Exhibit 10.1

 

 

EXECUTION VERSION

 

AGREEMENT

 

This Agreement (this “Agreement”) is made and entered into as of January 28,
2020 by and between Innovative Food Holdings, Inc., a Florida corporation (the
“Company”), and the entities and natural person set forth in the signature page
hereto (collectively, “JCP”) (each of the Company and JCP, a “Party” to this
Agreement, and collectively, the “Parties”).

 

RECITALS

 

WHEREAS, the Company and JCP have engaged in various discussions and
communications concerning the Company’s business, financial performance and
strategic plans;

 

WHEREAS, JCP submitted a letter to the Company on August 15, 2019 (the
“Nomination Letter”) nominating certain director candidates for election to the
Company’s board of directors (the “Board”) at the Company’s 2019 annual meeting
of shareholders (the “2019 Annual Meeting”);

 

WHEREAS, as of the date of this Agreement, JCP has a combined economic and
beneficial ownership (as determined under Rule 13d-3 promulgated under the
Exchange Act (as defined below)) interest in the shares of the Company (the
“Shares”) totaling, in the aggregate, 4,350,440 Shares (“JCP’s Ownership”); and

 

WHEREAS, the Company and JCP have determined to come to an agreement with
respect to the composition of the Board and certain other matters, as provided
in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and 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, intending to be legally bound hereby, agree as follows:

 

 

1.

Board Matters.

 

 

(a)

The Company agrees that within 10 business days following the execution of this
Agreement, the Board and all applicable committees of the Board shall take all
necessary actions to appoint James C. Pappas and Mark Schmulen (each an
“Appointed Director” and, collectively, the “Appointed Directors”) as directors
of the Company and (ii) the Board shall recommend, support and solicit proxies
for the Appointed Directors (A) at the 2019 Annual Meeting and (B) if thirty
(30) calendar days prior to the deadline for the submission of shareholder
nominations for the 2020 annual meeting of shareholders (the “2020 Annual
Meeting”) pursuant to the Amended Bylaws of the Company (the “Bylaws”) JCP’s
Ownership (as determined under Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of Shares is at least the
lesser of (x) 5.0% of the Company’s then outstanding Shares and (y) 1,709,947
Shares (the “Minimum Ownership Threshold”), at the 2020 Annual Meeting, in each
case, in the same manner as it recommends, supports, and solicits proxies for
the election of the other director candidates nominated by the Company at the
2019 Annual Meeting and 2020 Annual Meeting, respectively.

 

 

(b)

The Company agrees that (i) JCP will have the right to designate an additional
director candidate (the “Additional Director”) to be appointed to the Board,
subject to the approval (which shall not be unreasonably withheld) of the
Nominating and Corporate Governance Committee of the Board (the “Nominating
Committee”) and the Board after exercising their

 

 

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good faith customary due diligence process and fiduciary duties, on or within
thirty (30) days from the date that is eighteen (18) months from the date hereof
if at such time JCP’s Ownership (as determined under Rule 13d-3 promulgated
under the Exchange Act) of Shares is no less than the Minimum Ownership
Threshold, and (ii) if at such time JCP’s Ownership (as determined under Rule
13d-3 promulgated under the Exchange Act) of Shares is no less than the Minimum
Ownership Threshold, the Board shall recommend, support and solicit proxies for
the election of the Additional Director at the first annual meeting of
shareholders to occur after such Additional Director’s appointment to the Board
in the same manner as it recommends, supports, and solicits proxies for the
election of the other director candidates nominated by the Company. The
Additional Director shall qualify as “independent” pursuant to U.S. Securities
and Exchange Commission (the “SEC”) rules and regulations and applicable stock
exchange listing standards and be of sound character to serve as a director of a
public company. JCP shall promptly (and in any event within five (5) business
days) inform the Company in writing if at any time JCP’s Ownership (as
determined under Rule 13d-3 promulgated under the Exchange Act) of the Shares
decreases to less than the Minimum Ownership Threshold.

