Document:

EX-10.6

Exhibit 10.6

SAFEGUARD SCIENTIFICS, INC.

2004 EQUITY COMPENSATION PLAN

As Amended and Restated Effective October 21, 2008

     1. Purpose

          The purpose of the Safeguard Scientifics, Inc. 2004 Equity Compensation Plan is to provide (i)
designated Company employees, (ii) individuals to whom an offer of employment has been extended,
(iii) certain advisors who perform services for the Company, and (iv) nonemployee members of the
Company’s Board of Directors with the opportunity to receive grants of incentive stock options,
nonqualified stock options, stock units, stock appreciation rights, performance units, stock
awards, dividend equivalents and other stock-based awards. The Company believes that the Plan will
encourage the participants to contribute materially to the Company’s growth, thereby benefiting the
Company’s stockholders, and will align the economic interests of the participants with those of the
stockholders. The Plan was originally established by the Company’s Board of Directors effective
April 6, 2004 and approved by the stockholders on June 11, 2004. The Plan is hereby amended and
restated to reflect the applicable requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Code”) and to make certain other clarifying changes and is effective October 21,
2008.

     2. Definitions

          Whenever used in this Plan, the following terms will have the respective meanings set forth
below:

          (a) “Board” means the Company’s Board of Directors as constituted from time to time.

          (b) “Change of Control” means the first to occur of any of the following events:

               (i) An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares
of Common Stock of the Company (“Common Stock”) or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”) (a “Control Purchase”); excluding, however,
the following: (1) any acquisition directly from the Company, other than an acquisition by virtue
of the exercise of a conversion privilege unless the security being so converted was itself
acquired directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (4) any acquisition by any corporation pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) of this definition, or (5) provided,
however, that notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person acquires beneficial ownership of more than 20% of the Common Stock or the

 

 

Outstanding Company Voting Securities as a result of the acquisition of Common Stock or Outstanding
Company Voting Securities by the Company which reduces the amount of Common Stock or Outstanding
Company Voting Securities; provided, that if after such acquisition by the Company such Person
becomes the beneficial owner of additional Common Stock or Outstanding Company Voting Securities
that increases the percentage of Common Stock or Outstanding Company Voting Securities beneficially
owned by such Person, a Change in Control shall then occur; or

               (ii) A change in the composition of the Board such that the individuals who, as of the
effective date of the Plan, constitute the Board (such Board shall be hereinafter referred to as
the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this subsection (ii), that any individual who becomes a member
of the Board subsequent to the effective date of the Plan, whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of the Incumbent Board (or whose
membership on the Board was so approved by a board which itself consisted of a majority of
directors elected by the Incumbent Board) shall be considered as though such individual were a
member of the Incumbent Board; but, provided further, that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board
shall not be so considered as a member of the Incumbent Board (a “Board Change”); or

               (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company (“Corporate Transaction”); excluding,
however, such a Corporate Transaction pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of
common stock and the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan
(or related trust) of the Company or such corporation resulting from such Corporate Transaction)
will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares
of common stock of the corporation resulting from such Corporate Transaction or the combined voting
power of the outstanding voting securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed prior to the Corporate
Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the corporation resulting from such Corporate
Transaction; or

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               (iv) The approval by the stockholders of the Company of a complete liquidation or dissolution
of the Company.

               (v) Notwithstanding the foregoing, the Committee may modify the definition of Change of
Control for a particular Grant as the Committee deems appropriate to comply with Code Section 409A.

          (c) “Code” means the Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder.

          (d) “Committee” means (i) with respect to Grants to Employees, the Compensation Committee of
the Board or its delegate or successor, or such other committee appointed by the Board to
administer the Plan or its delegate or its successor, (ii) with respect to Grants made to
Nonemployee Directors, the Board or its delegate, and (iii) with respect to Grants designated as
“qualified performance based compensation” under Code Section 162(m), a committee that consists of
two or more persons appointed by the Board, all of whom shall be “outside directors” as defined
under Code Section 162(m).

          (e) “Company” means Safeguard Scientifics, Inc., any successor corporation, each corporation
which is a member of a controlled group of corporations (within the meaning of Code Section 414(b))
of which the Company is a component member, any subsidiary at least 50% directly or indirectly
owned by Safeguard Scientifics, Inc. (or any successor thereto)and any affiliate entity which, with
the approval of the Committee, is deemed to constitute an entity controlled by Safeguard
Scientifics, Inc.

          (f) “Date of Grant” means the effective date of a Grant; provided, however, that no
retroactive Grants will be made.

          (g) “Dividend Equivalent” means an amount determined by multiplying the number of shares of
Stock or Stock Units subject to a Grant by the per-share cash dividend, or the per-share fair
market value (as determined by the Committee) of any dividend in consideration other than cash,
paid by the Company on its Stock on a dividend payment date.

          (h) “Effective Date” means October 21, 2008.

          (i) “Employee” means, unless otherwise determined by the Committee, an employee of the
Company (including an officer or director who is also an employee) other than an individual (a)
employed in a casual or temporary capacity (i.e., those hired for a specific job of limited
duration), (b) whose terms of employment are governed by a collective bargaining agreement that
does not provide for participation in this Plan, (c) characterized as a “leased employee” within
the meaning of Code Section 414(d) who is a non-resident alien, or (d) classified by the Company as
a “contractor” or “consultant,” no matter how characterized by the Internal Revenue Service, other
governmental agency or a court; provided, however, that the Committee shall have the discretion to
determine on a case by case basis whether and to what extent an employee of an affiliate shall be
deemed an Employee. Any change of characterization of an individual by any court or government
agency shall have no effect upon the classification

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of an individual as an Employee for purposes of this Plan, unless the Committee determines
otherwise.

          (j) “Employed by, or providing service to, the Company” shall mean employment or service as an
Employee of the Company, Key Advisor, or member of the Board (so that, for purposes of exercising
Options and SARs and satisfying conditions with respect to Restricted Stock, Performance Units and
Other Stock-Based Grants, a Participant shall not be considered to have terminated employment or
service until the Participant ceases to be an Employee of the Company, Key Advisor, and member of
the Board), unless the Committee determines otherwise. The Committee’s determination as to a
Participant’s employment or other provision of services, termination of employment or cessation of
the provision of services, leave of absence, or reemployment shall be conclusive on all persons
unless determined to be incorrect.

          (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (l) “Fair Market Value” means the average of the highest and lowest sales prices of a share of
Stock on the New York Stock Exchange on the day on which Fair Market Value is being determined, as
reported on the composite tape for transactions on the New York Stock Exchange. In the event that
there are no Stock transactions on the New York Stock Exchange on such day, the Fair Market Value
will be determined as of the immediately preceding day on which there were Stock transactions on
that exchange. Notwithstanding the foregoing, in the case of a cashless exercise pursuant to
Section 8(g), the Fair Market Value will be the actual sale price of the shares issued upon
exercise of the Option.

          (m) “Grant” means an Option, Stock Unit, Performance Unit, Stock Award, Dividend Equivalent,
Stock Appreciation Right or Other Stock-Based Award granted under the Plan.

          (n) “Grant Instrument” means the written agreement that sets forth the terms and conditions of
a Grant, including all amendments thereto.

          (o) “Incentive Stock Option” means a stock option that is intended to meet the requirements of
Code Section 422, as described in Section 8.

          (p) “Nonemployee Director” means a member of the Board who is not an employee of the Company.

          (q) “Nonqualified Stock Option” means a stock option that is not intended to meet the
requirements of Code Section 422, as described in Section 8.

          (r) “Option” means an Incentive Stock Option or Nonqualified Stock Option to purchase Stock at
the Option Price for a specified period of time.

