Exhibit 10.5
 
SECOND AMENDED AND RESTATED SMART BALANCE, INC.
STOCK AND AWARDS PLAN
 
Section 1.             Purpose and Construction.
(a)           Purpose.  This Amended and Restated Smart Balance, Inc. Stock and
Awards Plan (the “Plan”) has three complementary purposes: (a) to promote the
long-term growth and financial success of Smart Balance, Inc. (the “Company”);
(b) to induce, attract and retain outstanding officers, employees, consultants
and advisors; and (c) to increase shareholder value. The Plan is designed to
accomplish these goals by providing Participants with incentives to increase
shareholder value by offering the opportunity to acquire shares of the Company’s
common stock.
 
(b)           Construction.  Capitalized terms used in this Plan shall have the
meanings set forth in Section 12, unless the context clearly requires otherwise.
Awards made under this Plan and the accompanying Award Agreements are intended
to (i) be performance based compensation which satisfies the requirements of
Code Section 162(m)(4)(C) and (ii) except for Awards of Restricted Stock Units,
not constitute non-qualified deferred compensation for purposes of Code Section
409A.  The Committee shall have the authority to interpret and apply the terms
of the Plan or any Award Agreement consistent with such intentions.
 
(c)           Deemed Amendment.  Any non-complying provision of the Plan and any
Award Agreement issued under the Plan shall be deemed amended to the extent
necessary to preserve these intended tax consequences.  Nothing in this Plan
shall be construed, interpreted or applied in any way that would conflict with
any provision of the Company’s Restated Certificate of Incorporation.
 
(d)           Effective Date and Shareholder Approval.  This Plan became
effective on May 21, 2007.  The Plan was amended and restated by action of the
Board of Directors effective August 7, 2008 in order to bring the Plan into full
compliance with the requirements of Section 409A of the Code and the final
Treasury Regulations issued thereunder and further amended and restated in the
form of this Second Amended and Restated Plan by action of the Board of
Directors to be effective May 21, 2007.
 
Section 2.             Shares Reserved Under this Plan.
(a)           Plan Reserve.  An aggregate of 12,150,000 Shares are reserved for
issuance under this Plan, provided that no more that 1,930,000 Shares may be
awarded as restricted stock or restricted stock units.  The maximum number of
Shares that may be the subject of Awards (Options, Restricted Stock or
Restricted Stock Units) granted to a Participant in any calendar year may not
exceed 3,000,000 Shares. The number of Shares covered by an Award under the Plan
shall be counted on the date of grant of such Award against the number of Shares
available for granting Awards under the Plan.  Any Shares delivered pursuant to
the exercise of an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury shares.  Under no circumstances, may any Award be
made effective prior to the date that such Award is approved by the Committee.

 
 

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(b)           Share Adjustment.  In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
(collectively referred to as “Events”) affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee may, in such manner as it may
deem equitable, adjust any or all of: (i) the number and type of Shares subject
to the Plan and which thereafter may be made the subject of Awards under the
Plan; (ii) the number and type of Shares subject to outstanding Awards; and
(iii) the exercise price with respect to any Option (collectively referred to as
“Adjustments”); provided, however, that Awards subject to grant or previously
granted to Participants under the Plan at the time of any such Event shall be
subject only to such Adjustments as shall be necessary to maintain the
proportionate interest of the Participants and preserve, without exceeding, the
value of such Awards; and provided further that the number of Shares subject to
any Award shall always be a whole number.  All such adjustments shall be made so
that the adjustments do not result in the grant of a new Award for purposes of
Section 409A of the Code or cause the Company to record a new compensation
charge for financial reporting purposes.
 
(c)           Replenishment of Shares Under this Plan.  The number of Shares
reserved for issuance under this Plan shall be reduced only by the number of
Shares actually delivered in payment or settlement of Awards, including
Restricted Stock and Restricted Stock Units.  If an Award lapses, expires,
terminates or is cancelled without the issuance of Shares under the Award, then
the Shares subject to, reserved for or delivered in payment in respect of such
Award may again be used for new Awards under this Plan.  If Shares are issued
under any Award and the Company subsequently reacquires them pursuant to rights
reserved upon the issuance of the Shares, or if Shares, including previously
owned Shares or newly issued shares, are delivered by a Participant to the
Company in satisfaction of any employment or income tax withholding obligation
or in payment of the exercise price of an Award, then the Shares subject to,
reserved for or delivered in payment in respect of such Award may again be used
for new Awards under this Plan.
 
