**EXHIBIT 10.1**

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**HANOVER FOODS CORPORATION**

2003 STOCK OPTION PLAN

| **1.**  | **Purpose of Plan** |
|--------------|---------------------|

The purpose of this 2003 Stock Option Plan (the "Plan") is to provide additional incentive to Eligible Employees (as hereafter defined) of Hanover Foods Corporation, a Pennsylvania corporation (the "Company"), by encouraging them to invest in shares of the Company's Class B common stock, par value $25.00 per share  ("Common Stock"), and thereby acquire a proprietary interest in the Company and an increased personal interest in the Company's continued success and progress.

| **2.** | **Aggregate Number of Shares** |
|--------|--------------------------------|

200,000 shares of the Company's Common Stock shall be the aggregate number of shares which may be issued under this Plan.  Notwith­standing the foregoing, in the event of any change in the outstanding shares of the Common Stock of the Company by reason of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, transfer of assets, reorganization, conversion or what the Committee (defined in Section 4(a)), deems in its sole discretion to be similar circumstances, the aggregate number and kind of shares which may be issued under this Plan shall be appropriately adjusted in a manner determined in the sole discretion of the Committee.  Reacquired shares of the Company's Common Stock, as well as unissuedshares, may be used for the purpose of this Plan.  Common Stock of the Company subject to options which have terminated unexercised, either in whole or in part, shall be available for future options granted under this Plan.

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| **3.** | **Class of Persons Eligible    to Receive Options** |
|--------|-----------------------------------------------------|

All Eligible Employees (as hereafter defined)    are eligible to receive an option or options under this Plan. The term “Eligible    Employees” refers to all full-time employees of the Company and of    any present or future Company parent or sub­sidiary corporation who    have been employed for at least one year, excluding John A. Warehime and    excluding any employee who is represented by a collective bargaining agent.    The individuals who shall, in fact, receive an option or options shall be    selected by the Committee (as defined in Section 4(a) hereof), in its sole    discretion, except that no option may be issued to John A. Warehime. No individual    may receive options under this Plan for more than 5% of the total number    of shares of the Company's Common Stock authorized for issuance under thisPlan.

| **4.**  | **Administrationof Plan** |
|--------------|---------------------------|

(a)     This    Plan shall be administered by the Company's Board of Directors or by an Option    Committee      ("Committee") appointed by the Company's Board of Directors.      The Committee shall consist of a minimum of two and a maximum of five members      of the Board of Directors, each of whom shall be a "Non-Employee Director" within      the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934,      as amended, or any future corresponding rule, except that the failure of      the Committee for any reason to be composed solely of Non-Employee Directors      shall not prevent an option from being considered granted under this Plan.      The Committee shall, in addition to its other authority and subject to      the provisions of this Plan, determine which individuals shall in fact      be granted      an option or options, whether the option shall be an Incentive Stock Option      or a Non-Qualified Stock Option (as such terms are defined in Section 5(a)),      the number of shares to be subject to each of the options, the time or      times at which the options shall be granted, the rate of option exercisability,      and, subject to Section 5 hereof, the price at which each of the options      is exercisable and the duration of the option. The term "Committee",      as used in this Plan and the options granted hereunder, refers to either      the Board of Directors or to the Committee, whichever is then administering  this Plan.

(b)      The    Committee shall adopt such rules for the conduct of its business and administration    of this Plan as it considers desirable. A majority of the members of the    Committee shall constitute a quorum for all purposes. The vote or written    consent of a majority of the members of the Committee on a particular matter    shall constitute the act of the Committee on such matter. The Committee shall    have the right to construe the Plan and the options issued pursuant to it,    to correct defects and omissions and to reconcile inconsistencies to the    extent necessary to effectuate the Plan and the options issued pursuant to    it, and such action shall be final, binding and conclusive upon all parties    concerned. No member of the Committee or the Board of Directors shall be    liable for any act or omission (whether or not negligent) taken or omitted    in good faith, or for the exercise of an authority or discretion granted    in connection with the Plan to a Committee or the Board of Directors, or    for the acts or omissions of any other members of a Committee or the Board    of Directors. Subject to the numerical limitations on Committee membership    set forth in Section 4(a) hereof, the Board of Directors may at any time    appoint additional members of the Committee and may at any time remove any    member of the Committee with or without cause. Vacancies in the Committee,    however caused, may be filled by the Board of Directors, if it so desires.

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| **5.** | **Incentive Stock Options    and Non-Qualified Stock Options** |
|--------|----------------------------------------------------------------|

(a)      Options        issued pursuant to this Plan may be either Incentive Stock Options granted        pursuant to Section 5(b) hereof or Non-Qualified Stock Options granted pursuant        to Section 5(c) hereof, as determined by the Committee. An "Incentive        Stock Option" is an option which satisfies all of the requirements of        Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code")        and the regulations thereunder, and a "Non-Qualified Stock Option" is        an option which either does not satisfy all of those requirements or the        terms of the option provide that it will not be treated as an Incentive Stock        Option. The Committee may grant both an Incentive Stock Option and a Non-Qualified        Stock Option to the same person, or more than one of each type of option        to the same person. The option price for options issued under this Plan shall        be equal at least to the fair market value (as defined below) of the Company's        Common Stock on the date of the grant of the option. The fair market value        of the Company's Common Stock on any particular date shall mean a price determined        in good faith by the Committee to equal the fair market value per share of        the Common Stock, and for the purpose, the Committee may conclusively rely        upon appraisals of the Company’s Common Stock performed by independent  appraisers.

