EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
September 12, 2005, by and between Galaxy Nutritional Foods, Inc., a Delaware
corporation, with headquarters located at 0000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx
00000 (the "Company") and Xxxxxxxxx X. XxXxxx, an individual (the "Investor"),
whose address is c/o Doctor's Associates, Inc., 000 Xxx Xxxxx, Xxxxxxx,
Xxxxxxxxxxx 00000.
PRELIMINARY STATEMENTS
A. In connection with the Note and Warrant Purchase Agreement by and
between the parties of even date herewith (the "Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the Purchase
Agreement, to issue to the Investor a certain Warrant described therein relating
to 300,000 shares (subject to certain adjustments as provided in the Warrant) of
the Company's common stock, par value $0.01 per share (the "Common Stock"); and
B. To induce the Investor to execute and deliver the Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 Act"), and applicable
state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Investor and any transferee or
assignee thereof who agrees to become bound by the provisions of this Agreement
in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "Registrable Securities" means the shares of Warrant
Stock (as defined in the Warrant) and any securities into which such Warrant
Stock may hereafter be reclassified.
(iv) "Registration Period" means the period commencing on the
date hereof and expiring on the date that (A) the Investor may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act, or (B) the Investor has sold all of the Registrable
Securities.
(v) "Registration Statement" means a registration statement of
the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Warrant.
2. REGISTRATION RIGHTS.
If at any time during the Registration Period, the Company shall file with
the SEC a Registration Statement, or a pre-effective amendment to a Registration
Statement already filed with the SEC, relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to the Investor who is entitled to registration rights under this Section 2
written notice of the intended filing of such Registration Statement and, if
within twenty (20) days after receipt of such notice, the Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities the Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment, marketing
or other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only a limited portion of the Registrable Securities with
respect to which the Investor has requested inclusion hereunder, such portion to
be determined as hereinafter provided; provided that no portion of the equity
securities which the Company is offering for its own account shall be excluded;
provided, further that the Company shall be entitled to exclude Registrable
Securities to the extent necessary to avoid breaching obligations existing prior
to the date hereof to other stockholders of the Company. Subject to the
foregoing, the Company shall not exclude any Registrable Securities unless the
Company has first excluded all outstanding securities, the holders of which are
not entitled to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the Registrable Securities, and,
after giving effect to the immediately preceding clause, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights as of date
hereof. The obligations of the Company under this Section 2 may be waived by the
Investor. If an offering in connection with which the Investor is entitled to
registration under this Section 2 is an underwritten offering, then if the
Investor's Registrable Securities are included in such Registration Statement
the Investor shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. A Registration Statement filed pursuant to this Agreement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
2
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during the Registration Period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement.
c. The Company shall furnish to the Investor if its Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as the Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by the Investor.
d. As promptly as practicable after becoming aware of such event,
the Company shall notify the Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to the Investor as the Investor may reasonably request.
e. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify the Investor if the Investor holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
f. The Company shall hold in confidence and not make any disclosure
of information concerning the Investor provided to the Company unless (i) the
Company determines disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other final, non-appealable order from a court or governmental body
of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning the Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Investor and allow the Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
g. The Company shall use its best efforts to cause all the
Registrable Securities covered by the Registration Statement to be listed on the
American Stock Exchange and on each additional national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange.
h. The Company shall cooperate with the Investor if it holds
Registrable Securities and the managing underwriter or underwriters, if any, to
3
facilitate the timely preparation and delivery of certificates representing the
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or the Investor may
reasonably request and registered in such names as the managing underwriter or
underwriters, if any, or the Investor may request.
4. OBLIGATIONS OF THE INVESTOR.
In connection with the registration of the Registrable Securities, the
Investor shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration of Registrable Securities pursuant to this
Agreement that the Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least twenty (20) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify the Investor
of the information the Company requires from the Investor if the Investor elects
to have any of the Investor's Registrable Securities included in the
Registration Statement.
b. The Investor, by the Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, or any amendment thereto, unless the Investor has notified
the Company in writing of the Investor's election to exclude all of the
Investor's Registrable Securities from the Registration Statement.
c. The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(d) or
3(e), the Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(d) or 3(e) and, if so directed by
the Company, the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
d. The Investor may not participate in any underwritten registration
hereunder unless the Investor (i) agrees to sell the Investor's Registrable
Securities on the basis provided in any underwriting arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements (provided that all such agreements and
documents shall be in substantially the same form as those executed by the
Company and the other selling stockholders participating in such distribution),
and (iii) agrees to pay its pro rata share of all underwriting discounts and
commissions.
e. The Investor shall give notice to the Company when it has sold
all of the Registrable Securities.
4
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, shall be borne by the
Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) the Investor who holds such Registrable Securities, and
(ii) the directors, officers and each person who controls the Investor within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), if any, (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities or expenses (joint or several) (collectively,
"Claims") to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or the omission or
alleged omission to state a material fact therein required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact in any preliminary
prospectus if used prior to the effective date of such Registration Statement,
or contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investor or controlling person,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (ii) with respect to
any preliminary prospectus, shall not inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; (iii) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or to cause
to be delivered the prospectus made available by the Company; and (iv) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9.
5
b. In connection with any Registration Statement in which the
Investor is participating, the Investor agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act (collectively and together with an
indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such violation occurs in reliance upon and
in conformity with written information furnished to the Company by the Investor
expressly for use in connection with such Registration Statement or to the
extent such Claim is based upon any violation or alleged violation by the
Investor of the 1933 Act, 1934 Act or any other law; and the Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed the net
proceeds to the Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investor pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
6
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investor to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company promptly after such
assignment, (ii) the Company is, promptly after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement, and applicable law, including federal
and state securities laws.
7
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the
Investor. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon the Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier, in each case addressed to a party. The addresses for
such communications shall be as set forth in the Purchase Agreement or, in
respect of any party, at such other address of which such party shall notify the
other parties in writing.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
e. This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
8
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
"Company"
GALAXY NUTRITIONAL FOODS, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
"Investor"
/s/ Xxxxxxxxx X. XxXxxx
------------------------------------------
XXXXXXXXX X. XXXXXX, an individual
9