          (s) “Option Price” means an amount per share of Stock purchasable under an Option, as
designated by the Committee.

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          (t) “Other Stock-Based Award” means any Grant based on, measured by or payable in Stock (other
than Grants described in Sections 7, 8, 9, 10, 11 and 12 of the Plan) as described in Section 13.

          (u) “Participant” means an Employee, Nonemployee Director or Key Advisor designated by the
Committee to participate in the Plan.

          (v) “Performance Units” means phantom units, as described in Section 10.

          (w) “Plan” means this 2004 Equity Compensation Plan, as in effect from time to time.

          (x) “Stock” means the common stock of Safeguard Scientifics, Inc. or such other securities of
Safeguard Scientifics, Inc. as may be substituted for Stock pursuant to Section 5(c) or Section 18.

          (y) “Stock Award” means an award of Stock, as described in Section 11.

          (z) “Stock Unit” means an award of a phantom unit, representing one or more shares of Stock,
as described in Section 9.

     3. Administration

          (a) Committee. The Plan shall be administered and interpreted by the Committee or its
successor; ministerial functions may be performed by an administrative committee comprised of
Company employees appointed by the Committee.

          (b) Committee Authority. The Committee shall have the sole authority to (i) determine the
individuals to whom Grants shall be made under the Plan, (ii) determine the type, size and terms of
the Grants to be made to each such individual, (iii) determine the time when the grants will be
made and the duration of any applicable exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability, and (iv) amend the terms of any previously
issued Grant, subject to the provisions of Section 21 below, and (v) deal with any other matters
arising under the Plan.

          (c) Committee Determinations. The Committee shall have full power and express discretionary
authority to administer and interpret the Plan, to make factual determinations and to adopt or
amend such rules, regulations, agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in its sole discretion. The
Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to
the powers vested in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the Committee shall be
executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly situated
individuals.

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     4. Grants

          Grants under the Plan may consist of grants of Stock Appreciation Rights as described in
Section 7, Incentive Stock Options and Nonqualified Stock Options as described in Section 8, Stock
Units as described in Section 9, Performance Units as described in Section 10, Stock Awards as
described in Section 11, Dividend Equivalents as described in Section 12 and Other Stock-Based
Awards as described in Section 13. All Grants shall be made conditional upon the Participant’s
acknowledgement, in writing or by acceptance of the Grant, that all decisions and determinations of
the Committee shall be final and binding on the Participant, his or her beneficiaries and any other
person having or claiming an interest under such Grant. Grants under a particular Section of the
Plan need not be uniform as among the Participants.

     5. Shares Subject to the Plan

          (a) Shares Authorized. Subject to adjustment as described below, the total aggregate number
of shares of Stock that may be issued or transferred under the Plan is 6,000,000 shares. The
shares may be authorized but unissued shares of Stock or reacquired shares of Stock, including
shares purchased by the Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or
surrendered without having been exercised or if any Stock Appreciation Rights, Stock Awards, Stock
Units, Performance Units, Dividend Equivalents or Other Stock-Based Awards are forfeited or
terminated, the shares subject to such Grants shall again be available for purposes of the Plan.
Shares of Stock surrendered in payment of the Option Price of an Option or any withholding taxes,
shall again be available for issuance or transfer under the Plan. To the extent that any Grants
are paid in cash, and not in shares of Stock, any shares previously reserved for issuance or
transfer under the Plan with respect to such Grants shall again be available for issuance or
transfer under the Plan.

          (b) Individual Limits. Grants under the Plan may be expressed in cash, in shares of Stock or
in a combination of the two, as the Committee determines. The maximum aggregate number of shares
of Stock that shall be subject to Grants made under the Plan to any individual during any calendar
year shall be 1,500,000 shares, subject to adjustment as described below. A Participant may not
accrue Dividend Equivalents during any calendar year in excess of $500,000. To the extent that
Grants made under the Plan are expressed in dollar amounts, the maximum amount payable to any
individual during any calendar year shall be $1,000,000.

          (c) Adjustments. If there is any change in the number or kind of shares of Stock outstanding
(i) by reason of a stock dividend, spinoff, recapitalization, stock split or combination or
exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of
a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual
event affecting the outstanding Stock as a class without the Company’s receipt of consideration, or
if the value of outstanding shares of Stock is substantially reduced as a result of a spinoff or
the Company’s payment of an extraordinary dividend or distribution, the maximum number of shares of
Stock available for issuance under the Plan, the maximum number of shares of Stock with respect to
which any individual may receive Grants in any year, the kind and number of shares covered by
outstanding Grants, the kind and number of shares issued and to be issued under the Plan, and the
price per share or the applicable market value of

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such Grants shall be equitably adjusted by the Committee, as the Committee deems appropriate, to
reflect any increase or decrease in the number of, or change in the kind or value of, issued shares
of Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits
under such Grants; provided, however, that any fractional shares resulting from such adjustment
shall be eliminated by rounding any portion of a share equal to .5 or greater up, and any portion
of a share equal to less than .5 down, in each case to the nearest whole number. In addition, the
Committee shall have discretion to make the foregoing equitable adjustments in any circumstances in
which an adjustment is not mandated by this subsection (c) or applicable law, including in the
event of a Change of Control. Any adjustments to outstanding Grants shall be consistent with Code
Sections 409A or 422, to the extent applicable. Any adjustments determined by the Committee shall
be final, binding and conclusive.

     6. Eligibility for Participation

          (a) Eligible Persons. All Employees, including Employees who are officers or members of the
Board, and all Nonemployee Directors shall be eligible to participate in the Plan. Advisors who
perform services at the Company’s request (“Key Advisors”) shall be eligible to participate in the
Plan.

          (b) Selection of Participants. The Committee shall select the eligible parties to receive
Grants and shall determine the number of shares of Stock subject to each Grant.

     7. Stock Appreciation Rights

          (a) General Requirements. The Committee may grant Stock Appreciation Rights (“SARs”) to a
Participant separately or in tandem with any Option (for all or a portion of the applicable
Option). Tandem SARs may be granted either at the time the Option is granted or at any time
thereafter while the Option remains outstanding; provided, however, that, in the case of an
Incentive Stock Option, SARs may be granted only at the time of the Grant of the Incentive Stock
Option. The Committee shall establish the base amount of the SAR at the time the SAR is granted.
Unless the Committee determines otherwise, the base amount of each SAR shall be equal to the per
share Exercise Price of the related Option or, if there is no related Option, the Fair Market Value
of a share of Stock as of the Date of Grant of the SAR. In no event shall the Base Amount of the
SAR be less than the Fair Market Value of a share of Stock as of the Date of Grant of the SAR.

          (b) Tandem SARs. In the case of tandem SARs, the number of SARs granted to a Participant that
shall be exercisable during a specified period shall not exceed the number of shares of Stock that
the Participant may purchase upon the exercise of the related Option during such period. Upon the
exercise of an Option, the SARs relating to the Stock purchased pursuant to such Option shall
terminate. Upon the exercise of SARs, the related Option shall terminate to the extent of an equal
number of shares of Stock.

          (c) Exercisability. A SAR shall be exercisable during the period specified by the Committee
in the Grant Instrument and shall be subject to such vesting and other restrictions as may be
specified in the Grant Instrument. The Committee may accelerate the exercisability of any or all
outstanding SARs at any time for any reason. SARs may only be exercised while the

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Participant is employed by, or providing service to, the Company or during the applicable period
after termination of employment. A tandem SAR shall be exercisable only during the period when the
Option to which it is related is also exercisable. No SAR may be exercised for cash by an officer
or director of the Company or any of its subsidiaries who is subject to Section 16 of the Exchange
Act, except in accordance with Rule 16b-3 under the Exchange Act.

