Document:

Exhibit 4.5

FLEETWOOD ENTERPRISES, INC.

2007 STOCK INCENTIVE PLAN

1.             Purpose

The purpose of the Fleetwood Enterprises, Inc. 2007 Stock Incentive
Plan (the “Plan”) is to advance the interests of Fleetwood Enterprises, Inc.
(the “Company”) by stimulating the efforts of employees, officers and, to the
extent provided by Section 5(d), non-employee directors, in each case who are
selected to be participants, by heightening the desire of such persons to
continue working toward and contributing to the success and progress of the
Company. The Plan supersedes the Company’s 1992 Stock-Based Incentive
Compensation Plan and 1992 Non-Employee Director Stock Option Plan with respect
to future awards, and provides for the grant of Incentive and Nonqualified
Stock Options, Stock Appreciation Rights, Restricted Stock and Restricted Stock
Units, any of which may be performance-based, and for Incentive Bonuses, which
may be paid in cash or stock or a combination thereof, as determined by the
Administrator.

2.             Definitions

As used in the Plan, the following terms shall have the meanings set
forth below:

(a)           “Administrator”
means the Administrator of the Plan in accordance with Section 18.

(b)           “Award”
means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
Right, Restricted Stock, Restricted Stock Unit or Incentive Bonus granted to a
Participant pursuant to the provisions of the Plan, any of which the
Administrator may structure to qualify in whole or in part as a Performance
Award.

(c)           “Award
Agreement” means a written agreement or other instrument as may be approved
from time to time by the Administrator implementing the grant of each Award. An
Agreement may be in the form of an agreement to be executed by both the
Participant and the Company (or an authorized representative of the Company) or
certificates, notices or similar instruments as approved by the Administrator.

(d)           “Board”
means the board of directors of the Company.

(e)           “Change
in Control” means the following and shall be deemed to occur if any of the
following events occur:

(i)            The acquisition (other than from the Company) by
any person, entity or “group,” within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act (excluding, for this purpose, the Company or its
subsidiaries, or any executive benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of the Company), of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty-five percent (25%) or more of either the then-

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outstanding
shares of common stock or the combined voting power of the Company’s
then-outstanding voting securities entitled to vote generally in the election
of directors;

(ii)           Individuals who, as of the date hereof, constitute
the Board (the “Incumbent Board”), cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company’s stockholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall, for the purposes
of this Plan, be considered as though such person were a member of the
Incumbent Board;

(iii)          A merger or consolidation with any other
corporation is consummated, other than

(A)          a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of another entity) more than 50% of the combined voting
power of the voting securities of the Company or such other entity outstanding
immediately after such merger or consolidation, and

(B)           a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires 25% or more of the combined voting power of the Company’s then
outstanding voting securities; or

(iv)          A plan of complete liquidation of the Company or
an agreement for the sale or other disposition by the Company of all or
substantially all of the Company’s assets is consummated.

Notwithstanding the
preceding provisions of this Section 2(e), a Change in Control shall not
be deemed to have occurred (1) if the “person” described in the preceding
provisions of this Paragraph is an underwriter or underwriting syndicate that
has acquired the ownership of 50% or more of the combined voting power of the
Company’s then outstanding voting securities solely in connection with a public
offering of the Company’s securities; (2) if the “person” described in the
preceding provisions of this Paragraph is an employee stock ownership plan or
other employee benefit plan maintained by the Company that is qualified under
the provisions of the Employee Retirement Income Security Act of 1974, as
amended; or (3)  if the person described in clause (i) of the
preceding provisions of this Paragraph would not otherwise be a beneficial
owner of 25% or more of the combined voting power of the Company’s then
outstanding voting securities but for a reduction in the number of outstanding
voting securities resulting from a stock repurchase program or other similar
plan of the Company or from a self tender offer of the Company, which plan or
tender offer commenced on or after the date hereof, provided, however, that the
term “person” shall

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include such person from
and after the first date upon which (A) such person, since the date of the
commencement of such plan or tender offer, shall have acquired beneficial
ownership of, in the aggregate, a number of voting securities of the Company
equal to 1% or more of the voting securities of the Company then outstanding
and (B) such person, together with all affiliates and associates of such
person, shall beneficially own 25% or more the voting securities of the Company
then outstanding.

(f)            “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the
rulings and regulations issues thereunder.

(g)           “Company”
means Fleetwood Enterprises, Inc., a Delaware corporation.

(h)           “Continued
Employment” refers to uninterrupted service for the Company.

(i)            “Early
Retirement” has the meaning specified by the Administrator in the terms of an
Award Agreement or, in the absence of any such term, for Participants other
than Non-employee Directors shall mean retirement from active employment with
the Company and its Subsidiaries on or after age 55 with 10 or more years of
service.  This does not apply in
situations pursuant to any Termination For Cause or pursuant to any termination
for unsatisfactory performance, or where the participant has become an employee
of or independent contractor to any other organization that competes with the
Company in the recreational vehicle or manufactured or modular housing
industries, all as determined by the Company.

(j)            “Fair
Market Value” means the closing selling price for the Common Stock reported on
the applicable composite tape or other comparable reporting system on the
applicable date, or if the applicable date is not a trading day, on the most
recent trading day immediately prior to the applicable date; or if closing
selling prices are not regularly reported for the Common Stock then the Fair
Market Value shall be such value as the Committee in good faith determines.

(k)            “Incentive
Bonus” means a bonus opportunity awarded under Section 9 pursuant to which a
Participant may become entitled to receive an amount based on satisfaction of
such performance criteria as are specified in the Award Agreement.

(l)            “Independent Director” refers to a Director
of the Company who is an Independent Director as defined by the New York Stock
Exchange listing standards.

(m)          “Incentive
Stock Option” means a stock option that is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.

(n)           “Non-Employee
Director” means each person who is, or is elected to be, a member of the Board
and who is not an employee of the Company or any Subsidiary.

(o)           “Nonqualified
Stock Option” means a stock option that is not intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.

(p)           “Option”
means an Incentive Stock Option and/or a Nonqualified Stock Option granted
pursuant to Section 6 of the Plan.

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(q)           “Participant”
means any individual described in Section 3 to whom Awards have been granted
from time to time by the Administrator and any authorized transferee of such
individual.

(r)            “Performance
Award” means an Award, the grant, issuance, retention, vesting or settlement of
which is subject to satisfaction of one or more Qualifying Performance Criteria
established pursuant to Section 13.

(s)           “Plan”
means the Fleetwood Enterprises, Inc. 2007 Stock Incentive Plan as set forth
herein and as amended from time to time.

(t)            “Prior
Plans” mean the Company’s 1992 Stock-Based Incentive Compensation Plan and 1992
Non-Employee Director Stock Option Plan.

(u)           “Qualifying
Performance Criteria” has the meaning set forth in Section 13(b).

(v)           “Restricted
Stock” means Shares granted pursuant to Section 8.

(w)          “Restricted
Stock Unit” means an Award granted to a Participant pursuant to Section 8 for`
which Shares or cash in lieu thereof may be issued in the future.

(x)            “Retirement”
has the meaning specified by the Administrator in the terms of an Award
Agreement or, in the absence of any such term, (i) for Participants other
than Non-Employee Directors shall mean retirement from active employment with
the Company and its Subsidiaries at or after age 65, provided that the Participant
has not become an employee of or independent contractor to any other
organization that competes with the Company in the recreational vehicle or
manufactured or modular housing industries, and (ii) for Non-Employee
Directors shall mean retirement from service as a member of the Board at the
end of a regular term in office. The determination of the Administrator as to
an individual’s Retirement shall be conclusive on all parties.

(y)           “Section 409A”
shall mean Section 409A of the Code, or any successor provision, and
applicable Treasury Regulations and other applicable guidance thereunder

(z)            “Share”
means a share of the Company’s common stock, par value $1.00, subject to
adjustment as provided in Section 12.

(aa)          “Specified
Employee” shall mean a specified employee as defined in Code
Section 409A(a)(2)(B) or applicable proposed or final regulations
under Code Section 409A.

(bb)         “Stock
Appreciation Right” means a right granted pursuant to Section 7 that entitles
the Participant to receive, in cash or Shares or a combination thereof, as
determined by the Administrator, value equal to or otherwise based on the
excess of (i) the market price of a specified number of Shares at the time of
exercise over (ii) the exercise price of the right, as established by the
Administrator on the date of grant.

(cc)         “Subsidiary”
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company where each of the corporations in the

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unbroken chain other than the last corporation owns
stock possessing at least 50 percent or more of the total combined voting power
of all classes of stock in one of the other corporations in the chain, and if
specifically determined by the Administrator in the context other than with
respect to Incentive Stock Options, may include an entity in which the Company
has a significant ownership interest or that is directly or indirectly
controlled by the Company.

(dd)         “Termination
For Cause” refers to termination of an Participant’s service in a manner either
consistent with the definition of “Cause” as outlined in a written agreement
between the Participant and the Company, or the intentional dishonest, illegal
or insubordinate conduct which is materially injurious to the Company or a
subsidiary, or the breach of any provision of any employment, nondisclosure,
non-competition or similar agreement. The Administrator, in its sole
discretion, shall determine whether circumstances warrant a Termination For
Cause.

