EXHIBIT 10.4
 
RESTRICTED ACCOUNT AGREEMENT
 
This Restricted Account Agreement (this "Agreement") is entered into this 28th
day of February 2005, by and among NORTH FORK BANK, a New York banking
corporation with offices at 275 Broadhollow Road, Melville, New York 11747
(together with its successors and assigns, the "Bank"), ELINEAR, INC., a
Delaware corporation with offices at 2901 West Sam Houston Pkwy North, Suite
E-300, Houston Texas 77043 (together with its successors and assigns, the
"Company"), and LAURUS MASTER FUND, LTD., a Cayman Islands corporation with
offices at 825 Third Avenue, 14th Floor, New York, New York 10022 (together with
its successors and assigns, "Laurus"). Unless otherwise defined herein,
capitalized terms used herein shall have the meaning provided such terms in the
Purchase Agreement referred to below.

WHEREAS, Laurus has provided financing to the Company, which financing is
evidenced by a Securities Purchase Agreement (as amended, modified or
supplemented from time to time, the "Purchase Agreement") and the Related
Agreements referred to therein;
 
WHEREAS, the Company and Laurus have retained the Bank to provide certain
services with respect to the Restricted Account (as defined below); and
 
WHEREAS, the Company and Laurus have agreed that an amount of cash equal to
$3,860,000 shall be deposited by Laurus on behalf of the Company by wire
transfer of immediately available funds into the Restricted Account, which cash
shall be held by the Bank, as security for the Company’s obligations under the
Purchase Agreement and the Related Agreements. For the purposes of this
Agreement, the "Restricted Account" shall mean that certain deposit account (as
defined in Section 9-102 of the Uniform Commercial Code as in effect in the
State of New York on the date hereof) described on Exhibit B hereto, which
Restricted Account shall be maintained at the Bank and shall be in the sole
dominion and control of Laurus;
 
NOW THEREFORE, in consideration of the mutual promises contained herein and for
other good and valuable consideration the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
 
1. The Bank is hereby authorized to accept for deposit into the Restricted
Account the sum of $3,860,000. The Bank hereby agrees to hold any and all
monies, and other amounts from time to time on deposit and/or held in the
Restricted Account for the benefit of the Laurus and shall not release any
monies held in the Restricted Account until such time as the Bank shall have
received a notice from Laurus substantially in the form attached hereto as
Exhibit A (a "Release Notice"). Following the receipt of a Release Notice from
Laurus, the Bank agrees to promptly disburse the amount of cash referred to in
such Release Notice to such account as Laurus shall determine in its sole
discretion. The Bank hereby agrees that it will only comply with written
instructions originated by Laurus directing disposition of funds in the
Restricted Account. The Company hereby irrevocably authorizes the Bank to comply
with any and all instructions given to the Bank by Laurus with respect to the
Restricted Account without further consent by the Company. The Bank, the Company
and Laurus agree that the Restricted Account is in Laurus’ sole dominion and
control.
 
2. Each of the Company, Laurus and the Bank hereby agrees that the Restricted
Account shall not be closed, and the account name and account number in respect
thereof shall not be changed, in any case, without the consent of the Laurus,
except as specifically provided for in Section 9 below.
 
3.  The Bank hereby subordinates any claims and security interests it may have
against, or with respect to, the Restricted Account (including any amounts from
time to time on deposit therein) to the security interests of Laurus therein,
and agrees that no amounts shall be charged by it to, or withheld or set-off or
otherwise recouped by it from, the Restricted Account or any amounts from time
to time on deposit therein; provided that, in connection with all service
charges and any other charges which the Bank is entitled to receive in
connection with the servicing and maintaining of the Restricted Account (such
charges, collectively, the "Charges"), each of the Company, Laurus and the Bank
hereby agrees that the Bank will collect such Charges in the following manner:
(i) first, the Bank will charge other deposit accounts maintained by the Company
with the Bank, (ii) second, in the event that there are insufficient collected
funds in such other deposit accounts to pay such Charges, the Bank will promptly
notify the Company and Laurus with respect to same and, within seven (7)
business days of the Company’s receipt of such notice, the Company shall pay to
the Bank the full amount of such Charges then due, and (iii) third, if the
Company fails to pay to the Bank such Charges then due within the time period
set forth in the preceding clause (ii), the Bank will promptly provide a written
notice to Laurus of such occurrence and, in such case, the Bank is hereby
authorized, following a period of five (5) business days after the receipt of
such written notice by Laurus, to deduct such Charges then due from the
Restricted Account, unless, during such five (5) business day period, Laurus
pays the amount of any such Charges then due to the Bank from its own account.
Except for the payment of the Charges as set forth in the immediately preceding
proviso, the Bank agrees that it shall not offset, deduct or claim against the
Restricted Account unless and until Laurus has notified the Bank in writing that
all of the Company’s obligations under the Purchase Agreement and the Related
Agreements have been performed.

