EXHIBIT 99.01
August 31, 2004
Tidel Technologies, Inc.
2900 Wilcrest Drive, Suite 205
Houston, TX 77042
Attn: Leonard Carr
Dear Mr. Carr:
We refer to the Convertible Term Note in the amount of $6,450,000,
dated November 25, 2003 (as amended, modified or supplemented from time to time,
the "Term Note"), made by Tidel Technologies, Inc. ("Borrower") in favor of
Laurus Master Fund, Ltd. ("Holder"). All capitalized terms used herein and not
defined herein shall have the meaning ascribed to them in the Term Note.
The Borrower and the Holder agree that on the date hereof an Event
of Default has occurred and is continuing (beyond any applicable cure or grace
period) under Section 4.1 of the Term Note, as a result of the Borrower's
non-payment of interest and principal on and after April 1, 2004, as required by
Sections 1.1 and 1.2 of the Term Note (the "Payment Event of Default").
Additionally, on April 4, 2004, the Borrower and the Holder agree that the
Contract Rate was automatically increased to eighteen percent (18%) per annum as
stipulated in Article IV of the Term Note. As of the date of this letter
agreement, such Payment Event of Default has not been cured and continues to
exist, and Borrower and Holder agree that Borrower is past due in the amount of
$692,987.50 (the "Past Due Amount"), which consists of $300,000.00 in unpaid
principal amortization (the "Unpaid Principal Amortization Amount") and
$392,987.50 in accrued interest, including the 18% Contract Rate (the "Unpaid
Interest Amount"). Additionally, the Borrower and the Holder agree that the
Borrower has, as of the date hereof, incurred fees under Sections 2(b)(i) and
(ii) of that certain Registration Rights Agreement, dated as of November 25,
2003, by and between the Borrower and the Holder (as amended, modified or
supplemented from time to time, the "Registration Rights Agreement") in an
aggregate amount equal to $212,500 (such amount, the "Unpaid Registration Rights
Fee").
The Borrower and the Holder hereby agree, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, that the Term Note,
the Warrant (as defined in the Purchase Agreement referred to in the Term Note)
and the Registration Rights Agreement shall be modified as follows:
1. The Fixed Conversion Price (as defined in the Term Note) and the
Exercise Price (as defined in the Warrant) are, in each case, hereby
reduced to $0.30, effective as of August 31, 2004 (the "Effective
Date").
2. Effective of the Effective Date, the Holder hereby agrees to reduce
the Unpaid Registration Rights Fee to a total of $106,250 (the
"Remaining Registration Rights Fee"). Furthermore, the Holder and
the Borrower hereby agree that the balance of the Remaining
Registration Rights Fee, after payment of the Cure Amount pursuant
to Section 4 below, shall be due and payable on the Maturity Date.
3. Effective on the Effective Date, the Contract Rate set forth in the
Section 1.1 of the Term Note shall be reinstated and shall be
applicable to any amounts of principal due and owing after the
Effective Date, so long as there is no Event of Default. Regular
payments of interest at such Contract Rate set forth in Section 1.1
of the Term Note shall not be due and payable to Holder until
October 1, 2004. On October 1, 2004, on the first of every month
thereafter and on the Maturity Date, regular payments of interest
shall be due monthly in arrears, and no Event of Default shall be
deemed to have occurred as a result of the non-payment of interest
under the Term Note unless such payments are not made on the dates
set forth in this Section 3 after expiration of applicable grace
periods under the Term Note.
4. The Holder hereby agrees to waive the Payment Event of Default for
the period beginning on the Effective Date and ending on September
17, 2004 at 2:00 p.m. New York time (such period, the "Waiver
Period") and hereby rescinds its letters to the Borrower dated July
20, 2004 and August 18, 2004. After the Waiver Period has ended, the
Payment Event of Default shall be reinstated in its entirety and the
Holder shall have all rights and remedies with respect to such
Payment Event of Default as are set forth in the Term Note, the
Purchase Agreement (as defined in the Term Note) and the Related
Agreements (as defined in the Purchase Agreement) without giving
effect to this letter agreement; provided that, if, after the
Effective Date and prior to the end of the Waiver Period, the
Borrower pays to the Holder an amount equal to $400,000 (the "Cure
Amount"), then the Payment Event of Default shall be permanently
waived and the Unpaid Principal Amortization Amount shall no longer
be due and payable immediately, but instead shall be due and payable
on the Maturity Date. The Cure Amount (when paid by the Borrower)
shall be applied first in satisfaction of the entire Unpaid Interest
Amount, and the remaining $7,012.50 of the Cure Amount shall be
applied towards payment of the Remaining Registration Fee Amount).
