-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Reehg0vjSiyB7KAP6VQitqNzioNogd0jHzMVMEI+TH5Co+3Rloy54nIEIZLhotVX epL6hHare7BI8o0c5ACC7A== 0000950129-00-002440.txt : 20000516 0000950129-00-002440.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950129-00-002440 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIDEL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000842695 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 752193593 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17288 FILM NUMBER: 633294 BUSINESS ADDRESS: STREET 1: 5847 SAN FELIPE STE 900 STREET 2: SAN FELIPE PLZ CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7137838200 MAIL ADDRESS: STREET 1: 5847 SAN FELIPE STREET 2: SUITE 900 CITY: HOUSTON STATE: TX ZIP: 77057 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN MEDICAL TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 10-Q 1 TIDEL TECHNOLOGIES, INC. - DATED MARCH 31, 2000 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission file Number 000-17288 TIDEL TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 75-2193593 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5847 San Felipe, Suite 900 Houston, Texas 77057 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 783-8200 ---------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. YES [X] NO [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares of Common Stock outstanding as of the close of business on March 31, 2000 was 16,447,827. 2 TIDEL TECHNOLOGIES, INC. I N D E X
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 2000 and September 30, 1999 (unaudited)...................................... 1 Consolidated Statements of Operations for the three months and six months ended March 31, 2000 and 1999 (unaudited)........................................................ 2 Consolidated Statements of Comprehensive Income for the three months and six months ended March 31, 2000 and 1999 (unaudited)............................................... 3 Consolidated Statements of Cash Flows for the six months ended March 31, 2000 and 1999 (unaudited)........................ 4 Notes to Consolidated Financial Statements (unaudited)..................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 6 Item 3. Quantitative and Qualitative Disclosures About Market Risks ......................................................... 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................................ 10 Item 2. Changes in Securities...................................................... 10 Item 3. Defaults Upon Senior Securities............................................ 10 Item 4. Submission of Matters to a Vote Of Security Holders..................................................... 11 Item 5. Other Information ........................................................ 11 Item 6. Exhibits and Reports on Form 8-K........................................... 11 SIGNATURE................................................................................... 11
3 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, SEPTEMBER 30, ASSETS 2000 1999 ------------ ------------ Current Assets: Cash and cash equivalents $ 1,126,713 $ 2,423,844 Trade accounts receivable, net of allowance of $636,848 and $566,917, respectively 17,579,488 15,137,056 Notes and other receivables 1,142,494 897,368 Inventories 10,200,169 6,128,741 Prepaid expenses and other 944,104 964,290 ------------ ------------ Total current assets 30,992,968 25,551,299 Investment in 3CI, at market value 392,886 261,924 Property, plant and equipment, at cost 3,947,101 3,912,348 Accumulated depreciation (2,296,056) (1,932,575) ------------ ------------ Net property, plant and equipment 1,651,045 1,979,773 Intangible assets, net of accumulated amortization of $1,096,467 and $1,039,364, respectively 604,606 661,709 Other assets 238,294 241,364 ------------ ------------ Total assets $ 33,879,799 $ 28,696,069 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 128,000 $ 128,000 Accounts payable 7,003,830 5,285,591 Accrued liabilities 2,065,149 2,114,314 ------------ ------------ Total current liabilities 9,196,979 7,527,905 Long-term debt 4,288,000 5,246,634 ------------ ------------ Total liabilities 13,484,979 12,774,539 ------------ ------------ Commitments and contingencies Shareholders' Equity: Common stock, $.01 par value, authorized 100,000,000 shares; issued and outstanding 16,447,827 and 16,067,968 shares, respectively 164,478 160,680 Additional paid-in capital 14,637,661 14,299,373 Retained earnings 7,149,570 3,149,328 Stock subscriptions receivable (382,063) (382,063) Accumulated other comprehensive loss (1,174,826) (1,305,788) ------------ ------------ Total shareholders' equity 20,394,820 15,921,530 ------------ ------------ Total liabilities and shareholders' equity $ 33,879,799 $ 28,696,069 ============ ============
See accompanying notes to consolidated financial statements. 1 4 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, ---------------------------- --------------------------- 2000 1999 2000 1999 ----------- ------------ ----------- ----------- Revenues $18,662,690 $10,286,247 $32,444,843 $17,346,940 Cost of sales 11,564,350 6,907,215 20,324,709 11,625,828 ----------- ----------- ----------- ----------- Gross profit 7,098,340 3,379,032 12,120,134 5,721,112 Selling, general and administrative 2,863,885 2,066,415 5,226,330 3,741,710 Depreciation and amortization 318,111 178,631 628,890 341,345 ----------- ----------- ----------- ----------- Operating income 3,916,344 1,133,986 6,264,914 1,638,057 Interest expense, net 89,169 96,024 191,672 199,762 ----------- ----------- ----------- ----------- Income before taxes 3,827,175 1,037,962 6,073,242 1,438,295 Income tax expense 1,308,000 412,000 2,073,000 560,000 ----------- ----------- ----------- ----------- Net income $ 2,519,175 $ 625,962 $ 4,000,242 $ 878,295 =========== =========== =========== =========== Basic earnings per share: Net income $ 0.15 $ 0.04 $ 0.25 $ 0.06 =========== =========== =========== =========== Weighted average common shares outstanding 16,290,536 16,006,912 16,193,449 15,952,116 =========== =========== =========== =========== Diluted earnings per share: Net income $ 0.14 $ 0.04 $ 0.22 $ 0.05 =========== =========== =========== =========== Weighted average common and dilutive shares outstanding 18,320,446 17,363,869 17,887,557 17,097,185 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 2 5 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, ---------------------------- -------------------------- 2000 1999 2000 1999 ----------- ----------- ---------- ----------- Net income $2,519,175 $ 625,962 $4,000,242 $ 878,295 Other comprehensive income (loss): Unrealized income (loss) on investment in 3CI 130,962 (108,960) 130,962 (305,927) ---------- ---------- ---------- ---------- Comprehensive income $2,650,137 $ 517,002 $4,131,204 $ 572,368 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 3 6 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED MARCH 31, ---------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Net income $ 4,000,242 $ 878,295 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 628,890 341,345 Changes in assets and liabilities: Trade accounts receivable, net (2,442,432) (701,866) Notes and other receivables (245,126) (33,670) Inventories (4,071,428) (98,016) Prepaids and other assets 23,256 (83,619) Accounts payable and accrued liabilities 1,669,074 (1,036,824) ----------- ----------- Net cash used in operating activities (437,524) (734,355) ----------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (243,059) (400,806) ----------- ----------- Net cash used in investing activities (243,059) (400,806) ----------- ----------- Cash flows from financing activities: (Repayments) borrowings of long-term debt (894,634) 540,030 Repayments of notes payable (64,000) (64,000) Proceeds from exercise of options and warrants 342,086 141,250 ----------- ----------- Net cash (used in) provided by financing activities (616,548) 617,280 ----------- ----------- Net decrease in cash and cash equivalents (1,297,131) (517,881) Cash and cash equivalents at beginning of period 2,423,844 1,400,148 ----------- ----------- Cash and cash equivalents at end of period $ 1,126,713 $ 882,267 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest $ 225,640 $ 224,871 =========== =========== Cash paid for taxes $ 1,880,000 $ 662,940 =========== ===========
See accompanying notes to consolidated financial statements. 4 7 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) (1) CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated balance sheets and related interim consolidated statements of operations and cash flows of Tidel Technologies, Inc. (the "Company"), a Delaware corporation, are unaudited. In the opinion of management, these financial statements include all adjustments (consisting only of normal recurring items) necessary for their fair presentation in accordance with generally accepted accounting principles. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended September 30, 1999. (2) INVENTORIES Inventories consisted of the following at March 31, 2000 and September 30, 1999:
March 31, September 30, 2000 1999 ------------ ------------ Raw materials ........ $ 7,238,265 $ 5,200,887 Work in process ...... 24,408 36,749 Finished goods ....... 2,631,999 590,852 Other ................ 355,497 384,963 ------------ ------------ 10,250,169 6,213,451 Inventory reserve .... (50,000) (84,710) ------------ ------------ $ 10,200,169 $ 6,128,741 ============ ============
(3) EARNINGS PER SHARE Basic earnings per share is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the income available to common shareholders by the weighted average number of common shares and dilutive potential common shares. The following is a reconciliation of the numerators and denominators of the basic and diluted per-share computations for net income for the three months and six months ended March 31, 2000 and 1999:
Weighted Average Shares Per Share Income Outstanding Amount ---------- ----------- ------- Three Months Ended March 31, 2000: Basic earnings per share ................... $2,519,175 16,290,536 $ .15 Effect of dilutive warrants and options .... -- 2,029,910 (.01) ---------- ---------- ------- Diluted earnings per share ................. $2,519,175 18,320,446 $ .14 ========== ========== =======
5 8
Weighted Average Shares Per Share Income Outstanding Amount ---------- ----------- ---------- Three Months Ended March 31, 1999: Basic earnings per share ................... $ 625,962 16,006,912 $ .04 Effect of dilutive warrants and options .... -- 1,356,957 -- ---------- ---------- ---------- Diluted earnings per share ................. $ 625,962 17,363,869 $ .04 ========== ========== ========== Six Months Ended March 31, 2000: Basic earnings per share ................... $4,000,242 16,193,449 $ .25 Effect of dilutive warrants and options .... -- 1,694,108 (.03) ---------- ---------- ---------- Diluted earnings per share ................. $4,000,242 17,887,557 $ .22 ========== ========== ========== Six Months Ended March 31, 1999: Basic earnings per share ................... $ 878,295 15,952,116 $ .06 Effect of dilutive warrants and options .... -- 1,145,069 (.01) ---------- ---------- ---------- Diluted earnings per share ................. $ 878,295 17,097,185 $ .05 ========== ========== ==========
(4) INVESTMENT IN 3CI The Company owns 698,464 shares of common stock of 3CI Complete Compliance Corporation ("3CI"), which is carried at market value. In addition, the Company owned warrants to purchase 226,939 shares of common stock of 3CI, exercisable at $1.50 per share, which expired unexercised in April 2000. (5) LITIGATION The Company and its subsidiaries are each subject to certain litigation and claims arising in the ordinary course of business. In the opinion of the management of the Company, the amounts ultimately payable, if any, as a result of such litigation and claims will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company develops, manufactures, sells and supports automated teller machines and related software (the "ATM" products) and electronic cash controller safes (the "Timed Access Cash Controller" or "TACC" products). PRODUCT REVENUES Total revenues increased $8,376,443, or 81%, for the second quarter of fiscal 2000 compared to the same quarter of 1999. On a year-to-date basis, revenues increased $15,097,903, or 87%, in 2000 when compared to 1999. As discussed below, a significant increase in ATM shipments was the principal factor in the Company's revenue growth. Revenue by product is detailed in the following table: 6 9
(Dollars in 000's) --------------------------------------------------------------- Three Months Ended March 31, Six Months Ended March 31, --------------------------- --------------------------- 2000 1999 2000 1999 ------- ------- ------- ------- ATM ......................... $15,104 $ 7,771 $26,015 $12,543 TACC ........................ 1,988 1,625 3,660 2,887 Parts, service and other .... 1,571 890 2,770 1,917 ------- ------- ------- ------- $18,663 $10,286 $32,445 $17,347 ======= ======= ======= =======
The growth in sales was due to continued strong demand for the Company's core Ignition Series ATMs. The Company shipped 3,055 ATMs in the quarter ended March 31, 2000, an increase of 102%, from the 1,511 ATMs shipped in the comparable period a year ago. Resulting ATM product sales increased $7,333,000, or 94%, for the quarter ended March 31, 2000 compared to the same period in 1999. Average sales prices for ATM products decreased approximately 4% in the quarter ended March 31, 2000 when compared to the same quarter in 1999, primarily a result of increased sales to major customers receiving volume discounts. TACC product sales increased $363,000, or 22%, from 1999 to 2000. Sales for the six month-to-date period increased $773,000, or 27%, from the same period in 1999. These increases were partially due to increased shipments of the new TACC IV model. Parts, service and other revenues vary with sales of finished goods, and have increased accordingly, except for sales of environmental monitoring equipment which have declined and are now insignificant. GROSS PROFIT, OPERATING EXPENSES AND NON-OPERATING ITEMS A comparison of certain operating information is provided in the following table:
