Document:

Exhibit 10.1

 

 

 

 

 

 

 

 

 

Lifeway Foods, Inc.

2022 Omnibus Incentive Plan

 

Effective August 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

    	 	 	 

     

    

 

TABLE OF CONTENTS

Page

	Article 1.   Establishment, Purpose, and Duration	1
	Article 2.   Definitions	1
	Article 3.   Administration	6
	Article 4.   Shares Subject to this Plan and Maximum Awards	6
	Article 5.   Eligibility and Participation	7
	Article 6.   Stock Options	7
	Article 7.   Stock Appreciation Rights	8
	Article 8.   Restricted Stock and Restricted Stock Units	9
	Article 9.   Performance Units/Performance Shares	9
	Article 10.   Cash-Based Awards and Other Stock-Based Awards	10
	Article 11.   Transferability of Awards	11
	Article 12.   Performance Measures	11
	Article 13.   Minimum Vesting of Share-Based Awards	12
	Article 14.   Dividend Equivalents	12
	Article 15.   Beneficiary Designation	13
	Article 16.   Rights of Participants	13
	Article 17.   Change of Control	13
	Article 18.   Amendment, Modification, Suspension, and Termination	15
	Article 19.   Withholding	16
	Article 20.   Successors	16
	Article 21.   General Provisions	16

 

 

 

 

 

 

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Lifeway Foods, Inc.

2022 Omnibus Incentive Plan

Article 1.                 Establishment, Purpose, and Duration

 

1.1             Establishment. Lifeway Foods, Inc., an Illinois corporation (hereinafter referred to as the “Company”) establishes
this incentive compensation plan to be known as the Lifeway Foods, Inc. 2022 Omnibus Incentive Plan (this “Plan”),
as set forth in this document.

 

This Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance
Units, Cash-Based Awards, and Other Stock- Based Awards.

 

This Plan’s effective date is the date this
Plan is approved by the Company’s shareholders (the “Effective Date”), and this Plan shall remain in effect as
provided in Section 1.3 hereof. Upon its effectiveness, the Plan shall supersede the Lifeway Foods, Inc. Omnibus Incentive Plan (the “Prior
Plan”) such that no further awards shall be made under the Prior Plan. This Plan shall not, in any way, affect awards under
the Prior Plan that are outstanding as of the Effective Date.

 

1.2             Purpose of this Plan. The purpose of this Plan is to provide a means whereby Employees develop a sense of proprietorship by
Employees, and personal involvement of Employees and Third Party Service Providers in the development and financial success of the Company,
and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and
its shareholders. A further purpose of this Plan is to provide a means through which the Company may attract able individuals to become
Employees and Third Party Service Providers and to provide a means whereby those individuals upon whom the responsibilities of the successful
administration and management of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their
concern for the welfare of the Company.

 

1.3             Duration of this Plan. Unless sooner terminated as provided herein, this Plan shall terminate ten (10) years from the Effective
Date. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with
their applicable terms and conditions and this Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options
may be granted more than ten (10) years after the earlier of (a) adoption of this Plan by the Board, or (b) the Effective Date.

 

Article 2.                
Definitions

 

Whenever used in this Plan, the following terms
shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.

 

2.1             “Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited
liability company), that is affiliated with the Company through stock or equity ownership or otherwise, and is designated as an Affiliate
for purposes of this Plan by the Committee.

 

2.2             “Annual Award Limit” has the meaning set forth in Section 4.1.

 

2.3             “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock
Options, SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, or Other Stock-Based
Awards, in each case subject to the terms of this Plan.

 

2.4             “Award Agreement” means either (i) a written agreement entered into by the Company and a Participant setting forth
the terms and provisions applicable to an Award granted under this Plan, or (ii) a written or electronic statement issued by the Company
to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may
provide for the use of electronic, internet, or other non-paper Award Agreements, and the use of electronic, internet, or other non-paper
means for the acceptance thereof and actions thereunder by a Participant.

 

2.5             “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.

 

2.6             “Board” or “Board of Directors” means the Board of Directors of the Company.

 

 

 

 

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2.7            
“Cash-Based Award” means an Award, denominated in cash, granted to a Participant as described in Article 10.

 

2.8             “Cause” means, unless otherwise specified in an Award Agreement or in an applicable employment agreement between
the Company and a Participant, with respect to any Participant, as determined by the Committee in its sole discretion:

 

		(a)	(for Employees only) willful refusal to follow the lawful directions of a supervisor, which directions are consistent with normal
business practice;
	 	 	 
		(b)	indictment or conviction of, or plea of nolo contendere to, (i) any felony, or (ii) another crime involving dishonesty or moral turpitude
if such other crime is work-related, materially impairs Participant’s ability to perform services for the Company, or results in
harm to the Company or any Subsidiary or Affiliate;
	 	 	 
		(c)	engaging in any theft, embezzlement, financial misappropriation, or fraud, regardless of its relationship to the Company;
	 	 	 
		(d)	willfully engaging in any illegal conduct or gross misconduct or act of dishonesty, which is injurious to the Company or any Subsidiary
or Affiliate;
	 	 	 
		(e)	failure to reasonably cooperate in any audit or investigation of the Company’s business or financial practices;
	 	 	 
		(f)	failure to obtain, and maintain in good standing, or provide documentation of any license, certification, or registration required
by law or which the Company may from time to time require; or
	 	 	 
		(g)	material breach or violation of any material provision of Participant-Employee’s employment, or a Third Party Service Provider’s
service contract.
	 	 	 

2.9             “Change
of Control” means the occurrence of any of the following events:

 

		(a)	Any one Person, or more than one Person acting as a group, excluding Julie Smolyansky, Edward Smolyansky, Ludmila Smolyansky and members
of their families, acquires ownership of stock (as determined under Section 318(a) of the Code) of the Company that, together with stock
held by such Person or group, constitutes more than fifty percent (50%) of the total Fair Market Value or total voting power of the stock
of the Company; provided, however, that if any one Person or more than one Person acting as a group, is considered to own more than fifty
percent (50%) of the total Fair Market Value or total voting power of the stock of the Company, the acquisition of additional stock by
the same Person or Persons is not considered to cause a Change in Control of the Company. This paragraph applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction.
	 	 	 
		(b)	Any one Person, or more than one Person acting as a group, excluding Julie Smolyansky, Edward Smolyansky, Ludmila Smolyansky and members
of their families, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person
or Persons) ownership of stock (as determined under Section 318(a) of the Code) of the Company possessing thirty percent (30%) or more
of the total voting power of the stock of the Company; provided, however, that if any one Person or more than one Person acting as a group,
is considered to own thirty percent (30%) or more of the total voting power of the stock of the Company, the acquisition of additional
stock by the same Person or Persons is not considered to cause a Change in Control of the Company.
	 	 	 
		(c)	a majority of members of the Company’s Board of Directors (the “Incumbent Directors”) is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a majority of the Incumbent Directors, provided that no other Company
is a majority shareholder of the Company.
	 	 	 

 

 

 

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		(d)	any one Person, or more than one Person acting as a group, acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross Fair Market Value equal to or
more than forty percent (40%) of the total gross Fair Market Value of all of the assets of the Company immediately prior to such acquisition(s);
provided, however, that a transfer of assets by the Company is not treated as a Change in Control if the assets are transferred to (A)
a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; (B) an entity, fifty
percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company; (C) a Person, or more
than one Person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of
all outstanding stock of the Company; or (D) an entity, at least fifty percent (50%) of the total value or voting power of which is owned,
directly or indirectly, by a Person described in the previous subsection (C). For purposes of this paragraph, (1) gross Fair Market Value
means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets, and (2) a Person’s status is determined immediately after the transfer of the assets.
	 	 	 
		(e)	Persons will be considered to be acting as a group if they are owners of a Company that enters into a merger, consolidation, purchase
or acquisition of stock, or similar transaction with the Company. If a Person, including an entity, owns stock in both Companies that
enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting
as a group with other shareholders in the Company prior to the transaction giving rise to the Change in Control and not with respect to
the ownership interest in the other Company. Persons will not be considered to be acting as a group solely because they purchase or own
stock of the Company at the same time, or as a result of the same public offering.
	 	 	 

 

2.10          “Code”
means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of
the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

 

2.11          “Committee” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee designated
by the Board to administer this Plan. The members of the Committee shall (i) be appointed from time to time by and shall serve at the
discretion of the Board, and (ii) shall consist of “non-employee directors” as defined in Section 16 of the Exchange Act.
If the Committee does not exist or cannot function for any reason, the Board may take any action under this Plan that would otherwise
be the responsibility of the Committee.

 

2.12          “Company” or “Corporation” means Lifeway Foods, Inc. and any successor thereto as provided in
Article 20 herein.

 

2.13          “Disability” means that a Participant is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months.

 

2.14          “Effective Date” has the meaning set forth in Section 1.1.

 

2.15         
“Employee” means any individual performing services for the Company, an Affiliate, or a Subsidiary and designated
as an employee of the Company, its Affiliates, and/or its Subsidiaries on the payroll records thereof. An Employee shall not include any
individual during any period they are classified or treated by the Company, Affiliate, and/or Subsidiary as an independent contractor,
a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company, Affiliate,
and/or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively
reclassified as a common-law employee of the Company, Affiliate, and/or Subsidiary during such period.

 

2.16          “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

 

2.17         
“Fair Market Value” means, on any given date, the closing price of a Share as reported on the Nasdaq Global Market
(“NASDAQ”) composite tape on such date, or if Shares were not traded on NASDAQ on such day, then on the next preceding
day that Shares were traded on NASDAQ; in the event Shares are traded only on an exchange other than NASDAQ, references herein to NASDAQ
shall mean such other exchange. The Company may use an alternate method of determining the value of Shares for accounting or any other
purpose.

 

2.18         
“Full Value Award” means an Award other than in the form of an ISO, NQSO, or SAR and which is settle by the issuance
of Shares.

