Document:

SECURITY
      AGREEMENT

     

    This
      Security Agreement is made as of February 1, 2006 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”), Integrated Strategies, Inc., a Delaware
      corporation (“Integrated”), CSI Sub Corp. II (DE), a Delaware corporation (“CSI
      Sub II”) and McKnight Associates, Inc., a Delaware corporation (“McKnight).

     

    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
      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.

     

    
      
        
        

      

      
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    2. Loans.
      (a)(i)
      Subject to the terms and conditions set forth herein and in the Ancillary
      Agreements, Laurus may make revolving loans (the “Revolving Loans”) to the
      Company and the Eligible Subsidiaries 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 Secured
      Non-Convertible Term Note and a Secured Non-Convertible Revolving
      Note.
      The
      Company and each Eligible Subsidiary hereby each acknowledge and agree that
      Laurus’ obligation to purchase the Secured Non-Convertible Revolving Note and
      the Secured Non-Convertible Term Note from the Company and the Eligible
      Subsidiaries on the Closing Date shall be contingent upon the satisfaction
      (or
      waiver by Laurus) of the items and matters set forth in the closing checklist
      provided by Laurus to the Company on or prior to the Closing Date.

     

    (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 (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.

     

    
      
        
        

      

      
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    (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) Term
      Loan.
      Subject
      to the terms and conditions set forth herein and in the Ancillary Agreements,
      Laurus shall make a term loan (the “Term Loan”) to Company in an aggregate
      amount equal to One Million Dollars ($1,000,000). The Term Loan shall be
      advanced on the Closing Date and shall be, with respect to principal, payable
      in
      consecutive monthly installments of principal commencing on February 1, 2006
      and
      on the first day of each month thereafter, subject to acceleration upon the
      occurrence of an Event of Default or termination of this Agreement. The Term
      Loan shall be evidenced by the Secured Non-Convertible Term Note.

     

    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); (b) shall repay the Term Loan on the Maturity
      Date (as defined in the Secured Non-Convertible Term Note) (i) the then
      aggregate outstanding principal balance of the Term Loan together with accrued
      and unpaid interest, fees and charges and; (ii) all other amounts owed Laurus
      under Secured Non-Convertible Term Note, (c) shall repay the Revolving Loans
      on
      the expiration of the Term (i) the then aggregate outstanding principal balance
      of the Revolving Loans together with accrued and unpaid interest, fees and
      charges and (ii) all other amounts owed Laurus under this Agreement and the
      Ancillary Agreements; and (d) subject to Section 2(a)(ii), shall repay on any
      day on which the then aggregate outstanding principal balance of the Loans
      are
      in excess of the Formula Amount at such time, Loans in an amount equal to such
      excess. 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.

     

    
      
        
        

      

      
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    4. Procedure
      for Revolving Loans.
      Company
      may by written notice request a borrowing of Revolving 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 Revolving Loan. Together with each request for a Revolving
      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 Revolving 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 Revolving 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 Revolving 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 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.

     

    
      
        
        

      

      
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    (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 one percent
      (1.00%) of the Total Investment 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) [Intentioanlly
      Omitted] 

     

    (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) will be paid on the Closing Date and shall be $5,000 for
      such expenses.

     

     

    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.

     

    
      
        
        

      

      
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    (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 Revolving Loan and made as of the time of each and every Revolving
      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 (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.

     

    
      
        
        

      

      
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    (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.

     

    (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.”

     

    
      
        
        

      

      
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    (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 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.

     

    
      
        
        

      

      
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    (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 (Account
      Name: Conversion Services International, Inc, Account Number: 2704052105)
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 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 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

        
          

        

      

      
        
        

      

       

    

    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.

     

    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;

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    (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.

     

    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, to issue and sell the Options and the shares of Common Stock issuable
      upon conversion of the Options (the “Option 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.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    (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).
      [Company to update].

     

    (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 Options, or the issuance of any
      of
      the Option 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 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
      Option 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 Option and the Common Stock underlying the Option 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 Option 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:

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    (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 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 Options and the subsequent exercise of the Options for Option
      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 (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, 2004, 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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    (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.

     

    (iv) the
      Parent maintains disclosure controls and procedures (“Disclosure Controls”)
      designed to ensure that information required to be disclosed by the Parent
      in
      the reports that it files or submits under the Exchange Act is recorded,
      processed, summarized, and reported, within the time periods specified in the
      rules and forms of the SEC.

     

    (v) The
      Company makes and keeps books, records, and accounts, that, in reasonable
      detail, accurately and fairly reflect the transactions and dispositions of
      its
      assets. It maintains internal control over financial reporting (“Financial
      Reporting Controls”) designed by, or under the supervision of, its principal
      executive and principal financial officers, and effected by its management,
      and
      other personnel, to provide reasonable assurance regarding the reliability
      of
      financial reporting and the preparation of financial statements for external
      purposes in accordance with GAAP, including that:

     

    (1) transactions
      are executed in accordance with management’s general or specific
      authorization;

     

    (2) unauthorized
      acquisition, use, or disposition of the Company’s assets that could have a
      material effect on the financial statements are prevented or timely
      detected;

     

    (3) transactions
      are recorded as necessary to permit preparation of financial statements in
      accordance with GAAP, and that its receipts and expenditures are being made
      only
      in accordance with authorizations of the Company’s management and board of
      directors;

     

    (4) transactions
      are recorded as necessary to maintain accountability for assets;
      and

     

    (5) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals, and appropriate action is taken with respect to any
      differences.

     

    (vi) There
      is
      no weakness in any of its Disclosure Controls or Financial Reporting Controls
      that is required to be disclosed in any of the Exchange Act Filings, except
      as
      so disclosed.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    (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
      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; 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    (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;

     

    (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:

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    (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 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 12(i), each of
      Company and each of its Subsidiaries are 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 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 Notes 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. 

     

    
      
        
        

      

      
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    (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

     

    (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.

