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                                                                   EXHIBIT 10.32



                 WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

                            2000 STOCK INCENTIVE PLAN
                       (AS AMENDED THROUGH MARCH 22, 2000)

                  The purposes of the 2000 Stock Incentive Plan as amended (the
"Plan"), are to encourage eligible employees of Westinghouse Air Brake
Technologies Corporation (the "Corporation") and its Subsidiaries to increase
their efforts to make the Corporation and each Subsidiary more successful, to
provide an additional inducement for such employees to remain with the
Corporation or a Subsidiary, to reward such employees by providing an
opportunity to acquire shares of the Common Stock, par value $0.01 per share, of
the Corporation (the "Common Stock") on favorable terms and to provide a means
through which the Corporation may attract able persons to enter the employ of
the Corporation or one of its Subsidiaries. For the purposes of the Plan, the
term "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Corporation, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing at least fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in the chain.


                                    SECTION 1
                                 ADMINISTRATION

                  The Plan shall be administered by a Committee (the
"Committee") appointed by the Board of Directors of the Corporation (the
"Board") and consisting of not less than two members of the Board, each of whom
at the time of appointment to the Committee and at all times during service as a
member of the Committee shall be (i) "Non-Employee Directors" as then defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or any successor Rule and (ii) if so determined by the Board, an
"outside director" under Section 162(m)(4)(C) of the Internal Revenue Code of
1986 (the "Code"), or any successor provision.

                  The Committee shall interpret the Plan and prescribe such
rules, regulations and procedures in connection with the operation of the Plan
as it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan. All questions of interpretation
and application of the Plan, or as to grants or awards under the Plan, shall be
subject to the determination of the Committee which shall be final and binding.

                  The Committee shall keep records of action taken. A majority
of the Committee shall constitute a quorum at any meeting, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all the members of the Committee, shall be the acts
of the Committee.


                                    SECTION 2
                                   ELIGIBILITY

                  Those key employees of the Corporation or any Subsidiary
(including, but not limited to, covered employees as defined in Section
162(m)(3) of the Code, or any successor provision) who share responsibility for
the management, growth or protection of the business of the Corporation or any




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Subsidiary shall be eligible to be granted stock options (with or without cash
payment rights) and to receive awards of restricted shares and performance units
as described herein.

                  Subject to the provisions of the Plan, the Committee shall
have full and final authority, in its discretion, to grant stock options (with
or without cash payment rights) and to award restricted shares and performance
units as described herein and to determine the employees to whom any such grant
or award shall be made and the number of shares to be covered thereby. In
determining the eligibility of any employee, as well as in determining the
number of shares or units covered by each grant or award and whether cash
payment rights shall be granted in conjunction with a stock option, the
Committee shall consider the position and the responsibilities of the employee
being considered, the nature and value to the Corporation or a Subsidiary of his
or her services, his or her present and/or potential contribution to the success
of the Corporation or a Subsidiary and such other factors as the Committee may
deem relevant.



