STOCK OPTION GRANT

The Stock Option and Compensation Committee (the "Committee") of the board of Directors of SCI Engineered Materials, Inc. (the "Company") has approved the grant of options to purchase shares of the Company's common stock, effective January 2, 2009, to the Company's Chief Executive Officer and three other executive officers of the Company listed below (the "Optionees"):

Daniel Rooney President and Chief Executive Officer 176,500

Scott Campbell Vice President - Technology 85,500

Gerald Blaskie Vice President and Chief Financial Officer 95,000

Michael Barna Vice President - Photonics 93,000

The Committee granted the options to purchase shares of the Company's common stock in accordance with the provisions of the Company's 2006 Stock Incentive Plan. In connection with the option grant, the Company entered into Incentive Stock Option Agreements with the Optionees. Pursuant to the terms of the Incentive Stock Option Agreements, the options have an exercise price of $6.00 per share, the closing price of the Company's common stock as reported on the OTC Bulletin Board regulated quotation service on January 2, 2009. The options vest at the rate of 10% per year, beginning on the date of grant. After the options have vested, the Optionees may exercise the options from time to time, in full or in part, until the options have been exercised as to all shares subject thereto, or January 2, 2019, which ever occurs first.

The Committee has also approved the grant of options to purchase shares of the Company's common stock, effective January 2, 2009, to the Company's Board of Directors (the "Optionees"):

Robert J. Baker Jr. Director 22,500

Walter J. Doyle     Director 22,500

Robert H. Peitz     Director 22,500

Edward W. Ungar     Director 22,500

The Committee granted the options to purchase shares of the Company's common stock in accordance with the provisions of the Company's 2006 Stock Incentive Plan. In connection with the option grant, the Company entered into Non-Statutory Stock Option Agreements with the Optionees. Pursuant to the terms of the Non-Statutory Stock Option Agreements, the options have an exercise price of $6.00 per share, the closing price of the Company's common stock as reported on the OTC Bulletin Board regulated quotation service on January 2, 2009. The options vest at the rate of 33.3% per year, beginning on the date of grant. After the options have vested, the Optionees may exercise the options from time to time, in full or in part, until the options have been exercised as to all shares subject thereto, or January 2, 2014, which ever occurs first.

A copy of the form of the Incentive Stock Option Agreement and Non-Statutory Stock Option Agreement applicable to each of the Optionees was previously filed with the Securities and Exchange Commission on June 23, 2006 as Exhibits 10.1 and 10.2 on the Company's Form 8-K. A copy of the Company's 2006 Stock Incentive Plan was previously filed with the Securities and Exchange Commission on May 1, 2006, as Appendix A to the Company's Definitive Proxy Statement for the 2006 Annual Meeting of Shareholders held on June 9, 2006.