Document:

Exhibit
4.2

THIS
SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED OR DISPOSED OF
ABSENT SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.

THE
HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH SECURITY
MAY BE OFFERED, RESOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR
DISPOSED OF, ONLY (1) (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, (B) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (C)
PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS) OR (D) TO THE COMPANY, AND (2) IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE BLUE SKY LAWS AND THE SECURITIES LAWS OF ANY OTHER APPLICABLE
DOMESTIC OR FOREIGN JURISDICTION.  THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT THAT THE SECURITY EVIDENCED HEREBY IS SUBJECT TO THE FOREGOING RESALE
RESTRICTIONS.

THE SHARES
OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS SECURITY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OR ANY OTHER STATE SECURITIES, OR “BLUE
SKY,” LAWS, AND WILL BE RESTRICTED IN THE SAME MANNER AS THESE SECURITIES. SUCH
SHARES ARE ENTITLED TO THE BENEFIT OF A SECURITIES PURCHASE AGREEMENT, DATED AS
OF [                    ],
2006, BY AND AMONG THE ISSUER AND THE PURCHASERS NAMED THEREIN, THAT COVERS THE
RESALE OF THE SHARES ACQUIRED UPON EXERCISE OF THESE WARRANTS.  A COPY OF THE PURCHASE AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE ISSUER.

WARRANT
TO PURCHASE

SHARES OF COMMON STOCK

OF

INNOVO GROUP INC.

DATE OF INITIAL
ISSUANCE:                          ,
2006

THIS
CERTIFIES THAT, for value received,                                                           
(the “Holder”) is entitled to purchase, subject to the exercise and
other provisions of this Warrant, from Innovo Group Inc., a Delaware
corporation (the “Company”), at any time beginning on the one hundred
and eight-first (181st)
day following the date of initial issuance and ending at 5:00 P.M. Eastern Time
on                   ,
2011 (the “Expiration Date”), up to                               
shares (as such number of shares may be adjusted in accordance with Section 2
hereof, the “Warrant Shares”) of the Company’s common stock, par value
$0.10 per share (the “Common Stock”), in whole or in part, at an
exercise price per share of $       (subject to
adjustment as provided in 

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Section 2 hereof,
the “Exercise Price”).  This
Warrant shall expire on the Expiration Date, and shall become void thereafter.

WHEREAS,
the Company proposes to sell, pursuant to a Securities Purchase Agreement,
dated as of the date hereof (the “Purchase Agreement”), by and among the
Company, the Holder and the other Purchasers named therein, an aggregate of up
to 6,834,347 shares of the Company’s Common Stock and, as an inducement for the
Purchasers to purchase such shares, the Company also proposes to grant to the
Purchasers Warrants to purchase an aggregate of up to 2,050,304 shares of the
Company’s Common Stock;

NOW,
THEREFORE, in consideration of the premises, the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

Section 1.              Exercise of Warrant.

1.1.          Vesting.  The Holder’s rights under this Warrant shall
fully be fully vested as of the date hereof; provided that this Warrant may
only be exercised during the Exercise Period (as hereinafter defined).

1.2.          Exercisability.  This Warrant shall be exercisable, in whole
or in part, beginning on the one hundred and eight first (181st) day following the date of
initial issuance until the Expiration Date (such period, the “Exercise
Period”).

1.3.          Procedure for Exercise of Warrant.

(a)           To exercise this Warrant in whole or in part, the Holder shall deliver
to the Company, at 5901 South Eastern Avenue, Commerce, California 90040,
Facsimile No. (323) 837-3791, Attention: Legal Department: (i) a completed and
signed Notice of Exercise (including the Substitute Form W-9, which
forms a part thereof), as attached hereto as Schedule A; (ii) delivery
of payment to the Company of the Exercise Price in any manner specified in subsection
(c) of this Section 1.3; and (iii) this Warrant.  Upon irrevocable payment in good collected
funds of the aggregate Exercise Price (rounded up to the nearest cent) for the
Warrant Shares being purchased, the Holder shall be deemed to be the holder of
record of such Warrant Shares, notwithstanding that the stock transfer books of
the Company may then be closed or that
certificates representing such Warrant Shares may not then be actually
delivered to the Holder.

