<PAGE>1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. _______)
X Filed by the Registrant
_____ Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
_____ Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
X Definitive Proxy Statement
_____ Definitive Additional Materials
_____ Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
<PAGE> 2
GALAXY FOODS COMPANY, a Delaware corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the approximate box)
X No fee required.
_____ Fee computed on table below per Exchange
Act Rules 14a-6(i)(4) and O-11.
1. Title of each class of securities to
which transaction applies:
2. Aggregate number of securities to which
transaction applies:
3. Per unit price or other underlying value
of transaction computed pursuant to
Exchange Act Rule O-11 (set forth the
amount on which the filing fee is
calculated and state how it was
determined):
4. Proposed maximum aggregate value of
transaction:
5. Total fee paid:
_____ Fee paid previously with preliminary
materials.
_____ Check box if any part of the fee is
offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for
which the offsetting fee was paid previously.
Identify the previous filing by registration
statement number, or the Form or Schedule and
the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE> 3
GALAXY FOODS COMPANY
2441 Viscount Row
Orlando, Florida 32809
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, NOVEMBER 11, 1998
To the Shareholders:
The Annual Meeting of Shareholders of Galaxy Foods Company (the
"Company"), will be held Friday, November 11, 1998 at 10:00 a.m.
at the offices of the Company in Orlando, Florida for the
following purposes:
1. To fix the number of directors at four and to elect a
Board of Directors for the ensuing year.
2. To ratify the retention of BDO Seidman L.L.P. as the
independent auditors of the Company for the fiscal year
ended March 31, 1999.
3. To transact such other business as may properly come
before the meeting and any adjournment thereof.
Shareholders of record at the close of business on September 18,
1998 will be entitled to vote at the meeting or any adjournment
thereof.
By Order of the Board of Directors
/S/Cynthia L. Hunter
Cynthia L. Hunter
Corporate Secretary
Orlando, Florida
September 18, 1998
SHAREHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL. IF YOU
ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE> 4
GALAXY FOODS COMPANY
2441 Viscount Row
Orlando, Florida 32809
September 18, 1998
PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
to be held Wednesday, November 11, 1998
Proxies in the form enclosed with this proxy statement are
solicited by the Board of Directors of Galaxy Foods Company
(the "Company"), a Delaware corporation, for the use at the
Annual Meeting of Shareholders to be held Wednesday, November
11th, 1998 at 10:00 a.m. at the offices of the Company in
Orlando, Florida.
Only shareholders of record as of September 18, 1998 will be
entitled to vote at the meeting and any adjournment thereof.
As of September 18, 1998, 61,717,051 shares of Common
Stock, par value $.01 per share, of the Company were issued
and outstanding. Each share of Common Stock outstanding as
of the record date will be entitled to one vote, and
shareholders may vote in person or by proxy. Execution of a
proxy will not, in any way, affect a shareholders' right to
revoke it by written notice to the Secretary of the Company
at any time before it is exercised or by delivering a later
executed proxy to the Secretary of the Company at any time
before the original proxy is exercised.
All properly executed proxies returned in time to be cast at
the meeting will be voted and, with respect to the election
of a Board of Directors, will be voted as stated below under
"Election of Directors". Any shareholder giving a proxy has
the right to withhold authority to vote for any individual
nominee to the Board of Directors by writing that nominee's
name in the space provided on the proxy. In addition to the
election of directors, the shareholders will consider and
vote upon a proposal to ratify the retention of BDO Seidman
L.L.P. as the Company's auditors for the fiscal year ending
March 31, 1999. Where a choice has been specified on the
proxy with respect to the foregoing matters, the shares
represented by the proxy will be voted in accordance with the
specification, and will be voted FOR if no specification is
indicated.
The Board of Directors knows of no other matter to be
presented at the meeting. If any other matter should be
presented at the meeting upon which a vote might be taken,
shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance
with the judgment of the persons named as attorneys in the
proxies. This proxy statement and the form of proxy were
first mailed to shareholders on or about September 30, 1998.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth to the knowledge of
Management, each person of entry who is the beneficial owner
of more than 5% of the 61,717,051 shares of the Company's
Common Stock, $.01 par value ("Common Stock") outstanding
as of September 18, 1998, the number of shares owned by each
such person and the percentage of the outstanding shares
represented thereby.
Amount and
Name and Address Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class(2)
Angelo S. Morini
2441 Viscount Row
Orlando, Florida 32809 25,170,199(3) 38.1%
Cede & Co.
Box #20
Bowling Green Station
New York, New York 35,525,107(4) 53.8%
(1) The inclusion herein of any shares deemed beneficially
owned does not constitute an admission of beneficial
ownership of these shares.
