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WAIVER NO. 4 AND AMENDMENT NO.
1 TO FIRST AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS
WAIVER NO. 4 AND AMENDMENT NO. 1 TO FIRST AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT is made as of August 31, 2006 (this “
Waiver and Amendment ”) by and among Fifth
Third Bank , an Ohio banking corporation (together with its
successors and assigns, the “ Lender ”),
and Zanett, Inc. , a Delaware corporation (“
Parent ”), and each of Parent’s direct
and indirect Subsidiaries identified on the signature pages hereof
(such Subsidiaries, together with Parent, are referred to
hereinafter each individually as a “ Borrower
”, and individually and collectively, jointly and severally,
as the “ Borrowers ”), with respect to
the First Amended and Restated Loan and Security Agreement entered
into as of December 30, 2005 by the Lender and the Borrowers, as
amended, supplemented, restated, or otherwise modified from time to
time (the “ Agreement ”). Capitalized
terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
R E C
I T A L S
WHEREAS,
the Borrowers and the Lender have entered into the Agreement;
and
WHEREAS,
the Lender has made Advances to the Borrowers pursuant to the terms
of the Agreement; and
WHEREAS,
the Borrowers have requested that the Lender grant a waiver under
the Agreement and agree to certain amendments to the Agreement, and
the Lender is willing to grant the waiver and agree to the
amendments requested by the Borrowers on the terms and conditions
hereinafter set forth;
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section
1. Waiver .
(a)
Upon the date that all conditions set forth in Section
4 of this Waiver and Amendment have been satisfied, the
Lender hereby waives the Events of Default arising under (i)
Section 7.18(a)(i) of the Agreement solely to the
extent resulting from the Borrower’s Senior Funded Debt to
EBITDA Ratio at June 30, 2006 exceeding the maximum covenanted
amount at such date of 3.25 to 1.00, and (ii) Section
7.18(a)(ii) of the Agreement solely to the extent resulting
from the Borrower’s Fixed Charge Coverage Ratio at June 30,
2006 being lower than the minimum covenanted amount at such date of
1.10 to 1.00 (the “ Existing Events of Default
”).
(b) The Borrowers acknowledge and agree that the foregoing
provisions of this Section 1 relate solely to the
Existing Events of Default specified in Section
1(a)
hereof and shall in no way be deemed or construed
as a waiver by the Lender of any other Default or Event of Default
under the Agreement or any other Loan Document now existing or
occurring subsequent to the date of this Waiver and Amendment. The
Lender expressly reserves the full extent of its rights under the
Agreement, the other Loan Documents, and applicable law in respect
of any Default or Event of Default existing on the date hereof and
not specified herein as the Existing Events of Default.
Section
2. Amendments to the Agreement .
(a)
Section 2.1(a) of the Agreement is hereby deleted and
the following inserted in its place:
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(a)
Subject to the terms and conditions of this Agreement, and until
November 1, 2006 (the “ Revolving Credit Maturity
Date ”), the Lender agrees to make revolving credit
Advances (the “ Revolving Credit Advances
”) to the Borrowers in an amount at any one time outstanding
not to exceed an amount equal to the lesser of (i) the
Maximum Revolver Amount, or (ii) the Borrowing Base. For purposes
of this Agreement, “ Borrowing Base ,” as
of any date of determination, shall mean the result of:
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(x)
75% of the amount of Eligible Accounts, plus
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(y)
90% of the amount of collected cash balances in the Concentration
Account, minus
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(z)
the aggregate amount reserves, if any, established by the Lender
under Section 2.1(b) .
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Notwithstanding
anything to the contrary in this Agreement or in any of the other
Loan Documents, no Revolving Credit Advances shall hereafter be
made, and no funds or other assets shall hereafter be advanced by
any of the other Borrowers, to Delta Communications Group, Inc., a
Delaware corporation, without the prior specific written consent of
the Lender, which the Lender may grant or withhold in its sole
discretion.
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(b)
Section 2.9 of the Agreement is hereby deleted and
the following inserted in its place:
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2.9
Fees . The Borrowers shall pay to the Lender the
following fees and charges, which fees and charges shall be
non-refundable when paid (irrespective of whether this Agreement is
terminated thereafter):
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(a) Audit Charges . For the account of the
Lender, audit fees and charges as follows, (i) a fee of $750.00 per
day, per auditor, plus out-of-pocket expenses for each
financial
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2
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audit of any or all of the Borrowers performed by
personnel employed by the Lender and (ii) the actual charges paid
or incurred by the Lender if it elects to employ the services of
one or more third Persons to perform financial audits of any or all
of the Borrowers. As long as no Default or Event of Default has
occurred, the Lender will not conduct more than 2 financial audits
of the Borrowers per calendar year and, assuming that each Borrower
forwards to the executive offices of the Administrative Borrower
all information requested by or on behalf of the Lender for the
conduct of such audits, such audits will be conducted at the
Administrative Borrower’s executive offices.
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(b) Amendment Fee . An amendment fee in
the aggregate amount of $25,000, with an installment of $5,000 due
on August 31, 2006 and the remaining balance of $20,000 due on
October 31, 2006.
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Section
3 . Representations and Warranties . The Borrowers
hereby represent and warrant to the Lender that:
(a)
after waiver of the Existing Events of Default, no Default or Event
of Default has occurred and is continuing on and as of the date
hereof;
(b) the representations and warranties of each of the Borrowers
contained in the Agreement and the other Loan Documents are true
and correct on and as of the date hereof as if made on and as of
the date hereof, except to the extent that such representations and
warranties expressly relate to a different date; and
(c) the execution and delivery by the Borrowers of this Waiver and
Amendment and the performance by the Borrowers of all of their
respective agreements and obligations under this Waiver and
Amendment, the Agreement as amended hereby, and the other Loan
Documents, respectively, are within the power and authority of the
Borrowers and have been duly authorized by all necessary action on
the part of the Borrowers, and the execution and delivery by the
Borrowers of this Waiver and Amendment, and the performance by them
of the transactions contemplated hereby, do not and will not
contravene any term or condition set forth in any agreement or
instrument to which any Borrower is a party or by which any
Borrower is bound.
Section
4. Effectiveness and Conditions Precedent . This Waiver
and Amendment shall become effective upon the Lender’s
receipt of: (a) counterparts of this Waiver and Amendment executed
and delivered by the Borrowers; (b) a Second Amended
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