Exhibit
10.28


HAYNES INTERNATIONAL, INC.


SECOND AMENDED AND RESTATED STOCK OPTION PLAN


As adopted by the Board of Directors as of January 22, 2007


The Board of Directors of Haynes International, Inc.
(the “Company”) has determined that the best interests of the Company will be
served by making available to eligible employees and directors of the Company
and its Subsidiaries a means to acquire shares of the Company’s common stock
(the “Shares”) through the granting of stock options.  The Haynes International, Inc. Stock Option
Plan, as amended or amended and restated from time to time (the “Plan”), is
intended to promote the growth of the Company and its shareholders by
attracting and motivating key employees and directors whose efforts are deemed
worthy of encouragement through the incentive effects of stock options.


The Shares purchased pursuant to the Plan shall be
subject to certain restrictions, the details of which are set forth below.  There is currently no public market for the
Shares.  The future market price, if any,
of the Shares may be highly volatile depending on a number of factors.  In addition, the ownership of the Company represented
by Options may be diluted by the future issuances of Shares or convertible
securities.


Accordingly, the Company’s Board of Directors adopts
this Plan in accordance with the Plan of Reorganization (as defined below),
effective as of the Effective Date.


1.             DEFINITIONS.  For
purposes of the Plan, the following terms, when capitalized, shall have the
meaning set forth below:


(a)           “Board” or “Board of Directors” means
the board of directors of the Company.


(b)           “CEO” means the Chief Executive
Officer of the Company.


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


(d)           “Committee” means the Compensation
Committee of the Board, and the composition of the Committee shall be governed
by the Compensation Committee Charter as adopted by the Board and as amended
from time to time.


(e)           “Company” means Haynes International,
Inc.


(f)            “Director” means any person serving
on the Board of Directors of the Company.


(g)           “Disability” means total and
permanent disability as defined in the Haynes International Inc. Pension Plan.













(h)           “Discretionary Participant” means any
additional Participant as may be designated on a limited basis by the Committee
upon the recommendation of the CEO to accommodate new hires, promotions and
other similar circumstances.


(i)            “Effective Date” has the meaning set
forth in the Plan of Reorganization.


(j)            “Employee” means any person,
including officers, employed by the Company or any Subsidiary.  The payment of a director’s fee by the
Company shall not be sufficient to constitute employment” by the Company.


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


(l)            “Executive” means executives
occupying the management positions listed on EXHIBIT A attached hereto.


(m)          “Fair Market Value” per share as of a
particular date means the last reported sale price (on the day immediately
preceding such date) of the Shares quoted on the NASDAQ National Market or the
NASDAQ SmallCap Market (or any other exchange or national market system upon
which price quotations for the Shares are regularly available); provided,
however, if price quotations for the Shares are not regularly available on any
exchange or national market system, Fair Market Value per share shall mean, as
of any date, the fair market value of such Shares on such date as determined in
good faith by the Board or Committee.


(n)           “Good Reason” means the occurrence of
any of the following actions or failures to act, but in each case only if it is
not consented to by the Optionee in writing: (a) a material adverse change in
the Optionee’s duties, reporting responsibilities, titles or elected or appointed
offices as in effect immediately prior to the effective date of such change;
(b) a material reduction by the Company in the Optionee’s base salary or annual
bonus opportunity in effect immediately prior to the effective date of such
reduction, not including any reduction resulting from changes in the market
value of securities or other instruments paid or payable to the Optionee; (c)
solely in the case of the CEO, any change of more than fifty (50) miles in the
location of the principal place of employment of the CEO immediately prior to
the effective date of such change.  For
purposes of this definition, none of the actions described in clauses (a) and
(b) above shall constitute “Good Reason” with respect to the Optionee if it was
an isolated and inadvertent action not taken in bad faith by the Company and if
it is remedied by the Company within thirty (30) days after receipt of written
notice thereof given by the Optionee (or, if the matter is not capable of
remedy within thirty (30) days, then within a reasonable period of time
following such thirty (30) day period, provided that the Company has commenced
such remedy within said thirty (30) day period); provided that “Good Reason”
shall cease to exist for any action described in clauses (a) and (b) above on
the sixtieth (60th) following the later of the occurrence of such action or the
Optionee’s knowledge thereof, unless the Optionee has given the Company written
notice thereof prior to such date.