(b)      Subject to the    authority of the Committee set forth in Section 4(a) here of Incentive Stock    Options issued to an Eligible Employee pursuant to this Plan shall be issued    substantially in the form set forth in Appendix I hereof, which form is hereby    incorporated by reference and made a part hereof, and shall contain substan­tially    the terms and conditions set forth therein. Incentive Stock Options shall    not be exercisable after the expiration of ten years from the date such options    are granted, unless terminated earlier under the terms of the option, except    that options granted to individuals described in Section 422(b)(6) of the    Code shall conform to the provisions of Section 422(c)(5) of the Code. At    the time of the grant of an Incentive Stock Option hereunder, the Committee    may, in its discretion, amend or supplement any of the option terms contained    in Appendix I for any particular optionee, provided that the option    as amended or supplemented satisfies the requirements of Section 422(b)    of the Code and the regulations thereunder. Each of the options granted pursuant    to this Section 5(b) is intended, if possible, to be an "Incentive    Stock Option" as that term is defined in Section 422(b) of the    Code and the regulations thereunder. In the event this Plan or any option    granted pursuant to this Section 5(b) is in any way inconsistent with    the applicable legal requirements of the Code or the regulations thereunder    for an Incentive Stock Option, this Plan and such option shall be deemed    automatically amended as of the date hereof to conform to such legal requirements,    if such conformity may be achieved by amendment. If Incentive Stock Options    are granted under this Plan, such options shall automatically be deemed converted    into Non-Qualified Stock Options if shareholder approval as required by the    Code is not obtained within one year after the date of adoption of this Planby the Board of Directors.

 

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(c)      Subject    to the authority of the Committee set forth in Section 4(a) hereof, Non-Qualified    Stock Options issued to an Eligible Employee pursuant to this Plan shall    be issued substantially in the form set forth in Appendix II hereof,    which form is hereby incorporated by reference and made a part hereof,    and shall contain substantially the terms and conditions set forth therein.    Non-Qualified Stock Options shall expire ten years after the date they are    granted, unless terminated earlier under the option terms. At the time of    granting a Non-Qualified Stock Option hereunder, the Committee may, in its    discretion, amend or supplement any of the option terms contained in Appendix IIfor any particular optionee.
(d)      Neither the    Company nor any of its current or future parent, subsidiaries or affiliates,    nor their officers, directors, shareholders, stock option plan committees,    employees or agents shall have any liability to any optionee in the event    (i) an option granted pursuant to Section 5(b) hereof does not    qualify as an "Incentive Stock Option" as that term is used in    Section 422(b) of the Code and the regulations thereunder; (ii) any    optionee does not obtain the tax treatment pertaining to an Incentive Stock    Option; or (iii) any option granted pursuant to Section 5(c) hereofis an "Incentive Stock Option."
**6.****Amendment, Supplement, Suspension    and Termination**
Options shall not be granted pursuant to this Plan after the expiration of ten years from the date the Plan is adopted by the Board of Directors of the Company.  The Board of Directors reserves the right at any time, and from time to time, to amend or supplement this Plan in any way, or to suspend or terminate it, effective as of such date, which date may be either before or after the taking of such action, as may be specified by the Board of Directors; provided, however, that such action shall not, without the consent of the optionee, affect options granted under the Plan prior to the actual date on which such action occurred.  If the Board of Directors voluntarily submits a proposed amendment, supplement, suspension or termination forshareholder approval, such submission shall not require any future amendments, supplements, suspensions or terminations (whether or not relating to the same provision or subject matter) to be similarly submitted for shareholder approval.
**7.****Effectiveness of Plan**
This Plan shall become effective on the date of its adoption by the Company's Board of Directors.  
**8.****General Conditions**
(a)      Nothing contained in this Plan or any option granted pursuant to this Plan shall confer upon any employee the right to continue in the employ of the Company or any affiliated or subsidiary corporation or interfere in any way with the rights of the Company or any affiliated or subsidiary corpora­tion      to terminate his employment in any way.

(b)      Corporate action constituting an offer of stock for sale to any person under the terms of the options to be granted hereunder shall be deemed complete as of the date when the Committee authorizes the grant of the option to the such person, regardless of when the option is actually delivered to such person or acknowledged or agreed to by him.

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(c)      The    terms "parent corporation" and "subsidiary corporation" as    used throughout this Plan, and the options granted pursuant to this Plan,    shall (except as otherwise provided in the option form) have the meaning    that is ascribed to that term when contained in Section 422(b) of the    Code and the regulations thereunder, and the Company shall be deemed to be    the grantor corporation for purposes of applying such meaning.

(d)      References    in this Plan to the Code shall be deemed to also refer to the corresponding    provisions of any future United States revenue law.

(e)      The    use of the masculine pronoun shall include the feminine gender whenever appropriate.

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**APPENDIX I**

**INCENTIVE STOCK OPTION**
To:    Name         Address     
 

 

 
Date of Grant:
 

You            are hereby granted an option, effective as of the date hereof, to      purchase __________ shares of Class B common stock, par value $25.00 per      share ("Common            Stock"), of Hanover Foods Corporation, a Pennsylvania corporation            (the "Company"),            at a price of $________  per share pursuant to the Company's 2003            Stock Option Plan (the "Plan"). 