(Dollars in 000's) ------------------------------------------------------------------- Three Months Ended March 31, Six Months Ended March 31, ---------------------------- -------------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Gross profit ........................... $ 7,098 $ 3,379 $12,120 $ 5,721 Selling, general and administrative .... 2,864 2,066 5,226 3,742 Depreciation and amortization .......... 318 179 629 341 Operating income ....................... 3,916 1,134 6,265 1,638 Interest expense ....................... 89 96 192 200 Income before taxes .................... 3,827 1,038 6,073 1,438 Income taxes ........................... 1,308 412 2,073 560 Net income ............................. 2,519 626 4,000 878
Despite a decrease in the average sales prices for ATM products, gross profit on product sales increased $3,719,000, or 110%, from the quarter ended March 31, 1999 to the quarter ended March 31, 2000. On a year-to-date basis, gross profit increased $6,399,000, or 112%, from 1999 to 2000. Gross profit as a percentage of sales improved markedly from 32.9% in the quarter ended March 31, 1999 to 38.0% in the 2000 quarter as a result of reductions in the cost of certain raw material components used in the ATM product line. On a year-to-date basis, gross margin improved from 33.0% in 1999 to 37.4% in 2000. Selling, general and administrative expenses increased $798,000 from the three months ended March 31, 1999 to the same period in 2000 primarily due to an increase in engineering and marketing personnel. On a year-to-date basis, these expenses increased $1,484,000 in 2000 when compared to the same period a year ago. As a percentage of sales, these expenses decreased from 20.1% for the quarter 7 10 ended March 31, 1999 to 15.4% in the same quarter in 2000, primarily due to increased sales volumes. On a year-to-date basis, these percentages decreased from 21.6% in 1999 to 16.1% in 2000. Depreciation and amortization increased 78% from $179,000 in the quarter ended March 31, 1999 to $318,000 for the same period in 2000. On a year-to-date basis, depreciation and amortization expense increased 84% from $341,000 in 1999 to $629,000 in 2000. The increases are due to additions of property, plant and equipment. Interest expense decreased slightly from 2000 to 1999 due to lower average debt outstanding during the period. Income taxes approximate the statutory state and federal rates in both years. LIQUIDITY AND CAPITAL RESOURCES The financial position of the Company continues to improve primarily as a result of profitable operations, as reflected in the following key indicators as of March 31, 2000 and September 30, 1999:
(dollars in 000's) ---------------------------------- March 31, September 30, 2000 1999 --------- ------------- Working capital ......... $21,796 $18,023 Total assets ............ 33,880 28,696 Shareholders' equity .... 20,395 15,922
The improvement in working capital is principally due to increases in accounts receivable and inventory during the six months ended March 31, 2000. The Company has a credit agreement with a bank which provides for a $7,000,000 revolving line of credit at the prime rate and a $640,000 term loan at 8.4% per annum. At March 31, 2000, $4,000,000 was outstanding pursuant to the revolving line of credit, the Company was in compliance with all covenants, and the balance of the revolving line of credit of $3,000,000 was available for future borrowing. The Company continues to own 698,464 shares of 3CI common stock subsequent to its divestiture of a majority interest in February 1994. Although the market value of 3CI common stock has recently declined, the Company does not believe that such decline represents a permanent impairment of the investment. At present, 680,818 shares are pledged to secure an outstanding note payable in the principal amount of $416,000. As of March 31, 2000, the Company had outstanding warrants to purchase 1,260,833 shares of common stock at exercise prices ranging from $.50 to $5.00 per share, which expire at various dates through February 2003, and if exercised would generate proceeds to the Company of approximately $1,778,000. The Company's research and development budget for fiscal 2000 is estimated at $3,100,000. The majority of these expenditures are applicable to enhancements of the existing product lines and development of new automated teller machine products and related software applications. During the three months and six months ended March 31, 2000, research and development expenditures were approximately $660,000 and $1,309,000, respectively. 8 11 With its present capital resources, its continuing earnings and cash flow from operations, its potential capital from the exercise of warrants, and availability from its borrowing facility, the Company believes it should have sufficient resources to meet its operating needs for the foreseeable future and to provide for debt maturities and capital expenditures. The Company has never paid dividends on shares of its common stock, and does not anticipate paying dividends in the foreseeable future. In addition, the Company's wholly owned subsidiary is restricted from paying dividends to the Company pursuant to the subsidiary's revolving credit agreement with a bank. SEASONALITY The Company can experience seasonal variances in its operations and historically has its lowest dollar volume sales months between November and February. The Company's operating results for any particular quarter may not be indicative of the results for the future quarter or for the year. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes new accounting and reporting standards requiring that all derivative instruments (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS 133, as amended, is effective for all fiscal years beginning after June 15, 2000. The Company has not yet determined the impact; if any, SFAS 133 will have on its financial position or results of operations, and plans to adopt this standard effective October 1, 2000. MAJOR CUSTOMERS AND CREDIT RISKS The Company generally retains a security interest in the underlying equipment that is sold to customers until it receives payment in full. In addition, one major customer has pledged additional collateral to the Company. The Company would incur an accounting loss equal to the carrying value of the accounts receivable, less any amounts recovered from liquidation of collateral, if a customer failed to perform according to the terms of the credit arrangements. Sales to major customers were as follows for the three months and six months ended March 31, 2000 and 1999:
(Dollars in 000's) ------------------------------------------------------------ Three Months Ended March 31, Six Months Ended March 31, ---------------------------- --------------------------- 2000 1999 2000 1999 ----------- ------------ ----------- ----------- Customer A .... $10,850,432 $ 2,958,037 $18,787,833 $ 6,021,193 Customer B .... 874,460 956,637 2,044,606 1,795,052 Customer C .... 838,588 -- 1,591,967 --
9 12 Foreign sales accounted for 6% of the Company's total sales during the three months and six months ended March 31, 2000 compared to 3% of total sales during the three months and six months ended March 31, 1999. FORWARD-LOOKING STATEMENTS This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, (including without limitation, the Company's compliance with Year 2000 Issues, the Company's future product sales, gross profit, selling, general and administrative expense, the Company's financial position, working capital and seasonal variances in the Company's operations, as well as general market conditions) though the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to changes in interest rates as a result of financing through its issuance of variable-rate and fixed-rate debt. If market interest rates were to increase 1% in fiscal 2000, however, there would be no material impact on the Company's consolidated results of operations or financial position. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES During the six months ended March 31, 2000, the Company granted warrants to purchase an aggregate of 175,000 shares of common stock to five companies or individuals with exercise prices ranging from $1.88 to $5.00. The grants of warrants were made pursuant to the exemption contained in Section 4(2) of the Securities Act of 1933, as amended. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. 10 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBITS 27 - Financial Data Schedule 99.1 - Employment agreement, dated January 1, 2000, between the Company and James T. Rash 99.2 - Employment agreement, dated January 1, 2000, between Tidel Engineering, L.P. and Mark K. Levenick 99.3 - Employment agreement, dated January 1, 2000, between Tidel Engineering, L.P. and Michael F. Hudson b) REPORTS ON FORM 8-K The Company filed no Reports on Form 8-K during the quarter ended March 31, 2000. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TIDEL TECHNOLOGIES, INC. (Registrant) DATE: May 15, 2000 By: /s/ JAMES T. RASH ----------------------------------------- James T. Rash Principal Executive and Financial Officer 11 14 EXHIBIT INDEX
Exhibit Number Description ------ ----------- 27 - Financial Data Schedule 99.1 - Employment agreement, dated January 1, 2000, between the Company and James T. Rash 99.2 - Employment agreement, dated January 1, 2000, between Tidel Engineering, L.P. and Mark K. Levenick 99.3 - Employment agreement, dated January 1, 2000, between Tidel Engineering, L.P. and Michael F. Hudson
EX-99.1 2 EMPLOYMENT AGREEMENT - JAMES T. RASH 1 EXHIBIT 99.1 EMPLOYMENT AGREEMENT This Employee Agreement ("Agreement") is entered into effective as of the 1st day of January, 2000 by and between TIDEL TECHNOLOGIES, INC., a Delaware corporation with its principal offices at Houston, Harris County, Texas ("Company"), and JAMES T. RASH ("Employee"). WHEREAS, Company desires to continue to have the benefits of Employee's knowledge and experience as a full time senior executive without distraction by employment-related uncertainties and considers such employment a vital element to protecting and enhancing the best interests of Company, and its and shareholder and Employee desires to continue to be employed full time with Company and to extend his employment agreement from that presently provided; and WHEREAS, Company and Employee desire to enter into an agreement reflecting the terms under which Employee will be employed by Company for a minimum THREE (3) YEAR PERIOD commencing on the Effective Date (subject to the provision of SECTIONS 5, 6 and 7 below); WHEREAS, Employee is employed hereunder by Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to customers of the Company, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constituted the valuable good will of the Company. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the parties agree as follows: 1. TERM. Company hereby agrees to employ Employee for an initial three-year period commencing on January 1, 2000 (the "Effective Date") and ending on the third anniversary thereof, unless sooner terminated as provided in SECTIONS 5 and 6 or unless extended by the mutual consent of the parties prior to the end of the term. On the Effective Date anniversary of every year, the term of the Employee's employment with Company shall be automatically extended by one year, on the same terms and conditions contained herein in effect as of the time of renewal unless either party hereto delivers to the other party not later than ten months after the anniversary of the Effective Date during the first year of the then-current term a written notice of its or his election to terminate the Employee's employment. If either party delivers such termination notice, the Employee's employment will terminate as of the end of the then-current three-year term. 2. DUTIES. Employee shall serve as the President/Chief Executive Officer of Company, shall exercise the authority and assume the responsibilities of President/Chief Executive Officer of a company of the size and nature of Company, and shall assume such other duties as the Board of Directors of Company may prescribe consistent with duties of President/Chief Executive Officer of a technology company of such size as Company including without limitation such positions and duties with Company's subsidiaries as assigned by the Board of Directors of Company. Employee 2 agrees to devote substantially all his full time, attention and best efforts to the performance of his duties. The Company may from time to time designate Employee as an officer of any current or future subsidiary and, in such event, shall use its best efforts to fairly allocate Employee's compensation among itself and such subsidiary or subsidiaries either through multiple direct payroll checks to Employee or by inter-Company reimbursements, in any case consistent with any applicable regulations or regulatory policies. 3. COMPENSATION. Company shall compensate Employee for the services rendered under this Agreement as follows: (a) A base annual salary determined by the Board of Directors of Company consistent with its practices for executive officers of Company, but not less than two hundred twenty-five thousand ($225,000) per year, payable in equal monthly installments (less applicable withholding) in accordance with the customary payroll practices of Company for the payment of executive officers; (b) Such bonuses as shall be determined by the Board of Directors of Company consistent with its practices for executive officers of Company; (c) If Employee's base annual salary is increased at any time, it shall, not thereafter be decreased during the term of this Agreement, unless such decrease is agreed to by the a Employee in writing; and (d) The Board of Directors of Company may from time to time grant restricted stock, performance units or stock options, stock appreciation rights, and other forms of long-term incentive compensation arrangements to the Employee. The privilege to participate in these grants is at the discretion of the Board of Directors and the stipulations regarding the granting of these awards and their exercise by the Employee will be defined in the Tidel Technologies, Inc. 1997 Long-Term Incentive Plan or in other plans or actions of the Board of Directors. (e) Employee shall be entitled to reimbursement of reasonable out of pocket expenses relating to Company business in accordance with policies in effect for executive officers generally. 