     

    
      
        
        

      

      
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    (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, to Company’s knowledge, in violation of
      the Sarbanes-Oxley Act of 2002 or is in violation of any SEC related regulation
      or rule or any rule of the Principal Market promulgated thereunder or any other
      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 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.

     

    
      
        
        

      

      
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    (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 Options, 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 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.

     

    
      
        
        

      

      
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    (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, 2004; and
      (ii) its Quarterly Reports on Form 10-QSB for its fiscal quarters ended March
      31, 2005, June 30, 2005 and September 30, 2005 and the Form 8-K filings which
      it
      has made during its fiscal years 2005 and 2006 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 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
      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 exercise of the Options is binding upon Company and enforceable
      regardless of the dilution such issuance may have on the ownership interests
      of
      other shareholders of Company. 

     

    
      
        
        

      

      
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    (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
      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.

     

    (cc) ERISA.
      Based upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and
      the regulations and published interpretations thereunder: (i) neither the
      Company nor any of its Subsidiaries has engaged in any Prohibited Transactions
      (as defined in Section 406 of ERISA and Section 4975 of the Code); (ii) the
      Company and each of its Subsidiaries has met all applicable minimum funding
      requirements under Section 302 of ERISA in respect of its plans; (iii) neither
      the Company nor any of its Subsidiaries has any knowledge of any event or
      occurrence which would cause the Pension Benefit Guaranty Corporation to
      institute proceedings under Title IV of ERISA to terminate any employee benefit
      plan(s); (iv) neither the Company nor any of its Subsidiaries has any fiduciary
      responsibility for investments with respect to any plan existing for the benefit
      of persons other than its or such Subsidiary’s employees; and (v) neither the
      Company nor any of its Subsidiaries has withdrawn, completely or partially,
      from
      any multi-employer pension plan so as to incur liability under the Multiemployer
      Pension Plan Amendments Act of 1980.

     

    
      
        
        

      

      
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    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
      exercise of the Options 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 term note facility and revolving
      credit facility with Laurus and (ii) for working capital purposes.

     

    
      
        
        

      

      
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    (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;

     

    (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. 

     

    
      
        
        

      

      
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    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
      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.

     

    
      
        
        

      

      
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    (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 any 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 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.

     

    
      
        
        

      

      
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    (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 Option 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 exercise
      of the Options.

     

    (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.

     

    
      
        
        

      

      
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    (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 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 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 exercise of the Options.

     

    (v) Financing
      Right of First Refusal.
      (i) For
      so long as the Obligations have not been indefeasibly repaid to Laurus in full,
      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. 

     

    
      
        
        

      

      
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    (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.

     

    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 Notes to be purchased by it
      under this Agreement and the Securities acquired by it upon the exercise of
      the
      Options.

     

    
      
        
        

      

      
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    (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 Notes, and the Securities and to protect its own interests
      in
      connection with the 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.

     

    
      
        
        

      

      
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    (i) Limitation
      on Acquisition of Common Stock.
      Notwithstanding anything to the contrary contained in this Agreement, any
      Ancillary Agreement, or any document, instrument or agreement entered into
      in
      connection with any other transaction entered into by and between Laurus and
      the
      Company (and/or Subsidiaries or Affiliates of the Company), Laurus shall not
      acquire stock in the Company (including, without limitation, pursuant to a
      contract to purchase, by exercising an option or warrant, by converting any
      other security or instrument, by acquiring or exercising any other right to
      acquire, shares of stock or other security convertible into shares of stock
      in
      the Company, or otherwise, and such options, warrants, conversion or other
      rights shall not be exercisable) to the extent such stock acquisition would
      cause any interest (including any original issue discount) payable by the
      Company to Laurus not to qualify as portfolio interest, within the meaning
      of
      Section 881(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)
      by reason of Section 881(c)(3) of the Code, taking into account the constructive
      ownership rules under Section 871(h)(3)(C) of the Code (the “Stock Acquisition
      Limitation”). The Stock Acquisition Limitation shall automatically become null
      and void without any notice to the Company upon the earlier to occur of either
      (a) the Company’s delivery to Laurus of a Notice of Redemption (as defined in
      the Secured Non-Convertible Term Note) or (b) the existence of an Event of
      Default at a time when the average closing price of the Common Stock as reported
      by Bloomberg, L.P. on the Principal Market for the immediately preceding five
      trading days is greater than or equal to 150% of the Exercise Price (as defined
      in the Options).

     

    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 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.

     

    
      
        
        

      

      
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    17. Term
      of Agreement.
      Laurus’
agreement to make Revolving 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;

     

    (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; 

     

    
      
        
        

      

      
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    (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); 

     

    (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;.

     

    
      
        
        

      

      
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    (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);

     

    (r) an
      SEC
      stop trade order or Principal Market trading suspension of the Common Stock
      shall be in effect for five (5) consecutive days or five (5) days during a
      period of ten (10) consecutive days, excluding in all cases a suspension of
      all
      trading on a Principal Market, provided that the Company shall not have been
      able to cure such trading suspension within thirty (30) days of the notice
      thereof or list the Common Stock on another Principal Market within sixty (60)
      days of such notice; or

     

    (s) the
      Company’s failure to deliver Common Stock to Laurus pursuant to and in the form
      required by the Option and this Agreement, if such failure to deliver Common
      Stock shall not be cured within three (3) Business Days or the Company is
      required to issue a replacement Note to Laurus and the Company shall fail to
      deliver such replacement Note within seven (7) Business Days.

     

    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 Laurus, in its sole discretion, deems
      advisable. 

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

       

    

    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.
      The
      parties hereto each hereby agree that the exercise by any party hereto of any
      right granted to it or the exercise by any party hereto of any remedy available
      to it (including, without limitation, the issuance of a notice of redemption,
      a
      borrowing request and/or a notice of default), in each case, hereunder or under
      any Ancillary Agreement which has been publicly filed with the SEC shall not
      constitute confidential information and no party shall have any duty to the
      other party to maintain such information as confidential.