(2) The total number of shares outstanding assuming the
exercise of all currently exercisable and vested options and
warrants held by all executive officers, current directors,
and holders of 5% or more of the Company's issued and
outstanding Common Stock is 66,025,940 shares. Does not
assume the exercise of any other options or warrants.
(3) Includes options to acquire 1,091,500 shares of the
Company's Common Stock. These options include an option
issued on October 1, 1991 to acquire 91,500 shares of the
Company's stock at $3.575 per share. The original exercise
price of this option was reduced by the Board of Directors
to $.50 per share on August 31, 1993. The term to exercise
this option was extended to October 1, 2001 on October 1,
1996. On July 1, 1997, Mr. Morini was granted an option to
acquire 1,000,000 shares of the Company's Common Stock at an
exercise price of $0.75 per share under the terms of his
employment agreement, which option expires on July 1, 2002.
The closing bid price of the Company's stock on the inter-
dealer quotation system operated by Nasdaq, Inc. (the
"NASDAQ System") on June 30, 1997 was $0.75. Also
includes 5,000 shares owned by Mr. Morini that are held in a
nominee name and 2,000 shares held in joint tenancy.
(4) Cede & Co. is a share depository used by shareholders
to hold stock in street name. Does not include 5,000 shares
beneficially owned by Angelo S. Morini and held by Cede &
Co. in street name.
<PAGE > 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of September 18, 1998,
the number of shares owned directly, indirectly and
beneficially by each executive officer and each director and
director-nominee of the Company, and by all executive
officers and directors as a group:
Amount and
Name and Address Nature of Percent of
of Beneficial Owner Beneficial Ownership(1) Class (2)__
Angelo S. Morini
Galaxy Foods Company
2441 Viscount Row
Orlando, Florida 32809 25,170,199 (3) 38.1%
Earl G. Tyree
240 North Line Drive
Apopka, Florida 32703 22,000 (4) *
Douglas A. Walsh
607 Tamiami Trail
Ruskin, Florida 33570 22,667 (5) *
Marshall K. Luther
Galaxy Foods Company
2441 Viscount Row
Orlando, Florida 32809 127,333 (6) *
Cynthia L. Hunter
Galaxy Foods Company
2441 Viscount Row
Orlando, Florida 32809 32,000 (7) *
All executive officers and directors
as a group 25,374,199 38.4%
* Less than 1%.
(1) The inclusion herein of any shares deemed beneficially
owned does not constitute an admission of beneficial
ownership of these shares.
(2) The total number of shares outstanding assuming the
exercise of all currently exercisable and vested options and
warrants held by all executive officers, directors, and
holders of 5% or more of the Company's issued and
outstanding Common Stock is 66,025,940 shares. Does not
assume the exercise of any other options or warrants.
(3) Includes options to acquire 1,091,500 shares of the
Company's Common Stock. These options include an option
issued on October 1, 1991 to acquire 91,500 shares of the
Company's stock at $3.575 per share. The original exercise
price of this option was reduced by the Board of Directors
to $.50 per share on August 31, 1993. The term to exercise
this option was extended to October 1, 2001 on October 1,
1996. On July 1, 1997, Mr. Morini was granted an option to
acquire 1,000,000 shares of the Company's Common Stock at an
exercise price of $0.75 per share under the terms of his
employment agreement, which option expires on July 1, 2002.
The closing bid price of the Company's stock as quoted on
the NASDAQ System on June 30, 1997 was $0.75. Also includes
5,000 shares owned by Mr. Morini that are held in a nominee
name and 2,000 shares held in joint tenancy.
<PAGE> 7
4) Mr. Tyree, a current member of the Board of Directors,
was granted an option to acquire 15,000 shares of Common
Stock on September 11, 1992 for an exercise price of $2.88
per share. This option expires on September 11, 2002. The
closing bid price of the Company's Common Stock as reported
on the NASDAQ System on September 10, 1992 was $2.875 per
share. Mr. Tyree was granted an additional option on
October 1, 1993 to acquire 1,000 shares of Common Stock at
an exercise price of $2.125 per share. This option expires
on October 1, 2003. The closing bid price of the Company's
Common Stock as quoted on the NASDAQ System on September 30,
1993 was $2.00 per share. The exercise price of all of Mr.
