Document:

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EXHIBIT 10.41

                           ALLIS-CHALMERS CORPORATION
                            2003 INCENTIVE STOCK PLAN

1. PURPOSE. The purpose of the Allis-Chalmers Corporation ("Corporation")
Incentive Stock Plan (the "Plan") is to encourage key employees, directors and
service providers of the Corporation and such subsidiaries of the Corporation as
the Administrator designates to acquire common stock of the Corporation (the
"Common Stock") or to receive monetary payments based on the value of such stock
or based upon achieving certain goals on a basis mutually advantageous to such
individuals and the Corporation and thus provide an incentive to contribute to
the success of the Corporation and align the interests of key employees,
directors and service providers with the interests of the shareholders of the
Corporation.

2. ADMINISTRATION. The Plan shall be administered by a committee of two or more
directors, which the board of directors of the Corporation shall appoint (the
"Administrator"). The directors appointed to such committee shall be
Non-Employee Directors as defined in Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 ("Exchange Act") or any successor regulations.

The authority to select persons eligible to participate in the Plan, to grant
Benefits in accordance with the Plan, and to establish the timing, pricing,
amount and other terms and conditions of such grants (which need not be uniform
with respect to the various Participants or with respect to different grants to
the same Participant), may be exercised by the Administrator in its sole
discretion.

Subject to the provisions of the Plan, the Administrator shall have exclusive
authority to interpret and administer the Plan, to establish appropriate rules
relating to the Plan, to delegate some or all of its authority under the Plan
and to take all such steps and make all such determinations in connection with
the Plan and the Benefits granted pursuant to the Plan as he or she may deem
necessary or advisable.

The Board of Directors in its discretion may delegate and assign specified
duties and authority of the Administrator to any other committee and retain
other duties and authority. Also, the Board of Directors in its discretion may
appoint a separate committee of outside directors to make awards that satisfy
the requirements of Section 162(m) of the Internal Revenue Code.

3. SHARES RESERVED UNDER THE PLAN. Subject to the provisions of Section 12
(relating to adjustment for changes in capital stock) the maximum number of
shares that may be issued under this Plan shall be 6,000,000 which may be
authorized but unissued or treasury shares.

As used in this Section 3, the term Plan Maximum shall refer to the number of
shares of Common Stock that are available for grant of awards pursuant to the
Plan. Stock underlying outstanding options, stock appreciation rights, or
performance awards will reduce the Plan Maximum while such options, stock
appreciation rights or performance awards are outstanding. Shares underlying
expired, canceled or forfeited options, stock appreciation rights or performance
awards shall be added back to the Plan Maximum. When the exercise price of stock
options is paid by delivery of shares of Common Stock, or if the Administrator
approves the withholding of shares from a distribution in payment of the
exercise price, the Plan Maximum shall be reduced by the net (rather than the
gross) number of shares issued pursuant to such exercise, regardless of the
number of shares surrendered or withheld in payment. If the Administrator
approves the payment of cash to an optionee equal to the difference between the
fair market value and the exercise price of stock subject to an option, or if a
stock appreciation right is exercised for cash or a performance award is paid in
cash the Plan Maximum shall be increased by the number of shares with respect to
which such payment is applicable. Restricted stock issued pursuant to the Plan
will reduce the Plan Maximum while outstanding even while subject to
restrictions. Shares of restricted stock shall be added back to the Plan Maximum
if such restricted stock is forfeited.

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4. PARTICIPANTS. Participants will consist of such officers, key employees,
directors and service providers of the Corporation or any designated subsidiary
as the Administrator in its sole discretion shall determine. Designation of a
Participant in any year shall not require the Administrator to designate such
person to receive a Benefit in any other year or to receive the same type or
amount of Benefit as granted to the Participant in any other year or as granted
to any other Participant in any year. The Administrator shall consider such
factors as it deems pertinent in selecting Participants and in determining the
type and amount of their respective Benefits.

5. TYPES OF BENEFITS. The following Benefits may be granted under the Plan: (a)
stock appreciation rights ("SARs"); (b) restricted stock ("Restricted Stock");
(c) performance awards ("Performance Awards"); (d) incentive stock options
("ISOs"); (e) nonqualified stock options ("NQSOs"); and (f) Stock Units, all as
described below ("Benefits").

The Administrator may (a) award Benefits in the alternative so that acceptance
of or exercise of one Benefit cancels the right of a Participant to another and
(b) award Benefits in any combination or combinations and subject to any
condition or conditions consistent with the terms of the Plan that the
Administrator in its sole discretion shall determine.