     

    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. 

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

       

    

    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 subject to the limitation set forth in Section
      5(b)(v),
      and,
      without limitation, 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 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.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

       

    

    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.

     

    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.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

       

    

    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

              

            

    

     

    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, WITHOUT REGARD TO PRINCIPLES OF
      CONFLICTS OF LAW.

     

    (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
      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.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

       

    

    (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 HERETO OR
      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; Maximum Interest.
      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. Nothing contained in this Agreement, any Ancillary Agreement 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 rate 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 rate permitted by such law, any payments in excess of such
      maximum shall be credited against amounts owed by the Company to Laurus and
      thus
      refunded to the Company.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

       

    

    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. Survival.
      The representations, warranties, covenants and agreements made herein shall
      survive any investigation made by Laurus 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 or any of its Subsidiaries pursuant hereto in connection
      with the transactions contemplated herebly shall be deemed to be representations
      and warranties by the Company or such Subsidiary hereunder solely as of the
      date
      of such certificate or instrument. All indemnities set forth herein shall
      survive the execution, delivery and termination of this Agreement and the
      Ancillary Agreements and the making and repaying of the
      Obligations.

     

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

     

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

     

    36. 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.

     

    37. 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.

     

    38. 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.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

       

    

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

     

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

     

    "THIS
      NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      OR
      ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT AS TO THIS NOTE 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 exercise of the Options, 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 SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO CONVERSION SERVICES INTERNATIONAL, INC. THAT SUCH REGISTRATION
      IS NOT REQUIRED.”

    

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

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

       

    

    
      “THIS
        OPTION AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS OPTION HAVE NOT
        BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
        STATE
        SECURITIES LAWS. THIS OPTION AND THE COMMON SHARES ISSUABLE UPON EXERCISE
        OF
        THIS OPTION MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
        THE
        ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS OPTION 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.]

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

       

    

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

     

    CONVERSION
      SERVICES INTERNATIONAL, INC.

    

    By:___________________________________

    Name:

    Title:

     

    MCKNIGHT
      ASSOCIATES, INC.

    

    By:
      ___________________________________

    Name:

    Title:

    

     

    DELEEUW
      ASSOCIATES, LLC

    

    By:___________________________________

    Name:

    Title:

     

    CSI
      SUB CORP. (DE)

    

    By:___________________________________

    Name:

    Title: 

     

    INTEGRATED
      STRATEGIES, INC.

    

    By:___________________________________

    Name:

    Title:

     

    

     

    CSI
      SUB CORP. II (DE)

    

    By:___________________________________

    Name:

    Title:

     

    

     

    LAURUS
      MASTER FUND, LTD. 

    

    By:___________________________________

    Name:

    Title:

     

    

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    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 Options, 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, as each of the same may be amended, supplemented, restated or otherwise
      modified from time to time.

     

    
      
        
        

      

      
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    “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
      $10,000,000.

     

    “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.

     

    “Code”
      has the meaning given such term in Section 15(i).

     

    “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
      Goods;

     

    (e) all
      General Intangibles;

     

    (f) all
      Accounts;

     

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

     

    (h) all
      Investment Property;

     

    (i) all
      Stock;

     

    (j) all
      Chattel Paper;

     

    
      
        
        

      

      
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    (k) all
      Letter-of-Credit Rights;

     

    (l) all
      Instruments;

     

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

     

    (n)  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).

     

    “Disclosure
      Controls” has the meaning given such term in Section 12(f)(iv)

     

    “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.

     

    
      
        
        

      

      
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    “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 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.

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

       

    

    “Eligible
      Subsidiary”
shall
      mean DeLeeuw, CSI Sub, Integrated, CSI Sub II, McKnight 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.

     

    “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).

     

    “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.

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

       

    

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

     

    
      
        
        

      

      
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    “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”
means
      the Revolving Loans and the Term Loan 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).

     

    “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).

     

    “Notes”
means
      each of the Secured Non-Convertible Term Note and the Secured Non-Convertible
      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.

     

    “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.

     

    
      
        
        

      

      
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    “Option
      Shares”
shall
      have the meaning given such term in Section 12(a).

     

    “Options”
means
      that certain Common Stock Purchase Option dated as of the Closing Date made
      by
      the Parent in favor of Laurus and each other Option made by the Parent in favor
      Laurus, as each of the same may be amended, restated, modified and/or
      supplemented from time to time.

     

    “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.

     

    
      
        
        

      

      
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    “Principal
      Market”
means
      the NASD Over The Counter Bulletin Board, NASDAQ Capital Market, NASDAQ National
      Market System, American Stock Exchange or New York Stock Exchange (whichever
      of
      the foregoing is at the time the principal trading exchange or market for the
      Common Stock).

     

    “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.

     

    “SEC”
shall
      mean the Securities and Exchange Commission.

     

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

     

    
      
        
        

      

      
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    “Secured
      Non-Convertible Revolving
      Note”
means
      that secured revolving note made by Company in favor of Laurus in the original
      face amount of Ten Million Dollars ($10,000,000), as the same may be amended,
      supplemented, restated and/or otherwise modified from time to time.

     

    “Secured
      Non-Convertible Term
      Note”
means
      that secured term note made by Company in favor of Laurus in the original face
      amount of One Million Dollars ($1,000,000), as the same may be amended,
      supplemented, restated and/or otherwise modified from time to time.

     

    “Securities”
means
      the Notes and the Options being issued by Company to Laurus pursuant to this
      Agreement and the Ancillary Agreements and the shares of the Common Stock which
      may be issued pursuant to exercise of the Options.

     

    “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, subject to acceleration
      at
      the option of Laurus upon the occurrence of an Event of Default hereunder or
      other termination hereunder.

     

    “Term
      Loan”
has
      the
      meaning given such term in Section 2(c).