4. EMPLOYEE BENEFITS. (a) Employee shall be entitled to full participation, on a basis commensurate with his position with Company, in all plans of life, accident, medical payment, health and disability insurance, retirement, pension, perquisites, and other employee benefit and pension plans which generally are made available to executive officers of Company or its principal subsidiaries, except for such plans which the Board of Directors, in its sole discretion, shall adopt for select employees to compensate them for special or extenuating circumstances. 2 3 (b) Employee shall be entitled to an annual vacation leave at full pay as may be provided or by Company's vacation policies applicable to executive officers, but in any event such paid vacation shall not be less than two weeks in the aggregate. (c) Employee shall be entitled to an automobile and/or an automobile allowance as may be determined by the Board of Directors. Once established, or if Employee's automobile allowance is increased at any time, it shall not thereafter be decreased during the term of this Agreement, unless such decrease is agreed to by the Employee in writing. (d) Nothing in this Agreement shall limit in any way Employee's participation in any other benefit plans or arrangements as are from time to time approved by Company. 5. TERMINATION BY COMPANY. Except for a termination pursuant to SECTION 1 upon the expiration of the scheduled initial or any other term of this Agreement, Employee's employment hereunder may be terminated by Company without any breach of this Agreement only under the following circumstances: (a) Death, or Retirement. Employee's employment shall terminate upon his death or retirement. (b) Disability. If, as a result of his incapacity resulting from physical or mental illness or disease which is likely to be permanent, Employee shall have been unable to perform his duties hereunder for a period of more than one hundred twenty (120) consecutive days during any twelve-month period, Company may terminate his employment hereunder. The Board of Directors will determine if the Employee's termination is due to total and permanent disability, according to any long-term disability plan then in effect for senior executives of Company and otherwise in good faith consistent with generally prevailing practices of employers. (c) Cause. Company may terminate Employee's employment hereunder for cause, which for purposes of this Agreement shall be defined to mean (i) the willful and continued failure by Employee to follow the reasonable instructions of the Board of Directors of Company or his duties pursuant to this Agreement continuing for ten (10) days after written notice of such failure has been given to Employee by the Board of Directors and the failure of the Employee to cure, (ii) the willful commission by Employee of acts that are dishonest or inconsistent with local normal standards and demonstrably and materially injurious to Company or its subsidiaries, monetarily or otherwise, (iii) the commission by Employee of a felonious act, (iv) ongoing alcohol/drug addiction and a failure by Employee to successfully complete a recovery program, (v) intentional wrongful disclosure of confidential information of the Company, (vi) intentional wrongful engagement in any competitive activity, or (vii) gross neglect of his duties by Employee. (d) Termination Without Cause. The termination of Employee's employment by Company for any reasons other than those specified above shall be deemed to be a 3 4 "Termination Without Cause" (and the Company shall be deemed to have "Terminated Without Cause") and Employee shall be entitled to the severance benefits described in SECTION 8 herein. Notwithstanding the foregoing, the Company shall not Terminate Without Cause the Employee's employment after a Change of Control (as defined in SECTION 7(b)) until the end of the then-current term of the Agreement. No breach or default by Employee shall be deemed to have occurred hereunder unless written notice thereof shall have been given by Company to Employee. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above. All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination. except that Employee's obligations under SECTIONS 13, 14, 15 and 16 herein shall survive such termination in accordance with their terms. If termination of Employee's employment arises out of the Company's failure to pay Employee on a timely basis the amounts to which Employee is entitled under this Agreement or as a result of any other breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of SECTION 17 below, the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder. 6. TERMINATION BY EMPLOYEE. Employee shall be entitled to terminate his employment (i) for Good Reason or (ii) pursuant to the provisions contained in SECTION 1 hereof. Termination for "Good Reason" is defined as Employee's resignation except in connection with his termination pursuant to SECTION 5, within NINETY (90) DAYS of the following: (a) Without the express written consent of Employee, the Company assigns the Employee any duties that are materially inconsistent with Employee's position, duties and status with Company as contemplated by this Agreement; (a) (b) Any action by Company results in a material diminution in the position, duties or status of Employee with Company as contemplated by this Agreement or the Company transfers or proposes a transfer of Employee for any extended period to a location outside Harris County, Texas without his consent; (c) The base annual salary of Employee, as the same may hereafter be increased from time to time, is reduced; (d) Without limiting the generality or effect of the foregoing, Company fails to materially comply with any of its obligations hereunder; or 4 5 (e) The Company's Compensation Committee fails to communicate the compensation objectives required within the Executive Annual Incentive Plan or subsequent plan, approved by the Board, if any, within the first 90 days of any fiscal year. Termination by Employee of his employment with Company pursuant to clause (i) of the first sentence of this Section 6 shall be deemed to be Termination Without Cause of Employee's employment by Company. 7. RIGHTS AFTER CHANGE OF CONTROL. (a) If a Change of Control (as defined in SECTION 7(B) below) occurs, (i) Employee shall have immediate vesting of all restricted stock, performance units, stock options, stock appreciation rights or warrants granted to Employee and full vesting in all other employee benefit plans and compensation plans to the maximum extent permitted under applicable law, and (ii) Employee shall have the right to "put" all or any portion of vested restricted stock, performance units, stock options, stock appreciation rights or warrants to Company for the difference between (i) (A) the stock option exercise price with respect to stock options and stock appreciation rights, (B) warrant exercise price with respect to warrants, or (C) common stock price with respect to restricted stock or performance units, and (ii) the higher of the market price of Company's common stock, as the case may be, at the date of the "put" or the "Sales Price." Sales Price is defined solely for purposes of this section as (i) the aggregate consideration per share received by the Company or its shareholder(s) for the Company's common stock in the transaction which resulted in a Change of Control. Employee's right to "put" vested restricted stock, performance units, stock options, stock appreciation rights or warrants to Company shall exist for the period ending on the earlier of (i) six (6) months from the date of the Change of Control, (ii) the termination of this Agreement, or (iii) Employee's termination pursuant to SECTION 5. (b) For the purposes of this Agreement, a "Change of Control" of Company shall be deemed to have taken place if one or more of the following occurs: (i) Any person or other entity, as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, ("Exchange Act") (other than a qualified benefit or retirement plan of Company or an affiliate of Company) becomes directly or indirectly, the beneficial owner (as defined in Rule 13(d) under the Exchange Act as in effect on the date hereof) of securities of Company representing fifty percent (50%) or more of the combined voting power of Company's then outstanding securities (unless such person is known by Employee to be already such beneficial owner on the date of this Agreement); (ii) during any period of two (2) consecutive years or less, individuals who at the beginning of such period constituted the Board of the Company cease, for any reason, to constitute at least a majority of the Board, unless the election or 5 6 nomination for election of each new member of the Board was approved by a vote of at least two-thirds of the members of the Board then still in office who were members of the Board at the beginning of the period; (iii) the equityholders of the Company approve any merger or consolidation to which the Company is a party as a result of which the persons who were equityholders of the Company immediately prior to the effective date of the merger or consolidation (and excluding, however, any shares held by any party to such merger or consolidation and their affiliates) shall have beneficial ownership of less than fifty percent, (50%) of the combined voting power for election of members of the Board (or equivalent) of the surviving entity following the effective date of such merger or consolidation; or (iv) the equityholders of the Company approve any merger or consolidation as a result of which the equity interests in the Company shall be changed, converted or exchanged (other than a merger with a wholly-owned subsidiary of the Company) or any liquidation of the company or any sale or other disposition of fifty percent (50%) or more of the assets or earnings power of the Company; (v) the Company's Board of Directors shall approve the distribution to the Company's shareholders of all or substantially all of Company's net assets or shall approve the dissolution of the Company; (vi) any other transaction or series of related transactions occur which have substantially the effect of the transactions specified in any of the preceding clauses in this SECTION 7(b); or (vii) Employee is Terminated Without Cause by the Company within the period of ONE HUNDRED EIGHTY (180) DAYS before an occurrence of a Change of Control as defined in any of the preceding clauses of this SECTION 7(b) or the execution of a contract intended to effect a Change of Control as defined in any of the preceding clauses of this SECTION 7(b). 8. OTHER SEVERANCE BENEFITS. (a) Except as set forth below, and notwithstanding the minimum term provided for in SECTION 1 of this Agreement, either the Company or Employee may terminate this Agreement at any time upon thirty (30) days notice to the other party, subject to the rights of Employee to any payment due under this Agreement in that circumstance. If at any time during the term of this Agreement, Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in SECTION 6 of this Agreement, then Employee shall be entitled to be paid a severance payment equal to two times (2x) Employee's highest base annual salary as set forth in SECTION 3(A) herein for Termination Without Cause during the 6 7 term of this Agreement. Notwithstanding the first sentence of this SECTION 8(a), if a Change of Control occurs, the Company shall have no right to Terminate Without Cause the Employee's employment until the end of the then-current term of this Agreement. (b) If at any time during the term of this Agreement Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in SECTION 6 of this Agreement, then (i) Employee shall be entitled to continuation of basic employee group benefits, as defined in SECTION 4(a), provided by Company to Employee for the lesser of one year after termination or until the Employee secures new employment without remuneration to Company, and (ii) the Employee's outstanding stock option agreements shall provide for a continuance of the option exercise period for ninety (90) days from Employee's termination or resignation date, except that in the case of death, voluntary termination, Retirement, Disability and termination for cause, Employee's continuance of the option exercise period shall be governed by the stock option agreements. (c) If at any time during the term of this Agreement, Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in Section 6 of this Agreement, Company shall promptly (and in any event within five business days after a request by the Employee therefor) either pay or reimburse the Employee for the costs and expenses of any executive outplacement firm selected by the Employee, provided, however, that Company's liability hereunder shall be limited to 10% of current salary of such expenses incurred by the Employee. The Employee shall provide Company with reasonable documentation of the incurrence of such outplacement costs and expenses. (d) With respect to provisions of the stock option agreements granted pursuant to the 1997 Long-Term Incentive Plan, "Termination For Good Reason" shall be construed to have the same meaning as "Termination Without Cause", as defined in this Agreement. 9. TIMING OF PAYMENT. Unless otherwise provided in this Agreement, any severance or other payment payable to Employee under this Agreement shall be paid within thirty (30) days after the event causing such payment or at such other date as the parties agree. 