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EXHIBIT 10.12
DANONE FOODS, INC.
December 24, 1999
Lifeway Foods, Inc. Julie Smolyansky
6431 W. Oakton c/o Lifeway Foods, Inc.
Morton Grove, IL 60053 6431 W. Oakton
Attention: Michael Smolyansky Morton Grove, IL 60053
Michael Smolyansky Edward Smolyansky
c/o Lifeway Foods, Inc. c/o Lifeway Foods, Inc.
6431 W. Oakton 6431 W. Oakton
Morton Grove, IL 60053 Morton Grove, IL 60053
Ludmila Smolyansky
c/o Lifeway Foods, Inc.
6431 W. Oakton
Morton Grove, IL 60053
Ladies and Gentlemen:
Reference is made to the Stockholders' Agreement (the
"Stockholders' Agreement") dated October 1, 1999, among Lifeway Foods, Inc. (the
"Company"), Danone Foods, Inc. (the "Stockholder"), Michael Smolyansky and the
other stockholders listed on the signature pages thereof (the Stockholder,
Michael Smolyansky and such other stockholders collectively being the
"Holders"). Capitalized terms used and not defined herein are used herein as
defined in the Stockholders' Agreement.
You hereby agree to amend the Stockholders' Agreement by
inserting a definition of "New Securities" in Section 1.01 to read in its
entirety as follows:
""New Securities" means any capital stock of the
Company, other than Common Stock, whether now authorized or not;
provided that the term "New Securities" does not include (i) securities
of the Company issued upon the conversion or exchange of convertible or
exchangeable securities of the Company that are outstanding as of the
date of this Agreement and (ii) options issued pursuant to an Employee
Plan and exercisable for capital stock of the Company other than Common
Stock, provided that the term "New Securities" does include the
underlying capital stock other than Common Stock, issued upon the
exercise of any such option."
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In addition, you hereby agree to amend the Stockholders'
Agreement by deleting Section 6.04 in full and substituting therefor a new
Section 6.04 to read in its entirety as follows:
"SECTION 6.04. Articles of Incorporation. (a) At or
prior to the Company's next annual meeting of its shareholders, which
the Company shall hold as promptly as reasonably practicable, the
Holders shall take all necessary action to amend the Company's Articles
of Incorporation to add thereto, immediately following the existing
provision relating to preemptive rights, the following sentence:
`Notwithstanding anything contained herein to the contrary,
the Corporation shall have the power to grant preemptive
rights to any of its shareholders by contract.'
(b) Until such time as the Company's Articles of
Incorporation shall have been amended in accordance with Section
6.04(a) above, the Company shall not issue, sell or transfer any shares
of capital stock or securities convertible into, or exercisable for,
shares of capital stock."
In addition, you hereby agree to amend the Stockholders'
Agreement by adding a new Section 6.05 to read in its entirety as follows:
"SECTION 6.05. Right to Purchase New Securities. (a)
In the event the Company proposes to issue any New Securities to any
Person (other than the Stockholder), the Company hereby grants to the
Stockholder the right to purchase a number of shares or other amount of
any New Securities which the Company proposes to issue equal to the
product of (i) the total number of shares or other amount of such New
Securities which the Company proposes to issue at such time and (ii) a
fraction, the numerator of which shall be the total number of issued
and outstanding shares of Common Stock owned by the Stockholder on a
Fully Diluted Basis, and the denominator of which shall be the total
number of issued and outstanding shares of Common Stock on a Fully
Diluted Basis. The rights given by the Company under this Section 6.05
shall terminate if unexercised within 15 Business Days after the Notice
of Issuance referred to in Section 6.05(b).
(b) In the event that the Company proposes to
undertake an issuance of New Securities to any Person (other than the
Stockholder), it shall give the Stockholder written notice (a "Notice
of Issuance") of its intention, describing all material terms of the
New Securities, the price and all material terms upon which the Company
proposes to issue such New Securities. The Stockholder shall have 15
Business Days from the date of the Notice of Issuance to agree to
purchase all or any portion of such Stockholder's pro rata share of
such New Securities (as determined pursuant to Section 6.05(a)) for the
same pro rata consideration payable by such other Person at the time of
payment and otherwise upon the terms specified in the Notice of
Issuance, by giving written notice to
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the Company and stating therein the quantity of New Securities to be
purchased by such Stockholder.
(c) The parties hereto agree that the rights
conferred and the obligations imposed by Section 4.01 and Section 4.02
of this Agreement upon the Stockholder and Mr. S, respectively, and the
procedures set forth therein, shall apply mutatis mutandis to the
Transfer of any New Securities by the Stockholder or any other Holder,
as the case may be."
(d) All New Securities acquired by any of the parties
hereto pursuant to or in compliance with this Article IV or as a
result of a recapitalization of the Company, or stock dividends or any
other action taken by the Company, shall be subject to all of the
terms, covenants and conditions of this Agreement.
In addition, you hereby agree to amend the Stockholders'
Agreement by adding a new Section 6.06 to read in its entirety as follows:
"SECTION 6.06. Non-Pro Rata Recapitalizations; Stock
Repurchases: Dividends and Distributions. The Company shall not, and
the Holders shall not permit the Company to, engage in any stock split,
dividend or combination, or any recapitalization, merger,
consolidation, exchange or other similar reorganization, unless in
connection therewith, the Stockholder receives such Stockholder's pro
rata share of the same type or types of consideration or securities as
all other stockholders of the Company receive in such transaction."
In addition, you hereby agree that the addresses set forth
above for Ludmila Smolyansky, Julie Smolyansky and Edward Smolyansky shall be
the address for each such Holder to receive notice in accordance with Section
7.03(c) of the Stockholders' Agreement.
This letter agreement shall be effective upon its execution by
the parties hereto. Please execute this letter agreement in the appropriate
spaces below. Upon execution, please return a copy of each signature page to
George Karafotias at Shearman & Sterling by facsimile at: (212) 893-9441.
This letter agreement may be executed manually or by facsimile
and in one or more counterparts, which, when taken together, shall constitute
one and the same agreement.
This letter agreement is governed by the laws of the State of
Illinois.
Very truly yours,
DANONE FOODS, INC.
By /s/ Michael Harrison
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Name: Michael Harrison
Title: a Vice President
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Acknowledged and agreed as of the date first above written:
LIFEWAY FOODS, INC.
By /s/ Michael Smolyansky
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Name: Michael Smolyanksy
Title: President
/s/ Michael Smolyanksy
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MICHAEL SMOLYANSKY
/s/ Ludmila Smolyanksy
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LUDMILA SMOLYANSKY
/s/ Julie Smolyanksy
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JULIE SMOLYANSKY
/s/ Edward Smolyanksy
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EDWARD SMOLYANSKY