NOTE AND WARRANT PURCHASE AGREEMENT
THIS NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement") is made as of
this 28th day of September, 2005, by and between Galaxy Nutritional Foods, Inc.,
a Delaware corporation (the "Company"), and SRB Greenway Capital (Q.P.), L.P.
(the "Investor").
WHEREAS, the Company desires to issue and sell to selected "accredited
investors" as that term is defined in Regulation D promulgated under the
Securities Act of 1933, as amended, the Note and Warrant (as those terms are
defined below).
WHEREAS, the Investor has agreed to loan to the Company the Loan Amount
(as defined below) (the "Loan") pursuant to the terms and conditions set forth
herein and in the Note.
WHEREAS, the Investor acknowledges that the Company is entering into other
Note and Warrant Purchase Agreements substantially similar to this Agreement
(the "Other Purchase Agreements") and offering notes and warrants substantially
similar to the Note and Warrant issued pursuant to this Agreement (the "Other
Notes" and "Other Warrants", respectively) to other accredited investors ("Other
Investors") making loans to the Company in an aggregate amount (including the
Loan) of no more than $2,400,000.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
TERMS OF THE LOAN
Section 1.1 The Loan.
(a) Loan Amount. Subject to the terms and conditions herein and in the
Note, and subject to the provisions of Section 1.1(b) hereof, the Investor
agrees to loan to the Company $485,200.00 (the "Loan Amount"), which Loan shall
evidenced by a Promissory Note in favor of the Investor, in the form attached
hereto as Exhibit A (the "Note"), dated the date on which such funds were
received by the Company from the Investor. The Loan shall be made in accordance
with and subject to the terms and conditions of the Note.
(b) Payment of the Loan Amount. The Loan Amount from the Investor shall be
paid to the Company upon or prior to October 3, 2005.
Section 1.2 Use of Proceeds. The proceeds of the Loan shall be used by the
Company primarily for general working capital and other general corporate
purposes for the Company and its affiliates, and as otherwise provided herein.
Section 1.3 Conditions Precedent. The Investor's obligation to make the Loan
shall be subject to the fulfillment to the Investor's satisfaction of the
following conditions:
(a) Delivery of Note and Warrant. The Investor shall have received a fully
executed Note and a fully executed redeemable warrant certificate to purchase
such number of shares of common stock of the Company equal to 1 share per every
$4 of the Loan Amount in the form attached hereto as Exhibit B (the "Warrant").
(b) Delivery of Registration Rights Agreement. The Investor shall have
received a fully executed Registration Rights Agreement in the form attached
hereto as Exhibit C (the "Registration Rights Agreement").
(c) Representations and Covenants. All of the representations and
warranties of the Company herein shall be true and correct and it shall have
fulfilled all of its obligations hereunder in all material respects.
(d) Absence of Violation or Litigation. The consummation of the
transactions contemplated hereby shall not be in violation of any law or
regulation applicable to the Company. The Company shall not be subject to any
injunction, stay or restraining order nor shall it be required to make or to
obtain any filings, approvals or consents which shall not have been previously
made or obtained.
(e) All Proceedings Satisfactory. All organizational and other proceedings
taken by the Company in connection with the transactions contemplated by this
Agreement, and all documents and instruments related thereto, shall be
reasonably satisfactory in form and substance to the Investor, and the Investor
shall have received copies thereof and other materials (certified, if requested)
as it may reasonably request in connection therewith. The issuance and sale of
the Note and the Warrant shall be made in conformity with all applicable state
and federal securities laws.
ARTICLE II
REPRESENTATIONS AND WARRANTIES; COVENANTS.
Section 2.1 Company Representations and Warranties.
(a) Organization and Company Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has all required power and authority to carry on
its business as presently conducted, to enter into and perform this Agreement,
the Note, the Warrant, the Registration Rights Agreement and any other
agreements contemplated hereby to which it is a party and to carry out the
transactions contemplated hereby and thereby.