Section 3.             Plan Administration and Operation.
(a)           Administrative Authority.  Subject to any limitations or
restrictions under the Company’s Restated Certificate of Incorporation, the Plan
shall be administered by, and Committee shall have full authority to administer
this Plan, including the authority to (i) interpret the provisions of this Plan,
(ii) prescribe, amend and rescind rules and regulations relating to this Plan,
(iii) correct any defect, supply any omission, or reconcile any inconsistency in
any Award or agreement covering an Award in the manner and to the extent it
deems desirable to carry this Plan into effect, and (iv) make all other
determinations necessary or advisable for the administration of this Plan.

 
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(b)           Awards.  The Committee has full authority to designate from time
to time which Participants shall receive Awards under this Plan and the nature
and scope of such Awards. The Committee may consider such factors as it deems
pertinent in selecting whether a Participant will receive any Award(s) and in
determining the types and amounts of Awards and in setting any Performance
Goals, vesting periods, or other conditions or limitations. In making such
selection and determination, factors the Committee may consider include, but
will not be limited to: (a) the Company’s financial condition; (b) anticipated
profits for the current or future years; (c) the Participant’s length of service
or experience; and (d) other compensation that the Company provides or has
agreed to provide to the Participant. The Committee’s decision to provide a
Participant with an Award in any year will not require the Committee to
designate such person to receive an Award in any other year.
 
(c)           Committee Action and Delegation.  A majority of the members of the
Committee will constitute a quorum, and a majority of the Committee’s members
present at a meeting at which a quorum is present must make all determinations
of the Committee. The Committee may make any determination under this Plan
without notice or meeting of the Committee by a writing that a majority of the
Committee members have signed. To the extent applicable law permits, the Board
may delegate to another committee of the Board or the Committee may delegate to
specified officers of the Company any or all of the authority and responsibility
of the Committee.  If such a delegation has been made, then all references to
the Committee in this Plan include such other committee or one or more officers
to the extent of such delegation.  Except to the extent prohibited by applicable
law, the Committee may also authorize any one or more of their number or the
Secretary or any other officer of the Company to execute and deliver documents
previously approved by the Committee.
 
(d)           Review of Committee Decisions.  All Committee determinations are
final and binding upon all interested parties and no reviewing court, agency or
other tribunal shall overturn a decision of the Committee unless it first
determines that the Committee acted in an arbitrary and capricious manner with
respect to such decision.
 
(e)           Committee Indemnification. No member of the Committee will be
liable for any act done, or determination made, by the individual in good faith
with respect to the Plan or any Award. The Company will indemnify and hold
harmless all Committee members to the maximum extent that the law and the
Company’s bylaws and Restated Certificate of Incorporation permit.
 
Section 4.             Discretionary Awards.
Subject to the terms of this Plan, including Section 7 below, the Committee has
full power and authority to determine: (a) the type or types of Awards to be
granted to each Participant (i.e., Options, Restricted Stock and/or Restricted
Stock Units); (b) the number of Shares with respect to which an Award is granted
to a Participant, if applicable; and (c) any other terms and conditions of any
Award granted to a Participant. Awards under this Plan may be granted either
alone or in addition to, in tandem with, or in substitution for any other Award
(or any other award granted under another plan of the Company or any Company
Entity). The Committee may grant multiple Awards and different types of Awards
(e.g., Options, Restricted Stock and/or Restricted Stock Units) to individual
Participants at the same time.  All awards shall be evidenced by written Awards
Agreements.
 
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Section 5.             Options.

(a)           Exercise Price of Options.  For each Option, the Award Agreement
will specify (i) the exercise price, which may not be less than the Fair Market
Value of the Shares subject to the Option on the Grant Date, and (ii) the method
or methods by which a Participant may pay the exercise price or satisfy his or
her Tax Obligation with respect to such Option, including net or cashless
exercise procedures.
 
