Document:

SECURITY AGREEMENT

            This  Security  Agreement is made as of August 16, 2004 by and among
LAURUS MASTER FUND, LTD., a Cayman Islands  corporation  ("Laurus"),  CONVERSION
SERVICES  INTERNATIONAL,  INC.,  a  Delaware  corporation  ("Company"),  DeLeeuw
Associates, LLC, a Delaware limited liability company ("DeLeeuw"), CSI Sub Corp.
(DE),  a Delaware  corporation  ("CSI Sub") and Evoke  Software  Corporation,  a
Delaware corporation ("Evoke").

                                   BACKGROUND

            Company  has  requested  that  Laurus  make  advances  available  to
Company; and

            Laurus has agreed to make such  advances to Company on the terms and
conditions set forth in this Agreement.

                                    AGREEMENT

      NOW, THEREFORE,  in consideration of the mutual covenants and undertakings
and the terms and  conditions  contained  herein,  the parties  hereto  agree as
follows:

            1. (a) General Definitions. Capitalized terms used in this Agreement
shall have the meanings assigned to them in Annex A.

            (b) Accounting  Terms.  Any accounting  terms used in this Agreement
which are not  specifically  defined shall have the meanings  customarily  given
them in accordance with GAAP and all financial  computations  shall be computed,
unless  specifically  provided  herein,  in  accordance  with GAAP  consistently
applied.

            (c) Other Terms.  All other terms used in this Agreement and defined
in the UCC,  shall have the  meaning  given  therein  unless  otherwise  defined
herein.

            (d) Rules of  Construction.  All  Schedules,  Addenda,  Annexes  and
Exhibits  hereto or expressly  identified  to this  Agreement  are  incorporated
herein by reference and taken  together  with this  Agreement  constitute  but a
single agreement. The words "herein",  hereof" and "hereunder" or other words of
similar  import refer to this  Agreement  as a whole,  including  the  Exhibits,
Addenda,  Annexes and  Schedules  thereto,  as the same may be from time to time
amended, modified, restated or supplemented,  and not to any particular section,
subsection or clause  contained in this Agreement.  Wherever from the context it
appears  appropriate,  each term stated in either the  singular or plural  shall
include the  singular  and the plural,  and  pronouns  stated in the  masculine,
feminine or neuter  gender  shall  include the  masculine,  the feminine and the
neuter.  The  term  "or" is not  exclusive.  The term  "including"  (or any form
thereof)  shall not be limiting or  exclusive.  All  references  to statutes and
related  regulations  shall  include any  amendments  of same and any  successor

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statutes and regulations.  All references in this Agreement or in the Schedules,
Addenda,  Annexes  and  Exhibits  to  this  Agreement  to  sections,  schedules,
disclosure schedules, exhibits, and attachments shall refer to the corresponding
sections,  schedules,  disclosure schedules,  exhibits, and attachments of or to
this  Agreement.  All references to any  instruments  or  agreements,  including
references to any of this  Agreement or the Ancillary  Agreements  shall include
any and all  modifications  or amendments  thereto and any and all extensions or
renewals thereof.

            2.  Loans.  (a)(i)  Subject  to the terms and  conditions  set forth
herein and in the Ancillary  Agreements,  Laurus may make loans (the "Loans") to
Company  from time to time during the Term which,  in the  aggregate at any time
outstanding,  will not  exceed the  lesser of (x) (I) the  Capital  Availability
Amount  minus  (II) such  reserves  as Laurus may  reasonably  in its good faith
judgment deem proper and necessary from time to time (the "Reserves") and (y) an
amount  equal to (I) the  Accounts  Availability  minus (II) the  Reserves.  The
amount derived at any time from Section 2(a)(i)(y)(I) minus 2(a)(i)(y)(II) shall
be referred to as the "Formula  Amount".  Company  shall  execute and deliver to
Laurus  on the  Closing  Date a  Minimum  Borrowing  Note and a  Revolving  Note
evidencing the Loans funded on the Closing Date.  From time to time  thereafter,
Company  shall  execute  and  deliver to Laurus  immediately  prior to the final
funding of each additional  $2,000,000 tranche of Loans allocated to any Minimum
Borrowing Note issued by Company to Laurus after the date hereof  (calculated on
a cumulative basis for each such tranche) an additional  Minimum  Borrowing Note
evidencing such tranche, substantially in the form of the Minimum Borrowing Note
delivered  by Company to Laurus on the Closing Date .  Notwithstanding  anything
herein to the contrary,  whenever during the Term the outstanding balance on the
Revolving  Note  should  equal  or  exceed  $2,000,000  to the  extent  that the
outstanding balance on Minimum Borrowing Note shall be less than $2,000,000 (the
difference of $2,000,000 less the actual balance of the Minimum  Borrowing Note,
the "Available Minimum Borrowing"), such portion of the balance of the Revolving
Note as shall  equal  the  Available  Minimum  Borrowing  shall be  deemed to be
simultaneously  extinguished  on the  Revolving  Note and  transferred  to,  and
evidenced by, the Minimum Borrowing Note.

                  (ii)  Notwithstanding  the  limitations  set forth  above,  if
requested by Company,  Laurus  retains the right to lend to Company from time to
time such amounts in excess of such  limitations  as Laurus may determine in its
sole discretion.

                  (iii) If Company  does not pay any  interest,  fees,  costs or
charges to Laurus when due,  Company shall thereby be deemed to have  requested,
and  Laurus  is  hereby  authorized  at its  discretion  to make and  charge  to
Company's  account, a Loan to Company as of such date in an amount equal to such
unpaid interest, fees, costs or charges.

                  (iv) If Company at any time fails to perform or observe any of
the covenants  contained in this  Agreement or any Ancillary  Agreement,  Laurus
may, but need not,  perform or observe such  covenant on behalf and in the name,
place and stead of Company (or, at Laurus' option, in Laurus' name) and may, but
need not, take any and all other actions which Laurus may deem necessary to cure
or correct such failure  (including the payment of taxes,  the  satisfaction  of
Liens, the performance of obligations owed to Account Debtors,  lessors or other
obligors,  the  procurement  and  maintenance  of  insurance,  the  execution of
assignments,  security agreements and financing statements,  and the endorsement
of  instruments).  The amount of all monies  expended and all costs and expenses

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(including  attorneys' fees and legal expenses) incurred by Laurus in connection
with or as a result of the  performance or observance of such  agreements or the
taking of such action by Laurus shall be charged to Company's  account as a Loan
and added to the Obligations. To facilitate Laurus' performance or observance of
such  covenants of Company,  Company  hereby  irrevocably  appoints  Laurus,  or
Laurus' delegate, acting alone, as Company's attorney in fact (which appointment
is coupled with an interest) with the right (but not the duty) from time to time
to create, prepare, complete,  execute, deliver, endorse or file in the name and
on behalf of Company any and all instruments,  documents,  assignments, security
agreements,   financing   statements,   applications  for  insurance  and  other
agreements and writings required to be obtained,  executed delivered or endorsed
by Company.

                  (v) Laurus will account to Company monthly with a statement of
all Loans  and other  advances,  charges  and  payments  made  pursuant  to this
Agreement,  and such account  rendered by Laurus shall be deemed final,  binding
and  conclusive  unless Laurus is notified by Company in writing to the contrary
within  thirty (30) days of the date each  account was rendered  specifying  the
item or items to which  objection  is made.

                  (vi) During the Term,  Company may borrow and prepay  Loans in
accordance with the terms and conditions hereof.

            (b) Following the occurrence of an Event of Default which  continues
to exist,  Laurus  may,  at its  option,  elect to convert  the credit  facility
contemplated  hereby to an  accounts  receivable  purchase  facility.  Upon such
election by Laurus (subsequent notice of which Laurus shall provide to Company),
Company shall be deemed to hereby have sold, assigned, transferred, conveyed and
delivered to Laurus,  and Laurus shall be deemed to have  purchased and received
from  Company,  all right,  title and interest of Company in and to all Accounts
which  shall  at  any  time  constitute   Eligible  Accounts  (the  "Receivables
Purchase").  All outstanding  Loans hereunder shall be deemed  obligations under
such  accounts  receivable  purchase  facility.  The  conversion  to an accounts
receivable  purchase  facility in accordance  with the terms hereof shall not be
deemed an exercise by Laurus of its secured  creditor  rights under Article 9 of
the UCC. Immediately  following Laurus' request,  Company shall execute all such
further  documentation  as may be required by Laurus to more fully set forth the
accounts receivable purchase facility herein  contemplated,  including,  without
limitation,  Laurus' standard form of accounts receivable purchase agreement and
account debtor  notification  letters,  but Company's  failure to enter into any
such  documentation  shall not impair or affect the Receivables  Purchase in any
manner whatsoever.

            (c)  Minimum  Borrowing  Amount.  After  a  registration   statement
registering the Registrable  Securities has been declared  effective by the SEC,
conversions of the Minimum Borrowing Amount into the Common Stock of Company may
be initiated as set forth in the respective  Minimum  Borrowing  Note.  From and
after the date upon which any  outstanding  principal  of the Minimum  Borrowing
Amount (as  evidenced by the first  Minimum  Borrowing  Note) is converted  into
Common Stock (the "First Conversion  Date"),  (i)  corresponding  amounts of all
outstanding  Loans (not  attributable to the then outstanding  Minimum Borrowing
Amount)  existing on or made after the First  Conversion Date will be aggregated
until  they  reach  the sum of  $3,000,000  and (ii)  Company  will  issue a new

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(serialized)  Minimum  Borrowing  Note to Laurus in respect  of such  $3,000,000
aggregation,  and (iii) Company shall prepare and file a subsequent registration
statement with the SEC to register such subsequent Minimum Borrowing Note as set
forth in the Registration Rights Agreement.

            3.  Repayment of the Loans.  Company (a) may prepay the  Obligations
from time to time in accordance  with the terms and provisions of the Notes (and
Section 16 hereof if such prepayment is due to a termination of this Agreement);
and (b)  shall  repay on the  expiration  of the  Term  (i) the  then  aggregate
outstanding  principal  balance of the Loans made by Laurus to Company hereunder
together with accrued and unpaid  interest,  fees and charges and (ii) all other
amounts owed Laurus  under this  Agreement  and the  Ancillary  Agreements.  Any
payments of principal,  interest, fees or any other amounts payable hereunder or
under any Ancillary  Agreement shall be made prior to 12:00 noon (New York time)
on the due date thereof in immediately available funds.

            4.  Procedure  for Loans.  Company may by written  notice  request a
borrowing  of Loans prior to 12:00 p.m.  (New York time) on the  Business Day of
its  request to incur,  on the next  business  day, a Loan.  Together  with each
request for a Loan (or at such other  intervals as Laurus may request),  Company
shall deliver to Laurus a Borrowing  Base  Certificate in the form of Exhibit A,
which shall be certified as true and correct by the Chief  Executive  Officer or
Chief Financial  Officer of Company  together with all supporting  documentation
relating  thereto.  All Loans shall be disbursed from whichever  office or other
place Laurus may  designate  from time to time and shall be charged to Company's
account on Laurus' books. The proceeds of each Loan made by Laurus shall be made
available to Company on the Business Day following the Business Day so requested
in  accordance  with the terms of this  Section 4 by way of credit to  Company's
operating account maintained with such bank as Company designated to Laurus. Any
and all Obligations due and owing hereunder may be charged to Company's  account
and shall constitute Loans.

            5. Interest and Payments.

            (a) Interest.

                  (i) Except as modified  by Section  5(a)(iii)  below,  Company
shall pay interest at the Contract Rate on the unpaid principal  balance of each
Loan until such time as such Loan is  collected in full in good funds in dollars
of the United States of America.

                  (ii)  Interest and payments  shall be computed on the basis of
actual days elapsed in a year of 360 days. At Laurus' option,  Laurus may charge
Company's account for said interest.

                  (iii)  Effective  upon the  occurrence of any Event of Default
and for so long as any Event of Default shall be  continuing,  the Contract Rate
shall  automatically  be  increased  as set  forth  Notes,  respectively,  (such
increased rate, the "Default Rate"), and all outstanding Obligations,  including
unpaid  interest,  shall continue to accrue interest from the date of such Event
of Default at the Default Rate applicable to such Obligations.

                  (iv)  In  no  event  shall  the  aggregate   interest  payable
hereunder  exceed  the  maximum  rate  permitted  under  any  applicable  law or
regulation, as in effect from time to time (the "Maximum Legal Rate") and if any
provision of this Agreement or any Ancillary  Agreement is in  contravention  of

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any such law or  regulation,  interest  payable  under this  Agreement  and each
Ancillary Agreement shall be computed on the basis of the Maximum Legal Rate (so
that such interest will not exceed the Maximum Legal Rate).

                  (v)  Company  shall  pay  principal,  interest  and all  other
amounts  payable  hereunder,  or under  any  Ancillary  Agreement,  without  any
deduction  whatsoever,  including any deduction for any set-off or counterclaim.

            (b) Payments; Certain Closing Conditions.

                  (i) Closing/Annual  Payments. Upon execution of this Agreement
by Company and Laurus, Company shall pay to Laurus Capital Management,  L.L.C. a
closing payment in an amount equal to three and  nine-tenths  percent (3.90%) of
the Capital  Availability  Amount.  Such payment shall be deemed fully earned on
the Closing Date and shall not be subject to rebate or proration for any reason.

                  (ii) Unused Line Payment. If, during any month, the average of
the aggregate Loans outstanding during such month (the "Average Loan Amount") do
not equal the Capital  Availability  Amount,  Company shall pay to Laurus at the
end of such month a payment (calculated on a per annum basis) in an amount equal
to one half  percent  (0.35%)  of the amount by which the  Capital  Availability
Amount exceeds the Average Loan Amount.  Notwithstanding the foregoing, any such
due and unpaid fee shall come  immediately  due and payable upon  termination of
this Agreement.

                  (iii)  Overadvance  Payment.  Without affecting Laurus' rights
hereunder in the event the Loans exceed the Formula Amount (each such event,  an
"Overadvance"),  all such  Overadvances  shall bear  interest  at an annual rate
equal to two percent (2%) of the amount of such  Overadvances  for each month or
portion  thereof such amounts shall be outstanding  and in excess of the Formula
Amount.

                  (iv) Financial Information Default.  Without affecting Laurus'
other rights and  remedies,  in the event Company fails to deliver the financial
information  required  by  Section  11 on or before  the date  required  by this
Agreement,  Company shall pay Laurus a fee in the amount of $250.00 per week (or
portion  thereof) for each such  failure  until such failure is cured to Laurus'
satisfaction  or waived in  writing  by  Laurus.  Such fee shall be  charged  to
Company's account upon the occurrence of each such failure.

                  (v)  Expenses.  The  Company  shall  reimburse  Laurus for its
reasonable  expenses  (including legal fees and expenses) incurred in connection
with  the  preparation  and  negotiation  of this  Agreement  and the  Ancillary
Agreements (as hereinafter  defined),  and expenses  incurred in connection with
Laurus' due diligence review of the Company and its Subsidiaries and all related
matters.  Amounts required to be paid under this Section 5(b)(v),  together with
amounts required to be paid pursuant to Section 2(c) of the Securities  Purchase
Agreement  (as  defined  below)  will be paid on the  Closing  Date and shall be
$52,500 for such expenses.

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            6. Security Interest.

            (a) To secure the prompt payment to Laurus of the Obligations,  each
of Company and Each Eligible  Subsidiary  hereby assigns,  pledges and grants to
Laurus a continuing  security  interest in and Lien upon all of the  Collateral.
All of Company's and each Eligible  Subsidiary's  Books and Records  relating to
the  Collateral  shall,  until  delivered  to or removed  by Laurus,  be kept by
Company and each  Eligible  Subsidiary,  as the case may be, in trust for Laurus
until  all  Obligations  have been paid in full.  Each  confirmatory  assignment
schedule  or other form of  assignment  hereafter  executed  by Company and each
Eligible  Subsidiary shall be deemed to include the foregoing grant,  whether or
not the same appears therein.

            (b)  Company  and each  Eligible  Subsidiary  hereby (i)  authorizes
Laurus to file any financing statements,  continuation  statements or amendments
thereto that (x) indicate the Collateral (1) as all assets and personal property
of Company or such Eligible Subsidiary,  as the case may be, or words of similar
effect,  regardless of whether any particular  asset comprised in the Collateral
falls within the scope of Article 9 of the UCC of such  jurisdiction,  or (2) as
being of an equal or lesser  scope or with greater  detail,  and (y) contain any
other information required by Part 5 of Article 9 of the UCC for the sufficiency
or filing office acceptance of any financing statement,  continuation  statement
or amendment  and (ii) ratifies its  authorization  for Laurus to have filed any
initial financial  statements,  or amendments thereto if filed prior to the date
hereof. Each of Company and each Eligible Subsidiary acknowledges that it is not
authorized to file any financing statement or amendment or termination statement
with respect to any financing  statement  without the prior  written  consent of
Laurus and agrees  that it will not do so without the prior  written  consent of
Laurus, subject to Company's and such Eligible Subsidiary's rights under Section
9-509(d)(2) of the UCC.

            (c) Each of Company and each  Eligible  Subsidiary  hereby grants to
Laurus an irrevocable,  non-exclusive  license (exercisable upon the termination
of this Agreement due to an occurrence and during the continuance of an Event of
Default  without  payment of royalty  or other  compensation  to Company or such
Eligible Subsidiary, as the case may be) to use, transfer, license or sublicense
any  Intellectual  Property now owned,  licensed  to, or  hereafter  acquired by
Company and/or such Eligible  Subsidiary,  and wherever the same may be located,
and  including in such license  access to all media in which any of the licensed
items may be  recorded or stored and to all  computer  and  automatic  machinery
software  and  programs  used  for the  compilation  or  printout  thereof,  and
represents,  promises and agrees that any such license or  sublicense is not and
will not be in conflict with the  contractual or commercial  rights of any third
Person;  provided,  that such license will terminate on the  termination of this
Agreement and the payment in full of all Obligations.

            7.   Representations,   Warranties  and  Covenants   Concerning  the
Collateral.  Each of Company and each Eligible Subsidiary  represents,  warrants
(each of which such representations and warranties shall be deemed repeated upon
the making of each  request for a Loan and made as of the time of each and every
Loan  hereunder  are  supplemented  by, and subject to,  Company's  Exchange Act
Filings (as defined below)) and covenants as follows:

            (a) all of the Collateral (i) is owned by Company and/or an Eligible
Subsidiary,  as the case may be,  free and  clear of all  Liens  (including  any
claims of  infringement)  except those in Laurus' favor and Permitted  Liens and

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(ii) is not  subject to any  agreement  prohibiting  the  granting  of a Lien or
requiring notice of or consent to the granting of a Lien.

            (b) neither the Company nor any Eligible  Subsidiary shall encumber,
mortgage, pledge, assign or grant any Lien in any Collateral or any of Company's
or any Eligible  Subsidiary  other assets to anyone other than Laurus and except
for Permitted Liens.

            (c) the Liens granted pursuant to this Agreement, upon completion of
the filings and other actions listed on Schedule 7(c) (which, in the case of all
filings and other documents referred to in said Schedule, have been delivered to
Laurus in duly executed form) constitute valid perfected  security  interests in
all of the Collateral in favor of Laurus as security for the prompt and complete
payment and performance of the  Obligations,  enforceable in accordance with the
terms hereof  against any and all creditors of and any  purchasers  from Company
and the Eligible  Subsidiaries and such security  interest is prior to all other
Liens in existence on the date hereof.

            (d) no  effective  security  agreement,  mortgage,  deed  of  trust,
financing  statement,  equivalent  security or Lien  instrument or  continuation
statement covering all or any part of the Collateral is or will be on file or of
record in any public office, except those relating to Permitted Liens.

            (e) neither Company nor any Eligible Subsidiary shall dispose of any
of  the  Collateral  whether  by  sale,  lease  or  otherwise,  except  for  (x)
Collateral,  the fair market value of which at the time of any such disposition,
does not exceed  $250,000 in the aggregate for all such  dispositions  after the
date hereof and (y) the sale of Inventory in the ordinary course of business and
for the  disposition or transfer in the ordinary  course of business  during any
fiscal year of obsolete and worn-out  Equipment  having an aggregate fair market
value of not more than  $50,000 and only (in the case of this clause (y)) to the
extent  that (i) the  proceeds  of any  such  disposition  are  used to  acquire
replacement  Equipment  which is  subject  to Laurus'  first  priority  security
interest  or are used to repay Loans or to pay general  corporate  expenses,  or
(ii)  following the  occurrence of an Event of Default which  continues to exist
the proceeds of which are remitted to Laurus to be held as cash  collateral  for
the Obligations.

            (f) each of Company and each  Eligible  Subsidiary  shall defend the
right,  title and interest of Laurus in and to the Collateral against the claims
and demands of all Persons whomsoever,  and take such actions, including (i) all
actions necessary to grant Laurus "control" of any Investment Property,  Deposit
Accounts,  Letter-of-Credit  Rights or electronic Chattel Paper owned by Company
and each Eligible Subsidiary,  with any agreements establishing control to be in
form and  substance  satisfactory  to Laurus,  (ii) the prompt  (but in no event
later than five (5) Business Days following Laurus' request  therefor)  delivery
to Laurus of all original Instruments,  Chattel Paper,  negotiable Documents and
certificated Stock owned by Company and each Eligible  Subsidiary (in each case,
accompanied by stock powers,  allonges or other instruments of transfer executed
in blank),  (iii)  notification  of Laurus'  interest in  Collateral  at Laurus'
request,  and (iv) the institution of litigation  against third parties as shall
be  prudent  in  order  to  protect  and  preserve   Company's,   each  Eligible
Subsidiary's  and/or Laurus' respective and several interests in the Collateral.

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            (g) each of Company and each Eligible Subsidiary shall promptly, and
in any event  within  five (5)  Business  Days after the same is acquired by it,
notify Laurus of any  commercial  tort claim (as defined in the UCC) acquired by
it and unless  otherwise  consented  by  Laurus,  each of  Company  and/or  each
Eligible  Subsidiary,  as the case may be, shall enter into a supplement to this
Agreement granting to Laurus a Lien in such commercial tort claim.

            (h)  each of  Company  and  each  Eligible  Subsidiary  shall  place
notations upon its Books and Records and any financial  statement of Company and
each Eligible  Subsidiary,  as the case may be, to disclose  Laurus' Lien in the
Collateral.

            (i)  If  either  Company  and/or  any  Eligible  Subsidiary  retains
possession of any Chattel Paper or Instrument with Laurus' consent, upon Laurus'
request such Chattel  Paper and  Instruments  shall be marked with the following
legend: "This writing and obligations evidenced or secured hereby are subject to
the security  interest of Laurus Master Fund, Ltd." (j) each of Company and each
Eligible Subsidiary shall perform in a reasonable time all other steps requested
by Laurus to create and maintain in Laurus' favor a valid  perfected  first Lien
in all Collateral subject only to Permitted Liens.

            (k) each of Company and each Eligible Subsidiary shall notify Laurus
promptly  and in any  event  within  three (3)  Business  Days  after  obtaining
knowledge  thereof (i) of any event or  circumstance  that to  Company's  or any
Eligible Subsidiary's knowledge would cause Laurus to consider any then existing
Account as no longer  constituting  an Eligible  Account;  (ii) of any  material
delay  in  Company's  or any  Eligible  Subsidiary's  performance  of any of its
obligations to any Account Debtor;  (iii) of any assertion by any Account Debtor
of any  material  claims,  offsets  or  counterclaims;  (iv) of any  allowances,
credits  and/or  monies  granted by Company or any  Eligible  Subsidiary  to any
Account  Debtor;  (v)  of  all  material  adverse  information  relating  to the
financial  condition of an Account Debtor; (vi) of any material return of goods;
and (vii) of any loss, damage or destruction of any of the Collateral.

            (l) All  Eligible  Accounts  (i) which are billed on a  construction
completion  basis but not  payable  until the  project is  completed,  represent
complete  bona  fide  transactions  which  require  no  further  act  under  any
circumstances  on  Company's  or any  Eligible  Subsidiary's  part to make  such
Accounts  payable by the Account  Debtors,  (ii) are not subject to any present,
future contingent offsets or counterclaims,  and (iii) do not represent bill and
hold sales, consignment sales, guaranteed sales, sale or return or other similar
understandings  or  obligations of any Affiliate or Subsidiary of either Company
or any Eligible  Subsidiary.  Neither  Company nor any Eligible  Subsidiary  has
made, and neither  Company nor any Eligible  Subsidiary will make, any agreement
with  any  Account  Debtor  for any  extension  of time for the  payment  of any
Account, any compromise or settlement for less than the full amount thereof, any
release  of any  Account  Debtor  from  liability  therefor,  or  any  deduction
therefrom  except a discount or allowance for prompt or early payment allowed by
Company  or any  Eligible  Subsidiary  in the  ordinary  course of its  business
consistent  with  historical  practice and as previously  disclosed to Laurus in
writing.

            (m) each of  Company  and each  Eligible  Subsidiary  shall keep and
maintain its Equipment in good operating condition, except for ordinary wear and
tear, and shall make all necessary repairs and replacements  thereof so that the

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value and operating  efficiency  shall at all times be maintained and preserved.
Neither  Company  nor any  Eligible  Subsidiary  shall  permit any such items to
become a Fixture to real estate or accessions to other personal property.

            (n) each of Company and each Eligible  Subsidiary shall maintain and
keep all of its Books and Records  concerning  the  Collateral  at such person's
executive  offices  listed in  Schedule  12(bb).  (o) each of  Company  and each
Eligible  Subsidiary  shall  maintain  and keep the tangible  Collateral  at the
addresses listed in Schedule 12(bb),  provided,  that each of Company and/or any
such  Eligible  Subsidiary  may change such  locations  or open a new  location,
provided  that  Company  or any such  Eligible  Subsidiary,  as the case may be,
provides  Laurus at least thirty (30) days prior written  notice of such changes
or new location and (ii) prior to such change or opening of a new location where
Collateral  having a value of more than $50,000 will be located,  Company and/or
any such  Eligible  Subsidiary,  as the case may be,  executes  and  delivers to
Laurus such  agreements as Laurus may request,  including  landlord  agreements,
mortgagee  agreements  and  warehouse  agreements,  each in form  and  substance
satisfactory to Laurus.

(p)  Schedule  7(p) lists all banks and other  financial  institutions  at which
Company and each Eligible  Subsidiary  maintains deposits and/or other accounts,
and such Schedule correctly identifies the name, address and telephone number of
each such  depository,  the name in which the account is held, a description  of
the purpose of the account, and the complete account number. Neither the Company
nor any Eligible Subsidiary shall establish any depository or other bank account
of any with any  financial  institution  (other than the  accounts  set forth on
Schedule 7(p)) without Laurus' prior written consent.

            8. Payment of Accounts.

            (a) Each of Company and each Eligible  Subsidiary  will  irrevocably
direct all of its present and future Account Debtors and other Persons obligated
to make payments  constituting  Collateral to make such payments directly to the
lockboxes  maintained by Company and each Eligible  Subsidiary (the "Lockboxes")
with North Fork Bank or such other financial  institution  accepted by Laurus in
writing as may be  selected  by  Company  and/or any  Eligible  Subsidiary  (the
"Lockbox  Bank")  pursuant to the terms of lockbox and other control  agreements
acceptable to Laurus. On or prior to 30 days following the Closing Date, each of
Company and each Eligible  Subsidiary  shall and shall cause the Lockbox Bank to
enter into all such documentation  acceptable to Laurus pursuant to which, among
other things, the Lockbox Bank agrees to: (a) sweep the Lockbox on a daily basis
and deposit all checks  received  therein to an account  designated by Laurus in
writing and (b) comply only with the  instructions or other directions of Laurus
concerning  the  Lockbox.  All  of  Company's  and  each  Eligible  Subsidiary's
invoices, account statements and other written or oral communications directing,
instructing,  demanding or  requesting  payment of any Account of Company or any
Eligible   Subsidiary  or  any  other  amount   constituting   Collateral  shall
conspicuously  direct  that all  payments  be made to the  Lockbox or such other

                                       9
<PAGE>

address as Laurus may direct in writing. If, notwithstanding the instructions to
Account  Debtors,  Company or any Eligible  Subsidiary  receives  any  payments,
Company or such Eligible Subsidiary, as the case may be, shall immediately remit
such payments to Laurus in their original form with all necessary  endorsements.
Until so  remitted,  Company and each  Eligible  Subsidiary  shall hold all such
payments in trust for and as the property of Laurus and shall not commingle such
payments with any of its other funds or property.

