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EXHIBIT 10.13
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SUPPORT AGREEMENT
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Among
LIFEWAY FOODS, INC.,
THE DANNON COMPANY, INC.,
and
MICHAEL SMOLYANSKY
Dated as of December 24, 1999
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TABLE OF CONTENTS
Section Page
ARTICLE I SALES SUPPORT
SECTION 1.01. Access to Brokers and Distributors.............................1
SECTION 1.02. Access to Marketing and Distribution Experts...................2
SECTION 1.03. Effectiveness, Term and Termination............................2
SECTION 1.04. Limitations on Dannon's Obligations............................4
ARTICLE II CONFIDENTIALITY
SECTION 2.01. Confidentiality................................................4
ARTICLE III NON-COMPETITION AND NO-SOLICITATION
SECTION 3.01. Non-Competition................................................5
SECTION 3.02. No-Solicitation................................................6
ARTICLE IV RESPONSIBILITY
SECTION 4.01. Responsibility.................................................6
ARTICLE V INDEMNIFICATION
SECTION 5.01. Indemnification by the Company.................................7
ARTICLE VI GENERAL PROVISIONS
SECTION 6.01. Notices........................................................9
SECTION 6.02. Headings......................................................10
SECTION 6.03. Assignment....................................................10
SECTION 6.04. No Third Party Beneficiaries..................................10
SECTION 6.05. Amendment; Waiver.............................................10
SECTION 6.06. Governing Law.................................................11
SECTION 6.07. Counterparts..................................................11
SECTION 6.08. Independent Contractors.......................................11
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SUPPORT AGREEMENT
SUPPORT AGREEMENT, dated as of December 24, 1999, among
LIFEWAY FOODS, INC., an Illinois corporation ("Lifeway"), THE DANNON COMPANY,
INC., a Delaware corporation ("Dannon") and MICHAEL SMOLYANSKY ("Mr. S").
WHEREAS, Dannon is a subsidiary of Danone Foods, Inc., a
Delaware corporation ("Danone");
WHEREAS, Lifeway, Danone, Mr. S and several other stockholders
of Lifeway have entered into a Stock Purchase Agreement, dated as of October 1,
1999 (the "Stock Purchase Agreement"), providing for the acquisition by Danone
of 647,767 shares of common stock, no par value ("Common Stock"), of Lifeway.
Capitalized terms used and not defined herein are used herein as defined in the
Stock Purchase Agreement;
WHEREAS, Danone has also acquired an additional 215,922 shares
of Common Stock through privately negotiated transactions (such shares of Common
Stock, together with the 647,767 shares of Common Stock acquired by Danone
pursuant to the Stock Purchase Agreement, being hereinafter referred to as the
"Investment");
WHEREAS, Lifeway, Danone, Mr. S and several other stockholders
of Lifeway have also entered into a Stockholders' Agreement, dated as of October
1, 1999, as amended by a Letter Agreement, dated as of December 24, 1999, among
Danone, Lifeway and several other stockholders of Lifeway (the "Stockholders'
Agreement"); and
WHEREAS, in connection with the Investment, Dannon has agreed
to permit Lifeway to have access to Dannon's regular sales brokers and
distributors within the United States and to provide certain other marketing and
distribution support services, in each case subject to the terms and conditions
specified below.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
ARTICLE I
SALES SUPPORT
SECTION 1.01. Access to Brokers and Distributors. (a) Dannon
shall, if requested by Lifeway in writing, use commercially reasonable efforts
to waive any exclusivity arrangement with any of Dannon's regular sales brokers
and distributors of dairy products within the United States if such arrangement
would, without such waiver, prevent the
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distribution by such sales brokers or distributors of products manufactured by
Lifeway that are identified in such request. Any such waiver shall only apply to
products of Lifeway that (i) are identified in such written request and (ii) the
sale of which, in the sole discretion of Dannon, could not have a material
adverse impact on the sales of part or all of any product, category of products
or brand of Dannon or any of its Affiliates. Upon the expiration or termination
of this Agreement, Dannon may revoke any such waiver. For purposes of this
Agreement, "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
(b) Dannon shall provide Lifeway with a current list and
contact details of Dannon's regular sales brokers and distributors of dairy
products in the United States as soon as reasonably practicable following
receipt by Dannon of a written request from Lifeway to do so.
