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                                                                  EXHIBIT 10.AI



                       PERFORMANCE STOCK OPTION AGREEMENT

             UNDER THE WYMAN-GORDON COMPANY LONG-TERM INCENTIVE PLAN


              WYMAN-GORDON COMPANY, a Massachusetts corporation (the "Company"),
hereby grants to Colin Stead (the "Grantee"), who is now employed by the Company
or by a Subsidiary of the Company, a Non-qualified Stock Option (the "Option")
to purchase prior to July 16, 2006 (the "Expiration Date") an aggregate of
37,375 shares of Common Stock of the Company ("Shares") at a price of $16.75 per
Share pursuant to the terms and conditions set forth in the Wyman-Gordon Company
Long-Term Incentive Plan as approved by the stockholders of the Company on
October 18, 1995, as it may be amended from time to time in accordance with its
terms (the "Plan") and this Stock Option Agreement, as it may be amended from
time to time in accordance with its terms (the "Award Agreement"). By execution
of this Award Agreement, the Grantee acknowledges receipt of a copy of the Plan
and further agrees to be bound thereby and by the actions, pursuant to the Plan,
of the Committee referred to in the Plan (the "Committee") and of the
Wyman-Gordon Company Board of Directors.

              (1) The Option is in all respects governed by the terms of the
Plan. All of the terms and provisions of the Plan are hereby incorporated into
this Award Agreement by reference and are made a part of this Award Agreement.
For the convenience of the Grantee, certain but not all of the provisions of the
Plan are also summarized or elaborated upon in this Award Agreement. Each and
every provision of this Award Agreement shall be administered, interpreted, and
construed so that the 



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Option shall conform to the provisions of the Plan. Any provisions of this Award
Agreement that cannot be so administered, interpreted, or construed shall be
disregarded, and, accordingly, in the event of any conflict between the Award
Agreement and the Plan, the latter will govern. Any capitalized terms used
herein and not defined herein have the respective meanings ascribed to them in
the Plan. Whenever the word "Grantee" is used herein in a context where the
provision should logically be construed to apply to the Grantee's Beneficiary,
the word "Grantee" shall be deemed to include such Beneficiary.

              (2) The date of grant of the Option is July 16, 1996.

              (3) The Option is a Non-qualified Stock Option and is not an
Incentive Stock Option.

              (4) Subject to the terms of this Award Agreement, the Option shall
be exercisable from and after July 16, 2003; provided, however, that the option
may be exercised by the Grantee at any time after January 16, 1997 with respect
to the number of shares set forth below if the average closing price during a
period of 30 consecutive business days of the Common Stock of the Company, par
value $1.00 per share, on the NASDAQ National Market System, or on any successor
market or exchange in which the Common Stock is publicly traded, as quoted in
the WALL STREET JOURNAL reaches the indicated price levels.




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                                                          CUMULATIVE
                                                            NO. OF
                 STOCK PRICE                            OPTIONS VESTED
                 -----------                            --------------

                Below $21.00                                     0
                       21.00                                 1,869
                       22.00                                 3,738
                       23.00                                 7,475
                       24.00                                13,081
                       25.00                                18,688
                       26.00                                24,294
                       27.00                                29,900
                       28.00                                33,368
                       29.00                                35,506
                       30.00 or above                       37,375

       (5) Grantee may exercise the Option only in the following manner: From
time to time prior to the Expiration Date and subject to the provisions of
Paragraph 4 above, the Grantee may give written notice to the Treasurer of the
Company of his election to purchase some or all of the Shares purchasable at the
time of such notice. Said notice shall specify the number of Shares to be
purchased and shall be accompanied by payment therefor (a) in U.S. dollars by
personal check, bank draft, or money order payable to the order of the Company;
(b) in Shares that have been held by the Grantee for at least six (6) months and
that have a Fair Market Value equal to the purchase price; (c) to the extent not
limited or prohibited by the Committee, by payment made by the Grantee's broker,
in U.S. dollars by personal check, bank draft, or money order payable to the
order of the Company, pursuant to the Grantee's instructions; or (d) by a
combination thereof; and by any agreement, statement, or other evidence that the
Committee may require in order to satisfy itself that the issuance of the Shares
being purchased pursuant to such exercise and any subsequent resale thereof will
be in compliance with applicable laws and regulations relating to the issuance
and sale of securities, including the provisions of the Securities Act of 1933
and regulations promulgated thereunder.



