SECOND AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS
Exhibit
10.29
SECOND AMENDMENT AND MODIFICATION
TO LOAN AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS
THIS SECOND AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS
(the
“Amendment”)
is made
effective as of October _____, 2007 by and among LASALLE BANK NATIONAL ASSOCIATION
(the
“Lender”)
and
ZANETT, INC.,
a
Delaware corporation (“Zanett”),
ZANETT COMMERCIAL SOLUTIONS, INC.,
a
Delaware corporation (“ZCS”)
and
PARAGON DYNAMICS, INC.,
a
Delaware corporation (“Paragon”).
(Zanett, ZCS and Paragon are each individually, a “Borrower”
and
collectively, the “Borrowers”).
BACKGROUND
A. Borrowers
and Lender have previously entered into a certain Loan and Security Agreement
dated December 21, 2006, as amended by that certain First Amendment and
Modification to Loan and Security Agreement and Other Loan Documents dated
May
31, 2007 (as amended, the “Loan Agreement”),
pursuant to which, inter alia,
Lender
agreed to extend to Borrowers certain credit facilities subject to the terms
and
conditions set forth therein.
▇. ▇▇▇▇▇
Guazzoni and Emral Holdings Limited have each previously entered into
Subordination Agreements with Lender both dated December 21, 2007 (as such
agreements may have been and may be amended, individually, a “Subordination Agreement”
and
collectively, the “Subordination Agreements”),
pursuant to which, inter alia,
▇▇▇▇▇
▇▇▇▇▇▇▇▇ and Emral Holdings Limited each subordinated their Junior Debt to
the
Senior Debt (as both such terms are defined in the applicable Subordination
Agreement).
C. Borrowers
and Lender are entering into this Amendment to amend certain terms and
conditions of the Loan Agreement and the Subordination Agreements.
D. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
set
forth for such terms in the Loan Agreement or the Subordination Agreements,
as
applicable.
NOW,
THEREFORE, in consideration of the foregoing premises and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Amendments to Loan Agreement.
1.1 Definitions.
(a) The
following definitions set forth in Section 1(a)
of the
Loan Agreement shall be amended to read, in each of their entirety, as
follows:
“Contract Term”
shall
mean the earlier to occur of (a) December ___, 2007 or (b) the date of the
closing of the ___________ Business Line Sale occurs.
“Maximum Revolving Loan Limit”
shall
mean $6,000,000 as of the date of this Agreement.
(b) The
following definition is hereby added to Section 1(a)
of the
Loan Agreement in its proper alphabetical order and when used in this Amendment,
such term shall have the following meaning:
“__________
Business Line Sale”
shall
mean any sale of any material portion of the __________ line of business
currently operated by __________.
1.2 Interest Rate.
Section 4(a)
of the
Loan Agreement shall be and is hereby amended to read, in its entirety, as
follows:
(a) Interest Rate.
Subject
to the terms and conditions set forth below, all Revolving Loans shall bear
interest at the per annum rate of interest set forth in subsections (i) and (ii)
below:
(i) The
Prime
Rate in effect from time to time plus
___________ percent (____%) per annum, payable on the first Business Day of
each
month in arrears. Said rate of interest shall increase or decrease by an amount
equal to each increase or decrease in the Prime Rate effective on the effective
date of each such change in the Prime Rate.
(ii) Upon
the
occurrence of an Event of Default and during the continuance thereof, the Loans
shall bear interest at the rate of two percent (2.0%) per annum in excess of
the
interest rate otherwise payable thereon (the “Default Rate”),
which
interest shall be payable on demand. All interest shall be calculated on the
basis of a 360-day year and based on actual principal amounts
outstanding.
1.3 No LIBOR Rate Loans.
Borrowers are no longer entitled to receive any LIBOR Rate Loans and Lender
shall have no obligation to make or continue any LIBOR Rate Loans.
1.4 Subordinated Debt.
Borrowers hereby represent and warrant to Lender that the following sets forth
the outstanding amount and the regularly scheduled principal and interest
payments due with respect to all existing Public Subordinated Debt:
|
Amount
|
Mature
Date
|
Interest
Payment Dates
|
Principal
Payment Dates
|
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Borrower
shall not make any prepayment of any amount due with respect to any Public
Subordinated Debt or make any non-mandatory redemptions or repurchases of any
Public Subordinated Debt.
Borrowers
hereby represent and warrant to Lender that the following sets forth the
outstanding amount and the regularly scheduled principal and interest payments
due with respect to all existing Private Subordinated Debt:
|
Payee
|
Amount
|
Maturity
Date
|
Interest
Payments Dates
|
Principal
Payment Dates
|
Notwithstanding
anything herein or elsewhere to the contrary, Borrowers shall not make any
payments whatsoever with respect to any principal, interest or other sums due
with respect to any Private Subordinated Debt or make any redemptions or
repurchases of any Private Subordinated Debt.