Tyree's then existing options was reduced to $2.00 per share
on January 31, 1994. The closing bid price of the Company's
Common Stock as quoted on the NASDAQ System on January 28,
1994 was $4.625 per share. On October 1, 1994, Mr. Tyree
was granted an option to acquire 1,000 shares at an exercise
price of $2.75 per share. The closing bid price of the
Company's Common Stock as quoted on the NASDAQ System on
September 30, 1994, was $2.875 per share. This option
expires on October 1, 2004. On October 1, 1995, Mr. Tyree
was granted an option to acquire 1,000 shares at an exercise
price of $0.59 per share. The closing bid price of the
Company's Common Stock as quoted on the NASDAQ System on
September 29, 1995, was $0.59375 per share. This option
expires on October 1, 2005. On October 1, 1996, Mr. Tyree
was granted an option to acquire 2,000 shares at an exercise
price of $1.47 per share which expires on October 1, 2006.
The closing bid price of the Company's Common Stock as
quoted on the NASDAQ System on September 30, 1996 was $1.50
per share. On October 1, 1997, he was granted an option to
acquire 2,000 shares at an exercise price of $1.1875 per
share which expires on October 1, 2007. The closing bid
price of the Company's Common Stock as quoted on the NASDAQ
System on September 30, 1997 was $1.1875 per share. All of
Mr. Tyree's options currently are exercisable.
(5) Dr. Walsh, a current member of the Board of Directors,
was granted an option to acquire 15,000 shares of Common
Stock on January 31, 1992 for an exercise price of $3.00 per
share. This option expires on January 31, 2002. The
closing bid price of the Company's Common Stock as quoted on
the NASDAQ System on January 30, 1992 was $2.50 per share.
Dr. Walsh was granted an additional option on October 1,
1992 to acquire 667 shares of Common Stock at an exercise
price of $2.875 per share. This option expires on October
1, 2002. The closing bid price of the Company's Common
Stock as quoted on the NASDAQ System on September 30, 1992
was $2.625 per share. Dr. Walsh was granted an additional
option on October 1, 1993 to acquire 1,000 shares of Common
Stock at an exercise price of $2.125 per share. This option
expires on October 1, 2003. The closing bid price of the
Company's Common Stock as quoted on the NASDAQ System on
September 30, 1993 was $2.00 per share. The exercise price
of all of Dr. Walsh's then existing options was reduced to
$2.00 per share on January 31, 1994. The closing bid price
of the Company's Common Stock as quoted on the NASDAQ System
on January 28, 1994 was $4.625 per share. On October 1,
1994, Dr. Walsh was granted an option to acquire 1,000
shares at an exercise price of $2.75 per share. The closing
bid price of the Company's Common Stock as quoted on the
NASDAQ System on September 30, 1994, was $2.875 per share.
This option expires on October 1, 2004. On October 1, 1995,
Dr. Walsh was granted an option to acquire 1,000 shares at
an exercise price of $.59 per share. The closing bid price
of the Company's Common Stock as quoted on the NASDAQ System
on September 29, 1995, was $.59375 per share. This option
expires on October 1, 2005. On October 1, 1996, Dr. Walsh
was granted an option to acquire 2,000 shares at an exercise
price of $1.47 per share which expires on October 1, 2006.
The closing bid price of the Company's Common Stock as
quoted on the NASDAQ System on September 30, 1996 was $1.50
per share. On October 1, 1997, he was granted an option to
acquire 2,000 shares at an exercise price of $1.1875 per
share which expires on October 1, 2007. The closing bid
price of the Company's Common Stock as quoted on the NASDAQ
System on September 30, 1997 was $1.1875 per share. All of
Dr. Walsh's options currently are exercisable.
(6) Mr. Luther, a current member of the Company's Board of
Directors, holds warrants to acquire 50,000 shares of Common
Stock at a price of $0.6407 per share. These warrants were
granted as compensation for work per the terms of Mr.
Luther's agreement with the Company to serve as Senior Vice
President of Marketing for a term of one year. In addition,
Mr. Luther was granted options to acquire 15,000 shares of
the Company's Common Stock on January 31, 1996, for an
exercise price of $.8125 per share, which option expires on
January 31, 2006. On October 1, 1996, Mr. Luther was granted
an option to acquire 1,333 shares at an exercise price of
$1.47 per share which expires on October 1, 2006. The
closing bid price of the Company's Common Stock was quoted
on the NASDAQ System on September 30, 1996 was $1.50 per
share. On October 1, 1997, he was granted an option to
acquire 2,000 shares at an exercise price of $1.1875 per
share which expires on October 1, 2007. The closing bid
price of the Company's Common Stock as quoted on the NASDAQ
System on September 30, 1997 was $1.1875 per share. All of
Mr. Luther's options are currently exercisable. Also
includes 59,000 shares owned by Mr. Luther and held in
nominee name.