(ee)         “Termination
of Employment” means ceasing to serve as a full-time employee of the Company
and its Subsidiaries or, with respect to a Non-Employee Director, ceasing to
serve as such for the Company, except that with respect to all or any Awards
held by a Participant (i) the Administrator may determine, subject to Section
6(d), that an approved leave of absence or approved employment on a less than
full-time basis is not considered a Termination of 

Employment, (ii) the Administrator may determine that a transition of
employment to service with a partnership, joint venture or corporation not
meeting the requirements of a Subsidiary in which the Company or a Subsidiary
is a party is not considered a Termination of Employment, (iii) service as
a member of the Board shall constitute Continued Employment with respect to
Awards granted to a Participant while he or she served as an employee and
(iv) service as an employee of the Company or a Subsidiary shall
constitute Continued Employment with respect to Awards granted to a Participant
while he or she served as a member of the Board.  The Administrator shall determine whether any
corporate transaction, such as a sale or spin-off of a division or subsidiary
that employs a Participant, shall be deemed to result in a termination of
employment with the Company and its Subsidiaries for purposes of any affected
Participant’s Options, and the Administrator’s decision shall be final and
binding.

(ff)           “Total
and Permanent Disablement” has the meaning specified by the Administrator in
the terms of an Award Agreement or, in the absence of any such term or in the
case of an Option intending to qualify as an Incentive Stock Option, the
inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months. The determination of the Administrator as to
an individual’s Total and Permanent Disablement shall be conclusive on all
parties.

3.             Eligibility

Any person who is a current or prospective officer or employee
(including any Board Member who is also an employee, in his or her capacity as
such) of the Company or of any Subsidiary shall be eligible for selection by
the Administrator for the grant of Awards hereunder. To the extent provided by
Section 5(d), any Non-Employee Director shall be eligible for the grant of
Awards hereunder as determined by the Administrator.  Options intending to qualify as Incentive
Stock Options may only be granted to employees of the Company or any Subsidiary

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within the meaning of the Code, as selected by the
Administrator. For purposes of this Plan, the Chairman of the Board’s status as
an employee shall be determined by the Administrator.

4.             Effective Date and
Termination of Plan

This Plan was adopted by the Board as of June 12, 2007, and it will
become effective (the “Effective Date”) when it is approved by the Company’s
stockholders. All Awards granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan by the stockholders prior to the
first anniversary date of the effective date of the Plan, by the affirmative
vote of the holders of a majority of the outstanding Shares of the Company
present, or represented by proxy, and entitled to vote, at a meeting of the
Company’s stockholders or by written consent in accordance with the laws of the
State of Delaware; provided that if such approval by the stockholders of the
Company is not forthcoming, all Awards previously granted under this Plan shall
be void. The Plan shall remain available for the grant of Awards until the
tenth (10th) anniversary of the Effective Date. Notwithstanding the foregoing,
the Plan may be terminated at such earlier time as the Board may determine. Termination
of the Plan will not affect the rights and obligations of the Participants and
the Company arising under Awards theretofore granted and then in effect.

5.             Shares Subject to the
Plan and to Awards

(a)           Aggregate Limits. The aggregate number of
Shares issuable pursuant to all Awards shall not exceed 5,000,000, plus
(i) any Shares that were authorized for issuance under the Prior Plans
that, as of September 11, 2007, remain available for issuance under the Prior
Plans (not including any Shares that are subject to, as of September 11, 2007,
outstanding awards under the Prior Plans or any Shares that prior to September
11, 2007 were issued pursuant to awards granted under the Prior Plans) and
(ii) any Shares subject to outstanding awards under the Prior Plans as of
September 11, 2007, that on or after such date cease for any reason to be
subject to such awards (other than by reason of exercise or settlement of the
awards to the extent they are exercised for or settled in vested and
nonforfeitable shares); provided that any Shares granted under Options or Stock
Appreciation Rights shall be counted against this limit on a one-for-one basis
and any Shares granted as Awards other than Options or Stock Appreciation
Rights shall be counted against this limit as 1.67 Shares for every one (1)
Share subject to such Award.  The
aggregate number of Shares available for grant under this Plan and the number
of Shares subject to outstanding Awards shall be subject to adjustment as provided
in Section 12. The Shares issued pursuant to Awards granted under this Plan may
be shares that are authorized and unissued or shares that were reacquired by
the Company, including shares purchased in the open market.

(b)           Issuance of Shares. For purposes of
Section 5(a), the aggregate number of Shares issued under this Plan at any time
shall equal only the number of Shares actually issued upon exercise or
settlement of an Award.  Notwithstanding
the foregoing, Shares subject to an
Award under the Plan may not again be made available for issuance under the
Plan if such Shares are: (i) Shares that were subject to a stock-settled
Stock Appreciation Right and were not issued upon the net settlement or net
exercise of such Stock Appreciation Right, (ii) Shares used to pay the
exercise price of an Option, (iii) Shares delivered to or withheld by the
Company to pay the withholding taxes related to an Option or a Stock
Appreciation Right, or (iv) Shares repurchased 

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on the open market with the
proceeds of an Option exercise.  Shares
subject to Awards that have been canceled, expired, forfeited or otherwise not
issued under an Award and Shares subject to Awards settled in cash shall not
count as Shares issued under this Plan.

(c)           Code Limits.  The aggregate number of Shares subject to
Option or Stock Appreciation Right Awards granted under this Plan during any
calendar year to any one Participant shall not exceed 900,000 and the aggregate
number of Shares subject to awards other than Options or Stock Appreciation
Rights granted under this Plan during any calendar year to any one Participant
shall not exceed 450,000; which shall be calculated and adjusted pursuant to
Section 12 only to the extent that such calculation or adjustment will not
affect the status of any Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code but which number shall not count
any tandem Stock Appreciation Rights (as defined in Section 7). The aggregate
number of Shares that may be issued pursuant to the exercise of Incentive Stock
Options granted under this Plan shall not exceed 5,000,000 which number shall
be calculated and adjusted pursuant to Section 12 only to the extent that such
calculation or adjustment will not affect the status of any option intended to
qualify as an Incentive Stock Option under Section 422 of the Code. The maximum
cash amount payable pursuant to that portion of an Incentive Bonus granted in
any calendar year to any Participant under this Plan that is intended to
satisfy the requirements for “performance-based compensation” under Section
162(m) of the Code shall not exceed $3,250,000 dollars

(d)           Director Awards.  The aggregate number of Shares under all
Awards, including Shares subject to Options and Stock Appreciation Rights,
granted under this Plan during any calendar year to any one Non-Employee
Director shall be an amount of $50,000, provided, however, that commencing in
fiscal year 2009, if at any time the Board determines that an increase in the
foregoing limit is recommended based upon corporate performance and best
practices of peer companies, the Board, is its sole discretion, may increase
such amount, but in no event shall the amount of foregoing limit exceed
$100,000, provided, however, that in the calendar year in which a Non-Employee
Director first joins the Board of Directors or is first designated as Chairman
of the Board of Directors or Lead Director, the maximum number of shares
subject to Awards granted to the Participant may be up to two hundred percent
(200%) of the foregoing limit and the foregoing limit shall not count any
tandem Stock Appreciation Rights (as defined in Section 7).

6.             Options

(a)           Option Awards. Options may be granted at
any time and from time to time prior to the termination of the Plan to
Participants as determined by the Administrator. No Participant shall have any
rights as a stockholder with respect to any Shares subject to Option hereunder
until said Shares have been issued. Each Option shall be evidenced by an Award
Agreement. Options granted pursuant to the Plan need not be identical but each
Option must contain and be subject to the terms and conditions set forth below.

(b)           Price. The Administrator will establish
the exercise price per Share under each Option, which, in no event will be less
than the Fair Market Value of the Shares on the date of grant; provided,
however, that the exercise price per Share with respect to an Option that is
granted in connection with a merger or other acquisition as a substitute or
replacement award for

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options held by optionees of the acquired entity may
be less than 100% of the market price of the Shares on the date such Option is
granted if such exercise price is based on a formula set forth in the terms of
the options held by such optionees or in the terms of the agreement providing
for such merger or other acquisition. The exercise price of any Option may be
paid in Shares, cash or a combination thereof, as determined by the
Administrator, including an irrevocable commitment by a broker to pay over such
amount from a sale of the Shares issuable under an Option, the delivery of
previously owned Shares and withholding of Shares deliverable upon exercise.

(c)           No Repricing without Stockholder Approval.
Other than in connection with a change in the Company’s capitalization (as
described in Section 12) the exercise price of an Option may not be reduced
without stockholder approval (including canceling previously awarded Options
and regranting them with a lower exercise price).

(d)           Provisions Applicable to Options. The date
on which Options become exercisable shall be determined at the sole discretion
of the Administrator and set forth in an Award Agreement. To the extent that a
grant of an Option is to vest based upon the Continued Employment of the
Participant, subject to Section 6(e) and Section 20, no portion of the Award
shall vest sooner than one (1) year from the date of grant (or such longer
period as the Administrator may determine, but in each case subject to Section
6(e) and Section 20 hereof.  Unless provided
otherwise in the applicable Award Agreement, to the extent that the
Administrator determines that an approved leave of absence or employment on a
less than full-time basis is not a Termination of employment, the vesting
period and/or exercisability of an Option shall be adjusted by the Administrator
during or to reflect the effects of any period during which the Participant is
on an approved leave of absence or is employed on a less than full-time basis.