Sections 4.6, 4.7 and 4.8
of the
First Amendment and Modification to Loan and Security Agreement and other Loan
Documents dated May 31,2007 are hereby deleted, since Borrower has agreed not
to
make any payments on any Private Subordinated Debt.
2. Waiver Regarding Fixed Charge Coverage Ratio.
Borrowers have requested and Lender has agreed to waive as an Event of Default
the failure of Borrowers to comply with the Fixed Charge Coverage Ratio covenant
set forth in Section 14(a)
of the
Loan Agreement for the 12 month period ending on September 30, 2007. Such waiver
shall be limited to Borrowers’ compliance with Section 14(a)
of the
Loan Agreement solely for such period and for no other period and such waiver
shall not be construed to constitute a waiver of Borrowers’ compliance with any
other terms of the Loan Agreement or an agreement to enter into any future
waivers with Borrowers.
3. Waiver Regarding Senior Debt Ratio.
Borrowers have requested and Lender has agreed to waive as an Event of Default
the failure of Borrowers to comply with the Senior Debt Ratio covenant set
forth
in Section 14(b)
of the
Loan Agreement for the following periods: (i) for the 9 month period ending
on
June 30, 2007 and (ii) for the 12 month period ending on September 30, 2007.
Such waiver shall be limited to Borrowers’ compliance with Section 14(b)
of the
Loan Agreement solely for such periods and for no other period and such waiver
shall not be construed to constitute a waiver of Borrowers’ compliance with any
other terms of the Loan Agreement or an agreement to enter into any future
waivers with Borrowers.
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4. Waiver of EBITDA Covenant.
Borrowers have requested and Lender has agreed to waive as an Event of Default
the failure of Borrowers to comply with the “EBITDA”
covenant set forth in Section 14(c)
of the
Loan Agreement: (a) for the following individual calendar months: (i) May,
2007,
(ii) June, 2007, (iii) July, 2007, (iv) August, 2007 and (v) September, 2007;
and (b) for the aggregate calendar months of ____________, 2007. Such waiver
shall be limited to Borrowers’ compliance with Section 14(c)
of the
Loan Agreement solely for such calendar months and for no other period and
such
waiver shall not be construed to constitute a waiver of Borrowers’ compliance
with any other terms of the Loan Agreement or an agreement to enter into any
future waivers with Borrowers.
5. Cure Period.
The
thirty (30) day cure period set forth in Section 15(b)
of the
Loan Agreement is hereby deleted in its entirety.
6. No Payments on Junior Debt.
Paragraph (C)
of each
of the Subordination Agreements are hereby amended to read, in each of their
entirety, as follows:
“(C) agrees
to
instruct Borrower not to pay, and agrees not to accept payment of, or assert,
demand, ▇▇▇ for or seek to enforce against Borrower or any other person or
entity, by setoff or otherwise, all or any portion of the Junior Debt unless
and
until Lender has, in writing, notified Creditor that the Senior Debt has been
paid in full, all obligations arising in connection therewith have been
discharged and Lender has no further obligation to make any advances to
Borrower.”
7. Amendment Fee.
As
consideration for Lender to enter into this Amendment, Borrowers have agreed
to
pay to Lender an amendment fee equal to $____________ (the “Amendment Fee”).
The
Amendment Fee is due and payable in full upon execution of this Amendment.
Borrowers agree that the Amendment Fee has been fully earned by Lender and
is
non-refundable.
8. Termination Fee.
Borrowers acknowledge and agree that, as a result of the financial covenant
defaults which are being waived pursuant to this Amendment, Lender could have
terminated the Loan Agreement and been entitled to receive a Termination Fee
equal to $160,000. As an inducement for Lender to grant the waivers set forth
in
this Agreement, Borrowers agree that such fee in the amount of $160,000 shall
be
deemed fully earned upon execution of this Amendment by Lender and that such
fee
is non-refundable and is payable upon the earlier to occur of: (a) the
expiration of the Contract Term, or (b) the occurrence of a Default or Event
of
Default, provided that,
in the
event that Borrowers repay all Loans and Liabilities owed to Lender on or before
November ___, 2007 and the obligation of Lender to make Advances to Borrowers
under the Loan Agreement is terminated, then such fee shall be reduced from
$160,000 to $__________.
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9. __________ Business Line Sale.
Borrowers hereby represent, warrant and covenant to and with Lender as
follows:
(a) Borrowers
have engaged ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ to find potential buyers of the __________ business
line operated by ____________________________.
(b) Borrowers
authorize Lender to communicate directly with ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ regarding any
and
all aspects of the offering for sale and sale of such __________ business line.
