STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT, dated as of October 13, 2003 (this
"Agreement"), by and between Galaxy Nutritional Foods, Inc., a Delaware
corporation (the "Company"), and Morini Investments Limited Partnership, a
Delaware limited liability partnership (the "Holder").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the beneficial owner of the Holder, and the
Company entered into that certain Loan Agreement dated as of June 15, 1999 (the
"Loan Agreement"), whereby ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ delivered to the Company a
promissory note in the principal amount of $12,772,200 (the "Note"); and
WHEREAS, pursuant to the terms of the Loan Agreement and as security for
the indebtedness evidenced by the Note (the "Indebtedness"), the Holder and the
Company entered into that certain Stock Pledge Agreement dated as of June 15,
1999, as amended by that certain First Amendment to Loan Agreement and Stock
Pledge Agreement (the "Pledge Agreement"), whereby the Holder pledged 2,914,286
shares of the Company's common stock, $0.01 par value per share (the "Subject
Shares"); and
WHEREAS, the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ desire to enter into an Amended
and Restated Employment Agreement to be dated as of the date hereof (the
"Employment Agreement"); and
WHEREAS, as a condition of its entering into the Employment Agreement, the
Company has requested that the Holder agree, and the Holder has agreed, among
other things, to vote the Subject Shares and to grant the Chairman of the Board
of Directors of the Company, or his designee, an irrevocable proxy to vote the
Subject Shares upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, agreements and covenants hereinafter set forth, and intending
to be legally bound hereby, the parties hereto hereby agree as follows:
1. Agreement to Vote Shares.
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(a) The Holder agrees that, prior to the Expiration Date (as defined
in Section 5), at every annual or special meeting of the stockholders of the
Company and at every continuation or adjournment thereof, and on every action or
approval by written consent of the stockholders of the Company in lieu of any
such meeting, in which in any case a "Hostile Takeover" (as defined below) is
being considered or voted on, the Holder shall cause the Subject Shares to be
voted in the manner directed in writing by the Board of Directors. Prior to the
Expiration Date, the Holder shall not enter into any agreement or understanding
with any Person to vote or give instructions in any manner inconsistent with the
preceding sentence. The Holder may vote the Subject Shares on all other matters
in its sole and absolute discretion. A "Hostile Takeover" shall mean the
acquisition (which includes, without limitation, by merger, tender offer
or otherwise), directly or indirectly, by any person of ownership of, or the
power to direct the exercise of voting power with respect to, a majority of any
class of voting capital stock of the Company, which acquisition is not approved
by the Company's Board of Directors.
(b) No person executing this Agreement who is or becomes during the
term hereof a director of the Company, or any successor thereof, makes any
agreement or understanding herein in his or her capacity as such director. The
Holder signs solely in its capacity as the owner of the Subject Shares.
2. IRREVOCABLE PROXY. Concurrently with the execution of this Agreement,
the Holder is delivering to the Company's Chairman of the Board a proxy with
respect to the Subject Shares in the form attached hereto as Exhibit A, which
shall be irrevocable to the full extent permitted by law.
3. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder hereby
represents and warrants to the Company that:
(a) this Agreement has been duly executed and delivered by the Holder
and is the legal, valid and binding obligation of the Holder;
(b) no consent of any governmental entity, beneficiary, co-trustee or
other person or entity is necessary for the execution, delivery and performance
of this Agreement by the Holder;
(c) the Holder owns the Subject Shares;
(d) except as provided on Schedule I, the Holder has the present
power and right to vote all of the Subject Shares; and
(e) except as provided on Schedule I, the Holder has not (i) granted
any power-of-attorney or other authorization, proxy or interest with respect to
any of the Subject Shares, (ii) deposited any of the Subject Shares into a
voting trust, or (iii) entered into any voting agreement or other arrangement
with respect to any of the Subject Shares.
4. COVENANTS OF THE HOLDER. The Holder hereby agrees and covenants that:
(a) during the period between the date hereof and the Expiration
Date, any shares of capital stock of the Company (including, without limitation,
the Company's common stock) that the Holder acquires by virtue of its beneficial
ownership of the Subject Shares (including by reason of stock dividends,
split-ups, recapitalizations, combinations, exchanges of shares or the like)
shall be considered Subject Shares and subject to each of the terms and
conditions of this Agreement; and
(b) during the period between the date hereof and the Expiration
Date, Holder shall not cause or permit any Transfer, other than a Permitted
Transfer (as those terms are defined below) of any of the Subject Shares to be
effected to any person or entity unless each person or entity to which any of
such Subject Shares, or any interest in any of such Subject Shares, is or may be
transferred shall have: (i) executed a counterpart of this Stockholder
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Agreement and proxy in the form attached hereto as Exhibit A; and (ii) agreed to
hold such Subject Shares (or interest in such Subject Shares) subject to all
terms and provisions of this Stockholder Agreement. A person or entity shall
have been deemed to have effected a "Transfer" of such security if such person
or entity directly or indirectly, (i) sells, pledges, encumbers, grants an
option with respect to, transfers or disposes of such security or any interest
in such security, or (ii) enters into an agreement or commitment contemplating
the grant of an option with respect to or sale, pledge, encumbrance, transfer or
disposition of such security or any interest therein. A "Permitted Transfer"
shall mean a Transfer of all or any portion of the Subject Shares to an
unaffiliated third party pursuant to an arm's length transaction (or in a
transaction otherwise approved by the Company's Board of Directors); provided
that, in each case, (x) such Transfer is not made in connection with a Hostile
Takeover and (y) the gross proceeds of such Transfer are applied to the
Indebtedness. Any Transfer made to SouthTrust Bank as a result of a default by
the Company under its loan to SouthTrust Bank secured by 1,000,000 shares of the
Subject Shares shall be a Permitted Transfer.