 

 

 

 

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2.19         
“Good Reason” shall apply to Employees only and means, unless otherwise specified in an Award Agreement or an employment
agreement, the occurrence of any of the following events, as determined by the Committee, without the express written consent of Participant,
unless such events are corrected in all material respects by the Company within thirty (30) days following written notification by Participant
to the Company of the occurrence of one of the following: (i) a material diminution in Participant’s base salary, other than pursuant
to across-the-board reductions affecting similarly situated employees of the Company; (ii) a material diminution in Participant’s
duties, authorities or responsibilities contemplated hereunder (other than temporarily while physically or mentally incapacitated or as
required by applicable law); (iii) the permanent relocation of Participant’s primary work location by more than fifty (50) miles
from its then current location; or (iv) the Company materially breaches the terms of an employment agreement with Participant.

 

2.20          “Grant Date” means the date an Award is granted to a Participant pursuant to this Plan.

 

2.21         
“Grant Price” means the price established at the time of grant of an SAR pursuant to Article 7, used to determine
whether there is any payment due upon exercise of the SAR.

 

2.22         
“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6
to an Employee and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422,
or any successor provision.

 

2.23         
“Insider” shall mean an individual who is, on the relevant date, an officer, or director of the Company, or a more
than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12
of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.

 

2.24          “Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements
of Code Section 422, or that otherwise does not meet such requirements.

 

2.25          “Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.

 

2.26          “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

 

2.27          “Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of
this Plan, granted pursuant to Article 10.

 

2.28          “Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted.

 

2.29          “Performance-Based Compensation” means compensation under an Award that is subject to performance-based criteria
as a component of the Award.

 

2.30          “Performance Measures” means measures as described in Article 12 on which the performance goals are based.

 

2.31          “Performance Period” means the period of time during which the performance goals must be met in order to determine
the amount and/or vesting of an Award.

 

2.32          “Performance Share” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in
Shares, the value of which at the time it is payable is determined by the extent to which the applicable Performance Measures have been
achieved.

 

2.33          “Performance Unit” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in
units, the value of which at the time it is payable is determined by the extent to which the applicable Performance Measures have been
achieved.

 

2.34          “Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial
risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined
by the Committee, in its discretion), as provided in Article 8.

 

 

 

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2.35          “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

 

2.36          “Plan” means this Lifeway Foods, Inc. 2022 Omnibus Incentive Plan.

 

2.37          “Restricted Stock” means an Award granted to a Participant pursuant to Article 8.

 

2.38          “Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8, except no Shares are actually
awarded to the Participant on the Grant Date.

 

2.39          “Share” means a share of common stock of the Company.

 

2.40          “Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to the terms
of Article 7 herein.

 

2.41          “Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains,
directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.

 

2.42          “Third Party Service Provider” means any consultant, agent, advisor, or independent contractor (other than a non-employee
director serving on the Company’s Board) who renders services to the Company, a Subsidiary, or an Affiliate that (a) are not in
connection with the offer and sale of Company’s securities in a capital raising transaction, and (b) do not directly or indirectly
promote or maintain a market for the Company’s securities.

 

Article 3.                
Administration

 

3.1            General. The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions
of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee,
and the Committee, the Company, and its officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any
such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the
Participants, the Company, and all other interested individuals.

 

3.2            Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the
intent of this Plan and any Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine
eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee
may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award
terms and conditions, including the terms and conditions set forth in Award Agreements, granting Awards as an alternative to or as the
form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision
of this Plan or any Award Agreement, and, subject to Article 18, adopting modifications and amendments to this Plan or any Award Agreement,
including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company,
its Affiliates, and/or its Subsidiaries operate.

 

3.3            Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company, and/or its
Subsidiaries and Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the
Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice
with respect to any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize
one or more officers of the Company to do one or both of the following on the same basis as can the Committee: (a) designate Employees
and/or Third Party Service Providers to be recipients of Awards and (b) determine the size of any such Awards; provided, however, (i)
the Committee shall not delegate such responsibilities to any such officer for Awards granted to an Employee or Third Party Service Provider
who is considered an Insider; (ii) the resolution providing such authorization sets forth the total number of Awards such officer(s) may
grant; and (iii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant
to the authority delegated.

 

 

 

 

 

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Article 4.                 Shares Subject to this Plan and Maximum Awards

 

4.1             Number of Shares Available for Awards and Maximum Amount of Non-Share Awards.

 

Subject to adjustment as provided in Section 4.3:

 

		(a)	The maximum number of Shares available for issuance to Participants under this Plan, inclusive of Shares issued and Shares underlying
outstanding awards granted on or after the Effective Date. if any, is 3,280,710 Shares, which number is intended to equal the number of
Shares available under the Prior Plan as of the Effective Date of this Plan, plus any Shares underlying any award granted under the Prior
Plan that expires, terminates, or is cancelled or forfeited under the terms of the Prior Plan after the Effective Date of this Plan.
	 	 	 
		(b)	The maximum aggregate number of Shares issuable pursuant to the exercise of Incentive Stock Options shall equal the maximum number
of Shares available for issuance under the Plan.

 

4.2             Share Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued. The number of
Shares available for Awards under this Plan shall be reduced by one (1) Share for each Share covered by such Award or to which such Award
relates. Awards that do not entitle the holder thereof to receive or purchase Shares shall not be counted against the aggregate number
of Shares available for Awards under this Plan. In addition, any Shares related to Awards which terminate by expiration, forfeiture, cancellation,
or otherwise without the issuance of such Shares shall be available again for grant under this Plan. In no event, however, will the following
Shares again become available for Awards or increase the number of Shares available for grant under this Plan: (i) Shares tendered by
the Participant in payment of the exercise price of an Option; (ii) Shares withheld from exercised Awards for tax withholding purposes;
(iii) Shares subject to a SAR that are not issued in connection with the settlement of that SAR; and (iv) Shares repurchased by the Company
with proceeds received from the exercise of an Option. The Shares available for issuance under this Plan may consist, in whole or in part,
of authorized and unissued Shares, treasury Shares, or Shares reacquired by the Company in any manner.

 

4.3            Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change
in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization,
separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution
of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure,
number of outstanding Shares or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate
event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights
under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan or under
particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to
outstanding Awards, Annual Award Limits, and other value determinations applicable to outstanding Awards.

 

The Committee, in its sole discretion, may also
make appropriate adjustments in the terms of any Awards under this Plan to reflect or relate to such changes or distributions and to modify
any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods.
The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this
Plan.

 

Subject to the provisions of Article 18 and notwithstanding
anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Committee may authorize
the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock,
or reorganization upon such terms and conditions as it may deem appropriate (including, but not limited to, a conversion of equity awards
into Awards under this Plan in a manner consistent with paragraph 53 of FASB Interpretation No. 44), subject to compliance with the rules
under Code Sections 422 and 424, as and where applicable.

 

 

 

 

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Article 5.                 Eligibility and Participation

 

5.1             Eligibility. Individuals eligible to participate in this Plan include all Employees and Third Party Service Providers.

 

5.2             Actual Participation. Subject to the provisions of this Plan, the Committee may, from time to time, select from all eligible
individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of any and all
terms permissible by law, and the amount of each Award.

 

Article 6.                
Stock Options

 

6.1             Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number,
and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion.

 

6.2             Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum
duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and
exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award
Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.

 

6.3            Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee in its sole
discretion and shall be specified in the Award Agreement; provided, however, the Option Price must be at least equal to one hundred percent
(100%) of the Fair Market Value of the Shares as determined on the Grant Date.

 

6.4            Term of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time
of grant; provided, however, no Option shall be exercisable later than the day before the tenth (10th) anniversary date of
its grant. Notwithstanding the foregoing, for Nonqualified Stock Options granted to Participants outside the United States, the Committee
has the authority to grant Nonqualified Stock Options that have a term greater than ten (10) years.

 

6.5            
Exercise of Options. Subject to Article 13, Options granted under this Article 6 shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be
the same for each grant or for each Participant.

 

6.6            
Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or
an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which
may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied
by full payment for the Shares.

 

A condition of the issuance of the Shares as to
which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company
in full either:

 

		(a)	in cash or its equivalent;
	 	 	 
		(b)	by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time
of exercise equal to the Option Price (provided that except as otherwise determined by the Committee, the Shares that are tendered must
have been held by the Participant for at least six (6) months (or such other period, if any, as the Committee may permit) prior to their
tender to satisfy the Option Price if acquired under this Plan or any other compensation plan maintained by the Company or have been purchased
on the open market);
	 	 	 
		(c)	by a cashless (broker-assisted) exercise;
	 	 	 
		(d)	by a combination of (a), (b), and/or (c); or
	 	 	 
		(e)	any other method approved or accepted by the Committee in its sole discretion.
	 	 	 

 

Subject to any governing rules or regulations,
as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax
withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share
certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).

 

 

 

 

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Unless otherwise determined by the Committee, all
payments under all of the methods indicated above shall be paid in United States dollars.

 

6.7             Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise
of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements,
restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are
then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.

 

6.8            Termination of Employment. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall
have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company,
its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee,
shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to
this Article 6, and may reflect distinctions based on the reasons for termination.

 

6.9            Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise
of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant
shall notify the Company of such disposition within ten (10) days thereof.

 

Article 7.                 Stock Appreciation Rights

 

7.1             Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time
to time as shall be determined by the Committee.

 

Subject to the terms and conditions of this Plan,
the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions
of this Plan, in determining the terms and conditions pertaining to such SARs.

 

The Grant Price for each grant of an SAR shall
be determined by the Committee and shall be specified in the Award Agreement; provided, however, the Grant Price on the Grant Date must
be at least equal to one hundred percent (100%) of the Fair Market Value of the Shares as determined on the Grant Date.

 

7.2             SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the
SAR, and such other provisions as the Committee shall determine.

 

7.3             Term of SAR. The term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except
as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th)
anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Committee
has the authority to grant SARs that have a term greater than ten (10) years.

