Exhibit
10.7


 


THIS FOURTH AMENDED AND RESTATED SECURED PROMISSORY NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THIS FOURTH AMENDED AND RESTATED SECURED PROMISSORY NOTE HAS
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND
NEITHER THIS FOURTH AMENDED AND RESTATED SECURED PROMISSORY NOTE NOR ANY
INTEREST HEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH
THE REGISTRATION AND QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.


 


THIS FOURTH AMENDED AND RESTATED SECURED PROMISSORY NOTE IS SUBJECT TO
THE TERMS OF AN INTERCREDITOR AND SUBORDINATION AGREEMENT, DATED AS OF JANUARY
26, 2004 AND REFERRED TO BELOW IN FURTHER DETAIL.


 


FOURTH AMENDED AND RESTATED
SECURED PROMISSORY NOTE


 


 


 


	
  $9,345,888.96

  	
  November 22, 2004

  



 


                For value
received, the undersigned, Aegis Communications Group, Inc., a Delaware
corporation (the “Company”), hereby PROMISES TO PAY to the order of
Essar Global Limited (the “Investor” and in its capacity as
administrative agent for each of its assignees hereunder, the “Administrative
Agent”), the principal sum of $9,345,888.96 together with interest in
arrears from and including the date hereof on the unpaid principal balance
until such principal balance is paid in full. The Company agrees to make all
payments under this Fourth Amended and Restated Secured Promissory Note to the
order of the Investor, in lawful money of the United States of America and in
immediately available funds, to such account or place as the Investor may
request in writing ten (10) Business Days (as defined herein) prior to any such
payment. The Investor, together with its assignees hereunder are collectively
referred to as the “Noteholders”. Terms used and not defined in the text
of this Fourth Amended and Restated Secured Promissory Note (this “Secured
Promissory Note”) have the meaning specified in Annex II to this Secured
Promissory Note or in the Purchase Agreement referred to below.


 


                This Secured
Promissory Note amends and restates in its entirety that certain Secured
Promissory Note, dated November 5, 2003, made by the Company to the order of
the Investor in the amount of $14,143,815.00, restated in that certain Amended
and Restated Secured Promissory Note, dated January 28, 2004, restated in that
certain Second Amended and Restated Secured Promissory Note, dated March 30,
2004, and restated in that certain Third Amended and Restated Secured
Promissory Note, dated August 23, 2004 (the “Original Note”) and shall
be deemed for purposes of the Loan Documents (defined herein) to be the same as
the Original Note.


 


                The Company agrees
to pay interest on the unpaid principal amount of this Secured Promissory Note
until such principal amount shall be paid in full, compounded quarterly, at a
rate per annum equal to 0.50% per annum above the rate of interest per annum
(the “Eurodollar Rate”) (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in U.S. dollars at 11:00 A.M.


 





















 


(London time) two Business Days before the first day of each Interest
Period (as defined below) for an amount substantially equal to such unpaid
amount and for a period equal to such Interest Period (provided that, if
for any reason such rate is not available, the term “Eurodollar Rate” shall
mean, for any Interest Period, the rate of interest per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in U.S. dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first day
of each Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates). Each interest period shall be a period
having a duration of three months (an “Interest Period”). The initial
Interest Period shall begin on the date hereof and each subsequent Interest
Period shall begin on the last day of the immediately preceding Interest
Period. Interest shall be payable in arrears at the end of each Interest Period
as set forth in the relevant provision below and shall be calculated on the
basis of actual number of days elapsed and a year of 360 days. Notwithstanding
any other provision of this Secured Promissory Note, the Investor does not
intend to charge, and the Company shall not be required to pay, any interest or
other fees or charges in excess of the maximum permitted by applicable law; any
payments in excess of such maximum shall be credited to reduce principal
hereunder. Except as otherwise provided herein or in the Security Agreement (as
defined below), all payments received by the Administrative Agent hereunder
will be applied first to costs of collection, if any, then to accrued but
unpaid interest and the balance to principal (in each case, pro rata to each Noteholder
according to the interests of each Noteholder in and to the principal
outstanding at such time under this Secured Promissory Note).


 


                The Company shall
pay interest on the amount of any principal, interest or other amount payable
hereunder that is not paid when due, from the date such amount shall be due
until such amount shall be paid in full, payable on demand, at a rate per annum
equal at all times to two percent (2%) per annum above the rate per annum of
interest set forth in the immediately preceding paragraph (the “Default Rate”).


 


                Principal
hereunder shall be payable in installments as follows:


 


                (a)           In
an initial installment of $1,184,177.00 (the “Initial Principal Payment”)
payable from time to time on or before January 3, 2005; provided, however,
that upon the election of Investor in writing, delivered to Company no later
than December 31, 2004, the due date for this initial installment will be
extended to on or before June 3, 2005; and


                (b)           the balance of the outstanding
principal amount hereof shall be payable on April 26, 2007.


 


                Each installment
of principal shall be paid to the Administrative Agent for distribution to the
Noteholders by 11:00 A.M. (New York City time) on the date due. Interest
hereunder shall be payable to the Administrative Agent for distribution to the
Noteholders on the last day of each Interest Period in arrears commencing on
November 23, 2004 (each such date being an “Interest Payment Date”) with
a final payment of all unpaid interest on the date principal is paid in full
hereunder. The Company shall have the option to pay such interest in cash or to
cause such interest to be capitalized on any such Interest Payment Date and
added to the principal amount of this Secured Promissory Note, which additional
amount shall bear interest and otherwise be payable in accordance with the
terms and conditions of this Secured Promissory Note.


 


2





















 


                The Administrative
Agent shall have the right at any time to request that any or all capitalized
interest added to the principal amount of this Secured Promissory Note be
evidenced by a separate promissory note or notes in substantially the form of
this Secured Promissory Note.


 


                If any day on
which a payment is due pursuant to the terms of this Secured Promissory Note is
not a Business Day, such payment shall be due on the next Business Day
following such date and interest shall accrue on the accrued and unpaid
interest during such extension of time; provided, that any such interest
accruing for such extension of time shall be due and payable on the immediately
succeeding Interest Payment Date.


 


                This Secured
Promissory Note may be prepaid at any time, without premium or penalty, in
whole or in part, together with accrued interest to the date of such prepayment
on the portion prepaid. All prepayments made shall be recorded by the
Administrative Agent and, prior to any transfer hereof, indorsed on the grid
attached as Annex I hereto, which is part of this Secured Promissory Note; provided,
that the failure of the Administrative Agent to make any such recordation shall
not affect the obligations of the Company under this Secured Promissory Note.


 


                 This Secured Promissory Note will be entitled
to the benefits of and will be secured by the pledge, liens, security, title,
rights and security interests granted under (a) the General Security Agreement,
dated as of January 26, 2004 (the “Security Agreement”), made by the
Company and its Subsidiaries party thereto in favor of Wilmington Trust Company,
as collateral trustee for the Noteholders (together with its successors and
assigns, the “Collateral Trustee”) pursuant to the Collateral Trustee
Agreement, dated as of January 26, 2004 (the “Collateral Trustee Agreement”),
among the Collateral Trustee, the Company, the Guarantors and the
Administrative Agents, (b) the Trademark Collateral Assignment and Security
Agreement, dated as of January 26, 2004 (the “Trademark Security Agreement”),
made by the Company and its Subsidiaries party thereto in favor of the
Collateral Trustee, (c) the Copyright Collateral Assignment and Security
Agreement, dated as of January 26, 2004 (the “Copyright Security Agreement”),
made by the Company and its Subsidiaries party thereto in favor of the
Collateral Trustee and (d) the Stock Pledge Agreement, dated as of January 26,
2004 (the “Pledge Agreement”), made by the Company and its Subsidiaries
party thereto in favor of the Collateral Trustee (the Security Agreement,
together with each of the Trademark Security Agreement, the Copyright Security
Agreement and the Pledge Agreement, are collectively referred to as the “Collateral
Documents”). This Secured Promissory Note is subject to the terms of the
Intercreditor and Subordination Agreement, dated as of January 26, 2004 (the “Intercreditor
Agreement”) among WFF, the Collateral Trustee and the Noteholders. The
Intercreditor Agreement, together with this Secured Promissory Note, each other
Secured Promissory Note, the Collateral Documents, the Collateral Trustee
Agreement and the Subsidiary Guaranty made by each of the Subsidiaries of the
Company and dated as of November 5, 2003, as amended by the Amendment No. 1 to
Subsidiary Guaranty dated as of January 26, 2004 (the “Guaranty”), as
each of the same may be amended, supplemented or renewed from time to time, are
collectively referred to as the “Loan Documents.”


 


                So long as any
Obligation under this Secured Promissory Note or any other Loan Document shall
remain unpaid, the Company will comply with the affirmative and negative covenants
set forth in Annex II to this Secured Promissory Note in accordance with the
terms of those covenants.