          (d) Value of SARs. When a Participant exercises SARs, the Participant shall receive in
settlement of such SARs an amount equal to the value of the stock appreciation for the number of
SARs exercised, payable in cash, Stock or a combination thereof, as determined by the Committee.
The stock appreciation for a SAR is the amount by which the Fair Market Value of the underlying
Stock on the date of exercise of the SAR exceeds the base amount of the SAR as described in
Subsection (a).

          (e) Form of Payment. The Committee shall determine whether the appreciation in a SAR shall be
paid in the form of cash, shares of Stock, or a combination of the two, in such proportion as the
Committee deems appropriate. For purposes of calculating the number of shares of Stock to be
received, shares of Stock shall be valued at their Fair Market Value on the date of exercise of the
SAR. If shares of Stock are to be received upon exercise of a SAR, cash shall be delivered in lieu
of any fractional share.

     8. Options

          (a) General Requirements. The Committee may grant Options to an Employee or Nonemployee
Director or Key Advisor upon such terms and conditions as the Committee deems appropriate under
this Section 8. The Committee may grant Dividend Equivalents with respect to Options.

          (b) Number of Shares. The Committee shall determine the number of shares of Stock that will
be subject to each Grant of Options.

          (c) Type of Option and Price.

               (i) The Committee may grant Incentive Stock Options or Nonqualified Stock Options, or any
combination of Incentive Stock Options and Nonqualified Stock Options. Incentive Stock Options may
be granted only to employees of the Company or its parents or subsidiaries, as defined in Code
Section 424. Nonqualified Stock Options may be granted to Employees, Nonemployee Directors and Key
Advisors. If an Option is not specifically designated as an Incentive Stock Option, then the
Option shall be a Nonqualified Stock Option.

               (ii) The Option Price shall be determined by the Committee and may be equal to or greater than
the Fair Market Value on the Date of Grant; provided, however, that an Incentive Stock Option may
not be granted to an Employee who, at the Date of Grant, owns stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, as defined in Code Section 424, unless the Option Price per share is not
less than 110% of the Fair Market Value on the Date of Grant.

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          (d) Option Term. The Committee shall determine the term of each Option. The term of an
Option shall not exceed ten years from the Date of Grant. However, an Incentive Stock Option that
is granted to an Employee who, at the Date of Grant, owns stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, as defined in Code Section 424, may not have a term that exceeds five years from
the Date of Grant.

          (e) Exercisability of Options. Options shall become exercisable in accordance with such terms
and conditions, as may be determined by the Committee and specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding Options at any time for any
reason. With the consent of the Committee, an Option may be exercised at a time prior to the time
at which the Option would otherwise be fully exercisable, in which event the Participant shall
receive shares of restricted stock (or be granted interests in restricted shares in a book entry
system) on such terms and conditions as shall be determined by the Committee.

          (f) Termination of Employment or Service. Except as provided in the Grant Instrument, or as
otherwise may be determined by the Committee in its discretion, an Option may only be exercised
while the Participant is employed by, or providing service to, the Company. The Committee shall
specify in the Grant Instrument under what circumstances and during what time periods a Participant
may exercise an Option.

          (g) Exercise of Options. A Participant may exercise an Option that has become exercisable, in
whole or in part, by delivering a notice of exercise to the Company or its designated agent. The
Participant shall pay the Option Price and any withholding taxes for the Option:

               (i) in cash,

               (ii) with the approval of the Committee, by delivering shares of Stock owned by the
Participant (including Stock acquired in connection with the exercise of an Option, subject to such
restrictions as the Committee deems appropriate) and having a Fair Market Value on the date of
exercise equal to the Option Price, or by attestation (on a form prescribed by the Committee) to
ownership of shares of Stock having a Fair Market Value on the date of exercise equal to the Option
Price,

               (iii) in cash, provided the payment is made in accordance with procedures permitted by
Regulation T of the Federal Reserve Board and such procedures do not violate applicable law, as
determined by the Committee in its sole discretion, or

               (iv) by such other method as the Committee may approve.

          Shares of Stock used to exercise an Option shall have been held by the Participant for the
requisite period of time to avoid adverse accounting consequences to the Company with respect to
the Option. Payment for the shares pursuant to the Option, and any required withholding taxes,
must be received by the time specified by the Committee depending on the type of payment being
made.

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          (h) Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that if the
aggregate Fair Market Value on the Date of Grant with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the
Option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock
Option shall not be granted to any person who is not an employee of the Company or a parent or
subsidiary, as defined in Code Section 424.

     9. Stock Units 

          (a) General Requirements. The Committee may grant Stock Units to an Employee, Nonemployee
Director or Key Advisor, upon such terms and conditions as the Committee deems appropriate under
this Section 9. Each Stock Unit shall represent the right of the Participant to receive a share of
Stock or an amount based on the value of a share of Stock. All Stock Units shall be credited to
accounts on the Company’s records for purposes of the Plan.

          (b) Terms of Stock Units. The Committee may grant Stock Units that are payable if specified
performance goals or other conditions are met, or under other circumstances. Stock Units may be
paid at the end of a specified period, or payment may be deferred to a date authorized by the
Committee. The Committee shall determine the number of Stock Units to be granted, the requirements
applicable to such Stock Units, and to the extent required by Code Section 409A, the specified
payment events on which the Stock Units will be payable. Pursuant to the requirements of Section
12, the Committee may grant Dividend Equivalents with respect to Stock Units.

          (c) Payment With Respect to Stock Units. Payment with respect to Stock Units shall be made in
cash, in Stock, or in a combination of the two, as determined by the Committee.

          (d) Requirement of Employment, Service or Other Action. If a Participant ceases to be
employed by, or providing service to the Company, or if other conditions established by the
Committee are not met, the Participant’s unvested or contingent Stock Units shall be forfeited.
The Committee may grant Stock Units contingent upon the Participant’s taking certain specified
actions as the Committee sees fit, including, but not limited to, deferral of compensation by the
Participant. The Committee may provide for complete or partial exceptions to this requirement as
it deems appropriate.

     10. Performance Units

          (a) General Requirements. The Committee may grant Performance Units to an Employee or
Nonemployee Director, upon such terms and conditions as the Committee deems appropriate under this
Section 10. Each Performance Unit shall represent the right of the Participant to receive a share
of Stock or an amount based on the value of a share of Stock, if specified performance goals are
met. All Performance Units shall be credited to accounts on the Company’s records for purposes of
the Plan.

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          (b) Terms of Performance Units. The Committee shall establish the performance goals and other
conditions for payment of Performance Units. Performance Units may be paid at the end of a
specified performance or other period, or payment may be deferred to a date authorized by the
Committee. The Committee shall determine the number of Performance Units to be granted, the
requirement applicable to such Performance Units, and to the extent required by Code Section 409A,
the specified payment events on which the Performance Units will be paid. Pursuant to Section 12,
the Committee may grant Dividend Equivalents with respect to Performance Units.

          (c) Payment with respect to Performance Units. At the end of each Performance Period, the
Committee shall determine to what extent the Performance Goals and other conditions of the
Performance Units have been met and the amount, if any, to be paid with respect to the Performance
Units. Payments with respect to Performance Units shall be made in cash, in Stock, or in a
combination of the two, as determined by the Committee. Payment of Performance Units shall be made
as set forth in the Grant Instrument, and, if applicable, shall be structured to comply with Code
Section 409A.