 

7.4             
Exercise of SARs. SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.

 

7.5             
Settlement of SARs. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an
amount determined by multiplying:

 

		(a)	The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by
	 	 	 
		(b)	The number of Shares with respect to which the SAR is exercised.

 

At the discretion of the Committee, the payment
upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion.
The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant
of the SAR.

 

7.6             
Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to
exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates,
and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included
in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to this Plan, and may reflect
distinctions based on the reasons for termination.

 

7.7             
Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise
of an SAR granted pursuant to this Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited
to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.

 

 

 

    	 	8	 

     

    

 

Article 8.                 Restricted Stock and Restricted Stock Units

 

8.1             Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of this Plan, the Committee, at any
time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the
Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the
Participant on the Grant Date.

 

8.2             Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced
by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted
Stock Units granted, and such other provisions as the Committee shall determine.

 

8.3             Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock
or Restricted Stock Units granted pursuant to this Plan as it may deem advisable including, without limitation, restrictions based upon
the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based
restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares
are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted
Stock or Restricted Stock Units.

 

To the extent deemed appropriate by the Committee,
the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all
conditions and/or restrictions applicable to such Shares have been satisfied or lapse.

 

Except as otherwise provided in this Article 8,
Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions
and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations),
and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion
shall determine.

 

8.4             Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.3, each certificate representing
Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the following or as otherwise determined by the Committee
in its sole discretion:

 

The sale or transfer of Shares of stock
represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on
transfer as set forth in the Lifeway Foods, Inc. 2022 Omnibus Incentive Plan, and in the associated Award Agreement. A copy of this
Plan and such Award Agreement may be obtained from Lifeway Foods, Inc.

 

8.5             Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the
extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder
may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall
have no voting rights with respect to any Restricted Stock Units granted hereunder.

 

8.6             Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to
retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of
services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all
Shares of Restricted Stock or Restricted Stock Units issued pursuant to this Plan, and may reflect distinctions based on the reasons for
termination

 

8.7             Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon
the Participant making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes
an election pursuant to Code Section 83(b) concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy
of such election with the Company.

 

Article 9.                 Performance Units/Performance Shares

 

9.1            Grant of Performance Units/Performance Shares. Subject to the terms and provisions of this Plan, the Committee, at any time
and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the
Committee shall determine. Performance Units and Performance Shares that are earned (as described in Section 9.3) may be subject to vesting
requirements as set forth in the applicable Award Agreement. Except as the Committee may provide in the event of the death, Disability,
involuntary termination without Cause (including voluntary termination for Good Reason with respect to eligible Employees), retirement
of a Participant or in the event of a Change in Control to the extent provided in Article 16, Performance Units and Performance Shares
may not vest prior to the expiration of at least one (1) year of a Performance Period.

 

 

 

    	 	9	 

     

    

 

9.2             Value of Performance Units/Performance Shares. Each Performance Unit shall have an initial value that is established by the
Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Grant
Date. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine
the value and/or number of Performance Units/Performance Shares that may be earned by the Participant.

 

9.3             Earning of Performance Units/Performance Shares. Subject to the terms of this Plan, after the applicable Performance Period
and vesting period, if any, have ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the
value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals have been achieved.

 

9.4             Form and Timing of Payment of Performance Units/Performance Shares. Payment of earned and vested Performance Units/Performance
Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee,
in its sole discretion, may pay earned and vested Performance Units/Performance Shares in the form of cash or in Shares (or in a combination
thereof). Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee
with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

 

9.5             Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to
retain Performance Units and/or Performance Shares following termination of the Participant’s employment with the Company, its Affiliates,
and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included
in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares
issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.

 

Article 10.              Cash-Based Awards and Other Stock-Based Awards

 

10.1          Grant of Cash-Based Awards. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time,
may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.

 

10.2          Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described
by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and
conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash
or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage
of the applicable local laws of jurisdictions other than the United States.

 

10.3          Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as
determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined
by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish
performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will
depend on the extent to which the performance goals are met.

 

10.4         
Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based Award or an Other
Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.

 

10.5          Termination of Employment. The Committee shall determine the extent to which the Participant shall have the right to receive
Cash-Based Awards or Other Stock-Based Awards following termination of the Participant’s employment with or provision of services
to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion
of the Committee and may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based
Awards or Other Stock- Based Awards issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.

 

 

 

    	 	10	 

     

    

 

Article 11.              Transferability of Awards

 

11.1          Transferability. Except as provided in Section 11.2 below, during a Participant’s lifetime, their Awards shall be exercisable
only by the Participant. Awards shall not be transferable other than by will or the laws of descent and distribution; no Awards shall
be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be
null and void. The Committee may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom
any amounts payable or Shares deliverable in the event of, or following, the Participant’s death, may be provided.

 

11.2         
Committee Action. The Committee may, in its discretion, determine that notwithstanding Section 11.1, any or all Awards (other
than ISOs) shall be transferable to and exercisable by such transferees, and subject to such terms and conditions, as the Committee may
deem appropriate; provided, however, no Award may be transferred for value (as defined in the General Instructions to Form S-8).

 

Article 12.               Performance Measures

 

12.1          Performance Measures. The Committee shall have full discretionary authority to select Performance Measures and related performance
goals upon which payment or vesting of an Award depends. The performance goals upon which the payment or vesting of an Award to a Covered
Employee that is intended to qualify as Performance-Based Compensation shall be any or any combination of the following Performance Measures:

 

		(a)	Net earnings or net income (before or after taxes) and/or net earnings or net income of continuing operations;
	 	 	 
		(b)	Earnings per share (basic or diluted) and/or net earnings per share or net income per share of continuing operations;
	 	 	 

		(c)	Net sales or revenue growth (including, but not limited to, innovation as measured as a percentage of sales of new products);
	 	 	 
		(d)	Net operating profit;
	 	 	 

		(e)	Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);
	 	 	 
		(f)	Cash flow (including, but not limited to, throughput, operating cash flow, free cash flow, cash flow return on equity, and cash flow
return on investment);
	 	 	 
		(g)	Earnings before or after taxes, interest, depreciation, and/or amortization;
	 	 	 
		(h)	Earnings before taxes;
	 	 	 
		(i)	Gross or operating ma

rgins;

		(j)	Corporate value measures;
	 	 	 

		(k)	Capital expenditures;
	 	 	 

		(l)	Unit volumes;
	 	 	 

		(m)	Productivity ratios;
	 	 	 

		(n)	Share price (including, but not limited to, growth measures and total shareholder return);
	 	 	 
		(o)	Cost or expense;
	 	 	 
		(p)	Margins (including, but not limited to, debt or profit);
	 	 	 
		(q)	Operating efficiency;

 

		(r)	Market share;
	 	 	 

 

 

 

    	 	11	 

     

    

 

		(s)	Customer satisfaction;
	 	 	 
		(t)	Working capital targets or any element thereof;
	 	 	 
		(u)	Economic value added or EVA® (net operating profit after tax minus the sum of capital multiplied by the cost of capital);
	 	 	 
		(v)	Health, safety and environmental performance;
	 	 	 
		(w)	Corporate social responsibility and/or diversity;
	 	 	 
		(x)	Strategic milestones (including, but not limited to, debt reduction, improvement of cost of debt, equity or capital, completion of
projects, achievement of synergies or integration objectives, or improvements to credit rating, inventory turnover, weighted average cost
of capital, implementation of significant new processes, productivity or production, product quality, and any combination of the foregoing);
	 	 	 
		(y)	Strategic sustainability metrics (including, but not limited to, corporate governance, consumer advocacy, enterprise risk management,
employee development, and portfolio restructuring);
	 	 	 
		(z)	Gross, operating, stockholder equity, or net worth;
	 	 	 
		(aa)	Deleveraging; and
	 	 	 
		(bb)	Any other measure of performance that the Committee determines to be appropriate.

 

Any one or more Performance Measure(s) may be used to measure the performance
of any Participant, the Company, Subsidiary, and/or Affiliate as a whole or any business unit or line of business of the Company, Subsidiary,
and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures on an absolute,
gross, total, net per share, average, adjusted or relative basis (or measure based on changes therein), including, as compared to the
performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate,
or the Company may select Performance Measure (n) above as compared to various stock market indices.

 

12.2          Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude
any of the following events that occurs during a Performance Period: (a) asset write- downs, (b) litigation or claim judgments or settlements,
(c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization
and restructuring programs, (e) extraordinary nonrecurring items as described in management’s discussion and analysis of financial
condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year, (f) acquisitions
or divestitures, and (g) foreign exchange gains and losses.

 

12.3          Adjustment of Performance-Based Compensation. The Committee shall retain the discretion to adjust such Awards downward, either
on a formula or discretionary basis or any combination, as the Committee determines.

 

Article 13.               Minimum Vesting of Share-Based Awards

 

Notwithstanding any other provision
of this Plan to the contrary, Awards granted pursuant to Article 6, 7, 8, or 10 of this Plan shall be subject to a minimum vesting period
of at least one (1) year, provided, however, such vesting may be cliff or graded (starting no earlier than one (1) year after grant, provided,
that, no more than five percent (5%) of the maximum number of Shares authorized for issuance under this Plan pursuant to Section 4.1(a)
may be granted with a minimum vesting period of less than one (1) year. Nothing in this Article 13 shall preclude the Committee from taking
action, in its sole discretion, to accelerate the vesting of any Award in connection with or following a Participant’s death, Disability,
involuntary termination of service (other than for Cause), an Employee’s termination for Good Reason or, subject to Article 17,
the consummation of a Change in Control.

 

Article 14.              Dividend Equivalents

 

Any Participant selected by the Committee may be
granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment
dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by
the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject
to such limitations as may be determined by the Committee. Notwithstanding the foregoing, for all Awards, the payment of dividend equivalents
prior to an Award becoming vested shall be prohibited, and the Committee shall determine the extent to which dividend equivalents may
accrue during the vesting period and become payable upon vesting.