<PAGE> 8
(7) Includes options to acquire 30,000 shares of the
Company's Common Stock granted to Ms. Hunter pusuant to the
Company's 1996 Stock Option Plan. Such options are
exercisable at $0.78125 to $1.00 per share and expire as to
15,000 on June 18, 2007 and as to 15,000 on October 23,
1997. Of these options, 10,000 are exercisable. Also
includes 2,000 shares owned by Ms. Hunter and held in
nominee name.
PROPOSAL ONE: ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold
office until the next annual meeting of shareholders and
until their successors shall have been elected and
qualified. Shares represented by all proxies received by the
Board of Directors and not so marked as to withhold
authority to vote for any individual director or for all
directors will be voted (unless one or more nominees are
unable or unwilling to serve) for fixing the number of
directors for the ensuing year at four and for the election
of the nominees named in the following table. The Board of
Directors knows of no reason why any such nominee should be
unable or unwilling to serve, but if such be the case,
proxies will be voted for the election of some other person
or for fixing the number of directors at a lesser number.
Officers and Directors
The following table sets forth the current and proposed
directors and executive officers of the Company as of
September 18, 1998, and the ages of and positions with the
Company held by each of such persons:
Name Age Positions
Angelo S. Morini (1) 55 Chairman of the Board of
Directors, President, and
Chief Executive Officer
Cynthia L. Hunter 28 Chief Financial Officer and
Corporate Secretary
Earl G. Tyree (1) 77 Director
Douglas A. Walsh (1) 53 Director
Marshall K. Luther (1) 45 Director
(1) Nominee for Director. The current directors of the
Company are the sole nominees for election to the Board of
Directors for the ensuing year.
Each director is elected to hold office until the next
annual meeting of shareholders and until his successor is
chosen and qualified. The officers of the Company are
elected annually at the first Board of Directors meeting
following the annual meeting of shareholders, and hold
office until their respective successors are duly elected
and qualified, unless sooner displaced.
<PAGE> 9
Angelo S. Morini has been President of the Company since its
inception and is the inventor of formagg?. He was elected
Chairman of the Board of Directors, President,
and Chief Executive Officer in 1987. Between 1974 and 1980,
Mr. Morini was the general manager of Galaxy Cheese Company,
which operated as a sole proprietorship until its
incorporation in May 1980. Prior to 1974, he was associated
with the Food Service Division of Pillsbury Company and the
Post Division of General Foods Company. In addition, he
worked in Morini Markets, his family-owned and operated
chain of retail grocery stores in the New Castle,
Pennsylvania, area. Mr. Morini received a B.S. degree in
Business Administration from Youngstown State University in
1968.
Cynthia L. Hunter, CPA was elected Chief Financial Officer
and Assistant Secretary on June 30, 1997 and Corporate
Secretary on August 6, 1997. Prior to joining the Company,
Ms. Hunter worked as an senior auditor for Coopers & Lybrand
L.L.P. in Orlando, Florida from December 1994 to June 1997
and an associate auditor for Coopers and Lybrand from
October 1993 to December 1994. Prior to her experience at
Coopers, Ms. Hunter worked as a Cost Accountant at Pratt &
Whitney, a division of United Technologies. During her
years in public accounting, Ms. Hunter was responsible for
coordinating and overseeing audits on a variety of clients
including manufacturing and electronics companies. Ms.
Hunter earned a B.S. in Accounting from Florida State
University, Tallahassee, Florida in May 1991 and a Masters
in Accountancy also from Florida State University, in May
1992.
Earl G. Tyree has been a director of the Company since
September 1992. From 1980 to 1994, Mr. Tyree served as
President of Bruce Novograd Advertising, Incorporated, a
company he co-founded. From 1975 to 1979, Mr. Tyree was
President of the John F. Murray advertising division of
American Home Products Corporation and from 1972 to 1975,
Mr. Tyree served as President of Sterling Drug,
Incorporated, whose subsidiaries included the Bayer Company
(Bayer Aspirin), the Charles H. Phillips Company (Milk of
Magnesia), and Glenbrook Laboratories. Mr. Tyree attended
the University of Richmond where he majored in accounting.