          (d) Requirement of Employment or Service. If a Participant ceases to be employed by, or
providing service to the Company, or if other conditions established by the Committee are not met,
the Participant’s Performance Units shall be forfeited. The Committee may provide for complete or
partial exceptions to this requirement as it deems appropriate.

     11. Stock Awards

          (a) General Requirements. The Committee may issue or transfer shares of Stock to an Employee
or Nonemployee Director under a Stock Award, upon such terms and conditions as the Committee deems
appropriate under this Section 11. Shares of Stock issued or transferred pursuant to Stock Awards
may be issued or transferred for consideration or for no consideration (except as required by
applicable law), and subject to restrictions or no restrictions, as determined by the Committee.
The Committee may establish conditions under which restrictions on Stock Awards shall lapse over a
period of time or according to such other criteria as the Committee deems appropriate, including
restrictions based upon the achievement of specific performance goals. The period of time during
which the Stock Award will remain subject to restrictions, if any, will be designated in the Grant
Instrument as the “Restriction Period.”

          (b) Number of Shares. The Committee shall determine the number of shares of Stock to be
issued or transferred pursuant to a Stock Award and any restrictions applicable to such shares.

          (c) Requirement of Employment or Service. If the Participant ceases to be employed by, or
providing service to, the Company, or if other specified conditions are not met, the Stock Award
shall terminate as to all shares covered by the Grant as to which the restrictions have not lapsed,
and those shares of stock must be immediately returned to the Company. The Committee may provide
for complete or partial exceptions to this requirement as it deems appropriate.

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          (d) Restrictions on Transfer. During the Restriction Period, a Participant may not sell,
assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except under death as
described in Section 17. Each certificate for a share of a Stock Award shall contain a legend
giving appropriate notice of the restrictions in the Grant. The Participant shall be entitled to
have the legend removed from the stock certificate covering any shares as to which restrictions
have lapsed. The Committee may determine that the Company will not issue certificates for Stock
Awards until all restrictions on such shares have lapsed, or that the Company will retain
possession of certificates for shares of Stock Awards until all restrictions on such shares have
lapsed. Alternatively, the Participant’s rights in the Stock Award shall be appropriately
reflected in a book entry system maintained by the Company, and a stock certificate shall be
issuable at the end of the Restriction Period.

          (e) Right to Vote and to Receive Dividends. The Committee shall determine to what extent, and
under what conditions, the Participant shall have the right to vote shares of Stock Awards and to
receive any dividends or other distributions paid on such shares, during the Restriction Period.
The Committee may determine that a Participant’s entitlement to dividends or other distributions
with respect to a Stock Award shall be subject to achievement of performance goals or other
conditions.

     12. Dividend Equivalents

          The Committee may grant Dividend Equivalents in connection with Grants under the Plan, under
such terms and conditions as the Committee deems appropriate under this Section 12. All Dividend
Equivalents may be paid to Participants currently or may be deferred as determined by the Committee
and set forth in the Grant Instrument. All Dividend Equivalents that are not paid currently shall
be credited to accounts on the Company’s records for purposes of the Plan. Dividend Equivalents
may be accrued as a cash obligation, or may be converted to Stock Units for the Participant. The
Committee shall determine whether any deferred Dividend Equivalents will accrue interest. The
Committee may provide that Dividend Equivalents shall be payable based on the achievement of
specific performance goals. Dividend Equivalents may be payable in cash or shares of Stock or in a
combination of two, as determined by the Committee.

     13. Other Stock-Based Grants

          The Committee may grant other awards that are based on, measured by or payable in Stock to
Employees or Nonemployee Directors, on such terms and conditions as the Committee deems appropriate
under this Section 13. Other Stock-Based Awards may be granted subject to achievement of
performance goals or other conditions and may be payable in Stock or cash, or in a combination of
the two, as determined by the Committee. The Committee may grant Dividend Equivalents with respect
to Other Stock-Based Awards.

     14. Qualified Performance-Based Compensation

          (a) Designation as Qualified Performance-Based Compensation. The Committee may determine that
Stock Units, Performance Units, Stock Awards, Stock Appreciation Rights, Dividend Equivalents or
Other Stock-Based Awards granted to an Employee shall be considered “qualified performance-based
compensation” under Code Section

-12-

 

162(m). The provisions of this Section 14 shall apply to any such Grants that are to be considered
“qualified performance-based compensation” under Code Section 162(m). To the extent that Grants
under this Plan designated as “qualified performance-based compensation under Code Section 162(m)
are made, no such Grant may be made as an alternative to another Grant that is not designated as
qualified performance based compensation but instead must be separate and apart from all other
Grants made.

          (b) Performance Goals. When Grants that are to be considered “qualified performance-based
compensation” are granted, the Committee shall establish in writing

               (i) the objective performance goals that must be met,

               (ii) the period during which performance will be measured,

               (iii) the maximum amounts that may be paid if the performance goals are met, and

               (iv) any other conditions that the Committee deems appropriate and consistent with the Plan
and the requirements of Code Section 162 for “qualified performance-based compensation.” The
performance goals shall satisfy the requirements for “qualified performance-based compensation,”
including the requirement that the achievement of the goals be substantially uncertain at the time
they are established and that the performance goals be established in such a way that a third party
with knowledge of the relevant facts could determine whether and to what extent the performance
goals have been met. The Committee shall not have discretion to increase the amount of
compensation that is payable upon achievement of the designated performance goals, but the
Committee may reduce the amount of compensation that is payable upon achievement of the designated
performance goals.

          (c) Criteria Used for Objective Performance Goals. In setting the performance goals for
Grants designated as “qualified performance-based compensation” pursuant to this Section 14, the
Committee shall use objectively determinable performance goals based on one or more of the
following objective criteria, either in absolute terms or in comparison to publicly available
industry standards or indices: earnings, revenue, operating margins and statistics, operating or
net cash flows, financial return and leverage ratios, total stockholder returns, market share, or
strategic business criteria consisting of one or more penetration goals, geographic business
expansion goals, cost targets, customer satisfaction goals, product development goals, goals
relating to acquisitions or divestitures, or any other objective measure derived from any of the
foregoing criteria. In addition, in setting the performance goals for Grants not designated as
“qualified performance-based compensation” for purposes of Code Section 162(m), the Committee may
use such other goals as are developed in the Company’s operating plan for the Performance Period.
The performance goals may relate to the Participant’s business unit or the performance of the
Company as a whole, or any combination of the foregoing. Performance goals need not be uniform as
among Participants.

          (d) Timing of Establishment of Goals. The Committee shall establish the performance goals in
writing either before the beginning of the performance period or during a period ending no later
than the earlier of (i) 90 days after the beginning of the performance

-13-

 

period or (ii) the date on which 25% of the performance period has been completed, or such other
date as may be required or permitted under applicable regulations under Code Section 162(m).

          (e) Announcement of Results. The Committee shall certify and announce the results for the
performance period to all Participants after the Company announces the Company’s financial results
for the performance period. If and to the extent that the Committee does not certify that the
performance goals have been met, the applicable Grants for the performance period shall be
forfeited or shall not be paid as applicable.

          (f) Death, Disability or Other Circumstances. The Committee may provide that Grants shall be
payable or restrictions shall lapse, in whole or in part, in the event of the Participant’s death
or disability during the Performance Period, a Change of Control or under other circumstances
consistent with the Treasury regulations and rulings under Code Section 162(m).

     15. Deferrals

          The Committee may permit or require a Participant to defer receipt of the payment of cash or
the delivery of shares that would otherwise be due to the Participant in connection with any Grant.
If any such deferral election is permitted or required, the Committee shall establish rules and
procedures for such deferrals as it shall determine in its sole discretion, consistent with the
applicable requirements of Code Section 409A.