10. OTHER BENEFITS. The provisions of SECTIONS 7 and 8 shall not affect Employee's participation in, or termination of distributions and vested rights under, any pension, profit sharing, insurance or other employee benefit plan of Company to which Employee is entitled pursuant to the terms of such plans except for the acceleration of vested benefits, to the maximum extent permissible under applicable law or employee benefit plan document, in certain employee benefits pursuant to SECTION 7(a) and the provisions pursuant to SECTION 8(b). 11. NO DUTY TO MITIGATE DAMAGES. In the event of termination of this Agreement by Employee after a Change of Control as defined in SECTION 7 above, or as a result of the breach by Company of any of its obligations hereunder, or in the event of the termination of Employee's employment by Company in breach of this Agreement or as a result of Employee's Termination Without Cause, or resignation for Good Reason, Employee shall not be required to seek other 7 8 employment in order to mitigate his damages hereunder, and no compensation Employee does earn after any termination shall be considered to mitigate damages Employee has incurred or to reduce any payment Company is obligated to make to Employee pursuant to this Agreement. 12. NO RIGHT TO SET OFF. Company shall not be entitled to set off against the amount payable to Employee any amounts earned by Employee from other employment after termination of his employment with Company or any amounts which might have been earned by Employee in other employment had he sought such other employment. The amounts payable to Employee under this Agreement shall not be treated as damages but as severance compensation to which Employee is entitled by reason of termination of this employment in all circumstances contemplated by this Agreement. 13. NON-COMPETE AND NON-DISCLOSURE OF INFORMATION. (a) For so long as Employee is employed by Company and continuing after the voluntary termination by Employee or termination for cause by Company as provided under SECTION 5(C) of such employment for TWO (2) YEARS: (i) Employee (A) will nor accept a position as an officer, director, employee, agent, consultant or representative of any technology manufacturing ATM (automatic teller machine) company with offices in any county or any county in which the Company has offices, and (B) will not make or fail to dispose of any stock in any other proprietary technology manufacturing ATM (automatic teller machine) company with offices within thirty-five (35) miles of Houston, Texas except investments equal to less than two percent (2%) of the outstanding stock of any class issued by any publicly traded company. (ii) Except in the performance on Employee's obligations to Company of one of its subsidiaries, Employee shall not, directly or indirectly, use or permit the use of any confidential or other proprietary information of a special unique nature and value to Company or one of its subsidiaries (the "Confidential Information"), including, but not limited to, trade secrets, systems, procedures, manuals, confidential reports, customer lists, sales or distribution methods, patentable information and data as well as financial information concerning Company or one of its subsidiaries, and information with respect to the nature and type of other services rendered by Company or one of its subsidiaries, which Confidential Information has been used by Company or one of its subsidiaries to date or during the term of this Agreement, and has been made known (whether or not with the knowledge and permission of Company, and whether or not developed, devised or otherwise created in whole or in part by the efforts of Employee) to Employee by reason of his activities on behalf of Company or one of its subsidiaries. Employee shall not reveal, divulge or make known any Confidential Information to any individual partnership, firm, company or other business organization whatsoever except in, performance of Employee's 8 9 obligations to Company or with the express permission of the Board of Directors of Company or as otherwise required by operation of law. (b) Employee confirms that all Confidential Information is the exclusive property of Company. All business records, papers and documents kept or made by Employee relating to the business of Company shall be and remains the property of Company and shall remain in the possession of Company during the term and at all times thereafter. Upon the termination of his employment with Company or upon the request of Company at any time, Employee shall promptly deliver to Company, and shall retain no copies of, any written material records and documents made by Employee or coming into his possession concerning the business or affairs of Company. (c) Without intending to limit the remedies available to Company, Employee acknowledges that a breach of any of the covenants contained in this SECTION 13 may result in material irreparable injury to Company or one of its subsidiaries for which them is not adequate remedy at law, that it may not be possible to measure damages for such injuries precisely, and that in the event of such a breach or threat thereof, may be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Employee from engaging in activities prohibited by this SECTION 13 or such other relief as may be required to specifically enforce any of the covenants in such Section. In the event a court requires a posting of a bond, the parties hereby agree that such bond shall be in the amount of One Thousand Dollars ($1,000.00). (a) (d) The covenants in this SECTION 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this SECTION 13 shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenant. It is specifically agreed that the period of TWO (2) YEARS following termination of employment stated at the beginning of this SECTION 13, during which the agreements and covenants of Employee made in this SECTION 13 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this SECTION 13. 14. RETURN OF COMPANY PROPERTY. All records, designs. patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company or their representatives, vendors, or customers which pertain to the business of the Company shall be and remain the property of the Company and be 9 10 subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 15. INVENTION. Employee shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not. which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter and which are directly related to the business or activities of the Company and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all Employee's interests therein to the Company or its nominee. 16. TRADE SECRETS. Employee agrees that Employee will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 17. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Houston, Texas, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement in the event the arbitrators determine that Employee was terminated without disability or cause, as defined in SECTION 5(b) and 5(c), respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final, non-appealable and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. Each party shall bear his or its own costs of arbitration, but if Employee is the prevailing party in such arbitration, he shall be entitled to recover from Company as part of any award entered his reasonable expenses for attorneys' fees and disbursements. 18. NOTICES. All notices, requests, demands and other communication called for or contemplated hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or when mailed by United Stated certified or registered mail, postage prepaid, addressed to the parties, their successors in interest or assignees; at the following addresses or such other addresses as the parties may designate by notice in the manner aforesaid: 10 11 If to Company: Tidel Technologies, Inc. 5847 San Felipe, Ste. 900 Houston, Texas 77057 Attention: Chairman If to Employee: Tidel Technologies, Inc. 5847 San Felipe, Ste. 900 Houston, Texas 77057 Attention: James T. Rash 19. GOVERNING LAW AND VENUE. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any principle of conflict-of-laws that would require the application of the law of any other jurisdiction. Venue for any dispute shall lie exclusively in Houston, Harris County, Texas. 20. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 21. ENTIRE AGREEMENT. This Agreement is not a promise of future employment, except as otherwise provided herein. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and preliminary agreements, and further superseding any and all employment arrangements between Employee and Company or any of Company's subsidiaries, affiliates or other related entities. This Agreement may not be amended except in a writing executed by the parties hereto. 22. ASSIGNMENT; BINDING EFFECT. Employee understands that Employee bas been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee agrees, therefore, that Employee cannot assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and the express provisions of SECTION 7 above, this Agreement shall be binding upon, inure to the benefit of an be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 23. EFFECTIVENESS. This Agreement shall be effective upon the Effective Date. 24. SURVIVAL OF SECTION. The provisions of SECTIONS 13, 14, 15 and 16 of this Agreement shall survive the termination of this Agreement for the period provided for therein. 11 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. TIDEL TECHNOLOGIES, INC.: EMPLOYEE: /s/ JAMES T. RASH ----------------------------------------- James T. Rash President and Chief Executive Officer By: /s/ LEONARD L. CARR ------------------------------- Leonard L. Carr Senior Vice President ATTEST: By: /s/ SUSAN RILEY ------------------------------- Susan Riley Assistant Secretary 12 EX-99.2 3 EMPLOYMENT AGREEMENT - MARK K. LEVENICK 1 EXHIBIT 99.2 EMPLOYMENT AGREEMENT This Employee Agreement ("Agreement") is entered into effective as of the 1st day of January, 2000 by and between TIDEL ENGINEERING, L.P., a Delaware limited partnership with its principal offices at Carrollton, Dallas County, Texas ("Company"), and MARK K. LEVENICK ("Employee"). WHEREAS, Company desires to continue to have the benefits of Employee's knowledge and experience as a full time senior executive without distraction by employment-related uncertainties and considers such employment a vital element to protecting and enhancing the best interests of Company, and its and shareholder and Employee desires to continue to be employed full time with Company and to extend his employment agreement from that presently provided; and WHEREAS, Company and Employee desire to enter into an agreement reflecting the terms under which Employee will be employed by Company for a minimum THREE (3) YEAR PERIOD commencing on the Effective Date (subject to the provision of SECTIONS 5, 6 and 7 below); WHEREAS, Employee is employed hereunder by Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to customers of the Company, and Tidel Technologies, Inc. (formerly known as American Medical Technologies, Inc. doing business as AMT Industries, Inc.) ("TTI"), specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and TTI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and TTI; this information is a trade secret and constituted the valuable good will of the Company and TTI. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the parties agree as follows: 1. TERM. Company hereby agrees to employ Employee for an initial three-year period commencing on January 1, 2000 (the "Effective Date") and ending on the third anniversary thereof, unless sooner terminated as provided in SECTIONS 5 and 6 or unless extended by the mutual consent of the parties prior to the end of the term. On the Effective Date anniversary of every year, the term of the Employee's employment with Company shall be automatically extended by one year, on the same terms and conditions contained herein in effect as of the time of renewal unless either party hereto delivers to the other party not later than ten months after the anniversary of the Effective Date during the first year of the then-current term a written notice of its or his election to terminate the Employee's employment. If either party delivers such termination notice, the Employee's employment will terminate as of the end of the then-current three-year term. 2. DUTIES. Employee shall serve as the President/Chief Executive Officer of Company, shall exercise the authority and assume the responsibilities of President/Chief Executive Officer of a company of the size and nature of Company, and shall assume such other duties as the Board of 2 Directors of Company may prescribe consistent with duties of President/Chief Executive Officer of a technology company of such size as Company including without limitation such positions and duties with Company's subsidiaries as assigned by the Board of Directors of Company. Employee agrees to devote substantially all his full time, attention and best efforts to the performance of his duties. The Company may from time to time designate Employee as an officer of any current or future subsidiary and, in such event, shall use its best efforts to fairly allocate Employee's compensation among itself and such subsidiary or subsidiaries either through multiple direct payroll checks to Employee or by inter-Company reimbursements, in any case consistent with any applicable regulations or regulatory policies. 