(b) Authorization and Non-Contravention. This Agreement and all
documents executed pursuant hereto are valid and binding obligations of the
Company, enforceable in accordance with their terms. The execution, delivery and
performance of this Agreement and all agreements, documents and instruments
contemplated hereby, the issuance and delivery of the Note and Warrant and, upon
exercise of the Warrant, the issuance and delivery of the equity securities
purchasable upon exercise of the Warrant, have been duly authorized by all
necessary corporate or other action of the Company.
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Section 2.2 Securities Law Compliance.
(a) The Investor agrees that its Note, Warrant, and the securities
issuable upon exercise of the Warrant, are being acquired for investment and
that such Investor will not offer, sell or otherwise dispose of its Note,
Warrant, or any securities issuable upon exercise of the Warrant, except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Securities Act"), or any applicable state securities
laws. Each Note, Warrant and all securities issued upon exercise of the Warrant
(unless registered under the Securities Act and any applicable state securities
laws) shall be stamped or imprinted with a legend in substantially the following
form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (B) AN EXEMPTION
THEREFROM, AND, IF REQUESTED BY THE COMPANY, THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS."
(b) Restricted Securities. The Investor understands that its Note, Warrant
and the securities issuable upon exercise of the Warrant, will not be registered
at the time of their issuance under the Securities Act for the reason that the
sales provided for in this Agreement are exempt pursuant to Section 4(2) of the
Securities Act based on the representations of the Investor set forth herein.
The Investor represents that it is experienced in evaluating companies such as
the Company, has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of its investment, and has
the ability to suffer the total loss of the investment. The Investor further
represents that it has had the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of its Note,
Warrant and the business of the Company, and to obtain additional information to
such Investor's satisfaction. All documents, records and books pertaining to the
Company and this investment have been made available to the Investor and its
representatives, including each Investor's attorney and accountant, that the
books and records of the Company will be available upon reasonable notice for
inspection by the Investor during reasonable business hours at the Company's
principal place of business, and the Investor have had access to and the
opportunity to request information from and ask questions of the officers and a
directors of the Company. The Investor further represents that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act, as presently in effect. The Investor further represents that the Note and
the Warrant are being acquired for the account of such Investor for investment
only and not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation therein. If an
Investor is a corporation, business trust, partnership, limited liability
company or other entity, such Investor represents that it was not formed for the
specific purpose of acquiring the securities offered hereby and has total assets
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of more than $5,000,000. If an Investor is an individual, such Investor
represents that (A) the Investor is a natural person whose individual net worth,
or joint net worth with spouse, exceeds $1 million at the time of purchase (in
this instance, the term "net worth" means the excess of assets at fair market
value, including home and personal property, over total liabilities, including
mortgages and income taxes on unrealized appreciation of assets); or (B) the
Investor is a natural person who has had individual income of more than $200,000
in each of the two most recent years (2003 and 2004), or joint income with that
person's spouse of more than $300,000 in each of those years, and reasonably
expects to reach the same income level in the current year (2005). (The term
"individual income" means adjusted gross income as reported for federal income
tax purposes, less any income attributable to a spouse or to property owned by a
spouse, increased by the following amounts (excluding any amount attributable to
a spouse or to property owned by a spouse): (1) the amount of any interest
income received which is tax-exempt under Section 103 of the Internal Revenue
Code of 1986, as amended (the "Code"); (2) the amount of losses claimed as a
partner in a limited partnership (as reported on Schedule E of Form 1040); and
(3) any deduction claimed for depletion under Section 611 et seq. of the Code).
(c) State of Residence. The Investor represents that it is a legal
resident of, or, if such Investor is an entity, has its principal place of
business in, the state listed on the signature page of this Agreement.
Section 2.3 Advice of Consultants. The Investor has obtained the advice of
independent counsel and tax advisors of Investor's choice in entering into this
Agreement and the transactions contemplated hereby or has knowingly elected not
to receive such counsel.