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       (6) The exercise of the Option shall be deemed to occur (a) on the date
that the notice of exercise and the personal check, bank draft, money order or
Shares are received by the Company, or (b) if such notice of exercise and
payment are mailed in the United States, and the United States Postal Service
has stamped its postmark thereon, then on the date of such postmark. As soon as
practicable after each exercise of the Option and compliance by the Grantee with
all applicable conditions, including any payments to the Company that may be
required pursuant to Paragraphs 5 and 7 hereof, the Company shall mail or
deliver or cause to be mailed or delivered to the Grantee a stock certificate or
certificates for the number of Shares that the Grantee shall be entitled to
receive upon such exercise under the provisions of this Award Agreement.

       (7) In each case where the Grantee shall exercise the Option, in whole or
in part, the Company will notify the Grantee of the amount of withholding tax,
if any, that must be paid under Federal and, where applicable, state and local
law, by reason of such exercise. It shall be a condition to any delivery of
Shares or payment to be made to the Grantee hereunder that provision
satisfactory to the Company shall have been made for payment of any taxes the
Company determines, in its reasonable opinion, are required to be paid or
withheld pursuant to any applicable law or regulation. The Grantee may
irrevocably elect to have any withholding tax obligation satisfied by either of
the methods described in clause (a) or (c) of Paragraph 5, above, or a
combination thereof, whether or not the same method is used to pay the purchase
price of the Option. As an alternative to such an election with respect to all
or any part of the withholding tax obligation, the Company and its Subsidiaries
also shall, to the extent permitted by law, have the right to deduct from any
payment or transfer of any kind (whether of cash, Shares, or other property, and
whether or not related to the Plan) otherwise due to the Grantee any such taxes
required to be withheld.




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       (8)    This Award Agreement and the Grantee's right to exercise the
Option shall terminate, as to any portion of the Option not theretofore
exercised, whenever the Grantee is for any reason no longer employed by the
Company or a Subsidiary; subject, however, to the following provisions:

              (a) If the Company or a Subsidiary terminates the Grantee's
employment for reasons other than fraud, dishonesty, willful misconduct,
retirement, or disability, or if the Grantee resigns from the Company and the
Subsidiaries (as applicable), the Grantee shall have a period of 90 days
immediately after such termination in which to exercise the Option to the extent
then exercisable. The Option shall not become exercisable with respect to any
Shares with respect to which it was not exercisable on the date of such
termination of employment.

              (b) If the termination of Grantee's employment results from the
Grantee's death, retirement or disability, the Grantee (or his Beneficiary in
the case of his death) shall have a period of three years following such
termination to exercise in whole or in part the Option with respect to Shares
subject to the Option, to the extent then exercisable. The Option shall not
become exercisable with respect to any Shares with respect to which it was not
exercisable on the date of such termination of employment.

              (c) If the Grantee dies during the three-year period following
retirement or disability referred to in Subsection (b) above, the Option may be
exercised in whole or in part by his Beneficiary before the expiration of one
year after the date of his death or the expiration of the three-year period
following retirement or disability referred to in Subsection (b) above,
whichever occurs later.

       For purposes of this Paragraph 8, the term "retirement" shall mean
termination of employment after the Grantee has become eligible for an early,
normal or late 



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retirement benefit (but not a terminated vested or deferred vested benefit)
under the tax-qualified deferred benefit pension plan maintained by the Company
and/or its Subsidiaries that covers the Grantee, and the term "disability" shall
have the meaning ascribed to it in the Wyman-Gordon Company Savings/Investment
Plan.

       (9)  The Option is nontransferable other than by will or by the laws of
descent and distribution, and the Option may be exercised during the lifetime of
the Grantee only by him.