 


                Subject to the
terms of the Intercreditor Agreement, upon the occurrence and during the
continuation of any Event of Default (as defined in Annex II hereto), (i) the
Administrative Agent, at the direction of the Required Essar Noteholders, may
by notice to the Company, declare this


 


3





















 


Secured Promissory Note, all interest thereon and all other amounts
payable hereunder to be forthwith due and payable, whereupon this Secured
Promissory Note, all such interest and all such other amounts shall become and
be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Company and
(ii) the Administrative Agent may pursue all remedies available to it under the
Loan Documents and applicable law against the Company and the personal property
that secures the Obligations, from time to time and in such order as the
Administrative Agent shall determine.


 


                The Company agrees
that, upon the acceleration of this Secured Promissory Note following the
occurrence of an Event of Default that is not cured within the applicable cure
period, the Company shall pay to the Administrative Agent, in addition to
principal and accrued interest thereon, all out-of-pocket costs of collection
of the principal and accrued interest, including, but not limited to, all
reasonable out-of-pocket attorneys’ fees, court costs, and other reasonable
out-of-pocket costs and expenses of each Noteholder Party related to the
enforcement of payment of this Secured Promissory Note. Such amounts which are
not paid within 10 days after Administrative Agent’s written demand therefor
shall be added to the principal of this Secured Promissory Note and will bear
interest at the Default Rate.


 


                Each
Noteholder Party hereby appoints and authorizes the Administrative Agent and
the Collateral Trustee (each, an “Agent”) to take such action as agent on its
behalf and to exercise such powers and discretion under this Secured Promissory
Note and the other Loan Documents as are delegated to such Agent by the terms
hereof and thereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or collection of this
Secured Promissory Note), no Agent shall be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required ESSAR Noteholders, in the case of the Administrative Agent, and the
Required Noteholders, in the case of the Collateral Trustee, and such
instructions shall be binding upon all Noteholder Parties; provided, however,
that no Agent shall be required to take any action that exposes such Agent to
personal liability or that is contrary to this Agreement or applicable law.


                Neither any Agent nor any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with the Loan Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, each
Agent: (a) may consult with legal counsel (including counsel for any Loan
Party), independent public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken in good faith by it
in accordance with the advice of such counsel, accountants or experts; (b)
makes no warranty or representation to any Noteholder Party and shall not be
responsible to any Noteholder Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the
Loan Documents; (c) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
any Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (d) shall not be
responsible to any Noteholder Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (e) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.


 


4





















 


                All notices and other communications provided for
under this Secured Promissory Note shall be in writing (including by facsimile
transmission) and mailed, faxed or delivered, in accordance with the terms of
the Secured Promissory Note and Warrant Purchase Agreement, dated as of
November 5, 2003, by and between the Company and the Noteholders (the “Purchase
Agreement”), in the case of the Company, to: 7880 Bent Branch Drive, Suite
150, Irving, Texas 75063 Attention: Chief Financial Officer, with copy to Chief
Executive Officer at 7880 Bent Branch Drive, Suite 150, Irving, Texas 75063),
and, in the case of the Investor or Administrative Agent, to: Essar Global
Limited, c/o Essar Group, 145 East 48th Street, (PH) New York,
NY  10017, Facsimile:  212-758-5860, Attention:  Madhu Vuppuluri..


                No amendment,
waiver, modification or supplement of any provision of this Secured Promissory
Note, nor consent to any departure by the Company therefrom, shall in any event
be effective unless the same shall be in writing signed by the Company and
accepted and agreed to by the Required Lenders and then such amendment, waiver,
modification, supplement or consent shall be effective only in the specific instance
and for the specific purpose for which given.


 


                This Secured
Promissory Note is governed by and construed in accordance with, the laws of
the State of New York.


 


This Secured Promissory Note
may be assigned, in whole or in part, from time to time, by the Investor
without the prior written consent of the Company.


 


                This Secured
Promissory Note and the rights and obligations under this Secured Promissory
Note are not assignable or delegable, directly or indirectly, in whole or in
part, by the Company, without the prior written consent of the Investor;
provided, however, that the Company may transfer this Secured Promissory Note
and the rights and obligations under this Secured Promissory Note to any third
party that has acquired all or substantially all of the capital stock or
ownership interest in and to the Company (including by way of merger or
consolidation) or to any third party that has acquired all or substantially all
of the assets of the Company; provided that the Collateral (as defined in the Security
Agreement) is included in any such sale. This Secured Promissory Note shall be
binding upon the Company, its permitted successors and its assigns, and, in
addition, shall inure to the benefit of and be enforceable by each Noteholder
and its successors and assigns. Whenever possible this Secured Promissory Note
and each provision hereof shall be interpreted in such manner as to be
effective, valid and enforceable under applicable law. If and to the extent
that any such provision of this Secured Promissory Note shall be held invalid
or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provisions hereof, and any
determination that the application of any provision hereof to any person or
under any circumstance is illegal and unenforceable shall not affect the
legality, validity and enforceability of such provision as it may be applied to
any other person or in any other circumstance. All rights and remedies provided
in this Secured Promissory Note, the Guarantee, the Security Agreement or any
law shall be available to the Investor and shall be cumulative.


 


                The Company hereby
expressly waives presentment, demand, and protest, notice of demand, dishonor
and nonpayment of this Secured Promissory Note, and all other notices or
demands of any kind in connection with the delivery, acceptance, performance,
default or enforcement hereof, and hereby consents to any delays, extensions of
time, renewals, waivers or modifications that may be granted or consented to by
the Noteholders with respect to the time of payment or any other provision
hereof or of the Security Agreement.


 


5





















 


                No course of dealing between the Company and the
Investor or any other Noteholder or Noteholder Party and no delay or failure in
exercising any rights hereunder in respect thereof shall operate as a waiver of
any rights of any Noteholder Party.


                This Secured
Promissory Note, and the indebtedness of the Company to the Investor evidenced
hereby, shall not be subject to any set-off, recoupment or counterclaim, each
of which is hereby expressly waived by the Company with respect to this Secured
Promissory Note and such indebtedness.


 


The Company hereby
irrevocably submits to the non-exclusive jurisdiction of any United States
Federal or New York State court sitting in New York City in any action or
proceeding arising out of or relating to this Secured Promissory Note and
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court and irrevocably waives
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such a court or that such court is an
inconvenient forum. Nothing herein shall limit the right of the Investor or any
other Noteholder Party to bring proceedings against the Company in the courts
of any other jurisdiction.


 


6





















 


THE COMPANY HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS SECURED PROMISSORY NOTE.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  AEGIS COMMUNICATIONS GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Ferry

  
	
   

  	
  Name:

  	
  Richard Ferry

  
	
   

  	
  Title:

  	
  President and CEO

  
					



 


7





















 


Annex
I 


 


PREPAYMENTS


 


	
  Date

  	
   

  	
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2





















 


Annex II


 


Covenants,
Events of Default and Related Definitions


 


1. Definitions
and Interpretations


 


1.1 Definitions As used in this Annex II,
the following terms shall have the following definitions:


“Account”
means an account (as that term is defined in the Code), and any and all
supporting obligations in respect thereof.


“Account
Debtor” means any Person who is obligated under, with respect to, or on
account of, an Account, chattel paper, or a General Intangible.


“Advances”
means the principal amounts outstanding and unpaid from time to time evidenced
by the Secured Promissory Note to which this Annex II is attached and any other
secured promissory note having the same terms as this secured promissory note
and issued simultaneously with the Secured Promissory Note to which this Annex
II is attached.


“Affiliate”
means, as applied to any Person, any other Person who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. For purposes of this definition, “control”
means the possession, directly or indirectly through one or more
intermediaries, of the power to direct the management and policies of a Person,
whether through the ownership of Stock, by contract, or otherwise.


“ATC” means Advanced Telemarketing Corporation, a
Nevada corporation.


“Bankruptcy Code” means title 11 of the United
States Code, as in effect from time to time.


“Board
of Directors” means the board of directors (or comparable managers) of the
Company or any committee thereof duly authorized to act on behalf of the board
of directors (or comparable managers).


“Books”
means all of Company’s and its Subsidiaries’ now owned or hereafter acquired
books and records (including all of their Records indicating, summarizing, or
evidencing their assets (including the Collateral) or liabilities, all of
Company’s and its Subsidiaries’ Records relating to their business operations
or financial condition, and all of their goods or General Intangibles related
to such information).


“Business
Day” means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the state of New York or for
purposes of determining the interest rate hereunder, London.


“Capital Expenditures”
means, with respect to any Person for any period, the sum of (a) the aggregate
of all expenditures by such Person and its Subsidiaries during such period that
are capital expenditures as determined in accordance with GAAP, whether such
expenditures are paid in cash or financed, and (b) to the extent not covered by
clause (a), the aggregate of all expenditures by such Person and its
Subsidiaries during such period to acquire by purchase or otherwise the
business or capitalized assets of, or the Capital Stock of, any other Person.


