-----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, EWGdW2d/hOdM2HkDmg3b5Ur23Q6bguP/ar6Hb1uYAxyt5DjLPCusjZB1+O1A44Ij eZBZhRgvJy2w8PjQOGI2Hw== 0000950129-98-003397.txt : 19980814 0000950129-98-003397.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950129-98-003397 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: PCX 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: 98684939 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 6/30/1998 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 June 30, 1998 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 August 10, 1998 was 15,775,468. 2 TIDEL TECHNOLOGIES, INC. I N D E X
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1998 and September 30, 1997 (unaudited)........................................ 1 Consolidated Statements of Operations for the three months and nine months ended June 30, 1998 and 1997 (unaudited)...................................................... 2 Consolidated Statements of Cash Flows for the nine months ended June 30, 1998 and 1997 (unaudited) .......................................................... 3 Notes to Consolidated Financial Statements (unaudited).................................................... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 6 PART II. OTHER INFORMATION: Item 1. Legal Proceedings .......................................................... 11 Item 2. Changes in Securities........................................................ 11 Item 3. Defaults Upon Senior Securities.............................................. 11 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..................................................................................... 12
3 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, SEPTEMBER 30, ASSETS 1998 1997 ------------ ------------ Current Assets: Cash and cash equivalents $ 1,459,504 $ 1,549,331 Trade accounts receivable, net of allowance of $781,715 and $750,347, respectively 9,946,774 8,732,080 Notes and other receivables 796,415 852,514 Inventories 5,238,998 4,208,360 Deferred tax asset 912,622 318,810 Prepaid expenses and other 221,754 233,273 ------------ ------------ Total current assets 18,576,067 15,894,368 Investment in 3CI, at market value 1,135,004 553,505 Property, plant and equipment, at cost 2,548,198 2,126,726 Accumulated depreciation (1,432,703) (1,189,409) ------------ ------------ Net property, plant and equipment 1,115,495 937,317 Intangible assets, net of accumulated amortization of $783,015 and $692,814, respectively 710,822 801,023 Other assets 65,375 77,238 ------------ ------------ Total assets $ 21,602,763 $ 18,263,451 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term notes payable $ -- $ 948,697 Accounts payable 2,043,997 3,239,412 Accrued liabilities 2,021,782 2,328,917 ------------ ------------ Total current liabilities 4,065,779 6,517,026 Long-term debt 4,894,604 3,654,604 ------------ ------------ Total liabilities 8,960,383 10,171,630 ------------ ------------ Commitments and contingencies Shareholders' Equity: Common stock, $.01 par value, authorized 100,000,000 shares; issued and outstanding 15,702,968 and 14,851,050 shares, respectively 157,030 148,511 Additional paid-in capital 14,033,378 13,387,412 Accumulated deficit (733,256) (4,026,262) Stock subscriptions receivable (382,063) (424,437) Unrealized loss on investment in 3CI (432,709) (993,403) ------------ ------------ Total shareholders' equity 12,642,380 8,091,821 ------------ ------------ Total liabilities and shareholders' equity $ 21,602,763 $ 18,263,451 ============ ============
See accompanying notes to consolidated financial statements. 1 4 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED JUNE 30, ENDED JUNE 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Revenues $ 9,935,472 $ 8,002,189 $25,111,381 $21,060,580 Cost of sales 6,180,517 4,992,185 15,700,347 13,545,832 ----------- ----------- ----------- ----------- Gross profit 3,754,955 3,010,004 9,411,034 7,514,748 Selling, general and administrative 1,792,813 2,022,382 5,207,874 5,116,402 Depreciation and amortization 122,235 121,657 340,161 344,990 ----------- ----------- ----------- ----------- Operating income 1,839,907 865,965 3,862,999 2,053,356 Interest expense, net 99,456 99,207 297,993 367,910 ----------- ----------- ----------- ----------- Income before taxes 1,740,451 766,758 3,565,006 1,685,446 Income taxes 204,000 -- 272,000 -- ----------- ----------- ----------- ----------- Net income $ 1,536,451 $ 766,758 $ 3,293,006 $ 1,685,446 =========== =========== =========== =========== Basic earnings per share: Income from continuing operations $ 0.10 $ 0.05 $ 0.21 $ 0.13 =========== =========== =========== =========== Net income $ 0.10 $ 0.05 $ 0.21 $ 0.13 =========== =========== =========== =========== Weighted average common shares outstanding 15,650,484 14,633,159 15,491,399 13,293,063 =========== =========== =========== =========== Diluted earnings per share: Income from continuing operations $ 0.09 $ 0.05 $ 0.19 $ 0.11 =========== =========== =========== =========== Net income $ 0.09 $ 0.05 $ 0.19 $ 0.11 =========== =========== =========== =========== Weighted average common and dilutive shares outstanding 17,159,142 16,387,186 17,027,845 14,965,852 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 2 5 TIDEL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED JUNE 30, 1998 1997 ----------- ----------- Cash flows from operating activities: Net income $ 3,293,006 $ 1,685,446 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 340,161 344,990 Deferred tax benefit (593,812) -- Changes in assets and liabilities: Trade accounts receivable, net (1,214,694) (2,732,364) Notes and other receivables 56,099 (282,079) Inventories (1,030,638) (189,641) Prepaids and other assets 23,382 (239,709) Accounts payable and accrued liabilities (1,502,550) 635,012 ----------- ----------- Net cash used in operating activities (629,046) (778,345) ----------- ----------- Cash flows from investing activities: Purchases of property, plant and equipment (428,138) (511,459) Proceeds from sale of property, plant and equipment -- 39,725 Increase in investment in 3CI (20,805) -- ----------- ----------- Net cash used in investing activities (448,943) (471,734) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of notes payable 1,240,000 4,549,604 Repayments of notes payable (948,697) (4,513,675) Proceeds from exercise of warrants 654,485 1,607,816 Payments of stock subscriptions 42,374 -- ----------- ----------- Net cash provided by financing activities 988,162 1,643,745 ----------- ----------- Net (decrease) increase in cash and cash equivalents (89,827) 393,666 Cash and cash equivalents at beginning of period 1,549,331 582,108 ----------- ----------- Cash and cash equivalents at end of period $ 1,459,504 $ 975,774 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest $ 351,506 $ 417,499 =========== =========== Cash paid for taxes $ 812,231 $ -- =========== =========== Supplemental disclosure of noncash financing activities: Exercise of warrants in exchange for notes receivable $ -- $ 743,000 =========== =========== Exercise of warrants in exchange for retirement of note payable $ -- $ 38,750 =========== =========== Conversion of note payable to common stock $ -- $ 60,000 =========== ===========
See accompanying notes to consolidated financial statements. 3 6 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. Certain amounts in the prior year's financial statements have been reclassified to conform with the current year presentation format. 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, 1997. (2) INVENTORIES Inventories consist of the following at June 30, 1998 and September 30, 1997:
June 30, September 30, 1998 1997 ----------- ----------- Raw materials $ 4,378,662 $ 3,635,349 Work in process 407,136 379,708 Finished goods 749,426 492,636 Other (demo) 260,774 212,667 ----------- ----------- 5,795,998 4,720,360 Inventory reserve (557,000) (512,000) ----------- ----------- $ 5,238,998 $ 4,208,360 =========== ===========
(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 income from continuing operations and net income for the three months and nine months ended June 30, 1998 and 1997: 4 7
Income Shares Per Share (Numerator) (Denominator) Amount ------------ ---------- --------- Three months ended June 30, 1998: -------------------------------- Basic EPS: Income available to common shareholders $ 1,536,451 15,650,484 $ 0.10 Diluted EPS: Effect of dilutive options and warrants 1,508,658 Income available to common shareholders $ 1,536,451 17,159,142 $ 0.09 Three months ended June 30, 1997: -------------------------------- Basic EPS: Income available to common shareholders $ 766,758 14,633,159 $ 0.05 Diluted EPS: Effect of dilutive options and warrants 1,754,027 Income available to common shareholders $ 766,758 16,387,186 $ 0.05 Nine months ended June 30, 1998: ------------------------------- Basic EPS: Income available to common shareholders $ 3,293,006 15,491,399 $ 0.21 Diluted EPS: Effect of dilutive options and warrants 1,536,446 Income available to common shareholders $ 3,293,006 17,027,845 $ 0.19 Nine months ended June 30, 1997: ------------------------------- Basic EPS: Income available to common shareholders $ 1,685,446 13,293,063 $ 0.13 Diluted EPS: Effect of dilutive options and warrants 1,643,230 Effect of convertible notes 3,038 29,559 Income available to common shareholders $ 1,688,484 14,965,852 $ 0.11