Section 2.4 No Preferential Treatment. Until all of the Company's obligations
hereunder are paid and performed in full, the Company shall not, without the
prior consent of the Investor, (a) make any payment or other consideration with
respect to any Other Note unless the Company makes the same payment or other
consideration with respect to the Note, pro rata based on the relative principal
amounts of the Note and Other Notes; or (b) amend or waive any provision of any
Other Purchase Agreement, Other Note or Other Warrant that would (i) increase
the interest rate of such Other Note, (ii) shorten the maturity date of such
Other Note, (iii) provide for any payments of principal prior to maturity under
such Other Note, or (iv) otherwise materially adversely affect the rights of the
Investor hereunder or under the Note or Warrant.
Section 2.5 Indebtedness Covenant.
(a) Until all of the Company's obligations hereunder are paid and
performed in full, the Company shall not, without the prior consent of the
Investor, incur any Indebtedness other than (i) the obligations incurred hereby
or pursuant to the Other Purchase Agreements not exceeding $2,400,000 in
principal in the aggregate outstanding at any time, (ii) obligations to Textron
Financial Corporation, or its successors or assigns, not exceeding $7,500,000 in
principal in the aggregate outstanding at any time, (iii) obligations to
Wachovia Bank, N.A., or its successors or assigns, not exceeding $11,000,000 in
principal in the aggregate outstanding at any time, and (iv) any other
indebtedness not otherwise permitted by this Section 2.5 not exceeding
$5,000,000 in principal in the aggregate outstanding at any time.
(b) As used herein, "Indebtedness" means any liability or obligation (i)
for borrowed money, other than trade payables incurred in the ordinary course of
business, (ii) evidenced by bonds, debentures, notes, or other similar
instruments, (iii) in respect of letters of credit or other similar instruments
(or reimbursement obligations with respect thereto), except letters of credit or
other similar instruments issued to secure payment of trade payables arising in
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the ordinary course of business, (iv) to pay the deferred purchase price of
property or services, except trade payables arising in the ordinary course of
business, (v) as lessee under capitalized leases, (vi) secured by a Lien on any
asset of the Company, whether or not such obligation is assumed by the Company;
provided, however, Indebtedness shall not be deemed to include (x) any liability
or obligation as lessee under any operating leases, (y) any letters of credit or
similar instruments issued to secured payment of rent under any operating
leases, or (z) any payroll obligations. As used herein "Lien" means any lien,
mortgage, deed of trust, pledge, security interest, charge or encumbrance of any
kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof and any agreement to give any of the foregoing).
ARTICLE III
TRANSFER RESTRICTIONS
Section 3.1 Transfers Void. The Investor agrees that it may not sell, give,
transfer, assign or otherwise dispose of its Note or Warrant, except as
expressly permitted by Section 3.2 hereof. Any purported sale, gift, transfer,
assignment or other disposition, or pledge of or grant of security interest in,
any Note or Warrant in violation of this Article III shall be null and void.
Section 3.2 Transfers to Affiliates. The Investor may, at any time, transfer all
of such Investor's Note and Warrant (but not less than all, and not separately),
to any of its affiliates, provided such affiliate is an "accredited investor."
Section 3.3 Legend. The Note and the Warrant shall be stamped or imprinted with
a legend in substantially the following form:
"THIS NOTE/WARRANT IS SUBJECT TO THE PROVISIONS OF A NOTE AND WARRANT AGREEMENT,
INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY
OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE."
ARTICLE IV
DEFAULT
Section 4.1 Events of Default. With respect to the Investor, if, while any part
of the principal of the Investor's Note remains unpaid, any one of the following
"Events of Default" shall occur:
(a) An order, judgment or decree shall be entered by any court of
competent jurisdiction, approving a petition seeking reorganization or
liquidation of the Company, or appointing a receiver, trustee or liquidator of
the Company of all or a substantial part of its assets, which such order,
judgment or decree has not been effectively stayed within sixty (60) days after
entry;
(b) the Company shall (i) from this date forward, admit in writing to its
inability to pay its debts as they mature; (ii) make a general assignment for
the benefit of creditors; (iii) be adjudicated bankrupt or insolvent; (iv) file
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a voluntary petition in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law; (v) file any answer admitting the material allegations of a
petition filed against it in any bankruptcy, reorganization or insolvency
proceeding or fail to dismiss such petition within sixty (60) days after the
filing thereof; or (vi) take any action for the purpose of effecting any of the
foregoing;
(c) the failure by the Company to observe and perform any material
covenant, condition and agreement under this Agreement which failure is not
cured within thirty (30) days, after written notice from the Investor or
discovery by the Company; and
(d) the failure by the Company to observe and perform any material
covenant, condition and agreement under the Note or Warrant which failure is not
cured within the applicable cure period (or thirty (30) days if no cure period
is expressly provided for such failure), after written notice from the Investor
or discovery by the Company;
then and in every such event such Investor may, upon written notice to the
Company, declare the Note to be due and payable in full, whereupon the Note
shall become due and payable in full.