(b)           The Company shall, as promptly as practicable
after completion of the actions specified in Section 1.3(a) above (the “Date of
Exercise”), and in no event later than three (3) business days after the Date
of Exercise, cause to be executed, and deliver to the Holder a certificate
representing the aggregate number of Warrant Shares specified in the Notice of
Exercise.  Each stock certificate so
delivered shall be in such denomination as may be requested by the Holder and
shall be registered in the name of the Holder. 
If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Holder a new Warrant evidencing the right of the Holder to
purchase the remaining Warrant Shares covered by this Warrant.  The Company shall pay all expenses, stock
transfer taxes and other charges payable in connection with the preparation,
execution and delivery of such stock certificates.

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(c)           The Exercise Price shall be payable
(i) in cash or its equivalent, payable by wire transfer of immediately
available funds to a bank account specified by the Company or by certified or
bank cashiers’ check in lawful money of the United States of America; or (ii)
by presentation and surrender of this Warrant to the Company at its principal
offices with a written notice of the Holder’s intention to effect a cashless
exercise, including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a “Cashless
Exercise”).  In the event of a
Cashless Exercise, in lieu of paying the Exercise Price in cash, the Holder
shall surrender this Warrant, in whole or in part, for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which
such Holder would otherwise be entitled by a fraction, the numerator of which
shall be the excess of the then Current Market Price per share of Common Stock
over the Exercise Price, and the denominator of which shall be the then Current
Market Price per share of Common Stock. 
For purposes of this subsection (c), “Current Market Price”
means, with respect to the Common Stock, on any given day, (i) the price of the
last trade, as reported on the Nasdaq Capital Market (or other comparable
system) on the business day immediately prior to the date on which the Holder
surrenders this Warrant to the Company for the purposes of the Cashless
Exercise, not identified as having been reported late to such system during
regular trading hours, or (ii) if the Common Stock is so traded, but not so
reported, the average of the last bid and ask prices, as those prices are
reported on the Nasdaq Capital Market (or other comparable system) during
regular trading hours on the business day immediately prior to the date on
which the Holder surrenders this Warrant to the Company for the purposes of the
Cashless Exercise, or (iii) if the Common Stock is not listed or authorized for
trading on the Nasdaq Capital Market or any comparable system, the average of
the closing bid and ask prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time in good
faith by the Board of Directors for that purpose.  If the Common Stock is not listed and traded
in a manner that the quotations referred to above are available for the period
required hereunder, the Current Market Price per share of Common Stock shall be
deemed to be the fair value per share of such security as determined in good
faith by the Board of Directors.  For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a Cashless
Exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

(d)           The Company’s obligations to issue
and deliver Warrant Shares in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any person or entity or any action to enforce
the same, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder or any other person or entity of
any obligation to the Company or any violation or alleged violation of law by
the Holder or any other person or entity, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing Warrant Shares upon exercise of the Warrant as
required pursuant to the terms hereof.

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1.4.          Restrictive Legend.  Each certificate for Warrant Shares shall
contain the following legend:

“THIS
SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED OR DISPOSED OF
ABSENT SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.

THE HOLDER OF THIS SECURITY
AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH SECURITY MAY BE OFFERED, RESOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF, ONLY (1) (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (B)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT, (C) PURSUANT TO ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS) OR (D) TO THE COMPANY, AND (2) IN EACH
CASE, IN ACCORDANCE WITH APPLICABLE BLUE SKY LAWS AND THE SECURITIES LAWS OF
ANY OTHER APPLICABLE DOMESTIC OR FOREIGN JURISDICTION.  THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT THAT THE SECURITY EVIDENCED HEREBY
IS SUBJECT TO THE FOREGOING RESALE RESTRICTIONS.”

The certificates shall also bear any additional legends that are
required by, or are appropriate with respect to the rules and regulation of,
any state, local, foreign or other securities authorities.  The Company’s transfer agent and registrar
will maintain stop transfer instructions on record for the Warrant Shares until
it has been notified by the Company, upon the advice of counsel, that such
instructions may be waived.  Such stop
transfer instructions will limit the method of sale of the Warrant Shares,
consistent with Rule 144 or other available exemptions from registration under
the Securities Act of 1933, as amended. 
Any transfers other than pursuant to Rule 144 will require an opinion of
counsel reasonably satisfactory to the Company and its counsel prior to such
transfers.