(4) INVESTMENT IN 3CI The Company currently owns 698,464 shares of the common stock of 3CI Complete Compliance Corporation ("3CI"), which is carried at market value. During the nine months ended June 30, 1998, the Company received 17,646 shares of 3CI common stock, together with 226,939 warrants to purchase 3CI common stock at $1.50 per share, as its pro rata portion of a settlement of the Texas class-action litigation against the majority shareholder of 3CI. The Company's pro rata portion of the legal fees incurred in connection with the settlement in the amount of $20,805 have been capitalized and included in Investment in 3CI. 5 8 (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 materially 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 products designed for specialty retail marketers, including automated teller machines and related software (the "AnyCard" or "ATM" products); electronic cash security systems (the "Timed Access Cash Controller" or "TACC" products); and underground fuel storage monitoring and leak detection devices (the "Environmental Monitoring System" or "EMS" products). PRODUCT REVENUES Total revenues increased $1,933,283, or 24%, for the third quarter of fiscal 1998 over the comparable quarter of 1997. On a year-to-date basis, revenues increased $4,050,801, or 19%, compared to the same period of the prior fiscal year. As discussed below, a significant increase in AnyCard sales was the principal factor in the Company's revenue growth. Revenue by product is detailed in the following table:
Three months ended Nine months ended June 30, June 30, --------------------- --------------------- Net product revenues (in 000's) 1998 1997 1998 1997 -------- -------- -------- -------- AnyCard $ 7,386 $ 5,705 $ 17,513 $ 14,428 TACC 1,549 1,529 4,842 4,367 Parts, service and other 678 592 1,969 1,643 EMS 322 176 787 623 -------- -------- -------- -------- $ 9,935 $ 8,002 $ 25,111 $ 21,061 ======== ======== ======== ========
AnyCard product sales for the quarter ended June 30, 1998 increased 29.5% over the comparable period in 1997. On a year-to-date basis, AnyCard product sales increased 21.4% when compared to the same period in 1997. Demand for all of the Company's ATM products continues to be strong, and management believes AnyCard product sales should continue to increase during the fourth fiscal quarter. TACC product sales increased slightly for the quarter ended June 30, 1998, when compared to the same period in 1997. On a year-to-date basis, TACC product sales increased 10.9% when compared to 6 9 the same period in 1997. Management believes TACC product sales should continue to be strong during the fourth fiscal quarter due to the development of new customers as a result of increased marketing efforts. All marketing activities for EMS products have terminated as the marketing focus of the Company has shifted to its two other product lines. Certain existing customers have continued to purchase these products, however, to complete retrofit projects that are currently in progress. Parts, service and other revenues vary directly with sales of finished goods, and have increased accordingly. GROSS PROFIT, OPERATING EXPENSES AND NON-OPERATING ITEMS Gross profit was 37.8% and 37.6% of revenues for the quarters ended June 30, 1998 and 1997. On a year-to-date basis, gross profit increased from 35.7% of revenues in 1997 to 37.5% of revenues in 1998. The increase was primarily due to improvements in ATM product design and engineering resulting in lower costs, offset by lower average sales prices for ATM products. As a percentage of revenues, selling, general and administrative expense was 18.0% and 25.3% in the respective third quarters of fiscal 1998 and 1997. On a year-to-date basis, selling, general and administrative expense was 20.7% of revenues in 1998, compared to 24.3% of revenues in 1997. Management believes that selling, general and administrative expense, as a percentage of revenues, should continue to decrease during the fourth fiscal quarter. Depreciation and amortization decreased slightly during fiscal 1998 on a year-to-date basis due to fewer additions of property, plant and equipment. Interest expense decreased slightly during fiscal 1998 on a year-to-date basis as a result of a decline in average rates for borrowed funds. LIQUIDITY AND CAPITAL RESOURCES The financial position of the Company continues to improve primarily as a result of profitable operations and the infusion of capital from the exercise of warrants, as reflected in the following key indicators as of June 30, 1998 and September 30, 1997:
June 30, September 30, 1998 1997 ------------ ----------- Shareholders' equity $ 12,634,510 $ 8,091,821 Tangible net worth 11,923,688 7,290,798 Working capital 14,531,093 9,377,342
The improvement in working capital is principally due to increased inventories, the repayment of current liabilities, and the replacement of all short-term notes payable with a long-term note. The 7 10 increase in inventories arose from a build-up of raw materials related to overall higher sales expectations. The repayment of current liabilities was facilitated by improved collections of accounts and notes receivable. During the quarter ended June 30, 1998, the Company refinanced $640,000 of short-term notes payable with a long-term installment note from a bank which provides for interest at 8.5% and matures May 31, 2003. During the quarter ended June 30, 1997, the Company's wholly owned subsidiary entered into a revolving credit agreement with a bank. During the quarter ended June 30, 1998, the agreement was extended from May 31, 1999 to May 31, 2000 and the maximum borrowing limit was increased from $5,000,000 to $7,000,000 at the prime rate, with certain LIBOR alternatives. At June 30, 1998, $4,254,604 was outstanding pursuant to the revolving credit agreement. The Company continues to own 680,818 shares of 3CI common stock subsequent to its divestiture of a majority interest in February 1994. The Company has no immediate plans for the disposal of the shares, and accordingly, the shares may be utilized to collateralize borrowings. At present, all the shares are pledged to secure the aforementioned long-term installment note payable in the principal amount of $400,000. The Company's registration statement covering the offering and sale by selling shareholders of the common stock underlying all of the Company's 5,517,500 outstanding warrants was declared effective in January 1997. During the nine-month period ended June 30, 1998, warrants to purchase 851,918 shares were exercised generating net proceeds to the Company of approximately $654,000. As of June 30, 1998, the Company has outstanding warrants to purchase 1,570,692 shares of common stock, which if exercised would generate proceeds to the Company of approximately $1,353,000. The Company's research and development budget for fiscal 1998 has been estimated at $1,650,000. The majority of these expenditures are applicable to enhancements of the existing product lines, development of new automated teller machine products and the development of new technology to facilitate the dispensing of products such as postage stamps, money orders, and prepaid telephone cards, as well as multiple denominations of currency. During the nine months ended June 30, 1998, $1,001,903 was expended for research and development. With its present capital resources, its potential capital from the exercise of warrants, and with its borrowing facility, the Company should have sufficient resources to meet its operating needs for the foreseeable future and to provide for debt maturities and capital expenditures. The Company does not anticipate paying dividends on shares of its common stock in the foreseeable future. SEASONALITY The Company can experience seasonal variances in operations and historically has its lowest dollar volume sales months between November and March. The Company's operating results for any particular quarter may not be indicative of the results for the future quarter or for the year. 8 11 MAJOR CUSTOMERS AND CREDIT RISKS The Company generally does not require collateral or other security from its customers and would incur an accounting loss equal to the carrying value of the account receivable if a customer failed to perform according to the terms of the credit arrangements. Sales to major customers were as follows for the three and nine months ended June 30, 1998 and 1997:
Three months ended Nine months ended June 30, June 30, ----------- ------------ ----------- -------------- 1998 1997 1998 1997 ----------- ------------ ----------- -------------- Customer A $ 1,452,721 $ 661,816 $ 3,217,937 $ 1,426,911 Customer B 2,043,914 -- 2,677,493 -- Customer C 1,241,212 -- -- -- Customer D -- 657,930 -- 2,933,968