3. COMPENSATION. Company shall compensate Employee for the services rendered under this Agreement as follows: (a) A base annual salary determined by the Board of Directors of Company consistent with its practices for executive officers of Company, but not less than two hundred sixty-two thousand five hundred ($262,500) per year, payable in equal monthly installments (less applicable withholding) in accordance with the customary payroll practices of Company for the payment of executive officers; (b) Such bonuses as shall be determined by the Board of Directors of Company consistent with its practices for executive officers of Company; (c) If Employee's base annual salary is increased at any time, it shall, not thereafter be decreased during the term of this Agreement, unless such decrease is agreed to by the a Employee in writing; and (d) The Board of Directors of Company or its parent Company, TTI, may from time to time grant restricted stock, performance units or stock options, stock appreciation rights, and other forms of long-term incentive compensation arrangements to the Employee. The privilege to participate in these grants is at the discretion of the Board of Directors and the stipulations regarding the granting of these awards and their exercise by the Employee will be defined in the Tidel Technologies, Inc. 1997 Long-Term Incentive Plan or in other plans or actions of the Board of Directors. (e) Employee shall be entitled to reimbursement of reasonable out of pocket expenses relating to Company business in accordance with policies in effect for executive officers generally. 4. EMPLOYEE BENEFITS. (a) Employee shall be entitled to full participation, on a basis commensurate with his position with Company, in all plans of life, accident, medical payment, health and disability insurance, retirement, pension, perquisites, and other employee benefit and pension plans which generally are made available to executive officers of Company or its principal 2 3 subsidiaries, except for such plans which the Board of Directors, in its sole discretion, shall adopt for select employees to compensate them for special or extenuating circumstances. (b) Employee shall be entitled to an annual vacation leave at full pay as may be provided or by Company's vacation policies applicable to executive officers, but in any event such paid vacation shall not be less than two weeks in the aggregate. (c) Employee shall be entitled to an automobile and/or an automobile allowance as may be determined by the Board of Directors. Once established, or if Employee's automobile allowance is increased at any time, it shall not thereafter be decreased during the term of this Agreement, unless such decrease is agreed to by the Employee in writing. (d) Nothing in this Agreement shall limit in any way Employee's participation in any other benefit plans or arrangements as are from time to time approved by Company. 5. TERMINATION BY COMPANY. Except for a termination pursuant to SECTION 1 upon the expiration of the scheduled initial or any other term of this Agreement, Employee's employment hereunder may be terminated by Company without any breach of this Agreement only under the following circumstances: (a) Death, or Retirement. Employee's employment shall terminate upon his death or retirement. (b) Disability. If, as a result of his incapacity resulting from physical or mental illness or disease which is likely to be permanent, Employee shall have been unable to perform his duties hereunder for a period of more than one hundred twenty (120) consecutive days during any twelve-month period, Company may terminate his employment hereunder. The Board of Directors will determine if the Employee's termination is due to total and permanent disability, according to any long-term disability plan then in effect for senior executives of Company and otherwise in good faith consistent with generally prevailing practices of employers. (c) Cause. Company may terminate Employee's employment hereunder for cause, which for purposes of this Agreement shall be defined to mean (i) the willful and continued failure by Employee to follow the reasonable instructions of the Board of Directors of Company or his duties pursuant to this Agreement continuing for ten (10) days after written notice of such failure has been given to Employee by the Board of Directors and the failure of the Employee to cure, (ii) the willful commission by Employee of acts that are dishonest or inconsistent with local normal standards and demonstrably and materially injurious to Company or its subsidiaries, monetarily or otherwise, (iii) the commission by Employee of a felonious act, (iv) ongoing alcohol/drug addiction and a failure by Employee to successfully complete a recovery program, (v) intentional wrongful disclosure of confidential information of the Company, (vi) intentional wrongful engagement in any competitive activity, or (vii) gross neglect of his duties by Employee. 3 4 (d) Termination Without Cause. The termination of Employee's employment by Company for any reasons other than those specified above shall be deemed to be a "Termination Without Cause" (and the Company shall be deemed to have "Terminated Without Cause") and Employee shall be entitled to the severance benefits described in SECTION 8 herein. Notwithstanding the foregoing, the Company shall not Terminate Without Cause the Employee's employment after a Change of Control (as defined in SECTION 7(b)) until the end of the then-current term of the Agreement. No breach or default by Employee shall be deemed to have occurred hereunder unless written notice thereof shall have been given by Company to Employee. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above. All other rights and obligations of TTI, the Company and Employee under this Agreement shall cease as of the effective date of termination. except that Employee's obligations under SECTIONS 13, 14, 15 and 16 herein shall survive such termination in accordance with their terms. If termination of Employee's employment arises out of the Company's failure to pay Employee on a timely basis the amounts to which Employee is entitled under this Agreement or as a result of any other breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of SECTION 17 below, the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder. 6. TERMINATION BY EMPLOYEE. Employee shall be entitled to terminate his employment (i) for Good Reason or (ii) pursuant to the provisions contained in SECTION 1 hereof. Termination for "Good Reason" is defined as Employee's resignation except in connection with his termination pursuant to SECTION 5, within NINETY (90) DAYS of the following: (a) Without the express written consent of Employee, the Company assigns the Employee any duties that are materially inconsistent with Employee's position, duties and status with Company as contemplated by this Agreement; (a) (b) Any action by Company results in a material diminution in the position, duties or status of Employee with Company as contemplated by this Agreement or the Company transfers or proposes a transfer of Employee for any extended period to a location outside Dallas County, Texas without his consent; (c) The base annual salary of Employee, as the same may hereafter be increased from time to time, is reduced; 4 5 (d) Without limiting the generality or effect of the foregoing, Company fails to materially comply with any of its obligations hereunder; or (e) The Company's Compensation Committee fails to communicate the compensation objectives required within the Executive Annual Incentive Plan or subsequent plan, approved by the Board, if any, within the first 90 days of any fiscal year. Termination by Employee of his employment with Company pursuant to clause (i) of the first sentence of this Section 6 shall be deemed to be Termination Without Cause of Employee's employment by Company. 7. RIGHTS AFTER CHANGE OF CONTROL. (a) If a Change of Control (as defined in SECTION 7(b) below) occurs, (i) Employee shall have immediate vesting of all restricted stock, performance units, stock options, stock appreciation rights or warrants (whether related to Company common stock or TTI common stock) granted to Employee and full vesting in all other employee benefit plans and compensation plans to the maximum extent permitted under applicable law, and (ii) Employee shall have the right to "put" all or any portion of vested restricted stock, performance units, stock options, stock appreciation rights or warrants to TTI or in the event TTI no longer exists or is unable or fails to fulfill its obligations pursuant to this SECTION 7(A) within thirty (30) days of Employee's exercise of his "put" rights then to Company for the difference between (i) (A) the stock option exercise price with respect to stock options and stock appreciation rights, (B) warrant exercise price with respect to warrants, or (C) common stock price with respect to restricted stock or performance units, and (ii) the higher of the market price of Company's or TTI's common stock, as the case may be, at the date of the "put" or the "Sales Price." Sales Price is defined solely for purposes of this section as (i) the aggregate consideration per share received by the Company or its shareholder(s) (currently TTI) for the Company's common stock in the transaction which resulted in a Change of Control in the event it is Company's common stock subject to a stock option, stock appreciation right, warrant, restricted stock or performance unit or (ii) the Market Price of TTI stock as of the date of the closing of the transaction which will result in a Change of Control in the event it is TTI's common stock subject to the stock option, stock appreciation right, warrant, restricted stock or performance unit. Employee's right to "put" vested restricted stock, performance units, stock options, stock appreciation rights or warrants to Company shall exist for the period ending on the earlier of (i) six (6) months from the date of the Change of Control, (ii) the termination of this Agreement, or (iii) Employee's termination pursuant to SECTION 5. (b) For the purposes of this Agreement, a "Change of Control" of Company shall be deemed to have taken place if one or more of the following occurs: 5 6 (i) Any person or other entity, as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, ("Exchange Act") (other than a qualified benefit or retirement plan of Company or an affiliate of Company) becomes directly or indirectly, the beneficial owner (as defined in Rule 13(d) under the Exchange Act as in effect on the date hereof) of securities of Company representing fifty percent (50%) or more of the combined voting power of Company's then outstanding securities (unless such person is known by Employee to be already such beneficial owner on the date of this Agreement); (ii) during any period of two (2) consecutive years or less, individuals who at the beginning of such period constituted the Board of the Company cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for election of each new member of the Board was approved by a vote of at least two-thirds of the members of the Board then still in office who were members of the Board at the beginning of the period; (iii) the equityholders of the Company approve any merger or consolidation to which the Company is a party as a result of which the persons who were equityholders of the Company immediately prior to the effective date of the merger or consolidation (and excluding, however, any shares held by any party to such merger or consolidation and their affiliates) shall have beneficial ownership of less than fifty percent, (50%) of the combined voting power for election of members of the Board (or equivalent) of the surviving entity following the effective date of such merger or consolidation; or (iv) the equityholders of the Company approve any merger or consolidation as a result of which the equity interests in the Company shall be changed, converted or exchanged (other than a merger with a wholly-owned subsidiary of the Company) or any liquidation of the company or any sale or other disposition of fifty percent (50%) or more of the assets or earnings power of the Company; (v) the Company's Board of Directors shall approve the distribution to the Company's shareholders of all or substantially all of Company's net assets or shall approve the dissolution of the Company; (i) (vi) any other transaction or series of related transactions occur which have substantially the effect of the transactions specified in any of the preceding clauses in this SECTION 7(b); or (vii) Employee is Terminated Without Cause by the Company within the period of ONE HUNDRED EIGHTY (180) DAYS before an occurrence of a Change of Control as defined in any of the preceding clauses of this SECTION 7(b) or the 6 7 execution of a contract intended to effect a Change of Control as defined in any of the preceding clauses of this SECTION 7(b). 8. OTHER SEVERANCE BENEFITS. (a) Except as set forth below, and notwithstanding the minimum term provided for in SECTION 1 of this Agreement, either the Company or Employee may terminate this Agreement at any time upon thirty (30) days notice to the other party, subject to the rights of Employee to any payment due under this Agreement in that circumstance. If at any time during the term of this Agreement, Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in SECTION 6 of this Agreement, then Employee shall be entitled to be paid a severance payment equal to two times (2x) Employee's highest base annual salary as set forth in SECTION 3(a) herein for Termination Without Cause during the term of this Agreement. Notwithstanding the first sentence of this SECTION 8(a), if a Change of Control occurs, the Company shall have no right to Terminate Without Cause the Employee's employment until the end of the then-current term of this Agreement. (b) If at any time during the term of this Agreement Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in SECTION 6 of this Agreement, then (i) Employee shall be entitled to continuation of basic employee group benefits, as defined in SECTION 4(a), provided by Company to Employee for the lesser of one year after termination or until the Employee secures new employment without remuneration to Company, and (ii) the Employee's outstanding stock option agreements shall provide for a continuance of the option exercise period for ninety (90) days from Employee's termination or resignation date, except that in the case of death, voluntary termination, Retirement, Disability and termination for cause, Employee's continuance of the option exercise period shall be governed by the stock option agreements. (c) If at any time during the term of this Agreement, Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in Section 6 of this Agreement, Company shall promptly (and in any event within five business days after a request by the Employee therefor) either pay or reimburse the Employee for the costs and expenses of any executive outplacement firm selected by the Employee, provided, however, that Company's liability hereunder shall be limited to 10% of current salary of such expenses incurred by the Employee. The Employee shall provide Company with reasonable documentation of the incurrence of such outplacement costs and expenses. (d) With respect to provisions of the stock option agreements granted pursuant to the 1997 Long-Term Incentive Plan, "Termination For Good Reason" shall be construed to have the same meaning as "Termination Without Cause" as defined in this Agreement. 