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[RIDGEWOOD GROUP INTERNATIONAL, LTD. LETTERHEAD]
May 3, 2001
Xx. Xxxx Xxxxxxx
XxxxxXxxxx Foods Corporation
0000 00xx Xxxxxx, Xxxxx X000
Xxxxxx, XX 00000
Dear Xx. Xxxxxxx:
This letter sets forth the Agreement and Understanding between CrossPoint Foods
Corporation (the "Company"), Ridgewood Group International Ltd. ("Ridgewood")
and Ridgewood Capital Funding Inc. (Ridgewood Capital) relating to the
engagement of Ridgewood by the Company to advise and assist in raising private
financing up to $25 million. Such financing may include senior debt,
subordinated debt, convertible debt, convertible preferred stock or a
combination with equity equivalents such as warrants to purchase common stock
and would be raised through a best efforts private placement offering of one
class or a combination of such securities, any of which may include a warrant
feature (the "Offering").
The size of the Offering will depend, among other things, on the amount of
common stock actually to be issued and sold in the Company's initial public
offering ("IPO") as further discussed herein, but is likely to range between
$18 million and $25 million.
We understand that the Company is preparing and intends to file on or about May
15, 2001 a Registration Statement covering the sale of common stock in the IPO.
The targeted size of the IPO is approximately $14 million to be completed in
2001. The lead manager will be Xxxxxxxxx Securities, Inc. ("Xxxxxxxxx"). The
net proceeds of the IPO will be used to pay a portion of the $19 million cash
(purchase prices for the acquisitions of Southwest Traders, Inc. ("SWT") and
Damon Industries, Inc. ("Damon").
The principal use of proceeds of the Offering will be to finance the balance of
the acquisition costs and additional companies operating in the specialty food
distribution industry. As soon as practicable after the completion of the IPO,
the Company and Xxxxxxxxx will agree upon the specific size and securities to
be included in the Offering (the "Determination Date"), and the Offering will
commence as described in Paragraph 8 herein.
Upon execution of this letter agreement, the Company agrees to wire to
Xxxxxxxxx an initial retainer fee of $20,000 for our services hereunder, and
Xxxxxxxxx will commence due diligence. Such initial retainer shall be deducted
from the success fees set forth below. Wire instructions for Ridgewood are as
follows:
Ridgewood Group International Ltd.
c/o Chase Bank
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
ABA #000000000
Account #1128076200465
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CrossPoint Foods Corporation
May 3, 2001
Page 2
Ridgewood Capital's fee, payable at the closing of the Offering, shall be
determined according to the following scale:
Type of Security Fee As % of Amount Raised
---------------- -------------------------
Senior Bank Debt 2.50%
Senior Notes 4.00%
Subordinated Notes 5.00%
Convertible Subordinated Notes 6.00%
Convertible Preferred Stock 7.00%
In addition, the Company agrees to issue to Ridgewood or Ridgewood Capital, at
our discretion, at the closing of the Offering five-year warrants to purchase
between 160,000 shares and 220,000 shares of common stock, to be determined on a
pro rata basis between $18 million and $25 million Offering sizes. The warrants
shall be exercisable at a price equal to the IPO price.
In connection with our services hereunder, the Company also agrees to promptly
reimburse us for our reasonable expenses, including our expenses of counsel.
As soon as practicable after the Determination Date, the Company and Ridgewood
Capital will executive a formal private placement agency agreement (the "Agency
Agreement"). The Agency Agreement shall set forth in Schedule A thereto the
definitive agreement between the Company and Ridgewood Capital with respect to
amounts, classes and terms of the securities to be offered. The Offering will
commence on the date of execution of the Agency Agreement and will continue for
a period of 120 days from such date unless extended by mutual agreement (the
"Termination Date").
The Company shall have the right to reject the terms of any indications of
interest of financing commitments obtained by Ridgewood. However, if Xxxxxxxxx
obtains financing commitments for at least 90% of the aggregate amount set forth
in the Agency Agreement on terms which reasonably approximate those set forth in
the Agency Agreement and the Company rejects such commitments, the Company will
pay Ridgewood a termination fee of $125,000 to $175,000 to be determined on a
pro rata basis between $18 million and $25 million Offering sizes (or financing
commitments ranging between $16.2 million and $22.5 million). Further, if the
Company terminates the Offering because it elects to accept financing from or
through a party other than Ridgewood, the Company will pay Ridgewood a
termination fee between $125,000 and $175,000 to be determined on the same pro
rata basis set forth above. In addition, if during the one year period following
the Termination Date the Company accepts financing from a party which was
introduced by Xxxxxxxxx or with whom Xxxxxxxxx held discussions or negotiations
during the term of this engagement, whose financing terms the Company elected to
reject (and with respect to which Xxxxxxxxx did not receive a termination fee
pursuant to this Paragraph), the Company will pay Ridgewood a fee to be
determined in accordance with the fee scale set forth in Paragraph 6 herein.
As is customary with respect to engagements of this type, the Company agrees to
indemnify Ridgewood and Ridgewood Capital in accordance with the Indemnification
Provisions set forth in Schedule A hereto.