(b)           Terms and Conditions of Options.  The Award Agreement shall also
set forth all other terms and conditions of the Option, including the term of
the Option, any vesting schedule and any Performance Goals.  Subject to the
terms of the Plan, an Option will be exercisable at such times and subject to
such conditions as the Committee specifies in the Award Agreement, including,
but not limited to, any Performance Goals. Notwithstanding the preceding, each
Option must terminate no later than ten (10) years after the Grant Date.
 
Section 6. Restricted Stock and Restricted Stock Units.
(a)           Subject to the terms of the Plan, each Award of Restricted Stock
and/or Restricted Stock Units may be subject to such terms and conditions as the
Committee determines appropriate, including, without limitation, (i) vesting
schedules, (ii) Performance Goals, and (iii) the method or methods by which a
Participant may satisfy his or her Tax Obligation with respect to such Award,
including reducing the number of Shares delivered to the Participant.  The
foregoing notwithstanding, each award of Restricted Stock and/or Restricted
Stock Units Option (i) shall be payable only in Shares and (ii) must be subject
to a substantial risk of forfeiture (not withstanding the fulfillment of any
Performance Goal) for a period of at least one (1) year.
 
(b)           Awards of Performance-Based Restricted Stock may be granted to
certain Participants that are employed at a level of Vice President or higher.
Each Award of Restricted Stock that is Performance-Based Restricted Stock shall
specify the number of Shares of Performance-Based Restricted Stock to which it
relates, the Performance Goals which must be satisfied in order for the such
Shares to vest and restrictions thereon to lapse, and the Performance Cycle
within which such Performance Goals must be satisfied, and may require that an
appropriate legend be placed on Share certificates.
 
(c)           The Performance Goals with respect to a Performance Cycle shall be
established in writing by the Committee by the earlier of (x) the date on which
a quarter of the Performance Cycle has elapsed or (y) the date which is ninety
(90) days after the commencement of the Performance Cycle, and in any event
while the performance relating to the Performance Goals remain substantially
uncertain.
 
(d)           Effect of Certain Events.  At the time of the granting of an Award
of Performance-Based Restricted Stock, or at any time thereafter, in either case
to the extent permitted under Section 162(m) of the Code and the regulations
thereunder without adversely affecting the treatment of the Award of
Performance-Based Restricted as performance-based compensation which satisfies
the requirements of Section 162(m)(4)(C), the Committee may provide for the
manner in which performance will be measured against the Performance Goals (or
may adjust the Performance Goals) to reflect losses from discontinued
operations, extraordinary, unusual or nonrecurring gains and losses, the
cumulative effect of accounting changes, acquisitions or divestitures, core
process redesign, structural changes/outsourcing, foreign exchange impacts, the
impact of specified corporate transactions, accounting or tax law changes and
other extraordinary or nonrecurring events.

 
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(e)           Determination of Performance.  Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Award of
Performance-Based Restricted Stock that is made to an Eligible Employee who is
subject to Section 162(m) of the Code, the Committee shall certify in writing
that the applicable Performance Goal has been satisfied to the extent necessary
for such Award to qualify as performance-based compensation in accordance with
Section 162(m)(4)(C) of the Code.  An Award Performance-Based Restricted Stock
may be reduced at any time before payment or lapsing of restrictions.
 
Section 7.             Effect of Termination of Employment.
(a)           Award Limitations.  Subject to the limitations set forth in
Section 7(b) below, the Committee shall, in its discretion, determine the
consequences under any outstanding Award(s) if the Participant has a Separation
From Service for any reason. The restrictions under Section 7(b) and any other
limitations imposed by the Committee under this Section 7(a) shall be included
in the Award Agreement.  Unless otherwise stated under the Award Agreement, if a
Participant has a Separation From Service, all non-vested Options, Restricted
Stock and Restricted Stock Units shall immediately be forfeited and all vested
Options shall terminate and be forfeited if not exercised within ninety (90)
days of such Separation From Service.  The foregoing notwithstanding, in the
event that the Separation From Service is due to the Participant’s death or
Disability, all non-vested Options shall vest upon such death or termination and
all Options shall terminate and be forfeited if not exercised within one (1)
year of the Separation From Service or prior to the expiration of the term of
the Option, if sooner.  When a Participant has a Separation From Service, the
Committee, in its sole discretion, is authorized to (i) accelerate vesting of
non-vested Awards, (ii) grant Participant’s longer periods to exercise Options
following a Separation From Service, consistent with the requirements of Treas.
Reg. § 1.409A-1(b)(5)(v)(C), or (iii) allow continued vesting of Options,
Restricted Stock or Restricted Stock Units, on such terms and conditions as the
Committee may deem reasonable and appropriate; provided however, that the
Committee may not accelerate Awards of Performance-Based Restricted Stock upon a
Separation From Service that is not due to death or Disability or occurs upon a
Change of Control.
 