1.5.          Character of Warrant Shares.  The Company represents and warrants that all
Warrant Shares shall be duly authorized, validly issued, and, upon payment of
the Exercise Price therefor, fully paid and nonassessable, and free from all
taxes, liens, hypothecations, security interests, adverse claims or interests
and charges created in respect of the issue thereof.  Each person in whose name any such certificate
for Warrant Shares is issued shall for all purposes be deemed to have become
the holder of record of the Common Stock represented thereby on the Exercise
Date of the Warrants resulting in the issuance of such shares, irrespective of
the date of issuance or delivery of such certificate.

1.6           No Fractional Shares.  The Company shall have no obligation to issue
fractional shares, or scrip representing fractional shares, of its Common Stock
under this Warrant, and, to the extent that the Holder would otherwise be
entitled to purchase and/or receive fractional shares 

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of Common Stock
hereunder, the Company shall, in lieu of issuing such fractional share, pay to
the Holder an amount in cash equal to the product of (x) the Current Market
Price per share of Common Stock, times (y) a fraction equal to the fraction of
a share of Common Stock into which this Warrant would otherwise be exercisable.

Section 2.              Certain Adjustments.

2.1.          Stock Dividends, Subdivisions and
Combinations.  If at any time the
Company shall:

(a)           establish a record date for the determination
of holders of record of its Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of, additional shares of
the Company’s Common Stock,

(b)           subdivide its outstanding shares of
Common Stock into a larger number of shares of Common Stock, or

(c)           combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock,

then (1) the Warrant Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the occurrence of such event would own or be entitled to receive after
the happening of such event, and (2) the Exercise Price shall be adjusted to
equal (x) the Exercise Price multiplied by the Warrant Shares for which this
Warrant is exercisable immediately prior to the adjustment divided by (y) the
Warrant Shares for which this Warrant is exercisable immediately after such
adjustment.

2.2.          Adjustment Procedures.  The following provisions shall be applicable
to adjustments to be made pursuant to Section 2.1 hereof:

(a)           When
Adjustments to be Made.  The
adjustments required by this Section 2 shall be made whenever and as often as
any event requiring an adjustment shall occur. For the purpose of any such
adjustment, any event shall be deemed to have occurred at the close of business
on the date of its occurrence.

(b)           Fractional Interests.  In computing adjustments under this Section
2, fractional interests in the Common Stock shall be taken into account to the
nearest 1/10th of a share.  Subject to
Section 1.6, in no event, however, shall fractional shares or scrip representing
fractional shares be issued upon the exercise of this Warrant.

(c)           When Adjustment Not Required.  If the Company shall establish a record date
for the determination of the holders of record of the Common Stock for the
purpose of entitling such holders to receive a dividend payable in Common Stock
and shall, thereafter and before the distribution to shareholders thereof,
legally abandon its plan to pay or deliver such dividend, then no adjustment
shall be required by reason of the establishment of such record date and any
such adjustment previously made in respect thereof shall be rescinded and
annulled.

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2.3.          Reorganization, Reclassification,
Merger, Consolidation or Share Exchange. 
If the Company at any time reorganizes or reclassifies the outstanding
shares of Common Stock (other than a change in par value, or from no par value
to par value, or from par value to no par value, or as a result of a
subdivision or combination) or consolidates with, merges into, or effects a
share exchange with, another corporation (where the Company is not the
continuing corporation after such merger or consolidation), then the Holder
shall thereafter be entitled to receive upon exercise of this Warrant in whole
or in part, the same kind and number of shares of stock and other securities,
cash or other property (and upon the same terms and with the same rights) as
would have been distributed to the Holder upon such reorganization,
reclassification, consolidation, merger or share exchange had the Holder
exercised this Warrant immediately prior to such reorganization,
reclassification, consolidation, merger or share exchange (subject to
subsequent adjustments under this Section 2), and the Exercise Price shall be
adjusted appropriately to reflect such action and adjustment.

