-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, In1fekorrFe6+BxDgvo69AaBpuEqxOyb9e9dKSMfaaEeZwiSl6MGqM0HyqseVfr7 rTxzIpqWbiehPLoBMPQvig== 0001133872-08-000002.txt : 20080318 0001133872-08-000002.hdr.sgml : 20080318 20080318172419 ACCESSION NUMBER: 0001133872-08-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20080314 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080318 DATE AS OF CHANGE: 20080318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZANETT INC CENTRAL INDEX KEY: 0001133872 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 564389547 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32589 FILM NUMBER: 08697256 BUSINESS ADDRESS: STREET 1: 135 E 57TH STREET STREET 2: 15TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127595700 MAIL ADDRESS: STREET 1: 135 E 57TH ST 15TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: PLANET ZANETT INC DATE OF NAME CHANGE: 20010206 8-K 1 r8ksale.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) March 14, 2008 -------------- Zanett, Inc. - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 001-32589 56-4389547 - ----------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 635 Madison Avenue, 15th Floor, New York, NY 10022 - ----------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 583-0300 --------------- - ----------------------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01. Entry Into a Definitive Material Agreement. On March 14, 2008, Zanett, Inc. (the "Company") entered into Stock Purchase Agreement (the "Agreement") with KOR Electronics ("KOR") and Paragon Dynamics, Inc. ("PDI"), a wholly owned subsidiary of the Company. The Agreement provides for the sale by the Company to KOR of all the issued and outstanding stock of PDI. The transaction closed (the "Closing") on March 18, 2008 (the "Closing Date"). The Company acquired PDI on January 31, 2003. Based in Denver, Colorado, PDI specializes in providing advanced software and satellite engineering services with domain area expertise on government and aerospace satellite and IT infrastructure contracts. The Agreement provided for a purchase price of $8,875,000 in cash, plus certain working capital adjustments. The initial working capital adjustment was $715,175 for a total aggregate purchase consideration of $9,590,175, including the working capital adjustment. Of that, $887,500 (the "Holdback Amount") was held back by KOR to secure the Company's indemnification obligations. On the Closing Date, KOR paid the Company $8,702,675. The Holdback Amount of $887,500, less any deductions made for indemnity claims, will be paid to the Company on the one year anniversary of the Closing Date. KOR's obligation to pay the Holdback Amount is secured by a security interest in PDI's assets pursuant to a Security Agreement entered into by the Company, KOR and PDI in connection with the Closing. The Company's security interest in PDI's assets is subordinate to KOR's senior indebtedness. As a condition to Closing, a portion of the proceeds of the sale of PDI was used to completely pay off the $1.5 million Amended and Restated Promissory Note bearing a 15% coupon issued by PDI to Emral Holdings dated March 15, 2007. A portion of the proceeds were used to completely pay off $1.5 million in promissory notes bearing a 15% coupon issued by the Company to Bruno Guazzoni and to pay certain expenses of the Company incurred in connection with transaction. The remaining balance was used to pay down a portion of the Company's borrowings under its loan facility with LaSalle Bank National Association ("LaSalle"). After this pay down, the outstanding balance under the LaSalle loan will be less than $1 million, as of March 18, 2008. The Company issued a press release on March 17, 2008 with respect to this transaction, which is included with this filing as Exhibit 99.1. Item 5.02 Departure of Directors or Certain Officers: Election of Directors; Appointment of Certain Officers; Compensatory Arrangements for Certain Officers. In connection with the sale of PDI described above in Item 1.01, Jack M. Rapport, the President of the Company, has resigned effective as of March 18, 2008. Item 9.01 Financial Statements and Exhibits (d) Exhibits. Exhibit No. Description 99.1 Press released dated March 17, 2008. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ZANETT, INC. Date: March 18, 2008 By: /s/ Claudio Guazzoni Claudio Guazzoni Chief Executive Officer EXHIBIT INDEX Exhibit No. Description 99.1 Press released dated March 17, 2008. - 1 - EX-99.1 CHARTER 2 r8kexhibit.txt Zanett Announces Agreement for $8.9 Million Sale of Government Solutions Subsidiary Proceeds to Fund Acquisition Strategy and Strengthen Balance Sheet NEW YORK--(BUSINESS WIRE)--Zanett, Inc. (NasdaqCM: ZANE), a leading consulting firm specializing in business process outsourcing (BPO), IT enabled services (ITES), and information technology (IT) serving Fortune 500 corporations and mid-market companies, today announced it has entered into an agreement to sell its Government Solutions subsidiary, Paragon Dynamics, Inc. (PDI) to KOR Electronics of Cypress, California, for $8.875 million in cash. Terms of the deal will be described in a Form 8-K filing with the SEC. Houlihan Lokey served as exclusive financial advisor to, initiated, structured, and negotiated the transaction on behalf of Zanett. The transaction is expected to close on March 18, 2008. Founded in 1997, PDI has been a wholly owned subsidiary of Zanett Government Solutions. Based in Aurora, CO, with offices in California and Washington, DC, PDI provides innovative systems, software and mission engineering solutions to a variety of Intelligence Agencies, Department of Defense (DoD), and aerospace clients. The firm specializes in system design, architecture and integration; software development and implementation; and mission operations, analysis and support. PDI has direct experience in government and commercial satellite, DoD Intelligence Community, and IT infrastructure programs. Claudio Guazzoni, Chief Executive Officer of Zanett, said, "PDI is a perfect fit for KOR Electronics, and the divestiture leaves Zanett free to intensify its focus strictly on Oracle business and bolstering the tangible growth of Zanett Commercial Services. The sale of PDI will give us additional capital to tactically redeploy our acquisition strategy, pay down our high coupon debt, and to greatly reduce our effective interest rate." Jack Rapport, President of Zanett, who