Exhibit,Appendix: Lmm Capital Partners, Llc v. Mill Point Capital, Llc, E&M Logistics, Inc., Martin Kelly

On September 30, 2022 a Exhibit,Appendix was filed involving a dispute between Lmm Capital Partners, Llc, and E&M Logistics, Inc., Martin Kelly, Mill Point Capital, Llc, for Commercial - Contract - Commercial Division in the District Court of New York County.

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FILED: NEW YORK COUNTY CLERK 01/06/2023 01:12 PM INDEX NO. 653606/2022
NYSCEF DOC. NO. 67 RECEIVED NYSCEF: 01/06/2023
FILED: NEW YORK COUNTY CLERK 09/30/2022
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NYSCEF DOC. NO. 1
67 RECEIVED NYSCEF: 10/03/2022
01/06/2023

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

LMM CAPITAL PARTNERS, LLC,

Plaintiffs,
Index No.: ____/2022
-against-

MILL POINT CAPITAL, LLC, E&M
SUMMONS
LOGISTICS, INC., AND MARTIN KELLY,

Defendants.

TO DEFENDANTS:

MILL POINT CAPITAL, LLC MARTIN KELLY
1177 Avenue of the Americas, 45th Floor 16 Forest Drive
New York, New York 10036 Sands Point, New York 11050

E&M LOGISTICS, INC.
701 Zerega Avenue
Bronx, New York 10473

YOU ARE SUMMONED and required to serve upon Plaintiffs’ attorney an answer to

the Complaint, dated September 30, 2022, in this action within 20 days after the service of this

Summons, exclusive of the day of service, if this Summons is personally delivered to you within

the State of New York, or within 30 days after service is complete if this Summons is not

personally delivered to you within the State of New York. In case of your failure to appear,

judgment will be taken against you by default for the relief demanded in the Complaint.

The place of venue is New York County, pursuant to C.P.L.R. § 503(a), because Plaintiff

and Defendant Mill Point Capital, LLC are residents of New York County.

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Dated: September 30, 2022
New York, New York

Respectfully submitted,

SCHLAM STONE & DOLAN LLP

By: __/s/ Samuel L. Butt_____________
Jeffrey M. Eilender
Samuel L. Butt
Michael A. Brodlieb
26 Broadway
New York, New York 10004
Tel.: (212) 344-5400
Fax: (212) 344-7677
Email: jeilender@schlamstone.com
Email: sbutt@schlamstone.com
Email: mbrodlieb@schlamstone.com

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

LMM CAPITAL PARTNERS, LLC,

Plaintiffs,

-against- Index No. ____/2022

MILL POINT CAPITAL, LLC, E&M COMPLAINT
LOGISTICS, INC., and MARTIN KELLY,

Defendants.

Plaintiff LMM Capital Partners, LLC (“LMM”), by its attorneys Schlam Stone & Dolan

LLP, for its Complaint against Mill Point Capital, LLC (“Mill Point”), E&M Logistics, Inc.

(“E&M”), and Martin Kelly (“Kelly” and, collectively with Mill Point and E&M, “Defendants”),

alleges as follows:

NATURE OF THE ACTION

1. This is an action for breach of contract, fraud, tortious interference, and

declaratory judgment against Defendants arising from a fraudulent conspiracy by defendants to

steal a significant business opportunity from the Plaintiff. LMM, a private equity firm, expended

considerable time and resources identifying an attractive off-market acquisition target, E&M, in

a deal that would realize profits to LMM of tens of millions of dollars. LMM entered into an

exclusive letter of intent with E&M, whose CEO and majority owner was Defendant Kelly, and

ultimately discussed the transaction with Defendant Mill Point, another private equity firm, as a

potential third-party co-investor. Mill Point, one of several potential co-investors with whom

LMM was speaking, signed an agreement that prohibited it from circumventing LMM with

respect to the E&M deal. LMM ultimately decided to pursue the transaction with a co-investor

other than Mill Point, but Mill Point refused to accept this result. Instead, Mill Point went

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behind LMM’s back, spoke with E&M about doing the deal at a higher purchase price without

LMM, and ultimately concluded that deal, all in violation of the agreement Mill Point signed

with LMM. Aware of their liability for breaching the non-circumvention agreement E&M and

Mill Point not only conspired to do their own deal with each other but to hide their tracks by

fraudulently inducing LMM into thinking that it could not complete a transaction with E&M. In

furtherance of this conspiracy, Kelly falsely claimed to LMM that E&M’s two main vendors,

Nestle and Froneri, would never agree to a deal with any private equity firm, which, if true,

would have excluded Mill Point as well as LMM. Once LMM was fraudulently induced to step

aside, E&M and Mill Point quickly announced their own deal.