     16. Withholding of Taxes

          (a) Required Withholding. All Grants under the Plan shall be subject to applicable federal
(including FICA), state and local tax withholding requirements. The Company may require that the
Participant or other person receiving or exercising Grants pay to the Company the amount of any
federal, state or local taxes that the Company is required to withhold with respect to such Grants,
or the Company may deduct from other wages paid by the Company the amount of any withholding taxes
due with respect to such Grants.

          (b) Share Withholding. At the Company’s election, or if the Committee so permits, with
respect to a Participant, the Company’s tax withholding obligation with respect to Grants paid in
Stock may be satisfied by having shares withheld, at the time such Grants become taxable, up to an
amount that does not exceed the minimum applicable withholding tax rate for federal (including
FICA), state and local tax liabilities, provided, however, that at the Company’s sole discretion, a
Participant may be permitted to tender other shares of Stock to the Company to supplement such
withholding, but only if such action is not in violation of applicable law and does not result in
materially disadvantageous tax, accounting or financial results to the Company. If the Committee
permits a Participant to elect share withholding, the Participant’s election must be in a form and
manner prescribed by the Committee and may be subject to the prior approval of the Committee.

-14-

 

     17. Transferability of Options

          The transferability of options granted under the Plan shall be governed by the following
provisions:

          (a) Incentive Stock Options. Unless otherwise specifically determined by the Committee,
during the lifetime of the Participant, Incentive Stock Options shall be exercisable only by the
Participant and shall not be assignable or transferable other than by will or the laws of
inheritance following the Participant’s death.

          (b) Nonqualified Stock Options — Limited Transferability. Except for the specially
transferable Nonqualified Stock Options described in subparagraph (c) below, or except as otherwise
specifically determined by the Committee, Nonqualified Stock Options shall be subject to the same
limitation on transfer as Incentive Stock Options, except that the Committee may structure one or
more Nonqualified Stock Options so that the option may be assigned in whole or in part during the
Participant’s lifetime to one or more family members of the Participant or to a trust established
exclusively for one or more such family members, to the extent such assignment is in connection
with the Participant’s estate plan or pursuant to a domestic relations order. The assigned portion
may only be exercised by the person or persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those
in effect for the option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Committee may deem appropriate.

          (c) Specially Transferable Nonqualified Stock Options. The Committee may, in its sole
discretion, structure one or more Nonqualified Stock Options, either at the time of the initial
grant or through subsequent amendment, so that those options will be transferable to a third party
for consideration payable in cash, securities or other property, subject to the following
limitations: (i) each such option may be transferred only to the extent that option is at the time
exercisable for vested shares, (ii) such option may only be transferred to a third party approved
by the Committee, (iii) the period during which the option may in fact be transferable may be
limited to one or more periods designated by the Committee, (iv) the Committee may structure the
option so that restrictions upon subsequent transferability may become applicable following the
initial transfer of that option to a third party, (v) the term of such option may be limited to a
fixed period, whether or not the Participant continues in service, where such period varies in
duration than the maximum term in effect for the option in the absence of such transfer, and (vi)
the share reserve under the Plan shall be reduced immediately upon the transfer, whether or not the
transferred option is in fact exercised. The Committee shall have complete discretion (subject to
the express limitations of the Plan) to establish the remaining terms and provisions of each such
specially transferable option, including appropriate anti-dilution provisions and
reorganization/recapitalization adjustments, so as to facilitate the marketability of the option
and conform such option to the typical terms and provisions in effect for similar securities traded
in the open market.

          (d) Notwithstanding the foregoing, the Participant may designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options, and those options shall, in
accordance with such designation, automatically be transferred to such beneficiary or

-15-

 

beneficiaries upon the Participant’s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and conditions of the
applicable agreement evidencing each such transferred option, including (without limitation) the
limited time period during which the option may be exercised following the Participant’s death.

     18. Consequences of a Change of Control

          (a) Notice and Acceleration. Upon a Change of Control, unless the Committee determines
otherwise, (i) the Company shall provide each Participant who holds outstanding Grants with written
notice of the Change of Control, (ii) all outstanding Options shall automatically accelerate and
become fully exercisable, (iii) the restrictions and conditions on all outstanding Stock Awards
shall immediately lapse, (iv) all Stock Units and Performance Units shall become payable in cash or
in stock in an amount not less than the Fair Market Value of the Stock or the Stock to which the
units relate, as determined by the Committee, and (v) Dividend Equivalents and Other Stock-Based
Awards shall become payable in full in cash or in stock, in amounts determined by the Committee.

          (b) Assumption of Grants. Upon a Change of Control where the Company is not the surviving
corporation (or survives only as a subsidiary of another corporation), unless the Committee
determines otherwise, all outstanding Options and SARs that are not exercised shall be assumed by,
or replaced with comparable options by, the surviving corporation (or a parent or subsidiary of the
surviving corporation), and other Grants that remain outstanding shall be converted to similar
grants of the surviving corporation (or a parent or subsidiary of the surviving corporation).

          (c) Other Alternatives. Notwithstanding the foregoing, subject to subsection (d) below, in
the event of a Change of Control, the Committee may take any of the following actions with respect
to any or all outstanding Grants, without the consent of any Participant: (i) the Committee may
require that Participants surrender their outstanding Options in exchange for a payment by the
Company, in cash or Stock as determined by the Committee, in an amount equal to the amount by which
the then Fair Market Value subject to the Participant’s unexercised Options exceeds the Option
Price, if any, or (ii) after giving Participants an opportunity to exercise their outstanding
Options, the Committee may terminate any or all unexercised Options, at such time as the Committee
deems appropriate, and (iii) with respect to Participants holding Stock Units, Performance Units,
Dividend Equivalents or Other Stock-Based Awards, the Committee may determine that such
Participants shall receive a payment in settlement of such Stock Units, Performance Units, Dividend
Equivalents or other Stock-Based Awards, in such amount and form as may be determined by the
Committee; provided, that the payment amount shall deliver an equivalent value for such settled
Award. Such surrender, termination or settlement shall take place as of the date of the Change of
Control or such other date as the Committee may specify.

          (d) Committee. The Committee making the determinations under this Section 18 following
a Change of Control must be comprised of the same members as those members of the Committee
immediately before the Change of Control. If the Committee members do not meet this requirement,
the automatic provisions of subsections (a) and (b) shall apply, and the Committee shall not have
discretion to vary them.

-16-

 

     19. Other Transactions

          The Committee may provide in a Grant Instrument that a sale or other transaction involving a
Subsidiary or other business unit of the Company shall be considered a Change of Control for
purposes of a Grant or the Committee may establish other positions that shall be applicable in the
event of a specified transaction.

     20. Requirements for Issuance or Transfer of Shares

          No Stock shall be issued or transferred in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance of such Stock have been complied with to
the satisfaction of the Committee. The Committee shall have the right to condition any Grant made
to any Participant hereunder on such Participant’s undertaking in writing to comply with such
restrictions on the Participant’s subsequent disposition of such shares of Stock as the Committee
shall deem necessary or advisable, and certificates representing such shares may be legended to
reflect any such restrictions. Certificates representing shares of Stock issued or transferred
under the Plan will be subject to such stop-transfer orders and other restrictions as may be
required by applicable laws, regulations and interpretations, including any requirement that a
legend be placed thereon.