(c) Lifeway may provide Dannon's regular sales brokers and
distributors of dairy products in the United States with a letter mentioning
this Support Agreement and the support arrangements detailed hereunder. Any such
letter must be submitted to Dannon prior to its use and may not be used without
Dannon's prior written approval.
SECTION 1.02. Access to Marketing and Distribution Experts.
Each party, at the request of the other, shall make certain of its employees
with relevant experience available to answer questions posed by the requesting
party with respect to distribution and marketing (the "Consultation Services");
provided, however, that the party providing Consultation Services shall not be
obliged to provide more than an aggregate of three hours of such Consultation
Services per fiscal quarter. All travel and out-of pocket expenses (if any)
incurred by or on behalf of either party, its Affiliates or its employees in
connection with providing Consultation Services shall be reimbursed by the party
that requested the services. Each party acknowledges and agrees that the
Consultation Services shall be provided to the requesting party in accordance
with the provisions of this Section 1.02 for use by the requesting party at its
own risk and sole discretion and neither party makes any representation,
guaranty or warranty of any kind as to the effect that such Consultation
Services may have on the sales or profits of the requesting party.
SECTION 1.03. Effectiveness, Term and Termination.
(a) Effectiveness. This Agreement shall have no effect and the
parties hereto shall have no obligation until Danone shall have
acquired 20% (on a Fully Diluted Basis) of the issued and outstanding
shares of Common Stock of Lifeway.
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(b) Term. Unless earlier terminated in accordance with
paragraph (c) or (d) of this Section 1.03, or unless otherwise agreed
to in writing by the parties hereto, the term of this Agreement
("Term") shall be three years from the date hereof, renewable annually
thereafter upon mutual agreement between the parties hereto, for
successive one year terms.
(c) Termination for Breach.
(i) If either Lifeway or Mr. S shall fail to perform
or shall default in the performance of any provision of this
Agreement, the Stock Purchase Agreement, the Stockholders'
Agreement or the Stock Purchase Agreement, dated as of
December 24, 1999, between Danone and Michael Smolyansky (the
"Smolyansky Stock Purchase Agreement") and if such failure or
default shall continue for 15 Business Days after receipt by
Lifeway or Mr. S of written notice of such failure or default,
and such failure or default is not cured within such 15-day
period, then Dannon may terminate this Agreement with
immediate effect.
(ii) If Dannon shall fail to perform or shall default
in the performance of any provision of this Agreement, the
Stock Purchase Agreement, the Stockholders' Agreement or the
Smolyansky Stock Purchase Agreement and if such failure or
default shall continue for 15 Business Days after receipt by
Dannon of written notice of such failure or default, and such
failure or default is not cured within such 15-day period,
then Lifeway or Mr. S may terminate this Agreement with
immediate effect.
(d) Termination for Other Events. Either Lifeway or Dannon may
terminate this Agreement upon the occurrence of any of the following
events:
(i) the liquidation or insolvency of the other party,
or the appointment (subject to the provisions of clause (ii)
of this paragraph (d)) of an administrator, receiver,
administrative receiver, trustee or other custodian acting to
protect the interests of any creditor or class of creditors
over all or a substantial part of the assets of the other
party; or
(ii) the commencement of involuntary bankruptcy
proceedings which remain undismissed for a period of at least
60 days with respect to, or of voluntary bankruptcy
proceedings filed by, the other party.
(iii) at any time Danone beneficially owns less than
20% of the outstanding shares of Common Stock (on a Fully
Diluted Basis);
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(iv) at any time if a Person, or any Affiliate of
such Person is, engaged in (x) the business of producing or
selling any type of yogurt (set, blended or drinkable) or (y)
the dairy business, the health food business or the business
of producing or distributing food products containing
pharmaceutical ingredients or any other business conducted by
Danone (in each case, a "Competitor"), beneficially owns more
than 5% of the issued and outstanding shares of Lifeway (on a
Fully Diluted Basis);
(v) at any time if Lifeway sells all or substantially
all of its assets or merges or consolidates with and into
another Person; or
(vi) at any time if an employee, director or designee
of a Competitor is elected to the board of directors, or is
employed as an officer, of Lifeway.