            (b) At Laurus'  election,  following  the  occurrence of an Event of
Default  which is  continuing,  Laurus may  notify  each of  Company's  and each
Eligible  Subsidiary's  Account  Debtors of  Laurus'  security  interest  in the
Accounts,  collect them  directly and charge the  collection  costs and expenses
thereof to Company's and the Eligible Subsidiaries joint and several account.

      9. Collection and Maintenance of Collateral.

            (a) Laurus  may  verify  Company's  and each  Eligible  Subsidiary's
Accounts from time to time,  but not more often than once every three (3) months
unless an Event of Default has  occurred and is  continuing,  utilizing an audit
control company or any other agent of Laurus.

            (b) Proceeds of Accounts  received by Laurus will be deemed received
on the  Business  Day after  Laurus'  receipt of such  proceeds in good funds in
dollars of the United States of America in Laurus' account.  Any amount received
by Laurus  after 12:00 noon (New York time) on any  Business Day shall be deemed
received on the next Business Day.

            (c) As Laurus  receives  the  proceeds of Accounts of Company or any
Eligible Subsidiary,  it shall (i) apply such proceeds,  as required, to amounts
outstanding under the Notes, and (ii) remit all such remaining  proceeds (net of
interest,  fees and other  amounts  then due and owing to Laurus  hereunder)  to
Company and/or any such Eligible Subsidiary upon request (but no more often than
twice a week).  Notwithstanding  the  foregoing,  following the  occurrence  and
during the continuance of an Event of Default,  Laurus,  at its option,  may (a)
apply such proceeds to the Obligations in such order as Laurus shall elect,  (b)
hold  all such  proceeds  as cash  collateral  for the  Obligations  and each of
Company and each Eligible Subsidiary hereby grants to Laurus a security interest
in such cash collateral  amounts as security for the  Obligations  and/or (c) do
any combination of the foregoing.

            10. Inspections and Appraisals.  At all times during normal business
hours,  Laurus,  and/or  any  agent of Laurus  shall  have the right to (a) have
access to, visit, inspect,  review,  evaluate and make physical verification and
appraisals of each of Company's and each Eligible  Subsidiary's  properties  and
the Collateral, (b) inspect, audit and copy (or take originals if necessary) and
make extracts from Company's and each Eligible  Subsidiary's  Books and Records,
including  management  letters  prepared  by  independent  accountants,  and (c)
discuss with Company's and each Eligible  Subsidiary's  principal officers,  and
independent  accountants,  Company's  and each Eligible  Subsidiary's  business,
assets,  liabilities,  financial  condition,  results of operations and business
prospects.  Each of Company and each Eligible  Subsidiary will deliver to Laurus
any  instrument  necessary for Laurus to obtain  records from any service bureau
maintaining records for Company and such Eligible Subsidiary.  If any internally
prepared  financial  information,  including that required under this Section is
unsatisfactory in any manner to Laurus,  Laurus may request that the Accountants
review the same.

                                       10
<PAGE>

            11.  Financial  Reporting.  Company  will  deliver,  or  cause to be
delivered,  to Laurus each of the  following,  which shall be in form and detail
acceptable to Laurus:

            (a) As soon as  available,  and in any event within ninety (90) days
after the end of each  fiscal year of Company or the due date of the Form 10-KSB
(without giving effect to any extension granted with respect thereto), whichever
is longer,  Company's audited financial  statements with a report of independent
certified  public  accountants  of recognized  standing  selected by Company and
acceptable  to Laurus (the  "Accountants"),  which annual  financial  statements
shall include  Company's balance sheet as at the end of such fiscal year and the
related statements of Company's income, retained earnings and cash flows for the
fiscal year then ended,  prepared, if Laurus so requests, on a consolidating and
consolidated basis to include all Subsidiaries and Affiliates, all in reasonable
detail and  prepared  in  accordance  with GAAP,  together  with (i) if and when
available,  copies of any management  letters prepared by such accountants;  and
(ii) a certificate  of Company's  President,  Chief  Executive  Officer or Chief
Financial  Officer stating that such financial  statements have been prepared in
accordance  with GAAP and  whether  or not such  officer  has  knowledge  of the
occurrence of any Default or Event of Default  hereunder  and, if so, stating in
reasonable detail the facts with respect thereto;

            (b) As soon as  available  and in any event  within  forty five (45)
days after the end of each  quarter or the due date of the Form 10-QSB  (without
giving  effect to any  extension  granted  with respect  thereto),  whichever is
longer, an unaudited/internal  balance sheet and statements of income,  retained
earnings and cash flows of Company as at the end of and for such quarter and for
the year to date  period  then  ended,  prepared,  if Laurus so  requests,  on a
consolidating and consolidated basis to include all Subsidiaries and Affiliates,
in  reasonable  detail  and  stating in  comparative  form the  figures  for the
corresponding  date and periods in the previous year, all prepared in accordance
with GAAP,  subject to year-end  adjustments and accompanied by a certificate of
Company's President, Chief Executive Officer or Chief Financial Officer, stating
(i) that such financial  statements  have been prepared in accordance with GAAP,
subject to year-end audit adjustments,  and (ii) whether or not such officer has
knowledge of the  occurrence  of any Default or Event of Default  hereunder  not
theretofore  reported and remedied and, if so, stating in reasonable  detail the
facts with respect thereto;

            (c)  Within  thirty  (30) days  after the end of each month (or more
frequently  if  Laurus  so  requests),  agings of  Company's  and each  Eligible
Subsidiary's Accounts, unaudited trial balances and their accounts payable and a
calculation  of Company's  and each  Eligible  Subsidiary's  Accounts,  Eligible
Accounts,  provided,  however,  that  if  Laurus  shall  request  the  foregoing
information  more often than as set forth in the immediately  preceding  clause,
Company  and/or any  Eligible  Subsidiary  shall have thirty (30) days from each
such request to comply with Laurus' demand; and

            (d) Promptly after (i) the filing thereof,  copies of Company's most
recent registration statements and annual,  quarterly,  monthly or other regular
reports which Company files with the  Securities  and Exchange  Commission  (the
"SEC"),  and (ii) the issuance  thereof,  copies of such  financial  statements,
reports and proxy statements as Company shall send to its stockholders.

                                       11
<PAGE>

            12.  Additional  Representations  and  Warranties.   Company  hereby
represents  and  warrants  to  Laurus  as  follows  (which  representations  and
warranties  are  supplemented  by, and subject to,  Company's  filings under the
Securities  Exchange  Act of 1934  made  prior  to the  date  of this  Agreement
(collectively, the "Exchange Act Filings"):

            (a) Organization,  Good Standing and Qualification.  Each of Company
and each of its Subsidiaries is a corporation  duly organized,  validly existing
and in good standing under the laws of its jurisdiction of organization. Each of
Company and each of its  Subsidiaries  has the corporate  power and authority to
own and operate its properties and assets, to execute and deliver this Agreement
and the  Ancillary  Agreements,  to issue and sell the  Notes and the  shares of
Common Stock issuable upon  conversion of the Minimum  Borrowing Note (the "Note
Shares"), to issue and sell the Warrants and the shares of Common Stock issuable
upon  conversion  of the Warrants (the  "Warrant  Shares"),and  to carry out the
provisions of this  Agreement and the Ancillary  Agreements  and to carry on its
business as presently  conducted is applicable.  Each of Company and each of its
Subsidiaries  is duly  qualified and is authorized to do business and is in good
standing  as a  foreign  corporation  in all  jurisdictions,  except  for  those
jurisdictions in which the failure to do so has not had, or could not reasonably
be  expected  to have,  individually  or in the  aggregate,  a Material  Adverse
Effect.

            (b)  Subsidiaries.  Each direct and indirect  Subsidiary of Company,
the direct owner of such Subsidiary and its percentage ownership thereof, is set
forth on Schedule 12(b).

            (c) Capitalization; Voting Rights.

                  (i) [The  authorized  capital stock of the Company,  as of the
date hereof consists of 1,020,000,000  shares, of which 1,000,000,000 are shares
of Common  Stock,  par value $0.001 per share,  766,129,715  shares of which are
issued and outstanding,  and 20,000,000 are shares of preferred stock, par value
$0.001 per share of which 0 shares of are issued and outstanding. The authorized
capital stock of each Subsidiary of the Company is set forth on Schedule 12 (c).

                  (ii) Except as disclosed on Schedule  12(c),  other than:  (i)
the shares reserved for issuance under  Company's  stock option plans;  and (ii)
shares  which  may be  issued  pursuant  to this  Agreement  and  the  Ancillary
Agreements,  there  are no  outstanding  options,  warrants,  rights  (including
conversion  or  preemptive  rights  and  rights  of  first  refusal),  proxy  or
stockholder  agreements,  or  arrangements  or  agreements  of any  kind for the
purchase  or  acquisition  from  Company  of any of its  securities.  Except  as
disclosed on Schedule 12(c),  neither the offer,  issuance or sale of any of the
Notes or the Warrants,  or the issuance of any of the Note Shares or the Warrant
Shares, nor the consummation of any transaction  contemplated hereby will result
in a change in the price or number of any  securities  of  Company  outstanding,
under  anti-dilution or other similar  provisions  contained in or affecting any
such securities.

                  (iii) All issued and  outstanding  shares of Company's  Common
Stock:  (i) have been duly  authorized and validly issued and are fully paid and
nonassessable;  and (ii) were issued in compliance with all applicable state and

                                       12
<PAGE>

federal laws concerning the issuance of securities.

                  (iv) The rights,  preferences,  privileges and restrictions of
the  shares  of the  Common  Stock are as stated  in  Company's  Certificate  of
Incorporation (the "Charter").  The Note Shares and the Warrant Shares have been
duly and validly  reserved  for  issuance.  When issued in  compliance  with the
provisions of this Agreement and Company's  Charter,  each Note, the Warrant and
the Common Stock  underlying  each Note and the Warrant will be validly  issued,
fully  paid and  nonassessable,  and will be free of any liens or  encumbrances;
provided,  however,  that the  Securities  may be  subject  to  restrictions  on
transfer  under state and/or federal  securities  laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.

            (d) Authorization;  Binding Obligations. All corporate action on the
part of each of Company and each of its Subsidiaries,  their respective officers
and  directors  necessary  for  the  authorization  of  this  Agreement  and the
Ancillary Agreements,  the performance of all obligations of Company and each of
its  Subsidiaries  hereunder and under the  Ancillary  Agreements on the Closing
Date and, the  authorization,  sale,  issuance and delivery of the Notes and the
Warrant  has been  taken  or will be  taken  prior  to the  Closing  Date.  This
Agreement and the Ancillary  Agreements,  when executed and delivered and to the
extent it is a party thereto,  will be valid and binding  obligations of each of
Company and each of its Subsidiaries enforceable in accordance with their terms,
except:

                  (i)  as  limited   by   applicable   bankruptcy,   insolvency,
reorganization,  moratorium  or  other  laws of  general  application  affecting
enforcement  of creditors'  rights;  and

                  (ii)   general   principles   of  equity  that   restrict  the
availability of equitable or legal remedies.

The sale of the  Notes and the  subsequent  conversion  of the  Notes  into Note
Shares  are not and will not be subject  to any  preemptive  rights or rights of
first refusal that have not been properly  waived or complied with. The issuance
of the Warrants and the  subsequent  exercise of the Warrants for Warrant Shares
are not and will not be  subject  to any  preemptive  rights  or rights of first
refusal that have not been properly waived or complied with.

            (e) Liabilities. Neither Company nor any of its Subsidiaries has any
contingent  liabilities,  except  current  liabilities  incurred in the ordinary
course of business and liabilities disclosed in any Exchange Act Filings.

            (f) Agreements;  Action. Except as set forth on Schedule 12(f) or as
disclosed in any Exchange Act Filings:

                  (i)  There  are no  agreements,  understandings,  instruments,
contracts,  proposed transactions,  judgments, orders, writs or decrees to which
Company or any of its Subsidiaries is a party or to its knowledge by which it is
bound which may  involve:  (i)  obligations  (contingent  or  otherwise)  of, or
payments to, Company or any of its Subsidiaries in excess of $50,000 (other than
obligations of, or payments to, Company or any of its Subsidiaries  arising from
purchase or sale agreements entered into in the ordinary course of business); or

                                       13
<PAGE>

(ii) the  transfer or license of any patent,  copyright,  trade  secret or other
proprietary  right to or from  Company or any of its  Subsidiaries  (other  than
licenses  arising  from the  purchase  of "off  the  shelf"  or  other  standard
products);  or (iii)  provisions  restricting  the  development,  manufacture or
distribution of Company's or any of its Subsidiaries'  products or services;  or
(iv)  indemnification  by Company  or any of its  Subsidiaries  with  respect to
infringements of proprietary rights.

                  (ii) Since December 31, 2003,  neither  Company nor any of its
Subsidiaries has: (i) declared or paid any dividends,  or authorized or made any
distribution  upon or with respect to any class or series of its capital  stock;
(ii)  incurred  any  indebtedness  for money  borrowed or any other  liabilities
(other than ordinary course  obligations)  individually in excess of $50,000 or,
in the case of indebtedness  and/or liabilities  individually less than $50,000,
in excess of $100,000 in the aggregate;  (iii) made any loans or advances to any
person not in excess,  individually or in the aggregate, of $100,000, other than
ordinary  advances  for travel  expenses;  or (iv) sold,  exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.

                  (iii) For the  purposes  of  subsections  (i) and (ii) of this
Section 12(f) above, all indebtedness,  liabilities, agreements, understandings,
instruments,  contracts and proposed  transactions  involving the same person or
entity  (including  persons  or  entities  Company  has  reason to  believe  are
affiliated therewith or with any Subsidiary thereof) shall be aggregated for the
purpose of meeting the individual  minimum  dollar amounts of such  subsections.

            (g) Obligations to Related Parties.  Except as set forth on Schedule
12(g),  there  are no  obligations  of  Company  or any of its  Subsidiaries  to
officers,  directors,  stockholders  or  employees  of  Company  or  any  of its
Subsidiaries other than:

                  (i) for payment of salary for services  rendered and for bonus
payments;

                  (ii) reimbursement for reasonable  expenses incurred on behalf
of Company or any of its Subsidiaries;

                  (iii) for other  standard  employee  benefits  made  generally
available to all employees (including stock option agreements  outstanding under
any stock option plan  approved by the Board of Directors of Company);  and

                  (iv) obligations listed in Company's  financial  statements or
disclosed in any of its Exchange Act Filings.

Except as described above or set forth on Schedule 12(g),  none of the officers,
directors or, to the best of Company's knowledge,  key employees or stockholders
of Company,  any of its Subsidiaries or any members of their immediate families,
are  indebted to Company or any of their  Subsidiaries,  individually  or in the
aggregate,  in excess  of  $50,000  or have any  direct  or  indirect  ownership
interest  in  any  firm  or  corporation  with  which  Company  or  any  of  its
Subsidiaries is affiliated or with which Company or any of its  Subsidiaries has

                                       14
<PAGE>

a business relationship,  or any firm or corporation which competes with Company
or any of its  Subsidiaries,  other than passive  investments in publicly traded
companies  (representing  less than one percent (1%) of such company)  which may
compete with Company or any of its  Subsidiaries.  Except as described above, no
officer, director or stockholder, or any member of their immediate families, is,
directly or indirectly,  interested in any material contract with Company or any
of its Subsidiaries and no agreements,  understandings or proposed  transactions
are contemplated between Company or any of its Subsidiaries and any such person.
Except  as  set  forth  on  Schedule  12(g),  neither  Company  nor  any  of its
Subsidiaries  is a guarantor  or  indemnitor  of any  indebtedness  of any other
person, firm or corporation.

            (h) Changes.  Since  December  31, 2003,  except as disclosed in any
Exchange  Act  Filing  or in any  Schedule  to this  Agreement  or to any of the
Ancillary Agreements, there has not been:

                  (i) any change in the business, assets, liabilities, condition
(financial or otherwise),  properties, operations or prospects of Company or any
of its Subsidiaries,  which, individually or in the aggregate, has had, or could
reasonably be expected to have, a Material Adverse Effect;

                  (ii)  any  resignation  or  termination  of any  officer,  key
employee or group of employees of Company or any of its Subsidiaries;

                  (iii) any material  change,  except in the ordinary  course of
business, in the contingent obligations of Company or any of its Subsidiaries by
way of guaranty, endorsement, indemnity, warranty or otherwise;

                  (iv) any damage,  destruction or loss,  whether or not covered
by  insurance,  which  has  had,  or  could  reasonably  be  expected  to  have,
individually or in the aggregate, a Material Adverse Effect;

                  (v) any  waiver by  Company  or any of its  Subsidiaries  of a
valuable right or of a material debt owed to it;

                  (vi) any direct or indirect  material loans made by Company or
any of its  Subsidiaries to any  stockholder,  employee,  officer or director of
Company or any of its  Subsidiaries,  other than  advances  made in the ordinary
course of business;

                  (vii) any material change in any  compensation  arrangement or
agreement with any employee, officer, director or stockholder;

                  (viii) any  declaration  or payment of any  dividend  or other
distribution of the assets of Company or any of its Subsidiaries;

                  (ix) any labor organization activity related to Company or any
of its Subsidiaries;

                  (x) any debt,  obligation  or liability  incurred,  assumed or
guaranteed by Company or any of its  Subsidiaries,  except those for  immaterial
amounts and for current liabilities incurred in the ordinary course of business;

                                       15
<PAGE>

                  (xi)  any  sale,   assignment  or  transfer  of  any  patents,
trademarks, copyrights, trade secrets or other intangible assets;

                  (xii) any change in any material agreement to which Company or
any of its  Subsidiaries  is a party  or by  which  it is  bound  which,  either
individually  or in the aggregate,  has had, or could  reasonably be expected to
have, a Material Adverse Effect;

                  (xiii) any other event or  condition  of any  character  that,
either  individually  or in the  aggregate,  has  had,  or could  reasonably  be
expected to have, a Material Adverse Effect; or

                  (xiv) any  arrangement  or commitment by Company or any of its
Subsidiaries to do any of the acts described in subsection

                         (i) through (xiii) of this Section 12(h).  (i) Title to
Properties and Assets;  Liens,  Etc. Except as set forth on Schedule 12(i), each
of Company and each of its  Subsidiaries  has good and  marketable  title to its
properties  and assets,  and good title to its leasehold  estates,  in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than:

                         (i)  those  resulting  from  taxes  which  have not yet
become delinquent;

                         (ii)  minor  liens  and   encumbrances   which  do  not
materially  detract from the value of the property subject thereto or materially
impair the operations of Company or any of its Subsidiaries; and

                         (iii) those that have otherwise  arisen in the ordinary
course of business.

All facilities,  machinery,  equipment,  fixtures, vehicles and other properties
owned, leased or used by Company or any of its Subsidiariesare in good operating
condition  and repair and are  reasonably  fit and usable for the  purposes  for
which  they are  being  used.  Except as set forth on  Schedule  12(i),  each of
Company and each of its Subsidiaries is in compliance with all material terms of
each lease to which it is a party or is otherwise bound.

            (j) Intellectual Property.

                  (i)  Each of  Company  and  each of its  Subsidiaries  owns or
possesses sufficient legal rights to all Intellectual Property necessary for its
business as now conducted and to Company's knowledge as presently proposed to be
conducted,  without any known infringement of the rights of others. There are no
outstanding  options,  licenses  or  agreements  of any  kind  relating  to such
Intellectual  Property of Company or any of its Subsidiaries,  nor is Company or
any of  its  Subsidiaries  bound  by or a  party  to any  options,  licenses  or
agreements  of any kind with respect to the  Intellectual  Property of any other
person or entity  other  than  such  licenses  or  agreements  arising  from the
purchase of "off the shelf" or standard  products.

                  (ii) Neither Company nor any of its  Subsidiaries has received
any communications alleging that Company or any of its Subsidiaries has violated

                                       16
<PAGE>

any of the patents, trademarks,  service marks, trade names, copyrights or trade
secrets  or other  proprietary  rights of any other  person  or  entity,  nor is
Company aware of any basis therefor.

                  (iii)  Company  does not believe it is or will be necessary to
utilize any inventions,  trade secrets or proprietary  information of any of its
employees made prior to their employment by Company or any of its  Subsidiaries,
except for inventions,  trade secrets or proprietary  information that have been
rightfully assigned to Company or any such Subsidiary.

            (k) Compliance  with Other  Instruments.  Neither Company nor any of
its  Subsidiaries  is in  violation or default of (x) any term of its Charter or
Bylaws  or  other  governing   documents,   or  (y)  of  any  provision  of  any
indebtedness, mortgage, indenture, contract, agreement or instrument to which it
is party or by which  it is  bound or of any  judgment,  decree,  order or writ,
which  violation  or default,  in the case of this clause (y), has had, or could
reasonably  be expected to have,  either  individually  or in the  aggregate,  a
Material  Adverse  Effect.  The  execution,  delivery  and  performance  of  and
compliance  with this  Agreement and the  Ancillary  Agreements to which it is a
party, and the issuance and sale of the Note by Company and the other Securities
by Company  each  pursuant  hereto and  thereto,  will not,  with or without the
passage of time or giving of notice,  result in any such material violation,  or
be in conflict with or constitute a default under any such term or provision, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the  properties  or assets of Company or any of its  Subsidiaries  or the
suspension,  revocation,  impairment,  forfeiture  or  nonrenewal of any permit,
license,  authorization  or  approval  applicable  to  Company  or  any  of  its
Subsidiaries, its business or operations or any of its assets or properties.

            (l) Litigation.  Except as set forth on Schedule 12(l),  there is no
action,  suit,  proceeding or investigation  pending or, to Company's knowledge,
currently  threatened  against Company or any of its Subsidiaries  that prevents
Company or any of its  Subsidiaries  from  entering  into this  Agreement or the
Ancillary Agreements,  or from consummating the transactions contemplated hereby
or thereby,  or which has had, or could  reasonably be expected to have,  either
individually or in the aggregate,  a Material Adverse Effect, or could result in
any  change  in  the  current  equity   ownership  of  Company  or  any  of  its
Subsidiaries,  nor is Company aware that there is any basis to assert any of the
foregoing.  Neither Company nor any of its Subsidiaries is a party or subject to
the provisions of any order, writ,  injunction,  judgment or decree of any court
or government agency or instrumentality. There is no action, suit, proceeding or
investigation by Company or any of its Subsidiaries  currently  pending or which
Company or any of its Subsidiaries intends to initiate.

            (m) Tax  Returns  and  Payments.  Each of  Company  and  each of its
Subsidiaries  has  timely  filed all tax  returns  (federal,  state  and  local)
required  to be filed by it.  All  taxes  shown  to be due and  payable  on such
returns, any assessments imposed, and all other taxes due and payable by each of
Company and each of its  Subsidiaries  on or before the Closing Date,  have been
paid or will be paid  prior to the time they  become  delinquent.  Except as set
forth on Schedule 12(m),  neither Company nor any of its  Subsidiaries  has been
advised:

                  (i) that any of its  returns,  federal,  state or other,  have
been or are being  audited as of the date hereof; or

                                       17
<PAGE>

                  (ii) of any  deficiency in assessment or proposed  judgment to
its federal, state or other taxes.

Company has no  knowledge  of any  liability  of any tax to be imposed  upon its
properties  or assets as of the date of this  Agreement  that is not  adequately
provided for.

            (n)  Employees.  Except  as set  forth on  Schedule  12(n),  neither
Company nor any of its  Subsidiaries  has any collective  bargaining  agreements
with any of its employees.  There is no labor union organizing  activity pending
or, to  Company's  knowledge,  threatened  with respect to Company or any of its
Subsidiaries.  Except as  disclosed  in the  Exchange Act Filings or on Schedule
12(n), neither Company nor any of its Subsidiaries is a party to or bound by any
currently effective  employment  contract,  deferred  compensation  arrangement,
bonus plan,  incentive plan, profit sharing plan,  retirement agreement or other
employee compensation plan or agreement.  To Company's knowledge, no employee of
Company or any of its Subsidiaries,  nor any consultant with whom Company or any
of  its  Subsidiaries  has  contracted,  is in  violation  of  any  term  of any
employment contract,  proprietary  information  agreement or any other agreement
relating to the right of any such  individual  to be employed by, or to contract
with,  Company or any of its Subsidiaries  because of the nature of the business
to be  conducted  by  Company  or  any  of its  Subsidiaries;  and to  Company's
knowledge the  continued  employment  by Company and its  Subsidiaries  of their
respective  present  employees,   and  the  performance  of  Company's  and  its
Subsidiaries contracts with its independent contractors,  will not result in any
such violation. Company is not aware that any of its or any of its Subsidiaries'
employees is  obligated  under any contract  (including  licenses,  covenants or
commitments  of any  nature) or other  agreement,  or  subject to any  judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to Company or any of its  Subsidiaries.  Neither Company nor any of
its  Subsidiaries  has received any notice  alleging that any such violation has
occurred. Except for employees who have a current effective employment agreement
with  Company or any of its  Subsidiaries,  no employee of Company or any of its
Subsidiaries  has been granted the right to continued  employment  by Company or
any of its Subsidiaries or to any material compensation following termination of
employment  with  Company  or any of its  Subsidiaries.  Except  as set forth on
Schedule 12(n),  neither  Company nor any of its  Subsidiaries is aware that any
officer,  key  employee or group of employees  intends to terminate  his, her or
their  employment with Company or any of its  Subsidiaries,  nor does Company or
any of its Subsidiaries  have a present intention to terminate the employment of
any officer, key employee or group of employees.

            (o)  Registration  Rights and Voting Rights.  Except as set forth on
Schedule 12(o) and except as disclosed in Exchange Act Filings,  neither Company
nor any of its  Subsidiaries is presently not under any obligation,  and has not
granted  any rights,  to  register  any of  Company's  or any such  Subsidiary's
presently outstanding  securities or any of its securities that may hereafter be
issued.  Except  as set forth on  Schedule  12(o) and  except  as  disclosed  in
Exchange Act Filings, to Company's  knowledge,  no stockholder of Company or any
of its Subsidiaries has entered into any agreement with respect to the voting of
equity securities of Company or any of its Subsidiaries.

            (p) Compliance  with Laws;  Permits.  Neither Company nor any of its
Subsidiaries is in violation of any applicable statute, rule, regulation,  order
or restriction of any domestic or foreign  government or any  instrumentality or

                                       18
<PAGE>

agency thereof in respect of the conduct of its business or the ownership of its
properties  which has had,  or could  reasonably  be  expected  to have,  either
individually or in the aggregate,  a Material  Adverse  Effect.  No governmental
orders,  permissions,  consents,  approvals or authorizations are required to be
obtained  and no  registrations  or  declarations  are  required  to be filed in
connection  with the execution  and delivery of this  Agreement or any Ancillary
Agreement  and the  issuance of any of the  Securities,  except such as has been
duly and validly  obtained or filed, or with respect to any filings that must be
made  after  the  Closing  Date,  as will be filed in a timely  manner.  Each of
Company  and each of its  Subsidiaries  has all  material  franchises,  permits,
licenses and any similar authority  necessary for the conduct of its business as
now being  conducted by it, the lack of which could,  either  individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

            (q) Environmental and Safety Laws. Neither Company is nor any of its
Subsidiaries  is in  violation  of any  applicable  statute,  law or  regulation
relating  to the  environment  or  occupational  health and  safety,  and to its
knowledge,  no material  expenditures are or will be required in order to comply
with any such  existing  statute,  law or  regulation.  Except  as set  forth on
Schedule 12(q), no Hazardous  Materials (as defined below) are used or have been
used,  stored,  or  disposed  of by  Company or any of its  Subsidiaries  or, to
Company's knowledge, by any other person or entity on any property owned, leased
or used by Company or any of its Subsidiaries. For the purposes of the preceding
sentence, "Hazardous Materials" shall mean:

                  (i)  materials  which  are  listed  or  otherwise  defined  as
"hazardous" or "toxic" under any applicable local, state, federal and/or foreign
laws and regulations that govern the existence and/or remedy of contamination on
property,  the protection of the environment from contamination,  the control of
hazardous wastes, or other activities involving hazardous substances,  including
building  materials;  and

                  (ii) any petroleum  products or nuclear  materials.

