MASTER FUND, LTD.
Avenue, 14th Floor
Sam Houston Pkwy North
E-300 Houston, TX 77043
Restricted Account: Account Number 2704053871,
Name: eLinear, Inc. maintained at North Fork Bank (the "Restricted Account").
is made to (i) that certain Securities Purchase Agreement, dated as of February
28, 2005 (as amended, modified or supplemented from time to time, the "Purchase
Agreement"), by and between ELINEAR, Inc., a Delaware corporation (the
"Company"), and Laurus Master Fund, Ltd. (the "Purchaser") and (ii) that certain
Restricted Account Agreement, dated as of February 28, 2005 (as amended,
modified or supplemented from time to time, the "Restricted Account Agreement"),
by and among the Company, Laurus and North Fork Bank (the "Bank"). Capitalized
terms used but not defined herein shall have the meanings ascribed them in the
Restricted Account Agreement, as applicable. Pursuant to Section 3.2 of the
Purchase Agreement, the Company is required to place $3,860,000 in the
Restricted Account, and, subject to the provisions of this letter, the Purchase
Agreement and any Related Agreement, maintain such amount in the Restricted
Account for as long as the Purchaser shall have any obligations outstanding
under the Note and to assign the Restricted Account for the benefit of the
Purchaser as security for the performance of the Company's obligations to the
Purchaser and the Company desire to clarify certain aspects regarding the use of
funds contained in the Restricted Account, and for good consideration, the
receipt and sufficiency of which is here acknowledged, the Company and the
Purchaser agree as follows:
1. That upon
any conversion of the Non-Amortizing Principal Amount (as defined in the Note)
into Common Stock, pursuant to the terms and conditions in the Note, Purchaser
shall provide the Bank with a Release Notice to wire an amount of funds equal to
the corresponding dollar amount by which the aggregate Principal Amount of the
Note that has been reduced by such conversion (as determined by the Note) from
the Restricted Account to such bank account as the Company may direct the
Purchaser in writing (each such occurrence, a "Conversion").
2. If a
Conversion is made pursuant to Section 2.1 (d) of the Note, then Purchaser shall
provide Bank with a Release Notice for such Conversion within two (2) days of
the Repayment Notice (as defined in the Note). If the Conversion is made
pursuant to Article 3 of the Note, then the Purchaser shall provide Bank with a
Release Notice for such Conversion within two (2) days of the Conversion Notice
(as defined in the Note).
Purchaser agrees and acknowledges that it will only provide the Bank with
Release Notices pursuant to the terms herein the and in accordance with the
Master Security Agreement. Purchaser will not request a Release Notice, remove,
transfer or any distribute the funds in the restricted account for any fees or
amounts not specifically allowed herein or in the Documents. Purchaser hereby
agrees not to make any changes to the Restricted Account Agreement without the
written approval of the Company.
agrees and acknowledges that any interest earned from the Bank on the funds held
in the Restricted Account will be credited to the Company's outstanding
obligations and the Purchaser is only entitled to such amount as provided for in
the Note and Master Security Agreement.
letter may not be amended or waived except by an instrument in writing signed by
the Company and the Purchaser. This letter may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this letter by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof or thereof, as the case may be. This letter
shall be governed by, and construed in accordance with, the laws of the State of
New York. This letter sets forth the entire agreement between the parties hereto
as to the matters set forth herein and supersede all prior communications,
written or oral, with respect to the matters herein.
foregoing meets with your approval please signify your acceptance of the terms
hereof by signing below.
Master Fund, Ltd.
and Accepted this 28th day of February, 2005.
Chief Executive Officer