 


3





















 


“Capital
Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.


“Capitalized
Lease Obligation” means that portion of the obligations under a Capital
Lease that is required to be capitalized in accordance with GAAP.


“Cash
Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof,
(b) marketable direct obligations issued by any state of the United States
or any political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service,
Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from
the date of creation thereof and, at the time of acquisition, having a rating
of at least A-1 from S&P or at least P-1 from Moody’s,
(d) certificates of deposit or bankers’ acceptances maturing within 1 year
from the date of acquisition thereof issued by any bank organized under the
laws of the United States or any state thereof having at the date of
acquisition thereof combined capital and surplus of not less than $250,000,000,
(e) demand Deposit Accounts maintained with any bank organized under the laws
of the United States or any state thereof so long as the amount maintained with
any individual bank is less than or equal to $100,000 and is insured by the
Federal Deposit Insurance Corporation, and (f) Investments in money market
funds substantially all of whose assets are invested in the types of assets
described in clauses (a) through (e) above.


“Change
of Control” means that (a) any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders,
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 25%, or more, of the Stock of the Company having the
right to vote for the election of members of the Board of Directors, or (b) the
Investors cease to own, directly or indirectly, and control Stock and Warrants
(as defined in the Purchase Agreement) of the Company representing (if such
warrants were exercised) in the aggregate 65% of the outstanding Stock of the
Company, or (c) a majority of the members of the Board of Directors do not
constitute Continuing Directors, or (d) the Company or its Subsidiaries cease
to own, directly or indirectly, and control 98.76 % of the outstanding Stock of
ATC and the Company or its Subsidiaries cease to own, directly or indirectly,
and control 100% of the outstanding Stock of each of their Subsidiaries (other
than ATC) extant as of the Closing Date.


“Closing
Date” means the date of this Secured Promissory Note.


“Code”
means the New York Uniform Commercial Code, as in effect from time to time.


“Collateral”
means all assets and interests in assets and proceeds thereof now owned or
hereafter acquired by the Company or its Subsidiaries in or upon which a Lien
is granted under any of the Loan Documents.


“Collateral Access
Agreement” means a landlord waiver, bailee letter, or acknowledgement
agreement of any lessor, warehouseman, processor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in Company’s
or its Subsidiaries’ Books or Equipment, in each case, in form and substance
satisfactory to Collateral Trustee.


 


4





















 


“Compliance
Certificate” means a certificate in a form to be agreed by the Company and
the Administrative Agent delivered by the chief financial officer of the
Company to Administrative Agent.


“Continuing
Director” means (a) any member of the Board of Directors who was a director
(or comparable manager) of the Company on the date of execution of the Secured
Promissory Notes, and (b) any individual who becomes a member of the Board of
Directors after the date of execution of the Secured Promissory Notes if such
individual was appointed or nominated for election to the Board of Directors by
a majority of the Continuing Directors, but excluding any such individual
originally proposed for election in opposition to the Board of Directors in
office on the date of execution of the Secured Promissory Notes in an actual or
threatened election contest relating to the election of the directors (or
comparable managers) of the Company and whose initial assumption of office
resulted from such contest or the settlement thereof.


“Control
Agreement” means a control agreement, in form and substance satisfactory to
Collateral Trustee, executed and delivered by the Company or one of its
Subsidiaries, Collateral Trustee and, so long as the WFF Facility remains
outstanding, WFF as Collateral Trustee under the WFF Facility (in which case
such Control Agreement shall provide that the Collateral Trustee shall replace
WFF as secured party thereunder upon termination and payment in full of the WFF
Facility), and the applicable securities intermediary (with respect to a
Securities Account) or a bank (with respect to a Deposit Account).


“Default”
means an event, condition, or default that, with the giving of notice, the
passage of time, or both, would be an Event of Default.


“Deposit
Account” means any deposit account (as that term is defined in the Code)
other than the payroll account of the Company or any of its Subsidiaries or any
account maintained by the Company or any of its Subsidiaries out of which
payroll or related taxes (but not other operating expenses) are payable.


“EBITDA”
means, with respect to any fiscal period, the Company’s and its Subsidiaries’
consolidated net earnings (or loss), minus extraordinary gains and interest
income, plus interest expense, income taxes, depreciation and amortization and
extraordinary non-cash losses for such period, as determined in accordance with
GAAP.


“Environmental
Actions” means any complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other communication from any Governmental Authority, or
any third party involving violations of Environmental Laws or releases of
Hazardous Materials from (a) any assets, properties, or businesses of the
Company or any of its Subsidiaries, or any of their predecessors in interest,
(b) from adjoining properties or businesses, or (c) from or onto any facilities
which received Hazardous Materials generated by the Company or any of its
Subsidiaries, or any of their predecessors in interest.


“Environmental Law”
means any applicable federal, state, provincial, foreign or local statute, law,
rule, regulation, ordinance, code, binding and enforceable guideline, binding
and enforceable written policy or rule of common law now or hereafter in effect
and in each case as amended, or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, to the extent binding on the Company or any of its Subsidiaries,
relating to the environment, employee health and safety (to the extent it
regulates


 


5





















 


occupational
exposure to Hazardous Materials), or Hazardous Materials, including CERCLA;
RCRA; the Federal Water Pollution Control Act, 33 USC § 1251 et  seq;
the Toxic Substances Control Act, 15 USC § 2601 et  seq; the
Clean Air Act, 42 USC § 7401 et  seq.; the Safe Drinking Water
Act, 42 USC § 3803 et  seq.; the Oil Pollution Act of 1990, 33 USC
§ 2701 et  seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 USC § 11001 et  seq.; the
Hazardous Material Transportation Act, 49 USC § 1801 et  seq.;
and the Occupational Safety and Health Act, 29 USC §651 et  seq.
(to the extent it regulates occupational exposure to Hazardous Materials); any
state and local or foreign counterparts or equivalents, in each case as amended
from time to time.


“Environmental
Liabilities and Costs” means all liabilities, monetary obligations,
Remedial Actions, losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.


“Environmental
Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities and Costs.


“Equipment”
means equipment (as that term is defined in the Code), and includes machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), computer hardware, tools, parts, and goods (other than
consumer goods, farm products, or Inventory), wherever located, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.


“Event
of Default” has the meaning set forth in Section 4 of this Annex II.


“Exchange
Act” means the Securities Exchange Act of 1934, as in effect from time to
time.


“Excluded
Subsidiary” means any Subsidiary of the Company or a Guarantor that (i) has
an aggregate book value, for all of its assets, of less than $25,000, (ii) owns
no registered intellectual property, (iii) has annual revenues of less than
$25,000, and (iv) has been designated an “Excluded Subsidiary” by the Company
with the consent of the Administrative Agent in its Permitted Discretion. The
Company may withdraw such designation at any time in its discretion. As of the
Closing Date, EBA Direct, Inc., a Canadian corporation and wholly owned
Subsidiary of IQI, Inc., is the sole Excluded Subsidiary.


“Financed
Capital Expenditures” means Capital Expenditures permitted under Section
3.16(b)(ii) without the incorporation by reference of Section 3.16(b)(i) set
forth therein.


“FEIN”
means Federal Employer Identification Number.


“Funded
Capital Expenditures” means Capital Expenditures permitted under Section
3.16(b)(i) without the incorporation by reference of Section 3.16(b)(ii) set
forth therein.


“GAAP” means
generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.


 


6





















 


“General
Intangibles” means general intangibles (as that term is defined in the Code),
including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trade secrets, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, insurance premium rebates, tax refunds, and tax
refund claims, and any and all supporting obligations in respect thereof, and
any other personal property other than Accounts, Deposit Accounts, goods, Investment
Property, and Negotiable Collateral.


“Governmental
Authority” means any federal, state, local, or other governmental or
administrative body, instrumentality, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.


“Guarantor”
means each Material Subsidiary of the Company.


“Hazardous
Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude
oil, natural gas, or geothermal resources, (c) any flammable substances or
explosives or any radioactive materials, and (d) asbestos in any form or
electrical equipment that contains any oil or dielectric fluid containing levels
of polychlorinated biphenyls in excess of 50 parts per million.


“Hedge
Agreement” means any and all agreements, or documents now existing or
hereafter entered into by Company or its Subsidiaries that provide for an
interest rate, credit, commodity or equity swap, cap, floor, collar, forward
foreign exchange transaction, currency swap, cross currency rate swap, currency
option, or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging Company’s or its Subsidiaries’
exposure to fluctuations in interest or exchange rates, loan, credit exchange,
security or currency valuations or commodity prices.


“Initial
Noteholders” means Deutsche Bank AG London acting through DB Alternative
Trading, Inc. (formerly known as DB Advisors, LLC) and Essar Global Limited.


“Indebtedness” means
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations as a lessee under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of a Person or its Subsidiaries, irrespective of whether such
obligation or liability is assumed, (e) all obligations to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary
course of business and repayable in accordance with customary trade practices),
(f) all obligations owing under Hedge Agreements, and (g) any obligation
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any
obligation of any other Person that constitutes Indebtedness under any of
clauses (a) through (f) above.