This    option shall terminate and is not exercisable after ten years from the date    of its grant (the "Scheduled Termination Date"), except if terminated    earlier as hereafter provided. 

Your    option may first be exercised on and after two years from the date of grant,    but not before that time. On and after two year and prior to three years    from the date of grant, your option may be exercised for up to 12.5% of the    total number of shares subject to the option minus the number of shares previously    purchased by exercise of the option (as adjusted for any change in the outstanding    shares of the Common Stock of the Company by reason of a stock dividend,    stock split, combination of shares, recapitalization, merger, consolidation,    transfer of assets, reorganization, conversion or what the Committee deems    in its sole discretion to be similar circumstances). Each succeeding year    thereafter your option may be exercised for up to an additional 12.5% of    the total number of shares subject to the option minus the number of shares      previously purchased by exercise of the option (as adjusted for any change      in the outstanding shares of the    Common Stock of the Company by reason of a stock dividend, stock split, combination    of shares, recapitalization, merger, consolidation, transfer of assets, reorganization,    conversion or what the Committee deems in its sole discretion to be similar    circumstances). Thus, this option is fully exercisable on and after nine    years after the date of grant, except if terminated earlier as provided herein. 

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You    may exercise your option by giving written notice to the Secretary of the    Company on forms supplied by the Company at its then principal executive    office, accompanied by payment of the option price for the total number of    shares you specify that you wish to purchase. The payment may be in any of    the following forms: (a) cash, which may be evidenced by a check and    includes cash received from a stock brokerage firm in a so-called "cashless    exercise"; (b) (unless prohibited by the Committee) certificates    representing shares of Common Stock of the Company, which will be valued    by the Secretary of the Company at the fair market value per share of the    Company's Common Stock (as determined in accordance with the Plan) on the    date of delivery of such certificates to the Company, accompanied by an assignment    of the stock to the Company; (c) (unless prohibited by the Committee)    any combination of cash and Common Stock of the Company valued as provided    in clause (b) or (d) if permitted by the Committee, a promissory note    containing such terms and conditions and collateral (if any) as the Committee    shall determine in its sole discretion. The use of the so-called "attestation    procedure" to exercise a stock option may be permitted by the Committee.    Any assignment of stock shall be in a form and substance satisfactory to    the Secretary of the Company, including guarantees of signature(s) and payment    of all transfer taxes if the Secretary deems such guarantees necessary or    desirable.

Your    option will, to the extent not previously exercised by you, terminate three    months after the date on which your employment by the Company or a Company    subsidiary corporation is terminated (whether such termination be voluntary    or involuntary) other than by reason of disability as defined in Section 22(e)(3)    of the Internal Revenue Code of 1986, as amended (the "Code"),    and the regulations thereunder, or death, in which case your option will    terminate one year from the date of termination of employment due to disability    or death (but in no event later than the Scheduled Termination Date). After    the date your employment is terminated, as aforesaid, you may exercise this    option only for the number of shares which you had a right to purchase and    did not purchase on the date your employment terminated. If you are employed    by a Company subsidiary corporation, your employment shall be deemed to have    terminated on the date your employer ceases to be a Company subsidiary corporation,    unless you are on that date transferred to the Company or another Company    subsidiary corporation. Your employment shall not be deemed to have terminated    if you are transferred from the Company to a Company subsidiary corpora­tion,    or vice versa, or from one Company subsidiary corporation to another Company    subsidiary corporation.

If    you die while employed by the Company or a Company subsidiary corporation,    your executor or administrator, as the case may be, may, at any time within    one year after the date of your death (but in no event later than the Scheduled    Termination Date), exercise the option as to any shares which you had a right    to purchase and did not purchase during your lifetime. If your employment    with the Company or a Company parent or subsidiary corporation is terminated    by reason of your becoming disabled (within the meaning of Section 22(e)(3)    of the Code and the regulations thereunder), you or your legal guardian or    custodian may at any time within one year after the date of such termination    (but in no event later than the Scheduled Termination Date), exercise the    option as to any shares which you had a right to purchase and did not purchase    prior to such termination. Your executor, administrator, guardian or custodian    must present proof of his authority satisfactory to the Company prior to    being allowed to exercise this option.

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In the event of any change in the outstanding shares of the Common Stock of the Company by reason of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, transfer of assets, reorganization, conversion or what the Committee deems in its sole discretion to be similar circumstances, the number and kind of shares subject to this option and the option price of such shares shall be appropriately adjusted in a manner to be determined in the sole discretion of the Committee.  

**In the event of a liquidation or proposed liquidation of the Company, including (but not limited to) a transfer of assets followed by a liquidation of the Company, the Committee shall have the right to require you to exercise this option upon thirty (30) days prior written notice to you.  If at the time such written notice is given this option is not otherwise exercisable, the written notice will set forth your right to exercise this option even though it is not otherwise exercisable.  In the event this option is not exercised by you within the thirty (30) day period set forth in such written notice, this option shall terminate on the last day of such thirty (30) day period, notwithstanding anything to thecontrary contained in this option.**

This option is not transferable otherwise than by will or the laws of descent and distribution, and is exercisable during your lifetime only by you, including, for this purpose, your legal guardian or custodian in the event of disability.  Until the option price has been paid in full pursuant to due exercise of this option and the purchased shares are delivered to you, you do not have any rights as a shareholder of the Company, except for voting right to the extent provided in the Company’s Employee Stock Trust.  The Company reserves the right not to deliver to you the shares purchased by virtue of the exercise of this option during any period of time in which the Company deems, in its sole discretion, thatsuch delivery would violate a federal, state, local or securities exchange rule, regulation or law.