(o)           “New Common Stock” has the meaning
set forth in the Plan of Reorganization.



 2
 









(p)           “Non-Employee Director” means a
Director who is a “non-employee director” within the meaning of Rule 16b-3 and
who is also an “outside director” within the meaning of Section 162(m) of the
Code.


(q)           “Option” means any stock option
issued pursuant to the Plan.  Options
will be “Nonqualified Options” which are defined as options not intended to
meet the requirements of Section 422 of the Code.


(r)            “Option Agreement” means the written
agreement by and between the Participant and the Company setting forth the
terms and conditions of an Option.  Each
Option Agreement shall be subject to the terms and conditions of the Plan and
need not be identical.


(s)           “Optionee” means the holder of an
outstanding Option granted under the Plan.


(t)            “Participant” means the CEO,
Executive, Non-Employee Director or Discretionary Participant who has entered
into an Option Agreement with the Company pursuant to this Plan.


(u)           “Plan” means this Haynes
International, Inc. Stock Option Plan as provided herein and as may be amended
from time to time.


(v)           “Plan of Reorganization” means the
First Amended Plan of Reorganization for the Company that was filed with the
United States Bankruptcy Court Southern District Indianapolis Division and
approved on August 16, 2004.


(w)          “Retirement” means in the case of the
CEO, a resignation by the CEO after having reached age fifty-five (55), but in
no event prior to September 30, 2007, and, in the case of any other
Participant, a resignation after reaching age fifty-five (55) and completing at
least five (5) years of service with the Company, but in no event prior to
September 30, 2007.


(x)            “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect
from time to time.


(y)           “Share” means a share of common stock
of the Company authorized under the Plan of Reorganization, as may be adjusted
in accordance with Section 5(b) below.


(z)            “Shares Outstanding” means the total
number of Shares outstanding on a fully diluted basis, as reflected in the
Company’s financial statements for purposes of determining earnings per share.


(aa)         “Subsidiary” and “Subsidiaries” used
herein means a company or companies of which 80% or more of the total voting
power of the equity of each such company and 80% or more of the total value of
the equity of each such company are owned by the Company or a Subsidiary of the
Company.



 3
 









(bb)         “Terminated for Cause,” “Termination
for Cause” or “Cause” means, (i) if the Optionee is a party to an employment or
service agreement with the Company or its Subsidiaries and such agreement
provides for a definition of Cause, the definition therein contained, or, (ii)
if no such agreement exists, a termination by reason of the good faith
determination of the Board that the Optionee (A) continually failed to
substantially perform his duties with the Company (other than a failure
resulting from the Optionee’s medically documented incapacity due to physical
or mental illness), including, without limitation, repeated refusal to follow the
reasonable directions of the Board, knowing violation of the law in the course
of performance of the Optionee’s duties with the Company or a Subsidiary,
repeated absences from work without a reasonable excuse, or intoxication with
alcohol or illegal drugs while on the Company’s or a Subsidiary’s premises
during regular business hours, (B) engaged in conduct which constituted a
material breach of such Optionee’s employment agreement (if applicable), (C)
was indicted (or equivalent under applicable law), convicted of or entered a
plea of nolo contendere to the commission of a felony or crime involving
dishonesty or moral turpitude, or (D) engaged in conduct which is demonstrably
and materially injurious to the financial condition, business reputation, or otherwise
of the Company or its Subsidiaries or affiliates, or (E) perpetuated a fraud or
embezzlement against the Company or its Subsidiaries or affiliates, and in each
case the particular act or omission was not cured, if curable, in all material
respects by the Optionee within thirty (30) days after receipt of written
notice from the Board, which shall set forth in reasonable detail the nature of
the facts and circumstances which constitute “Cause;” provided, however, the
Optionee shall not be deemed to have been Terminated for Cause unless there
shall have been delivered to the Optionee a copy of a resolution duly adopted
by the Board.  If the Company has
reasonable belief that the Optionee has committed any of the acts described
above, it may suspend the Optionee (with or without pay) while it investigates
whether it has or could have Cause to terminate the Optionee.  The Company may terminate the Optionee for
Cause prior to the completion of its investigation; provided, that, if it is
ultimately determined that the Optionee has not committed an act which would
constitute Cause, Optionee shall be treated as if he were terminated without
Cause.