 

 

 

 

    	 	12	 

     

    

 

Article 15.              Beneficiary Designation

 

Each Participant under this Plan may, from time
to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is
to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations
by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing
with the Company, or the Company’s designated agent, during the Participant’s lifetime. In the absence of any such beneficiary
designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death shall be paid to or exercised
by the Participant’s executor, administrator, or legal representative.

 

Article 16.              Rights of Participants

 

16.1          Employment. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its
Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment, or service to the Company, at any time or for any
reason not prohibited by law, nor confer upon any Participant any right to continue their employment or service as a Third Party Service
Provider for any specified period of time.

 

Neither an Award nor any benefits arising under
this Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject
to Articles 3 and 18, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee
without giving rise to any liability on the part of the Company, its Affiliates or Subsidiaries, or the Committee.

 

16.2          Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected,
to be selected to receive a future Award.

 

16.3          Rights as a Shareholder. Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder
with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.

 

Article 17.              Change of Control

 

17.1          Change of Control of the Company. Notwithstanding any other provision of this Plan to the contrary, the provisions of this
Article 17 shall apply in the event of a Change of Control, unless otherwise determined by the Committee in connection with the grant
of an Award as reflected in the applicable Award Agreement or other agreement between the Participant and the Company or a subsidiary
or Affiliate.

 

		(a)	If, upon a Change of Control, a Participant receives a new Award which qualifies as a “Replacement Award” (as defined
below), the Award shall continue subject to the terms of the Replacement Award.
	 	 	 
		(b)	If, upon a Change of Control that results in the Company’s Shares no longer being traded on the NASDAQ or another established
securities market and no Replacement Award is granted to a Participant, the unvested portion of an Award whose vesting is based only on
a service requirement shall become immediately vested and exercisable, as applicable, upon the Change of Control.
	 	 	 
		(c)	Notwithstanding subparagraph (a) and except as may be otherwise provided in an Award Agreement, upon a Change of Control, with respect
to Awards that are Performance Shares or Performance Units issued pursuant to Article 9 of this Plan, a pro-rata portion of the Award
shall be immediately earned, vested and payable; such portion shall be determined based on the portion of the Performance Period that
has elapsed as of (i) the date of the Change of Control, if the Performance Measure is based on stock price, or (ii) the end of the last
full calendar quarter preceding or commensurate with the date of the Change of Control if the Performance Measure is not based on stock
price (in each case, the “Adjusted Measurement Date”). The Award amount that will be considered earned and payable
will be calculated based on the higher of target or actual performance measured as of the Adjusted Measurement Date. To the extent any
earned Awards that are Performance Shares or Performance Units have not been paid prior to the Change of Control because they are subject
to vesting, such earned but unvested Awards shall become immediately vested, and payable upon the Change of Control.
	 	 	 
		(d)	Except as provided in subparagraph (c) or as otherwise provided in an Award Agreement, if, following a Change of Control, the Company’s
Shares continue to be traded on the NASDAQ or another established securities market, outstanding Awards shall continue in effect and be
treated as Replacement Awards as described in subparagraph (a).
	 

     

     

     

    	 	13	 

     

    

	 	 	 

                                   

		(e)	Notwithstanding any of subparagraphs (a), (b) or (d) of this Section 17.1, the Committee may, in its sole discretion, determine that
any or all outstanding Awards granted under this Plan, whether or not exercisable, will be canceled and terminated, and that in connection
with such cancellation and termination, the holder of such Award may receive for each Share of Common Stock subject to such Awards a cash
payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment)
equal to the difference, if any, between the consideration received by shareholders of the Company in respect of a Share of Common Stock
in connection with such transaction and the purchase price per share, if any, under the Award multiplied by the number of Shares of Common
Stock subject to such Award; provided that if such product is zero or less or to the extent that the Award is not then exercisable, the
Awards will be canceled and terminated without payment therefor.

 

17.2          Replacement Awards. An Award shall be considered a Replacement Award if: (i) it has a value at least equal to the value of
the Award it is replacing as determined by the Committee in its sole discretion; (ii) it relates to publicly traded equity securities
of the Company or its successor in the Change of Control or another entity that is affiliated with the Company or its successor following
the Change of Control; and (iii) its other terms and conditions are not less favorable to the Participant than the terms and conditions
of the Award it is replacing (including the provisions that would apply in the event of a subsequent Change of Control). Without limiting
the generality of the foregoing, the Replacement Award may take the form of a continuation of the Award it is replacing if the requirements
of the preceding sentence are satisfied. The determination of whether the conditions of this Section 17.2 are satisfied shall be made
by the Committee, as constituted immediately before the Change of Control, in its sole discretion.

 

17.3          Termination of Employment. With respect to Employees only, except as may otherwise be provided in the Award Agreement, upon
a termination of employment other than for Cause, of an Employee; occurring in connection with or during the period of two (2) years after
a Change of Control, (i) all Replacement Awards held by the Employee shall become fully vested and (if applicable) exercisable and free
of restrictions, and (ii) all Stock Options and Stock Appreciation Rights held by the Employee immediately before the termination of employment
that the Employee held as of the date of the Change of Control or that constitute Replacement Awards shall remain exercisable for not
less than one (1) year following such termination or until the expiration of the stated term of such Stock Option or SAR, whichever period
is shorter; provided, that if the applicable Award Agreement provides for a longer period of exercisability, that provision shall control.

 

17.4         
Reduction of Excess Parachute Payments. Except as may be provided in an employment or severance compensation or service agreement
between the Company and the Participant, if, in connection with a Change of Control, a Participant’s payment of any Awards will
cause the Participant to be liable for federal excise tax under Code Section 4999 levied on certain “excess parachute payments”
as defined in Code Section 280G (“Excise Tax”), then the payments made pursuant to the Awards shall be reduced (or
repaid to the Company, if previously paid or provided) as provided below:

 

		(a)	If the payments due upon of Change of Control under this Plan and any other agreement between a Participant and the Company, exceed
2.99 times the Participant’s “base amount,” as defined in Code Section 280G, a reduced payment amount shall be calculated
by reducing the payments to the minimum extent necessary so that no portion of any payment, as so reduced or repaid, constitutes an excess
parachute payment. If it is determined that any Excise Tax is payable by a Participant, the Participant shall receive either (i) all payments
otherwise due; or (ii) the reduced payment amount described in the preceding sentence, whichever will provide the Participant with the
greater after-tax economic benefit taking into account for these purposes any applicable Excise Tax.
	 	 	 
		(b)	Whether payments are to be reduced pursuant to this Section 17.3, and the extent to which they are to be so reduced, will be determined
solely by the Company in good faith and the Company will notify the Participant in writing of its determination.
	 	 	 
		(c)	In no event shall a Participant be entitled to receive any kind of gross-up payment or Excise Tax reimbursement from the Company.

 

 

 

 

 

    	 	14	 

     

    

 

Article 18.              Amendment, Modification, Suspension, and Termination

 

18.1          Amendment, Modification, Suspension, and Termination. Subject to Section 18.3, the Committee may, at any time and from time
to time, alter, amend, modify, suspend, or terminate this Plan and any Award Agreement in whole or in part; provided, however, that, (i)
without the prior approval of the Company’s shareholders and except as provided in Section 4.3, Options or SARs issued under this
Plan will not be repriced, repurchased (including a cash buyout), replaced, or regranted through cancellation, or by lowering the Option
Price of a previously granted Option or the Grant Price of a previously granted SAR, (ii) any amendment of this Plan must comply with
the rules of the NASDAQ, and (iii) no material amendment of this Plan shall be made without shareholder approval if shareholder approval
is required by law, regulation, or stock exchange rule.

 

18.2          Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4.3 hereof) affecting the Company or the financial statements of the Company or of changes in applicable
laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent
unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination
of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.

 

18.3          Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary (other than Section 18.4), no termination,
amendment, suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award previously
granted under this Plan, without the written consent of the Participant holding such Award.

 

18.4          Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Committee may amend this
Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming
this Plan or an Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to,
Code Section 409A), and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a
Participant agrees to any amendment made pursuant to this Section 18.4 to any Award granted under this Plan without further consideration
or action.

 

 

 

 

 

 

 

 

    	 	15	 

     

    

 

Article 19.              Withholding

 

19.1          Tax Withholding. The Company shall have the power and the right to deduct or withhold from any amounts due and owing to the
Participant, or require a Participant to remit to the Company, up to the maximum statutory amount to satisfy federal, state, and local
taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this
Plan.

 

19.2           Share Withholding. With respect to withholding required upon the lapse of restrictions on Restricted Stock and Restricted Stock
Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an
Award granted hereunder, the Committee may establish provisions in the applicable Award Agreements to satisfy the withholding requirement,
in whole or in part, by having the Company withhold whole Shares having a Fair Market Value on the date the tax is to be determined up
to the maximum statutory total tax withholding that could be imposed on the transaction.

 

Article 20.               Successors

 

All obligations of the Company under this Plan
with respect to Awards granted hereunder shall be binding on any successor to the Company, regardless of whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

 

Article 21.              General Provisions

 

21.1          Forfeiture Events. Any Awards granted under this Plan will be subject to recoupment in accordance with any clawback policy
that the Company currently has in effect, or is required to adopt or modify, pursuant to the listing standards of any national securities
exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform
and Consumer Protection Act or the Sarbanes-Oxley Act of 2002, or other applicable law (“Clawback Policy”). In addition,
the Committee or the Board may impose such clawback, recovery or recoupment provisions in an Award Agreement as the Committee or the Board
determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired Shares or other
cash or property as set forth in the Award Agreement. No recovery of compensation under this Section will be an event giving rise to a
right to resign for “good reason” or “constructive termination” (or similar term) under any agreement or otherwise
with the Company.

 

21.2          Legend. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions
on transfer of such Shares.

 

21.3          Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine,
the plural shall include the singular, and the singular shall include the plural.