SECTION 1.04. Limitations on Dannon's Obligations.
(a) Dannon and its Affiliates will not be obligated to (i)
hire additional or different personnel, replace retiring or otherwise
disassociated personnel, or acquire additional resources or assets, or
take any other actions, in each case in order to provide the
Consultation Services to Lifeway pursuant to this Agreement or (ii)
provide the Consultation Services to Lifeway where such services are
provided directly or indirectly for the benefit of any person other
than Lifeway or where the Consultation Services are used by Lifeway
other than in the ordinary course of business.
(b) Other than the waiver of exclusivity arrangements pursuant
to Section 1.01 hereof, Lifeway shall not require any further action by
Dannon to give access to brokers and distributors.
ARTICLE II
CONFIDENTIALITY
SECTION 2.01. Confidentiality. During the term of this
Agreement and for a period of three years after the expiration or termination of
this Agreement, unless disclosed pursuant to judicial or administrative process
or disclosed in an action or proceeding brought by a party hereto in pursuit of
its rights or in exercise of its remedies hereunder, all information that is
disclosed by a party under the provisions of this Agreement, whether written or
oral and whether contained in blueprints, drawings, written reports, letters or
memoranda, or notes made by employees, or acquired by employees from observation
or any other activities of a party related to the performance of this Agreement,
shall be held in strict
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confidence by the party receiving such information (the "Receiving Party"), and
shall not be used by the Receiving Party for any purpose other than the
performance of the terms of this Agreement.
ARTICLE III
NON-COMPETITION AND NO-SOLICITATION
SECTION 3.01. Non-Competition.
(a) During the term of this Agreement and for a period of
three years after the expiration or termination of this Agreement,
neither Lifeway nor Mr. S shall directly or indirectly engage in the
business of producing or selling any type of yogurt (set, blended or
drinkable), fromage frais, Italian style cheese, chilled desserts or
any soy-based products, other than drinkable yogurts, chilled desserts
and soy-based products which are currently being produced and sold by
Lifeway as of the date of this Agreement and listed on Schedule A
attached hereto, or which are Kefir based, in the United States of
America or, directly or indirectly, engage in the business of producing
any type of yogurt (set, blended or drinkable) fromage frais, Italian
style cheese, chilled desserts or any soy-based products in Europe
(including, without limitation, Western European countries, Eastern
European countries and the successor countries formerly constituting
the U.S.S.R.), in each case whether as a proprietor, partner, joint
venturer, employer, agent, employee, consultant, officer or beneficial
or record owner of more than one percent of the stock of any
corporation or association of any nature which is engaged in such
business. For purposes of this Section 3.01, "fromage frais" does not
include cheese products which are currently being produced and sold by
the Company as of the date of this Agreement under the name "Farmers
Cheese" (or other similar cheese products currently being produced by
the Company as of the date of this Agreement) and listed on Schedule A
attached hereto. Also, for purposes of this Section 3.01, "Italian
style cheese" is defined to mean mozzarella, mascarpone, ricotta,
gorgonzola, bel paese, crema bel paese, provolone, taleggio and such
other similar types of cheese.
(b) During the term of this Agreement and for a period of
three years after the expiration or termination of this Agreement,
Dannon and its Affiliates shall not directly or indirectly engage in
the business of producing or selling Kefir-based products in the United
States of America, whether as a proprietor, partner, joint venturer,
employer, agent, employee, consultant, officer or beneficial or record
owner of more than one percent of the stock of any corporation or
association of any nature which is engaged in such business.
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(c) In the event that the agreements in this Section 3.01
shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of
time or over too great a geographical area or by reason of their being
too extensive in any other respect, they shall be interpreted to extend
only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be
enforceable and/or to the maximum extent in all other respects as to
which they may be enforceable, all as determined by such court in such
action.