(e)           Term of Options and Termination of Employment
The Administrator shall establish the term of each Option, which in no case
shall exceed a period of ten (10) years from the date of grant.  Unless an Option earlier expires upon the
expiration date established pursuant to the foregoing sentence, upon the
termination of the Participant’s employment, his or her rights to exercise an
Option then held shall be only as follows, unless the Administrator specifies
otherwise:

(1)           Death. Upon the death of a Participant
while in the employ of the Company or any Subsidiary or while serving as a
member of the Board, all of the Participant’s Options then held shall be
exercisable by his or her estate, heir or beneficiary for up to one (1) year
from the date of death. Any and all of the deceased Participant’s Options that
are not exercised during the one (1) year commencing on the date of death shall
terminate as of the end of such one (1) year period, or sooner pursuant to the
original term of the Option.

If a Participant should die within thirty (30) days of
his or her termination of employment with the Company and its Subsidiaries, an
Option shall be exercisable by his or her estate, heir or beneficiary at any
time during the one (1) year period commencing on the date of termination, but
only to the extent of the number of Shares as to which such Option was
exercisable as of the date of such termination. Any and all of the deceased
Participant’s 

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Options that are not exercised during the one (1) year
period commencing on the date of termination shall terminate as of the end of
such one (1) year period, or sooner pursuant to the original term of the
Option.

A Participant’s estate shall mean his or her legal representative or
other person who so acquires the right to exercise the Option by bequest or
inheritance or by reason of the death of the Participant.

(2)           Total and Permanent Disablement. Upon the
Total and Permanent Disablement of a Participant, the Participant’s unvested
options shall continue to vest based on their original vesting schedule for up
to one (1) year from the date of Total and Permanent Disablement. Options that
are exercisable as of the date of Total and Permanent Disablement, or become
exercisable subsequent to the date of Total and Permanent Disablement will
expire one (1) year from the date of Total and Permanent Disablement, or sooner
pursuant to the original term of the Option. 
In the case of Participants who are also Non-Employee Directors, all of
the Participant’s Options then held shall become exercisable and remain
exercisable for up to one (1) year from the date of Total and Permanent
Disablement. Options that are exercisable as of the date of Total and Permanent
Disablement, or become exercisable subsequent to the date of Total and
Permanent Disablement will expire one (1) year from the date of date of Total
and Permanent Disablement, or sooner pursuant to the original term of the
option.

(3)           Retirement.  Upon Retirement of a Participant, the
Participant’s Options held shall become, and remain, exercisable for up to
three (3) years from the date of Retirement. Any and all of the Participant’s
Options that are not exercised during the three (3) year period commencing on
the date of Retirement shall terminate as of the end of such three (3) year
period, or sooner pursuant to the original term of the option.

(4)           Early Retirement. 
Upon Early Retirement of a Participant, the Participant’s
unvested options shall continue to vest based on their original vesting
schedule for up to three (3) years from the date of Early Retirement.  Any and all of the Participant’s Options that
are not exercised during the three (3) year period commencing on the date of
Early Retirement shall terminate as of the end of such three (3) year period,
or sooner pursuant to the original term of the option.

(5)           Termination for Cause. If a Participant’s
service terminates due to a Termination For Cause, all outstanding Awards held by the Participant (whether vested or
unvested) will be terminated as of the commencement of business on the date of
Termination for Cause.

(6)           Other Reasons. Upon the date of a
termination of a Participant’s employment for any reason other than those
stated above in Sections 6(e)(1), (e)(2), (e)(3), (e)(4), (e)(5) or as
described in Section 15, (A) to the extent that any Option is not exercisable
as of such termination date, such portion of the Option shall remain
unexercisable and shall terminate as of such date, and (B) to the extent that
any Option is exercisable as of such termination date, such portion of the
Option shall expire on the

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earlier of (i) ninety (90) days following such date
and (ii) the expiration date of such Option.

(f)            Incentive Stock Options. Notwithstanding
anything to the contrary in this Section 6, in the case of the grant of an
Option intending to qualify as an Incentive Stock Option: (i) if the
Participant owns stock possessing more than 10 percent of the combined voting
power of all classes of stock of the Company (a “10% Shareholder”), the
exercise price of such Option must be at least 110 percent of the fair market
value of the Shares on the date of grant and the Option must expire within a
period of not more than five (5) years from the date of grant, and
(ii) termination of employment will occur when the person to whom an Award
was granted ceases to be an employee (as determined in accordance with Section
3401(c) of the Code and the regulations promulgated thereunder) of the Company
and its Subsidiaries. Notwithstanding anything in this Section 6 to the
contrary, options designated as Incentive Stock Options shall not be eligible
for treatment under the Code as Incentive Stock Options (and will be deemed to
be Nonqualified Stock Options) to the extent that either (a) the aggregate fair
market value of Shares (determined as of the time of grant) with respect to
which such Options are exercisable for the first time by the Participant during
any calendar year (under all plans of the Company and any Subsidiary) exceeds
$100,000, taking Options into account in the order in which they were granted,
or (b) such Options otherwise remain exercisable but are not exercised within
three (3) months of Termination of employment (or such other period of time
provided in Section 422 of the Code).

7.             Stock Appreciation
Rights

Stock Appreciation Rights may be granted to Participants from time to
time either in tandem with or as a component of other Awards granted under the
Plan (“tandem Stock Appreciation Rights”) or not in conjunction with other
Awards (“freestanding Stock Appreciation Rights”) and may, but need not, relate
to a specific Option granted under Section 6. The provisions of Stock
Appreciation Rights need not be the same with respect to each grant or each
recipient. Any Stock Appreciation Right granted in tandem with an Award may be
granted at the same time such Award is granted or at any time thereafter before
exercise or expiration of such Award. All freestanding Stock Appreciation
Rights shall be granted subject to the same terms and conditions applicable to
Options as set forth in Section 6 and all tandem Stock Appreciation Rights
shall have the same exercise price, vesting, exercisability, forfeiture and
termination provisions as the Award to which they relate. Subject to the
provisions of Section 6 and the immediately preceding sentence, the
Administrator may impose such other conditions or restrictions on any Stock Appreciation
Right as it shall deem appropriate. Stock Appreciation Rights may be settled in
Shares, cash or a combination thereof, as determined by the Administrator and
set forth in the applicable Award Agreement. Other than in connection with a
change in the Company’s capitalization (as described in Section 12) the
exercise price of Stock Appreciation Rights may not be reduced without
stockholder approval (including canceling previously awarded Stock Appreciation
Rights and regranting them with a lower exercise price).

8.             Restricted Stock and
Restricted Stock Units

(a)           Restricted Stock and Restricted Stock Unit Awards.
Restricted Stock and Restricted Stock Units may be granted at any time and from
time to time prior to the termination 

 10
 

of the Plan to Participants as determined by the
Administrator. Restricted Stock is an award or issuance of Shares the grant,
issuance, retention, vesting and/or transferability of which is subject during
specified periods of time to such conditions (including Continued Employment or
performance conditions) and terms as the Administrator deems appropriate.
Restricted Stock Units are Awards denominated in units of Shares under which
the issuance of Shares is subject to such conditions (including continued
employment or performance conditions) and terms as the Administrator deems
appropriate. Each grant of Restricted Stock and Restricted Stock Units shall be
evidenced by an Award Agreement. Unless determined otherwise by the
Administrator, each Restricted Stock Unit will be equal to one Share and will
entitle a Participant to either the issuance of Shares or payment of an amount
of cash determined with reference to the value of Shares. To the extent
determined by the Administrator, Restricted Stock and Restricted Stock Units may
be satisfied or settled in Shares, cash or a combination thereof. Restricted
Stock and Restricted Stock Units granted pursuant to the Plan need not be
identical but each grant of Restricted Stock and Restricted Stock Units must
contain and be subject to the terms and conditions set forth below.

(b)           Contents of Agreement. Each Award
Agreement shall contain provisions regarding (i) the number of Shares or
Restricted Stock Units subject to such Award or a formula for determining such
number, (ii) the purchase price of the Shares, if any, and the means of
payment, (iii) the performance criteria, if any, and level of achievement
versus these criteria that shall determine the number of Shares or Restricted
Stock Units granted, issued, retainable and/or vested, (iv) such terms and
conditions on the grant, issuance, vesting and/or forfeiture of the Shares or
Restricted Stock Units as may be determined from time to time by the
Administrator, (v) the term of the performance period, if any, as to which
performance will be measured for determining the number of such Shares or
Restricted Stock Units, and (vi) restrictions on the transferability of the
Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award
may be issued in the name of the Participant and held by the Participant or
held by the Company, in each case as the Administrator may provide.