Ridgewood Capital's execution of the Agency Agreement and commencement of the
Offering shall be conditioned upon (i) satisfactory completion of our due
diligence; (ii) negotiation of mutually satisfactory definitive terms of the
Offering; (iii) no occurrence of any material adverse change, on a pro forma
basis including any potential acquisitions, in the operations, financial
condition or operating outlook of the Company; (iv) no occurrence of any
material adverse change in financial markets which, in Ridgewood Capital's
judgment, would materially decrease the likelihood that the Offering could be
completed; and (v) completion of the Company's IPO in an amount sufficient to
complete the acquisitions of SWT and Damon.
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CrossPoint Foods Corporation
May 3, 2001
Page 3
The validity and interpretation of this agreement be governed by the laws of
the State of New York applicable to agreements made and to be fully performed
therein. Any dispute regarding the interpretation of this agreement shall be
submitted to arbitration in New York, NY under the procedures of the American
Arbitration Association or the National Association of Security Dealers. The
awarded party shall be entitled to be awarded costs and expenses including
expenses of counsel, if the award is appealed and upheld, not subject to
further appeal.
If the foregoing correctly sets forth our agreement, please sign the enclosed
copies of this letter in the space provided below and return one copy to us.
Very truly yours,
Ridgewood Group International Ltd. Confirmed and Agreed to this
3rd day of May, 2001
CrossPoint Foods Corporation
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXX XXXXXXX
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Xxxxxxx X. Xxxxxx Xxxx Xxxxxxx
President President &
Chief Executive Officer
Ridgewood Capital Funding, Inc.
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Managing Director
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SCHEDULE A
INDEMNIFICATION PROVISIONS
The Company (as such term is defined in the Agreement) agrees to indemnify and
hold harmless Ridgewood and Ridgewood Capital (as such term is defined in the
Agreement) against any all losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements (and any and
all legal and other costs, expenses and disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise) including, without
limitation, the costs, expenses and disbursements as and when incurred, of
investigating, preparing or defending any such action, suit, proceeding or
investigation (whether or not in connection with litigation in which Xxxxxxxxx's
acting for the Company including, without limitation, any act or omission by
Ridgewood in connection with its acceptance of or the performance or
non-performance to it obligations under the letter agreement dated May 3, 2001
between the Company and Ridgewood as it may be amended from time to time (the
"Agreement"); provided, however, such indemnity agreement shall not apply to any
costs, expenses or disbursements to the extent it is found in a final judgment,
by a court of competent jurisdiction (not subject to further appeal) to have
resulted from the gross negligence or willful misconduct of Ridgewood. The
Company also agrees that Xxxxxxxxx shall not have any liability (whether direct
or indirect, in contract or tort or otherwise) to the Company for or in
connection with the engagement of Ridgewood except to the extent that such
liability is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) to have resulted primarily and directly from
Xxxxxxxxx's gross negligence or willful misconduct.
If the Company becomes aware of any action, suit, proceeding or investigation
(at any level) which may concern or involve Ridgewood for which Ridgewood may be
entitled to indemnification by the Company, it shall immediately give written
notice to Ridgewood of such action, suit, proceeding or investigation.
These indemnification Provisions shall be in addition to any liability which the
Company may otherwise have to Ridgewood or the persons indemnified below in this
sentence and shall extend to the following: Ridgewood or the persons indemnified
below in this sentence and shall extend to the following: Ridgewood and its
respective affiliated entities, members, directors, officers, employees, legal
counsel, agents and controlling persons (within the meaning of the federal
securities laws). All references to Xxxxxxxxx in these indemnification
Provisions shall be understood to include any and all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to which
Xxxxxxxxx proposes to demand indemnification, it shall notify the Company with
reasonable promptness; provided, however, that any failure by Xxxxxxxxx to
notify the Company shall not relieve the Company from its obligations hereunder,
Ridgewood shall have the right to retain counsel of its own choice to represent
it, and the Company shall pay the fees, expenses and disbursements of such
counsel; and such counsel shall, to the extent consistent with its professional
responsibilities, cooperate with the Company and any counsel designated by the
Company. The Company shall be liable for any settlement of any claim against
Ridgewood made with the Company's written consent, which consent shall not be
unreasonably withheld. The Company shall not, without prior written consent of
Xxxxxxxxx, settle or compromise a claim, or permit a default or consent to the
entry of any judgment in respect thereof, unless such settlement, compromise or
consent includes, as an unconditional term thereof, the giving by the claimant
to Ridgewood of an unconditional release from all liability in respect of such
claim.
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Schedule A -- CrossPoint Foods Corporation
Page 2
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification in such
case, then the Company, on the one hand, and Ridgewood, on the other hand,
shall contribute to the losses, claims, damages, obligations, penalties,
awards, liabilities, costs, expenses and disbursements to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, and Ridgewood, on the other hand, in connection with
the statements, acts, omissions which resulted in such losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses or
disbursements and the relevant equitable considerations shall also be
considered. No person found liable for a fraudulent misrepresentation shall be
entitled to contribution from any person who is not also found liable for such
fraudulent misrepresentation. Notwithstanding the foregoing, Xxxxxxxxx shall
not be obligated to contribute any amount hereunder that exceeds the amount of
fees previously received by Ridgewood pursuant to the Agreement.
Neither termination nor completion of the engagement of Ridgewood referred to
above shall affect these Indemnification Provisions which shall then remain
operative and in full force and effect.
Dated: May 3rd, 2001
Ridgewood Group International Ltd. CrossPoint Foods Corporation
/s/ ILLEGIBLE /s/ ILLEGIBLE
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Ridgewood Capital Funding, Inc.
/s/ ILLEGIBLE
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