The reason Charles cast Alice in the film, was because he actually liked her. As they examine the film, their thoughts become turned when they see parts of a strange creature emerging from one of the wrecked train cars. As they wonder what it was they just saw, air raid sirens begin to go off.
They emerge outside to find the town being evacuated, with everyone being asked to report to the local Military base. Word is that a dangerous fire is headed towards Lillian, and could cause terrible damage if it reaches the town's chemical plant.
Joe and Charles get on a bus, and are transported to the base. There, Charles is reunited with his family, while Joe goes to look for his Dad. However, he instead finds Louis, who tells Joe that he saw Alice being taken away by a creature, but nobody believes him.
Joe then rounds up Charles and their friends, with the intent to get back into town and rescue Alice. Bribing the town's camera-store owner to helping them, he manages to get them into town. They first go to the Middle School. Dr Woodward had a specially padlocked storage area behind the school where he hid confiscated items from his class.
Joe assumes that there may be additional information as to his past, and the group finds numerous films, tapes, and records stored in there as well, that could help them find out more about the creature and how to possibly defeat it.
Breaking into the school, they use a film projector in one of the classrooms. Through the materials, they learn that the creature is sub-terranean, and mainly wants to just go home.
However, General Nelec was more intent on keeping the creature for Army purposes. They also found its ship contained technology that when disassembled, 'shattered' into the little white cubes that the group saw at the crash site.
Due to Woodward's interactions with the creature, he was able to gain a telepathic link to it, and notes in his findings that due to the hostilities directed towards it, it has grown hostile in nature to humans as well. The boys soon hear noises in the school, and are soon found by Nelec and his men. The group confiscate the items, as well as Joe's Mom's locket.
The boys are put on a Military bus and are headed back to the base when the creature attacks the bus. The boys manage to escape while the creature attacks the other Military Officers and kills General Nelec. In the aftermath, Joe is able to obtain his Mom's locket.
Meanwhile, Jackson has managed to escape his captors, and after creating a diversion, gets to the other base where the townspeople are being kept. He finds one of Joe's friends there, and after hearing of Joe's plans to rescue Alice, finds her father and takes him along.
The boys meanwhile, have made it back into town, but suddenly find themselves in the middle of a war zone, as tanks and other Military weaponry are going haywire, firing random shots and destroying property. As the boys attempt to escape, Martin is injured.
Charles stays behind to tend to his wounds, as Joe and Cary rush off to the cemetery. Joe tells Cary about the strange things he saw and heard from the garage. Breaking down a door, they find a large hole, dug down several stories deep.