(c)           Vesting and Performance Criteria. The
grant, issuance, retention, vesting and/or settlement of shares of Restricted
Stock and Restricted Stock Units will occur when and in such installments as
the Administrator determines or under criteria the Administrator establishes,
which may include Qualifying Performance Criteria. The grant, issuance,
retention, vesting and/or settlement of Shares under any such Award that is
based on performance criteria and level of achievement versus such criteria
will be subject to a performance period of not less than one (1) year, and the
grant, issuance, retention, vesting and/or settlement of Shares under any
Restricted Stock or Restricted Stock Unit Award that is based solely upon
Continued Employment and/or the passage of time may not vest or be settled in
full over a period of less than three (3) years but may be subject to pro-rata
vesting over such period, except that the Administrator may provide for the
satisfaction and/or lapse of all conditions under any such Award in the event
of the Participant’s death, disability, Retirement or in connection with a
Change in Control of the Company, and the Administrator may provide that any
such restriction or limitation will not apply in the case of a Restricted Stock
or Restricted Stock Unit Award that is issued in payment or settlement of
compensation that has been earned by the Participant. Notwithstanding anything
in this Plan to the contrary, the performance criteria for any Restricted Stock
or Restricted Stock Unit that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code will be a measure based on one
or more

 11

Qualifying Performance Criteria selected by the
Administrator and specified when the Award is granted.

(d)           Discretionary Adjustments and Limits.
Subject to the limits imposed under Section 162(m) of the Code for Awards that
are intended to qualify as “performance-based compensation,” notwithstanding
the satisfaction of any performance goals, the number of Shares granted,
issued, retainable and/or vested under an Award of Restricted Stock or
Restricted Stock Units on account of either financial performance or personal
performance evaluations may, to the extent specified in the Award Agreement, be
reduced, but not increased, by the Administrator on the basis of such further
considerations as the Administrator shall determine.

(e)           Voting Rights. Unless otherwise determined
by the Administrator, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those shares during
the period of restriction. Participants shall have no voting rights with
respect to Shares underlying Restricted Stock Units unless and until such
Shares are reflected as issued and outstanding shares on the Company’s stock
ledger.

(f)            Dividends and Distributions. Participants
in whose name Restricted Stock is granted shall be entitled to receive all
dividends and other distributions paid with respect to those Shares, unless
determined otherwise by the Administrator. The Administrator will determine
whether any such dividends or distributions will be automatically reinvested in
additional shares of Restricted Stock and subject to the same restrictions on
transferability as the Restricted Stock with respect to which they were
distributed or whether such dividends or distributions will be paid in cash.
Shares underlying Restricted Stock Units shall be entitled to dividends or
dividend equivalents only to the extent provided by the Administrator.

(g)           Effect of
Termination of Employment Except as otherwise determined by the Committee and
provided in an Award Agreement:

(i) in the event a Participant’s employment
with the Company shall terminate for any reason, other than: Death, Total
and Permanent Disablement, Early Retirement, or Retirement, all Awards under the Plan whose restrictions
have not lapsed will be forfeited;

(ii) in the case of the Death of a
Participant, Awards held by the Participant at the time of death or Disability
that vest based on Continued Employment will accelerate, fully vest and be
distributed to the Participant’s legal representatives or heirs in the case of
death. In the case of Participants who are also Non-Employee Directors all of
the Participant’s Awards then held shall continue to vest pursuant to their
original vesting schedule for one (1) year from the date of Death.  Any Awards that remain unvested on the date
that is one (1) year from the date of Death will be forfeited;

(iii) in the case of the Total and
Permanent Disablement of a
Participant, Awards held by the Participant at the time of Total and
Permanent Disablement that vest based
on Continued Employment will continue to vest pursuant to their original
vesting schedule for one (1) year. Upon vesting, Awards will be distributed to
the Participant’s legal 

 12
 

representatives.  Awards that remain unvested at the date that
is one year (1) from the date of Total and Permanent Disablement of a Participant will be forfeited;

(iv) in the event a Participant’s employment
with the Company shall terminate due to Retirement, Awards held by the
Participant at the time of Retirement that vest based on Continued Employment will accelerate and fully vest
on the date of Retirement. In the case of Participants who are also
Non-Employee Directors, all of the Participant’s Awards then held shall
continue to vest pursuant to their original vesting schedule for one (1) year
from the date of Retirement.
Any Awards that remain unvested on the date that is one (1) year from the date
of Retirement will be
forfeited;

(v) in the event a Participant’s employment
with the Company shall terminate due to Early Retirement, Awards held by the
Participant at the time of Early Retirement that vest based on Continuous Service will continue to vest for
pursuant to their original vesting schedule for two (2) years. Awards that
remain unvested at the date that is two years (2) from the date of the Early
Retirement of a Participant will be
forfeited.

9.             Incentive Bonuses

(a)           General. Each Incentive Bonus Award will
confer upon the Participant the opportunity to earn a future payment tied to
the level of achievement with respect to one or more performance criteria
established for a performance period of not less than one (1) year.

(b)           Incentive Bonus Document. The terms of any
Incentive Bonus will be set forth in an Award Agreement. Each Award Agreement
evidencing an Incentive Bonus shall contain provisions regarding (i) the target
and maximum amount payable to the Participant as an Incentive Bonus, (ii) the
performance criteria and level of achievement versus these criteria that shall
determine the amount of such payment, (iii) the term of the performance period
as to which performance shall be measured for determining the amount of any
payment, (iv) the timing of any payment earned by virtue of performance, (v)
restrictions on the alienation or transfer of the Incentive Bonus prior to
actual payment, (vi) forfeiture provisions and (vii) such further terms and
conditions, in each case not inconsistent with this Plan as may be determined
from time to time by the Administrator.

(c)           Performance Criteria. The Administrator
shall establish the performance criteria and level of achievement versus these
criteria that shall determine the target and maximum amount payable under an
Incentive Bonus, which criteria may be based on financial performance and/or
personal performance evaluations. The Administrator may specify the percentage
of the target Incentive Bonus that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code. Notwithstanding anything to the
contrary herein, the performance criteria for any portion of an Incentive Bonus
that is intended by the Administrator to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code shall be a measure based on one
or more Qualifying Performance Criteria (as defined in Section 13(b)) selected
by the Administrator and specified at the time the Incentive Bonus is granted,
or within the time prescribed by Section 162(m) and shall otherwise be in
compliance with Section 162(m). The Administrator shall certify the extent to
which any

 13
 

Qualifying Performance Criteria has been satisfied,
and the amount payable as a result thereof, prior to payment of any Incentive
Bonus that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code.

(d)           Timing and Form of Payment. The
Administrator shall determine the timing of payment of any Incentive Bonus.
Payment of the amount due under an Incentive Bonus may be made in cash or in
Shares, as determined by the Administrator. The Administrator may provide for or,
subject to such terms and conditions as the Administrator may specify, may
permit a Participant to elect for the payment of any Incentive Bonus to be
deferred to a specified date or event.

(e)           Discretionary Adjustments. Notwithstanding
satisfaction of any performance goals, the amount paid under an Incentive Bonus
on account of either financial performance or personal performance evaluations
may, to the extent specified in the Award Agreement, be reduced, but not
increased, by the Administrator on the basis of such further considerations as
the Administrator shall determine.

10.          Deferral of Gains

The Administrator may, in an Award Agreement or otherwise, provide for
the deferred delivery of Shares upon settlement, vesting or other events with
respect to Restricted Stock or Restricted Stock Units, or in payment or
satisfaction of an Incentive Bonus. Notwithstanding anything herein to the
contrary, in no event will any deferral of the delivery of Shares or any other
payment with respect to any Award be allowed if the Administrator determines,
in its sole discretion, that the deferral would result in the imposition of the
additional tax under Section409A(a)(1)(B) of the Code. No award shall provide
for deferral of compensation that does not comply with Section 409A of the
Code, unless the Board, at the time of grant, specifically provides that the
Award is not intended to comply with Section 409A of the Code.  The Company shall have no liability to a
Participant, or any other party, if an Award that is intended to be exempt
from, or compliant with, Section 409A is not so exempt or compliant or for any
action taken by the Board.

11.          Conditions and
Restrictions Upon Securities Subject to Awards

The Administrator may provide that the Shares issued upon exercise of an
Option or Stock Appreciation Right or otherwise subject to or issued under an
Award shall be subject to such further agreements, restrictions, conditions or
limitations as the Administrator in its discretion may specify prior to the
exercise of such Option or Stock Appreciation Right or the grant, vesting or
settlement of such Award, including without limitation, conditions on vesting
or transferability, forfeiture or repurchase provisions and method of payment
for the Shares issued upon exercise, vesting or settlement of such Award
(including the actual or constructive surrender of Shares already owned by the
Participant) or payment of taxes arising in connection with an Award. Without
limiting the foregoing, such restrictions may address the timing and manner of
any resales by the Participant or other subsequent transfers by the Participant
of any Shares issued under an Award, including without limitation (i)
restrictions under an insider trading policy or pursuant to applicable law,
(ii) restrictions designed to delay and/or coordinate the timing and manner of
sales by Participant and holders of other Company equity 

 14
 

compensation arrangements, (iii) restrictions as to
the use of a specified brokerage firm for such resales or other transfers and
(iv) provisions requiring Shares to be sold on the open market or to the
Company in order to satisfy tax withholding or other obligations.