2.             ADMINISTRATION OF THE PLAN.


(a)           COMMITTEE.  The Plan shall be administered by the
Committee.  The Committee shall have full
authority to administer the Plan, authority to interpret and construe any
provision of the Plan and to adopt such rules and regulations for administering
the Plan as it may deem necessary in order to comply with the requirements of
the Plan, or in order to conform to any regulation or to any change in any law
or regulation applicable thereto.


(b)           ACTIONS OF THE COMMITTEE.  All actions taken and all interpretations and
determinations made by the Committee in good faith (including determinations of
Fair Market Value) shall be final and binding upon all Participants, the
Company, and all other interested persons. 
No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan,
and all members of the Committee shall, in addition to their rights as 



 4
 









Directors, be fully protected to the extent
permitted by law by the Company with respect to any such action, determination,
or interpretation.


(c)           POWERS OF THE COMMITTEE.  Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to determine, upon
review of the relevant information, the Fair Market Value of the Shares; (ii)
to determine the persons to whom Options shall be granted, the time or times at
which Options shall be granted, the number of Shares to be represented by each
Option, and the exercise price per Share; (iii) to interpret the Plan; (iv) to
prescribe, amend, and rescind rules and regulations relating to the Plan; (v)
to accelerate or defer (with the consent of the Participant unless otherwise
provided herein) the vesting of any Option; (vi) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted by the Board or the Committee; and (vii)
to make all other determinations deemed necessary or advisable for the
administration of the Plan.


3.             ELIGIBILITY AND PARTICIPATION.


(a)           ELIGIBILITY.  Grants of Options shall be made to the CEO
and the Executives in accordance with Exhibit A and, in the discretion of the
Committee, may be made to any Non-Employee Director or any Discretionary
Participant.


(b)           PARTICIPATION BY DIRECTOR.  Members of the Committee who are eligible
either for Options or have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of any Options pursuant
to the Plan, except that no such member shall act upon the granting of an
Option to himself, but any such member may be counted in determining the
existence of a quorum at any meeting of the Committee and may be counted as
part of an action by unanimous written consent during or with respect to which
action is taken to grant Options to him or her.


4.             EXERCISE PRICE, CONSIDERATION AND FORM OF OPTION
AGREEMENT.


(a)           EXERCISE PRICE.  The price to be paid for Shares upon the
exercise of an Option (“exercise price”) shall be determined by the Committee
at the time such Option is granted.


(b)           PAYMENT OF EXERCISE PRICE.  The exercise price shall be paid in full, at
the time of exercise of the Option, (i) by personal or bank cashier’s check,
(ii) if the Participant may do so without violating Section 16(b) or (c) of the
Exchange Act, and subject to approval by the Committee, by tendering to the Company
whole Shares owned by such Participant having a Fair Market Value at the time
of exercise equal to the exercise price of the Shares to which the Option is
being exercised, (iii) if the Participant may do so without violating Section
16(b) or (c) of the Exchange Act, and subject to approval by the Committee, by
surrendering sufficient vested options based on the difference between the
exercise price and the Fair Market Value at the time of exercise of the Shares
to equal the exercise price of the Shares to which the Option is being
exercised, or (iv) any combination of (i), (ii) or (iii).  Unless otherwise specifically 



 5
 









provided in an Option Agreement, the purchase
price of Shares acquired pursuant to an Option that is paid by delivery to the
Company of other Shares or attestation of ownership thereof acquired, directly
or indirectly from the Company, shall be paid only with Shares that have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).


