<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
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 Section 240.14a-11(c) or
Section 240.14a-12
LIFEWAY FOODS, INC.
- --------------------------------------------------------------------------------
(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 appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(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 0-11 (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 0-11(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LIFEWAY FOODS, INC.
7625 North Austin Avenue, Suite 1100
Skokie, Illinois 60077
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 15, 1996
TO OUR STOCKHOLDERS:
You are invited to be present either in person or by proxy at the
Annual Meeting of Stockholders of Lifeway Foods, Inc., an Illinois corporation
(the "Company"), to be held at the Holiday Inn North Shore, 5300 West Touhy
Avenue, Skokie, Illinois 60077, on Saturday, June 15, 1996, at 11:00 a.m.,
local time (the "Meeting"), to consider and act upon the following:
1. To elect four Directors to serve until the next meeting and
until their successors are duly elected and qualified;
2. To ratify the appointment of Gleeson, Sklar, Sawyers & Cumpata
LLP as independent auditors for the next fiscal year.
3. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only stockholders of Common Stock of record at the close of business
on May 13, 1996, will be entitled to notice of and to vote at the meeting. The
stock transfer books of the Company will remain open.
WE INVITE EACH OF YOU TO ATTEND THE MEETING. IF YOU CANNOT ATTEND,
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENVELOPE PROVIDED. NO STAMP IS NECESSARY IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MICHAEL SMOLYANSKY
MICHAEL SMOLYANSKY
Chairman of the Board
Skokie, Illinois
May 24, 1996
YOUR VOTE IS IMPORTANT
WHETHER YOU OWN A FEW OR MANY SHARES OF STOCK AND WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN YOUR
PROXY CARD PROMPLTLY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR
WISHES AND IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. THE PROMPT
RETURN OF YOUR SIGNED PROXY WILL AID THE COMPANY IN REDUCING THE EXPENSE OF
PROXY SOLICITATION.
<PAGE> 3
LIFEWAY FOODS, INC.
PROXY STATEMENT
May 24, 1996
PROCEDURAL MATTERS
THIS PROXY STATEMENT IS FURNISHED TO THE STOCKHOLDERS OF LIFEWAY
FOODS, INC., AN ILLINOIS CORPORATION (THE "COMPANY"), IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY TO BE VOTED AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT 11:00
A.M., CDT, ON SATURDAY, JUNE 15, 1996, OR AT ANY ADJOURNMENT OR POSTPONEMENT
THEREOF. Stockholders of record of Common Stock of the Company at the close of
business on May 13, 1996 (the "Record Date"), will be entitled to notice of and
to vote at the meeting. The Annual Meeting will be held at the Holiday Inn
North Shore, 5300 West Touhy Avenue, Skokie, Illinois 60077. Proxies received
prior to the meeting will be voted in accordance with the instructions
contained in the proxy and, if no choice is specified, will be voted in favor
of each of management's nominees for Director and in favor of each of
management's proposals set forth in the Notice of Annual Meeting of
Stockholders. A stockholder who signs and returns the enclosed proxy may
revoke it at any time before it is voted by a written revocation delivered to
any of the proxy holders named therein, by submitting another valid proxy
bearing a later date or by attending the meeting and voting in person.
Beneficial owners wishing to vote at the meeting who are not stockholders of
record on the Company's books (e.g., persons holding in street name) must bring
to the meeting a Power of Attorney or proxy in their favor signed by the holder
of record in order to be able to vote.
SOLICITATION OF PROXIES
This Proxy Statement and the form of proxy are first being mailed to
the stockholders beginning May 24, 1996. All of the costs and expenses in
connection with the solicitation of proxies with respect to the matters
described herein will be borne by the Company. In addition to solicitation of
proxies by use of the mails, Directors, officers and employees (who will
receive no compensation therefor in addition to their regular remuneration) of
the Company may solicit the return of proxies by telephone, telegram or
personal interview. As of this date, the Company has no plans to retain an
outside firm to solicit proxies. The Company will request banks, brokerage
houses and other custodians, nominees and fiduciaries to forward copies of the
proxy material to their principals and to request instructions for voting the
proxies. The Company may reimburse such banks, brokerage houses and other
custodians, nominees and fiduciaries for their expenses in connection
therewith. Action may be taken on the business to be transacted at the meeting
on the date specified in the Notice of Meeting or on any date or dates to which
such Meeting may be adjourned.