 


7





















 


“Insolvency
Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.


“Interest
Expense” means, for any period, the aggregate of the interest expense of
the Company and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.


“Inventory”
means inventory (as that term is defined in the Code).


“Investment”
means, with respect to any Person, any investment by such Person in any other
Person (including Affiliates) in the form of loans, guarantees, advances, or
capital contributions (excluding (a) commission, travel, and similar advances
to officers and employees of such Person made in the ordinary course of
business, and (b) bona fide
Accounts arising in the ordinary course of business consistent with past
practice), purchases or other acquisitions of Indebtedness, Stock, or all or
substantially all of the assets of such other Person (or of any division or
business line of such other Person), and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.


“Investment
Property” means investment property (as that term is defined in the Code),
and any and all supporting obligations in respect thereof.


“Lien”
means any interest in an asset securing an obligation owed to, or a claim by,
any Person other than the owner of the asset, irrespective of whether (a) such
interest is based on the common law, statute, or contract, (b) such interest is
recorded or perfected, and (c) such interest is contingent upon the occurrence
of some future event or events or the existence of some future circumstance or
circumstances. Without limiting the generality of the foregoing, the term
“Lien” includes the lien or security interest arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
security agreement, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also includes reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Real Property.


“Material
Adverse Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole,
(b) a material impairment of the Company’s or a Subsidiary of the
Company’s ability to perform its obligations under the Loan Documents to which
it is a party or of the Noteholder Parties’ ability to enforce the Obligations
or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of the Collateral Trustee’s Liens with respect to
the Collateral as a result of an action or failure to act on the part of the
Company or a Subsidiary of the Company.


“Material
Subsidiary” means any Subsidiary of the Company or a Guarantor that is not
an Excluded Subsidiary.


“Negotiable Collateral”
means letters of credit, letter of credit rights, instruments, promissory
notes, drafts, documents, and chattel paper (including electronic chattel paper
and tangible chattel paper), and any and all supporting obligations in respect
thereof.


 


8





















 


“Noteholder”
or “Noteholders” means the Investor and each Person that becomes a
holder of the Secured Promissory Note to which this Annex II is attached or to
the owner of an undivided interest in the Secured Promissory Note to which this
Annex II is attached pursuant to the terms hereof for so long as the Investor
or such Person, as the case may be, shall be a holder hereof.


“Noteholder
Party” or “Noteholder Parties” means any or all of the Noteholders
and Agents, as the case may be.


 “Obligations” means all loans,
Advances, debts, principal, interest (including any interest that, but for the
commencement of an Insolvency Proceeding, would have accrued), premiums,
liabilities, obligations (including indemnification obligations), fees,
charges, costs, expenses of any of the Noteholders or the Agents payable by the
Company to any Noteholder Party under the Loan Documents and (including any
fees or expenses that, but for the commencement of an Insolvency Proceeding,
would have accrued), guaranties, covenants, and duties of any kind and
description owing by the Company to any of the Noteholder Parties pursuant to or
evidenced by the Loan Documents and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all interest not paid
when due and all costs and expenses of the Noteholder Parties payable by the
Company under the Loan Documents, by law, or otherwise. Any reference herein to
the Obligations shall include all extensions, modifications, renewals, or
alterations thereof, both prior and subsequent to any Insolvency Proceeding.


 “Permitted Discretion” means a
determination made in good faith and in the exercise of reasonable (from the
perspective of a secured asset-based lender) business judgment.


“Permitted
Dispositions” means (a) sales or other dispositions of Equipment that is
substantially worn, damaged, or obsolete in the ordinary course of business,
(b) sales of Inventory to buyers in the ordinary course of business, (c) the
use or transfer of money or Cash Equivalents in a manner that is not prohibited
by the terms of this Agreement or the other Loan Documents, and (d) the
licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of business and (d)
the sale of assets having an aggregate book value on the Books of the
“Borrowers” (as such term is defined in the WWF Facility) not exceeding
$100,000 in any twelve-month period.


“Permitted
Holders” means the Initial Noteholders and the Prior Stockholders.


“Permitted
Investments” means (a) Investments in cash and Cash Equivalents, (b)
Investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) Investments received in settlement of amounts due to the Company
or any Material Subsidiary of the Company effected in the ordinary course of
business or owing to the Company or any Material Subsidiary of the Company as a
result of Insolvency Proceedings involving an Account Debtor or upon the
foreclosure or enforcement of any Lien in favor of the Company or any Material
Subsidiary of the Company, and (e) Investments in de minimis amounts in Excluded Subsidiaries that are
necessary to maintain the corporate existence of such Excluded Subsidiaries
under applicable law.


“Permitted Liens”
means (a) Liens held by Collateral Trustee, (b) Liens for unpaid taxes
that either (i) are not yet delinquent, or (ii) do not constitute an
Event of Default hereunder and are the subject of Permitted Protests, (c) Liens
set forth on Schedule 3.2 to this Annex II, (d) the interests of lessors
under operating leases, (e) purchase money Liens or the interests of lessors


 


9





















 


under
Capital Leases to the extent that such Liens or interests secure Permitted
Purchase Money Indebtedness and so long as such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, (f) Liens arising by operation
of law in favor of warehousemen, landlords, carriers, mechanics, materialmen,
laborers, or suppliers, incurred in the ordinary course of the Company and its
Subsidiaries’ business and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet delinquent, or (ii) are
the subject of Permitted Protests, (g) Liens arising from deposits made in
connection with obtaining worker’s compensation or other unemployment
insurance, (h) Liens or deposits to secure performance of bids, tenders, or
leases incurred in the ordinary course of business and not in connection with
the borrowing of money, (i) Liens granted as security for surety or appeal
bonds in connection with obtaining such bonds in the ordinary course of
business, (j) Liens resulting from any judgment or award that is not an Event
of Default hereunder, (k) with respect to any Real Property, easements, rights
of way, and zoning restrictions that do not materially interfere with or impair
the use or operation thereof and (l) any and all Liens granted in, created by
or arising out of any WFF Loan Documents, which Liens may be senior and prior
to any Lien in favor of the Collateral Trustee or Noteholders to secure the
repayment and performance of the Obligations.


“Permitted
Protest” means the right of Company or any of its Subsidiaries to protest
any Lien (other than any Lien that secures the Obligations), taxes (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the Books in such amount as is required under
GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by Company or any of its Subsidiaries, as applicable, in good faith,
and (c) while any such protest is pending, there will be no impairment of
the enforceability, validity, or priority of any of the Collateral Trustee’s
Liens.


“Permitted
Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the date of execution of the Secured
Promissory Notes in an aggregate amount outstanding at any one time not in
excess of $10,000,000.


“Person”
means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, statutory
trusts, joint ventures, trusts, land trusts, business trusts, statutory trusts
or other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.


“Prior
Stockholders” means Questor Partners Fund II, L.P.; Questor Side-by-Side
Partners II, L.P.; Questor Side-by-Side Partners II 3(c)(1), L.P.; TC
Co-Investors, LLC; and Thayer Equity Investors III, L.P.


“Projections”
means the Company’s forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a consistent basis
with the Company’s historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.


“Purchase
Money Indebtedness” means Indebtedness (other than the Obligations, but
including Capitalized Lease Obligations), incurred at the time of, or within 20
days after, the acquisition of any fixed assets for the purpose of financing
all or any part of the acquisition cost thereof.


“Real Property” means
any estates or interests in real property now owned or hereafter acquired by
the Company or a Subsidiary of the Company and the improvements thereto.


 


10





















 


“Record”
means information that is inscribed on a tangible medium or which is stored in
an electronic or other medium and is retrievable in perceivable form.


“Remedial
Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or outdoor
environment, (c) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (d) conduct any other
actions authorized by 42 USC § 9601.


“Required
Essar Noteholders” means, at any time, Noteholders owed or holding at least
a majority in interest of the aggregate principal amount of the Advances
outstanding at such time under this Secured Promissory Note.


“Required
Noteholders” means the Noteholders holding at least a majority in interest
of the aggregate principal amount of the Advances (as defined in each Secured
Promissory Note) outstanding at such time under each of the Secured Promissory
Notes.


“SEC”
means the United States Securities and Exchange Commission and any successor
thereto.


“Secured
Promissory Note” means this Secured Promissory Note and each other secured
promissory note issued by the Company as of the date hereof.


“Securities
Account” means a “securities account” as that term is defined in the Code.


“Solvent”
means, with respect to any Person on a particular date, that, at fair
valuations, the sum of such Person’s assets is greater than all of such
Person’s debts.


“Stock”
means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, 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 Exchange Act).


“Subsidiary”
of a Person means a corporation, partnership, limited liability company, or
other entity in which that Person directly or indirectly owns or controls the
shares of Stock having ordinary voting power to elect a majority of the board
of directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.