Notwithstanding anything to the contrary contained herein, this option is not exercisable until all the following events occur and during any of the following periods of time:

(a)      Until this option and the optioned shares are approved and/or registered with such federal, state and local regulatory bodies or agencies and securities exchanges as the Company may deem necessary or desirable.

(b)      During any period of time in which the Company deems that the exercisability of this option, the offer to sell the shares optioned hereunder, or the sale thereof, may violate a federal, state, local or securities exchange rule, regulation or law, or may cause the Company to be legally obligated to issue or sell more shares than the Company is legally entitled to issue or sell.

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(c)      Until    you have paid or made suitable arrangements to pay (which may include payment    through the surrender of Common Stock, unless prohibited by the Committee)    (i) all federal, state and local income tax withholding required to be withheld    by the Company in connection with the option exercise and (ii) the employee's    portion of other federal, state and local payroll and other taxes due in    connection with the option exercise.

(d)      Until    you have executed such shareholder agreements as shall be required by the    Company. Such shareholder agreements may, at the Company’s option,    include (among other provisions) provisions requiring you to (i) enter into    any “lock-up” agreements required by underwriters, (ii) enter    into voting trust agreements, (iii) grant to the Company or its nominees    an option to repurchase the stock, (iv) not sell, pledge or otherwise dispose    of the stock without the consent of the Company, (v) maintain any Subchapter    S elections made by the Company, (vi) grant rights of first refusal to the    Company or its nominees with respect to the stock, and (vii) join in any    sale of a majority or all of the outstanding stock of the Company.

The    following two paragraphs shall be applicable if, on the date of exercise    of this option, the Common Stock to be purchased pursuant to such exercise    has not been registered under the Securities Act of 1933, as amended, and    under applicable state securities laws, and shall continue to be applicable    for so long as such registration has not occurred:

(a)      The    optionee hereby agrees, warrants and represents that he will acquire the    Common Stock to be issued hereunder for his own account for investment purposes    only, and not with a view to, or in connection with, any resale or other    distribution of any of such shares, except as hereafter permitted. The optionee    further agrees that he will not at any time make any offer, sale, transfer,    pledge or other disposition of such Common Stock to be issued hereunder without    an effective registration statement under the Securities Act of 1933, as    amended, and under any applicable state securities laws or an opinion of    counsel acceptable to the Company to the effect that the proposed transaction    will be exempt from such registration. The optionee shall execute such instruments,    representations, acknowledgments and agreements as the Company may, in its    sole discretion, deem advisable to avoid any violation of federal, state,    local or securities exchange rule, regulation or law.

(b)      The    certificates for Common Stock to be issued to the optionee hereunder shall    bear the following legend:

"The shares represented by this    certificate have not been registered under the Securities Act of 1933, as    amended, or under applicable state securities laws. The shares have been    acquired for investment and may not be offered, sold, transferred, pledged    or otherwise disposed of without an effective registration statement under    the Securities Act of 1933, as amended, and under any applicable state securities    laws or an opinion of counsel acceptable to the Company that the proposed  transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration    of the legended shares under the Securities Act of 1933, as amended, and    under any applicable state laws or upon receipt of any opinion of counselacceptable to the Company that said registration is no longer required.

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The sole purpose of the agreements,    warranties, representations and legend set forth in the two immediately preceding    paragraphs is to prevent violations of the Securities Act of 1933, as amended,    and any applicable state securities laws.

It    is the intention of the Company and you that this option shall, if possible,    be an "Incentive Stock Option" as that term is used in Section 422(b)    of the Code and the regulations thereunder. In the event this option is in    any way inconsistent with the legal requirements of the Code or the regulations    thereunder for an "Incentive Stock Option," this option shall be    deemed automatically amended as of the date hereof to conform to such legal    requirements, if such conformity may be achieved by amendment. To the extent    that the number of shares subject to this option which are exercisable for    the first time exceed the $100,000 limitation contained in Section 422(d)    of the Code, this option will not be considered an Incentive Stock Option. **In    the event that approval of the Plan by the shareholders of the Company is    not obtained within twelve months after the adoption of the Plan by the Company’s    Board of Directors, this option shall automatically be deemed converted into    an option which is not an Incentive Stock Option as that term is used in    Section 422(b) of the Code and the regulations thereunder. Nothing contained    herein shall require the Company to submit the Plan for such shareholder    approval.**

Nothing    herein shall modify your status as an at-will employee of the Company. Further,    nothing herein guarantees you employment for any specified period of time.    This means that either you or the Company may terminate your employment at    any time for any reason, with or without cause, or for no reason. You recognize    that, for instance, you may terminate your employment or the Company may    terminate your employment prior to the date on which your option becomes    vested or exercisable. 