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

       

    

    “Total
      Investment Amount”
means
      $11,000,000.“UCC”
means
      the Uniform Commercial Code as the same may, from time to 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 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.

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

     

     

    LAURUS
      MASTER FUND, LTD.

     

    CONVERSION
      SERVICES INTERNATIONAL, INC.

     

    CSI
      SUB
      CORP. (DE)

     

    DELEEUW
      ASSOCIATES, LLC

     

    INTEGRATED
      STRATEGIES, INC.

     

    CSI
      SUB
      CORP. II (DE)

     

    MCKNIGHT
      ASSOCIATES, INC.

     

    Dated:
      February 1, 2006

     

    

    
      
        
        

      

      
        55

        
          

        

      

      
        
        

      

    

    

       

      TABLE
        OF CONTENTS

       

       

      Page

      
        
          	
                  1.

                	
                  General.

                	
                  1

                
	
                  2.

                	
                  Loans.

                	
                  2

                
	
                  3.

                	
                  Repayment
                    of the Loans.

                	
                  3

                
	
                  4.

                	
                  Procedure
                    for Revolving Loans.

                	
                  4

                
	
                  5.

                	
                  Interest
                    and Payments.

                	
                  4

                
	
                  6.

                	
                  Security
                    Interest.

                	
                  5

                
	
                  7.

                	
                  Representations,
                    Warranties and Covenants Concerning the Collateral.

                	
                  7
                    

                
	
                  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.

                	
                  23

                
	
                  14.

                	
                  Further
                    Assurances. 

                	
                  29

                
	
                  15.

                	
                  Representations
                    and Warranties of Laurus.

                	
                  29

                
	
                  16.

                	
                  Power
                    of Attorney. 

                	
                  31

                
	
                  17.

                	
                  Term
                    of Agreement.

                	
                  31

                
	
                  18.

                	
                  Termination
                    of Lien.

                	
                  32

                
	
                  19.

                	
                  Events
                    of Default.

                	
                  32

                
	
                  20.

                	
                  Remedies.

                	
                  34

                
	
                  21.

                	
                  Waivers.

                	
                  35

                
	
                  22.

                	
                  Expenses.

                	
                  35

                

        

         

        
          
            
            

          

          
            56

            
              

            

          

          
            
            

          

        

         

        
          	
                  23.

                	
                  Assignment
                    By Laurus.

                	
                  36

                
	
                  24.

                	
                  No
                    Waiver; Cumulative Remedies.

                	
                  36

                
	
                  25.

                	
                  Application
                    of Payments.

                	
                  37

                
	
                  26.

                	
                  Indemnity.

                	
                  37

                
	
                  27.

                	
                  Revival.
                    

                	
                  37

                
	
                  28.

                	
                  Notices.

                	
                  37

                
	
                  29.

                	
                  Governing
                    Law, Jurisdiction and Waiver of Jury Trial.

                	
                  38

                
	
                  30.

                	
                  Limitation
                    of Liability.

                	
                  39

                
	
                  31.

                	
                  Entire
                    Understanding; Maximum Interest. 

                	
                  39

                
	
                  32.

                	
                  Severability.

                	
                  40

                
	
                  33.

                	
                  Captions.

                	
                  40

                
	
                  34.

                	
                  Counterparts;
                    Telecopier Signatures.

                	
                  40

                
	
                  35.

                	
                  Construction.

                	
                  40

                
	
                  36.

                	
                  Publicity.
                    

                	
                  40

                
	
                  37.

                	
                  Joinder.

                	
                  40

                
	
                  38.

                	
                  Legends.
                    

                	
                  41

                

        

      

    

     

     

    LIST
      OF EXHIBITS

     

      
Exhibit
      A-Borrowing Base
      Certificate

     

    
      
         

      

        57STOCK
      PLEDGE AGREEMENT

     

     

    This
      Stock Pledge Agreement (this “Agreement”),
      dated
      as of February 1, 2006, among Laurus Master Fund, Ltd. (the “Pledgee”),
      Conversion Services International, Inc., a Delaware corporation (the
“Company”),
      and
      each of the other undersigned parties (other than the Pledgee) (the Company
      and
      each such other undersigned party, a “Pledgor”
and
      collectively, the “Pledgors”).

     

    BACKGROUND

     

    The
      Company has entered into a Security Agreement dated as of the date hereof (as
      amended, modified, restated or supplemented from time to time, the “Security
      Agreement”),
      pursuant to which the Pledgee provides or will provide certain financial
      accommodations to the Company and certain subsidiaries of the
      Company.

     

    In
      order
      to induce the Pledgee to provide or continue to provide the financial
      accommodations described in the Security Agreement, each Pledgor has agreed
      to
      pledge and grant a security interest in the collateral described herein to
      the
      Pledgee on the terms and conditions set forth herein.

     

    NOW,
      THEREFORE, in consideration of the premises and for other good and valuable
      consideration the receipt of which is hereby acknowledged, the parties hereto
      agree as follows:

     

    1. Defined
      Terms.
      All
      capitalized terms used herein which are not defined shall have the meanings
      given to them in the Security Agreement.

