8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)    November 6, 2008

SMART BALANCE, INC.
(Exact name of registrant as specified in its charter)

Delaware	001-33595	20-2949397
(State or other	(Commission	(IRS Employer
jurisdiction of incorporation)	File Number)	Identification No.)

115 West Century Road - Suite 260
Paramus, New Jersey	07652
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number including area code:           (201) 568-9300

Not Applicable
(Former name or former address, if changed since last report)

        Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

        [ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230 .425)

        [ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

        [ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

        [ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

        On November 6, 2008, Smart Balance, Inc. issued a release regarding earnings for the third quarter of 2008. The text of the press release is attached as Exhibit 99.1.

Item 5.02 Compensatory Arrangements Of Certain Officers.

        On November 6, 2008, the Company and each of its executive officers (Stephen B. Hughes, Chief Executive Officer, Robert S. Gluck, Chief Operating Officer, John F. Konzelmann, Principal Accounting Officer, and Alan S. Gever, Chief Financial Officer) entered into an Amended Stock Option Agreement and Amended Change of Control Agreement. Each of the agreements were amended in order to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations or other guidance promulgated thereunder.

        The form of the Amended Stock Option Agreement and the Amended Change of Control Agreement are attached hereto as Exhibit 10.1 and 10.2, respectively.

Item 9.01 Exhibits.

(d) Exhibits.

Exhibit 10.1:    Form of the Smart Balance, Inc. Amended Stock Option Agreement

Exhibit 10.2:    Form of the Smart Balance, Inc. Amended Change of Control Agreement

Exhibit 99.1:    Text of the Press Release of Smart Balance, Inc. issued November 6, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SMART BALANCE, INC.
	(registrant)
November 6, 2008	By: /s/ Robert S. Gluck
	Robert S. Gluck
	Vice Chairman and Chief       Operating Officer

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EXHIBIT INDEX

Exhibit 10.1:    Form of the Smart Balance, Inc. Amended Stock Option Agreement

Exhibit 10.2:    Form of the Smart Balance, Inc. Amended Change of Control Agreement

Exhibit 99.1:    Text of the Press Release of Smart Balance, Inc. issued November 6, 2008

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EX-10.1

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.

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        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.

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        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 91^st 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 91^st 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.

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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.

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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.

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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»

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EX-10.2

Exhibit 10.2

SMART BALANCE, INC.
CHANGE OF CONTROL AGREEMENT

        This Agreement (the “Agreement”) is made and entered into as of SAMPLE (the “Effective Date”) by and between Smart Balance, Inc., a Delaware corporation (the “Company”), and SAMPLE (“Employee”).

Recitals

        A.     The Employee is a key employee of the Company;

        B.     The Company believes that the threat or occurrence of, or negotiation or other event or action that could lead to, a Change of Control (as hereinafter defined) could result in the departure or distraction of key personnel to the detriment of the Company and its stockholders;

        C.     The Board of Directors of the Company (“Board”) has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Employee and to ensure the Employee’s continued dedication and efforts, without undue distraction or concern, in the face of a potential Change of Control; and

        D.     The Company and Executive are entering into this Agreement to provide certain incentives and protections to the Employee against the exigencies of a Change of Control.

Agreement

        In consideration of the respective agreements of the parties contained herein, it is hereby agreed as follows:

        1.    Term of Agreement. This Agreement shall commence as of the Effective Date and shall continue in effect until the thirty-first (31st) day of December in the year in which the Effective Date occurred (the “Expiration Date”); provided, however, that commencing on the Expiration Date and on each anniversary of the Expiration Date thereafter, the term of this Agreement shall automatically be extended for one (1) year following such date unless the Company or the Employee shall have provided written notice to the other at least ninety (90) days prior to such date that the term of this Agreement shall not be so extended; and provided, further, that, notwithstanding the foregoing, in the event of the occurrence of a Change of Control during the term of this Agreement as extended, the term of this Agreement shall automatically be extended to cover, and the Agreement shall not expire during, the twenty-four (24) month period immediately following the occurrence of a Change of Control, but may expire on the first day following such twenty-four (24) month period if a notice not to extend the term of this Agreement is timely provided at least ninety (90) days prior to the Expiration Date or an anniversary thereof, as applicable, as set forth herein.

        2.    Definitions.

                (a)     Accrued Compensation. “Accrued Compensation” means an amount which shall include all amounts earned, accrued, payable to or awarded through the Termination Date (as hereinafter defined) but not paid as of the Termination Date, including (a) base salary, (b) reimbursement for reasonable and necessary expenses incurred by the Employee on behalf of the Company during the period ending on the Termination Date, (c) accrued but unused vacation pay, and (d) bonuses, commissions and incentive compensation (other than the Target Bonus (as hereinafter defined)). References to Accrued Compensation under this Agreement shall not obligate the Company to pay such amounts twice (e.g., under this Agreement and under another agreement or obligation) and such references are meant only to clarify obligations outside the scope of this Agreement and not to create additional rights hereunder.

                (b)    Base Amount. “Base Amount” means SAMPLE times the greater of the Employee’s annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the applicable Change of Control, and shall include all amounts of base salary that are deferred under the employee benefit plans of the Company or any other agreement or arrangement.

                (c)     Bonus Amount. “Bonus Amount” means SAMPLE of the greater of (i) the Employee’s Target Bonus Amount as in effect on the Termination Date, (ii) the actual bonus amount earned by the Employee under the Company’s Financial Performance Incentive Program for the fiscal year prior to the fiscal year in which the Termination Date occurs or (iii) the actual bonus amount earned by the Employee under the Company’s Financial Performance Incentive Program for the fiscal year in which the Termination Date occurs.