2. On this basis Mill Point is liable for breach of its non-circumvention agreement

with LMM. Each of Defendants is also liable for tortiously interfering with the other’s

agreement or prospective business deal with LMM.

3. Emblematic of the sophistication of this fraud is Defendants’ conduct in

connection with E&M’s termination of the transaction with LMM. E&M and Mill Point knew

they could not subsequently do a deal together due to the non-circumvention provision in Mill

Point’s agreement with LMM without significant legal risk. Accordingly, E&M and Kelly (with

Mill Point plotting and acting behind the scenes) also fraudulently induced LMM to sign a

release purportedly covering E&M and any of its “affiliates”, including so-called future

affiliates, falsely claiming, as mentioned above, that Nestle and Froneri would not approve any

private equity buyer. E&M and Kelly also failed to disclose to LMM that they had secretly

agreed to pursue and, ultimately did enter into, a transaction with Mill Point and that this was the

true reason why E&M was not proceeding with a deal with LMM. The release was signed under

false pretenses as Defendants knew that LMM was totally unaware that Mill Point had breached

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the non-circumvention provision of its agreement with LMM, and that E&M had tortiously

induced that breach. Accordingly, the release is unenforceable and does not shield these

Defendants for their conspiracy to defraud LMM from the benefits and protections of the

agreements that it signed and the deal it sourced. Thus, in addition to monetary damages, LMM

seeks a declaratory judgment that the purported release is void.

THE PARTIES

4. Plaintiff LMM is a Delaware limited liability company with its principal place of

business in New York County. Elisha Aharon is its Managing Partner, who resides in New York

County.

5. Defendant Mill Point is a Delaware limited liability company with its principal

place of business at 1177 Avenue of the Americas, 45th Floor, New York, NY 10036, in New

York County.

6. Defendant E&M is a Delaware corporation, with its principal place of business at

701 Zerega Ave, Bronx, NY 10473, in Bronx County.

7. Defendant Martin Kelly is the Chief Executive Officer of E&M. Kelly resides in

Sands Point, NY in Nassau County.

JURISDICTION AND VENUE

8. This Court has personal jurisdiction over Defendants under C.P.L.R. § 301, as all

Defendants reside in New York State and have continuous and systematic contacts with New

York state. This Court also has personal jurisdiction over Defendants under C.P.L.R.

§ 302(a)(1), because Defendants transacted business in New York State. This Court also has

personal jurisdiction over Defendants under C.P.L.R. § 302(a)(2), because Defendants

committed tortious acts within New York State. Further, this Court has personal jurisdiction

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over Defendants under C.P.L.R. § 302(a)(3), because Defendants committed tortious acts

without New York State causing injury to persons within New York State, and Defendants

regularly do or solicit business and derive substantial revenue from services rendered in New

York State, and expect or should reasonably expect these tortious acts to have consequences in

New York State and derive substantial revenue from interstate commerce.

9. Venue is proper in this county under C.P.L.R. § 503(a), because LMM and Mill

Point are residents of this county.

FACTUAL ALLEGATIONS

A. LMM

10. LMM is a private equity firm, launched by Aharon in 2016, which raises equity in

the lower middle market deal-by-deal from various investors under the “fundless

sponsor/independent sponsor” model.

11. Under this model, LMM seeks to acquire, grow, and exit one or more businesses

for a profit, much like a conventionally funded private equity firm.

12. Unlike a traditional private equity firm, however, a fundless sponsor does not

have a dedicated pool of committed capital and usually is required to raise both debt and equity

capital on a deal-by-deal basis.