VOTING OF PROXIES
A form of proxy is enclosed for use at the meeting if a stockholder is
unable to attend in person. Each proxy may be revoked at any time thereafter
by writing to the Secretary of the Company prior to the meeting, by execution
and delivery of a subsequent proxy, or by attendance and voting in person at
the meeting, except as to any matter or matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority conferred by
such proxy. Shares represented by a valid proxy which if received pursuant to
this solicitation and not revoked before it is exercised, will be voted as
provided on the proxy at the meeting or at any adjournment or adjournments
thereof. Management intends to vote the 2,584,350 shares (68.4%) of Common
Stock which it controls in favor of the proposals to: (i) elect four Directors
to serve until the next Meeting and until their successors are duly elected and
qualified; (ii) to ratify the appointment of Gleeson, Sklar, Sawyers & Cumpata
LLP as independent auditors for 1996; and (iii) to transact such other business
as may properly come before the meeting or any adjournments thereof.
<PAGE> 4
VOTING SECURITIES AND VOTE REQUIRED
Only holders of Common Stock, no par value per share, of record at the
close of business on May 13, 1996 (the "Record Date"), will be entitled to vote
at the meeting. As of the Record Date, 3,778,977 shares of Common Stock, the
only class of voting securities of the Company, were issued and outstanding.
Each holder of Common Stock is entitled to one vote for each share held by such
holder. The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the meeting. Under the rules of the Securities and Exchange Commission (the
"Commission"), boxes and a designated blank space are provided on the proxy
card for shareholders to mark if they wish to withhold authority to vote for
one or more nominees for Director or for Proposal 2. Votes withheld in
connection with the election of one or more of the nominees for Director or
Proposal 2 will be counted as votes cast against such individuals or Proposal 2
and will be counted toward the presence of a quorum for the transaction of
business. If no direction is indicated, the proxy will be voted for the
election of the nominees for Director. The form of proxy does not provide for
abstentions with respect to the election of Directors; however, a shareholder
present at the meeting may abstain with respect to such election.
ANNUAL REPORT ON FORM 10-KSB
This Proxy Statement is accompanied by the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1995 (the "Annual Report").
Stockholders are referred to the Annual Report for information concerning the
Company's business and operations, but the Annual Report is not part of the
proxy soliciting materials. CERTAIN OTHER INFORMATION IS AVAILABLE WITHOUT
CHARGE UPON WRITTEN REQUEST. PLEASE CONTACT LIFEWAY FOODS, INC., 7625 NORTH
AUSTIN AVENUE, SKOKIE, ILLINOIS 60077, TELEPHONE (847) 967-1010, IF YOU WOULD
LIKE TO REQUEST A COPY OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR THE
PERIOD ENDED MARCH 31, 1996, OR ADDITIONAL REPORTS.
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<PAGE> 5
PROPOSAL 1
ELECTION OF DIRECTORS
Four Directors are to be elected at the meeting. The Directors will
be elected at the meeting to serve until the next annual meeting of
stockholders of the Company and until their successors shall be duly elected
and shall qualify. As noted, unless otherwise indicated thereon, all proxies
received will be voted in favor of the election individually, of the four
nominees of the Board named below as Directors of the Company. Should any of
the nominees not remain a candidate for election at the date of the meeting
(which contingency is not now contemplated or foreseen by the Board), proxies
solicited thereunder will be voted in favor of those nominees who do remain
candidates and may be voted for substitute nominees elected by the Board. The
four nominees receiving the highest number of affirmative votes of the shares
present or represented and entitled to be voted for them shall be elected as
Directors. Votes withheld from any Director are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business, but have no other legal effect under Illinois law. Each of the
nominees are currently serving as Directors of the Company. The names of the
nominees and certain information with regard to each nominee follows:
<TABLE>
<CAPTION>
Name Age Position Director Since
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Michael Smolyansky 48 CEO, CFO, President,
Treasurer and Director 1986
Pol Sikar 47 Director 1986
Rick D. Salm 45 Director 1986
Renzo Bernardi 58 Director 1994
</TABLE>
NOMINEES FOR ELECTION AS DIRECTORS
MICHAEL SMOLYANSKY has been Chief Executive Officer, Chief Financial
Officer, President, Treasurer and a Director of the Company since its inception
in February 1986. From 1976 to 1985, he was Project Engineer and Department
Manager of E.J. Littell Machine Co., of Chicago, Illinois, where he had primary
responsibility for design of material handling equipment. Mr. Smolyansky is a
graduate of the Kiev Institute of Technology (M.S., Mechanical Engineering,
1971). Mr. Smolyansky devotes full time to the business of the Company. Mr.