SECTION 3.02. No-Solicitation. Each party hereto agrees that,
without the prior written consent of the other party, it will not during the
term of this Agreement and for a period of two years from the expiration or
termination of this Agreement directly or indirectly solicit for employment or
employ any person who is now or who becomes or who has been within the past six
months employed by the other party or any of its Affiliates; provided, however,
that neither party shall be prohibited from employing any such person who
contacts such party on his or her own initiative and without any direct or
indirect solicitation by such party.
ARTICLE IV
RESPONSIBILITY
SECTION 4.01. Responsibility. Nothing in this Agreement shall
be construed as:
(a) an assumption by Dannon or any of its Affiliates of any
obligation to increase the sales or profits of Lifeway or otherwise to
assume responsibility for the operations of Lifeway;
(b) an assumption by Dannon or any of its Affiliates of any
obligation (financial or otherwise) of Lifeway;
(c) the creation of any relationship of employment between
Lifeway and employees or consultants of Dannon or any of its
Affiliates;
(d) an assumption by Dannon or any of its Affiliates of any
responsibility for the work performed by Lifeway or any outside
suppliers employed directly by Lifeway or any of its Affiliates at the
suggestion or recommendation of Lifeway;
(e) the delegation of any function or authority of Lifeway; or
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(f) creating or giving rise to any liability on the part of
Dannon or any of its Affiliates for any third party claim arising out
of the conduct by Lifeway of its business or arising out of or relating
to the quality of Lifeway's products.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification by the Company.
(a) Dannon, its Affiliates and its successors and assigns and
the officers, directors, employees and agents of Dannon, its Affiliates
and its successors and assigns shall be indemnified and held harmless
by Lifeway for any and all Liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including,
without limitation, attorneys' and consultants' fees and expenses)
actually suffered or incurred by them (including, without limitation,
any Action brought or otherwise initiated by any of them) (hereinafter
a "Loss"), arising out of or resulting from the breach of any
representation, covenant or agreement by Lifeway or Mr. S contained in
this Agreement or arising out of or resulting from any claim or cause
of action brought by any third party (i) relating to the performance of
this Agreement by any party hereto or (ii) relating to the quality of
Lifeway's products or any claims made by Lifeway, its officers or
employees, with respect thereto. To the extent that Lifeway's
undertakings set forth in this Section 5.01(a) may be unenforceable,
Lifeway shall contribute the maximum amount that it is permitted to
contribute under applicable Law to the payment and satisfaction of all
Losses incurred by Dannon, its Affiliates or its successors and assigns
or the officers, directors, employees and agents of Dannon, its
Affiliates or its successors and assigns.
(b) An indemnified party shall give Lifeway notice of any
matter which an indemnified party has determined has given or could
give rise to a right of indemnification under this Agreement, within 60
days of such determination, stating the amount of the Loss, if known,
and method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of
indemnification is claimed or arises; provided, however, that the
failure to provide such notice shall not release Lifeway from any of
its obligations under this Article V except to the extent Lifeway is
materially prejudiced by such failure and shall not relieve Lifeway
from any other obligation or Liability that it may have to any
indemnified party otherwise than under this Article V.
