[GRAPHIC]
GALAXY NUTRITIONAL FOODS COMPANY, INC.
Non-Qualified Stock Option Agreement
Galaxy Nutritional Foods Company, Inc., a Delaware corporation (the
"Company"), hereby grants as of the 7th day of August, 2006, to Xxxxxx X. Xxxxx,
(the "Optionee"), an option to purchase a maximum of 100,000 shares of its
Common Stock, $.01 par value (the "Common Stock"), at the price of $ 0.45 per
share, which is 110% of the closing market price (the "Option"), on the
following terms and conditions:
1. Grant as Non-Qualified Stock Option; Other Options. The Option shall be
treated for federal income tax purposes as a non-qualified stock option and NOT
as an incentive stock option under Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"). The option is in addition to any other options
heretofore or hereafter granted to the Optionee by the Company, but a duplicate
original of this instrument shall not affect the grant of another option.
2. Extent of Option. The Option is vested immediately. The Option (or a
portion hereof) may be exercised up to and including the date which is five
years from the date the Option is granted.
3. Termination of Directorship. If the Optionee ceases to be a director of
the Company, other than by reason of death at a time when the Optionee holds the
Option, the Optionee may exercise such Option within the original term of the
Option, as to all or any of the shares fully vested at the time.
4. Death. If the Optionee dies while serving as a director of the Company,
the Option may be exercised, to the extent of the number of shares with respect
to which the Optionee could have exercised it on the date of his death, by his
estate, personal representative or beneficiary who acquires the Option by will
or by the laws of descent and distribution, at any time prior to the Option's
expiration date specified in this Agreement.
5. Partial Exercise. Exercise of the Option up to the extent above stated
may be made in part at any time and from time to time within the above limits,
except that the Option may not be exercised for a fraction of a share.
6. Payment Price. The option price is payable, upon exercise, in United
States dollars and may be paid in cash or by check, or any combination of the
foregoing, equal in amount to the option price.
7. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may be exercised by written notice to the Company, at
the principal executive office of the Company, or to such transfer agent as the
Company shall designate. Such notice shall state the election to exercise the
Option and the number of shares in respect of which it is being exercised and
shall be signed by the person or persons so exercising the Option. Such notice
shall be accompanied by payment of the full purchase price of such shares, and
the Company shall deliver a certificate or certificates representing such shares
as soon as practicable after the notice shall be received. The certificate or
certificates for the shares as to which the Option shall have been so exercised
shall be registered in the name of the person or persons exercising the Option
and shall be delivered as provided above to or upon the written order of the
person or persons exercising the Option. In the event the Option shall be
exercised, pursuant to Section 4 hereof, by any person or persons other than the
Optionee, such notice shall be accompanied by appropriate proof of the right of
such person to exercise the Option. All shares that shall be purchased upon the
exercise of the Option as provided herein shall be fully paid and
non-assessable.
8. Option Not Transferable. The Option is not transferable or assignable
except by will or by the laws of descent and distribution. During the Optionee's
lifetime, only the Optionee can exercise the Option.
9. No Obligation to Exercise Option. The grant and acceptance of the
Option imposes no obligation on the Optionee to exercise it.
10. No Rights as Stockholder until Exercise. The Optionee shall not have
rights as a stockholder with respect to shares subject to this Agreement until a
stock certificate therefor has been issued to the Optionee and is fully paid
for. Except as is expressly provided below with respect to certain changes in
the capitalization of the Company, no adjustment shall be made for dividends or
similar rights for which the record date is prior to the date such stock
certificate is issued.
11. Capital Changes and Business Successions.
(a) The existence of the Option granted hereunder shall not affect
in any way the right or power of the Board of Directors of the Company (the
"Board") or the stockholders of the Company to make or authorize (i) any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, (ii) any merger or consolidation of the
Company or any of its affiliates, (iii) any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Stock, (iv)
the dissolution or liquidation of the Company or any of its affiliates, (v) any
sale or transfer of all or part of the assets or business of the Company or any
of its affiliates or (vi) any other corporate act or proceeding.