guided and supervised PDI during the five years it operated as Zanett's government solutions subsidiary, will retire as President of Zanett in conjunction with the sale. "The sale of PDI makes sense for all concerned." Mr. Rapport said. "Customers, employees and shareholders will all benefit. As the demands of the market have changed over the last few years, the need to focus on distinct activities has become paramount, and this divestiture will allow Zanett, KOR and Paragon to better serve their fundamental clients. Employees will benefit from the singular focus of their activities, and the shareholders will benefit form the positive impact the deal will have on the company's leverage and profitability." Commenting on his retirement, from Zanett, Mr. Rapport said, "It has been a great privilege and opportunity to participate in the growth and development of Zanett over the last seven years. Building a public company from the ground up, particularly in light of the regulatory and economic challenges that faced us along the way, was professionally one of the most rewarding periods of my career. As a continued significant shareholder in Zanett stock, I look forward to seeing the company continue to grow and prosper." Dennis Harkins, Chief Financial Officer of Zanett, said, "Our balance sheet will be much stronger upon the completion of the sale of PDI. Second, we will be able to focus exclusively on the commercial marketplace, and we believe our efforts will result in increased value for our shareholders. The sale of PDI further substantiates our recent reorganization. We are now ready to seek larger accretive acquisitions and build critical mass in 2008 for Zanett Commercial Solutions." Zanett management believes that corporate expenses will be reduced by as much as $300,000 annually, due to a decrease in the level of accounting, legal, and supervisory costs formerly associated with owning PDI as part of a public company listed on NASDAQ. Founded in 1986, KOR Electronics is an aerospace defense technology company providing domestic and international customers with advanced military electronics equipment and system solutions. Headquartered in Cypress, CA, with offices in Long Island, NY, and Washington DC, the company produces equipment that serves mission critical operational requirements as well as laboratory simulation, testing and training needs. KOR Electronics is solely focused in support of the defense and intelligence electronics markets. Kevin Carnino, President and CEO of KOR Electronics, said, "We are extremely excited about this partnership with PDI, as it is a key step in the pursuit of our strategic vision. Both companies possess strengths in areas that complement each other's primary markets. This union will allow us to create an elite fellowship, such that we can provide uniquely different solutions to our customers." Mr. Doug Hartmann, President and CEO of Paragon Dynamics, said, "KOR's acquisition of PDI will enable PDI to more clearly represent its business model as part of a DOD business strictly focusing on highly classified, mission critical Intel (IC) and Defense work." Mr. Hartmann plans to remain a significant holder of Zanett common shares. About Zanett, Inc. Zanett is a leading business process outsourcing (BPO), IT enabled services (ITES), and information technology (IT) consulting firm serving Fortune 500 corporations, mid-market companies, and highly classified federal agencies involved in Homeland Defense and Homeland Security. The company has historically operated in two segments, Government Solutions and Commercial Solutions. With the sale of PDI, Zanett will focus exclusively on its Commercial Solutions business. The Commercial Solutions segment provides BPO, ITES, IT and Management Consulting Services, as well as delivers custom business solutions that integrate and implement Oracle's full suite of product offerings - Oracle, JD Edwards, PeopleSoft, Seibel, together with associated Oracle Fusion technologies. A wide range of industry-focused delivery expertise is provided to clients, including Managed Services, Enterprise Applications, Business Intelligence, SOA, and Middleware Technologies. Zanett also provides full infrastructure and application hosting, utilizing local and international resources, remote and onsite DBA support, all on a 24x7 basis. Zanett currently employs over 198 people nationwide, is headquartered in New York City, and operates out of 8 offices (Atlanta, Boston, Cincinnati, Indianapolis, Jacksonville, New York City and the Philippines). For more information, please visit http://www.zanett.com. Certain statements in this news release regarding projected results of operations, or, projected results of financial plans or future strategies and initiatives, including, but not limited to, projections of revenue, projections of profitability, any and all future expectation, and plans for future activities may and should be regarded as ``forward-looking statements'' within the meaning of the Securities Litigation Reform Act. These statements involve, among other things, known and unknown risks, uncertainties and other factors that may cause Zanett, Inc.'s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Zanett currently is considering, but in reality may or may not in the future implement any or all of the items and issues listed in any planned budget or strategic initiative, due to, among other things, known and unknown risks, uncertainties and other factors. Circumstances do change, and if and when the landscape changes, Zanett shall endeavor to remain as flexible as possible, and adjust its strategy accordingly. Zanett, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, change in strategy, or otherwise. The aforementioned listing of risks and uncertainties is not inclusive. For a more detailed discussion of some, but not all, of the risks and uncertainties that may affect Zanett, Inc., see Zanett, Inc.'s filings with the Securities and Exchange Commission. Neither Zanett, Inc. nor Zanett Oracle Solutions is a part of, a division of, nor a subsidiary of, nor in any other manner connected with Oracle Corporation, and no implication is made whatsoever to suggest as such. Contacts Zanett, Inc. 212-583-0300 or Porter, LeVay & Rose, Inc. Michael J. Porter, 212-564-4700 President - Investor Relations or Jeffrey Myhre, 212-564-4700 VP - Editorial Fax: 212-244-3075 plrmail@plrinvest.com www.plrinvest.com -----END PRIVACY-ENHANCED MESSAGE-----