 

 

(c)

The Company agrees that the last sentence of Article III, Section 11 of the
Bylaws shall be inapplicable with respect to the Appointed Directors and the
Additional Director (collectively, the “New Directors”). For the avoidance of
doubt, no New Director may be removed as a director by a majority vote of the
Board.

 

 

(d)

Without the approval of two (2) New Directors, the size of the Board shall not
exceed seven (7) members prior to the appointment of the Additional Director and
shall not exceed eight (8) members thereafter during the Standstill Period;
provided that the Board shall have the ability to expand the Board and add
additional directors at any time in connection with (i) an acquisition of or
merger with a third party by the Company or its subsidiaries or (ii) a private
investment in the Company, in each case, in which more than 5% of the issued and
outstanding shares of the Company are issued in connection with such a
transaction that is approved by at least two-thirds (2/3) of the Board
(including at least two (2) New Directors).

 

 

(e)

Each New Director understands and acknowledges that all members of the Board,
including the New Directors, are required to comply with all policies,
procedures, processes, codes, rules, standards and guidelines applicable to
Board members, including the Company’s code of business conduct and ethics,
securities trading policies, director confidentiality policies, and corporate
governance guidelines, and agrees to preserve the confidentiality of Company
business and information, including discussions of matters considered in
meetings of the Board or committees of the Board. JCP shall provide, and shall
use its commercially reasonable efforts to cause each New Director to provide,
the Company with such information concerning such New Director or JCP, as the
case may be, as is required to be disclosed under applicable law or stock
exchange regulations, in each case as promptly as necessary to enable timely
filing of the Company’s proxy statement.

 

 

(f)

The Company agrees that if any New Director is unable to serve as a director,
resigns as a director or is removed as a director prior to the expiration of the
Standstill Period, and at such time JCP’s Ownership (as determined under Rule
13d-3 promulgated under the Exchange Act) of Shares is no less than the Minimum
Ownership Threshold, then JCP shall have the right to recommend a substitute
person(s); provided, that any substitute person recommended by JCP shall qualify
as “independent” pursuant to the Over-the-Counter Quotations Bureau (the
“OTCQB”) listing standards, and have relevant financial and business experience
to fill

 

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the resulting vacancy. In the event the Nominating Committee or the Board does
not accept a substitute person so recommended by JCP (it being acknowledged that
the Nominating Committee and the Board shall exercise their good faith customary
due diligence process and fiduciary duties and shall not unreasonably withhold
their approval), JCP shall have the right to recommend additional substitute
person(s) for consideration by the Nominating Committee. Upon the acceptance of
a replacement director nominee by the Nominating Committee, the Board will take
such actions as to appoint such replacement director to the Board no later than
ten (10) business days after the Nominating Committee recommendation of such
replacement director.

 

 

(g)

Nothing in this Agreement shall require the Company, its committees and
directors to take any action contrary to their corporate governance
responsibilities and to the reasonable and faithful fulfillment of their
fiduciary and other duties as directors of the Company, nor contrary to any law
or regulation applicable to the Company and its directors, including but not
limited to responsibilities related to the review, vetting and appointment of
potential directors considered for appointment to the Board.

 

 

2.

Withdrawal of Nomination. Effective upon the appointment of the Appointed
Directors to the Board, JCP withdraws and rescinds the Nomination Letter.

 

 

3.

Voting. At any annual or special meeting of shareholders of the Company
occurring during the Standstill Period, JCP will vote all of its Shares in favor
of the election of directors nominated by the Board and otherwise in accordance
with the recommendations of the Board; provided, however, that in the event that
Institutional Shareholder Services Inc. (“ISS”) or Glass, Lewis & Co., LLC
(“Glass Lewis”) recommends otherwise with respect to any proposals (other than
the election of directors), JCP shall be permitted to vote in accordance with
ISS’s or Glass Lewis’ recommendation; provided, further, that JCP shall be
permitted to vote in its sole discretion with respect to any publicly announced
proposals relating to a merger, acquisition, disposition of all or substantially
all of the assets of the Company or other business combination involving the
Company requiring a vote of shareholders of the Company.

 

 

4.