     21. Amendment and Termination of the Plan

          (a) Amendment. The Board may amend or terminate the Plan at any time; provided, however, that
the Board shall not amend the Plan without approval of the stockholders of the Company if such
approval is required in order to comply with the Code or applicable laws, or to comply with
applicable stock exchange requirements. No amendment or termination of this Plan shall, without
the consent of the Participant, impair any rights or obligations under any Grant previously made to
the Participant, unless such right has been reserved in the Plan or the Grant Instrument, or except
as provided in Section 23(b) below. Notwithstanding the preceding, the Board may amend the Plan at
any time, without the consent of the Participant, to comply with applicable legal requirements or
to ensure the various Grants awarded under this Plan maintain the designations given to them in the
Plan, including, but not limited to, changes necessary to ensure an option continues to be an
incentive stock option or to ensure qualified performance-based compensation continues to
“qualified performance-based compensation” under Code Section 162(m).

          (b) No Repricing Without Stockholder Approval. Notwithstanding anything in the Plan to the
contrary, the Committee may not reprice Options, nor may the Board amend the Plan to permit
repricing of Options, unless the stockholders of the Company provide prior approval for such
repricing. The term “repricing” shall have the meaning given that term in Section 303A(8) of the
New York Stock Exchange Listed Company Manual, as in effect from time to time, or any other
substantially equivalent successor rule.

          (c) Stockholder Approval for “Qualified Performance-Based Compensation.” If Grants
denominated as “qualified performance-based compensation” are awarded under Section 14 above, the
Plan must be reapproved by the Company’s stockholders no later than the first stockholders’ meeting
that occurs in the fifth year following the year in which the

-17-

 

stockholders previously approved the provisions of Section 14, if additional Grants are to be made
under Section 14 and if required by Code Section 162(m) or the regulations thereunder. Any such
reapproval shall not affect outstanding grants made within the five-year period following the year
in which the previous approval was obtained.

          (d) Termination of Plan. The Plan shall terminate on the day immediately preceding the tenth
anniversary of its effective date, unless the Plan is terminated earlier by the Board or is
extended by the Board with the approval of the stockholders. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding Grant.

     22. Effective Date of the Plan

          The Plan shall be effective on October 21, 2008.

     23. Miscellaneous

          (a) Grants in Connection with Corporate Transactions and Otherwise. Nothing contained
in this Plan shall be construed to (i) limit the right of the Committee to make Grants under this
Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of
the business or assets of any corporation, firm or association, including Grants to employees
thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of
the Company to grant stock options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another corporation who becomes an
Employee by reason of a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company in substitution for a grant made by such
corporation. The terms and conditions of the substitute Grants may vary from the terms and
conditions required by the Plan and from those of the substituted stock incentives. The Committee
shall prescribe the provisions of the substitute Grants.

          (b) Compliance with Law. The Plan, the exercise of Options and the obligations of the Company
to issue or transfer shares of Stock under Grants shall be subject to all applicable laws and to
approvals by any governmental or regulatory agency as may be required. In addition, it is the
intent of the Company that Incentive Stock Options comply with the applicable provisions of Code
Section 422 and that, to the extent applicable, all other Grants comply with the requirements of
Code Section 409A. To the extent that any legal requirement of Code Sections 422 or 409A as set
forth in the Plan ceases to be required under Code Sections 422 or 409A, that Plan provision shall
cease to apply. With respect to persons subject to Section 16 of the Exchange Act, it is the
intent of the Company that the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent
of the Company that the Plan and applicable Grants comply with the applicable provisions of Code
Section 162(m) . To the extent that any legal requirement of Section 16 of the Exchange Act or
Code Section 162(m) as set forth in the Plan ceases to be required under Section 16 of the Exchange
Act or Code Section 162(m) , that Plan provision shall cease to apply. The Committee may revoke
any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and
mandatory government regulation.

-18-

 

The Committee may also adopt rules regarding the withholding of taxes on payments to Participants.
The Committee may, in its sole discretion, agree to limit its authority under this Section.

          (c) Code Section 409A. The Plan is intended to comply with the applicable requirements of
Code Section 409A and the regulations promulgated thereunder, to the extent applicable, and shall
be administered in accordance with Code Section 409A to the extent Code Section 409A is applicable
to the Plan or any Grant hereunder. Each Grant shall be subject to such terms as the Committee
determines and shall be construed and administered such that the Grant either (i) qualifies for an
exemption from the requirements of Code Section 409A, or (ii) satisfies such requirements. Grants
of Performance Units, Stock Units, and other similar stock-based awards shall be structured in a
manner consistent with the requirements of Code Section 409A and distributions shall only be made
in a manner and upon an event permitted under Code Section 409A and, to the extent required under
Code Section 409A, payments to a Participant who is a “specified employee” (within the meaning of
such term under Code Section 40A) upon his or her separation from service shall be subject to a
six-month delay and shall be paid within 15 days after the end of the six-month period following
separation from service. All payments to be made upon a termination of employment or service shall
only be made upon a “separation from service” under Code Section 409A. Except as permitted by Code
Section 409A, in no event shall a Participant, directly or indirectly, designate the calendar year
in which the distribution is made.

          (d) Effect of Revisions to Accounting Standards or Applicable Law. In the event of revisions
to accounting standards applicable to the Company or to applicable law, which revisions are viewed
by the Committee as resulting in a material detriment to the Company, the Committee shall have the
discretion to modify any Grant, Grant Instrument or related right or document issued under this
Plan but only to the extent such modification does not result in a material detriment to the
Participant.

          (e) Enforceability. The Plan shall be binding upon and enforceable against the Company and
its successors and assigns.

          (f) Funding of the Plan; Limitation on Rights. This Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plant.

          (g) Rights of Participants. Nothing in this Plan shall entitle any Employee, Nonemployee
Director or other person to any claim or right to receive a Grant under this Plan. Neither this
Plan nor any action taken hereunder shall be construed as giving any individual any rights to be
retained by or in the employment or service of the Company.

          (h) No Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant
to the Plan or any Grant. The Committee shall determine whether cash, other awards or other
property shall be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise limited.

-19-

 

          (i) Employees Subject to Taxation Outside the United States. With respect to Participants who
are subject to taxation in countries other than the United States, the Committee may make Grants on
such terms and conditions as the Committee deems appropriate to comply with the laws of the
applicable countries, and the Committee may create such produces addendum and subplans and make
such modifications as may be necessary or advisable to comply with such laws.

          (j) Governing Law. The validity, construction, interpretation and effect of the Plan and
Grant Instruments issued under the Plan shall be governed and construed by and determined in
accordance with the laws of the Commonwealth of Pennsylvania without giving effect to the conflict
of laws provisions thereof.

-20-Exhibit 10.1 

SMART BALANCE, INC.
STOCK AND AWARDS PLAN 

AMENDED STOCK
OPTION AGREEMENT 

To:    «Name»
(“you”) 

        Smart
Balance, Inc. (the “Company”) previously granted you a stock option award
(“Prior Award”), effective «Grant_Date» (the “Grant Date”)
under the terms of the Smart Balance, Inc. Stock and Awards Plan (the “Prior
Plan”). The Prior Plan was amended and restated effective August 7, 2008 in the form
of the Amended and Restated Smart Balance, Inc. Stock and Awards Plan (“Plan”),
which is incorporated into this Agreement by reference. The Award evidenced by this
Agreement (the “Option”) amends, restates, and supersedes the Prior Award in all
respects in order to bring the Prior Award into compliance with Section 409A of the
Internal Revenue Code. It is the intent of the parties that this Option shall not be
treated as the grant of a new Award or result in the addition of a deferral feature to the
Prior Award for purposes of Section 409A of the Code and Treas. Reg.
§§1.409A-1(b)(5)(v), but rather is intended as and shall be construed as an
amendment to the Prior Award that does not provide a direct or indirect reduction in the
exercise price or any additional deferral feature. 