Foreign sales accounted for 2% and 6% of the Company's total sales during the three months ended June 30, 1998 and 1997, respectively, and 3% and 6% of the Company's total sales during the nine months ended June 30, 1998 and 1997, respectively. YEAR 2000 Many computer software systems, as well as certain hardware and equipment containing date sensitive data were structured to utilize a two-digit date field meaning that they may not be able to properly recognize dates in the Year 2000. This could result in significant system and equipment failures. While Year 2000 considerations are not expected to materially impact the Company's internal operations because they are either Year 2000 compliant or required changes are not expected to be material, they may have an effect on some of the Company's customers and suppliers and thus indirectly affect the Company. It is not possible to quantify the aggregate cost to the Company with respect to customers and suppliers with Year 2000 problems, although the Company does not anticipate it will have a material adverse impact on its business. The Company believes that its management, operational and financial systems will be free of any Year 2000 limitations. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS 128 establishes new standards for computing and presenting earnings per share ("EPS") amounts for companies with publicly held common stock or potential common stock. The new standards require the presentation of both basic and diluted EPS amounts for companies with complex capital structures. Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period, and excludes the effect of potentially dilutive securities (such as options, warrants and convertible securities) which are convertible into common stock. Dilutive EPS reflects the potential dilution from convertible securities. SFAS 128 is effective for periods ending after December 15, 1997. 9 12 In February 1997, the FASB issued Statement of Financial Accounting Standards No 129, Disclosure of Information about Capital Structure ("SFAS 129"). SFAS 129 establishes standards for disclosing information about a company's outstanding debt and equity securities and eliminates exemptions from such reporting requirements for nonpublic companies. SFAS 129 is effective for periods ending after December 15, 1997. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes standards for the reporting and display of comprehensive income in a company's financial statements. Comprehensive income includes all changes in a company's equity accounts (including net income or loss) except investments by, or distributions to, the company's owners. Items which are components of comprehensive income (other than net income or loss) include foreign currency translation adjustments, minimum pension liability adjustments and unrealized gains and losses on certain investments in debt and equity securities. The components of comprehensive income must be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS 130 is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes standards for the way that public companies report, in their annual financial statements, certain information about their operating segments, their products and services, the geographic areas in which they operate and their major customers. SFAS 131 also requires that certain information about operating segments be reported in interim financial statements. SFAS 131 is effective for periods beginning after December 15, 1997. 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 future 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. 10 13 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Pursuant to recent amendments to the proxy rules under the Securities Exchange Act of 1934, as amended, the Company's stockholders are notified that the deadline for providing the Company timely notice of any stockholder proposal to be submitted outside of the Rule 14a-8 process for consideration at the Company's 1999 Annual Meeting of Stockholders (the "Annual Meeting") will be May 11, 1999. As to all such matters which the Company does not have notice on or prior to May 11, 1999, discretionary authority shall be granted to the designated persons in the Company's proxy statement for the Annual Meeting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 4.01 - First Amendment to Credit Agreement dated February 1, 1998 by and between Tidel Engineering, Inc. and Chase Bank of Texas, N. A. 4.02 - Second Amendment to Credit Agreement dated May 27, 1998 by and among Tidel Engineering, Inc., the Company and Chase Bank of Texas, N. A. 4.03 - Promissory Note dated May 27, 1998 executed by Tidel Engineering, Inc. payable to the order of Chase Bank of Texas, N. A. 11 14 4.04 - Promissory Note dated May 27, 1998 executed by Tidel Engineering, Inc. payable to the order of Chase Bank of Texas, N. A. 4.05 - First Amendment to Security Agreement (Personal Property) dated as of May 27, 1998, by and between Tidel Engineering, Inc. and Chase Bank of Texas, N. A. 4.06 - First Amendment to Pledge and Security Agreement (3CI Stock) dated as of May 27, 1998 executed by the Company in favor of Chase Bank of Texas, N. A. 27 - Financial Data Schedule b) Reports on Form 8-K The Company filed no Reports on Form 8-K during the quarter ended June 30, 1998. 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: August 13, 1998 By: /s/ JAMES T. RASH --------------------------- James T. Rash Principal Executive and Financial Officer 12 15 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 4.01 - First Amendment to Credit Agreement dated February 1, 1998 by and between Tidel Engineering, Inc. and Chase Bank of Texas, N. A. 4.02 - Second Amendment to Credit Agreement dated May 27, 1998 by and among Tidel Engineering, Inc., the Company and Chase Bank of Texas, N. A. 4.03 - Promissory Note dated May 27, 1998 executed by Tidel Engineering, Inc. payable to the order of Chase Bank of Texas, N. A. 4.04 - Promissory Note dated May 27, 1998 executed by Tidel Engineering, Inc. payable to the order of Chase Bank of Texas, N. A. 4.04 - Promissory Note dated May 27, 1998 executed by Tidel Engineering, Inc. payable to the order of Chase Bank of Texas, N. A. 4.05 - First Amendment to Security Agreement (Personal Property) dated as of May 27, 1998, by and between Tidel Engineering, Inc. and Chase Bank of Texas, N. A. 4.06 - First Amendment to Pledge and Security Agreement (3CI Stock) dated as of May 27, 1998 executed by the Company in favor of Chase Bank of Texas, N. A. 27 - Financial Data Schedule
EX-4.01 2 FIRST AMENDMENT TO CREDIT AGREEMENT, DATED 2/01/98 1 Exhibit 4.01 FIRST AMENDMENT TO CREDIT AGREEMENT This First Amendment to Credit Agreement (this "Amendment") is made and entered into as of February __, 1998, by and between CHASE BANK OF TEXAS, N.A., a national banking association ("Lender"), formerly known as TEXAS COMMERCE BANK NATIONAL ASSOCIATION, and TIDEL ENGINEERING, INC., a Delaware corporation ("Borrower"). R E C I T A L S: A. On June 12, 1997, Lender and Borrower entered into that certain Credit Agreement (the "Credit Agreement") pursuant to which Lender agreed to make loans and advances (collectively the "Loans") to Borrower in accordance with the terms thereof. The Loans are evidenced by that certain Promissory Note of even date with the Credit Agreement, in the stated principal amount of $5,000,000.00, bearing interest and being payable to the order of Lender as therein provided (as amended, the "Note"). The Credit Agreement, the Note and the documents, instruments and agreements executed in connection therewith are collectively referred to herein as the "Loan Documents". B. Borrower has requested Lender to modify the Credit Agreement so as to require Annual Audited Financial Statements (as such term is defined in the Credit Agreement) only on Tidel Technologies, Inc., formerly known as American Medical Technologies, Inc., d/b/a AMT Industries, Inc., the parent of Borrower, and Annual Consolidating Financial Statements (as such term is defined in this Amendment), instead of Annual Audited Financial Statements, on Borrower. C. Lender, at the request of Borrower, for good and valuable consideration, is willing to enter into this Amendment upon the terms and conditions set forth below: A G R E E M E N T: NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby covenant and agree as follows: 1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Credit Agreement. 2. Annual Audited Financial Statements. The second sentence of the definition of Annual Audited Financial Statements in the Credit Agreement is hereby amended to read in its entirety as follows: 2 The Annual Audited Financial Statements for the Parent and its Subsidiaries shall be prepared on a Consolidated and consolidating basis in accordance with GAAP. 3. Annual Consolidating Financial Statements. Section 1.1 of the Credit Agreement is hereby amended by adding the following definition of Annual Consolidating Financial Statements: Annual Consolidating Financial Statements shall mean the annual audited consolidating financial statements of a Person, including all notes thereto, which statements shall include a balance sheet as of the end of such fiscal year and an income statement, a retained earnings statement and a statement of cash flows for such fiscal year, all setting forth in comparative form the corresponding figures from the previous fiscal year, all prepared in conformity with GAAP by a "Big 6" accounting firm or other accounting firm of similar national standing and reputation. 