5. TERMINATION. This Agreement shall terminate on the earlier of (a) the
consummation of a Permitted Transfer, provided all the Subject Shares are so
Transferred, (b) the Indebtedness is paid in full or completely forgiven, or (c)
at any time upon written notice by the Company to the Holder terminating this
Agreement (such earlier date being referred to herein as the "Expiration Date").
The obligations imposed by this Agreement with respect to any of the Subject
Shares transferred in a Permitted Transfer shall no longer apply to and with
respect to such shares.
6. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, telecopy or
by registered or certified mail (postage prepaid, return receipt requested) or
by overnight courier to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 6):
if to the Company:
Galaxy Nutritional Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Holder:
Morini Investments Limited Partnership
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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7. Amendments; No Waivers.
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(a) Any provision of this Agreement may be amended or waived prior to
the Expiration Date if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company and the Holder or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; and with respect to the Holder, his respective heirs,
legal representatives and permitted successors and assigns, provided, that no
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto except that the Company may assign all or any of its rights to any
affiliate thereof or to any person acquiring the Company by merger or
consolidation. Notwithstanding the foregoing, in the event of a merger or
consolidation, this Agreement shall terminate if the Subject Shares (or
securities received or exchanged for such shares) constitute less than 5% of the
outstanding voting securities of the issuer of such securities in connection
with the merger or consolidation.
9. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements made by the Holder in this Stockholder Agreement shall
promptly terminate upon the Expiration Date.
10. COUNTERPARTS. This Agreement may be executed in one or more identical
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed an original, but all of which taken
together shall constitute one and the same agreement.
11. GOVERNING LAW. The validity, interpretation, construction,
performance, enforcement and remedies of or relating to this Agreement, and the
rights and obligations of the parties hereunder, shall be governed by the laws
of the State of Delaware without regard to principles of conflicts of laws, and
any and every legal or other proceeding arising out of or in connection with
this Agreement shall be brought in the appropriate courts of Orlando, in the
State of Florida, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose.
12. JURY TRIAL WAIVER. EACH PARTY HERETO HEREBY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE
OTHER FOR BREACH OF THIS AGREEMENT.
13. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that, in addition to any remedy to which
they are entitled at law or in equity, the
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parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement without the need to or prove special damages.
14. ENTIRE AGREEMENT. This Agreement and the related irrevocable proxy
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior written and oral and all contemporaneous
agreements and understandings with respect to the subject matter hereof. Each
party acknowledges and agrees that no other party hereto makes any
representations or warranties, whether express or implied, other than the
express representations and warranties contained herein.
15. SEVERABILITY. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated herein is not affected in any
manner materially adverse to any party hereto. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, or caused this Agreement to be duly executed and delivered by their
respective authorized officers, as of the day and year first above written.
GALAXY NUTRITIONAL FOODS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Title: Chairman of the Board
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MORINI INVESTMENTS LIMITED PARTNERSHIP
By: Morini Investments, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
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SCHEDULE I
The Subject Shares are subject to the Pledge Agreement and to redemption rights
in favor of the Company. Also, 1,000,000 shares of the Subject Shares are
subject to a pledge agreement securing the obligations of the Company to South
Trust Bank.
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EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of Galaxy Nutritional Foods, Inc., a Delaware
corporation (the "Company"), hereby irrevocably (to the full extent permitted by
law) appoints and constitutes ▇▇▇▇▇ ▇▇▇▇▇ and, in the event he is not the
Chairman of the Board of Directors of the Company at the time this Irrevocable
Proxy is exercised, then the then-current Chairman of the Board of Directors of
the Company, the attorney and proxy of the undersigned with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights, to the extent set forth below, to the full extent of the undersigned's
rights with respect to the shares of the Company's common stock (as described in
the Stockholder Agreement, dated as of October 13, 2003 (the "Stockholder
Agreement")) beneficially owned by the undersigned, which shares are listed on
the final page of this Irrevocable Proxy, and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof or
which the undersigned may acquire after the date hereof (collectively, the
"Shares"), until such time as the Stockholder Agreement shall be terminated in
accordance with its terms. Upon the execution hereof, all prior proxies given by
the undersigned with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof are
hereby revoked and no subsequent proxies shall be given.
This proxy is irrevocable (to the full extent permitted by law), shall be
deemed to be coupled with an interest, and is granted in connection with the
Stockholder Agreement and in consideration of the Company entering into the
Amended and Restated Employment Agreement, dated as of October 13, 2003 (the
"Employment Agreement"), between the Company and the Holder. This proxy shall
terminate on the Expiration Date (as defined in the Stockholder Agreement).
If, and to the extent that, the undersigned does not fully discharge its
obligations under the Stockholder Agreement, the attorneys and proxies named
above shall be empowered at any time prior to termination of the Stockholder
Agreement to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Shares) of the undersigned at every annual or special meeting of the
stockholders of the Company and at every continuation or adjournment thereof,
and on every action or approval by written consent of the stockholders of the
Company in lieu of any such meeting in the manner directed by the Board of
Directors in which a "Hostile Takeover" (as defined in the Stockholder
Agreement) is being considered or voted on. The undersigned may vote the Shares
in its sole and absolute discretion on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
heirs, legal representatives and permitted successors and assigns of the
undersigned.
If any term or other provision of this proxy is determined to be invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this proxy shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this proxy so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner.
Dated: October 13, 2003
Morini Investments Limited Partnership
By: Morini Investments, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as _____________
Subject Shares: 2,914,286 shares of the Company's Common Stock
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