12.          Adjustment of and
Changes in the Stock

In the event that
any dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), stock split or a combination or consolidation of
the outstanding Shares into a lesser number of shares, is declared with respect
to the Shares, the authorization limits under Sections 5(a) and 5(c) shall
be increased or decreased proportionately, and the Shares then subject to each
Award shall be increased or decreased proportionately without any change in the
aggregate purchase price therefore. In the event the Shares shall be changed
into or exchanged for a different number or class of shares of stock or
securities of the Company or of another corporation, whether through
recapitalization, reorganization, reclassification, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Shares or other securities of the Company, or any other similar corporate
transaction or event affects the Shares such that an equitable adjustment would
be required in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
authorization limits under Sections 5(a) and 5(c) shall be adjusted
proportionately, and an equitable adjustment shall be made to each Share
subject to an Award such that no dilution or enlargement of the benefits or
potential benefits occurs. Each such Share then subject to each Award shall be
adjusted to the number and class of shares into which each outstanding Share
shall be so exchanged such that no dilution or enlargement of the benefits
occurs, all without change in the aggregate purchase price for the Shares then
subject to each Award. Action by the Committee pursuant to this Section 12
may include adjustment to any or all of: (i) the number and type of Shares
(or other securities or other property) that thereafter may be made the subject
of Awards or be delivered under the Plan; (ii) the number and type of
Shares (or other securities or other property) subject to outstanding Awards;
(iii) the purchase price or exercise price of a Share under any
outstanding Award or the measure to be used to determine the amount of the
benefit payable on an Award; and (iv) any other adjustments the Committee
determines to be equitable.

No right to purchase fractional shares shall result from any adjustment
in Awards pursuant to this Section 12. In case of any such adjustment, the
Shares subject to the Award shall be rounded down to the nearest whole
share.  The Company shall notify Participants
holding Awards subject to any adjustments pursuant to this Section 12 of such
adjustment, but (whether or not notice is given) such adjustment shall be
effective and binding for all purposes of the Plan.

13.          Qualifying
Performance-Based Compensation

(a)           General. The Administrator may establish
performance criteria and the level of achievement versus such criteria that
shall determine the number of Shares to be granted, retained, vested, issued or
issuable under or in settlement of or the amount payable pursuant to an Award,
which criteria may be based on Qualifying Performance Criteria or other
standards of financial performance and/or personal performance evaluations. In
addition, the Administrator may specify that an Award or a portion of an Award is
intended to satisfy the requirements for 

 15
 

“performance-based compensation” under Section 162(m)
of the Code, provided that the performance criteria for such Award or portion
of an Award that is intended by the Administrator to satisfy the requirements
for “performance-based compensation” under Section 162(m) of the Code shall be
a measure based on one or more Qualifying Performance Criteria selected by the
Administrator and specified at the time the Award is granted, or within the
time prescribed by Section 162(m) and shall otherwise be in compliance with
Section 162(m). The Administrator shall certify the extent to which any
Qualifying Performance Criteria has been satisfied, and the amount payable as a
result thereof, prior to payment, settlement or vesting of any Award that is
intended to satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code. Notwithstanding satisfaction of any performance
goals, the number of Shares issued under or the amount paid under an award may,
to the extent specified in the Award Agreement, be reduced, but not increased,
by the Administrator on the basis of such further considerations as the
Administrator in its sole discretion shall determine.

(b)           Qualifying Performance Criteria. For purposes
of this Plan, the term “Qualifying Performance Criteria” shall mean any one or
more of the following performance criteria, or derivations of such performance
criteria, either individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or Subsidiary, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated
comparison group, in each case as specified by the Administrator: (i) cash flow
(before or after dividends), (ii) earnings per share (including earnings before
interest, taxes, depreciation and amortization), (iii) stock price, (iv) return
on equity, (v) total stockholder return, (vi) return on capital (including
return on total capital or return on invested capital), (vii) return on assets
or net assets, (viii) market capitalization, (ix) economic value added, (x)
debt leverage (debt to capital), (xi) revenue, (xii) income or net income,
(xiii) operating income, (xiv) operating profit or net operating profit, (xv)
operating margin or profit margin, (xvi) return on operating revenue, (xvii)
cash from operations, (xviii) operating ratio, (xix) operating revenue, (xx)
market share, (xxi) (xxii) product development or release schedules, (xxiii)
new product innovation, (xxiv) product cost reduction through advanced
technology, (xxv) brand recognition/acceptance, (xxvi) product ship targets,
(xxvii) cost reductions, customer service, (xxviii) customer satisfaction or
(xxix) the sales of assets or subsidiaries. To the extent consistent with
Section 162(m) of the Code, the Administrator (A) shall appropriately
adjust any evaluation of performance under a Qualifying Performance Criteria to
eliminate the effects of charges for restructurings, discontinued operations,
extraordinary items and all items of gain, loss or expense determined to be
extraordinary or unusual in nature or related to the disposal of a segment of a
business or related to a change in accounting principle all as determined in
accordance with standards established by opinion No. 30 of the Accounting
Principles Board (APA Opinion No. 30) or other applicable or successor accounting
provisions, as well as the cumulative effect of accounting changes, in each
case as determined in accordance with generally accepted accounting principles
or identified in the Company’s financial statements or notes to the financial
statements, and (B) may appropriately adjust any evaluation of performance
under a Qualifying Performance Criteria to exclude any of the following events
that occurs during a performance period: (i) asset write-downs, (ii)
litigation, claims, judgments or settlements, (iii) the effect of changes in
tax law or other such laws or provisions affecting reported results, (iv)
accruals for reorganization and restructuring programs and (v) accruals of any
amounts for payment under this Plan or any other compensation arrangement
maintained by the Company.

 16
 

14.          Transferability

Each Award may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated by a Participant other than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order, and each Option or Stock Appreciation Right shall be exercisable only by
the Participant during his or her lifetime. 
Notwithstanding the foregoing, to the extent permitted by the
Administrator, the person to whom an Award is initially granted (the “Grantee”)
may transfer an Award to any “family member” of the Grantee (as such term is
defined in Section 1(a)(5) of the General Instructions to Form S-8 under the
Securities Act of 1933, as amended (“Form S-8”)), to trusts solely for the benefit
of such family members and to partnerships in which such family members and/or
trusts are the only partners; provided that, (i) as a condition thereof,
the transferor and the transferee must execute a written agreement containing
such terms as specified by the Administrator, and (ii) the transfer is
pursuant to a gift or a domestic relations order to the extent permitted under
the General Instructions to Form S-8. 
Except to the extent specified otherwise in the agreement the
Administrator provides for the Grantee and transferee to execute, all vesting,
exercisability and forfeiture provisions that are conditioned on the Grantee’s
Continued Employment or service shall continue to be determined with reference
to the Grantee’s employment or service (and not to the status of the
transferee) after any transfer of an Award pursuant to this Section 14, and the
responsibility to pay any taxes in connection with an Award shall remain with
the Grantee notwithstanding any transfer other than by will or intestate succession.

15.          Suspension or
Termination of Awards

Except as otherwise provided by the Administrator, if at any time
(including after a notice of exercise has been delivered or an award has
vested) the Chief Executive Officer or any other person designated by the
Administrator (each such person, an “Authorized Officer”) reasonably believes
that a Participant may have committed an Act of Misconduct as described in this
Section 15, the Authorized Officer, Administrator or the Board may suspend the
Participant’s rights to exercise any Option, to vest in an Award, and/or to
receive payment for or receive Shares in settlement of an Award pending a
determination of whether an Act of Misconduct has been committed.

If the Administrator or an Authorized Officer determines a Participant
has committed an act of embezzlement, fraud, dishonesty, nonpayment of any
obligation owed to the Company or any Subsidiary, breach of fiduciary duty,
violation of Company ethics policy or code of conduct, or deliberate disregard
of the Company or Subsidiary rules resulting in loss, damage or injury to the
Company or any Subsidiary, or if a Participant makes an unauthorized disclosure
of any Company or Subsidiary trade secret or confidential information, solicits
any employee or service provider to leave the employ or cease providing
services to the Company or any Subsidiary, breaches any intellectual property
or assignment of inventions covenant, engages in any conduct constituting
unfair competition, breaches any non-competition agreement, induces any Company
or Subsidiary customer to breach a contract with the Company or any Subsidiary
or to cease doing business with the Company or any Subsidiary, or induces any
principal for whom the Company or any Subsidiary acts as agent to terminate
such agency relationship (any of the foregoing acts, an “Act of Misconduct”),
then except as otherwise provided by the Administrator, (i) neither the
Participant nor his or her estate nor transferee shall be entitled to

 17
 

exercise any Option or Stock Appreciation Right
whatsoever, vest in or have the restrictions on an Award lapse, or otherwise
receive payment of an Award, (ii) the Participant will forfeit all outstanding
Awards and (iii) the Participant may be required, at the Administrator’s sole
discretion, to return and/or repay to the Company any then unvested Shares
previously issued under the Plan. In making such determination, the
Administrator or an Authorized Officer shall give the Participant an
opportunity to appear and present evidence on his or her behalf at a hearing
before the Administrator or its designee or an opportunity to submit written
comments, documents, information and arguments to be considered by the
Administrator. Any dispute by a Participant or other person as to the
determination of the Administrator shall be resolved pursuant to Section 23 of
the Plan.