Smolyansky holds no other Directorships in any other company reporting under
either Section 12(b), 12(g) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
POL SIKAR has been a Director of the Company since its inception in
February 1986. He is a graduate with a Master's degree from the Odessa State
Institute of Civil Engineering in Russia. For more than 10 years he has been
President and major stockholder of Still-Montrose Glass & Mirror Co., a company
providing glass and mirror products to the wholesale and retail trade in the
greater Chicago area. Mr. Sikar devotes as much time as necessary to the
business of the Company. Mr. Sikar holds no other Directorships in any other
company reporting under either Section 12(b), 12(g) or 15(d) of the Exchange
Act.
RICK D. SALM, a Director of the Company since its inception in
February 1986, is first Vice-President of the First Commercial Bank of Chicago,
Illinois. Mr. Salm joined First Commercial in 1982 and is currently in charge
of commercial lending activities. Mr. Salm holds a Bachelor's degree from St.
Norbert College, from which he graduated in 1974. Mr. Salm devotes as much
time as necessary to the business of the Company. Mr. Salm holds no other
Directorships in any other company reporting under either Section 12(b), 12(g)
or 15(d) of the Exchange Act.
RENZO BERNARDI has been a Director of the Company since 1994 and has
been a Director of the Company's subsidiary, Lifeway International, Inc. since
its inception in 1992. Mr. Bernardi is the president and founder of Renzo &
Sons, Inc. - Dairy and Food Service Company which has been in business since
1969 (formerly, Renzo-Milk Distribution Systems). He has over 29 years of
experience in the dairy distribution industry. Over the years, Mr. Bernardi
has developed and implemented several innovative programs which have proven to
3
<PAGE> 6
reduce the costs of distribution and have resulted in the steady and continuous
growth of Renzo & Sons, Inc. which he now shares with his two sons. Mr.
Bernardi is a graduate of Instituto Teonico E Commerciale of Macomer, Sardinia.
Mr. Bernardi will devote as much time as necessary to the business of the
Company. Mr. Bernardi holds no other Directorships in any other company
reporting under either Section 12(b), 12(g) or 15(d) of the Exchange Act.
BOARD MEETINGS AND COMMITTEES
The Company has a standing Special Committee to administer its
employee benefit plan (the "Plan") consisting of three members. The current
members are Directors Smolyansky, Sikar and Salm. The Special Committee held
two meetings during the last fiscal year. Its principal function is to, in its
discretion, determine from time to time the eligible participants to receive an
award; the number of shares of stock issuable directly or to be granted
pursuant to option; the price at which the option may be exercised or the price
per share in cash or cancellation of fees or other payment which the Company is
liable if a direct issue of stock and all other terms on which each option
shall be granted.
During 1995, the Company's Board of Directors held three meetings.
The attendance at the meetings of the Board and the Special Committee of the
Board was 90%. No Director attended fewer than 75% of the meetings of the
Board and the Special Committee, if any, on which such Director served during
the last fiscal year.
COMPENSATION OF DIRECTORS
During the first three quarters of fiscal 1995, the Board of Directors
participated in two meetings and were compensated at the rate of $250 per
meeting. In August 1995, the Board of Directors voted to increase the
compensation paid to its Directors from $250 to $500 for their meeting
participation. The Board of Directors conducted one meeting in the last
quarter of fiscal 1995 for which the Directors were each compensated $500.
EXECUTIVE COMPENSATION
The following information discloses all plan and non-plan compensation
awarded to, earned by, or paid to Mr. Michael Smolyansky, Chairman of the
Board, CEO, CFO, President, Treasurer and Director of the Company, for all
services rendered in all capacities to the registrant and its subsidiaries.
Mr. Smolyansky is the only person meeting the reporting requirements of Item
402 of Regulation S-B. No other executive officer of the Company's total
annual salary and bonus exceeded $100,000 for the fiscal year ended December
31, 1995.
