FIRST AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT
This FIRST AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT (this
"Amendment") is made and entered into this 7th day of October, 2005 by and
between Galaxy Nutritional Foods, Inc., a Delaware corporation (the "Company"),
and Frederick A. DeLuca, an individual ("Investor").
WHEREAS, the Company and Investor previously entered into that certain
Note and Warrant Purchase Agreement dated as of September 12, 2005 (the
"Original Agreement"). Capitalized terms not expressly defined herein shall have
the meanings ascribed to them in the Original Agreement.
WHEREAS, subsequent to the Original Agreement, the Company entered into
other Note and Warrant Purchase Agreements substantially similar to the Original
Agreement (the "Other Purchase Agreements") and offered and sold notes and
warrants substantially similar to the Note and Warrant issued pursuant to the
Original Agreement (the "Other Notes" and "Other Warrants", respectively) to
other accredited investors ("Other Investors") who made loans to the Company in
an aggregate amount (including the Loan) of $2,400,000.
WHEREAS, the Company and Investor desire to amend the Original Agreement
to conform it to the Other Purchase Agreements, in accordance with the terms and
conditions of this Amendment.
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the parties hereto agree
as follows:
Section 1. Recitals. Each of the parties hereto agree that the recitals
set forth above are true and correct and are incorporated into the terms of this
Amendment.
Section 2. Amendment to the Original Agreement. Article II of the Original
Agreement is hereby amended by adding the following new Sections 2.4 and 2.5:
"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
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)."
Section 3. Further Assurances. Each party hereby agrees to execute and
deliver any and all documents as may be reasonably requested by another party in
order to carry out the terms of this Amendment and give effect thereto.
Section 4. No Other Changes. The parties further agree that, except as
specifically provided by this Amendment, no part of the Original Agreement is in
any way altered, amended or changed. In the event of any inconsistency between
the Original Agreement and this Amendment, the terms of this Amendment shall
supersede and control to the extent of any such inconsistency.
Section 5. Severability. If any of the provisions of this Amendment are
held to be invalid, illegal or unenforceable in any respect or for any reason,
the validity, legality and enforceability of any remaining provisions of this
Amendment shall not be in any respect impaired. In lieu of each such
unenforceable provision, there shall be added automatically as part of this
Amendment a provision that is legal, valid and enforceable and is similar in
terms of such unenforceable provisions as may be possible.
Section 6. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The signatures to this
Amendment need not all be on a single copy of this Amendment, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
day and year written above.
GALAXY NUTRITIONAL FOODS, INC.
By: /s/ Michael E. Broll
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Michael E. Broll
Chief Executive Officer
/s/ Frederick A. DeLuca
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FREDERICK A. DELUCA
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