“Surviving
Preferred Shares” means, collectively, the Surviving Series B Shares and
the Surviving Series F Shares.


“Surviving
Series B Shares” means 29,778 shares of the Series B Preferred Stock, par
value $.01 per share, of Parent.


“Surviving Series F
Shares” means 23,875 shares of the Series F Preferred Stock, par value $.01
per share, of Parent.


 


11





















 


“United
States” means the United States of America.


“WFF” means Wells
Fargo Foothill.


“WFF Facility” means the
Loan and Security Agreement, dated as of January 26, 2004, by and among the
Company, each of its subsidiaries signatories thereto, each of the lenders
signatories thereto and WFF as the arranger and administrative agent
thereunder.


“WFF Loan Documents” means the WFF
Facility and each other “Loan Document” as defined therein.


                1.2 Accounting Terms. All accounting
terms not specifically defined herein shall be construed in accordance with
GAAP. When used herein, the term “financial statements” shall include the notes
and schedules thereto. Whenever the term “the Company and its Subsidiaries” or
the term “Company” is used in respect of a financial covenant or a related
definition, it shall be understood to mean the Company and its Subsidiaries on
a consolidated basis unless the context clearly requires otherwise.


                1.3 Code. Any terms used
in this Annex II that are defined in the Code shall be construed and defined as
set forth in the Code unless otherwise defined herein.


2.                   Affirmative Covenants


The
Company covenants and agrees that, until the payment in full of the
Obligations, the Company and its Subsidiaries shall and shall cause each of
their respective Subsidiaries to do all of the following:


2.1
Accounting System. Maintain a system of accounting that enables
the Company and its Subsidiaries to produce financial statements in accordance
with GAAP and maintain records pertaining to the Collateral that contain
information as from time to time reasonably may be requested by Collateral
Trustee.


2.2
Financial Statements, Reports, Certificates. Deliver to Administrative
Agent, with copies to each Noteholder:


(a) as soon as available,
but in any event within 30 days (45 days in the case of a month that is the end
of one of the Company’s fiscal quarters) after the end of each month during
each of the Company’s fiscal years,


(i) a company prepared consolidated balance sheet, income statement,
and statement of cash flow covering the Company’s and its Subsidiaries’
operations during such period,


(ii) a certificate signed by the chief financial officer of the Company
to the effect that:


A.    the financial statements delivered hereunder have been prepared
in accordance with GAAP (except for the lack of footnotes and being subject to
year-end audit adjustments) and fairly present in all material respects the
financial condition of the Company and its Subsidiaries,


 


12





















 


B.    there does not exist any
condition or event that constitutes a Default or Event of Default (or, to the
extent of any non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action the Company and its Subsidiaries have taken,
are taking, or propose to take with respect thereto), and


(iii) for each month, quarter or year that is a month, quarter or year
as to which a financial covenant in Section 3.17 is to be tested, a
Compliance Certificate demonstrating, in reasonable detail, compliance at the
end of such period with the applicable financial covenants contained in Section 3.17,


(b) as soon as available,
but in any event within 90 days after the end of each of the Company’s fiscal
years,


(i) financial statements of the Company and its Subsidiaries for each
such fiscal year, audited by the Company’s independent certified public
accountants as of the original issuance date of the Secured Promissory Notes or
such other independent certified public accountants reasonably acceptable to
Administrative Agent and certified, without any qualifications, by such
accountants to have been prepared in accordance with GAAP (such audited
financial statements to include a balance sheet, income statement, and
statement of cash flow and, if prepared, such accountants’ letter to
management), and


(ii) a certificate of such accountants addressed to Administrative
Agent and the Lenders stating that such accountants do not have knowledge of
the existence of any Default or Event of Default under Section 3.17,


(c) as soon as available,
but in any event within 30 days prior to the start of each of the Company’s
fiscal years, copies of the Company’s Projections, in form and substance
(including as to scope and underlying assumptions) satisfactory to Administrative
Agent, in its sole discretion, for the forthcoming three years, year by year,
and for the forthcoming fiscal year, month by month, certified by the chief
financial officer of the Company as being such officer’s good faith best
estimate of the financial performance of the Company and its Subsidiaries
during the period covered thereby,


(d) if and when filed by the
Company with the SEC,


(i) the Company’s quarterly reports on Form 10-Q, annual reports on
Form 10-K and current reports on Form 8-K,


(ii) any other filings made by the Company with the SEC,


(iii) copies of the Company and its Subsidiaries’ federal income tax
returns, and any amendments thereto, filed with the Internal Revenue Service,
and


(iv) any other information that is provided by the Company to its
shareholders generally,


(e) if and when filed by the Company or any Subsidiary of the Company
and as requested by Administrative Agent, satisfactory evidence of payment of
applicable excise taxes in each jurisdiction in which (i) the Company or any
Subsidiary of the Company conducts


 


13





















 


business or is required to
pay any such excise tax, (ii) where the Company’s or any Subsidiary of the
Company’s failure to pay any such applicable excise tax would result in a Lien
on the properties or assets of the Company or such Subsidiary, or (iii) where
the Company’s or any Subsidiary of the Company’s failure to pay any such
applicable excise tax reasonably could be expected to result in a Material
Adverse Change,


(f) as soon as the Company
has knowledge of any event or condition that constitutes a Default or an Event
of Default, notice thereof and a statement of the curative action that the
Company and its Subsidiaries propose to take with respect thereto,


(g)
promptly after the commencement thereof, but in any event within five days
after the service of process with respect thereto on the Company or any
Subsidiary of the Company, notice of all actions, suits, or proceedings brought
by or against the Company or any Subsidiary of the Company before any
Governmental Authority which, if determined adversely to such Borrower or such
Subsidiary, reasonably could be expected to result in a Material Adverse
Change, and


(h) upon the request of
Administrative Agent, any other report reasonably requested relating to the
financial condition of the Company or its Subsidiaries.


 


In
addition to the financial statements referred to above, the Company and its
Subsidiaries agree that no Subsidiary of the Company will have a fiscal year
different from that of the Company. the Company and its Subsidiaries agree to
cooperate with Administrative Agent to allow Administrative Agent to consult
with their independent certified public accountants if Administrative Agent
reasonably requests the right to do so and that, in such connection, their
independent certified public accountants are authorized to communicate with
Administrative Agent and to release to Administrative Agent whatever financial
information concerning the Company and its Subsidiaries or their Subsidiaries
that Administrative Agent reasonably may request.


2.3 Returns. Cause returns
and allowances as between the Company and its Subsidiaries and their
Subsidiaries and their Account Debtors, to be on the same basis and in accordance
with the usual customary practices of the Company and its Subsidiaries and
their Subsidiaries, as they exist at the time of the execution and delivery of
this Agreement.


2.4
Maintenance of Properties. Maintain and preserve all
of their properties which are necessary or useful in the proper conduct to
their business and not obsolete in good working order and condition, ordinary
wear and tear excepted, and comply at all times with the provisions of all
leases to which it is a party as lessee, so as to prevent any loss or
forfeiture thereof or thereunder.


2.5 Taxes. Cause all assessments and
taxes, whether real, personal, or otherwise, due or payable by, or imposed,
levied, or assessed against the Company and its Subsidiaries, their
Subsidiaries, or any of their respective assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. The Company and its Subsidiaries will and will cause their
Subsidiaries to make timely payment or deposit of all tax payments and
withholding taxes required of them by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Administrative Agent with proof
satisfactory to Administrative Agent indicating that the Company or the
Subsidiary of the Company, as the case may be, has made such payments or
deposits.


 


14





















 


2.6
Insurance. (a) At the Company and its Subsidiaries’ expense,
maintain insurance respecting the Company’s and its Subsidiaries’ assets
wherever located, covering loss or damage by fire, theft, explosion, and all
other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. The Company and its Subsidiaries
also shall maintain business interruption, public liability, and product
liability insurance. All such policies of insurance shall be in such amounts
and with such insurance companies as are reasonably satisfactory to Collateral
Trustee. The Company and its Subsidiaries shall deliver copies of all such
policies to Collateral Trustee with a satisfactory lender’s loss payable
endorsement naming Collateral Trustee as sole loss payee or additional insured,
as appropriate, with respect to any losses of the Collateral. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Collateral Trustee in the event
of cancellation of the policy for any reason whatsoever.