                                    SECTION 3
                         SHARES AVAILABLE UNDER THE PLAN

                  For fiscal year 2000 and annually for each of the four fiscal
years thereafter, the maximum aggregate number of shares of the Common Stock for
which grants or awards may be made under the Plan is 1,100,000 shares, increased
by 1.5% of the issued and outstanding shares of the Common Stock (not including
treasury shares and shares held by the Westinghouse Air Brake Company Employee
Stock Ownership Plan (the "ESOP") or a related trust, but including outstanding
restricted shares) as of December 31 of the preceding fiscal year. In any such
annual period, the maximum aggregate number of shares of the Common Stock for
which grants or awards may be made under the Plan may also be increased, in the
discretion of the Committee, by an additional 1% of the issued and outstanding
shares of the Common Stock (not including treasury shares and shares held by the
ESOP or a related trust, but including outstanding restricted shares ) as of
December 31 of the preceding fiscal year. In the event of the exercise of such
discretion by the Committee, the number of shares related to such 1% increase
shall be deducted from any increase in the maximum aggregate number of shares of
Common Stock to be made in the next annual period. Notwithstanding the
foregoing, the maximum aggregate number of shares of the Common Stock for which
grants or awards may be made under the Plan on any given date shall not exceed
15% of the then aggregate issued and outstanding shares of the Common Stock (not
including treasury shares and shares held by the ESOP or a related trust, but
including outstanding restricted shares), less the aggregate number of (i) all
outstanding stock options granted at any time under the Corporation's plans
since their initial date of adoption, which remain unexercised and outstanding
(and which have not expired) as of such date (ii) all restricted shares granted
at any time under the Corporation's plans which have not yet vested or been
forfeited to the Corporation pursuant to their terms as of such date and (iii)
all performance units granted at any time under the Corporation's plans that are
payable in performance shares, for which performance targets have not yet been
satisfied as of such date, or which have not yet been forfeited, subject to
adjustment and substitution as set forth in Section 7. If any option is canceled
by mutual consent or terminates or expires for any reason without having been
exercised in full, the number of shares subject thereto shall again be available
for purposes of the Plan. If restricted shares are forfeited to the Corporation
pursuant to the restrictions applicable to any award, the restricted shares so
forfeited shall again be available for purposes of the Plan. To the extent that
any award of performance units is not earned or is paid in cash rather than
performance shares, the number of shares covered thereby shall again be
available for purposes of the Plan.

                  Notwithstanding the immediately preceding paragraph, the
maximum aggregate number of shares of the Common Stock which may be issued in
connection with grants of incentive stock options made under the Plan is
1,752,500 shares, subject to adjustment and substitution as set forth in Section
7. If any such incentive stock option granted under the Plan and counted against
such sub-limit




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is cancelled by mutual consent or terminates or expires for any reason without
having been exercised, the number of shares subject thereto shall again be
available for purposes of granting incentive stock options under the Plan.

                  The shares which may be issued or delivered under the Plan may
be either authorized but unissued shares or treasury shares or partly each, as
shall be determined from time to time by the Board.


                                    SECTION 4
                             GRANT OF STOCK OPTIONS
                      AND CASH PAYMENT RIGHTS AND AWARD OF
                     RESTRICTED SHARES AND PERFORMANCE UNITS

                  The Committee shall have authority, in its discretion, (i) to
grant "incentive stock options" pursuant to Section 422 of the Code, to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem), (ii) to award restricted shares and (iii) to award performance
units, all as provided herein. The Committee also shall have the authority, in
its discretion, to grant cash payment rights in conjunction with nonstatutory
stock options with the effect provided in Section 5(D). Cash payment rights may
not be granted in conjunction with incentive stock options. Cash payment rights
granted in conjunction with a nonstatutory stock option may be granted either at
the time the stock option is granted or at any time thereafter during the term
of the stock option.

                  During the duration of the Plan, the maximum number of shares
as to which stock options may be granted and as to which shares may be awarded
under the Plan to any one employee in any one calendar year is 300,000 shares
plus the cumulative difference between that maximum number and the number
actually granted to such employee for all prior completed calendar years since
the effective date of the Plan, subject to adjustment and substitution as set
forth in Section 7, and subject to the overall limit of the number of shares
available under the Plan. For the purposes of this limitation, any adjustment or
substitution made pursuant to Section 7 with respect to the maximum number of
shares set forth in the preceding sentence shall also be made with respect to
any shares subject to stock options or share awards previously granted under the
Plan to such employee in the same calendar year. The limitation in this
paragraph shall be interpreted and applied in a manner consistent with Section
162(m) of the Code.

                  Notwithstanding any other provision contained in the Plan or
in any agreement referred to in Section 5(H), but subject to the possible
exercise of the Committee's discretion contemplated in the last sentence of this
paragraph, the aggregate fair market value, determined as provided in Section
5(I) on the date of grant, of the shares with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year under all plans of the corporation employing such employee, any parent or
subsidiary corporation of such corporation and any predecessor corporation of
any such corporation shall not exceed $100,000. If the date on which one or more
of such incentive stock options could first be exercised would be accelerated
pursuant to any provision of the Plan or any stock option agreement, and the
acceleration of such exercise date would result in a violation of the limitation
set forth in the preceding sentence, then, notwithstanding any such provision,
but subject to the provisions of the next succeeding sentence, the exercise
dates of such incentive stock options shall be accelerated only to the date or
dates, if any, that do not result in a violation of such limitation and, in such
event, the exercise dates of the incentive stock options with the lowest option
prices shall be accelerated to the earliest such dates. The Committee may, in
its discretion, authorize the acceleration of the exercise date of one or more
incentive stock options even if such acceleration would violate the $100,000
limitation set forth in the first sentence of this paragraph and even if such
incentive stock options are thereby converted in whole or in part to
nonstatutory stock options.



