SECOND AMENDMENT TO SUPPLY AGREEMENT
SECOND
AMENDMENT TO SUPPLY AGREEMENT
This
Second Amendment to Supply Agreement (this “Second
Amendment”)
is
made and entered into this 17th day of March, 2008, by and between Galaxy
Nutritional Foods, Inc. (hereinafter “Galaxy”)
and
Xxxxxxxxx Foods, Inc. (hereinafter “SFI”).
WHEREAS,
Galaxy and SFI entered into a Supply Agreement effective as of June 30,
2005, which agreement was amended by the letter agreement dated November 3,
2006
(the “Agreement”);
and
WHEREAS,
Galaxy and SFI desire to extend the term of the Agreement and to amend certain
other provisions of the Agreement.
NOW
THEREFORE, in consideration of the premises and of the mutual covenants and
agreements contained herein and for other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1.
Shortfall
Payment.
Notwithstanding
any provisions of the Agreement to the contrary, Galaxy and SFI hereby
acknowledge and agree that the Shortfall Payment to be made by Galaxy to SFI
pursuant to the terms of the Agreement, including without limitation Sections
III(C)(1), (2) and (3), shall be as determined by this Section 1.
a. |
Subject
to Sections 1(b), 1(c) and 1(d) below, the Shortfall Payment shall
be
determined as follows:
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i.
If
Galaxy
terminates the Agreement (other than pursuant to Section VII(B)(1) of the
Agreement) at any time prior to the first anniversary of this Second Amendment,
the Shortfall Payment shall be $5,100,000.
ii.
If
Galaxy
terminates the Agreement (other than pursuant to Section VII(B)(1) of the
Agreement) at any time on or after the first anniversary of this Second
Amendment and prior to the second anniversary of this Second Amendment, the
Shortfall Payment shall be $3,400,000.
iii. If
Galaxy
terminates the Agreement (other than pursuant to Section VII(B)(1) of the
Agreement) at any time on or after the second anniversary of this Second
Amendment and prior to the third anniversary of this Second Amendment, the
Shortfall Payment shall be $1,700,000.
iv.
At
all
times on or after the third anniversary of this Second Amendment, the Shortfall
Payment shall be $0.
b.
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In
the event of either party’s Change of Control, Galaxy’s obligation (and,
for purposes of clarification, the obligation of such acquiring party)
to
remit the Shortfall Payments to SFI shall terminate and be extinguished
as
of the date of such Change of Control; provided, however, that if
there is
a Change of Control of Galaxy in connection with the sale of Galaxy
(including stock sale, merger or sale of substantially all of Galaxy’s
assets) for a purchase price exceeding $50 million, then the obligation
to
remit the Shortfall Payments to SFI shall not terminate pursuant
to this
Section 1(b).
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c. |
If
SFI terminates the Agreement, Galaxy’s obligations to remit the Shortfall
Payments to SFI shall terminate and be extinguished as of the termination
date.
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d. |
If
Galaxy terminates the Agreement pursuant to Section VII(B)(1) of
the
Agreement, then Galaxy’s obligations to remit the Shortfall Payments to
SFI shall terminate and be extinguished as of the termination date.
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2.
Amendments.
The
Agreement is hereby amended as follows:
a.
|
Sections
III(A) and (B) of the Agreement shall be deleted in their entireties,
and
in their place, the following shall be
inserted:
|
“TERM
AND PRICE.
A. |
Term.The
“Term” of this Agreement shall be for a period of fifteen (15) years from
the Effective Date of this Agreement (the “Initial Term”).
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SFI
may
terminate this Agreement prior to the end of the Initial Term, without penalty,
upon provision of written notice to Galaxy issued at least six (6) months prior
to such proposed termination date. In such an event, Galaxy shall use its
commercially reasonable efforts to transition production of the Products to
a
new supplier. In the event Galaxy is unable to transition production for one
or
more of the Products within such six (6) month period, upon Galaxy’s request,
SFI shall continue to provide such Products to Galaxy, under the terms of this
Agreement, for an additional six (6) months after the date that would otherwise
have been the effective date of such termination.
