Document:

GALAXY
      NUTRITIONAL FOODS, INC.

     

    2007
      STAY BONUS, SEVERANCE BONUS AND SALES BONUS PLAN

     

    The
      purpose of this 2007 Stay Bonus, Severance Bonus and Sales Bonus Plan (this
      "Plan")
      is to
      provide additional incentives and offer certain protections to certain key
      executives of Galaxy Nutritional Foods, Inc. (the "Company")
      in
      connection with a possible Company Sale (as defined below). This Plan would
      apply to a Company Sale that is consummated prior to September 1, 2009, subject
      to extension by the Board of Directors. 

     

    This
      Plan
      shall be effective as of December 10, 2007 (the "Plan
      Effective Date").

     

    Capitalized
      terms used in this Plan and not otherwise defined in this Plan shall have the
      respective meanings assigned to them in Section
      4
      of this
      Plan.

     

     

    
      	
              1.

            	
              STAY
                BONUS

            

    

     

    
      	 	
              A.

            	
              Stay Bonus
                Pool.
                A
                stay bonus pool of up to $475,000 is established under this Plan
                to
                encourage and reward executives to remain with the Company through
                the
                sale process. 

            

    

     

    
      	 	
              B.

            	
              Pool
                Allocation.
                The stay bonus pool will be allocated as
                follows:

            

    

     

    
      
        	 	
                David
                  Lipka

              	
                $125,000

              
	 	 	 
	 	
                Michael
                  Broll

              	
                $100,000

              
	 	 	 
	 	
                Other
                  key executives (unallocated)

              	
                up
                  to $250,000

              

      

    

     

    
      	 	
              C.

            	
              Timing
                of Payment.
                The stay bonuses will be paid following the Company’s receipt of a
                Definitive Purchase Offer (as hereinafter defined) upon the earlier
                of (i)
                the Consummation Date or (ii) the termination of the Definitive Purchase
                Offer for any reason other than a breach by the Company. Payments
                will be
                made to an executive if he is employed by the Company, or serving
                on the
                Board of Directors, at the time his respective payment or payments
                are due
                or if his employment was terminated for any reason other than death,
                termination by the Company for Cause or by the executive without
                Good
                Reason. 

            

    

     

    
      	 	
              D.

            	
              
                Unallocated
                  Amounts.
                  The $250,000 portion of the bonus pool that is not allocated to
                  a
                  particular executive as of the Plan Effective Date as provided
                  above may
                  be awarded, in whole or in part, at any time and from time to time
                  after
                  the Plan Effective Date, by agreement of David Lipka (as Chairman)
                  and
                  Michael Broll (as Chief Executive Officer) in their full discretion
                  to one
                  or more executives of the Company. Any such awards will be paid,
                  if at
                  all, in accordance with Section 1.C
                  above.

              

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              2.

            	
              SEVERANCE
                BONUS

            

    

     

    
      	 	
              A.

            	
              Severance
                Payments.
                Severance payments will be made to executives if their employment
                with the
                Company or service as Chairman of the Board in the case of David
                Lipka, or
                Chief Executive Officer in the case of Michael Broll, as applicable,
                is
                terminated after the Consummation Date in the cases and within the
                periods
                described below.

            

    

     

    
      	 	
              B.

            	
              Triggers.
                David Lipka will receive a severance payment (i) upon termination
                of his
                employment or of his position as Chairman of the Board with the Company
                for any reason (including voluntary resignation) other than by the
                Company
                with Cause, or (ii) if he is not re-elected to the Board of Directors,
                at
                any time during the period commencing on the Consummation Date and
                ending
                on the first anniversary thereafter. Michael Broll will receive a
                severance payment upon termination of his employment for any reason
                (including voluntary resignation) other than by the Company for Cause
                at
                any time during the period commencing on the Consummation Date and
                ending
                on the first anniversary of the Consummation
                Date.

            

    

     

    
      	 	
              C.

            	
              Severance
                Amounts.
                The respective severance payment amounts payable to the executives
                in the
                cases described above are as
                follows:

            

    

     

    
      
        
          	 	
                  David
                    Lipka

                	
                  $125,000

                
	 	 	 
	 	
                  Michael
                    Broll

                	
                  $100,000

                

        

      

       

    

    
      	
              3.

            	
              SALES
                BONUS

            

    

     

    
      	 	
              A.

