<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (earliest event reported): October 1, 1999
LIFEWAY FOODS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 0-17363 36-3442829
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6431 W. Oakton, Morton Grove, Illinois 60053
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 967-1010
-----------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On October 1, 1999, Lifeway Foods, Inc. (the "Registrant") issued and sold
497,767 shares of restricted common stock to Danone Foods, Inc. ("Danone"), a
subsidiary of Groupe Danone based in Paris, France. The purchase price paid to
the Registrant was $10.00 per share, for an aggregate equity investment of
$4,977,670.
Pursuant to the terms and conditions of a Stock Purchase Agreement and a
Stockholders' Agreement, copies of which are attached as exhibits to this Form
8-K, the Registrant granted certain limited rights to Danone, which include a
right to nominate one director, anti-dilutive rights relating to future
offerings, and limited registration rights.
The Registrant and Danone also agreed that they would not compete with each
other for a period of five years with respect to certain yogurt, cheese and
kefir products.
In connection with the transaction, Danone also purchased 150,000 outstanding
shares of common stock from certain shareholders, including the Registrant's
controlling shareholder, on similar terms.
As a result of these purchases, Danone became the beneficial owner of 15% of
the outstanding common stock of the Registrant. The parties have agreed that
for a period of five years, Danone may increase its ownership interest up to,
but not more than, 20% of the outstanding common stock of the Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits. The following exhibits are furnished in accordance
with the provisions of Item 601 of Regulation S-B.
Exhibit No. Description
----------- -----------
10.10 Stock Purchase Agreement with Danone Foods, Inc.,
dated October 1, 1999. (Filed herewith.)
10.11 Stockholders' Agreement with Danone Foods, Inc.
dated October 1, 1999. (Filed herewith.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LIFEWAY FOODS, INC.
By: /s/ Michael Smolyansky
--------------------------------------
Michael Smolyansky, President and CEO
Date: October 12, 1999
2
<PAGE> 3
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.10 Stock Purchase Agreement with Danone Foods, Inc.,
dated October 1, 1999. (Filed herewith.)
10.11 Stockholders' Agreement with Danone Foods, Inc.
dated October 1, 1999. (Filed herewith.)
</TABLE>
<PAGE> 1
EXHIBIT 10.10
================================================================================
--------------------------------------
STOCK PURCHASE AGREEMENT
--------------------------------------
AMONG
LIFEWAY FOODS, INC.,
DANONE FOODS, INC.,
MICHAEL SMOLYANSKY
AND
THE OTHER STOCKHOLDERS
LISTED ON THE SIGNATURE PAGES HEREOF
DATED AS OF OCTOBER 1, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms.....................................................1
1.02. Other Definitions.........................................................5
1.03. Terms Generally...........................................................6
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale of the Shares...........................................6
2.02. The Closing...............................................................7
2.03. Closing Deliveries by the Company.........................................7
2.04. Closing Deliveries by the Selling Stockholders............................8
2.05. Closing Deliveries by the Purchaser.......................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization, Authority and Qualification of the Company and the
Subsidiaries............................................................9
3.02. Capital Stock of the Company; Ownership of the Shares.....................9
3.03. Corporate Books and Records..............................................10
3.04. Subsidiaries.............................................................10
3.05. No Conflict..............................................................11
3.06. Governmental Consents and Approvals......................................11
3.07. SEC Filings; Financial Statements........................................11
3.08. No Undisclosed Liabilities...............................................12
3.09. Absence of Certain Changes or Events.....................................12
3.10. Litigation...............................................................13
3.11. Compliance with Laws.....................................................13
3.12. Environmental Matters....................................................14
3.13. Material Contracts.......................................................15
3.14. Intellectual Property....................................................15
3.15. Year 2000 Compliance.....................................................17
3.16. Title to Properties; Absence of Encumbrances.............................17
3.17. Employee Benefit Matters; Labor Matters..................................17
3.18. Taxes....................................................................19
3.19. Insurance................................................................20
3.20. Brokers..................................................................20
3.21. State Takeover Statutes; Appraisal Rights................................20
3.22. Securities Law Compliance................................................20
3.23. Company Statement........................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
4.01. Authorization............................................................21
4.02. No Conflict..............................................................21
4.03. Governmental Consents and Approvals......................................22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.05. Ownership................................................................22
4.06. Disclosure; Access to Information........................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.01. Organization and Authority of the Purchaser..............................22
5.02. No Conflict..............................................................23
5.03. Governmental Consents and Approvals......................................23
5.04. Investment Purpose.......................................................23
5.05. Status of Shares.........................................................23
5.06. Brokers..................................................................24
5.07. Disclosure; Access to Information........................................24
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Public Announcements.....................................................24
6.02. Further Action...........................................................24
6.03. NASDAQ Listing...........................................................24
6.04. Treasury Shares..........................................................24
ARTICLE VII
INDEMNIFICATION
7.01. Survival of Representations and Warranties...............................25
7.02. Indemnification by the Company...........................................25
ARTICLE VIII
GENERAL PROVISIONS
8.01. Waiver...................................................................27
8.02. Expenses.................................................................27
8.03. Notices..................................................................28
8.04. Headings.................................................................29
8.05. Selling Stockholders Representative......................................29
8.06. Severability.............................................................30
8.07. Entire Agreement.........................................................30
8.08. Assignment...............................................................30
8.09. No Third Party Beneficiaries.............................................30
8.10. Amendment................................................................30
8.11. Governing Law............................................................30
8.12. Consent to Jurisdiction..................................................30
8.13. Waiver of Jury Trial.....................................................31
8.14. Counterparts.............................................................31
</TABLE>
-ii-
<PAGE> 4
STOCK PURCHASE AGREEMENT, dated as of October 1, 1999, among
Lifeway Foods, Inc., an Illinois corporation (the "Company"), Danone Foods,
Inc., a Delaware corporation (the "Purchaser"), Michael Smolyansky and the other
stockholders of the Company listed on the signature pages hereto (collectively,
the "Selling Stockholders").
W I T N E S S E T H:
WHEREAS, the Company wishes to issue and sell to the
Purchaser, and the Purchaser wishes to purchase from the Company, 497,767 shares
of common stock, no par value per share, of the Company ("Common Stock"), upon
the terms and subject to the conditions set forth herein. Such shares of Common
Stock are collectively referred to as the "Company Shares";
WHEREAS, concurrently with the issuance and sale of the
Company Shares hereunder, the Selling Stockholders wish to sell to the Purchaser
and the Purchaser wishes to purchase from the Selling Stockholders 150,000
shares of Common Stock (the "Seller Shares"), upon the terms and subject to the
conditions set forth herein. The Company Shares and the Seller Shares are
collectively referred to as the "Shares"; and
WHEREAS, simultaneously with the execution of this Agreement,
the parties hereto are executing the Stockholders' Agreement (as defined below);
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the Purchaser, the
Selling Stockholders and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"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.
"Agreement" or "this Agreement" means this Stock Purchase
Agreement, dated as of October 1, 1999, among the Company, the Purchaser and the
Selling Stockholders (including the Exhibits hereto and the Disclosure Schedule)
and all amendments hereto made in accordance with the provisions of Section
8.10.
<PAGE> 5
"Business" means the business of manufacturing, marketing and
selling cultured, probiotic and functional food products in the health food
industry and all other business which prior to the date hereof has been
conducted by the Company and the Subsidiaries.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
New York City or the State of Illinois.
"CERCLA" means the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
"Company Systems" shall mean all computer, hardware, software,
systems and equipment (including embedded microcontrollers in noncomputer
equipment) material to or necessary for the Company and the Subsidiaries to
carry on their businesses as currently conducted.
"control" (including the terms "controlled by" and "under
common control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto, dated as of the date hereof, and forming a part of this Agreement.
"Employee Plan" means any equity incentive plan, agreement,
bonus, award, stock purchase plan, stock option plan or other stock arrangement
with respect to any directors, officers or other employees of the Company.
"Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Environmental Laws" means any federal, state or local
statute, law, ordinance, regulation, rule, code or order of the United States,
or any other foreign or domestic or supranational jurisdiction and any
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment or natural resources, including,
without limitation, those relating
2
<PAGE> 6
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials, as in effect as of the date of this Agreement.
"Environmental Permits" means any permit, approval,
identification number, license and other authorization required under any
applicable Environmental Law.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" means, in respect of the Common Stock,
the method of calculating the number of shares of Common Stock issued and
outstanding on an applicable measurement date, pursuant to which the number of
shares of Common Stock issued and outstanding on any such date are aggregated
with the number of shares of Common Stock issuable on such date upon exercise or
conversion of any other security of the Company outstanding on such date
(including employee stock options issued and issuable pursuant to Employee
Plans).
"Governmental Authority" means any United States federal,
state, local, supranational or any foreign government, governmental, regulatory
or administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Hazardous Materials" means (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"Intellectual Property" means (i) United States, international
and foreign patents, patent applications and statutory invention registrations,
(ii) trademarks, service marks, trade dress, logos, and other source
identifiers, including registrations and applications for registration thereof,
(iii) copyrights, including registrations and applications for registration
thereof and (iv) confidential and proprietary information, including trade
secrets and know-how.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including, without limitation, those
arising under any Law (including, without limitation, any Environmental Law),
Action or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Material Adverse Effect" means any circumstance, change in,
or effect on the Business, the Company or any Subsidiary that, individually or
in the aggregate with any other
3
<PAGE> 7
circumstances, changes in, or effects on, the Business, the Company or any
Subsidiary is, or could be materially adverse to the business, operations,
assets or liabilities, employee relationships, customer or supplier
relationships, prospects, results of operations or the condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole. Material
Adverse Effect shall be determined without regard to the definition of Material
Contracts contained in this Agreement.
"Owned Real Property" means the real property owned by the
Company or any Subsidiary, together will all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or any
Subsidiary attached or appurtenant thereto and all easements, licenses, rights
and appurtenances relating to the foregoing.
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) liens for taxes, assessments and governmental
charges or levies not yet due and payable which are not in excess of the amount
accrued therefor on the Company Balance Sheet; (b) Encumbrances imposed by law,
such as materialmen's, mechanics', carriers', workmen's and repairmen's liens
and other similar liens arising in the ordinary course of business securing
obligations that (i) are not overdue for a period of more than 30 days and (ii)
are not in excess of $5,000 in the case of a single property or $50,000 in the
aggregate at any time; (c) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure public or
statutory obligations; and (d) minor survey exceptions, reciprocal easement
agreements and other customary encumbrances on title to real property that (i)
were not incurred in connection with any indebtedness, (ii) do not render title
to the property encumbered thereby unmarketable and (iii) do not, individually
or in the aggregate, materially adversely affect the value or use of such
property for its current and anticipated purposes.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Exchange Act.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like into or upon any land or water or air or otherwise entering into the
environment.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated the date hereof, among the Company, the Purchaser and the other
stockholders of the Company party thereto.
"Stock Option Plan" means the Consulting and Services
Compensation Agreement dated June 5, 1995.
4
<PAGE> 8
"Subsidiaries" means any and all other corporations,
partnerships, joint ventures, associations and other entities controlled by the
Company directly or indirectly through one or more intermediaries.
"Vendors" means any and all vendors who are unaffiliated with
the Company who supply raw materials, components, spare parts, supplies, goods,
merchandise or services to the Company or any Subsidiary.
"Year 2000 Compliant" means that the Company Systems provide
uninterrupted millennium functionality in that the Company Systems will (a)
record, store, process and present calendar dates falling on or after January 1,
2000, in the same manner and with the same functionality as the Company Systems
record, store, process and present calendar dates falling on or before December
31, 1999 and (b) correctly recognize September 9, 1999 date values.
SECTION 1.02. Other Definitions. The meanings of the following
terms can be found in the Sections of this Agreement indicated below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Board of Directors......................Section 2.03(c)
Closing.................................Section 2.02
Closing Date............................Section 2.02
Common Stock............................Recitals
Company.................................Preamble
Company Balance Sheet...................Section 3.07(b)
Company Benefit Plans...................Section 3.17(a)
Company Permits.........................Section 3.11(b)
Company SEC Reports.....................Section 3.07(a)
Company Shares..........................Recitals
Company Shares Purchase Price...........Section 2.01(a)
ERISA...................................Section 3.17(a)
FDA.....................................Section 3.11(a)
IRS.....................................Section 3.17(d)
Licensed Intellectual Property..........Section 3.14(a)
Loss....................................Section 7.02(a)
Material Contracts......................Section 3.13(a)
Owned Intellectual Property.............Section 3.14(a)
Preferred Stock.........................Section 3.02
Purchaser...............................Preamble
Regulated Products......................Section 3.11(a)
Seller Shares...........................Recitals
Seller Shares Purchase Price............Section 2.01(b)
Selling Stockholder Representative......Section 8.05(a)
Selling Stockholders....................Preamble
Shares..................................Recitals
Third Party Claims......................Section 7.02(e)
</TABLE>
5
<PAGE> 9
SECTION 1.03. Terms Generally. References in this Agreement to
articles, sections, paragraphs, clauses, schedules and exhibits are to articles,
sections, paragraphs, clauses, schedules and exhibits in or to this Agreement
unless otherwise indicated. Whenever the context may require, any pronoun
includes the corresponding masculine, feminine and neuter forms. Any term
defined by reference to any agreement, instrument or document has the meaning
assigned to it whether or not such agreement, instrument or document is in
effect. The words "include", "includes" and "including" are deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, any agreement, instrument or other document defined or referred to
herein refers to such agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified from time to time. Unless the
context otherwise requires, references herein to any Person include its
successors and assigns. The words "shall" and "will" have the same meaning and
effect.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. (a) Subject to
the terms and conditions contained herein, upon the basis of the representations
and warranties contained herein of the Purchaser, the Company agrees to issue
and sell to the Purchaser and, upon the basis of the representations and
warranties contained herein of the Company, the Purchaser agrees to purchase
from the Company, the Company Shares for an aggregate purchase price of
$4,977,670 (the "Company Shares Purchase Price").
(b) Subject to the terms and conditions contained herein, upon
the basis of the representations and warranties contained herein of the
Purchaser, the Selling Stockholders, severally and not jointly, agree
to sell to the Purchaser and, upon the basis of the representations and
warranties contained herein of the Selling Stockholders, the Purchaser
agrees to purchase from each Selling Stockholder, the number of Seller
Shares set forth in Schedule A opposite such Selling Stockholders name
for an aggregate purchase price of $1,500,000 (the "Seller Shares
Purchase Price").
SECTION 2.02. The Closing. The purchase of the Shares
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of the Company on the date hereof ("Closing Date").
