exh10-17_16773.htm


    EXHIBIT 10.17

      


      


      


      


      


      THIRD
MODIFICATION TO

      


      LOAN AND
SECURITY AGREEMENT

      


      


      among

      


      


      THE
PRIVATEBANK AND TRUST COMPANY

      Bank

      


      


      LIFEWAY
FOODS, INC., FRESH MADE, INC.,

      HELIOS
NUTRITION LIMITED, PRIDE OF MAIN STREET DAIRY, LLC,

      AND
STARFRUIT, LLC

      Borrowers

      


      


      


      


      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      THIRD
MODIFICATION TO

      LOAN AND SECURITY
AGREEMENT

      


      


      THIS
THIRD MODIFICATION TO LOAN AND SECURITY AGREEMENT (“Third Modification”) is made
as of the 6th day of February, 2010 (the “Effective Date”) is executed
by and among THE PRIVATEBANK AND TRUST COMPANY (“Bank”), LIFEWAY FOODS, INC.,
an Illinois corporation, FRESH MADE, INC., a Pennsylvania corporation, HELIOS
NUTRITION LIMITED, a Minnesota corporation, PRIDE OF MAIN STREET DAIRY, LLC, a
Minnesota limited liability company, and STARFRUIT, LLC, an Illinois limited
liability company (“Borrowers”).

       

      


      W I T N E S S E T
H:

      


      WHEREAS,
Bank and Borrowers previously entered into a Loan and Security Agreement dated
February 6, 2009, as amended by that certain First Modification to Loan and
Security Agreement dated as of August 13, 2009, and by that certain Second
Modification Agreement dated November 12, 2009 (as modified, the “Loan Agreement”), pursuant to
which Bank made available to Borrowers a credit facility.

      


      WHEREAS,
Bank and Borrowers desire to amend the Loan Agreement to, among other things,
extend the maturity of the Revolving Loan to February 6, 2011 and decrease the
Borrowers’ Revolving Loan Commitment to $4,000,000.

       

      NOW,
THEREFORE, in consideration of the terms and conditions contained herein, and of
any extension of credit heretofore, now or hereafter made by Bank to Borrowers,
the parties hereto hereby agree as follows:

      


      1.        
    GENERAL
DEFINITIONS

      


      1.1           Undefined
Terms.  Unless the context otherwise provides or requires,
capitalized terms used herein which are not defined herein shall have the
meanings ascribed to them in the Loan Agreement; provided, however, that all
references in the Loan Agreement to (a) “Obligations” shall, in addition to the
definition set forth in the Loan Agreement include, but not be limited to, the
duties and obligations of Borrowers under this Third Modification and (b) “Loan
Documents” shall, in addition to the definition set forth in the Loan Agreement
include, but not be limited to, this Third Modification and the documents and
instruments to be delivered pursuant to this Third Modification.

      


      1.2           Amended and Restated Defined
Terms.  When used herein and in the Loan Agreement, the
following terms shall have the following amended and restated
meanings:

      


      ““Revolving Loan
Commitment” shall mean Four Million and 00/100 Dollars ($4,000,000.00).”

      


      ““Revolving Loan Maturity
Date” shall mean February 6, 2011, unless extended by the Bank pursuant
to any modification, extension or renewal note executed by the Borrowers and
accepted by the Bank in its sole and absolute discretion in substitution for the
Revolving Note.”

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      1.3           Other
Terms.  All other terms contained in this Third Modification
shall, unless the context indicates otherwise, have the meanings provided for by
the Uniform Commercial Code (the “Code”) of the State of
Illinois, as now or hereafter in effect, to the extent the same are used or
defined therein.

      


      2.          
 AMENDMENT TO
REVOLVING NOTE.  The Revolving Note is hereby amended by
deleting all references to “$5,000,000” and replacing such references with
“$4,000,000”.  Except as specifically set forth herein, the Revolving
Note, the Term Note and the Loan Documents previously delivered by the Borrowers
shall remain in full force and effect and are hereby ratified and confirmed in
all respects.  The indebtedness evidenced by the Revolving Note (as
hereby amended by this Third Modification) is continuing indebtedness of
Borrowers and nothing herein shall be deemed to constitute a payment, settlement
or novation of the Revolving Note, or to release or otherwise adversely affect
any lien or security interest securing such indebtedness or any rights of Bank
against any party primarily or secondarily liable for such
indebtedness.

       

      3.        
    WARRANTIES AND
REPRESENTATIONS.

      


      3.1           General Representations and
Warranties.  Each of the Borrowers jointly and severally
warrants and represents that, except as provided in Exhibit A hereto, the
representations and warranties of Borrowers as set forth in the Loan Agreement
were true and correct when made and remain true and correct as of the Effective
Date.

