinated  Note  and  related
            documents that are non-monetary in nature, and

            (Y)   Subordinated   Creditor's   rights  and  remedies   under  the
            Subordinated  Note and  related  documents  (other  than  rights and
            remedies   consisting  of  the  payment  of  cash  to   Subordinated
            Creditor).

            (ii)  In the  event  that,  notwithstanding  the  provisions  of the
preceding  subsection (i) of this Section 2.A, and except as provided in 2.B and
2.C below,  Debtor  shall make any  payment on account of the  principal  of, or
interest on, or amounts  otherwise  owing in respect of, the  Subordinated  Debt
while Senior  Indebtedness has not been paid in full or while a commitment is in
existence to advance or create any Senior  Indebtedness,  such payment  shall be
segregated  from other funds and property of  Subordinated  Creditor and held by
the Subordinated  Creditor,  in trust for the benefit of, and shall forthwith be
paid over and delivered to,  Lender or the holder of Senior  Indebtedness  (with
any necessary endorsement) for application pro rata to the payment of all Senior
Indebtedness  remaining  unpaid  to  the  extent  necessary  to pay  all  Senior
Indebtedness  or held as  collateral  in the case of non cash  property  for the
payment of the Senior Indebtedness.

            B.  Principal  and Interest on  Subordinated  Debt Prior to Default.
Notwithstanding anything to the contrary contained in 2.A so long as there shall
exist no Event of Default as  defined in any of the Loan  Documents,  Debtor may
from time to time pay or cause to be paid, and Subordinated Creditor may receive
and retain for its own account, regularly scheduled payments of accrued interest
as and  when  such  payments  are  due  on the  Subordinated  Note.  Debtor  and
Subordinated  Creditor  will not change the schedule of payments as to principal
or  interest  without  Lender's  prior  written  consent.  Each  of  Debtor  and
Subordinated  Creditor shall maintain  records with respect to such payments and
upon the happening of any Event of Default,  Debtor shall have no right to make,
and  Subordinated  Creditor shall cease to have the right to receive and retain,
such  payments  in cash;  and any  payments  in cash  received  by

                                       2

<PAGE>

Subordinated  Creditor shall be held in trust for the benefit of Senior Creditor
in accordance with this Agreement.

            C.  Payments  on  Subordinated  Debt in Common  Stock or Addition to
Principal  Amount Due under the  Subordinated  Note.  Whether or not there shall
exist any Event of Default as defined in any of the Loan  Documents,  Debtor may
make,  and  Subordinated  Creditor  may receive and retain for its own  account,
payments  of  principal,  accrued  interest,   penalties,   liquidated  damages,
premiums,   or  any  other  amounts  owing  under  the  Subordinated   Note  and
Registration  Rights Agreement entered into as of the date hereof between Debtor
and the  purchasers  signatory  thereto,  either in the form of Common Stock (as
such term is  defined in the  Subordinated  Note) or by adding the amount of any
such payments to the principal amount due under the  Subordinated  Note (but not
in cash),  pursuant to Section 2(c) of the Registration Rights Agreement entered
into as of the date hereof between Debtor and the purchasers  signatory  thereto
and Section 7 of the Subordinated Note.


            SECTION 3. In Furtherance of Subordination.

            (a) Upon any  distribution  of all or any of the  assets  of  Debtor
(other than assets  constituting  Common Stock)  (whether in connection with the
dissolution, winding up, liquidation, arrangement,  reorganization,  adjustment,
protection,  relief or  composition  of Debtor  or its debts or  whether  in any
bankruptcy, insolvency, rearrangement,  reorganization,  receivership, relief or
similar  proceedings  or whether upon an assignment for the benefit of creditors
or otherwise) the following provisions shall apply:

            (i) Lender or the holder of all Senior  Indebtedness  shall first be
entitled to receive payment in full of the principal thereof,  premium,  if any,
and interest (including  post-petition interest) due thereon before Subordinated
Creditor  or the holder of the  Subordinated  Debt is  entitled  to receive  any
payment on account of the  principal of or interest on or any other amount owing
in respect of the Subordinated Debt;

            (ii) any payment,  dividend or  distribution  of assets of Debtor of
any  kind or  character,  whether  in  cash,  property  or  securities  to which
Subordinated  Creditor or the holder of the Subordinated  Debt would be entitled
except for the provisions of this  Agreement,  shall be paid by the  liquidating
trustee or agent or other person making such payment or distribution,  whether a
trustee in  bankruptcy,  a receiver or  liquidating  trustee or other trustee or
agent,  directly to Lender or the holder of Senior  Indebtedness,  to the extent
necessary to make payment in full of all Senior Indebtedness remaining unpaid;