(b) The Company shall give
Collateral Trustee prompt notice of any loss covered by such insurance.
Collateral Trustee shall have the exclusive right to adjust any losses claimed
under any such insurance policies with respect to Collateral in excess of
$50,000 (or in any amount after the occurrence and during the continuation of
an Event of Default), without any liability to the Company and its Subsidiaries
whatsoever in respect of such adjustments, except to the extent the Company or
any of its Subsidiaries suffers any loss or damage as a direct result of the
gross negligence or willful malfeasance of the Collateral Trustee. Any monies
received as payment for any loss of any of the Collateral under any insurance
policy mentioned above (other than liability insurance policies) or as payment
of any award or compensation for condemnation or taking by eminent domain of
any of the Collateral, shall be paid over to Collateral Trustee to be applied
at the option of the Required Noteholders either to the prepayment of the
Obligations under each of the Secured Promissory Notes (pro rata according to
the interests of each Noteholder in and to the principal outstanding at such
time under the Secured Promissory Notes) or shall be disbursed to the Company
under staged payment terms reasonably satisfactory to the Required Noteholders
for application to the cost of repairs, replacements, or restorations. Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction.


(c) The Company and its
Subsidiaries shall not, and shall not suffer or permit their Subsidiaries to,
take out separate insurance concurrent in form or contributing in the event of
loss with that required to be maintained under this Section 2.7, unless
Collateral Trustee is included thereon as named insured with the loss payable
to Collateral Trustee under a lender’s loss payable endorsement or its
equivalent. The Company immediately shall notify Collateral Trustee whenever
such separate insurance is taken out, specifying the insurer thereunder and
full particulars as to the policies evidencing the same, and copies of such
policies promptly shall be provided to Collateral Trustee.


2.7 Location of Inventory and Equipment. Keep the
Company and its Subsidiaries’ and their Subsidiaries’ Equipment only at the
locations identified on Schedule 2.7 to this Annex II and their chief
executive offices only at the locations identified on said Schedule 2.7; provided,
however, that Company may amend Schedule 2.7 so long as such
amendment occurs by written notice to Collateral Trustee not less than 30 days
prior to the date on which such Equipment is moved to such new location or such
chief executive office is relocated, so long as such new location is within the
continental United States, and so long as, at the time of such written
notification, the Company or its Subsidiary provides Collateral Trustee a
Collateral Access Agreement with respect thereto.


 


15





















 


2.8
Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Change.


2.9 Leases. Pay when due
all rents and other amounts payable under any leases to which the Company or
any Subsidiary of the Company is a party or by which the Company’s or any
Subsidiary of the Company’s properties and assets are bound, unless such
payments are the subject of a Permitted Protest.


2.10.
Existence. Except as permitted under
the WFF Facility, at all times preserve and keep in full force and effect the
Company’s and each Subsidiary of the Company’s valid existence and good
standing and any rights and franchises material to their businesses.


2.11
Environmental. (a) Keep any property either owned or operated by
the Company or any Subsidiary of the Company free of any Environmental Liens or
post bonds or other financial assurances sufficient to satisfy the obligations
or liability evidenced by such Environmental Liens, (b) comply, in all material
respects, with Environmental Laws and provide to Administrative Agent
documentation of such compliance which Administrative Agent reasonably
requests, (c) promptly notify Administrative Agent of any release of a
Hazardous Material of any reportable quantity from or onto property owned or
operated by the Company or any Subsidiary of the Company and take any Remedial
Actions required to abate said release or otherwise to come into compliance
with applicable Environmental Law, and (d) promptly, but in any event within
five days of its receipt thereof, provide Administrative Agent with written
notice of any of the following: (i) notice that an Environmental Lien has been
filed against any of the real or personal property of the Company or any
Subsidiary of the Company, (ii) commencement of any Environmental Action or
notice that an Environmental Action will be filed against the Company or any
Subsidiary of the Company, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.


2.12
Disclosure Updates. Promptly and in no event later than five
Business Days after obtaining knowledge thereof, notify Administrative Agent if
any written information, exhibit, or report furnished to the Noteholders
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which made. The foregoing to the contrary
notwithstanding, any notification pursuant to the foregoing provision will not
cure or remedy the effect of the prior untrue statement of a material fact or
omission of any material fact nor shall any such notification have the affect
of amending or modifying this Agreement or any of the Schedules hereto.


2.13 Formation of Subsidiaries. At the time
that the Company or any Subsidiary of the Company forms any direct or indirect
Subsidiary or acquires any direct or indirect Subsidiary after the Closing
Date, the Company or such existing Subsidiary shall, subject to the terms of
the Intercreditor Agreement, (a) if such new Subsidiary is a Material
Subsidiary, cause such new Subsidiary to provide to Administrative Agent a
Guaranty Supplement (as defined in the Guaranty) and joinder to the Security
Agreement, together with such other security documents as well as appropriate
UCC-1 financing statements, all in form and substance satisfactory to
Collateral Trustee (including being sufficient to grant Collateral Trustee a
first priority Lien (subject to Permitted Liens) in and to the assets of such
newly formed or acquired Subsidiary), (b) provide to Collateral Trustee a
pledge agreement and appropriate certificates and powers or UCC-1 financing
statements, hypothecating all of the direct or beneficial ownership interest in
such new Subsidiary, in form and


 


16





















 


substance satisfactory to
Collateral Trustee, and (c) provide to Collateral Trustee all other
documentation, including one or more opinions of counsel satisfactory to
Collateral Trustee, which in its opinion is appropriate with respect to the
execution and delivery of the applicable documentation referred to above
(including policies of title insurance or other documentation with respect to
all property subject to a Mortgage). Any document, agreement, or instrument
executed or issued pursuant to this Section 2.13 shall be a Loan Document.


Notwithstanding anything to
the contrary in this Section 2 of this Annex II, in no event shall the Company
or any Subsidiary of the Company be required to make any disclosure of
information or provide any information, including any financial statements, to
the Administrative Agent or any Noteholder if, pursuant to Regulation FD
promulgated under the Securities Act of 1933, as amended, the Company would be
required to make any disclosure of that information in a circumstance in which,
or at a time at which, the Company reasonably determines such disclosure would
be adverse to the best interest of the Company and its Subsidiaries or the best
interest of its stockholders or if the disclosure of that information would
include the disclosure of non-GAAP financial measures as contemplated by
Regulation G of the SEC.


2.14        Conversion of Excluded Subsidiaries. At the time
that any Excluded Subsidiary becomes a Material Subsidiary, the Company shall,
subject to the terms of the Intercreditor Agreement, (a) cause such Subsidiary
to provide to Collateral Trustee a Guaranty Supplement and joinder to the
Security Agreement, together with such other security documents (including
Mortgages with respect to any Real Property of such Subsidiary), as well as
appropriate UCC-1 financing statements (and with respect to all property
subject to a Mortgage, fixture filings), all in form and substance satisfactory
to Collateral Trustee (including being sufficient to grant Collateral Trustee a
second priority Lien (subject to Permitted Liens) in and to the assets of such
Subsidiary), and (b) provide to Collateral Trustee all other documentation,
including one or more opinions of counsel satisfactory to Collateral Trustee,
which in its opinion is appropriate with respect to the execution and delivery
of the applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all property subject to a
Mortgage). Any document, agreement, or instrument executed or issued pursuant
to this Section 2.14 shall be a Loan Document.


2.15        Surviving Preferred Shares. Cause the
Surviving Series F Shares to be either converted to common Stock or cancelled as
soon as practicable after the Closing Date but in any event not later than the
later to occur of (a) March 31, 2004 and (b) the date occurring thirty (30)
days after the SEC approves the Company’s registration statement or other
filings in respect of such conversion or cancellation.


3. Negative Covenants.


The
Company covenants and agrees that, until the payment in full of the
Obligations, but subject to the terms of the Intercreditor Agreement and to the
obligation and rights of the Company to perform its obligations and covenants
and discharge its obligations under the WFF Loan Documents, the Company and its
Subsidiaries will not and will not permit any of their respective Material
Subsidiaries to do any of the following:


3.1
Indebtedness. Create, incur, assume, suffer to exist, guarantee,
or otherwise become or remain, directly or indirectly, liable with respect to
any Indebtedness withouth the written consent of the Required ESSAR
Noteholders, except:


(a) Indebtedness evidenced by the Secured Promissory Notes;


 


17





















 


(b) Indebtedness set forth
on Schedule 3.1 to this Annex II;


(c) Permitted Purchase Money
Indebtedness;


(d) refinancings, renewals,
or extensions of Indebtedness permitted under clauses (b) and (c) of this Section
3.1 (and continuance or renewal of any Permitted Liens associated
therewith) so long as: (i) the terms and conditions of such refinancings,
renewals, or extensions do not, in Administrative Agent’s judgment, materially
impair the prospects of repayment of the Obligations by the Company and its
Subsidiaries or materially impair the Company and its Subsidiaries’
creditworthiness, (ii) such refinancings, renewals, or extensions do not result
in an increase in the then extant principal amount of, or interest rate with
respect to, the Indebtedness so refinanced, renewed, or extended or add one or
more borrowers as liable with respect thereto if such additional borrowers were
not liable with respect to the original Indebtedness, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are materially more burdensome
or restrictive to the Company or any of its Subsidiaries, (iv) if the
Indebtedness that is refinanced, renewed, or extended was subordinated in right
of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must be include subordination
terms and conditions that are at least as favorable to the Noteholders as those
that were applicable to the refinanced, renewed, or extended Indebtedness, and
(v) the Indebtedness that is refinanced, renewed, or extended is not recourse
to any Person that is liable on account of the Obligations other than those
Persons which were obligated with respect to the Indebtedness that was
refinanced, renewed, or extended;


(e)          Indebtedness
under the WFF Loan Documents;


(f)            endorsement of
instruments or other payment items for deposit; and


(g) Indebtedness composing
Permitted Investments.