16.          Compliance with Laws and
Regulations

This Plan, the grant, issuance, vesting, exercise and settlement of
Awards thereunder, and the obligation of the Company to sell, issue or deliver
Shares under such Awards, shall be subject to all applicable foreign, federal,
state and local laws, rules and regulations, stock exchange rules and
regulations, and to such approvals by any governmental or regulatory agency as
may be required. The Company shall not be required to register in a Participant’s
name or deliver any Shares prior to the completion of any registration or
qualification of such shares under any foreign, federal, state or local law or
any ruling or regulation of any government body which the Administrator shall
determine to be necessary or advisable. To the extent the Company is unable to
or the Administrator deems it infeasible to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, the Company and its Subsidiaries shall be relieved of any liability
with respect to the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained. No Option shall be
exercisable and no Shares shall be issued and/or transferable under any other
Award unless a registration statement with respect to the Shares underlying
such Option is effective and current or the Company has determined that such
registration is unnecessary.

In the event an Award is granted to or held by a Participant who is
employed or providing services outside the United States, the Administrator
may, in its sole discretion, modify the provisions of the Plan or of such Award
as they pertain to such individual to comply with applicable foreign law or to
recognize differences in local law, currency or tax policy. The Administrator
may also impose conditions on the grant, issuance, exercise, vesting, settlement
or retention of Awards in order to comply with such foreign law and/or to
minimize the Company’s obligations with respect to tax equalization for
Participants employed outside their home country.

 18
 

17.          Withholding

To the extent required by applicable federal, state, local or foreign
law, a Participant shall be required to satisfy, in a manner satisfactory to
the Company, any withholding tax obligations that arise by reason of an Option
exercise, disposition of Shares issued under an Incentive Stock Option, the
vesting of or settlement of an Award, an election pursuant to Section 83(b) of
the Code or otherwise with respect to an Award. To the extent a Participant
makes an election under section 83(b), within ten days of filing such election
with the Internal Revenue Service, the Participant must notify the Company in
writing of such election. The Company and its Subsidiaries shall not be
required to issue Shares, make any payment or to recognize the transfer or
disposition of Shares until all such obligations are satisfied. The
Administrator may provide for or permit these obligations to be satisfied
through the mandatory or elective sale of Shares and/or by having the Company
withhold a portion of the Shares that otherwise would be issued to him or her
upon exercise of the Option or the vesting or settlement of an Award, or by
tendering Shares previously acquired. To the extent a Participant makes an
election under section 83(b), within ten days of filing such election with the
Internal Revenue Service, the Participant must notify the Company in writing of
such election.

18.          Administration of the
Plan

(a)           Administrator of the Plan. The Plan shall
be administered by the Administrator who shall be the Compensation Committee of
the Board or, in the absence of a Compensation Committee, the Board itself. The
Committee shall serve at the pleasure of the Board and shall consist of not
less than three (3) directors, each of whom is an “Independent Director” under
NYSE listing requirements and an “Outside Director” within the meaning of
Section 162(m) of the Code. Any power of the Administrator may also be
exercised by the Board, except to the extent that the grant or exercise of such
authority would cause any Award or transaction to become subject to (or lose an
exemption under) the short-swing profit recovery provisions of Section 16 of
the Securities Exchange Act of 1934 or cause an Award designated as a
Performance Award not to qualify for treatment as performance-based
compensation under Section 162(m) of the Code. To the extent that any permitted
action taken by the Board conflicts with action taken by the Administrator, the
Board action shall control.

(b)           Powers of Administrator. Subject to the
express provisions of this Plan, the Administrator shall be authorized and
empowered to do all things that it determines to be necessary or appropriate in
connection with the administration of this Plan, including, without limitation:
(i) to prescribe, amend and rescind rules and regulations relating to this Plan
and to define terms not otherwise defined herein; (ii) to determine which
persons are Participants, to which of such Participants, if any, Awards shall
be granted hereunder and the timing of any such Awards; (iii) to grant Awards
to Participants and determine the terms and conditions thereof, including the
number of Shares subject to Awards and the exercise or purchase price of such
Shares and the circumstances under which Awards become exercisable or vested or
are forfeited or expire, which terms may but need not be conditioned upon the
passage of time, Continued Employment, the satisfaction of performance
criteria, the occurrence of certain events (including a Change in Control), or
other factors; (iv) to establish and verify the extent of satisfaction of any

 19
 

performance goals or other conditions applicable to
the grant, issuance, exercisability, vesting and/or ability to retain any
Award; (v) to prescribe and amend the terms of the agreements or other
documents evidencing Awards made under this Plan (which need not be identical)
and the terms of or form of any document or notice required to be delivered to
the Company by Participants under this Plan; (vi) to determine whether, and the
extent to which, adjustments are required pursuant to Section 12; (vii) to
interpret and construe this Plan, any rules and regulations under this Plan and
the terms and conditions of any Award granted hereunder, and to make exceptions
to any such provisions in if the Committee, in good faith, determines that it
is necessary to do so in light of extraordinary circumstances and for the
benefit of the Company; and (viii) to make all other determinations deemed
necessary or advisable for the administration of this Plan. The Committee may,
in its sole and absolute discretion, without amendment to the Plan, waive or
amend the operation of Plan provisions respecting exercise after termination of
employment or service to the Company or an Affiliate and, except as otherwise
provided herein, adjust any of the terms of any Award. The Committee may also (a) accelerate
the date on which any Award granted under the Plan becomes exercisable or
(b) accelerate the Vesting Date or waive or adjust any condition imposed
hereunder with respect to the vesting or exercisability of an Award, provided
that the Committee, in good faith, determines that such acceleration, waiver or
other adjustment is necessary or desirable in light of extraordinary
circumstances. Notwithstanding anything in the Plan to the contrary, no Award
outstanding under the Plan may be repriced, regranted through cancellation or
otherwise amended to reduce the exercise price applicable thereto (other than
with respect to adjustments made in connection with a Transaction or other
change in the Company’s capitalization) without the approval of the Company’s
stockholders.

(c)           Determinations by the Administrator. All
decisions, determinations and interpretations by the Administrator regarding
the Plan, any rules and regulations under the Plan and the terms and conditions
of or operation of any Award granted hereunder, shall be final and binding on
all Participants, beneficiaries, heirs, assigns or other persons holding or
claiming rights under the Plan or any Award. The Administrator shall consider
such factors as it deems relevant, in its sole and absolute discretion, to
making such decisions, determinations and interpretations including, without
limitation, the recommendations or advice of any officer or other employee of
the Company and such attorneys, consultants and accountants as it may select.

(d)           Subsidiary Awards. In the case of a grant
of an Award to any Participant employed by a Subsidiary, such grant may, if the
Administrator so directs, be implemented by the Company issuing any subject
Shares to the Subsidiary, for such lawful consideration as the Administrator
may determine, upon the condition or understanding that the Subsidiary will
transfer the Shares to the Participant in accordance with the terms of the
Award specified by the Administrator pursuant to the provisions of the Plan.
Notwithstanding any other provision hereof, such Award may be issued by and in
the name of the Subsidiary and shall be deemed granted on such date as the
Administrator shall determine.

19.          Amendment of the Plan or
Awards

The Board may amend, alter or discontinue this Plan and the
Administrator may amend, or alter any agreement or other document evidencing an
Award made under this Plan but, except

 20
 

as provided pursuant to the provisions of Section 12,
no such amendment shall, without the approval of the stockholders of the
Company:

(a)           increase
the maximum number of Shares for which Awards may be granted under this Plan;

(b)           reduce
the price at which Options may be granted below the price provided for in
Section 6(a);

(c)           reduce
the exercise price of outstanding Options;

(d)           extend
the term of this Plan;

(e)           change
the class of persons eligible to be Participants;

(f)            otherwise
amend the Plan in any manner requiring stockholder approval by law or under the
New York Stock Exchange listing requirements; or

(g)           increase
the individual maximum limits in Sections 5(c) and (d).

No amendment or alteration to the Plan or an Award or Award Agreement
shall be made which would impair the rights of the holder of an Award, without
such holder’s consent, provided that no such consent shall be required if the
Administrator determines in its sole discretion and prior to the date of any
Change in Control that such amendment or alteration either is required or
advisable in order for the Company, the Plan or the Award to satisfy any law or
regulation or to meet the requirements of or avoid adverse financial accounting
consequences under any accounting standard.

20.          Change in Control.

Unless otherwise specified in an individual Award Agreement or
otherwise, in the event of a Change in Control, the restrictions covering each
outstanding Award, whether the restrictions are based on Continuous Service or
the attainment of Performance Goals, at the time of the Change in Control,
shall lapse immediately prior to such Change in Control and such Award shall no
longer be subject to risk of forfeiture. 
In the case of an “Incentive Bonus” Awards that are outstanding at the
time of a Change in Control, Participants will receive the target Award amount
for all performance cycles in place as soon as practical after the closing of
the Change in Control transaction.

21.          No Liability of Company

The Company and any Subsidiary or affiliate which is in existence or
hereafter comes into existence shall not be liable to a Participant or any
other person as to: (i) the non-issuance or sale of Shares as to which the
Company has been unable to obtain from any regulatory body having jurisdiction
the authority deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder; and (ii) any tax consequence
expected, but not realized, by any Participant or other person due to the
receipt, exercise or settlement of any Award granted hereunder.

 21
 

22.          Non-Exclusivity of Plan

Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Administrator to
adopt such other incentive arrangements as either may deem desirable, including
without limitation, the granting of restricted stock or stock options otherwise
than under this Plan or an arrangement not intended to qualify under Code
Section 162(m), and such arrangements may be either generally applicable or
applicable only in specific cases.