            (iii) in any such  proceeding,  Lender or the  holder of the  Senior
Indebtedness  is hereby  irrevocably  authorized  and  empowered (in the name of
Subordinated  Creditor or otherwise),  but shall have no obligation,  to demand,
sue for,  collect  and  receive  every  payment or  distribution  referred to in
clauses (i) and (ii) of subsection (a) above and given acquittance  therefor and
to file  claims  and  proofs  of claim and take such  other  action  (including,
without  limitation,  voting the  Subordinated  Debt or  enforcing  any security
interest or other lien securing payment of the Subordinated Debt) as it may deem
necessary or advisable for the exercise or  enforcement  of any of the rights or
interests of Lender or the holder of Senior Indebtedness hereunder;

            (iv)  in  any  proceeding,  Subordinated  Creditor  shall  duly  and
promptly  take such action to the  extent,  and only to the extent as Lender may
expressly request:

                  (A) to collect the Subordinated Debt for the account of Lender
or the holder of Senior

                                       3


<PAGE>

Indebtedness and to file appropriate claims or proofs of claim in respect of the
Subordinated Debt;

                  (B) to execute and deliver to Lender such powers of  attorney,
assignments,  or other  instruments  as it may  request in order to enable it to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinated Debt; and

                  (C)  to  collect  and   receive   any  and  all   payments  or
distributions  which may be payable or  deliverable  upon or with respect to the
Subordinated Debt; and

            (v) in any such proceeding, Subordinated Creditor shall not have any
right  to  setoff  against  the  Subordinated  Debt  any  indebtedness  owed  by
Subordinated  Creditor to Debtor (including,  without  limitation,  any right of
setoff under Section 553 of the  Bankruptcy  Code),  and  Subordinated  Creditor
hereby irrevocably  agrees, to the fullest extent permitted by law, that it will
not exercise (and herein waives) any right of setoff.

If the foregoing  waivers are adjudicated  unenforceable by a court of competent
jurisdiction,  then  Subordinated  Creditor  agrees  that,  in the event that it
exercises any right of setoff in any such proceeding, Subordinated Creditor will
pay directly to Lender or the holder of the Senior Indebtedness remaining unpaid
or unprovided for, an amount equal to the amount of Subordinated  Debt which was
so setoff,  for  application to such Senior  Indebtedness  until all such Senior
Indebtedness shall have been paid in full;

            (b) in the event that,  notwithstanding the foregoing  provisions of
this Section 3, any payment or  distribution  of assets of Debtor of any kind or
character,  whether  in cash,  property  or  securities,  shall be  received  by
Subordinated  Creditor on account of principal or interest on Subordinated  Debt
before all Senior  Indebtedness  is paid in full, or effective  provision  shall
have been made for its payment,  such payment or distribution  shall be received
and held in trust for and  shall be paid  over to  Lender  or the  holder of the
Senior  Indebtedness  remaining unpaid or unprovided for, for application to the
payment of such Senior  Indebtedness  until all such Senior  Indebtedness  shall
have been paid in full; and

            (c)  Lender  or the  holder  of the  Senior  Indebtedness  is hereby
authorized to demand  specific  performance  of this  Agreement,  whether or not
Debtor shall have complied with any of the provisions  hereof  applicable to it,
at any time when  Subordinated  Creditor shall have failed to comply with any of
the provisions of this Agreement applicable to it. Subordinated  Creditor hereby
irrevocably  waives any defense based on the adequacy of a remedy at law,  which
might be asserted as a bar to such remedy of specific performance.

            SECTION 4. Subordination of all Liens  Subordinated  Creditor agrees
that it will  not hold any lien or  security  interest  in any real or  personal
property as security for the Subordinated Debt unless Lender has given its prior
written  consent to the creation  thereof.  In the event  Subordinated  Creditor
shall  acquire any lien or security  interest as security  for the  Subordinated
Debt,  regardless  of whether  such lien or security  interest is  permitted  or
prohibited by this Agreement or the Loan Documents,  Subordinated  Creditor will
hold such lien or security  interest for the benefit of Lender and shall enforce
such lien or security  interest in accordance  with the written  instructions of
Lender.  Any cash or other property  received on account of any lien or security
interest securing the Subordinated Debt shall be delivered to Lender and, in the
case of cash, applied to, or, in the case of other property,  held as collateral
for, the Senior Indebtedness. To the extent that any Subordinated Debt is now or
hereafter secured by a lien or security interest (a "Subordinate  Lien") against
any  real  or  personal  property  that is also  subject  to a lien or  security
interest  securing  the  Senior  Indebtedness  (a "Senior  Lien"),  Subordinated
Creditor  agrees  that  such  Subordinate  Lien  shall  be  second,  junior  and
subordinate to such Senior Lien and such Senior Lien shall be first and prior to
such Subordinate Lien. It is further agreed that the priorities specified in the
preceding  sentence

                                       4
<PAGE>

are applicable  irrespective of the time or order of attachment or perfection of
liens  and  security  interests,  or the time or order of  filing  of liens  and
security interests,  or the time or order of filing of financing statements,  or
the giving or failure to give notice of the acquisition or expected  acquisition
of purchase money or other security interests.