6. STOCK APPRECIATION RIGHTS. A SAR is the right to receive all or a portion of
the difference between the fair market value of a share of Common Stock at the
time of exercise of the SAR and the exercise price of the SAR established by the
Administrator, subject to such terms and conditions set forth in a SAR agreement
as may be established by the Administrator in its sole discretion. At the
discretion of the Administrator, SARs may be exercised (a) in lieu of exercise
of an option, (b) in conjunction with the exercise of an option, (c) upon lapse
of an option, (d) independent of an option or (e) each of the above in
connection with a previously awarded option under the Plan. If the option
referred to in (a), (b) or (c) above qualified as an ISO pursuant to Section 422
of the Internal Revenue Code of 1986 (Code), the related SAR shall comply with
the applicable provisions of the Code and the regulations issued thereunder. At
the time of grant, the Administrator may establish, in its sole discretion, a
maximum amount per share which will be payable upon exercise of a SAR, and may
impose conditions on exercise of a SAR. At the discretion of the Administrator,
payment for SARs may be made in cash or shares of Common Stock, or in a
combination thereof. SARs will be exercisable not later than ten years after the
date they are granted and will expire in accordance with the terms established
by the Administrator.

7. RESTRICTED STOCK. Restricted Stock is Common Stock issued or transferred
under the Plan (other than upon exercise of stock options or as Performance
Awards) at any purchase price less than the fair market value thereof on the
date of issuance or transfer, or as a bonus, subject to such terms and
conditions set forth in a Restricted Stock agreement as may be established by
the Administrator in its sole discretion. In the case of any Restricted Stock:

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(a) The purchase price, if any, will be determined by the Administrator.

(b) The period of restriction shall be established by the Administrator for any
grants of Restricted Stock;

(c) Restricted Stock may be subject to (i) restrictions on the sale or other
disposition thereof; (ii) rights of the Corporation to reacquire such Restricted
Stock at the purchase price, if any, originally paid therefor upon termination
of the employee's employment within specified periods; (iii) representation by
the recipient that he or she intends to acquire Restricted Stock for investment
and not for resale; and (iv) such other restrictions, conditions and terms as
the Administrator deems appropriate.

(d) The Participant shall be entitled to all dividends paid with respect to
Restricted Stock during the period of restriction and shall not be required to
return any such dividends to the Corporation in the event of the forfeiture of
the Restricted Stock.

(e) The Participant shall be entitled to vote the Restricted Stock during the
period of restriction.

(f) The Administrator shall determine whether Restricted Stock is to be
delivered to the Participant with an appropriate legend imprinted on the
certificate or if the shares are to be issued in the name of a nominee or
deposited in escrow pending removal of the restrictions.

8. PERFORMANCE AWARDS. Performance Awards are Common Stock, monetary units or
some combination thereof, to be issued without any payment therefor, in the
event that certain performance goals established by the Administrator are
achieved over a period of time designated by the Administrator, but not in any
event more than five years. The goals established by the Administrator may
include return on average total capital employed, earnings per share, increases
in share price or such other goals as may be established by the Administrator.
In the event the minimum corporate goal is not achieved at the conclusion of the
period, no payment shall be made to the Participant. Actual payment of the award
earned shall be in cash or in Common Stock or in a combination of both, as the
Administrator in its sole discretion determines. If Common Stock is used, the
Participant shall not have the right to vote and receive dividends until the
goals are achieved and the actual shares are issued.

9. INCENTIVE STOCK OPTIONS. ISOs are stock options to purchase shares of Common
Stock at not less than 100% of the fair market value of the shares on the date
the option is granted (110% if the optionee owns stock possessing more than 10%
of the combined voting power of all owners of stock of the Corporation or a
subsidiary), subject to such terms and conditions set forth in an option
agreement as may be established by the Administrator in its sole discretion that
conform to the requirements of Section 422 of the Code. Said purchase price may
be paid (a) by check or (b), in the discretion of the Administrator, by the
delivery of shares of Common Stock then owned by the Participant, or (c), in the
discretion of the Administrator, by a combination of any of the foregoing, in
the manner provided in the option agreement. The aggregate fair market value
(determined as of the time an option is granted) of the stock with respect to
which ISOs are exercisable for the first time by an optionee during any calendar
year (under all option plans of the Corporation and its subsidiary corporations)
shall not exceed $100,000.00 or such other maximum applicable to ISOs as may be
in effect from time to time under the Code. ISOs shall be granted only to
employees of the Corporation and designated subsidiaries. The maximum term of an
ISO shall be ten years from the date it was granted (five years if the optionee
owns more than 10% of the total combined voting power of all classes of stock of
the Corporation or a subsidiary). No ISO shall be awarded after the date
preceding the tenth anniversary of the effective date of the Plan.