(c)           FORM OF OPTION AGREEMENT.  Each Option shall be evidenced by an Option
Agreement specifying the number of Shares which may be purchased upon exercise
of the Option and containing such terms and provisions as the Committee may
determine, subject to the provisions of the Plan.


5.             SHARES OF COMMON STOCK SUBJECT TO THE PLAN.


(a)           NUMBER.  Subject to adjustment as provided in
paragraph (b) of this Section 5, the maximum aggregate number of Shares which
may be issued pursuant to Options granted under the Plan shall not exceed one
(1) million Shares.  To the extent any
Option granted under the Plan shall for any reason expire or otherwise
terminate or become unexercisable, in whole or in part, without having been
exercised in full, the Shares not acquired under such Option shall revert to
and thereafter be available for future grants under the Plan.


(b)           CAPITAL CHANGES.  In the event of any extraordinary dividend or
other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, reclassification, stock split, reverse stock
split, spin-off, 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 other similar corporate transaction or event (an “Event”), and
such Event affects the Shares such that an adjustment is reasonably determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan or with respect to an Option, then the Committee shall, in such manner as
it may reasonably deem equitable, take action to make the appropriate
adjustment, including, without limitation, adjusting any or all of the
following: (i) the number and kind of Shares (or other securities or property)
with respect to which Options may be granted or awarded; (ii) the number and
kind of Shares (or other securities or property) subject to outstanding Options;
and (iii) the grant or exercise price with respect to any Option; provided,
however, that no Committee action under this Section 5(b) shall result in a
reduction in the aggregate value of outstanding Options (whether or not vested)
held by any Participant immediately prior to the Event.  The Committee’s determination under this
Section 5(b) shall be final, binding and conclusive.  If any of the foregoing adjustments shall
result in a fractional Share, the fraction shall be disregarded, and the Company
shall have no obligation to make any cash or other payment with respect to such
a fractional Share.


(c)           SALE PROTECTION.  In the event that the Company’s Shares are
not readily traded on a national exchange or quotations system, and the Company
is sold in a sale or merger, the Fair Market Value of the Shares received upon
the exercise of each vested Option shall be the value per Share payable or used
in such transaction.



 6
 









(d)           TERMINATION OF OPTIONS. Unless
otherwise provided in an Option Agreement upon the occurrence of an Event, a
Change in Control (as defined in Section 11 below) or other corporate event or
transaction in which outstanding Options are not to be assumed or otherwise
continued following such an Event, Change in Control or other corporate event
or transaction, the Committee may, in its discretion, terminate any outstanding
Option without a Participant’s consent and (i) provide for the purchase of any
such Option for an amount of cash equal to the positive amount (if any) that
could have been attained upon the exercise of such Option or realization of the
Participant’s rights had such Option been currently exercisable or payable or
fully vested; and/or (ii) provide that such Option shall be exercisable
(whether or not vested) as to all Shares covered thereby for at least thirty
(30) days prior to such an Event, Change in Control or other corporate event or
transaction.


(e)           FUTURE TRANSACTIONS.  The existence of the Plan, any Option
Agreement and the Options granted hereunder shall not affect or restrict in any
way the right or power of the Company or the shareholders of the Company to
make or authorize any adjustment, recapitalization, reorganization or other
change in the Company’s capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Shares or the rights thereof
or which are convertible into or exchangeable for Shares, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.


6.             EXERCISE OF STOCK OPTIONS.


(a)           VESTING.  Except as provided otherwise in this Plan or
the applicable Option Agreement, each Option shall become vested and
exercisable in three (3) equal installments such that the Option may be
exercised as to Shares covered by the first installment from and after the
first anniversary of the date of the grant of the Option, with the second and
third installments becoming vested and exercisable on the two succeeding
anniversary dates.  Except as provided
herein, or except as specifically restricted by the Committee, any Option may
be exercised in whole at any time or in part at any time to the extent that
such Shares under the Option are then vested and exercisable.  In no event, however, may any Option be
exercised after the expiration of its exercise period, as described in Section
6(b), below.


