Quality Food Brands, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
May 18, 2007
Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
P.O. Box 309 XX
Xxxxxx House
Xxxxxx Town
South Church Street
Grand Cayman, Cayman Islands
Milfam I L.P.
0000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx, 00000
Re: Quality Food Brands/Laurus/Milfam
Quality Food Brands, Inc., a Nevada corporation (the "Company"), for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby grants to Milfam I L.P., a Georgia limited partnership
("Milfam"), the irrevocable right and option (collectively, the "Option"),
exercisable by Milfam's giving written notice (the "Milfam Notice") to the
Company and to Laurus Master Fund, Ltd., a Cayman Islands company ("Laurus") not
later than August 31, 2007, to enter into that certain Securities Purchase
Agreement with the Company in the form annexed hereto (together with the
documents and instruments annexed as Exhibits thereto, the "Milfam Securities
Purchase Agreement") and to consummate the transactions contemplated thereby
including, without limitation, upon the funding called for thereby on the part
of Milfam, the issuance and delivery to Milfam of the Note and Warrant and the
grant of the security interest to Milfam by the Company as contemplated by the
Master Security Agreement (capitalized terms used, but not otherwise defined
herein, having the meaning given to such terms in the Milfam Securities Purchase
Agreement). It is expressly understood and agreed that, notwithstanding anything
to the contrary expressed or implied herein, Milfam shall have the right to
exercise or decline to exercise the Option in accordance herewith solely at its
sole discretion and, accordingly, shall be under no obligation whatsoever to
enter into the Milfam Securities Purchase Agreement or consummate the
transactions contemplated thereby unless and until it exercises the Option. It
is agreed by the parties hereto that, prior to the first to occur of (x) the
Closing and (y) August 31, 2007: (i) no modifications, amendments and or
supplements, may be made to the attached forms of the Milfam Securities Purchase
Agreement, the Note, the Warrant, the Master Security Agreement, or any other
related agreement attached hereto without the prior written consent of Laurus;
and (ii) no modifications, amendments and or supplements, may be made to the
Laurus Securities Purchase Agreement, the Laurus Note, that certain warrant,
issued pursuant to the Laurus Securities Purchase Agreement and exercisable by
Xxxxxx, to purchase up to 15% shares of the common stock of the Company, that
certain Master Security Agreement dated as of the date of the Laurus Securities
Purchase
Agreement, or any other related agreement attached thereto, in each case in the
form in effect on the date hereof, without the prior written consent of Milfam.
All notices required or permitted hereunder shall be in writing and shall
be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification
of receipt.
All such notices shall be sent to the addresses set forth in Schedule A
hereto or at such other address as the Company, Laurus or Milfam may designate
by written notice to the other parties hereto given in accordance herewith
If Milfam exercises the Option in accordance herewith, the execution and
delivery of the Milfam Securities Purchase Agreement and the consummation of the
transactions contemplated thereby shall take place at a closing (the "Closing")
that shall occur on a date within ten (10) days after the date of the Milfam
Notice. Without limiting the generality of the foregoing, due execution and
delivery by the Company of the Note and Warrant to Milfam shall be made on such
date against payment of the purchase price therefor and the Company shall
further execute and deliver the Master Security Agreement in favor of Milfam on
such date.
It is understood and agreed that, as provided in Section 6.5 of the Milfam
Securities Purchase Agreement, cash proceeds (the "Cash Proceeds") received by
the Company from Milfam under the Milfam Securities Purchase Agreement in an
amount equal to one-half of the principal amount of the Laurus Note outstanding
as at the time of the Closing shall be paid by the Company to Laurus to prepay
in part principal under the Laurus Note by such amount.
Notwithstanding anything to the contrary expressed or implied in the Laurus
Securities Purchase Agreement, Laurus hereby acknowledges and consents to (i)
the grant by the Company to Milfam of the Option and (ii) upon Milfam's
exercising the Option in accordance herewith, Milfam's and the Company's
entering into the Milfam Securities Purchase Agreement and the consummation of
the transactions contemplated thereby (including, without limitation, the
issuance and delivery by the Company to Milfam of the Note and Warrant and the
grant by the Company to Milfam of the security interest called for by the Master
Security Agreement. Xxxxxx further acknowledges and agrees that, upon the
occurrence of the closing (i) Milfam shall be, and for all purposes be deemed to
be a "Senior Creditor" under, and as such term is defined in, that certain
Intercreditor and Subordination Agreement, dated as of May [_____], 2007, among
the Company, Laurus and Milfam; (ii) that certain Right of First Refusal
Agreement, dated as of May [_____], 2007, among the Company, Laurus and Milfam
shall be fully effective and in force;
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and (iii) Laurus shall apply the amount received from the Company as provided in
the preceding paragraph to the prepayment of the principal amount of the Laurus
Note.
This letter shall be governed by and construed in accordance with the laws
of the State of New York.
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If the foregoing correctly sets forth our understanding of the subject
matter hereof, kindly so indicate by signing below in the space provided for
your signature, whereupon this letter shall be our binding agreement concerning
such subject matter.
Very truly yours,
QUALITY FOOD BRANDS, INC.
By: /s/ Xxxxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Treasurer
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Xxxx
---------------------------------
Name: Xxxxx Xxxx
Title: Director
MILFAM I L.P.
By: Milfam LLC
Its: General Partner
By: /s/ Xxxxx X. Xxxxxx, III
---------------------------------
Name: Xxxxx X. Xxxxxx, III
Title: Manager
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