13. As part of such a deal, LMM generally receives a closing fee based on a certain

percentage of the total price of the deal, paid at closing, that normally ranges between 2%-3%,

equity in the acquired company, a quarterly management fee throughout the holding period, and

carried interest (a share in the future capital gain at the exit of the investment).

14. The firm’s day-to-day operations and deal-related expenses have been self-funded

since inception by Aharon.

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15. Aharon has been LMM’s only full-time employee/principal at LMM since

inception, although certain individuals have come on for various periods on a project basis.

16. Aharon has worked intensively for the last six and one-half years, 70 hours a

week on average, to get LMM into a position to where it was able to do the E&M transaction

discussed below.

B. E&M

17. E&M is one of the nation’s leading direct store delivery (“DSD”) distributors of

ice cream, frozen and fresh foods, and beverages, with its main warehouse and corporate office

in the Bronx, NY.

18. E&M’s largest vendors were Nestle and Froneri at the time E&M and LMM

entered into the Letter of Intent, discussed below, and upon information and belief, Nestle and

Froneri still are E&M’s biggest vendors.

19. Froneri is a joint venture owned 48% by Nestle and 52% by the private equity

firm PAI Partners. This joint venture was formed in 2019, when Nestle’s sold its United States

ice cream business to Froneri for $4 billion. The joint venture did not include Nestle’s other

frozen food business, such as pizza, which were still solely under Nestle’s ownership and

management.

20. In 2020, Nestle and Froneri comprised 70% of E&M’s annual revenue.

21. In 2020, Nestle and Froneri also each had 10-year contracts with E&M, set to

expire in 2028 and each contract contained a change in control clause requiring their consent to

any change in the control ownership of E&M.

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C. LMM Sources The E&M Deal And Negotiates A Letter of Intent

22. In June 2016, Aharon was introduced to Kelly in connection with an unrelated

potential investment in an ice cream brand that LMM had evaluated and E&M used to distribute.

23. Aharon met with Kelly at E&M’s Bronx offices to discuss the contemplated

investment, the ice cream industry and competitive landscape.

24. As part of that meeting, Kelly gave Aharon a facility tour and explained about

E&M’s operations. Aharon was highly impressed by E&M and added it to LMM’s list of

companies to track and follow-up with in the coming years.

25. That is exactly what Aharon did, and on or about January 30, 2020, Aharon

emailed Kelly about the prospects of LMM investing in or acquiring E&M.

26. Kelly called Aharon the same day in response and proposed to meet as soon as

possible.

27. On February 5, 2020, Aharon and Kevin Singer, a then-partner at LMM, met with

Kelly in New York City for about two hours to formally present LMM, their robust industry

experience, and their plans for E&M and to learn more about the acquisition opportunity.

28. At this meeting, Kelly indicated that at this stage of his life he was very interested

in selling his stake at E&M, with the option for LMM to buy out the E&M Employee Stock

Ownership Plan (“ESOP”) as well.

29. After the meeting, Kelly, Aharon and Singer agreed to continue the dialogue and

meet again in 1-2 weeks.

30. On February 12, 2020, Kelly, Aharon and Singer met again, this time at E&M’s

offices at the Bronx. Aharon and Singer were introduced to E&M’s Chief Financial Officer,

Tom Murray, and a Vice President of Sales, Sal Pesce.

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31. The meeting went very well, and the parties agreed that LMM would submit to

E&M a short information request list to commence preliminary due diligence ahead of

submitting a formal acquisition proposal, which LMM did.

32. On March 15, 2020, following LMM’s review of select information provided by

E&M and additional calls with Kelly and Murray, LMM submitted a first draft of a letter of

intent for its proposed acquisition of E&M.

33. In May 2020, Kelly informed LMM that he was inclined to proceed with LMM’s

letter of intent, but the negotiation was somewhat delayed due to the COVID-19 pandemic and

the positive impact it had on E&M’s business (in-home consumption increased dramatically and

E&M struggled to meet the demand).

34. LMM and E&M agreed that in the meantime LMM would expand its due

diligence on E&M.

35. In June 2020, Kelly informed LMM that he had decided to proceed with LMM as

its future buyer.