If
any such reorganization, reclassification, consolidation, merger or share
exchange results in a cash distribution in excess of the Exercise Price
provided by this Warrant, the Holder may, at the Holder’s option, exercise this
Warrant without making payment of the Exercise Price, and in such case the
Company or its successors and assigns shall, upon distribution to such Holder,
consider the Exercise Price to have been paid in full, and in making settlement
to such Holder, shall deduct an amount equal to the Exercise Price from the
amount payable to such Holder. 
Notwithstanding anything herein to the contrary, the Company will not
effect any such reorganization, reclassification, merger, consolidation or
share exchange unless prior to the consummation thereof, the corporation that
may be required to deliver any stock, securities or other assets upon the
exercise of this Warrant shall agree by an instrument in writing to deliver
such stock, cash, securities or other assets to the Holder.  A sale, transfer or lease of all or
substantially all of the assets of the Company to another person shall be
deemed a reorganization, reclassification, consolidation, merger or share
exchange for the foregoing purposes.

2.4.          Officer’s Certificate.  Upon each adjustment of the Exercise Price
and the Warrant Shares issuable upon the exercise of this Warrant, and in the
event of any change in the rights of the Holder by reason of other events
herein set forth, then and in each such case, the Company will promptly prepare
a certificate of a responsible officer of the Company, stating the adjusted
Exercise Price, the adjusted number of Warrant Shares so issuable, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.  The Company
will promptly mail a copy of such certificate to the Holder.  Such calculation shall be final and binding
on the parties and shall be conclusive evidence of the correctness of the
computation with respect to any such adjustment of the Exercise Price and any
such change in the number of Warrant Shares so issuable, absent manifest error.

2.5           Notice of Certain Proposed Actions.  In the event the Company shall propose to
take any action of the types described in Sections 2.1 or 2.3 above, then the
Company shall forward, at the same time and in the same manner, to the Holder
such notice and related proxy or other materials, if any, that the Company
gives to the holders of the Common Stock. 
Failure to give such notice, or any defect therein, however, shall not
affect the legality or validity of any such action.

Section 3.              Ownership and Transfer.

3.1.          Ownership.  The Company may deem and treat the person in
whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of 

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ownership or
writing hereon made by anyone other than the Company) for all purposes and
shall not be affected by any notice to the contrary until presentation of this
Warrant to the Company for registration of transfer.

3.2.          Transfers.  Upon the sale, disposition, transfer or
conveyance of this Warrant, the purchaser, transferee or other recipient hereof
shall, together with the previous Holder hereof, promptly notify the Company of
such sale, disposition, transfer or conveyance and shall provide such recipient’s
name, address and capacity in which this Warrant is held, and present such
other information as the Company may reasonably request, and such recipient
will thereafter be subject to, and bound by, the terms and provisions of, this
Warrant to the same extent as the previous Holder.

3.3.          Replacement.  Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft or destruction of this
Warrant, and of indemnity or security reasonably satisfactory to it, or upon
surrender of this Warrant if mutilated, the Company will make and deliver a new
Warrant of like tenor, in lieu of this Warrant. 
This Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any transfer or replacement.  Except as otherwise provided above in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant.  Applicants
for such substitute Warrants shall also comply with such other reasonable
regulations and pay such other reasonable charges incidental thereto as the
Company may reasonably prescribe.  Any
such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall at any time be presented.

3.4           Cancellation of Warrant.  Any Warrant surrendered upon exercise or for
split up, combination, exchange or transfer, or purchased or otherwise acquired
by the Company, shall be cancelled and shall not be reissued by the Company;
and, except as provided herein in the case of the purchase of less than all of
the Warrant Shares that the Holder may purchase hereunder or in the case of a
split up, combination, exchange or transfer, no Warrant shall be issued
hereunder in lieu of such cancelled Warrant. 
Any Warrant so cancelled shall be marked cancelled and destroyed by the
Company.

Section 4.              Miscellaneous.

4.1           Reservation of Shares.  The Company covenants that, at all times
during the Exercise Period, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of
Common Stock upon the exercise of this Warrant, as well as for the issuance of
Common Stock pursuant to any other outstanding warrants, options or other
instruments convertible or exercisable into the Company’s Common Stock, and
with respect to any employee benefit or similar plans.

4.2           No Rights as Shareholder;
Limitation of Liability.  This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company, including, without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to attend,
meetings of Company shareholders, prior to exercise of this Warrant and
irrevocable payment in good, collected funds of the Exercise Price therefor.