4. Financial Statements and Information. Clause (a) of Section 6.3 of the Credit Agreement is hereby amended to read in its entirety as follows: (a) as soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower or the Parent, as the case may be, Annual Audited Financial Statements of the Parent and its Subsidiaries, and Annual Consolidating Financial Statements of the Borrower; This amendment to clause (a) of Section 6.3 is effective for the fiscal year of the Parent and the Borrower that ended September 30, 1997, except that the Annual Consolidating Financial Statements of the Borrower for the 1997 fiscal year shall be furnished to the Lender by March 17, 1998. 5. Costs and Expenses. Borrower agrees to reimburse Lender for Lender's costs and expenses, including, but not limited to, attorneys' fees and legal expenses, incurred by Lender in connection with the preparation of this Amendment and in connection with the negotiation and consummation of the transaction contemplated hereby. 6. The Credit Agreement. All references to the Credit Agreement in the Loan Documents shall be deemed to be the Credit Agreement, as modified hereby. Borrower expressly promises to perform all of its obligations under the Credit Agreement and other Loan Documents, as modified by this Amendment. 7. Acknowledgments of Borrower. Borrower hereby acknowledge and agree that (a) Lender is not in default in the performance of its obligations under the Loan Documents; (b) Borrower has no claims, counterclaims, offsets, credits or defenses to the Loan Documents and the performance of its obligations thereunder, or if Borrower has any such claims, counterclaims, offsets, credits or defenses to the Loan Documents or any transaction related to the Loans and/or the Loan Documents, same are hereby waived, relinquished and released in consideration of Lender's execution and delivery of this Amendment; (c) all of the provisions of the Loan Documents, except as amended hereby, are in full force and effect; and (d) upon the 3 execution hereof, the Credit Agreement, the Note, and the other Loan Documents are not in default. 8. Full Force and Effect. Except as expressly modified and amended in this Amendment, all of the terms, provisions and conditions of the Credit Agreement, the Note, and all other Loan Documents are and shall remain in full force and effect and are incorporated herein by reference. 9. Counterparts. This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. 10. No Oral Agreements. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. 4 IN WITNESS WHEREOF, the parties have executed this First Amendment to Credit Agreement as of the day and year first above written. LENDER: CHASE BANK OF TEXAS, N.A., a national banking association By: /s/ JOANNE BRAMANTI Joanne Bramanti, Vice President BORROWER: TIDEL ENGINEERING, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board 5 By its execution below, Tidel Technologies, Inc., formerly known as American Medical Technologies, Inc., a Delaware corporation ("Guarantor"), d/b/a AMT Industries, Inc., acknowledges and consents to all of the terms and conditions of this Amendment, and ratifies and confirms its respective Guaranty to and for the benefit of Lender. Guarantor acknowledges that Guarantor has no claims, counterclaims, offsets, credits or defenses to the Loan Documents and the performance of its obligations thereunder, or if Guarantor does have any such claims, counterclaims, offsets, credits or defenses to the Loan Documents or any transaction related to the Loans and/or the Loan Documents, same are hereby waived, relinquished and released in consideration of Lender's execution and delivery of this Amendment. Further, Guarantor agrees that nothing contained in this Amendment shall adversely affect any right or remedy of Lender under the Guaranty and that with respect to the Guaranty, all references in the Guaranty to the "Obligations" shall mean the "Obligations", as amended by this Amendment; that the execution and delivery of this Amendment shall in no way change or modify its obligations as Guarantor pursuant to its Guaranty; and that the execution and delivery of any agreements by Borrower and Lender in connection with this Amendment shall not constitute a waiver by Lender of any of Lender's rights against Guarantor. TIDEL TECHNOLOGIES, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board EX-4.02 3 SECOND AMEND. TO CREDIT AGREEMENT - MAY 27, 1998 1 EXHIBIT 4.02 SECOND AMENDMENT TO CREDIT AGREEMENT This Second Amendment to Credit Agreement (this "Amendment") is made and entered into as of May 27, 1998, by and among CHASE BANK OF TEXAS, N.A., a national banking association ("Lender"), formerly known as TEXAS COMMERCE BANK NATIONAL ASSOCIATION, and TIDEL ENGINEERING, INC., a Delaware corporation ("Borrower"), and TIDEL TECHNOLOGIES, INC., a Delaware corporation ("Parent"), formerly known as American Medical Technologies, Inc., d/b/a AMT Industries, Inc. R E C I T A L S: A. On June 12, 1997, Lender and Borrower entered into that certain Credit Agreement (as amended, the "Credit Agreement") pursuant to which Lender agreed to make loans and advances (collectively the "Loans") to Borrower in accordance with the terms thereof. The Credit Agreement was amended pursuant to that certain First Amendment to Credit Agreement dated as of February 23, 1998. The Loans are evidenced by that certain Promissory Note of even date with the Credit Agreement, in the stated principal amount of $5,000,000.00, bearing interest and being payable to the order of Lender as therein provided (as amended, the "Note"). The Credit Agreement, the Note and the documents, instruments and agreements executed in connection therewith are collectively referred to herein as the "Loan Documents". B. Borrower has requested Lender to modify the Credit Agreement so as to increase the Commitment from $5,000,000 to $7,000,000. C. Borrower and Parent also have requested Lender to modify the Credit Agreement so as to add a term loan facility in the amount of $640,000, to be evidenced by a term note from Borrower and Parent, jointly and severally, which will be governed by the Credit Agreement. D. Finally, Borrower and Parent have requested that Lender modify certain of the covenants set forth in the Credit Agreement, including, without limitation, the covenants pertaining to Tangible Net Worth and Capital Expenditures. E. Lender, at the request of Borrower and Parent, for good and valuable consideration, is willing to enter into this Amendment upon the terms and conditions set forth below: A G R E E M E N T: NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby covenant and agree as follows: 1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Credit Agreement. 2 2. Additional Definitions. Article 1 of the Credit Agreement is hereby amended by adding the following definitions: Dividend means, in respect of any corporation: (a) the payment or making of any dividend or other distribution of Property in respect of capital stock of such corporation, other than distributions in capital stock of the same class; or (b) the redemption or other acquisition of any capital stock of such corporation. Fixed Rate means eight and four-tenths percent (8.4%) per annum. Second Amendment Closing Date shall mean the date of the Second Amendment to the Agreement. Term Loan shall mean the Term Loan made pursuant to Section 2A.1 hereof. Term Loan Commitment shall mean the obligation of Lender to make the Term Loan in an aggregate principal amount of Six Hundred Forty Thousand Dollars ($640,000). Term Loan Maturity Date shall mean the earlier of (a) May 31, 2003, and (b) any date the Term Loan Maturity Date is accelerated by the Lender pursuant to Section 8.1 hereof. 3. Consequential Loss. The definition of "Consequential Loss" in Section 1.1 of the Credit Agreement is hereby amended to add the following provisions: Consequential Loss also shall mean, with respect to (a) the Borrower's payment of principal of a Fixed Rate Borrowing on a day other than the last day of the applicable Interest Period, or (b) the Borrower's failure to borrow a Fixed Rate Borrowing on the date specified by the Borrower for any reason, in each case whether voluntary or involuntary, any loss, expense, penalty, premium or liability incurred by the Lender as a result thereof, including without limitation, any interest paid by the Lender to lenders of funds borrowed by it to make or carry the Term Loan and any other costs and expenses sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain the Term Loan. 4. Concentration Limits for Eligible Receivables. The definition of "Eligible Receivables" in Section 1.1 of the Credit Agreement is hereby amended by revising clause (d) of the definition to delete the following parenthetical: (other than Hanco Systems, in which case 25%, and Retriever Payment Systems, in which case 15%). 