Summary Compensation Table
The following table sets forth all compensation, including bonuses,
stock option awards and other payments, paid or accrued by the Company during
each of the fiscal years ended December 31, 1995, 1994 and 1993, to or for the
Company's Chief Executive Officer and each of the other executive officers of
the Company whose total annual salary and bonus, if any, exceeded $100,000 for
the fiscal year ended 1995.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------
(a) (b) (c) (d) (e)
Name Year Other
and Ended Annual
Principal December Salary Bonus Compensation
Position 31 ($) ($) ($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael Smolyansky 1995 99,999.84 15,000.00 -0-
Chairman of the Board, 1994 81,333.00 15,000.00 -0-
CEO, CFO, President, 1993 72,000.00 15,000.00 -0-
and Treasurer
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------
Awards Payouts
--------------------------------------
(a) (f) (g) (h) (i)
Name Restricted All
and Stock Shares LTIP Other Compen-
Principal Award(s) Underlying Payouts sation
Position ($) Options ($) ($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael Smolyansky -0- -0- -0- -0-
Chairman of the Board, -0- -0- -0- -0-
CEO, CFO, President, -0- -0- -0- -0-
and Treasurer
</TABLE>
Option/SAR Grants in Last Fiscal Year
Mr. Smolyansky, the only person meeting the reporting requirements of
Item 402 of Regulation S-B, has not received any individual grants of stock
options during fiscal 1995 or stock appreciation rights during 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values
Mr. Smolyansky, the only person meeting the reporting requirements of
Item 402 of Regulation S-B, has not exercised any stock options during fiscal
1995.
Long-Term Incentive Plans ("LTIP") - Awards in Last Fiscal Year
Mr. Smolyansky, the only person meeting the reporting requirements of
Item 402 of Regulation S-B, has not received any awards pursuant to any LTIP
during fiscal 1995.
EMPLOYMENT CONTRACTS
On April 15, 1992, Michael Smolyansky executed a 5-year employment
contract with the Company which will expire on April 14, 1997. The agreement
provides for a base salary, payable in equal monthly installments, which may be
increased, subject to approval of the Board of Directors, on a yearly basis in
proportion to the Company's profitability. Additionally, under the agreement,
Mr. Smolyansky is entitled to receive cash bonuses at the discretion of the
Board of the Directors, subject to the Company being profitable.
The employment agreement obligates the Company to pay Mr. Smolyansky's
basic annual salary for the remaining term of the agreement from the date of
the employee's termination regardless of whether such termination is based upon
cause. Additionally, the employment agreement provides that (a) the Company
shall furnish a suitable automobile for the employee's use and (b) the
employee, for a period of two years after termination, agrees not to compete in
a business substantially similar to that of the Company.
RESTRICTED STOCK PLAN
The Company has adopted a Restricted Stock Plan which provides for the
granting of stock options to employees, including salaried officers of the
Company. The maximum aggregate amount of shares of the Company's Common Stock
that may be made subject to stock options granted under the Restricted Stock
Plan is 300,000. Options may be granted under the Restricted Stock Plan at
exercise prices that are not less than the fair market value of the Common
Stock at the time of the grant. The Restricted Stock Plan is administered by
the Company's Board of Directors. Once the options are exercised, the terms of
payment for the underlying shares of Common Stock may vary, as determined by
the Board of Directors. As of May 13, 1996, no options have been granted under
this Plan.
5
<PAGE> 8
EMPLOYEE, CONSULTANTS AND SERVICE PROVIDERS BENEFIT PLAN
On June 9, 1995, the Company filed a registration statement on Form
S-8 with the Securities and Exchange Commission in connection with an employee
benefit plan (the "Plan") covering 300,000 shares of its Common Stock.
Pursuant to the Plan, the Company may issue Common Stock and/or options to
purchase Common Stock to certain consultants, service providers and employees,
including officers and Directors, of the Company. The purpose of the Plan is
to promote the best interests of the Company and its stockholders by providing
a means of non-cash remuneration to eligible participants who contribute to
operating progress and earning power of the Company. The Plan is administered
by the Company's Board of Directors or a committee consisting of three members
which has the discretion to determine from time to time the eligible
participants to receive an award; the number of shares of stock issuable
directly or to be granted pursuant to option; the price at which the option may
be exercised or the price per share in cash or cancellation of fees or other
payment which the Company is liable if a direct issue of stock and all other
terms on which each option shall be granted. As of May 13, 1996, a total of
20,000 shares were issued under the Plan for public relations services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the
Company regarding the beneficial ownership of the Company's Common Stock, the
Company's only class of securities, as of May 13, 1996 (except as indicated
below) by: (a) each stockholder known by the Company to be the beneficial owner
of more than five percent of the Company's Common Stock; (b) each of the
Company's Directors; (c) each of the Company's executive officers named in the
Summary Compensation Table above; and (d) all current executive officers and
Directors of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial Owner of Ownership Percent of Class
(1) (2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Michael Smolyansky (3)(5) 2,567,750 67.9
7625 N. Austin Ave.
Skokie, IL 60077
Rick D. Salm (5) 1,500 *
6945 N. Clark St.
Chicago, IL 60626
Pol Sikar (4)(5) 11,400 *
3907 Miller Drive
Glenview, IL 60025
Renzo Bernardi (5) 800 *
2919 N. Natoma
Chicago, IL 60634
Valeriy Nikolenko (5) 2,900 *
8917 Lamon Ave.
Skokie, IL 60077
All officers and Directors of 2,584,350 68.4
the Company as a group (five
persons)
</TABLE>
- ---------------
* Represents less than one percent of the outstanding Common Stock.