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

                (e)     Cause. “Cause” means with respect to the Employee any of the following as determined by the Board, in its sole discretion, (a) fraud or intentional misrepresentation, (b) embezzlement, misappropriation or conversion of assets or opportunities of the Company or any Company Entity, (c) acts or omissions that are in bad faith or constitute gross negligence, or willful or reckless misconduct, or (d) conviction, plea of guilty or nolo contendere, or judicial determination of civil liability, based on a federal or state felony or serious criminal or civil offense.

                (f)     Change of Control. “Change of Control” means the occurrence of any of the following: events with respect to the Company:

                (i)     any Person (other than an Exempt Person) acquires securities of the Company representing fifty percent (50 percent) or more of the combined voting power of the Company’s then outstanding voting securities;

                (ii)     any Person acquires, during the twelve (12) month period ending on the date of the most recent acquisition, securities of Company representing thirty percent (30) percent of Company’s then outstanding voting securities;

                (iii)     a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board serving immediately prior to such appointment or election; or

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                (iv)     any Person, during the twelve (12) month period ending on the date of the most recent acquisition, acquires assets of Company having a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of Company’s assets immediately before such acquisition or acquisitions;

but only if the applicable transaction otherwise constitutes a “change in control event” for purposes of Section 409A of the Code and Treas. Reg. §1.409A-3(i)(5).

                (g)     Company. “Company” means Smart Balance, Inc., a corporation organized under the laws of the State of Delaware.

                (h)     Company Entity. “Company Entity” means any other entities that along with the Company is considered a single employer pursuant to Section 414(b) or (c) of the Code and the Treasury regulations promulgated thereunder, determined by applying the phrase “at least 50 percent” in place of the phrase “at least 80 percent” each place it appears in such Treasury regulations or Section 1563(a) of the Code. The term “Company Entity” shall also include any entity so designated by the Board for legitimate business reasons in which the Company holds a controlling interest under Treas. Reg. § 1.414(c)-2(b)(2)(i), determined by applying the phrase “at least 20%” in the place of the phrase “at least 80 percent” each place it appears in such Treasury Regulation or Section 1563(a) of the Code.

                (i)     Disability. “Disability” means the Employee’s inability to perform any material portion of his or her assigned duties and responsibilities, with or without accommodation, due to a mental or physical condition that is expected to last indefinitely.

                (j)     Exempt Person. “Exempt Person” means (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Company in such capacity, (b) a corporation or other entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (c) any Person beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act, which holds as of the date hereof securities possessing more than twenty-five percent (25%) of the total combined voting power of the Company’s outstanding securities.

                (k)     Good Reason. “Good Reason” means any one or more of the following conditions, but only if (x) such condition was not consented to by the Employee in advance or subsequently ratified by the Employee in writing, (y) such condition remains in effect thirty (30) days after the Employee gives written notice to the Board of the Employee’s intention to terminate his or her employment for Good Reason, which notice specifically identifies such condition, and (z) the Employee gives the notice referred to in (y) above within ninety (90) days of the initial existence of such condition:

                (i)     any material diminution of the Employee’s authority, duties or responsibilities;

                (ii)     any material diminution in the authority, duties, or responsibilities of the officer to whom the Employee is required to report, including the requirement that the Employee report to a corporate officer or employee rather than reporting to the Board of Directors of the Company.

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                (iii)     a material diminution of the Employee’s base compensation;

                (iv)     a material diminution in the budget over which the Employee retains authority;

                (v)     a material change in the geographic location at which the Employee must perform the Employee’s duties and responsibilities.; or

                (vi)     any other action or inaction by the Company that constitutes a material breach of this Agreement or any other agreement pursuant to which the Employee provides services to the Company.

                In determining whether the Employee has grounds to terminate employment for Good Reason, the Employee’s assertion of the existence of Good Reason shall be assumed correct unless the Company establishes by clear and convincing evidence that Good Reason does not exist.

                (l)     Person. “Person” means a “person” as used in Sections 3(a)(9) and 13(d) of the Exchange Act or any group of Persons acting in concert that would be considered “persons acting as a group” within the meaning of Treasury Regulation §1.409A-3(i)(5).

                (m)     Separation From Service. “Separation from Service” means the termination of the Employee’s employment with the Company and all Company Entities, provided that, notwithstanding such termination of the employment relationship between the Employee and the Company and all Company Entities, the Employee shall not be deemed to have had a Separation from Service where it is reasonably anticipated that the level of bona fide services that the Employee will perform (whether as an employee or independent contractor) for the Company and all Company Entities following such termination would be twenty percent (20%) or more of the average level of bona fide services performed by the Employee (whether as an employee or independent contractor) for the Company and all Company Entities over the immediately preceding thirty-six (36) month period (or such lesser period of actual service). In such event, Separation from Service shall mean the permanent reduction of the level of bona fide services to be performed by the Employee (whether as an employee or independent contractor) to a level that is less than twenty percent (20%) of the average level of bona fide services performed by the Employee (whether as an employee or independent contractor) during the thirty-six (36) month period (or such lesser period of actual service) immediately prior to the termination of the Employee’s employment relationship. A Separation from Service shall not be deemed to have occurred if the Employee is absent from active employment due to military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed the greater of (i) six months or (ii) the period during which the Employee’s right to reemployment by the Company or any Company Entity is provided either by statute or contract.

                (n)     Specified Employee “Specified Employee” means an employee of the Company or any Company Entity who is a “specified employee” as defined in Section 409A(a)(2)(b)(i) of the Code and Treas. Reg. §1.409A-1(i). If the Employee is a key Employee as of the applicable identification date, the Employee shall be treated as a Specified Employee for the 12-month period beginning on the first day of the fourth month following such identification date. The applicable identification date for purposes of this Agreement shall be September 30 of each year.

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                (o)     Target Bonus Amount. “Target Bonus Amount” means with respect to the Employee for the fiscal year during which the Employee’s employment terminated SAMPLE of the greater of the Employee’s annual base salary (i) as in effect immediately prior to the Termination Date or (ii) at the highest rate in effect at any time during the ninety (90) day period immediately prior to the applicable Change in Control.