**The      Company has no obligation to repurchase any stock which you may acquire      upon exercise of this option. To the extent necessary to satisfy the Company’s      legal reporting obligations, the optionee shall advise the Company of any      disposition of the stock acquired upon exercise of this option.**

Any    dispute or disagreement between you and the Company with respect to any portion    of this option (excluding Attachment A hereto) or its validity, construction,    meaning, performance or your rights hereunder shall be settled by arbitration    in accordance with the Commercial Arbitration Rules of the American Arbitration    Association or its successor, as amended from time to time. However, prior    to submission to arbitration you will attempt to resolve any disputes or    disagreements with the Company over this option amicably and informally,    in good faith, for a period not to exceed two weeks. Thereafter, the dispute    or disagreement will be submitted to arbitration. At any time prior to a    decision from the arbitrator(s) being rendered, you and the Company may resolve    the dispute by settlement. You and the Company shall equally share the costs    charged by the American Arbitration Association or its successor, but you    and the Company shall otherwise be solely responsible for your own respective    counsel fees and expenses. The decision of the arbitrator(s) shall be made    in writing, setting forth the award, the reasons for the decision and award    and shall be binding and conclusive on you and the Company. Further, neither    you nor the Company shall appeal any such award. Judgment of a court of competent    jurisdiction may be entered upon the award and may be enforced as such in    accordance with the provisions of the award.

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This option shall be subject to the terms of the Plan in effect on the date this option is granted, which terms are hereby incorporated herein by reference and made a part hereof. In the event of any conflict between the terms of this option and the terms of the Plan in effect on the date of this option, the terms of the Plan shall govern.  This option constitutes the entire understanding between the Company and you with respect to the subject matter hereof and no amendment, supplement or waiver of this option, in whole or in part, shall be binding upon the Company unless in writing and signed by the President of the Company.  This option and the performances of the partieshereunder shall be construed in accordance with and governed by the laws of the State of Pennsylvania.

In consideration of the grant to you of this option, you hereby agree to the confidentiality and non-interference provisions set forth in  Attachment A hereto.

Please sign the copy of this option and return it to the Company's Secretary, thereby indicating your understanding of and agreement with its terms and conditions, **including Attachment A hereto.**
 Hanover Foods Corporation     By: ______________________________________
I hereby acknowledge receipt of a copy of the foregoing stock option and the Plan, and having read them hereby signify my understanding of, and my agreement with, their terms and conditions, **including Attachment A hereto.**I accept this option in full satisfaction of any previous written or verbal promises made to me by the Company with respect to option grants.
________________________________ ________________________________(Signature) (Date)
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**Attachment A to Stock Option**

Confidentiality and Non-Interference.

(a)     You    covenant and agree that, in consideration of the grant to you of this stock    option, you will not, during your employment with the Company or at any time    thereafter, except with the express prior written consent of the Company    or pursuant to the lawful order of any judicial or administrative agency    of government, directly or indirectly, disclose, communicate or divulge to    any individual or entity, or use for the benefit of any individual or entity,    any knowledge or information with respect to the conduct or details of the    Company's business which you, acting reasonably, believe or should believe    to be of a confidential nature and the disclosure of which not to be in the    Company'sinterest.

(b)      You covenant    and agree that, in consideration of the grant to you of this stock option,    you will not, during your employment with the Company and for a period of    two years thereafter, except with the express prior written consent of the    Company, directly or indirectly, whether as employee, owner, partner, member,    consultant, agent, director, officer, shareholder or in any other capacity,    engage in or assist any individual or entity to engage in any act or action    which you, acting reasonably, believe or should believe would be harmfulor inimical to the interests of the Company.

(c)      You    covenant and agree that, in consideration of the grant to you of this stock    option, you will not, for a period of two years after your employment with    the Company ceases for any reason whatsoever (whether voluntary or not),    except with the express prior written consent of the Company, directly or    indirectly, whether as employee, owner, partner, member, consultant, agent,    director, officer, shareholder or in any other capacity, for your own account    or for the benefit of any individual or entity, (i) solicit any customer    of the Company for business which would result in such customer terminating    their relationship with the Company; or (ii) solicit or induce any individual    or entity which is an employee of the Company to leave the Company or tootherwise terminate their relationship with the Company.

(d)      The    parties agree that any breach by you of any of the covenants or agreements    contained in this Attachment A will result in irreparable injury to the Company    for which money damages could not adequately compensate the Company and therefore,    in the event of any such breach, the Company shall be entitled (in addition    to any other rights and remedies which it may have at law or in equity) to    have an injunction issued by any competent court enjoining and restraining    you and/or any other individual or entity involved therein from continuing    such breach. The existence of any claim or cause of action which you may    have against the Company or any other individual or entity shall not constitute    a defense or bar to the enforcement of such covenants. If the Company is    obliged to resort to the courts for the enforcement of any of the covenants    or agreements contained in this Attachment A, or if such covenants or agreements    are otherwise the subject of litigation between the parties, and the Company    prevails in such enforcement or litigation, then the term of such covenants    and agreements shall be extended for a period of time equal to the period    of such breach, which extension shall commence on the later of (a) the date    on which the original (unextended) term of such covenants and agreements    is scheduled to terminate or (b) the date of the final court order (without    further right of appeal) enforcing such covenant or agreement.

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(e)      If  any portion of the covenants or agreements contained in this Attachment A,    or the application hereof, is construed to be invalid or unenforceable, the    other  portions of such covenant(s) or agreement(s) or the application thereof shall  not be affected and shall be given full force and effect without regard to    the invalid or enforceable portions to the fullest extent possible. If any    covenant  or agreement in this Attachment A is held unenforceable because of the area    covered, the duration thereof, or the scope thereof, then the court making    such determination  shall have the power to reduce the area and/or duration and/or limit the scope  thereof, and the covenant or agreement shall then be enforceable in its reducedform.