Borrowers shall direct and authorize ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ by a separate letter to
discuss such sale with Lender and to share information with Lender regarding
such sale.
(c) Borrowers
shall provide Lender with weekly written up-dates regarding the progress of
such
sale.
(d) Borrowers
acknowledge and agree that all assets constituting part of or used or useful
in
connection with the __________ business line are subject to a perfected, first
priority lien in favor of Lender and that all proceeds from the __________
Business Line Sale shall be applied first to repay the Loans and other
Liabilities owed to Lender.
10. Confirmation of Collateral.
Nothing
contained herein shall be deemed to be a compromise, satisfaction, accord and
satisfaction, novation or release of any of the Loan Documents, or any rights
or
obligations thereunder, or a waiver by Lender of any of its rights under the
Loan Documents or at law or in equity. All liens, security interests, rights
and
remedies granted to Lender in Loan Documents are hereby ratified, confirmed
and
continued. Borrowers acknowledge and agree that the term “Loan Documents” as
used in the Loan Agreement and any other documents executed in connection
therewith shall include, without limitation, this Amendment and any and all
other documents executed in connection herewith.
11. Challenge to Enforcement.
Borrowers acknowledge and agree that they do not have any defense, set-off,
counterclaim or challenge against the payment of any sums owing under the Loan
Documents, or the enforcement of any of the terms or conditions
thereof.
12. Representation and Warranties.
Borrowers hereby, jointly and severally, represent and warrant, which
representations and warranties shall survive until all Liabilities are paid
and
satisfied in full, as follows:
12.1 All
representations and warranties of Borrowers set forth in the Loan Documents
are
true and complete in all material respects as of the date hereof.
12.2 Upon
the
effectiveness of this Amendment, no condition or event exists or has occurred
which would constitute a Default or an Event of Default under the Loan Agreement
or any of the other Loan Documents.
12.3 Borrowers
have not received any notice of default or event of default from any other
lender, trustee or lessor with respect to any other loan, financing or lease
agreement.
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12.4 The
execution and delivery of this Amendment by Borrowers and all documents and
agreements to be executed and delivered pursuant to the terms
hereof:
(a) has
been
duly authorized by all requisite corporate action by each Borrower;
(b) will
not
conflict with or result in the breach of or constitute a default (upon the
passage of time, delivery of notice or both) under any Borrower’s Articles of
Incorporation, By-Laws or any applicable statute, law, rule, regulation or
ordinance or any indenture, mortgage, loan or other document or agreement to
which any Borrower is a party or by which any of them is bound or affected;
and
(c) will
not
result in the creation or imposition of any lien, charge or encumbrance of
any
nature whatsoever upon any of the property or assets of Borrower, except liens
in favor of Lender or as otherwise permitted under the Loan
Documents.
13. Conditions.
The
obligation of Lender to enter into this Amendment is subject to the following
conditions (any of which may be waived by Lender):
13.1 Loan Documents.
Borrowers and all other required persons and entities will have executed and
delivered to Lender this Amendment and such other documents as Lender may
require.
13.2 Other Documents.
Such
other documents as may be required to be submitted to Lender by the terms hereof
or any of the Loan Documents shall have been delivered by or on behalf of
Borrowers.
14. Additional Documents; Further Assurances.
Borrowers covenant and agree to execute and deliver to Lender, or to cause
to be
executed and delivered to Lender contemporaneously herewith, at the sole cost
and expense of Borrowers, any and all other documents, agreements, statements,
resolutions, certificates, consents and information as Lender may require in
connection with the matters or actions described herein. Borrowers further
covenant and agree to execute and deliver to Lender or to cause to be executed
and delivered at the sole cost and expense of Borrowers, from time to time,
any
and all other documents, agreements, statements, certificates and information
as
Lender shall reasonably request to evidence or effect the terms hereof, the
Loan
Agreement, as amended, or any of the other Loan Documents, or to enforce or
to
protect Lender’s interest in the Collateral. All such documents, agreements,
statements, certificates and information shall be in form and content acceptable
to Lender in its sole discretion.
15. Certain Fees, Costs, Expenses and Expenditures.
Borrowers will pay all of the Lender’s expenses in connection with the review,
preparation, negotiation, documentation and closing of this Amendment and the
consummation of the transactions contemplated hereunder, including without
limitation, costs and fees and expenses of counsel retained by Lender and all
fees related to filings, recording of documents and searches, whether or not
the
transactions contemplated hereunder are consummated. Nothing contained herein
shall limit in any manner whatsoever Lender’s right to reimbursement under any
of the Loan Documents.
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16. Communications and Notices.
All
notices, requests and other communications made or given in connection with
this
Amendment shall be made in accordance with the provisions of the Loan
Agreement.