            (r) Valid Offering. Assuming the accuracy of the representations and
warranties of Laurus contained in this Agreement,  the offer,  sale and issuance
of the  Securities  will be exempt  from the  registration  requirements  of the
Securities Act of 1933, as amended (the  "Securities  Act"),  and will have been
registered  or qualified  (or are exempt from  registration  and  qualification)
under the registration,  permit or qualification  requirements of all applicable
state securities laws.

            (s) Full  Disclosure.  Each of Company and each of its  Subsidiaries
has provided Laurus with all information  requested by Laurus in connection with
its decision to purchase the Notes and the Warrants,  including all  information
Company  believes is  reasonably  necessary  to make such  investment  decision.
Neither this Agreement,  the Ancillary Agreements nor the exhibits and schedules
hereto and thereto  nor any other  document  delivered  by Company or any of its
Subsidiaries  to Laurus or its  attorneys  or agents in  connection  herewith or
therewith or with the transactions  contemplated hereby or thereby,  contain any
untrue  statement of a material fact nor omit to state a material fact necessary

                                       19
<PAGE>

in order to make the  statements  contained  herein or therein,  in light of the
circumstances in which they are made, not misleading.  Any financial projections
and other  estimates  provided  to Laurus by Company and its  Subsidiaries  were
based on  Company's  and its  Subsidiaries'  experience  in the  industry and on
assumptions  of fact and opinion as to future events which  Company  and/or such
Subsidiary,  at the  date of the  issuance  of such  projections  or  estimates,
believed to be reasonable.

            (t)  Insurance.  Each of Company  and each of its  Subsidiaries  has
general commercial, product liability, fire and casualty insurance policies with
coverages which Company believes are customary for companies  similarly situated
to Company and its Subsidiaries in the same or similar business.

            (u) SEC Reports and Financial Statements(v) . Except as set forth on
Schedule  12(u),  Company  and each of its  Subsidiaries  has  filed  all  proxy
statements,  reports  and other  documents  required to be filed by it under the
Exchange Act. Company has furnished Laurus with copies of: (i) its Annual Report
on Form  10-KSB  for its fiscal  year  ended  December  31,  2003;  and (ii) its
Quarterly Report on Form 10-QSB for its fiscal quarter ended March 31, 2004, and
the Form 8-K  filings  which it has made  during  its  fiscal  year 2004 to date
(collectively,  the "SEC  Reports").  Except as set forth on Schedule 4.21, each
SEC Report was, at the time of its filing,  in substantial  compliance  with the
requirements  of its  respective  form  and  none  of the SEC  Reports,  nor the
financial  statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact  required to be stated  therein or necessary
to make the statements  therein,  in light of the circumstances under which they
were made,  not  misleading.  Such  financial  statements  have been prepared in
accordance with generally accepted  accounting  principles ("GAAP") applied on a
consistent  basis  during the periods  involved  (except (i) as may be otherwise
indicated in such financial  statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be  condensed)  and fairly  present in all material  respects the  financial
condition,  the  results of  operations  and the cash  flows of Company  and its
Subsidiaries,  on a consolidated basis, as of, and for, the periods presented in
each such SEC Report.

            (w) Listing.  The  Company's  Common Stock  currently  trades on the
National  Association  of  Securities  Dealers Over the Counter  Bulletin  Board
("NASD  OTCBB") and  satisfies all  requirements  for the  continuation  of such
trading.  The Company has not received any notice that its Common Stock will not
be  eligible  to be traded on the NASD OTCBB or that its  Common  Stock does not
meet all requirements for such trading.

            (x)  No  Integrated  Offering.  Neither  Company,  nor  any  of  its
Subsidiaries  nor any of its  affiliates,  nor any person acting on its or their
behalf,  has directly or indirectly  made any offers or sales of any security or
solicited  any offers to buy any security  (other than a concurrent  offering to
Laurus under a Securities  Purchase  Agreement between Company,  a subsidiary of
the Company  and Laurus  dated as of the date  hereof (as  amended,  modified or
supplemented  from time to time,  the  "Securities  Purchase  Agreement")  under
circumstances  that would cause the offering of the Securities  pursuant to this
Agreement or any Ancillary  Agreement to be integrated  with prior  offerings by
Company for  purposes of the  Securities  Act which would  prevent  Company from

                                       20
<PAGE>

selling the  Securities  pursuant to Rule 506 under the  Securities  Act, or any
applicable exchange-related stockholder approval provisions, nor will Company or
any of its affiliates or Subsidiaries  take any action or steps that would cause
the offering of the Securities to be integrated with other offerings.

            (y) Stop Transfer.  The  Securities are restricted  securities as of
the date of this  Agreement.  Company will not issue any stop transfer  order or
other order impeding the sale and delivery of any of the Securities at such time
as  the  Securities  are  registered  for  public  sale  or  an  exemption  from
registration  is available,  except as required by state and federal  securities
laws.

            (z) Dilution.  Company specifically acknowledges that its obligation
to issue the shares of Common Stock upon conversion of the Notes and exercise of
the Warrants is binding upon Company and enforceable  regardless of the dilution
such  issuance  may have on the  ownership  interests of other  shareholders  of
Company.

            (aa) Patriot Act.  Company  certifies that, to the best of Company's
knowledge,  neither Company nor any of its Subsidiaries has been designated, and
is not owned or controlled,  by a "suspected  terrorist" as defined in Executive
Order 13224.  Company hereby  acknowledges  that Laurus seeks to comply with all
applicable  laws  concerning  money  laundering  and  related   activities.   In
furtherance of those efforts,  Company  hereby  represents,  warrants and agrees
that:  (i) none of the cash or property that Company or any of its  Subsidiaries
will pay or will  contribute  to Laurus  has been or shall be derived  from,  or
related to, any activity  that is deemed  criminal  under United States law; and
(ii) no contribution or payment by Company or any of its Subsidiaries to Laurus,
to the extent that they are within  Company's or any such  Subsidiary's  control
shall cause Laurus to be in violation of the United States Bank Secrecy Act, the
United States  International  Money Laundering Control Act of 1986 or the United
States International Money Laundering Abatement and Anti-Terrorist Financing Act
of 2001.  Company shall promptly  notify Laurus if any of these  representations
ceases to be true and  accurate  regarding  Company or any of its  Subsidiaries.
Company  agrees to provide  Laurus  with any  additional  information  regarding
Company and each Subsidiary thereof that Laurus deems necessary or convenient to
ensure  compliance  with all applicable  laws  concerning  money  laundering and
similar  activities.  Company  understands  and agrees that if at any time it is
discovered  that  any of the  foregoing  representations  are  incorrect,  or if
otherwise  required by applicable law or regulation  related to money laundering
similar  activities,   Laurus  may  undertake   appropriate  actions  to  ensure
compliance  with  applicable  law or  regulation,  including  but not limited to
segregation and/or redemption of Laurus' investment in Company.  Company further
understands that Laurus may release  confidential  information about Company and
its Subsidiaries and, if applicable, any underlying beneficial owners, to proper
authorities if Laurus, in its sole discretion, determines that it is in the best
interests of Laurus in light of relevant  rules and  regulations  under the laws
set forth in subsection  (ii) above.

            (bb)  Schedule   12(bb)  sets  forth  Company's  and  each  Eligible
Subsidiary's  name  as it  appears  in  official  filing  in  the  state  of its
incorporation,  the type of entity of Company and each Eligible Subsidiary,  the
organizational  identification  number  issued by  Company's  and each  Eligible
Subsidiary's  state of incorporation or a statement that no such number has been
issued, Company's and each Eligible Subsidiary's state of incorporation, and the
location of Company's and each Eligible  Subsidiary's  chief  executive  office,
corporate offices, warehouses, other locations of Collateral and locations where
records with respect to Collateral  are kept  (including in each case the county
of such  locations)  and,  except as set forth in such  Schedule  12(bba),  such

                                       21
<PAGE>

locations have not changed during the preceding twelve months. As of the Closing
Date,  during  the prior five  years,  except as set forth in  Schedule  12(bb),
neither  Company  nor any  Eligible  Subsidiary  has been known as or  conducted
business in any other name  (including  trade  names).  Each of Company and each
Eligible Subsidiary has only one state of incorporation.

            13. Covenants.  Company covenants and agrees with Laurus as follows:

            (a)  Stop-Orders.  Company  will advise  Laurus,  promptly  after it
receives notice of issuance by the SEC, any state  securities  commission or any
other  regulatory  authority  of any stop  order or of any order  preventing  or
suspending  any offering of any  securities of Company,  or of the suspension of
the  qualification  of the Common  Stock of Company for  offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.

            (b) Listing. Company shall promptly secure the listing of the shares
of Common  Stock  issuable  upon  conversion  of the Notes and  exercise  of the
Warrants on the NASD OTCBB (the "Principal  Market") upon which shares of Common
Stock are listed  (subject to official  notice of issuance)  and shall  maintain
such  listing so long as any other  shares of Common  Stock  shall be so listed.
Company will maintain the listing of its Common Stock on the  Principal  Market,
and will comply in all material  respects with Company's  reporting,  filing and
other  obligations  under the  bylaws or rules of the  National  Association  of
Securities Dealers ("NASD") and such exchanges, as applicable.

            (c) Market  Regulations.  Company  shall  notify  the SEC,  NASD and
applicable  state  authorities,  in accordance with their  requirements,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to Laurus and
promptly provide copies thereof to Laurus.

            (d)  Reporting  Requirements.  Company will timely file with the SEC
all reports  required to be filed  pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit such termination.

            (e) Use of Funds.  Company  agrees that it will,  and will cause its
Subsidiaries  to, use the proceeds of the sale of the Notes (i) to refinance its
existing facility with North Fork Bank and (ii) for working capital purposes.

            (f) Access to  Facilities.  Company will, and will cause each of its
Subsidiaries  to,  permit  any  representatives  designated  by  Laurus  (or any
successor of Laurus),  upon reasonable  notice and during normal business hours,
at such person's expense and accompanied by a  representative  of Company or any
such Subsidiary, as the case may be, to:

                  (i) visit and inspect any of the  properties of Company or any
such Subsidiary;

                                       22
<PAGE>

                  (ii) examine the corporate and financial records of Company or
any of its  Subsidiaries  (unless such  examination is not permitted by federal,
state  or  local  law or by  contract)  and  make  copies  thereof  or  extracts
therefrom; and

                  (iii) discuss the affairs, finances and accounts of Company or
any of its Subsidiaries with the directors, officers and independent accountants
of Company or any of its Subsidiaries.

Notwithstanding  the foregoing,  neither the Company nor any of its Subsidiaries
will provide any material,  non-public information to Laurus unless Laurus signs
a confidentiality agreement and otherwise complies with Regulation FD, under the
federal securities laws.

            (g) Taxes. Company will, and will cause each of its Subsidiaries to,
promptly pay and  discharge,  or cause to be paid and  discharged,  when due and
payable,  all  lawful  taxes,  assessments  and  governmental  charges or levies
imposed  upon the  income,  profits,  property  or  business  of Company or such
Subsidiary,  as  the  case  may  be;  provided,  however,  that  any  such  tax,
assessment,  charge  or levy  need  not be paid if the  validity  thereof  shall
currently be contested in good faith by appropriate  proceedings  and if Company
and/or such Subsidiary shall have set aside on its books adequate  reserves with
respect thereto, and provided,  further,  that Company will, and will cause each
of its  Subsidiaries  to,  pay all such  taxes,  assessments,  charges or levies
forthwith upon the  commencement  of proceedings to foreclose any lien which may
have attached as security therefor.

            (h) Insurance.  Each of Company and each Eligible Subsidiary, as the
case  may be,  will  bear  the full  risk of loss  from  any loss of any  nature
whatsoever  with  respect to the  Collateral.  Each of  Company  and each of its
Subsidiaries will keep its assets which are of an insurable character insured by
financially  sound  and  reputable  insurers  against  loss or  damage  by fire,
explosion and other risks  customarily  insured  against by companies in similar
business similarly situated as Company and its Subsidiaries; and Company and its
Subsidiaries  will  maintain,  with  financially  sound and reputable  insurers,
insurance  against other hazards and risks and liability to persons and property
to the extent and in the manner which  Company  and/or such  Subsidiary  thereof
reasonably  believes is customary  for companies in similar  business  similarly
situated  as  Company  and  its  Subsidiaries  and to the  extent  available  on
commercially reasonable terms. Company and each of its Subsidiaries will jointly
and severally bear the full risk of loss from any loss of any nature  whatsoever
with  respect to the assets  pledged to Laurus as security  for its  obligations
hereunder and under the Ancillary Agreements.  At Company's own cost and expense
in amounts and with carriers reasonably  acceptable to Laurus,  Company and each
of its Subsidiaries  shall (i) keep all its insurable  properties and properties
in which  it has an  interest  insured  against  the  hazards  of  fire,  flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other  hazards,  and for such amounts,  as is customary in the case of companies
engaged  in  businesses  similar to  Company's  or the  respective  Subsidiary's
including business interruption insurance;  (ii) maintain a bond in such amounts
as is  customary  in the case of  companies  engaged  in  businesses  similar to
Company and its Subsidiaries  insuring  against  larceny,  embezzlement or other
criminal  misappropriation  of insured's  officers and  employees who may either
singly or jointly  with others at any time have access to the assets or funds of
Company or any of its  Subsidiaries  either  directly  or  through  governmental
authority to draw upon such funds or to direct generally the disposition of such
assets; (iii) maintain public and product liability insurance against claims for
personal injury,  death or property damage suffered by others; (iv) maintain all
such worker's  compensation  or similar  insurance as may be required  under the
laws of any state or jurisdiction in which Company or any of its Subsidiaries is
engaged in business;  and (v) furnish Laurus with (x) copies of all policies and
evidence of the  maintenance  of such  policies at least thirty (30) days before
any expiration  date,  (y) excepting  Company's and its  Subsidiaries'  workers'
compensation policy, endorsements to such policies naming Laurus as "co-insured"
or "additional  insured" and appropriate  loss payable  endorsements in form and

                                       23
<PAGE>

substance  satisfactory to Laurus, naming Laurus as loss payee, and (z) evidence
that as to Laurus the insurance coverage shall not be impaired or invalidated by
any act or neglect of Company or any of its  Subsidiaries  and the insurer  will
provide  Laurus with at least  thirty (30) days  notice  prior to  cancellation.
Company  shall  instruct the  insurance  carriers  that in the event of any loss
thereunder,  the carriers  shall make payment for such loss to Laurus and not to
Company  and/or any  Subsidiary  thereof and Laurus  jointly.  If any  insurance
losses are paid by check,  draft or other  instrument  payable to Company and/or
any Subsidiary  thereof and Laurus jointly,  Laurus may endorse Company's and/or
such  Subsidiary's  name  thereon  and do such  other  things as Laurus may deem
advisable to reduce the same to cash.  Laurus is hereby authorized to adjust and
compromise  claims.  All  loss  recoveries  received  by  Laurus  upon  any such
insurance may be applied to the Obligations, in such order as Laurus in its sole
discretion  shall  determine or shall  otherwise be delivered to Company  and/or
such Subsidiary  thereof.  Any surplus shall be paid by Laurus to Company and/or
such  Subsidiary  thereof or applied as may be  otherwise  required by law.  Any
deficiency  thereon shall be paid by Company and its  Subsidiares to Laurus,  on
demand.

            (i)  Intellectual  Property.  Company shall, and shall cause each of
its Subsidiaries to, maintain in full force and effect its corporate  existence,
rights and  franchises  and all licenses  and other  rights to use  Intellectual
Property owned or possessed by it and  reasonably  deemed to be necessary to the
conduct of its business.

            (j)   Properties.   Company  will,   and  will  cause  each  of  its
Subsidiaries  to,  keep  its  properties  in  good  repair,  working  order  and
condition,  reasonable  wear and tear  excepted,  and from time to time make all
needful and proper repairs, renewals,  replacements,  additions and improvements
thereto;  and Company will, and will cause each of its  Subsidiaries  to, at all
times  comply with each  provision of all leases to which it is a party or under
which it occupies  property if the breach of such provision could  reasonably be
expected to have a Material Adverse Effect.

            (k)  Confidentiality.  Company agrees that it will not, and will not
permit any of its Subsidiaries to, disclose,  and will not include in any public
announcement, the name of Laurus, unless expressly agreed to by Laurus or unless
and until such disclosure is required by law or applicable regulation,  and then
only to the extent of such  requirement.  Company may disclose  Laurus' identity
and the terms of this Agreement to its current and  prospective  debt and equity
financing sources.

            (l) Required Approvals.  For so long as at least twenty-five percent
(25%) of the original aggregate principal amount of the Note is outstanding, the
Company,  without the prior  written  consent of the  Purchaser,  shall not, and
shall not permit any of its Subsidiaries to: (i) create, incur, assume or suffer
to exist any indebtedness (exclusive of trade debt) whether secured or unsecured
other  than  Company's  indebtedness  to  Laurus  and as set  forth on  Schedule
13(l)(i)  attached hereto and made a part hereof;  (ii) cancel any debt owing to

                                       24
<PAGE>

it in excess of  $50,000 in the  aggregate  during  any 12 month  period;  (iii)
assume,  guarantee,  endorse or otherwise become directly or contingently liable
in connection with any  obligations of any other Person,  except the endorsement
of  negotiable  instruments  by a Company for deposit or  collection  or similar
transactions  in the ordinary  course of business;  (iv)  directly or indirectly
declare,  pay or make any  dividend  or  distribution  on any class of its Stock
other than to pay dividends on shares of Preferred Stock outstanding on the date
hereof or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any Stock of Company  outstanding on the date hereof,  or
issue any  Preferred  Stock  manditorily  redeemable  prior to the  sixth  month
anniversary of the Maturity Date (as defined in the Notes); (v) purchase or hold
beneficially any Stock or other securities or evidences of indebtedness of, make
or permit to exist any loans or advances to, or make any  investment  or acquire
any  interest  whatsoever  in, or  transfer  any assets  to,  any other  Person,
including any  partnership or joint  venture,  except (x) travel  advances,  (y)
loans to  Company's  officers  and  employees  not  exceeding at any one time an
aggregate of $10,000,  and (z) existing  Subsidiaries  of Company  which (x) are
party to a guaranty, master security agreement and stock pledge agreement, dated
as of the date hereof, guaranteeing and securing the Obligations for the benefit
of  Laurus,  (y) have  granted  to Laurus a first  priority  perfected  security
interest  in  substantially  all of  such  Subsidiary's  assets  to  secure  the
Obligations;  (vi)  create or permit to exist  any  Subsidiary,  other  than any
Subsidiary  in existence on the date hereof and listed in Schedule  12(b) unless
such new Subsidiary is a wholly-owned  Subsidiary and is designated by Laurus as
either a  co-borrower  or guarantor  hereunder  and such  Subsidiary  shall have
entered  into all such  documentation  required  by Laurus,  including,  without
limitation,  to grant to Laurus a first priority  perfected security interest in
substantially all of such Subsidiary's  assets to secure the Obligations;  (vii)
directly or indirectly, prepay any indebtedness (other than to Laurus and in the
ordinary course of business), or repurchase, redeem, retire or otherwise acquire
any  indebtedness  (other than to Laurus and in the ordinary course of business)
except to make  scheduled  payments of principal  and interest  thereof;  (viii)
enter into any merger,  consolidation or other  reorganization  with or into any
other Person or acquire all or a portion of the assets or Stock of any Person or
permit any other Person to consolidate with or merge with it, unless (1) Company
is the surviving entity of such merger or consolidation, (2) no Event of Default
shall  exist  immediately  prior to and after  giving  effect to such  merger or
consolidation,   (3)  Company   shall  have   provided   Laurus  copies  of  all
documentation  relating to such merger or  consolidation  and (4) Company  shall
have  provided  Laurus with at least thirty (30) days' prior  written  notice of
such merger or consolidation;  (ix) materially change the nature of the business
in which it is presently  engaged;  (x) become  subject to  (including,  without
limitation,  by way  of  amendment  to or  modification  of)  any  agreement  or
instrument  which by its terms  would  (under any  circumstances)  restrict  the
Company's  right to  perform  the  provisions  of this  Agreement  or any of the
agreements contemplated thereby; (xi) change its fiscal year or make any changes
in accounting  treatment and reporting practices without prior written notice to
Laurus except as required by GAAP or in the tax reporting treatment or except as
required by law; (xii) enter into any transaction with any employee, director or
Affiliate,  except in the ordinary  course on arms-length  terms; or (xiii) bill
Accounts  under any name  except the  present  name of  Company or its  existing
Subsidiaries.

                                       25
<PAGE>

            (m) Reissuance of Securities. Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 37 below at
such time as:

                  (i)  the  holder  thereof  is  permitted  to  dispose  of such
Securities pursuant to Rule 144(k) under the Securities Act; or

                  (ii)  upon  resale   subject  to  an  effective   registration
statement  after such  Common  Stock  underlying  the Notes and the  Warrant are
registered under the Securities Act.

Company agrees to cooperate with Laurus in connection with all resales  pursuant
to Rule 144(d) and Rule 144(k) and provide  legal  opinions  necessary  to allow
such  resales  provided  Company and its counsel  receive  reasonably  requested
representations from Laurus and broker, if any.

            (n) Opinion.  On the Closing Date, Company will deliver to Laurus an
opinion acceptable to Laurus from Company's legal counsel. Company will provide,
at Company's expense,  such other legal opinions in the future as are reasonably
necessary for the conversion of the Notes and the exercise of the Warrants.

            (o)  Legal  Name,  etc.  Neither  Company  nor  any of its  Eligible
Subsidiaries  will,  without providing Laurus with 30 days prior written notice,
change (i) its name as it appears  in the  official  filings in the state of its
incorporation  or  formation,  (ii) the type of legal  entity  it is,  (iii) its
organization   identification   number,   if  any,   issued   by  its  state  of
incorporation,  (iv) its state of  incorporation or (v) amend its certificate of
incorporation,  by-laws or other  organizational  document.

            (p) Compliance with Laws. The operation of each of the Company's and
each of its  Subsidiaries'  business is and will continue to be in compliance in
all material respects with all applicable  federal,  state and local laws, rules
and ordinances, including to all laws, rules, regulations and orders relating to
taxes,  payment  and  withholding  of  payroll  taxes,   employer  and  employee
contributions  and similar items,  securities,  employee  retirement and welfare
benefits, employee health safety and environmental matters.

            (q) Notices.  Each of the Company and each of its Subsidiaries  will
promptly  inform Laurus in writing of: (i) the  commencement  of all proceedings
and  investigations  by or before  and/or the receipt of any notices  from,  any
governmental  or  nongovernmental  body and all actions and  proceedings  in any
court or before any arbitrator  against or in any way concerning any event which
could  reasonably  be expected to have  singly or in the  aggregate,  a Material
Adverse Effect;  (ii) any change which has had, or could  reasonably be expected
to have, a Material Adverse Effect;  (iii) any Event of Default or Default;  and
(iv) any default or any event which with the passage of time or giving of notice
or both would  constitute a default under any agreement for the payment of money
to which  Company or any of its  Subsidiaries  is a party or by which Company or
any of its Subsidiaries or any of Company's or any such Subsidiary's  properties
may be bound the breach of which would have a Material Adverse Effect.

            (r) Margin Stock. The Company will not permit any of the proceeds of
the Loans made  hereunder to be used  directly or  indirectly  to  "purchase" or
"carry"  "margin  stock" or to repay  indebtedness  incurred  to  "purchase"  or
"carry"  "margin  stock"  within the  respective  meanings of each of the quoted

                                       26
<PAGE>

terms under Regulation U of the Board of Governors of the Federal Reserve System
as now and from time to time  hereafter in effect.

            (s) Offering Restrictions. Except as previously disclosed in the SEC
Reports or in the  Exchange Act Filings,  or stock or stock  options  granted to
employees or directors of the Company (these exceptions  hereinafter referred to
as the "Excepted  Issuances"),  neither the Company nor any of its  Subsidiaries
will,  for so  long  as at  least  twenty-five  percent  (25%)  of  the  Capital
Availability  Amount  is  outstanding  in  accordance  with  the  terms  of this
Agreement and the Ancillary Agreements, issue any securities with a continuously
variable/floating  conversion  feature  which are or could be (by  conversion or
registration)   free-trading   securities  (i.e.   common  stock  subject  to  a
registration  statement)  prior to the full repayment or conversion of the Notes
(together  with all accrued and unpaid  interest and fees  related  thereto (the
"Exclusion Period").

            (t)  Authorization  and  Reservation of Shares.  Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the conversion of the Notes and exercise of the Warrants.

            (v) Financing Right of First Refusal.  (i) The Company hereby grants
to the  Purchaser a right of first refusal to provide any  Additional  Financing
(as defined below) to be issued by the Company  and/or any of its  Subsidiaries,
subject to the following terms and  conditions.  From and after the date hereof,
prior  to the  incurrence  of any  additional  indebtedness  and/or  the sale or
issuance of any equity  interests of the Company or any of its  Subsidiaries (an
"Additional  Financing"),  the Company and/or any Subsidiary of the Company,  as
the case may be,  shall  notify  Laurus  of its  intention  to enter  into  such
Additional Financing. In connection therewith, the Company and/or the applicable
Subsidiary  thereof shall submit a fully  executed term sheet (a "Proposed  Term
Sheet") to Laurus  setting forth the terms,  conditions  and pricing of any such
Additional  Financing  (such  financing to be negotiated on "arm's length" terms
and the terms  thereof to be  negotiated  in good faith)  proposed to be entered
into by the Company and/or such Subsidiary. Laurus shall have the right, but not
the obligation, to deliver its own proposed term sheet (the "Laurus Term Sheet")
setting  forth the terms and  conditions  upon which  Laurus would be willing to
provide such  Additional  Financing to the Company and/or such  Subsidiary.  The
Laurus Term Sheet shall contain  terms no less  favorable to the Company and /or
the Subsidiary than those outlined in Proposed Term Sheet.  Laurus shall deliver
such Laurus Term Sheet within ten business days of receipt of each such Proposed
Term Sheet. If the provisions of the Laurus Term Sheet are at least as favorable
to the Company and/or such Subsidiary,  as the case may be, as the provisions of
the Proposed Term Sheet, the Company and/or such Subsidiary shall enter into and
consummate  the  Additional  Financing  transaction  outlined in the Laurus Term
Sheet.  Notwithstanding the foregoing, for the purpose of this subsection (v)(i)
only, an  "Additional  Financing"  shall not include up to $10,000,000 of equity
financing arranged by Sands Brothers prior to December 31, 2004.

            (ii) The Company will not, and will not permit its  Subsidiaries to,
agree,  directly or  indirectly,  to any  restriction  with any person or entity
which limits the ability of Laurus to consummate an  Additional  Financing  with
the Company or any of its Subsidiaries.

                                       27
<PAGE>

            14. Further Assurances.  At any time and from time to time, upon the
written  request of Laurus and at the sole  expense of Company,  each of Company
and each Eligible Subsidiary shall promptly and duly execute and deliver any and
all such further  instruments  and  documents  and take such  further  action as
Laurus may request (a) to obtain the full  benefits  of this  Agreement  and the
Ancillary  Agreements,  (b) to protect,  preserve and maintain Laurus' rights in
the Collateral and under this  Agreement or any Ancillary  Agreement,  or (c) to
enable Laurus to exercise all or any of the rights and powers herein  granted or
any Ancillary Agreement.

            15. Representations and Warranties of Laurus.

            Laurus hereby represents and warrants to Company as follows:

            (a) Requisite  Power and Authority.  Laurus has all necessary  power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Ancillary  Agreements and to carry out their  provisions.  All
corporate  action on Laurus' part required for the lawful execution and delivery
of this Agreement and the Ancillary  Agreements have been or will be effectively
taken  prior to the  Closing  Date.  Upon their  execution  and  delivery,  this
Agreement and the Ancillary  Agreements will be valid and binding obligations of
Laurus,  enforceable  in accordance  with their terms,  except (a) as limited by
applicable bankruptcy, insolvency,  reorganization,  moratorium or other laws of
general  application  affecting  enforcement  of creditors'  rights,  and (b) as
limited by general  principles  of equity  that  restrict  the  availability  of
equitable and legal remedies.