 

21.4          Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.

 

21.5          Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

21.6          Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this
Plan prior to:

 

		(a)	Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
	 	 	 
		(b)	Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any
governmental body that the Company determines to be necessary or advisable.

 

21.7          Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained.

 

21.8          Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under this Plan
to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell
or distribute such Shares.

 

 

    	 	16	 

     

    

 

21.9          Employees Based Outside the United States. Notwithstanding any provision of this Plan to the contrary, in order to comply with
the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees, Third Party Service
Providers, the Committee, in its sole discretion, shall have the power and authority to:

 

		(a)	Determine which Affiliates and Subsidiaries shall be covered by this Plan;
	 	 	 

		(b)	Determine which Employees and/or Third Party Service Providers outside the United States are eligible to participate in this Plan;
	 	 	 

		(c)	Modify the terms and conditions of any Award granted to Employees and/or Third Party Service Providers outside the United States to
comply with applicable foreign laws;
	 	 	 

		(d)	Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable.
Any subplans and modifications to Plan terms and procedures established under this Section 21.9 by the Committee shall be attached to
this Plan document as appendices; and
	 	 	 

		(e)	Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government
regulatory exemptions or approvals.
	 	 	 

 

Notwithstanding the above, the Committee may not
take any actions hereunder, and no Awards shall be granted, that would violate applicable law.

 

21.10        Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares,
the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of
any stock exchange.

 

21.11        Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or
its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan,
and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship
between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual
acquires a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under this Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments
to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special
or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly
set forth in this Plan.

 

21.12        No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. To the extent an
Award that is payable under this Plan shall include fractional Shares, such fractional Shares shall be rounded to the nearest whole Share.

 

21.13        Retirement and Welfare Plans. Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards may be included
as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s
or Affiliate’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides
that such compensation shall be taken into account in computing a Participant’s benefit.

 

21.14        Deferred Compensation. If any Award would be considered deferred compensation as defined under Code Section 409A and if this
Plan fails to meet the requirements of Code Section 409A with respect to such Award, then such Award shall be null and void. However,
the Committee may permit deferrals of compensation pursuant to the terms of a Participant’s Award Agreement, a separate plan or
a subplan which meets the requirements of Code Section 409A and any related guidance. Additionally, to the extent any Award is subject
to Code Section 409A, notwithstanding any provision herein to the contrary, this Plan does not permit the acceleration or delay of the
time or schedule of any distribution related to such Award, except as permitted by Code Section 409A, the regulations thereunder, and/or
the Secretary of the United States Treasury.

 

21.15        Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the
Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.

 

21.16        No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s
or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of
its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business
or assets; or (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems
to be necessary or appropriate.

 

 

 

 

    	 	17	 

     

    

 

21.17        Governing Law. This Plan shall be governed by the laws of the State of Illinois, without regard to choice-of-law principles.
The Participants consent to personal and exclusive jurisdiction and venue in Cook County in the State of Illinois. Any controversy or
claim arising out of or relating to (i) a Participant’s employment with the Company or a Subsidiary or Affiliate and/or (ii) the
Plan, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its
Employment Arbitration Rules before a single arbitrator in Chicago, Illinois, and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The Company and the Participant will each be responsible for their own attorneys’
fees and expenses incurred in connection with any such arbitration. The decision arrived at by the arbitrator shall be binding upon all
parties to the arbitration and no appeal shall lie therefrom, except as provided by the Federal Arbitration Act. These arbitration procedures
are intended to be the exclusive method of resolving any claim or dispute arising out of or related to this Plan, including the applicability
of this Section; provided, however, that any party seeking injunctive relief in connection with a breach or anticipated breach of the
Plan will do so in a state or federal court of competent jurisdiction within the Northern District of Illinois.

 

As evidence of its adoption of this Plan, the Company
has caused this document to be executed by its duly authorized officer on the 31st day of August, 2022.

 

 

	 	LIFEWAY FOODS, INC.
	 	 
	 	 
	 	By:
	 	Name: Julie Smolyansky
	 	Title: Chief Executive Officer
	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	18Exhibit 10.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Lifeway Foods, Inc.

2022 Non-Employee Director Equity and 

Deferred Compensation Plan

Effective August 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	 	 

     

    

 

	Article 1   Establishment, Purpose, and Duration	1
	Article 2   Definitions	1
	Article 3   Administration	5
	Article 4   Shares Subject to this Plan and Maximum Grants	5
	Article 5   Eligibility and Participation	6
	Article 6   Grants of RSUS	6
	Article 7   Deferral Elections	8
	Article 8   Distributions	9
	Article 9   Hardship Distributions	9
	Article 10   Beneficiary Designation	9
	Article 11   Successors	10
	Article 12   Amendment, Modification, Suspension, and Termination	10
	Article 13   General Provisions	11

 

 

 

 

 

 

 

 

 

    	 	i	 

     

    

 

 

Lifeway Foods, Inc.

2022 Non-Employee Director Equity and 

Deferred Compensation Plan

 

Article 1                    Establishment, Purpose, and Duration

 

1.1               Establishment. Lifeway Foods, Inc. (the “Company”), establishes a compensation plan to be known as the Lifeway
Foods, Inc. Non-Employee Director Equity and Deferred Compensation Plan (this “Plan”), in accordance with the terms
and conditions of the Plan as set forth in this document.

 

This Plan’s effective date is the date this
Plan is approved by the Company's shareholders at an Annual Meeting (the “Effective Date”), and this Plan shall remain
in effect as provided in Section 1.3 hereof.

 

1.2              
Purpose of this Plan. The purpose of this Plan is to enable the Company to pay part of the compensation of its non-employee
Directors in restricted stock units (“RSUs”) as defined below representing the Company’s common stock and to
allow the Company’s non-employee Directors to defer some or all of their directors’ fees.

 

1.3              
Duration of this Plan. Unless sooner terminated as provided herein, this Plan shall terminate ten years from the Effective
Date. After this Plan is terminated, no RSU Compensation may be granted but RSU Compensation previously granted shall remain outstanding
in accordance with its applicable terms and conditions and this Plan’s terms and conditions.

 

Article 2                    Definitions

 

Whenever used in this Plan, the following terms
shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.

 

2.1               “Administrator” means the Chief Financial Officer of the Company.

 

2.2               “Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited
liability company), that is affiliated with the Company through stock or equity ownership or otherwise, and is designated as an Affiliate
for purposes of this Plan by the Administrator.

 

2.3               “Annual Grant Limits” and “Grant Limits” shall mean the number of RSUs and dollar amounts set
forth in Section 4.1.

 

2.4               “Annual Meeting” means the annual meeting of the shareholders of the Company held in the relevant year.

 

2.5               “Beneficiary” or “Beneficiaries” means any person or persons designated on a Beneficiary Designation
Form by a Director as allowed in Article 10 to receive RSU Compensation and unpaid Deferred Benefits under this Plan. If there is no valid
designation by the Director, or if the designated Beneficiary or Beneficiaries fail to survive the Director or otherwise fail to take
the benefit, the Director’s Beneficiary shall be the first of the following who survives the Director: (i) a Director’s spouse
(the person legally married to the Director when the Director dies); (ii) the Director’s children in equal shares, and (iii) the
Director’s estate.

 

2.6               “Beneficiary Designation Form” means a form acceptable to the Administrator or its designee used by a Director
pursuant to Article 10 hereof to name their Beneficiary or Beneficiaries who will receive their RSU Compensation and unpaid Deferred Benefits
under this Plan, if any, when they die.

 

2.7               “Board” or “Board of Directors” means the Board of Directors of the Company.

 

2.8               “Cash Compensation” means any retainers or other fees payable to a Director in cash in consideration for services
performed as a Director.

 

 

 

 

    	 	1	 

     

    

 

2.9              
“Change in Control” means the occurrence of any of the following events:

 

		(i)	Any one Person, or more than one Person acting as a group, excluding Julie Smolyansky, Edward Smolyansky, Ludmila Smolyansky and members
of their families, acquires ownership of stock (as determined under Section 318(a) of the Code) of the Company that, together with stock
held by such Person or group, constitutes more than fifty percent (50%) of the total Fair Market Value or total voting power of the stock
of the Company; provided, however, that if any one Person or more than one Person acting as a group, is considered to own more than fifty
percent (50%) of the total Fair Market Value or total voting power of the stock of the Company, the acquisition of additional stock by
the same Person or Persons is not considered to cause a Change in Control of the Company. This paragraph applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction.
	 	 	 
		(ii)	Any one Person, or more than one Person acting as a group, excluding Julie Smolyansky, Edward Smolyansky, Ludmila Smolyansky and members
of their families, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person
or Persons) ownership of stock (as determined under Section 318(a) of the Code) of the Company possessing thirty percent (30%) or more
of the total voting power of the stock of the Company; provided, however, that if any one Person or more than one Person acting as a group,
is considered to own thirty percent (30%) or more of the total voting power of the stock of the Company, the acquisition of additional
stock by the same Person or Persons is not considered to cause a Change in Control of the Company.
	 	 	 
		(iii)	a majority of members of the Company's Board of Directors (the "Incumbent Directors") is replaced during any 12-month period
by directors whose appointment or election is not endorsed by a majority of the Incumbent Directors, provided that no other Company is
a majority shareholder of the Company.
	 	 	 
		(iv)	any one Person, or more than one Person acting as a group, acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross Fair Market Value equal to or
more than forty percent (40%) of the total gross Fair Market Value of all of the assets of the Company immediately prior to such acquisition(s);
provided, however, that a transfer of assets by the Company is not treated as a Change in Control if the assets are transferred to (A)
a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; (B) an entity, fifty
percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company; (C) a Person, or more
than one Person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of
all outstanding stock of the Company; or (D) an entity, at least fifty percent (50%) of the total value or voting power of which is owned,
directly or indirectly, by a Person described in the previous subsection (C). For purposes of this paragraph, (1) gross Fair Market Value
means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets, and (2) a Person's status is determined immediately after the transfer of the assets.
	 	 	 