23.          Governing Law

This Plan and any agreements or other documents hereunder shall be
interpreted and construed in accordance with the laws of the Delaware and
applicable federal law. Any reference in this Plan or in the agreement or other
document evidencing any Awards to a provision of law or to a rule or regulation
shall be deemed to include any successor law, rule or regulation of similar
effect or applicability.

24.          Arbitration of Disputes

In the event a Participant or other holder of an Award or person
claiming a right under an Award or the Plan believes that a decision by the
Administrator with respect to such person or Award was arbitrary or capricious,
the person may request arbitration with respect to such decision. The review by
the arbitrator shall be limited to determining whether the Participant or other
Award holder has proven that the Administrator’s decision was arbitrary or
capricious. This arbitration shall be the sole and exclusive review permitted
of the Administrator’s decision. Participants, Award holders and persons
claiming rights under an Award or the Plan explicitly waive any right to
judicial review.

Notice of demand for arbitration shall be made in writing to the
Administrator within thirty (30) days after the applicable decision by the
Administrator. The arbitrator shall be selected by those members of the Board
who are neither members of the Compensation Committee of the Board nor
employees of the Company or any Subsidiary. If there are no such members of the
Board, the arbitrator shall be selected by the Board. The arbitrator shall be
an individual who is an attorney licensed to practice law in the jurisdiction
in which the Company’s headquarters are then located. Such arbitrator shall be
neutral within the meaning of the Commercial Rules of Dispute Resolution of the
American Arbitration Association; provided, however, that the arbitration shall
not be administered by the American Arbitration Association. Any challenge to
the neutrality of the arbitrator shall be resolved by the arbitrator whose
decision shall be final and conclusive. The arbitration shall be administered
and conducted by the arbitrator pursuant to the Commercial Rules of Dispute
Resolution of the American Arbitration Association. Each side shall bear its
own fees and expenses, including its own attorney’s fees, and each side shall
bear one half of the arbitrator’s fees and expenses. The decision of the
arbitrator on the issue(s) presented for arbitration shall be final and
conclusive and may be enforced in any court of competent jurisdiction.

 22
 

25.          No Right to Employment,
Reelection or Continued Service

Nothing in this Plan or an Award Agreement shall interfere with or
limit in any way the right of the Company, its Subsidiaries and/or its
affiliates to terminate any Participant’s employment, service on the Board or
service for the Company at any time or for any reason not prohibited by law,
nor shall this Plan or an Award itself confer upon any Participant any right to
continue his or her employment or service for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute an
employment contract with the Company, any Subsidiary and/or its affiliates.
Subject to Sections 4 and 19, this Plan and the benefits hereunder may be
terminated at any time in the sole and exclusive discretion of the Board
without giving rise to any liability on the part of the Company, its
Subsidiaries and/or its affiliates.

26.          Unfunded Plan

The Plan is intended to be an unfunded plan. Participants are and shall
at all times be general creditors of the Company with respect to their Awards.
If the Administrator or the Company chooses to set aside funds in a trust or
otherwise for the payment of Awards under the Plan, such funds shall at all
times be subject to the claims of the creditors of the Company in the event of
its bankruptcy or insolvency.

 23EXHIBIT 10.18

 

Term Sheet Proposal

 

This is a proposed term sheet for a possible lending
relationship between Blackhawk Biofuels, LLC (Borrower) and 1st Farm
Credit Services or its agent/assignee (Lender). The loan proposal described
below is conditioned upon completion and approval of loan underwriting
requirements leading to a loan commitment and conditions precedent contained
herein.

 

BLACKHAWK BIOFUELS, LLC

FREEPORT, IL

 

LOAN TERMS AND CONDITIONS

 

August 31, 2007

 

 

	
  Borrower:

  	
   

  	
  Blackhawk Biofuels, LLC

  
	
   

  	
   

  	
   

  
	
  Project Costs:  

  	
   

  	
  The total estimated cost of this 30 million gallon biodiesel
  production project is $59,800,000 per the Borrowers updated sources and uses
  estimate dated 08/20/07. 

  
	
   

  	
   

  	
   

  
	
  Minimum Equity Funding:

  	
   

  	
  The borrower will provide a minimum of $32,300,000 of equity
  contribution as follows: Member cash equity of $32,300,000. All non-cash
  equity sources must be approved by lender.

  
	
   

  	
   

  	
   

  
	
  Construction Facility:

  	
   

  	
  1st Farm Credit Services will provide a single
  construction loan of a maximum of $27,500,000 or approximately $.917/gallon.

  
	
   

  	
   

  	
   

  
	
  Maturity Date:

  	
   

  	
  Maturity date of construction credit facility will be for 16 months
  based upon the loan closing date of those facilities.

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  The purpose of the loan is for the construction of a 30  million gallon biodiesel and co-product production
  facility.

  
	
   

  	
   

  	
   

  
	
  Availability Period:

  	
   

  	
  The construction loan is available from the day of formal loan
  closing until the earlier of 60 days post construction or the maturity date.
  A third party engineer must certify confirmation 

  

 

1

 

	
   

  	
   

  	
  of the end of the construction period.

  
	
   

  	
   

  	
   

  
	
  Construction Loan Interest Payments:

  	
   

  	
  Interest shall be calculated on the actual number of days each loan
  is outstanding on the basis of a year consisting of 365 days. Accrued
  construction interest is due quarterly from the month of closing.

  
	
   

  	
   

  	
   

  
	
  Construction Bonding:

  	
   

  	
  Construction bonding acceptable to the lender will be required.

  
	
  Interest Rate – Construction Loan

  	
   

  	
  The construction loan facility is eligible for the variable base rate
  of the 30-day LIBOR plus 365 bps, the construction period is defined as 16
  months from the date of loan closing not to exceed 60 days from the initial
  plant start-up.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Facility A:

  	
   

  	
  1st Farm Credit Services will provide a term loan A of a
  maximum of $20,000,000 or approximately $.67/gallon.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Facility B:

  	
   

  	
  1st Farm Credit Services will provide a term loan B of a
  maximum of $7,500,000 or approximately $.25/gallon.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Upon completion of construction and with appropriate certification of
  the plant operation, the total outstanding construction loan balance will be
  converted into the respective term credit facilities.

  
	
   

  	
   

  	
   

  
	
  Maturity Date:

  	
   

  	
   

  
	
  Term Facility A: 

  	
   

  	
  Maturity date of term credit facility A will be for ten years based
  upon the loan closing date of those facilities.

  
	
   

  	
   

  	
   

  
	
  Term Facility B:

  	
   

  	
  Maturity date of term credit facility B will be for fifteen years
  based upon the loan closing date of those facilities.

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  The purpose of the term loan A & B is for the long term financing
  of a 30  million gallon biodiesel and
  co-product production facility.

  
	
   

  	
   

  	
   

  
	
  Principal and Interest Payments:

  	
   

  	
  All principal payments are due monthly along with interest
  (calculated on a 360 day basis) as will be described in the term loan
  facilities.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The term loan A amortization will be equal payments of principal and
  interest fully amortized on a 10 year schedule.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The term loan B amortization will be equal payments of principal and
  interest fully amortized on a 15 year schedule.

  

 

2

 

	
  Voluntary Prepayments:

  	
   

  	
  There will be a penalty if prepayment of the senior term facility
  indebtedness is paid in its entirety according to the following schedule: If
  within one year after the conversion to the senior term facility = 2 percent;
  If within the second year after the conversion to the senior term loan = 1
  percent.

  
	
   

  	
   

  	
   

  
	
  USDA Guarantees:

  	
   

  	
   

  
	
  Term Facility A:

  	
   

  	
  Approval of a 60% USDA Business & Industry Guarantee with conditions
  acceptable to the Lender is required prior to closing.

  
	
   

  	
   

  	
   

  
	
  Term Facility B:

  	
   

  	
  Approval of a 70% USDA Renewable Systems and Energy Efficiency
  Improvements Guarantee with conditions acceptable to the Lender is required
  prior to closing.

  
	
   

  	
   

  	
   

  
	
  Interest Rates - Term Facility A & B

  	
   

  	
  At conversion, up to 50% of the term loan facility is eligible for
  the variable base rate at 90-day LIBOR plus 340 basis points.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Variable rate incentive pricing:

  

  After receipt of the first annual audit report post conversion, variable rate
  reductions or premiums are offered based upon achievement of certain owner
  equity benchmarks and loan covenant compliance; as measured according to
  lenders underwriting methods.

  When owner equity is less than 50%; LIBOR + 365 bps

  When owner equity is >50% - <60%: LIBOR + 340 bps

  When owner equity is >60% - <70%: LIBOR + 300 bps

  When owner equity is >70%: LIBOR + 275 bps

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fixed Rate:

  A minimum of 50% of the term facility will be required to be priced
  on fixed rates at the conversion of the construction loan to the term loan.
  The rate will be determined by adding 340 bps to Lender’s funding costs or a
  similar benchmark existing at the time of conversion.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fixed rates are not eligible for rate incentives.

  
	
   

  	
   

  	
   

  
	
  Operating Facility:

  	
   

  	
  1st Farm Credit Services will provide an operating Line of
  Credit of a maximum of $5,000,000.

  

 

3

 

	
  Maturity Date:

  	
   

  	
  Maturity date of operating Line of Credit facility will be 364-days
  from the loan closing date of those facilities.