36. Also in June 2020, Kelly said he would work on setting up a meeting or call

between Froneri and Nestle, on the one hand, and LMM, on the other, to discuss the transaction

and seek consent for the deal with LMM as a buyer, as required by the change in control clause

of Froneri’s and Nestle’s contracts with E&M.

37. On June 25, 2020, Kelly, Aharon, and Singer had a three-way conference call

with Jared Damiano, Vice President of Sales at Dreyers Grand Ice Cream, which is the name

given to Froneri’s United States business, at which Aharon and Singer briefly presented LMM,

and Damiano discussed Froneri’s and Nestle’s commitment to E&M and the New York City

market and key growth plans.

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38. Damiano further mentioned that E&M and Kelly were highly valued by Nestle

and Froneri, and any buyer that is acceptable to Kelly would be good for them too.

39. In early July 2020, Kelly informed LMM that the call with Froneri and Nestle

went well and he had received the green light to procced with LMM as the buyer.

40. Accordingly, E&M and LMM undertook negotiations on a few open points and

resumed refining the language in the proposed letter of intent.

41. On July 22, 2020, Aharon and Singer met with Kelly to visit E&M’s other

warehouses in Woodbury, New York and Patterson, New Jersey and also met with a few

operations managers and employees.

42. In a text exchange, from on or about August 27, 2020, Kelly stated that Dave

Williams, E&M’s ESOP trustee, was “also good” with the contemplated deal and asked to have a

conference call with Kelly and his lawyer to go over the letter of intent draft.

43. Kelly also attached a screenshot of an email from Damiano to Kelly in which

Damiano stated, “I am here to support in any way I can. I do not have a need to meet unless the

buyers would like to meet. My goal is support you. I am here can make myself available to your

schedule.”

44. During a text exchange on or about August 31, 2020, Kelly confirmed with

Aharon that he was going to have a call with Williams that Wednesday and that “Nestle has

approved” the deal with LMM.

D. E&M And LMM Sign The Letter Of Intent

45. On September 15, 2020, E&M, by Kelly, executed an exclusive Letter of Intent

(the “LOI”) with LMM. A copy of the LOI is attached as Exhibit 1.

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46. Under the deal structure in the Term Sheet attached as Exhibit A to the LOI, a

new company formed by LMM would acquire all of the issued and outstanding stock of E&M,

with an enterprise value of $74 million (excluding the value of E&M’s owned facility in the

Bronx).

47. Pursuant to the LOI, E&M was to negotiate exclusively with LMM for 90 days

from the date the LOI was signed by E&M, meaning that E&M could not undertake discussions

concerning any Alternative Transaction, as defined in the LOI, that might prevent the transaction

contemplated in the LOI.

48. Section 10 of the LOI provided for a breakup fee of $400,000:

Notwithstanding anything in the foregoing to the contrary, the Company agrees to
immediately make payment to the Investor (by wire transfer of immediately
available funds) a breakup fee in the amount of Four Hundred Thousand Dollars
($400,000) if, prior to closing, (i) the Company is unable to close the transaction
because the Company failed to receive government approvals and/or third party
approvals which are necessary and required for the closing of the transaction
contemplated by this Letter; or (ii) the Company elects not to close the transaction
contemplated by this Letter for any reason, including but not limited to because
the Company receiving a superior proposal; or (iii) the ESOP (trustee or members
themselves) vote against the transaction and such vote prevents the transaction
from closing; provided however, this Section 10 shall not apply, and the Company
shall not be obligated to pay the Investor the breakup fee set forth in this Section
10, if such termination is as a result of the failure to satisfy Conditions to Closing
D (financing) and H (fairness opinion) as set forth in the Term Sheet.

49. At no time had E&M engaged a sell-side investment banking firm to market

E&M through a formal auction process.

50. The E&M transaction was solely sourced by LMM.

E. LMM Conducts Due Diligence And Searches For A Partner For The Deal

51. After the execution of the LOI, LMM spent the next three months on extensive

deep-dive due diligence and reaching out to potential debt (senior and junior) and equity

investors to fund the deal.

