Exhibit 10
FIRST AMENDMENT
TO
SECURITIES PURCHASE AGREEMENT
dated as of
April 5, 2007
among
PHS GROUP INC., as Borrower
SYNERGY BRANDS INC., as Parent Company
and
LLOYD I. MILLER, III, as a Purchaser
MILFAM I L.P., as a Purchaser
FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT (this "First
Amendment") dated as of April 5, 2007, is by and among PHS GROUP INC., a
Pennsylvania corporation (the "Borrower"), SYNERGY BRANDS INC., a Delaware
corporation (the "Parent Company"), and Lloyd I. Miller, III ("Miller") and
Milfam I L.P., a Georgia limited partnership, ("Milfam" and collectively
referred to herein with Miller as the "Purchasers").
R E C I T A L S
A. WHEREAS, the Borrower, the Parent Company and the Purchasers are parties
to that certain Securities Purchase Agreement dated as of January 19, 2007 (the
"Purchase Agreement"), pursuant to which (x) the Borrower issued and sold to the
Purchasers an initial aggregate principal amount of $6,500,000 of its secured
promissory notes and (y) the Parent Company issued and sold to the Purchasers an
aggregate of 1,075,000 shares of common stock, par value $0.01 per share, of the
Parent Company.
B. WHEREAS, as a condition to the Purchasers' obligations to enter into the
Purchase Agreement and to extend credit to the Borrower thereunder, the
Borrower, the Parent Company and certain subsidiaries of the Parent Company
executed and delivered that certain Security, Pledge and Guaranty Agreement (the
"Security Agreement"), dated as of January 19, 2007 (as amended or otherwise
modified from time to time), as security for the payment and performance of all
obligations of the Borrower and the Parent Company to the Purchasers and to
guarantee all of the obligations of the Borrower and the Parent Company under
the Purchase Agreement.
C. WHEREAS, as a condition to the Purchasers' obligations to enter into the
Purchase Agreement and to extend credit to the Borrower thereunder, the
Borrower, the Parent Company, Laurus Master Fund, Ltd. ("Laurus"), Gran Reserve
Corporation ("Gran Reserve"), SYBR.Com Inc. ("SYBR"), and the Purchasers entered
into that certain Subordination and Intercreditor Agreement (the "Subordination
Agreement" and collectively referred to herein with the Purchase Agreement, the
Secured Notes and the Security Agreement as the "Purchase Documents"), dated as
of January 19, 2007 (as amended or otherwise modified from time to time),
whereby Laurus generally, pursuant to the terms thereof, subordinated liens
granted to Laurus to liens granted to the Purchasers.
D. WHEREAS, the Borrower is hereby authorized and wishes to have the
Purchasers make an additional secured loan to the Borrower in the initial
aggregate principal amount of $1,500,000 pursuant to the same terms and
conditions as provided for in the Purchase Agreement subject, however, to the
modifications to such terms as set forth herein.
E. WHEREAS, the Borrower and the Purchasers have agreed that to give effect
to the foregoing, each Purchaser shall (a) deliver to the Borrower an agreed
upon amount by wire transfer of immediately available funds and (b) surrender
the initial secured promissory note originally issued by the Borrower to each
Purchaser on January 19, 2007, and Borrower shall thereafter issue each
Purchasers in exchange therefore a new secured promissory note in the initial
principal amount of $3,945,833.34.
F. WHEREAS, in order to satisfy the foregoing, both the Borrower, the
Parent Company and the Purchasers have agreed to amend and modify certain
provisions of the Purchase Agreement and the Borrower and the Parent Company
have also agreed to ratify and affirm all of their respective obligations under
the Purchase Documents.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Defined Terms. Each capitalized term used herein but not
otherwise defined herein has the meaning given such term in the Purchase
Agreement.
Section 2. Amendments to Purchase Agreement.
2.1 Amendments to Introductory Recital
(a) The definition of "Agreement" is hereby amended in its entirety to read
as follows:
"Agreement" means this Securities Purchase Agreement, originally dated as
of January 19, 2007, among the Borrower, the Parent Company and the Purchasers,
as amended by the First Amendment, and as the same may be amended, supplemented,
restated or otherwise modified from time to time.
(b) The definition of "First Amendment" is hereby inserted to read as
follows:
"First Amendment" means the First Amendment to Securities Purchase
Agreement, dated as of April 5, 2007 by and among the Borrower, the Parent
Company and the Purchasers.
