SETTLEMENT AGREEMENT
This Settlement Agreement is entered into this 6th day of May, 2004, by
and between Xxxxxxxxx Foods, Inc. (hereinafter referred to as "Xxxxxxxxx") and
Galaxy Nutritional Foods, Inc. (hereinafter referred to as "Galaxy").
Whereas, Xxxxxxxxx and Galaxy are currently involved in a certain Lawsuit
known as Xxxxxxxxx Foods, Inc. v. Galaxy Nutritional Foods, Inc., Case No.
02-C-00498, pending in the United States District Court for the Eastern District
of Wisconsin, Green Bay Division ("the Lawsuit");
Whereas, Xxxxxxxxx and Galaxy wish to avoid the further burden and expense
of the Lawsuit, and wish to resolve and conclude the Lawsuit and other disputes
that may exist between them;
Whereas, in agreeing to the terms herein, Xxxxxxxxx has taken into account
circumstances unique to Galaxy and as a result, the Agreement reflects terms
that Xxxxxxxxx would not be willing to offer to other companies that have used
the types of machines at issue in the Lawsuit and that Xxxxxxxxx has accused of
infringing its patents; and
Now therefore, in consideration of the mutual promises contained in this
Agreement, and for other good and valuable consideration, receipt of which is
hereby acknowledged, Xxxxxxxxx and Galaxy hereby agree as follows:
1. Galaxy agrees that, for so long as Galaxy is granted a license by
Xxxxxxxxx under paragraph 2 of this Agreement, if Galaxy receives an offer from
any third party to acquire Galaxy's business through a stock sale, merger,
consolidation, reorganization, sale of all or substantially all of the assets,
or any similar transaction (a "Transaction"), that Galaxy intends to accept (an
"Acceptable Offer"), Galaxy shall provide to Xxxxxxxxx notice of the Acceptable
Offer, together with an option for a period of 10 days following such notice in
which Xxxxxxxxx (or any affiliate designated by Xxxxxxxxx) has the right to
submit an offer to acquire Galaxy's business under terms that are equal to or
better than the terms of the Acceptable Offer (the "Offer Right"). Xxxxxxxxx
acknowledges that any Transaction with Xxxxxxxxx or its affiliates is subject to
approval by Galaxy's Board of Directors and stockholders in accordance with
applicable law. Galaxy agrees that, if not inconsistent with the powers,
obligations, and duties, fiduciary and otherwise, of the Board of Directors, and
if the Board reasonably determines that the terms of the Xxxxxxxxx offer are in
fact equal to or better than the Acceptable Offer, then Galaxy and its Board of
Directors will take all permitted action to complete Galaxy's acceptance of the
Xxxxxxxxx offer, including as applicable approval of the Xxxxxxxxx offer by the
Board of Directors and recommendation to Galaxy's stockholders to accept the
offer by Xxxxxxxxx or its affiliate. Galaxy further agrees that, if the
Transaction consideration set forth in the Acceptable Offer is all cash payable
at closing of the Transaction, and if Xxxxxxxxx or its designated affiliate
exercises its Offer Right by making an offer that is equal to or better than the
Acceptable Offer, the Board of Directors shall recommend to Galaxy's
stockholders to accept the offer by Xxxxxxxxx or its affiliate. The parties
acknowledge that the Transaction will be subject to negotiation of definitive
purchase or acquisition documents.