            (b)  Investment   Representations.   Laurus   understands  that  the
Securities are being offered and sold pursuant to an exemption from registration
contained  in the  Securities  Act  based in part upon  Laurus'  representations
contained in this Agreement,  including,  without limitation,  that Laurus is an
"accredited  investor"  within the meaning of Regulation D under the  Securities
Act.  Laurus  has  received  or has had full  access to all the  information  it
considers  necessary or appropriate to make an informed investment decision with
respect  to the  Note  to be  purchased  by it  under  this  Agreement  and  the
Securities acquired by it upon the conversion of the Note.

            (c) Laurus Bears Economic Risk. Laurus has substantial experience in
evaluating  and  investing in private  placement  transactions  of securities in
companies  similar to Company so that it is capable of evaluating the merits and
risks of its  investment  in Company  and has the  capacity  to protect  its own
interests.  Laurus  must bear the  economic  risk of this  investment  until the
Securities are sold pursuant to (i) an effective  registration  statement  under
the Securities Act, or (ii) an exemption from registration is available.

            (d) Acquisition for Own Account.  Laurus is acquiring the Securities
for its own account for  investment  only, and not as a nominee or agent and not
with a view towards or for resale in connection with their distribution.

            (e) Laurus Can  Protect  Its  Interest.  Laurus  represents  that by
reason of its, or of its management's, business and financial experience, Laurus
has the capacity to evaluate the merits and risks of its investment in the Note,
and the  Securities  and to protect its own  interests  in  connection  with the

                                       28
<PAGE>

transactions  contemplated  in this  Agreement,  and the  Ancillary  Agreements.
Further,  Laurus is aware of no publication of any  advertisement  in connection
with the transactions contemplated in the Agreement or the Ancillary Agreements.

            (f) Accredited Investor.  Laurus represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.

            (g) Shorting. Neither Laurus nor any of its Affiliates or investment
partners has,  will, or will cause any person or entity,  to directly  engage in
"short sales" of Company's  common stock  directly  related to Company's  Common
Stock  as long as any  Note  (as  defined  in  each  of this  Agreement  and the
Securities Purchase Agreement) shall be outstanding.

(h) Patriot Act. Laurus certifies that, to the best of Laurus' knowledge, Laurus
has not  been  designated,  and is not  owned  or  controlled,  by a  "suspected
terrorist" as defined in Executive Order 13224.  Laurus seeks to comply with all
applicable  laws  concerning  money  laundering  and  related   activities.   In
furtherance  of those  efforts,  Laurus hereby  represents,  warrants and agrees
that:  (i) none of the cash or property  that  Laurus  will use to purchase  the
Notes has been or shall be derived  from,  or related to, any  activity  that is
deemed  criminal under United States law; and (ii) no  disbursement by Laurus to
the Company,  to the extent within Laurus' control,  shall cause Laurus to be in
violation of the United States Bank Secrecy Act, the United States International
Money Laundering  Control Act of 1986 or the United States  International  Money
Laundering  Abatement and  Anti-Terrorist  Financing  Act of 2001.  Laurus shall
promptly  notify the Company if any of these  representations  ceases to be true
and  accurate  regarding  Laurus.  Laurus  agrees to  provide  the  Company  any
additional  information  regarding  Laurus that the Company  deems  necessary or
convenient  to ensure  compliance  with all  applicable  laws  concerning  money
laundering and similar activities.  Laurus understands and agrees that if at any
time it is discovered that any of the foregoing  representations  are incorrect,
or if  otherwise  required  by  applicable  law or  regulation  related to money
laundering  similar  activities,  Laurus may  undertake  appropriate  actions to
ensure  compliance with applicable law or regulation,  including but not limited
to segregation  and/or redemption of Laurus'  investment in the Company.  Laurus
further  understands that the Company may release  information about Laurus and,
if applicable,  any underlying  beneficial  owners, to proper authorities if the
Company, in its sole discretion,  determines that it is in the best interests of
the Company in light of relevant rules and regulations  under the laws set forth
in subsection (ii) above.

            16. Power of Attorney.  Each of Company and each Eligible Subsidiary
hereby  appoints  Laurus,  or any other  Person  whom  Laurus may  designate  as
Company's and/or any Eligible Subsidiary's attorney,  with power to: (i) endorse
Company's and each Eligible Subsidiary's name on any checks, notes, acceptances,
money  orders,  drafts or other forms of payment or security  that may come into
Laurus' possession;  (ii) sign Company's and each Eligible  Subsidiary's name on
any invoice or bill of lading  relating to any Accounts,  drafts against Account
Debtors, schedules and assignments of Accounts, notices of assignment, financing
statements and other public records,  verifications of Account and notices to or
from  Account  Debtors;  (iii) verify the  validity,  amount or any other matter
relating to any Account by mail, telephone,  telegraph or otherwise with Account
Debtors; (iv) do all things necessary to carry out this Agreement, any Ancillary
Agreement  and all related  documents;  and (v) on or after the  occurrence  and
continuation  of an Event of  Default,  notify the post  office  authorities  to
change the address for delivery of Company's and each Eligible Subsidiary's mail
to an address designated by Laurus, and to receive, open and dispose of all mail

                                       29
<PAGE>

addressed  to  Company or any  Eligible  Subsidiary.  Each of  Company  and each
Eligible  Subsidiary  hereby  ratifies and  approves  all acts of the  attorney.
Neither Laurus, nor the attorney will be liable for any acts or omissions or for
any error of judgment or mistake of fact or law, except for gross  negligence or
willful misconduct.  This power, being coupled with an interest,  is irrevocable
so long as Laurus has a security  interest and until the  Obligations  have been
fully  satisfied.

            17. Term of  Agreement.  Laurus'  agreement to make Loans and extend
financial  accommodations  under  and in  accordance  with  the  terms  of  this
Agreement or any  Ancillary  Agreement  shall  continue in full force and effect
until the  expiration  of the Initial Term.  At Laurus'  election  following the
occurrence of an Event of Default,  Laurus may  terminate  this  Agreement.  The
termination of the Agreement shall not affect any of Laurus' rights hereunder or
any Ancillary  Agreement and the provisions hereof and thereof shall continue to
be fully  operative  until all  transactions  entered into,  rights or interests
created and the  Obligations  have been  irrevocably  disposed of,  concluded or
liquidated.  Notwithstanding  the  foregoing,  Laurus shall release its security
interests at any time after thirty (30) days notice upon irrevocable  payment to
it of all  Obligations  as calculated by Laurus in accordance  with the terms of
this  Agreement  and the  Ancillary  Agreements  if  Company  and each  Eligible
Subsidiary  shall have paid to Laurus an early payment fee in an amount equal to
(1) five percent (5%) of the Capital  Availability Amount if such payment occurs
prior to the first anniversary of the Closing Date, (2) four percent (4%) of the
Capital  Availability  Amount  if such  payment  occurs  on or after  the  first
anniversary  and prior to the second  anniversary  of the  Closing  Date and (3)
three percent (3%) of the Capital Availability Amount if such termination occurs
thereafter during the Initial Term; such fee being intended to compensate Laurus
for its costs and expenses  incurred in initially  approving  this  Agreement or
extending  same.  Such early  payment fee shall be due and payable by Company to
Laurus upon  termination by  acceleration of this Agreement by Laurus due to the
occurrence and continuance of an Event of Default.

            18.  Termination  of Lien.  The Liens and  rights  granted to Laurus
hereunder and any Ancillary  Agreements  and the financing  statements  filed in
connection  herewith  or  therewith  shall  continue  in full force and  effect,
notwithstanding  the  termination  of this  Agreement or the fact that Company's
account may from time to time be temporarily in a zero or credit position, until
(a) all of the  Obligations of Company have been paid or performed in full after
the  termination  of  this  Agreement.  Laurus  shall  not be  required  to send
termination  statements to Company or any Eligible  Subsidiary,  or to file them
with any  filing  office,  unless  and until this  Agreement  and the  Ancillary
Agreements  shall have been  terminated in  accordance  with their terms and all
Obligations paid in full in immediately available funds.

            19. Events of Default.  The occurrence of any of the following shall
constitute an "Event of Default":

            (a) failure to make payment of any of the Obligations  when required
hereunder;

            (b)  failure by the  Company or any of its  Subsidiaries  to pay any
taxes  when  due  unless  such  taxes  are  being  contested  in good  faith  by
appropriate  proceedings  and with respect to which adequate  reserves have been
provided on Company's and/or such Subsidiary's books;

                                       30
<PAGE>

            (c) failure to perform  under,  and/or  committing any breach of, in
any material  respect,  this  Agreement or any Ancillary  Agreement or any other
agreement  between Company and/or any Subsidiary  thereof,  on the one hand, and
Laurus,  on the other hand,  which failure or breach shall continue for a period
of thirty (30) days after the occurrence thereof;

            (d) the  occurrence  of any event of default (or similar term) under
any indebtedness  which Company or any of its Subsidiaries is a party with third
parties;

            (e) any representation, warranty or statement made by Company or any
of its  Subsidiaries  hereunder,  in any Ancillary  Agreement,  any certificate,
statement or document  delivered  pursuant to the terms hereof, or in connection
with the transactions contemplated by this Agreement should at any time be false
or misleading in any material respect;

            (f) an  attachment or levy is made upon  Company's  assets having an
aggregate value in excess of $150,000 or a judgment is rendered  against Company
or Company's  property  involving a liability of more than $150,000  which shall
not have been vacated, discharged, stayed or bonded within thirty (30) days from
the entry thereof;

            (g) any change in Company's or any of its Subsidiaries' condition or
affairs  (financial  or  otherwise)  which in  Laurus'  reasonable,  good  faith
opinion, could reasonably be expected to have a Material Adverse Effect;

            (h) any Lien created hereunder or under any Ancillary  Agreement for
any  reason  ceases to be or is not a valid and  perfected  Lien  having a first
priority interest;

            (i) if  Company  or any of its  Subsidiaries  shall (i)  apply  for,
consent to or suffer to exist the  appointment  of, or the taking of  possession
by, a  receiver,  custodian,  trustee  or  liquidator  of  itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of creditors,  (iii) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect),  (iv) be  adjudicated  a bankrupt or insolvent,
(v) file a petition seeking to take advantage of any other law providing for the
relief of debtors,  (vi) acquiesce to, or fail to have dismissed,  within thirty
(30) days,  any petition  filed  against it in any  involuntary  case under such
bankruptcy  laws,  or (vii) take any action for the purpose of effecting  any of
the foregoing;

            (j)  Company or any of its  Subsidiaries  shall admit in writing its
inability,  or be generally  unable to pay its debts as they become due or cease
operations of its present business;

            (k)  Company  directly  or  indirectly  sells,  assigns,  transfers,
conveys,  or  suffers  or permits  to occur any sale,  assignment,  transfer  or
conveyance of any assets of Company or any interest therein, except as permitted
herein;

            (l) (i) Any  "Person"  or  "group"  (as such  terms are  defined  in
Sections  13(d) and 14(d) of the Exchange  Act, as in effect on the date hereof)
is or becomes the  "beneficial  owner" (as defined in Rules  13(d)-3 and 13(d)-5
under the  Exchange  Act),  directly  or  indirectly,  of 35% or more on a fully
diluted basis of the then  outstanding  voting equity interest of the Company or
(ii) the Board of Directors of the Company  shall cease to consist of a majority
of the Board of  Directors  of the  Company  on the date  hereof  (or  directors
appointed by a majority of the Board of Directors in effect immediately prior to
such appointment);

                                       31
<PAGE>

            (m) the indictment or threatened indictment of Company or any of its
Subsidiaries  or any  executive  officer of  Company or any of its  Subsidiaries
under any criminal  statute,  or  commencement  or  threatened  commencement  of
criminal or civil  proceeding  against Company or any of its Subsidiaries or any
executive  officer  of  Company  or any of its  Subsidiaries  pursuant  to which
statute  or  proceeding  penalties  or  remedies  sought  or  available  include
forfeiture of any of the property of Company or any of its Subsidiaries; or

            (n) if an Event of Default  shall  occur under and as defined in any
Note or in any Ancillary Agreement;.

            (o) the Company or any of its Subsidiaries  shall breach any term or
provision of any  Ancillary  Agreement to which it is a party which is not cured
within any applicable cure or grace period;

            (p) if the Company of any of its Subsidiaries attempts to terminate,
challenges the validity of, or its liability under any Ancillary Agreement; or

            (q) should the  Company  or any of its  Subsidiaries  default in its
obligations  under  any  Ancillary  Agreement  to  which it is a party or if any
proceeding  shall be brought to challenge  the validity,  binding  effect of any
Ancillary  Agreement  to which it is a party or should the Company or any of its
Subsidiaries  breach any  representation,  warranty or covenant contained in any
Ancillary  Agreement  to which it is a party or should any  Ancillary  Agreement
cease to be a valid, binding and enforceable obligation of the Company of any of
its Subsidiaries (to the extent such Persons are a party thereto).

            20.  Remedies.  Following  the  occurrence  of an Event of  Default,
Laurus  shall  have the right to demand  repayment  in full of all  Obligations,
whether or not otherwise due. Until all Obligations  have been fully  satisfied,
Laurus shall retain its Lien in all  Collateral.  Laurus shall have, in addition
to all other rights provided herein and in each Ancillary Agreement,  the rights
and remedies of a secured party under the UCC, and under other  applicable  law,
all other legal and equitable rights to which Laurus may be entitled,  including
the right to take immediate  possession of the  Collateral,  to require  Company
and/or each  Eligible  Subsidiary to assemble the  Collateral,  at Company's and
each Eligible  Subsidiaries' joint and several expense, and to make it available
to Laurus at a place designated by Laurus which is reasonably convenient to both
parties and to enter any of the premises of Company or any  Eligible  Subsidiary
or wherever the Collateral shall be located, with or without force or process of
law,  and to keep and store the same on said  premises  until  sold (and if said
premises be the property of Company or any Eligible  Subsidiary,  Company agrees
not to  charge  Laurus  for  storage  thereof),  and the  right to apply for the
appointment of a receiver for Company's and each Eligible Subsidiary's property.
Further,  Laurus may, at any time or times after the  occurrence  of an Event of
Default,  sell and  deliver  all  Collateral  held by or for Laurus at public or
private sale for cash,  upon credit or  otherwise,  at such prices and upon such
terms as Laurus,  in Laurus'  sole  discretion,  deems  advisable  or Laurus may
otherwise  recover upon the Collateral in any commercially  reasonable manner as

                                       32
<PAGE>

Laurus, in its sole discretion,  deems advisable.  The requirement of reasonable
notice shall be met if such notice is mailed  postage  prepaid to Company or any
such  Eligible  Subsidiary,  as the case may be, at Company's  or such  Eligible
Subsidiary's  address as shown in Laurus' records, at least ten (10) days before
the  time of the  event of  which  notice  is  being  given.  Laurus  may be the
purchaser at any sale, if it is public.  In connection  with the exercise of the
foregoing  remedies,  Laurus is granted  permission  to use all of Company's and
each Eligible Subsidiary's trademarks, tradenames,  tradestyles, patents, patent
applications, licenses, franchises and other proprietary rights. The proceeds of
sale  shall be  applied  first to all  costs  and  expenses  of sale,  including
attorneys'  fees, and second to the payment (in whatever order Laurus elects) of
all Obligations. After the indefeasible payment and satisfaction in full in cash
of all of the  Obligations,  and after the payment by Laurus of any other amount
required by any provision of law,  including  Section 608(a)(1) of the Code (but
only after  Laurus has  received  what Laurus  considers  reasonable  proof of a
subordinate  party's security  interest),  the surplus, if any, shall be paid to
Company,  such Eligible Subsidiary or its representatives or to whosoever may be
lawfully  entitled to receive the same, or as a court of competent  jurisdiction
may direct.  Each of Company and each Eligible  Subsidiary  shall remain jointly
and  severally  liable  to  Laurus  for  any  deficiency.   Company  and  Laurus
acknowledge  that the actual  damages that would be incurred by Laurus after the
occurrence  of an Event of  Default  would be  difficult  to  quantify  and that
Company and Laurus have agreed that the fees and  obligations  set forth in this
Section and in this Agreement would  constitute fair and appropriate  liquidated
damages in the event of any such termination.

            21. Waivers. To the full extent permitted by applicable law, each of
Company and each Eligible  Subsidiary hereby waives (a) presentment,  demand and
protest,   and  notice  of   presentment,   dishonor,   intent  to   accelerate,
acceleration,  protest,  default,  nonpayment,  maturity,  release,  compromise,
settlement,  extension  or  renewal  of any or all of  this  Agreement  and  the
Ancillary Agreements or any other notes, commercial paper, Accounts,  contracts,
Documents,  Instruments, Chattel Paper and guaranties at any time held by Laurus
on which Company or any such Eligible  Subsidiary may in any way be liable,  and
hereby  ratifies and  confirms  whatever  Laurus may do in this regard;  (b) all
rights to notice and a hearing prior to Laurus' taking possession or control of,
or to Laurus'  replevy,  attachment or levy upon,  any Collateral or any bond or
security  that  might be  required  by any  court  prior to  allowing  Laurus to
exercise any of its remedies;  and (c) the benefit of all  valuation,  appraisal
and exemption  laws. Each of Company and each Eligible  Subsidiary  acknowledges
that it has been advised by counsel of its choices and decisions with respect to
this Agreement,  the Ancillary Agreements and the transactions  evidenced hereby
and thereby.

            22.   Expenses.   Company  shall  pay  all  of  Laurus'   reasonable
out-of-pocket costs and expenses, including reasonable fees and disbursements of
in-house or outside counsel and appraisers,  in connection with the preparation,
execution and delivery of this  Agreement and the Ancillary  Agreements,  and in
connection with the prosecution or defense of any action, contest, dispute, suit
or  proceeding  concerning  any matter in any way arising out of,  related to or
connected with this Agreement or any Ancillary Agreement. Company shall also pay
all of Laurus'  reasonable  fees,  charges,  out-of-pocket  costs and  expenses,
including fees and  disbursements of counsel and appraisers,  in connection with
(a) the preparation, execution and delivery of any waiver, any amendment thereto
or consent proposed or executed in connection with the transactions contemplated
by this Agreement or the Ancillary Agreements, (b) Laurus' obtaining performance
of the Obligations under this Agreement and any Ancillary Agreements, including,
but not limited to, the  enforcement or defense of Laurus'  security  interests,
assignments of rights and Liens hereunder as valid perfected security interests,
(c) any  attempt to  inspect,  verify,  protect,  collect,  sell,  liquidate  or
otherwise dispose of any Collateral,  (d) any appraisals or re-appraisals of any
property  (real  or  personal)  pledged  to  Laurus  by  Company  or  any of its

                                       33
<PAGE>

Subsidiaries as Collateral  for, or any other Person as security for,  Company's
Obligations  hereunder and (e) any  consultations  in connection with any of the
foregoing.  Company shall also pay Laurus'  customary  bank charges for all bank
services  (including  wire  transfers)  performed  or caused to be  performed by
Laurus for Company or any of its Subsidiaries at Company's or such  Subsidiary's
request or in connection with Company's loan account with Laurus. All such costs
and expenses  together  with all filing,  recording  and search fees,  taxes and
interest  payable by  Company to Laurus  shall be payable on demand and shall be
secured by the Collateral. If any tax by any Governmental Authority is or may be
imposed  on or as a  result  of  any  transaction  between  Company  and/or  any
Subsidiary  thereof, on the one hand, and Laurus on the other hand, which Laurus
is or may be required to withhold or pay,  Company  agrees to indemnify and hold
Laurus  harmless in respect of such taxes,  and Company will repay to Laurus the
amount of any such taxes which shall be charged to Company's account;  and until
Company  shall  furnish  Laurus with  indemnity  therefor (or supply Laurus with
evidence  satisfactory to it that due provision for the payment thereof has been
made), Laurus may hold without interest any balance standing to Company's credit
and Laurus shall retain its Liens in any and all Collateral.

            23.  Assignment  By  Laurus.  Laurus  may  assign  any or all of the
Obligations  together  with any or all of the  security  therefor  to any Person
which is not a competitor  of Company and any such  transferee  shall succeed to
all of Laurus' rights with respect thereto. Upon such transfer,  Laurus shall be
released  from all  responsibility  for the  Collateral  to the  extent  same is
assigned to any transferee. Laurus may from time to time sell or otherwise grant
participations   in  any  of  the   Obligations  and  the  holder  of  any  such
participation  shall,  subject to the terms of any agreement  between Laurus and
such  holder,  be  entitled to the same  benefits as Laurus with  respect to any
security  for the  Obligations  in which such holder is a  participant.  Company
agrees that each such holder may exercise  any and all rights of banker's  lien,
set-off and counterclaim with respect to its participation in the Obligations as
fully as though  Company were directly  indebted to such holder in the amount of
such participation.

            24. No Waiver;  Cumulative  Remedies.  Failure by Laurus to exercise
any right, remedy or option under this Agreement, any Ancillary Agreement or any
supplement  hereto or thereto or any other agreement  between Company and Laurus
or delay by Laurus in  exercising  the same,  will not  operate as a waiver;  no
waiver by Laurus will be effective  unless it is in writing and then only to the
extent specifically stated. Laurus' rights and remedies under this Agreement and
the Ancillary Agreements will be cumulative and not exclusive of any other right
or remedy which Laurus may have.

            25. Application of Payments. Company irrevocably waives the right to
direct the  application  of any and all payments at any time or times  hereafter
received by Laurus from or on Company's  behalf and Company  hereby  irrevocably
agrees  that  Laurus  shall  have the  continuing  exclusive  right to apply and
reapply any and all payments received at any time or times hereafter against the
Obligations   hereunder   in  such   manner   as  Laurus   may  deem   advisable
notwithstanding any entry by Laurus upon any of Laurus' books and records.

                                       34
<PAGE>

            26. Indemnity.  Company agrees to indemnify and hold Laurus, and its
respective  affiliates,  employees,  attorneys and agents (each, an "Indemnified
Person"),  harmless  from and against any and all suits,  actions,  proceedings,
claims,  damages,  losses,  liabilities  and  expenses  of any  kind  or  nature
whatsoever  (including  attorneys'  fees and  disbursements  and other  costs of
investigation or defense, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of credit  having  been  extended,  suspended  or  terminated  under this
Agreement or any of the Ancillary  Agreements or with respect to the  execution,
delivery,  enforcement,  performance and  administration of, or in any other way
arising out of or relating to, this Agreement,  the Ancillary  Agreements or any
other documents or transactions contemplated by or referred to herein or therein
and any actions or failures to act with respect to any of the foregoing,  except
to the extent that any such  indemnified  liability is finally  determined  by a
court of competent  jurisdiction to have resulted  solely from such  Indemnified
Person's gross negligence or willful misconduct.  NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE  OR LIABLE TO  COMPANY  OR TO ANY OTHER  PARTY OR TO ANY  SUCCESSOR,
ASSIGNEE  OR THIRD  PARTY  BENEFICIARY  OR ANY  OTHER  PERSON  ASSERTING  CLAIMS
DERIVATIVELY   THROUGH  SUCH  PARTY,  FOR  INDIRECT,   PUNITIVE,   EXEMPLARY  OR
CONSEQUENTIAL  DAMAGES  WHICH MAY BE ALLEGED AS A RESULT OF CREDIT  HAVING  BEEN
EXTENDED,  SUSPENDED  OR  TERMINATED  UNDER  THIS  AGREEMENT  OR  ANY  ANCILLARY
AGREEMENT  OR AS A RESULT OF ANY OTHER  TRANSACTION  CONTEMPLATED  HEREUNDER  OR
THEREUNDER.

            27. Revival. Company further agrees that to the extent Company makes
a payment or payments to Laurus,  which  payment or payments or any part thereof
are subsequently  invalidated,  declared to be fraudulent or  preferential,  set
aside  and/or  required  to be repaid to a trustee,  receiver or any other party
under any bankruptcy act, state or federal law,  common law or equitable  cause,
then, to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made.

            28. Notices. Any notice or request hereunder may be given to Company
or Laurus at the  respective  addresses  set forth below or as may  hereafter be
specified in a notice designated as a change of address under this Section.  Any
notice or request  hereunder  shall be given by  registered  or certified  mail,
return receipt requested,  hand delivery,  overnight mail or telecopy (confirmed
by mail).  Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when  delivered to any officer of the party to whom it
is  addressed,  in the case of those by mail or overnight  mail,  deemed to have
been given three (3) business days after the date when  deposited in the mail or
with the overnight mail carrier, and, in the case of a telecopy, when confirmed.

                                       35
<PAGE>
<TABLE>
<CAPTION>
<S>               <C>                                       <C>
Notices shall be provided as follows:

                 If to Laurus:                              Laurus Master Fund, Ltd.
                                                            c/o Laurus Capital Management, LLC
                                                            825 Third Avenue 14th Fl.
                                                            New York, New York 10022
                                                            Attention:  John E. Tucker, Esq.
                                                            Telephone:  (212) 541-5800
                                                            Telecopier:  (212) 541-4434

                 If to Company or any Eligible Subsidiary:  Conversion Services International, Inc.
                                                            100 Eagle Rock Avenue
                                                            East Hanover, New Jersey 07936
                                                            Attention:        Chief Financial Officer
                                                            Facsimile:        973-581-7113
                 With a copy to:                            Ellenoff Grossman & Schole LLP
                                                            370 Lexington Avenue
                                                            New York, New York 10017
                                                            Attention:        David Selengut, Esq.
                                                            Facsimile:        212-370-7889
</TABLE>

or such other address as may be  designated  in writing  hereafter in accordance
with this Section 28 by such Person.

            29.  Governing Law,  Jurisdiction and Waiver of Jury Trial. (a) THIS
AGREEMENT  AND THE ANCILLARY  AGREEMENTS  SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK  APPLICABLE  TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE.

            (b) COMPANY AND EACH ELIGIBLE  SUBSIDIARY HEREBY CONSENTS AND AGREES
THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK SHALL  HAVE  EXCLUSIVE  JURISDICTION  TO HEAR AND  DETERMINE  ANY CLAIMS OR
DISPUTES BETWEEN COMPANY AND/OR EACH ELIGIBLE  SUBSIDIARY,  ON THE ONE HAND, AND
LAURUS, ON THE OTHER HAND,  PERTAINING TO THIS AGREEMENT OR ANY OF THE ANCILLARY
AGREEMENTS OR TO ANY MATTER  ARISING OUT OF OR RELATED TO THIS  AGREEMENT OR ANY
OF THE ANCILLARY AGREEMENTS; PROVIDED, THAT LAURUS, EACH ELIGIBLE SUBSIDIARY AND
COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK,  STATE OF NEW YORK; AND FURTHER
PROVIDED,  THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
LAURUS FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO COLLECT THE  OBLIGATIONS,  TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE  OBLIGATIONS,  OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LAURUS.  EACH OF COMPANY  AND EACH  ELIGIBLE  SUBSIDIARY  EXPRESSLY  SUBMITS AND
CONSENTS IN ADVANCE TO SUCH  JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION,  IMPROPER VENUE OR FORUM NON CONVENIENS.  EACH OF
COMPANY AND EACH  ELIGIBLE  SUBSIDIARY  HEREBY  WAIVES  PERSONAL  SERVICE OF THE

                                       36
<PAGE>

SUMMONS,  COMPLAINT  AND OTHER  PROCESS  ISSUED  IN ANY SUCH  ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS,  COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED  OR CERTIFIED  MAIL  ADDRESSED TO COMPANY AT THE ADDRESS SET FORTH IN
SECTION 27 AND THAT SERVICE SO MADE SHALL BE DEEMED  COMPLETED  UPON THE EARLIER
OF COMPANY'S OR SUCH ELIGIBLE  SUBSIDIARY'S,  AS THE CASE MAY BE, ACTUAL RECEIPT
THEREOF  OR THREE (3) DAYS  AFTER  DEPOSIT  IN THE U.S.  MAILS,  PROPER  POSTAGE
PREPAID.

            (c) THE PARTIES  DESIRE  THAT THEIR  DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION,  SUIT, OR  PROCEEDING  BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, ANY
ELIGIBLE  SUSBIDIARY  AND/OR COMPANY ARISING OUT OF, CONNECTED WITH,  RELATED OR
INCIDENTAL TO THE RELATIONSHIP  ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED THERETO.

            30.  Limitation of Liability.  Company  acknowledges and understands
that in order to assure  repayment of the  Obligations  hereunder  Laurus may be
required to exercise any and all of Laurus'  rights and remedies  hereunder  and
agrees that,  except as limited by  applicable  law,  neither  Laurus nor any of
Laurus'  agents shall be liable for acts taken or omissions  made in  connection
herewith or therewith  except for actual bad faith.