        Initially
capitalized terms used in this Agreement and defined in the Plan shall have the meanings
given to such terms in the Plan. Copies of the Plan are available from the Compensation
Committee of the Company’s Board of Directors (“Committee”). 

	1. 	Option
Grant. 

        Your Option
permits you to purchase, on the terms and conditions set forth in this Agreement, the
number of shares (the “Option Shares”) of the Company’s common stock (the
“Common Stock”), at the exercise price (the “Exercise Price”) set
forth in the following table. 

	Number of Option Shares
	Exercise Price Per Option Share

	
«Total_Options»	«Exercise_Price»

	2. 	Option
Type. 

        Your
Option is a non-qualified stock option and is intended to conform in all respects with the
Plan. This Option is not intended to qualify as an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”). 

	3. 	Term
of Option. 

        As
a general matter, your right to exercise the Option will expire on the tenth anniversary
of the Grant Date (the “Expiration Date”). As provided below, your right to
exercise the Option may expire prior to the Expiration Date, if you die or your employment
with the Company terminates. 

	4.  	Vesting. 

        You
may exercise the Option only to the extent that the Option is vested. The Option with
respect to «TimeVested_Options» Shares (“Time Vested Award”) will
vest over time and with respect to «PriceVested_Options» Shares (“Price
Vested Award”) will vest based on the closing price of the Company’s common
stock during the term of the Option. 

        Time
Vested Award. Your right to exercise the Time Vested Award will vest over time in
accordance with the following schedule, provided you are employed with the Company or any
of its Subsidiaries (collectively, the “Smart Balance Companies”) on the
applicable Anniversaries of the Grant Date listed below. 

	Anniversary of Grant Date
	Vested Percentage of Award

	1st Anniversary	25%
	2nd Anniversary	50%
	3rd Anniversary	75%
	4th Anniversary	100%

        Price
Vested Award. Your right to exercise the Price Vested Award will vest or not
depending on the closing price of the Company’s common stock. Fifty percent (50%) of
the Price Vested Award will vest if the closing price for a share of Company common stock
is at least $16.75 per share for any twenty (20) of thirty (30) consecutive trading days
during the term of the Option and fifty percent (50%) of the Price Vested Award will vest
if the closing price for a share of Company common stock is at least $20.25 per share for
any twenty (20) of thirty (30) consecutive trading days during the term of the Option. 

        Except
as otherwise provided in Section 7 below, if your employment with the Smart Balance
Companies terminates you will forfeit that portion of the Award that is not vested on the
date of your termination. 

	5. 	Change
in Control Vesting. 

        In
the event that a Change of Control occurs with respect to the Company, any portion of your
Option that is not vested shall vest, and become exercisable, upon such Change in Control. 

	6. 	Exercise. 

        Prior
to the Expiration Date and at any time during your employment with the Smart Balance
Companies, you may exercise all or a portion of your Option, to the extent vested, by
designating the number of Option Shares to be acquired in accordance with the exercise
procedures established by the Committee from time to time. Your right to exercise the
Option to the extent vested following the date your employment terminates will depend on
the reason for such termination, as described in Section 7 below. 

- 2 - 

        You
must pay to the Company at the time of exercise the sum of (i) the full amount of the
Exercise Price for the number of Option Shares to be acquired and (ii) an amount equal to
the aggregate minimum federal, state and local income and employment taxes that the
Company is required to withhold and deposit on behalf of you with respect to your exercise
(“Tax Obligation”). 

        You
may elect to pay the Exercise Price or your Tax Obligation by having the Company reduce
the number of Option Shares you receive upon such exercise. Alternatively, you may pay the
Exercise Price or your Tax Obligation: 

          		        a.    
               in cash; 

               

          		        b.    
               by surrendering to the Company previously acquired shares of Common Stock having
               a Fair Market Value at the time of exercise equal to the Exercise Price or Tax
               Obligation; or 

               

          		        c.    
               to the extent permitted by applicable law, by delivery of irrevocable
               instructions to a broker to (1) promptly deliver to the Company the amount of
               sale proceeds from the Option Shares or other proceeds to pay the Exercise Price
               or the Tax Obligation, and (2) deliver to you the balance of the Option Share
               proceeds in the form of cash or shares of Common Stock. 

               

        If
you pay the Exercise Price or your Tax Obligation by surrender of shares of Common Stock,
you must also submit proof acceptable to the Company substantiating your ownership of
those shares. The value of previously acquired shares of Common Stock used to pay the
Exercise Price (either directly or by attestation) of the Option Shares to be acquired or
your Tax Obligation shall be equal to the aggregate Fair Market Value of such previously
acquired shares of Common Stock on the date of the exercise. Your Option will be
considered finally exercised on the date on which your payment of the Exercise Price and
Tax Obligation is received by the Company. By exercising any portion of the Option, you
are accepting all of the terms and conditions specified in this Agreement. 

	7. 	Impact
of Termination of Employment on Option. 

        Except
as otherwise expressly provided in this Section 7 or otherwise agreed to by the Committee,
if your employment with the Smart Balance Companies terminates, (i) you will forfeit that
portion of your Option that is not vested on the date of your termination and (ii) you
will have a limited period in which to exercise such portion of any Option as was vested
on the date of your termination. The Committee, in its sole discretion, shall be
authorized to determine the nature of any termination of employment and your rights under
this Section 7 as a result of such termination and such determination shall be binding for
all purposes under this Section 7. 

             (a)    
          Death or Disability.  If you die or if the Company elects to
          terminate your employment with the Smart Balance Companies due to your
          Disability, (i) your Option to the extent not previously vested will vest and
          become non-forfeitable as of the date of your death or the date your employment
          terminates due to your Disability and (ii) your Option may be exercised
          thereafter at any time that is both before the Expiration Date and within one
          year of the date of your death or termination. To the extent not previously
          exercised, your Option will terminate and may not be exercised after the earlier
          of the Expiration Date or the first anniversary of the termination of your
          employment due to your permanent disability. 

- 3 - 

        Your
employment will be considered to have been terminated due to your Disability if the Board
determines, in its sole discretion, that at the time your employment terminates you were
unable to perform any material portion of your assigned duties and responsibilities, with
or without accommodation, due to a mental or physical condition that is expected to last
indefinitely. In making this determination, the Committee may rely upon such information
as it deems necessary or appropriate. 

             (b)    
          Voluntary Termination. If you voluntarily terminate your employment with
          the Smart Balance Companies, (i) your Option to the extent not previously vested
          will terminate and be forfeited as of the date your employment terminates and
          (ii) your Option, to the extent vested, may be exercised during the 90 day
          period immediately following the date your employment terminates. Any vested
          portion of the Option which remains unexercised will be forfeited, and your
          right to exercise that portion of the Option shall terminate, on the 91st
          day following the date your employment terminates. 

             (c)    
          Involuntary Termination. If your employment with the Smart Balance
          Companies is terminated by the Company other than for Cause, (i) your Option to
          the extent not previously vested will terminate and be forfeited as of the date
          your employment terminates and (ii) your Option, to the extent vested, may be
          exercised during the 90 day period immediately following the date your
          employment terminates. Any vested portion of the Option which remains
          unexercised will be forfeited, and your right to exercise that portion of the
          Option shall terminate, on the 91st day following the date your
          employment terminates. 

             d)    
          Termination for Cause. If your employment with the Smart Balance
          Companies is terminated for Cause, your Option will be forfeited and your right
          to exercise the Option, whether or not vested, shall terminate as of the date
          your employment terminates. 