(b)           For Cause Termination.  Notwithstanding any provision in this Plan
or in any Award Agreement, if a Participant’s employment is terminated by the
Company for Cause, then all Awards previously granted to such Participant shall
immediately be forfeited retroactively to the date the Participant first engaged
in the conduct that was the basis for such termination.
 
Section 8.             Non-Transferability.
(a)           Awards.  Except as otherwise provided in this Section or as the
Committee otherwise provides in the Award Agreement, Awards granted under this
Plan are not transferable by a Participant, other than by will or the applicable
laws of descent or distribution.  During the lifetime of the Participant,
Options may be exercised only by the Participant.  Following the death of a
Participant, Options may be exercised, consistent with the terms of the Option,
by the Participant’s legal representative or a transferee of such Participant by
will or applicable law of descent or distribution.

 
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(b)           Shares.  Shares received in connection with an Award of Restricted
Stock are not transferable until the applicable restrictions lapse.  Shares
received in connection with other Awards are transferable, subject to any
restriction on transfer imposed by applicable securities laws.
 
Section 9.             Amendment and Termination of the Plan and Awards.
(a)           Term of Plan.  This Plan will terminate on, and no Award may be
granted after, the ten (10) year anniversary of the Effective Date, unless the
Board earlier terminates this Plan pursuant to Section 9(b).
 
(b)           Termination and Amendment.  The Board may amend, alter, suspend,
discontinue or terminate this Plan at any time, subject to shareholder approval
if: (i) shareholder approval of such amendment(s) is required under the Exchange
Act; (ii) shareholder approval of such amendment(s) is required under the
listing requirements of principal securities exchange or market on which the
Shares are then traded (to maintain the listing or quotation of the Shares on
that exchange); or (iii) the amendment will: [a] materially increase any number
of Shares specified in Section 2(a) (except as permitted by Section 2(b)); [b]
shorten the restriction periods specified in Section 6; or [c] modify the
provisions of Section 9(e).
 
(c)           Amendment, Modification or Cancellation of Awards.  Except as
provided in Section 9(e) and subject to the requirements of this Plan, the
Committee may waive any restrictions or conditions applicable to any Award or
the exercise of the Award, and the Committee may modify, amend, or cancel any of
the other terms and conditions applicable to any Awards by mutual agreement
between the Committee and the Participant or any other persons as may then have
an interest in the Award, so long as any amendment or modification does not
increase the total number of Shares issuable under this Plan (except as
permitted by Section 2(b)), but the Committee need not obtain the Participant’s
(or other interested party’s) consent for the cancellation of an Award pursuant
to the provisions of Section 2(b).  Notwithstanding anything to the contrary in
this Plan, the Committee shall have sole discretion to alter the selected
Performance Goals.  The foregoing notwithstanding, no modification, extension,
amendment or cancellation of any terms and conditions of any Award shall be made
to the extent such action would violate the requirements of Section 409A of the
Code or which would result in such modification, extension, amendment or
cancellation being treated as a new Option grant pursuant to Treas. Reg. §
1.409A-1(b)(5)(v).
 
(d)           Survival of Committee Authority and Awards.  Notwithstanding the
foregoing, the authority of the Committee to administer this Plan and modify or
amend an Award shall extend beyond the date this Plan is terminated. In
addition, termination of this Plan will not affect the rights of Participants
with respect to Awards previously granted to them, and all unexpired Awards will
continue in force and effect after termination of this Plan except as they may
lapse or be terminated by their own terms and conditions.
 
(e)           Repricing Prohibited.  Notwithstanding anything in this Plan to
the contrary, and except for the adjustments provided in Section 2(b), neither
the Committee nor any other person may decrease the exercise price for any
outstanding Option granted under this Plan after the date of grant nor allow a
Participant to surrender an outstanding Option granted under this Plan to the
Company as consideration for the grant of a new Option with a lower exercise
price.

