Employee Benefits Agreement

EMPLOYEE BENEFITS AGREEMENT


THIS EMPLOYEE BENEFITS AGREEMENT (this "Agreement") is entered into by and between Epitope, Inc., an Oregon corporation ("Epitope"), and Agritope, Inc., a Delaware corporation ("Agritope"), as of December 1, 1997.


RECITALS


A. The board of directors of Epitope has determined that it is in the best interests of Epitope and its shareholders to separate the businesses of Epitope and Agritope.


B. In furtherance of the plan to separate the businesses, Epitope and Agritope have entered into that certain Separation Agreement dated December 1, 1997 (the "Separation Agreement"), pursuant to which Epitope will make a dividend distribution to its shareholders (the "Distribution") of all the issued and outstanding shares of Agritope common stock, par value $.01 per share, including certain preferred stock purchase rights attached thereto, held by Epitope, on the terms and conditions contained therein.


C. In connection with the Distribution, Epitope and Agritope desire to provide for the allocation between them of assets, liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs following the Distribution.


NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, Epitope and Agritope agree as follows:


ARTICLE 1
DEFINITIONS


Capitalized terms shall have the meanings given below or elsewhere in this Agreement, or as set forth in the Separation Agreement.


401(k) Retirement Plan: A defined contribution plan maintained pursuant to Section 401(k) or 401(a) of the Code for Employees and their beneficiaries. The following are specific 401(k) Retirement Plans:


(i) Agritope 401(k) Plan: The Agritope, Inc. 401(k)
Profit Sharing Plan to be adopted by Agritope prior
to the Distribution Date pursuant to Section 5.1(a)
of this Agreement.


(ii) Epitope 401(k) Plan: The Epitope, Inc. 401(k) Profit
Sharing Plan, in effect as of the date hereof.


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Additional Insurance Plans: Insurance plans providing insurance benefits other than Medical/Dental Plan benefits to Employees, including Life Insurance and Accidental Death and Dismemberment Insurance.


Agritope Board: The board of directors of Agritope.


Agritope Option Plan: The Agritope, Inc. 1997 Stock Award Plan to be adopted pursuant to Section 3.4 of this Agreement.


Agritope Stock Distribution Value: See definition in Section 3.1(b).


Agritope Stock Plans: The Agritope Option Plan and the Agritope Purchase Plan. Each Agritope Stock Plan will contain substantially the same material provisions as the corresponding Epitope Plan.


Distribution Date: The effective date of the Distribution, as determined by the Epitope board of directors.


Distribution Ratio: The number (which may be or include a fraction) of shares of Agritope Stock to be issued in the Distribution to Epitope shareholders for each share of Epitope Stock as determined by the Epitope Board.


Employee: An individual who, on the Distribution Date, is an employee of either Epitope or Agritope or any of its subsidiaries. There will be two categories of Employees after the Distribution:


Agritope Employee: Any individual who is an employee
of Agritope or any of its subsidiaries immediately after the
Distribution.


Epitope Employee: Any individual who is an employee
of Epitope immediately after the Distribution.


Epitope Option Plans: The Epitope, Inc. Incentive Stock Option Plan and the Epitope, Inc. 1991 Stock Award Plan.


ERISA: The Employee Retirement Income Security Act of 1974, as amended, or any successor legislation.


Existing Agritope Option Plan: The Agritope, Inc. 1992 Stock Award Plan.


Existing Epitope Option: Each unexercised option to purchase Epitope Stock outstanding as of the close of business on the day before the Distribution Date, issued pursuant to an Epitope Option Plan or the Existing Agritope Option Plan.


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Medical/Dental Plan: A plan providing health benefits to Employees and their dependents, including:


(i) Agritope Medical/Dental Plans: The Medical/Dental Plans to
be established by Agritope in accordance with Section 5.2 hereof and


(ii) Epitope Medical/Dental Plans: The Epitope Medical/Dental
Plans in effect as of the date hereof and continued by Epitope after
the Distribution Date.


Plan: Any plan, policy, arrangement, contract or agreement providing compensation or benefits for any group of Employees or for any individual Employee or the dependents or beneficiaries of any such Employee, including without limitation any employee welfare and employee pension benefit plans (as defined in ERISA) and any employee option plans. The term "Plan" as used in this Agreement does not include any contract, agreement or understanding entered into by Epitope or Agritope relating to settlement of actual or potential employee-related litigation claims.


Purchase Plan: A stock-based Plan meeting the requirements of Section 423 of the Code. The following are specific Purchase Plans:


(i) Agritope Purchase Plan: The Agritope, Inc. 1997
Employee Stock Purchase Plan to be adopted by Agritope prior
to the Distribution Date pursuant to Section 4.2.


(ii) Epitope Purchase Plan: The Epitope, Inc. 1993
Employee Stock Purchase Plan, as amended, in effect as of the
date hereof.


Qualified Beneficiary: An individual (or dependent thereof) who either (1) experiences a "qualifying event" (as that term is defined in Code Section 4980B(f)(3) and ERISA Section 603) while a participant in any Medical/Dental Plan, or (2) becomes a "qualified beneficiary" (as that term is defined in Code Section 4980B(g)(1) and ERISA Section 607(3)) under any Medical/Dental Plan.


Service Time: The period taken into account under any Plan for purposes of determining length of service or plan participation to satisfy eligibility, vesting, benefit accrual and similar requirements under such Plan.