             (e)    
          Non-Employee Option Holders. For purposes of this Agreement, (i)
          with respect to an individual who is an independent member of the Board, the
          terms “employee”, “employed” or “employment” shall
          refer to your service as a member of the Board and (ii) with respect to option
          holders who are independent service providers to the Company, the terms
          “employed” or “employment” shall refer to the term of the
          service relationship between you and the Company. 

	8. 	Adjustments
In Capitalization. 

        In
the event of any dividend or other distribution (in whatever form), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase Common Stock or other securities
of the Company, or other similar transaction or event that affects the Common Stock, the
Committee shall adjust the terms of the Option, to the extent necessary, in its sole
discretion, in order to prevent dilution or enlargement of the benefits or potential
benefits of the Option. However, in no event shall the Committee adjust the terms of the
Option in a manner which could cause the Option to be treated as the grant of a new Option
for purposes of Section 409A of the Code and Treas. Reg. §§1.409A-2 through
1.409A-6 or cause the Company to incur a new compensation charge for financial reporting
purposes. 

- 4 - 

     9.    
          Rights as a Stockholder. 

        You
will have no rights as a stockholder with respect to any Option Shares until and unless
you exercise the Option and shares of Common Stock have been transferred to you. 

	10. 	Public
Offer Waiver. 

        By
executing this Agreement, you acknowledge and confirm your understanding that your rights
under the Plan arise strictly from your status as an employee of or service provider to
the Smart Balance Companies and that the Company’s grant of the Option to you is not
an offer of securities made to the general public. 

	11. 	Transferability
of Option Shares. 

        You
hereby agree not to offer, sell or otherwise attempt to dispose of any Common Stock
covered by the Option Shares in a way which would: (i) require the Company to file any
registration statement with the Securities and Exchange Commission (or any similar filing
under state law or the laws of any other country) or to amend or supplement any such
filing or (ii) violate or cause the Company to violate the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, any other state or federal law, or the laws of any other country.
The Company reserves the right to place restrictions on any Common Stock you may receive
as a result of your exercise of the Option. 

	12. 	Conformity
with the Plan. 

        This
Option is intended to conform in all respects with, and is subject to, all applicable
provisions of the Plan. Inconsistencies between this Agreement and the Plan shall be
resolved in accordance with the terms of the Plan. By accepting your Option, you agree to
be bound by the terms and conditions of this Agreement, the Plan, and any and all
conditions established by the Company in connection with Options issued under the Plan.
You also understand that this Agreement does not give you any legal or equitable right
(other than those rights constituting the Agreement itself) against the Smart Balance
Companies directly or indirectly, or give rise to any cause of action at law or in equity
against the Smart Balance Companies. 

	13.  	Interpretations.  

        Any
dispute, disagreement or question which arises under, or as a result of, or in any way
relates to the interpretation, construction or application of terms of this Agreement or
the Plan will be determined and resolved by the Committee or its authorized delegate. The
Committee’s determination or resolution will be final, binding and conclusive for all
purposes. 

- 5 - 

	14.  	No
Rights to Continued Employment or Future Awards.

        You
hereby acknowledge and understand that this Option shall not form part of any contract of
employment between you and any of the Smart Balance Companies. Nothing in the Agreement or
the Plan confers on you any right to continue in the employ of the Smart Balance Companies
or in any way affects the Smart Balance Companies’ right to terminate your employment
without prior notice at any time or for any reason. You further acknowledge that the
Option is being granted to you in consideration of your performance of future services for
the Smart Balance Companies and is not under any circumstances to be considered
compensation for services you performed for the Smart Balance Companies in the past. 

        You
acknowledge and agree that the granting of your Option is at the discretion of the
Committee and that acceptance of your Option is no guarantee that future Options will be
granted under the Plan. Notwithstanding anything in this Agreement or the Plan to the
contrary, the Company may amend this Agreement or the Plan, including but not limited to
modifications to any of the rights granted to you under this Agreement, without your
consent, at such time and in such manner as the Company may consider necessary or
desirable, to reflect changes in law. You also understand that the Company may amend,
resubmit, alter, change, suspend, cancel, or discontinue the Plan at any time without
limitation. 

	15. 	Consent
to Transfer Personal Data. 

        You
hereby acknowledge and consent to the collection, use, processing and transfer of your
personal data as described in this Section 15. You are not obliged to consent to such
collection, use, processing and transfer of personal data. However, failure to provide
your consent may affect your ability to participate in the Plan. As part of your
employment with the Smart Balance Companies, the Company may maintain certain personal
information about you, that may include your name, home address and telephone number, fax
number, email address, family size, marital status, sex, beneficiary information,
emergency contacts, passport / visa information, age, language skills, drivers license
information, date of birth, birth certificate, social security number or other employee
identification number, nationality, C.V. (or resume), wage history, employment references,
job title, employment or severance contract, current wage and benefit information,
personal bank account number, tax related information, plan or benefit enrollment forms
and elections, option or benefit statements, any shares of stock or directorships in the
Company, and details of all options or any other entitlements to shares of stock awarded,
canceled, purchased, vested, unvested or outstanding in your favor (the “Data”).
The Company maintains the Data for the purpose of managing and administering the Plan. The
Smart Balance Companies may transfer Data amongst themselves as needed to implement,
administer and manage your participation in the Plan, and the Company may also transfer
Data to third parties assisting the Company in the implementation, administration and
management of the Plan. These third parties may be located throughout the world, including
within the United States. By voluntarily acknowledging receipt of the Option Shares, you
are authorizing these third parties to receive, possess, use, retain and transfer the
Data, in electronic or other form, for the purposes of implementing, administering and
managing your participation in the Plan, including any transfer of the Data that may be
required to administer the Plan and/or to permit a broker, or other third party you have
chosen, to hold any shares of Company Common Stock you may acquire pursuant to the Plan.
You may, at any time, review the Data, require any necessary amendments to it or withdraw
your consent to its collection by contacting the Company in writing; however, withdrawing
your consent may affect your ability to participate in the Plan. 

- 6 - 

	16.  	Miscellaneous.  

             a)    
          Modification. The Committee (or its authorized delegate) shall make all
          determinations regarding the number of Option Shares granted to you and the
          conditions set forth in this Agreement. The Committee shall maintain a copy of
          your Agreement in its records. The Committee may amend or modify this Agreement
          in any manner, provided that the Committee would have had the authority to do so
          under the Plan. However, no amendment or modification of this Agreement shall
          impair your rights under this Agreement without your express consent. Any such
          amendment, modification or supplementation of this Agreement must be in writing
          and signed by both you and a representative of the Company. 

             b)    
          Governing Law. This Agreement and the Plan shall be construed in
          accordance with the laws of the State of Delaware, without reference to any
          conflict of law principals. 

             c)    
          Successors and Assigns. Except as otherwise provided herein, this
          Agreement will bind and inure to the benefit of the respective successors and
          permitted assigns of you and the Company, whether so expressed or not. 

             d)    
          Waiver. The failure of the Company to enforce at any time any provision
          of this Agreement shall in no way be construed to be a waiver of such provision
          or any other provision hereof. 

             e)    
          Severability. Whenever feasible, each provision of this Agreement will be
          interpreted in such manner as to be effective and valid under applicable law,
          but if any provision of this Agreement is held to be prohibited by or invalid
          under applicable law, such provision will be ineffective only to the extent of
          such prohibition or invalidity, without invalidating the remainder of this
          Agreement. 

        IN
WITNESS WHEREOF, the undersigned have executed this Stock Option Grant Notice and
Agreement effective as of the day and year first above written. 

		COMPANY:
		
SMART BALANCE, INC.
		

By: _____________________________________________
		        Robert Gluck, Vice Chairman
		

GRANTEE:
		

_____________________________________________
		«Name»

- 7 -

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