WAIVER AND CONSENT AGREEMENT
THIS WAIVER AND CONSENT AGREEMENT (this "Agreement") dated as of May 29,
2008, 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"). Capitalized terms not otherwise defined herein shall have the
meaning as set forth in the Purchase Agreement (as defined below).
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, as
amended by that certain First Amendment to Securities Purchase Agreement, dated
as of April 5, 2007, as further amended, supplemented or otherwise modified from
time to time (the "Purchase Agreement"), pursuant to which (x) the Borrower
issued and sold to the Purchasers an initial aggregate principal amount of
$8,000,000 of its secured promissory notes (the "Secured 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,
including Gran Reserve Corporation, a Florida corporation ("Gran Reserve")
executed and delivered that certain Security, Pledge and Guaranty Agreement,
dated as of January 19, 2007, as amended by that certain First Amendment to
Security, Pledge and Guaranty Agreement, dated as of April 5, 2007, as further
amended, supplemented or otherwise modified from time to time (the "Security
Agreement" and collectively referred to with the Purchase Agreement and any
related ancillary documents thereto, including any related exhibits and
schedules, each as amended, supplemented or otherwise modified from time to time
the "Loan Documents"), 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, the Parent Company intends to enter into a Stock Purchase
Agreement (the "Stock Purchase Agreement"), in substantially the form attached
hereto as Exhibit A, with GRC Group, a Florida corporation ("GRC'), and Gran
Reserve, a wholly owned indirect subsidiary of the Parent Company, pursuant to
which, among other things, the Parent Company would sell, transfer and assign to
GRC all of the Company Stock (as defined in the recitals of the Stock Purchase
Agreement) for the Purchase Price (as defined in Section 2 of the Stock Purchase
Agreement) (the "Sale Transaction");
D. WHEREAS, pursuant to Section 5.10 of the Purchase Agreement ("Section
5.10"), the sale and transfer of the Company Stock by the Parent Company in
connection with the Sale Transaction would constitute a substantial asset sale;
E. WHEREAS, pursuant to Section 2.2 of the Security Agreement ("Section
2.2"), the transfer of the Company Stock in connection with the Sale Transaction
would constitute a transfer of a portion of the Collateral (as defined in the
Security Agreement); and
F. WHEREAS, each of the Purchasers consents to the sale and transfer of the
Company Stock and the receipt of the Purchase Price in connection therewith, and
desires to waive any breach or default which may arise as a result of the
consummation of the Sale Transaction.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
1. Waiver and Consent.
(a) Section 5.10 of the Purchase Agreement. Each of the Purchasers hereby
consents to the Parent Company's sale and transfer of the Company Shares in
connection with the consummation of the Sale Transaction. Each of the Purchasers
hereby expressly acknowledges and agrees that the sale and transfer of the
Company Stock will not constitute a breach or default under Section 5.10 of the
Purchase Agreement.
(b) Section 2.2 of the Security Agreements. Each of the Purchasers hereby
consents to the Company's sale and transfer of the Company Stock in connection
with the consummation of the Sale Transaction. Each of the Purchasers hereby
expressly acknowledges and agrees that the sale and transfer of the Company
Stock will not constitute a breach or default under Section 2.2 of the Security
Agreement.
2. Effect on Loan Documents. Other than as expressly set forth in this
Agreement:
(a) Nothing in this Agreement shall constitute a waiver or relinquishment
of (i) any Event of Default under the Loan Documents, (ii) any of the
agreements, terms or conditions contained in the Loan Documents and all such
agreements, terms and conditions contained in the Loan Documents shall remain in
full force and effect, (iii) any rights, remedies or claims of the Purchasers
with respect to the Loan Documents, or (iv) the rights of the Purchasers to
collect the full amounts owing to them under the Secured Notes; and
(b) The foregoing waivers and consents by the Purchasers shall not be
construed as waivers of, or consents to, any other breach by the Parent Company,
the Borrower or any of their direct and indirect subsidiaries pursuant to any
other provision(s) of the Loan Documents.
3. Representations and Warranties. The Parent Company and the Borrower each
hereby represent and warrant to the Purchasers (as of the date hereof) that: (i)
it has full power and authority to enter into this Agreement, the Stock Purchase
Agreement and the transactions contemplated thereby 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; and (ii) no Event of Default
under the Purchase Agreement nor Default under the Security Agreement has
occurred and is continuing.
4. Continuing Security Interest. Both the Parent Company and the Borrower
hereby represent, warrant, acknowledge, ratify 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 Secured Notes; provided,
however, that solely with respect to the grant of the Security Interest made by
Gran Reserve for the benefit of the Secured Parties under the Security
Agreement, such grant made by Gran Reserve shall terminate upon the receipt by
the Secured Parties of a notice in writing by the Parent Company that the
indebtedness owed by GRC to the Parent Company under that certain secured
promissory note issued by GRC to the Parent Company in connection with the Sale
Transaction in the initial principal amount of $400,000 has been paid in full in
cash. Upon receipt of such notice by the Secured Parties the Security Interest
granted by Gran Reserve to the Secured Parties under the Security Agreement
shall automatically terminate and the Security Agreement with respect thereto
shall be of no further force nor effect.
5. Entire Agreement. This Agreement shall be construed in connection with
and as part of the Loan Documents, and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents and each
other document, schedule, exhibit or instrument referenced in the Loan
Documents, except as herein expressly waived, are hereby ratified and confirmed
and shall remain in full force and effect.
6. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the Parent Company, the Borrower and the Purchasers, respectively.
(b) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York (without regard to any conflicts of law).
(c) This Agreement may be executed in counterparts, which together shall
constitute one Agreement.
(d) By their signatures below, the parties acknowledge that they have had
sufficient opportunity to read and consider, and that they have carefully read
and considered, each provision of this Agreement and that they are voluntarily
signing this Agreement.
[SIGNATURES BEGIN NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Consent
Agreement to be duly executed as of the date first written above.
PHS GROUP INC., the Borrower
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
SYNERGY BRANDS INC., the Parent Company
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
PURCHASERS:
MILFAM I L.P.
By: Milfam LLC
Its: General Partner
By:
- ----------------------------
Name: Lloyd I. Miller, III
Title: Manager
LLOYD I. MILLER, III
By:
- ---------------------------
Name: Lloyd I. Miller, III