Document:

Exhibit 10.3

 

THIS THIRD AMENDED AND
RESTATED SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW.  THIS THIRD AMENDED AND RESTATED SECURED PROMISSORY NOTE HAS BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND
NEITHER THIS THIRD 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 THIRD 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.

 

THIRD AMENDED AND
RESTATED SECURED PROMISSORY NOTE

 

 

	
  $

  	
  9,236,358.21

  	
   

  	
   

  	
  August 23,
  2004

  

 

For value received, the
undersigned, Aegis Communications Group, Inc., a Delaware corporation (the “Company”),
hereby PROMISES TO PAY to the order of Deutsche Bank AG London acting through
DB Advisors, LLC (the “Investor” and in its capacity as administrative
agent for each of its assignees hereunder, the “Administrative Agent”),
the principal sum of $9,236,358.21 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 Third 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 Third 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 $14,087,352.00, restated in that certain Amended and Restated
Secured Promissory Note, dated January 28, 2004 and restated in that
certain Second Amended and Restated Secured Promissory Note, dated
March 30, 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 $1,159,489.00 (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.

 

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.

 

2

 

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 DB Noteholders, may by notice to the
Company, declare this 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

 

3

 

(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 DB 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.

 

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

 

4

 

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: DB Advisors LLC,
280 Park Avenue, New York, New York 10017, Attention: Roger Ehrenberg with a
copy to:  Shearman & Sterling LLP,
599 Lexington Avenue, New York, New York 
10022-6069, Facsimile:  (212)
848-7179, Attention:  Stephen M. Besen,
Esq.

 

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.

 

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.

 

5

 

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:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

7

 

Annex I

 

PREPAYMENTS

 

 

	
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  Balance

  	
   

  	
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8

 

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.

 

9

 

“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.

 

10

 

“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

 

11

 

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.

 

12

 

“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 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.

 

13

 

“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.

 

14

 

“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 

 

15

 

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.

 

16

 

“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.

 

17

 

“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,

 

18

 

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

 

19

 

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.

 

20

 

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.

 

21

 

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

 

22

 

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 DB Noteholders, except:

 

(a)  Indebtedness evidenced by the Secured
Promissory Notes;

 

23

 

(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).

 

24

 

(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

 

25

 

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)

  	
   

  
	
  $

  	
  63,000

  	
   

  	
   

  	
  January 2004

  	
   

  
	
  $

  	
  (177,000

  	
  )

  	
   

  	
  February 2004

  	
   

  
	
  $

  	
  (1,602,000

  	
  )

  	
   

  	
  March 2004

  	
   

  
	
  $

  	
  (1,526,000

  	
  )

  	
   

  	
  April 2004

  	
   

  
	
  $

  	
  (1,968,000

  	
  )

  	
   

  	
  May 2004

  	
   

  
	
  $

  	
  (1,562,000

  	
  )

  	
   

  	
  June 2004

  	
   

  
	
  $

  	
  (7,750,000

  	
  )

  	
   

  	
  July 2004

  	
   

  
	
  $

  	
  (8,275,000

  	
  )

  	
   

  	
  August 2004

  	
   

  
	
  $

  	
  (8,650,000

  	
  )

  	
   

  	
  September 2004

  	
   

  
	
  $

  	
  (8,500,000

  	
  )

  	
   

  	
  October 2004

  	
   

  
	
  $

  	
  (8,500,000

  	
  )

  	
   

  	
  November 2004

  	
   

  
	
  $

  	
  (8,225,000

  	
  )

  	
   

  	
  December 2004

  	
   

  

 

26

 

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

 

(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.

 

27

 

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 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

 

28

 

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;

 

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.

 

29

 

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

 

30

 

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.

 

31

 

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

  

 

32

 

	
  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

  	
   

  	
   

  	
   

  	
   

  

 

33Exhibit 10.4

 

THIS THIRD
AMENDED AND RESTATED SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW.  THIS THIRD AMENDED AND RESTATED SECURED
PROMISSORY NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE AND NEITHER THIS THIRD 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 THIRD
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.

 

THIRD AMENDED AND RESTATED SECURED PROMISSORY NOTE

 

	
  $9,293,843.43

  	
   

  	
  August 23, 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
$9,293,843.43 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 Third 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 Third 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 and restated in that certain Amended and Restated
Secured Promissory Note dated January 28, 2004 and restated in that
certain Second Amended and Restated Secured Promissory Note, dated
March 30, 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

 

1

 

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 two 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.

 

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.

 

2

 

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 Agent, (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 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

 

3

 

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 Agent, 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.

 

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

 

4

 

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 St. (PH), New York, NY 10017, Facsimile:  212-758-5860,  Attention:  Madhu
Vuppuluri with a copy to:  Shearman
& Sterling LLP, 599 Lexington Avenue, New York, New York  10022-6069, Facsimile:  (212) 848-7179, Attention:  Stephen M. Besen, Esq.

 

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:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
										

 

7

 

Annex I 

 

PREPAYMENTS

 

	
  Date

  	
   

  	
  Amount
  Prepaid

  	
   

  	
  Unpaid
  Balance

  	
   

  	
  Notation
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8

 

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.

 

9

 

“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.

 

10

 

“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

 

11

 

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.

 

12

 

“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 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.

 

13

 

“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.

 

14

 

“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

 

15

 

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.

 

16

 

“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
DB 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.

 

17

 

“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,

 

18

 

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

 

19

 

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.

 

20

 

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.

 

21

 

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

 

22

 

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 DB
Noteholders, except:

 

(a)  Indebtedness evidenced by the Secured
Promissory Notes;

 

23

 

(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).

 

24

 

(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

 

25

 

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)

  	
   

  
	
  $

  	
  63,000

  	
   

  	
   

  	
  January 2004

  	
   

  
	
  $

  	
  (177,000

  	
  )

  	
   

  	
  February 2004

  	
   

  
	
  $

  	
  (1,602,000

  	
  )

  	
   

  	
  March 2004

  	
   

  
	
  $

  	
  (1,526,000

  	
  )

  	
   

  	
  April 2004

  	
   

  
	
  $

  	
  (1,968,000

  	
  )

  	
   

  	
  May 2004

  	
   

  
	
  $

  	
  (1,562,000

  	
  )

  	
   

  	
  June 2004

  	
   

  
	
  $

  	
  (7,750,000

  	
  )

  	
   

  	
  July 2004

  	
   

  
	
  $

  	
  (8,275,000

  	
  )

  	
   

  	
  August 2004

  	
   

  
	
  $

  	
  (8,650,000

  	
  )

  	
   

  	
  September 2004

  	
   

  
	
  $

  	
  (8,500,000

  	
  )

  	
   

  	
  October 2004

  	
   

  
	
  $

  	
  (8,500,000

  	
  )

  	
   

  	
  November 2004

  	
   

  
	
  $

  	
  (8,225,000

  	
  )

  	
   

  	
  December 2004

  	
   

  

 

26

 

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

 

(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.

 

27

 

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 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

 

28

 

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;

 

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.

 

29

 

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

 

30

 

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.

 

31

 

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

  	
   

  

 

32

 

	
  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

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

33

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