                (p)     Termination Date. For purposes of this Agreement, “Termination Date” shall mean (a) in the case of Employee’s death, Employee’s date of death, (b) in the case of Good Reason, the last day of Employee’s employment and, (c) in all other cases, the date specified in the Notice of Termination; provided, that if Employee’s employment is to be terminated by the Company due to Disability, such employment shall not be terminated if Employee returns to the full-time performance of his or her material duties prior to the date specified in the Notice of Termination.

        3.    Termination of Employment. If, during the term of this Agreement and within twenty-four (24) months following a Change of Control, Employee’s employment with the Company and all Company Entities terminates, and conditioned upon and subject to Employee’s execution of a release agreement referred to in Section 15 hereof, Employee shall be entitled to the following compensation and benefits following such termination:

                (a)     If Employee’s employment with the Company and all Company Entities is terminated for Cause or by Employee other than for Good Reason, the Company shall pay to Employee only the Accrued Compensation.

                (b)     If Employee’s employment with the Company is terminated due to death or Disability, then the Company shall pay to Employee the Accrued Compensation and the Target Bonus Amount.

                (c)     If Employee’s employment with the Company shall be terminated for any reason other than as specified in Sections 3(a) and 3(b) hereof, Employee shall be entitled to the following:

                (i)     the Company shall pay Employee all Accrued Compensation;

                (ii)     the Company shall pay Employee as severance pay, in lieu of any further compensation for periods subsequent to the Termination Date, an amount in cash equal to the sum of (A) the Base Amount and (B) the Bonus Amount; and

                (iii)     in the event that the Employee makes a timely election of COBRA continuation coverage for the Employee or his spouse or dependants under any group health plan provided by the Company, the Company shall either pay directly or reimburse Employee for the cost of all premiums for such coverage.

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                (d)     Employee’s rights under any Company sponsored employee benefit plan, program or arrangement or with respect to any equity based incentives awarded to Employee shall be determined in accordance with the applicable plan or other operative document.

                (e)     All cash amounts payable under Section 3(a), 3(b) or Section 3(c) shall be paid in a single lump sum within fifteen (15) days after the date of the Employee’s Termination Date (or earlier, if required by applicable law) or Separation from Service, if later. Reimbursement payments of COBRA continuation premiums under Section 3(c)(iv) above shall be made in a lump sum within fifteen (15) days of the date such premiums are paid by the Employee and in all events prior to the end of the Employee’s taxable year following the taxable year in which such premiums were paid by the Employee.

                (f)     The Company shall be authorized to withhold from all payments to the Employee hereunder all amounts required to be withheld under applicable local, state or federal income and employment tax laws.

                (g)     The Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Employee in any subsequent employment.

                (h)     The severance pay and other benefits provided for in this Section 3 shall be in lieu of any other severance or termination pay to which the Employee may be entitled under any general Company severance or termination plan, program, practice or arrangement, but shall be in addition to any other payments or benefits to which the Employee may become entitled based on the occurrence of a Change in Control, including any bonus payable to the Employee under the Company’s Financial Performance Incentive Program as in effect for the fiscal year in which the Change of Control occurs..

                (i)     The Employee’s entitlement to any other benefits as a result of a termination of employment shall be determined in accordance with the Company’s employee benefit plans and other applicable programs, policies and practices then in effect.

                (j)     If the Company terminates the Employee’s employment with the Company and all Company entities other than for Cause or as a result of Employee’s Disability during the one hundred and eighty (180) day period immediately preceding a Change of Control, Employee shall be entitled to the payments and benefits provided for in Section 3(c). All cash amounts payable under Section 3(c) shall be paid within fifteen (15) days of the occurrence of the Change of Control. COBRA premium reimbursements shall be made in accordance with Section 3(e), provided that any pre-Change of Control premiums paid by the Employee shall be reimbursed within fifteen (15) days of the occurrence of the Change in Control.

                (k)     Notwithstanding any other Section of this Agreement, if the Employee is a Specified Employee at the time of Employee’s Separation from Service, payments or distribution of property to Employee provided under this Agreement, to the extent considered amounts deferred under a non-qualified deferred compensation plan (as defined in Section 409A of the Code) shall be deferred until the six-month anniversary of such Separation from Service to the extent required in order to comply with Section 409A of the Code and Treasury Regulation 1.409A-3(i)(2).

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        4.    Excess Parachute Payment Gross-Up.

                (a)     If in the opinion of Tax Counsel (as defined in Section 4(c) below) the Employee will be subject to an excise tax under Code Section 4999 (“Excise Tax”) with respect to all or any portion of the payments to be made by the Company to the Employee following a termination of the Employee’s employment, under this Agreement or otherwise, then the following will apply:

                (i)     If the aggregate present value of all payments which would be taken into account for purposes of determining the amount of the Excise Tax, if any, payable by the Employee under Code Section 4999 (“280G Payments”) is greater than the sum of 300% of the Employee’s “base amount” for purposes of Code Section 280G (“280G Base Amount”), plus $100,000, then the Company shall pay to the Employee within thirty (30) days after such determination (and in all events prior to March 15 of the year following the year of termination) an additional amount (the “Gross-Up Payment”). The Gross-Up Payment shall be in such amount such that the net amount retained by the Employee, after deduction of any Excise Tax (but not federal, state or local income and employment taxes) on the 280G Payments and any Excise Tax and federal, state or local income and employment taxes on the Gross-Up Payment equals the 280G Payments. For purposes of determining the amount of the Gross-Up Payment, the Employee shall be deemed to pay federal income taxes at the highest marginal federal income tax rate and state and local income taxes at the highest marginal income tax rates in the state and locality where the Employee resides on the Termination Date. In determining the Gross-Up Payment, the Employee’s deemed federal income tax liability shall be determined net of the maximum reduction in federal income taxes that could be obtained from the deduction of state and local income taxes.