6
<PAGE> 9
(1) Unless otherwise indicated, all shares are directly owned and
investing power is held by the persons named.
(2) Based upon 3,778,977 shares issued and outstanding as of May
13, 1996.
(3) Mr. Smolyansky directly owns 2,538,320 Common Shares of the
Company. 29,430 Common Shares are owned by his wife and
therefore deemed to be beneficially owned by Mr. Smolyansky.
(4) Mr. Sikar directly owns 10,900 Common Shares of the Company.
500 Common Shares are owned by his minor children and are
therefore deemed to be beneficially owned by Mr. Sikar.
(5) Director or officer. The majority of the Common Shares held
by officers, Directors and principal shareholders listed above
are "restricted securities" and, as such, are subject to
limitations on resale. The shares may be sold pursuant to
Rule 144 under certain circumstances. The Board of Directors
has adopted a Restricted Stock Plan under which certain
employees may be granted up to 300,000 shares of the Common
Stock of the Company. In addition, the Company filed a
registration statement on Form S-8 with the Securities and
Exchange Commission in connection with an employee benefit
plan covering 300,000 shares of its Common Stock. Pursuant to
the employee benefit plan, the Company may issue Common Stock
and/or options to purchase Common Stock to certain consultants
and employees, including officers and Directors, of the
Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1994, the Company determined that it would not be able to
implement its business plan for its subsidiary, Lifeway International, Inc.
("LII"). As a result, the Company conducted an exchange offer to the minority
shareholders of LII, whereby each minority shareholder could alternatively
exchange their shares for (i) restricted Common Shares in Lifeway Foods, Inc.
("LFI"); or (ii) receive a return of their original investment in cash plus
interest on their investment paid in restricted Common Shares in LFI. On
February 21, 1995, Mr. Michael Smolyansky, the Company's CEO, CFO, President,
Treasurer and a Director, and his wife elected to exchange their shares of LII
for the return of their original investment in cash aggregating $10,000 plus
interest paid in an aggregate 800 restricted Common Shares in LFI. On March
25, 1995, Mr. Pol Sikar, a Director of the Company, elected to exchange his
shares of LII for 4,400 restricted Common Shares in LFI. On January 10, 1995,
Mr. Renzo Bernardi, a Director of the Company, elected to exchange his shares
of LII for the return of his $10,000 investment in cash plus interest paid in
1,600 restricted Common Shares in LFI.
7
<PAGE> 10
PROPOSAL 2
RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board has designated the firm of Gleeson, Sklar, Sawyers & Cumpata
LLP, independent auditors, as auditors of the Company for the next fiscal year.
The Company has been advised by such firm that neither it nor any member or
associate of such firm has any relationship with the Company or with any of its
affiliates other than as independent accountants and auditors. Representatives
of Gleeson, Sklar, Sawyers & Cumpata LLP, will be present at the meeting, will
have an opportunity to make any statement they may desire to make, and will be
available to answer appropriate questions from stockholders.
On March 7, 1995, the Company filed a Form 8-K with the Securities and
Exchange Commission ("SEC") to report a change in its independent accountants.
The change in accountants was necessitated as a result of the peer review of
Robert L. DeLorme, C.P.A., the Company's former certifying accountant, as
required by the American Institute of Certified Public Accountants and the
Division for CPA firms, when, on February 8, 1995, the SEC determined that the
nature of the services Mr. DeLorme provided with respect to the Company during
1993 would be viewed as having impaired his audit independence with respect to
the 1993 audit of the Company. Because the SEC did not recognize Mr. DeLorme's
audit of the Company's 1993 financial statements as meeting the technical
requirements of Rule 2.01 of Regulation S-X, the Company requested that Mr.
DeLorme resign as its certifying accountant and take the appropriate steps to
have his audit opinion with respect to the Company's 1993 financial statements
withdrawn.