       (10) In the event that there is any change in the Shares through merger,
consolidation, reorganization, recapitalization, or otherwise; or if there shall
be any dividend on the Shares, payable in Shares, or an extraordinary cash
dividend or other extraordinary distribution; or if there shall be a stock
split, reverse stock split, combination of Shares, exercisability of stock
purchase rights received under the Company's Stockholder Rights Plan, or other
similar corporate transaction or event that affects the Shares, such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the rights of the Grantee or of the potential
benefits intended to be made available under the Plan, the number and kind of
Shares subject to the Option, the purchase price, and the other relevant
provisions of this Award Agreement shall be appropriately adjusted as provided
in Section 12 of the Plan.

       (11) As provided in Section 25 of the Plan in the event of a Triggering
Event, as hereinafter defined, the Option, to the extent it has not theretofore
been exercised, shall be fully exercisable without regard to the schedule in
Paragraph 4 above, but the Option shall thereupon become a Limited Right, as
hereinafter defined, and the terms thereof shall be modified as described in the
remaining provisions of this Paragraph 11. In the event of a Triggering Event,
the Grantee shall have the right (the "Limited Right") to have the Company, at
the election of the Grantee (which election for each Triggering 




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Event, as hereinafter defined, may be made only during the period beginning on
the effective date of such Triggering Event, as hereinafter defined, and ending
on the 45th day following such date), purchase all or any Shares subject to the
Option (to the extent not theretofore exercised) for an amount (payable entirely
in cash) equal to the number of Shares with respect to which the Limited Right
is exercised, multiplied by the excess of the higher of (a) the highest Fair
Market Value of a Share during the period commencing on the ninetieth (90th) day
preceding the exercise of the Limited Right and ending on the date of exercise
and (b) either (i) if an event described in clause (b) of the definition of
"Triggering Event," below, has occurred, the highest price per Share paid for
any Share as shown on Schedule 13D (or an amendment thereto) filed pursuant to
Section 13(d) of the 1934 Act by any person or group (as defined in that
definition) whose acquisition caused the Triggering Event to occur, or (ii) if
an event described in clause (a) of the definition of "Triggering Event," below,
has occurred, the fixed or formula price specified in the reorganization (as
defined in that definition) if such price is determinable as of the date of
exercise of the Limited Right OVER the purchase price of the Option. Such
purchase pursuant to the exercise of a Limited Right shall be deemed to be an
exercise of the Option. Notwithstanding any other provision of this Award
Agreement, no Limited Right may be exercised after the Expiration Date, but a
Limited Right may be exercised within six months of the date hereof. For
purposes of this Paragraph 11, a Triggering Event shall be deemed to occur when
and if any of the following events occurs: (a) stockholder approval of a merger
or consolidation involving the Company or a sale of all or substantially all of
the assets of the Company (each a "reorganization"), in each case except for a
transaction in which the Company's shareholders receive at least 50% of the
stock of the surviving, resulting or acquiring corporation; (b) any "person"
(other than the Company or an employee benefit plan of the Company or a
corporation controlled by an employee benefit plan of the Company or a
corporation controlled by the Company's shareholders) becomes the "beneficial
owner" of shares of capital stock of the Company representing a majority of the
votes entitled to be cast on matters submitted 




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to the shareholders of the Company; or (c) persons who, as of July 16, 1996
constituted the Company's Board (the "Incumbent Board") cease for any reason,
including without limitation as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to July
16, 1996 whose election was approved by at least a majority of the directors
then comprising the Incumbent Board shall, for purposes of this Agreement, be
considered a member of the Incumbent Board. For purposes of this paragraph, the
term "person" shall have the meaning used in Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and "beneficial
ownership" shall have the meaning set forth in Rule 13d-3 of the 1934 Act.

       (12) Notices hereunder shall be mailed or delivered to the Treasurer of
the Company at its principal place of business at Grafton, Massachusetts, and
shall be mailed or delivered to Grantee at his address set forth below or at
such other address as he may subsequently furnish the Treasurer of the Company
in writing.