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  General operating and risk management funding needs.

  
	
   

  	
   

  	
   

  
	
  Borrowing Base:

  	
   

  	
  Loan will be governed by a monthly borrowing base which will limit
  the outstanding balance under the loan to a maximum of 75% of the value of
  inventory at cost and receivables to be defined.

  
	
   

  	
   

  	
   

  
	
  Principal and Interest Payments:

  	
   

  	
  Principal will be due at loan maturity. Monthly interest payments
  (calculated on a 365 day basis) required.

  
	
   

  	
   

  	
   

  
	
  Interest Rate – Operating Loan

  	
   

  	
  The operating loan facility is eligible for the variable base rate of
  the 30-day LIBOR plus 325 bps.

  
	
   

  	
   

  	
   

  
	
  Fees:

  	
   

  	
  1. There will be a $225,000 underwriting and participation fee;
  $50,000 is due upon acceptance of the term sheet by the borrower and $175,000
  is due at loan closing.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2. There will be an annual servicing fee of $25,000 beginning at the
  conversion of the construction loan to the term facility and annually
  thereafter until loan maturity. The servicing fee is solely for the account
  of the lender, not the participants.

  
	
   

  	
   

  	
  3. There will be an unused commitment fee of 30 bps paid quarterly
  during the term of the Operating Line of Credit.

  
	
   

  	
   

  	
   

  
	
  Costs:

  	
   

  	
  All costs associated with this construction and senior loan are the
  responsibility of the borrower. Some of these costs include but are not
  limited to: appraisal, title insurance, engineer oversight, document
  recording, legal costs, construction bonding, interest swap agreement and
  guarantee fees.

  
	
   

  	
   

  	
   

  
	
  Security:

  	
   

  	
  First security interest covering all real estate and personal
  property including but not limited to such things as accounts receivables,
  inventory, machinery, equipment and investments. Assignment of all material
  contracts per lender discretion. Maximum 60% combined term loans to facility
  value required.

  
	
   

  	
   

  	
   

  
	
  Documentation:

  	
   

  	
  The Loans will be subject to the negotiation, execution and delivery
  of a definitive Master Loan Agreement (including schedules, exhibits and
  ancillary documentation) and all such other documentation (“Loan Documents”).
  The terms, 

  

 

4

 

	
   

  	
   

  	
  conditions and definitions in this Term Sheet are
  set forth in relative detail not for the purpose of establishing precise
  terminology for the Loan Documents, but for the purpose of establishing the
  basic elements of the offered financing package.

  
	
   

  	
   

  	
   

  
	
  Representations and Warranties, Conditions
  Precedent, Affirmative and Negative Covenants:

  	
   

  	
  Documentation will contain representations,
  warranties, conditions precedent, affirmative (including, without limitation,
  the Financial Covenants) and negative covenants, reporting requirements that
  are reasonable and customary for Loans of this type.

  
	
   

  	
   

  	
   

  
	
  Participants:

  	
   

  	
  This commitment is subject to 1st Farm
  Credit Services obtaining sufficient participants to fund the transactions as
  outlined.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  This space left intentionally blank.

  

 

CONDITIONS PRECEDENT:

 

	
  1.

  	
   

  	
  Borrower or a permitted assignee is to provide Lender with copies of
  all agreements with third parties, including but not limited to the following
  areas: construction, management, output marketing and receivable funding,
  input purchasing, transportation, rail access , water & wastewater
  treatment, energy sources & distribution, road improvement, insurance and
  other contracts used in the normal operations of Borrower. Lender approval of
  all agreements is required.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Assignments of all applicable contracts to be provided to Lender
  prior to loan closing.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Borrower will provide Lender with proof of insurance naming the
  primary lender as lender’s loss payable and/or mortgagee as requested. Lender
  approval of all insurance coverage is required.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Independent construction inspections are to occur on a scheduled
  basis, with unscheduled inspections by Lender and/or Bank Group at their
  discretion.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Borrower will provide 1st FCS with proof of total equity
  prior to first advance of loan disbursements. Cash equity requirements will
  be not less than $30,000,000 with combined cash equity plus a Letter of
  Credit payable to lender totaling $32,300,00. The Letter of Credit and Draw
  Conditions must be acceptable to the lender.

  

 

5

 

	
  6.

  	
   

  	
  All equity will be disbursed by the designated Lender escrow agent
  for agreed upon construction purposes prior to the first disbursement of loan
  proceeds.

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  If applicable, Borrower will accept the designated agent of 1st
  Farm Credit Services for co-leading the senior debt of this project.

  
	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Completion of an acceptable appraisal by a third party appraiser as
  selected by Lender supporting the maximum 60% term loan to value requirement.

  
	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Borrower to provide Lender copies of all necessary permits to
  construct and operate proposed facilities.

  
	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Approval and compliance with all conditions required to obtain the
  above outlined USDA guarantees.

  

 

LOAN COVENANTS:

 

	
  1.

  	
   

  	
  To achieve and maintain minimum working capital of $6.0 million at
  the end of the construction period, $8.0 million after the end of the first
  12 months of production, $10.0 million after the end of the first 24 months
  of production and to be maintained continually at $10.0 million thereafter.
  Working Capital to be defined as GAAP basis current assets less GAAP basis
  current liabilities.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  To
  achieve and maintain a minimum Owner Equity of 50% at the end of the
  construction period and thereafter. Owner Equity to be defined as GAAP basis
  equity divided by GAAP basis total assets.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  To
  achieve and maintain a minimum Net Worth of not less than $30M at the end of
  the construction period and thereafter. Net Worth to be defined as GAAP basis
  total assets less GAAP basis total liabilities.

  

 

6

 

	
  4.

  	
   

  	
  To
  achieve and maintain a minimum Debt Service Coverage Ratio of at least 1.20
  in the first year and all subsequent year’s of operations. Debt Service
  Coverage Ratio is defined as: i) net income after taxes, plus depreciation
  and amortization divided by ii) current portion of long term debt. Initial
  measuring time is the end of the first full year after production and will be
  measured annually based on fiscal year-end audit thereafter.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  No distributions/dividends will be allowed for the first 3 fiscal
  years of operation after the construction loan is converted to term loans.
  Thereafter, the maximum distributions/dividends allowed will be 30% of
  previous year’s net income, including state and federal incentive payments.
  Distributions/dividends may be paid out annually or as negotiated with
  lender, based on a 12-month year to be determined by Lender and Borrower,
  after Lender has received annual audited financial statements and after all
  Lender covenants are met on a post-distribution/dividend basis.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Maximum annual capital expenditures, other than construction of the
  plant per approved plans, of not greater than $250,000.

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  No additional borrowings without Lender approval.

  

 

7

 

	
  8.

  	
   

  	
  Free Cash Flow Sweep

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In addition to the Term Loan payment schedule, the Company shall also
  within 120 days of each fiscal year end make a sweep payment applied to the
  principal installment in inverse order of maturity of the term loan equal to
  75% of the available (if any) Free Cash Flow* of the Company. The Free Cash
  Flow payment requirement will be limited to a maximum $2,500,000 annually and
  will be discontinued when the aggregate total received, exceeds $10,000,000.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Not withstanding the paragraph above, in any periods in which the
  Federal Biodiesel Tax Credit is scheduled to expire in less than 12 months or
  is reduced to < $.80/gallon or is replaced by an alternative support
  structure not acceptable to the Lender in its sole discretion, the Free Cash
  Flow Sweep rate will increase to 100% and the annual/aggregate limits will
  not apply.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cash Flow Sweeps will be suspended in any year where owner equity is >70%
  but will be reinstated if the owner equity goes below 70% owner equity.

  

	
   

  	
   

  	
  *The term “Free Cash Flow” is
  defined as the Company’s annual profit, plus the respective fiscal
  year depreciation and amortization expense, minus allowed capitalized
  expenditures for fixed assets, allowed dividends/distributions to the
  members/owners, and regular scheduled term loan payments to Lender and other
  long-term creditors.

  
	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Lender must approve any changes in plant management or any decision
  to excuse management.

  
	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Lender approval of all construction changes orders required.

  
	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  To provide monthly interim compiled financial statements (balance
  sheet and income statement), prepared in accordance with GAAP along with
  calculations of financial covenants and borrowing base, within thirty (30)
  days of month-end.

  
	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  To provide accountant prepared unqualified audit of fiscal year-end
  financial statements within 120 days of fiscal year-end.

  
	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  To
  provide a quarterly Compliance Certificate, completed by the Plant or General
  Manager, certifying that Borrower is in compliance with all Lender covenants,
  within thirty days of quarter-end.

  

 

8

 

	
  14

  	
   

  	
  To provide a monthly production report in form
  agreed between the parties outlining input and output levels within thirty
  days of month-end.

  
	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  Lender approval of the plant’s initial Risk
  Management Plan and any significant modification is required.

  

 

This
commitment expires if not accepted and presented to 1st Farm Credit
Services by Borrower before 09/07/07. Borrower hereby accepts this Term Sheet.

 

 

	
  Signed
  by

  	
     /S/
  Ronald L. Mapes

  	
   

  	
  Dated:

  	
     9/06/07

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signors printed name:

  	
    Ronald L. Mapes

  	
   

  	
   

  
										

 

9

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