                (ii)     If the aggregate present value of all 280G payments is less than or equal to the sum of 300% of the Employee’s 280G Base Amount, plus $100,000, then the Company and the Employee agree that the amount of payments to be made by the Company to the Employee under this Agreement shall be reduced such that the present value of 280G Payments to be received by the Employee is reduced to 299.99% of the Employee’s Base Amount (“Scaled Back Amount”).

                (b)     If there is a final determination, pursuant to a binding, irrevocable agreement between the Employee and the Internal Revenue Service or pursuant to a final, non-appealable order of a court of competent jurisdiction, that the amount of the Excise Tax payable by the Employee is greater than the Excise Tax amount used in computing the Gross-Up Payment, then the Company shall pay to the Employee within thirty (30) days of such determination (and in all events prior to the end of the calendar year following the calendar year in which Employee pays such additional Excise Tax amount) an additional payment (“Supplemental Gross-Up Payment”) in such amount so that the net amount retained by the Employee, after deduction of any Excise Tax (but not federal, state, and local income and employment taxes)on the 280G Payments and any Excise Tax and federal, state or local income and employment taxes on the Gross-Up Payment and Supplemental Gross-Up Payment equals the 280G Payments.. If under such final determination the amount of the Excise Tax ultimately payable by the Employee is less than the amount of Excise Tax used in computing the Gross-Up Amount, then the Employee shall refund to the Company such amount so that the net amount retained by the Employee, after deduction of any Excise Tax (but not federal, state and local income and employment taxes)on the 280G Payments and any Excise Tax and federal, state or local income and employment taxes on the Gross-Up Payment, equals the 280G Payments.

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                (c)     For purposes of this Section 4, within sixty (60) days after the Termination Date of the Employee within twenty-four (24) months of a Change of Control with respect to the Company (or, if an event other than termination of employment results in payment of parachute payments under Section 280G and it is reasonably possible that such parachute payments could result in an excise tax, with sixty (60) days after such other event), the Company shall obtain, at its expense, the opinion (which need not be unqualified) of nationally recognized tax counsel (“Tax Counsel”) selected by the Compensation Committee of the Board, which sets forth (i) the 280G Base Amount; (ii) the aggregate present value of the payments in the nature of compensation to the Employee as prescribed in Section 280G(b)(2)(A)(ii); and (iii) the amount and present value of any “excess parachute payment” within the meaning of Section 280G(b)(1). Such opinion shall be addressed to the Company and the Employee and shall be binding upon the Company and the Employee. For purposes of such opinion, the value of any non-cash benefits or any deferred payment or benefit shall be determined by an independent accounting firm selected by the Compensation Committee of the Company’s Board in accordance with the principles of Section 280G and regulations thereunder, which determination shall be evidenced in a certificate of such firm addressed to the Company and the Employee.

        5.    Successors; Binding Agreement.

        (a)     This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns. The Company shall require (i) any successors and assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place, and (ii) the parent entity, if any, of any such successors and assigns to guarantee the performance of any such Successors and Assigns hereunder.

        (b)     Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by Employee or Employee’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee’s legal personal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

        6.    Notice. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be delivered in person, by facsimile, or by certified or registered mail with return receipt requested. Each such notice, request, demand, or other communication shall be effective: (a) if delivered by hand, when delivered at the address specified in this Section 6; (b) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 6 and confirmation is received; or (c) if given by certified or registered mail, three (3) days after the mailing thereof. Notices to the Employee shall be delivered to the last mailing address that the Employee has provided to the Company for purposes of receiving tax statements and other notices. Notices to the Company shall be delivered as follows:

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Smart Balance, Inc.
115 West Century Road
Suite 260
Paramus, New Jersey 07625
Attn. General Counsel

        Any party may change its address or other contact information for the purposes hereof by providing notice thereof to the other party in accordance with the foregoing provisions.

        7.    Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which Employee may qualify, nor shall anything herein limit or reduce such rights as the Employee may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

        8.    No Implied Employment Rights. The Employee hereby acknowledges and agrees that nothing in this Agreement shall be construed to imply that his or her employment is guaranteed for any period of time. The Employee understands and agrees that his or her employment is, unless otherwise specified in a written agreement signed by the Employee and a duly authorized officer of the Company, “at will,” which means that either the Company or the Employee can terminate the employment relationship at any time, with or without advance notice, for any reason or no reason, and with or without cause. The Employee acknowledges and agrees that the only way that his or her “at will” employment relationship, if applicable, can be altered is by a written agreement signed by the Employee and a duly authorized officer of the Company.

        9.    Settlement Of Claims. Employee hereby agrees that, to the extent permitted by law, the Company’s obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be reduced by any amounts owed by the Employee to the Company including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee.

        10.    Miscellaneous. No provision of this Agreement may be modified, waived or discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof has been made by either party which is not expressly set forth in this Agreement.

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        11.    Governing Law. This Agreement has been negotiated and executed in the State of New Jersey and is to be performed in New Jersey. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New Jersey, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in the State of New Jersey.

        12.    Severability. If any provision of this Agreement, or the application thereof in any circumstance, is or becomes illegal, invalid or unenforceable, such provision shall be deemed severable and the invalidity or unenforceability of any such provision shall not affect the validity or enforceability of the other provisions hereof.

        13.    Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, if any, whether oral or written, between the parties hereto with respect to the subject matter hereof, including, but not limited to, any prior severance, change of control or similar agreements, understandings or arrangements previously entered into between the Company and the Employee.

        14.    Severance and Release Agreement. The Employee’s right to the severance payments under this Agreement shall be conditioned upon the Employee’s execution and delivery of a release agreement in a form attached hereto as Exhibit A.

        15.    Remedies. All rights, remedies, undertakings, obligations, options, covenants, conditions, and agreements contained in this Agreement shall be cumulative and no one of them shall be exclusive of any other.

