Zanett Selects LaSalle Bank... $10 Million Credit Facility... 3-year Revolver... Interest Rate Improvement...

NEW YORK--(BUSINESS WIRE)---Zanett Inc. (NASDAQ: ZANE) a leading information technology (IT) consulting firm serving Fortune 500 corporations, mid-market companies, and classified government agencies involved in Homeland Defense and Homeland Security, today announced that it had accepted a proposal from LaSalle Bank N.A. for a $10 million, 3 year Revolving Credit Facility. The offer is dependant on completion of the standard due diligence and credit approval process by LaSalle Bank, and approval by the Board of Directors of Zanett.

RIGHT FIT FOR ZANETT'S GROWTH PLANS
"Zanett went through an extensive multi-month process to find the right banking partner for our future," Dennis Harkins, Zanett's Chief Financial Officer noted. "We wanted to get the right deal with the right people; we feel that this relationship with LaSalle is the right fit for our needs not only of today, but also our needs for future growth."

ONLY TOP BANKS WERE SHORT-LISTED
"We also would like to express a great gesture of gratitude to those banks who contended for Zanett's business. All of the proposals were impressive, and the selection process was not an easy one. We sincerely appreciate everyone's great efforts," Mr Harkins concluded.

5/3 LINE OF CREDIT TO BE PAID OFF
The due diligence process is expected to take 4 to 6 weeks. If needed, the Company expects to use the recently-secured Stand-by Credit Facility to pay down the current $3.8 million of the $5.0 million bank line with 5/3 Bank, which is set to expire on November 1, unless further extended.

IMPROVEMENT ON PRICING AND TERMS
While the exact terms of the deal are pending the completion of due diligence from LaSalle, the proposal that was signed is a significant decrease in "all in" costs, than the current 5/3 Line of Credit.

FIFTH THIRD WAS GOOD PARTNER
"Fifth Third Bank has been a good partner for us over the past two years, but this new facility with improved covenants and significant savings in interest rate, as well as decreases in professional fees, will reduce our overall borrowing costs and boost our bottom line," Harkins concluded.

ZANETT - STRONG FUNDAMENTALS
Mr Guazzoni further stated, "Zanett has now achieved a revenue run rate approaching $50 million with positive cash flow. We're delighted to have the support of creditors who recognize not only our strong fundamentals, but also the inherent growth potential of our company and stand ready to support us with attractive terms and conditions that will provide us maximum flexibility."

LARGE ACQUISITION PIPELINE
Dennis Harkins, Chief Financial Officer noted, "The bidding process is a very effective way to establish a high quality commercial Line of Credit. We are a company both growing organically and by acquisition, thus we are seeking a line of credit which will be available both to supplement working capital as well as fund our substantial acquisition pipeline." "For the next few months, we will continue to use Fifth Third Bank's treasury management services, however we will not seek to renew the existing revolving credit facility that expires November 1, 2006. Fifth Third has been a good partner for us over the past two years, but a new facility with improved covenants and an equal interest rate will be less costly to administer, thus reducing our overall borrowing costs and boosting our bottom line," he concluded.

IT SERVICE SECTOR MARGINS INCREASING
Zanett is experiencing increases in IT Service gross margins, as is Zanett's IT peer group, led by Austin-based Perficient, Inc (NASDAQ: PRFT - News).