            31.  Entire   Understanding.   This   Agreement  and  the  Ancillary
Agreements contain the entire understanding between Company and Laurus as to the
subject matter hereof and thereof and any promises, representations,  warranties
or  guarantees  not herein  contained  shall have no force and effect  unless in
writing,  signed by  Company's  and Laurus'  respective  officers.  Neither this
Agreement,  the Ancillary Agreements,  nor any portion or provisions thereof may
be changed, modified, amended, waived,  supplemented,  discharged,  cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged.

            32. Severability. Wherever possible each provision of this Agreement
or the  Ancillary  Agreements  shall  be  interpreted  in such  manner  as to be
effective and valid under applicable law, but if any provision of this Agreement
or the Ancillary  Agreements  shall be prohibited by or invalid under applicable
law such provision  shall be  ineffective  to the extent of such  prohibition or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining provisions thereof.

            33.  Captions.  All  captions  are and shall be without  substantive
meaning or content of any kind whatsoever.

            34.  Counterparts;  Telecopier  Signatures.  This  Agreement  may be
executed in one or more counterparts, each of which shall constitute an original

                                       37
<PAGE>

and all of which taken together shall constitute one and the same agreement. Any
signature delivered by a party via telecopier transmission shall be deemed to be
any original signature hereto.

            35.  Construction.  The parties  acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any  ambiguities  are to be resolved  against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.

            36. Publicity.  Company hereby authorizes Laurus to make appropriate
announcements of the financial  arrangement  entered into by and between Company
and Laurus,  including,  without  limitation,  announcements  which are commonly
known as tombstones, in such publications and to such selected parties as Laurus
shall in its sole and absolute  discretion deem  appropriate,  or as required by
applicable  law. Laurus shall obtain  Company's  approval before making any such
announcements, such approval not to be unreasonably withheld.

            37.  Joinder.  It is understood and agreed that any person or entity
that  desires to become an  Eligible  Subsidiary  hereunder,  or is  required to
execute a counterpart  of this Agreement  after the date hereof  pursuant to the
requirements  of this  Agreement  or any  Ancillary  Agreement,  shall become an
Eligible  Subsidiary  hereunder by (x) executing a Joinder Agreement in form and
substance  satisfactory to Laurus,  (y) delivering  supplements to such exhibits
and annexes to this  Agreement  and the  Ancillary  Agreements  as Laurus  shall
reasonably  request and (z) taking all actions as specified in this Agreement as
would have been taken by such  Assignor  had it been an  original  party to this
Agreement,  in each case with all  documents  required  above to be delivered to
Laurus and with all  documents  and  actions  required  above to be taken to the
reasonable  satisfaction  of Laurus.

            38. Legends. The Securities shall bear legends as follows;

            (a) The Note shall bear substantially the following legend:

            "THIS NOTE AND THE COMMON STOCK  ISSUABLE  UPON  CONVERSION  OF THIS
            NOTE HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE
            COMMON STOCK ISSUABLE UPON  CONVERSION OF THIS NOTE MAY NOT BE SOLD,
            OFFERED  FOR SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE OF AN
            EFFECTIVE  REGISTRATION  STATEMENT  AS TO THIS  NOTE OR SUCH  SHARES
            UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
            COUNSEL    REASONABLY    SATISFACTORY    TO   CONVERSION    SERVICES
            INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

            (b) Any shares of Common Stock issued  pursuant to conversion of the
Note or  exercise  of the  Warrants,  shall  bear a  legend  which  shall  be in

                                       38
<PAGE>

substantially  the following  form until such shares are covered by an effective
registration statement filed with the SEC:

            "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
            UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  OR ANY  APPLICABLE,
            STATE  SECURITIES  LAWS.  THESE SHARES MAY NOT BE SOLD,  OFFERED FOR
            SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE
            REGISTRATION  STATEMENT  UNDER SUCH  SECURITIES  ACT AND  APPLICABLE
            STATE  LAWS OR AN  OPINION OF  COUNSEL  REASONABLY  SATISFACTORY  TO
            CONVERSION  SERVICES  INTERNATIONAL,  INC. THAT SUCH REGISTRATION IS
            NOT REQUIRED."

            (c) The Warrants shall bear substantially the following legend:

            "THIS WARRANT AND THE COMMON  SHARES  ISSUABLE UPON EXERCISE OF THIS
            WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933,
            AS AMENDED,  OR ANY APPLICABLE  STATE  SECURITIES LAWS. THIS WARRANT
            AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
            BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
            AN  EFFECTIVE  REGISTRATION  STATEMENT  AS TO  THIS  WARRANT  OR THE
            UNDERLYING  SHARES OF COMMON  STOCK  UNDER  SAID ACT AND  APPLICABLE
            STATE   SECURITIES   LAWS  OR  AN  OPINION  OF  COUNSEL   REASONABLY
            SATISFACTORY TO CONVERSION  SERVICES  INTERNATIONAL,  INC. THAT SUCH
            REGISTRATION IS NOT REQUIRED."

       [Balance of page intentionally left blank; signature page follows.]

                                       39
<PAGE>

      IN WITNESS WHEREOF,  the parties have executed this Security  Agreement as
of the date first written above.

                                   CONVERSION SERVICES INTERNATIONAL, INC.

                                   By: /s/ Scott Newman
                                   Name: Scott Newman
                                   Title: President and CEO

                                   DELEEUW ASSOCIATES, LLC

                                   By: /s/ Scott Newman
                                   Name: Scott Newman
                                   Title: CEO

                                   CSI SUB CORP. (DE)

                                   By: /s/ Scott Newman
                                   Name: Scott Newman
                                   Title: President and CEO

                                   EVOKE SOFTWARE CORPORATION

                                   By: /s/ Scott Newman
                                   Name: Scott Newman
                                   Title: President and CEO

                                       40
<PAGE>

                                   LAURUS MASTER FUND, LTD.

                                   By: /s/ David Grin
                                   Name: David Grin
                                   Title:__________________________________

                                       41
<PAGE>

                              Annex A - Definitions

            "Account  Debtor"  means any Person who is or may be obligated  with
respect to, or on account of, an Account.

            "Accountants" has the meaning given to such term in Section 11(a).

            "Accounts" means all "accounts", as such term is defined in the UCC,
now owned or  hereafter  acquired by any  Person,  including:  (a) all  accounts
receivable, other receivables,  book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments)  (including
any such  obligations  that may be characterized as an account or contract right
under the UCC);  (b) all of such  Person's  rights in, to and under all purchase
orders or receipts for goods or services; (c) all of such Person's rights to any
goods  represented by any of the foregoing  (including unpaid sellers' rights of
rescission,  replevin,  reclamation  and  stoppage  in  transit  and  rights  to
returned, reclaimed or repossessed goods); (d) all rights to payment due to such
Person for Goods or other property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance  issued or to be issued,  for a secondary
obligation  incurred or to be incurred,  for energy  provided or to be provided,
for the use or hire of a vessel under a charter or other  contract,  arising out
of the use of a credit card or charge card,  or for  services  rendered or to be
rendered by such Person or in connection with any other transaction  (whether or
not  yet  earned  by  performance  on the  part  of  such  Person);  and (e) all
collateral  security of any kind given by any Account Debtor or any other Person
with respect to any of the foregoing.

            "Accounts  Availability"  means the amount of Loans against Eligible
Accounts  Laurus  may from time to time make  available  to Company up to ninety
percent (90%) of the net face amount of Eligible  Accounts  based on Accounts of
Company and the Eligible Subsidiaries.

            "Affiliate"  of any  Person  means  (a)  any  Person  (other  than a
Subsidiary) which,  directly or indirectly,  is in control of, is controlled by,
or is under common control with such Person, (b) any Person who is a director or
officer (i) of such Person,  (ii) of any  Subsidiary  of such Person or (iii) of
any Person  described in clause (a) above.  For the purposes of this definition,
control of a Person shall mean the power (direct or indirect) to direct or cause
the direction of the  management and policies of such Person whether by contract
or otherwise.

            "Ancillary   Agreements"   means,  the  Notes,  the  Warrants,   the
Registration Rights Agreements, each Security Document and all other agreements,
instruments,  documents,  mortgages,  pledges,  powers  of  attorney,  consents,
assignments,  contracts,  notices,  security  agreements,  trust  agreements and
guarantees  whether  heretofore,  concurrently,  or hereafter  executed by or on
behalf of Company or any other Person or  delivered to Laurus,  relating to this
Agreement or to the  transactions  contemplated  by this  Agreement or otherwise
relating to the relationship between the Company and Laurus.

            "Available Minimum Borrowing" shall have the meaning given such term
in Section 2(a)(i).

                                       42
<PAGE>

            "Books  and  Records"  means  all  books,  records,  board  minutes,
contracts,  licenses, insurance policies,  environmental audits, business plans,
files,  computer files,  computer discs and other data and software  storage and
media devices,  accounting books and records,  financial  statements (actual and
pro forma),  filings with  Governmental  Authorities and any and all records and
instruments  relating to the Collateral or otherwise necessary or helpful in the
collection thereof or the realization thereupon.

            "Business  Day" means a day on which Laurus is open for business and
that is not a  Saturday,  a Sunday or other day on which  banks are  required or
permitted to be closed in the State of New York.

            "Capital Availability Amount" means $6,000,000.

            "Charter"  shall  have  the  meaning  given  such  term  in  Section
12(c)(iv).

            "Chattel  Paper" means all "chattel  paper," as such term is defined
in the UCC, including  electronic chattel paper, now owned or hereafter acquired
by any Person.

            "Closing  Date" means the date on which  Company shall first receive
proceeds of the initial  Loans or the date hereof,  if no Loan is made under the
facility on the date hereof.

            "Collateral"  means all of Company's and each Eligible  Subsidiary's
property  and assets,  whether  real or personal,  tangible or  intangible,  and
whether now owned or hereafter  acquired,  or in which it now has or at any time
in the future may acquire any right,  title or  interests  including  all of the
following  property in which it now has or at any time in the future may acquire
any right,  title or interest:

            (a)   all Inventory;

            (b)   all Equipment;

            (c)   all Fixtures;

            (d)   all General Intangibles;

            (e)   all Accounts;

            (f)   all Deposit  Accounts,  other bank  accounts  and all funds on
                  deposit therein;

            (g)   all Investment Property;

            (h)   all Stock;

            (i)   all Chattel Paper;

            (j)   all Letter-of-Credit Rights;

            (k)   all Instruments;

                                       43
<PAGE>

            (l)   all commercial tort claims set forth on Schedule 1(A);

            (m)   all Books and Records;

            (n)   all Intellectual Property;

            (o) all  Supporting  Obligations  including  letters  of credit  and
      guarantees  issued  in  support  of  Accounts,   Chattel  Paper,   General
      Intangibles and Investment Property;

            (p)(i) all money,  cash and cash  equivalents and (ii) all cash held
      as cash  collateral to the extent not otherwise  constituting  Collateral,
      all other cash or property  at any time on deposit  with or held by Laurus
      for the account of Company  and/or any  Eligible  Subsidiary  (whether for
      safekeeping, custody, pledge, transmission or otherwise); and

            (q) all products and Proceeds of all or any of the  foregoing,  tort
claims and all claims and other  rights to payment  including  insurance  claims
against  third  parties  for loss of,  damage  to, or  destruction  of, and (ii)
payments due or to become due under  leases,  rentals and hires of any or all of
the foregoing and Proceeds  payable under, or unearned  premiums with respect to
policies of insurance in whatever form.

            "Common Stock" the shares of stock representing the Company's common
equity interests.

            "Contract  Rate" shall have the meaning set forth in the  respective
Note.

            "Default" means any act or event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.

            "Default  Rate"  has  the  meaning  given  to such  term in  Section
5(a)(iii).

            "Deposit  Accounts"  means all  "deposit  accounts"  as such term is
defined in the UCC, now or hereafter held in the name of any Person,  including,
without limitation, the Lockbox Account(s).

            "Documents"  means all  "documents",  as such term is defined in the
UCC, now owned or hereafter acquired by any Person, wherever located,  including
all bills of lading, dock warrants, dock receipts, warehouse receipts, and other
documents of title, whether negotiable or non-negotiable.

            "Eligible  Accounts"  means and includes each Account of the Company
and each  Eligible  Subsidiary  which  conforms to the following  criteria:  (a)
shipment of the merchandise or the rendition of services has been completed; (b)
no return,  rejection or  repossession  of the  merchandise  has  occurred;  (c)
merchandise  or services shall not have been rejected or disputed by the Account
Debtor  and  there  shall  not  have  been  asserted  any  offset,   defense  or
counterclaim;  (d) continues to be in full conformity  with the  representations
and  warranties  made by Company  and each  Eligible  Subsidiary  to Laurus with
respect  thereto;  (e) Laurus is, and continues to be, satisfied with the credit
standing of the Account Debtor in relation to the amount of credit extended; (f)
there are no facts  existing  or  threatened  which are  likely to result in any
adverse change in an Account Debtor's financial condition;  (g) is documented by

                                       44
<PAGE>

an invoice in a form approved by Laurus and shall not be unpaid more than ninety
(90) days from invoice date; (h) not more than twenty-five  percent (25%) of the
unpaid amount of invoices due from such Account  Debtor remains unpaid more than
ninety (90) days from invoice date;  (i) is not evidenced by chattel paper or an
instrument of any kind with respect to or in payment of the Account  unless such
instrument is duly endorsed to and in possession of Laurus or represents a check
in payment of a Account; (j) the Account Debtor is located in the United States;
provided,  however,  Laurus may,  from time to time, in the exercise of its sole
discretion and based upon satisfaction of certain conditions to be determined at
such time by Laurus, deem certain Accounts as Eligible Accounts  notwithstanding
that such Account is due from an Account  Debtor  located  outside of the United
States;  (k) Laurus has a first priority perfected Lien in such Account and such
Account is not  subject to any Lien other  than  Permitted  Liens;  (l) does not
arise out of transactions with any employee,  officer, director,  stockholder or
Affiliate  of Company or any Eligible  Subsidiary;  (m) is payable to Company or
any Eligible Subsidiary; (n) does not arise out of a bill and hold sale prior to
shipment and does not arise out of a sale to any Person to which  Company or any
Eligible Subsidiary is indebted; (o) is net of any returns,  discounts,  claims,
credits and  allowances;  (p) if the  Account  arises out of  contracts  between
Company and/or any Eligible Subsidiary,  on the one hand, and the United States,
on the other hand, any state, or any department,  agency or  instrumentality  of
any of them, Company and/or such Eligible Subsidiary, as the case may be, has so
notified Laurus,  in writing,  prior to the creation of such Account,  and there
has been  compliance  with any  governmental  notice or  approval  requirements,
including  compliance  with the Federal  Assignment of Claims Act; (q) is a good
and valid account representing an undisputed bona fide indebtedness  incurred by
the Account Debtor  therein  named,  for a fixed sum as set forth in the invoice
relating  thereto with respect to an  unconditional  sale and delivery  upon the
stated terms of goods sold by Company or any Eligible  Subsidiary or work, labor
and/or  services  rendered by Company or any Eligible  Subsidiary;  (r) does not
arise out of progress  billings prior to completion of the order;  (s) the total
unpaid  Accounts from such Account  Debtor does not exceed  twenty-five  percent
(25%) of all Eligible  Accounts;  (t)  Company's or such  Eligible  Subsidiary's
right to payment is absolute  and not  contingent  upon the  fulfillment  of any
condition whatsoever;  (u) Company or such Eligible Subsidiary,  as the case may
be, is able to bring suit and enforce its  remedies  against the Account  Debtor
through judicial  process;  (v) does not represent  interest  payments,  late or
finance  charges owing to Company or such Eligible  Subsidiary,  as the case may
be, and (w) is otherwise  satisfactory  to Laurus as determined by Laurus in the
exercise  of its sole  discretion.  In the event  Company  requests  that Laurus
include within Eligible  Accounts  certain  Accounts of one or more of Company's
acquisition  targets,  Laurus  shall at the time of such request  consider  such
inclusion,  but any such  inclusion  shall be at the sole  option of Laurus  and
shall at all times be subject to the  execution  and  delivery  to Laurus of all
such  documentation  (including,  without  limitation,   guaranty  and  security
documentation) as Laurus may require in its sole discretion.

            "Eligible  Subsidiary" shall mean DeLeeuw,  CSI Sub Corp., Evoke and
each other  Subsidiary  of the Company  consented  to in writing by Laurus to be
included as and "Eligible Subsidiary" for the purposes of this Agreement.

                                       45
<PAGE>

            "Equipment"  means all  "equipment"  as such term is  defined in the
UCC, now owned or hereafter acquired by any Person, wherever located,  including
any and all machinery,  apparatus,  equipment,  fittings,  furniture,  fixtures,
motor vehicles and other tangible  personal  property  (other than Inventory) of
every kind and  description  that may be now or hereafter  used in such Person's
operations  or that are owned by such Person or in which such Person may have an
interest,  and all parts,  accessories and accessions  thereto and substitutions
and replacements therefor.

            "ERISA" shall have the meaning given to such term in Section 12(g).

            "Event of  Default"  means the  occurrence  of any of the events set
forth in Section 18.

            "Excepted  Issuances"  shall  have the  meaning  given  such term in
Section 13(t).

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
amended.

            "Exchange Act Filings"  shall have the meaning given to such term in
Section 12.

            "Exclusion Period" shall have the meaning given such term in Section
13(t).

            "Fixed  Conversion  Price"  has the  meaning  given such term in the
Minimum Borrowing Note.

            "Fixtures"  means all "fixtures" as such term is defined in the UCC,
now owned or hereafter acquired by any Person.

            "Formula Amount" has the meaning set forth in Section 2(a)(i).

            "GAAP" means generally accepted accounting principles, practices and
procedures in effect from time to time in the United States of America.

            "General  Intangibles" means all "general  intangibles" as such term
is defined in the UCC, now owned or hereafter  acquired by any Person  including
all right,  title and interest that such Person may now or hereafter  have in or
under  any  contract,   all  Payment  Intangibles,   customer  lists,  Licenses,
Intellectual  Property,  interests  in  partnerships,  joint  ventures and other
business  associations,   permits,   proprietary  or  confidential  information,
inventions  (whether or not  patented  or  patentable),  technical  information,
procedures,  designs,  knowledge,  know-how,  Software, data bases, data, skill,
expertise,  experience,   processes,  models,  drawings,  materials,  Books  and
Records,  Goodwill  (including  the Goodwill  associated  with any  Intellectual
Property),  all  rights  and claims in or under  insurance  policies  (including
insurance for fire,  damage,  loss,  and  casualty,  whether  covering  personal
property,  real property,  tangible rights or intangible  rights, all liability,
life,  key-person,   and  business  interruption  insurance,  and  all  unearned
premiums), uncertificated securities, choses in action, deposit accounts, rights
to  receive  tax  refunds  and other  payments,  rights to  received  dividends,
distributions, cash, Instruments and other property in respect of or in exchange
for pledged Stock and Investment Property, and rights of indemnification.

                                       46
<PAGE>

            "Goods"  means all "goods",  as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located,  including embedded
software to the extent  included in "goods" as defined in the UCC,  manufactured
homes,  standing  timber that is cut and  removed  for sale and unborn  young of
animals.

            "Goodwill"  means  all  goodwill,  trade  secrets,   proprietary  or
confidential information,  technical information,  procedures, formulae, quality
control standards,  designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.

            "Governmental  Authority" means any nation or government,  any state
or other  political  subdivision  thereof,  and any agency,  department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

            "Hazardous  Materials"  shall  have the  meaning  given such term in
Section 12(q).

            "Indemnified  Person"  shall have the meaning  given to such term in
Section 25.

            "Initial  Term" means the Closing Date through the close of business
on the day  immediately  preceding  the third  anniversary  of the Closing Date,
subject to  acceleration at the option of Laurus upon the occurrence of an Event
of Default hereunder or other termination hereunder.

            "Instruments"  means all  "instruments",  as such term is defined in
the UCC,  now owned or  hereafter  acquired  by any  Person,  wherever  located,
including  all  certificated  securities  and all  promissory  notes  and  other
evidences of indebtedness, other than instruments that constitute, or are a part
of a group of writings that constitute, Chattel Paper.

            "Intellectual  Property"  means  any  and all  patents,  trademarks,
service marks, trade names, copyrights, trade secrets, Licenses, information and
other proprietary rights and processes

            "Inventory"  means all  "inventory",  as such term is defined in the
UCC, now owned or hereafter acquired by any Person, wherever located,  including
all inventory,  merchandise,  goods and other personal property that are held by
or on  behalf of such  Person  for sale or lease or are  furnished  or are to be
furnished under a contract of service or that constitute raw materials,  work in
process,  finished goods,  returned goods, or materials or supplies of any kind,
nature  or  description  used or  consumed  or to be used  or  consumed  in such
Person's  business  or in  the  processing,  production,  packaging,  promotion,
delivery or shipping of the same, including all supplies and embedded software.

            "Investment Property" means all "investment property",  as such term
is defined in the UCC, now owned or hereafter  acquired by any Person,  wherever
located.

            "Letter-of-Credit  Rights" means  "letter-of-credit  rights" as such
term is defined  in the UCC,  now owned or  hereafter  acquired  by any  Person,
including rights to payment or performance under a letter of credit,  whether or

                                       47
<PAGE>

not such Person,  as beneficiary,  has demanded or is entitled to demand payment
or performance.

            "License"  means any  rights  under  any  written  agreement  now or
hereafter acquired by any Person to use any trademark,  trademark  registration,
copyright,  copyright  registration  or  invention  for  which  a  patent  is in
existence or other license of rights or interests now held or hereafter acquired
by any Person.

            "Lien" means any mortgage,  security  deed,  deed of trust,  pledge,
hypothecation,   assignment,  security  interest,  lien  (whether  statutory  or
otherwise),  charge,  claim or  encumbrance,  or  preference,  priority or other
security  agreement or preferential  arrangement  held or asserted in respect of
any asset of any kind or nature  whatsoever  including any  conditional  sale or
other  title  retention  agreement,  any  lease  having  substantially  the same
economic  effect as any of the  foregoing,  and the filing of, or  agreement  to
give,  any  financing   statement  under  the  UCC  or  comparable  law  of  any
jurisdiction.

            "Loans"  shall have the  meaning  set forth in Section  2(a)(i)  and
shall include all other  extensions of credit  hereunder and under any Ancillary
Agreement.

            "Material  Adverse Effect" means a material  adverse effect on (a) a
material  adverse  effect  on  the  business,  assets,  liabilities,   condition
(financial or otherwise),  properties, operations or prospects of Company or any
of its Subsidiaries  (taken individually or as a whole), (b) Company's or any of
its  Subsidiary's  ability to pay or perform the  Obligations in accordance with
the terms hereof or any Ancillary  Agreement,  (c) the value of the  Collateral,
the  Liens  on the  Collateral  or the  priority  of any  such  Lien  or (d) the
practical  realization of the benefits of Laurus' rights and remedies under this
Agreement and the Ancillary Agreements.

            "Maximum  Legal Rate"  shall have the meaning  given to such term in
Section 5(a)(iv).

            "Minimum  Borrowing Amount" means Two Million Dollars  ($2,000,000),
which such aggregate amount shall be evidenced by Minimum Borrowing Notes.

            "Minimum Borrowing Notes" shall mean each Secured  Convertible Note,
which  shall be  issued  in a  series,  made by  Company  in favor of  Laurus to
evidence the Minimum Borrowing Amount.

            "NASD" shall have the meaning given to such term in Section 13(b).

            "NASD  OTCBB"  shall  have the  meaning  given  such term in Section
12(w).

            "Note  Shares"  shall  have the  meaning  given such term in Section
12(a).

            "Notes" means each of the Minimum  Borrowing Notes and the Revolving
Note made by  Company  in favor of Laurus in  connection  with the  transactions
contemplated hereby, as the same may be amended,  modified and supplemented from
time to time, as applicable.

                                       48
<PAGE>

            "Obligations"  means all Loans,  all advances,  debts,  liabilities,
obligations, covenants and duties owing by Company or any of its Subsidiaries to
Laurus (or any corporation that directly or indirectly controls or is controlled
by or is  under  common  control  with  Laurus)  of every  kind and  description
(whether or not evidenced by any note or other instrument and whether or not for
the payment of money or the performance or  non-performance  of any act), direct
or  indirect,  absolute  or  contingent,  due or to become due,  contractual  or
tortious,  liquidated or  unliquidated,  whether existing by operation of law or
otherwise now existing or hereafter  arising  including  any debt,  liability or
obligation  owing from Company or any of its Subsidiaries to others which Laurus
may have obtained by assignment or otherwise and further  including all interest
(including  interest  accruing  at the then  applicable  rate  provided  in this
Agreement  after the  maturity  of the Loans and  interest  accruing at the then
applicable  rate provided in this Agreement  after the filing of any petition in
bankruptcy,  or the  commencement  of any  insolvency,  reorganization  or  like
proceeding,  whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), charges or any other payments Company or any of its
Subsidiaries  is  required  to make by law or  otherwise  arising  under or as a
result  of this  Agreement  and the  Ancillary  Agreements,  together  with  all
reasonable  expenses and reasonable  attorneys'  fees chargeable to Company's or
any of its  Subsidiary's  account  or  incurred  by  Laurus in  connection  with
Company's or any of its  Subsidiary's  account whether provided for herein or in
any Ancillary Agreement.

            "Payment  Intangibles" means all "payment  intangibles" as such term
is defined in the UCC, now owned or hereafter acquired by any Person, including,
a General Intangible under which the Account Debtor's principal  obligation is a
monetary obligation.

            "Permitted  Liens"  means  (a)  Liens  of  carriers,   warehousemen,
artisans,  bailees, mechanics and materialmen incurred in the ordinary course of
business securing sums not overdue; (b) Liens incurred in the ordinary course of
business in connection with workmen's  compensation,  unemployment  insurance or
other forms of  governmental  insurance  or  benefits,  relating  to  employees,
securing sums (i) not overdue or (ii) being  diligently  contested in good faith
provided that adequate reserves with respect thereto are maintained on the books
of the Company or any Subsidiary  thereof in conformity  with GAAP; (c) Liens in
favor of Laurus;  (d) Liens for taxes (i) not yet due or (ii)  being  diligently
contested  in good faith by  appropriate  proceedings,  provided  that  adequate
reserves with respect  thereto are maintained on the books of the Company or any
Subsidiary  thereof in conformity with GAAP provided,  that, the Lien shall have
no effect on the priority of Liens in favor of Laurus or the value of the assets
in which Laurus has a Lien;  (e) Purchase  Money Liens  securing  Purchase Money
Indebtedness  to the extent  permitted in this Agreement and (f) Liens specified
on Schedule 2 hereto.

            "Person" means any  individual,  sole  proprietorship,  partnership,
limited   liability   partnership,    joint   venture,   trust,   unincorporated
organization,  association, corporation, limited liability company, institution,
public  benefit  corporation,  entity or  government  (whether  federal,  state,
county, city, municipal or otherwise,  including any instrumentality,  division,
agency, body or department thereof),  and shall include such Person's successors
and assigns.

                                       49
<PAGE>

            "Prime  Rate" means the "prime  rate"  published  in The Wall Street
Journal from time to time. The Prime Rate shall be increased or decreased as the
case may be for each  increase or decrease in the Prime Rate in an amount  equal
to such  increase or decrease in the Prime Rate;  each change to be effective as
of the day of the change in such rate.

            "Proceeds" means "proceeds", as such term is defined in the UCC and,
in any  event,  shall  include:  (a)  any  and all  proceeds  of any  insurance,
indemnity,  warranty or guaranty payable to Company,  any Eligible Subsidiary or
any other Person from time to time with respect to any  Collateral;  (b) any and
all payments (in any form  whatsoever) made or due and payable to Company or any
Eligible  Subsidiary  from  time to time in  connection  with  any  requisition,
confiscation,  condemnation,  seizure or  forfeiture  of any  Collateral  by any
governmental  body,  governmental  authority,  bureau or agency  (or any  person
acting under color of governmental  authority);  (c) any claim of Company or any
Eligible  Subsidiary  against  third  parties  (i) for past,  present  or future
infringement of any  Intellectual  Property or (ii) for past,  present or future
infringement or dilution of any trademark or trademark  license or for injury to
the goodwill associated with any trademark,  trademark registration or trademark
licensed  under any  trademark  License;  (d) any  recoveries  by Company or any
Eligible  Subsidiary  against  third  parties with respect to any  litigation or
dispute  concerning any Collateral,  including claims arising out of the loss or
nonconformity  of,  interference with the use of, defects in, or infringement of
rights  in,  or  damage  to,  Collateral;  (e)  all  amounts  collected  on,  or
distributed  on account of, other  Collateral,  including  dividends,  interest,
distributions  and Instruments  with respect to Investment  Property and pledged
Stock;  and (f) any and all other amounts , rights to payment or other  property
acquired  upon the  sale,  lease,  license,  exchange  or other  disposition  of
Collateral and all rights arising out of Collateral.