		(v)	Persons will be considered to be acting as a group if they are owners of a Company that enters into a merger, consolidation, purchase
or acquisition of stock, or similar transaction with the Company. If a Person, including an entity, owns stock in both Companies that
enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting
as a group with other shareholders in the Company prior to the transaction giving rise to the Change in Control and not with respect to
the ownership interest in the other Company. Persons will not be considered to be acting as a group solely because they purchase or own
stock of the Company at the same time, or as a result of the same public offering.

 

 

 

 

    	 	2	 

     

    

 

For purposes of this section, the following terms
have the meanings set forth below:

 

		(a)	“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
	 	 	 
		(b)	“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
	 	 	 
		(c)	"Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
	 	 	 

 

2.10             “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references
to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

 

2.11             “Common Stock” means the common stock of the Company.

 

2.12             “Company” means Lifeway Foods, Inc. and any successor thereto as provided in Article 11 herein.

 

2.13             “Compensation Year” means the 12-month period commencing on each July 1st and ending the following June
30th during which Directors’ Cash Compensation is paid.

 

2.14             “Deferral Election” means a Director’s election to defer Cash Compensation or RSU Compensation granted or
earned during the Deferral Year.

 

2.15             “Deferral Election Form” means any instrument, whether in paper, electronic or such other form or manner prescribed
by the Administrator, governed by the provisions of Article 7 of this Plan, including the related Beneficiary Designation Form that applies
to all of that Director’s Deferred Benefits under the Plan.

 

2.16             “Deferral Year” means a calendar year for which a Director has an operative Deferral Election Form.

 

2.17             “Deferred Benefit” means either a Deferred Cash Benefit or a Deferred RSU Benefit under the Plan for a Director
who has submitted an operative Deferral Election Form pursuant to Article 7 of this Plan.

 

2.18             “Deferred Cash Account” means that bookkeeping record established for each Director who elects to defer some or
all of their Cash Compensation as cash for a Compensation Year. A Deferred Cash Account is established only for purposes of measuring
a Deferred Cash Benefit and not to segregate assets or to identify assets that may or must be used to satisfy a Deferred Cash Benefit.
A Deferred Cash Account will be credited with the Director’s Cash Compensation deferred as a Deferred Cash Benefit according to
a Deferral Election Form and according to Section 7.3 of this Plan. There will be no crediting of interest, earnings or losses on Deferred
Cash Accounts.

 

2.19             “Deferred Cash Benefit” means the Cash Compensation that a Director elects to defer as a Deferred Cash Benefit
under Article 7, that results in payments governed by Section 7.3 and Article 8 of this Plan.

 

2.20             “Deferred RSU Account” means that bookkeeping record established for each Director who elects to defer some or
all of their Cash Compensation and/or RSU Compensation as a Deferred RSU Benefit. A Deferred RSU Account is established only for purposes
of measuring a Deferred RSU Benefit and not to segregate assets or to identify assets that may or must be used to satisfy a Deferred RSU
Benefit. A Deferred RSU Account will be credited with the Director’s Cash Compensation and/or RSU Compensation deferred as a Deferred
RSU Benefit according to a Deferral Election Form and according to Section 7.4 of this Plan.

 

2.21             “Deferred RSU Benefit” means cash and/or RSU Compensation that a Director elects to defer as RSUs under Article
7 that results in payments governed by Section 7.4 and Article 8 of this Plan.

 

 

 

 

    	 	3	 

     

    

 

2.22             “Director” means each director of the Company who is not an employee of the Company.

 

2.23             “Disabled” or “Disability” means a Director’s inability to engage in any substantial gainful
activity because of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted,
or can be expected to last, for a continuous period of twelve (12) months or longer.

 

2.24             “Effective
Date” has the meaning set forth in Section 1.1.

 

2.25             “Election Date” means the date established by this Plan as the date before which a Director must submit a valid
Deferral Election Form to the Administrator. For each Deferral Year, the Election Date is December 31 of the preceding calendar year.
However, for an individual who becomes a Director during a Deferral Year, the Election Date is the thirtieth day following the date they
become a Director. The Administrator may set an earlier date as the Election Date for any Deferral Year.

 

2.26             “Fair Market Value” means, on any given date, the closing price of a Share as reported on the Nasdaq Global Market
(“Nasdaq”) composite tape on such date, or if Shares were not traded on the Nasdaq on such day, then on the next preceding
day that Shares were traded on the Nasdaq; in the event Shares are traded only on an exchange other than the Nasdaq, references herein
to the Nasdaq shall mean such other exchange. The Company may use an alternate method of determining the value of Shares for accounting
or any other purpose.

 

2.27             “Financial Emergency” means a severe financial hardship to the Director resulting from an illness or accident of
the Director, the Director’s spouse, or the Director’s dependent; loss of the Director’s property due to casualty; or
other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Director and qualifying
as an Unforeseeable Emergency for purposes of Code Section 409A.

 

2.28             “Grant” means the grant of RSUs made to Directors pursuant to Article 6 of this Plan.

 

2.29             “Grant Date” means the date a Grant is made to a Director pursuant to Article 6 of this Plan.

 

2.30             “Plan” means this Lifeway Foods, Inc. 2022 Non-Employee Director Equity and Deferred Compensation Plan.

 

2.31             “RSUs” means the restricted stock units that are granted under Article 6, or are accrued in a Director’s
Deferred RSU Account pursuant to Section 7.4. Each RSU shall equal the value of one Share. Cash Compensation that a Director has elected
to defer as a Deferred RSU Benefit shall be converted to RSUs based on the Fair Market Value of Shares on the date the Cash Compensation
would otherwise be paid to the Director.

 

2.32             “RSU Compensation” means RSUs granted to the Directors pursuant to Article 6, if any, as part of their annual compensation.

 

2.33             “Share” means a share of Common Stock of the Company.

 

2.34             “Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains,
directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.

 

2.35             “Terminate”, “Terminating”, or “Termination”, with respect to a Director,
means cessation of their relationship with the Company as a director whether by death, Disability or severance for any other reason provided
there is a “separation from service” for purposes of Code Section 409A.

 

2.36          
“Vesting Year” means, with respect to each Grant pursuant to Article 6, the 12-month period commencing on the date
of an Annual Meeting at which an RSU Grant is made, and with respect to that Grant, all subsequent 12-month periods until the RSUs are
either fully vested or forfeited pursuant to the terms of the Grant and this Plan.

 

 

 

 

    	 	4	 

     

    

 

Article 3                    Administration

 

3.1               General. The Administrator shall be responsible for administering this Plan, subject to this Article 3 and the other provisions
of this Plan. The Administrator may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an employee,
and the Administrator, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations
of any such individuals. All actions taken and all interpretations and determinations made by the Administrator shall be final and binding
upon the Directors, the Company, and all other interested individuals.

 

3.2               Authority of the Administrator. The Administrator shall have full and exclusive discretionary power to interpret the terms
and the intent of this Plan and any agreement or document ancillary to or in connection with this Plan, to determine eligibility for Grants
and the right to make deferrals, and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan
as the Administrator may deem necessary or proper. Such authority shall include, but not be limited to, determining Grant recipients,
establishing Grant and deferral terms and conditions, construing any ambiguous provision of the Plan, and, subject to Article 12, adopting
modifications and amendments to this Plan, including without limitation, any that are necessary to comply with applicable laws.

 

3.3               Delegation. The Administrator may delegate to one or more officers of the Company, and/or its Subsidiaries and Affiliates or
to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Administrator or any individuals
to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility
the Administrator or such individuals may have under this Plan.

 

Article 4                    Shares Subject to this Plan and Maximum Grants

 

4.1              
Number of Shares Available for Grants.

 

		(a)	Subject to adjustment as provided in Section 4.3, the maximum number of Shares available for issuance to Directors under this Plan
is 500,000 Shares.
	 	 	 
		(b)	The aggregate Fair Market Value (determined as of the Grant Date) of Shares that may be issued as RSU Compensation Grants under Section
6.1 of this Plan to a Director in any year shall not exceed $170,000.

 

4.2               Share Usage. RSUs covered by a Grant or deferral election under Section 7.4 shall only be counted as Shares used to the extent
they are actually issued. Any Shares related to Grants or Deferred RSUs which terminate by forfeiture, cancellation, or otherwise shall
be available again for grant under this Plan. The Shares available for issuance under this Plan may consist, in whole or in part, of authorized
and unissued Shares, treasury Shares, or Shares reacquired by the Company in any manner.

 

4.3              Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change
in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization,
separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution
of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure,
number of outstanding Shares or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate
event or transaction, the Administrator, in its sole discretion, in order to prevent dilution or enlargement of Directors’ rights
under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan, the number
and kind of Shares subject to outstanding Grants or deferral elections, the Annual Grant Limits, and other value determinations applicable
to outstanding Grants and Deferred RSUs.

 

The Administrator, in its sole discretion, may also
make appropriate adjustments in the terms of any Grants under this Plan to reflect or relate to such changes or distributions and to modify
any other terms of outstanding Grants. The determination of the Administrator as to the foregoing adjustments, if any, shall be conclusive
and binding on Directors under this Plan.

 

Subject to the provisions of Section 6.7 and notwithstanding
anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Administrator may authorize
the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock,
or reorganization upon such terms and conditions as it may deem appropriate.

 

 

 

 

    	 	5	 

     

    

 

Article 5                    Eligibility and Participation

 

5.1               Eligibility. Each Director of the Company shall be eligible to participate in this Plan until the Director is no longer serving
as a non-employee director of the Company.

 

Article 6                    Grants of RSUs

 

6.1               Annual Grants. As of the date of the Company’s Annual Meeting each year, the Company may make a Grant of RSUs to each
Director. The number of RSUs granted to each Director, if any, shall be determined solely at the discretion of the Company, and the Company’s
decision to make an RSU Grant in one year, shall not entitle any Director to RSU Grants in any other year. Except as provided herein,
the RSUs shall remain unvested and forfeitable.