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                                    SECTION 5
                             TERMS AND CONDITIONS OF
                      STOCK OPTIONS AND CASH PAYMENT RIGHTS

                  Stock options and cash payment rights granted under the Plan
shall be subject to the following terms and conditions:

                  (A) The purchase price at which each stock option may be
exercised (the "option price") shall be such price as the Committee, in its
discretion, shall determine, but shall not be less than one hundred percent
(100%) of the fair market value per share of the Common Stock covered by the
stock option on the date of grant, except that in the case of an incentive stock
option granted to an employee who, immediately prior to such grant, owns stock
possessing more than (10%) of the total combined voting power of all classes of
stock of the Corporation or any Subsidiary (a "Ten Percent Employee"), the
option price shall be one hundred ten percent (110%) of such fair market value
on the date of grant; provided, however, that with respect to employees who
become employees of the Corporation or any Subsidiary as a result of the
acquisition by the Corporation or any Subsidiary of the stock or assets of
another entity or business (an "Acquisition"), and who are not deemed to be
reporting persons of the Corporation or any Subsidiary for purposes of Section
16(b) of the 1934 Act, the option price with respect to nonstatutory stock
options granted to such persons within 12 months of such Acquisition shall be
such price as the Committee, in its discretion, shall determine, which may be
less than the fair market value per share of the Common Stock on the date of
grant. For purposes of this Section 5(A), the fair market value of the Common
Stock shall be determined as provided in Section 5(I). For purposes of this
Section 5(A), an individual (i) shall be considered as owning not only shares of
stock owned individually but also all shares of stock that are at the time
owned, directly or indirectly, by or for the spouse, ancestors, lineal
descendants and brothers and sisters (whether by the whole or half blood) of
such individual and (ii) shall be considered as owning proportionately any
shares owned, directly or indirectly, by or for any corporation, partnership,
estate or trust in which such individual is a stockholder, partner or
beneficiary.

                  (B) The option price for each stock option shall be payable in
cash in United States dollars (including check, bank draft or money order);
provided, however, that in lieu of cash the person exercising the stock option
may (if authorized by the Committee at the time of grant in the case of an
incentive stock option, or at any time in the case of a nonstatutory stock
option) pay the option price in whole or in part by delivering to the
Corporation shares of the Common Stock having a fair market value on the date of
exercise of the stock option, determined as provided in Section 5(I), equal to
the option price for the shares being purchased, except that (i) any portion of
the option price representing a fraction of a share shall in any event be paid
in cash and (ii) no shares of the Common Stock which have been held for less
than six months may be delivered in payment of the option price of a stock
option. Delivery of shares, if authorized, may also be accomplished through the
effective transfer to the Corporation of shares held by a broker or other agent.
The Corporation will also cooperate with any person exercising a stock option
who participates in a cashless exercise program of a broker or other agent under
which all or part of the shares received upon exercise of the stock option are
sold through the broker or other agent or under which the broker or other agent
makes a loan to such person. Notwithstanding the foregoing, unless the
Committee, in its discretion, shall otherwise determine at the time of grant in
the case of an incentive stock option, or at any time in the case of a
nonstatutory stock option, the exercise of the stock option shall not be deemed
to occur and no shares of Common Stock will be issued or delivered by the
Corporation upon exercise of the stock option until the Corporation has received
payment of the option price in full. The date of exercise of a stock option
shall be determined under procedures established by the Committee, and as of the
date of exercise the person exercising the stock option shall be considered for
all purposes to be the owner of the shares with respect to which the stock
option has been exercised. Payment of the option price with shares shall not
increase the number of shares of the Common Stock which may be issued or
delivered under the Plan as provided in Section 3.