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10. NONQUALIFIED STOCK OPTIONS. NQSOs are nonqualified stock options to purchase
shares of Common Stock at purchase prices established by the Administrator on
the date the options are granted, subject to such terms and conditions set forth
in an option agreement as may be established by the Administrator in its sole
discretion. The purchase price may be paid (a) by check or (b), in the
discretion of the Administrator, by the delivery of shares of Common Stock then
owned by the Participant, or (c), in the discretion of the Administrator, by a
combination of any of the foregoing, in the manner provided in the option
agreement. NQSOs shall be exercisable no later than ten years after the date
they are granted.

11. STOCK UNITS. A Stock Unit represents the right to receive a share of Common
Stock from the Corporation at a designated time in the future, subject to such
terms and conditions set forth in a Stock Unit agreement as may be established
by the Administrator in its sole discretion. The Participant generally does not
have the rights of a shareholder until receipt of the Common Stock. The
Administrator may in its discretion provide for payments in cash, or adjustment
in the number of Stock Units, equivalent to the dividends the Participant would
have received if the Participant had been the owner of shares of Common Stock
instead of the Stock Units.

12. ADJUSTMENT PROVISIONS.

(a) If the Corporation shall at any time change the number of issued shares of
Common Stock without new consideration to the Corporation (such as by stock
dividends or stock splits), the total number of shares reserved for issuance
under this Plan and the number of shares covered by each outstanding Benefit
shall be adjusted so that the aggregate consideration payable to the
Corporation, if any, and the value of each such Benefit shall not be changed.
Benefits may also contain provisions for their continuation or for other
equitable adjustments after changes in the Common Stock resulting from
reorganization, sale, merger, consolidation, issuance of stock rights or
warrants, or similar occurrence.

(b) Notwithstanding any other provision of this Plan, and without affecting the
number of shares reserved or available hereunder, the Board of Directors may
authorize the issuance or assumption of Benefits in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such
terms and conditions as it may deem appropriate.

13. CHANGE IN CONTROL. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change in Control of the Corporation, as defined
below, all outstanding SARs, ISOs and NQSOs shall be immediately fully vested
and exercisable and any restrictions on Restricted Stock issued under the Plan
shall lapse.

Change in Control means:

(a)  The acquisition on or after March 6, 2003 by any individual, entity or
     group, or a Person (within the meaning of Section 13(d)(3) or 14(d)(2) of
     the Exchange Act) other than an Excluded Person (as defined below), of
     ownership of more than 50% of either: (i) the then outstanding shares of
     Common Stock ("Outstanding Common Stock"); or (ii) the combined voting
     power of the then outstanding voting securities of the Corporation entitled
     to vote generally in the election of directors ("Outstanding Voting
     Securities");

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     (b) Individuals who, as of the date of approval of the Plan by the Board of
     Directors of the Corporation, constitute the Board of Directors of the
     Corporation ("Incumbent Board") cease for any reason to constitute at least
     a majority of the Board; provided, however, that any individual becoming a
     director subsequent to the date hereof whose election, or nomination for
     election by the Corporation's stockholders, was approved by a vote of at
     least a majority of the directors then comprising the Incumbent Board shall
     be considered as though such individual were a member of the Incumbent
     Board, but excluding, as a member of the Incumbent Board, any such
     individual whose initial assumption of office occurs as a result of either
     an actual or threatened election contest (as such terms are used in Rule
     14a-11 of Regulation 14A promulgated under the Exchange Act) or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Board; or