2.2 Further Amendments to Purchase Agreement
(a) Section 1.01 is hereby amended in its entirety to read as follows:
"On the terms and subject to the conditions hereof, the Borrower has
authorized and agreed to issue and sell to the Purchasers, secured promissory
notes, due January 15, 2012 (the "Maturity Date"), dated as of January 19, 2007,
in the initial aggregate principal amount of $6,500,000 (the "Initial Secured
Notes"). The Borrower has further authorized and agreed to allow the Purchasers
to make an additional secured loan to the Borrower, on April 5, 2007, in the
initial aggregate principal amount of $1,500,000, due on the Maturity Date. To
give effect to the additional secured loan made to the Borrower by the
Purchasers on April 5, 2007, the Purchasers shall surrender to the Borrower the
Initial Secured Notes and in exchange therefore the Borrower shall issue to the
Purchasers new secured promissory notes (the "New Secured Notes") that shall
reflect the initial aggregate principal amount of the following: (a) the unpaid
aggregate principal amount of the Initial Secured Notes so surrendered plus (b)
$1,500,000 ((a) and (b) collectively shall equal $7,891,666.68). Each New
Secured Note issued to each Purchaser, dated as of the date of this First
Amendment, in the initial principal amount of $3,945,833.34, shall be due on the
Maturity Date. The New Secured Notes will be substantially in the form set forth
on Exhibit E hereto. The New Secured Notes shall each be referred to herein as a
"Secured Note" and, collectively as the "Secured Notes," which term will also
include any notes delivered in exchange or replacement therefor. The amount of
accrued and unpaid interest owed by the Borrower to the Purchasers under the
Initial Secured Notes immediately prior to their surrender and cancellation, as
set forth above, shall remain due and owing by the Borrower and shall be paid by
the Borrower on the next Interest Payment Date notwithstanding the surrender of
such Initial Secured Notes by the Purchasers to the Borrower."
(b) Section 1.05 is hereby amended in its entirety to read as follows:
"The Secured Notes will accrue interest at the rate of 11.75% per annum.
Interest will be due and payable quarterly in arrears on the last day of each
calendar quarter (each, an "Interest Payment Date"), with the first interest
payment due June 30, 2007. Principal will be amortized over ten years and
payable in equal monthly installments on the last day of each month beginning on
April 30, 2007. The principal amount owed to the Purchasers under the Secured
Notes and all accrued but unpaid interest thereon shall be due and payable in
full on the Maturity Date unless earlier redeemed pursuant to the terms and
conditions set forth in Section 1.06 herein. In the event any payment under a
Secured Note is not timely made when due, interest will accrue on such late
payment at an amount equal to 18% per annum from and including the date such
late payment was due to (but excluding) the date such late payment is paid to
the Purchasers. All amounts payable under the Secured Notes and hereunder shall
be paid in lawful money of the United States without setoff or withholding of
any kind."
(c) Schedule I has been amended and restated in its entirety to reflect the
issuance of the Additional Secured Notes pursuant to the terms and conditions
hereof. The revised Schedule 1 setting forth the "Schedule of Purchasers" is
attached hereto.
Section 3. Conditions Precedent. This First Amendment shall not become
effective until the date on which each of the following conditions are satisfied
(the "Effective Date"):
(a) no Event of Default nor a breach of any representation and warranty by
either the Borrower or the Parent Company shall have occurred and be continuing
as of the date hereof (including after giving effect to the terms of this First
Amendment);
(b) the parties shall have received this First Amendment duly and validly
delivered and executed on behalf of the Borrower, the Parent Company and the
Purchasers;
(c) Purchasers shall have received an amendment, dated as of the date
hereof, amending and modifying the terms of the Security Agreement, duly and
validly delivered and executed on behalf of the Borrower, the Parent Company,
SYBR, Gran Reserve, Dealbynet.com Inc., Quality Food Brands, Inc., NYCE North
America Inc., Net Cigar.Com Inc., and the Purchasers;
(d) Purchasers shall have received a deposit bank control agreement duly
executed and agreed upon by and among the Borrower and the Purchasers, whereby
the Purchasers will receive, upon execution by North Fork Bank, a perfected
security interest in certain deposit accounts established by the Borrower at
North Fork Bank;
(e) Purchasers and their counsel will have received a Borrowing Base
Certificate, dated as of the date hereof, and calculated pursuant to the terms
and conditions in Article VI of the Purchase Agreement and such Borrowing Base
Certificate will show that the aggregate principal amount outstanding at the
time of the issuance of the New Secured Notes, taken together, is less than the
Borrowing Base as set forth in such Borrowing Base Certificate;
(f) Purchasers will have received an opinion of the Parent Company's and
the Borrower's counsel, dated the date hereof, with respect to legal matters
customary for transactions of this type, in a form reasonably acceptable to
Purchasers and counsel for Purchasers;
(g) Purchasers will have received a consent and waiver document duly
executed by an authorized signatory on behalf of Laurus, whereby Laurus waives
any limitation or restriction set forth in the Laurus Secured Note Agreements to
the sale by the Borrower of the Additional Secured Notes to the Purchasers
pursuant to this First Amendment and whereby Laurus also waives any right of
first refusal that Laurus may have pursuant to the Laurus Secured Note
Agreements, in a form reasonably acceptable to the Purchasers;
(h) Purchasers will have received an amendment to the Subordination
Agreement duly executed by and among the Borrower, the Parent Company, Gran
Reserve, SYBR, Laurus and the Purchasers dated as of the date hereof, whereby
Laurus shall have agreed to increase the maximum amount of allowable Senior Debt
(as defined in the Subordination Agreement) from $6,500,000 to $8,000,000;
(i) the Borrower's and the Parent Company's representations and warranties
contained herein will be true, complete and correct on and as of the date
hereof;
(j) the Borrower and the Parent Company will have performed and complied in
all respects with all covenants and agreements contained herein required to be
performed or complied with by it prior to or at the date hereof;
(k) all corporate and other proceedings to be taken by the Borrower and the
Parent Company in connection with the transactions contemplated hereby and all
documents incident thereto will be satisfactory in form and substance to
Purchasers and their counsel, and Purchasers and their counsel will have
received all such counterpart originals or certified or other copies of such
documents as they reasonably may request;
(l) Purchasers and its counsel will have received copies of the following
documents, which will be satisfactory in form and substance to the Purchasers
and their counsel, (i) a certificate of the Secretary of State of Delaware dated
as of a recent date as to the due incorporation and good standing of the Parent
Company, the payment of all excise taxes by the Parent Company and listing all
documents of the Parent Company on file with said Secretary, (ii) a true and
complete copy of all resolutions adopted by the Board of Directors and the Audit
Committee of the Parent Company and the corporate resolutions of the Borrower
authorizing the execution, delivery and performance of this First Amendment and
the issuance, sale and delivery of the New Secured Notes; and (iii) such
additional supporting documents and other information with respect to the
operations and affairs of the Borrower and the Parent Company as the Purchasers
or their counsel reasonably may request; and
(m) the Company shall have issued and delivered the New Secured Notes,
dated the date hereof in the original aggregate principal amount of
$7,891,666.68 to the Purchasers.