SECTION 2.03. Closing Deliveries by the Company. At the
Closing, the Company shall deliver or cause to be delivered to the Purchaser:
6
<PAGE> 10
(a) a newly issued stock certificate issued to the Purchaser
evidencing the Company Shares;
(b) a receipt for the Company Shares Purchase Price;
(c) a true and complete copy, certified by the Secretary or an
Assistant Secretary of the Company, of the resolutions duly and validly
adopted by the board of directors of the Company evidencing (i) its
authorization of the execution and delivery of this Agreement and the
Stockholders' Agreement and the consummation of the transactions
contemplated hereby and thereby, including the issuance of the Company
Shares and (ii) the expansion of the board of directors of the Company
(the "Board of Directors") from four to five directors and the election
of the individual designated by the Purchaser in writing to the board
of directors, to serve until the next annual meeting of the Company's
stockholders;
(d) from Futro & Trauernicht LLC a legal opinion, addressed to
the Purchaser and dated the Closing Date, substantially in the form of
Exhibit 2.03(d);
(e) a copy of (i) the certificates of incorporation, as
amended (or similar organizational documents), of the Company,
certified by the secretary of state of Illinois, as of a date not
earlier than five Business Days prior to the Closing Date and
accompanied by a certificate of the Secretary or Assistant Secretary of
the Company, dated as of the Closing Date, stating that no amendments
have been made to such certificate of incorporation since such date,
and (ii) the by-laws of the Company certified by the Secretary or
Assistant Secretary of the Company;
(f) good standing certificates for the Company and for each
Subsidiary from the secretary of state or similar Governmental
Authority, if applicable, of the jurisdiction in which each such entity
is incorporated or organized, in each case dated as of a date not
earlier than five Business Days prior to such Closing Date; and
(g) a certificate of the registrar and transfer agent of the
Company, certifying the number of outstanding shares of Common Stock of
the Company as of a date not more than two Business Days prior to the
Closing Date.
SECTION 2.04. Closing Deliveries by the Selling Stockholders.
At the Closing, the Selling Stockholders shall deliver to the Purchaser:
(a) stock certificates evidencing the Seller Shares duly
endorsed in blank, or accompanied by stock powers duly executed in
blank, in form satisfactory to the Purchaser and with all required
stock transfer tax stamps affixed;
(b) a receipt for the Seller Shares Purchase Price; and
(c) from Futro & Trauernicht LLC a legal opinion, addressed to
the Purchaser and dated on the Closing Date, substantially in the form
of Exhibit 2.04(c).
7
<PAGE> 11
SECTION 2.05. Closing Deliveries by the Purchaser. (a) At the
Closing, the Purchaser shall deliver to the Company:
(i) the Company Shares Purchase Price by wire
transfer of immediately available funds to the bank account
designated by the Company; and
(ii) a receipt acknowledging delivery of the stock
certificate specified in Section 2.06(a).
(b) At the Closing, the Purchaser shall deliver to the Selling
Stockholders Representative:
(i) the Seller Shares Purchase Price by wire transfer
of immediately available funds to the bank account designated
by the Selling Stockholder Representative; and
(ii) a receipt acknowledging delivery of the stock
certificates specified in Section 2.04(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Purchaser to enter into this Agreement
and the Stockholders' Agreement, the Company hereby represents and warrants to
the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the
Company and the Subsidiaries. (a) The Company and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and the Company has all
necessary power and authority to enter into each of this Agreement and the
Stockholders' Agreement, to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The Company
and each Subsidiary is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its Business makes such licensing or qualification necessary,
except to the extent that the failure to be so licensed or qualified would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement and the
Stockholders' Agreement by the Company, the performance by the Company
of its obligations hereunder and thereunder and the consummation by the
Company of the transactions contemplated hereby and thereby have been
duly authorized by all requisite action on the part of the Company and
its shareholders.
8
<PAGE> 12
(c) Each of this Agreement and the Stockholders' Agreement
have been duly executed and delivered by the Company, and (assuming due
authorization, execution and delivery by the Purchaser and stockholders
of the Company party thereto) each of this Agreement and the
Stockholders' Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms. Neither the Company nor any Subsidiary is in violation
of any of the provisions of their respective certificate of
incorporation, by-laws or equivalent organizational documents.
(d) True and complete copies of the charter and by-laws, in
each case as in effect on the date hereof, of the Company have been
delivered by the Company to the Purchaser.
SECTION 3.02. Capital Stock of the Company; Ownership of the
Shares. As of the date hereof and without giving effect to the consummation of
the transactions contemplated hereby, (a) the authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock and 2,500,000 shares of
preferred stock, no par value per share, of the Company ("Preferred Stock"), (b)
(i) 3,820,677 shares of Common Stock are issued and outstanding, all of which
are validly issued, fully paid and nonassessable, (ii) 10,400 shares of Common
Stock are held in the treasury of the Company, (iii) 234,300 shares of Common
Stock are reserved for issuance pursuant to stock options granted pursuant to
the Stock Option Plan and (iv) no options are outstanding under the Stock Option
Plan and (c) no shares of Preferred Stock have been issued and are outstanding.
After giving effect to the consummation of the transactions contemplated hereby,
the number of issued and outstanding shares of Common Stock on a Fully Diluted
Basis will be 4,318,344. None of the issued and outstanding shares of Common
Stock was issued in violation of any preemptive rights. Except for the Stock
Option Plan, there are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character relating to the
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or any other interest in, the Company. There are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of Common Stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable; and none of the outstanding shares of Common Stock
of the Company (including the Shares) was issued in violation of the preemptive
or other similar rights of any securityholder of the Company. Upon delivery of
the Shares and payment of the purchase price therefor as herein contemplated,
the Purchaser, assuming it shall have purchased the Shares for value in good
faith and without notice of any adverse claim, will own the Shares free and
clear of all Encumbrances. There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any shares of Common Stock. No person has demand or other
rights to cause the Company to file any registration statement under the
Securities Act relating to any securities of the Company or any right to
participate in any such registration.
9
<PAGE> 13
SECTION 3.03. Corporate Books and Records. The minute books of
the Company contain accurate records of all meetings and accurately reflect all
other actions taken by the shareholders, the Board of Directors and all
committees of the Board of Directors of the Company. Complete and accurate
copies of all such minute books and of the stock register of the Company have
been made available to the Purchaser.
SECTION 3.04. Subsidiaries. (a) Section 3.04(a) of the
Disclosure Schedule sets forth a true and complete list of all Subsidiaries,
listing for each Subsidiary its name, type of entity, the jurisdiction and date
of its incorporation or organization, its authorized capital stock, partnership
capital or equivalent, the number and type of its issued and outstanding shares
of capital stock, partnership interests or similar ownership interests, the
current ownership of such shares, partnership interests or similar ownership
interests, a brief description of its business, revenues for the most recent
ended fiscal year and the number of employees employed by it at the end of such
fiscal year.
(b) Other than the Subsidiaries, there are no other
corporations, partnerships, joint ventures, associations or other
entities in which the Company owns, of record or beneficially, any
direct or indirect equity or other interest or any right (contingent or
otherwise) to acquire the same.
SECTION 3.05. No Conflict. The execution, delivery and
performance of this Agreement and the Stockholders' Agreement by the Company do
not and will not (a) violate, conflict with or result in the breach of any
provision of the charter or by-laws (or similar organizational documents) of the
Company or any Subsidiary, (b) conflict with or violate any Law or Governmental
Order, applicable to the Company, any Subsidiary or any of their respective
assets, properties or businesses, or (c) except as disclosed in Section 3.05 of
the Disclosure Schedule, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
Shares or on any of the assets or properties of the Company or any Subsidiary
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument, obligation or
arrangement to which the Company or any Subsidiary is a party or by which any of
the shares of Common Stock or any of such assets or properties is bound or
affected, except, with respect to clauses (b) and (c), as would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.06. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement and the Stockholders'
Agreement by the Company do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to any
Governmental Authority, except for (a) the applicable requirements, if any, of
the Exchange Act (b) the applicable requirements of the Securities Act and state
securities or "blue sky" laws in connection with the Company's obligations under
the Stockholders' Agreement and (c) as disclosed in Section 3.06 of the
Disclosure Schedule.
10
<PAGE> 14
SECTION 3.07. SEC Filings; Financial Statements. (a) The
Company has filed all forms, reports and documents required to be filed by it
with the SEC since January 1, 1994 (collectively, the "Company SEC Reports"). As
of the respective dates on which they were filed, (i) the Company SEC Reports
complied in all material respects with the requirements of the Securities Act
and the rules and regulations promulgated thereunder, and the Exchange Act, as
the case may be, and (ii) none of the Company SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No
Subsidiary is required to file any form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Company SEC Reports
was prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q under the
Exchange Act), and each presented fairly, in all material respects, the
consolidated financial position, results of operations and cash flows
of the Company and the consolidated Subsidiaries as at the respective
dates thereof and for the respective periods indicated therein, except
as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments that could not
be reasonably expected to, individually or in the aggregate, have a
Material Adverse Effect). The balance sheet of the Company contained in
the Company SEC Reports as of June 30, 1999 is hereinafter referred to
as the "Company Balance Sheet."
(c) The Company has heretofore furnished to the Purchaser a
complete and correct copy of any amendments or modification, that have
not yet been filed with the SEC but that it would customarily file, to
agreements, documents or other instruments that previously had been
filed by the Company with the SEC pursuant to the Securities Act or the
Exchange Act. The Company is not obligated to file any report on
Exchange Act Form 8-K (except as may be required with respect to the
transactions contemplated hereby).
SECTION 3.08. No Undisclosed Liabilities. There are no
Liabilities of the Company or any Subsidiary which would be required to be
reflected on a balance sheet, or the notes thereto, prepared in accordance with
generally accepted accounting principles, other than Liabilities (i) reflected
or reserved against on the Company Balance Sheet, (ii) disclosed in Section 3.08
of the Disclosure Schedule or (iii) incurred since the date of the Company
Balance Sheet in the ordinary course of the business, consistent with the past
practices, of the Company and the Subsidiaries and which do not and will not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.09. Absence of Certain Changes or Events. Since June
30, 1999, except as contemplated by, or disclosed pursuant to, this Agreement or
disclosed in any SEC Report filed after June 30, 1999, the Company and the
Subsidiaries have conducted their
11
<PAGE> 15
businesses only in the ordinary course and in a manner consistent with past
practices and there has not been any (a) Material Adverse Effect, (b) change by
the Company in its accounting methods, principles or policies, (c) material
revaluation by the Company of any asset (including, without limitation, any
writing down of the value of inventory or writing off of notes or accounts
receivable, other than in the ordinary course of business consistent with past
practices, (d) entry by the Company or any Subsidiary into any commitment or
transaction material to the Company and the Subsidiaries, taken as a whole, (e)
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities, (f) increase in or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of the Company or any Subsidiary, except in the ordinary course of business
consistent with past practices, (g) (i) incurrence, assumption or guarantee by
the Company or any Subsidiary of any indebtedness for borrowed money other than
in the ordinary course of business and consistent with past practices, except as
incurred under facilities existing as of the date of the Company Balance Sheet,
or (ii) grant of any security interest on the assets of the Company or any
Subsidiary to any Person, (h) making of any loan, advance or capital
contribution to or investment in any Person by the Company or any Subsidiary
other than (i) loans, advances or capital contributions to or investments in any
wholly owned Subsidiary, (ii) loans or advances to the Company by any Subsidiary
or (iii) loans or advances to employees of the Company or any Subsidiary made in
the ordinary course of business consistent with past practices, (i) (i)
transactions, commitments, contracts or agreements entered into by the Company
or any Subsidiary relating to any acquisition or disposition of any assets or
business with a value in excess of $100,000 or (ii) modification, amendment,
assignment, termination or relinquishment by the Company or any Subsidiary of
any material contract, license or other right, other than, in either case,
transactions, commitment, contracts or agreements in the ordinary course of
business consistent with past practices, (j) disclosure or abandonment by the
Company or the Subsidiaries of any Intellectual Property or the grant of any
Intellectual Property rights to any person by the Company or the Subsidiaries or
(k) act or omission by the board of directors of the Company or any officer of
the Company that could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.10. Litigation. Except as disclosed in Section 3.10
of the Disclosure Schedule or as disclosed in the SEC Reports filed prior to the
date of this Agreement, there are no Actions by or against the Company or any
Subsidiary or Affiliate thereof (and relating to the Business, the Company or
any Subsidiary), or affecting any of the assets of the Company or the
Subsidiaries, pending before any Governmental Authority or, to the knowledge of
the Company threatened to be brought by or before any Governmental Authority.
Except as disclosed in Section 3.10 of the Disclosure Schedule, none of the
Company, the Subsidiaries nor any of the assets of the Company or the
Subsidiaries is subject to any Governmental Order (nor, to the knowledge of the
Company, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has had or will have, individually or in the
aggregate, a Material Adverse Effect.
12
<PAGE> 16
SECTION 3.11. Compliance with Laws. (a) Except as disclosed in
Section 3.11 of the Disclosure Schedule, neither the Company nor any Subsidiary
is in default or violation of any Law or Governmental Order (including, but not
limited to, those of the Food and Drug Administration (the "FDA") or any
nongovernmental self-regulatory agency and including environmental laws or
regulations). Each of the Company and each Subsidiary has timely filed or
otherwise provided all registrations, reports, data, and other information and
applications with respect to its governmentally regulated products (the
"Regulated Products"), if any, required to be filed with or otherwise provided
to the FDA or any Governmental Authority with jurisdiction over the manufacture,
use or sale of the Regulated Products, and all regulatory licenses or approvals
in respect thereof are in full force and effect, except where the failure to
file timely such registrations, reports, data, information and applications or
the failure to have such licenses and approvals in full force and effect would
not, individually or in the aggregate, have a Material Adverse Effect.
(b) Except as disclosed in Section 3.11(b) of the Disclosure
Schedule, each of the Company and the Subsidiaries is in possession of
all franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of
any Governmental Authority (including, but not limited to, the FDA or
any nongovernmental self-regulatory agency) necessary or required for
the Company or any Subsidiary to own, lease and operate its properties
or to carry on its business as it is now being conducted (the "Company
Permits"), and no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened.
SECTION 3.12. Environmental Matters. Except as disclosed in
Section 3.12 of the Disclosure Schedule or as would not, individually or in the
aggregate, have a Material Adverse Effect:
(a) The Company and the Subsidiaries (i) are in compliance
with all applicable Environmental Laws, (ii) hold all Environmental
Permits required for it to conduct its business and (iii) are in
compliance with their respective Environmental Permits.
(b) Neither the Company nor any of the Subsidiaries has
released, and to their knowledge no other person has released,
Hazardous Materials on any real property owned or leased by the Company
or the Subsidiaries or, during their ownership or occupancy of such
property, on any property formerly owned or leased by the Company or
any Subsidiary.
(c) Neither the Company nor any Subsidiary has received any
written request for information, or been notified that it is a
potentially responsible party, under CERCLA, or any similar Law of any
state, locality or any other jurisdiction.
(d) Neither the Company nor any Subsidiary has entered into or
agreed to any consent decree or order or is subject to any judgment,
decree or judicial order relating to
13
<PAGE> 17
compliance with Environmental Laws, Environmental Permits or the
investigation, sampling, monitoring, treatment, remediation, removal or
cleanup of Hazardous Materials (as defined below) and, to the knowledge
of Company, no investigation, litigation or other proceeding is pending
or threatened in writing with respect thereto.
(e) None of the real property currently or formerly owned or
leased by the Company or any Subsidiary is listed or, to the knowledge
of the Company, proposed for listing on the "National Priorities List"
under CERCLA, as updated through the date of this Agreement, or any
similar list of sites in the United States or any other jurisdiction
requiring investigation or cleanup.
SECTION 3.13. Material Contracts. (a) Other than as filed as
Exhibits to the SEC Reports or as disclosed in Section 3.13(a) of the Disclosure
Schedule , there are no contracts, agreements, leases, licenses or commitments
to which the Company or any Subsidiary is a party that involve consideration of
more than $50,000 over the remaining term of such contract, agreement, leave,
license or commitment ("Material Contracts").