            SECTION 5. No Commencement of Any Proceeding.  Subordinated Creditor
agrees that, so long as any of the Senior  Indebtedness  shall remain unpaid, it
will not commence,  or join with any creditor other than Lender or the holder of
Senior Indebtedness in commencing, any proceeding for any distribution of all or
any of the  assets of Debtor  (other  than  assets  constituting  Common  Stock)
(whether  in  connection  with  the   dissolution,   winding  up,   liquidation,
arrangement,  reorganization,  adjustment,  protection, relief or composition of
Debtor or its debts or whether  in any  bankruptcy,  insolvency,  rearrangement,
reorganization,  receivership,  relief or similar proceedings or whether upon an
assignment for the benefit of creditors or otherwise).

            SECTION 6. Rights of Subrogation.  Subordinated Creditor agrees that
no  payment  or  distribution  to  Lender or the  holder of Senior  Indebtedness
pursuant to the provisions of this Agreement shall entitle Subordinated Creditor
to  exercise  any  rights of  subrogation  in respect  thereof  until the Senior
Indebtedness shall have been paid in full.

            SECTION 7. Subordination  Legend;  Further Assurances.  Subordinated
Creditor and Debtor will cause each instrument  evidencing  Subordinated Debt to
be endorsed with the following legend:

            "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."

Subordinated  Creditor and Debtor each will further mark its books of account in
such a manner as shall be effective to give proper  notice of the effect of this
Agreement and will, in the case of any Subordinated  Debt which is not evidenced
by any instrument,  upon Lender's  reasonable  request,  cause such Subordinated
Debt to be evidenced by an appropriate  instrument or instruments  endorsed with
the above legend. Subordinated Creditor and Debtor each will, at its expense and
at any time and from time to time,  promptly  execute  and  deliver  all further
instruments and documents,  and take all further actions,  that may be necessary
or desirable,  or that Lender may  reasonably  request,  in order to protect any
right or interest  granted or purported to be granted hereby or to enable Lender
to exercise and enforce its rights and remedies hereunder.

            SECTION  8.  No  Change  in or  Disposition  of  Subordinated  Debt.
Subordinated  Creditor  shall not: (a) cancel or otherwise  discharge any of the
Subordinated Debt, except by the issuance of Common Stock as permitted under the
Subordinated  Debenture,  or  subordinate  any of the  Subordinated  Debt to any
indebtedness  of Debtor other than the Senior  Indebtedness,  except as provided
otherwise  in  Section  2,  above;  or  (b)  permit  the  terms  of  any  of the
Subordinated  Debt to be changed  in such a manner as to have an adverse  effect
upon the rights or  interests  of the Lender  under this  Agreement  or the Loan
Documents.

            SECTION 9.  Agreement by the Debtor.  Debtor agrees that it will not
make any payment of any of the Subordinated  Debt, nor take any other action, in
contravention  of the provisions of this  Agreement.  Nothing  contained in this
Agreement is intended to or shall impair,  as between  Debtor,  on the one hand,
and its  creditors  other than the  holders of the Senior  Indebtedness  and the
Subordinated  Debt,  on the other  hand,  the  obligations  of Debtor to pay the
holders of the Subordinated  Debt all amounts owing on

                                       5

<PAGE>

the  Subordinated  Debt as and when the same  shall  become  due and  payable in
accordance  with its terms,  or to affect the relative  rights of the holders of
Subordinated  Debt,  on the one hand,  and  creditors  of the Debtor  other than
holders of the Senior Indebtedness, on the other hand.

