RESTRICTED ACCOUNT AGREEMENT

 

 

                          RESTRICTED ACCOUNT AGREEMENT

 

      This Restricted  Account Agreement (this "Agreement") is entered into this

16th day of August  2004,  by and among  NORTH  FORK  BANK,  a New York  banking

corporation  with  offices at 275  Broadhollow  Road,  Melville,  New York 11747

(together  with its  successors and assigns,  the "Bank"),  CONVERSION  SERVICES

INTERNATIONAL,  INC.,  a  Delaware  corporation  with  offices at 100 Eagle Rock

Avenue,  East Hanover,  NJ 07936 (together with its successors and assigns,  the

"Company"),  and LAURUS MASTER FUND,  LTD., a Cayman  Islands  corporation  with

offices at 825 Third Avenue, 14th Floor, New York, New York 10022 (together with

its  successors  and  assigns,   "Laurus").  Unless  otherwise  defined  herein,

capitalized  terms used herein shall have the meaning provided such terms in the

Purchase Agreement referred to below.

 

      WHEREAS,  Laurus has provided financing to the Company, which financing is

evidenced  by  a  Securities   Purchase  Agreement  (as  amended,   modified  or

supplemented  from  time to time,  the  "Purchase  Agreement")  and the  Related

Agreements referred to therein;

 

      WHEREAS,  the Company and Laurus have retained the Bank to provide certain

services with respect to the Restricted Account (as defined below); and

 

      WHERERAS,  the Company and Laurus have agreed that an amount of cash equal

to  $4,251,000  shall be  deposited  by Laurus on behalf of the  Company by wire

transfer of immediately available funds into the Restricted Account,  which cash

shall  be held by the  Bank for the  benefit  of  Laurus,  as  security  for the

Company's and its Subsidiaries' obligations under the Purchase Agreement and the

Related Agreements. For the purposes of this Agreement, the "Restricted Account"

shall mean that  certain  deposit  account (as  defined in Section  9-102 of the

Uniform  Commercial  Code as in  effect  in the  State  of New  York on the date

hereof)  described  on  Exhibit  B hereto,  which  Restricted  Account  shall be

maintained at the Bank and shall be in the sole dominion and control of Laurus;

 

      NOW THEREFORE,  in consideration  of the mutual promises  contained herein

and for other good and valuable consideration the sufficiency of which is hereby

acknowledged, the parties hereto agree as follows:

 

      1. The Bank is hereby authorized to accept for deposit into the Restricted

Account  the sum of  $4,251,000.  The  Bank  hereby  agrees  to hold any and all

monies,  and other  amounts  from  time to time on  deposit  and/or  held in the

Restricted  Account  for the  benefit of the Laurus  and shall not  release  any

monies  held in the  Restricted  Account  until such time as the Bank shall have

received a notice  from  Laurus  substantially  in the form  attached  hereto as

Exhibit A (a "Release  Notice").  Following the receipt of a Release Notice from

Laurus,  the Bank agrees to promptly  disburse the amount of cash referred to in

such  Release  Notice to such  account  as Laurus  shall  determine  in its sole

discretion.  The Bank  hereby  agrees  that it will  only  comply  with  written

instructions  originated  by  Laurus  directing  disposition  of  funds  in  the

Restricted Account. The Company hereby irrevocably authorizes the Bank to comply

with any and all  instructions  given to the Bank by Laurus with  respect to the

Restricted Account without further consent by the Company. The Bank, the Company

and Laurus agree that the  Restricted  Account is in Laurus'  sole  dominion and

control.

 

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      2.  Each of the  Company,  Laurus  and the  Bank  hereby  agrees  that the

Restricted  Account shall not be closed, and the account name and account number

in respect thereof shall not be changed, in any case, without the consent of the

Laurus, except as specifically provided for in Section 9 below.

 

      3. The Bank hereby  subordinates any claims and security  interests it may

have against,  or with respect to, the Restricted Account (including any amounts

from  time to time on  deposit  therein)  to the  security  interests  of Laurus

therein,  and agrees  that no amounts  shall be charged by it to, or withheld or

set-off or otherwise  recouped by it from, the Restricted Account or any amounts

from time to time on deposit  therein;  provided  that, in  connection  with all

service  charges and any other  charges which the Bank is entitled to receive in

connection  with the servicing and  maintaining of the Restricted  Account (such

charges,  collectively, the "Charges"), each of the Company, Laurus and the Bank

hereby agrees that the Bank will collect such Charges in the  following  manner:

(i) first, the Bank will charge other deposit accounts maintained by the Company

with the Bank, (ii) second,  in the event that there are insufficient  collected

funds in such other deposit accounts to pay such Charges, the Bank will promptly

notify  the  Company  and Laurus  with  respect  to same and,  within  seven (7)

business days of the Company's receipt of such notice,  the Company shall pay to

the Bank the full  amount of such  Charges  then due,  and (iii)  third,  if the

Company  fails to pay to the Bank such  Charges  then due within the time period

set forth in the preceding clause (ii), the Bank will promptly provide a written

notice  to Laurus  of such  occurrence  and,  in such  case,  the Bank is hereby

authorized,  following a period of five (5)  business  days after the receipt of

such  written  notice  by  Laurus,  to  deduct  such  Charges  then due from the

Restricted  Account,  unless,  during such five (5) business day period,  Laurus

pays the amount of any such  Charges  then due to the Bank from its own account.