     

    2. Pledge
      and Grant of Security Interest.
      To
      secure the full and punctual payment and performance of (the following clauses
      (a) and (b), collectively, the “Obligations”)
      (a)
      the obligations under the Security Agreement and the Ancillary Agreements
      referred to in the Security Agreement (the Security Agreement and the Ancillary
      Agreements, as each may be amended, restated, modified and/or supplemented
      from
      time to time, collectively, the “Documents”)
      and
      (b) all other obligations and liabilities of each Pledgor to the Pledgee whether
      now existing or hereafter arising, direct or indirect, liquidated or
      unliquidated, absolute or contingent, due or not due and whether under, pursuant
      to or evidenced by a note, agreement, guaranty, instrument or otherwise (in
      each
      case, irrespective of the genuineness, validity, regularity or enforceability
      of
      such Obligations, or of any instrument evidencing any of the Obligations or
      of
      any collateral therefor or of the existence or extent of such collateral, and
      irrespective of the allowability, allowance or disallowance of any or all of
      such in any case commenced by or against any Pledgor under Title 11, United
      States Code, including, without limitation, obligations of each Pledgor for
      post-petition interest, fees, costs and charges that would have accrued or
      been
      added to the Obligations but for the commencement of such case), each Pledgor
      hereby pledges, assigns, hypothecates, transfers and grants a security interest
      to Pledgee in all of the following (the “Collateral”):

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    (a) the
      shares of stock set forth on Schedule
      A
      annexed
      hereto and expressly made a part hereof (together with any additional shares
      of
      stock or other equity interests acquired by any Pledgor, the “Pledged
      Stock”),
      the
      certificates representing the Pledged Stock and all dividends, cash, instruments
      and other property or proceeds from time to time received, receivable or
      otherwise distributed in respect of or in exchange for any or all of the Pledged
      Stock;

     

    (b) all
      additional shares of stock or other equity interests of any issuer (each, an
      “Issuer”)
      of the
      Pledged Stock from time to time acquired by any Pledgor in any manner,
      including, without limitation, stock dividends or a distribution in connection
      with any increase or reduction of capital, reclassification, merger,
      consolidation, sale of assets, combination of shares, stock split, spin-off
      or
      split-off (which shares shall be deemed to be part of the Collateral), and
      the
      certificates representing such additional shares, and all dividends, cash,
      instruments and other property or proceeds from time to time received,
      receivable or otherwise distributed in respect of or in exchange for any or
      all
      of such shares; and

     

    (c) all
      options and rights, whether as an addition to, in substitution of or in exchange
      for any shares of any Pledged Stock and all dividends, cash, instruments and
      other property or proceeds from time to time received, receivable or otherwise
      distributed in respect of or in exchange for any or all such options and
      rights.

     

    3. Delivery
      of Collateral.
      All
      certificates representing or evidencing the Pledged Stock shall be delivered
      to
      and held by or on behalf of Pledgee pursuant hereto and shall be accompanied
      by
      duly executed instruments of transfer or assignments in blank, all in form
      and
      substance satisfactory to Pledgee. Each Pledgor hereby authorizes the Issuer
      upon demand by the Pledgee to deliver any certificates, instruments or other
      distributions issued in connection with the Collateral directly to the Pledgee,
      in each case to be held by the Pledgee, subject to the terms hereof. Upon the
      occurrence and during the continuance of an Event of Default (as defined below),
      the Pledgee shall have the right, during such time in its discretion and without
      notice to the Pledgor, to transfer to or to register in the name of the Pledgee
      or any of its nominees any or all of the Pledged Stock. In addition, the Pledgee
      shall have the right at such time to exchange certificates or instruments
      representing or evidencing Pledged Stock for certificates or instruments of
      smaller or larger denominations.

     

    4. Representations
      and Warranties of each Pledgor.
      Each
      Pledgor jointly and severally represents and warrants to the Pledgee (which
      representations and warranties shall be deemed to continue to be made until
      all
      of the Obligations have been paid in full and each Document and each agreement
      and instrument entered into in connection therewith has been irrevocably
      terminated) that:

     

    (a) the
      execution, delivery and performance by each Pledgor of this Agreement and the
      pledge of the Collateral hereunder do not and will not result in any violation
      of any agreement, indenture, instrument, license, judgment, decree, order,
      law,
      statute, ordinance or other governmental rule or regulation applicable to any
      Pledgor;

     

    (b) this
      Agreement constitutes the legal, valid, and binding obligation of each Pledgor
      enforceable against each Pledgor in accordance with its terms;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    (c) (i)
      all
      Pledged Stock owned by each Pledgor is set forth on Schedule
      A
      hereto
      and (ii) each Pledgor is the direct and beneficial owner of each share of the
      Pledged Stock;

     

    (d) all
      of
      the shares of the Pledged Stock have been duly authorized, validly issued and
      are fully paid and nonassessable;

     

    (e) no
      consent or approval of any person, corporation, governmental body, regulatory
      authority or other entity, is or will be necessary for (i) the execution,
      delivery and performance of this Agreement, (ii) the exercise by the Pledgee
      of
      any rights with respect to the Collateral or (iii) the pledge and assignment
      of,
      and the grant of a security interest in, the Collateral hereunder;

     

    (f) there
      are
      no pending or, to the best of Pledgor’s knowledge, threatened actions or
      proceedings before any court, judicial body, administrative agency or arbitrator
      which may materially adversely affect the Collateral;

     

    (g) each
      Pledgor has the requisite power and authority to enter into this Agreement
      and
      to pledge and assign the Collateral to the Pledgee in accordance with the terms
      of this Agreement;

     

    (h) each
      Pledgor owns each item of the Collateral and, except for the pledge and security
      interest granted to Pledgee hereunder, the Collateral shall be, immediately
      following the closing of the transactions contemplated by the Documents, free
      and clear of any other security interest, mortgage, pledge, claim, lien, charge,
      hypothecation, assignment, offset or encumbrance whatsoever (collectively,
      “Liens”);

     

    (i) there
      are
      no restrictions on transfer of the Pledged Stock contained in the certificate
      of
      incorporation or by-laws (or equivalent organizational documents) of the Issuer
      or otherwise which have not otherwise been enforceably and legally waived by
      the
      necessary parties;

     

    (j) none
      of
      the Pledged Stock has been issued or transferred in violation of the securities
      registration, securities disclosure or similar laws of any jurisdiction to
      which
      such issuance or transfer may be subject;

     

    (k) the
      pledge and assignment of the Collateral and the grant of a security interest
      under this Agreement vest in the Pledgee all rights of each Pledgor in the
      Collateral as contemplated by this Agreement; and

     

    (l) Unless
      otherwise set forth on Schedule A hereto, the Pledged Stock constitutes one
      hundred percent (100%) of the issued and outstanding shares of capital stock
      of
      each Issuer.