9. TIMING OF PAYMENT. Unless otherwise provided in this Agreement, any severance or other payment payable to Employee under this Agreement shall be paid within thirty (30) days after the event causing such payment or at such other date as the parties agree. 7 8 10. OTHER BENEFITS. The provisions of SECTIONS 7 and 8 shall not affect Employee's participation in, or termination of distributions and vested rights under, any pension, profit sharing, insurance or other employee benefit plan of Company to which Employee is entitled pursuant to the terms of such plans except for the acceleration of vested benefits, to the maximum extent permissible under applicable law or employee benefit plan document, in certain employee benefits pursuant to SECTION 7(a) and the provisions pursuant to SECTION 8(b). 11. NO DUTY TO MITIGATE DAMAGES. In the event of termination of this Agreement by Employee after a Change of Control as defined in SECTION 7 above, or as a result of the breach by Company of any of its obligations hereunder, or in the event of the termination of Employee's employment by Company in breach of this Agreement or as a result of Employee's Termination Without Cause, or resignation for Good Reason, Employee shall not be required to seek other employment in order to mitigate his damages hereunder, and no compensation Employee does earn after any termination shall be considered to mitigate damages Employee has incurred or to reduce any payment Company is obligated to make to Employee pursuant to this Agreement. 12. NO RIGHT TO SET OFF. Company shall not be entitled to set off against the amount payable to Employee any amounts earned by Employee from other employment after termination of his employment with Company or any amounts which might have been earned by Employee in other employment had he sought such other employment. The amounts payable to Employee under this Agreement shall not be treated as damages but as severance compensation to which Employee is entitled by reason of termination of this employment in all circumstances contemplated by this Agreement. 13. NON-COMPETE AND NON-DISCLOSURE OF INFORMATION. (a) For so long as Employee is employed by Company and continuing after the voluntary termination by Employee or termination for cause by Company as provided under SECTION 5(C) of such employment for TWO (2) YEARS: (i) Employee (A) will nor accept a position as an officer, director, employee, agent, consultant or representative of any technology manufacturing ATM (automatic teller machine) company with offices in any county or any county in which the Company has offices, and (B) will not make or fail to dispose of any stock in any other proprietary technology manufacturing ATM (automatic teller machine) company with offices within thirty-five (35) miles of Dallas, Texas except investments equal to less than two percent (2%) of the outstanding stock of any class issued by any publicly traded company. (ii) Except in the performance on Employee's obligations to Company of one of its subsidiaries, Employee shall not, directly or indirectly, use or permit the use of any confidential or other proprietary information of a special unique nature and value to Company or one of its subsidiaries (the "Confidential Information"), 8 9 including, but not limited to, trade secrets, systems, procedures, manuals, confidential reports, customer lists, sales or distribution methods, patentable information and data as well as financial information concerning Company or one of its subsidiaries, and information with respect to the nature and type of other services rendered by Company or one of its subsidiaries, which Confidential Information has been used by Company or one of its subsidiaries to date or during the term of this Agreement, and has been made known (whether or not with the knowledge and permission of Company, and whether or not developed, devised or otherwise created in whole or in part by the efforts of Employee) to Employee by reason of his activities on behalf of Company or one of its subsidiaries. Employee shall not reveal, divulge or make known any Confidential Information to any individual partnership, firm, company or other business organization whatsoever except in, performance of Employee's obligations to Company or with the express permission of the Board of Directors of Company or as otherwise required by operation of law. (b) Employee confirms that all Confidential Information is the exclusive property of Company. All business records, papers and documents kept or made by Employee relating to the business of Company shall be and remains the property of Company and shall remain in the possession of Company during the term and at all times thereafter. Upon the termination of his employment with Company or upon the request of Company at any time, Employee shall promptly deliver to Company, and shall retain no copies of, any written material records and documents made by Employee or coming into his possession concerning the business or affairs of Company. (c) Without intending to limit the remedies available to Company, Employee acknowledges that a breach of any of the covenants contained in this SECTION 13 may result in material irreparable injury to Company or one of its subsidiaries for which them is not adequate remedy at law, that it may not be possible to measure damages for such injuries precisely, and that in the event of such a breach or threat thereof, may be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Employee from engaging in activities prohibited by this SECTION 13 or such other relief as may be required to specifically enforce any of the covenants in such Section. In the event a court requires a posting of a bond, the parties hereby agree that such bond shall be in the amount of One Thousand Dollars ($1,000.00). (d) The covenants in this SECTION 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this SECTION 13 shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause 9 10 of action of Employee against the Company or 171, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by TTI or the Company of such covenant. It is specifically agreed that the period of TWO (2) YEARS following termination of employment stated at the beginning of this SECTION 13, during which the agreements and covenants of Employee made in this SECTION 13 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this SECTION 13. 14. RETURN OF COMPANY PROPERTY. All records, designs. patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, TTI or their representatives, vendors, or customers which pertain to the business of the Company or TTI shall be and remain the property of the Company or TTI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or TTI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 15. INVENTION. Employee shall disclose promptly to TTI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not. which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter and which are directly related to the business or activities of the Company or TTI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all Employee's interests therein to the Company or its nominee. 16. TRADE SECRETS. Employee agrees that Employee will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or TTI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or TTI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 17. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement in the event the arbitrators determine that Employee was terminated without disability or cause, as defined in SECTION 5(b) and 5(c), respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final, non-appealable and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 10 11 Each party shall bear his or its own costs of arbitration, but if Employee is the prevailing party in such arbitration, he shall be entitled to recover from Company as part of any award entered his reasonable expenses for attorneys' fees and disbursements. 18. NOTICES. All notices, requests, demands and other communication called for or contemplated hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or when mailed by United Stated certified or registered mail, postage prepaid, addressed to the parties, their successors in interest or assignees; at the following addresses or such other addresses as the parties may designate by notice in the manner aforesaid: If to Company: Tidel Engineering, L.P. 2310 McDaniel Drive Carrollton, Texas 75006 Attention: Chairman If to Employee: Tidel Engineering, L.P. 2310 McDaniel Drive Carrollton, Texas 75006 Attention: Mark K. Levenick 19. GOVERNING LAW AND VENUE. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any principle of conflict-of-laws that would require the application of the law of any other jurisdiction. Venue for any dispute shall lie exclusively in Dallas, Dallas County, Texas. 20. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 21. ENTIRE AGREEMENT. This Agreement is not a promise of future employment, except as otherwise provided herein. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and preliminary agreements, and further superseding any and all employment arrangements between Employee and Company or any of Company's subsidiaries, affiliates or other related entities. This Agreement may not be amended except in a writing executed by the parties hereto. 22. ASSIGNMENT; BINDING EFFECT. Employee understands that Employee bas been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee agrees, therefore, that Employee cannot assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and 11 12 the express provisions of SECTION 7 above, this Agreement shall be binding upon, inure to the benefit of an be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 23. EFFECTIVENESS. This Agreement shall be effective upon the Effective Date. 24. SURVIVAL OF SECTION. The provisions of SECTIONS 13, 14, 15 and 16 of this Agreement shall survive the termination of this Agreement for the period provided for therein. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. TIDEL ENGINEERING, L.P.: EMPLOYEE: By: Tidel Cash Systems, Inc., a Delaware corporation its general partner /s/ MARK K. LEVENICK ----------------------------------------- Mark K. Levenick President and Chief Executive Officer By: /s/ JAMES T. RASH ------------------------------- James T. Rash, Chairman ATTEST: By: /s/ LEONARD L. CARR JR. ------------------------------- Leonard L. Carr Jr., Secretary 12 EX-99.3 4 EMPLOYMENT AGREEMENT - MICHAEL F. HUDSON 1 EXHIBIT 99.3 EMPLOYMENT AGREEMENT This Employee Agreement ("Agreement") is entered into effective as of the 1st day of January, 2000 by and between TIDEL ENGINEERING, L.P., a Delaware limited partnership with its principal offices at Carrollton, Dallas County, Texas ("Company"), and MICHAEL F. HUDSON ("Employee"). WHEREAS, Company desires to continue to have the benefits of Employee's knowledge and experience as a full time senior executive without distraction by employment-related uncertainties and considers such employment a vital element to protecting and enhancing the best interests of Company, and its and shareholder and Employee desires to continue to be employed full time with Company and to extend his employment agreement from that presently provided; and WHEREAS, Company and Employee desire to enter into an agreement reflecting the terms under which Employee will be employed by Company for a minimum THREE (3) YEAR PERIOD commencing on the Effective Date (subject to the provision of SECTIONS 5, 6 and 7 below); WHEREAS, Employee is employed hereunder by Company in a confidential relationship wherein Employee, in the course of Employee's employment with the Company, has and will continue to become familiar with and aware of information as to customers of the Company, and Tidel Technologies, Inc. (formerly known as American Medical Technologies, Inc. doing business as AMT Industries, Inc.) ("TTI"), specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company and TTI, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company and TTI; this information is a trade secret and constituted the valuable good will of the Company and TTI. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the parties agree as follows: 1. TERM. Company hereby agrees to employ Employee for an initial three-year period commencing on January 1, 2000 (the "Effective Date") and ending on the third anniversary thereof, unless sooner terminated as provided in SECTIONS 5 and 6 or unless extended by the mutual consent of the parties prior to the end of the term. On the Effective Date anniversary of every year, the term of the Employee's employment with Company shall be automatically extended by one year, on the same terms and conditions contained herein in effect as of the time of renewal unless either party hereto delivers to the other party not later than ten months after the anniversary of the Effective Date during the first year of the then-current term a written notice of its or his election to terminate the Employee's employment. If either party delivers such termination notice, the Employee's employment will terminate as of the end of the then-current three-year term. 2. DUTIES. Employee shall serve as the Chief Operating Officer of Company, shall exercise the authority and assume the responsibilities of Chief Operating Officer of a company of the size and nature of Company, and shall assume such other duties as the Board of Directors of 2 Company may prescribe consistent with duties of Chief Operating Officer of a technology company of such size as Company including without limitation such positions and duties with Company's subsidiaries as assigned by the Board of Directors of Company. Employee agrees to devote substantially all his full time, attention and best efforts to the performance of his duties. The Company may from time to time designate Employee as an officer of any current or future subsidiary and, in such event, shall use its best efforts to fairly allocate Employee's compensation among itself and such subsidiary or subsidiaries either through multiple direct payroll checks to Employee or by inter-Company reimbursements, in any case consistent with any applicable regulations or regulatory policies. 3. COMPENSATION. Company shall compensate Employee for the services rendered under this Agreement as follows: (a) A base annual salary determined by the Board of Directors of Company consistent with its practices for executive officers of Company, but not less than two hundred four thousand seven hundred fifty ($204,750) per year, payable in equal monthly installments (less applicable withholding) in accordance with the customary payroll practices of Company for the payment of executive officers; (b) Such bonuses as shall be determined by the Board of Directors of Company consistent with its practices for executive officers of Company; (c) If Employee's base annual salary is increased at any time, it shall, not thereafter be decreased during the term of this Agreement, unless such decrease is agreed to by the a Employee in writing; and (d) The Board of Directors of Company or its parent Company, TTI, may from time to time grant restricted stock, performance units or stock options, stock appreciation rights, and other forms of long-term incentive compensation arrangements to the Employee. The privilege to participate in these grants is at the discretion of the Board of Directors and the stipulations regarding the granting of these awards and their exercise by the Employee will be defined in the Tidel Technologies, Inc. 1997 Long-Term Incentive Plan or in other plans or actions of the Board of Directors. (e) Employee shall be entitled to reimbursement of reasonable out of pocket expenses relating to Company business in accordance with policies in effect for executive officers generally. 4. EMPLOYEE BENEFITS. (a) Employee shall be entitled to full participation, on a basis commensurate with his position with Company, in all plans of life, accident, medical payment, health and disability insurance, retirement, pension, perquisites, and other employee benefit and pension plans which generally are made available to executive officers of Company or its principal 2 3 subsidiaries, except for such plans which the Board of Directors, in its sole discretion, shall adopt for select employees to compensate them for special or extenuating circumstances. (b) Employee shall be entitled to an annual vacation leave at full pay as may be provided or by Company's vacation policies applicable to executive officers, but in any event such paid vacation shall not be less than two weeks in the aggregate. (c) Employee shall be entitled to an automobile and/or an automobile allowance as may be determined by the Board of Directors. Once established, or if Employee's automobile allowance is increased at any time, it shall not thereafter be decreased during the term of this Agreement, unless such decrease is agreed to by the Employee in writing. (d) Nothing in this Agreement shall limit in any way Employee's participation in any other benefit plans or arrangements as are from time to time approved by Company. 5. TERMINATION BY COMPANY. Except for a termination pursuant to SECTION 1 upon the expiration of the scheduled initial or any other term of this Agreement, Employee's employment hereunder may be terminated by Company without any breach of this Agreement only under the following circumstances: (a) Death, or Retirement. Employee's employment shall terminate upon his death or retirement. (b) Disability. If, as a result of his incapacity resulting from physical or mental illness or disease which is likely to be permanent, Employee shall have been unable to perform his duties hereunder for a period of more than one hundred twenty (120) consecutive days during any twelve-month period, Company may terminate his employment hereunder. The Board of Directors will determine if the Employee's termination is due to total and permanent disability, according to any long-term disability plan then in effect for senior executives of Company and otherwise in good faith consistent with generally prevailing practices of employers. (c) Cause. Company may terminate Employee's employment hereunder for cause, which for purposes of this Agreement shall be defined to mean (i) the willful and continued failure by Employee to follow the reasonable instructions of the Board of Directors of Company or his duties pursuant to this Agreement continuing for ten (10) days after written notice of such failure has been given to Employee by the Board of Directors and the failure of the Employee to cure, (ii) the willful commission by Employee of acts that are dishonest or inconsistent with local normal standards and demonstrably and materially injurious to Company or its subsidiaries, monetarily or otherwise, (iii) the commission by Employee of a felonious act, (iv) ongoing alcohol/drug addiction and a failure by Employee to successfully complete a recovery program, (v) intentional wrongful disclosure of confidential information of the Company, (vi) intentional wrongful engagement in any competitive activity, or (vii) gross neglect of his duties by Employee. 3 4 (d) Termination Without Cause. The termination of Employee's employment by Company for any reasons other than those specified above shall be deemed to be a "Termination Without Cause" (and the Company shall be deemed to have "Terminated Without Cause") and Employee shall be entitled to the severance benefits described in SECTION 8 herein. Notwithstanding the foregoing, the Company shall not Terminate Without Cause the Employee's employment after a Change of Control (as defined in SECTION 7(b)) until the end of the then-current term of the Agreement. No breach or default by Employee shall be deemed to have occurred hereunder unless written notice thereof shall have been given by Company to Employee. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above. All other rights and obligations of TTI, the Company and Employee under this Agreement shall cease as of the effective date of termination. except that Employee's obligations under SECTIONS 13, 14, 15 and 16 herein shall survive such termination in accordance with their terms. If termination of Employee's employment arises out of the Company's failure to pay Employee on a timely basis the amounts to which Employee is entitled under this Agreement or as a result of any other breach of this Agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of SECTION 17 below, the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach and all reasonable legal fees and expenses and other costs incurred by Employee to enforce Employee's rights hereunder. 6. TERMINATION BY EMPLOYEE. Employee shall be entitled to terminate his employment (i) for Good Reason or (ii) pursuant to the provisions contained in SECTION 1 hereof. Termination for "Good Reason" is defined as Employee's resignation except in connection with his termination pursuant to SECTION 5, within NINETY (90) DAYS of the following: (a) Without the express written consent of Employee, the Company assigns the Employee any duties that are materially inconsistent with Employee's position, duties and status with Company as contemplated by this Agreement; (a) (b) Any action by Company results in a material diminution in the position, duties or status of Employee with Company as contemplated by this Agreement or the Company transfers or proposes a transfer of Employee for any extended period to a location outside Dallas County, Texas without his consent; (c) The base annual salary of Employee, as the same may hereafter be increased from time to time, is reduced; 4 5 (d) Without limiting the generality or effect of the foregoing, Company fails to materially comply with any of its obligations hereunder; or (e) The Company's Compensation Committee fails to communicate the compensation objectives required within the Executive Annual Incentive Plan or subsequent plan, approved by the Board, if any, within the first 90 days of any fiscal year. Termination by Employee of his employment with Company pursuant to clause (i) of the first sentence of this Section 6 shall be deemed to be Termination Without Cause of Employee's employment by Company. 7. RIGHTS AFTER CHANGE OF CONTROL. (a) If a Change of Control (as defined in SECTION 7(b) below) occurs, (i) Employee shall have immediate vesting of all restricted stock, performance units, stock options, stock appreciation rights or warrants (whether related to Company common stock or TTI common stock) granted to Employee and full vesting in all other employee benefit plans and compensation plans to the maximum extent permitted under applicable law, and (ii) Employee shall have the right to "put" all or any portion of vested restricted stock, performance units, stock options, stock appreciation rights or warrants to TTI or in the event TTI no longer exists or is unable or fails to fulfill its obligations pursuant to this SECTION 7(A) within thirty (30) days of Employee's exercise of his "put" rights then to Company for the difference between (i) (A) the stock option exercise price with respect to stock options and stock appreciation rights, (B) warrant exercise price with respect to warrants, or (C) common stock price with respect to restricted stock or performance units, and (ii) the higher of the market price of Company's or TTI's common stock, as the case may be, at the date of the "put" or the "Sales Price." Sales Price is defined solely for purposes of this section as (i) the aggregate consideration per share received by the Company or its shareholder(s) (currently TTI) for the Company's common stock in the transaction which resulted in a Change of Control in the event it is Company's common stock subject to a stock option, stock appreciation right, warrant, restricted stock or performance unit or (ii) the Market Price of TTI stock as of the date of the closing of the transaction which will result in a Change of Control in the event it is TTI's common stock subject to the stock option, stock appreciation right, warrant, restricted stock or performance unit. Employee's right to "put" vested restricted stock, performance units, stock options, stock appreciation rights or warrants to Company shall exist for the period ending on the earlier of (i) six (6) months from the date of the Change of Control, (ii) the termination of this Agreement, or (iii) Employee's termination pursuant to SECTION 5. (b) For the purposes of this Agreement, a "Change of Control" of Company shall be deemed to have taken place if one or more of the following occurs: 5 6 (i) Any person or other entity, as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, ("Exchange Act") (other than a qualified benefit or retirement plan of Company or an affiliate of Company) becomes directly or indirectly, the beneficial owner (as defined in Rule 13(d) under the Exchange Act as in effect on the date hereof) of securities of Company representing fifty percent (50%) or more of the combined voting power of Company's then outstanding securities (unless such person is known by Employee to be already such beneficial owner on the date of this Agreement); (ii) during any period of two (2) consecutive years or less, individuals who at the beginning of such period constituted the Board of the Company cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for election of each new member of the Board was approved by a vote of at least two-thirds of the members of the Board then still in office who were members of the Board at the beginning of the period; (iii) the equityholders of the Company approve any merger or consolidation to which the Company is a party as a result of which the persons who were equityholders of the Company immediately prior to the effective date of the merger or consolidation (and excluding, however, any shares held by any party to such merger or consolidation and their affiliates) shall have beneficial ownership of less than fifty percent, (50%) of the combined voting power for election of members of the Board (or equivalent) of the surviving entity following the effective date of such merger or consolidation; or (iv) the equityholders of the Company approve any merger or consolidation as a result of which the equity interests in the Company shall be changed, converted or exchanged (other than a merger with a wholly-owned subsidiary of the Company) or any liquidation of the company or any sale or other disposition of fifty percent (50%) or more of the assets or earnings power of the Company; (v) the Company's Board of Directors shall approve the distribution to the Company's shareholders of all or substantially all of Company's net assets or shall approve the dissolution of the Company; (vi) any other transaction or series of related transactions occur which have substantially the effect of the transactions specified in any of the preceding clauses in this SECTION 7(b); or (vii) Employee is Terminated Without Cause by the Company within the period of ONE HUNDRED EIGHTY (180) DAYS before an occurrence of a Change of Control as defined in any of the preceding clauses of this SECTION 7(b) or the 6 7 execution of a contract intended to effect a Change of Control as defined in any of the preceding clauses of this SECTION 7(b). 