3 5. Maturity Date for Revolving Loans. The definition of "Maturity Date" in Section 1.1 of the Credit Agreement is hereby amended by revising clause (a) of the definition to read in full as follows: (a) May 31, 2000. 6. Term Loan. The Credit Agreement is hereby amended by adding Article 2A as follows: 2A. Term Loan; Term Note; Payments; Prepayments; Interest Rates. 2A.1 Term Loan Commitment. Subject to the terms and conditions hereof, Lender agrees to make a Term Loan to the Borrower after the Second Amendment Closing Date until, but not including, the Term Loan Maturity Date, in a principal amount up to, but not exceeding the Term Loan Commitment. 2A.2 Mandatory and Voluntary Prepayments. (a) The Borrower shall have the right, at its option and subject to the requirements of Section 2.4, to prepay the Term Loan as provided in this Section 2A.2. Any prepayment under this subsection shall applied to the prepayment of the aggregate unpaid principal amount of the Term Note. Prepayment under this subparagraph (a) shall be subject to the following additional conditions: (1) In no event shall the Term Note be partially prepaid. (2) Prepayment applied to the Term Note may be made on any Business Day, provided, that (i) the Borrower shall have given the Lender at least five (5) Business Days' prior irrevocable written or telecopied notice of such prepayment, specifying the principal amount of the Term Note to be prepaid, which shall be the entire amount of the outstanding principal of the Term Note, and (ii) if such prepayment is made on any day other than the Term Loan Maturity Date, the Borrower shall pay directly to the Lender, on the date of such prepayment, the Consequential Loss as a result of such prepayment. (b) Notice of any prepayment having been given, the principal amount specified in such notice, together with interest thereon to the date of prepayment, shall be due and payable on such prepayment date. 2A.3 Term Note; Payments. (a) The Term Loan made by Lender to the Borrower shall be evidenced by a Term Note dated as of the Second Amendment Closing Date, delivered and payable to Lender in a principal amount equal to the Term Loan Commitment as of the Term Loan Closing Date. 4 (b) Principal payments in the amount of Thirty-Two Thousand and No/100 Dollars ($32,000.00), each, shall be due and payable quarterly, on each August 31, November 30, February 28 and May 31 during the term of the Term Note, beginning August 31, 1998. The remaining outstanding principal balance of the Term Loan, as evidenced by the Term Note, shall mature and be fully due and payable on the Term Loan Maturity Date. (c) Subject to Section 9.6 hereof, the Borrower hereby agrees to pay accrued interest on the unpaid principal balance of the Term Loan on each August 31, November 30, February 28 and May 31 during the term of the Term Note, beginning August 31, 1998. After the Term Loan Maturity Date, accrued and unpaid interest on the Term Loan shall be payable on demand. (d) To effect payment of accrued interest owing on the Term Loan as of the Interest Payment Dates, subject to the provisions of Sections 2.1 and 4.1 hereof, the Lender may, but shall not be obligated to, make a Loan to pay in full the amount of accrued interest owing and payable on the Term Loan as of the respective Interest Payment Date if (i) such Loan is to be made prior to the Maturity Date, (ii) the Availability would be equal to or greater than zero after giving effect to the Loan, and (iii) no Default or Event of Default shall have occurred which is then continuing. The inability of the Lender to cause a payment of any accrued interest owing on the Term Loan on any Interest Payment Date as of the respective due date thereof in accordance with the preceding sentence shall not in any way whatsoever effect the Borrower's and the Parent's obligation to otherwise pay such amounts in accordance with the applicable terms hereof or any other Loan Documents. 2A.4 Application of Payments and Prepayments. (a) Prepayment on the Term Note shall be applied to payment of the aggregate unpaid principal amount of the Term Note, with the balance of any such prepayments, if any, being applied to accrued interest. Payments of accrued interest on the Term Note in accordance with Section 2A.3(c) hereof shall be applied to the aggregate accrued interest then outstanding under the Term Note, while payment by the Borrower of the aggregate principal amount outstanding under the Term Note on the Term Loan Maturity Date shall be applied to principal. (b) All sums payable by the Borrower to the Lender hereunder or pursuant to the Term Note shall be payable in United States dollars in immediately available funds not later than 12:00 noon on the date such payment or prepayment is due and shall be made without set-off, counterclaim or deduction of any kind. Any such payment or prepayment received and accepted by the Lender after 12:00 noon shall be considered for all purposes (including the payment of interest, to the extent permitted by law) as having been made on the next succeeding Business Day. All such payments or prepayments shall be made at the Principal Office. If any payment or prepayment becomes due and payable on a day which is not a Business Day, then the date for the 5 payment thereof shall be extended to the next succeeding Business Day and interest shall be payable thereon at the then applicable rate per annum during such extension 2A.5 Interest Rate for Term Loan. (a) Subject to Section 9.6 hereof, the Term Note shall bear interest on its outstanding principal balances at a rate per annum equal to the Fixed Rate. (b) All interest will be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, unless the effect of so computing shall be to cause the rate of interest to exceed the Highest Lawful Rate. 2A.6 Special Provisions Applicable to Fixed Rate Borrowings. THE BORROWER AND PARENT HEREBY AGREE TO INDEMNIFY THE LENDER AGAINST AND HOLD LENDER HARMLESS FROM ANY LOSS OR EXPENSE WHICH IT MAY INCUR OR SUSTAIN AS A CONSEQUENCE OF ANY UNTIMELY PAYMENT (MANDATORY OR OPTIONAL) OR DEFAULT BY THE BORROWER OR THE PARENT IN THE PAYMENT OF ANY PRINCIPAL AMOUNT OF OR INTEREST ON THE TERM NOTE, OR ANY FAILURE BY THE BORROWER OR THE PARENT TO CONVERT OR TO BORROW ANY FIXED RATE BORROWING ON THE DATE SPECIFIED BY THE BORROWER, IN EACH CASE INCLUDING ANY INTEREST PAYABLE BY LENDER TO THE LENDERS OF THE FUNDS OBTAINED BY IT IN ORDER TO MAKE OR MAINTAIN ANY FIXED RATE BORROWING (OR ANY PORTION THEREOF), AND, TO THE EXTENT NOT COVERED ABOVE, ANY CONSEQUENTIAL LOSS. THIS AGREEMENT SHALL SURVIVE THE PAYMENT OF THE TERM NOTE. A CERTIFICATE AS TO ANY ADDITIONAL AMOUNTS PAYABLE TO THE LENDER PURSUANT TO THIS PARAGRAPH SUBMITTED BY THE LENDER TO THE BORROWER AND PARENT SHALL BE CONCLUSIVE AND BINDING UPON THE BORROWER AND PARENT, ABSENT MANIFEST ERROR, PROVIDED THE CALCULATION THEREOF IS SET FORTH IN REASONABLE DETAIL IN SUCH NOTICE. 2A.7 Use of Proceeds. The proceeds of the Term Loan will be used to refinance the existing Indebtedness of Parent to Felton Investments Ltd. 7. Tangible Net Worth. Section 7.12 of the Credit Agreement is hereby amended to read in its entirety as follows: 7.12 Tangible Net Worth. Permit the Tangible Net Worth of the Borrower (expressly excluding Parent, its Subsidiaries and Borrower's Subsidiaries) to be less than: (i) $6,900,000 as of the Second Amendment Closing Date and at all times thereafter through and including September 30, 1998; and (ii) thereafter, at all times, an amount equal to the minimum Tangible Net Worth requirement for the preceding fiscal year end, plus fifty percent (50%) of cumulative, positive net income of the Borrower for the preceding fiscal year, plus one hundred percent (100%) of the consideration received in exchange for 6 the issuance of any capital stock of the Borrower during the fiscal year in which the Tangible Net Worth of the Borrower is being measured. 8. Capital Expenditures. Section 7.13 of the Credit Agreement is hereby amended to read in its entirety as follows: 7.13 Capital Expenditures. Make, directly or indirectly, Capital Expenditures other than such expenditures which do not exceed Six Hundred Thousand Dollars ($600,000) in any fiscal year. 9. Dividends and Distributions. Article 7 of the Credit Agreement is hereby amended by adding Section 7.18 as follows: 7.18 Dividends. The Borrower shall not directly or indirectly declare or make, or incur any liability to make, any Dividend, except Dividends to the Parent by Borrower, so long as no Event of Default has occurred or would result therefrom, solely for the following purposes: (a) payment of Federal income tax liabilities of Parent, in the amount of such Federal income tax liabilities, and at time as the same become due and payable; and (b) payment of principal and interest as they becomes due and payable under the Term Loan. 10. Officer's and Borrowing Base Certificates. Exhibit C to the Credit Agreement, the form of Officer's Certificate, and Exhibit G to the Credit Agreement, the form of Borrowing Base Compliance Certificate, are hereby amended and restated in their entirety to read in full in the forms of Exhibits C and G, respectively, attached to this Amendment. 