        16.    Legal Fees. The Company shall pay directly or reimburse the Employee for all reasonable legal fees and expenses incurred by the Executive in disputing in good faith any issue under this Agreement relating to the termination of the Employee’s employment, in seeking in good faith to obtain or enforce any benefit or right under this Agreement or in any tax audit or proceeding to the extent related to issues regarding the application of section 4999 of the Internal Revenue Code of 1986, as amended. Such payments or reimbursements shall be made within five (5) business days after receipt by the Company of the Employee’s written request for payment or reimbursement accompanied by such evidence of the amount of fees and expenses incurred as the Company may reasonably request. For purposes of this Section 16, any dispute by the Employee shall be presumed to be in good faith unless the Company establishes by clear and convincing evidence that the dispute was not in good faith.

        17.    Interpretation. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa. The descriptive headings of the sections and subsections of this Agreement are inserted for convenience only and shall not control or affect the interpretation or construction of any of the provisions herein.

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        18.    Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

        19.    Further Documents and Acts. Each of the parties hereto agrees to cooperate in good faith with the other and to execute and deliver such further instruments and perform such other acts as may be reasonably necessary or appropriate to consummate and carry into effect the transactions contemplated under this Agreement.

        20.    Consultation with Counsel. Employee acknowledges (a) that he or she has been given the opportunity to consult with counsel of his or her own choice concerning this Agreement, and (b) that he or she has read and understands this Agreement, is fully aware of its legal effect, and has entered into it freely based upon his or her own judgment with or without the advice of such counsel.

        THE EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS. THE EMPLOYEE FURTHER ACKNOWLEDGES THAT HE OR SHE HAS BEEN ADVISED BY THE COMPANY OF HIS OR HER RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OR HER OWN CHOICE CONCERNING THIS AGREEMENT. BY SIGNING THIS AGREEMENT, THE EMPLOYEE AND THE COMPANY AGREE TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT.

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        IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Employee has executed this Agreement as of the day and year first above written.

SMART BALANCE, INC.

By:  ____________________________________________

        Robert Gluck, Vice Chairman

_______________________________________________

EMPLOYEE

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Exhibit A

RELEASE

                Date: ________________________

                In consideration of the agreement of Smart Balance, Inc. (“Company”) to enter into that certain Change of Control Agreement, dated as _____________, 2009 (“Agreement”), with the undersigned and the promises and covenants of the Company made thereunder, the undersigned, on behalf of himself and his respective heirs, representatives, executors, family members, and assigns hereby fully and forever releases and discharges the Company and its past, present and future shareholders, directors, officers, employees, agents, attorneys, investors, administrators, affiliates, divisions, subsidiaries, predecessors, successors and assigns from and against, and agrees not to sue or otherwise institute or cause to be instituted any legal, alternative dispute resolution or administrative proceeding concerning, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that he may possess arising from any omissions, acts or facts that have occurred through the date his employment terminates, including without limitation:

                1.     Any and all claims relating to or arising from his employment by Company and the termination of such employment;

                2.     Any and all claims under the Agreement or any other agreement or understanding governing the service relationship between the Company and the undersigned;

                3.     Any and all claims for wrongful discharge, termination in violation of good policy, discrimination, breach of contract, both expressed or implied, covenants of good faith or fair dealing, both expressed or implied, promissory estoppel, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, unfair business practice, defamation, libel, slander, negligence, personal injury, assault, battery, invasion of privacy, false imprisonment, or conversion;

                4.     Any and all claims for violation of any federal, state or municipal statute, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, and all amendments to each such Act as well as the regulations issued there under;

                5.     Any and all claims based on the violation of the federal or any state constitution;

                6.     Any and all claims for attorneys’ fees and costs.

                The foregoing release shall not apply with respect to (i) Company’s payment obligations under Paragraph 3 of the Change of Control Agreement, (ii) any obligation, whether to pay money or otherwise, of a successor to the Company created under any agreement relating to a Change of Control with respect to the Company, (iii) or the undersigned’s rights under any “employee benefit plans” as that term is defined in the Employee Retirement Income Security Act of 1974, as amended, or any award made to the undersigned under the Smart Balance, Inc. Stock and Award Plan or the Amended and Restated Smart Balance, Inc. Stock and Award Plan.

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                The undersigned acknowledges that (i) he has been advised by Company to consult a lawyer of his own choice prior to executing this release and has done so or voluntarily declined to seek such counsel, (ii) he has read this release and understands the terms and conditions hereof and the binding nature hereof, (iii) he has had at least twenty-one (21) days within which to consider the terms of this release and executed this release voluntarily and without duress or undue influence on the part of Company, (iv) he has seven (7) days to revoke his execution of this release and that such execution shall not be effective until seven (7) days following delivery to Company (“Effective Date”), and (v) he understands that his right to receive payments under Paragraph 3 of the Change of Control Agreement is subject to and conditioned on the undersigned’s signing and delivering this release to Company.

                Initially capitalized terms used in this release and defined in the Agreement shall have the meanings given to such terms under the Agreement.

_____________________________________

Printed Name

_____________________________________

Signature

Date:  ________________________________

_____________________________________
Notary

My Commission expires _____________

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EX-99.1

Smart Balance Announces 2008 Third-Quarter Results

• Net sales $57.5 million, up 39% versus year ago

• Net loss $1.6 million, includes non-cash charges of $5.0 million

• 2008 Second Half outlook unchanged: 25%-35% growth in net sales

Paramus, N.J. (November 6, 2008) – Smart Balance, Inc. (NasdaqGM: SMBL) today announced its results for the third quarter ended September 30, 2008. The Company reported net sales of $57.5 million, an increase of 38.6% versus year ago, and a net loss of $1.6 million, reflecting the after-tax impact of $5.0 million of non-cash items, including $2.5 million of stock-based compensation expense, $1.7 million of change in fair value of an interest rate swap and $0.9 million of amortization and depreciation. The net loss was $0.03 on both diluted and basic shares.