4.3           Amendment.  This Warrant may only be modified or amended
and any provision hereof may only be waived by a writing executed by the
Company and the Holder of this Warrant.

 7
 

 

4.4           Successors and Assigns.  This Warrant shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and
assigns permitted hereunder, and no other parties shall have any rights
hereunder.  The Company will not merge or
consolidate with or into any other corporation or other entity or sell or
otherwise transfer its property, assets and business substantially as an
entirety to a successor corporation or other entity, unless the corporation or
other entity resulting from such merger, consolidation, sale or transfer (if
not the Company) shall expressly assume, by supplemental agreement, the due and
punctual performance and observance of each and every covenant and condition of
this Warrant to be performed and observed by the Company.

4.5           Governing Law.  This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.

4.6           Entire Agreement; Other Benefits.  The Holder is entitled, with respect to his
ownership of this Warrant and/or the Warrant Shares to the benefits of the
Securities Purchase Agreement, dated as of the date hereof (the “Purchase
Agreement”), by and among the Company, the Holder and the other Purchasers
named in the Purchase Agreement.  Except
as otherwise expressly provided herein, this Warrant (including the Purchase
Agreement and any other agreements, instruments and other documents referred to
herein or therein) constitutes the entire agreement among the parties hereto
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereto, written or oral.

4.7           Standing.  Nothing in this Warrant is intended, or shall
be construed, to confer upon, or give to, any person other than the Company and
the Holder any right, remedy or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise or agreement contained
herein.  All covenants, conditions,
stipulations, promises and agreements contained in this Warrant shall be for
the sole and exclusive benefit of the Company and its successors, and the
Holder, and no other person shall have any other rights or interests herein,
whether as third party beneficiaries or otherwise.

4.8           Headings, etc.  The descriptive headings of the articles and
sections of this Warrant are inserted for convenience of reference only and
shall not control or affect the meaning or construction of any of the
provisions hereof.  As under herein, the
singular shall include the plural and the terms “include” and “including” shall
mean without limitation by way of enumeration or otherwise.

4.9           Counterparts.  This Warrant may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

[Signatures
on following page.]

 8
 

 

IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first written above.

	
  

  	
  INNOVO GROUP INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Marc Crossman

  
	
   

  	
   

  	
  Title:

  	
  CEO, President and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE HOLDER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
						

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SCHEDULE
A

NOTICE OF
EXERCISE OF

WARRANT TO PURCHASE COMMON STOCK OF

INNOVO GROUP INC.

To:          Innovo Group Inc.

The undersigned, the registered owner of this Warrant, hereby
irrevocably elects to exercise the purchase rights represented thereby for, and
to purchase thereunder,                   
shares of Common Stock of Innovo Group Inc. and

            
herewith makes payment of $                    
therefore; or

            
hereby elects a “Cashless Exercise” as defined and in the manner stated in
Section 1.3(c) of this Warrant; and

requests that the certificates evidencing such shares be issued in the
name of and be delivered to

	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Social Security
  or

  	
   

  	
   

  
	
  Tax I.D. Number:

  	
   

  	
   

  

 

and if such shares shall
not be all of the shares purchasable hereunder, that a new Warrant of like
tenor for the balance of the shares purchasable hereunder be delivered to the
undersigned.

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
   

  	
  THE
  HOLDER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  

 

 10Exhibit 10.1

CONSENT
AND SECOND AMENDMENT

TO

CREDIT AGREEMENT

This CONSENT AND SECOND AMENDMENT TO CREDIT
AGREEMENT (this “Amendment”)
dated as of December 20, 2006, by and among SITEL CORPORATION, a Minnesota corporation (“Parent”), and
each of Parent’s Subsidiaries identified on the signature pages hereof (such
Subsidiaries, together with Parent, are referred to hereinafter each
individually as a “Borrower”, and collectively, as the “Borrowers”), WELLS FARGO FOOTHILL, INC., a
California corporation, as a Lender, as administrative agent for the Lenders
(in such capacity, together with its successors and assigns in such capacity, “Administrative
Agent”), European administrative agent for the Lenders, collateral agent
for the Lender Group and the Bank Product Providers (in such capacity, together
with its successors and assigns in such capacity, “Collateral Agent”)
and fronting lender for the Lenders, WELLS
FARGO FINANCIAL CORPORATION CANADA, a Nova Scotia unlimited liability
company, as a Lender and as Canadian administrative agent for the Lenders, and
the other Lenders party hereto.

