1996 Stock & Restricted Stock Plan

CRAGAR INDUSTRIES, INC.
1996 STOCK OPTION AND RESTRICTED STOCK PLAN


1. Purpose of the Plan. Under this 1996 Stock Option and Restricted Stock Plan (the "Plan") of CRAGAR INDUSTRIES, INC. (the "Company") options may be granted to eligible employees to purchase shares of the Company's capital stock and restricted stock may be granted to eligible employees. The Plan is designed to enable the Company and its subsidiaries to attract, retain and motivate employees of the Company and its subsidiaries. The Plan provides for the grant of options which qualify as incentive stock options ("Incentive Options") under Section 422 of the Internal Revenue Code of 1986, as amended, as well as options which do not so qualify and for the grant of restricted stock.


2. Stock Subject to Plan. The maximum number of shares of stock subject to this Plan shall be 10,000 shares of the Company's Class A Common Stock, $.01 par value, subject to the adjustments provided in Sections 6 and 13. Shares of stock subject to the unexercised portion of any options granted under this Plan which expire or terminate or are cancelled may again be subject to options under the Plan. However, if stock appreciation rights are granted with respect to any options under this Plan, the total number of shares of stock for which options granted under this Plan may thereafter be exercised shall be irrevocably reduced not only when there is an exercise of an option granted under the Plan, but also when such option is surrendered upon an exercise of a stock appreciation right granted under this Plan, in either case by the number of shares covered by the portion of such option which is exercised or surrendered. When the exercise price for an option granted under this Plan is paid with previously outstanding shares or with shares as to which the option is being exercised, as permitted in Section 9, the total number of shares of stock for which options granted under this Plan may thereafter be exercised shall be irrevocably reduced by the total number of shares for which such option is thus exercised, without regard to the number of shares received or retained by the Company in connection with the exercise.


3. Eligible Employees. The employees eligible to be considered for the grant of options hereunder are any persons regularly employed by the Company or its subsidiaries in a managerial, professional or technical capacity on a full-time, salaried basis.


4. Exercise Price. The exercise price for each option granted hereunder as an Incentive Option shall be not less than 100% of the Fair Market Value (defined hereinbelow) of the stock being optioned at the date of the grant of the option. The exercise price for an option that is not an Incentive Option shall be determined by the Committee at the time of grant, but shall not be less than 85% of the Fair Market Value of the stock subject to the option.


5. Nontransferability. Any option granted under this Plan shall by its terms be nontransferable by the optionee other than by will or the laws of descent and distribution and shall be exercisable during the optionee's lifetime only by the optionee or by the optionee's guardian or legal representative, except that an option which is not intended to be an Incentive Option may, if the instrument evidencing it so provides, also be transferable to members of the optionee's Immediate Family (defined hereinbelow), to a partnership whose members are only the optionee and/or members of the optionee's Immediate Family, or to a trust for the benefit of only the optionee and/or members of the optionee's Immediate Family.


6. Adjustments. If the outstanding shares of stock of the class then subject to this


2 Plan are increased or decreased, or are changed into or exchanged for a different number or kind of shares or securities or other forms of property (including cash) or rights, as a result of one or more reorganizations, recapitalizations, spin-offs, stock splits, reverse stock splits, stock dividends or the like, appropriate adjustments shall be made in the number and/or kind of shares or securities or other forms of property (including cash) or rights for which options may thereafter be granted under this Plan and for which options then outstanding under this Plan may thereafter be exercised. Any such adjustment in outstanding options shall be made without changing the aggregate exercise price applicable to the unexercised portions of such options.


In connection with any reorganization, recapitalization, spin-off or other transaction in which the outstanding shares of stock of the class then subject to options outstanding under this Plan are changed into or exchanged for property (including cash), rights and/or securities other than, or in addition to, stock of the Company, an outstanding option may under this Section entitled "Adjustments" be adjusted to become exercisable for either: (a) the property (including cash), rights and/or securities receivable in that transaction by a holder of the number and kind of outstanding shares of stock subject to the option immediately prior to the transaction; or (b) stock of the Company or of a successor employer corporation, or a parent or subsidiary thereof, provided, that (i) such adjustment may preserve but may not increase any amount by which the Fair Market Value of the stock subject to the option exceeds the option exercise price, comparing such excess immediately before and immediately after the transaction, and (ii) such adjustment may preserve but may not reduce the ratio of the option exercise price to the Fair Market Value of the stock subject to the option, comparing such ratio immediately before and immediately after the transaction.


7. Maximum Option Term. No option granted under this Plan may be exercised in whole or in part more than ten years after its date of grant.


8. Plan Duration. Options may not be granted under this Plan after ____________, 2006.


9. Payment. Payment for stock purchased upon any exercise of an option granted under this Plan shall be made in full in cash (including payment by check) concurrently with such exercise, except that, if and to the extent the instrument evidencing the option so provides and the Company is not then prohibited from purchasing or acquiring shares of such stock, such payment may be made in whole or in part with shares of the same class of stock as that then subject to the option, delivered in lieu of cash concurrently with such exercise, the shares so delivered to be valued on the basis of the Fair Market Value of such class of stock on the date of exercise. If and while payment with stock is permitted for the exercise of an option granted under this Plan in accordance with the foregoing provision, the instrument evidencing the option may also permit the person then entitled to exercise that option, in lieu of using previously outstanding shares therefor, to use some of the shares as to which the option is then being exercised.


10. Administration. The Plan shall be administered by the Company's board of directors (the "Board") or, at the discretion of the Board, by a committee (the "Committee") of not less than two members of the Board.


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The interpretation and construction by the Committee of any term or provision of the Plan or of any option granted under it, including withou ...