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(b) Subject to the provisions of Section 11(d), in the event of any
such change in the capital structure or business of the Company by reason of any
stock split, reverse stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger, consolidation, spin off,
reorganization, partial or complete liquidation, acquisition of property or
shares, separation, issuance of rights or warrants to purchase any Common Stock
or securities convertible into Common Stock, any sale or transfer of all or part
of the Company's assets or business, disaffiliation, any special cash dividend
or any other corporate transaction or event having an effect similar to any of
the foregoing and effected without receipt of consideration by the Company, then
the aggregate number and kind of shares that thereafter may be issued hereunder,
the number and kind of shares to be issued hereunder and the purchase price
thereof shall be appropriately adjusted consistent with such change in such
manner as the Board may deem equitable to prevent substantial dilution or
enlargement of the rights granted to, or available for, the Optionee, and any
such adjustment determined by the Board in good faith shall be final, binding
and conclusive on the Company and the Optionee and their respective heirs,
executors, administrators, successors and assigns. In connection with any event
described in this paragraph, the Board may provide, in its sole discretion, (i)
for the cancellation of the Option and payment in cash and/or other property
having an aggregate value equal to the value of such Option in exchange
therefor, (ii) the substitution of other property for the shares of Common Stock
subject to the Option; and (iii) in connection with any disaffiliation,
arranging for the assumption of the Option, or replacement of the Option with
new awards based on other property or other securities by the affected affiliate
or division or by the entity that controls such affiliate or division following
such disaffiliation (as well as any corresponding adjustments to the Option that
remain based upon Company securities). Except as provided hereunder, the
Optionee shall have no rights by reason of any issuance by the Company of any
class or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock
dividend, any other increase or decrease in the number of shares of stock of any
class, any sale or transfer of all or part of the Company's assets or business
or any other change affecting the Company's capital structure or business.
(c) Except as otherwise determined by the Board, fractional shares
of Common Stock resulting from any adjustment in the Option pursuant to Section
11(a) or Section 11(b) shall be aggregated until, and eliminated at, the time of
exercise by rounding-down and any remaining fractional shares of Common Stock
shall be settled in cash. Notice of any adjustment shall be given by the Board
to the Optionee, and such adjustment (whether or not such notice is given) shall
be effective and binding for all purposes hereunder.
(d) In the event of (x) a merger or consolidation in which the
Company is not the surviving entity, (y) any transaction that results in the
acquisition of substantially all of the Company's outstanding Common Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or (z) the sale or transfer of all or substantially all of the
Company's assets (all of the foregoing being referred to as an "Acquisition
Event"), then the Board, in its sole discretion, may terminate the Option if it
is outstanding as of the date of the Acquisition Event, by delivering notice of
termination to the Optionee at least 20 days prior to the date of the
Acquisition Event, in which case, during the period from the date on which such
notice of termination is delivered to the date of the Acquisition Event, the
Optionee shall have the right to exercise in full the Option then outstanding,
but any such exercise shall be contingent on the consummation of the Acquisition
Event, and, provided that, if the Acquisition Event does not occur within a
specified period after giving such notice for any reason whatsoever, the notice
and exercise pursuant thereto shall be null and void. If an Acquisition Event
occurs but the Board does not terminate the outstanding Awards pursuant to this
paragraph, then the provisions of Section 11(b) shall apply.
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12. Provision of Documentation to Optionee. By signing this Agreement, the
Optionee acknowledges receipt of a copy of this Agreement.
13. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware.
14. Expiration. This Option shall expire at 5:00 p.m. Orlando time on
August 7, 2011. Whether or not surrendered to the Company by the holder, this
Option shall be deemed cancelled upon expiration hereof.
IN WITNESS WHEREOF the Company and the Optionee have caused this
instrument to be executed on August 7, 2006.
OPTIONEE GALAXY NUTRITIONAL FOODS, INC.
/s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx Xxxxxxx X. Xxxxx
Chief Executive Officer
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