Standstill Provisions. JCP agrees that, from the date of this Agreement until
the earlier of (x) the date that is thirty (30) calendar days prior to the
deadline for the submission of shareholder nominations for the third annual
meeting of shareholders pursuant to the Bylaws to occur following the date of
this Agreement or (y) twenty four (24) months from the date hereof (the
“Standstill Period”), neither it nor any of its Affiliates or Associates (as
such terms are defined in Rule 12b-2 promulgated by the SEC under the Exchange
Act) will, and it will cause each of its Affiliates and Associates not to,
directly or indirectly, in any manner:

 

 

(i)

engage in any solicitation of proxies or consents or become a “participant” in a
“solicitation” (as such terms are defined in Regulation 14A under the Exchange
Act) of proxies or consents (including, without limitation, any solicitation of
consents that seeks to call a special meeting of shareholders), in each case,
with respect to securities of the Company;

 

 

(ii)

form, join or in any way participate in any “group” (within the meaning of
Section 13(d)(3) of the Exchange Act) with respect to the Shares (other than a
“group” that includes all or some of the entities or persons identified in this
Agreement or any of their respective Affiliates or Associates);

 

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(iii)

deposit any Shares in any voting trust or subject any Shares to any arrangement
or agreement with respect to the voting of any Shares, other than any such
voting trust, arrangement or agreement solely among the members of JCP and
otherwise in accordance with this Agreement;

 

 

(iv)

seek, or encourage any person or entity, to submit nominations in furtherance of
a “contested solicitation” for the election or removal of directors with respect
to the Company or, except as specifically permitted in Section 1, seek,
encourage or take any other action with respect to the election or removal of
any directors;

 

 

(v)

(A) make any proposal for consideration by shareholders at any annual or special
meeting of shareholders of the Company or call or seek to call a special meeting
of the Company’s shareholders, (B) make any offer or proposal (with or without
conditions) with respect to any merger, acquisition, recapitalization,
restructuring, disposition or other business combination or other significant
corporate transaction, including any tender or exchange offer, dissolution,
liquidation, reorganization or similar transaction involving the Company, its
subsidiaries or its business, whether or not any such transaction involves a
change of control of the Company, (C) affirmatively solicit a third party, on an
unsolicited basis, to make an offer or proposal (with or without conditions)
with respect to any merger, acquisition, recapitalization, restructuring,
disposition or other business combination involving the Company, or knowingly
encourage, initiate or assist any third party in making such an offer or
proposal, (D) make a request for a list of the Company’s shareholders or for any
books and records of the Company in JCP’s capacity as a shareholder of the
Company or (E) publicly comment on any third party proposal regarding any
merger, acquisition, recapitalization, restructuring, disposition, other
business combination or other significant corporate transaction with respect to
the Company by such third party prior to such proposal becoming public;

 

 

(vi)

seek, alone or in concert with others, representation on the Board, except as
specifically permitted in Section 1;

 

 

(vii)

seek to advise, encourage, support or influence any person or entity with
respect to the voting or disposition of any securities of the Company at any
annual or special meeting of shareholders, except in accordance with Section 1;
or

 

 

(viii)

disclose publicly, or privately in a manner that could reasonably be expected to
become public, any intention, plan or arrangement inconsistent with the
foregoing or publicly request or advance any proposal to amend, modify or waive
the terms of this Agreement; provided that JCP may make confidential requests to
the Board to amend, modify or waive any provision of this Section 4, which the
Board may accept or reject in its sole discretion, so long as any such request
is not publicly disclosed by JCP and is made by JCP in a manner that does not
require the public disclosure thereof by the Company, JCP or any other person.

 

 

(b)

Notwithstanding the foregoing, nothing in this Agreement shall prohibit or
restrict JCP from (i) communicating privately with the Board or, with prior
notice to the Board, with any of the Company’s officers regarding any matter, so
long as such communications are not intended to, and would not reasonably be
expected to, require any public disclosure of such communications, (ii)
communicating with shareholders of the Company and others in a manner that does
not otherwise violate Section 4(a) or Section 6 or (iii) taking any action
necessary to comply with any law, rule or regulation or any action required by
any governmental or regulatory authority or stock exchange that has jurisdiction
over JCP.