(b)           EXERCISE PERIOD.  Notwithstanding any provision herein to the
contrary, any Option granted pursuant to this Plan shall expire, to the extent
not exercised, no later than the tenth (10th) anniversary of the date on which
it was granted.  Such time or times shall
be set forth in the Option Agreement evidencing such Option.


(c)           NOTICE OF EXERCISE.  A Participant electing to exercise an Option
shall give written notice to the Company, as specified by the Option Agreement,
of his 



 7
 









election to purchase a specified number of
Shares.  Such notice shall be accompanied
by the instrument evidencing such Option and any other documents required by
the Company, and payment of the exercise price of the Shares the Participant
has elected to purchase.  If the notice
of election to exercise is given by the executor or administrator of a deceased
Participant, or by the person or persons to whom the Option has been
transferred by the Participant’s will or the applicable laws of descent and
distribution, the Company will be under no obligation to deliver Shares pursuant
to such exercise unless and until the Company is satisfied that the person or
persons giving such notice is or are entitled to exercise the Option.


(d)           TERMINATION OF EMPLOYMENT WITHOUT
CAUSE OR FOR GOOD REASON.


(i)            Unless specifically provided otherwise
in the Option Agreement, if the CEO’s employment is Terminated without Cause by
the Company or by the CEO for Good Reason during the term of his employment
agreement, all unvested Options of the CEO shall vest immediately and all
Options held by the CEO shall remain exercisable for one (1) year following
termination of employment, but in no event later than the expiration date of
such Option as specified in the applicable Option Agreement.  If the Option is not exercised during this
period it shall be void and deemed to have been forfeited and be of no further
force or effect.  In the CEO’s employment
terminates on September 30, 2007 upon expiration of the employment term under
his employment agreement, any unvested Options shall terminate immediately and
any vested Options shall remain exercisable for ninety (90) days following
termination of employment.  If the Option
is not exercised during this period, it shall be void and deemed to have been
forfeited and be of no further force or effect.


(ii)           Unless specifically provided
otherwise in the Option Agreement, if the employment of an Executive or
Discretionary Participant is Terminated without Cause by the Company or by the
Executive or Discretionary Participant for Good Reason, all unvested Options held
by the Executive or Discretionary Participant, as the case may be, shall
terminate immediately and any vested Options shall remain exercisable for six
(6) months following the date of such event, but in no event later than the
expiration of such Options as specified in the applicable Option
Agreement.  If the Option is not
exercised during this period, it shall be void and deemed to have been
forfeited and be of no further force or effect.


(e)           TERMINATION DUE TO DEATH, DISABILITY
OR RETIREMENT.


(i)            In addition to any rights under
Section 10, upon the death, Disability or Retirement of the CEO, all unvested
Options shall vest immediately and all Options held by the CEO shall remain
exercisable for one (1) year in the event of death or Disability and six (6)
months in the event of Retirement following the date of any such event, but in
no event later than the expiration date of Option as specified in the
applicable Option Agreement.  If the
Option is not 



 8
 









exercised during this period it shall be void
and deemed to have been forfeited and be of no further force or effect.


(ii)           In addition to any rights under
Section 10, upon the death or Disability of an Executive, a Director or a
Discretionary Participant, all unvested Options shall vest immediately and all
Options held by such Executive, Director, or Discretionary Participant, as the
case may be, shall remain exercisable for six (6) months following the date of
such event, but in no event later than the expiration date of such Option as
specified in the applicable Option Agreement. 
If the Option is not exercised during this period, it shall be void and
deemed to have been forfeited and be of no further force or effect.


(iii)          Upon the Retirement of the Executive,
a Non-Employee Director, or a Discretionary Participant, all unvested Options
shall terminate immediately and all vested Options held by such Executive,
Non-Employee Director or Discretionary Participant, as the case may be, shall
remain exercisable for six (6) months following the date of such event, but in
no event later than the expiration date of such Options as specified in the
applicable Option Agreement.  If the
Option is not exercised during this period, it shall be void and deemed to have
been forfeited and be of no further force or effect.