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52. Since there were no sell-side M&A advisors representing E&M, LMM had to do

extensive work on the deal, including:

• Educating E&M about the due diligence process and helping Kelly through the

process;

• Writing from scratch a 100-page investment memo both for internal purposes and

for distribution to potential debt and equity investors;

• Working with E&M to set up a business, accounting and legal data room;

• Building a full three statements bottom-up leveraged buyout model;

• Conducting ten interviews with key customers and vendors (each 30-60 minutes)

and compiling comprehensive notes and a summary report;

• 2:1 interviews with key managers and employees of E&M;

• Conducting primary market research on the ice cream and frozen food industries;

• Reviewing select legal documents and contracts and submitting to E&M a first

draft of a stock purchase agreement;

• Reviewing certain aspects of the preliminary ESOP initiation in 2015 and the

requirements and procedures for its contemplated buyout; and

• Coordinating due diligence on insurance and employee benefits.

53. As part of its commercial due diligence, Kelly helped to coordinate a call between

LMM and Steve Kross, VP, Nestle Retail Sales, on October 19, 2020. Aharon spoke with Kross

for over half an hour about many aspects of Nestle, E&M and the pizza and frozen food

industries. Kross was very friendly and informative. During that call Kross did not ask Aharon

any questions about LMM’s profile and practices as a private equity investor, and the issue of

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Nestle’s approval of E&M sale to LMM was not addressed at all (as it had already been

approved a few months before).

54. LMM led the key areas of the deal due diligence and did mostly all of the heavy

lifting on its own for its prospective equity and debt investors.

55. LMM cast a wide net in its efforts to raise debt and equity to fund its acquisition.

56. Due to LMM’s continued efforts, tenacity, and thorough due diligence it was able

to secure nine indications of interest and term sheets from senior and junior lenders to provide

debt (and in some cases with minority equity co-investment too) to support LMM’s acquisition

of E&M.

57. Between January and early March 2021, LMM narrowed down its potential

lenders list and executed exclusive term sheets with Key Bank on January 14, 2021, for a cash

flow revolver and term loan and with Brookside Mezzanine Partners, on January 20, 2021, for a

mezzanine debt and minority equity co-investment.

58. On February 15, 2021, seven members of E&M’s management team, including

Kelly, LMM, Key Bank and Brookside held a 3½ hour meeting in order to allow Key Bank and

Brookside to meet directly with E&M’s management and further assess its team and the

financing opportunity as a whole.

59. After the meeting, both Key Bank and Brookside confirmed their continued

enthusiasm in providing financing for the acquisition and proceeding to close in a timely manner

as soon as LMM identified its preferred majority equity partners.

60. Also starting in January 2021 LMM pitched the E&M opportunity to several

private equity funds, whereas prior to that LMM’s equity fundraising efforts focused more on

single family offices, high net worth individuals and select institutional investors.

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61. LMM received strong interest in the opportunity from four majority equity

investors who submitted proposals to LMM; two of them were introduced to Kelly through a

conference call, and the other two, Tenex Capital Management (“Tenex”) and Mill Point, which

had emerged as the two most interested buyers, were invited for a full management presentation

at E&M’s corporate offices in the Bronx.

62. Mill Point was founded in 2013 by a group of senior private equity professionals

and closed an inaugural fund at $450 million in June 2018 and second fund at $886 million in

February 2021.

63. As of February 2021, Mill Point had $2 billion in assets under management,

which could easily translate into $30-40 million annually in management fees for the firm’s

operations, including hefty salaries and bonuses, and does not include the most substantial

economic component of private equity transactions, carried interest, which, as noted above, is the

private equity fund’s share in the capital gain created at the exit from the investment and which is

typically 20%.

64. As of August 31, 2022, Mill Point employs seventeen full-time professionals, including

six partners, and not including administrative staff and senior industry advisors.

65. The interest from Mill Point, Tenex, and other potential co-investors was

unsurprising: the deal was attractive because E&M had a EBITDA in the low teens, which

would position it as a sizable acquisition target for many equity firms, it operated in the ice

cream and frozen food DSD distribution industry which is an overall stable and durable industry,

its strong relationship with Nestle and Froneri and its exclusive contract in the New York City

market created a strong bulwark against competition, and the opportunity was off-market since it

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was solely sourced by LMM, meaning there were no sell-side auctions or other activity to drive

up the price.