            "Purchase Money  Indebtedness"  means (a) any indebtedness  incurred
for the  payment of all or any part of the  purchase  price of any fixed  asset,
including  indebtedness under capitalized leases, (b) any indebtedness  incurred
for the sole purpose of financing or refinancing all or any part of the purchase
price of any fixed  asset,  and (c) any  renewals,  extensions  or  refinancings
thereof (but not any increases in the principal  amounts thereof  outstanding at
that time).

            "Purchase  Money  Lien"  means any Lien upon any fixed  assets  that
secures the Purchase Money  Indebtedness  related  thereto but only if such Lien
shall at all times be confined  solely to the asset the purchase  price of which
was  financed  or  refinanced  through  the  incurrence  of the  Purchase  Money
Indebtedness  secured  by such  Lien and only if such  Lien  secures  only  such
Purchase Money Indebtedness.

            "Receivables  Purchase"  shall have the  meaning  given such term in
Section 2(b).

            "Registration  Rights  Agreements" means those  registration  rights
agreements  from time to time  entered  into  between  Company  and  Laurus,  as
amended, modified and supplemented from time to time.

            "Revolving  Note" means that secured  revolving note made by Company
in favor of Laurus in the  aggregate  principal  amount of Four Million  Dollars
($4,000,000).

                                       50
<PAGE>

            "SEC" shall mean the Securities and Exchange Commission.

            "SEC Reports"  shall have the meaning  provided such term in Section
12(u).

            "Securities"  means  the  Notes  and the  Warrants  being  issued by
Company to Laurus  pursuant to this  Agreement and the Ancillary  Agreements and
the  shares of the  common  stock of  Company  which may be issued  pursuant  to
conversion of such Notes in whole or in part or exercise of such Warrants.

            "Securities  Act" shall have the meaning  given such term in Section
12(r).

            "Security Documents" means all security agreements,  mortgages, cash
collateral  deposit letters,  pledges and other agreements which are executed by
the Company or any of its Subsidiaries in favor of Laurus.

            "Software"  means all "software" as such term is defined in the UCC,
now owned or hereafter  acquired by any Person,  including all computer programs
and all supporting information provided in connection with a transaction related
to any program.

            "Stock" means all certificated and uncertificated  shares,  options,
warrants,  membership  interests,  general  or  limited  partnership  interests,
participation  or other  equivalents  (regardless of how  designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting,  including  common  stock,  preferred  stock,  or any other
"equity  security"  (as such term is defined in Rule 3a11-1 of the General Rules
and  Regulations  promulgated  by the SEC under the  Securities  Exchange Act of
1934).

            "Subsidiary"  of any Person means (i) a corporation  or other entity
whose shares of stock or other ownership  interests having ordinary voting power
(other than stock or other ownership  interests having such power only by reason
of the happening of a contingency)  to elect a majority of the directors of such
corporation,  or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity or
(ii) a corporation or other entity in which such person or entity owns, directly
or indirectly, more than 50% of the equity interests at such time.

            "Supporting  Obligations" means all "supporting obligations" as such
term is defined in the UCC.

            "Term" means, as applicable, the Initial Term and any Renewal Term.

            "UCC" means the Uniform  Commercial  Code as the same may, from time
be in  effect in the State of New York;  provided,  that in the event  that,  by
reason of mandatory provisions of law, any or all of the attachment,  perfection
or priority of, or remedies with respect to,  Laurus' Lien on any  Collateral is
governed by the Uniform  Commercial  Code as in effect in a  jurisdiction  other
than the State of New York,  the term "UCC"  shall mean the  Uniform  Commercial
Code as in effect in such other  jurisdiction  for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and

                                       51
<PAGE>

for purposes of definitions related to such provisions;  provided further,  that
to the  extent  that UCC is used to define any term  herein or in any  Ancillary
Agreement  and  such  term is  defined  differently  in  different  Articles  or
Divisions  of the UCC,  the  definition  of such term  contained  in  Article or
Division 9 shall govern.

            "Warrant  Shares"  shall have the meaning given such term in Section
12(a).

            "Warrants"  has the  meaning  set forth in the  Registration  Rights
Agreements.

                                       52
<PAGE>

                                    Exhibit A

                           Borrowing Base Certificate

                                [To be inserted]

                        --------------------------------

                                       53
<PAGE>

                            LAURUS MASTER FUND, LTD.

                     CONVERSION SERVICES INTERNATIONAL, INC.

                               CSI SUB CORP. (DE)

                             DELEEUW ASSOCIATES, LLC

                           EVOKE SOFTWARE CORPORATION

                             Dated: August 16, 2004

<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                              PAGE
<S>      <C>                                                                                                  <C>
1.       (a) General Definitions................................................................................1
         (b)      Accounting Terms..............................................................................1
         (c)      Other Terms...................................................................................1
         (d)      Rules of Construction.........................................................................1

2.       Credit Advances........................................................................................2

3.       Repayment of the Loans.................................................................................3

4.       Procedure for Loans....................................................................................4

5.       Interest and Payments..................................................................................4
         (a)      Interest......................................................................................4
         (b)      Payments......................................................................................4

6.       Security Interest......................................................................................5

7.       Representations, Warranties and Covenants Concerning the Collateral....................................6

8.       Payment of Accounts....................................................................................9

9.       Collection and Maintenance of Collateral..............................................................10

10.      Inspections and Appraisals............................................................................10

11.      Financial Reporting...................................................................................10

12.      Additional Representations and Warranties.............................................................11

13.      Covenants.  ..........................................................................................22

14.      Further Assurances....................................................................................28

15.      Power of Attorney.....................................................................................30

16.      Term of Agreement.....................................................................................30

17.      Termination of Lien...................................................................................30

18.      Events of Default.....................................................................................31

19.      Remedies..............................................................................................32

20.      Waivers...............................................................................................33

                                       i
<PAGE>

                                                                                                            PAGE(S)

21.      Expenses..............................................................................................34

22.      Assignment By Laurus..................................................................................34

23.      No Waiver; Cumulative Remedies........................................................................35

24.      Application of Payments...............................................................................35

25.      Indemnity.............................................................................................35

26.      Revival...............................................................................................35

27.      Notices...............................................................................................35

28.      Governing Law, Jurisdiction and Waiver of Jury........................................................36

29.      Limitation of Liability...............................................................................37

30.      Entire Understanding..................................................................................37

31.      Severability..........................................................................................38

32.      Captions..............................................................................................38

33.      Counterparts; Telecopier Signatures...................................................................38

34.      Construction..........................................................................................38

35.      Publicity.............................................................................................38
</TABLE>

                                LIST OF EXHIBITS

         Exhibit A-Borrowing Base Certificate

                                       iiCONVERSION SERVICES INTERNATIONAL, INC.

                          SECURITIES PURCHASE AGREEMENT

                                 AUGUST 16, 2004

<PAGE>

                                TABLE OF CONTENTS
                                                                            PAGE

1.       Agreement to Sell and Purchase........................................1

2.       Fees and Warrant......................................................1

3.       Closing, Delivery and Payment.........................................2
         3.1        Closing....................................................2
         3.2        Delivery...................................................2

4.       Representations and Warranties of the Company.........................3
         4.1        Organization, Good Standing and Qualification..............3
         4.2        Subsidiaries...............................................3
         4.3        Capitalization; Voting Rights..............................4
         4.4        Authorization; Binding Obligations.........................4
         4.5        Liabilities................................................5
         4.6        Agreements; Action.........................................5
         4.7        Obligations to Related Parties.............................6
         4.8        Changes....................................................6
         4.9        Title to Properties and Assets; Liens, Etc.................7
         4.10       Intellectual Property......................................8
         4.11       Compliance with Other Instruments..........................8
         4.12       Litigation.................................................9
         4.13       Tax Returns and Payments...................................9
         4.14       Employees..................................................9
         4.15       Registration Rights and Voting Rights.....................10
         4.16       Compliance with Laws; Permits.............................10
         4.17       Environmental and Safety Laws.............................11
         4.18       Valid Offering............................................11
         4.19       Full Disclosure...........................................11
         4.20       Insurance.................................................11
         4.21       SEC Reports...............................................11
         4.22       Listing...................................................12
         4.23       No Integrated Offering....................................12
         4.24       Stop Transfer.............................................12
         4.25       Dilution..................................................12
         4.26       Patriot Act...............................................12

5.       Representations and Warranties of the Purchaser......................13
         5.1        No Shorting...............................................13
         5.2        Requisite Power and Authority.............................13
         5.3        Investment Representations................................13
         5.4        Purchaser Bears Economic Risk.............................14
         5.5        Acquisition for Own Account...............................14
         5.6        Purchaser Can Protect Its Interest........................14
         5.7        Accredited Investor.......................................14
         5.8        Legends...................................................14

                                       i
<PAGE>

6.       Covenants of the Company.............................................15
         6.1        Stop-Orders...............................................15
         6.2        Listing...................................................16
         6.3        Market Regulations........................................16
         6.4        Reporting Requirements....................................16
         6.5        Use of Funds..............................................16
         6.6        Access to Facilities......................................16
         6.7        Taxes.....................................................17
         6.8        Insurance.................................................17
         6.9        Intellectual Property.....................................18
         6.10       Properties................................................18
         6.11       Confidentiality...........................................18
         6.12       Required Approvals........................................18
         6.13       Reissuance of Securities..................................19
         6.14       Opinion...................................................20
         6.15       Margin Stock..............................................19
         6.16       Financing Right of First Refusal..........................19
         6.17       Restricted Cash Disclosure................................19

7.       Covenants of the Purchaser...........................................21
         7.1        Confidentiality...........................................21
         7.2        Non-Public Information....................................21

8.       Covenants of the Company and Purchaser Regarding Indemnification.....21
         8.1        Company Indemnification...................................21
         8.2        Purchaser's Indemnification...............................21

9.       Conversion of Convertible Note.......................................22
         9.1        Mechanics of Conversion...................................22

10.      Registration Rights..................................................23
10.1                Registration Rights Granted...............................23
         10.2       Offering Restrictions.....................................23

11.      Miscellaneous........................................................23
         11.1       Governing Law.............................................23
         11.2       Survival..................................................24
         11.3       Successors................................................24
         11.4       Entire Agreement..........................................24
         11.5       Severability..............................................24
         11.6       Amendment and Waiver......................................24
         11.7       Delays or Omissions.......................................25
         11.8       Notices...................................................25
         11.9       Attorneys' Fees...........................................26
         11.10      Titles and Subtitles......................................26
         11.11      Facsimile Signatures; Counterparts........................26
         11.12      Broker's Fees.............................................26
         11.13      Construction..............................................26

                                       ii
<PAGE>

                                LIST OF EXHIBITS

Form of Convertible Term Note......................... Exhibit A
Form of Warrant....................................... Exhibit B
Form of Opinion....................................... Exhibit C
Form of Escrow Agreement.............................. Exhibit D

                                      iii
<PAGE>

                          SECURITIES PURCHASE AGREEMENT

      THIS SECURITIES  PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of August 16, 2004, by and between  Conversion  Services  International,
Inc., a Delaware  corporation (the  "Company"),  and Laurus Master Fund, Ltd., a
Cayman Islands company (the "Purchaser").

                                    RECITALS

      WHEREAS,  the  Company  has  authorized  the  sale to the  Purchaser  of a
Convertible Term Note in the aggregate  principal amount of Five Million Dollars
($5,000,000)  (as  amended,  modified  or  supplemented  from time to time,  the
"Note"),  which Note is convertible  into shares of the Company's  common stock,
$0.001 par value per share (the "Common  Stock") at an initial fixed  conversion
price of $0.14 per share of Common Stock ("Fixed Conversion Price");

      WHEREAS,  the  Company  wishes  to issue a  warrant  to the  Purchaser  to
purchase up to  12,000,000  shares of the  Company's  Common  Stock  (subject to
adjustment as set forth therein) in connection with Purchaser's  purchase of the
Note and certain other related notes;

      WHEREAS,  Purchaser  desires  to  purchase  the Note and the  Warrant  (as
defined in Section 2) on the terms and conditions set forth herein; and

      WHEREAS,  the  Company  desires to issue and sell the Note and  Warrant to
Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the foregoing  recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

      1.  Agreement to Sell and Purchase.  Pursuant to the terms and  conditions
set forth in this Agreement,  on the Closing Date (as defined in Section 3), the
Company  agrees to sell to the  Purchaser,  and the  Purchaser  hereby agrees to
purchase  from  the  Company,  a  Note  in the  aggregate  principal  amount  of
$5,000,000  convertible in accordance  with the terms thereof into shares of the
Company's  Common  Stock  in  accordance  with  the  terms  of the Note and this
Agreement.  The  Note  purchased  on the  Closing  Date  shall  be  known as the
"Offering."  A form of the Note is  annexed  hereto as  Exhibit A. The Note will
mature on the Maturity Date (as defined in the Note). Collectively, the Note and
Warrant and Common Stock issuable in payment of the Note, upon conversion of the
Note and upon exercise of the Warrant are referred to as the "Securities."

      2. Fees and Warrant. On the Closing Date:

            (a) The Company will issue and deliver to the Purchaser a Warrant to
      purchase up to 12,000,000  shares of Common Stock in  connection  with the
      Offering  (as amended,  modified or  supplemented  from time to time,  the
      "Warrant")  pursuant to Section 1 hereof. The Warrant must be delivered on

<PAGE>

      the Closing  Date.  A form of Warrant is annexed  hereto as Exhibit B. All
      the   representations,    covenants,    warranties,    undertakings,   and
      indemnification, and other rights made or granted to or for the benefit of
      the  Purchaser  by the Company are hereby also made and granted in respect
      of the Warrant and shares of the  Company's  Common  Stock  issuable  upon
      exercise of the Warrant (the "Warrant Shares").

            (b) Subject to the terms of Section  2(d) below,  the Company  shall
      pay to Laurus Capital  Management,  LLC, the manager of the  Purchaser,  a
      closing  payment  in an  amount  equal to three  and  nine-tenths  percent
      (3.90%) of the aggregate  principal  amount of the Note. The foregoing fee
      is referred to herein as the "Closing Payment."

            (c) The Company shall  reimburse  the  Purchaser for its  reasonable
      expenses for services  rendered to the  Purchaser in  preparation  of this
      Agreement  and  the  Related  Agreements  (as  hereinafter  defined),  and
      expenses  incurred in connection with the Purchaser's due diligence review
      of the Company and its  Subsidiaries  (as defined in Section  6.8) and all
      related  matters.  Amounts  required to be paid under this  Section  2(c),
      together with amounts  required to be paid pursuant to Section  5(b)(v) of
      that certain Security  Agreement,  dated as of the date hereof,  among the
      Company,  certain  Subsidiaries  of the  Company  and  the  Purchaser  (as
      amended,  modified  or  supplemented  from  time to  time,  the  "Security
      Agreement"),  will be paid on the  Closing  Date and shall be $52,500  for
      such expenses.

            (d)  The  Closing  Payment  and  the  expenses  referred  to in  the
      preceding  clause (c) (net of  deposits  previously  paid by the  Company)
      shall  be paid  at  closing  out of  funds  held  pursuant  to the  Escrow
      Agreement (as defined below) and a disbursement  letter (the "Disbursement
      Letter").

      3. Closing, Delivery and Payment.

            3.1 Closing. Subject to the terms and conditions herein, the closing
of the transactions contemplated hereby (the "Closing"), shall take place on the
date  hereof,  at such time or place as the Company and  Purchaser  may mutually
agree (such date is hereinafter referred to as the "Closing Date").

            3.2 Delivery.  Pursuant to the Escrow  Agreement,  at the Closing on
the Closing Date, the Company will deliver to the Purchaser, among other things,
a Note in the form attached as Exhibit A  representing  the aggregate  principal
amount of  $5,000,000  and a Warrant  in the form  attached  as Exhibit B in the
Purchaser's name representing  12,000,000  Warrant Shares and the Purchaser will
deliver  to the  Company,  among  other  things,  the  amounts  set forth in the
Disbursement  Letter by certified  funds or wire  transfer (it being  understood
that  $4,251,000  of the proceeds of the Note shall be placed in the  Restricted
Account (as defined in the Restricted Account Agreement referred to below)).

                                       2
<PAGE>

      4.  Representations  and  Warranties  of the Company.  The Company  hereby
represents and warrants to the Purchaser as follows (which  representations  and
warranties  are  supplemented  by the  Company's  filings  under the  Securities
Exchange Act of 1934 made prior to the date hereof (collectively,  the "Exchange
Act Filings"):

            4.1  Organization,  Good  Standing  and  Qualification.  Each of the
Company and each of its  Subsidiaries  is a corporation,  partnership or limited
liability company,  as the case may be, duly organized,  validly existing and in
good standing under the laws of its  jurisdiction of  organization.  Each of the
Company and each of its  Subsidiaries  has the corporate  power and authority to
own and  operate  its  properties  and  assets,  to execute and deliver (i) this
Agreement,  (ii) the Note and the Warrant to be issued in  connection  with this
Agreement,  (iii) the  Master  Security  Agreement  dated as of the date  hereof
between the Company,  certain  Subsidiaries of the Company and the Purchaser (as
amended,  modified  or  supplemented  from time to time,  the  "Master  Security
Agreement"),  (iv) the Registration  Rights  Agreement  relating to, among other
things,  the Note,  the Warrant  and Common  Stock  underlying  the Note and the
Warrant,  dated as of the date hereof  between the Company and the Purchaser (as
amended,  modified or supplemented from time to time, the  "Registration  Rights
Agreement"),  (v) the  Subsidiary  Guaranty  dated as of the date hereof made by
certain  Subsidiaries of the Company (as amended,  modified or supplemented from
time to time, the "Subsidiary Guaranty"),  (vi) the Stock Pledge Agreement dated
as of the date hereof among the Company, certain Subsidiaries of the Company and
the  Purchaser  (as amended,  modified or  supplemented  from time to time,  the
"Stock Pledge Agreement"), (vii) the Funds Escrow Agreement dated as of the date
hereof  among the  Company,  the  Purchaser  and the escrow  agent  referred  to
therein,  substantially in the form of Exhibit D hereto (as amended, modified or
supplemented from time to time, the "Escrow  Agreement"),  (viii) the Restricted
Account  Agreement dated as of the date hereof among the Company,  the Purchaser
and North Fork Bank (as amended, modified or supplemented from time to time, the
"Restricted Account Agreement"), (ix) the Restricted Account Side Letter related
to the  Restricted  Account  Agreement  dated as of the date hereof  between the
Company and the Purchaser  (as amended,  modified or  supplemented  from time to
time, the "Restricted Account Side Letter") and (x) all other agreements related
to this  Agreement  and the Note and referred to herein (the  preceding  clauses
(ii) through (x), collectively, the "Related Agreements"), to issue and sell the
Note and the shares of Common Stock  issuable  upon  conversion of the Note (the
"Note  Shares"),  to issue and sell the Warrant and the Warrant  Shares,  and to
carry out the  provisions of this  Agreement and the Related  Agreements  and to
carry on its  business as presently  conducted.  Each of the Company and each of
its  Subsidiaries  is duly  qualified and is authorized to do business and is in
good  standing  as a  foreign  corporation,  partnership  or  limited  liability
company,  as the case may be, in all  jurisdictions  in which the  nature of its
activities   and  of  its   properties   (both  owned  and  leased)  makes  such
qualification  necessary,  except for those jurisdictions in which failure to do
so has not, or could not reasonably be expected to have,  individually or in the
aggregate,  a material  adverse  effect on the  business,  assets,  liabilities,
condition (financial or otherwise),  properties,  operations or prospects of the
Company and it  Subsidiaries,  taken  individually  and as a whole (a  "Material
Adverse Effect").

            4.2  Subsidiaries.  Each  direct  and  indirect  Subsidiary  of  the
Company,  the  direct  owner of such  Subsidiary  and its  percentage  ownership
thereof,  is set forth on Schedule  4.2.  For the purpose of this  Agreement,  a
"Subsidiary"  of any person or entity  means (i) a  corporation  or other entity

                                       3
<PAGE>

whose shares of stock or other ownership  interests having ordinary voting power
(other than stock or other ownership  interests having such power only by reason
of the happening of a contingency)  to elect a majority of the directors of such
corporation,  or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity or
(ii) a corporation or other entity in which such person or entity owns, directly
or indirectly, more than 50% of the equity interests at such time.

            4.3 Capitalization; Voting Rights.

            (a) The  authorized  capital  stock of the  Company,  as of the date
      hereof consists of 1,020,000,000 shares, of which 1,000,000,000 are shares
      of Common Stock, par value $0.001 per share,  766,129,715  shares of which
      are issued  and  outstanding  [, and  20,000,000  are shares of  preferred
      stock,  par  value  $0.001  per  share of which 0 shares  are  issued  and
      outstanding.  The  authorized  capital  stock  of each  Subsidiary  of the
      Company is set forth on Schedule 4.3.

            (b) Except as disclosed on Schedule 4.3,  other than: (i) the shares
      reserved for issuance  under the Company's  stock option  plans;  and (ii)
      shares  which may be granted  pursuant to this  Agreement  and the Related
      Agreements,  there are no outstanding options, warrants, rights (including
      conversion or  preemptive  rights and rights of first  refusal),  proxy or
      stockholder agreements,  or arrangements or agreements of any kind for the
      purchase or acquisition from the Company of any of its securities.  Except
      as disclosed on Schedule 4.3,  neither the offer,  issuance or sale of any
      of the Note or the  Warrant,  or the issuance of any of the Note Shares or
      Warrant  Shares,  nor the  consummation  of any  transaction  contemplated
      hereby will result in a change in the price or number of any securities of
      the Company  outstanding,  under anti-dilution or other similar provisions
      contained in or affecting any such securities.

            (c) All issued and outstanding shares of the Company's Common Stock:
      (i) have been duly  authorized  and validly  issued and are fully paid and
      nonassessable;  and (ii) were  issued in  compliance  with all  applicable
      state and federal laws concerning the issuance of securities.

            (d) The rights,  preferences,  privileges  and  restrictions  of the
      shares of the Common Stock are as stated in the Company's  Certificate  of
      Incorporation  (the  "Charter").  The Note Shares and Warrant  Shares have
      been duly and validly  reserved for  issuance.  When issued in  compliance
      with the provisions of this Agreement and the Company's  Charter,  each of
      the Note,  the Warrant and the Common  Stock  underlying  the Note and the
      Warrant will be validly issued, fully paid and nonassessable,  and will be
      free of any liens or encumbrances;  provided, however, that the Securities
      may be subject to  restrictions  on transfer  under state  and/or  federal
      securities laws as set forth herein or as otherwise  required by such laws
      at the time a transfer is proposed.

            4.4 Authorization;  Binding Obligations. All corporate,  partnership
or  limited  liability  company,  as the case may be,  action on the part of the
Company and each of its  Subsidiaries  (including  the  respective  officers and
directors)  necessary for the  authorization  of this  Agreement and the Related
Agreements,   the  performance  of  all  obligations  of  the  Company  and  its
Subsidiaries  hereunder  and under the other  Related  Agreements at the Closing

                                       4
<PAGE>

and, the authorization,  sale, issuance and delivery of the Note and Warrant has
been taken or will be taken prior to the Closing. This Agreement and the Related
Agreements, when executed and delivered and to the extent it is a party thereto,
will be valid and  binding  obligations  of each of the  Company and each of its
Subsidiaries,  enforceable  against  each such person in  accordance  with their
terms, except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application  affecting  enforcement of
      creditors' rights; and

            (b) general  principles of equity that restrict the  availability of
      equitable or legal remedies.

The sale of the Note and the subsequent  conversion of the Note into Note Shares
are not and will not be  subject  to any  preemptive  rights  or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the  subsequent  exercise of the Warrant for Warrant  Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.

            4.5 Liabilities. Neither the Company nor any of its Subsidiaries has
any contingent liabilities,  except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any Exchange Act Filings.

            4.6  Agreements;  Action.  Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:

            (a) there are no agreements, understandings, instruments, contracts,
      proposed  transactions,  judgments,  orders, writs or decrees to which the
      Company  or any of its  Subsidiaries  is a party  or by  which it is bound
      which may  involve:  (i)  obligations  (contingent  or  otherwise)  of, or
      payments to, the Company in excess of $50,000 (other than  obligations of,
      or  payments  to, the Company  arising  from  purchase or sale  agreements
      entered into in the ordinary course of business);  or (ii) the transfer or
      license of any patent, copyright,  trade secret or other proprietary right
      to or from the Company  (other than licenses  arising from the purchase of
      "off  the  shelf"  or  other  standard  products);   or  (iii)  provisions
      restricting the development,  manufacture or distribution of the Company's
      products or services;  or (iv) indemnification by the Company with respect
      to infringements of proprietary rights.

            (b) Since  December  31,  2003,  neither  the Company nor any of its
      Subsidiaries  has: (i) declared or paid any  dividends,  or  authorized or
      made any  distribution  upon or with respect to any class or series of its
      capital stock;  (ii) incurred any  indebtedness  for money borrowed or any
      other liabilities (other than ordinary course obligations) individually in
      excess of  $50,000  or,  in the case of  indebtedness  and/or  liabilities
      individually  less than $50,000,  in excess of $100,000 in the  aggregate;

                                       5
<PAGE>

      (iii) made any loans or advances to any person not in excess, individually
      or in the aggregate, of $100,000,  other than ordinary course advances for
      travel expenses;  or (iv) sold,  exchanged or otherwise disposed of any of
      its assets or rights, other than the sale of its inventory in the ordinary
      course of business.

            (c)  For  the  purposes  of  subsections  (a)  and  (b)  above,  all
      indebtedness,   liabilities,  agreements,   understandings,   instruments,
      contracts  and proposed  transactions  involving the same person or entity
      (including  persons or  entities  the  Company  has reason to believe  are
      affiliated  therewith)  shall be aggregated for the purpose of meeting the
      individual minimum dollar amounts of such subsections.

            4.7 Obligations to Related Parties.  Except as set forth on Schedule
4.7,  there are no  obligations  of the  Company or any of its  Subsidiaries  to
officers,  directors,  stockholders  or  employees  of the Company or any of its
Subsidiaries other than:

            (a) for  payment  of  salary  for  services  rendered  and for bonus
      payments;

            (b) reimbursement for reasonable  expenses incurred on behalf of the
      Company and its Subsidiaries;

            (c) for other standard employee benefits made generally available to
      all employees  (including stock option  agreements  outstanding  under any
      stock option plan approved by the Board of Directors of the Company); and

            (d)  obligations  listed in the  Company's  financial  statements or
      disclosed in any of its Exchange Act Filings.

Except as described  above or set forth on Schedule  4.7,  none of the officers,
directors  or,  to the  best  of  the  Company's  knowledge,  key  employees  or
stockholders  of the Company or any  members of their  immediate  families,  are
indebted to the Company,  individually or in the aggregate, in excess of $50,000
or have any direct or indirect  ownership  interest  in any firm or  corporation
with which the  Company is  affiliated  or with which the Company has a business
relationship,  or any firm or corporation which competes with the Company, other
than passive  investments in publicly traded companies  (representing  less than
one percent (1%) of such company) which may compete with the Company.  Except as
described  above, no officer,  director or  stockholder,  or any member of their
immediate  families,  is,  directly or  indirectly,  interested  in any material
contract  with  the  Company  and  no  agreements,  understandings  or  proposed
transactions are contemplated between the Company and any such person. Except as
set forth on Schedule  4.7, the Company is not a guarantor or  indemnitor of any
indebtedness of any other person, firm or corporation.