11. Conditions. 11.1 Second Amendment. The agreements of Lender to increase the Commitment from $5,000,000 to $7,000,000, to make the Term Loan, and to be bound by the terms and conditions of this Amendment are subject to the accuracy of all representations and warranties of the Borrower on the date of the Term Loan, to the performance by the Borrower and the Parent of their respective obligations under the Loan Documents and to the satisfaction of the following further conditions: (a) all representations and warranties of the Borrower and the Parent set forth in this Amendment, the Credit Agreement and in any other Loan Document shall be true and correct in all material respects with the same effect as though made on and as of such date, except for (1) those representations and warranties which relate only to the Closing Date, or (2) such changes in the representations and warranties otherwise permitted by the terms of this Amendment; 7 (b) the Borrower and the Parent shall be in compliance with all the terms and provisions contained in this Amendment, the Credit Agreement or in any other Loan Document which are to be observed or performed by the Borrower or the Parent, if applicable; (c) prior to the making of the Term Loan there shall have occurred no Material Adverse Effect in the assets, liabilities, financial condition, business or affairs of the Borrower or the Parent since the date hereof; and (d) no Default or Event of Default shall have occurred and be continuing. 11.2 Documentation. In addition to the matters described in Section 6.1 hereof, the agreements of Lender to increase the Commitment from $5,000,000 to $7,000,000, to make the Term Loan, and to be bound by the terms and conditions of this Amendment are subject to the receipt by the Lender of each of the following, in Proper Form: (a) the amended and restated $7,000,000 Revolving Credit Note, executed by the Borrower; (b) the Term Note, executed by the Borrower and the Parent; (c) the amendments to Security Documents executed by the Borrower and the Parent; (d) a certificate executed by the Secretary or Assistant Secretary of the Borrower and the Parent dated as of the date thereof; (e) certified copies of any amendments to the Organizational Documents of the Borrower or the Parent; (f) a legal opinion from counsel for the Borrower and the Parent, dated as of the Closing Date, addressed to the Lender and acceptable in all respects to the Lender in its sole and absolute discretion; (g) an executed disbursement authorization letter from the Borrower and the Parent to the Lender with respect to the disbursement of the proceeds of the Term Loan to be made on or after the Second Amendment Closing Date; (h) all other Loan Documents and any other instruments or documents consistent with the terms of this Amendment and relating to the transactions contemplated hereby as the Lender may reasonably request, executed by the Borrower or any other Person required by the Lender; and subject to the further conditions that, at the time of the Term Loan, (1) all such actions as the Lender shall reasonably require to perfect the Liens created pursuant to the Security Documents shall have been taken, including without 8 limitation, the delivery to the Lender of all Property with respect to which possession is necessary for the purpose of perfecting such Liens (including, without limitation, delivery to the Lender of the stock certificates described on Schedule I to this Amendment); (2) the Borrower shall have paid all fees owing to the Lender by the Borrower under this Amendment, including without limitation, the following; (i) a fee in consideration for the Term Loan and the increase in the Commitment, in the amount of $12,000; and (ii) the administration fee, in the amount of $5,000, pursuant to Section 2.3(b) of the Credit Agreement; (3) all other legal matters incident to the transactions herein contemplated shall be reasonably satisfactory to counsel for the Lender. 12. Collateral. The Term Loan and all other Obligations shall be secured by the Collateral described in the Security Documents and are entitled to the benefits thereof. 13. Costs and Expenses. Borrower agrees to reimburse Lender for Lender's costs and expenses, including, but not limited to, attorneys' fees and legal expenses, incurred by Lender in connection with the preparation of this Amendment and in connection with the negotiation and consummation of the transaction contemplated hereby. 14. The Credit Agreement. All references to the Credit Agreement in the Loan Documents shall be deemed to be the Credit Agreement, as modified hereby. Borrower expressly promises to perform all of its obligations under the Credit Agreement and other Loan Documents, as modified by this Amendment. 15. Acknowledgments of Borrower and Parent. Borrower and Parent hereby acknowledge and agree that (a) Lender is not in default in the performance of its obligations under the Loan Documents; (b) neither Borrower nor Parent has any claims, counterclaims, offsets, credits or defenses to the Loan Documents and the performance of its respective obligations thereunder, or if Borrower or Parent has any such claims, counterclaims, offsets, credits or defenses to the Loan Documents or any transaction related to the Loans and/or the Loan Documents, same are hereby waived, relinquished and released in consideration of Lender's execution and delivery of this Amendment; (c) all of the provisions of the Loan Documents, except as amended hereby, are in full force and effect; and (d) upon the execution hereof, the Credit Agreement, the Note, and the other Loan Documents are not in default. 16. Full Force and Effect. Except as expressly modified and amended in this Amendment, all of the terms, provisions and conditions of the Credit Agreement, the Note, and all other Loan Documents are and shall remain in full force and effect and are incorporated herein by reference. 9 17. Counterparts. This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. 18. No Oral Agreements. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. 10 IN WITNESS WHEREOF, the parties have executed this Second Amendment to Credit Agreement as of the day and year first above written. LENDER: CHASE BANK OF TEXAS, N.A., a national banking association By: /s/ JOANNE BRAMANTI -------------------------------------- Joanne Bramanti, Vice President BORROWER: TIDEL ENGINEERING, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board PARENT: TIDEL TECHNOLOGIES, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board Exhibits: C - Officer's Certificate G - Borrowing Base Compliance Certificate Schedule: 1 - 3CI Complete Compliance Corporation Stock Certificates 11 By its execution below, Tidel Technologies, Inc., formerly known as American Medical Technologies, Inc., a Delaware corporation ("Guarantor"), d/b/a AMT Industries, Inc., acknowledges and consents to all of the terms and conditions of this Amendment, and ratifies and confirms its respective Guaranty to and for the benefit of Lender. Guarantor acknowledges that Guarantor has no claims, counterclaims, offsets, credits or defenses to the Loan Documents and the performance of its obligations thereunder, or if Guarantor does have any such claims, counterclaims, offsets, credits or defenses to the Loan Documents or any transaction related to the Loans and/or the Loan Documents, same are hereby waived, relinquished and released in consideration of Lender's execution and delivery of this Amendment. Further, Guarantor agrees that nothing contained in this Amendment shall adversely affect any right or remedy of Lender under the Guaranty and that with respect to the Guaranty, all references in the Guaranty to the "Obligations" shall mean the "Obligations", as amended by this Amendment; that the execution and delivery of this Amendment shall in no way change or modify its obligations as Guarantor pursuant to its Guaranty; and that the execution and delivery of any agreements by Borrower and Lender in connection with this Amendment shall not constitute a waiver by Lender of any of Lender's rights against Guarantor. TIDEL TECHNOLOGIES, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board EX-4.03 4 PROMISSORY REVOLVING CREDIT NOTE, DATED MAY 27, 98 1 EXHIBIT 4.03 REVOLVING CREDIT NOTE Dallas, Texas $7,000,000.00 May 27, 1998 FOR VALUE RECEIVED, TIDEL ENGINEERING, INC., a Delaware corporation (herein called "Borrower"), promises to pay to the order of CHASE BANK OF TEXAS, N.A., a national banking association (herein called "Payee"), at 2200 Ross Avenue, Dallas, Texas 75201, or at such other place as Payee may hereafter designate in writing, in immediately available funds and in lawful money of the United States of America, the principal sum of SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00) (or the unpaid balance of all principal advanced against this note, if that amount is less), together with interest on the unpaid principal balance of this note from time to time outstanding until maturity at the rate or rates provided for in the Credit Agreement and interest on all past due amounts at the