(b) Except as disclosed in Section 3.13(b) of the Disclosure
Schedule, each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii)
upon consummation of the transactions contemplated by this Agreement
and the Stockholders' Agreement, except to the extent that any consents
set forth in Section 3.06 of the Disclosure Schedule are not obtained,
shall continue in full force and effect without penalty or other
adverse consequence. Neither the Company nor any Subsidiary is in
breach of, or default under, any Material Contract.
(c) Except as disclosed in Section 3.13(c) of the Disclosure
Schedule, to the knowledge of the Company, no other party to any
Material Contract is in breach thereof or default thereunder.
SECTION 3.14. Intellectual Property. (a) Section 3.14(a) of
the Disclosure Schedule sets forth a true and complete list of all (i) patents,
patent applications, trademarks and other material Intellectual Property, in
each case owned by the Company or a Subsidiary ("Owned Intellectual Property")
and (ii) licenses (including sublicenses) of Intellectual Property to the
Company or a Subsidiary or by the Company or a Subsidiary from a third party, in
each case that are material to the Business of the Company or any Subsidiary
("Licensed Intellectual Property"), other than (A) any end-user operating system
obtained with the purchase or license of equipment and (B) any end-user
application software, in each case, that is commonly available. The Company and
the Subsidiaries own or have the right to use all Intellectual Property material
to the conduct of the business of the Company and its Subsidiaries.
(b) The use of the Owned Intellectual Property and the
Licensed Intellectual Property by the Company and the Subsidiaries in
the ordinary course of business does not conflict with or infringe upon
the Intellectual Property rights of any third party.
14
<PAGE> 18
(c) The Company or a Subsidiary is the exclusive owner of the
entire and unencumbered right, title and interest in and to each item
of Owned Intellectual Property, and the Company and the Subsidiaries
have the right to use all of the Owned Intellectual Property and
Licensed Intellectual Property in the continued operation of the
Business in a manner consistent with past practice, subject only to the
terms of the licenses of the Licensed Intellectual Property. The
consummation of the transactions contemplated hereby will not alter or
impair any of the Intellectual Property rights of the Company or any
Subsidiary.
(d) Except as disclosed in Section 3.14(d) of the Disclosure
Schedule, the Owned Intellectual Property and the Licensed Intellectual
Property include all of the Intellectual Property material to the
ordinary day-to-day conduct of the Business. The Owned Intellectual
Property of the Company and the Subsidiaries is subsisting, valid and
enforceable, and has not been adjudged invalid or unenforceable in
whole or part.
(e) Except as disclosed in Section 3.14(e) of the Disclosure
Schedule, no claims have been asserted, or are pending or, to the
knowledge of the Company, threatened against the Company or any
Subsidiary (i) based upon or challenging or seeking to deny or restrict
the use by the Company or any Subsidiary of any of the Owned
Intellectual Property or Licensed Intellectual Property, (ii) alleging
that any services provided by, processes used by or products
manufactured or sold by the Company or any Subsidiary or that the use
of Owned Intellectual Property or Licensed Intellectual Property in the
ordinary course of business of the Company and the Subsidiaries
infringes upon or misappropriates any Intellectual Property right of
any third party or (iii) alleging that any Intellectual Property
licensed pursuant to the Licensed Intellectual Property infringes upon
any Intellectual Property right of any third party or is being licensed
or sublicensed in conflict with the terms of any license or other
agreement.
(f) Except as set forth in Section 3.14(f) of the Disclosure
Schedule, to the knowledge of the Company, no person is engaging in any
activity that infringes upon the Owned Intellectual Property or any
Intellectual Property licensed to the Company and the Subsidiaries
under the Licensed Intellectual Property. Except as disclosed in
Section 3.14(f) of the Disclosure Schedule, neither the Company nor any
Subsidiary has granted any license or other right to any third party
with respect to the Owned Intellectual Property or Licensed
Intellectual Property.
(g) To the knowledge of the Company (i) there has been no
misappropriation of any material trade secrets or other material
confidential Intellectual Property of the Company or any Subsidiary by
any person, (ii) no employee, independent contractor or agent of the
Company or any Subsidiary has misappropriated any trade secrets of any
other person in the course of such performance as an employee,
independent contractor or agent, and (iii) no employee, independent
contractor or agent of the Company or any Subsidiary is in default or
breach of any term of any employment agreement, nondisclosure
agreement, assignment-of-invention agreement or similar agreement or
15
<PAGE> 19
contract relating in any way to the protection, ownership, development,
use or transfer of Intellectual Property.
(h) The Company has taken all steps reasonably necessary to
protect and maintain its rights to the Owned Intellectual Property and
the Licensed Intellectual Property.
SECTION 3.15. Year 2000 Compliance. The Company has (i)
undertaken an assessment of those Company Systems that could be adversely
affected by a failure to be Year 2000 Compliant, (ii) developed a plan and time
line for rendering such Company Systems Year 2000 Compliant and (iii)
implemented such plan in accordance with such time line in all material
respects. Based on such assessment, all Company Systems are Year 2000 Compliant
or will be Year 2000 Compliant as required to avoid having a Material Adverse
Effect. The Company estimates that the total remaining cost of rendering the
Company Systems Year 2000 Compliant will be less than $10,000.
SECTION 3.16. Title to Properties; Absence of Encumbrances.
(a) Section 3.16(a) of the Disclosure Schedule lists all Owned Real Property of
the Company or any Subsidiary. Other than the Owned Real Property identified in
Section 3.16(a) of the Disclosure Schedule, the Company and the Subsidiaries
have no ownership or leasehold interest in any real property.
(b) Each of the Company and the Subsidiaries has good and
valid title to, or in the case of leased properties and assets, valid
leasehold interests in, all of the tangible properties and assets,
real, personal and mixed, used or held for use in, or which are
necessary to conduct, the Business as currently conducted, free and
clear of any Encumbrances except for Permitted Encumbrances.
SECTION 3.17. Employee Benefit Matters; Labor Matters. (a) For
purposes of this Agreement, "Company Benefit Plans" means (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, whether legally enforceable or not, to which the
Company or any Subsidiary is a party, with respect to which the Company or any
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
former employee, officer or director of the Company or any Subsidiary, (ii) each
employee benefit plan for which the Company or any Subsidiary could incur
liability under Section 4069 of ERISA in the event such plan has been or were to
be terminated, (iii) any plan in respect of which the Company or any Subsidiary
could incur liability under Section 4212(c) of ERISA and (iv) any contracts,
arrangements or understandings between the Company or any Subsidiary or any of
their Affiliates and any employee of the Company or any Subsidiary including,
without limitation, any contracts, arrangements or understandings relating to a
sale of the Company or any Subsidiary.
16
<PAGE> 20
(b) Except for the Company Benefit Plans listed in Section
3.17(b) of the Disclosure Schedule, none of the Company Benefit Plans
provides for the payment of separation, severance, termination or
similar-type benefits to any person or obligates the Company or any
Subsidiary to pay separation, severance, termination or similar-type
benefits solely or partially as a result of any transaction
contemplated by this Agreement and the Stockholders' Agreement.
(c) Each Company Benefit Plan is now and always has been
operated in all material respects in accordance with its terms and the
requirements of all applicable laws, regulations and rules promulgated
thereunder, including, without limitation, ERISA and the Code. The
Company and each Subsidiary has performed all obligations required to
be performed by it under, is not in any respect in default under or in
violation of, and has no knowledge of any default or violation by any
party to, any Company Benefit Plan. No action, claim or proceeding is
pending or, to the knowledge of the Company, threatened with respect to
any Company Benefit Plan (other than claims for benefits in the
ordinary course) and no fact or event exists that could give rise to
any such action, claim or proceeding.
(d) Each Company Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has timely received a favorable
determination letter from the Internal Revenue Service of the United
States ("IRS") covering all of the provisions applicable to the Company
Benefit Plan for which determination letters are currently available
that the Company Benefit Plan is so qualified and each trust
established in connection with any Company Benefit Plan which is
intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that it is
so exempt, and no fact or event has occurred since the date of such
determination letter or letters from the IRS to adversely affect the
qualified status of any such Company Benefit Plan or the exempt status
of any such trust.
(e) Neither the Company nor any Subsidiary has incurred any
liability under, arising out of or by operation of Title IV of ERISA
(other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of
ERISA or (ii) the withdrawal from any multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) or multiple employer
plan (within the meaning of Section 4001(a)(15) of ERISA), and no fact
or event exists which could give rise to any such liability.
(f) Neither the Company nor any Subsidiary is a party to any
collective bargaining or other labor union contract applicable to
persons employed by the Company or any Subsidiary and no collective
bargaining agreement is being negotiated by the Company or any
Subsidiary. There is no labor dispute, strike or work stoppage against
the Company or any Subsidiary pending or threatened which may interfere
with the respective business activities of the Company or any
Subsidiary, except where such
17
<PAGE> 21
dispute, strike or work stoppage could not materially affect the
Business as currently conducted. To the knowledge of the Company, none
of the Company, any Subsidiary, or any of their respective
representatives or employees has committed any unfair labor practices
in connection with the operation of the respective businesses of the
Company or any Subsidiary, and there is no charge or complaint against
the Company or any Subsidiary by the National Labor Relations Board or
any comparable state agency pending or threatened in writing, except
where such unfair labor practice, charge or complaint could not
materially affect the Business as currently conducted.
SECTION 3.18. Taxes. (a) (i) All returns and reports in
respect of Taxes required to be filed with respect to the Company and each
Subsidiary (including any state Tax return that includes the Company or any
Subsidiary on a consolidated or combined basis) have been timely filed; (ii) all
Taxes required to be shown on such returns and reports or otherwise due have
been timely paid; (iii) all such returns and reports (insofar as they relate to
the activities or income of the Company or any Subsidiary) are true, correct and
complete in all material respects; (iv) no adjustment relating to such returns
has been proposed formally or informally by any Tax authority (insofar as either
relates to the activities or income of the Company or any Subsidiary or could
result in liability of the Company or any Subsidiary on the basis of joint
and/or several liability) and, to the best knowledge of the Company and the
Subsidiaries (after due inquiry), no basis exists for any such adjustment; (v)
there are no pending or, to the best knowledge of the Company and the
Subsidiaries (after due inquiry), threatened actions or proceedings for the
assessment or collection of Taxes against the Company or any Subsidiary (insofar
as either relates to the activities or income of the Company or any Subsidiary
or could result in liability of the Company or any Subsidiary on the basis of
joint and/or several liability); (vi) no consent under Section 341(f) of the
Code has been filed with respect to the Company or any Subsidiary; (vii) there
are no Tax liens on any assets of the Company or any Subsidiary; (viii) neither
the Company nor any Subsidiary or Affiliate of the Company is a party to any
agreement or arrangement that would result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; (ix) no acceleration of the vesting schedule for any property
that is substantially unvested within the meaning of the regulations under
Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement; (x) from and after the Company's incorporation,
the Company and each Subsidiary has been and continues to be a member of the
affiliated group (within the meaning of Section 1504(a)(1) of the Code) for
which the Company files a consolidated return as the common parent, and has not
been includible in any other consolidated return for any taxable period for
which the statute of limitations has not expired; (xi) neither the Company nor
any Subsidiary has been at any time a member of any partnership or joint venture
or the holder of a beneficial interest in any trust for any period for which the
statute of limitations for any Tax has not expired; (xii) neither the Company
nor any Subsidiary has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; and (xiii) neither the
Company nor any Subsidiary is subject to any accumulated earnings tax penalty or
personal holding company tax.
18
<PAGE> 22
(b) On the Company Balance Sheet, reserves and allowances have
been provided adequate to satisfy all Liabilities for Taxes relating to
the Company and the Subsidiaries for periods through the applicable
Closing Date (without regard to the materiality thereof).
SECTION 3.19. Insurance. The Company and the Subsidiaries
maintain insurance coverage with reputable insurers in such amounts and covering
such risks as are in accordance with normal industry practice for companies
engaged in businesses similar to that of the Company and the Subsidiaries
(taking into account the cost and availability of such insurance).
SECTION 3.20. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
SECTION 3.21. State Takeover Statutes; Appraisal Rights. No
state takeover statute is applicable to this Agreement or the Stockholders'
Agreement or the transactions contemplated hereby or thereby. No stockholder of
the Company shall have any appraisal rights under applicable Law as a result of
this Agreement or the Stockholders' Agreement or any of the transactions
contemplated hereby or thereby.
SECTION 3.22. Securities Law Compliance. Assuming the
representations and warranties of the Purchaser set forth in Article IV hereof
are true and correct in all respects, the subscription and sale of the Company
Shares pursuant to this Agreement will be exempt from the registration
requirements of the Securities Act. Neither the Company nor any Person acting on
its behalf has, in connection with the sale of the Company Shares, engaged in
(i) any form of general solicitation or general advertising (as those terms are
used within the meaning of Rule 502(c) under the Securities Act), (ii) any
action involving a public offering within the meaning of Section 4(2) of the
Securities Act, or (iii) any action that would require the registration under
the Securities Act of the offering and sale of the Shares pursuant to this
Agreement or that would violate applicable state securities or "blue sky" laws.
The Company has not made, directly or indirectly, any offer or sale of the
Company Shares or of securities of the same or similar class as the Shares if,
as a result, the offer and sale contemplated hereby could fail to be entitled to
exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(3)
of the Securities Act.
SECTION 3.23. Company Statement. The statement listed as
Section 3.23 of the Disclosure Schedule was prepared by the Company in good
faith and on the basis of reasonable assumptions. Such statement contains both
statements of historical fact and forward looking statements. Forward looking
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those indicated by the forward looking
statements. Examples of forward looking statements include, but are not limited
to, projections of revenues, income, capital expenditures, and future economic
performance. Important factors could cause actual results to differ materially
from those indicated by forward looking statements. These
19
<PAGE> 23
risks and uncertainties include, but are not limited to, price competition, the
actions of competitors, the effects of government regulation, possible delays in
the introduction of new products, and customer acceptance of products. Forward
looking statements are beyond the ability of the Company to control and in many
cases the Company cannot predict what factors would cause results to differ
materially from those indicated by the forward looking statements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
As an inducement to the Purchaser to enter into this Agreement
and the Stockholders' Agreement, each of the Selling Stockholders hereby,
severally but not jointly, represent and warrant to the Purchaser as follows:
SECTION 4.01. Authorization. Each Selling Stockholder is an
individual and has all requisite right, power and authority and full legal
capacity to execute and deliver this Agreement and the Stockholders' Agreement
and to perform his or her obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. This Agreement and the
Stockholders' Agreement have been duly and validly executed and delivered by
such Selling Stockholder, and this Agreement and the Stockholders' Agreement
constitute, legal, valid and binding obligations of each enforceable against
such Selling Stockholder in accordance with its terms. The failure of the spouse
of any Selling Stockholder to be a party or signatory to this Agreement or the
Stockholders' Agreement shall not (i) prevent any such Selling Stockholder from
performing his or her obligations and from consummating the transactions
contemplated hereunder and thereunder or (ii) prevent this Agreement or the
Stockholders' Agreement from constituting the legal, valid and binding
obligation of any such Selling Stockholder enforceable against any such Selling
Stockholder in accordance with its terms.