            4.8 Changes.  Since  December  31, 2003,  except as disclosed in any
Exchange Act Filing or on Schedule 4.8 to this Agreement, there has not been:

            (a) any  change  in the  business,  assets,  liabilities,  condition
      (financial  or  otherwise),  properties,  operations  or  prospects of the
      Company or any of its Subsidiaries, which individually or in the aggregate
      has had, or could  reasonably be expected to have,  individually or in the
      aggregate, a Material Adverse Effect;

                                       6
<PAGE>

            (b) any  resignation or termination of any officer,  key employee or
      group of employees of the Company or any of its Subsidiaries;

            (c) any material change,  except in the ordinary course of business,
      in the contingent obligations of the Company or any of its Subsidiaries by
      way of guaranty, endorsement, indemnity, warranty or otherwise;

            (d) any  damage,  destruction  or loss,  whether  or not  covered by
      insurance,  has had, or could reasonably be expected to have, individually
      or in the aggregate, a Material Adverse Effect;

            (e)  any  waiver  by the  Company  or any of its  Subsidiaries  of a
      valuable right or of a material debt owed to it;

            (f) any direct or  indirect  loans made by the Company or any of its
      Subsidiaries  to any  stockholder,  employee,  officer or  director of the
      Company  or any of its  Subsidiaries,  other  than  advances  made  in the
      ordinary course of business;

            (g) any material change in any compensation arrangement or agreement
      with any employee,  officer, director or stockholder of the Company or any
      of its Subsidiaries;

            (h) any declaration or payment of any dividend or other distribution
      of the assets of the Company or any of its Subsidiaries;

            (i) any labor organization activity related to the Company or any of
      its Subsidiaries;

            (j)  any  debt,   obligation  or  liability  incurred,   assumed  or
      guaranteed  by the Company or any of its  Subsidiaries,  except  those for
      immaterial  amounts and for current  liabilities  incurred in the ordinary
      course of business;

            (k) any sale,  assignment  or transfer of any  patents,  trademarks,
      copyrights,  trade secrets or other intangible assets owned by the Company
      or any of its Subsidiaries;

            (l) any change in any material agreement to which the Company or any
      of its  Subsidiaries  is a party or by which  either the Company or any of
      its  Subsidiaries  is bound which either  individually or in the aggregate
      has had, or could  reasonably be expected to have,  individually or in the
      aggregate, a Material Adverse Effect;

            (m) any other  event or  condition  of any  character  that,  either
      individually or in the aggregate, has had, or could reasonably be expected
      to have, individually or in the aggregate, a Material Adverse Effect; or

            (n) any  arrangement  or  commitment  by the  Company  or any of its
      Subsidiaries to do any of the acts described in subsection (a) through (m)
      above.

            4.9 Title to Properties and Assets;  Liens, Etc. Except as set forth
on Schedule 4.9, each of the Company and each of its  Subsidiaries  has good and

                                       7
<PAGE>

marketable  title to its properties and assets,  and good title to its leasehold
estates, in each case subject to no mortgage,  pledge, lien, lease,  encumbrance
or charge, other than:

            (a) those resulting from taxes which have not yet become delinquent;

            (b) minor liens and  encumbrances  which do not  materially  detract
      from the value of the property  subject  thereto or materially  impair the
      operations of the Company or any of its Subsidiaries; and

            (c) those  that have  otherwise  arisen  in the  ordinary  course of
      business.

Such facilities,  machinery,  equipment, fixtures, vehicles and other properties
owned,  leased or used by the Company and its Subsidiaries are in good operating
condition  and repair and are  reasonably  fit and usable for the  purposes  for
which they are being used.  Except as set forth on Schedule 4.9, the Company and
its  Subsidiaries  are in  compliance  with all material  terms of each lease to
which it is a party or is otherwise bound.

            4.10 Intellectual Property.

            (a)  Each  of the  Company  and  each  of its  Subsidiaries  owns or
      possesses  sufficient  legal  rights to all patents,  trademarks,  service
      marks, trade names, copyrights,  trade secrets, licenses,  information and
      other proprietary  rights and processes  necessary for its business as now
      conducted  and to the  Company's  knowledge,  as presently  proposed to be
      conducted (the "Intellectual Property"), without any known infringement of
      the  rights of  others.  There are no  outstanding  options,  licenses  or
      agreements of any kind relating to the foregoing  proprietary  rights, nor
      is the  Company  or any of its  Subsidiaries  bound  by or a party  to any
      options,  licenses or  agreements of any kind with respect to the patents,
      trademarks,   service  marks,  trade  names,  copyrights,  trade  secrets,
      licenses,  information and other  proprietary  rights and processes of any
      other person or entity other than such licenses or agreements arising from
      the purchase of "off the shelf" or standard products.

            (b) Neither the Company nor any of its Subsidiaries has received any
      communications  alleging that the Company or any of its  Subsidiaries  has
      violated  any of the  patents,  trademarks,  service  marks,  trade names,
      copyrights  or trade  secrets  or other  proprietary  rights  of any other
      person or entity,  nor is the Company or any of its Subsidiaries  aware of
      any basis therefor.

            (c) The  Company  does not  believe  it is or will be  necessary  to
      utilize any inventions, trade secrets or proprietary information of any of
      its employees made prior to their  employment by the Company or any of its
      Subsidiaries,   except  for  inventions,   trade  secrets  or  proprietary
      information  that have been  rightfully  assigned to the Company or any of
      its Subsidiaries.

            4.11 Compliance with Other Instruments.  Neither the Company nor any
of its Subsidiaries is in violation or default of (x) any term of its Charter or
Bylaws,  or (y) of any  provision  of  any  indebtedness,  mortgage,  indenture,
contract,  agreement or  instrument to which it is party or by which it is bound
or of any judgment,  decree,  order or writ, which violation or default,  in the
case of this  clause  (y),  has had,  or could  reasonably  be expected to have,

                                       8
<PAGE>

either  individually  or in  the  aggregate,  a  Material  Adverse  Effect.  The
execution,  delivery and  performance of and compliance  with this Agreement and
the Related  Agreements to which it is a party, and the issuance and sale of the
Note by the Company and the other Securities by the Company each pursuant hereto
and thereto,  will not, with or without the passage of time or giving of notice,
result in any such  material  violation,  or be in conflict with or constitute a
default  under any such term or  provision,  or  result in the  creation  of any
mortgage,  pledge,  lien,  encumbrance  or charge upon any of the  properties or
assets of the Company or any of its Subsidiaries or the suspension,  revocation,
impairment,  forfeiture or nonrenewal of any permit,  license,  authorization or
approval  applicable  to the Company,  its business or  operations or any of its
assets or properties.

            4.12 Litigation.  Except as set forth on Schedule 4.12 hereto, there
is no action,  suit,  proceeding or  investigation  pending or, to the Company's
knowledge,  currently  threatened against the Company or any of its Subsidiaries
that  prevents the Company or any of its  Subsidiaries  from  entering into this
Agreement or the other Related Agreements, or from consummating the transactions
contemplated  hereby  or  thereby,  or which  has had,  or could  reasonably  be
expected to have,  either  individually or in the aggregate,  a Material Adverse
Effect or any change in the current  equity  ownership  of the Company or any of
its Subsidiaries, nor is the Company aware that there is any basis to assert any
of the foregoing.  Neither the Company nor any of its Subsidiaries is a party or
subject to the provisions of any order, writ, injunction,  judgment or decree of
any court or government agency or instrumentality.

            4.13 Tax Returns and  Payments.  Each of the Company and each of its
Subsidiaries  has  timely  filed all tax  returns  (federal,  state  and  local)
required  to be filed by it.  All  taxes  shown  to be due and  payable  on such
returns,  any  assessments  imposed,  and all other taxes due and payable by the
Company or any of its  Subsidiaries on or before the Closing,  have been paid or
will be paid prior to the time they  become  delinquent.  Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been advised:

            (a) that any of its returns,  federal,  state or other, have been or
      are being audited as of the date hereof; or

            (b) of any  deficiency  in  assessment  or proposed  judgment to its
      federal, state or other taxes.

The Company has no knowledge of any  liability of any tax to be imposed upon its
properties  or assets as of the date of this  Agreement  that is not  adequately
provided for.

            4.14  Employees.  Except as set forth on Schedule 4.14,  neither the
Company nor any of its  Subsidiaries  has any collective  bargaining  agreements
with any of its employees.  There is no labor union organizing  activity pending
or, to the Company's knowledge, threatened with respect to the Company or any of
its Subsidiaries. Except as disclosed in the Exchange Act Filings or on Schedule
4.14,  neither the Company nor any of its Subsidiaries is a party to or bound by
any currently effective employment contract,  deferred compensation arrangement,
bonus plan,  incentive plan, profit sharing plan,  retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no employee
of the  Company or any of its  Subsidiaries,  nor any  consultant  with whom the
Company or any of its Subsidiaries  has contracted,  is in violation of any term

                                       9
<PAGE>

of any  employment  contract,  proprietary  information  agreement  or any other
agreement  relating to the right of any such individual to be employed by, or to
contract with, the Company or any of its  Subsidiaries  because of the nature of
the business to be conducted by the Company or any of its  Subsidiaries;  and to
the Company's  knowledge  the continued  employment by the Company or any of its
Subsidiaries of its present employees,  and the performance of the Company's and
its Subsidiaries' contracts with its independent contractors, will not result in
any such  violation.  Neither the Company nor any of its  Subsidiaries  is aware
that any of its employees is obligated under any contract  (including  licenses,
covenants or  commitments of any nature) or other  agreement,  or subject to any
judgment,  decree or order of any court or  administrative  agency,  that  would
interfere with their duties to the Company or any of its  Subsidiaries.  Neither
the Company nor any of its  Subsidiaries  has received any notice  alleging that
any such  violation  has  occurred.  Except  for  employees  who have a  current
effective employment  agreement with the Company or any of its Subsidiaries,  no
employee of the Company or any of its Subsidiaries has been granted the right to
continued  employment  by the  Company  or any  of  its  Subsidiaries  or to any
material  compensation  following  termination of employment with the Company or
any of its  Subsidiaries.  Except as set forth on Schedule  4.14, the Company is
not aware  that any  officer,  key  employee  or group of  employees  intends to
terminate  his,  her  or  their  employment  with  the  Company  or  any  of its
Subsidiaries,  nor does the  Company or any of its  Subsidiaries  have a present
intention to terminate the  employment of any officer,  key employee or group of
employees.

            4.15 Registration  Rights and Voting Rights.  Except as set forth on
Schedule  4.15 and except as  disclosed  in Exchange  Act  Filings,  neither the
Company nor any of its  Subsidiaries  is  presently  under any  obligation,  and
neither  the  Company nor any of its  Subsidiaries  has  granted any rights,  to
register  any  of  the  Company's  or its  Subsidiaries'  presently  outstanding
securities or any of its securities that may hereafter be issued.  Except as set
forth on Schedule  4.15 and except as disclosed in Exchange Act Filings,  to the
Company's  knowledge,  no stockholder of the Company or any of its  Subsidiaries
has entered into any agreement  with respect to the voting of equity  securities
of the Company or any of its Subsidiaries.

            4.16 Compliance with Laws;  Permits.  Neither the Company nor any of
its Subsidiaries is in violation of any applicable  statute,  rule,  regulation,
order  or   restriction   of  any   domestic  or  foreign   government   or  any
instrumentality  or agency  thereof in respect of the conduct of its business or
the ownership of its properties  which has had, or could  reasonably be expected
to have, either individually or in the aggregate,  a Material Adverse Effect. No
governmental  orders,  permissions,  consents,  approvals or authorizations  are
required to be obtained and no  registrations or declarations are required to be
filed in connection  with the  execution  and delivery of this  Agreement or any
other Related  Agreement and the issuance of any of the Securities,  except such
as has been duly and validly  obtained or filed,  or with respect to any filings
that must be made after the Closing,  as will be filed in a timely manner.  Each
of the  Company  and its  Subsidiaries  has all  material  franchises,  permits,
licenses and any similar authority  necessary for the conduct of its business as
now being  conducted by it, the lack of which could,  either  individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

                                       10
<PAGE>

            4.17  Environmental and Safety Laws.  Neither the Company nor any of
its  Subsidiaries is in violation of any applicable  statute,  law or regulation
relating  to the  environment  or  occupational  health and  safety,  and to its
knowledge,  no material  expenditures are or will be required in order to comply
with any such  existing  statute,  law or  regulation.  Except  as set  forth on
Schedule  4.17, no Hazardous  Materials (as defined below) are used or have been
used,  stored,  or disposed of by the Company or any of its  Subsidiaries or, to
the Company's  knowledge,  by any other person or entity on any property  owned,
leased or used by the Company or any of its  Subsidiaries.  For the  purposes of
the preceding sentence, "Hazardous Materials" shall mean:

            (a) materials  which are listed or otherwise  defined as "hazardous"
      or "toxic" under any applicable local, state,  federal and/or foreign laws
      and regulations  that govern the existence  and/or remedy of contamination
      on property,  the protection of the environment  from  contamination,  the
      control of  hazardous  wastes,  or other  activities  involving  hazardous
      substances, including building materials; or

            (b) any petroleum products or nuclear materials.

            4.18 Valid  Offering.  Assuming the accuracy of the  representations
and warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration  requirements of
the Securities  Act of 1933, as amended (the  "Securities  Act"),  and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration,  permit or qualification  requirements of all applicable
state securities laws.

            4.19  Full  Disclosure.   Each  of  the  Company  and  each  of  its
Subsidiaries  has provided the Purchaser with all  information  requested by the
Purchaser  in  connection  with its  decision to purchase  the Note and Warrant,
including all information the Company and its Subsidiaries believe is reasonably
necessary to make such investment decision.  Neither this Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto nor any other document
delivered  by  the  Company  or  any of its  Subsidiaries  to  Purchaser  or its
attorneys or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby,  contain any untrue statement of a material fact
nor omit to state a  material  fact  necessary  in order to make the  statements
contained  herein or therein,  in light of the  circumstances  in which they are
made, not misleading.  Any financial projections and other estimates provided to
the  Purchaser  by the  Company  or any of its  Subsidiaries  were  based on the
Company's and its Subsidiaries' experience in the industry and on assumptions of
fact  and  opinion  as to  future  events  which  the  Company  or  any  of  its
Subsidiaries,  at the date of the  issuance of such  projections  or  estimates,
believed to be reasonable.

            4.20 Insurance. Each of the Company and each of its Subsidiaries has
general commercial, product liability, fire and casualty insurance policies with
coverages  which the Company  believes are  customary  for  companies  similarly
situated to the Company and its Subsidiaries in the same or similar business.

            4.21 SEC Reports.  Except as set forth on Schedule 4.21, the Company
has filed all proxy statements, reports and other documents required to be filed
by it under the Securities  Exchange Act 1934, as amended (the "Exchange  Act").
The Parent has furnished the Purchaser with copies of: (i) its Annual Reports on

                                       11
<PAGE>

Form 10-KSB for its fiscal year ended  December  31,  2003,  (ii) its  Quarterly
Report on Form 10-QSB for its fiscal quarter ended March 31, 2004, and (iii) the
Form  8-K  filings  which  it has  made  during  the  fiscal  year  2004 to date
(collectively,  the "SEC  Reports").  Except as set forth on Schedule 4.21, each
SEC Report was, at the time of its filing,  in substantial  compliance  with the
requirements  of its  respective  form  and  none  of the SEC  Reports,  nor the
financial  statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact  required to be stated  therein or necessary
to make the statements  therein,  in light of the circumstances under which they
were made, not misleading.

            4.22  Listing.  On the date hereof,  the  Company's  Common Stock is
listed for trading on the National  Association  of Securities  Dealers Over the
Counter  Bulletin  Board ("NASD OTCBB") and satisfies all  requirements  for the
continuation  of such trading.  The Company has not received any notice that its
Common  Stock  will not be  eligible  to be traded on the NASD OTCBB or that its
Common Stock does not meet all requirements for such trading.

            4.23 No  Integrated  Offering.  Neither the Company,  nor any of its
Subsidiaries  or affiliates,  nor any person acting on its or their behalf,  has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under  circumstances that would cause the offering of
the Securities pursuant to this Agreement or any of the Related Agreements to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the  Securities  Act, or any applicable  exchange-related  stockholder
approval  provisions,  nor  will  the  Company  or  any  of  its  affiliates  or
Subsidiaries  take any  action or steps  that would  cause the  offering  of the
Securities to be integrated with other offerings.

            4.24 Stop Transfer.  The Securities are restricted  securities as of
the date of this Agreement. Neither the Company nor any of its Subsidiaries will
issue any stop transfer  order or other order  impeding the sale and delivery of
any of the  Securities at such time as the  Securities are registered for public
sale or an exemption from registration is available, except as required by state
and federal securities laws.

            4.25  Dilution.  The  Company  specifically  acknowledges  that  its
obligation  to issue the shares of Common Stock upon  conversion of the Note and
exercise of the Warrant is binding upon the Company and  enforceable  regardless
of the  dilution  such  issuance  may have on the  ownership  interests of other
shareholders of the Company.

            4.26  Patriot  Act.  The  Company  certifies  that,  to the  best of
Company's  knowledge,  neither the Company nor any of its  Subsidiaries has been
designated,  and is not  owned or  controlled,  by a  "suspected  terrorist"  as
defined in  Executive  Order 13224.  The Company  hereby  acknowledges  that the
Purchaser seeks to comply with all applicable laws concerning  money  laundering
and related  activities.  In furtherance  of those  efforts,  the Company hereby
represents,  warrants and agrees that: (i) none of the cash or property that the
Company or any of its Subsidiaries  will pay or will contribute to the Purchaser
has been or shall be derived  from,  or related to, any activity  that is deemed
criminal  under United  States law; and (ii) no  contribution  or payment by the
Company or any of its Subsidiaries to the Purchaser, to the extent that they are
within the Company's and/or its Subsidiaries'  control shall cause the Purchaser

                                       12
<PAGE>

to be in  violation of the United  States Bank  Secrecy  Act, the United  States
International  Money  Laundering  Control  Act  of  1986  or the  United  States
International  Money Laundering  Abatement and  Anti-Terrorist  Financing Act of
2001.  The  Company  shall  promptly  notify  the  Purchaser  if  any  of  these
representations  ceases to be true and accurate  regarding the Company or any of
its  Subsidiaries.  The Company  agrees to provide the Purchaser any  additional
information  regarding the Company or any of its Subsidiaries that the Purchaser
deems  necessary or convenient to ensure  compliance  with all  applicable  laws
concerning money laundering and similar activities.  The Company understands and
agrees  that  if at  any  time  it is  discovered  that  any  of  the  foregoing
representations  are  incorrect,  or if otherwise  required by applicable law or
regulation  related to money laundering  similar  activities,  the Purchaser may
undertake  appropriate  actions  to ensure  compliance  with  applicable  law or
regulation,  including but not limited to segregation  and/or  redemption of the
Purchaser's  investment in the Company. The Company further understands that the
Purchaser  may  release  confidential  information  about  the  Company  and its
Subsidiaries  and, if applicable,  any underlying  beneficial  owners, to proper
authorities if the Purchaser,  in its sole discretion,  determines that it is in
the best interests of the Purchaser in light of relevant  rules and  regulations
under the laws set forth in subsection (ii) above.

      5.  Representations and Warranties of the Purchaser.  The Purchaser hereby
represents  and  warrants  to the  Company  and  Subsidiaries  as follows  (such
representations  and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):

            5.1  No  Shorting.  The  Purchaser  or any  of  its  affiliates  and
investment partners has not, will not and will not cause any person or entity to
directly  engage in "short sales" of the  Company's  Common Stock as long as any
Note (as defined in each of this Agreement and the Security  Agreement) shall be
outstanding.

            5.2 Requisite  Power and Authority.  The Purchaser has all necessary
power and  authority  under all  applicable  provisions  of law to  execute  and
deliver  this  Agreement  and the  Related  Agreements  and to carry  out  their
provisions.  All corporate  action on  Purchaser's  part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be  effectively  taken  prior to the  Closing.  Upon  their  execution  and
delivery,  this Agreement and the Related  Agreements  will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except:

            (a) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium or other laws of general application  affecting  enforcement of
      creditors' rights; and

            (b) as limited by general  principles  of equity that  restrict  the
      availability of equitable and legal remedies.

            5.3  Investment  Representations.  Purchaser  understands  that  the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon  Purchaser's  representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities

                                       13
<PAGE>

Act of 1933, as amended (the "Securities  Act"). The Purchaser  confirms that it
has  received  or has had  full  access  to all  the  information  it  considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant,  respectively.  The Purchaser further confirms that
it has had an opportunity to ask questions and receive  answers from the Company
regarding the Company's and its Subsidiaries' business, management and financial
affairs and the terms and conditions of the Offering,  the Note, the Warrant and
the Securities and to obtain  additional  information (to the extent the Company
possessed such  information or could acquire it without  unreasonable  effort or
expense)  necessary to verify any  information  furnished to the Purchaser or to
which the Purchaser had access.

            5.4 Purchaser  Bears Economic  Risk.  The Purchaser has  substantial
experience in  evaluating  and investing in private  placement  transactions  of
securities  in  companies  similar  to the  Company  so  that it is  capable  of
evaluating  the merits and risks of its  investment  in the  Company and has the
capacity to protect its own interests. The Purchaser must bear the economic risk
of this  investment  until the Securities are sold pursuant to: (i) an effective
registration  statement  under the  Securities  Act; or (ii) an  exemption  from
registration is available with respect to such sale.

            5.5 Acquisition for Own Account. The Purchaser is acquiring the Note
and Warrant and the Note Shares and the Warrant Shares for the  Purchaser's  own
account for  investment  only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.

            5.6  Purchaser Can Protect Its  Interest.  The Purchaser  represents
that  by  reason  of  its,  or  of  its  management's,  business  and  financial
experience,  the  Purchaser has the capacity to evaluate the merits and risks of
its  investment in the Note,  the Warrant and the  Securities and to protect its
own interests in connection with the transactions contemplated in this Agreement
and the Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions  contemplated in the Agreement
or the Related Agreements.

            5.7  Accredited  Investor.   Purchaser  represents  that  it  is  an
accredited investor within the meaning of Regulation D under the Securities Act.

            5.8 Legends.

            (a) The Note shall bear substantially the following legend:

            "THIS NOTE AND THE COMMON STOCK  ISSUABLE  UPON  CONVERSION  OF THIS
            NOTE HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE
            COMMON STOCK ISSUABLE UPON  CONVERSION OF THIS NOTE MAY NOT BE SOLD,
            OFFERED  FOR SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE OF AN
            EFFECTIVE  REGISTRATION  STATEMENT  AS TO THIS  NOTE OR SUCH  SHARES
            UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
            COUNSEL    REASONABLY    SATISFACTORY    TO   CONVERSION    SERVICES
            INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

                                       14
<PAGE>

            (b) The Note  Shares and the Warrant  Shares,  if not issued by DWAC
      system (as  hereinafter  defined),  shall bear a legend  which shall be in
      substantially  the  following  form  until such  shares are  covered by an
      effective registration statement filed with the SEC:

            "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
            UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR ANY  APPLICABLE
            STATE  SECURITIES  LAWS.  THESE SHARES MAY NOT BE SOLD,  OFFERED FOR
            SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE
            REGISTRATION  STATEMENT  UNDER SUCH  SECURITIES  ACT AND  APPLICABLE
            STATE  LAWS OR AN  OPINION OF  COUNSEL  REASONABLY  SATISFACTORY  TO
            CONVERSION  SERVICES  INTERNATIONAL,  INC. THAT SUCH REGISTRATION IS
            NOT REQUIRED."

            (c) The Warrant shall bear substantially the following legend:

            "THIS WARRANT AND THE COMMON  SHARES  ISSUABLE UPON EXERCISE OF THIS
            WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933,
            AS AMENDED,  OR ANY APPLICABLE  STATE  SECURITIES LAWS. THIS WARRANT
            AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
            BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
            AN  EFFECTIVE  REGISTRATION  STATEMENT  AS TO  THIS  WARRANT  OR THE
            UNDERLYING  SHARES OF COMMON  STOCK  UNDER  SAID ACT AND  APPLICABLE
            STATE   SECURITIES   LAWS  OR  AN  OPINION  OF  COUNSEL   REASONABLY
            SATISFACTORY TO CONVERSION  SERVICES  INTERNATIONAL,  INC. THAT SUCH
            REGISTRATION IS NOT REQUIRED."

      6.  Covenants of the Company.  The Company  covenants  and agrees with the
Purchaser as follows:

            6.1  Stop-Orders.  The Company will advise the  Purchaser,  promptly
after it receives  notice of issuance by the Securities and Exchange  Commission
(the "SEC"), any state securities  commission or any other regulatory  authority
of any stop order or of any order  preventing or suspending  any offering of any
securities  of the Company,  or of the  suspension of the  qualification  of the
Common  Stock of the Company for  offering or sale in any  jurisdiction,  or the
initiation of any proceeding for any such purpose.

                                       15
<PAGE>

            6.2 Listing.  The Company shall  promptly  secure the listing of the
shares  of  Common  Stock  issuable  upon  conversion  of the  Note and upon the
exercise of the Warrant on the OTCBB (the "Principal  Market") upon which shares
of Common Stock are listed  (subject to official  notice of issuance)  and shall
maintain  such  listing so long as any other  shares of Common Stock shall be so
listed.  The  Company  will  maintain  the  listing of its  Common  Stock on the
Principal  Market,  and will comply in all material  respects with the Company's
reporting,  filing  and  other  obligations  under  the  bylaws  or rules of the
National  Association  of Securities  Dealers  ("NASD") and such  exchanges,  as
applicable.

            6.3 Market  Regulations.  The Company shall notify the SEC, NASD and
applicable  state  authorities,  in accordance with their  requirements,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and  regulation,  for the legal  and valid  issuance  of the  Securities  to the
Purchaser and promptly provide copies thereof to the Purchaser.

            6.4  Reporting  Requirements.  The Company will timely file with the
SEC all reports  required to be filed  pursuant to the  Exchange Act and refrain
from  terminating  its status as an issuer  required by the Exchange Act to file
reports  thereunder  even  if  the  Exchange  Act or the  rules  or  regulations
thereunder would permit such termination.

            6.5 Use of Funds.  The Company  agrees that it will use the proceeds
of the sale of the Note for (x) the acquisition of business (each such business,
an  "Acquired  Business")  approved  by  the  Purchaser  (such  acquisitions,  a
"Permitted  Acquisition")  and (y) general  working  capital  purposes (it being
understood  that $_________ of the proceeds of the Note will be deposited in the
Restricted  Account (as defined in the Restricted  Account Agreement referred to
below)).

            6.6  Access  to  Facilities.  Each of the  Company  and  each of its
Subsidiaries will permit any representatives designated by the Purchaser (or any
successor of the Purchaser),  upon reasonable  notice and during normal business
hours,  at such person's  expense and  accompanied  by a  representative  of the
Company, to:

            (a) visit and inspect any of the properties of the Company or any of
      its  Subsidiaries;

            (b) examine the corporate  and  financial  records of the Company or
      any of its  Subsidiaries  (unless  such  examination  is not  permitted by
      federal,  state or local law or by  contract)  and make copies  thereof or
      extracts therefrom; and

            (c) discuss the affairs, finances and accounts of the Company or any
      of  its  Subsidiaries   with  the  directors,   officers  and  independent
      accountants of the Company or any of its Subsidiaries.

Notwithstanding  the foregoing,  neither the Company nor any of its Subsidiaries
will provide any material,  non-public  information to the Purchaser  unless the
Purchaser  signs  a  confidentiality   agreement  and  otherwise  complies  with
Regulation FD, under the federal securities laws.

                                       16
<PAGE>

            6.7 Taxes.  Each of the  Company and each of its  Subsidiaries  will
promptly pay and  discharge,  or cause to be paid and  discharged,  when due and
payable,  all  lawful  taxes,  assessments  and  governmental  charges or levies
imposed  upon the income,  profits,  property or business of the Company and its
Subsidiaries;  provided, however, that any such tax, assessment,  charge or levy
need not be paid if the validity  thereof  shall  currently be contested in good
faith by appropriate proceedings and if the Company and/or such Subsidiary shall
have set  aside  on its  books  adequate  reserves  with  respect  thereto,  and
provided,  further,  that the  Company  and its  Subsidiaries  will pay all such
taxes,  assessments,  charges  or  levies  forthwith  upon the  commencement  of
proceedings to foreclose any lien which may have attached as security therefor.