     (c) Approval by the stockholders of the Corporation of a reorganization,
     merger or consolidation, in each case, unless, following such
     reorganization, merger or consolidation, (i) more than 50% of,
     respectively, the then outstanding shares of common stock of the
     corporation resulting from such reorganization, merger or consolidation and
     the combined voting power of the then outstanding voting securities of such
     corporation entitled to vote generally in the election of directors is then
     beneficially owned, directly or indirectly, by all or substantially all of
     the individuals and entities who were the beneficial owners, respectively,
     of the Outstanding Corporation Common Stock and Outstanding Corporation
     Voting Securities immediately prior to such reorganization, merger or
     consolidation, in substantially the same proportions as their ownership,
     immediately prior to such reorganization, merger or consolidation of the
     Outstanding Corporation Common Stock and Outstanding Corporation Voting
     Securities, as the case may be, or at least a majority of the members of
     the board of directors of the corporation resulting from such
     reorganization, merger or consolidation were members of the Incumbent Board
     at the time of the execution of the initial agreement providing for such
     reorganization, merger or consolidation; or

     (d) Approval by the stockholders of the Corporation of (i) a complete
     liquidation or dissolution of the Corporation or (ii) the sale or other
     disposition of all or substantially all of the assets of the Corporation,
     other than to a corporation, with respect to which following such sale or
     other disposition, (1) more than 50% of, respectively, the then outstanding
     shares of common stock of such corporation and the combined voting power of
     the then outstanding voting securities of such corporation entitled to vote
     generally in the election for directors is then beneficially owned,
     directly or indirectly, by all or substantially all of the individuals and
     entities who were the beneficial owners, respectively, of the Outstanding
     Corporation Common Stock and Outstanding Corporation Voting Securities
     immediately prior to such sale or other disposition in substantially the
     same proportion as their ownership, immediately prior to such sale or other
     disposition, of the Outstanding Corporation Common Stock and Outstanding
     Corporation Voting Securities, as the case may be,or (2) at least a
     majority of the members of the board of directors of such corporation were
     members of the Incumbent Board at the time of the execution of the initial
     agreement or action of the Board providing for such sale or other
     disposition of assets of the Corporation.

Excluded Person means any Person who beneficially owns more than 10% of the
outstanding shares of the Corporation on the date hereof or at any time prior to
the first anniversary of the adoption of this plan.

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14. NONTRANSFERABILITY. Each Benefit granted under the Plan shall not be
transferable otherwise than by will or the laws of descent and distribution;
provided, however, NQSOs granted under the Plan may be transferred, without
consideration, to a Permitted Transferee (as defined below). Benefits granted
under the Plan shall be exercisable, during the Participant's lifetime, only by
the Participant or a Permitted Transferee. In the event of the death of a
Participant, exercise or payment shall be made only:

(a) By or to the Permitted Transferee, executor or administrator of the estate
of the deceased Participant or the person or persons to whom the deceased
Participant's rights under the Benefit shall pass by will or the laws of descent
and distribution; and

(b) To the extent that the deceased Participant or the Permitted Transferee, as
the case may be, was entitled thereto at the date of his death.

For purposes of this Section 14, Permitted Transferee shall include (i) one or
more members of the Participant's family, (ii) one or more trusts for the
benefit of the Participant and/or one or more members of the Participant's
family, or (iii) one or more partnerships (general or limited), corporations,
limited liability companies or other entities in which the aggregate interests
of the Participant and members of the Participant's family exceed 80% of all
interests. For this purpose, the Participant's family shall include only the
Participant's spouse, children and grandchildren.

15. TAXES. The Corporation shall be entitled to withhold the amount of any tax
attributable to any amounts payable or shares deliverable under the Plan after
giving the person entitled to receive such payment or delivery notice as far in
advance as practicable, and the Corporation may defer making payment or delivery
as to any Benefit if any such tax is payable until indemnified to its
satisfaction. The person entitled to any such delivery may, with the consent of
the Administrator, elect to have such withholding satisfied by a reduction of
the number of shares otherwise so deliverable, such reduction to be calculated
based on a closing market price on the date of such notice.

16. TENURE. A Participant's right, if any, to continue to serve the Corporation
and its subsidiaries as an officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his or her designation as a Participant under
the Plan.

17. RULES OF CONSTRUCTION. The terms of the Plan shall be constructed in
accordance with the laws of the State of Delaware; provided that the terms of
the Plan as they relate to ISOs shall be construed first in accordance with the
meaning under and in a manner that will result in the Plan satisfying the
requirements of the provisions of the Code governing incentive stock options.

18. DURATION, AMENDMENT AND TERMINATION. No Benefit shall be granted more than
ten years after the date of adoption of this Plan; provided, however, that the
terms and conditions applicable to any Benefit granted within such period may
thereafter be amended or modified by mutual agreement between the Corporation
and the Participant or such other person as may then have an interest therein.
Also, by mutual agreement between the Corporation and a Participant hereunder,
stock options or other Benefits may be granted to such Participant in
substitution and exchange for, and in cancellation of, any Benefits previously
granted such Participant under this Plan.