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                  (C) Unless the Committee, in its discretion, shall otherwise
determine, stock options shall be exercisable by a grantee during employment
commencing on the date of grant. No stock option shall be exercisable after the
expiration of ten years (five years in the case of an incentive stock option
granted to a Ten Percent Employee) from the date of grant. Unless the Committee,
in its discretion, shall otherwise determine, a stock option to the extent
exercisable at any time may be exercised in whole or in part.

                  (D) Cash payment rights granted in conjunction with a
nonstatutory stock option shall entitle the person who is entitled to exercise
the stock option, upon exercise of the stock option or any portion thereof, to
receive cash from the Corporation (in addition to the shares to be received upon
exercise of the stock option) equal to such percentage as the Committee, in its
discretion, shall determine not greater than one hundred percent (100%) of the
excess of the fair market value of a share of the Common Stock on the date of
exercise of the stock option over the option price per share of the stock option
times the number of shares covered by the stock option, or portion thereof,
which is exercised. Payment of the cash provided for in this Section 5(D) shall
be made by the Corporation as soon as practicable after the time the amount
payable is determined. For purposes of this Section 5(D), the fair market value
of the Common Stock shall be determined as provided in Section 5(I).

                  (E) No incentive stock option and, except to the extent
otherwise determined by the Committee and reflected in the stock option
agreement or an amendment thereto, no nonstatutory stock option shall be
transferable by the grantee otherwise than by will, or if the grantee dies
intestate, by the laws of descent and distribution of the state of domicile of
the grantee at the time of death. All incentive stock options and, except to the
extent otherwise determined by the Committee and reflected in the stock option
agreement or an amendment thereto, all nonstatutory stock options shall be
exercisable during the lifetime of the grantee only by the grantee.

                  (F) Subject to the provisions of Section 4 in the case of
incentive stock options, unless the Committee, in its discretion, shall
otherwise determine:

                           (i) If the employment of a grantee who is not
                  disabled within the meaning of Section 422(c)(6) of the Code
                  (a "Disabled Grantee") is voluntarily terminated with the
                  consent of the Corporation or a Subsidiary or a grantee
                  retires under any retirement plan of the Corporation or a
                  Subsidiary, any then outstanding incentive stock option held
                  by such grantee shall be exercisable by the grantee (but only
                  to the extent exercisable by the grantee immediately prior to
                  the termination of employment) at any time prior to the
                  expiration date of such incentive stock option or within three
                  months after the date of termination of employment, whichever
                  is the shorter period;

                           (ii) If the employment of a grantee who is not a
                  Disabled Grantee is voluntarily terminated with the consent of
                  the Corporation or a Subsidiary or a grantee retires under any
                  retirement plan of the Corporation or a Subsidiary any then
                  outstanding nonstatutory stock option held by such grantee
                  shall be exercisable by the grantee (but only to the extent
                  exercisable by the grantee immediately prior to termination of
                  employment) at any time prior to the expiration date of such
                  nonstatutory stock option or within one year after the date of
                  termination of employment, whichever is the shorter period;

                           (iii) If the employment of a grantee who is a
                  Disabled Grantee is voluntarily terminated with the consent of
                  the Corporation or a Subsidiary, any then outstanding stock
                  option held by such grantee shall be exercisable by the
                  grantee in full (whether or not so exercisable by the grantee
                  immediately prior to the termination of employment) by the
                  grantee at any time prior to the expiration date of such stock
                  option or within one year after the date of termination of
                  employment, whichever is the shorter period;



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                           (iv) Following the death of a grantee during
                  employment, any outstanding stock option held by the grantee
                  at the time of death shall be exercisable in full (whether or
                  not so exercisable by the grantee immediately prior to the
                  death of the grantee) by the person entitled to do so under
                  the Will of the grantee, or, if the grantee shall fail to make
                  testamentary disposition of the stock option or shall die
                  intestate, by the legal representative of the grantee at any
                  time prior to the expiration date of such stock option or
                  within one year after the date of death of the grantee,
                  whichever is the shorter period;