      


      3.2           Warranty and Reaffirmation
of Warranties and Representations; Survival of Warranties and
Representations.  Each request for an advance made by Borrowers
pursuant to this Third Modification, the Loan Agreement or the Loan Documents
shall constitute a reaffirmation as of the date of said request of the
representations and warranties of Borrowers contained in Section 7 of the Loan
Agreement and Section 3.1 of this Third Modification.  All
representations and warranties of Borrowers contained in this Third Modification
and the Loan Documents shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto and the termination of this Third Modification for
any reason.

      


      4.        
    CONDITIONS
PRECEDENT.

      


      This
Third Modification shall become effective upon the satisfaction of the following
conditions precedent:

      


      4.1           Execution and Delivery of
Amendment.  This Third Modification or counterparts thereof
shall have been duly executed by Borrowers and Bank, and delivered to, Borrowers
and Bank.

      


      4.2           Documents and Loan
Documents.  Bank shall have received such other documents,
affidavits, certificates, lien searches and statements executed and delivered by
Borrowers as may be required or deemed advisable by Bank or its counsel, to duly
authorize, create and perfect the security interests in the Collateral in favor
of Bank as contemplated by this Third Modification.

      


      4.3           No Default
Exists.  No Event of Default or Unmatured Event of Default
exists.

      


      4.4         
 Material Adverse
Effect.  No event shall have occurred since November 1, 2009
which has had or could have a Material Adverse Effect.

      
        
          
          

        

        
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      5.         
   MISCELLANEOUS.

      


      5.1           Expenses (Including
Attorneys’ Fees).  In addition to amounts payable pursuant to
the Loan Agreement, Borrowers shall reimburse Bank on demand for all its
reasonable expenses (including, but not limited to, reasonable attorneys’ fees
and expenses) of, or incidental to:

      


      (a)           The
preparation of this Third Modification, all Loan Documents, any amendment of or
modification of this Third Modification or the Loan Documents including, without
limitation, any lien search costs and expenses;

      


      (b)           Any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Bank, Borrowers or any other Person) in any way relating to the Collateral, this
Third Modification, the Loan Documents or Borrowers’ affairs;

      


      (c)           Any
attempt to enforce any rights of Bank against Borrowers or any other Person
which may be obligated to Bank by virtue of this Third Modification or the Loan
Documents, including, without limitation, the Account Debtors;
and/or

      


      (d)           Any
attempt to inspect, verify, protect, collect, sell, liquidate or otherwise
dispose of the Collateral.

      


      Such
expenses shall be additional Obligations hereunder secured by the
Collateral.  Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include paralegal fees, costs and
expenses; accountants’ fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
secretarial over-time charges; and expenses for travel, lodging and
food.

      


      5.2           Limited Waiver of Field
Audit.  The Bank hereby waives it right to conduct any
inspections and audits under Section 8.14 of the Loan Agreement prior to the
Revolving Loan Maturity Date provided that (a) no Event of Default or Unmatured
Event of Default shall have occurred and (b) between the Effective Date and the
Revolving Loan Maturity Date, the outstanding balance of the Revolving Loan will
be $0.00 for not less than thirty (30) consecutive days (it being understood and
agreed that Bank may conduct such inspections and audits at any time (i) after
the Revolving Loan Maturity Date, (ii) prior to the Borrowers’ compliance with
the preceding clause (b) and/or (c) following the occurrence of an Event of
Default or Unmatured Event of Default).

      


      5.3           Severability.  Wherever
possible, each provision of this Third Modification shall be interpreted in such
manner as to be effective and valid under applicable law.  If,
however, any provision of this Third Modification shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Third Modification, unless the
ineffectiveness of such provision materially and adversely alters the benefits
accruing to either party hereunder.

      


      5.4           Parties.  This
Third Modification and the Loan Documents shall be binding upon and inure to the
benefit of the successors and assigns of Borrowers and Bank.

      


      5.5           Conflict of
Terms.  The Loan Agreement, Loan Documents and all Schedules
and Exhibits hereto are incorporated in this Third Modification by this
reference thereto.  Except as otherwise provided in this Third
Modification and except as otherwise provided in the Loan Agreement by specific
reference to the applicable provision of this Third 

      
        
          
          

        

        
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      Modification,
if any provision contained in this Third Modification is in conflict with, or
inconsistent with, any provision in the Loan Agreement or Loan Documents, the
provision contained in this Third Modification shall govern and control; provided, however, that
whenever possible the provisions of this Third Modification, the Loan Agreement
and Loan Documents shall be construed and interpreted to avoid any such
conflicts or inconsistencies.

      


      5.6           Waivers by
Borrowers.  Except as otherwise provided for in this Third
Modification and the Loan Agreement, each of the Borrowers waives
(a) presentment, demand and protest and notice of presentment, protest,
default, non-payment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Bank on which any
of the Borrowers may in any way be liable and hereby ratifies and confirms
whatever Bank may do in this regard; (b) all rights to notice of a hearing
prior to Bank’s taking possession or control of, or to Bank’s replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Bank to exercise any of Bank’s remedies;
and (c) the benefit of all valuation, appraisement and exemption
laws.  Each of the Borrowers acknowledge that they have been advised
by counsel with respect to this Third Modification and the transactions
evidenced by this Third Modification.