Douglas A. Walsh, D.O., has been a director of the Company
since January 1992. Dr. Walsh has been a practicing
physician since 1970, specializing in Family Practice and
Sports Medicine. From 1984 to present, he has been
affiliated with Family Doctors, a four-physician group
located in Tampa, Florida. From 1971 to 1984, he was the
Health Commissioner for Mahoning County, Ohio, and from 1983
to 1985, he was the Clinic Commander for the U.S. Air Force
911 Tac Clinic in Pittsburgh, Pennsylvania. From 1985 to
1988, he was a flight surgeon at Patrick Air Force Base,
Cocoa Beach, Florida. Dr. Walsh's teaching appointments
include Associate Professor of Family Practice (Clinical) at
Ohio University and Clinical Preceptor at the University of
Health Sciences, Kansas City, Missouri. Dr. Walsh received
a B.S. degree in Microbiology from the University of
Houston, Houston, Texas, in 1965, and a D.O. degree from the
University of Health Sciences, Kansas City, Missouri, in
1970. Dr. Walsh also serves as a team physician for the
Pittsburgh Pirates organization.
Marshall K. Luther was elected to the Board of Directors on
January 31, 1996. From 1993 to 1995, Mr. Luther served as
Senior Vice President, Marketing of Tropicana Products, Inc.
and from 1975 to 1992, he served in various marketing
positions for General Mills International Restaurants. Mr.
Luther received his B.S. in Engineering from Brown
University in 1974 and his M.B.A. in Marketing from the
Wharton Graduate School of Business in 1976.
To the knowledge of the Company, no executive officer or
director of the Company is a party adverse to the Company or
has material interest adverse to the Company in any legal
proceeding.
<PAGE> 10
Certain Relationships and Related Transactions
On October 10, 1995, the Company entered into an employment
agreement with Angelo S. Morini. The agreement increases
Mr. Morini's base salary to $250,000 per year from $200,000.
Additionally, the agreement details additional non-cash
compensation based on the performance of the Company. See
"Executive Compensation - Employment Agreement of Chief
Executive Officer."
On July 1, 1997, Mr. Morini was granted an option to acquire
1,000,000 shares of the Company's Common Stock at an
exercise price of $0.75 per share under the terms of his
employment agreement, which option expires on July 1, 2002.
The closing bid price of the Company's stock as quoted on
the NASDAQ System on June 30, 1997 was $0.75.
Meetings of the Board of Directors and Committees
The Board of Directors met one time during the fiscal year
ended March 31, 1998 and all the Directors were present.
The Board of Directors does not currently have any standing
audit, nominating, compensation, or other committees.
Executive Compensation
The following table sets forth the compensation of the
Company's Chief Executive Officer for the fiscal years ended
March 31, 1998, 1997, and 1996 (no other executive officer
of the Company was compensated in an amount in excess of
$100,000 for any such fiscal years):
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Under- All Other
Name and Compen- Stock lying LTIP Compen-
Principal Fiscal Salary Bonus sation Award(s) Options/ Pay sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
Angelo S. Morini(1) 1998 250,000 -- 19,132(2) -- -- -- --
Chairman of the 1997 250,000 -- 16,262(3) -- -- -- --
Board of Directors, 1996 227,917 -- 14,704(4) -- 18,000,000 -- --
President, and Chief
Executive Officer
(1) For the fiscal year ended March 31, 1996, Mr. Morini
was also paid $8,208, for interest on three loans,
aggregating $1,035,652, made to the Company by Mr. Morini.
The interest rates on these loans ranged from 12% to 14% per
annum. These loans were paid in full by June 7, 1995. On
October 10, 1995, the Company entered into an employment
agreement with Mr. Morini upon terms and conditions approved
by the Board of Directors. In accordance with the terms of
such employment agreement, Mr. Morini was granted the right
to purchase up to 18,000,000 shares of the Company's Common
Stock at a per share price of 110% of the average closing
bid price as reported on the NASDAQ System for the ten
trading days preceding the receipt by the Company of written
notice of Mr. Morini's election to purchase shares. Mr.
Morini exercised this option on October 11, 1995, for a
price per share of $0.6429 and currently owes $11,572,200
for a note payable to the Company. On August 11, 1993, the
Board of Directors approved the issuance to Angelo S. Morini
of an option to purchase 2,400,000 shares of the Company's
Common Stock for a purchase price of $.50 per share in
consideration for Mr. Morini's past services to the Company,
the pledge by Mr. Morini of all of then-current shares owned
by Mr. Morini to the Company's then principal lender, J&C
Resources, Inc. ("J&C"), to secure loans made to the
Company, and the subordination of all loans made by Mr.
Morini to the Company to payment of the sums due J&C. Mr.
Morini exercised this option on November 4, 1994 and
currently owes $1,200,000 for a note payable to the Company.
See "Certain Relationships and Related Party
Transactions."
<PAGE> 11
(2) For the fiscal year ended March 31, 1998, the Company
paid $11,500 in lease payments for Mr. Morini's automobile
and $7,632 in club dues for Mr. Morini.