SECTION 4.02. No Conflict. The execution, delivery and
performance of this Agreement and the Selling Stockholders' Agreement by each of
the Selling Stockholders do not and will not conflict with or violate any Law or
Governmental Order, applicable to such Selling Stockholder, or conflict with,
result in any breach of, constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Seller Shares or on any of the assets
or properties of such Selling Stockholder pursuant to, any note, bond, mortgage
or indenture, contract, agreement, lease, sublease, license, permit, franchise
or other instrument, obligation or arrangement to which such Selling Stockholder
is a party or by which any of the Seller Shares or any of such assets or
properties is bound or affected.
SECTION 4.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement and the Selling
Stockholders' Agreement by each of the
20
<PAGE> 24
Selling Stockholders do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to any
Governmental Authority, except as may be required by the Exchange Act.
SECTION 4.04. Accuracy of Representations and Warranties of
the Company. Each of the Selling Stockholders has reviewed the representations
and warranties of the Company contained in Article III of this Agreement, and,
to the best knowledge of each such Selling Stockholder, such representations and
warranties of the Company are true and correct (without giving effect to any
knowledge qualifier contained in such representation and warranty).
SECTION 4.05. Ownership. Each of the Selling Stockholders owns
the number of Seller Shares set forth next to such Selling Stockholder's name in
Schedule A and such Selling Stockholder has good and marketable title to such
Seller Shares, free and clear of any Encumbrance of any kind. All the Seller
Shares set forth next to each Selling Stockholder's name in Schedule A have been
duly authorized, validly issued, and are fully paid and nonassessable and have
been accorded full voting rights. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Seller Shares and upon delivery of such
Seller Shares and payment of the Purchase Price therefor as contemplated herein,
the Purchaser, assuming it shall have purchased the Seller Shares for value in
good faith and without notice of any adverse claim, will own the Seller Shares
free and clear of all Encumbrances.
SECTION 4.06. Disclosure; Access to Information. Each of the
Selling Stockholders has received the materials listed in Section 4.06 of the
Disclosure Schedule, but has not necessarily relied on all the information
contained in such materials.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Company to enter into this Agreement
and the Stockholders' Agreement, the Purchaser hereby represents and warrants to
the Company as follows:
SECTION 5.01. Organization and Authority of the Purchaser. The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of Delaware. The Purchaser has all necessary corporate power and
authority to enter into this Agreement and the Stockholders' Agreement to which
it is a party, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stockholders' Agreement by the Purchaser, the
performance by the Purchaser of its obligations hereunder and thereunder and the
consummation by each of the Parent and the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action on the part of the Purchaser. This Agreement and the Stockholders'
Agreement have been duly executed and delivered by the Purchaser, and
21
<PAGE> 25
(assuming due authorization, execution and delivery by the Company and the
stockholders of the Company party thereto) constitute legal, valid and binding
obligations of the Purchaser enforceable against the Purchaser in accordance
with their terms.
SECTION 5.02. No Conflict. Assuming the making and obtaining
of all filings, notifications, consents, approvals, authorizations and other
actions referred to in Section 5.03, except as may result from any facts or
circumstances relating solely to the Company, the execution, delivery and
performance of this Agreement and the Stockholders' Agreement by the Purchaser
do not and will not (a) violate, conflict with or result in the breach of any
provision of the certificate of incorporation, by-laws or other similar
organizational documents of the Purchaser, (b) conflict with or violate any Law
or Governmental Order applicable to the Purchaser or (c) conflict with, or
result in any breach of, constitute a default (or event which with the giving of
notice or lapse or time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation, or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Purchaser
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
the Purchaser is a party or by which any of such assets or properties are bound
or affected which, with respect to clauses (b) and (c) above would have a
material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated by this Agreement and the Stockholders' Agreement.
SECTION 5.03. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement and the Stockholders'
Agreement by the Purchaser do not and will not require any consent, approval,
authorization or other order of, action by, filing with, or notification to, any
Governmental Authority, except for the applicable requirements of the Exchange
Act.
SECTION 5.04. Investment Purpose. The Purchaser is acquiring
the Company Shares solely for the purpose of investment and not with a view to,
or for offer or sale in connection with, any distribution thereof.
SECTION 5.05. Status of Shares. The Purchaser understands that
the Company Shares have not been and will not be registered under the Securities
Act or under any state securities laws (other than in accordance with the
Stockholder's Agreement) and are being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering. The
Purchaser further understands that such exemption depends in part upon, and such
Shares are being sold in reliance on, the representations and warranties set
forth in this Article V.
SECTION 5.06. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
22
<PAGE> 26
SECTION 5.07. Disclosure; Access to Information. The Purchaser
has had access to publicly available information pertaining to the Company,
conducted oral discussions with senior management of the Company and has been
provided with certain portions of a certain Collaboration Agreement, dated as of
May 13, 1997, between GalaGen Inc. and Lifeway Foods, Inc., a certain
Sub-license Agreement, dated as of May 1, 1998, between Galagen, Inc. and
Lifeway Foods, Inc. and a certain License Agreement, dated as of April 7, 1998,
between Metagenics Inc. and Galagen Inc. For purposes of this transaction, a due
diligence examination of the Company was conducted on behalf of the Purchaser by
an Affiliate of the Purchaser and such due diligence was based upon the publicly
available information pertaining to the Company that was made available to the
Affiliate of the Purchaser and the oral discussions conducted by the Affiliate
of the Purchaser with senior management of the Company.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Public Announcements. No party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the Stockholders' Agreement or the transactions
contemplated thereby or otherwise communicate with any news media without the
prior written consent of the Company and the Purchaser, and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement.
SECTION 6.02. Further Action. Each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement or the Stockholders'
Agreement and consummate and make effective the transactions contemplated
hereby.
SECTION 6.03. NASDAQ Listing. The Company shall use its best
efforts to effect the listing of the Company Shares on the NASDAQ SmallCap
Market no later than 10 Business Days after the Closing.
SECTION 6.04. Treasury Shares. Immediately after the Closing,
all 10,400 shares of Common Stock held by the Company in its treasury shall be
canceled.
23
<PAGE> 27
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of each of the parties contained in this
Agreement and all statements contained in this Agreement and the Disclosure
Schedule shall survive until the third anniversary of the Closing Date. If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties, then the relevant representations and
warranties shall survive as to such claim, until such claim has been finally
resolved.
SECTION 7.02. Indemnification by the Company. (a) The
Purchaser, their Affiliates and their successors and assigns and the officers,
directors, employees and agents of the Purchaser, their Affiliates and their
successors and assigns shall be indemnified and held harmless by the Company 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:
(i) the breach of any representation or warranty made
by the Company contained in this Agreement;
(ii) the breach of any covenant or agreement by the
Company contained in this Agreement; or
(iii) any claim or cause of action of any third party
relating to the business conducted by the Company or any
Subsidiary.
To the extent that the Company's undertakings set forth in this Section 7.02(a)
may be unenforceable, the Company shall contribute the maximum amount that it is
permitted to contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Purchaser.
(b) The Purchaser, their Affiliates and their successors and
assigns and the officers, directors, employees and agents of the
Purchaser, their Affiliates and their successors and assigns shall be
indemnified and held harmless by the Selling Stockholders, severally
and not jointly, for any and all Loss arising out of or resulting from:
(i) the breach of any representation or warranty made
by the Selling Stockholders contained in this Agreement; or
(ii) the breach of any covenant or agreement by the
Selling Stockholders contained in this Agreement.
24
<PAGE> 28
To the extent that the Selling Stockholders' undertakings set forth in this
Section 7.02(b) may be unenforceable, the Selling Stockholder shall contribute
the maximum amount that it is permitted to contribute under applicable Law to
the payment and satisfaction of all Losses incurred by the Purchaser.
(c) The Company, its Affiliates and their successors and
assigns and the officers, directors, employees and agents of the
Company, their Affiliates and their successors and assigns and the
Selling Stockholders shall be indemnified and held harmless by the
Purchaser for any and all Loss arising out of or resulting from any
claim by a third party based on or related to the breach of any
representation or warranty made by the Purchaser contained in Article V
of this Agreement.
To the extent that the Purchaser's undertakings set forth in this Section
7.02(c) may be unenforceable, the Purchaser shall contribute the maximum amount
that it is permitted to contribute under applicable Law to the payment and
satisfaction of all such Losses incurred by the Company and the Selling
Stockholders.
(d) An indemnified party shall give the indemnifying party
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 the indemnifying
party from any of its obligations under this Article VII except to the
extent the indemnifying party is materially prejudiced by such failure
and shall not relieve the indemnifying party from any other obligation
or Liability that it may have to any indemnified party otherwise than
under this Article VII.
(e) The obligations and Liabilities of the indemnifying party
under this Article VII with respect to Losses arising from claims of
any third party which are subject to the indemnification provided for
in this Article VII ("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 the indemnifying party 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 the indemnifying party from any of its
obligations under this Article VII except to the extent the
indemnifying party is materially prejudiced by such failure and shall
not relieve the indemnifying party from any other obligation or
Liability that it may have to any indemnified party otherwise than
under this Article VII. If the indemnifying party acknowledges in
writing its obligation to indemnify the indemnified party hereunder
against any Losses that may result from such Third Party Claim, then
the indemnifying party 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
25
<PAGE> 29
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 the indemnifying party, then the indemnified
party shall be entitled to retain its own counsel at the expense of the
indemnifying party. In the event the indemnifying party exercises the
right to undertake any such defense against any such Third Party Claim
as provided above, the indemnified party shall cooperate with the
indemnifying party in such defense and make available to the
indemnifying party, at the indemnifying party'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 the indemnifying party. Similarly, in the
event the indemnified party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the indemnifying party
shall cooperate with the indemnified party in such defense and make
available to the indemnified party, at the indemnifying party's
expense, all such witnesses, records, materials and information in the
indemnifying party's possession or under the indemnifying party's
control relating thereto as is reasonably required by the indemnified
party. No such Third Party Claim may be settled by the indemnifying
party without the prior written consent of the indemnified party.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Waiver. The Company and the Purchaser may (a)
extend the time for the performance of any of the obligations or other acts of
the other party, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered by
the other party pursuant hereto or (c) waive compliance with any of the
agreements or conditions of the other party contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
the party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.
SECTION 8.02. Expenses. (a) Except as otherwise specified in
this Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
(b) The Selling Stockholders severally and not jointly, will
pay any stamp duties, capital duties and taxes payable upon the sale of
the Seller Shares.
26
<PAGE> 30
SECTION 8.03. 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 8.03):
(a) if to the Company:
Lifeway Foods, Inc.
6431 W. Oakton
Morton Grove, IL 60053
Fax: (847) 967-6558
Attention: Michael Smolyansky
with 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 the Purchaser:
Danone Foods, Inc.
120 White Plains Road
Tarrytown, New York 10591
Fax: (914) 366-2865
Attention: General Counsel
with a copy to:
Groupe Danone
7 rue de Teheran
75381 Paris Cedex 08
Fax: 33-1-44-352-554
Attention: General Counsel
and a copy to:
Groupe Danone
7 rue de Teheran
75381 Paris Cedex 08
27
<PAGE> 31
Fax: 33-1-44-352-097
Attention: Director of Corporate Development
and
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: 212-848-7179
Attention: John J. Madden, Esq.
(c) if to the Stockholders' Representative:
c/o Lifeway Foods, Inc.
6431 W. Oakton
Morton Grove, IL 60053
Fax: (847) 967-6558
Attention: Michael Smolyansky
SECTION 8.04. 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 8.05. Selling Stockholders Representative. (a) Each of
the Selling Stockholders hereby appoints and authorizes Michael Smolyansky to
act as, and Michael Smolyansky by his signature on the designated signature page
of this Agreement agrees to act as, the agent for all matters hereunder and
under the Stockholders Agreement for the benefit of all the Selling Stockholders
including for the receipt and for the giving of any notice specified in this
Agreement or the Stockholders Agreement to be given or received, as the case may
be, by the Selling Stockholder Representative (in such capacity, the "Selling
Stockholder Representative"). The Purchaser may conclusively rely on the
authority of the Selling Stockholder Representative to act as agent for each of
the Selling Stockholders and for the receipt or giving of any notice specified
in this Agreement or Stockholders Agreement to be given or received, as the case
may be, by the Selling Stockholder Representative, until such time as the
Purchaser shall have received written notice from the Selling Stockholder
Representative of his, her or its resignation and the appointment of a
substitute agent.
(b) The Selling Stockholder Representative accepts his or her
appointment.
SECTION 8.06. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
28
<PAGE> 32
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 8.07. Entire Agreement. This Agreement and the
Stockholders' Agreement constitute the entire agreement of the parties hereto
with respect to the subject matter hereof and thereof and supersedes all prior
agreements and undertakings, both written and oral, among the parties hereto
with respect to the subject matter hereof and thereof.
SECTION 8.08. Assignment. This Agreement may not be assigned
by operation of law or otherwise without the express written consent of the
Company and the Purchaser (which consent may be granted or withheld in the sole
discretion of the Company or the Purchaser); provided, however, that the
Purchaser may assign this Agreement to an Affiliate of the Purchaser without the
consent of the Company.
SECTION 8.09. No Third Party Beneficiaries. Except for the
provisions of Article VII relating to indemnified parties, 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 any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 8.10. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Company and the Purchaser or (b) by a waiver in accordance with Section 8.01.
SECTION 8.11. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Illinois, without
giving effect to its principles or rules of conflict of laws to the extent such
principles or rules would require or permit the application of the laws of
another jurisdiction.
SECTION 8.12. Consent to Jurisdiction. Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of (a) a Federal court
for the Northern District, Eastern Division of Illinois and (b) any Illinois
state court located in the County of Cook, for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the Company and the Purchaser agrees to commence
any action, suit or proceeding relating hereto either in a Federal Court for the
Northern District, Eastern Division of Illinois or in an Illinois state court
located in the County of Cook. Each of the parties hereto further agrees that
service of any process, summons, notice or document by U.S. registered mail or
internationally recognized courier to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in Illinois with respect to any matters to which it has submitted to
jurisdiction in this Section 8.12. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) any Federal court for the Northern District, Eastern Division of
Illinois or (ii) any Illinois
29
<PAGE> 33
state court located in the County of Cook, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 8.13. Waiver of Jury Trial. Each of the parties hereto
hereby waives to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement. Each of the parties
hereto (a) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce that foregoing waiver and (b)
acknowledges that it and the other parties hereto have been induced to enter
into this Agreement, by, among other things, the mutual waivers and
certifications in this Section 8.13.
SECTION 8.14. 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.
30
<PAGE> 34
IN WITNESS WHEREOF, each of the parties hereto have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
LIFEWAY FOODS, INC.
By: /s/ Michael Smolyansky
-------------------------------------
Name: Michael Smolyansky
Title: President
DANONE FOODS, INC.
By: /s/ Michael Harrison
-------------------------------------
Name: Michael Harrison
Title: a Vice President
By: /s/ Michael Smolyansky
-------------------------------------
Name: Michael Smolyansky
By: /s/ Ludmila Smolyansky
-------------------------------------
Name: Ludmila Smolyansky
By: /s/ Julie Smolyansky
-------------------------------------
Name: Julie Smolyansky
By: /s/ Edward Smolyansky
-------------------------------------
Name: Edward Smolyansky
[Exhibits, Schedules and Attachments have been omitted but shall be provided to
the commission upon request.]