                           (v) Following the death of a grantee after
                  termination of employment during a period when a stock option
                  is exercisable, the stock option shall be exercisable by such
                  person entitled to do so under the Will of the grantee or by
                  such legal representative (but only to the extent the stock
                  option was exercisable by the grantee immediately prior to the
                  death of the grantee) at any time prior to the expiration date
                  of such stock option or within one year after the date of
                  death, whichever is the shorter period;

                           (vi) Unless the exercise period of a stock option
                  following termination of employment has been extended as
                  provided in Section 8(C), if the employment of a grantee
                  terminates for any reason other than voluntary termination
                  with the consent of the Corporation or a Subsidiary,
                  retirement under any retirement plan of the Corporation or a
                  Subsidiary or death, all outstanding stock options held by the
                  grantee at the time of such termination of employment shall
                  automatically terminate.

Whether termination of employment is a voluntary termination with the consent of
the Corporation or a Subsidiary shall be determined, in its discretion, by the
Committee and any such determination by the Committee shall be final and
binding.

                  (G) If a grantee of a stock option (i) engages in the
operation or management of a business (whether as owner, partner, officer,
director, employee or otherwise and whether during or after termination of
employment) which is in competition with the Corporation or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(C) applies following termination of employment), (ii) induces or attempts to
induce any customer, supplier, licensee or other individual, corporation or
other business organization having a business relationship with the Corporation
or any of its Subsidiaries to cease doing business with the Corporation or any
of its Subsidiaries or in any way interferes with the relationship between any
such customer, supplier, licensee or other person and the Corporation or any of
its Subsidiaries or (iii) solicits any employee of the Corporation or any of its
Subsidiaries to leave the employment thereof or in any way interferes with the
relationship of such employee with the Corporation or any of its Subsidiaries,
the Committee, in its discretion, may immediately terminate all outstanding
stock options held by the grantee. Whether a grantee has engaged in any of the
activities referred to in the preceding sentence which would cause the
outstanding stock options to be terminated shall be determined, in its
discretion, by the Committee, and any such determination by the Committee shall
be final and binding.

                  (H) All stock options and cash payment rights shall be
confirmed by an agreement which shall be executed on behalf of the Corporation
by the Chief Executive Officer (if other than the President), the President or
any Vice President and by the grantee. The agreement confirming a stock option
shall specify whether the stock option is an incentive stock option or a
nonstatutory stock option. The provisions of such agreements need not be
identical.

                  (I) Fair market value of the Common Stock shall be the mean
between the following prices, as applicable, for the date as of which fair
market value is to be determined as quoted in The Wall Street Journal (or in
such other reliable publication as the Committee, in its discretion, may
determine to rely upon): (i) if the Common Stock is listed on the New York Stock
Exchange, the highest and lowest sales prices per share of the Common Stock as
quoted in the NYSE-Composite Transactions listing for such date, (ii) if the
Common Stock is not listed on such exchange the highest



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and lowest sales prices per share of Common Stock for such date on (or on any
composite index including) the principal United States securities exchange
registered under the 1934 Act on which the Common Stock is listed or (iii) if
the Common Stock is not listed on any such exchange, the highest and lowest
sales prices per share of the Common Stock for such date on the National
Association of Securities Dealers Automated Quotations System or any successor
system then in use ("NASDAQ"). If there are no such sale price quotations for
the date as of which fair market value is to be determined but there are such
sale price quotations within a reasonable period both before and after such
date, then fair market value shall be determined by taking a weighted average of
the means between the highest and lowest sales prices per share of the Common
Stock as so quoted on the nearest date before and the nearest date after the
date as of which fair market value is to be determined. The average should be
weighted inversely by the respective numbers of trading days between the selling
dates and the date as of which fair market value is to be determined. If there
are no such sale price quotations on or within a reasonable period both before
and after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide bid and
asked prices per share of Common Stock as so quoted for such date on NASDAQ, or
if none, the weighted average of the means between such bona fide bid and asked
prices on the nearest trading date before and the nearest trading date after the
date as of which fair market value is to be determined, if both such dates are
within a reasonable period. The average is to be determined in the manner
described above in this Section 5(I). If the fair market value of the Common
Stock cannot be determined on any basis previously set forth in this Section
5(I) for the date as of which fair market value is to be determined, the
Committee shall in good faith determine the fair market value of the Common
Stock on such date. Fair market value shall be determined without regard to any
restriction other than a restriction which, by its terms, will never lapse.