Past Due Rate as provided in the Credit Agreement; provided, that for the full term of this note, the interest rate produced by the aggregate of all sums paid or agreed to be paid to the holder of this note for the use, forbearance or detention of the debt evidenced hereby shall not exceed the Highest Lawful Rate, if any, applicable to Payee. If, for any reason whatever, the interest paid or received on this note during its full term produces a rate which exceeds the Highest Lawful Rate, if any, applicable to Payee, the holder of this note shall refund to the payor or, at the holder's option, credit against the principal of this note such portion of said interest as shall be necessary to cause the interest paid on this note to produce a rate equal to the Highest Lawful Rate, if any, applicable to payee. All sums paid or agreed to be paid to the holder of this note for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of this note, so that the interest rate is uniform throughout the full term of this note. To the extent the laws of the State of Texas are applicable for purposes of determining the "Highest Lawful Rate," such term shall mean the "weekly ceiling" from time to time in effect under Article 1D.003, Title 79, Revised Civil Statutes of Texas, as amended, or if permitted by applicable law and effective upon the giving of the notices required by Article 1D.103 (or effective upon any other date otherwise specified by applicable Law), the "monthly ceiling," the "quarterly ceiling," or "annualized ceiling" from time to time in effect under such Chapter 1D of the Texas Credit Title, whichever that Lender shall elect to substitute for the "weekly ceiling," and vice versa, each such substitution to have the effect provided in Chapter 1D of the Texas Credit Title; and Lender shall be entitled to make such election from time to time and one or more times and, without notice to Borrower, to leave any such substitute rate in effect for subsequent periods in accordance with Chapter 1D of the Texas Credit Title. Pursuant to Article 15.10(b) of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as amended, and Section 346.004 of the Texas Finance Code, as amended, Borrower agrees that Chapter 15 of the Texas Credit Title and Chapter 346 of the Texas Finance Code (which regulate certain revolving credit loan accounts and revolving tri-party accounts) shall not govern or in any manner apply to the Obligations. 2 This note has been issued pursuant to the terms of a Credit Agreement (which, as it may have been or may be amended, restated, modified or supplemented from time to time, is herein called the "Credit Agreement") dated June 12, 1997, by and between Borrower and Payee, as amended by the First Amendment to Credit Agreement dated as of February 23, 1998, and by the Second Amendment to Credit Agreement of even date herewith, to which reference is made for all purposes. This note is a Note under the terms of the Credit Agreement, and advances against this note by Payee or other holder hereof, payments and prepayments hereunder and acceleration hereof shall be governed by the Credit Agreement. Capitalized words and phrases used herein and not defined herein and which are defined in the Credit Agreement shall have the same meanings herein as are ascribed to them in the Credit Agreement. The unpaid principal balance of this note at any time shall be the total of all principal lent or advanced against this note less the sum of all principal payments and permitted prepayments made on this note by or for the account of Borrower. All loans and advances and all payments and permitted prepayments made hereon may be endorsed by the holder of this note on the schedule which is attached hereto (and hereby made a part hereof for all purposes) or otherwise recorded in the holder's records; provided, that any failure to make notation of (a) any advance shall not cancel, limit or otherwise affect Borrower's obligations or any holder's rights with respect to that advance, or (b) any payment or permitted prepayment of principal shall not cancel, limit or otherwise affect Borrower's entitlement to credit for that payment as of the date received by the holder. Borrower and any and all co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such person agrees that his, her or its liability on or with respect to this note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after maturity. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT. This note is a renewal, extension, modification and rearrangement, and not a novation or extinguishment, of that certain Promissory Note (the "Prior Note") dated June 12, 1997, executed by Borrower, payable to the order of Payee (formerly known as Texas Commerce Bank National Association), in the original principal amount of $5,000,000.00. All rights, titles, liens and security interests securing the Prior Note are preserved, maintained and carried forward to secure this note. 3 TIDEL ENGINEERING, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board EX-4.04 5 PROMISSORY TERM NOTE, DATED MAY 27, 1998 1 EXHIBIT 4.04 TERM NOTE Dallas, Texas $640,000.00 May 27, 1998 FOR VALUE RECEIVED, TIDEL ENGINEERING, INC., a Delaware corporation, and TIDEL TECHNOLOGIES, INC., a Delaware corporation (herein called "Borrowers"), jointly and severally promise to pay to the order of CHASE BANK OF TEXAS, N.A., a national banking association (herein called "Payee"), at 2200 Ross Avenue, Dallas, Texas 75201, or at such other place as Payee may hereafter designate in writing, in immediately available funds and in lawful money of the United States of America, the principal sum of SIX HUNDRED FORTY THOUSAND AND NO/100 DOLLARS ($640,000.00), together with interest on the unpaid principal balance of this note from time to time outstanding until maturity at the rate or rates provided for in the Credit Agreement and interest on all past due amounts at the Past Due Rate as provided in the Credit Agreement; provided, that for the full term of this note, the interest rate produced by the aggregate of all sums paid or agreed to be paid to the holder of this note for the use, forbearance or detention of the debt evidenced hereby shall not exceed the Highest Lawful Rate, if any, applicable to Payee. If, for any reason whatever, the interest paid or received on this note during its full term produces a rate which exceeds the Highest Lawful Rate, if any, applicable to Payee, the holder of this note shall refund to the payor or, at the holder's option, credit against the principal of this note such portion of said interest as shall be necessary to cause the interest paid on this note to produce a rate equal to the Highest Lawful Rate, if any, applicable to payee. All sums paid or agreed to be paid to the holder of this note for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of this note, so that the interest rate is uniform throughout the full term of this note. To the extent the laws of the State of Texas are applicable for purposes of determining the "Highest Lawful Rate," such term shall mean the "weekly ceiling" from time to time in effect under Article 1D.003, Title 79, Revised Civil Statutes of Texas, as amended, or if permitted by applicable law and effective upon the giving of the notices required by Article 1D.103 (or effective upon any other date otherwise specified by applicable Law), the "monthly ceiling," the "quarterly ceiling," or "annualized ceiling" from time to time in effect under such Chapter 1D of the Texas Credit Title, whichever that Lender shall elect to substitute for the "weekly ceiling," and vice versa, each such substitution to have the effect provided in Chapter 1D of the Texas Credit Title; and Lender shall be entitled to make such election from time to time and one or more times and, without notice to Borrower, to leave any such substitute rate in effect for subsequent periods in accordance with Chapter 1D of the Texas Credit Title. This note has been issued pursuant to the terms of a Credit Agreement (which, as it may have been or may be amended, restated, modified or supplemented from time to time, is herein called the "Credit Agreement") dated June 12, 1997, by and between Tidel Engineering, Inc. and Payee, as amended by the First Amendment to Credit Agreement dated as of February 23, 1998, 2 by and between Tidel Engineering, Inc. and Payee, and by the Second Amendment to Credit Agreement of even date herewith, , by and between Borrowers and Payee, to which reference is made for all purposes. This note is the Term Note under the terms of the Credit Agreement, and the advance against this note by Payee or other holder hereof, payments and prepayments hereunder and acceleration hereof shall be governed by the Credit Agreement. Capitalized words and phrases used herein and not defined herein and which are defined in the Credit Agreement shall have the same meanings herein as are ascribed to them in the Credit Agreement. The unpaid principal balance of this note at any time shall be the total of all principal lent or advanced against this note less the sum of all principal payments and permitted prepayments made on this note by or for the account of Borrowers. All loans and advances and all payments and permitted prepayments made hereon may be endorsed by the holder of this note on the schedule which is attached hereto (and hereby made a part hereof for all purposes) or otherwise recorded in the holder's records; provided, that any failure to make notation of (a) any advance shall not cancel, limit or otherwise affect Borrowers' obligations or any holder's rights with respect to that advance, or (b) any payment or permitted prepayment of principal shall not cancel, limit or otherwise affect Borrowers' entitlement to credit for that payment as of the date received by the holder. Borrowers and any and all co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such person agrees that his, her or its liability on or with respect to this note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after maturity. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT. [This space intentionally left blank. The next page is the signature page] 3 SIGNATURE PAGE TO TERM NOTE TIDEL ENGINEERING, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board TIDEL TECHNOLOGIES, INC., By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board EX-4.05 6 FIRST AMEND. TO SECURITY AGMT. (PERSONAL PROPERTY) 1 EXHIBIT 4.05 FIRST AMENDMENT TO SECURITY AGREEMENT (PERSONAL PROPERTY) This First Amendment to Security Agreement (this "Amendment") is made and entered into as of May 27, 1998, by and between CHASE BANK OF TEXAS, N.A., a national banking association ("Secured Party"), formerly known as TEXAS COMMERCE BANK NATIONAL ASSOCIATION, and TIDEL ENGINEERING, INC., a Delaware corporation ("Debtor"), under the Credit Agreement (including any and all existing and future amendments thereto, the "Credit Agreement") dated as of June 12, 1997, as amended by that certain Second Amendment to Credit Agreement of even date herewith, by and among Debtor, Secured Party and Tidel Technologies, Inc. R E C I T A L S: A. On June 12, 1997, Secured Party and Debtor entered into that certain Security Agreement (as further amended, restated and supplemented from time to time, the "Security Agreement") pursuant to which Debtor granted to Secured Party a security interest in the Collateral as described therein. B. Debtor has requested Secured Party to modify the Security Agreement so as to include within the definition of "Secured Indebtedness" certain obligations of Tidel Technologies, Inc., formerly known as American Medical Technologies, Inc., d/b/a AMT Industries, Inc., the parent of Debtor, which are evidenced by a Term Note in the original principal amount of $640,000.00. C. Secured Party, at the request of Debtor, for good and valuable consideration, is willing to enter into this Amendment upon the terms and conditions set forth below: A G R E E M E N T: NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor and Secured Party hereby covenant and agree as follows: 1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Security Agreement. 2. Secured Indebtedness. Section 2.1 of the Security Agreement is hereby amended by adding the following paragraph (c): (c) The obligations of Debtor and Tidel Technologies, Inc. under that certain $640,000.00 Term Note, dated May 27, 1998, executed by Debtor and Tidel 2 Technologies, Inc. and payable to Secured Party, and any renewals, extensions, rearrangements and modifications thereof. 3. Costs and Expenses. Debtor agrees to reimburse Secured Party for Secured Party's costs and expenses, including, but not limited to, attorneys' fees and legal expenses, incurred by Secured Party in connection with the preparation of this Amendment and in connection with the negotiation and consummation of the transaction contemplated hereby. 4. The Security Agreement. All references to the Security Agreement in the Loan Documents shall be deemed to be the Security Agreement, as modified hereby. Debtor expressly promises to perform all of its obligations under the Security Agreement and other Loan Documents, as modified. 5. Full Force and Effect. Except as expressly modified and amended in this Amendment, all of the terms, provisions and conditions of the Security Agreement are and shall remain in full force and effect and are incorporated herein by reference. 6. Counterparts. This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. 7. No Oral Agreements. THIS AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. 3 IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written. SECURED PARTY: CHASE BANK OF TEXAS, N.A., a national banking association By: /s/ JOANNE BRAMANTI Joanne Bramanti, Vice President DEBTOR: TIDEL ENGINEERING, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board EX-4.06 7 FIRST AMEND. TO PLEDGE & SECURITY AGMT.(3CI STOCK) 1 EXHIBIT 4.06 FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT This First Amendment to Pledge and Security Agreement (this "Amendment") is executed as of the 27th day of May, 1998, by TIDEL TECHNOLOGIES, INC. ("Pledgor"), formerly known as American Medical Technologies, Inc., d/b/a AMT Industries, Inc., and CHASE BANK OF TEXAS, N.A., a national banking association ("Pledgee"), formerly known as Texas Commerce Bank National Association. R E C I T A L S: A. Tidel Engineering, Inc., a Delaware corporation ("TEI"), and Pledgee entered into that certain Credit Agreement dated as of June 12, 1997, as amended by that First Amendment to Credit Agreement dated as of February 23, 1998 (as amended, modified or supplemented from time to time, the "Credit Agreement"), pursuant to which Pledgee agreed to make available to TEI a credit facility subject to the terms and conditions contained therein. B. On June 12, 1997, Pledgee and Pledgor entered into that certain Pledge and Security Agreement (as further amended, restated and supplemented from time to time, the "Pledge Agreement") pursuant to which Pledgor granted to Pledgee a security interest in the Initial Pledged Stock, as described therein. C. Pledgor is the legal, record and beneficial owner of 680,818 shares of the issued and outstanding common stock of 3CI Complete Compliance Corporation, evidenced by common stock certificates registered in the name of Pledgor, copies of which certificates are attached hereto as SCHEDULE 1 (the "3CI Stock"). D. TEI has requested Pledgee to modify the Pledge Agreement so as to grant a security interest to Pledgee in the 3CI Stock. E. It is a condition precedent to the obligations of Pledgee under the Credit Agreement, as amended by that certain Second Amendment to Credit Agreement (the "Second Amendment") dated of even date herewith by and among Pledgor, TEI and Pledgee, that Pledgor shall have executed and delivered this Amendment to Pledgee. F. Pledgor, by virtue of its ownership of the 3CI Stock, deems it to be in its best interest, based on sound judgment, in that valuable benefits will be derived by the Pledgor by virtue of the Second Amendment, to execute and deliver to Pledgee this Amendment. G. In consideration of these premises and in order to induce Pledgee to extend the credit pursuant to the Credit Agreement, as amended by the certain Second Amendment, and for other 2 good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor and Pledgee hereby agree as follows: AGREEMENTS: 1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Pledge Agreement. 2. Collateral. Pledgor and Pledgee agree and acknowledge that the 3CI Stock is property that Pledgor has pledged, and hereby does pledge, to Pledgee under the terms and conditions of the Pledge Agreement, and that the 3CI Stock, together with all income therefrom and proceeds thereof, shall be "Collateral", as such term is defined in the Pledge Agreement. 3. Costs and Expenses. TEI agrees to reimburse Pledgee for Pledgee's costs and expenses, including, but not limited to, attorneys' fees and legal expenses, incurred by Pledgee in connection with the preparation of this Amendment and in connection with the negotiation and consummation of the transaction contemplated hereby. 4. Full Force and Effect. Except as expressly modified and amended in this Amendment, all of the terms, provisions and conditions of the Pledge Agreement are and shall remain in full force and effect and are incorporated herein by reference. 5. Counterparts. This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. 6. No Oral Agreements. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. 3 IN WITNESS WHEREOF, the parties have executed this First Amendment to Pledge and Security Agreement as of the day and year first above written. PLEDGEE: CHASE BANK OF TEXAS, N.A., a national banking association By: /s/ JOANNE BRAMANTI Joanne Bramanti, Vice President PLEDGOR: TIDEL TECHNOLOGIES, INC., a Delaware corporation By: /s/ JAMES T. RASH James T. Rash, Chairman of the Board Schedule: 1 - Copies of 3CI Stock Certificates EX-27 8 FINANCIAL DATA SCHEDULE
5 9-MOS SEP-30-1998 JUN-30-1998 1,459,504 0 9,946,774 781,715 5,238,998 18,576,067 2,548,198 1,432,703 21,602,763 4,065,779 4,894,604 0 0 157,030 12,485,350 21,602,763 25,111,381 25,111,381 15,700,347 15,700,347 0 0 297,993 3,565,006 272,000 3,293,006 0 0 0 3,293,006 .21 .19
-----END PRIVACY-ENHANCED MESSAGE-----