            6.8 Insurance.  Each of the Company and its  Subsidiaries  will keep
its assets which are of an insurable  character insured by financially sound and
reputable  insurers  against loss or damage by fire,  explosion  and other risks
customarily  insured against by companies in similar business similarly situated
as the Company and its  Subsidiaries;  and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner  which the Company  reasonably  believes is  customary  for  companies in
similar business  similarly  situated as the Company and its Subsidiaries and to
the extent available on commercially  reasonable terms. The Company, and each of
its Subsidiaries  will jointly and severally bear the full risk of loss from any
loss  of any  nature  whatsoever  with  respect  to the  assets  pledged  to the
Purchaser  as  security  for its  obligations  hereunder  and under the  Related
Agreements.  At the  Company's and each of its  Subsidiaries'  joint and several
cost  and  expense  in  amounts  and  with  carriers  reasonably  acceptable  to
Purchaser,  the  Company  and each of its  Subsidiaries  shall  (i) keep all its
insurable  properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies  engaged in businesses  similar to the Company's or the
respective Subsidiary's including business interruption insurance; (ii) maintain
a bond in such  amounts  as is  customary  in the case of  companies  engaged in
businesses  similar to the  Company's or the  respective  Subsidiary's  insuring
against larceny,  embezzlement or other criminal  misappropriation  of insured's
officers and  employees who may either singly or jointly with others at any time
have  access to the assets or funds of the  Company  or any of its  Subsidiaries
either directly or through governmental  authority to draw upon such funds or to
direct  generally the  disposition  of such assets;  (iii)  maintain  public and
product  liability  insurance  against  claims  for  personal  injury,  death or
property damage suffered by others; (iv) maintain all such worker's compensation
or  similar  insurance  as may be  required  under  the  laws  of any  state  or
jurisdiction  in which the Company or the  respective  Subsidiary  is engaged in
business; and (v) furnish Purchaser with (x) copies of all policies and evidence
of the  maintenance  of such  policies  at least  thirty  (30) days  before  any
expiration  date,  (y)  excepting the Company's  workers'  compensation  policy,
endorsements  to such policies  naming  Purchaser as "co-insured" or "additional
insured"  and  appropriate  loss  payable  endorsements  in form  and  substance
satisfactory to Purchaser, naming Purchaser as loss payee, and (z) evidence that
as to Purchaser the insurance  coverage  shall not be impaired or invalidated by
any act or neglect of the Company or any Subsidiary and the insurer will provide
Purchaser  with at least  thirty (30) days  notice  prior to  cancellation.  The
Company and each  Subsidiary  shall instruct the insurance  carriers that in the
event of any loss  thereunder,  the carriers shall make payment for such loss to
the Company and/or the Subsidiary and Purchaser jointly. In the event that as of

                                       17
<PAGE>

the date of receipt of each loss recovery upon any such insurance, the Purchaser
has not declared an event of default  with  respect to this  Agreement or any of
the  Related  Agreements,  then the  Company  and/or  such  Subsidiary  shall be
permitted  to direct  the  application  of such loss  recovery  proceeds  toward
investment in property,  plant and equipment  that would  comprise  "Collateral"
secured by Purchaser's  security  interest  pursuant to its security  agreement,
with any surplus funds to be applied  toward  payment of the  obligations of the
Company to Purchaser. In the event that Purchaser has properly declared an event
of default with respect to this Agreement or any of the Related Agreements, then
all loss recoveries received by Purchaser upon any such insurance thereafter may
be applied to the  obligations  of the Company  hereunder  and under the Related
Agreements, in such order as the Purchaser may determine. Any surplus (following
satisfaction of all Company obligations to Purchaser) shall be paid by Purchaser
to the Company or applied as may be otherwise  required by law.  Any  deficiency
thereon  shall be paid by the  Company  or the  Subsidiary,  as  applicable,  to
Purchaser, on demand.

            6.9  Intellectual  Property.  Each of the  Company  and  each of its
Subsidiaries  shall maintain in full force and effect its existence,  rights and
franchises and all licenses and other rights to use Intellectual  Property owned
or possessed by it and  reasonably  deemed to be necessary to the conduct of its
business.

            6.10  Properties.  Each of the Company and each of its  Subsidiaries
will keep its properties in good repair, working order and condition, reasonable
wear and tear  excepted,  and from  time to time  make all  needful  and  proper
repairs, renewals, replacements, additions and improvements thereto; and each of
the  Company  and each of its  Subsidiaries  will at all times  comply with each
provision  of all  leases  to which it is a party  or  under  which it  occupies
property if the breach of such provision  could,  either  individually or in the
aggregate, reasonably be expected tohave a Material Adverse Effect.

            6.11 Confidentiality.  The Company agrees that it will not disclose,
and will not  include in any  public  announcement,  the name of the  Purchaser,
unless  expressly agreed to by the Purchaser or unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of such
requirement. Notwithstanding the foregoing, the Company may disclose Purchaser's
identity and the terms of this Agreement to its current and prospective debt and
equity financing sources.

            6.12 Required Approvals. For so long as at least twenty-five percent
(25%) of the original aggregate principal amount of the Note is outstanding, the
Company,  without the prior  written  consent of the  Purchaser,  shall not, and
shall not permit any of its Subsidiaries to:

            (a) directly or indirectly declare or pay any dividends,  other than
      dividends paid to the Parent or any of its wholly-owned Subsidiaries, (ii)
      issue any  preferred  stock that is  manditorily  redeemable  prior to the
      sixth month  anniversary  of the Maturity Date (as defined in the Note) or
      (iii) redeem any of its preferred stock or other equity interests;

            (b)  liquidate,  dissolve  or effect a material  reorganization  (it
      being understood that in no event shall the Company dissolve, liquidate or
      merge with any other person or entity (unless the Company is the surviving
      entity);

                                       18
<PAGE>

            (c) become  subject to  (including,  without  limitation,  by way of
      amendment to or modification  of) any agreement or instrument which by its
      terms would (under any circumstances) restrict the Company's or any of its
      Subsidiaries  right to  perform  the  provisions  of this  Agreement,  any
      Related Agreement or any of the agreements contemplated hereby or thereby;

      (d)  materially  alter or change the scope of the  business of the Company
      and its Subsidiaries  taken as a whole; (e) (i) create,  incur,  assume or
      suffer  to  exist  any  indebtedness  (exclusive  of  trade  debt and debt
      incurred  to finance  the  purchase  of  equipment  (not in excess of five
      percent  (5%)  of  the  fair  market  value  of  the   Company's  and  its
      Subsidiaries'  assets)  whether  secured or  unsecured  other than (x) the
      Company's  indebtedness to the Purchaser,  (y)  indebtedness  set forth on
      Schedule   6.12(e)  attached  hereto  and  made  a  part  hereof  and  any
      refinancings  or  replacements  thereof on terms no less  favorable to the
      Purchaser than the indebtedness being refinanced or replaced,  and (z) any
      debt  incurred in  connection  with the purchase of assets in the ordinary
      course of business,  or any refinancings or replacements  thereof on terms
      no less favorable to the Purchaser than the indebtedness  being refinanced
      or replaced;  (ii) cancel any debt owing to it in excess of $50,000 in the
      aggregate during any 12 month period; (iii) assume, guarantee,  endorse or
      otherwise  become directly or  contingently  liable in connection with any
      obligations  of any other  Person,  except the  endorsement  of negotiable
      instruments   by  the  Company  for  deposit  or   collection  or  similar
      transactions   in  the  ordinary  course  of  business  or  guarantees  of
      indebtedness otherwise permitted to be outstanding pursuant to this clause
      (e);

      (f) create or acquire any Subsidiary after the date hereof unless (i) such
      Subsidiary  is a  wholly-owned  Subsidiary  of the  Company  and (ii) such
      Subsidiary  becomes  party to the  Master  Security  Agreement,  the Stock
      Pledge  Agreement  and the  Subsidiary  Guaranty  (either by  executing  a
      counterpart  thereof  or an  assumption  or joinder  agreement  in respect
      thereof)  and, to the extent  required by the  Purchaser,  satisfies  each
      condition  of  this  Agreement  and  the  Related  Agreements  as if  such
      Subsidiary were a Subsidiary on the Closing Date; and

      (g) with  respect  to the  Company  and  each  Subsidiary  of the  Company
      organized in the United States of America,  make  investments in, make any
      loans or  advances  to, or  transfer  assets to,  any of its  Subsidiaries
      organized  in any  jurisdiction  other than the United  States of America,
      other  than any  immaterial  investments,  loans,  advances  and/or  asset
      transfers made in the ordinary course of business.

            6.13  Reissuance  of  Securities.  The  Company  agrees  to  reissue
certificates  representing  the  Securities  without  the  legends  set forth in
Section 5.8 above at such time as:

            (a) the holder  thereof is permitted  to dispose of such  Securities
      pursuant to Rule 144(k) under the Securities Act; or

            (b) upon resale subject to an effective registration statement after
      such Securities are registered under the Securities Act.

                                       19
<PAGE>

The Company  agrees to  cooperate  with the  Purchaser  in  connection  with all
resales  pursuant  to Rule 144(d) and Rule  144(k) and  provide  legal  opinions
necessary  to allow such resales  provided  the Company and its counsel  receive
reasonably  requested  representations from the selling Purchaser and broker, if
any.

            6.14 Opinion.  On the Closing Date,  the Company will deliver to the
Purchaser an opinion  acceptable  to the Purchaser  from the Company's  external
legal counsel.  The Company will provide,  at the Company's expense,  such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and  acceptable to the Purchaser) in connection with the conversion of the Note
and exercise of the Warrant.

            6.15 Margin  Stock.  The Company will not permit any of the proceeds
of the Note or the Warrant to be used  directly or  indirectly  to "purchase" or
"carry"  "margin  stock" or to repay  indebtedness  incurred  to  "purchase"  or
"carry"  "margin  stock"  within the  respective  meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve System
as now and from time to time hereafter in effect.

            6.16 Financing Right of First Refusal. (a) The Company hereby grants
to the  Purchaser a right of first refusal to provide any  Additional  Financing
(as defined below) to be issued by the Company  and/or any of its  Subsidiaries,
subject to the following terms and  conditions.  From and after the date hereof,
prior  to the  incurrence  of any  additional  indebtedness  and/or  the sale or
issuance of any equity  interests of the Company or any of its  Subsidiaries (an
"Additional  Financing"),  the Company and/or any Subsidiary of the Company,  as
the case may be, shall notify the  Purchaser of its intention to enter into such
Additional Financing. In connection therewith, the Company and/or the applicable
Subsidiary  thereof shall submit a fully  executed term sheet (a "Proposed  Term
Sheet") to the Purchaser setting forth the terms,  conditions and pricing of any
such  Additional  Financing  (such  financing to be negotiated on "arm's length"
terms and the terms  thereof to be  negotiated  in good  faith)  proposed  to be
entered into by the Company and/or such Subsidiary. The Purchaser shall have the
right,  but not the  obligation,  to deliver  its own  proposed  term sheet (the
"Purchaser  Term  Sheet")  setting  forth the terms and  conditions  upon  which
Purchaser would be willing to provide such  Additional  Financing to the Company
and/or such  Subsidiary.  The  Purchaser  Term Sheet shall contain terms no less
favorable to the Company and /or the Subsidiary  than those outlined in Proposed
Term Sheet.  The Purchaser  shall deliver such  Purchaser  Term Sheet within ten
business days of receipt of each such Proposed Term Sheet.  If the provisions of
the  Purchaser  Term Sheet are at least as favorable to the Company  and/or such
Subsidiary,  as the case may be, as the  provisions  of the Proposed Term Sheet,
the  Company  and/or  such  Subsidiary  shall  enter  into  and  consummate  the
Additional   Financing   transaction  outlined  in  the  Purchaser  Term  Sheet.
Notwithstanding  the  foregoing,  for the  purpose  of  this  6.16(a)  only,  an
"Additional  Financing"  shall not include up to $10,000,000 of equity financing
arranged by Sands Brothers prior to December 31, 2004.

            (b) The Company will not, and will not permit its  Subsidiaries  to,
agree,  directly or  indirectly,  to any  restriction  with any person or entity
which limits the ability of the Purchaser to consummate an Additional  Financing
with the Company or any of its Subsidiaries.

            6.17  Restricted  Cash  Disclosure.  The  Company  agrees  that,  in
connection  with  its  filing  of its 8-K  Report  with the SEC  concerning  the
transactions  contemplated  by this Agreement and the Related  Agreements  (such
report, the "Laurus  Transaction 8-K") in a timely manner after the date hereof,

                                       20
<PAGE>

it will  disclose in such Laurus  Transaction  8-K the amount of the proceeds of
the Note  issued to the  Purchaser  that has been  placed in a  restricted  cash
account and is subject to the terms and  conditions  of this  Agreement  and the
Related  Agreements.  Furthermore,  the Company agrees to disclose in all public
filings required by the Commission (where  appropriate)  following the filing of
the Laurus  Transaction 8-K, the existence of the restricted cash referred to in
the immediately preceding sentence, together with the amount thereof.

      7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company and Subsidiaries as follows:

            7.1 Confidentiality. The Purchaser agrees that it will not disclose,
and will not include in any public announcement, the name of the Company, unless
expressly  agreed to by the  Company  or unless  and until  such  disclosure  is
required by law or  applicable  regulation,  and then only to the extent of such
requirement.

            7.2 Non-Public  Information.  The Purchaser agrees not to effect any
sales in the  shares  of the  Company's  Common  Stock  while in  possession  of
material,  non-public  information  regarding  the  Company if such sales  would
violate applicable securities law.

      8. Covenants of the Company and Purchaser Regarding Indemnification.

            8.1 Company Indemnification.  The Company agrees to indemnify,  hold
harmless,  reimburse and defend the Purchaser, each of the Purchaser's officers,
directors,  agents,  affiliates,  control persons,  and principal  shareholders,
against  any  claim,  cost,  expense,  liability,  obligation,  loss  or  damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser   which   results,   arises  out  of  or  is  based   upon:   (i)  any
misrepresentation  by the  Company or any of its  Subsidiaries  or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement,  any other
Related Agreement or in any exhibits or schedules attached hereto or thereto; or
(ii) any breach or default in performance by Company or any of its  Subsidiaries
of  any  covenant  or  undertaking  to be  performed  by  Company  or any of its
Subsidiaries hereunder, under any other Related Agreement or any other agreement
entered  into  by the  Company  and/or  any of its  Subsidiaries  and  Purchaser
relating hereto or thereto.

            8.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold
harmless,  reimburse and defend the Company and each of the Company's  officers,
directors,  agents, affiliates,  control persons and principal shareholders,  at
all times  against any claim,  cost,  expense,  liability,  obligation,  loss or
damage (including  reasonable legal fees) of any nature,  incurred by or imposed
upon  the  Company  which  results,  arises  out of or is  based  upon:  (i) any
misrepresentation  by  Purchaser  or breach of any warranty by Purchaser in this
Agreement  or in any  exhibits  or  schedules  attached  hereto  or any  Related
Agreement;  or (ii) any breach or default in  performance  by  Purchaser  of any
covenant or  undertaking  to be performed by Purchaser  hereunder,  or any other
agreement entered into by the Company and Purchaser relating hereto.

                                       21
<PAGE>

      9. Conversion of Convertible Note.

            9.1 Mechanics of Conversion.

            (a)  Provided  the   Purchaser  has  notified  the  Company  of  the
      Purchaser's  intention  to sell the Note  Shares  and the Note  Shares are
      included in an effective  registration  statement or are otherwise  exempt
      from  registration  when sold: (i) upon the conversion of the Note or part
      thereof,  the  Company  shall,  at its own  cost  and  expense,  take  all
      necessary  action  (including  the  issuance  of  an  opinion  of  counsel
      reasonably  acceptable  to  the  Purchaser  following  a  request  by  the
      Purchaser) to assure that the Company's  transfer agent shall issue shares
      of the  Company's  Common  Stock  in the  name  of the  Purchaser  (or its
      nominee)  or  such  other  persons  as  designated  by  the  Purchaser  in
      accordance  with Section  9.1(b)  hereof and in such  denominations  to be
      specified  representing  the  number  of Note  Shares  issuable  upon such
      conversion;  and (ii) the Company warrants that no instructions other than
      these instructions have been or will be given to the transfer agent of the
      Company's  Common  Stock  (unless  otherwise  required  by  law,  rule  or
      regulation)  and that  after the  Effectiveness  Date (as  defined  in the
      Registration  Rights  Agreement)  the Note  Shares  issued  will be freely
      transferable  subject  to  the  prospectus  delivery  requirements  of the
      Securities Act and the provisions of this Agreement,  and will not contain
      a legend restricting the resale or transferability of the Note Shares.

            (b) Purchaser will give notice of its decision to exercise its right
      to convert the Note or part thereof by telecopying or otherwise delivering
      an executed and  completed  notice of the number of shares to be converted
      to the Company (the "Notice of  Conversion").  The  Purchaser  will not be
      required to surrender  the Note until the  Purchaser  receives a credit to
      the account of the  Purchaser's  prime broker  through the DWAC system (as
      defined  below),  representing  the Note Shares or until the Note has been
      fully  satisfied.  Each date on which a Notice of Conversion is telecopied
      or delivered to the Company in accordance with the provisions hereof shall
      be deemed a  "Conversion  Date."  Pursuant  to the terms of the  Notice of
      Conversion,  the Company will issue  instructions  to the  transfer  agent
      accompanied  by an opinion of counsel  within two (2) business days of the
      date of the delivery to the Company of the Notice of Conversion  and shall
      cause the transfer  agent to transmit the  certificates  representing  the
      Conversion   Shares  to  the  Holder  by  crediting  the  account  of  the
      Purchaser's prime broker with the Depository Trust Company ("DTC") through
      its Deposit  Withdrawal Agent Commission  ("DWAC") system within three (3)
      business  days after  receipt by the  Company of the Notice of  Conversion
      (the "Delivery Date").

            (c) The Company understands that a delay in the delivery of the Note
      Shares  in the form  required  pursuant  to  Section 9 hereof  beyond  the
      Delivery Date could result in economic loss to the Purchaser. In the event
      that the Company  fails to direct its  transfer  agent to deliver the Note
      Shares to the  Purchaser  via the DWAC  system  within  the time frame set
      forth in Section 9.1(b) above and the Note Shares are not delivered to the
      Purchaser by the Delivery Date, as  compensation to the Purchaser for such
      loss,  the Company  agrees to pay late  payments to the Purchaser for late
      issuance  of the Note  Shares in the form  required  pursuant to Section 9

                                       22
<PAGE>

      hereof  upon  conversion  of the  Note in the  amount  equal  to $250  per
      business day after the Delivery Date.  Notwithstanding the foregoing,  the
      Company will not owe the  Purchaser  any late payments if the delay in the
      delivery of the Note Shares  beyond the Delivery Date is solely out of the
      control of the  Company  and the  Company is  actively  trying to cure the
      cause of the delay. The Company shall pay any payments incurred under this
      Section in  immediately  available  funds upon  demand and, in the case of
      actual damages,  accompanied by reasonable  documentation of the amount of
      such damages. Such documentation shall show the number of shares of Common
      Stock the Purchaser is forced to purchase (in an open market  transaction)
      which the Purchaser anticipated receiving upon such conversion,  and shall
      be calculated as the amount by which (A) the  Purchaser's  total  purchase
      price (including customary brokerage  commissions,  if any) for the shares
      of Common Stock so purchased  exceeds (B) the aggregate  principal  and/or
      interest  amount of the Note,  for which  such  Conversion  Notice was not
      timely honored.

Nothing  contained herein or in any document  referred to herein or delivered in
connection  herewith  shall be deemed to  establish  or require the payment of a
rate of  interest  or other  charges  in  excess  of the  maximum  permitted  by
applicable law. In the event that the rate of interest or dividends  required to
be paid or other charges  hereunder  exceed the maximum amount permitted by such
law, any payments in excess of such maximum  shall be credited  against  amounts
owed by the Company to a Purchaser and thus refunded to the Company.

      10. Registration Rights.

            10.1  Registration   Rights  Granted.   The  Company  hereby  grants
registration rights to the Purchaser pursuant to a Registration Rights Agreement
dated as of even date herewith between the Company and the Purchaser.

            10.2 Offering  Restrictions.  Except as previously  disclosed in the
SEC Reports or in the Exchange Act Filings, or stock or stock options granted to
employees or directors of the Company (these exceptions  hereinafter referred to
as the "Excepted  Issuances"),  neither the Company nor any of its  Subsidiaries
will,  for so  long  as at  least  twenty-five  percent  (25%)  of the  original
aggregate principal amount of the Note is outstanding, issue any securities with
a continuously  variable/floating  conversion  feature which are or could be (by
conversion or registration)  free-trading  securities (i.e. common stock subject
to a  registration  statement)  prior to the full repayment or conversion of the
Note  (together with all accrued and unpaid  interest and fees related  thereto)
(the "Exclusion Period").

      11. Miscellaneous.

            11.1 Governing Law. THIS AGREEMENT AND EACH RELATED  AGREEMENT SHALL
BE GOVERNED BY AND  CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW
YORK,  WITHOUT  REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY
EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS  CONTEMPLATED BY THIS
AGREEMENT AND EACH RELATED  AGREEMENT  SHALL BE BROUGHT ONLY IN THE STATE COURTS
OF NEW YORK OR IN THE  FEDERAL  COURTS  LOCATED  IN THE STATE OF NEW YORK.  BOTH
PARTIES AND THE INDIVIDUALS  EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS
ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE  JURISDICTION OF SUCH COURTS AND

                                       23
<PAGE>

WAIVE TRIAL BY JURY.  IN THE EVENT THAT ANY  PROVISION OF THIS  AGREEMENT OR ANY
RELATED AGREEMENT  DELIVERED IN CONNECTION  HEREWITH IS INVALID OR UNENFORCEABLE
UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL BE DEEMED
INOPERATIVE  TO THE EXTENT THAT IT MAY  CONFLICT  THEREWITH  AND SHALL BE DEEMED
MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH  PROVISION  WHICH
MAY PROVE INVALID OR  UNENFORCEABLE  UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY
OR  ENFORCEABILITY  OF ANY OTHER  PROVISION  OF THIS  AGREEMENT  OR ANY  RELATED
AGREEMENT.

            11.2  Survival.  The  representations,   warranties,  covenants  and
agreements made herein shall survive any investigation made by the Purchaser and
the  closing of the  transactions  contemplated  hereby to the  extent  provided
therein.  All statements as to factual  matters  contained in any certificate or
other  instrument  delivered by or on behalf of the Company  pursuant  hereto in
connection  with the  transactions  contemplated  hereby  shall be  deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.

            11.3 Successors.  Except as otherwise expressly provided herein, the
provisions  hereof  shall  inure to the  benefit  of, and be binding  upon,  the
successors,  heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be  enforceable by each person who shall be a holder
of the  Securities  from time to time,  other than the  holders of Common  Stock
which  has been  sold by the  Purchaser  pursuant  to Rule  144 or an  effective
registration  statement.  Purchaser  may not assign its  rights  hereunder  to a
competitor of the Company.

            11.4 Entire Agreement.  This Agreement, the Related Agreements,  the
exhibits  and  schedules  hereto and thereto and the other  documents  delivered
pursuant  hereto  constitute  the full and entire  understanding  and  agreement
between the parties  with  regard to the  subjects  hereof and no party shall be
liable or bound to any other in any manner by any  representations,  warranties,
covenants and agreements except as specifically set forth herein and therein.

            11.5  Severability.  In case any provision of the Agreement shall be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

            11.6 Amendment and Waiver.

            (a) This  Agreement may be amended or modified only upon the written
      consent of the Company and the Purchaser.

            (b) The  obligations  of the Company and the rights of the Purchaser
      under this  Agreement  may be waived only with the written  consent of the
      Purchaser.

            (c) The  obligations  of the Purchaser and the rights of the Company
      under this  Agreement  may be waived only with the written  consent of the
      Company.

                                       24
<PAGE>

            11.7 Delays or Omissions.  It is agreed that no delay or omission to
exercise  any right,  power or remedy  accruing  to any party,  upon any breach,
default or  noncompliance  by another party under this  Agreement or the Related
Agreements,  shall  impair  any such  right,  power or  remedy,  nor shall it be
construed to be a waiver of any such breach,  default or  noncompliance,  or any
acquiescence  therein, or of or in any similar breach,  default or noncompliance
thereafter occurring.  All remedies,  either under this Agreement or the Related
Agreements,  by law or otherwise  afforded to any party, shall be cumulative and
not alternative.

            11.8 Notices.  All notices required or permitted  hereunder shall be
in writing and shall be deemed effectively given:

            (a) upon personal delivery to the party to be notified;

            (b) when sent by confirmed  facsimile if sent during normal business
      hours of the recipient, if not, then on the next business day;

            (c) three (3) business  days after having been sent by registered or
      certified mail, return receipt requested, postage prepaid; or

            (d) one (1) day after deposit with a nationally recognized overnight
      courier,  specifying  next day  delivery,  with  written  verification  of
      receipt.

All communications shall be sent as follows:

<TABLE>
<CAPTION>
         <S>                        <C>
         If to the Company, to:     Conversion Services International, Inc.
                                    100 Eagle Rock Avenue
                                    East Hanover, New Jersey 07936
                                    Attention:  Chief Financial Officer
                                    Facsimile:  973-581-7113

                                    with a copy to:
                                    Ellenoff Grossman & Schole LLP
                                    370 Lexington Avenue
                                    New York, New York 10017
                                    Attention:  David Selengut, Esq.
                                    Facsimile:  212-370-7889

         If to the Purchaser, to:   Laurus Master Fund, Ltd.
                                    c/o Ogier Fiduciary Services {Cayman) Limited
                                    P.O. Box 1234
                                    Queensgate House, South Church Street, George Town
                                    Grand Cayman, Cayman Islands, British West Indies Facsimile:
                                    345-949-9877

                                    with a copy to:

                                    John E. Tucker, Esq.
                                    825 Third Avenue 14th Floor
                                    New York, NY 10022
                                    Facsimile:  212-541-4434
</TABLE>
or at such  other  address as the  Company or the  Purchaser  may  designate  by
written notice to the other parties hereto given in accordance herewith.

                                       25
<PAGE>

            11.9  Attorneys'  Fees.  In the  event  that any suit or  action  is
instituted to enforce any provision in this Agreement,  the prevailing  party in
such dispute shall be entitled to recover from the losing party all fees,  costs
and  expenses  of  enforcing  any right of such  prevailing  party under or with
respect to this Agreement,  including,  without limitation, such reasonable fees
and  expenses  of  attorneys  and  accountants,  which  shall  include,  without
limitation, all fees, costs and expenses of appeals.

            11.10  Titles  and  Subtitles.   The  titles  of  the  sections  and
subsections of this Agreement are for  convenience of reference only and are not
to be considered in construing this Agreement.

            11.11  Facsimile  Signatures;  Counterparts.  This  Agreement may be
executed by  facsimile  signatures  and in any number of  counterparts,  each of
which shall be an  original,  but all of which  together  shall  constitute  one
instrument.

            11.12 Broker's  Fees.  Except as set forth on Schedule 11.12 hereof,
each party hereto  represents  and warrants  that no agent,  broker,  investment
banker,  person or firm acting on behalf of or under the authority of such party
hereto is or will be  entitled  to any  broker's  or  finder's  fee or any other
commission   directly  or  indirectly  in  connection   with  the   transactions
contemplated  herein.  Each party hereto  further agrees to indemnify each other
party for any  claims,  losses or  expenses  incurred  by such other  party as a
result of the representation in this Section 11.12 being untrue.

            11.13  Construction.  Each party acknowledges that its legal counsel
participated  in the  preparation of this  Agreement and the Related  Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be  resolved   against  the   drafting   party  shall  not  be  applied  in  the
interpretation of this Agreement to favor any party against the other.

             [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

                                       26
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto  have  executed  the  SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANY:                                              PURCHASER:

CONVERSION SERVICES INTERNATIONAL, INC.               LAURUS MASTER FUND, LTD.

By:     /s/ Scott Newman                              By:      /s/ David Grin
        ------------------------------------------             -----------------
Name:   Scott Newman                                  Name:    David Grin
        ------------------------------------------             -----------------
Title:  President and CEO                             Title:
        ------------------------------------------             -----------------

                                       27
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERTIBLE NOTE

                                      A-1
<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

                                      B-1
<PAGE>

                                    EXHIBIT C
                                [FORM OF OPINION]

                                      C-1
<PAGE>

                                    EXHIBIT D

                            FORM OF ESCROW AGREEMENT

                                      D-1

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