2. Except as limited by this Agreement, Xxxxxxxxx hereby grants an
irrevocable, world-wide, fully paid-up, and non-exclusive license to Galaxy
under the claims of Schreiber's U.S. Patent Nos. 5,112,632, 5,440,860,
5,701,724, and 6,058,680 (the "Patents") and any and all continuations-in-part,
continuations, divisions, substitutes, reissues, reexaminations or extensions
thereof, and all related foreign patents thereof (the "Licensed Patents"), to
own and use all IWS equipment currently owned by Galaxy (the "Equipment"), and
to make, use, sell,
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and offer to sell the products produced on that Equipment. The license shall not
extend to any equipment other than the Equipment, but Galaxy shall have the
right to repair, to modify and to replace the Equipment from any source. Galaxy
further agrees that during the period of time that the license is in effect,
Galaxy will not use the Equipment to co-pack, for Xxxxxxxx Cheese, Inc., Xxxxxx,
Inc., Xxxxxx Chemical, Inc., Xxxxxx Foods Corp., Dairy Farmers of America, Great
Lakes Cheese Co., Inc., Great Lakes Cheese of La Crosse Wisconsin, Inc., Great
Lakes Cheese of Wisconsin, Inc., The Kroger Co. and subsidiaries (including
Pace), Land O' Lakes, Inc. and subsidiaries, or Whitehall Specialties, Inc.,
products produced previously hereto by any of those named entities.
3. Galaxy may assign or transfer the license granted in this Agreement to
a third party ("Assignee"), only if the following conditions are met: (a) the
assignment or transfer is in connection with a sale of Galaxy's business; (b)
Galaxy complies with Paragraph 1 of this Agreement in respect of the Offer
Right; and (c) the Assignee agrees that if, following such sale, the Assignee's
net revenue generated from sales of private label product manufactured on the
Equipment exceeds fifty percent (50%) of the Assignee's net revenue generated
from sales of all product manufactured on the Equipment, the Assignee shall pay
to Xxxxxxxxx a royalty on all private label product manufactured on the
Equipment and sold by the Assignee which exceeds in each twelve (12) month
period following such assignment the amount of private label product (by pounds)
that Galaxy sold in the twelve (12) months immediately preceding such assignment
("Qualifying Product"). The amount of the royalty and the payment thereof is
subject in all respects to the mutual agreement of the Assignee and Xxxxxxxxx,
but, in any event, shall not exceed $0.20 per pound of Qualifying Product. The
Assignee, in the event of such royalty payment requirements, shall provide
Xxxxxxxxx, upon Schreiber's reasonable periodic requests,
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with information necessary to test compliance with the requirements of this
paragraph. If an agreement meeting the foregoing conditions of Paragraph 3(c) is
not reached, then in lieu of that condition, the license if assigned or
transferred to the Assignee shall be amended and further limited as follows:
The license does not permit or extend to the use of the Equipment to
produce an amount of private label product whereby the Assignee's net
revenue generated from sales of private label product manufactured on the
Equipment exceeds fifty percent (50%) of the net revenue generated from all
sales of product manufactured on the Equipment.
4. The term of this license shall run until the end of the life of the
last-to-terminate of the Licensed Patents, unless earlier terminated in
accordance with the terms of this Agreement. Xxxxxxxxx also may terminate the
license in the event of (a) any breach by Galaxy of the terms of this Agreement,
if such breach continues for thirty (30) days after Galaxy's receipt of written
notice from Xxxxxxxxx (or such longer period of time that may be reasonably
necessary to cure such breach provided Galaxy initiates such cure with such
thirty (30) day period and diligently prosecutes such cure to completion); or
(b) any act of infringement by Galaxy of any Licensed Patent, if such
infringement continues for thirty (30) days after Galaxy's receipt of written
notice from Xxxxxxxxx.
5. Xxxxxxxxx and Galaxy agree that except as expressly provided herein,
Xxxxxxxxx grants no license or other right to practice any Xxxxxxxxx patent,
including the Patents.
6. Xxxxxxxxx and Galaxy agree to terminate the Lawsuit pursuant to the
terms of the Notice of Dismissal attached hereto as Exhibit A. Upon execution of
this Agreement, the parties agree to take such action as necessary to jointly
present the Notice to the Court and to
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terminate the Lawsuit.