            	
              Sales Bonus
                Pool.
                A
                sales bonus pool is established under this Plan to reward David Lipka
                and
                Michael Broll if the Company Sale is consummated. The aggregate sales
                bonus pool is as follows:

            

    

     

    
      	 	
              ·

            	
              If
                the Sales Price is equal to or greater than $17 million but less
                than $20
                million, the sales bonus pool shall be $250,000 plus
                an
                amount equal to 1.6% of the excess of the Sales Price over $17
                million.

            

    

     

    
      	 	
              ·

            	
              If
                the Sales Price is equal to or greater than $20 million but less
                than $23
                million, the sales bonus pool shall be $300,000 plus
                an
                amount equal to 3% of the excess of the Sales Price over $20
                million.

            

    

     

    
      	 	
              ·

            	
              If
                the Sales Price is equal to or greater than $23 million, the sales
                bonus
                pool shall be an amount equal to 1.8% of the Sales Price.
                

            

    

     

    
      	 	
              B.

            	
              Pool
                Allocation.
                The sales bonus pool will be allocated as
                follows:

            

    

     

    
      
        
          	 	
                  David
                    Lipka

                	55.5%
	 	 	 
	 	
                  Michael
                    Broll

                	44.5%

        

      

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	 	
              C.

            	
              Timing
                of Payment.
                All executives will receive their respective sales bonuses as soon
                as
                practicable after the Consummation Date. Payments will be made to
                each
                executive if he is then an officer or employee on the Consummation
                Date,
                or if he is not so serving if his termination is by the Company without
                Cause, or by him for Good Reason.

            

    

     

    
      	
              4.

            	
              CERTAIN
                DEFINITIONS

            

    

     

    Definition
      of Cause:

     

    The
      term
“Cause” means any of the following:

     

    
      	 	
              ·

            	
              Failure
                to perform duties, except as a result of physical or mental disability,
                continuing after notice and ten days to
                cure.

            

    

     

    
      	 	
              ·

            	
              Willful
                misconduct or gross negligence.

            

    

     

    
      	 	
              ·

            	
              Refusal
                or willful failure to follow the lawful direction of the Board of
                Directors or a more senior officer.

            

    

     

    
      	 	
              ·

            	
              Disclosure
                of confidential information of the Company except in connection with
                the
                Company Sale, engaging in activities in competition with the business
                of
                the Company, or attempting to interfere in the Company’s relationship with
                its vendors, customers or
                employees.

            

    

     

    
      	 	
              ·

            	
              Material
                breach of the Company’s Code of
                Conduct.

            

    

     

    
      	 	
              ·

            	
              Conviction
                or plea of nolo
                contendere
                to
                any crime involving fraud or
                dishonesty.

            

    

     

    Definition
      of Company Sale

     

    A
      sale of
      the Company pursuant to which the acquiror(s) acquire(s) (i) at least sixty
      (60%) of the equity securities of the Company then outstanding (whether by
      merger, consolidation, sale or transfer of the Company’s shares of capital stock
      or otherwise), or (ii) all or substantially all of the Company’s assets (whether
      by way of sale of equity securities or assets), other than any transaction
      (or
      series of related transactions) under either clause (i) or (ii) above in which
      Frederick Deluca and/or his affiliates are the acquiror.

     

    Definition
      of Consummation Date

     

    The
      date
      on which the Company Sale is consummated.

     

    Definition
      of Definitive Purchase Offer

     

    A
      written
      agreement between the Company and an acquiror pursuant to which the Company,
      upon the Closing thereof, would engage in a Company Sale, or a tender offer
      or
      similar arrangement to acquire outstanding securities of the Company (whether
      or
      not there is a written agreement between the Company and the party making the
      tender offer or similar arrangement) that if consummated would result in a
      Company Sale.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Definition
      of Good Reason:

     

    The
      term
“Good Reason” means any of the following:

     

    
      	 	
              ·

            	
              Material
                reduction in the nature or status of position, duties, responsibilities
                or
                support.

            

    

     

    
      	 	
              ·

            	
              Reduction
                in annual rate of base cash compensation during any
                period.

            

    

     

    
      	 	
              ·

            	
              Failure
                by the Company to pay compensation after notice has been given and
                10 days
                have elapsed without cure.