Upon satisfaction of the foregoing conditions and receipt of the New
Secured Notes by the Purchasers, the Purchasers shall deliver to the Company
$1,500,000.
Section 4. Miscellaneous.
4.1 Confirmation. The provisions of the Purchase Documents, as amended by
this First Amendment, shall remain in full force and effect following the
effectiveness of this First Amendment.
4.2 Ratification and Affirmation. The Parent Company and the Borrower each
hereby (a) acknowledge the terms of this First Amendment; and (b) ratifies and
affirms its obligations under, and acknowledges, renews and extends its
continued liability under, each Purchase Document to which it is a party and
agrees that each Purchase Document to which it is a party remains in full force
and effect, except as expressly amended hereby, notwithstanding the amendments
contained herein.
4.3 Representations and Warranties. The Parent Company and the Borrower
each hereby represent and warrant to the Purchasers (as of the date hereof, the
Effective Date and after giving effect to the terms of this First Amendment)
that: (i) it has full power and authority to enter into this First Amendment and
the transactions contemplated by this First Amendment, and this First Amendment
and such transactions have been duly authorized, are valid and enforceable
against it, are not in contravention of any law, order or agreement by which it
is bound and do not require any consent, notice or filing of any kind (except
for the consent of Laurus); (ii) all of the representations and warranties
contained in each Purchase Document to which it is a party are true and correct,
unless such representations and warranties are stated to relate to a specific
earlier date, in which case, such representations and warranties shall continue
to be true and correct as of such earlier date, (iii) no Event of Default under
the Purchase Agreement nor Default under the Security Agreements has occurred
and is continuing and (iv) from and after the date of the Purchase Agreement
until the date of this First Amendment, no changes have been made to the
Certificate of Incorporation of the Debtors (as such term is defined in the
Security Agreement) nor the Bylaws of the Debtors (as such term is defined in
the Security Agreement).
4.4 Continuing Security Interest. Both the Parent Company and the Borrower
hereby represent, warrant, acknowledge and agree that the Security Interest (as
defined in the Security Agreement) secures and shall continues to secure the
payment and performance of the Obligations (as defined in the Security
Agreement), including, without limitation, the New Secured Notes.
4.5 Further Assurances. The parties agree to (i) execute and deliver, or
cause to be executed and delivered, all such other and further agreements,
documents and instruments and (ii) take or cause to be taken all such other and
further actions as any Purchaser may reasonably request to effectuate the intent
and purposes, and carry out the terms, of this First Amendment.
4.6 Counterparts. This First Amendment may be executed by one or more of
the parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of this First Amendment by facsimile transmission or
electronic mail shall be effective as delivery of a manually executed
counterpart hereof.
4.7 ENTIRE AGREEMENT. THIS FIRST AMENDMENT, THE PURCHASE AGREEMENT, THE
SECURED NOTES, THE SUBORDINATION AGREEMENT, THE SECURITY AGREEMENT AND ANY
RELATED ANCILLARY DOCUMENT THERETO, EXECUTED IN CONNECTION HEREWITH AND
THEREWITH REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
4.8 GOVERNING LAW. THIS FIRST AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed as of the date first written above.
PHS GROUP INC., the Borrower
By:
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Name:
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Title:
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SYNERGY BRANDS INC., the Parent Company
By:
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Name:
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Title:
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PURCHASERS:
MILFAM I L.P.
By: Milfam LLC
Its: General Partner
By:
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Name: Lloyd I. Miller, III
Title: Manager
LLOYD I. MILLER, III
By:
- ---------------------------------
Name: Lloyd I. Miller, III