“The 38.6% increase in net sales was the result of the broad-based distribution gains from our ‘Plus Six’ initiative and acceptance of our new spreads products. The increase in sales also reflected support from our loyal consumer base in traditional supermarkets as well as the addition of new users in supercenters and warehouse clubs,” said Stephen B. Hughes, Smart Balance Chairman and CEO. “We are pleased with the performance in the third quarter and we are prepared for a very competitive environment during the upcoming holiday periods. Key elements of our fourth quarter will be our new 50/50 butter blend stick for the cooking and baking season and a strong promotional program supporting our core categories.”

The net sales increase versus 2007 was due to higher pricing to recover commodity cost increases and a 15% increase in case shipments. Selling prices in the Company’s core category of spreads were increased in February, June, and August to cover rising costs.

The Company’s spreads products, which represent approximately 70% of its sales, increased market share by 1.5 points to 13.9% in the third quarter versus the prior year.

Gross profit margin for the quarter was 43.8%, versus 48.0% in the prior year, as the rate of selling price increases lagged the rate of commodity cost increases. Costs continued to rise in the third quarter versus prior periods but are expected to stabilize and begin to trend lower late in the fourth quarter.

The Company paid down $5.0 million of long-term debt during the quarter and met its debt covenants. Year-to-date, $35 million of long-term debt has been paid down. The Company plans to pay down additional debt in the fourth quarter.

The Company recently signed a multi-year agreement with Brandeis University to fund research to develop new product technologies for existing and future categories. Under the terms of the collaborative partnership, Smart Balance will contribute funding and consumer research to identify areas of consumer focus and Brandeis will provide technological expertise. In return, Smart Balance will receive an option to license any of the resulting technologies for use in its products.

“Our business is on solid ground. We continue to grow market share and sales despite the difficult economic environment. We are encouraged by the strengthening of the spreads category, reflecting a trend toward more in-home dining,” said Hughes. “Our performance in the second half of 2008 will give us a great base for expansion and growth in 2009.”

Change in Accounting Principles
In 2008, the Company began accounting for certain trade incentives and marketing costs as prepaid expenses to better match recognition of expense to revenue, consistent with the general practice in the consumer product goods industry. This methodology is a change from prior years.  While this methodology may create timing differences between prior year’s quarters on an operating basis, it has no impact on full year results. In accordance with FAS No. 154, a retrospective application of the change in accounting principle has been applied to 2007 quarterly results included herein to improve comparability.

2008 Third Quarter Results
Net sales increased 38.6% to $57.5 million in 2008, from $41.5 million in 2007, primarily due to higher prices and a 15% increase in cases shipped. The Company increased prices on its products in August to cover rising costs, following similar pricing actions in February and June. In addition, reduced sizes of its largest volume spreads products were shipped to all customers during the third quarter, bringing Smart Balance in line with the rest of the industry.

The increase in cases shipped was due primarily to the success of new products (extra virgin olive oil spreads, omega-3 enhanced spreads, 50/50 butter blend, and milk) and higher sales of cooking oil. The Company’s ‘Plus Six’ distribution drive achieved improved placement of Smart Balance ® products, facilitating the gain in cases shipped.

Market share for Smart Balance® family of spreads increased versus the prior year for the 27^th consecutive quarter. The spreads category continued to experience higher prices to cover rising costs together with promotional activity in the last six weeks of the quarter to attract increasingly price sensitive consumers. Market share for cooking oil increased in the quarter while shares for peanut butter and microwave popcorn declined.

On an operating basis⁽¹⁾, net sales increased 38% in the quarter versus prior year and were above the 36% growth in estimated consumer purchases of our products across all channels – dollar sales at retail. For the first nine months of 2008, net sales growth of 25% versus prior year was similar to the 25% growth in estimated consumer purchases of our products across all channels for the same period.

⁽¹⁾     In addition to its GAAP results, the Company has provided operating basis results to explain year –over-year changes. The operating basis should not be viewed in isolation or as a substitute for GAAP results. A reconciliation of operating basis results to GAAP results is provided in the accompanying tables.

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Comparison of Net Sales to Consumer Purchases Across All Channels
Change versus Prior Year

	First Quarter	Second Quarter	Third Quarter	First Nine Months
Net Sales	+25%	+13%	+38%	+25%
Consumer Purchases Across All Channels
(Dollar Sales at Retail)(1)	+15%	+21%	+36%	+25%

^{(1) Source: IRI, Company estimates}

Gross profit increased $5.3 million to $25.2 million in 2008 from $19.9 million in 2007 due to the growth in case shipments and the impact of higher pricing, partially offset by increases in input costs, primarily in commodity raw materials, and higher coupon redemption expenses. Gross profit as a percent of net sales decreased to 43.8% in 2008 from 48.0% in the third quarter of 2007, as the rate of selling price increases lagged the rate of input cost increases, in addition to higher coupon redemption expenses.

Operating income increased $1.7 million to $2.6 million in 2008 from $0.9 million in 2007 due primarily to the increase in gross profit partially offset by higher marketing costs of $2.3 million and an increase in selling and distribution costs of $1.1 million. The increases in marketing, selling and distribution costs were in line with the net sales growth versus prior year. General and administrative expenses increased less than $0.1 million in 2008 versus 2007 as higher costs from the expansion of the Company’s infrastructure were offset by timing of legal expenses in the prior year.

Operating income in the third quarters of 2008 and 2007 included non-cash charges of $4.9 million and $4.7 million, respectively. See the table below for the non-cash items affecting operating income.