31
<PAGE> 1
EXHIBIT 10.11
- --------------------------------------------------------------------------------
STOCKHOLDERS' AGREEMENT
Among
LIFEWAY FOODS, INC.
DANONE FOODS, INC.
MICHAEL SMOLYANSKY
and
THE OTHER STOCKHOLDERS LISTED ON THE SIGNATURE PAGES HEREOF
Dated as of October 1, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions....................................................1
ARTICLE II
GOVERNANCE
SECTION 2.01. Board Representation...........................................5
SECTION 2.02. Resignations and Replacements..................................5
SECTION 2.03. Committees.....................................................5
ARTICLE III
VOTING RIGHTS
SECTION 3.01. Voting Restrictions............................................6
SECTION 3.02. Special Board Rights...........................................6
ARTICLE IV
TRANSFER RESTRICTIONS AND STANDSTILL PROVISIONS
SECTION 4.01. Stockholder's Right of First Refusal...........................6
SECTION 4.02. Mr. S' Right of First Refusal..................................8
SECTION 4.03. Acquisition of Additional Shares; Other Restrictions..........10
SECTION 4.04. Additional Shares.............................................10
SECTION 4.05. Anti-Dilutive Rights..........................................11
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. Restrictive Legend............................................16
SECTION 5.02. Notice of Proposed Transfer...................................16
SECTION 5.03. Request for Registration......................................17
SECTION 5.04. Incidental Registration.......................................18
SECTION 5.05. Shelf Registration............................................19
SECTION 5.06. Obligations of the Company....................................20
SECTION 5.07. Furnish Information...........................................22
SECTION 5.08. Expenses of Registration......................................23
SECTION 5.09. Underwriting Requirements.....................................23
SECTION 5.10. Indemnification...............................................23
SECTION 5.11. Rule 144 Information..........................................26
ARTICLE VI
COVENANTS
SECTION 6.01. Furnishing of Information.....................................27
SECTION 6.02. Non-Competition...............................................27
SECTION 6.03. Issuance of Stock Options.....................................28
SECTION 6.04. Articles of Incorporation.....................................28
</TABLE>
i
<PAGE> 3
<TABLE>
ARTICLE VII
GENERAL PROVISIONS
<S> <C> <C>
SECTION 7.01. Waiver........................................................28
SECTION 7.02. Expenses......................................................29
SECTION 7.03. Notices.......................................................29
SECTION 7.04. Headings......................................................30
SECTION 7.05. Severability..................................................31
SECTION 7.06. Entire Agreement..............................................31
SECTION 7.07. Assignment....................................................31
SECTION 7.08. No Third Party Beneficiaries..................................31
SECTION 7.09. Amendment.....................................................31
SECTION 7.10. Governing Law.................................................31
SECTION 7.11. Consent to Jurisdiction.......................................31
SECTION 7.12. Waiver of Jury Trial..........................................32
SECTION 7.13. Counterparts..................................................32
SECTION 7.14. Specific Performance..........................................32
</TABLE>
ii
<PAGE> 4
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated October 1, 1999 (this
"Agreement") among LIFEWAY FOODS, INC., an Illinois corporation (the
"Company"), DANONE FOODS, INC., a Delaware corporation (the "Stockholder"),
Michael Smolyansky ("Mr. S") and THE STOCKHOLDERS LISTED ON THE SIGNATURE PAGES
HEREOF (such stockholders, together with the Stockholder and Mr. S being the
"Holders").
WHEREAS, the Company and the Holders have entered into the
Stock Purchase Agreement dated the date hereof (the "Purchase Agreement"),
pursuant to which the Company and the Holders have sold to the Stockholder, and
the Stockholder has purchased from the Company and such Holders, 647,767 shares
of common stock of the Company, no par value (the "Common Stock"), upon the
terms and conditions set forth in the Purchase Agreement;
WHEREAS, as a result of the transactions contemplated by the
Purchase Agreement, the Stockholder will beneficially own an aggregate of
647,767 shares of Common Stock; and
WHEREAS, the Company and the Holders now wish to enter into
this Agreement to set forth their agreement as to the matters set forth herein
with respect to, among other things, representation on the Company's Board of
Directors (the "Board") and certain transfers of Common Stock.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Holders hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) Unless otherwise defined in
this Agreement, capitalized terms are used herein as defined in the Purchase
Agreement.
(b) As used in this Agreement, the following terms shall have
the following meanings:
"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.
<PAGE> 5
2
"Beneficially Own" has the meaning set forth in Rule 13d-3 of
the Exchange Act, as in effect on the date of this Agreement.
"Business Day" means any day that is not a Saturday, Sunday
or other day on which banks are required or authorized by law to be closed in
New York City or the State of Illinois.
"By-laws" means the by-laws of the Company, as amended and
restated as of the date hereof and as may be amended from time to time.
"Director" means a member of the Board.
"Employee Plan" means any equity incentive plan, agreement,
bonus, award, stock purchase plan, stock option plan or other stock arrangement
with respect to any directors, officers or other employees of the Company.
"Exchange Act" means the United States Securities Exchange
Act of 1934, as amended.
"Fully Diluted Basis" means, in respect of the Common Stock,
the method of calculating the number of shares of Common Stock issued and
outstanding on an applicable measurement date, pursuant to which the number of
shares of Common Stock issued and outstanding on any such date are aggregated
with the number of shares of Common Stock issuable on such date upon exercise
or conversion of any other security of the Company outstanding on such date
(including employee stock options issued and issuable pursuant to Employee
Plans).
"Group" has the meaning set forth in Rule 13d-5, as in effect
on the date hereof, under the Exchange Act.
"Person" means any individual, firm, corporation,
partnership, limited partnership, limited liability company, association,
trust, unincorporated organization or other entity, as well as any syndicate or
group that would be deemed to be a person under Section 13(d)(3), as in effect
on the date hereof, of the Exchange Act.
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document with the SEC in compliance with the Securities Act and the
declaration or ordering of effectiveness by the SEC of such registration
statement or document.
"Registrable Stock" means the Stockholder Shares and any
securities issued or issuable with respect to any Stockholder Shares by way of
conversion, exchange, replacement, stock dividend, stock split or other
distribution or in connection with a combination of shares,
<PAGE> 6
3
recapitalization, merger, consolidation or other reorganization or otherwise.
For purposes of this Agreement, any Registrable Stock shall cease to be
Registrable Stock when (a) a registration statement covering such Registrable
Stock has been declared effective and such Registrable Stock has been disposed
of pursuant to such effective registration statement, (b) such Registrable
Stock is sold by a Person in a transaction in which the rights under the
provisions of this Agreement are not assigned or (c) such Registrable Stock is
sold pursuant to Rule 144(k) (or any similar provision then in force, but not
Rule 144A) under the Securities Act without registration under the Securities
Act.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the United States Securities Act of
1933, as amended.
"Standstill Period" shall mean any time during the period
beginning on the date hereof and ending on October 1, 2004 during which the
Stockholder Beneficially Owns 10% or more of the outstanding shares of Common
Stock (on a Fully Diluted Basis).
"Stockholder Director" means a Director designated by the
Stockholder pursuant to this Agreement.
"Stockholder Shares" means Common Stock now or hereafter
Beneficially Owned by the Stockholder and any securities issued or issuable
with respect to any such Common Stock by way of conversion, exchange,
replacement, stock dividend, stock split or other distribution or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Subsidiary" of any Person means any corporation,
partnership, joint venture, limited liability company, trust, estate, or other
Person of which (or in which), directly or indirectly, more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
at the time capital stock or any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, joint venture or
limited liability company or other Person or (c) the beneficial interest in
such trust or estate, in each case is at the time owned by such first Person,
or by such first Person and one or more of its other Subsidiaries or by one or
more of such first Person's other Subsidiaries.
(c) The following terms have the meanings set forth in the
Sections set forth below:
<PAGE> 7
4
<TABLE>
<CAPTION>
Term Location
---- ----------
<S> <C>
Agreement.................................................. Preamble
Anti-Dilutive Rights....................................... Section 4.05(a)
Board...................................................... Recitals
Common Stock............................................... Recitals
Company.................................................... Preamble
Departing Stockholder Director............................. Section 2.02(a)
Holders.................................................... Preamble
Issuance................................................... Section 4.05
Issuance Notice............................................ Section 4.05(b)
Maintenance Price.......................................... Section 4.05(c)
Maintenance Securities..................................... Section 4.05(a)
Mr. S...................................................... Preamble
New Issuance Rights........................................ Section 4.05(b)
Purchase Agreement......................................... Recitals
Selling Stockholder........................................ Section 4.01
Shelf Registration......................................... Section 5.05(a)
Stockholder................................................ Preamble
Transfer................................................... Section 4.01
Transfer Notice............................................ Section 4.01(a)
</TABLE>
(d) References in this Agreement to annexes, articles,
sections, paragraphs, clauses, schedules and exhibits are to annexes,
articles, sections, paragraphs, clauses, schedules and exhibits in or
to this Agreement unless otherwise indicated. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine
and neuter forms. Any term defined by reference to any agreement,
instrument or document has the meaning assigned to it whether or not
such agreement, instrument or document is in effect. The words
"include", "includes" and "including" are deemed to be followed by the
phrase "without limitation". Unless the context otherwise requires,
any agreement, instrument or other document defined or referred to
herein refers to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified from time to
time. Unless the context otherwise requires, references herein to any
Person or entity include its successors and assigns. The words "shall"
and "will" have the same meaning and effect.
<PAGE> 8
5
ARTICLE II
GOVERNANCE
SECTION 2.01. Board Representation. From and after the date
hereof, (a) For as long as the Stockholder Beneficially Owns at least 10% of
the issued and outstanding shares of Common Stock (on a Fully Diluted Basis),
the parties hereto shall use best efforts and exercise all authority under
applicable law to cause any slate of Directors presented to the stockholders of
the Company for election to the Board to consist of such nominees that, if
elected, would result in a Board that included one Director as designated by
the Stockholder.
(b) If the Stockholder Beneficially Owns less than 10% of the
issued and outstanding shares of Common Stock (on a Fully Diluted
Basis), the Company shall have no obligation pursuant to this
Agreement to cause any slate of Directors presented to the
stockholders of the Company for election to the Board to include any
designee of the Stockholder.
SECTION 2.02. Resignations and Replacements. (a) If the
Stockholder Director ceases to serve as a Director for any reason (a "Departing
Stockholder Director"), the parties hereto shall take all action necessary to
ensure that the vacancy created by such Departing Stockholder Director shall be
filled by an individual designated by the Stockholder, which individual shall
serve out the remaining term of the Departing Stockholder Director as a
Stockholder Director.
(b) In the event that at any time the Stockholder shall no
longer be entitled to designate a Director pursuant to Section 2.01,
then the Stockholder Director shall be deemed to have resigned
immediately upon the occurrence of such event and the parties hereto
shall take all action promptly to effect the resignation or removal of
such Director.
SECTION 2.03. Committees. For so long as there is one
Stockholder Director, if the Company forms an executive committee or a
committee by any such other name that performs functions similar to those
typically performed by an executive committee or if the Company forms any such
other committee of the Board, the parties hereto will take all actions
necessary to cause the appointment of such Stockholder Director to serve on
each such committee.
ARTICLE III
VOTING RIGHTS
SECTION 3.01. Voting Restrictions. Each Holder agrees to vote
the shares of Common Stock Beneficially Owned by such Holder to effect the
terms of Article II of this Agreement and on other matters to vote in a manner
consistent with the terms of this Agreement.
SECTION 3.02. Special Board Rights. For so long as the
Stockholder Beneficially owns, in the aggregate, at least 10% of the
outstanding shares of Common Stock (on
<PAGE> 9
6
a Fully Diluted Basis), the Company shall not, and shall cause its Subsidiaries
not to, make or endorse any new claims relating to the health benefits of its
existing products or any claims relating to the health benefits of products
launched after the date hereof publicly, whether by means of advertising or
otherwise, without the affirmative vote of the Stockholder Director (such
affirmative vote to be exercised in good faith by the Stockholder Director).
ARTICLE IV
TRANSFER RESTRICTIONS AND STANDSTILL PROVISIONS
SECTION 4.01. Stockholder's Right of First Refusal. Each
Holder other than the Stockholder shall not, directly or indirectly, sell,
transfer, assign, pledge, hypothecate or otherwise dispose of ("Transfer")
shares of Common Stock, except in accordance with the following provisions.
Prior to any Transfer of shares of Common Stock by any Holder other than the
Stockholder (a "Selling Stockholder"), such Holder shall give the Stockholder
the opportunity to purchase, or to designate an alternative purchaser of such
Common Stock, in the following manner:
(a) The Selling Stockholder shall give to the Stockholder
written notice (the "Transfer Notice") of the proposed Transfer,
specifying the proposed transferee, the number of shares of Common
Stock proposed to be disposed of, the proposed consideration to be
received in exchange therefor, and the other material terms of the
proposed Transfer.
(b) The Stockholder shall have the right, exercisable by
written notice given to the Selling Stockholder within 15 Business
Days after receipt of such Transfer Notice, to purchase (or to cause
another Person designated by the Stockholder to purchase) all, but not
less than all, of the Common Stock specified in such Transfer Notice,
at the purchase price and on the other terms set forth therein. If the
consideration specified in the Transfer Notice includes any property
other than cash, such purchase price shall be deemed to be the amount
of any cash included as part of such consideration plus the value (as
jointly determined by internationally recognized independent public
accountancy firms selected by each of the Selling Stockholder and the
Stockholder or, in the event such firms are unable to agree, a third
internationally recognized independent public accountancy firm to be
selected by the first two such firms) of such other property included
in such consideration, and the date by which the Stockholder must
exercise its right of first refusal pursuant to this Section 4.01
shall be extended until five Business Days after the determination of
the value of property included in the consideration.
(c) If the Stockholder exercises its right of first refusal
pursuant to this Section 4.01, the closing of the purchase of the
Common Stock with respect to which such right has been exercised shall
take place within 10 Business Days after the
<PAGE> 10
7
Stockholder gives notice of such exercise; provided that if any
approval of or notice to any Governmental Entity is required in
connection with such purchase of Common Stock, the Selling Stockholder
and the Stockholder shall use all reasonable efforts to obtain such
approvals or to provide such notices and the closing shall take place
within five Business Days after receipt of the last such approval and
expiration of any required waiting periods.
