THE ENTIRE
OUTSTANDING PRINCIPAL BALANCE AND ALL ACCRUED INTEREST UNDER THAT CERTAIN
PROMISSORY NOTE MADE BY PARAGON TO EMRAL HOLDINGS LIMITED IN THE ORIGINAL
PRINCIPAL AMOUNT OF $1,500,000 DATED DECEMBER 19, 2006.
LENDER FURTHER AGREES THAT SUCH PRIVATE SUBORDINATED DEBT PAYMENTS TO BRUNO
GUAZZONI AND EMRAL HOLDINGS LIMITED, AS APPLICABLE, SHALL NOT BE A DEFAULT OR AN
EVENT OF DEFAULT UNDER THE LOAN AGREEMENT.
14.
GUAZZONI LINE.
BORROWERS HEREBY REPRESENT AND WARRANT TO AND
COVENANT WITH LENDER AS FOLLOWS:
14.1
BRUNO GUAZZONI HAS EXTENDED A $3,000,000 LINE OF CREDIT TO ZANETT
(THE "GUAZZONI LINE").
14.2
THE GUAZZONI LINE IS EVIDENCED BY THAT CERTAIN PROMISSORY NOTE MADE
BY ZANETT PAYABLE TO BRUNO GUAZZONI IN THE ORIGINAL PRINCIPAL AMOUNT OF
$3,000,000 DATED FEBRUARY 21, 2007.
14.3
THE OUTSTANDING BALANCE ON THE GUAZZONI LINE AS OF THE DATE OF THIS
AMENDMENT IS $2,400,000.
14.4
SUBJECT TO THE SATISFACTION OF THE CONDITIONS SET FORTH IN
SECTION 19 BELOW AND AFTER RECEIPT OF BORROWERS' 10Q FOR THE FISCAL QUARTER
ENDING MARCH 31, 2008, BORROWERS MAY MAKE QUARTERLY PAYMENTS ON THE GUAZZONI
LINE; PROVIDED, HOWEVER, SUCH QUARTERLY PAYMENTS SHALL NOT EXCEED FIFTY PERCENT
(50%) OF BORROWERS' EXCESS CASH FLOW (AS DEFINED BELOW) FOR SUCH FISCAL
QUARTER.
FOR PURPOSES HEREOF, "EXCESS CASH FLOW" SHALL MEAN FOR EACH OF
BORROWERS' FISCAL YEARS, BORROWERS' EBITDA FOR SUCH PERIOD, MINUS BORROWERS'
TAXES DURING SUCH PERIOD AND ANY DISTRIBUTIONS TO EACH OF THEIR SHAREHOLDERS IN
RESPECT OF TAXES FOR SUCH PERIOD, MINUS NON-PIK INTEREST PAYABLE DURING SUCH
PERIOD, MINUS ACTUAL PRINCIPAL PAYMENTS MADE WITH RESPECT TO LONG TERM DEBT
DURING SUCH PERIOD, MINUS ALL UNFINANCED CAPITAL EXPENDITURES BY BORROWERS
DURING SUCH PERIOD.
15.
AMENDMENT AND WAIVER FEE.
AS CONSIDERATION FOR LENDER TO ENTER
INTO THIS AMENDMENT AND TO WAIVE COMPLIANCE WITH CERTAIN FINANCIAL COVENANTS AS
SET FORTH HEREIN, BORROWERS HAS AGREED TO PAY TO LENDER AN AMENDMENT AND WAIVER
FEE EQUAL TO $10,000 (THE "AMENDMENT AND WAIVER FEE").
THE AMENDMENT AND WAIVER
FEE IS DUE AND PAYABLE IN FULL UPON EXECUTION OF THIS AMENDMENT.
BORROWERS
AGREE THAT THE AMENDMENT AND WAIVER FEE HAS BEEN FULLY EARNED BY LENDER AND IS
NON-REFUNDABLE.
16.
CONFIRMATION OF COLLATERAL.
NOTHING CONTAINED HEREIN SHALL BE
DEEMED TO BE A COMPROMISE, SATISFACTION, ACCORD AND SATISFACTION, NOVATION,
RELEASE OR WAIVER (EXCEPT THE WAIVERS AND RELEASES AS PROVIDED IN SECTIONS 2, 3,
4, 8, 9, 10, 11 AND 13 HEREOF) OF ANY OF THE LOAN DOCUMENTS OR OTHER AGREEMENTS,
OR ANY RIGHTS OR OBLIGATIONS THEREUNDER BY LENDER OF ANY OF ITS RIGHTS UNDER THE
LOAN DOCUMENTS OR OTHER AGREEMENTS OR AT LAW OR IN EQUITY.
EXCEPT AS SET FORTH
IN SECTION 9 ABOVE, ALL LIENS, SECURITY INTERESTS, RIGHTS AND REMEDIES GRANTED
TO LENDER IN LOAN DOCUMENTS AND OTHER AGREEMENTS ARE HEREBY RATIFIED, CONFIRMED
AND CONTINUED.
8
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.
17.
CHALLENGE TO