 

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(c)

For the avoidance of doubt, nothing in Section 4(a) or elsewhere in this
Agreement shall be deemed to limit or restrict in any way the exercise by any
New Director of his or her fiduciary duties under applicable law as a director
of the Company.

 

 

5.

Public Disclosure. Promptly following the execution of this Agreement, the
Company and JCP shall jointly issue a mutually agreeable press release (the
“Press Release”) in the form attached hereto as Exhibit A. Prior to the issuance
of the Press Release and subject to the terms of this Agreement, neither Party
shall issue any press release or public announcement regarding this Agreement or
take any action that would require public disclosure thereof without the prior
written consent of the other Party. During the Standstill Period, neither the
Company nor JCP shall make any public announcement or statement that is
inconsistent with or contrary to the terms of this Agreement. Notwithstanding
the foregoing, no later than two business days following the execution of this
Agreement, JCP shall file with the SEC an amendment to its Schedule 13D in
compliance with Section 13 of the Exchange Act reporting its entry into this
Agreement, disclosing applicable items to conform to its obligations hereunder
and appending this Agreement as an exhibit thereto (the “Schedule 13D
Amendment”). The Schedule 13D Amendment shall be consistent with the terms of
this Agreement and the Press Release. JCP shall provide the Company with a
reasonable opportunity to review and comment on the Schedule 13D Amendment prior
to its filing with the SEC and will consider in good faith any comments of the
Company.

 

 

6.

Mutual Non-Disparagement. Subject to applicable law, each Party covenants and
agrees that, during the Standstill Period, neither it nor any of its Affiliates,
nor any of their respective principals, members, general partners, directors,
officers, employees or agents shall in any way publicly (including in any manner
that could reasonably be foreseen to result in public disclosure such as
statements to the press or members of the press) criticize, disparage, call into
disrepute or otherwise defame or slander the other Party or any of its
Affiliates, or any of their respective principals, members, general partners,
directors, officers, employees or agents, in any manner that would reasonably be
expected to damage the business or reputation thereof; provided, however, if a
Party or any of its Affiliates, principals, members, general partners,
directors, officers, employees or agents shall have breached this section, then
the other Party or any of its representatives may publicly respond with regards
to the subject matter of such breach. The foregoing shall not restrict the
ability of any person or entity to comply with any subpoena or other legal
process or respond to a request for information (provided that such request is
not targeted at this Agreement or the other Party hereto) from any governmental
authority with competent jurisdiction over the party from whom information is
sought or from making any statement or disclosure required under the federal
securities laws or other applicable laws; provided, that such Party must provide
written notice to the other Party at least two business days prior to making any
such statement or disclosure required under the federal securities laws or other
applicable laws that would otherwise be prohibited by the provisions of this
Section 6, and reasonably consider any comments of such other Party. Moreover,
the limitations set forth in this Section 6 shall not prevent any Party from
responding to any public statement made by the other Party of the nature
described in Section 6 if such statement by the other Party was made in breach
of this Agreement.

 

 

7.

Term. This Agreement will terminate upon the expiration of the Standstill
Period. Notwithstanding the foregoing, the provisions of Section 1(b), Section 7
and Section 8 shall survive the termination of this Agreement; provided,
further, that the provisions of Section 1(e) shall also survive for so long as
any New Director continues to serve as a director of the

 

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Company. No termination of this Agreement shall relieve any Party from liability
for any breach of this Agreement prior to such termination.

 

 

8.

Miscellaneous.

 

 

(a)

Governing Law and Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of New York without reference to the
conflict of laws principles thereof. The federal and state courts within the
County of New York in the State of New York shall be the exclusive venue and
shall have the exclusive jurisdiction to adjudicate any dispute arising out of
this Agreement. Each Party hereby agrees to accept service of process by U.S.
certified or registered mail, return receipt requested, or by any other methods
authorized by New York law.