(d) If the Stockholder does not exercise its right of first
refusal pursuant to this Section 4.01 within the time specified for
such exercise, the Selling Stockholder shall be free during the 90-day
period following the expiration of such time for exercise, but only
during such period, to sell the Common Stock specified in such
Transfer Notice to the Person specified therein for the consideration
(or at any price in excess thereof) and on substantially the same
terms (or on other terms more favorable to the Selling Stockholder)
specified therein; provided, however, that (i) such Person's offer
constituted a bona fide, arm's length offer, (ii) at the request of
the Stockholder, the Selling Stockholder shall have obtained an
opinion from an internationally recognized investment bank, selected
jointly by the Selling Stockholder and the Stockholder, to the effect
that the consideration to be paid by such Person per share of Common
Stock falls within a reasonable range of valuations therefor, (iii)
such Person shall have offered to purchase all of the Stockholder's
Common Stock for the same consideration and on the same terms as such
Person has offered to acquire the Selling Stockholder's Common Stock
from the Selling Stockholder, and the Stockholder shall have either
accepted or rejected such offer within 10 Business Days of the date
thereof, and, if accepted, such proposed sale shall have been
consummated simultaneously with the sale by the Selling Stockholder of
all of such Selling Stockholder's Common Stock to such Person and
(iii) such Person or any Affiliate of such Person is not (x) engaged
in the business of producing or selling any type of yogurt (set,
blended, or drinkable), (y) engaged in 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 the Stockholder and having consolidated revenues in
excess of $75 million (such amount to be adjusted on each anniversary
date of this Agreement, commencing October 1, 2000, by a percentage
equal to the percentage change in the rate of inflation in the United
States for the preceding calendar year as measured by the change in
the Consumer Price Index for the United States for the preceding
calendar year) at the time of the Transfer Notice, or (z) a Person
whose ownership of the Common Stock could reasonably be expected, in
the opinion of the Board, to materially disadvantage the businesses of
the Company and its Subsidiaries or could reasonably be expected to
have an adverse effect on the future profitability of the Company and
its Subsidiaries, taken as a whole.
(e) The Stockholder's right of refusal shall not apply to (i)
any proposed Transfer of Common Stock by a Holder other than the
Stockholder if the amount of shares to be transferred when combined
with all other Transfers of common stock by the Holders other than the
Stockholder during the calendar year does not equal or exceed 2%
<PAGE> 11
8
of the shares of Common Stock issued and outstanding as of the date of
the Transfer Notice delivered in connection such proposed Transfer (ii)
any proposed Transfer of Common Stock by a Holder other than the
Stockholder to an immediate family member or a trust in which the
beneficiary is the Holder or an immediate family member of such Holder
or (iii) any proposed Transfer of Common Stock by a Holder other than
the Stockholder to a charitable organization; provided that in the case
of clauses (ii) and (iii) the transferee shall have agreed to be bound
by the terms of this Agreement.
(f) No transferee (other than any Holder) of Common Stock
shall be entitled to any of the rights set forth under this Agreement
by virtue of its ownership of such Common Stock.
(g) Any attempted Transfer in violation of this Section 4.01
shall be null, void and of no force and effect, and the Company shall
not give effect to any such attempted Transfer.
SECTION 4.02. Mr. S' Right of First Refusal. The Stockholder
shall not, directly or indirectly, Transfer shares of Common Stock, except in
accordance with the following provisions. Prior to any Transfer of shares of
Common Stock by the Stockholder, such Stockholder shall give Mr. S the
opportunity to purchase, or to designate an alternative purchaser of such
Common Stock, in the following manner:
(a) The Stockholder shall give to Mr. S the Transfer Notice
of the proposed Transfer, specifying the proposed transferee, the
number of shares of Common Stock proposed to be disposed of, the
proposed consideration to be received in exchange therefor, and the
other material terms of the proposed Transfer.
(b) Mr. S shall have the right, exercisable by written notice
given to the Stockholder within 15 Business Days after receipt of such
Transfer Notice, to purchase (or to cause another Person designated by
Mr. S to purchase) all, but not less than all, of the Common Stock
specified in such Transfer Notice, at the purchase price and on the
other terms set forth therein. If the consideration specified in the
Transfer Notice includes any property other than cash, such purchase
price shall be deemed to be the amount of any cash included as part of
such consideration plus the value (as jointly determined by
internationally recognized independent public accountancy firms
selected by the Stockholder and Mr. S or, in the event such firms are
unable to agree, a third internationally recognized independent public
accountancy firm to be selected by the first two such firms) of such
other property included in such consideration, and the date by which
Mr. S must exercise his right of first refusal pursuant to this
Section 4.02 shall be extended until five Business Days after the
determination of the value of property included in the consideration.
<PAGE> 12
9
(c) If Mr. S exercises his right of first refusal pursuant to
this Section 4.02, the closing of the purchase of the Common Stock
with respect to which such right has been exercised shall take place
within 10 Business Days after Mr. S gives notice of such exercise;
provided that if any approval of or notice to any Governmental Entity
is required in connection with such purchase of Common Stock, the
Stockholder and Mr. S shall use all reasonable efforts to obtain such
approvals or to provide such notices and the closing shall take place
within five Business Days after receipt of the last such approval and
expiration of any required waiting periods.
(d) If Mr. S does not exercise his right of first refusal
pursuant to this Section 4.02 within the time specified for such
exercise, the Stockholder shall be free during the 90-day period
following the expiration of such time for exercise, but only during
such period, to sell the Common Stock specified in such Transfer
Notice to the Person specified therein for the consideration (or at
any price in excess thereof) and on substantially the same terms (or
on other terms more favorable to the Stockholder) specified therein;
provided, however, that (i) such Person's offer constituted a bona
fide, arm's length offer and (ii) at the request of Mr. S, the
Stockholder shall have obtained an opinion from an internationally
recognized investment bank, selected jointly by the Stockholders and
Mr. S, to the effect that the consideration has to be paid by such
Person per share of Common Stock falls within a reasonable range of
valuations therefor.
(e) The Mr. S' right of refusal shall not apply to (i) any
proposed Transfer of Common Stock by the Stockholder if the amount of
shares to be transferred when combined with all other Transfers of
common stock by the Stockholder during the calendar year does not
equal or exceed 2% of the shares of Common Stock issued and
outstanding as of the date of the Transfer Notice delivered in
connection such proposed Transfer; or (ii) any proposed Transfer of
Common Stock by the Stockholder to any Affiliate of the Stockholder.
(f) No transferee (other than the Stockholder) of Common
Stock shall be entitled to any of the rights set forth under this
Agreement by virtue of its ownership of such Common Stock.
(g) Any attempted Transfer in violation of this Section 4.02
shall be null, void and of no force and effect, and the Company shall
not give effect to any such attempted Transfer.
(h) Notwithstanding anything to the contrary, the rights of
Mr. S under this Section 4.02 will inure to the benefit of Mr. S'
estate and legal representatives upon Mr. S' death.
SECTION 4.03. Acquisition of Additional Shares; Other
Restrictions. During the Standstill Period, the Stockholder shall not, directly
or indirectly acquire, announce an
<PAGE> 13
10
intention to acquire, offer to acquire, or enter into any agreement,
arrangement or undertaking of any kind the purpose of which is to acquire, by
purchase, exchange or otherwise:
(a) Beneficial Ownership of any shares of Common Stock or any
other security convertible into, or any option, warrant or right to
acquire, Common Stock, if such acquisition would cause the Beneficial
Ownership of the Stockholder to be more than 20% of the outstanding
shares of Common Stock (on a Fully Diluted Basis), or
(b) a significant portion of the assets of the Company or any
of its Subsidiaries, except that the foregoing restriction shall not
apply to the Stockholder if (i) such acquisition is approved by the
Board, (ii) any Person other than Mr. S or the Stockholder, or any
Group not including Mr. S or the Stockholder, directly or indirectly
acquires, announces an intention to acquire, offers to acquire, or
enters into any agreement, arrangement or undertaking of any kind the
purpose of which is to acquire, by purchase, exchange or otherwise
Beneficial Ownership of any shares of Common Stock or any other
security convertible into, or any option, warrant or right to acquire,
Common Stock, if such acquisition would cause the Beneficial Ownership
of such Person or such Group to be more than 10% of the outstanding
shares of Common Stock (on a Fully Diluted Basis) or (iii) any Person
other than Mr. S or the Stockholder, or any Group not including Mr. S
or the Stockholder, directly or indirectly makes, or in any way
participates in, any "solicitation" of proxies or becomes a
"participant" in any "election contest" with respect to the Company;
provided, however, that in all cases, the Stockholder may acquire
securities of the Company pursuant to Sections 4.01 and 4.05 or
pursuant to the issuance of any dividends on Common Stock.
SECTION 4.04. Additional Shares. All shares of Common Stock
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.
SECTION 4.05. Anti-Dilutive Rights. The Company shall not
issue, sell or transfer to any Person any Common Stock or securities
convertible into, or exercisable for, Common Stock (an "Issuance"):
(a) Unless such Issuance is by means of a widely disbursed
underwritten public offering of such shares of Common Stock or such
securities, pursuant to which no Person or Group acquires more than 5%
of the number of shares of Common Stock issued and outstanding at the
time of such offering, and the Company offers such Common Stock or
securities to the Stockholder in the following manner:
(i) The Company shall offer to the Stockholder in
writing the right to purchase, at the same price and on the
same terms proposed to be issued and sold, an amount of such
Common Stock or such securities (the "Maintenance
<PAGE> 14
11
Securities") as is necessary for the Stockholder to maintain
the same level of its percentage of Beneficial Ownership of
Common Stock (on a Fully Diluted Basis) as it owned
immediately prior to such issuance ("Anti-Dilutive Rights").
The Company shall deliver its offer to the Stockholder at
least 10 Business Days prior to executing any underwriting
agreement for such offering and shall provide a copy of any
preliminary prospectus when available containing either the
indicative price range of the offered securities or trading
information relating to the offered securities, as the case
may be, and other information concerning the offering
reasonably requested by the Stockholder,
(ii) If the Stockholder does not deliver to the
Company written notice of acceptance of any offer made
pursuant to Section 4.05(a)(i) with respect to a public
offering within five Business Days after receipt by the
Stockholder of a preliminary prospectus (filed with the SEC
as part of a registration statement) containing the pricing
information indicated in Section 4.05(a)(i) above, the
Stockholder shall be deemed to have waived its right to
purchase all or any part of its Maintenance Securities as set
forth in such offer but the Stockholder shall retain its
rights under this Section 4.05(a) with respect to future
offers, and
(iii) If the Stockholder delivers to the Company
written notice of its acceptance of any offer made pursuant
to Section 4.05(a)(i) with respect to a public offering
within five Business Days after receipt by the Stockholder of
a preliminary prospectus (filed with the SEC as part of the
registration statement) containing the pricing information
indicated in Section 4.05(a)(i) above, a closing for the
purchase of such Maintenance Securities pursuant to this
Section 4.05(a) shall occur on the later of (A) the date on
which such public issuance occurs or (B) such date as may be
mutually agreed to by the Company and the Stockholder and
shall take place at the offices of the Company or at such
other reasonable location as the Company may otherwise notify
the Stockholder, at the time specified by the Company in such
notice provided to the Stockholder, at least five Business
Days prior to such closing date. In connection with such
closing, the Company and the Stockholder shall provide such
closing certificates and other closing deliveries provided in
the transaction giving rise to the rights specified in
Section 4.05(a); or
(b) Unless, prior to any other Issuance of such shares of
Common Stock by the Company, the Company shall give the Stockholder
the opportunity to purchase (the "New Issuance Rights"), or the
opportunity to designate an alternative purchaser of such Common
Stock, in the following manner:
(i) The Company shall give to the Stockholder
written notice (the "Issuance Notice") of the proposed
Issuance, specifying the proposed transferee or transferees,
the intended method of distribution, the number of shares of
Common
<PAGE> 15
12
Stock or securities proposed to be issued, sold or
transferred, the proposed consideration to be received in
exchange therefor, and the other material terms of the
proposed Issuance. In the case of a public offering, the
Company shall, as part of the Issuance Notice, provide a copy
of any preliminary prospectus containing either the
indicative price range of the offered securities or trading
information relating to the offered securities, as the case
may be, and other information concerning the offering
reasonably requested by the Stockholder,
(ii) The Stockholder shall have the right,
exercisable by written notice given to the Company, (A) with
respect to a public offering within five Business Days after
receipt by the Stockholder of a preliminary prospectus (filed
with the SEC as part of a registration statement) containing
the pricing information indicated in Section 4.05(b)(i)
above, or (B) with respect to any Issuance other than a
public offering, within 15 Business Days after receipt of
such Issuance Notice by the Stockholder to purchase (or to
cause another Person designated by the Stockholder to
purchase) all, but not less than all, of the Common Stock or
securities, as the case may be, specified in such Issuance
Notice at the purchase price and on the other terms set forth
therein. If the consideration specified in the Issuance
Notice includes any property other than cash, such purchase
price shall be deemed to be the amount of any cash included
as part of such consideration plus the value (as jointly
determined by internationally recognized independent public
accountancy firms selected by each of the Company and the
Stockholder or, in the event such firms are unable to agree,
a third internationally recognized independent public
accountancy firm to be selected by the first two such firms)
of such other property included in such consideration, and
the date by which the Stockholder must exercise its right of
first refusal pursuant to this Section 4.05(b) shall be
extended until five Business Days after the determination of
the value of property included in the consideration,
(iii) If the Stockholder exercises its right of
first refusal pursuant to this Section 4.05(b), the closing
of the purchase of the Common Stock or the securities, as the
case may be, with respect to which such right has been
exercised, shall take place within five Business Days after
the Stockholder gives notice of such exercise; provided that
if any approval of or notice to any Governmental Entity is
required in connection with such purchase of Common Stock or
securities, the Company and the Stockholder shall use all
reasonable efforts to obtain such approvals or to provide
such notices and the closing shall take place within five
Business Days after receipt of the last such approval and
expiration of any required waiting periods,
(iv) If the Stockholder does not exercise its right
of first refusal pursuant to this Section 4.05(b) within the
time specified for such exercise, the Company shall be free
during the 90-day period following the expiration of such
<PAGE> 16
13
time for exercise, but only during such period, to sell the
Common Stock or the securities specified in such Issuance
Notice to the Person or Persons specified therein for the
consideration (or at any price in excess thereof) and on
substantially the same terms (or on other terms more
favorable to the Company) specified therein; provided,
however, that (A) such Person's or Persons' offer constituted
a bona fide, arm's length offer, (B) at the request of the
Stockholder, the Company shall have obtained an opinion from
an internationally recognized investment bank, selected
jointly by the Company and the Stockholder, to the effect
that the consideration to be paid by such Person per share of
Common Stock falls within a reasonable range of valuations
therefor, (C) such Person or Persons shall have offered to
purchase all of the Stockholder's Common Stock for the same
consideration and on the same terms as such Person or Persons
have offered to acquire the Common Stock or securities from
the Company, and the Stockholder shall have either accepted
or rejected such offer within 10 Business Days of the date
thereof, and, if accepted, such proposed sale shall have been
consummated simultaneously with the Issuance by the Company
of such Common Stock or such securities to such Person or
Persons or any of their Affiliates and (D) such Person or
Persons or any of their Affiliates are not (x) engaged in the
business of producing or selling any type of yogurt (set,
blended or drinkable), or (y) engaged in 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 the
Stockholder and having consolidated revenues in excess of $75
million (such amount to be adjusted on each anniversary date
of this Agreement, commencing October 1, 2000, by a
percentage equal to the percentage change in the rate of
inflation in the United States for the preceding calendar
year as measured by the change in the Consumer Price Index
for the United States for the preceding calendar year) at the
time of the Issuance Notice, and
(v) The New Issuance Rights set forth above shall
not apply to (A) the issuance of shares of Common Stock
issuable upon exercise of any option, warrant, convertible
security or other rights to purchase or subscribe for Common
Stock which, in each case, had been issued prior to the date
hereof or in compliance with Section 4.05, or (B) securities
issued pursuant to any stock split, stock dividend or other
similar stock recapitalization; or
(c) Unless such Issuance is made in connection with a merger
or acquisition pursuant to which Common Stock or securities
convertible into, or exercisable for, Common Stock will be issued in
exchange for capital stock of the Person being merged into the Company
or any Subsidiary or acquired by the Company or any Subsidiary, and
the Company offers such Common Stock or securities to the Stockholder
in the following manner:
<PAGE> 17
14
(i) The Company shall offer to the Stockholder in
writing the right to purchase an amount of such Common Stock
or such securities as is necessary for the Stockholder to
maintain the same level of its percentage of Beneficial
Ownership of Common Stock (on a Fully Diluted Basis) as is
owned immediately prior to such issuance. The Company shall
offer to the Stockholder such Common Stock or securities at a
price per share equal to the lesser of (A) $10.00 and (B) the
average of the last reported sales prices of Common Stock for
each trading day within the six month period ending on the
date a definitive agreement to effect such merger or
acquisition is executed (the "Maintenance Price"),
(ii) If the Stockholder does not deliver to the
Company written notice of acceptance of any offer made
pursuant to Section 4.05(c)(i) with respect to an issuance
made in connection with a merger or acquisition within five
Business Days after receipt by the Stockholder of a
preliminary prospectus (filed with the SEC as part of a
registration statement) containing the pricing information
indicated in Section 4.05(c)(i) above, the Stockholder shall
be deemed to have waived its right to purchase all or any
amount of Common Stock or such other securities as set forth
in such offer but the Stockholder shall retain its rights
under this Section 4.05(c) with respect to future issuances
made in connection with a merger or acquisition, and
(iii) If the Stockholder Director shall not have
voted in favor of such merger or acquisition, Mr. S shall,
upon the Stockholder's request, purchase from the Company and
the Company shall sell to Mr. S Common Stock or such
securities as are necessary for Mr. S to maintain,
individually, the same level of his percentage of Beneficial
Ownership of Common Stock (on a Fully Diluted Basis) as is
owned immediately prior to such issuance. The Company shall
sell such Common Stock or securities to Mr. S at the
Maintenance Price, and
(iv) If the Stockholder delivers to the Company
written notice of its acceptance of any offer made pursuant
to Section 4.05(c)(i) with respect to an issuance made in
connection with a merger or acquisition within five Business
Days after receipt by the Stockholder of a preliminary
prospectus (filed with the SEC as part of the registration
statement) containing the pricing information indicated in
Section 4.05(c)(i) above, a closing for the purchase of
Common Stock or securities pursuant to this Section 4.05(c)
shall occur on the later of (i) the date on which such merger
or acquisition is consummated and (ii) such date as may be
mutually agreed to by the Company and the Stockholder and
shall take place at the offices of the Company or at such
other reasonable location as the Company may otherwise notify
the Stockholder, at the time specified by the Company in such
notice provided to the Stockholder, at least five Business
Days prior to such closing date. In connection with such
closing, the Company and the Stockholder
<PAGE> 18
15
shall provide such closing certificates and other closing
deliveries provided in the transaction giving rise to the
rights specified in Section 4.05(c); or
(d) No transferee (other than any Holder) of Common Stock
shall be entitled to any of the rights set forth under this Agreement
by virtue of its ownership of such Common Stock.