 
4. The Company and the Bank agree that the maintenance by the Bank of the
Restricted Account shall be as agent for Laurus. The Bank shall be responsible
for the performance of only such duties as are set forth herein. The Bank’s
duties hereunder, however, are merely ministerial, and the Bank shall have no
liability or obligation to the Company or Laurus or to any other person for any
act or omission of the Bank in connection with the performance of the Bank’s
duties in servicing and/or maintaining the Restricted Account, except for acts
of gross negligence or willful misconduct by Bank. IN NO EVENT, HOWEVER, SHALL
THE BANK HAVE ANY RESPONSIBILITY FOR CONSEQUENTIAL, INDIRECT, SPECIAL OR
EXEMPLARY DAMAGES OR LOST PROFITS, WHETHER OR NOT IT HAS NOTICE THEREOF, AND
REGARDLESS OF THE BASIS, THEORY OR NATURE OF THE ACTION UPON WHICH THE CLAIM IS
ASSERTED, NOR SHALL IT HAVE ANY RESPONSIBILITY OR LIABILITY FOR THE VALIDITY OR
ENFORCEABILITY OF ANY SECURITY INTEREST OR OTHER INTEREST OF LAURUS OR THE
COMPANY IN THE RESTRICTED ACCOUNT. In furtherance of and without limiting the
foregoing, the Company and Laurus agree that the Bank shall not be liable for
any damage or loss to them for any delay or failure of performance arising out
of the acts or omissions of any third parties, including, but not limited to,
various communication services, courier services, the Federal Reserve system,
any other bank or any third party who may be affected by funds transactions,
fire, mechanical, computer or electrical failures or other unforeseen
contingencies, strikes or any similar or dissimilar cause beyond the reasonable
control of the Bank. This paragraph shall survive the termination of this
Agreement.
 
5. Except where the Bank has been grossly negligent or has acted in bad faith,
each of Laurus and the Company and their respective successors and assigns will
release the Bank from and shall indemnify and hold the Bank harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
(including, without limitation, reasonable counsel fees, whether arising in an
action or proceeding among the parties hereto or otherwise, without regard to
the merit or lack of merit thereof) to which the Bank may become subject, or
which it may suffer or incur, arising out of or based upon this Agreement or the
actions contemplated hereby. This paragraph shall survive termination of this
Agreement.
 
6. The Bank shall be fully protected in acting on any order or direction by
Laurus respecting the items received by the Bank or the monies or other items in
the Restricted Account without making any independent inquiry whatsoever as to
Laurus’ rights or authority to give such order or direction or as to the
application of any payments made pursuant thereto.

7. Nothing in this Agreement shall be deemed to prohibit the Bank from complying
with its customary procedures in the event that it is served with any legal
process with respect to the Restricted Account.

 
8. The rights and powers granted in this to Laurus have been granted in order to
protect and further perfect its security interests in the Restricted Account
(including any amounts from time to time on deposit therein) and are powers
coupled with an interest and will be affected neither by any purported
revocation by the Company of this Agreement or the rights granted to Laurus
hereunder or by the bankruptcy, insolvency, conservatorship or receivership of
the Company or the Bank or by the lapse of time.
 
9. This Agreement may not be amended or waived except by an instrument in
writing signed by each of the parties hereto. This Agreement may be terminated
by the Bank upon giving the Company and Laurus thirty (30) days prior written
notice. Laurus shall designate a successor bank on or prior to the effective
date of such termination and the Bank shall deliver the balance in the
Restricted Account to such successor bank. Any notice required to be given
hereunder may be given, and shall be deemed given when delivered, via telefax,
U.S. mail return receipt requested or nationally recognized overnight courier to
each of the parties at the address set forth above. This 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 Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof or thereof, as
the case may be. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to its
conflict of laws principles. This 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. EACH
OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR CONTEMPLATED BY THIS
AGREEMENT. THE BANK, THE COMPANY AND LAURUS EACH HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE COUNTY OF
NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS AGREEMENT OR ANY MATTERS
CONTEMPLATED HEREBY OR THEREBY.
 

 
Agreed and accepted this ___ day of February, 2005.
 

 
NORTH FORK BANK
 

 
By:     
Name:
Title:
 
  LAURUS MASTER FUND, LTD.
 

 
By:     
Name: David Grin
Title: Director
 

 
ELINEAR, INC.
 

 

 
By:     
Name: Michael Lewis
Title: Chief Executive Officer