(f)            FORFEITURE BY REASON OF TERMINATION
FOR CAUSE OR WITHOUT GOOD REASON.


(i)            Notwithstanding the exercise period
described in Section 6(b), if the employment or service of a Participant or a
Director is Terminated for Cause by the Company, all rights or interests in any
Option, regardless of the extent to which it might otherwise have been vested
and exercisable on the date of such Termination for Cause, shall be void and
forfeited effective on the date of such Termination for Cause, and such Option
shall no longer be exercisable to any extent whatsoever.


(ii)           Unless specifically provided
otherwise in the Option Agreement, if the CEO’s employment is terminated by the
CEO without Good Reason, all unvested Options held by the CEO shall terminate
immediately and all vested Options held by the CEO shall remain exercisable for
thirty (30) days following termination, but in no event later than the
expiration date of such Option as specified in the applicable Option
Agreement.  If the Option is not
exercised during this period, it shall be void and deemed to have been
forfeited and be of no further force or effect.


(iii)          Unless specifically provided otherwise
in the Option Agreement, if the employment of any Participant other than the
CEO is terminated by the Participant without Good Reason, all vested and
unvested Options held by the Participant shall terminate immediately and all
rights or interests therein shall be void and forfeited effective on the date
of such termination.


 



 9















(g)           DISPOSITION OF TERMINATED STOCK
OPTIONS.  Any Shares subject to Options
which have been terminated and forfeited as provided above shall not thereafter
be eligible for purchase by the Participant but shall again be available for
grant by the Board or the Committee to other Participants.


7.             RESTRICTIONS ON RESALE OR DISPOSITION OF SHARES.


(a)           Reserved.


(b)           ISSUANCE OF SHARES AND COMPLIANCE
WITH SECURITIES LAWS.  The Shares are
being offered in reliance upon an exemption from registration provided by the
federal Securities Act of 1933, as amended (the “Securities Act”), and an
exemption from registration provided by applicable state securities laws.  Accordingly, a Participant may not sell or
transfer the Shares to any person other than the Company without registering
the Shares under the Securities Act or until the Participant has obtained an
opinion of legal counsel satisfactory to the Company that the sale or
disposition is exempt from such registration requirements.  A Participant has no right at any time to
require the Company to register the Shares under federal or state securities
laws.  Any person purchasing Shares upon
exercise of an Option issued pursuant to the Plan may be required to make such
representations and furnish such information as may, in the opinion of counsel
for the Company, be appropriate to permit the Company, in light of the
existence or nonexistence with respect to such Shares of an effective
registration under the Securities Act, or any similar state statute, to issue
the Shares in compliance with the provisions of those or any comparable
acts.  These restrictions are imposed by
federal and state securities laws.


(c)           SECURITIES RESTRICTIONS.  All certificates for Shares delivered under
the Plan shall be subject to such stock-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions.  If the Committee determines that the issuance
of Shares hereunder is not in compliance with, or subject to an exemption from,
any applicable federal or state securities laws, such shares shall not be
issued until such time as the Committee determines that the issuance is
permissible.


8.             NO CONTRACT OF EMPLOYMENT.  Unless otherwise expressed in a separate
writing signed by an authorized officer of the Company, all Employees are
employed for an unspecified period of time and are considered to be “at-will
employees.” Nothing in this Plan shall confer upon any Participant the right to
continue in the employ of the Company or any Subsidiary, nor shall it limit or
restrict in any way the right of the Company or any Subsidiary to discharge the
Participant at any time for any reason whatsoever, with or without cause.


9.             NO RIGHTS AS A STOCKHOLDER.  A Participant shall have no rights as a
stockholder with respect to any Shares subject to an Option unless and until
the Participant duly exercises the Option, makes full payment of the Option
price and certificates evidencing 



 10
 









ownership of Shares are issued to the Participant.  Thereafter, cash dividends, stock dividends,
stock splits and other securities and rights to subscribe shall be paid or
distributed with respect to Shares acquired pursuant to the Plan in the same
manner as such items are paid or distributed to other shareholders of the
Company.  Adjustments to the number and
kind of Shares in the event of certain transactions shall be made as described
in Section 5(b).