(3) For the fiscal year ended March 31, 1997, the Company
paid $9,107 in lease payments for Mr. Morini's automobile
and $7,155 in club dues for Mr. Morini.
(4) For the fiscal year ended March 31, 1996, the Company
paid $9,107 in lease payments for Mr. Morini's automobile
and $5,597 in club dues for Mr. Morini.
(5) On October 1, 1991, Mr. Morini was issued an option to
acquire 91,500 shares of the Company's stock at $3.575 per
share. The original exercise price of this option was
reduced by the Board of Directors to $.50 per share on
August 31, 1993. The term to exercise this option expired
as of October 1, 1996. On October 1, 1996, the Board of
Directors extended the expiration date of such option to
October 1, 2001.
The following table sets forth information concerning each
grant of stock options and freestanding stock appreciation
rights during the fiscal year ended March 31, 1997 by each
of the executive officers named in the Summary of
Compensation Table above, and the fiscal year-end value of
unexercised options and SARs.
Option/SAR Grants in Last Fiscal Year
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
(a) (b) (c) (d) (e) (f) (g)
Number of % of
Securities Total
Under- Options/
Lying SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
Angelo S. Morini 1,000,000 82.7% $0.75 07/01/02 $210,000 $460,000
Compensation of Directors
Each non-employee director who served on the Board of
Directors during the last fiscal year received a fee of $500
plus expenses for his services.
<PAGE> 12
Additionally, each non-employee director of the Company is
entitled to receive on October 1 of each year, options to
purchase a number of shares of Common Stock equal to (i) 1,000
shares, if such director served for a full year prior to the
October 1 anniversary date, or (ii) a pro rated amount equal
to 83.33 shares for each full month served during the year
prior to such anniversary date, if such director did not serve
for a full year prior to the anniversary date. Such options
are granted pursuant to the Company's 1991 Non-Employee
Director Stock Option Plan (the "1991 Plan") which was adopted
by the Board of Directors on October 1, 1991, and approved by
the shareholders of the Company on January 31, 1992. As
originally adopted, 33,500 shares of Common Stock were
reserved for issuance under the 1991 Plan. Of these 33,500
shares, Dr. Richard Gentile, a former director, and Mr. Earl
Tyree and Dr, Douglas Walsh, current directors, each received
options on October 1, 1995 to purchase 1,000 shares of Common
Stock. Dr. Douglas Walsh, Mr. Earl Tyree and Mr. Marshall
Luther, all current directors, each received options on
October 1, 1996 to purchase 2,000, 2,000 and 1,333 shares
respectively of Common Stock. Dr. Douglas Walsh, Mr. Earl
Tyree and Mr. Marshall Luther, all current directors, each
received options on October 1, 1997 to purchase 2,000 shares
respectively of Common Stock. The remaining 16,617 shares are
available for issuance pursuant to options granted under the
1991 Plan.
Employment Agreement of Chief Executive Officer
As of October 10, 1995, the Company entered into an
Employment Agreement (the "Agreement") with Angelo S.
Morini, the Company's President and Chief Executive Officer.
The Agreement has a term of five years and provides for an
annual base salary of $250,000. Additionally, Mr. Morini
will receive an annual bonus in an amount equal to five
percent of the Company's pre-tax net income for book
purposes, as determined by the Company's independent
certified public accounting firm. Other material provisions
of the Agreement are as follows:
1. Mr. Morini shall have the right to purchase (the
"Purchase Rights") up to 18,000,000 shares of the
Company's Common Stock, at a per share price of 110% of the
average closing bid price as reported on the NASDAQ System
for the ten trading days preceding the receipt by the
Company of written notice of Mr. Morini's election to
purchase shares. The purchase price for such shares may be
evidenced by a promissory note executed by Mr. Morini in
favor of the Company, which note shall bear interest at a
rate at least equal to the applicable federal rate
established by the United States Internal Revenue Service.
The promissory note shall have a term of five years. Mr.
Morini shall have the option to extend the note for up to
five additional years provided that he pays at least one-
third of the then accrued but unpaid interest, with any
remaining unpaid interest to be added to principal. Any
such promissory note shall be secured by a first priority
security interest in all shares purchased by Mr. Morini in
conjunction with the exercise of the Purchase Rights as
evidenced by a stock pledge and security agreement executed
by Mr. Morini in favor of the Company.