(f)      For      purposes of this Attachment A, the term "the Company" shall include      the Company, any successor to the Company and all present and future direct    and indirect subsidiaries and affiliates of the Company.

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**APPENDIX II**

**NON-QUALIFIED STOCK OPTION FOR OFFICERS AND OTHER**

KEY EMPLOYEES
To:   Name         Address     Date of Grant: 
You are hereby granted an option, effective as of the date hereof, to purchase __________ shares of Class B common stock, par value $25.00 per share ("Common Stock"), of Hanover Foods Corporation, a Pennsylvania corporation (the "Company"), at a price of $ _____ per share pursuant to the Company's 2003 Stock Option Plan (the "Plan").

This option shall terminate and is not exercisable after ten years from the date of its grant (the "Scheduled Termination Date"), except if terminated earlier as hereafter provided.

Your option may first be exercised on and after two years from the date of grant, but not before that time.  On and after two year and prior to three years from the date of grant, your option may be exercised for up to 12.5% of the total number of shares subject to the option minus the number of shares previously purchased by exercise of the option (as adjusted for any change in the outstanding shares of the Common Stock of the Company by reason of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, transfer of assets, reorganization, conversion or what the Committee deems in its sole discretion to be similar circumstances).  Each succeeding year thereafter your option maybe exercised for up to an additional 12.5% of the total number of shares subject to the option minus the number of shares previously purchased by exercise of the option (as adjusted for any change in the outstanding shares of the Common Stock of the Company by reason of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, transfer of assets, reorganization, conversion or what the Committee deems in its sole discretion to be similar circumstances).  Thus, this option is fully exercisable on and after nine years after the date of grant, except if terminated earlier as provided herein.

 

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You may exercise your option by giving    written notice to the Secretary of the Company on forms supplied by the Company    at its then principal executive office, accompanied by payment of the option    price for the total number of shares you specify that you wish to purchase.    The payment may be in any of the following forms: (a) cash, which may    be evidenced by a check and includes cash received from a stock brokerage    firm in a so-called "cashless exercise"; (b) (unless prohibited    by the Committee) certificates representing shares of Common Stock of the    Company, which will be valued by the Secretary of the Company at the fair    market value per share of the Company's Common Stock (as determined in accordance with the Plan) on the date          of delivery of          such certificates to the Company, accompanied by an assignment of the          stock to the Company; (c) (unless prohibited by the Committee) any combination of cash and Common Stock of the Company valued as provided in clause (b) or (d) if permitted by the Committee,  a promissory note containing such terms and conditions and collateral (if any) as the Committee shall determine in its sole discretion.  The use of the so-called "attestation procedure" to          exercise a stock option may be permitted by the Committee. Any assignment          of stock shall be in a form and substance satisfactory to the Secretary          of the Company, including guarantees of signature(s) and payment of          all transfer taxes if the Secretary deems such guarantees necessary          or desirable.

Your option will, to the extent not previously exercised by you, terminate three months after the date on which your employment by the Company or a Company subsidiary corporation is terminated (whether such termination be voluntary or involuntary) other than by reason of disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder, or death, in which case your option will terminate one year from the date of termination of employment due to disability or death (but in no event later than the Scheduled Termination Date).  After the date your employment is terminated, as aforesaid, you may exercise this option only for the numberof shares which you had a right to purchase and did not purchase on the date your employment terminated.  If you are employed by a Company subsidiary corporation, your employment shall be deemed to have terminated on the date your employer ceases to be a Company subsidiary corporation, unless you are on that date transferred to the Company or another Company subsidiary corporation.  Your employment shall not be deemed to have terminated if you are transferred from the Company to a Company subsidiary corpora­tion, or vice versa, or from one Company subsidiary corporation to another Company subsidiary corporation.

If you die while employed by the Company or a Company subsidiary corporation, your executor or administrator, as the case may be, may, at any time within one year after the date of your death (but in no event later than the Scheduled Termination Date), exercise the option as to any shares which you had a right to purchase and did not purchase during your lifetime.  If your employment with the Company or a Company parent or subsidiary corporation is terminated by reason of your becoming disabled (within the meaning of Section 22(e)(3) of the Code and the regulations thereunder), you or your legal guardian or custodian may at any time within one year after the date of such termination (but in no event later thanthe Scheduled Termination Date), exercise the option as to any shares which you had a right to purchase and did not purchase prior to such termination.  Your executor, administrator, guardian or custodian must present proof of his authority satisfactory to the Company prior to being allowed to exercise this option.

In the event of any change in the outstanding shares of the Common Stock of the Company by reason of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, transfer of assets, reorganization, conversion or what the Committee deems in its sole discretion to be similar circumstances, the number and kind of shares subject to this option and the option price of such shares shall be appropriately adjusted in a manner to be determined in the sole discretion of the Committee.  