The Board of Directors may amend the Plan from time to time or terminate the
Plan at any time. However, no action authorized by this paragraph shall reduce
the amount of any existing Benefit or change the terms and conditions thereof
without the Participant's consent. No amendment of the Plan shall, without
approval of the stockholders of the Corporation, (a) increase the total number
of shares which may be issued under the Plan or increase the amount or type of
Benefits that may be granted under the Plan; or (b) modify the requirements as
to eligibility for Benefits under the Plan.

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     19. GRANTS TO DIRECTORS. The Administrator shall be authorized to award
Benefits in reasonable amounts as compensation for services provided by the
directors of the Company, including directors who serve on the Compensation
Committee or otherwise act as the Administrator. The foregoing sentence shall
not be deemed to limit of define the other circumstances in which Benefits may
be awarded to directors of the Company.

20. EFFECTIVE DATE. This Plan shall become effective as of the date it is
adopted by the Board of Directors of the Corporation subject only to approval by
the holders of a majority of the outstanding voting stock of the Corporation
within twelve months before or after the adoption of the Plan by the Board of
Directors. In the event that the shareholders fail to approve the Plan within
twelve (12) months after its adoption by the Board, any grants made pursuant to
the Plan or sales of Option Shares that have already occurred shall be
rescinded, and no additional grants, sales or awards shall be made thereafter
under the Plan.

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EXHIBIT 10.42

                           ALLIS-CHALMERS CORPORATION
                         NOTICE OF GRANT OF STOCK OPTION

Notice is hereby given of the following stock option grant (the "Option") to
purchase shares of the common stock of Allis-Chalmers Corporation (the
"Corporation"). The named Optionee understands and agrees that the Option is
granted subject to and in accordance with the terms of the Allis-Chalmers
Corporation 2003 Incentive Stock Plan (the "Plan"). The Optionee further agrees
to be bound by the terms of the Plan and the terms of the Option as set forth in
the Stock Option Agreement attached hereto. Optionee hereby acknowledges receipt
of a copy of the Plan.

           Optionee:                      ((First_)) ((Last))

           Grant Date:                     December 16, 2003

           Issue Date:                     March 22, 2004

           Expiration Date:                December 15, 2013

           Option Shares:                 ((Option))

           Exercise Price:                 $0.55

           Type of Option:                 [X] Incentive Stock Option
                                           [ ] Non-Qualified Stock Option

           Vesting Schedule:               The Option shall be vested and become
                                           exercisable as follows:

                                           One-third of the Option Shares
                                           covered by this Option shall vest as
                                           of the Issue Date, and one-third of
                                           the Option Shares covered by this
                                           Option shall vest on each of the
                                           first and second anniversaries of the
                                           Grant Date.

ALLIS-CHALMERS CORPORATION                 OPTIONEE

__________________________________         _____________________________________
By:      Munawar H. Hidayatallah           ((First_))  ((Last))
Title:   Chief Executive Officer

By his or her signature below, the spouse of the Optionee acknowledges that he
or she has read the Agreement and the Plan and agrees to be bound by all their
terms and conditions. If the spousal consent is not signed below, the Optionee
represents and warrants that he or she is not married.

_______________________________            _____________________________________
Spouse                                     Date

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                           ALLIS-CHALMERS CORPORATION

                             STOCK OPTION AGREEMENT

         1. RECITALS

A. The Board has adopted the 2003 Stock Incentive Plan (the "Plan") for the
purpose of retaining the services of selected Employees, non-employee members of
the Board or of the board of directors of any Parent or Subsidiary and
consultants and other independent advisors who provide services to the
Corporation or any Parent or Subsidiary (All capitalized terms in this Agreement
shall have the meaning assigned to them in the attached Appendix).

B. Optionee is to render valuable services to the Corporation (or a Parent or
Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of an option to Optionee.

         2. AGREEMENT

         NOW, THEREFORE, it is hereby agreed as follows:

         1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

         2. OPTION TERM. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

         3. LIMITED TRANSFERABILITY. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may be transferred,
without consideration, during Optionee's lifetime to a Permitted Transferee. The
transferred portion shall be exercisable only by the person or persons who
acquire a proprietary interest in the option pursuant to such transfer. The
terms applicable to the transferred portion shall be the same as those in effect
for this option immediately prior to such transfer.