WHEREAS,
Borrowers, Administrative Agent and certain other financial institutions from
time to time party thereto (the “Lenders”) are parties to that certain
Credit Agreement dated as of August 19, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”);

WHEREAS,
Borrowers desire to increase the maximum principal amount of the Letter of
Credit issued by US Bank on behalf of Parent and listed on Schedule 4.19 to the
Credit Agreement from $900,000 to $1,350,000 and to increase the balance of the
Deposit Account pledged to US Bank to secure such Letter of Credit as described
on Schedule P-1 to the Credit Agreement from $900,000 to $1,350,000 (the “Additional
L/C Indebtedness”);

WHEREAS, Borrowers have requested that
Administrative Agent and Required Lenders consent to incurrence of the
Additional L/C Indebtedness and the undersigned Required Lenders have agreed to
do so subject to the terms and conditions contained herein; and

WHEREAS, Borrowers, Administrative Agent and
Required Lenders have further agreed to amend Section 6.17(a)(iii) of the
Credit Agreement, subject to the terms and conditions contained herein.

NOW, THEREFORE, in consideration of the foregoing
recitals, the mutual covenants and agreements set forth herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

1.             Defined Terms.  Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to such terms in the Credit
Agreement.

 

2.             Consent. Subject to the satisfaction of the
conditions set forth in Section 5 below, notwithstanding any provision in the
Credit Agreement or the other Loan Documents to the contrary, Administrative
Agent and the Required Lenders hereby consent to the incurrence of the
Additional L/C Indebtedness.  This
consent is a limited consent and shall not be deemed to constitute a consent
with respect to any other current or future departure from the requirements of
any provision of the Credit Agreement or any other Loan Documents.

3.             Amendments to Credit Agreement.  Subject to the satisfaction of the conditions
set forth in Section 5 of this Amendment, Section 6.17(a)(iii) of the Credit Agreement is hereby
amended and restated in its entirety as follows:

(iii)          Leverage Ratio.  A
Leverage Ratio, measured on a quarter-end basis, of not more than the ratio set
forth in the following table for the applicable period set forth opposite
thereto:

	
  Applicable Ratio

  	
   

  	
  Applicable Period

  
	
  2.50:1.0

  	
   

  	
  For the 4 fiscal
  quarters

  ending March 31, 2006 and June 30, 2006

  
	
  2.25:1.0

  	
   

  	
  For the 4 fiscal
  quarters 

  ending September 30, 2006 and December 31, 2006

  
	
  2.00:1.0

  	
   

  	
  For the 4 fiscal
  quarters 

  ending each fiscal quarter thereafter

  

 

4.             Ratification.  This Amendment, subject to satisfaction of
the conditions provided below, shall constitute consents and amendments to the
Credit Agreement and all of the Loan Documents as appropriate to express the
agreements contained herein.  In all
other respects, the Credit Agreement and the Loan Documents shall remain
unchanged and in full force and effect in accordance with their original terms.

5.             Conditions Precedent.  The effectiveness of this Amendment is
subject to the following conditions precedent:

(a)           Borrowers,
Administrative Agent and the Required Lenders shall have executed and delivered
to Administrative Agent this Amendment;

(b)           Borrowers,
Ableco Finance LLC, as agent, and the “Required Lenders” party to the Term B
Credit Agreement shall have executed and delivered a consent and amendment to
the Term B Credit Agreement in form and substance satisfactory to Administrative
Agent; and

 2
 

 

(c)           Administrative
Agent shall have received the amendment fee payable pursuant to Section 6
below.

6.             Amendment
Fee.  Borrowers hereby agree to pay
to Administrative Agent on the date hereof, for distribution to the Lenders
based on their Pro Rata Shares, an amendment fee equal to $50,000.  The foregoing amendment fee is in addition
to, and not in lieu of, all other fees charged to the Borrowers under the Loan
Documents.