       (13) The Grantee shall not have any rights of a shareholder by virtue of
the Option except with respect to Shares actually issued to him, and the
issuance of Shares shall confer no retroactive right to dividends.

       (14) The Committee may not, without the written consent of the Grantee,
cause this Award Agreement to be revoked, and may not without such written
consent make or change any determination or change any term, condition or
provision affecting the Option if the determination or change would reduce or
adversely affect the Option or the Grantee's rights thereto.

       (15) Notwithstanding anything herein to the contrary, on or after the
occurrence of a Triggering Event, as defined above, the Committee may not under
any 



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circumstances make or change any determination or change any term, condition, or
provision affecting the Option if the determination or change would reduce or
adversely affect the Option or the Grantee's rights thereto.

       (16) The Grantee shall designate a Beneficiary in writing and in such
manner as is acceptable to the Company. If the Grantee fails so to designate a
Beneficiary, or if no such designated Beneficiary survives the Grantee, the
Grantee's beneficiary shall be the Grantee's estate.

       (17) The exercise of the Option shall be subject to the condition that if
at any time the Company shall determine (in accordance with the provisions of
the following sentence) that it is necessary as a condition of, or in connection
with, such exercise (a) to satisfy withholding tax or other withholding
liabilities, (b) to effect the listing, registration, or qualification on any
securities exchange or under any state or Federal law of any Shares otherwise
deliverable in connection with such exercise, or (c) to obtain the consent or
approval of any regulatory body, then in any such event such exercise shall not
be effective unless such withholding, listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company in its reasonable and good faith judgment. Any
such determination (described in the preceding sentence) by the Company must be
reasonable, must be made in good faith, and must be made without any intent to
postpone or limit such exercise, grant or distribution beyond the minimum extent
necessary and without any intent otherwise to deny or frustrate the Grantee's
rights in respect of the Option. In seeking to effect or obtain any such
withholding, listing, registration, qualification, consent or approval, the
Company shall act with all reasonable diligence. Any such postponement or
limitation affecting the right to exercise the Option shall not extend the time
within which the Option may be exercised, unless the Company and the Grantee
choose to amend the terms of this Award Agreement to provide for such an
extension; and neither the Company nor its directors 



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or officers shall have any obligation or liability to the Grantee with respect
to any Shares with respect to which the Option shall lapse, because of a
postponement or limitation that conforms to the provisions of this Paragraph 17.

       (18) No fractional Shares shall be issued pursuant to this Award
Agreement. The Committee shall determine whether cash, other securities, or
other property shall be paid or transferred in lieu of fractional Shares, or
whether fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

       (19) Nothing in this Award Agreement shall confer upon the Grantee the
right to continue in the employment or service of the Company or any Subsidiary
or affect any right that the Company or any Subsidiary may have to terminate the
employment or service of (or to demote or to exclude from future Awards under
the Plan) the Grantee at any time for any reason. The grant of the Option shall
not give the Grantee any right to similar grants in future years.

       (20) So long as this Award Agreement shall remain in effect, the Company
shall furnish to the Grantee, as and when available, a copy of any Prospectus
issued with respect to the Shares covered hereby, and also a copy of all
material hereinafter distributed by the Company to its stockholders generally.

       (21) This Award Agreement and the provisions thereof shall be binding
upon, and inure to the benefit of, any successor or successors of the Company
and the person or entity to whom the Option may have been transferred by will,
the laws of descent and distribution, or beneficiary designation hereunder.

       (22) The Award Agreement shall be governed and its provisions construed,
enforced and administered in accordance with the laws of the Commonwealth of



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Massachusetts except to the extent that such laws may be superseded by any
Federal law. It may not be modified orally.


WYMAN-GORDON COMPANY

By: /s/ David P. Gruber
    ------------------------------
    David P. Gruber, President
    and Chief Executive Officer

              The foregoing Award Agreement is hereby accepted and the terms
thereof hereby agreed to.

GRANTEE


/s/ 
----------------------------------
   Grantee's Signature


Grantee's Address:

Colin Stead
17030 Country Bridge Rd
Houston, Texas 77098

Social Security Number: ###-##-####









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