ARTICLE V
MISCELLANEOUS
Section 5.1 Notices. All necessary notices, demands and requests permitted or
required under this Agreement shall be in writing and shall be deemed effective
(a) if given by facsimile, when such facsimile is transmitted to the facsimile
number specified below, the appropriate answer back is received and a copy is
sent to such party by an express mail carrier at the address indicated below,
(b) three business days after being mailed by certified mail, return receipt
requested, postage prepaid to the applicable party at the address indicated
below or (c) one business day after being sent by an express mail carrier to the
applicable party at the address indicated below:
If to the Company: Galaxy Nutritional Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With copies to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Investor: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ___________________
Attention: ___________________
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or such other address or facsimile number as such party may hereafter specify
for the purpose of receiving notice hereunder. A copy of any notice to the
Investor shall be provided, as described above, to any counsel designated by the
Investor in writing to the Company as above provided.
Section 5.2 No Waiver. No failure to exercise, and no delay in exercising, on
the part of an Investor, any right, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.
Section 5.3 Governing Law; Construction. This Agreement, the Note, the Warrant
and the Registration Rights Agreement shall each be deemed to be a contract made
under the laws of the State of Florida, and shall be construed in accordance
with the laws of the State of Florida. The descriptive headings of the several
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof. This Agreement, the
Note, the Warrant and the Registration Rights Agreement together with the
Exhibits hereto and thereto and all documents, instruments and agreements
executed pursuant hereto, constitute the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, supersede
all prior agreements, understandings or representations pertaining to the
subject matter hereof, whether oral or written, and may not be contradicted by
evidence of any alleged oral agreement. Venue for any action brought under this
Agreement, the Note, the Warrant or the Registration Rights Agreement shall be
in Orange County, Florida.
Section 5.4 Amendments, Waivers and Consents. Any term, covenant or condition of
this Agreement may be amended, omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) only by written
consent of all of the parties hereto.
Section 5.5 Expenses. Any expense incurred by either party (including, without
limitation, reasonable attorneys' fees and disbursements) in connection with the
negotiation, execution, administration or enforcement of this Agreement, the
Note, the Warrant, the Registration Rights Agreement and any other document
executed in connection with the obligations hereunder or thereunder and any
amendment hereto or thereto shall be the sole responsibility and shall be paid
such party.
Section 5.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
Section 5.7 Attorneys' Fees. In the event of a judicial or administrative
proceeding or action by one party against the other party with respect to the
interpretation or enforcement of this Agreement, the prevailing party shall be
entitled to recover reasonable costs and expenses including reasonable
attorneys' fees and expenses, whether at the investigative, pretrial, trial or
appellate level. The prevailing party shall be determined by the court based
upon an assessment of which party's major arguments or position prevailed.
Section 5.8 Construction of Agreement. This Agreement shall not be construed
more strictly against one party than against the other merely by virtue of the
fact that it may have been prepared primarily by counsel for one of the parties.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
"COMPANY"
GALAXY NUTRITIONAL FOODS, INC., a
Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
"INVESTOR"
SRB GREENWAY CAPITAL (Q.P.), L.P.