 
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Section 10.           Change of Control.
To the extent not prohibited under the Restated Certificate of Incorporation and
except to the extent otherwise provided in the applicable Award Agreement, in
the event of a Change of Control, the following rules shall apply.
 
(a)           Options.  All unvested Options shall vest and become fully
exercisable upon the occurrence of a Change of Control without regard to any
Performance Goal or vesting schedule set forth in the applicable Award
Agreement;
 
(b)           Restricted Stock.  All unvested Restricted Stock shall vest and
cease to be subject to any substantial risk of forfeiture upon the occurrence of
the Change of Control without regard for any Performance Goal or vesting
schedule set forth in the applicable Award Agreement; and
 
(c)           Restricted Stock Units.  All unvested Restricted Stock Units shall
vest and be converted into Shares upon the occurrence of the Change in Control
without regard for any Performance Goal or vesting schedule set forth in the
applicable Award Agreement.
 
Section 11.           General Provisions.
(a)           Other Terms and Conditions.  The grant of any Award under this
Plan may also be subject to such other provisions or include other tandem rights
or features (whether or not applicable to the Award awarded to any other
Participant) as the Committee determines appropriate.  The foregoing
notwithstanding, no Award shall include any additional deferral feature or other
provision that would cause the Award to be subject to Section 409A of the Code.
 
(b)           No Fractional Shares.  No fractional Shares or other securities
may be issued or delivered pursuant to this Plan, and the Committee may
determine whether cash, other securities or other property will be paid or
transferred in lieu of any fractional Shares or other securities, or whether
such fractional Shares or other securities or any rights to fractional Shares or
other securities will be canceled, terminated or otherwise eliminated.
 
(c)           Requirements of Law.  The granting of Awards under this Plan and
the issuance of Shares in connection with an Award are subject to all applicable
laws, rules and regulations and to such approvals by any governmental agencies
or national securities exchanges as may be required. Notwithstanding any other
provision of this Plan or any Award Agreement, the Company has no liability to
deliver any Shares under this Plan or make any payment unless such delivery or
payment would comply with all applicable laws and the applicable requirements of
any securities exchange or similar entity.
 
(d)           Governing Law.  This Plan, and all agreements under this Plan,
should be construed in accordance with and governed by the laws of the State of
Delaware, without reference to any conflict of law principles. Any legal action
or proceeding with respect to this Plan, any Award or any Award Agreement, or
for recognition and enforcement of any judgment in respect of this Plan, any
Award or any Award Agreement, may only be brought and determined in a court
sitting in the County of Bergen, or the Federal District Court for the Third
District of New Jersey sitting in Third District, in the State of New Jersey.

 
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(e)           Severability.  If any provision of this Plan or any Award
Agreement or any Award (i) is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person or Award, or (ii) would
disqualify this Plan, any Award Agreement or any Award under any law the
Committee deems applicable, then such provision should be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of this Plan, Award Agreement or Award, then such provision should be
stricken as to such jurisdiction, person or Award, and the remainder of this
Plan, such Award Agreement and such Award will remain in full force and effect.
 
(f)           Other Arrangements.  Nothing contained in the Plan shall prevent
the Company or any Company Entity from adopting or continuing in effect other or
additional compensation arrangements for Participants, and such arrangements may
be either generally applicable or applicable only in specific cases.
 
(g)           No Right to Remain Employed.  The grant of an Award to a
Participant pursuant to the Plan shall confer no right on such Participant to
continue as an officer, employee, consultant, advisor or other similar position
relative to the Company or any Company Entity. Except for rights accorded under
the Plan, Participants shall have no rights as holders of Shares as a result of
the granting of Awards hereunder.
 
Section 12.           Definitions.
(a)           “Award” means any grant of Options, Restricted Stock or Restricted
Stock Units under this Plan.
 
(b)           “Award Agreement” means a written agreement, in such form
(consistent with the terms of this Plan) as approved by the Committee.
 
(c)           “Board” shall mean the Board of Directors of the Company.
 