         4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

         5. CESSATION OF SERVICE. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

                  (a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.

                  (b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of inheritance shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the earlier of:
(i) the expiration of the twelve (12) month period measured from the date of
Optionee's death; or (ii) the Expiration Date.

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                  (c) Should Optionee cease to remain in Service by reason of
Permanent Disability while holding this option, then Optionee shall have a
period of twelve (12) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.

                  (d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
vested Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has
not been exercised. However, this option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares in which Optionee is not otherwise at that time
vested or for which this option is not otherwise at that time exercisable.

                  (e) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain outstanding.

         6. SPECIAL ACCELERATION OF OPTION.

                  (a) This option, to the extent outstanding at the time of a
Change in Control but not otherwise fully exercisable, shall automatically
accelerate so that such option shall, immediately prior to the effective date of
that Change in Control, become fully exercisable for all the shares of Common
Stock at the time subject to this option and may be exercised for any or all of
those shares as fully vested shares.

                  (b) Immediately following the Change in Control, this option
shall terminate and cease to be outstanding, except to the extent this option is
to continue in full force and effect pursuant to the terms of the Change in
Control transaction.

                  (c) This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

         7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

         8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

         9. MANNER OF EXERCISING OPTION.

                  (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                           (i) Execute and deliver to the Corporation a Notice
of Exercise for the Option Shares for which the option is exercised.

                           (ii) Pay the aggregate Exercise Price for the
purchased shares in cash or check made payable to the Corporation, or, to the
extent authorized by the Plan Administrator, in one or more of the following
forms:

                                    (A) a promissory note payable to the
Corporation, but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;

                                    (B) shares of Common Stock held by Optionee
(or any other person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or

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                                    (C) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (I) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (II) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale. Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.

                           (iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.

                           (iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.

                  (b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

                  (c) In no event may this option be exercised for any
fractional shares.

         10. COMPLIANCE WITH LAWS AND REGULATIONS; SHAREHOLDER APPROVAL.

                  (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto (including,
but not limited to, the Securities Act of 1933, the Securities Exchange Act of
1934, any applicable state securities laws and any rules and regulations
promulgated thereunder) and with all applicable regulations of any stock
exchange (or the Nasdaq National Market, if applicable) on which the Common
Stock may be listed for trading at the time of such exercise and issuance.

                  (b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.

                  (c) The stock option grant hereunder is subject to the
Corporation obtaining approval from its shareholders. In the event that the
shareholders fail to approve the Plan within twelve (12) months after its
adoption by the Board, this Agreement and the stock option granted hereunder
shall be null and void.

         11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the Corporation and its successors and assigns and Optionee,
Optionee's assigns and the legal representatives, heirs and legatees of
Optionee's estate.

         12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address set forth on the Company's records. All notices shall be deemed
effective upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.

         13. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse, interest-bearing
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.

<PAGE>

         14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. The Plan Administrator shall have the
discretionary authority to interpret and construe any term or provision of the
Plan or this Agreement, and such interpretation shall be binding on all persons
having an interest in this option.

         15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Delaware without
resort to that State's conflict-of-laws rules.