-----------------------------------------
(Name of Entity)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
(Signature of Individual Executing)
Member
-----------------------------------------
(Title)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
(Print Name)
-----------------------------------------
(FEIN)
$485,200.00
-----------------------------------------
(Amount of Advance)
Texas
-----------------------------------------
State of Residency or Principal Place of
Business
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EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD,
DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR (B) SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION AND, IF REQUESTED BY THE MAKER, THE MAKER HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE MAKER THAT THE TRANSFER IS EXEMPT FROM
THE REGISTRATION PROVISIONS UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
THIS NOTE IS SUBJECT TO THE PROVISIONS OF A NOTE AND WARRANT AGREEMENT,
INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY
OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE
PROMISSORY NOTE
$______________ __________ __, 2005
FOR VALUE RECEIVED, the undersigned, GALAXY NUTRITIONAL FOODS, INC., a
Delaware corporation ("Maker"), promises to pay to the order of _______________
("Payee"; Payee and any subsequent holder[s] hereof are hereinafter referred to
collectively as "Holder"), at the office of Payee at
__________________________________, or at such other place as Holder may
designate to Maker in writing from time to time, the principal sum of
______________________________ AND NO/100THS DOLLARS ($_________.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the Interest Rate, in lawful money of the United States. Amounts payable
hereunder shall be paid, at Payee's option as specified by Payee in writing from
time to time, either by (i) check delivered to the office of Payee or (ii) wire
transfer of immediately available funds to an account specified by Payee in
writing from time to time. This Note is referred to in and issued pursuant to
that certain Note and Warrant Purchase Agreement, dated as of September 28,
2005, by and between Payee and Maker (as amended from time to time, the
"Agreement").
The Interest Rate shall be a floating rate calculated at an annual rate
equal to three percent (3.0%) per annum in excess of the Bank Prime Rate of
Interest per the Federal Reserve Bank in effect from time to time, calculated on
the basis of a 360-day year, actual days elapsed, upon the principal balance
hereof from time to time outstanding, but in no event to exceed the Maximum Rate
(as defined below). Each adjustment in the Interest Rate shall be effective on
the day the change in the Bank Prime Rate occurs.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
fifteenth (15th) day of October, 2005, and subsequent installments being payable
on the fifteenth (15th) day of each succeeding month thereafter until June 15,
2006 (the "Maturity Date"), at which time the entire outstanding principal
balance, together with all accrued and unpaid interest, shall be immediately due
and payable in full. If any such day is not a business day, such payment shall
be made on the next succeeding day which is a business day and interest shall
continue to accrue thereon until paid. As used herein, "business day" means a
day, other than a Saturday, Sunday or legal holiday, on which commercial banks
in Orlando, Florida are open for the general transaction of business.
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without premium or penalty. Any such prepayments
shall be credited first to any accrued and unpaid interest and then to the
outstanding principal balance hereof.
The failure of Maker to pay any principal, interest or any other sums
required hereunder when due under this Note shall constitute a default. If (i) a
default shall occur hereunder and such default shall continue for ten (10) days
after notice thereof is delivered by Holder to Maker, or (ii) an Event of
Default shall occur under the Agreement, which Event of Default is not cured
following the giving of any applicable notice and within any applicable cure
period set forth in the Agreement, then, and in such event, the entire
outstanding principal balance of the indebtedness evidenced hereby, together
with any other sums advanced hereunder and/or under any other instrument or
document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of a default as set forth
herein or in the Agreement, which default is not cured following the giving of
any applicable notice and within any applicable cure period set forth herein, at
the option of Holder and without notice to Maker, all accrued and unpaid
interest, if any, shall be added to the outstanding principal balance hereof,
and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the "Default Rate") equal to
the lesser of (i) the rate that is five percentage points (5.0%) in excess of
the above-specified Interest Rate on the date of such default, or (ii) the
maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate"), regardless of whether or not there has been an acceleration of
the payment of principal as set forth herein.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any endorsers hereof agree to pay to
Holder an amount equal to all such costs, including, without limitation, all
reasonable attorneys' fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of a default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
law. No extension of the time for payment of the indebtedness evidenced hereby
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or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Florida, and shall be
enforceable in a court of competent jurisdiction in the State of Florida,
regardless of in which state this Note is being executed.