2. Mr. Morini shall be granted certain options to
purchase Common Stock upon the Company's achievement of each
of the following milestone events:
<PAGE> 13
Milestone Event Number of Options Granted
Reaching break-even for a 1,000,000
calendar quarter
Annual net operating income 1,000,000
of $1,000,000 or more
Each increment of $1,000,000 1,000,000
of annual net operating income
in excess of $1,000,000
Each of the options granted as aforesaid shall have a term
of five years from the date granted and shall be exercisable
in whole or in part upon the delivery by Mr. Morini to the
Company of written notice of exercise. The exercise price
for each of the options shall be the closing bid price of
the Company's Common Stock on the trading day immediately
preceding the Company's achievement of the related milestone
event as established by the NASDAQ System. The exercise
price for any such option shares may be evidenced by a
promissory note executed by Mr. Morini in favor of the
Company and bearing interest at a rate at least equal to the
applicable federal rate established by the United States
Internal Revenue Service. The promissory note shall have a
term of five years. Mr. Morini shall have the option to
extend the note for up to five additional years provided
that he pays at least one-third of the then accrued but
unpaid interest, with any remaining unpaid interest to be
added to principal. Any such promissory note shall be
secured by a first priority security interest in all shares
purchased by Mr. Morini in conjunction with the exercise of
the options as evidenced by a stock pledge and security
agreement executed by Mr. Morini in favor of the Company.
3. The Agreement is terminable by Mr. Morini upon
the delivery of written notice of termination in the event
that a majority of the Company's Board of Directors is at
any time comprised of persons for whom Mr. Morini did not
vote in his capacity as a director or a shareholder of the
Company (a "Change of Control"). If Mr. Morini abstains
from voting for any person as a director, such abstention
shall be deemed to be an affirmative vote by Mr. Morini for
such person as a director.
4. If the Agreement is terminated, regardless of
the reason for such termination, Mr. Morini shall be
entitled to retain all unexercised Purchase Rights and
options granted under the Agreement and all shares of Common
Stock issued in connection with the exercise of such
Purchase Rights and options, and shall receive all earned
but unpaid base salary through the effective date of
termination and all accrued but unpaid bonuses for the
fiscal year(s) ending prior to the effective date of
termination. Additionally, in the event that Mr. Morini's
employment is terminated without cause or due to his death,
total disability or legal incompetence, or if Mr. Morini
terminates his employment upon a change of control, the
Company shall pay to Mr. Morini or his estate severance pay
equal to three times the amount of Mr. Morini's annual base
salary (before deductions for withholding, employment and
unemployment taxes), and a bonus for the year of termination
and the following two years equal to the average of the two
bonuses paid to Mr. Morini under the Agreement.
<PAGE> 12
5. In the event of a change of control, Mr.
Morini may, at any time thereafter, require that the Company
purchase up to 1,638,564 shares of his Common Stock at a
purchase price of $.50 per share, subject to adjustment for
any increase or decrease in the number of outstanding shares
of the Company's Common Stock or in the event that the
Common Stock is changed into or exchanged for a different
number or class or kind of shares or securities of the
Company, by reason of merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in
corporate structure or the like.
6. The Company extended the maturity date of that
certain Promissory Note dated as of November 4, 1994,
executed by Mr. Morini in favor of the Company in the
principal amount of $1,200,000 in conjunction with his
exercise of options previously granted by the Company for
two additional years until November 4, 2001.
7. Mr. Morini has agreed that in the event he
voluntarily terminates his employment with the Company or if
he is terminated for "cause" (as defined in the
Agreement), he will not compete with the Company for a
period of one year following the date of termination of his
employment with the Company, whether as an employee,
officer, director, partner, shareholder, consultant or
independent contractor in any business substantially similar
to that conducted by the Company within those areas in the
United States in which the Company is doing business as of
the date of termination.
As of October 11, 1995, Mr. Morini exercised the Purchase
Rights with respect to all 18,000,000 shares of Common Stock
subject thereto (the "Purchase Right Shares"). In
connection with the exercise of such Purchase Rights, Mr.
Morini executed in favor of the Company a balloon promissory
note (the "Note") in the principal amount of $11,572,200.
The Note bears interest at the rate of seven percent per
annum and is due and payable in full on October 11, 2000,
subject to Mr. Morini's option to extend the Note for up to
five additional years provided that he pays at least one-
third of the then accrued but unpaid interest, with any
remaining unpaid interest to be added to principal. In
order to secure the Note, Mr. Morini executed in favor of
the Company a stock pledge and security agreement pursuant
to which Mr. Morini granted the Company a first priority
security interest in all of the Purchase Right Shares.
On July 1, 1997, Mr. Morini was granted an option to acquire
1,000,000 shares of the Company's Common Stock at an
exercise price of $0.75 per share under the terms of the
agreement, by virtue of the Company reaching the first
milestone event under his employment agreement. This option
expires on July 1, 2002. The closing bid price of the
Company's stock as quoted on the NASDAQ System on June 30,
1997 was $0.75.