         16. MANDATORY ARBITRATION. ANY AND ALL DISPUTES OR CONTROVERSIES
BETWEEN OPTIONEE AND THE CORPORATION ARISING OUT OF, RELATING TO OR OTHERWISE
CONNECTED WITH THIS AGREEMENT OR THE OPTION EVIDENCED HEREBY OR THE VALIDITY,
CONSTRUCTION, PERFORMANCE OR TERMINATION OF THIS AGREEMENT SHALL BE SETTLED
EXCLUSIVELY BY BINDING ARBITRATION TO BE HELD IN THE COUNTY IN WHICH THE
OPTIONEE IS (OR HAS MOST RECENTLY BEEN) EMPLOYED BY THE CORPORATION (OR ANY
PARENT OR SUBSIDIARY) AT THE TIME OF SUCH ARBITRATION. THE ARBITRATION
PROCEEDINGS SHALL BE GOVERNED BY: (i) THE NATIONAL RULES FOR THE RESOLUTION OF
EMPLOYMENT DISPUTES THEN IN EFFECT OF THE AMERICAN ARBITRATION ASSOCIATION; AND
(ii) THE FEDERAL ARBITRATION ACT. THE ARBITRATOR SHALL HAVE THE SAME, BUT NO
GREATER, REMEDIAL AUTHORITY AS WOULD A COURT HEARING THE SAME DISPUTE. THE
DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES
TO THE ARBITRATION AND SHALL BE IN LIEU OF THE RIGHTS THOSE PARTIES MAY
OTHERWISE HAVE TO A JURY TRIAL; PROVIDED, HOWEVER, THAT SUCH DECISION SHALL BE
SUBJECT TO CORRECTION, CONFIRMATION OR VACATION IN ACCORDANCE WITH THE
PROVISIONS AND STANDARDS OF APPLICABLE LAW GOVERNING THE JUDICIAL REVIEW OF
ARBITRATION AWARDS. THE PREVAILING PARTY IN SUCH ARBITRATION, AS DETERMINED BY
THE ARBITRATOR, AND IN ANY ENFORCEMENT OR OTHER COURT PROCEEDINGS, SHALL BE
ENTITLED, TO THE EXTENT PERMITTED BY LAW, TO REIMBURSEMENT FROM THE OTHER PARTY
FOR ALL OF THE PREVAILING PARTY'S COSTS (INCLUDING BUT NOT LIMITED TO THE
ARBITRATOR'S COMPENSATION), EXPENSES AND ATTORNEY'S FEES. JUDGMENT SHALL BE
ENTERED ON THE ARBITRATOR'S DECISION IN ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER OF SUCH DISPUTE OR CONTROVERSY. NOTWITHSTANDING THE FOREGOING,
EITHER PARTY MAY IN AN APPROPRIATE MATTER APPLY TO A COURT FOR PROVISIONAL
RELIEF, INCLUDING A TEMPORARY RESTRAINING ORDER OR A PRELIMINARY INJUNCTION. TO
THE EXTENT PERMITTED BY LAW, THE PROCEEDINGS AND RESULTS, INCLUDING THE
ARBITRATOR'S DECISION, SHALL BE KEPT CONFIDENTIAL.

         17. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without shareholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

         18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Stock Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:

                  (a) No installment under this option shall qualify for
favorable tax treatment as an Incentive Stock Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or any other
Incentive Stock Options granted to Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred
Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this
option shall nevertheless become exercisable for the excess shares in such
calendar year as a Non-Statutory Option.

                  (b) Should the exercisability of this option be accelerated
upon a Change in Control, then this option shall qualify for favorable tax
treatment as an Incentive Stock Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which this
option first becomes exercisable in the calendar year in which the Change in
Control occurs does not, when added to the aggregate value (determined as of the
respective date or dates of grant) of the Common Stock or other securities for

<PAGE>

which this option or one or more other Incentive Stock Options granted to
Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Change in Control, the
option may nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.

                  (c) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Stock Options
shall be applied on the basis of the order in which such options are granted.

<PAGE>

                                    EXHIBIT I
                               NOTICE OF EXERCISE

         I hereby notify Allis-Chalmers Corporation (the "Corporation") that I
elect to purchase _____________________ shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $_____________ per
share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 2003 Incentive Stock Plan.

         Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

____________________________,   20____
Date

______________________________________
Optionee

Address: _____________________________

______________________________________

Print name in exact manner
it is to appear on the
stock certificate:

             ________________________________________

Address to which certificate is to be sent, if
different from address above:
             ________________________________________

             ________________________________________

Social Security Number:

             ________________________________________

Employee Number:

             ________________________________________

<PAGE>

                                    APPENDIX

         The following definitions shall be in effect under the Agreement:

A.       AGREEMENT shall mean this Stock Option Agreement.

B.       BOARD shall mean the Corporation's Board of Directors.

C.       COMMON STOCK shall mean shares of the Corporation's common stock.

D.       CODE shall mean the Internal Revenue Code of 1986, as amended.

E.       CHANGE IN CONTROL shall mean:

         (a) The acquisition on or after March 6, 2003 by any individual, entity
         or group, or a Person (within the meaning of Section 13(d)(3) or
         14(d)(2) of the Exchange Act) other than an Excluded Person, of
         ownership of more than 50% of either: (i) the then outstanding shares
         of Common Stock ("Outstanding Common Stock"); or (ii) the combined
         voting power of the then outstanding voting securities of the
         Corporation entitled to vote generally in the election of directors
         ("Outstanding Voting Securities");