3.2 Liens. Create,
incur, assume, or suffer to exist, directly or indirectly, any Lien on or with
respect to any of its assets, of any kind (expressly including, without
limitation, Real Property), whether now owned or hereafter acquired, or any
income or profits therefrom, except for Permitted Liens (including Liens that
are replacements of Permitted Liens to the extent that the original
Indebtedness is refinanced, renewed, or extended under Section 3.1(d) of
this Annex II and so long as the replacement Liens only encumber those assets
that secured the refinanced, renewed, or extended Indebtedness).


3.3
Restrictions on Fundamental Changes.


(a) Enter into any merger,
consolidation, reorganization or recapitalization, or reclassify its Stock; provided, that (i) the Company may be
merged with or into or consolidated into a wholly-owned direct or indirect
Subsidiary of the Company if the Company is the surviving entity; (ii) any
Guarantor may be merged with or into or consolidated into a wholly-owned direct
or indirect Subsidiary of the Company if the surviving entity is a Guarantor;
(iii) any Material Subsidiary may be merged with or into or consolidated into an
Excluded Subsidiary if the surviving entity is a Material Subsidiary; and (iv)
any Subsidiary may be merged into the Company.


(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution).


 


18





















 


(c) Other than in Permitted
Dispositions, convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.


3.4
Disposal of Assets. Other than in Permitted Dispositions or, in
any twelve month period in the ordinary course of business consistent with past
practices, assets having a book value on the Books of the Company of up to
$100,000 in the aggregate, convey, sell, lease, license, assign, transfer, or
otherwise dispose of any of the assets of the Company or any Subsidiary of the
Company.


3.5 Change
Name. Change the Company’s or any Subsidiary of the
Company’s name, FEIN, organizational identification number, state of
organization, or organizational identity; provided, however, that
the Company or a Subsidiary of the Company may change its name upon at least 30
days prior written notice by Company to Collateral Trustee of such change and
so long as, at the time of such written notification, such Borrower or such
Subsidiary provides any financing statements necessary to perfect and continue
perfected Collateral Trustee’s Liens.


3.6 Nature
of Business. Make any change in the principal nature of their
business.


3.7
Prepayments and Amendments. Except in connection with
a refinancing permitted by Section 3.1(d) of this Annex II,


(a) prepay, redeem, defease,
purchase, or otherwise acquire any Indebtedness of the Company or any
Subsidiary of the Company, other than the Obligations in accordance with this
Agreement, or


(b) directly or indirectly,
amend, modify, alter, increase, or change any of the terms or conditions of any
agreement, instrument, document, indenture, or other writing evidencing or
concerning Indebtedness permitted under Section 3.1(b) or (c) of this
Annex II.


3.8 Change
of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.


3.9
Distributions. Other than distributions or declaration and
payment of dividends by the Company to another Borrower or by a Subsidiary of the
Company to the Company, make any distribution or declare or pay any dividends
(in cash or other property, other than common Stock) on, or purchase, acquire,
redeem, or retire any of the Company’s Stock, of any class, whether now or
hereafter outstanding.


3.10
Accounting Methods. Modify or change their fiscal year or their
method of accounting (other than as may be required to conform to GAAP or to
conform to more commonly used principles that are a part of GAAP) or as
required by applicable law or enter into, modify, or terminate any agreement
currently existing, or at any time hereafter entered into with any third party
accounting firm or service bureau for the preparation or storage of the Company
and its Subsidiaries’ or their Subsidiaries’ accounting records without said
accounting firm or service bureau agreeing to provide Administrative Agent
information regarding the Company and its Subsidiaries’ and their Subsidiaries’
financial condition.


3.11 Investments. Except for Permitted
Investments, directly or indirectly, make or acquire any Investment, or incur
any liabilities (including contingent obligations) for or in connection with
any Investment; provided, that
the Company and its Subsidiaries shall not have


 


19





















 


Permitted Investments (other
than in the Cash Management Accounts (as defined in the WFF Facility)) in
Deposit Accounts or Securities Accounts in an aggregate amount in excess of
$100,000 outstanding at any one time unless the Company or its Subsidiary, as
applicable, and the applicable securities intermediary or bank have entered
into Control Agreements or similar arrangements governing such Permitted
Investments in order to perfect (and further establish) the Collateral
Trustee’s Liens in such Permitted Investments (subject in all respects to the
terms of the Intercreditor Agreement). Subject to the foregoing proviso, the
Company shall not, and shall not permit its Subsidiaries to, establish or
maintain any Deposit Account or Securities Account unless Collateral Trustee or
WFF, as agent under the WFF Facilities, shall have received a Control Agreement
in respect of such Deposit Account or Securities Account.


3.12
Transactions with Affiliates. Directly or indirectly
enter into or permit to exist any transaction with any Affiliate of the
Company, other than one of the Company’s wholly owned Subsidiaries, except for
transactions that are in the ordinary course of the Company and its
Subsidiaries’ business, upon fair and reasonable terms, that are fully
disclosed to Administrative Agent, and that are no less favorable to the
Company and its Subsidiaries than would be obtained in an arm’s length
transaction with a non-Affiliate.


3.13
Suspension. Suspend or go out of a substantial portion of
their business.


3.14
Compensation. Increase the annual fee or per-meeting fees paid
to the members of its Board of Directors during any year by more than 15% over
the prior year; pay or accrue total cash compensation, during any year, to its
officers and senior management employees in an aggregate amount in excess of
115% of that paid or accrued in the prior year.


3.15
Equipment with Bailees. Store the Equipment of the
Company and its Subsidiaries or their Subsidiaries at any time now or hereafter
with a bailee, warehouseman, or similar party without Collateral Trustee’s
prior written consent.


3.16 Financial Covenants.


(a) Minimum of EBITDA.  Fail
to maintain or achieve at least the required amount set forth in the
following table for the applicable period ending in the month set forth
opposite thereto:


 


	
  Applicable
  Amount

  	
   

  	
  Applicable Period (Month-end)

  	
   

  
	
  $

  	
  (9,880,000

  	
  )

  	
  October 2004

  	
   

  
	
  $

  	
  (10,800,000

  	
  )

  	
  November 2004

  	
   

  
	
  $

  	
  (11,500,000

  	
  )

  	
  December 2004

  	
   

  



 


EBITDA
shall be calculated on a cumulative twelve-month basis building through the
first twelve calendar months occurring ending after the Closing Date
(commencing with January of 2004) and thereafter on a rolling twelve-month
basis. EBITDA shall be measured on a quarter-end basis. Administrative Agent
and the Company shall establish required minimum EBITDA amounts for quarter
occurring after December 31, 2004 on the basis of projections and business
plans for such periods prepared and delivered by the Company and its
Subsidiaries and accepted by Administrative Agent in its Permitted Discretion,
but in any event in amounts not less than the amount required for the quarter
ending December 31, 2004.


(b) Make


 


20





















 


(i)            Funded Capital Expenditures. Except as
permitted under 3.16(b)(ii), make capital expenditures in any period in excess
of the amount set forth in the following table for the applicable period:


	
  Fiscal Year 2004

  	
   

  
	
  $

  	
  1,750,000

  	
   

  
			



 


(ii)           Financed
Capital Expenditures. Except as permitted under Section 3.16(b)(i),
capital expenditures in any period in excess of the amount set forth in the
following table for the applicable period:


 


	
  Fiscal Year 2004

  	
   

  	
  Fiscal Year 2005

  	
   

  
	
  $

  	
  7,000,000

  	
   

  	
  $

  	
  7,000,000

  	
   

  
						



 


Administrative Agent shall
establish required maximum Funded Capital Expenditure amounts for periods
ending after December 31, 2004 and required maximum Financed Capital
Expenditure amounts for periods ending after December 31, 2005 in accordance
with the amounts established by WFF under the WFF Facility or, if the WFF
Facility is no longer in effect, on the basis of projections and business plans
for such periods prepared and delivered by the Company and accepted by
Administrative Agent in its Permitted Discretion


 


 


3.17
Billing Practices. Modify or
change their billing practices.


3.18 Change
of Officers.  Permit any change in the holders of the
offices of President and Chief Executive Officer and Chief Financial Officer
unless the individual named to any such office is satisfactory to
Administrative Agent in its Permitted Discretion.