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**In the event of a liquidation or proposed liquidation of the Company, including (but not limited to) a transfer of assets followed by a liquidation of the Company, the Committee shall have the right to require you to exercise this option upon thirty (30) days prior written notice to you.  If at the time such written notice is given this option is not otherwise exercisable, the written notice will set forth your right to exercise this option even though it is not otherwise exercisable.  In the event this option is not exercised by you within the thirty (30) day period set forth in such written notice, this option shall terminate on the last day of such thirty (30) dayperiod, notwithstanding anything to the contrary contained in this option.**

This option is not transferable otherwise than by will or the laws of descent and distribution, and is exercisable during your lifetime only by you, including, for this purpose, your legal guardian or custodian in the event of disability.  Until the option price has been paid in full pursuant to due exercise of this option and the purchased shares are delivered to you, you do not have any rights as a shareholder of the Company, except for voting right to the extent provided in the Company’s Employee Stock Trust.  The Company reserves the right not to deliver to you the shares purchased by virtue of the exercise of this option during any period of time in which the Company deems, in its sole discretion, thatsuch delivery would violate a federal, state, local or securities exchange rule, regulation or law.

Notwithstanding anything to the contrary contained herein, this option is not exercisable until all the following events occur and during any of the following periods of time:

(a)      Until this option and the optioned shares are approved and/or registered with such federal, state and local regulatory bodies or agencies and securities exchanges as the Company may deem necessary or desirable.

(b)      During any period of time in which the Company deems that the exercisability of this option, the offer to sell the shares optioned hereunder, or the sale thereof, may violate a federal, state, local or securities exchange rule, regulation or law, or may cause the Company to be legally obligated to issue or sell more shares than the Company is legally entitled to issue or sell.

(c)      Until you have paid or made suitable arrangements to pay (which may include payment through the surrender of Common Stock, unless prohibited by the Committee) (i) all federal, state and local income tax withholding required to be withheld by the Company in connection with the option exercise and (ii) the employee's portion of other federal, state and local payroll and other taxes due in connection with the option exercise.

(d)      Until you have executed such shareholder agreements as shall be required by the Company.  Such shareholder agreements may, at the Company’s option, include (among other provisions) provisions requiring you to (i) enter into any “lock-up” agreements required by underwriters, (ii) enter into voting trust agreements, (iii) grant to the Company or its nominees an option to repurchase the stock, (iv) not sell, pledge or otherwise dispose of the stock without the consent of the Company, (v) maintain any Subchapter S elections made by the Company, (vi) grant rights of first refusal to the Company or its nominees with respect to the stock, and (vii) join in any sale of amajority or all of the outstanding stock of the Company.

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The following two paragraphs shall be applicable if, on the date of exercise of this option, the Common Stock to be purchased pursuant to such exercise has not been registered under the Securities Act of 1933, as amended, and under applicable state securities laws, and shall continue to be applicable for so long as such registration has not occurred:

(a)      The optionee hereby agrees, warrants and represents that he will acquire the Common Stock to be issued hereunder for his own account for investment purposes only, and not with a view to, or in connection with, any resale or other distribution of any of such shares, except as hereafter permitted.  The optionee further agrees that he will not at any time make any offer, sale, transfer, pledge or other disposition of such Common Stock to be issued hereunder without an effective registration statement under the Securities Act of 1933, as amended, and under any applicable state securities laws or an opinion of counsel acceptable to the Company to the effect that the proposed transactionwill be exempt from such registration.  The optionee shall execute such instruments, representations, acknowledgments and agreements as the Company may, in its sole discretion, deem advisable to avoid any violation of federal, state, local or securities exchange rule, regulation or law.

(b)      The certificates for Common Stock to be issued to the optionee hereunder shall bear the following legend:

"The shares represented by this    certificate have not been registered under the Securities Act of 1933, as    amended, or under applicable state securities laws. The shares have been    acquired for investment and may not be offered, sold, transferred, pledged    or otherwise disposed of without an effective registration statement under    the Securities Act of 1933, as amended, and under any applicable state securities    laws or an opinion of counsel acceptable to the Company that the proposed  transaction will be exempt from such registration."

The    foregoing legend shall be removed upon registration of the legended shares    under the Securities Act of 1933, as amended, and under any applicable state    laws or upon receipt of any opinion of counsel acceptable to the Company  that said registration is no longer required.

The    sole purpose of the agreements, warranties, representations and legend set    forth in the two immediately preceding paragraphs is to prevent violations    of the Securities Act of 1933, as amended, and any applicable state securities  laws.

 It    is the intention of the Company and you that this option shall not be an "Incentive    Stock Option" as that term is used in Section 422(b) of the Code  and the regulations there­under.

Nothing    herein shall modify your status as an at-will employee of the Company. Further,    nothing herein guarantees you employment for any specified period of time.    This means that either you or the Company may terminate your employment at    any time for any reason, with or without cause, or for no reason. You recognize    that, for instance, you may terminate your employment or the Company may    terminate your employment prior to the date on which your option becomes  vested or exercisable.

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The Company has no obligation to    repurchase any stock which you may acquire upon exercise of this option.    To the extent necessary to satisfy the Company’s legal reporting obligations,    the optionee shall advise the Company of any disposition of the stock acquired    upon exercise of this option. 