         (b) Individuals who, as of the date of approval of the Plan by the
         Board of Directors of the Corporation, constitute the Board of
         Directors of the Corporation ("Incumbent Board") cease for any reason
         to constitute at least a majority of the Board; provided, however, that
         any individual becoming a director subsequent to the date hereof whose
         election, or nomination for election by the Corporation's stockholders,
         was approved by a vote of at least a majority of the directors then
         comprising the Incumbent Board shall be considered as though such
         individual were a member of the Incumbent Board, but excluding, as a
         member of the Incumbent Board, any such individual whose initial
         assumption of office occurs as a result of either an actual or
         threatened election contest (as such terms are used in Rule 14a-11 of
         Regulation 14A promulgated under the Securities Exchange Act of 1934)
         or other actual or threatened solicitation of proxies or consents by or
         on behalf of a Person other than the Board; or

         (c) Approval by the stockholders of the Corporation of a
         reorganization, merger or consolidation, in each case, unless,
         following such reorganization, merger or consolidation, (i) more than
         50% of, respectively, the then outstanding shares of common stock of
         the corporation resulting from such reorganization, merger or
         consolidation and the combined voting power of the then outstanding
         voting securities of such corporation entitled to vote generally in the
         election of directors is then beneficially owned, directly or
         indirectly, by all or substantially all of the individuals and entities
         who were the beneficial owners, respectively, of the Outstanding Common
         Stock and Outstanding Voting Securities immediately prior to such
         reorganization, merger or consolidation, in substantially the same
         proportions as their ownership, immediately prior to such
         reorganization, merger or consolidation of the Outstanding Common Stock
         and Outstanding Voting Securities, as the case may be, or at least a
         majority of the members of the board of directors of the corporation
         resulting from such reorganization, merger or consolidation were
         members of the Incumbent Board at the time of the execution of the
         initial agreement providing for such reorganization, merger or
         consolidation; or

         (d) Approval by the stockholders of the Corporation of (i) a complete
         liquidation or dissolution of the Corporation or (ii) the sale or other
         disposition of all or substantially all of the assets of the
         Corporation, other than to a corporation, with respect to which
         following such sale or other disposition, (1) more than 50% of,
         respectively, the then outstanding shares of common stock of such
         corporation and the combined voting power of the then outstanding
         voting securities of such corporation entitled to vote generally in the
         election for directors is then beneficially owned, directly or
         indirectly, by all or substantially all of the individuals and entities
         who were the beneficial owners, respectively, of the Outstanding Common
         Stock and Outstanding Voting Securities immediately prior to such sale
         or other disposition in substantially the same proportion as their
         ownership, immediately prior to such sale or other disposition, of the
         Outstanding Common Stock and Outstanding Voting Securities, as the case
         may be; or (2) at least a majority of the members of the board of
         directors of such corporation were members of the Incumbent Board at
         the time of the execution of the initial agreement or action of the
         Board providing for such sale or other disposition of assets of the
         Corporation.

F. CORPORATION shall mean Allis-Chalmers Corporation, a Delaware corporation.

<PAGE>

G. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.

H. EXCLUDED PERSON means any Person who beneficially owns more than 10% of the
outstanding shares of the Corporation on the date hereof or at any time prior to
the first anniversary of the adoption of the Plan (February 25, 2004).

I. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.

J. EXERCISE PRICE shall mean the exercise price per Option Share as specified in
the Grant Notice.

K. EXPIRATION DATE shall mean the date on which the option expires as specified
in the Grant Notice.

L. GRANT DATE shall mean the date of grant of the option as specified in the
Grant Notice.

M. GRANT NOTICE shall mean the Notice of Grant of Stock Option accompanying the
Agreement, pursuant to which Optionee has been informed of the basic terms of
the option evidenced hereby.

N. INCENTIVE OPTION shall mean an option which satisfies the requirements of
Code Section 422.

O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or
dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).

P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form attached
hereto as Exhibit I.

R. OPTION SHARES shall mean the number of shares of Common Stock subject to the
option as specified in the Grant Notice.

S. OPTIONEE shall mean the person to whom the option is granted as specified in
the Grant Notice.

T. PARENT shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which is expected to result in death or has lasted or can be
expected to last for a continuous period of twelve (12) months or more.

V. PLAN shall mean the Corporation's 2003 Incentive Stock Plan.

W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.

X. SERVICE shall mean the Optionee's performance of services for the Corporation
(or any Parent or Subsidiary) in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor.

<PAGE>

Y. STOCK EXCHANGE shall mean the American Stock Exchange, the New York Stock
Exchange or any other exchange in which shares of the Corporation's common stock
is traded.

Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

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