3.19
Limitations on other Subordinated Indebtedness. Directly or
indirectly, incur any Indebtedness that is subordinate in right of payment to
any other Indebtedness of the Company or such Material Subsidiary, as the case
may be, unless such Indebtedness is either (a) pari
passu in right of payment with the Advances or such Material
Subsidiary’s Guaranty, as the case may be or (b) subordinated in right of
payment to the Advances, or such Material Subsidiary’s Guaranty, as the case
may be.


3.20
Excluded Subsidiaries. Except as permitted under Section 3.12,
transfer any capital or assets to an Excluded Subsidiary or incur any
Indebtedness to an Excluded Subsidiary


4. EVENTS OF DEFAULT.


Any
one or more of the following events shall constitute an event of default (each,
an “Event of Default”) under the Secured Promissory Notes:


4.1 If the Company and its Subsidiaries fail to pay within 5 calendar
days of the date when due and payable or when declared due and payable, all or
any portion of the Obligations other than the principal amount payable under
the Secured Promissory Notes (whether of interest (including any interest
which, but for the provisions of the Bankruptcy Code, would have accrued on
such


 


21





















 


amounts), fees, charges and
expense reimbursements due the Noteholders or other amounts constituting
Obligations);


4.2 If the Company and its
Subsidiaries fail to pay when due and payable or when declared due and payable,
all or any portion of the principal amount payable under the Secured Promissory
Notes;


4.3 If the Company and its
Subsidiaries fail to perform, keep, or observe any term, provision, covenant or
agreement contained in any of the Loan Documents and, except for those
covenants set forth in Sections 2.7 or 2.11 or Section 3, such failure
continues for a period of 30 days or more after the earlier of (a) the date on
which the Company first receives notice of such failure from the Administrative
Agent or a Noteholder and (b) the first date on which an executive officer of
the Company has actual awareness of such failure.


4.4 If any material portion
of the Company’s or any Subsidiary of the Company’s assets is attached, seized,
subjected to a writ or distress warrant, levied upon, or comes into the
possession and control of any third Person;


4.5 If an Insolvency
Proceeding is commenced by the Company or any Subsidiary of the Company;


4.6 If an Insolvency
Proceeding is commenced against the Company or any Subsidiary of the Company,
and any of the following events occur: (a) the applicable Borrower or
Subsidiary consents to the institution of the Insolvency Proceeding against it,
(b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 60 calendar days of the date of the filing thereof,
(d) an interim trustee is appointed to take possession of all or any
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, the Company or any Subsidiary of the
Company, or (e) an order for relief shall have been entered therein;


4.7 If the Company or any
Subsidiary of the Company is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;


4.8 If a notice of Lien,
levy, or assessment is filed of record with respect to the Company’s or any
Subsidiary of the Company’s assets by the United States, or any department,
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter to
any one or more of such entities becomes a Lien, whether choate or otherwise,
upon the Company’s or any Subsidiary of the Company’s assets and the same is
not paid before such payment is delinquent or the same is not subject to a
Permitted Protest;


4.9 If a judgment or other
claim becomes a Lien (other than a Permitted Lien) upon any material portion of
the Company’s or any Subsidiary of the Company’s properties or assets ;


4.10 If there is a default in the WFF Loan Documents, any other Secured
Promissory Note or any material agreement to which the Company or any
Subsidiary of the Company is a party (other than any customer contract) and such
default (a) occurs at the final maturity of the obligations thereunder, or (b)
results in a right by the other party thereto, irrespective of whether
exercised, to accelerate the maturity of the applicable Borrower’s or
Subsidiary’s obligations thereunder, or to terminate such agreement, which
termination is reasonably likely to have a Material Adverse Change;


 


22





















 


4.11 If the Company or any
Subsidiary of the Company makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;


4.12 If any representation,
warranty, statement or Record fails to be true and accurate in all material
respects on the date as of which such information is dated or certified and or
omits to state any fact necessary to make such representation, warranty,
statement or Record (taken as a whole) not misleading in any material respect
at such time in light of the circumstances in which it was made to the
Noteholders or any Agent by the Company, any Subsidiary of the Company, or any
officer, employee, agent, or director of the Company or any Subsidiary of the
Company;


4.13 If any of the Loan
Documents that purports to create a Lien, shall, for any reason, fail or cease
to create a valid and perfected and, except to the extent permitted by the
terms hereof or thereof, first priority Lien on or security interest in the
Collateral covered hereby or thereby; or


4.14 Any material provision
of any Loan Document shall at any time for any reason be declared to be null
and void, or the validity or enforceability thereof shall be contested by the
Company or any Subsidiary of the Company, or a proceeding shall be commenced by
the Company or any Subsidiary of the Company, or by any Governmental Authority
having jurisdiction over the Company or any Subsidiary of the Company, seeking
to establish the invalidity or unenforceability thereof, or the Company or any
Subsidiary of the Company shall deny that it has any liability or obligation
purported to be created under any Loan Document.


 


23





















 


Schedule
2.7


 


Locations
of Equipment


 


                The
Equipment is located at the offices and facilities of the Company located in
the following cities.


 


	
  1.

  	
  Sierra Vista, Arizona

  
	
  2.

  	
  El Segundo, California

  
	
  3.

  	
  Los Angeles, California

  
	
  4.

  	
  Port St. Lucie, Florida

  
	
  5.

  	
  Atlanta, Georgia

  
	
  6.

  	
  Terra Haute, Indiana

  
	
  7.

  	
  Joplin, Missouri

  
	
  8.

  	
  St. Joseph, Missouri

  
	
  9.

  	
  Rocky Mount, North
  Carolina

  
	
  10.

  	
  Arlington, Texas

  
	
  11.

  	
  Irving, Texas (2
  facilities)

  
	
  12.

  	
  Elkins, West Virginia

  
	
  13.

  	
  Fairmont, West Virginia

  



 


Address
of Chief Executive Office of the Company


 


7880 Bent Branch Drive,
Suite 150


Irving, Texas 75063


 


24





















 


Schedule
3.1


 


Scheduled
Indebtedness


 


1.             Indebtedness
relating to outstanding Letters of Credit as to which the Company or one of its
Subsidiaries is the account party and any reimbursement and other obligations
of the Company or any of its Subsidiaries with respect thereto.


 


25





















 


Schedule
3.2


 


Permitted
Liens


 


The following table describes the existing
Liens to which assets of the Company and its Subsidiaries are subject.


 


	
  Debtor

  	
   

  	
  Secured
  Party

  	
   

  	
  Delaware
  UCC file number and date of filing

  	
   

  	
  Collateral

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  Dell Financial
  Services, L.P.

  	
   

  	
  10855903

  8/2/01

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  Heller Financial
  Leasing, Inc., Commercial Equipment Finance

  	
   

  	
  11140669

  10/2/01

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  Heller Financial
  Leasing, Inc., Commercial Equipment Finance

  	
   

  	
  11369516

  11/1/01

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  De Lage Landen
  Financial Services, Inc.

  	
   

  	
  21931223

  7/12/02

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  De Lage Landen
  Financial Services, Inc.

  	
   

  	
  22246365

  9/3/02

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  De Lage Landen
  Financial Services, Inc.

  	
   

  	
  22246373

  9/3/02

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  Dell Financial
  Services, L.P.

  	
   

  	
  22754962

  10/31/02

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  IOS Capital, LLC

  	
   

  	
  22826158

  11/8/02

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  Dell Financial
  Services, L.P.

  	
   

  	
  23098211

  12/11/02

  	
   

  	
  equipment

  



 


26





















 


	
  Debtor

  	
   

  	
  Secured Party

  	
   

  	
  File number and date

  	
   

  	
  Collateral

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  General Electric Credit
  Corporation

  	
   

  	
  30942212

  4/3/03

  	
   

  	
  equipment

  
	
  Aegis Communications
  Group, Inc.

  	
   

  	
  IOS Capital, LLC

  	
   

  	
  31045957

  4/23/03

  	
   

  	
  equipment

  
	
  InterServ Services
  Corporation

  	
   

  	
  Inter-Tel Leasing, Inc.

  	
   

  	
  20911010

  4/11/02

  	
   

  	
  equipment

  
	
  InterServ Services
  Corporation

  	
   

  	
  Inter-Tel Leasing, Inc.

  	
   

  	
  20911051

  4/11/02

  	
   

  	
  equipment

  
	
  InterServ Services
  Corporation

  	
   

  	
  Inter-Tel Leasing, Inc.

  	
   

  	
  20911093

  4/11/02

  	
   

  	
  equipment

  
	
  InterServ Services
  Corporation

  	
   

  	
  Inter-Tel Leasing, Inc.

  	
   

  	
  20911135

  4/11/02

  	
   

  	
  equipment

  
	
  InterServ Services
  Corporation

  	
   

  	
  Inter-Tel Leasing, Inc.

  	
   

  	
  20911200

  4/11/02

  	
   

  	
  equipment

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ontario
  Personal Property Security Registration System

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EBA Direct, Inc.

  	
   

  	
  none

  	
   

  	
   

  	
   

  	
   

  



 


27