HOLDER AND MAKER HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW OR IN EQUITY,
ARISING OUT OF OR IN ANY WAY RELATING TO THIS NOTE.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law.
MAKER:
GALAXY NUTRITIONAL FOODS, INC.
a Delaware corporation
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
3
EXHIBIT B
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (B)
AN EXEMPTION THEREFROM AND, IF REQUESTED BY THE COMPANY, THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT THE TRANSFER IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A NOTE AND WARRANT AGREEMENT,
INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT
COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE
OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
WARRANT TO PURCHASE SECURITIES
OF
GALAXY NUTRITIONAL FOODS, INC.
Void after October 17, 2008
This Warrant is issued to _____________, or its registered assigns (the
"Holder") by Galaxy Nutritional Foods, Inc., a Delaware corporation (the
"Company"), as of October 17, 2005 (the "Warrant Issue Date"). This Warrant is
issued pursuant to the terms of a Note and Warrant Purchase Agreement dated of
September 28, 2005 (the "Purchase Agreement") in connection with a loan by the
Holder to the Company. Capitalized terms used herein, but not otherwise defined,
shall have the meaning ascribed to them in the Purchase Agreement.
1. Number of Shares Subject to Warrant. Subject to the terms and
conditions hereinafter set forth, the Holder is entitled, upon surrender of this
Warrant at the principal office of the Company, to purchase from the Company, at
a price equal to the Exercise Price (as defined in Section 2 below), shares of
the Warrant Stock.
For purposes of this Warrant:
(A) "Common Stock" shall mean the Company's common stock,
$0.01 par value.
(B) "Expiration Date" shall mean October 17, 2008.
4
(C) "Warrant Stock" shall mean __________ shares of the
Company's Common Stock, subject to adjustment as described in Section 7 below.
(D) "Shares" shall mean fully paid and non-assessable shares
of Common Stock.
2. Exercise Price. The per share purchase price for the Shares shall
be 95% of the lowest closing sale price of the Common Stock on the AMEX Stock
Exchange (or any successor exchange or quotation system on which the Common
Stock is listed or quoted) during the 60 calendar days immediately preceding the
Warrant Issue Date (the "Exercise Price"). The Exercise Price shall be subject
to adjustment pursuant to Section 7 hereof.
3. Exercise Period. Except as otherwise provided for herein, this
Warrant shall be exercisable, in whole or in part, at any time and from time to
time after the Warrant Issue Date. From and after 5:00 p.m., Orlando, Florida
time, on the Expiration Date, all Warrants evidenced hereby shall thereafter be
void and of no further force and effect. Whether or not surrendered to the
Company by the Holder, this Warrant shall be deemed canceled upon the expiration
hereof.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 hereof, the purchase rights hereby
represented may be exercised in whole or in part, at the election of the Holder,
by the tender of the Notice of Exercise in substantially the form attached
hereto as Exhibit A and the surrender of this Warrant at the principal office of
the Company and by the payment to the Company in cash, by check, cancellation of
indebtedness or other form of payment acceptable to the Company, of an amount
equal to the then applicable Exercise Price multiplied by the number of Shares
then being purchased.
5. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, as applicable), but in no event more than five (5) business
days following the exercise of this Warrant.
6. Issuance of Shares. The Company hereby covenants that it will
duly and validly reserve shares of Common Stock for issuance upon exercise of
this Warrant. The Company covenants that the Shares of Warrant Stock, when
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof. The Shares of Warrant Stock issued
hereunder shall have the same rights and obligations pertaining to the other
shares of Common Stock issued previously by the Company.
7. Adjustment of Exercise Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time prior to the exercise or expiration of this Warrant
subdivide its Common Stock, by split-up or otherwise, or combine its Common
Stock, or issue additional Common Stock as a dividend with respect to any of its
5
Common Stock, the number of Shares issuable on the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the Exercise Price, provided that
the aggregate Exercise Price payable hereunder for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In the
event of any corporate reclassification, capital reorganization, consolidation,
spin-off or change in the Common Stock of the Company (other than as a result of
a subdivision, combination, or dividend provided for in Section 7(a) above),
then, as a condition of such event, lawful provision shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall have the right at any time
prior to the expiration of this Warrant to purchase, at a total price equal to
that payable upon the exercise of this Warrant, the kind and amount of shares of
stock and/or other securities and property receivable in connection with such
event by a holder of the same number of shares for which this Warrant could have
been exercised immediately prior to such event. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the Exercise Price,
provided that the aggregate exercise price payable hereunder for the total
number of Shares purchasable under this Warrant (as adjusted) shall remain the
same.