            SECTION 10. Senior Indebtedness  Hereunder Not Affected.  All rights
and interests of Lender or the holder of Senior Indebtedness hereunder,  and all
agreements  and  obligations  of  Subordinated  Creditor  and Debtor  under this
Agreement, shall remain in full force and effect irrespective of:

            (i) any lack of validity or  enforceability of all or any portion of
this Agreement;

            (ii) any change in the amount of interest  rate  accruing  on, time,
manner or place of payment of, or in any other term of, all or any of the Senior
Indebtedness,  or any other amendment or waiver of any consent to departure from
any of the Loan Documents,  including, without limitation,  changes in the terms
of  disbursement  of the Loan  proceeds  or  repayment  thereof,  modifications,
extensions  or  renewals  of  payment  dates,  changes in  interest  rate or the
advancement of additional funds by the Lender in its discretion;

            (iii) any exchange,  release or  non-perfection of any collateral or
any release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the Senior Indebtedness; or

            (iv) any other circumstance in respect of this Agreement which might
otherwise  constitute a defense  available  to, or a discharge of, Debtor or any
guarantor  of or in  respect  of the  Senior  Indebtedness  or the  Subordinated
Creditor.

            SECTION  11.  Reinstatement.  This  Agreement  shall  continue to be
effective  or be  reinstated,  as the case may be, if at any time any payment of
any of the Senior  Indebtedness  is rescinded  or must  otherwise be returned by
Lender upon the insolvency, bankruptcy or reorganization of Debtor or otherwise,
all as though such payment had not been made.

            SECTION 12. Waivers. Subordinated Creditor hereby waives promptness,
diligence,  notice of acceptance,  notice of intention to accelerate,  notice of
acceleration and any other notice with respect to any of the Senior Indebtedness
and this Agreement and any requirement that Lender protect,  secure,  perfect or
insure any security  interest or lien or any property subject thereto or exhaust
any right or take any action against Debtor or any other person or entity or any
collateral.  Subordinated  Creditor waives any right or benefit of any notice of
any action, event or circumstance relating to the Senior Indebtedness, including
but not limited to the incurrence,  modification, default, exercise of remedies,
compromise or release of or with respect to Senior Indebtedness.

            SECTION 13. Representations and Warranties.

            (a) Debtor  hereby  represents  and  warrants  as  follows:  (i) the
Subordinated  Debt now outstanding  (true and complete copies of any instruments
evidencing  which having been furnished to the Lender) has been duly  authorized
by Debtor, has not been amended or otherwise modified and constitutes the legal,
valid and binding obligation of Debtor enforceable  against Debtor in accordance
with its terms; (ii) there exists no default in respect of any such Subordinated
Debt; (iii) Debtor is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation as set forth on
the  first  page  hereof;  and  Debtor  has all  requisite  corporate  power and
authority  to  execute,  deliver  and  perform  this  Agreement;  and  (iv)  The
execution,  delivery and  performance by Debtor of this Agreement have been duly
authorized by all necessary  corporate action and do not and will not contravene
its articles, charter or bylaws; and


<PAGE>

            (b) Subordinated Creditor hereby represents and warrants as follows:
(i) Subordinated  Creditor owns the  Subordinated  Debt now outstanding free and
clear of any lien,  security  interest,  charge or  encumbrance or any rights of
others; (ii) The execution, delivery and performance by Subordinated Creditor of
this Agreement do not and will not contravene any law or governmental regulation
or any contractual  restriction binding on or affecting Subordinated Creditor or
any of its properties, and do not and will not result in or require the creation
of any lien,  security  interest  or other  charge or  encumbrance  upon or with
respect to any of its  properties;  (iii) This  Agreement is a legal,  valid and
binding obligation of Subordinated  Creditor,  enforceable against  Subordinated
Creditor  in  accordance  with  its  terms  except  as  limited  by  bankruptcy,
insolvency or other laws of general  application  relating to the enforcement of
creditors' rights and by general equitable principles;  and (iv) There exists no
default in respect of any Subordinated Debt.

            SECTION 14. Amendments, Etc. No amendment or waiver of any provision
of this  Agreement  nor consent to any  departure  by  Subordinated  Creditor or
Debtor  therefrom  shall in any event be  effective  unless the same shall be in
writing and signed by Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

            SECTION 15. Expenses.  Subordinated  Creditor and Debtor jointly and
severally  agree to pay,  upon  demand,  to  Lender  the  amount  of any and all
reasonable expenses,  including the reasonable fees and expenses of its counsel,
which Lender or any other holders of Senior Indebtedness may incur in connection
with the  exercise  or  enforcement  of any of the  rights or  interests  of the
holders of Senior Indebtedness hereunder.

            SECTION 16. Addresses for Notices. All communications from any party
to  any  other  shall  be  in  writing   (including   telegraphic  and  telecopy
communication).  Communications to any party shall be delivered to another party
by certified or registered mail,  return receipt  requested,  or sent by private
overnight courier or telegraphed, or telecopied,  addressed to it at the address
of such party specified next to its signature in this  Agreement.  Any party may
designate a different address for receipt of communications by written notice to
the other parties.  All  communications  shall be effective when received and if
receipt is refused,  either three (3) business days after deposit in the mail or
the  date of  attempted  delivery  as  confirmed  by  private  courier  service,
telegraph company or telecopy operator.