     

    5. Covenants.
      Each
      Pledgor jointly and severally covenants that, until the Obligations shall be
      indefeasibly satisfied in full and each Document and each agreement and
      instrument entered into in connection therewith is irrevocably
      terminated:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    (a) No
      Pledgor will sell, assign, transfer, convey, or otherwise dispose of its rights
      in or to the Collateral or any interest therein; nor will any Pledgor create,
      incur or permit to exist any Lien whatsoever with respect to any of the
      Collateral or the proceeds thereof other than that created hereby. 

     

    (b) Each
      Pledgor will, at its expense, defend Pledgee’s right, title and security
      interest in and to the Collateral against the claims of any other
      party.

     

    (c) Each
      Pledgor shall at any time, and from time to time, upon the written request
      of
      Pledgee, execute and deliver such further documents and do such further acts
      and
      things as Pledgee may reasonably request in order to effectuate the purposes
      of
      this Agreement including, but without limitation, delivering to Pledgee, upon
      the occurrence of an Event of Default, irrevocable proxies in respect of the
      Collateral in form satisfactory to Pledgee. Until receipt thereof, upon an
      Event
      of Default that has occurred and is continuing beyond any applicable grace
      period, this Agreement shall constitute Pledgor’s proxy to Pledgee or its
      nominee to vote all shares of Collateral then registered in each Pledgor’s
      name.

     

    (d) No
      Pledgor will consent to or approve the issuance of (i) any additional shares
      of
      any class of capital stock or other equity interests of the Issuer; or (ii)
      any
      securities convertible either voluntarily by the holder thereof or automatically
      upon the occurrence or nonoccurrence of any event or condition into, or any
      securities exchangeable for, any such shares, unless, in either case, such
      shares are pledged as Collateral pursuant to this Agreement.

     

    6. Voting
      Rights and Dividends.
      In
      addition to the Pledgee’s rights and remedies set forth in Section 8 hereof, in
      case an Event of Default shall have occurred and be continuing, beyond any
      applicable cure period, the Pledgee shall (i) be entitled to vote the
      Collateral, (ii) be entitled to give consents, waivers and ratifications in
      respect of the Collateral (each Pledgor hereby irrevocably constituting and
      appointing the Pledgee, with full power of substitution, the proxy and
      attorney-in-fact of each Pledgor for such purposes) and (iii) be entitled to
      collect and receive for its own use cash dividends paid on the Collateral.
      No
      Pledgor shall be permitted to exercise or refrain from exercising any voting
      rights or other powers if, in the reasonable judgment of the Pledgee, such
      action would have a material adverse effect on the value of the Collateral
      or
      any part thereof; and, provided,
      further,
      that
      each Pledgor shall give at least five (5) days’ written notice of the manner in
      which such Pledgor intends to exercise, or the reasons for refraining from
      exercising, any voting rights or other powers other than with respect to any
      election of directors and voting with respect to any incidental matters.
      Following the occurrence of an Event of Default, all dividends and all other
      distributions in respect of any of the Collateral, shall be delivered to the
      Pledgee to hold as Collateral and shall, if received by any Pledgor, be received
      in trust for the benefit of the Pledgee, be segregated from the other property
      or funds of any other Pledgor, and be forthwith delivered to the Pledgee as
      Collateral in the same form as so received (with any necessary
      endorsement).

     

    7. Event
      of Default.
      An
“Event of Default” under this Agreement shall occur upon the happening of any of
      the following events:

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    (a) An
“Event
      of Default” under any Document or any agreement or note related to any Document
      shall have occurred and be continuing beyond any applicable cure
      period;

     

    (b) Any
      Pledgor shall default in the performance of any of its obligations under any
      Document, including, without limitation, this Agreement, and such default shall
      not be cured during the cure period applicable thereto;

     

    (c) Any
      representation or warranty of any Pledgor made herein, in any Document or in
      any
      agreement, statement or certificate given in writing pursuant hereto or thereto
      or in connection herewith or therewith shall be false or misleading in any
      material respect; 

     

    (d) Any
      portion of the Collateral is subjected to a levy of execution, attachment,
      distraint or other judicial process or any portion of the Collateral is the
      subject of a claim (other than by the Pledgee) of a Lien or other right or
      interest in or to the Collateral and such levy or claim shall not be cured,
      disputed or stayed within a period of thirty (30) days after the occurrence
      thereof; or

     

    (e) Any
      Pledgor shall (i) apply for, consent to, or suffer to exist the appointment
      of,
      or the taking of possession by, a receiver, custodian, trustee, liquidator
      or
      other fiduciary 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 any state or 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.

     

    8. Remedies.
      In case
      an Event of Default shall have occurred and is continuing, the Pledgee
      may:

     

    (a) Transfer
      any or all of the Collateral into its name, or into the name of its nominee
      or
      nominees;

     

    (b) Exercise
      all corporate rights with respect to the Collateral including, without
      limitation, all rights of conversion, exchange, subscription or any other
      rights, privileges or options pertaining to any shares of the Collateral as
      if
      it were the absolute owner thereof, including, but without limitation, the
      right
      to exchange, at its discretion, any or all of the Collateral upon the merger,
      consolidation, reorganization, recapitalization or other readjustment of the
      Issuer thereof, or upon the exercise by the Issuer of any right, privilege
      or
      option pertaining to any of the Collateral, and, in connection therewith, to
      deposit and deliver any and all of the Collateral with any committee,
      depository, transfer agent, registrar or other designated agent upon such terms
      and conditions as it may determine, all without liability except to account
      for
      property actually received by it; and

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    (c) Subject
      to any requirement of applicable law, sell, assign and deliver the whole or,
      from time to time, any part of the Collateral at the time held by the Pledgee,
      at any private sale or at public auction, with or without demand, advertisement
      or notice of the time or place of sale or adjournment thereof or otherwise
      (all
      of which are hereby waived, except such notice as is required by applicable
      law
      and cannot be waived), for cash or credit or for other property for immediate
      or
      future delivery, and for such price or prices and on such terms as the Pledgee
      in its sole discretion may determine, or as may be required by applicable
      law.