10.           NONTRANSFERABILITY OF OPTIONS; DEATH
OR DISABILITY OF PARTICIPANT.  No Option
acquired by a Participant under the Plan shall be assignable or transferable by
a Participant, other than by will or the laws of descent and distribution, and
such Options are exercisable, during his lifetime, only by the Participant.  In the event of the Participant’s death or
Disability, the Option may be exercised by the personal representative of the
Participant’s estate or if no personal representative has been appointed, by
the successor(s) in interest determined under the Participant’s will or under
the applicable laws of descent and distribution during the exercise period set
forth in Section 6(e) herein.  During
such exercise period and only if price quotations for the Shares are NOT
available on any exchange or national market system, in the case of the death
or Disability of the CEO, an Executive, or a Discretionary Participant, such
individual in the case of Disability, or the beneficial holder of such Option
in the case of death, shall have the right during the exercise period provided
in Section 6(e)(i) or (ii), as applicable, and in accordance with procedures
that the Committee, in its discretion, may establish from time to time, to
demand that the Company purchase each vested Option at a value equal to the
value of the difference between the Fair Market Value of the Shares of the
Company and the exercise price of such Options.


11.           CHANGE IN CONTROL.  In the event of a “Change in Control” (as
defined below), the Board, in its discretion, may accelerate the vesting of all
Options without regard to the normal vesting schedule of the Options; provided
that, in the case of a Change in Control described in Sections 11(a) or (b), all Options shall vest immediately upon the occurrence of
the Change in Control.  If the Options
will continue to be outstanding following the Change in Control, such Options
will remain fully exercisable following the Change in Control and will not be
subject to any other vesting schedule, provided that such Options will expire
on the expiration date as specified in the applicable Option Agreement.  “Change in Control” shall mean the occurrence
of any one of the following events:


(a)           any “Person” other than an Existing
Substantial Shareholder (as defined below) becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing a majority of
the combined voting power of the Company’s then outstanding securities
(assuming conversion of all outstanding non-voting securities into voting
securities and the exercise of all outstanding options or other convertible
securities);


(b)           the following individuals cease for
any reason to constitute a majority of the number of Directors then serving:
individuals who, on the Effective Date, constitute the Board and any new Director
(other than a Director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited to, 



 11
 









a consent solicitation, relating to the
election of Directors of the Company) whose appointment or election by the
Board or nomination for election by the Company’s stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the Directors then still
in office who either were Directors on the Effective Date or whose appointment,
election or nomination for election was previously so approved or recommended;


(c)           the consummation of a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation (other than with an Existing Substantial
Shareholder or any of its affiliates), other than (x) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent,
either by remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof, a majority of the combined voting
power of the securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (y) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person, is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing a
majority of the combined voting power of the Company’s then outstanding
securities; or


(d)           the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or there
is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets, other than a sale or disposition
by the Company of all or substantially all of the Company’s assets to an entity
controlled by an Existing Substantial Shareholder or any of its affiliates, or
to an entity a majority of the combined voting power of the voting securities
of which is owned by substantially all of the stockholders of the Company
immediately prior to such sale in substantially the same proportions as their
ownership of the Company immediately prior to such sale.  As used herein the term “Existing Substantial
Shareholder” means any Person that alone or together with its affiliates shall
be the Beneficial Owner of or entitled to receive more than 15% of New Common
Stock as of the Effective Date.  As used
herein the term “Beneficial Owner” shall have the meaning set forth in Rule
13d-3 under the Exchange Act.  As used
herein the term “Person” shall have the meaning given in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any subsidiary of the Company, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities or (iv) a corporation
owned, directly or indirectly, by substantially all of the stockholders of the
Company in substantially the same proportions as their ownership of stock of
the Company.


