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                                                                   EXHIBIT 10.12

                               DANONE FOODS, INC.


                                December 24, 1999



Lifeway Foods, Inc.                           Julie Smolyansky
6431 W. Oakton                                c/o Lifeway Foods, Inc.
Morton Grove, IL 60053                        6431 W. Oakton
Attention: Michael Smolyansky                 Morton Grove, IL 60053

Michael Smolyansky                            Edward Smolyansky
c/o Lifeway Foods, Inc.                       c/o Lifeway Foods, Inc.
6431 W. Oakton                                6431 W. Oakton
Morton Grove, IL 60053                        Morton Grove, IL 60053

Ludmila Smolyansky
c/o Lifeway Foods, Inc.
6431 W. Oakton
Morton Grove, IL 60053


Ladies and Gentlemen:

                  Reference is made to the Stockholders' Agreement (the
"Stockholders' Agreement") dated October 1, 1999, among Lifeway Foods, Inc. (the
"Company"), Danone Foods, Inc. (the "Stockholder"), Michael Smolyansky and the
other stockholders listed on the signature pages thereof (the Stockholder,
Michael Smolyansky and such other stockholders collectively being the
"Holders"). Capitalized terms used and not defined herein are used herein as
defined in the Stockholders' Agreement.

                  You hereby agree to amend the Stockholders' Agreement by
inserting a definition of "New Securities" in Section 1.01 to read in its
entirety as follows:

                           ""New Securities" means any capital stock of the
         Company, other than Common Stock, whether now authorized or not;
         provided that the term "New Securities" does not include (i) securities
         of the Company issued upon the conversion or exchange of convertible or
         exchangeable securities of the Company that are outstanding as of the
         date of this Agreement and (ii) options issued pursuant to an Employee
         Plan and exercisable for capital stock of the Company other than Common
         Stock, provided that the term "New Securities" does include the
         underlying capital stock other than Common Stock, issued upon the
         exercise of any such option."


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                  In addition, you hereby agree to amend the Stockholders'
Agreement by deleting Section 6.04 in full and substituting therefor a new
Section 6.04 to read in its entirety as follows:

                           "SECTION 6.04. Articles of Incorporation. (a) At or
         prior to the Company's next annual meeting of its shareholders, which
         the Company shall hold as promptly as reasonably practicable, the
         Holders shall take all necessary action to amend the Company's Articles
         of Incorporation to add thereto, immediately following the existing
         provision relating to preemptive rights, the following sentence:

                  `Notwithstanding anything contained herein to the contrary,
                  the Corporation shall have the power to grant preemptive
                  rights to any of its shareholders by contract.'

                           (b) Until such time as the Company's Articles of
         Incorporation shall have been amended in accordance with Section
         6.04(a) above, the Company shall not issue, sell or transfer any shares
         of capital stock or securities convertible into, or exercisable for,
         shares of capital stock."


                  In addition, you hereby agree to amend the Stockholders'
Agreement by adding a new Section 6.05 to read in its entirety as follows:

                           "SECTION 6.05. Right to Purchase New Securities. (a)
         In the event the Company proposes to issue any New Securities to any
         Person (other than the Stockholder), the Company hereby grants to the
         Stockholder the right to purchase a number of shares or other amount of
         any New Securities which the Company proposes to issue equal to the
         product of (i) the total number of shares or other amount of such New
         Securities which the Company proposes to issue at such time and (ii) a
         fraction, the numerator of which shall be the total number of issued
         and outstanding shares of Common Stock owned by the Stockholder on a
         Fully Diluted Basis, and the denominator of which shall be the total
         number of issued and outstanding shares of Common Stock on a Fully
         Diluted Basis. The rights given by the Company under this Section 6.05
         shall terminate if unexercised within 15 Business Days after the Notice
         of Issuance referred to in Section 6.05(b).

                           (b) In the event that the Company proposes to
         undertake an issuance of New Securities to any Person (other than the
         Stockholder), it shall give the Stockholder written notice (a "Notice
         of Issuance") of its intention, describing all material terms of the
         New Securities, the price and all material terms upon which the Company
         proposes to issue such New Securities. The Stockholder shall have 15
         Business Days from the date of the Notice of Issuance to agree to
         purchase all or any portion of such Stockholder's pro rata share of
         such New Securities (as determined pursuant to Section 6.05(a)) for the
         same pro rata consideration payable by such other Person at the time of
         payment and otherwise upon the terms specified in the Notice of
         Issuance, by giving written notice to


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         the Company and stating therein the quantity of New Securities to be
         purchased by such Stockholder.

                           (c) The parties hereto agree that the rights
         conferred and the obligations imposed by Section 4.01 and Section 4.02
         of this Agreement upon the Stockholder and Mr. S, respectively, and the
         procedures set forth therein, shall apply mutatis mutandis to the
         Transfer of any New Securities by the Stockholder or any other Holder,
         as the case may be."

                           (d) All New Securities acquired by any of the parties
         hereto pursuant to or in compliance with this Article IV or as a
         result of a recapitalization of the Company, or stock dividends or any
         other action taken by the Company, shall be subject to all of the
         terms, covenants and conditions of this Agreement.

                  In addition, you hereby agree to amend the Stockholders'
Agreement by adding a new Section 6.06 to read in its entirety as follows:

                           "SECTION 6.06. Non-Pro Rata Recapitalizations; Stock
         Repurchases: Dividends and Distributions. The Company shall not, and
         the Holders shall not permit the Company to, engage in any stock split,
         dividend or combination, or any recapitalization, merger,
         consolidation, exchange or other similar reorganization, unless in
         connection therewith, the Stockholder receives such Stockholder's pro
         rata share of the same type or types of consideration or securities as
         all other stockholders of the Company receive in such transaction."


                  In addition, you hereby agree that the addresses set forth
above for Ludmila Smolyansky, Julie Smolyansky and Edward Smolyansky shall be
the address for each such Holder to receive notice in accordance with Section
7.03(c) of the Stockholders' Agreement.

                  This letter agreement shall be effective upon its execution by
the parties hereto. Please execute this letter agreement in the appropriate
spaces below. Upon execution, please return a copy of each signature page to
George Karafotias at Shearman & Sterling by facsimile at: (212) 893-9441.

                  This letter agreement may be executed manually or by facsimile
and in one or more counterparts, which, when taken together, shall constitute
one and the same agreement.

                  This letter agreement is governed by the laws of the State of
Illinois.

                                            Very truly yours,

                                            DANONE FOODS, INC.


                                            By /s/ Michael Harrison
                                               ---------------------------------
                                               Name: Michael Harrison
                                               Title: a Vice President

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Acknowledged and agreed as of the date first above written:

LIFEWAY FOODS, INC.


By /s/ Michael Smolyansky
   ---------------------------------------
   Name: Michael Smolyanksy
   Title: President


/s/ Michael Smolyanksy
---------------------------------------
MICHAEL SMOLYANSKY



/s/ Ludmila Smolyanksy
---------------------------------------
LUDMILA SMOLYANSKY



/s/ Julie Smolyanksy
---------------------------------------
JULIE SMOLYANSKY



/s/ Edward Smolyanksy
---------------------------------------
EDWARD SMOLYANSKY