Restricted Account Agreement




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