17. Time of Essence.
Time is
of the essence of this Amendment.
18. No Waiver.
Except
as otherwise provided herein, nothing contained and no actions taken by Lender
in connection herewith shall constitute nor shall they be deemed to be a waiver,
release or amendment of or to any rights, remedies, or privileges afforded
to
Lender under the Loan Documents or under the Uniform Commercial Code as adopted
in the Commonwealth of Pennsylvania. Nothing herein shall constitute a waiver
by
Lender of Borrowers’ compliance with the terms of the Loan Documents, nor shall
anything contained herein constitute an agreement by Lender to enter into any
further amendments with Borrowers.
19. Inconsistencies.
To the
extent of any inconsistencies between the terms and conditions of this Amendment
and the terms and conditions of the Loan Documents, the terms and conditions
of
this Amendment shall prevail. All terms and conditions of the Loan Documents
not
inconsistent herewith shall remain in full force and effect and are hereby
ratified and confirmed by Borrowers.
20. Binding Effect.
This
Amendment and all rights and powers granted hereby will bind and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
21. Severability.
The
provisions of this Amendment and all other Loan Documents are deemed to be
severable, and the invalidity or unenforceability of any provision shall not
affect or impair the remaining provisions which shall continue in full force
and
effect.
22. No Third Party Beneficiaries.
The
rights and benefits of this Amendment and the Loan Documents shall not inure
to
the benefit of any third party.
23. Modifications.
No
modifications of this Amendment or any of the Loan Documents shall be binding
or
enforceable unless in writing and signed by or on behalf of the party against
whom enforcement is sought.
24. Holidays.
If the
day provided herein for the payment of any amount or the taking of any action
falls on a Saturday, Sunday or public holiday at the place for payment or
action, then the due date for such payment or action will be the next succeeding
Business Day.
25. Law Governing.
This
Amendment has been made, executed and delivered in the Commonwealth of
Pennsylvania and will be construed in accordance with and governed by the laws
of such Commonwealth, without regard to any rules or principles regarding
conflicts of law or any rule or canon of construction which interprets
agreements against the draftsman.
26. Headings.
The
headings of the Articles, Sections, paragraphs and clauses of this Amendment
are
inserted for convenience only and shall not be deemed to constitute a part
of
this Amendment.
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27. Counterparts; Facsimile Signatures.
This
Amendment may be executed in any number of counterparts, all of which taken
together constitute one and the same instrument, and any of the parties hereto
may execute this Amendment by signing any such counterpart. Any signature
delivered via facsimile shall be deemed an original signature
hereto.
28. Waiver
of Right to Trial by Jury. BORROWERS AND LENDER WAIVE ANY RIGHT TO TRIAL BY
JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS
AMENDMENT, (b) ARISING UNDER ANY OF THE OTHER LOAN DOCUMENTS OR (c) IN ANY
WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWERS OR LENDER
WITH RESPECT TO THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE. BORROWERS AND LENDER AGREE AND CONSENT THAT
ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AMENDMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE
CONSENT OF BORROWERS AND LENDER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
EACH BORROWER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL REGARDING THIS SECTION, THAT IT FULLY UNDERSTANDS ITS TERMS, CONTENT
AND
EFFECT, AND THAT IT VOLUNTARILY AND KNOWINGLY AGREES TO THE TERMS OF THIS
SECTION.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF,
the
parties hereto have duly executed this Amendment, intending to be legally
bound
hereby, effective as of the date first written above.
|
BORROWERS:
ZANETT, INC.
By:__________________________________
Name:________________________________
Title:_________________________________
ZANETT COMMERCIAL SOLUTIONS, INC.
By:__________________________________
Name:________________________________
Title:_________________________________
PARAGON DYNAMICS, INC.
By:__________________________________
Name:________________________________
Title:_________________________________
|
|
|
LENDER:
LASALLE BANK NATIONAL ASSOCIATION
By:__________________________________
Name:________________________________
Title:_________________________________
|
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CONSENT AND AGREEMENT
The
undersigned, as holders of the Private Subordinated Debt, hereby consent and
agree to the terms of this Amendment, and further consent to, agree to and
join
in the provisions of Section 1.4
and
Section 6
of this
Amendment as such provisions relate to the Private Subordinated Debt and to
the
extent that such provisions amend or modify each of the Subordination Agreements
dated December 21, 2006 executed by the undersigned in favor of Lender, all
of
the terms of which are hereby ratified and confirmed as amended by this
Amendment.
IN WITNESS WHEREOF,
the
undersigned have duly executed this Consent and Agreement, intending to be
legally bound hereby, effective as of October _____, 2007.
____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
an
individual
EMRAL HOLDINGS LIMITED
By:_________________________________
Name:______________________________
Title:_______________________________
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