On
October 23, 2007, the Company engaged Gordian Group, LLC to serve as
the
Company's investment banker and financial adviser, to assist the Company
in
evaluating,
exploring and, if deemed appropriate, pursuing and implementing certain
strategic and financial options and transactions that may be available
to the
Company, including in connection with a possible sale, merger, restructuring,
recapitalization, reorganization or other strategic or financial
transaction
.
Gordian
Group, LLC is a New York-based investment banking firm with expertise
in
financial advisory services. While the Company has commenced evaluating
its
available options, no conclusion as to any specific option or transaction
has
been reached, nor has any specific timetable been fixed for this effort,
and
there can be no assurance that any strategic or financial option or transaction
will be presented, implemented or consummated.
On
October 3, 2007, the Company received a purported written notice of default
from
the Emalfarb Trust pursuant to the Revolving Note and the Security Agreement
dated as of May 29, 2003, as amended by the first amendment to the security
agreement dated as of August 19, 2004 (the "
Security
Agreement
").
The
notice alleges that, with reference to certain events reported in the
Company's
previously filed Current Reports on Form 8-K, the Company is in default
under
the Revolving Note and Security Agreement because, among other alleged
defaults,
the Emalfarb Trust deems itself to be "insecure". The Company does not
believe
that it is in default under the Revolving Note and Security Agreement.
Even if
the notice were to be deemed a proper notice of default, the Revolving
Note
provides that the Company has 90 days from receipt of such notice to
cure the
default before an “event of default” occurs under the Revolving Note. If such an
event occurs and is continuing under the Revolving Note, all unpaid principal,
currently in the amount of approximately $2.4 million, and accrued interest
on
the Revolving Note then outstanding may become immediately due and payable
at
the option of the Emalfarb Trust.
On
October 11, 2007, the Company received written notice from T. Rowe Price
Associates, Inc. ("
T.
Rowe Price
")
demanding rescission of the purchase by T. Rowe Price (on behalf of certain
funds and accounts) of 1,200,000 shares of the Company's common stock
and
warrants to purchase 240,000 shares of the Company's common stock under
and in
connection with that certain Securities Purchase Agreement dated as of
November
17, 2006 (the "
Securities
Purchase Agreement
")
and,
in connection with such rescission, the return of the $5,616,000 purchase
price
paid by T. Rowe Price in the closing under the Securities Purchase Agreement.
Pursuant to the Securities Purchase Agreement, the Company sold 2,787,00
shares
of the Company's common stock and warrants to purchase 557,400 shares
for an
aggregate purchase price of approximately $13.0 million, in a so-called
"PIPE"
transaction which closed on December 1, 2006. T. Rowe Price's notice
seeks
rescission based on a claim that the Company's representations in the
Securities
Purchase Agreement regarding its financial statements were false and
the
Company's warranties in such agreement were breached. The Company's Executive
Committee of the Board of Directors and senior management are reviewing
the
allegations and related documents and will respond appropriately and
in due
course. While the Company believes that T. Rowe Price's demand for rescission
as
set forth in the notice is without merit, no assurance can be given as
to the
ultimate outcome of this matter.
On
October 17, 2007, the Company was served with a summons and complaint
filed in
the United States District Court for the Southern District of Florida
on October
12, 2007 (Case No. 07-80948), purporting to be a class action. The complaint
names the Company and the Company’s current directors, Mark A. Emalfarb, Stephen
J. Warner, Harry Z. Rosengart and Richard J. Berman, and former directors,
Robert B. Shapiro and Glenn E. Nedwin, as defendants. The lawsuit claims
that
all or some of the defendants, among other things, violated federal securities
laws by issuing various materially false and misleading statements that
had the
effect of artificially inflating the market price of the Company's securities
and causing class members to overpay for the securities during the period
from
November 10, 2006 through April 23, 2007. The complaint seeks unspecified
monetary damages and the costs and expenses incurred in prosecuting the
action,
among other things. The Company intends to vigorously contest and defend
the
allegations under the complaint, but no assurances can be given as to
the
ultimate outcome of this matter.
On
October 18, 2007, a complaint was filed in the United States District
Court for
the Southern District of Florida (Case No. 07-80993), purporting to be
a class
action. The complaint names the Company, Mark A. Emalfarb, a director
of the
Company, and Wayne Moor, a director and the Chief Executive Officer and
President of the Company, as defendants. The lawsuit claims that all
or some of
the defendants, among other things, violated federal securities laws
by issuing
various materially false and misleading statements and/or concealing
material
adverse facts that had the effect of artificially inflating the market
price of
the Company's securities and causing class members to overpay for the
securities
during the period from April 5, 2006 through April 23, 2007. The complaint
seeks
unspecified monetary damages and the costs and expenses incurred in prosecuting
the action, among other things. Although the Company has not yet been
served
with a summons and complaint, the Company intends to vigorously contest
and
defend the allegations under the complaint, but no assurances can be
given as to
the ultimate outcome of this matter.
As
disclosed on the Company's Current Report on Form 8-K filed on October
1, 2007,
Mark A. Emalfarb commenced an arbitration proceeding (Case No. 32 166
00765 07)
against the Company before the American Arbitration Association seeking
$10,000,000 in monetary damages resulting from the termination of his
employment
with the Company for cause, asserting, among other things, that "cause",
as
defined in his employment agreement with the Company, did not exist and
that his
reputation had been damaged by the Company. The arbitration will be conducted
in
West Palm Beach, Florida. On October 22, 2007, the Company filed its
answering
statement in this arbitration proceeding. The Company is vigorously contesting
and defending the arbitration proceeding; however, no assurance can be
given as
to the ultimate outcome thereof.
On
September 25, 2007, the day after Mark A. Emalfarb's employment with
the Company
was formally terminated for cause, Mr. Emalfarb commenced an action in
Delaware
Chancery Court (Case No. 3250-VCP) seeking an order compelling the Company
to
give Mr. Emalfarb access to certain books and records of the Company
that he had
previously demanded access to in his capacity as a director of the Company.
Prior to and after the commencement of the action, the Company agreed
to provide
Mr. Emalfarb access to certain books and records of the Company and has
delivered to Mr. Emalfarb's counsel certain of the books and records
of the
Company which Mr. Emalfarb demanded access to. The Company is vigorously
contesting and defending the action (insofar as it relates to books and
records
that the Company believes Mr. Emalfarb and/or his counsel should not
be allowed
access to), and is seeking attorneys fees and costs from Mr. Emalfarb
in
connection with the action. However, no assurance can be given as to
the
ultimate outcome of this proceeding.