(e) Any attempted Issuance in violation of this Section 4.05
shall be null, void and of no force and effect, and the Company shall
not give effect to any such attempted Transfer.
(f) The Stockholder acknowledges that the Company may grant
to the Holders anti-dilution rights substantially similar to the
anti-dilution rights granted to the Stockholder in this Section 4.05.
<PAGE> 19
16
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. Restrictive Legend. Each certificate
representing the Common Stock held by Holders shall, except as otherwise
provided in this Article V, be stamped or otherwise imprinted with legends
substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE SECURITY REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND CERTAIN RESTRICTIONS ON VOTING CONTAINED
IN THE STOCKHOLDERS' AGREEMENT, DATED OCTOBER 1, 1999, AS THE SAME MAY
BE AMENDED, AMONG THE COMPANY AND CERTAIN STOCKHOLDERS LISTED ON THE
SIGNATURE PAGES THEREOF.
A certificate shall not bear the Securities Act legend or the legend regarding
this Agreement, as the case may be, if in the opinion of counsel satisfactory
to the Company the securities being sold thereby may be publicly sold without
registration under the Securities Act or may be sold without being subject to
the restrictions on sale specified in Article IV.
SECTION 5.02. Notice of Proposed Transfer. Prior to any
proposed Transfer of any shares of Registrable Stock (other than under the
circumstances described in Section 5.03, 5.04 or 5.05) permitted under Article
IV, the holder thereof shall give written notice to the Company of its
intention to effect such Transfer. Each such notice shall describe the manner
of the proposed Transfer, whereupon the holder of such stock shall be entitled
to Transfer such stock in accordance with the terms of its notice, subject in
any event to the restrictions set forth in this Agreement. Each certificate
representing Registrable Stock transferred as above provided shall bear the
legends set forth in Section 5.01, except that such certificate shall not bear
such legends if (i) such Transfer is in accordance with the provisions of Rule
144 of the Securities Act (or any other rule permitting public sale without
registration under the Securities Act, but not Rule 144A) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee (other than an Affiliate of the Company) would be
entitled to Transfer such securities in a public sale without registration
under the Securities Act. The restrictions provided for in this Section 5.02
shall not apply to securities that are not required to bear the legends
prescribed by Section 5.01 in accordance with the provisions of Section 5.01.
<PAGE> 20
17
SECTION 5.03. Request for Registration. (a) Subject to the
provisions of Article IV, at any time after April 1, 2000, the Stockholder may
request in a written notice that the Company file a registration statement
under the Securities Act (or a similar document pursuant to any other statute
then in effect corresponding to the Securities Act) covering the registration
of any or all Registrable Stock held by the Stockholder in the manner specified
in such notice; provided, however, that there must be included in such
registration at least 25% of the Registrable Stock so held. Following receipt
of any notice under this Section 5.03, the Company shall use its best efforts
to cause to be registered under the Securities Act all Registrable Stock that
the Stockholder has requested be registered in accordance with the manner of
disposition specified in such notice by the Stockholder.
(b) If the Stockholder intends to have the Registrable Stock
distributed by means of an underwritten offering, the Stockholder and
the Company shall enter into an underwriting agreement in customary
form with the underwriter or underwriters, which shall contain any
customary provisions (including customary provisions with respect to
indemnification by the Company of the underwriters) requested by the
underwriters. Such underwriter or underwriters shall be selected by
the Stockholder and shall be approved by the Company, which approval
shall not be unreasonably withheld.
(c) Notwithstanding any provision of this Agreement to the
contrary,
(i) the Company shall not be required to effect a
registration pursuant to this Section 5.03 during the period
starting with the date which is 30 days prior to the date of
the initial public filing by the Company of, and ending on a
date that is 120 days following the effective date of, a
registration statement pertaining to a public offering of
securities for the account of the Company or on behalf of the
selling stockholders under any other registration rights
agreement that the Stockholder has been entitled to join
pursuant to Section 5.04; provided, however, that the Company
shall actively employ in good faith all reasonable efforts to
cause such registration statement to become effective as
promptly as practicable;
(ii) if (A) (i) the Company is in possession of
material nonpublic information relating to the Company or any
of its Subsidiaries and (ii) the Company determines in good
faith that public disclosure of such material nonpublic
information would not be in the best interests of the Company
and its stockholders, (B) (i) the Company has made a public
announcement relating to an acquisition or business
combination transaction that includes the Company and/or one
or more of its Subsidiaries that is material to the Company
and its Subsidiaries taken as a whole and (ii) the Company
determines in good faith that (x) offers and sales of
Registrable Stock pursuant to any registration statement
prior to the consummation of such transaction (or such
earlier date as the Company shall determine) is not in the
best interests of the Company and its stockholders or (y) it
would be impracticable at the time to obtain any financial
<PAGE> 21
18
statements relating to such acquisition or business
combination transaction that would be required to be set
forth in a registration statement or (C) the Company shall
furnish to the Stockholder a certificate signed by the chief
executive officer of the Company stating that in the good
faith opinion of the Board such registration would interfere
with any material transaction or financing, confidential
negotiations, including, without limitation, negotiations
relating to an acquisition or business combination
transaction, or business activities then being pursued by the
Company or any of its Subsidiaries, then, in any such case,
the Company's obligation to use all reasonable efforts to
file a registration statement shall be deferred, or the
effectiveness of any registration statement may be suspended,
in each case for a period not to exceed 30 days; provided,
however, that the Company may not delay the filing or suspend
the effectiveness of any registration statement under this
Section 5.03(c)(ii) on more than one occasion in any
consecutive twelve-month period;
(iii) the Company shall not be required to effect a
registration pursuant to this Section 5.03 if the Registrable
Stock requested by the Stockholder to be registered pursuant
to such registration is included in, and eligible for sale
under, a Shelf Registration (as defined below); and
(iv) the Company shall not be required to effect a
registration pursuant to this Section 5.03 more than two
times.
(d) The Company shall not be obligated to effect and pay for
more than two registrations of the Stockholder pursuant to this
Section 5.03; provided, however, that a registration requested by the
Stockholder pursuant to this Section 5.03 shall not be deemed to have
been effected for purposes of this Section 5.03(d) unless (i) it has
been declared effective by the SEC, (ii) it has remained effective for
the period set forth in Section 5.06(a), (iii) the offering of
Registrable Stock pursuant to such registration is not subject to any
stop order, injunction or other order or requirement of the SEC (other
than any such stop order, injunction, or other requirement of the SEC
prompted by any act or omission of the Stockholder).
SECTION 5.04. Incidental Registration. (a) Subject to Section
5.09, if at any time the Company determines that it shall file a registration
statement under the Securities Act for the registration of Common Stock (other
than a registration statement on a Form S-4 or S-8 or an offering of securities
solely to the Company's existing stockholders) on any form that would also
permit the registration of the Registrable Stock and such filing is to be on
its behalf or on behalf of selling holders of its securities for the general
registration of Common Stock to be sold for cash, the Company shall each such
time promptly give the Stockholder written notice of such determination setting
forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than 15 days from the date of such
notice, and advising the Stockholder of its right to have Registrable Stock
included in such registration. In the case of
<PAGE> 22
19
a registration statement to be filed on behalf of selling holders of its
securities, the Company shall also indicate in such notice whether it will be
registering securities on its own behalf as part of such registration
statement. Upon the written request of the Stockholder received by the Company
not later than 15 days after the date of the Company's notice (which request
shall state the number of Registrable Shares to be so registered and the
intended method of distribution), the Company shall, subject to Section 5.04(b)
below, use all reasonable efforts to cause to be registered under the
Securities Act all of the Registrable Stock that the Stockholder has so
requested to be registered; provided, however, that the Company shall have the
right to postpone or withdraw any registration effected pursuant to this
Section 5.04 without obligation or liability to the Stockholder.
(b) If, in the opinion of the managing underwriter (or, in
the case of a non-underwritten offering, in the opinion of the
Company), the total amount of such securities to be so registered,
including such Registrable Stock, will exceed the maximum amount of
the Company's securities which can be marketed (i) at a price
reasonably related to the then current market value of such securities
and (ii) without otherwise materially and adversely affecting the
entire offering, then the Company shall be entitled to reduce the
number of shares of Registrable Stock to be sold in such offering by
the Stockholder and any other stockholder of the Company requesting to
be included in the registration in proportion (as nearly as
practicable) to the amount of shares of Common Stock requested to be
included by the Stockholder and each other stockholder at the time of
filing the registration statement.
SECTION 5.05. Shelf Registration. (a) The Stockholder may use
its registration rights granted pursuant to Section 5.03, subject to the
limitations of Section 5.03(d), to request that the Company file a "shelf"
registration statement pursuant to Rule 415 under the Securities Act or any
successor rule (the "Shelf Registration") with respect to the Registrable
Stock. The Company shall (i) use all reasonable efforts to have the Shelf
Registration filed within 30 days of such request and declared effective as
soon as reasonably practicable following such request and (ii) subject to
Section 5.03(c)(iii), use all reasonable efforts to keep the Shelf Registration
continuously effective from the date such Shelf Registration is declared
effective until at least the earlier of such time as (A) all such Registrable
Stock has been sold thereunder or (B) the first anniversary of such effective
date in order to permit the prospectus forming a part thereof to be usable by
the Stockholder during such period.
(b) Subject to Section 5.03(c)(iii), the Company shall
supplement or amend the Shelf Registration (i) as required by the
registration form utilized by the Company or by the instructions
applicable to such registration form or by the Securities Act, (ii) to
include in such Shelf Registration any additional securities that
become Registrable Stock by operation of the definition thereof and
(iii) following the written request of the Stockholder pursuant to
Section 5.05(c), to cover offers and sales of all or a part of the
Registrable Stock by means of an underwriting. The Company shall
furnish to the Stockholder copies of any such supplement or amendment
sufficiently in advance (but in
<PAGE> 23
20
no event less than five Business Days in advance) of its use or filing
with the SEC to allow the Stockholder a meaningful opportunity to
comment thereon.
(c) The Stockholder may, at its election and upon written
notice by the Stockholder to the Company, subject to the limitations
set forth in Section 5.03(c)(iii), effect offers and sales under the
Shelf Registration by means of one or more underwritten offerings, in
which case the provisions of Section 5.03(b) shall apply to any such
underwritten distribution of securities under the Shelf Registration
and such underwriting shall, if sales of Registrable Stock pursuant
thereto shall have closed, be regarded as the exercise of one of the
registration rights contemplated by Section 5.03.