12.           AMENDMENTS; DISCONTINUANCE OF
PLAN.  The Board may from time to time
alter, amend, suspend, or discontinue the Plan, including, where applicable,
any modifications or amendments as it shall deem advisable for any reason,
including satisfying the requirements of any law or regulation or any change
thereof; provided, however, except as provided in Section 5, that no such
action shall adversely affect the rights and obligations with 



 12
 









respect to Options at that time outstanding under the Plan;
and provided further, that no such action shall, without the approval of the
stockholders of the Company, (a) increase the maximum number of Shares of
common stock that may be made subject to Options (unless necessary to effect
the adjustments required by Section 5(b)).


13.           WITHHOLDING TAXES; TAXES SATISFIED BY
WITHHOLDING OPTIONED SHARES.


(a)           GENERALLY.  The Company or any Subsidiary may take such
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company or any Subsidiary is required by law or regulation of any
governmental authority, whether federal, state, or local, domestic or foreign,
to withhold in connection with any Option including, but not limited to,
requiring the Participant to pay such tax at the time of exercise or the
withholding of issuance of Shares to be issued upon the exercise of any Option
until the Participant reimburses the Company for the amount the Company is
required to withhold with respect to such taxes, or, at the Company’s sole
discretion, canceling any portion of such issuance of Shares in any amount
sufficient to reimburse itself for the amount it is required to so withhold.


(b)           SATISFYING TAXES BY WITHHOLDING
OPTIONED SHARES.  Option Agreements under
the Plan may, at the discretion of the Board or the Committee, contain a
provision to the effect that all federal and state taxes required to be
withheld or collected from a Participant upon exercise of an Option may be
satisfied by the withholding of a sufficient number of exercised Shares that
are subject to the Option which, valued at Fair Market Value on the date of
exercise, would be equal to the total withholding obligation of the Participant
for the exercise of such Option; provided, however, that if the Company is a
public reporting corporation, no person who is an “officer” of the Company, as
such term is defined in Rule 3b-2 under the Exchange Act, may elect to satisfy
the withholding of federal and state taxes upon the exercise of an Option by
the withholding of exercised Shares that are subject to the Option, unless such
election is made either (i) at least six (6) months prior to the date that the
exercise of the Option becomes a taxable event or (ii) during any of the
periods beginning on the third business day following the date on which the
Company issues a news release containing the operating results of a fiscal
quarter or fiscal year and ending on the twelfth business day following such
date.  Such election shall be deemed made
upon receipt of notice thereof by an officer of the Company, by mail, personal
delivery, or by facsimile message, and shall (unless notice to the contrary is
provided to the Company) be operative for all Option exercises which occur
during the twelve-month period following the election.


14.           EFFECTIVE DATE AND TERM OF PLAN.  The Plan is effective as of the Effective
Date and Options may be granted at any time on or after such date.  No Options shall be granted subsequent to August
30, 2014 (which is ten (10) years after the effective date of the Plan).



 13














EXHIBIT A


	
  Position

  	
   

  	
   

  	
   

  	
  % of Options

  	
   

  	
  Option Shares

  	
   

  
	
  President & CEO

  	
   

  	
   

  	
   

  	
  20

  	
   

  	
  200,000

  	
   

  
	
  VP Finance & CFO

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
  100,000

  	
   

  
	
  VP Marketing &
  International

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
  100,000

  	
   

  
	
  VP Operations — Kokomo

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
  100,000

  	
   

  
	
  VP IT & Business
  Planning

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Corporate Affairs

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Engr. & Tech.

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  Controller & CAO

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Sales

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  VP Manufacturing
  Planning

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  GM Arcadia

  	
   

  	
   

  	
   

  	
  5

  	
   

  	
  50,000

  	
   

  
	
  Options reserved for
  distribution to Directors

  	
   

  	
   

  	
   

  	
  9

  	
   

  	
  90,000

  	
   

  
	
  Options reserved for
  distribution to Discretionary Participants

  	
   

  	
   

  	
   

  	
  6

  	
   

  	
  60,000

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  100

  	
   

  	
  1,000,000