Items Affecting GAAP Operating Income - Third Quarter

$ in Millions	2008	2007
Operating Income	2.6	0.9
Non-cash charges affecting Operating Income:
FAS 123R Stock Option Expense	3.7	3.7
Depreciation & Amortization	1.2	1.0
	4.9	4.7
Operating Income excluding non-cash charges	7.5	5.6

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Net Loss was lower by $31.4 million to $1.6 million in 2008 versus $33.0 million in 2007. Excluding the after-tax impact of non-cash charges, net income in 2008 was $3.5 million versus a net loss in 2007 of $0.6 million. Interest expense was $4.5 million in the third quarter and included a $2.6 million non-cash change in fair value of an interest rate swap related to the Company's long-term debt. The after-tax impact of the adjustment was a loss of $1.7 million. See the table below for non-cash items affecting net income (loss).

Items Affecting GAAP Net Income (Loss) - Third Quarter

$ in Millions	2008	2007
Net Income (Loss)	(1.6)	(33.0)
Non-cash charges after-tax affecting Net Loss:
FAS 123R Stock Option Expense	2.5	2.2
Depreciation & Amortization	0.8	0.6
Accelerated Financing Amortization	0.1	--
Change in Fair Value of an Interest Rate Swap	1.7	--
Loss on Derivative Liability	--	29.6
	5.1	32.4
Net Income (Loss) excluding non-cash charges after-tax	3.5	(0.6)

2008 Year-to-date Results
The Company’s GAAP financial statements include the results of its acquisition of GFA Brands, Inc. since the date of acquisition on May 21, 2007. Because there were no operations prior to the acquisition, year-to-date results are not comparable to prior periods. The Company has provided operating basis results that include the operating results of Smart Balance Inc. from the date of its acquisition of GFA Brands, Inc. and the operating results of GFA Brands prior to the acquisition. Management believes that this presentation provides more useful information because it reflects the performance of the operating entity in both the current and prior periods presented. The operating basis results should not be viewed in isolation or as a substitute for reported GAAP results. Year-to-date operating results and a reconciliation of operating basis results to GAAP results are provided in the accompanying table.

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2008 Outlook
Smart Balance’s outlook for the second half of 2008 continues to reflect growth in net sales on an operating basis in line with its long-term target of approximately 30%. Increased distribution achieved through the Company’s ‘Plus Six’ drive and the innovations in its core category — extra virgin olive oil spreads, omega-3 enhanced spreads and 50/50 butter blend — will begin to have a solid impact. The Company’s target for second half sales growth is unchanged at 25%-35% versus 2007. Because of the highly competitive, highly promotional holiday season, the fourth quarter growth rate is expected to be lower than third quarter growth rate of 39%. The fourth quarter will likely experience continued uncertainty around consumer reaction to higher prices throughout the store. The Company has maintained a loyal base of consumers, as evidenced by its market share growth; however, the ability to generate trial of the Company’s premium priced products by potential new consumers may become more difficult in the current environment. Gross profit as a percent of net sales will be lower in 2008 versus 2007 as pricing actions are expected to continue to trail rising input costs. The Company anticipates additional non-cash changes in fair value of an interest rate swap, given the current interest rate environment. The Company plans to continue to meet the covenants related to its long-term debt.

FORWARD-LOOKING STATEMENTS
Statements made in this press release that are not historical facts, including statements about the Company’s plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may include use of the words “expect”, “anticipate”, “plan”, “intend”, “project”, “may”, “believe” and similar expressions. Forward-looking statements speak only as of the date they are made, and, except for the Company’s ongoing obligations under the U.S. federal securities laws, the Company undertakes no obligation to publicly update any forward-looking statement, whether to reflect actual results of operations, changes in financial condition, changes in general economic or business conditions, changes in estimates, expectations or assumptions, or circumstances or events arising after the issuance of this press release. Actual results may differ materially from such forward-looking statements for a number of reasons, including those risks and uncertainties set forth in the Company’s filings with the SEC and the Company’s ability to:

• raise prices as fast as commodity costs increase;

• introduce and expand distribution of new products;

• meet marketing and infrastructure needs;

• meet long-term debt covenants; and

• continue to grow net sales in a competitive environment with rising costs and an increasingly price sensitive consumer.

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About Smart Balance, Inc.
Smart Balance, Inc. (NasdaqGM: SMBL) is committed to providing superior tasting heart healthier alternatives in every category it enters by avoiding trans fats naturally, balancing fats and/or reducing saturated fats, total fat and cholesterol. The Company’s products include Smart Balance® Buttery Spreads, Milk, Butter Blend Sticks, Cream Cheese, Peanut Butter, Microwave Popcorn, Cooking Oil, Mayonnaise, Non-Stick Cooking Spray and Cheese. For more information about products and the Smart Balance™ Food Plan, visit http://www.smartbalance.com.

                                                                      ###

Media Contact:	Investor Contact:
Mark Walsh	John Mintz
Senior Account Supervisor	Vice President Finance &
TBC Public Relations	Investor Relations
mwalsh@tbc.us	Smart Balance, Inc.
646-366-1470	investor@smartbalance.com
	201-568-9300