SECTION 5.06. Obligations of the Company. Whenever required
under Sections 5.03 and 5.05 to effect the registration of any Registrable
Stock under the Securities Act, the Company shall:
(a) in a reasonably timely manner, file with the SEC a
registration statement with respect to such Registrable Stock, and use
best efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby
determined as provided hereafter; provided that the Company shall not
be required to keep any Registration Statement (other than the Shelf
Registration) effective more than 120 days;
(b) as expeditiously as possible, prepare and file with the
SEC such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Stock covered by such registration
statement;
(c) as expeditiously as possible, furnish to the Stockholder
such reasonable numbers of copies of the registration statement and
the prospectus included therein (including each preliminary prospectus
and any amendments or supplements thereto) in conformity with the
requirements of the Securities Act, any exhibits filed therewith and
such other documents and information as they may reasonably request;
(d) as expeditiously as possible, use best efforts to
register or qualify the Registrable Stock covered by such registration
statement under such other securities or "blue sky" laws of such
states as shall be reasonably requested by the Stockholder for the
distribution of the Registrable Stock covered by the registration
statement; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do
business in or to file a general consent to service of process in any
jurisdiction wherein it would not but for the requirements of this
paragraph (except that the Company will use its best efforts to
register or qualify Registrable Stock in such additional jurisdiction
as the Stockholder may request subject to the foregoing
<PAGE> 24
21
proviso and at the Stockholder's own expense) be obligated to do so;
and provided further that the Company shall not for any purpose be
required to qualify such Registrable Stock in any jurisdiction in which
the securities regulatory authority requires that the Stockholder
submit any shares of Registrable Stock to the terms, provisions and
restrictions of any escrow, lockup or similar agreement(s) for consent
to sell Registrable Stock in such jurisdiction unless the Stockholder
agrees to do so;
(e) promptly notify the Stockholder, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they were made, and at the request of the Stockholder promptly
prepare and furnish to the Stockholder a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. In the event the Company
shall give such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective as
provided in Section 5.06(a) (or, in the case of the Shelf Registration,
Section 5.05(a)) by the number of days during the period from and
including the date of the giving of such notice to the date when the
Company shall make available to the Stockholder such supplemented or
amended prospectus;
(f) furnish, at the request of the Stockholder, if the method
of distribution is by means of an underwriting, on the date that the
shares of Registrable Stock are delivered to the underwriters for sale
pursuant to such registration or, if such Registrable Stock is not
being sold through underwriters, on the date that the registration
statement with respect to such shares of Registrable Stock becomes
effective, (1) a signed opinion, dated on or about such date, of the
independent legal counsel representing the Company for the purpose of
such registration, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Stockholder, as to such matters as such underwriters or the
Stockholder, as the case may be, may reasonably request and as would be
customary in such a transaction, and (2) letters dated on or about such
date and the date the offering is priced from the independent certified
public accountants of the Company, addressed to the underwriters, if
any, and if such Registrable Stock is not being sold through
underwriters, then to the Stockholder, if such accountants refuse to
deliver such letters to the Stockholder, then to the Company (i)
stating that they are independent certified public accountants within
the meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements and other financial data of the
Company included in the registration statement or the prospectus, or
any amendment or supplement thereto, comply as to form in all material
<PAGE> 25
22
respects with the applicable accounting requirements of the Securities
Act and (ii) covering such other financial matters (including
information as to the period ending not more than five Business Days
prior to the date of such letters) with respect to the registration in
respect of which such letter is being given as such underwriters or the
Stockholder, as the case may be, may reasonably request and as would be
customary in such a transaction;
(g) enter into customary agreements (including, if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(h) otherwise use best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, but not later than
18 months after the effective date of the registration statement, an
earnings statement covering the period of at least 12 months beginning
with the first full month after the effective date of such registration
statement, which earnings statements shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(i) use all reasonable efforts to list the
Registrable Stock covered by such registration statement with
any U.S. nationally recognized securities exchange on which
the Common Stock is then listed.
For purposes of Sections 5.06(a) and 5.06(b), the period of distribution of
Registrable Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Stock covered thereby and six months after the effective
date thereof.
SECTION 5.07. Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Article V of this Agreement that the Stockholder shall furnish to the Company
such information regarding the Stockholder, the Registrable Stock held by it,
and the intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
SECTION 5.08. Expenses of Registration. All expenses incurred
in connection with each registration pursuant to Sections 5.03, 5.04 and 5.05 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance), fees of the National Association of
Securities Dealers, Inc., or
<PAGE> 26
23
listing fees, messenger and delivery expenses, all fees and expenses of
complying with state securities or "blue sky" laws, and the fees and
disbursements of counsel for the Company shall be paid by the Company; provided,
however, that if a registration request pursuant to Section 5.03 or 5.05 is
subsequently withdrawn by the Stockholder, the Company shall not be required to
pay any expenses of such registration proceeding and the Stockholder shall bear
such expenses. The Stockholder shall bear and pay the underwriting commissions
and discounts applicable to securities offered for its account and the fees and
disbursements of its counsel in connection with any registrations, filings and
qualifications made pursuant to this Agreement.
SECTION 5.09. Underwriting Requirements. In connection with
any underwritten offering, the Company shall not be required under Section 5.04
to include shares of Registrable Stock in such underwritten offering unless the
Stockholder accepts the terms of the underwriting of such offering that have
been reasonably agreed upon between the Company and the underwriters selected by
the Stockholder.
SECTION 5.10. Indemnification. In the event any Registrable
Stock is included in a registration statement under this Agreement:
(a) The Company shall indemnify and hold harmless the
Stockholder, the Stockholder's directors and officers, each Person who
participates in the offering of such Registrable Stock, and each
Person, if any, who controls the Stockholder or participating Person
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become
subject under the Securities Act, the Exchange Act, state securities or
"blue sky" laws or otherwise, insofar as such losses, claims, damages
or liabilities (or proceedings in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any preliminary prospectus or prospectus filed under Rule
424 under the Securities Act or any amendments or supplements thereto)
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall
reimburse the Stockholder, the Stockholder's directors and officers,
such participating Person or controlling Person for any legal or other
expenses reasonably incurred by them (but not in excess of expenses
incurred in respect of one counsel for all of them unless there is an
actual conflict of interest between any indemnified parties, which
indemnified parties may be represented by separate counsel) in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 5.10(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company;
provided further that the Company shall not be liable to the
Stockholder, the Stockholder's directors and officers, participating
Person or controlling Person in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or
<PAGE> 27
24
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements
thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by the
Stockholder, the Stockholder's directors and officers, participating
Person or controlling Person. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Stockholder, the Stockholder's directors and officers, participating
Person or controlling Person, and shall survive the Transfer of such
securities by the Stockholder.
(b) The Stockholder shall indemnify and hold harmless the
Company, each of its directors and officers, each Person, if any, who
controls the Company within the meaning of the Securities Act, and each
agent against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director, officer,
controlling Person, agent or underwriter may become subject, under the
Securities Act, the Exchange Act, state securities or "blue sky" laws
or otherwise, insofar as such losses, claims, damages or liabilities
(or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any preliminary prospectus or prospectus filed under Rule
424 under the Securities Act or any amendments or supplements thereto)
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
such registration statement, preliminary or final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity
with written information furnished by or on behalf of the Stockholder
expressly for use in connection with such registration; and the
Stockholder shall reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling
Person or agent (but not in excess of expenses incurred in respect of
one counsel for all of them unless there is an actual conflict of
interest between any indemnified parties which indemnified parties may
be represented by separate counsel) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 5.10(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Stockholder, which consent shall not be unreasonably
withheld or delayed, and provided further that the liability of the
Stockholder hereunder shall be limited to the proportion of any such
loss, claim, damage, liability or expense which is equal to the
proportion that the net proceeds from the sale of the shares of Common
Stock sold by the Stockholder under such registration statement bears
to the total net proceeds from the sale of all securities sold
thereunder, but not in any event to exceed the net proceeds received by
the Stockholder from the sale of Registrable Stock covered by such
registration statement.
<PAGE> 28
25
(c) Promptly after receipt by an indemnified party under this
Section 5.10 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against any indemnifying party under this Section 5.10, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in and assume
the defense thereof with counsel selected by the indemnifying party and
reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own
counsel, with all fees and expenses thereof to be paid by such
indemnified party, and to be apprized of all progress in any proceeding
the defense of which has been assumed by the indemnifying party. The
failure to notify an indemnifying party promptly of the commencement of
any such action shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such
indemnified party on account of the indemnity contained in this Section
5.10, unless (and only to the extent) the indemnifying party was
prejudiced by such failure, and in no event shall such failure relieve
the indemnifying party from any other liability which it may have to
such indemnified party. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the
indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability arising out of such claim or proceeding.
(d) To the extent any indemnification by an indemnifying party
is prohibited or limited by applicable law, the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
the indemnified party in connection with the actions which resulted in
such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of material fact or
omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims,
damages or liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.10(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. No Person guilty of fraudulent
<PAGE> 29
26
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
SECTION 5.11. Rule 144 Information. Subject to Article IV, and
with a view to making available the benefits of certain rules and regulations of
the SEC which may at any time permit the sale of the Registrable Stock to the
public without registration, at all times after ninety (90) days after any Shelf
Registration Statement covering a public offering of securities of the Company
under the Securities Act shall have become effective, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(c) furnish to the Stockholder forthwith upon request a
written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the
Company as the Stockholder may reasonably request in availing itself of
any rule or regulation of the SEC allowing the Stockholder to sell any
Registrable Stock without registration.
<PAGE> 30
27
ARTICLE VI
COVENANTS
SECTION 6.01. Furnishing of Information. For so long as the
Stockholder Beneficially Owns at least 5% of the outstanding shares of Common
Stock (on a Fully Diluted Basis):
(a) The Company will furnish or make available to the
Stockholder its annual reports to stockholders and any quarterly or
other financial reports and information furnished by it to stockholders
pursuant to the requirements of the Exchange Act.
(b) If the Company is not required to furnish annual or
quarterly reports to its stockholders pursuant to the Exchange Act, it
shall furnish to the Stockholder its financial statements, including
any notes thereto (and with respect to annual reports, an auditors'
report by a nationally recognized firm of independent certified public
accountants), a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and such other information which
the Company would otherwise be required to include in annual and
quarterly reports filed under the Exchange Act.
(c) The Company shall, at any reasonable time and from time to
time, permit the Stockholder or any agent or representative thereof, to
examine and make copies of and abstracts from the records and books of
account of the Company, and to discuss the records, finances and
accounts of the Company with any of its officers, Directors and with
their independent certified public accountants.
SECTION 6.02. Non-Competition. (a) For a period of five years
after the date hereof, neither the Company 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 product, other than drinkable yogurts, chilled
desserts and soy-based products which are currently being produced and sold by
the Company as of the date of this Agreement and listed on Schedule B 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 product 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, 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 6.02,
"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 B hereto.
Also, for purposes of this Section 6.02, "Italian style cheese" is defined to
<PAGE> 31
28
mean mozzarella, mascarpone, ricotta, gorgonzola, bel paese, crema bel paese,
provolone, taleggio and such other similar types of cheese.
(b) For a period of five years after the date hereof, Danone
and its Affiliates shall not directly or indirectly engage in the
business of producing or selling Kefir products in the United States of
America, whether as a proprietor, partner, joint venturer, agent,
employer, 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.
SECTION 6.03. Issuance of Stock Options. The Company shall
not, and the Holders shall cause the Company not to, issue any options,
warrants, securities or other rights convertible into capital stock of the
Company without the prior consent of the Stockholder, which consent may be
withheld in the sole discretion of the Stockholder. Notwithstanding the above,
the Company may, in its sole discretion, issue no more than 5,000 options during
each calendar year without the prior consent of the Stockholder, provided,
however, that the exercise price of each such option on the date of issuance
shall be no less than the average of the reported trading price at the close of
each day of trading of the underlying security measured over the five trading
days of such underlying security immediately preceding the date of such
issuance.
SECTION 6.04. Articles of Incorporation. As promptly as
practicable after the date hereof, and in any case within 30 days of the date
hereof, the Holders shall take all necessary action to amend the Company's
Articles of Incorporation to cause the existing provision relating to preemptive
rights to be deleted, including, without limitation, executing a written consent
to approve such amendment; provided, however, if such amendment cannot be
effected by written consent, then at the next meeting of the stockholders of the
Company, the Holders shall take all necessary action to amend the Company's
Articles of Incorporation to cause the provision relating to preemptive rights
to be deleted, including, without limitation, voting in favor of such deletion
at such meeting.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Waiver. The parties hereto may agree to (a)
extend the time for the performance of any of the obligations or other acts of
other parties, (b) waive any inaccuracies in the representations and warranties
of other parties contained herein or in any document delivered by other parties
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of other parties contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the parties to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach
<PAGE> 32
29
or a subsequent waiver of the same term or condition, or a waiver of any other
term or condition, of this Agreement. The failure of any party to assert any of
its rights hereunder shall not constitute a waiver of any of such rights.
SECTION 7.02. Expenses. (a) Except as otherwise specified in
this Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
(b) A party in breach of this Agreement shall, on demand,
indemnify and hold harmless the other parties for and against all
reasonable out-of-pocket expenses, including legal fees, incurred by
such other party by reason of the enforcement and protection of its
rights under this Agreement. The payment of such expenses is in
addition to any other relief to which such other party may be entitled.
SECTION 7.03. 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 telecopy, by e-mail (receipt
requested) 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 7.03):
(a) if to the Company or Mr. S,
Lifeway Foods, Inc.
6431 W. Oakton
Morton Grove, IL 60053
Fax: (847) 967-6558
Attention: Michael Smolyansky
with copies to:
Futro & Trauernicht LLC
1401 17th Street, 11th Floor
Denver, CO 80202
Fax: (303) 295-1563
Attention: Peter G. Futro, Esq.
<PAGE> 33
30
(b) if to the Stockholder,
Danone Foods, Inc.
120 White Plains Road
Tarrytown, New York 10591
Fax: (914) 366-2865
Attention: General Counsel
with a copy to:
Groupe Danone
8 rue de Teheran
75381 Paris Cedex 08
Fax: 33-1-44-352-554
Attention: General Counsel
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
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Fax: (212) 848-7179
Attention: John J. Madden, Esq.
(c) if to any other party, at its address specified on the
signature pages hereof.
SECTION 7.04. 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. No party to this Agreement
shall be deemed to be the draftsman of this Agreement.
SECTION 7.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
<PAGE> 34
31
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 7.06. Entire Agreement. This Agreement, together with
the Subscription Agreement and the Purchase Agreement, constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, between
the parties with respect to the subject matter hereof.
SECTION 7.07. Assignment. This Agreement may not be assigned
without the express written consent of the Company and the Stockholder (which
consent shall not be unreasonably withheld or delayed by the Company or the
Stockholder, as the case may be); provided, however, that all covenants and
agreements contained in this Agreement by or on behalf of any parties hereto
will bind and inure to the benefit of their respective successors and assigns.
Notwithstanding the foregoing, the Stockholder may assign this Agreement to an
Affiliate of the Stockholder.
SECTION 7.08. 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 any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 7.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 7.01.
SECTION 7.10. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Illinois, without
giving effect to its principles or rules of conflict of laws to the extent such
principles or rules would require or permit the application of the laws of
another jurisdiction.
SECTION 7.11. Consent to Jurisdiction. Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of (a) a Federal court
for the Northern District, Eastern Division of Illinois and (b) any Illinois
state court located in the County of Cook, for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the Company and the Stockholder agrees to commence
any action, suit or proceeding relating hereto either in a Federal Court for the
Northern District, Eastern Division of Illinois or in an Illinois state court
located in the County of Cook. Each of the parties hereto further agrees that
service of any process, summons, notice or document by U.S. registered mail or
internationally recognized courier to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in Illinois with
<PAGE> 35
32
respect to any matters to which it has submitted to jurisdiction in this Section
7.11. Each of the parties hereto irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) any Federal
court for the Northern District, Eastern Division of Illinois or (ii) any
Illinois state court located in the County of Cook, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
SECTION 7.12. Waiver of Jury Trial. Each of the parties hereto
hereby waives to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement. Each of the parties
hereto (a) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce that foregoing waiver and (b)
acknowledges that it and the other parties hereto have been induced to enter
into this Agreement, by, among other things, the mutual waivers and
certifications in this Section 7.12.
SECTION 7.13. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) 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 7.14. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
<PAGE> 36
33
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
LIFEWAY FOODS, INC.
By: /s/ Michael Smolyansky
-------------------------------------
Name: Michael Smolyansky
Title: President
DANONE FOODS, INC.
By: /s/ Michael Harrison
-------------------------------------
Name: Michael Harrison
Title: a Vice President
By: /s/ Michael Smolyansky
-------------------------------------
Name: Michael Smolyansky
By: /s/ Ludmila Smolyansky
-------------------------------------
Name: Ludmila Smolyansky
By: /s/ Julie Smolyansky
-------------------------------------
Name: Julie Smolyansky
By: /s/ Edward Smolyansky
-------------------------------------
Name: Edward Smolyansky
[Exhibits, Schedules and Attachments have been omitted but shall be provided to
the commission upon request.]