Welfare Plan: Any Plan that provides medical, health, disability, accident, life insurance, death, dental or any other welfare benefit, including, without limitation, any post-employment benefit.


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ARTICLE 2
EMPLOYMENT AND CREDITS


2.1 Allocation of Responsibilities on Distribution Date. On the Distribution Date, except as otherwise agreed between the parties, Agritope shall retain or assume, as the case may be, sole responsibility as employer for Agritope Employees, and shall cause any Agritope Employee that is then a party to any employment, change in control or other employment-related agreement with Epitope to terminate such agreement effective as of the Distribution Date (except confidentiality, indemnification, and similar agreements relating primarily to past services to Epitope). Except as otherwise provided in this Agreement, the fact that Agritope assumes or retains responsibility as employer of Agritope Employees as of the Distribution Date shall not, of itself, cause such employee to be deemed terminated under any Plan maintained by Epitope or Agritope.


2.2 Service Time. For purposes of determining Service Time under any Welfare Plan, Agritope shall credit each Agritope Employee with such Employee's Service Time and original hire date as may be reflected in Epitope's employment records as of the Distribution Date. Such Service Time and hire date shall continue to be maintained for as long as the Employee's employment with Agritope does not terminate. Agritope shall be free to make such determinations relating to Service Time under any Agritope Stock Plans as Agritope, in its sole discretion, deems appropriate. Subject to the provisions of ERISA, Agritope may, in its sole discretion, make such decisions as it deems appropriate with respect to determining Service Time for any Agritope Employee whose employment with Agritope is terminated following the Distribution Date but who is subsequently reemployed by Agritope.


ARTICLE 3
STOCK OPTIONS


3.1 Amendment of Epitope Option Plans. Prior to the Distribution Date, Epitope shall take all action necessary and appropriate to amend the Epitope Option Plans and, to the extent necessary and permissible without the consent of option holders, outstanding options issued under the plans to be consistent with the terms of this Section 3.1.


(a) Effect of Employment by Agritope. For purposes of
determining the period during which Existing Epitope Options remain
exercisable, employment by Agritope or any of its majority owned
subsidiaries following the Distribution Date shall be deemed employment
by Epitope, notwithstanding the fact that Agritope will no longer be a
subsidiary of Epitope after the Distribution Date. For continued or
future vesting and all other purposes relating to Existing Epitope
Options, employment by Agritope or any of its majority owned
subsidiaries after the Distribution Date shall not be deemed employment
by Epitope. Accordingly, any affected holder of an Existing Epitope
Options granted under Epitope Option Plans will be treated as a
terminated employee and options will continue to vest according to the
schedule provided in the applicable award agreement.


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(b) Adjustment to Exercise Price of Existing Epitope Options.
The per share exercise price of each Existing Epitope Option issued
under the Epitope Option Plans shall be reduced ten days after the
Distribution Date by subtracting the Agritope Stock Distribution Value
(as defined below) from the stated exercise price. "Agritope Stock
Distribution Value" is an amount intended to reflect the value of the
Agritope Stock distributed on each share of Epitope Stock, and is equal
to the product of (a) the average of the reported closing prices of
Agritope Stock on The Nasdaq SmallCap Market during the five
consecutive trading days beginning on the Distribution Date, multiplied
by (b) the Distribution Ratio.


3.2 Amendment of Existing Agritope Option Plan. Prior to the Distribution Date, Agritope shall take all action necessary and appropriate to amend the Existing Agritope Option Plan and/or outstanding Award Agreements (as defined in the Existing Agritope Option Plan) entered into in connection with the Plan to be consistent with the terms of this Section 3.2.


(a) Issuance of Epitope Stock Upon Exercise. Epitope Stock
shall be issued upon exercise of Existing Epitope Options granted
pursuant to the Existing Agritope Option Plan, notwithstanding the fact
that the options are denominated in shares of Agritope Stock. The
existing agreement between Epitope and Agritope providing for issuance
of Epitope Stock upon exercise of such options will be amended to
remain in effect following the Distribution.


(b) Effect of the Distribution. If the holder of Existing
Epitope Options granted under the Existing Agritope Option Plan is an
Agritope Employee after the Distribution, such holder shall for
continued or future vesting purposes be deemed terminated on the
Distribution Date but, for purposes of determining the period options
remain exercisable, such holder shall not be deemed terminated until
employment by Agritope is terminated. Accordingly, Existing Epitope
Options granted under the Existing Agritope Option Plan shall continue
to vest following the Distribution Date according to the vesting
schedule applicable to terminated employees set forth in the applicable
Award Agreement. If such option holder is an Epitope Employee, such
options shall continue to vest and be exercisable as set forth in the
Existing Agritope Option Plan or outstanding Award Agreements.


(c) Adjustment to Exercise Price of Options Issued Under
Existing Agritope Plan. The per share exercise price of each Existing
Epitope Option issued under the Existing Agritope Option Plan (which
price is stated in terms of Agritope Stock) shall be reduced ten days
after the Distribution Date by subtracting from the stated exercise
price the product of (a) the Agritope Stock Distribution Value,
multiplied by (b) the number (which will be a fraction) of shares of
Epitope Stock to be exchanged for each share of Agritope Stock for
which the option is exercised.


(d) No Further Option Grants. Agritope shall not grant any
additional options under the Existing Agritope Option Plan.


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3.3 Effect of the Distribution on Change in Control Provisions. ...