                  (J) The obligation of the Corporation to issue or deliver
shares of the Common Stock under the Plan shall be subject to (i) the
effectiveness of a registration statement under the Securities Act of 1933, as
amended, with respect to such shares, if deemed necessary or appropriate by
counsel for the Corporation, (ii) the condition that the shares shall have been
listed (or authorized for listing upon official notice of issuance) upon each
stock exchange, if any, on which the Common Stock may then be listed and (iii)
all other applicable laws, regulations, rules and orders which may then be in
effect.

                  Subject to the foregoing provisions of this Section 5 and the
other provisions of the Plan, stock options and cash payment rights granted
under the Plan shall be subject to such restrictions and other terms and
conditions, if any, as shall be determined, in its discretion, by the Committee
and set forth in the agreement referred to in Section 5(H), or an amendment
thereto.


                                    SECTION 6
                     RESTRICTED SHARES AND PERFORMANCE UNITS

(A) RESTRICTED SHARES

                  Awards of restricted shares shall be confirmed by a written
agreement in the form prescribed by the Committee in its discretion, which shall
set forth the number of shares of the Common Stock awarded, restrictions imposed
thereon (including, without limitation, restrictions on the right of the grantee
to sell, assign, transfer or encumber such shares (except as provided below)
while such shares are subject to other restrictions imposed under this Section
6(A)), the duration of such restrictions, events (which may, in the discretion
of the Committee, include termination of employment and/or performance-based
events) the occurrence of which would cause a forfeiture of the restricted
shares and such other terms and conditions as shall be determined, in its
discretion, by the Committee. The agreement shall be executed on behalf of the
Corporation by the Chief Executive Officer (if other than the President), the
President or any Vice President and by the grantee. The provisions of such




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agreements need not be identical. Awards of restricted shares shall be effective
on the date determined, in its discretion, by the Committee.

                  Following the award of restricted shares and prior to the
lapse or termination of the applicable restrictions, share certificates for the
restricted shares shall be issued or delivered in the name of the grantee and
deposited with the Corporation in escrow together with related stock powers
signed by the grantee. Except as provided in Section 7, the Committee, in its
discretion, may determine that dividends and other distributions on the shares
held in escrow shall not be paid to the grantee until the lapse or termination
of the applicable restrictions. Unless otherwise provided, in its discretion, by
the Committee, any such dividends or other distributions shall not bear
interest. Upon the lapse or termination of the applicable restrictions (and not
before such time), the grantee shall receive the share certificates for the
restricted shares (subject to the provisions of Section 10) and unpaid
dividends, if any. From the date the award of restricted shares is effective,
the grantee shall be a stockholder with respect to all the shares represented by
the share certificates and shall have all the rights of a stockholder with
respect to all the restricted shares, including the right to vote such shares
and to receive all dividends and other distributions paid with respect to such
shares, subject only to the preceding provisions of this paragraph and the other
restrictions imposed by the Committee. If a grantee of restricted shares (i)
engages in the operation or management of a business (whether as owner, partner,
officer, director, employee or otherwise and whether during or after termination
of employment) which is in competition with the Corporation or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(D) applies), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Corporation or any of its Subsidiaries to cease
doing business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii) solicits
any employee of the Corporation or any of its Subsidiaries to leave the
employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately declare forfeited all restricted shares held by the grantee as to
which the restrictions have not yet lapsed. Whether a grantee has engaged in any
of the activities referred to in the preceding sentence which would cause the
restricted shares to be forfeited shall be determined, in its discretion, by the
Committee, and any such determination by the Committee shall be final and
binding.

                  Neither this Section 6(A) nor any other provision of the Plan
shall preclude a grantee from transferring or assigning restricted shares to (i)
the trustee of a trust that is revocable by such grantee alone, both at the time
of the transfer or assignment and at all times thereafter prior to such
grantee's death or (ii) the trustee of any other trust to the extent approved in
advance by the Committee in writing. A transfer or assignment of restricted
shares from such trustee to any person other than such grantee shall be
permitted only to the extent approved in advance by the Committee in writing,
and restricted shares held by such trustee shall be subject to all of the
conditions and restrictions set forth in the Plan and in the applicable
agreement as if such trustee were a party to such agreement.