On February 28, 1995, the Company accepted the resignation of Robert
L. DeLorme, C.P.A., as its certifying accountant. The accountants' reports for
either of the past two years, prepared by Robert L. DeLorme, C.P.A., did not
contain an adverse opinion or disclaimer of opinion, and were not qualified or
modified as to audit scope or accounting principles. The Company engaged the
firm of Gleeson, Sklar, Sawyers & Cumpata LLP, Certified Public Accountants, to
re-audit the Company's 1993 financial statements and also to audit the
Company's 1994 financial statements. The replacement of Robert L. DeLorme,
C.P.A., was approved by majority of the Board of Directors of the Company on
February 28, 1995, also constituting the management of the Company, as the
Company has no audit committee. The Company had no prior consultation with the
newly engaged accountants regarding the application of accounting principles to
a specific transaction, the type of audit opinion that might be rendered, or
any matter that was the subject of any disagreement or a reportable event.
During the Company's two most recent fiscal years and the subsequent
interim periods preceding the replacement of Robert L. DeLorme, C.P.A., there
were no disagreements with the Mr. DeLorme on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. Mr. DeLorme did not advise Company that the internal controls
necessary for the Company to develop reliable financial statements did not
exist; and he did not advise the Company as to any information that would lead
him to believe that he could no longer rely on management's representations, or
that made him unwilling to be associated with the financial statements prepared
by management. Furthermore, Mr. DeLorme did not advise the Company of any
necessity to expand significantly the scope of the audit or that information
had come to his attention during the time period covered by the requirements of
Item 304 of Regulation S-X, that, if further investigated, might have: (i)
materially impacted the fairness or reliability of either of the previously
issued audit reports, or the underlying financial statements, or the financial
statements issued or to be issued covering the fiscal period subsequent to the
date of the most recent financial statements covered by an audit report
(including information that might have prevented them from rendering an
unqualified audit report on those financial statements); or (ii) have caused
him to be unwilling to rely on management's representation or be associated
with the Company's financial statements; and (iii) due to his replacement, or
for any reason, he did not so expand the scope of its audit, or conduct such
further investigation. It should be noted that, although the Company requested
that Mr. DeLorme withdraw his audit opinion with respect to its 1993 financial
statements, the Company does not view such request as being a result of any
disagreement with its former accountant. All issues resulting from Mr.
DeLorme's replacement for the reasons set forth herein were resolved to his
satisfaction by the subsequent actions of the Company.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GLEESON, SKLAR, SAWYERS & CUMPATA LLP, AS AUDITORS.
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OTHER MATTERS
The Board of Directors knows of no other business to come before the
meeting. If, however, other matters properly come before the meeting, it is
the intention of the persons named in the enclosed proxy to vote the shares
represented thereby in accordance with their best judgment.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder may desire to present to the Company's
1997 Annual Meeting of Stockholders must be received in writing by the
Secretary of the Company on or before January 1, 1997, in order to be
considered for possible inclusion in the Company's proxy materials relating to
such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MICHAEL SMOLYANSKY
MICHAEL SMOLYANSKY
Chairman of the Board
May 24, 1996
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PROXY LIFEWAY FOODS, INC. PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT THE HOLIDAY INN NORTH SHORE, SKOKIE, ILLINOIS,
SATURDAY, JUNE 15, 1996, AT 11:00 A.M. LOCAL TIME
The undersigned hereby appoints Michael Smolyansky, with full power of
substitution, as proxy to vote the Common Stock of the undersigned in Lifeway
Foods, Inc. at the above Annual Meeting and at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS HEREIN SPECIFIED. IF A
CHOICE IS NOT SPECIFIED, SUCH SHARES WILL BE VOTED FOR PROPOSALS 1 AND 2.
1. Election of Directors:
Nominees: Michael Smolyansky Pol Sikar Rick D. Salm Renzo Bernardi
[ ] FOR [ ] WITHHELD For, except vote withheld from
the following nominees:
____________________________________________________________________________
2. Ratification of Gleeson, Sklar, Sawyers & Cumpata LLP as independent
auditors:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 13
3. Other Matters:
In his discretion, to vote with respect to any other matters that may come
before the meeting or any adjournment thereof, including matters incident
to its conduct.
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURE____________________________________ DATED:___________
________________________________ ____________________________
SIGNATURE IF JOINTLY OWNED PRINT NAME
NOTE: This Proxy must be signed exactly as your name appears hereon.
Executors, administrators, trustees, etc. should give full title as
such. If the signer is a corporation, please sign full corporate name
by duly authorized officer.