(d)           “Cause” means with respect to a Participant any of the following
as determined by the Board, in its sole discretion, (a) fraud or intentional
misrepresentation, (b) embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any Company Entity, (c) acts or omissions that
are in bad faith or constitute gross negligence, or willful or reckless
misconduct, or (d) conviction, plea of guilty or nolo contendere, or judicial
determination of civil liability, based on a federal or state felony or serious
criminal or civil offense.
 
(e)           “Change of Control” means the occurrence of any of the following:
events with respect to the Company:
 
a.      any Person (other than an Exempt Person) acquires securities of the
Company representing fifty percent (50%) or more of the combined voting power of
the Company’s then outstanding voting securities;

 
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b.      any Person acquires, during the twelve (12) month period ending on the
date of the most recent acquisition, securities of Company representing thirty
percent (30%) of Company’s then outstanding voting securities;
 
c.      a majority of the members of the  Board is replaced during any twelve
(12) month period by directors whose appointment or election is not endorsed by
a majority of the members of the Board serving immediately prior to such
appointment or election; or
 
d.      any Person, during the twelve (12) month period ending on the date of
the most recent acquisition, acquires assets of Company having a total gross
fair market value equal to or more than forty percent (40%) of the total gross
fair market value of Company’s assets immediately before such acquisition or
acquisitions;
 
but only if the applicable transaction otherwise constitutes a “change in
control event” for purposes of Section 409A of the Code and Treas. Reg.
§1.409A-3(i)(5).
 
(f)           “Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted by applicable regulations, rulings,
notices and other similar guidance. Any reference to a specific provision of the
Code includes any successor provision and any guidance issued under such
provision.
 
(g)          “Committee” means the Compensation Committee of the Board or any
subcommittee thereof.
 
(h)          “Common Stock” means the $.0001 par value common stock of the
Company.
 
(i)           “Company” shall mean Smart Balance, Inc., a Delaware corporation,
together with any successor thereto.
 
(j)           “Company Entity” means a corporation or other entity in which the
Company holds a controlling interest under Treas. Reg. § 1.414(c)-2(b)(2)(i),
but determined by applying the phrase “at least 50 percent” in the place of the
phrase “at least 80 percent” each place that it appears in such Treasury
Regulation or Section 1563(a) of the Code  and each other entity so designated
by the Committee as an Affiliate for “legitimate business reasons” (within the
meaning of Treas. Reg. § 1.409A-1(b)(5)(iii)(E)) in which the Company holds a
controlling interest under Treasury Regulation §1.414(c)-2(b)(2)(i), but
determined by applying the phrase “at least 20 percent” in the place of the
phrase “at least 80 percent” in  each place it appears in such Treasury
Regulation or Section 1563(a) of the Code.
 
(k)           “Disability” means a determination by the Company to terminate the
service relationship between the Company and all Company Entities and a
Participant based on the inability of a Participant to perform a material
portion of his or her duties and responsibilities on behalf of the Company or a
Company Entity due to a physical or mental condition that is expected to last
indefinitely.
 
(l)           “Effective Date” means May 21, 2007.

 
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(m)         “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time, and as interpreted by applicable regulations,
rulings, notices and other similar guidance. Any reference to a specific
provision of the Exchange Act includes any successor provision and any guidance
issued under such provision.
 
(n)          “Fair Market Value” shall mean with respect to a Share, for
purposes of determining the minimum exercise price of an Option on the Grant
Date or otherwise, (i) if the Shares are readily tradable on an established
securities market, the closing price of a Share on such market on the Grant Date
or (ii) if the Shares are not readily tradable on an established securities
market, the value determined by the Committee as of the Grant Date through the
reasonable application of a reasonable valuation method and otherwise in
accordance with Treas. Reg. § 1.409A-1(b)(5)(iv)(B).
 
(o)          “Grant Date” means the date on which all corporate action required
to duly authorize and effect the grant of the Award is first completed or the
first date on which all conditions precedent to the effectiveness of the Award
are fully satisfied, if later.
 
(p)          “Option” shall mean the right to purchase Shares at a stated price
in accordance with the terms of this Plan and the underlying Award Agreement.
 
(q)          “Participant” shall mean a permanent full-time employee (defined as
at least 32 hours per week) or director of the Company or any Company Entity and
who enters into a written Award Agreement with the Company. Only Participants
shall be entitled to receive Awards under this Plan.
 