(c) Adjustment to Number of Shares. Upon each adjustment of
the Exercise Price, the number of Shares issuable upon exercise of the Warrant
shall be increased to equal the quotient obtained by dividing (x) the product
resulting from multiplying (i) the number of Shares issuable upon exercise of
the Warrant, and (ii) the Exercise Price, in each case as in effect immediately
before such adjustment by (y) the adjusted Exercise Price.
(d) Notice of Adjustment. When any adjustment is required to
be made to the Exercise Price or in the number or kind of Shares purchasable
upon exercise of the Warrant, the Company shall promptly notify the Holder of
such event and of the adjusted Exercise Price or number of Shares or other
securities or property thereafter purchasable upon exercise of this Warrant.
8. Assumption of Warrant. If at any time, while this Warrant, or any
portion thereof, is outstanding and unexpired there shall be an acquisition of
the Company by another entity by means of a merger, reorganization or
consolidation of the Company or any other transaction in which the owners of the
Company's outstanding voting power immediately prior to such transaction own,
directly or indirectly, less than 51% of the voting power of the resulting or
surviving entity immediately upon completion of such transaction, then, as a
part of such acquisition, lawful provision shall be made so that the Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
6
then in effect, the number of shares of stock or other securities or property of
the successor corporation resulting from such acquisition which a holder of the
Shares deliverable upon exercise of this Warrant would have been entitled to
receive in such acquisition if this Warrant had been exercised immediately
before such acquisition.
9. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant, but in lieu of any fractional Share the Company shall make a cash
payment therefor on the basis of the closing sale price of the Common Stock on
the AMEX Stock Exchange (or any successor exchange or quotation system on which
the Common Stock is listed or quoted) on the date of exercise.
10. No Shareholder Rights. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a shareholder with respect to the
Shares of Warrant Stock, including (without limitation) the right to vote such
Shares, receive dividends or other distributions thereon, exercise preemptive
rights or be notified of shareholder meetings, and such Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company. However, nothing in this Section 10 shall limit the right of the
Holder to be provided the notices required under this Warrant.
11. Compliance With Securities Act; Transferability of Warrant or
Shares.
(a) Compliance With Securities Act. The Holder, by acceptance
hereof, agrees that this Warrant, and the Shares issuable upon exercise of this
Warrant, are being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares issuable upon exercise
of this Warrant, except under circumstances which will not result in a violation
of the Securities Act, or any applicable state securities laws. This Warrant and
all Shares issued upon exercise of this Warrant (unless registered under the
Securities Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN EXEMPTION THEREFROM, AND, IF REQUESTED BY THE
COMPANY, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY TO THAT EFFECT. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE."
(b) Transferability. Subject to compliance with applicable
federal and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed for transfer
by delivery of an Assignment Form in substantially the form attached hereto as
Exhibit B, to the Company at the address set forth in Section 15 hereof, and the
7
payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer. In the event of a partial transfer, the Company shall
issue to the holders one or more appropriate new warrants.
12. Restricted Securities. The Holder understands that this Warrant
and the Shares issuable upon exercise of this Warrant, may not be registered at
the time of their issuance under the Securities Act for the reason that the sale
provided for herein and in the Purchase Agreement is exempt pursuant to Section
4(2) of the Securities Act based on the representations of the Holder set forth
herein and in the Purchase Agreement. The Holder represents that it is
experienced in evaluating companies such as the Company, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to suffer the total loss
of the investment. The Holder further represents that it has had the opportunity
to ask questions of and receive answers from the Company concerning the terms
and conditions of this Warrant, the business of the Company, and to obtain
additional information to such Holder's satisfaction. The Holder further
represents that it is an "accredited investor" within the meaning of Regulation
D under the Securities Act, as presently in effect. The Holder further
represents that this Warrant is being acquired for the account of the Holder for
investment only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any participation
therein.
13. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holders
hereof and their respective successors and assigns.
14. Amendments and Waivers. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder.
15. Notices. All notices required under this Warrant shall be deemed
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile, (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) three business days
after posting when sent by registered or certified mail. Notices shall be sent
to the addresses set forth in the Purchase Agreement.
16. Captions. The section and subsection headings of this Warrant
are inserted for convenience only and shall not constitute a part of this
Warrant in construing or interpreting any provision hereof.
17. Governing Law. This Warrant shall be governed by the laws of the
State of Florida, without regard to the choice or conflict of laws principles
thereof.
* * *
8
IN WITNESS WHEREOF, the undersigned have caused this Warrant to be duly
executed as of the date first set forth above.
COMPANY
GALAXY NUTRITIONAL FOODS, INC.
By:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
HOLDER
-----------------------------------------
(Name of Entity, if applicable)
By:
-------------------------------------
(Signature of Individual Executing)
-----------------------------------------
(Title, if applicable)
-----------------------------------------
(Print Name of Holder if an Individual)
9
EXHIBIT A
NOTICE OF EXERCISE
To: Galaxy Nutritional Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned hereby elects to [check applicable
subsection]:
_____________ (a) Purchase __________ Shares (as defined in the attached
Warrant) of Galaxy Nutritional Foods, Inc., pursuant to
the terms of the attached Warrant and payment of the
Exercise Price per Share required under such Warrant
accompanies this notice;
OR
_____________ (b) Exercise the attached Warrant or portion thereof for all
of ___________ Shares under the Warrant pursuant to the
net exercise provisions of Section 4 of such Warrant.
The Holder reaffirms all covenants, representations and warranties
made by it in Section 12 and agrees that all such covenants, representations and
warranties shall be deemed to be have been re-made as of the date hereof.
Date:_______________________ WARRANTHOLDER:
By:
---------------------------------------
Name:
Address:
Name in which shares should be registered: ______________________
EXHIBIT B
ASSIGNMENT FORM
To: Galaxy Nutritional Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned hereby assigns and transfers unto ________________________ of
_________________________________________ (Please typewrite or print in block
letters) the right to purchase ____________ Shares (as defined in the Warrant)
of Galaxy Nutritional Foods, Inc. subject to the Warrant, dated as of
_____________________________, by and between Galaxy Nutritional Foods, Inc. and
the undersigned (the "Warrant").
This assignment complies with the provisions of Section 11 of the Warrant and is
accompanied by funds sufficient to pay all applicable transfer taxes.
In addition, the undersigned and/or its assignee will provide such evidence as
is reasonably requested by, Galaxy Nutritional Foods, Inc., to evidence
compliance with applicable securities laws as contemplated by Sections 11 and 12
of the Warrant.
Date: By:
----------------------- ---------------------------------
------------------------------------
(Print Name of Signatory)
------------------------------------
(Title of Signatory)
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
________________, 2005, by and between Galaxy Nutritional Foods, Inc., a
Delaware corporation, with headquarters located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company") and ___________________, a ____________ (the
"Investor"), whose address is _________________.
PRELIMINARY STATEMENTS
A. In connection with the Note and Warrant Purchase Agreement by and
between the parties dated as of September 28, 2005 (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 ___________ 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 ▇▇▇▇ ▇▇▇.
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
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
10
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
facilitate the timely preparation and delivery of certificates representing the
Registrable Securities to be offered pursuant to the Registration Statement and
11
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.
12
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.
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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.
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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 ▇▇▇▇ ▇▇▇) 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.
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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.
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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:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
"Investor"
-----------------------------------------
(Name of Entity, if applicable)
By:
-------------------------------------
(Signature of Individual Executing)
-----------------------------------------
(Title, if applicable)
-----------------------------------------
(Print Name of Investor if an Individual)
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