 

6.2               Partial Year Directors. For individuals who become Directors after the date of the Annual Meeting for a year in which an RSU
Grant pursuant to Section 6.1 has been made, such Directors shall receive a pro-rata RSU Grant; the pro-rata number of RSUs made under
such Grant shall equal the number of RSUs granted pursuant to Section 6.1, times a fraction; the numerator of such fraction shall equal
(365 – x) where x = the number of days that have elapsed since the RSU Grant under Section 6.1 for that year was made, and the denominator
of such fraction shall be 365.

 

6.3               Limits on Shares and RSUs. The Administrator shall have the authority to increase the number of RSUs granted to each Director
for a year but in no event shall the amount granted exceed the limits set forth in Article 4 above.

 

6.4               Vesting and Payment of RSUs. Subject to Section 6.7, each Director’s RSUs pursuant to a Grant (including the RSUs of
Directors whose Grants were subject to Section 6.2) shall become vested and non-forfeitable based on the number of Vesting Years that
the Company shall designate for such Grant as of the Grant Date. The Company may determine each year, in its sole discretion, that a different
vesting schedule shall apply to the Grant for that year without regard to the vesting schedule that applies to any prior years’
Grants. Unless deferred pursuant to Article 7 hereof, any RSUs that become vested shall be paid out in Shares as soon as administratively
practicable after the RSUs vest, and such payment shall in no event be made later than March 15th of the year following the
year in which the RSUs vest.

 

6.5               Death or Disability Before Vesting. Subject to Section 6.7, if a Director dies or becomes Disabled while they are a Director,
all RSUs that are forfeitable shall become fully vested and paid as of the date of the Director’s death or Disability.

 

6.6              
Forfeiture of Nonvested RSUs. (a) Subject to subparagraph (b), and Sections 6.5 and 6.7, all RSUs that are forfeitable shall
be forfeited if a Director Terminates their service as a director before the RSUs become vested under Section 6.4.

 

		(b)	Notwithstanding subparagraph (a) hereof, a Director who elects
not to stand for reelection as a Director at the next-following Annual Meeting, shall vest in a pro-rata portion of their outstanding
Grants at the Annual Meeting at which their service as a Director Terminates. For the avoidance of doubt, (i) if such Director’s
service Terminates prior to such Annual Meeting for any reason, the Director shall not be entitled to pro-rata accelerated vesting pursuant
to this Section 6.6(b); and (ii) for purposes of determining the pro-rata number of outstanding RSU Grants that shall vest under this
subparagraph (b), if the applicable Grant provides for multi-year vesting, each Vesting Year’s tranche shall be calculated separately
based on the specific vesting period applicable to such tranche.

 

6.7              
Change in Control of the Company. Notwithstanding any other provision of this Plan to the contrary, the provisions of this
Section 6.7 shall apply in the event of a Change in Control, unless otherwise determined by the Administrator in connection with a Grant
or Deferred RSUs.

 

		(a)	If, upon a Change in Control, a Director receives a new Grant
or other amount which qualifies as a “Replacement Grant” (as defined below), the Award shall continue subject to the terms
of the Replacement Grant.

 

		(b)	If, upon a Change in Control that results in the Company’s
Shares no longer being traded on the Nasdaq or another established securities market and no Replacement Grant is granted to a Director,
the unvested portion of a Grant shall become immediately vested upon the Change in Control.

 

		(c)	If, following a Change in Control, the Company’s Shares
continue to be traded on the Nasdaq or another established securities market, outstanding Grants shall continue in effect and be treated
as Replacement Awards as described in subparagraph (a).

 

 

 

 

 

    	 	6	 

     

    

 

		(d)	Notwithstanding any of subparagraphs (a), (b) or (c) of this Section
6.7, the Administrator may, in its sole discretion, determine that any or all outstanding RSU Grants and Deferred RSUs under this Plan
will be canceled and terminated, and that in connection with such cancellation and termination, the holder of such Grant or Deferred
RSUs may receive for each Share of Common Stock subject to such Grant or Deferred RSU a cash payment (or the delivery of shares of stock,
other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the consideration received
by shareholders of the Company in respect of a Share of Common Stock in connection with such transaction multiplied by the number of
Shares of Common Stock subject to such Grant or Deferred RSUs.

 

		(e)	A grant shall be considered a Replacement Grant if: (i) it has
a value at least equal to the value of the Grant or Deferred RSUs it is replacing as determined by the Administrator in its sole discretion;
(ii) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that
is affiliated with the Company or its successor following the Change in Control; and (iii) its other terms and conditions are not less
favorable to the Director than the terms and conditions of the Grant or Deferred RSUs it is replacing (including the provisions that
would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, the Replacement Grant
may take the form of a continuation of the Grant or Deferred RSUs it is replacing if the requirements of the preceding sentence are satisfied.
The determination of whether the conditions of this Section 6.7 are satisfied shall be made by the Administrator (in place immediately
prior to the Change in Control) in its sole discretion.

 

		(f)	With respect to Grants for which a Deferral Election has been
made under Article 7, such Grants shall vest pursuant to paragraph (a) but the Deferral Election with respect to such Grants shall remain
in place.

 

6.8              
Dividend Equivalents. (a) If, prior to vesting and the payment of any RSUs, the Company declares a cash or stock dividend on
its Shares, then, on the payment date of the dividend, a Director’s RSUs and Deferred RSU Account, as applicable, shall be credited
with dividend equivalents in an amount equal to the dividends that would have been paid to the Director if the Director held one Share
for each RSU.

 

		(b)	The dividend equivalents credited to the Director will be deemed
to be reinvested in additional RSUs (rounded to the nearest whole share) and will be subject to the same terms and conditions as the
RSU which they are attributable and shall vest or be forfeited (if applicable) at the same time as the RSUs to which they are attributable.
Such additional RSUs shall also be credited with additional RSUs as any further dividends are declared.

 

		(c)	Dividend equivalents shall be vested and paid on the same date
that the RSUs to which they are attributable are vested and paid.

 

6.9              
RSU Award Documents. Each RSU Grant under this Article 6 shall be evidenced by an Award Agreement that shall specify the number
of RSUs Granted, the relevant terms that shall govern the RSU Grant, and such other provisions as the Administrator shall determine.

 

 

 

 

 

    	 	7	 

     

    

 

Article 7                    Deferral Elections

 

7.1              
Right to Elect Deferrals. A Director may elect a Deferred Benefit for any Deferral Year if they are a Director at the beginning
of that Deferral Year or they become a Director during that Deferral Year.

 

		(a)	A Deferral Election is valid when a Deferral Election Form is
completed, signed by the electing Director, and received by the Administrator. Deferral Elections are governed by the provisions of this
Article 7.

 

		(b)	Before each Deferral Year’s Election Date, each Director
will be provided with a Deferral Election Form. Under the Deferral Election Form for a single Deferral Year, a Director may elect on
or before the Election Date to defer the receipt of all or part of their Cash Compensation (in 10% multiples) as a Deferred Cash Benefit
for the Deferral Year, that will be earned and payable after the Election Date.

 

		(c)	Before each Deferral Year’s Election Date, a Director may
also elect to defer the receipt of all or part of their Cash Compensation and/or RSU Compensation granted during the Deferral Year (in
10% multiples) as a Deferred RSU Benefit.

 

		(d)	Prior to the Election Date, the Administrator may reject any Deferral
Election Form for any or no reason, including to the extent necessary to comply with any federal tax or securities laws or regulations.
However, the Administrator’s rejection of any Deferral Election Form must be based upon action taken without regard to any vote
of the Director whose Deferral Election Form is under consideration, and the Administrator’s rejections must be made on a uniform
basis with respect to similarly situated Directors. If the Administrator rejects a Deferral Election Form, the Director must be paid
the amounts such Director would then have been entitled to receive if such Director had not submitted the rejected Deferral Election
Form.

 

		(e)	A Director may not revise or revoke a Deferral Election Form after
the Deferral Year begins. Any revocation of a Deferral Election Form before the beginning of the Deferral Year is the same as a failure
to submit a Deferral Election Form. Any writing signed by a Director expressing an intention to revoke their Deferral Election Form and
delivered to the Administrator before the close of business on the relevant Election Date shall constitute a revocation of such form.

 

		(f)	The Plan is unfunded. A Deferred Benefit is at all times a mere
contractual obligation of the Company. The Company will not segregate any funds or assets for Deferred Benefits nor issue any notes or
security for the payment of any Deferred Benefit.

 

		(g)	A Director has no control over Deferred Benefits except according
to their Deferral Election Forms and Beneficiary Designation Forms.

 

		(h)	A Director’s Deferred Cash Account and Deferred RSU Account
are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt
to do so is void. Deferred Benefits are not subject to attachment or legal process for a Director’s debts or other obligations.
Nothing contained in this Plan gives any Director any interest, lien, or claim against any specific asset of the Company. A Director
or their Beneficiary has no rights to receive Deferred Benefits other than as a general creditor of the Company.

 

7.2               Effect of No Election. A Director who has not submitted a valid Deferral Election Form to the Administrator on or before the
relevant Election Date may not defer their Cash Compensation or RSU Compensation for the applicable Deferral Year.

 

7.3               Deferred Cash Benefits.

Deferred Cash Benefits will
be allocated to a Deferred Cash Account for each Director as of the day they would have been paid to such Director but for the applicable
Deferral Election. No interest, earnings or losses shall be credited or accrued on Deferred Cash Benefits for so long as such amounts
are deferred under this Plan.

 

7.4               Deferred RSU Benefits.

Deferred RSU Benefits will be
allocated to a Deferred RSU Account for each electing Director and credited with a number of RSUs pursuant to Sections 2.31 and 6.8, as
applicable. The value of a Deferred RSU Account as of any date shall equal the Fair Market Value of the Shares represented by the RSUs
that are allocated to such Deferred RSU Account on such date. Dividends with respect to Shares underlying Deferred RSU Benefits will be
credited to such Benefits pursuant to Section 6.8.