      


      5.7           Authorized
Signatures.  The signature upon this Third Modification or any
of the Loan Documents of a person previously designated by Borrowers shall bind
Borrowers and be deemed to be the act of Borrowers.

      


      5.8           Forum Selection and Consent
to Jurisdiction.  ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS THIRD MODIFICATION OR ANY OTHER LOAN
DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS; PROVIDED THAT NOTHING IN THIS THIRD MODIFICATION SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE BANK FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION.  EACH OF THE BORROWERS HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.  EACH OF
THE BORROWERS FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF ILLINOIS.  EACH OF THE BORROWERS HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

      


      5.9           Waiver of Jury
Trial.  THE BANK AND EACH OF THE BORROWERS, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS THIRD MODIFICATION, ANY
NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY
COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND ANY OF THE


      
        
          
          

        

        
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      BORROWERS
ARE ADVERSE PARTIES, AND EACH AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.  THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE
BORROWERS.

      


      5.10           Governing
Law.  This Third Modification shall be delivered and accepted
in and shall be deemed to be contracts made under and governed by the internal
laws of the State of Illinois (but giving effect to federal laws applicable to
national banks) applicable to contracts made and to be performed entirely within
such state, without regard to conflict of laws principles.

      


      


      5.11           Release of
Claims. In
consideration of the execution and delivery of this Third Modification by Bank,
the sufficiency of which is acknowledged, and excepting only the contractual
obligations respecting future performance by Bank arising under the Loan
Agreement and the Loan Documents, each of the Borrowers hereby irrevocably
releases and forever discharges Bank and each of its affiliates, subsidiaries,
successors, assigns, directors, officers, employees, agents, representatives and
attorneys (each, a “Released
Person”) of and from all damages, losses, claims, demands, liabilities,
obligations, actions and causes of action whatsoever which such Borrowers may
now have or claim to have on and as of the date hereof against any Released
Person, whether presently known or unknown, liquidated or unliquidated,
suspected or unsuspected, contingent or non-contingent, and of every nature and
extent whatsoever (collectively, “Claims”).  Each
Borrower jointly and severally  represents and warrants to Bank that
it has not granted or purported to grant to any other Person any interest
whatsoever in any Claim, as security or otherwise.  Borrowers shall
jointly and severally indemnify, defend and hold harmless each Released Person
from and against any and all Claims and any loss, cost, liability, damage or
expense (including reasonable attorneys’ fees and expenses) incurred by any
Released Person in investigating, preparing for, defending against, providing
evidence or producing documents in connection with or taking other action in
respect of any commenced or threatened Claim.

      


      5.12         Section
Titles.  The section titles contained in this Third
Modification are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties
hereto.

      


      5.13         Remainder of Loan Agreement
Unaffected.  Except as specifically amended by this Third
Modification, all of the terms and provisions of the Loan Agreement shall remain
in full force and effect.

      


      5.14         Counterparts; Integration;
Effectiveness.  This Third Modification may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed counterpart of a
signature page of this Third Modification by telecopy or electronically (such as
PDF) shall be effective as delivery of a manually executed counterpart of this
Third Modification.  Execution of any Exhibit to this Third
Modification shall have the same legal effect as if such document were
separately executed without the Exhibit reference thereon.

      


      


      *     *     *     *     *

      
        
          
          

        

        
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      IN
WITNESS WHEREOF, this Third Modification has been duly executed as of the day
and year specified at the beginning hereof.

      


      


       

      
        	 	
                BANK:

                


                THE
      PRIVATEBANK AND TRUST COMPANY

                


                


                By:
      /s/ Thomas G. Estey

                

                  
      

                Name:
      Thomas G. Estey

                Title:
      Managing Director

              


      

       

      


      


      BORROWERS:

      


      LIFEWAY
FOODS, INC.

      


      


      By: 
/s/ Julie Smolyansky

      
        

      

      Title: 
President

      


      FRESH
MADE, INC.

      


      


      By: 
/s/ Edward Smolyansky

      
        

      

      Title: 
President, CEO 

      


      HELIOS
NUTRITION LIMITED

      


      


      
        By: 
/s/ Julie Smolyansky

        
          

        

        Title: 
President

        


      

      


      PRIDE
OF MAIN STREET DAIRY, LLC

      


      
         

        By: 
/s/ Julie Smolyansky

        
          

        

        Title: 
President

      

      


      


      STARFRUIT,
LLC

       

       

      
        By: 
/s/ Julie Smolyansky

        
          

        

        Title: 
President

        
 

      

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
A

      


      


      EXCEPTIONS
TO REPRESENTATIONS AND WARRANTIES

      


      


      No
exceptions.