6

SMART BALANCE, INC. AND SUBSIDIARY
Consolidated Balance Sheets

	September 30, 2008			December 31, 2007
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,384,472		$	37,648,754
Accounts receivable, net of allowance 2008- $260,056 and
2007-$228,871		14,100,748			11,733,117
Accounts receivable - other		446,883			799,470
Inventories		9,678,544			7,202,198
Prepaid taxes		4,453,155			6,517,833
Prepaid expenses and other assets		6,841,525			1,454,866
Deferred tax asset		1,072,297			1,079,509
Total current assets		43,977,624			66,435,747
Property and equipment, net		4,013,757			1,805,331
Other assets:
Goodwill		374,885,923			374,885,923
Other intangibles, net		156,239,909			159,645,634
Deferred costs, net		2,247,754			3,519,412
Other assets		173,265			74,975
Total other assets		533,546,851			538,125,944
Total assets	$	581,538,232		$	606,367,022
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	21,550,173		$	20,355,419
Income taxes payable		2,265,901			1,035,149
Total current liabilities		23,816,074			21,390,568
Long term debt		84,504,174			119,504,174
Deferred tax liability		49,516,398			53,293,528
Derivative liability		2,582,524			--
Other liabilities		137,302			--
Total liabilities		160,556,472			194,188,270
Commitment and contingencies:
Stockholders' equity
Series A Convertible Preferred stock, $.0001 par value,
50,000,000 shares authorized; 15,388,889 preferred
shares converted into 19,516,832 shares of common stock
on January 3, 2008		--			175,659,013
Common stock, $.0001 par value, 250,000,000 shares
authorized; 62,630,683 (September 30, 2008) and
43,113,863 (December 31, 2007) issued and outstanding..		6,263			4,311
Additional paid in capital		504,266,685			315,479,759
Retained deficit		(83,291,188	)		(78,964,331	)
Total stockholders' equity		420,981,760			412,178,752
Total liabilities and stockholders' equity	$	581,538,232		$	606,367,022

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SMART BALANCE, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)

	Three months ended September 30, 2008			Three months ended September 30, 2007			Nine Months ended September 30, 2008			Nine Months ended September 30, 2007
Net sales	$	57,531,521		$	41,502,575		$	156,311,306		$	60,151,818
Cost of goods sold		32,344,738			21,591,160			88,397,643			31,499,243
Gross profit		25,186,783			19,911,415			67,913,663			28,652,575
Operating expenses:
Marketing		8,898,048			6,472,666			23,738,638			9,520,155
Selling		4,565,600			3,459,572			12,677,592			5,099,652
General and administrative		9,147,806			9,063,951			27,462,573			12,860,284
Total operating expenses		22,611,454			18,996,189			63,878,803			27,480,091
Operating income		2,575,329			915,226			4,034,860			1,172,484
Other income (expense):
Interest income		19,119			42,675			283,486			2,342,644
Interest expense		(4,547,179	)		(3,922,836	)		(9,767,967	)		(6,022,417	)
Loss on derivative liability		--			(29,646,232	)		--			(50,532,926	)
Other income (expense), net		(434,153	)		10,721			(1,412,869	)		130,327
Total other (expense)		(4,962,213	)		(33,515,672	)		(10,897,350	)		(54,082,372	)
(Loss) before income taxes		(2,386,884	)		(32,600,446	)		(6,862,490	)		(52,909,888	)
(Benefit) provision for income taxes		(772,811	)		407,129			(2,535,633	)		948,851
Net (loss)	$	(1,614,073	)	$	(33,007,575	)	$	(4,326,857	)	$	(53,858,739	)
Less: Unpaid dividends on cumulative
preferred stock		--			2,817,868			--			4,062,467
Net (loss) available for common stock	$	(1,614,073	)	$	(35,825,443	)	$	(4,326,857	)	$	(57,921,206	)
(Loss) per share:
Basic	$	(0.03	)	$	(1.25	)	$	(0.07	)	$	(2.71	)
Diluted	$	(0.03	)	$	(1.25	)	$	(0.07	)	$	(2.71	)
Weighted average shares outstanding:
Basic		62,630,683			28,766,133			62,487,703			21,376,293
Diluted		62,630,683			28,766,133			62,487,703			21,376,293

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SMART BALANCE, INC. AND SUBSIDIARY
Reconciliation of Operating Basis to GAAP Basis

Prior to Smart Balance, Inc.‘s May 21, 2007 acquisition of GFA Brands, Inc., operating income consisted largely of formation costs and other expenses incurred in seeking and evaluating potential business combinations. We have added these expenses back to the operating basis results below, as GFA incurred its own operating expenses for these periods, and the inclusion of the parent company’s expenses prior to the date of acquisition make it difficult to compare operating results period to period. Additionally, in 2008, the Company began accounting for certain trade incentives and marketing costs as prepaid expense to better match recognition of expense to revenue.  A retrospective application of the change in accounting principle is being applied to 2007 quarterly results to improve comparability. With the information set forth below, management and stockholders would be better able to determine whether or not sales or operating income of the acquired business have improved in 2008 compared with prior periods. The operating basis results provided below are intended to assist the reader in comparing the operating performance of the GFA business we acquired, for the periods before and after the acquisition. However, they do not indicate what consolidated results would have been had we acquired GFA on January 1, 2007. The operating basis results should not be viewed in isolation or as a substitution for GAAP results.

($ in millions) (unaudited)	As reported Form 10-Q(1)		Add GFA Results Prior to Acquisition			Adjustments(2)			Operating Basis
Three Months Ended September 30, 2008
Net Sales	$	57.5	$	--		$	-		$	57.5
Gross Profit		25.2		--			--			25.2
Operating Income		2.6		--			--			2.6
Three Months Ended September 30, 2007
Net Sales	$	41.5	$	0.1		$	-		$	41.6
Gross Profit		19.9		0.1			--			20.0
Operating Income		0.9		(0.1	)		--			0.8
Nine Months Ended September 30, 2008
Net Sales	$	156.3	$	--		$	-		$	156.3
Gross Profit		67.9		--			--			67.9
Operating Income		4.0		--			--			4.0
Nine Months Ended September 30, 2007
Net Sales	$	60.2	$	64.4		$	-		$	124.6
Gross Profit		28.7		31.7			(0.1	)		60.3
Operating Income		1.2		12.5			1.5			15.2

⁽¹⁾     The retrospective application of the change in accounting principle resulted in adjustments to previously reported amounts of $(0.2) million and $(4.4) million to net sales and operating income, respectively, for the third quarter of 2007 and $(0.2) million and $(4.7) million to net sales and operating income, respectively, for the nine month period ended September 30, 2007.

⁽²⁾     To remove parent company pre-acquisition expenses from results prior to the acquisition date. Parent company expenses incurred beginning May 21, 2007 remain included in operating basis results.

9