            SECTION 17. No Waiver, Remedies. No failure on the part of Lender to
exercise,  and no delay in exercising,  any right  hereunder  shall operate as a
waiver thereof;  nor shall any single or partial exercise of any right hereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right.  The remedies  herein  provided are  cumulative  and not exclusive of any
remedies provided by law.

            SECTION 18. Continuing Agreement; Transfer of Notes. All warranties,
representations and covenants made by Subordinated  Creditor or Debtor herein or
in any certificate or other instrument delivered by it or on its behalf shall be
considered  to have been relied upon by Lender and shall  survive  execution and
delivery of the Loan Documents  regardless of any  investigation by or on behalf
of any thereof. This Agreement is a continuing agreement and shall:(i) remain in
full force and  effect  until the  Senior  Indebtedness  shall have been paid in
full; (ii) be binding upon Subordinated Creditor,  Debtor and its successors and
assigns and any subsequent  holder of Subordinated  Debt; and (iii) inure to the
benefit of and be  enforceable  by Lender and its  successors,  transferees  and
assigns.  Without limiting the generality of the foregoing clause (iii),  Lender
may assign or otherwise  transfer the Notes or any other  evidence of any Senior
Indebtedness held by it to any other person or entity,  and such other person or
entity  shall  thereupon  become  vested with all the rights in respect  thereof
granted to such lender herein or otherwise.

            SECTION 19.  GOVERNING  LAW.  THIS  AGREEMENT  SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

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<PAGE>

            SECTION 20.  Counterparts and Facsimile  Signatures.  This Agreement
may be  separately  executed  in any  number of  counterparts  and by  different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to constitute one and the same Agreement. Any party to this Agreement may
indicate  its  intention to be bound by this  Agreement by its  signature to the
signature page hereof and the delivery of the signature page hereof to the other
party or its representatives by facsimile transmission or telecopy. The delivery
of  a  party's  signature  page  on  the  signature  page  hereof  by  facsimile
transmission  or telecopy  shall have the same force and effect as if such party
signed and delivered this Agreement in person.

            SECTION 21. Section Headings.  Headings are for convenience only and
shall be  given no  substantive  meaning  or  significance  in  construing  this
Agreement.

            SECTION  22.  THIS  AGREEMENT  EMBODIES  THE  ENTIRE  AGREEMENT  AND
UNDERSTANDING BY AND AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDES ALL PRIOR  AGREEMENTS,  CONSENTS AND  UNDERSTANDINGS  RELATING TO
SUCH  SUBJECT  MATTER  AND  MAY  NOT  BE  CONTRADICTED  BY  EVIDENCE  OF  PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

            THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.


                                       8

<PAGE>

            IN WITNESS  WHEREOF,  Debtor and  Subordinated  Creditor have caused
this  Agreement to be duly  executed and delivered by their  officers  thereunto
duly authorized as of the date first above written.

                                           SUBORDINATED CREDITOR:

                                           MONTROSE INVESTMENTS LTD.



                                           By:
                                           Name:
                                           Title:

                                           Address for Notices:

                                           c/o HBK Investments, L.P.
                                           300 Crescent Court, Suite 700
                                           Dallas, Texas  75201
                                           Attn.:  Jeff Estes and Kim Rozman

                                           LENDER:

                                           THE CHASE MANHATTAN BANK



                                           By:
                                               Joanne Bramanti, Vice President

                                           TIDEL ENGINEERING, L.P.,
                                           a Delaware limited partnership

                                           By:   Tidel Cash Systems, Inc.,
                                                 its sole general partner


                                                 By:
                                                        Mark K. Levenick,
                                                        President


                                          TIDEL TECHNOLOGIES, INC.,
                                          a Delaware corporation



                                          By:
                                                  James T. Rash,
                                                  Chief Executive Officer

                                          Address for Notices:
                                          -------------------

                                       9

<PAGE>

                                        Borrower:
                                        Tidel Engineering, L.P.
                                        c/o Tidel Cash Systems, Inc.
                                        5847 San Felipe, Suite 900
                                        Houston, Texas 77057
                                        Attention: James T. Rash

                                        Ultimate Parent:
                                        Tidel Technologies, Inc.
                                        5847 San Felipe, Suite 900
                                        Houston, Texas 77057
                                        Attention: James T. Rash

</TEXT>
</DOCUMENT>