Galaxy
may terminate this Agreement prior to the end of the Initial Term, without
penalty, upon provision of written notice to SFI issued at least six (6) months
prior to such proposed termination date, provided that the effective date for
such termination by Galaxy shall not be prior to December 31, 2012, unless
a
Change of Control of Galaxy shall have occurred, in which case the effective
date for such termination by Galaxy shall not be prior to December 31,
2010.
B. |
Price.
The price for Products during the Initial Term shall be as determined
in
accordance with the attached Exhibit B. SFI may increase the Conversion
component of the price described on Exhibit B once in any twelve-month
period to reflect changes in labor and benefits, materials, utilities
and
energy. Upon request by Galaxy, SFI will provide Galaxy with reasonable
back-up documentation substantiating such price adjustments. If the
proposed price exceeds the price at which Galaxy can obtain such
item
(either on its own or through another private labeling source), then
Galaxy may elect such alternative source for such item, and such
item will
be removed as a Product under this
Agreement.”
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b.
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Section
III(C)(3) of the Agreement shall be deleted in its
entirety.
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c. |
Section
VII(B)(1) of the Agreement is hereby amended by inserting the following
sentence at the end thereof, so that the following sentence is the
last
sentence of such section: “A material deterioration in the level of
service or quality of Products provided by or on behalf of SFI from
the
quality of Products or the service levels provided by SFI under this
Agreement as of March 17, 2008 shall constitute breach of a material
obligation under this Agreement for purposes of this Section
VII(B)(3).”
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3.
Mutual
Release.
SFI and
Galaxy hereby fully and forever release the other from any and all liability,
claims, damages, causes of action, rights and obligations arising out of or
relating in any manner to either party’s performance under the Agreement from
June 30, 2005 through and including the date of this Second Amendment.
4.
Co-Pack
Arrangements.
Notwithstanding any provisions of the Agreement to the contrary, Galaxy
acknowledges and agrees that SFI may elect to retain a third-party to provide
the Products on the same terms as provided in the Agreement, as amended, subject
to receipt of Galaxy’s prior written approval of such third party supplier,
which approval shall not be unreasonably withheld (it being understood and
agreed that Galaxy may withhold its consent if (a) the retention of such third
party would result in an increase in pricing to Galaxy or (b) such third party
is one of the companies listed on Exhibit
A
hereto
or an affiliate thereof or successor thereto). SFI shall remain responsible
to
Galaxy for all warranties and requirements under the Agreement as if SFI
manufactured the Products. SFI shall procure from any such third-party supplier
a confidentiality and non-use agreement in form and substance satisfactory
to
Galaxy.
5.
Definitions.
All
capitalized terms not otherwise defined herein, shall be defined as set forth
in
the Agreement.
6.
Remaining
Terms and Conditions.
SFI and
Galaxy hereby acknowledge and agree that, as of the date hereof, the Agreement
is in full force and effect, and that except as set forth herein, all remaining
terms and conditions of the Agreement shall remain unchanged, and the Agreement
shall remain in full force and effect.
7.
Distribution
of Products.
At
Galaxy’s request, Xxxxxxxxx shall distribute any Galaxy products which are
manufactured by third party co-packers or Galaxy. Xxxxxxxxx will charge standard
rates for such services.
[Signature
Page Follows.]
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IN
WITNESS WHEREOF, this Second Amendment to Supply Agreement has been duly
executed as of the date and year first set forth above.
XXXXXXXXX FOODS, INC. | GALAXY NUTRITIONAL FOODS, INC. | ||||
By: | /s/Xxxxxx X. Xxxxxxx | By: | /s/ Xxxxx X. Xxxxx | ||
Name: | Xxxxxx X. Xxxxxxx | Name: | Xxxxx X. Xxxxx | ||
Title: | COO, Xxxxxxxxx Operations | Title: | Chairman |
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Exhibit
A
Whitehall
Specialties, Inc.