 

 

(b)

Remedies. It is understood and agreed that money damages may not be an adequate
remedy for any breach of this Agreement and, accordingly, that the non-breaching
Party shall be entitled to equitable relief, including, without limitation,
injunction and specific performance, as a remedy for any such actual or
potential breach. Such remedies shall not be deemed to be the exclusive remedies
for a breach of this Agreement but shall be in addition to all other remedies
available at law or equity. Each Party agrees not to raise as a defense or
objection to the request or granting of such relief that any breach of this
Agreement is or would be compensable by an award of money damages. In any
proceeding instituted by a Party arising in whole or in part under, related to,
based on, or in connection with, this Agreement or the subject matter hereof,
the prevailing Party shall be entitled to receive from the losing Party
reasonable attorneys’ fees, costs and expenses incurred in connection therewith,
including any appeals therefrom.

 

 

(c)

Notices. Any notices, consents, determinations, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally; (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending Party); (c) upon confirmation of receipt, when sent
by email (provided such confirmation is not automatically generated); or (d) one
(1) business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the Party to receive the same. The
addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

Innovative Food Holdings, Inc.
28411 Race Track Rd.
Bonita Springs, Florida 34135
Attention: Sam Klepfish
Email:       sklepfish@ivfh.com

 

with a copy (which shall not constitute notice) to:

 

Latham & Watkins LLP
355 South Grand Avenue, Suite 100

Los Angeles, CA 90071-1560
Attention:  Paul Tosetti
                  Josh Dubofsky

 

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Facsimile: (213) 891-8770

                     (650) 463-2631

E-mail:      paul.tosetti@lw.com

                      josh.dubofsky@lw.com

 

If to JCP or any member thereof:

 

JCP Investment Management, LLC
1177 West Loop South, Suite 1320

Houston, TX 77027
Attention: James C. Pappas
Email:       jcp@jcpinv.com

 

with a copy (which shall not constitute notice) to:

 

Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, New York 10019
Attention: Steve Wolosky

                  Ryan Nebel
Facsimile: (212) 451-2222
Email:       swolosky@olshanlaw.com

                  rnebel@olshanlaw.com

 

 

(d)

Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the undersigned Parties, their successors and assigns.

 

 

(e)

No Waiver. Failure to enforce any provision of this Agreement shall not
constitute a waiver of any term hereof. No waiver of a breach of any provision
of this Agreement shall constitute a waiver of any prior, concurrent or
subsequent breach of the same or any other provision hereof, and no waiver shall
be effective unless granted in writing and signed by an authorized
representative of the waiving Party.

 

 

(f)

Partial Invalidity. If any provision of this Agreement is held by a court of
competent jurisdiction to be illegal, invalid or unenforceable, the other
provisions shall remain in full force and effect, and the illegal, invalid or
unenforceable provision shall be deemed replaced by a legal, valid and
enforceable provision that most nearly reflects the intent of the Parties in
entering into this Agreement.

 

 

(g)

Entire Agreement. This Agreement contains the entire agreement of the Parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous communications, understandings and agreements between the
Parties. The word “including” shall be deemed to mean “including, without
limitation.”

 

 

(h)

Amendment. This Agreement shall not be amended other than in writing signed by
all Parties hereto.

 

 

(i)

Counterparts. This Agreement may be executed in one or more counterparts each of
which shall be an original and all of which together shall be but one agreement.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized signatories of the Parties as of the date hereof.

 

Innovative Food Holdings, Inc.

 

By:

   

Name:

   

Title:

 

 

JCP Investment Partnership, LP

 

By:

JCP Investment Management, LLC
Investment Manager

 

By:

   

Name:

James C. Pappas

 

Title:

Managing Member

 

JCP Investment Partners, LP

 

By:

JCP Investment Holdings, LLC

General Partner

 

By:

   

Name:

James C. Pappas

 

Title:

Sole Member

 

 

JCP Investment Holdings, LLC

 

By:

   

Name:

James C. Pappas

 

Title:

Sole Member

 

 

JCP Investment Management, LLC

 

By:

   

Name:

James C. Pappas

 

Title:

Managing Member

 

 

 

James C. Pappas

 

 

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Exhibit A

 

[See attached.]