7.             Release.  Each Borrower hereby absolutely and
unconditionally releases and forever discharges Administrative Agent and the
Lenders, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all
claims, demands or causes of action of any kind, nature or description, whether
arising in law or equity or upon contract or tort or under any state or federal
law or otherwise, which such Borrower has had, now has or has made claim to
have against any such person for or by reason of any act, omission, matter,
cause or thing whatsoever arising from the beginning of time to and including
the date of this Amendment, whether such claims, demands and causes of action
are matured or unmatured or known (and for the avoidance of doubt, not
including any act, omission, matter, cause or thing whatsoever arising after
the date of this Amendment) or unknown.

8.             Miscellaneous.

(a)           Warranties and Absence of Defaults.  In order to induce Administrative
Agent and the Required Lenders to enter
into this Amendment, each Borrower hereby warrants to Administrative Agent and the Lenders, as of the date hereof,
that:

(i)            the representations
and warranties contained in the Credit Agreement or in the other Loan Documents
shall be true and correct in all material respects on and as of the date
hereof, as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date); and

(ii)           no Default or Event
of Default shall have occurred and be continuing on the date hereof.

(b)           Expenses. 
Borrowers, jointly and severally, agree to pay on demand all reasonable
costs and expenses of Administrative Agent (including the reasonable fees and
expenses of outside counsel for Agent) in connection with the preparation,
negotiation, execution, delivery and administration of this Amendment and all other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection
herewith.  All obligations provided
herein shall survive any termination of this Amendment and the Credit Agreement.

(c)           Governing Law. 
This Amendment shall
be a contract made under and governed by the internal laws of the State of New
York.

 3
 

 

(d)           Counterparts. 
This Amendment may be
executed in any number of counterparts, and by the parties hereto on the same
or separate counterparts, and each such counterpart, when executed and
delivered, shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Amendment.

[Signature Page Follows]

 4
 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their
respective officers thereunto duly authorized and delivered as of the date
first above written.

	
  

  	
   

  	
   

  	
  BORROWER AND ADMINISTRATIVE
  BORROWER: 

  

  SITEL CORPORATION

  a Minnesota corporation, as a Borrower and as Administrative
  Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President of Finance and Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  BORROWERS: NATIONAL ACTION FINANCIAL SERVICES,
  INC. 

  a Georgia corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Assistant Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SITEL HOME MORTGAGE CORP. 

  a Nebraska corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  FINANCIAL INSURANCE SERVICES, INC. 

  a Nebraska corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 5
 

 

 

	
  

  	
   

  	
   

  	
  SITEL INTERNATIONAL LLC

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President of Finance and Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SITEL UK LIMITED

  a corporation organized under the laws of 

  England and Wales

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Charles Horton

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SITEL EUROPE LIMITED

  a corporation organized under the laws of 

  England and Wales

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Charles Horton

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SITEL IRELAND LIMITED

  a corporation organized under the laws of Ireland

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Charles Horton

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SITEL TELESERVICES CANADA INC. 

  an Ontario corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 6
 

 

 

	
  

  	
   

  	
   

  	
  SITEL INSURANCE SERVICES CANADA INC. 

  an Ontario corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SITEL CUSTOMER CARE, INC. 

  an Ontario corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Ronald E. Reno

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Assistant Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SITEL GmbH

  a limited liability company organized under the laws of Germany

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Eddy Van de Poel

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Gabriele Grossecker

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SRM INKASSO GMBH

  a limited liability company organized under the laws of Germany

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Eddy Van de Poel

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Gabriele Grossecker

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 7
 

 

 

	
  

  	
   

  	
   

  	
  ADMINISTRATIVEAGENT AND LENDERS:

  

  WELLS FARGO FOOTHILL, INC.,

  as Administrative Agent, European Administrative Agent, Collateral Agent and
  as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  WELLS FARGO FINANCIAL
  CORPORATION CANADA,
  as Canadian Administrative Agent and as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 8
 

 

 

	
  

  	
   

  	
   

  	
  ALLIED IRISH BANKS PLC, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  AIB DEBT
  MANAGEMENT, LIMITED, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  MARATHON
  STRUCTURED FINANCE FUND, LP, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  PACIFIC
  ASSET FUNDING, LLC, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  THE CIT GROUP/BUSINESS
  CREDIT, INC., as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  E*TRADE
  BANK, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  BANK OF THE WEST, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

 9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]