            

    

     

    
      	 	
              ·

            	
              Relocation
                of executive offices to an office more than 30 miles away from the
                Company’s current headquarters.

            

    

     

    Definition
      of Sales Price

     

    The
      total
      consideration to be paid for the Company's equity securities or assets, as
      applicable. 

     

    
      	
              5.

            	
              TAX
                WITHHOLDING

            

    

     

    The
      Company will be entitled to deduct and withhold from the bonus payments
      otherwise payable to any executive under this Plan such amounts as may be
      required to be deducted and withheld with respect to the making of such payment
      under the Internal Revenue Code of 1986, as amended, or under any provision
      of
      state, local or other applicable law. 

     

    
      	
              6.

            	
              DISPUTE
                RESOLUTION

            

    

     

    Disputes
      under this Plan shall be settled by arbitration conducted in Orange County,
      Florida pursuant to arbitration rules and procedures selected by the Board
      of
      Directors in its full discretion.

     

    
      	
              7.

            	
              LEGAL
                FEES

            

    

     

    The
      Company shall pay all reasonable legal fees of an executive for any dispute
      under this Plan, other than in connection with frivolous claims as determined
      by
      the arbitrator.

     

    
      	
              8.

            	
              GOVERNING
                LAW

            

    

     

    This
      Plan
      and all rights hereunder shall be subject to and construed in accordance with
      the laws of the State of Florida without reference to rules relating to
      conflicts of law.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    
      	
              9.

            	
              SUCCESSORS
                AND ASSIGNS

            

    

     

    This
      Plan
      shall be binding upon the Company’s successors and assigns.

     

    
      
        
        

      

      
        5Exhibit
      4.1.1

    

    CERTIFICATE
      OF DESIGNATION

    SETTING
      FORTH THE PREFERENCES, RIGHTS AND LIMITATIONS OF PREFERRED STOCK OF

    TORBAY
      HOLDINGS, INC.

    

    Torbay
      Holdings, Inc., a Delaware corporation (the "Corporation"), certifies that
      pursuant to the authority contained in Article Fourth of its Certificate of
      Incorporation and in accordance with the provisions of Section 151 of the
      General Corporation Law of the State of Delaware, the Corporation has the
      authority to issue 20,000,000 shares of Preferred Stock, par value $0.0001
      per share; and, further

    

    The
      Board
      of Directors of the Corporation has the authority to issue any or all of such
      shares in one or more series and by resolution to provide for the designation
      of
      each series to be issued pursuant to the foregoing authority.

    

    The
      Board
      of Directors previously designated 700,000 shares as Series 1 Preferred Stock,
      all of which were issued and subsequently retired, leaving 19,300,000 shares
      undesignated.

    

    The
      Board
      of Directors voted on 07/19/2007 and unanimously adopted the following
      resolution creating a series of its preferred stock to be designated Series
      B
      Preferred Stock and consisting of 10,000,000 shares:

    

    RESOLVED,
      that a series of the authorized preferred stock entitled Series B Preferred
      Stock is hereby created with the following designation, preferences and
      rights:

    

    Designation
      and Amount; Par Value. The shares of such series are designated as Series B
      Preferred Stock (the "Series B Preferred Stock") and the number of shares
      constituting such series is 10,000,000. The par value of each share of the
      series is $0.0001.

    

    Conversion.
      The shares of Series B Preferred Stock are not convertible into common stock
      of
      the Corporation.

    

    Voting.
      Each share of Series B Preferred Stock shall be entitled to sixty votes on
      all
      matters on which such shareholders are lawfully entitled to vote and shall
      be
      entitled to receive notice of or attend any annual or extraordinary meeting
      of
      shareholders of the Corporation.

    

    Dividends
      and Dissolution. The holders of the Series B Preferred Shares shall have the
      same rights regarding dividends and upon dissolution as Common
      Shares.

    

    IN
      WITNESS WHEREOF, TORBAY HOLDINGS, INC. has caused this Certificate of
      Designation to be executed by its President and attested to by its Secretary
      this 19th day of July, 2007.

     

    
      	 	
              TORBAY HOLDINGS, INC.

            
	 	 
	 	
              /s/
                Richard K Lauer

            
	
               

            	
              President

            
	
              ATTEST:

            	 
	 	 
	
              /s/ Richard K Lauer

            	 
	
              Secretary

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