 

 

 

 

    	 	8	 

     

    

 

Article 8                    Distributions

 

8.1               Time and Form of Payments.

 

		(a)	Deferred Cash Benefits will be distributed in cash and Deferred
RSU Benefits will be distributed in Shares of Common Stock equal to the number of whole RSUs credited to the Director’s Deferred
RSU Account determined as of the distribution date. However, cash will be paid in lieu of fractional RSUs credited to the Director’s
Deferred RSU Account.

 

		(b)	All Deferred Benefits will be paid in a lump sum.

 

		(c)	A Director’s Deferred Benefits, to the extent vested as
applicable, shall be paid as soon as practicable following the date the Director has a Termination.

 

8.2               Death. Upon a Director’s death, their Beneficiary will receive the Beneficiary’s portion of the Director’s
Deferred Cash Account and Deferred RSU Account in a lump sum payment as soon as administratively feasible following the Director’s
death.

 

Article 9                    Hardship Distributions

 

		(a)	At the request of a Director before the Director’s Termination,
a Director’s vested Deferred Benefits under this Plan shall be paid in the event of a Financial Emergency. An accelerated distribution
on account of a Financial Emergency must be limited to the amount determined by the Administrator to be necessary to satisfy the Financial
Emergency plus amounts necessary to pay applicable income taxes and penalties.

 

		(b)	For purposes of an accelerated distribution under this section,
the Deferred RSU Benefit’s value is determined by the value of the Deferred RSU Account, as set out in Section 7.4, at the time
of distribution.

 

		(c)	Distributions under this section must first be made from the Director’s
Deferred Cash Account before accelerating the distribution of any amount attributable to a Deferred RSU Benefit.

 

		(d)	A distribution under this section is in lieu of that portion of
the Deferred Benefit that would have been paid otherwise. A Deferred Cash Benefit is adjusted for a distribution under this section by
reducing the Director’s Deferred Cash Account by the amount of the distribution. A Deferred RSU Benefit is adjusted for a distribution
under this section by reducing the value of the Director’s Deferred RSU Account by the amount of the distribution.

 

Article 10                  Beneficiary Designation

 

Each Director under this Plan may, from time to
time, name a Beneficiary or Beneficiaries (who may be named contingently or successively) who will receive any vested RSU Compensation
or unpaid Deferred Benefit under this Plan in case of the Director’s death before their RSU Compensation or their Deferred Benefits
are paid. Each such designation shall revoke all prior designations by the same Director, shall be in a form prescribed by the Administrator,
and will be effective only when filed by the Director in writing with the Company during the Director’s lifetime. In the absence
of any such Beneficiary designation, benefits remaining unpaid at the Director’s death shall be paid to the default Beneficiary.

 

 

 

 

    	 	9	 

     

    

 

Article 11                  Successors

 

All obligations of the Company under this Plan
with respect to Grants made hereunder shall be binding on any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets
of the Company.

 

Article 12                  Amendment, Modification, Suspension, and Termination

 

12.1            Amendment, Modification, Suspension, and Termination. The Board may at any time and from time to time, alter, amend, modify,
suspend, or terminate this Plan in whole or in part; provided, however, that, without the prior approval of the Company’s shareholders,
no such amendment shall increase the number of Shares that may be granted to any Director, except as otherwise described in this Plan,
or increase the total number of Shares that may be granted under the Plan. In addition, any amendment of the Plan must comply with the
rules of the Nasdaq and no material amendment of this Plan shall be made without shareholder approval if shareholder approval is required
by law, regulation, or stock exchange rule.

 

12.2             Plan Termination. Except for a termination of the Plan caused by the determination of the Board that the laws upon which the
Plan is based have changed in a manner that negates the Plan’s objectives, this Plan may not be altered, amended, suspended, or
terminated without the majority consent of all Directors who are Directors if that action would result either in a distribution of all
Deferred Benefits in any manner other than as provided in this Plan or that would result in immediate taxation of Deferred Benefits to
Directors.

 

Upon termination of the Plan, all vested benefits
shall be paid upon the earliest to occur of the following events:

 

		1.	Termination and liquidation of the Plan within 12 months of a qualifying corporate dissolution or bankruptcy;
	 	 	 
		2.	Termination and liquidation of the Plan pursuant to irrevocable action of the Company within 30 days before,
or 12 months after, a Change in Control that qualifies as a distribution event under Code Section 409A;
	 	 	 
		3.	A termination and liquidation of the Plan (i) that does not occur proximate to a downturn in the Company’s
financial condition; (ii) where all plans required to be aggregated with the Plan are terminated; (iii) where no liquidation payments
are made for at least 12 months after the Plan is terminated; (iv) where all payments are made by 24 months after the Plan is terminated;
and (v) where the Company does not adopt a new plan of the same type, for at least three years after the Plan is terminated; or
	 	 	 
		4.	The occurrence of an applicable distribution event pursuant to the other terms of the Plan.

 

Distributions made under this Section 12.2 shall
be paid in the form of a lump sum.

 

12.3            Adjustment of Grants Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Administrator may make adjustments
in the terms and conditions of, and the criteria included in, Grants and Deferred RSUs in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4.3 hereof) affecting the Company or the financial statements of the Company
or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines that such adjustments are
appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available
under this Plan. The determination of the Administrator as to the foregoing adjustments, if any, shall be conclusive and binding on Directors
under this Plan.

 

12.4            Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Plan shall be amended, to
take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan to any present or future
law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), and to the administrative regulations
and rulings promulgated thereunder. By accepting a Grant under this Plan, a Director agrees to any amendment made pursuant to this Section
12.4 to any Grant made under the Plan without further consideration or action.

 

 

 

 

    	 	10	 

     

    

 

Article 13                  General Provisions

 

13.1             Forfeiture Events. Any Shares, including Shares represented by RSUs, issuable under this Plan will be subject to recoupment
in accordance with any clawback policy that the Company currently has in effect, or is required to adopt or modify, pursuant to the listing
standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required
by the Dodd-Frank Wall Street Reform and Consumer Protection Act or the Sarbanes-Oxley Act of 2002, or other applicable law (“Clawback
Policy”). In addition, the Committee or the Board may impose such clawback, recovery or recoupment provisions on any Shares
payable under this Plan as the Administrator determines necessary or appropriate, including but not limited to a reacquisition right in
respect of previously acquired Shares or other cash or property.

 

13.2             Legend. The certificates for Shares may include any legend which the Administrator deems appropriate to reflect any restrictions
on transfer of such Shares.

 

13.3             Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the
feminine, the plural shall include the singular, and the singular shall include the plural.

 

13.4             Non-Assignability. Deferred Benefits may not be assigned by a Director or Beneficiary.

 

13.5             Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.

 

13.6            Requirements of Law. The granting of RSUs and issuance of Shares under this Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

13.7             Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this
Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and (b)
completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental
body that the Company determines to be necessary or advisable.

 

13.8             Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority shall not have
been obtained.

 

13.9             Investment Representations. The Administrator may require any individual receiving Shares under this Plan to represent and
warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute
such Shares.

 

13.10          Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares,
the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of
any stock exchange.

 

13.11          Unfunded Plan. Directors shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or
its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan,
and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship
between the Company and any Director, beneficiary, legal representative, or any other individual. To the extent that any individual acquires
a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under this Plan, such right shall be no greater
than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be
made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or
separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set
forth in this Plan.

 

13.12          Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the
Board or Administrator to adopt such other compensation arrangements as it may deem desirable for any Director.

 

13.13          No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the
Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations,
or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part
of its business or assets; or, (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which
such entity deems to be necessary or appropriate.

 

13.14          No Right to Continued Board Membership. Nothing in this Plan shall confer on any Director the right to continued service as
a member of the Board or in any other capacity.

 

 

 

 

    	 	11	 

     

    

 

13.15          Governing
Law. The Plan and each Grant, RSU, and Deferred Benefit hereunder shall be governed by the laws of the State of Illinois, without
regard to choice-of-law principles. The Directors consent to personal and exclusive jurisdiction and venue Cook County in the State of
Illinois. Any controversy or claim arising out of or relating to (i) a Director’s service with the Company or a Subsidiary or Affiliate
and/or (ii) the Plan, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in
accordance with its Employment Arbitration Rules before a single arbitrator in Chicago, Illinois, and judgment on the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof. The Company and the Director will each be responsible for
their own attorneys’ fees and expenses incurred in connection with any such arbitration. The decision arrived at by the arbitrator
shall be binding upon all parties to the arbitration and no appeal shall lie therefrom, except as provided by the Federal Arbitration
Act. These arbitration procedures are intended to be the exclusive method of resolving any claim or dispute arising out of or related
to this Plan, including the applicability of this Section; provided, however, that any party seeking injunctive relief in connection
with a breach or anticipated breach of the Plan will do so in a state or federal court of competent jurisdiction within the Northern
District of the State of Illinois.

 

13.16          Code Section 409A. Notwithstanding any other provision of this Plan, it is intended that all benefits under this Plan that
are subject to Code Section 409A, including vested RSU Compensation that has been deferred pursuant to Article 7, shall satisfy the provisions
of Code Section 409A, and this Plan shall be interpreted and administered, as necessary, to comply with such provisions.

 

13.17           Notices. Notices and elections under this Plan must be in writing. A notice or election is deemed delivered if it is delivered
personally or if it is mailed by registered or certified mail to the person at their last known business address.

 

13.18          Waiver. The waiver of a breach of any provision in this Plan does not operate as and may not be construed as a waiver of any
later breach.

 

As evidence of its adoption of this Plan, the Company has caused this document to be executed by its duly authorized officer the 31st
day of August, 2022.

 

  

	 	LIFEWAY FOODS, INC.
	 	 
	 	 
	 	By:
	 	Name: Julie Smolyansky
	 	Title: CEO, President and Secretary
	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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