66. Indeed, as discussed below, the price was so attractive that it explains why Mill

Point, believing that, as a much larger and established private equity firm, it could improperly

circumvent LMM without consequence, was able to offer more money to Kelly when it

concluded its own transaction with E&M.

67. The E&M deal also provided an entry into the ice cream and frozen food

distribution industry.

68. Most of the companies in the industry are still founder- or family-owned, and

E&M would serve as a strong platform to not only grow organically, but also through acquisition

of other distributors nationwide, particularly with Kelly’s strong connections in the industry, as

LMM planned to do.

F. Mill Point Executes A Non-Disclosure And Non-Circumvention Agreement

69. On February 16, 2021, Mill Point executed a Non-Disclosure and Non-

Circumvention Agreement concerning the proposed transaction with LMM and E&M (the “Non-

Circumvention Agreement”). (Exhibit 2).

70. In the Non-Circumvention Agreement, Mill Point agreed:

that you have been made aware of the Potential Transaction by LMM and agree
that until the first to occur of: (i) the second anniversary of the date hereof, or (ii)
LMM notifying you in writing that it is no longer interested in pursuing the
Potential Transaction, you and your Representatives shall not, directly or
indirectly, other than in a transaction including LMM, participate in or assist or
encourage any other person or entity in connection with any acquisition of,
investment in, business combination with or change of control of [E&M]. For the
avoidance of doubt, this paragraph will apply to all your affiliates and portfolio
companies whether or not they received Confidential Material.

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71. Mill Point also agreed:

In the event that you determine not to proceed with a Potential Transaction, or at
any time upon the request of LMM for any reason, you will promptly redeliver to
LMM or destroy all copies of the Confidential Material in your or your
Representatives’ possession or control, and, upon request, you agree promptly to
certify to LMM that you have complied with your obligations under this
paragraph.

72. Mill Point further agreed:

All communications and requests for information in connection with the Potential
Transaction will be submitted or directed exclusively to the persons specified by
LMM, and you shall not contact representatives of the Company without LMM’s
prior consent.

73. Mill Point additionally agreed that it and its Representatives, as defined in the

Non-Circumvention Agreement:

Will (i) use the Confidential Material exclusively for the purpose of evaluating the
Potential Transaction (the “Permitted Use”) and not for any other purpose, (ii)
keep the Confidential Material strictly confidential, and (iii) not disclose any of
the Confidential Material to any person or entity without the prior written consent
of LMM…

74. The Non-Circumvention Agreement defined Confidential Material as:

information (in whatever form or medium) concerning [E&M], LMM or the
Potential Transaction (whether prepared by [E&M], LMM or otherwise) which
has been or is furnished to you or your Representatives by or on behalf of LMM
or [E&M], together with any notes, analyses, summaries, documents or records
prepared by you or others containing, reflecting or based upon such information,
in whole or in part (collectively, the “Confidential Material”)…

G. Mill Point And Tenex Pursue The Deal

75. Each of Tenex and Mill Point had a good understanding of the target industry and

each of them was well-capitalized to support acquisition of future add-ons to the E&M platform

as part of the buy and build strategy.

76. Each of Tenex and Mill Point held multiple calls and meetings with LMM leading

to their separate onsite meetings with E&M.

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67 RECEIVED NYSCEF: 10/03/2022
01/06/

Case Info

Judge

Barry R. Ostrager Track Judge’s New Case

Case No.

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Document Filed Date

January 06, 2023

Case Filing Date

September 30, 2022

County

Parties

BUTT, SAMUEL L Attorney for the Plaintiff
EILENDER, JEFFREY M Attorney for the Plaintiff
E&M Logistics, Inc. Defendant
KLEIN, GAYLE R Attorney for the Defendant
LMM Capital Partners, LLC Plaintiff
Martin Kelly Defendant
Mill Point Capital, LLC Defendant
PIASECKI, PAULINA Attorney for the Defendant
ROGOVIN, MARC A Attorney for the Defendant
SABOW, MARC Attorney for the Defendant
GAVIN ROONEY Attorney
MITCHELL COHEN Attorney

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Exhibit,Appendix: Lmm Capital Partners, Llc v. Mill Point Capital, Llc, E&M Logistics, Inc., Martin Kelly

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Case Info

Parties