     

    Each
      Pledgor hereby waives and releases any and all right or equity of redemption,
      whether before or after sale hereunder. At any such sale, unless prohibited
      by
      applicable law, the Pledgee may bid for and purchase the whole or any part
      of
      the Collateral so sold free from any such right or equity of redemption. All
      moneys received by the Pledgee hereunder, whether upon sale of the Collateral
      or
      any part thereof or otherwise, shall be held by the Pledgee and applied by
      it as
      provided in Section 10 hereof. No failure or delay on the part of the Pledgee
      in
      exercising any rights hereunder shall operate as a waiver of any such rights
      nor
      shall any single or partial exercise of any such rights preclude any other
      or
      future exercise thereof or the exercise of any other rights hereunder. The
      Pledgee shall have no duty as to the collection or protection of the Collateral
      or any income thereon nor any duty as to preservation of any rights pertaining
      thereto, except to apply the funds in accordance with the requirements of
      Section 10 hereof. The Pledgee may exercise its rights with respect to property
      held hereunder without resort to other security for or sources of reimbursement
      for the Obligations. In addition to the foregoing, Pledgee shall have all of
      the
      rights, remedies and privileges of a secured party under the Uniform Commercial
      Code of New York (the “UCC”) regardless of the jurisdiction in which enforcement
      hereof is sought.

     

    9. Private
      Sale.
      Each
      Pledgor recognizes that the Pledgee may be unable to effect (or to do so only
      after delay which would adversely affect the value that might be realized from
      the Collateral) a public sale of all or part of the Collateral by reason of
      certain prohibitions contained in the Securities Act, and may be compelled
      to
      resort to one or more private sales to a restricted group of purchasers who
      will
      be obliged to agree, among other things, to acquire such Collateral for their
      own account, for investment and not with a view to the distribution or resale
      thereof. Each Pledgor agrees that any such private sale may be at prices and
      on
      terms less favorable to the seller than if sold at public sales and that such
      private sales shall be deemed to have been made in a commercially reasonable
      manner. Each Pledgor agrees that the Pledgee has no obligation to delay sale
      of
      any Collateral for the period of time necessary to permit the Issuer to register
      the Collateral for public sale under the Securities Act.

     

    10. Proceeds
      of Sale.
      The
      proceeds of any collection, recovery, receipt, appropriation, realization or
      sale of the Collateral shall be applied by the Pledgee as follows:

     

    (a) First,
      to
      the payment of all costs, reasonable expenses and charges of the Pledgee and
      to
      the reimbursement of the Pledgee for the prior payment of such costs, reasonable
      expenses and charges incurred in connection with the care and safekeeping of
      the
      Collateral (including, without limitation, the reasonable expenses of any sale
      or any other disposition of any of the Collateral), attorneys’ fees and
      reasonable expenses, court costs, any other fees or expenses incurred or
      expenditures or advances made by Pledgee in the protection, enforcement or
      exercise of its rights, powers or remedies hereunder;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

    (b) Second,
      to the payment of the Obligations, in whole or in part, in such order as the
      Pledgee may elect, whether or not such Obligations is then due;

     

    (c) Third,
      to
      such persons, firms, corporations or other entities as required by applicable
      law including, without limitation, Section 9-615(a)(3) of the UCC;
      and

     

    (d) Fourth,
      to the extent of any surplus to the Pledgors or as a court of competent
      jurisdiction may direct.

     

    In
      the
      event that the proceeds of any collection, recovery, receipt, appropriation,
      realization or sale are insufficient to satisfy the Obligations, each Pledgor
      shall be jointly and severally liable for the deficiency plus the costs and
      fees
      of any attorneys employed by Pledgee to collect such deficiency.

     

    11. Waiver
      of Marshaling.
      Each
      Pledgor hereby waives any right to compel any marshaling of any of the
      Collateral.

     

    12. No
      Waiver.
      Any and
      all of the Pledgee’s rights with respect to the Liens granted under this
      Agreement shall continue unimpaired, and Pledgor shall be and remain obligated
      in accordance with the terms hereof, notwithstanding (a) the bankruptcy,
      insolvency or reorganization of any Pledgor, (b) the release or substitution
      of
      any item of the Collateral at any time, or of any rights or interests therein,
      or (c) any delay, extension of time, renewal, compromise or other indulgence
      granted by the Pledgee in reference to any of the Obligations. Each Pledgor
      hereby waives all notice of any such delay, extension, release, substitution,
      renewal, compromise or other indulgence, and hereby consents to be bound hereby
      as fully and effectively as if such Pledgor had expressly agreed thereto in
      advance. No delay or extension of time by the Pledgee in exercising any power
      of
      sale, option or other right or remedy hereunder, and no failure by the Pledgee
      to give notice or make demand, shall constitute a waiver thereof, or limit,
      impair or prejudice the Pledgee’s right to take any action against any Pledgor
      or to exercise any other power of sale, option or any other right or
      remedy.

     

    13. Expenses.
      The
      Collateral shall secure, and each Pledgor shall pay to Pledgee on demand, from
      time to time, all reasonable costs and expenses, (including but not limited
      to,
      reasonable attorneys’ fees and costs, taxes, and all transfer, recording, filing
      and other charges) of, or incidental to, the custody, care, transfer,
      administration of the Collateral or any other collateral, or in any way relating
      to the enforcement, protection or preservation of the rights or remedies of
      the
      Pledgee under this Agreement or with respect to any of the
      Obligations.