Any    dispute or disagreement between you and the Company with respect to any portion    of this option (excluding Attachment A hereto) or its validity, construction,    meaning, performance or your rights hereunder shall be settled by arbitration    in accordance with the Commercial Arbitration Rules of the American Arbitration    Association or its successor, as amended from time to time. However, prior    to submission to arbitration you will attempt to resolve any disputes or    disagreements with the Company over this option amicably and informally,    in good faith, for a period not to exceed two weeks. Thereafter, the dispute    or disagreement will be submitted to arbitration. At any time prior to a    decision from the arbitrator(s) being rendered, you and the Company may resolve    the dispute by settlement. You and the Company shall equally share the costs    charged by the American Arbitration Association or its successor, but you    and the Company shall otherwise be solely responsible for your own respective    counsel fees and expenses. The decision of the arbitrator(s) shall be made    in writing, setting forth the award, the reasons for the decision and award    and shall be binding and conclusive on you and the Company. Further, neither    you nor the Company shall appeal any such award. Judgment of a court of competent    jurisdiction may be entered upon the award and may be enforced as such in    accordance with the provisions of the award.

This    option shall be subject to the terms of the Plan in effect on the date this    option is granted, which terms are hereby incorporated herein by reference    and made a part hereof. In the event of any conflict between the terms of    this option and the terms of the Plan in effect on the date of this option,    the terms of the Plan shall govern. This option constitutes the entire understanding    between the Company and you with respect to the subject matter hereof and    no amendment, supplement or waiver of this option, in whole or in part, shall    be binding upon the Company unless in writing and signed by the President    of the Company. This option and the performances of the parties hereunder    shall be construed in accordance with and governed by the laws of the State    of Pennsylvania.

In    consideration of the grant to you of this option, you hereby agree to the    confidentiality and non-interference provisions set forth in Attachment A    hereto.

Please    sign the copy of this option and return it to the Company's Secretary, thereby    indicating your understanding of and agreement with its terms and conditions, **including    Attachment A hereto.**
 Hanover Foods Corporation      By: 
I hereby    acknowledge receipt of a copy of the foregoing stock option and the Plan,    and having read them hereby signify my understanding of, and my agreement    with, their terms and conditions, **including Attachment A hereto.**I    accept this option in full satisfaction of any previous written or verbal    promises made to me by the Company with respect to option grants.
  (Signature)  (Date) 

 

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**Attachment A to Stock Option**

Confidentiality and Non-Interference.

(a)      You covenant and agree that, in consideration of the grant to you of this stock option, you will not, during your employment with the Company or at any time thereafter, except with the express prior written consent of the Company or pursuant to the lawful order of any judicial or administrative agency of government, directly or indirectly, disclose, communicate or divulge to any individual or entity, or use for the benefit of any individual or entity, any knowledge or information with respect to the conduct or details of the Company's business which you, acting reasonably, believe or should believe to be of a confidential nature and the disclosure of which not to be in the Company'sinterest.

(b)      You covenant and agree that, in consideration of the grant to you of this stock option, you will not, during your employment with the Company and for a period of two years thereafter, except with the express prior written consent of the Company, directly or indirectly, whether as employee, owner, partner, member, consultant, agent, director, officer, shareholder or in any other capacity, engage in or assist any individual or entity to engage in any act or action which you, acting reasonably, believe or should believe would be harmful or inimical to the interests of the Company.

(c)      You covenant and agree that, in consideration of the grant to you of this stock option, you will not, for a period of two years after your employment with the Company ceases for any reason whatsoever (whether voluntary or not), except with the express prior written consent of the Company, directly or indirectly, whether as employee, owner, partner, member, consultant, agent, director, officer, shareholder or in any other capacity, for your own account or for the benefit of any individual or entity, (i) solicit any customer of the Company for business which would result in such customer terminating their relationship with the Company; or (ii) solicit or induce any individual or entitywhich is an employee of the Company to leave the Company or to otherwise terminate their relationship with the Company.

(d)      The parties agree that any breach by you of any of the covenants or agreements contained in this Attachment A will result in irreparable injury to the Company for which money damages could not adequately compensate the Company and therefore, in the event of any such breach, the Company shall be entitled (in addition to any other rights and remedies which it may have at law or in equity) to have an injunction issued by any competent court enjoining and restraining you and/or any other individual or entity involved therein from continuing such breach.  The existence of any claim or cause of action which you may have against the Company or any other individual or entity shall notconstitute a defense or bar to the enforcement of such covenants.  If the Company is obliged to resort to the courts for the enforcement of any of the covenants or agreements contained in this Attachment A, or if such covenants or agreements are otherwise the subject of litigation between the parties, and the Company prevails in such enforcement or litigation, then the term of such covenants and agreements shall be extended for a period of time equal to the period of such breach, which extension shall commence on the later of (a) the date on which the original (unextended) term of such covenants and agreements is scheduled to terminate or (b) the date of the final court order (without further right of appeal) enforcing such covenant or agreement.

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(e)      If any  portion of the covenants or agreements contained in this Attachment A, or the  application hereof, is construed to be invalid or unenforceable, the other portions  of such covenant(s) or agreement(s) or the application thereof shall not be  affected and shall be given full force and effect without regard to the invalid  or enforceable portions to the fullest extent possible. If any covenant or agreement  in this Attachment A is held unenforceable because of the area covered, the  duration thereof, or the scope thereof, then the court making such determination  shall have the power to reduce the area and/or duration and/or limit the scope  thereof, and the covenant or agreement shall then be enforceable in its reduced  form.

(f)      For purposesof this Attachment A, the term "the Company" shall include the Company,any successor to the Company and all present and future direct and indirect subsidiariesand affiliates of the Company.

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