(c) The obligations and Liabilities of Lifeway under this
Article V with respect to Losses arising from claims of any third party
which are subject to the
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indemnification provided for in this Article V ("Third Party Claims")
shall be governed by and contingent upon the following additional terms
and conditions: if an indemnified party shall receive notice of any
Third Party Claim, the indemnified party shall give Lifeway notice of
such Third Party Claim within 60 days of the receipt by the indemnified
party of such notice; provided, however, that the failure to provide
such notice shall not release Lifeway from any of its obligations under
this Article V except to the extent Lifeway is materially prejudiced by
such failure and shall not relieve Lifeway from any other obligation or
Liability that it may have to any indemnified party otherwise than
under this Article V. If Lifeway acknowledges in writing its obligation
to indemnify the indemnified party hereunder against any Losses that
may result from such Third Party Claim, then Lifeway shall be entitled
to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its
intention to do so to the indemnified party within ten days of the
receipt of such notice from the indemnified party; provided, however,
that if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the judgment of the
indemnified party, in its reasonable discretion, for the same counsel
to represent both the indemnified party and Lifeway, then the
indemnified party shall be entitled to retain its own counsel at the
expense of Lifeway. In the event Lifeway exercises the right to
undertake any such defense against any such Third Party Claim as
provided above, the indemnified party shall cooperate with Lifeway in
such defense and make available to Lifeway, at Lifeway's expense, all
witnesses, pertinent records, materials and information in the
indemnified party's possession or under the indemnified party's control
relating thereto as is reasonably required by Lifeway. Similarly, in
the event the indemnified party is, directly or indirectly, conducting
the defense against any such Third Party Claim, Lifeway shall cooperate
with the indemnified party in such defense and make available to the
indemnified party, at Lifeway's expense, all such witnesses, records,
materials and information in Lifeway's possession or under Lifeway's
control relating thereto as is reasonably required by the indemnified
party. No such Third Party Claim may be settled by Lifeway without the
prior written consent of the indemnified party; provided, however, that
Lifeway may settle such Third Party Claim without the prior written
consent of the indemnified party if such settlement includes a full
release of the indemnified party from such Third Party Claim.
(d) The obligations of the parties under this Article V shall
survive the termination of this Agreement.
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ARTICLE VI
GENERAL PROVISIONS
SECTION 6.01. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 6.01):
(a) if to Lifeway or Mr. S:
Lifeway Foods, Inc.
6431 W. Oakton
Morton Grove, IL 60053
Telecopy: (847) 967-6558
Attention: Michael Smolyansky
and a copy to:
Futro & Trauernicht LLC
1401 17th Street, 11th Floor
Denver, CO 80202
Fax: (303) 295-1563
Attention: Peter G. Futro, Esq.
(b) if to Dannon:
The Dannon Company, Inc.
120 White Plains Road
Tarrytown, New York 10591
Telecopy: (914) 366-2865
Attention: General Counsel
and a copy to:
Groupe Danone
8 rue de Teheran
75381 Paris Cedex 08
Fax: 33-1-44-352-554
Attention: General Counsel
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and a copy to:
Groupe Danone
8 rue de Teheran
75381 Paris Cedex 08
Fax: 33-1-44-352-097
Attention: Director of Corporate Development
and a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Fax: (212) 848-7179
Attention: John J. Madden, Esq.
SECTION 6.02. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.03. Assignment. This Agreement shall not be assigned
by any party without the express written consent of the other parties (which
consent may be granted or withheld in the sole discretion of such other
parties); provided, however, that Dannon may assign its rights and obligations
hereunder to one or more of its Affiliates.
SECTION 6.04. No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other Person (including, without limitation, any of
Dannon's brokers or distributors) any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 6.05. Amendment; Waiver.
(a) This Agreement may not be amended or modified, and no
obligation or right hereunder may be waived, except by an instrument in
writing signed by the parties hereto.
(b) No failure or delay on the part of a party hereto in
exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy hereunder. The remedies
provided for herein are cumulative and are not exclusive of any
remedies provided by law or available at equity.
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SECTION 6.06. Governing Law. This Agreement shall be governed
by the laws of the State of Illinois.
SECTION 6.07. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 6.08. Independent Contractors. No agency, partnership,
fiduciary relationship, or joint venture is established by this Agreement.
Neither Lifeway or Mr. S with respect to Dannon, nor Dannon with respect to
Lifeway or Mr. S, shall enter into, incur liabilities, or hold itself out to
third parties as having the authority to enter into and incur any contractual
obligations, expenses or liabilities on behalf of the other.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, in the case of Mr. S individually, and, in the case of Lifeway and
Dannon, by their respective duly authorized representatives as of the date first
above written.
LIFEWAY FOODS, INC.
By: /s/ Michael Smolyansky
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Name: Michael Smolyansky
Title: President
THE DANNON COMPANY, INC.
By: /s/ Michael Harrison
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Name: Michael Harrison
Title: a Vice President
By: /s/ Michael Smolyanksy
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Name: Michael Smolyansky