Furthermore, the portion of the Unpaid Registration Fee Amount not
reduced by the payment of the Cure Amount shall be due and payable
on the Maturity Date. The Borrower and the Holder agree that the
failure by the Borrower to pay the Cure Amount prior to the end of
the Waiver Period shall constitute an "Event of Default" under, and
as defined in, the Term Note.
5. As of the Effective Date, no payments of Principal Amount shall be
due under the Term Note until February 1, 2005. From February 1,
2005 until November 30, 2005, on the first of every month, payments
of Monthly Amounts in an amount equal to $75,000 shall be due and
payable to Holder, together with any accrued and unpaid interest to
date on such portion of the Monthly Amount pursuant to Section 3 of
this letter agreement. From December 1, 2005 until the day prior to
the Maturity Date, on the first of every month, payments of Monthly
Amounts in an amount equal to $225,000 shall be due and payable to
Holder, together with any accrued and unpaid interest to date on
such portion of the Monthly Amount pursuant to Section 3 of this
letter agreement. On the Maturity Date, all remaining amounts of
principal and interest due under the Term Note shall be due and
payable to Holder. No Event of Default as a result of the
non-payment of principal of the Term Note by the Borrower shall be
deemed to have occurred unless and until payments of Monthly Amounts
or any other portion of the Principal Amount are not made pursuant
to this paragraph and after the expiration of any applicable grace
periods under the Term Note.
6. As of the Effective Date, the requirement in Section 6.2 of the
Purchase Agreement that the Company deliver evidence of the filing
of its Annual Report on Form 10-K for the fiscal year ended
September 30, 2002 within 75 days of the Closing Date (as defined in
the Purchase Agreement) shall hereby be amended to state that such
evidence shall be delivered on or before October 31, 2004. As of the
Effective Date, the requirement in Section 6.2 of the Purchase
Agreement that evidence of certain other Securities and Exchange
Commission filings be delivered to the Holder within 165 days
following the Closing Date shall hereby be amended to state that
such evidence be delivered on or before March 31, 2005. Holder
hereby waives any potential default that may have occurred prior to
this letter agreement as a result of non-compliance by the Borrower
with Section 6.2 of the Purchase Agreement.
7. As of the Effective Date, the definition of "Filing Date" under and
as defined in the Registration Rights Agreement shall be amended to
read as follows:
"FILING DATE" means, with respect to the
initial Registration Statement required to be filed
hereunder, a date not later than the earlier of (a)
April 20, 2005 and (b) twenty (20) days following the
date upon which the Company shall have satisfied the
Filing Requirements (as defined in Section 6.2 of the
Securities Purchase Agreement).
There are no other amendments or modifications to the Term Note, the Purchase
Agreement, the Registration Rights Agreement or any Related Agreement, and all
of the other terms and provisions of the Term Note, the Purchase Agreement, the
Registration Rights Agreement and the Related Agreements remain in full force
and effect; however, in the event that the terms of this letter agreement
conflict with the terms of such agreements or documents, the terms of this
letter agreement shall govern. Holder hereby expressly reserves and preserves
all of the rights and remedies of Holder under the Term Note, the Purchase
Agreement, the Registration Rights Agreement, the Related Agreements, any other
documents related to the forgoing and/or applicable law.
The parties hereto hereby agree to execute any further documentation required to
evidence the foregoing, including, but not limited to, an allonge to the Term
Note.
This letter agreement may not be amended or waived except by an instrument in
writing signed by the Borrower and the Holder. This letter agreement may be
executed in any number of counterparts, each of which shall be an original and
all of which, when taken together, shall constitute one agreement. Delivery of
an executed signature page of this letter by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof or thereof, as
the case may be. This letter agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. This letter agreement sets
forth the entire agreement between the parties hereto as to the matters set
forth herein and supersede all prior communications, written or oral, with
respect to the matters herein.
If the foregoing meets with your approval please signify your acceptance of the
terms hereof by signing below.
Very truly yours,
LAURUS MASTER FUND, LTD.
/s/ Eugene Grin
- -------------------------------
Eugene Grin
Director
Accepted and Agreed to By:
TIDEL TECHNOLOGIES, INC.
By: /s/ James T. Rash
---------------------
Name: James T. Rash
Title: Chief Executive Officer