7. Except for all rights and obligations arising under this Agreement,
Xxxxxxxxx and Galaxy, for themselves and also for their parent, subsidiary and
related entities, hereby release and forever discharge each other and their
subsidiaries, predecessors, successors, assigns, officers, directors,
shareholders, employees, attorneys and agents, from and of any and all claims,
demands, rights, liabilities, and causes of action that relate to the claims,
counterclaims, or allegations of the Lawsuit, from the beginning of time to the
effective date of this Agreement as first written above, that either Xxxxxxxxx
or Galaxy may have against the other, whether such claims, demands, rights,
liabilities, and causes of action are known or unknown, foreseen or unforeseen,
contingent or noncontingent, and whether arising in tort, contract, or breach of
statutory duty. In addition, Xxxxxxxxx hereby releases and covenants not to xxx
any person or entity who purchased IWS products from Galaxy, of and from any and
all causes of action, liabilities, damages, claims and demands of any nature
whatsoever, whether known or unknown, which existed as of the effective date of
this Agreement and which arose out of or resulted from that person or entity's
purchase of IWS products produced by Galaxy.
8. Each party to this Agreement warrants and represents: that it has
complete authority to accomplish the actions and undertake the obligations
stated in this Agreement including the Exhibits; that the agents who sign the
Agreement or any Exhibit are authorized to do so on behalf of the party; that it
enters into this Agreement freely, without duress, and after consultation with
counsel; and that it has read and understands the Agreement including all
Exhibits. Further, Xxxxxxxxx represents and warrants that it is the sole entity
having an ownership interest in the Licensed Patents, and the sole entity having
the right to xxx for past damages relating to the Licensed Patents, and that it
has full legal right and authority to grant the
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licenses and releases set out herein.
9. Each party has had a reasonable opportunity to consult with counsel
concerning the releases in this Agreement.
10. This Agreement contains the entire understanding between the parties
and supersedes any prior or contemporaneous understandings, agreements,
proposals, and all other communications between the parties relating to this
subject matter of this Agreement, whether oral or written.
11. Nothing contained herein should be construed as a release of any party
for causes of action which may arise after the effective date of this Agreement.
12. This Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of Wisconsin.
13. This Agreement has been drafted with the assistance of counsel for
each signatory and shall not be construed in favor of, or against, any
signatory.
14. This Agreement may be executed in counterparts, and each such duly
executed counterpart shall be of the same validity, force and effect as the
original.
15. Notwithstanding any other provisions of this Agreement to the
contrary, this Agreement can be amended or modified only by a writing signed by
all of the parties. This provision cannot be orally waived.
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16. This Agreement shall be deemed to have been accepted and signed in
Green Bay, Wisconsin.
GALAXY NUTRITIONAL FOODS, INC.
By: /s/ Xxxxx Xxxxx
------------------------------------
Xxxxx Xxxxx, Chairman
Dated: May 6, 2004.
XXXXXXXXX FOODS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Print Name: President and COO
----------------------------
For Xxxxxxxxx Foods, Inc.
Dated: May 6, 2004.
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF WISCONSIN
GREEN BAY DIVISION XXXXXXXXX
FOODS, INC., )
)
Plaintiff, )
) Case No. 02 C 0498
)
v. ) Judge Xxxxxxxxx
)
GALAXY NUTRITIONAL FOODS, INC., )
)
Defendant. )
NOTICE AND STIPULATION OF DISMISSAL
Plaintiff, XXXXXXXXX FOODS, INC., and Defendant, GALAXY NUTRITIONAL FOODS,
INC., pursuant to Fed. R. Civ. P. 41(a)(1), by the signatures of their
respective counsel below, stipulate and agree to the dismissal of this case in
its entirety, including all claims and counterclaims of each party, with
prejudice, and with each party to bear its own costs and fees.
XXXXXXXXX FOODS, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx
NIRO, SCAVONE, XXXXXX & NIRO
000 Xxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000
GALAXY NUTRITIONAL FOODS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxxx
---------------------------
Xxxxxxxx X. Xxxxxxxxx
Xxxxxxx Xxxx & Xxxxxxxxx LLP
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
(000) 000-0000
Xxxxxx X. Xxxxx
Xxxx X. Xxxxxxx
Xxxxx & Xxxxxxxxx LLP
3200 National City Center
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
(000) 000-0000
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