8. OTHER SEVERANCE BENEFITS. (a) Except as set forth below, and notwithstanding the minimum term provided for in SECTION 1 of this Agreement, either the Company or Employee may terminate this Agreement at any time upon thirty (30) days notice to the other party, subject to the rights of Employee to any payment due under this Agreement in that circumstance. If at any time during the term of this Agreement, Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in SECTION 6 of this Agreement, then Employee shall be entitled to be paid a severance payment equal to two times (2x) Employee's highest base annual salary as set forth in SECTION 3(a) herein for Termination Without Cause during the term of this Agreement. Notwithstanding the first sentence of this SECTION 8(a), if a Change of Control occurs, the Company shall have no right to Terminate Without Cause the Employee's employment until the end of the then-current term of this Agreement. (b) If at any time during the term of this Agreement Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in SECTION 6 of this Agreement, then (i) Employee shall be entitled to continuation of basic employee group benefits, as defined in SECTION 4(a), provided by Company to Employee for the lesser of one year after termination or until the Employee secures new employment without remuneration to Company, and (ii) the Employee's outstanding stock option agreements shall provide for a continuance of the option exercise period for ninety (90) days from Employee's termination or resignation date, except that in the case of death, voluntary termination, Retirement, Disability and termination for cause, Employee's continuance of the option exercise period shall be governed by the stock option agreements. (c) If at any time during the term of this Agreement, Employee is Terminated Without Cause, or Employee resigns for Good Reason as defined in Section 6 of this Agreement, Company shall promptly (and in any event within five business days after a request by the Employee therefor) either pay or reimburse the Employee for the costs and expenses of any executive outplacement firm selected by the Employee, provided, however, that Company's liability hereunder shall be limited to 10% of current salary of such expenses incurred by the Employee. The Employee shall provide Company with reasonable documentation of the incurrence of such outplacement costs and expenses. (d) With respect to provisions of the stock option agreements granted pursuant to the 1997 Long-Term Incentive Plan, "Termination For Good Reason" shall be construed to have the same meaning as "Termination Without Cause", as defined in this Agreement. 9. TIMING OF PAYMENT. Unless otherwise provided in this Agreement, any severance or other payment payable to Employee under this Agreement shall be paid within thirty (30) days after the event causing such payment or at such other date as the parties agree. 7 8 10. OTHER BENEFITS. The provisions of SECTIONS 7 and 8 shall not affect Employee's participation in, or termination of distributions and vested rights under, any pension, profit sharing, insurance or other employee benefit plan of Company to which Employee is entitled pursuant to the terms of such plans except for the acceleration of vested benefits, to the maximum extent permissible under applicable law or employee benefit plan document, in certain employee benefits pursuant to SECTION 7(a) and the provisions pursuant to SECTION 8(a). 11. NO DUTY TO MITIGATE DAMAGES. In the event of termination of this Agreement by Employee after a Change of Control as defined in SECTION 7 above, or as a result of the breach by Company of any of its obligations hereunder, or in the event of the termination of Employee's employment by Company in breach of this Agreement or as a result of Employee's Termination Without Cause, or resignation for Good Reason, Employee shall not be required to seek other employment in order to mitigate his damages hereunder, and no compensation Employee does earn after any termination shall be considered to mitigate damages Employee has incurred or to reduce any payment Company is obligated to make to Employee pursuant to this Agreement. 12. NO RIGHT TO SET OFF. Company shall not be entitled to set off against the amount payable to Employee any amounts earned by Employee from other employment after termination of his employment with Company or any amounts which might have been earned by Employee in other employment had he sought such other employment. The amounts payable to Employee under this Agreement shall not be treated as damages but as severance compensation to which Employee is entitled by reason of termination of this employment in all circumstances contemplated by this Agreement. 13. NON-COMPETE AND NON-DISCLOSURE OF INFORMATION. (a) For so long as Employee is employed by Company and continuing after the voluntary termination by Employee or termination for cause by Company as provided under SECTION 5(C) of such employment for TWO (2) YEARS: (i) Employee (A) will nor accept a position as an officer, director, employee, agent, consultant or representative of any technology manufacturing ATM (automatic teller machine) company with offices in any county or any county in which the Company has offices, and (B) will not make or fail to dispose of any stock in any other proprietary technology manufacturing ATM (automatic teller machine) company with offices within thirty-five (35) miles of Dallas, Texas except investments equal to less than two percent (2%) of the outstanding stock of any class issued by any publicly traded company. (ii) Except in the performance on Employee's obligations to Company of one of its subsidiaries, Employee shall not, directly or indirectly, use or permit the use of any confidential or other proprietary information of a special unique nature and value to Company or one of its subsidiaries (the "Confidential Information"), 8 9 including, but not limited to, trade secrets, systems, procedures, manuals, confidential reports, customer lists, sales or distribution methods, patentable information and data as well as financial information concerning Company or one of its subsidiaries, and information with respect to the nature and type of other services rendered by Company or one of its subsidiaries, which Confidential Information has been used by Company or one of its subsidiaries to date or during the term of this Agreement, and has been made known (whether or not with the knowledge and permission of Company, and whether or not developed, devised or otherwise created in whole or in part by the efforts of Employee) to Employee by reason of his activities on behalf of Company or one of its subsidiaries. Employee shall not reveal, divulge or make known any Confidential Information to any individual partnership, firm, company or other business organization whatsoever except in, performance of Employee's obligations to Company or with the express permission of the Board of Directors of Company or as otherwise required by operation of law. (b) Employee confirms that all Confidential Information is the exclusive property of Company. All business records, papers and documents kept or made by Employee relating to the business of Company shall be and remains the property of Company and shall remain in the possession of Company during the term and at all times thereafter. Upon the termination of his employment with Company or upon the request of Company at any time, Employee shall promptly deliver to Company, and shall retain no copies of, any written material records and documents made by Employee or coming into his possession concerning the business or affairs of Company. (c) Without intending to limit the remedies available to Company, Employee acknowledges that a breach of any of the covenants contained in this SECTION 13 may result in material irreparable injury to Company or one of its subsidiaries for which them is not adequate remedy at law, that it may not be possible to measure damages for such injuries precisely, and that in the event of such a breach or threat thereof, may be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining Employee from engaging in activities prohibited by this SECTION 13 or such other relief as may be required to specifically enforce any of the covenants in such Section. In the event a court requires a posting of a bond, the parties hereby agree that such bond shall be in the amount of One Thousand Dollars ($1,000.00). (d) The covenants in this SECTION 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. (e) All of the covenants in this SECTION 13 shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause 9 10 of action of Employee against the Company or 171, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by TTI or the Company of such covenant. It is specifically agreed that the period of TWO (2) YEARS following termination of employment stated at the beginning of this SECTION 13, during which the agreements and covenants of Employee made in this SECTION 13 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this SECTION 13. 14. RETURN OF COMPANY PROPERTY. All records, designs. patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company, TTI or their representatives, vendors, or customers which pertain to the business of the Company or TTI shall be and remain the property of the Company or TTI, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company or TTI which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 15. INVENTION. Employee shall disclose promptly to TTI and the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not. which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter and which are directly related to the business or activities of the Company or TTI and which Employee conceives as a result of Employee's employment by the Company. Employee hereby assigns and agrees to assign all Employee's interests therein to the Company or its nominee. 16. TRADE SECRETS. Employee agrees that Employee will not, during or after the Term of this Agreement with the Company, disclose the specific terms of the Company's or TTI's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company or TTI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 17. ARBITRATION. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement in the event the arbitrators determine that Employee was terminated without disability or cause, as defined in SECTION 5(b) and 5(c), respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final, non-appealable and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 10 11 Each party shall bear his or its own costs of arbitration, but if Employee is the prevailing party in such arbitration, he shall be entitled to recover from Company as part of any award entered his reasonable expenses for attorneys' fees and disbursements. 18. NOTICES. All notices, requests, demands and other communication called for or contemplated hereunder shall be in writing and shall be deemed to have been duly given when delivered personally or when mailed by United Stated certified or registered mail, postage prepaid, addressed to the parties, their successors in interest or assignees; at the following addresses or such other addresses as the parties may designate by notice in the manner aforesaid: If to Company: Tidel Engineering, L.P. 2310 McDaniel Drive Carrollton, Texas 75006 Attention: Chairman If to Employee: Tidel Engineering, L.P. 2310 McDaniel Drive Carrollton, Texas 75006 Attention: Michael F. Hudson 19. GOVERNING LAW AND VENUE. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to any principle of conflict-of-laws that would require the application of the law of any other jurisdiction. Venue for any dispute shall lie exclusively in Dallas, Dallas County, Texas. 20. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 21. ENTIRE AGREEMENT. This Agreement is not a promise of future employment, except as otherwise provided herein. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and preliminary agreements, and further superseding any and all employment arrangements between Employee and Company or any of Company's subsidiaries, affiliates or other related entities. This Agreement may not be amended except in a writing executed by the parties hereto. 22. ASSIGNMENT; BINDING EFFECT. Employee understands that Employee bas been selected for employment by the Company on the basis of Employee's personal qualifications, experience and skills. Employee agrees, therefore, that Employee cannot assign all or any portion of Employee's performance under this Agreement. Subject to the preceding two (2) sentences and 11 12 the express provisions of SECTION 7 above, this Agreement shall be binding upon, inure to the benefit of an be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 23. EFFECTIVENESS. This Agreement shall be effective upon the Effective Date. 24. SURVIVAL OF SECTION. The provisions of SECTIONS 13, 14, 15 and 16 of this Agreement shall survive the termination of this Agreement for the period provided for therein. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. TIDEL ENGINEERING, L.P.: EMPLOYEE: By: Tidel Cash Systems, Inc., a Delaware corporation its general partner /s/ MICHAEL F. HUDSON ----------------------------------------- Michael F. Hudson Senior Vice President Sales & Marketing By: /s/ JAMES T. RASH ------------------------------- James T. Rash, Chairman ATTEST: By: /s/ LEONARD L. CARR JR. ------------------------------- Leonard L. Carr Jr., Secretary 12 EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND CONSOLIDATED STATEMENT OF INCOME FOR THE SIX-MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPANY'S REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000. 6-MOS SEP-30-2000 OCT-01-1999 MAR-31-2000 1,126,713 0 17,579,488 636,848 10,200,169 30,992,968 3,947,101 2,296,056 33,879,799 9,196,979 4,288,000 0 0 164,478 20,230,342 33,879,799 32,444,843 32,444,843 20,324,709 20,324,709 0 0 191,672 6,073,242 2,073,000 4,000,242 0 0 0 4,000,242 .25 .22
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