     

    14. The
      Pledgee Appointed Attorney-In-Fact and Performance by the
      Pledgee.
      Upon
      the occurrence of an Event of Default, each Pledgor hereby irrevocably
      constitutes and appoints the Pledgee as such Pledgor’s true and lawful
      attorney-in-fact, with full power of substitution, to execute, acknowledge
      and
      deliver any instruments and to do in such Pledgor’s name, place and stead, all
      such acts, things and deeds for and on behalf of and in the name of such
      Pledgor, which such Pledgor could or might do or which the Pledgee may deem
      necessary, desirable or convenient to accomplish the purposes of this Agreement,
      including, without limitation, to execute such instruments of assignment or
      transfer or orders and to register, convey or otherwise transfer title to the
      Collateral into the Pledgee’s name. Each Pledgor hereby ratifies and confirms
      all that said attorney-in-fact may so do and hereby declares this power of
      attorney to be coupled with an interest and irrevocable. If any Pledgor fails
      to
      perform any agreement herein contained, the Pledgee may itself perform or cause
      performance thereof, and any costs and expenses of the Pledgee incurred in
      connection therewith shall be paid by the Pledgors as provided in Section 10
      hereof.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    15. Waivers.
      THE
      PARTIES HERETO 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 PLEDGEE, AND/OR ANY
      COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
      RELATIONSHIP ESTABLISHED BETWEEN THEN IN CONNECTION WITH THIS AGREEMENT, ANY
      OTHER DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

     

    16. Recapture.
      Notwithstanding anything to the contrary in this Agreement, if the Pledgee
      receives any payment or payments on account of the Obligations, 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 the United States Bankruptcy Code, as
      amended, or any other federal or state bankruptcy, reorganization, moratorium
      or
      insolvency law relating to or affecting the enforcement of creditors’ rights
      generally, common law or equitable doctrine, then to the extent of any sum
      not
      finally retained by the Pledgee, each Pledgor’s obligations to the Pledgee shall
      be reinstated and this Agreement shall remain in full force and effect (or
      be
      reinstated) until payment shall have been made to Pledgee, which payment shall
      be due on demand.

     

    17. Captions.
      All
      captions in this Agreement are included herein for convenience of reference
      only
      and shall not constitute part of this Agreement for any other
      purpose.

     

    18. Miscellaneous.

     

    (a) This
      Agreement constitutes the entire and final agreement among the parties with
      respect to the subject matter hereof and may not be changed, terminated or
      otherwise varied except by a writing duly executed by the parties
      hereto.

     

    (b) No
      waiver
      of any term or condition of this Agreement, whether by delay, omission or
      otherwise, shall be effective unless in writing and signed by the party sought
      to be charged, and then such waiver shall be effective only in the specific
      instance and for the purpose for which given.

     

    (c) In
      the
      event that any provision of this Agreement or the application thereof to any
      Pledgor or any circumstance in any jurisdiction governing this Agreement shall,
      to any extent, be invalid or unenforceable under any applicable statute,
      regulation, or rule of law, such provision shall be deemed inoperative to the
      extent that it may conflict therewith and shall be deemed modified to conform
      to
      such statute, regulation or rule of law, and the remainder of this Agreement
      and
      the application of any such invalid or unenforceable provision to parties,
      jurisdictions, or circumstances other than to whom or to which it is held
      invalid or unenforceable shall not be affected thereby, nor shall same affect
      the validity or enforceability of any other provision of this
      Agreement.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    (d) This
      Agreement shall be binding upon each Pledgor, and each Pledgor’s successors and
      assigns, and shall inure to the benefit of the Pledgee and its successors and
      assigns.

     

    (e) Any
      notice or other communication required or permitted pursuant to this Agreement
      shall be given in accordance with the Security Agreement. 

     

    (f) THIS
      AGREEMENT AND THE OTHER DOCUMENTS 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, WITHOUT REGARD TO PRINCIPLES OF
      CONFLICTS OF LAW.

     

    (g) EACH
      PLEDGOR 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 ANY PLEDGOR, ON THE ONE HAND,
      AND THE PLEDGEE, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF
      THE
      OTHER DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
      OR
      ANY OF THE OTHER DOCUMENTS, PROVIDED,
      THAT
      EACH PLEDGOR ACKNOWLEDGES 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 THE PLEDGEE
      FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO
      COLLECT THE INDEBTEDNESS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
      FOR
      THE INDEBTEDNESS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
      THE
      PLEDGEE. EACH PLEDGOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
      JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PLEDGOR
      HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
      JURISDICTION, IMPROPER VENUE OR FORUM
      NON CONVENIENS.
      EACH
      PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF THE 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 SUCH PLEDGOR AT THE ADDRESS SET FORTH IN THE THE
      SECURITY AGREEMENT
      AND THAT
      SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE SUCH PLEDGOR’S
      ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
      POSTAGE PREPAID.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

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

     

    (i) This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original and all of which when taken together shall constitute one
      and
      the same agreement. Any signature delivered by a party by facsimile transmission
      shall be deemed an original signature hereto.

     

    [Remainder
      of Page Intentionally Left Blank]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
      and
      year first written above.

     

    CONVERSION
      SERVICES INTERNATIONAL, INC.

     

    By:

    
      
        

      

    

    Name:

     

    Title:

     

     

    MCKNIGHT
      ASSOCIATES, INC.

     

    By:

    
      
        

      

    

    Name:

     

    Title

     

     

    DELEEUW
      ASSOCIATES, LLC

     

    By:

    
      
        

      

    

    Name:

     

    Title

     

     

    CSI
      SUB
      CORP. (DE)

     

    By:

    
      
        

      

    

    Name:

     

    Title

     

     

    INTEGRATED
      STRATEGIES, INC.

     

    By:

    
      
        

      

    

    Name:

     

    Title

     

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

    CSI
      SUB
      CORP. II (DE)

     

    By:      

    
      
        

      

    

    Name:

     

    Title

     

     

    LAURUS
      MASTER FUND, LTD.

     

    By:

    
      
        

      

    

    Name:

     

    Title

     

    

    
      
        
        

      

        12

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