<PAGE> 15
PROPOSAL TWO: TO RATIFY THE RETENTION OF BDO SEIDMAN
L.L.P. AS THE COMPANY'S AUDITORS
The Board of Directors has selected the firm of BDO Seidman
L.L.P. as the Company's independent certified public
accountants for the current fiscal year. BDO Seidman has
served as the Company's independent public accountants for
each of the last five years. It is expected that a
representative of BDO Seidman L.L.P. will be present during
the Annual Meeting. The representative will have an
opportunity to make a statement if he or she so desires and is
expected to be available to respond to appropriate questions
from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RETENTION OF BDO SEIDMAN L.L.P. AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE CURRENT
FISCAL YEAR.
OTHER BUSINESS
The Board of Directors knows of no business which will be
presented for consideration at the meeting other than stated
above. If any other business should come before the meeting,
votes may be cast pursuant to proxies in respect to any such
business in the best judgment of the person or persons
acting under the proxies.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the
Company. In addition to soliciting shareholders by mail of
by its regular employees, the Company may request banks and
brokers to solicit their customers who have stock of the
Company registered in the name of a nominee and, if so, will
reimburse such banks and brokers for their reasonable out-
of-pocket costs. Solicitation by officers and employees of
the Company, none of whom will receive additional
compensation therefor, may also be made of some shareholders
in person or by mail, telephone or telegraph, following the
original solicitation.
SHAREHOLDER PROPOSALS
It is anticipated that the Company's next annual meeting of
shareholders will be held in October 1999, and proposals of
shareholders intended for inclusion in the proxy statement
will be furnished to all shareholders entitled to vote at
the next annual meeting of the Company, and must be received
at the Company's principal executive offices no later than
July 13, 1999. It is suggested that proponents submit their
proposals by Certified Mail-Return Receipt Requested.
Notice of shareholder proposals outside the processes of
Rule 14a-8 of the of the Securities Exchange Act of 1934, as
amended, (for proposals submitted for inclusion in proxy
statement and form of proxy) for the next annual meeting of
shareholders must be received at the Company's principal
executive offices no later than September 28, 1999.
The Company will provide without charge to each person whose
proxy is being solicited hereby, upon the written request of
such person, a copy of the Company's annual report on Form
10-K, including the financial statements and the financial
statement schedules, filed with the Securities and Exchange
Commission for the Company's fiscal year ended March 31,
1998. All such requests should be directed to Investor
Relations, at 2441 Viscount Row, Orlando, Florida 32809.
<PAGE> 16
GALAXY FOODS COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, NOVEMBER 11, 1998
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Angelo S. Morini with full
power of substitution, the proxies of the undersigned to
vote all shares of Common Stock of Galaxy Foods Company (the
"Company") which the undersigned is entitled to vote at
the Annual Meeting of Shareholders of the Company to be held
on Friday, November 11, 1998, at 10:00 a.m., local time, at
the offices of the Company located at Orlando Central Park,
2441 Viscount Row, Orlando, Florida, and at any adjournments
or postponements thereof, with the same force and effect as
the undersigned might or could do if personally present
thereof.
1. ELECTION OF DIRECTORS [ ] FOR all nominees
below
[ ] WITHHOLD AUTHORITY to vote for all nominees
listed below.
(Instruction: To withhold authority to vote for
any nominee, draw a line through such nominee's
name.)
Marshall K. Luther, Angelo S. Morini, Earl G.
Tyree, Douglas A. Walsh, MD.
(continued on the other side)
(continued from other side)
2. TO RATIFY THE RETENTION OF BDO SEIDMAN L.L.P. AS
THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS (The Board of Directors recommends a vote
FOR)
[ ] FOR [ ] AGAINST
[ ] ABSTAIN
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING AND
ANY ADJOURNMENT THEREOF
The Board of Directors knows
of no business which will be
presented for consideration
at the meeting other than
stated above. If any other
business should come before
the meeting, votes may be
cast pursuant to proxies in
respect to any such business
in the best judgment of the
person or persons acting
under the proxies.
Signature:
_____________________________
____
Signature:___________________
_______________
Date:
_____________________________
________
This Proxy when properly
executed will be voted in the
manner directed herein by the
undersigned stockholder. If
no direction is made, this
proxy will be voted FOR
proposal 1 and FOR
proposal 2. If signing as an
attorney, executor, trustee
or guardian, please give your
full title as such. If stock
is held jointly, each owner
should sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY
USING THE ENCLOSED ENVELOPE