(r)           “Performance Cycle” means a time period of not less than one (1)
and not more than five (5) years as specified by the Committee at the time
Performance Awards are granted during which the performance of the Company will
be measured.
 
(s)           “Performance Goals” means any goals the Committee establishes that
relate to one or more of the following with respect to the Company or any one or
more Company Entities or other business units: revenue; cash flow; net cash
provided by operating activities; net cash provided by operating activities less
net cash used in investing activities; cost of goods sold; ratio of debt to debt
plus equity; profit before tax; gross profit; net profit; gross sales; net
sales; product units sold; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; Fair Market Value of Shares;
basic earnings per share; diluted earnings per share; return on shareholder
equity; average accounts receivable (calculated by taking the average of
accounts receivable at the end of each month); average inventories (calculated
by taking the average of inventories at the end of each month); return on
average total capital employed; return on net assets employed before interest
and taxes; economic value added; and/or return on year-end equity.
 
(t)           “Performance-Based Restricted Stock” means Awards of Restricted
Stock that are contingent upon the attainment of specified Performance Goals
within the Performance Cycle and that are subject to the terms and conditions
provided in Section 6(b)-(e) hereof.
 
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(u)          “Plan” shall mean the Amended and Restated Smart Balance, Inc.
Incentive Stock and Awards Plan, as set forth herein and as amended from time to
time.
 
(v)          “Restricted Stock” means Shares that are issued to a Participant
under this Plan and subject to a risk of forfeiture and/or restrictions on
transfer that constitute a substantial risk of forfeiture for purposes of
Section 83 of the Code and that may lapse upon the achievement or partial
achievement of Performance Goals during the period specified by the Committee
and/or upon the completion of a period of service, as established by the
Committee and reflected in the applicable Award Agreement.
 
(w)         “Restricted Stock Units” mean the right to receive Shares and/or
Restricted Stock at a future date, subject to the completion of such Performance
Goals and/or upon the completion of a period of service, as the Committee shall
establish as part of the Award Agreement.  Prior to the achievement of such
Performance Goals and/or upon the completion of a period of service, the
Participant shall have no rights with respect to such Restricted Stock Units,
except as set forth in the underlying Award Agreement. Each Restricted Stock
Unit shall correspond and relate to one Share under this Plan.
 
(x)           “Share” means a share of Common Stock.
 
(y)          “Separation From Service” shall mean with respect to an employee
the termination of the employee’s employment with the Company and all Company
Entities, provided that, notwithstanding such termination of the employment
relationship between the employee and the Company and all Company Entities, the
employee shall not be deemed to have had a Separation from Service where it is
reasonably anticipated that the level of bona fide services that the employee
will perform (whether as an employee or independent contractor) following such
termination for the Company and all Company Entities would be twenty percent
(20%) or more of the average level of bona fide services performed by the
employee (whether as an employee or independent contractor) for the Company and
all Company Entities over the immediately preceding thirty-six (36) month period
(or such lesser period of actual service).  In such event, Separation from
Service shall mean the permanent reduction of the level of bona fide services to
be performed by the employee (whether as an employee or independent contractor)
to a level that is less than twenty percent (20%) of the average level of bona
fide services performed by the employee (whether as an employee or independent
contractor) during the thirty-six (36) month period (or such lesser period of
actual service) immediately prior to the termination of the employee’s
employment relationship.  A Separation from Service shall not be deemed to have
occurred if the employee is absent from active employment due to military leave,
sick leave, or other bona fide leave of absence if the period of such leave does
not exceed the greater of (i) six months or (ii) the period during which the
Employee’s right to reemployment by the Company or any Company Entity is
provided either by statute or contract.  “Separation of Service” with respect to
a consultant or advisor who is an independent contractor with respect to the
Company for income and employment tax purposes means a good-faith and complete
termination of the service relationship with the consultant or advisor at a time
when there is no reasonable expectation that the consultant or advisor will
provide further services in the future either as an independent contractor or
employee.

 
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(z)          “Tax Obligation” means with respect to any period an amount equal
to the total obligation of the Company to withhold and deposit federal, state or
local employment and income taxes with respect to an Award.

 
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