(B)      PERFORMANCE UNITS

                  The Committee may award performance units which shall be
earned by an awardee based on the level of performance over a specified period
of time by the Corporation, a Subsidiary or Subsidiaries, any branch, department
or other portion thereof or the awardee individually, as determined by the
Committee. For the purposes of the grant of performance units, the following
definitions shall apply:

                  (i) "Performance unit" shall mean an award, expressed in
         dollars or shares of Common Stock, granted to an awardee with respect
         to a Performance Period. Awards expressed in dollars may be established
         as fixed dollar amounts, as a percentage of salary, as a percentage of
         a pool based on earnings of the Corporation, a Subsidiary or
         Subsidiaries or any branch,



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         department or other portion thereof or in any other manner determined
         by the Committee in its discretion, provided that the amount thereof
         shall be capable of being determined as a fixed dollar amount as of the
         close of the Performance Period.

                  (ii) "Performance Period" shall mean an accounting period of
         the Corporation or a Subsidiary of not less than one year, as
         determined by the Committee in its discretion.

                  (iii) "Performance Target" shall mean that level of
         performance established by the Committee which must be met in order for
         the performance unit to be fully earned. The Performance Target may be
         expressed in terms of earnings per share, return on assets, asset
         growth, ratio of capital to assets or such other level or levels of
         accomplishment by the Corporation, a Subsidiary or Subsidiaries, any
         division, branch, department or other portion thereof or the awardee
         individually as may be established or revised from time to time by the
         Committee.

                  (iv) "Minimum Target" shall mean a minimal level of
         performance established by the Committee which must be met before any
         part of the performance unit is earned. The Minimum Target may be the
         same as or less than the Performance Target in the discretion of the
         Committee.

                  (v) "Performance shares" shall mean shares of Common Stock
         issued or delivered in payment of earned performance units.

                  An awardee shall earn the performance unit in full by meeting
the Performance Target for the Performance Period. If the Minimum Target has not
been attained at the end of the Performance Period, no part of the performance
unit shall have been earned by the awardee. If the Minimum Target is attained
but the Performance Target is not attained, the portion of the performance unit
earned by the awardee shall be determined on the basis of a formula established
by the Committee.

                  At any time prior to the end of a Performance Period, the
Committee may adjust downward (but not upward) the Performance Target and/or
Minimum Target as a result of major events unforeseen at the time of the award,
such as changes in the economy, in the industry or laws affecting the operations
of the Corporation or a Subsidiary, or any division, branch, department or other
portion thereof, or any other event the Committee determines would have a
significant impact upon the probability of attaining the previously established
Performance Target.

                  Payment of earned performance units shall be made to awardees
following the close of the Performance Period as soon as practicable after the
time the amount payable is determined by the Committee. Payment in respect of
earned performance units, whether expressed in dollars or shares, may be made in
cash, in shares of Common Stock, or partly in cash and partly in shares of
Common Stock, as determined by the Committee at the time of payment. For this
purpose, performance units expressed in dollars shall be converted to shares,
and performance units expressed in shares shall be converted to dollars, based
on the fair market value of the Common Stock, determined as provided in Section
5(I), as of the date the amount payable is determined by the Committee. The
Committee, in its discretion, may determine that awardees shall also be entitled
to any dividends or other distributions that would have been paid on earned
performance shares had the shares been outstanding during the period from the
award to the payment of the performance shares. Unless otherwise provided, in
its discretion, by the Committee, any such dividends or other distributions
shall not bear interest.

                  Unless otherwise provided in the agreement confirming the
award of the performance units, if prior to the close of a Performance Period,
the employment of an awardee of performance units is voluntarily terminated with
the consent of the Corporation or a Subsidiary, the grantee retires under any
retirement plan of the Corporation or a Subsidiary or the grantee dies during
employment, the Committee in its discretion may determine to pay to the grantee
all or part of the performance unit




                                       9
<PAGE>   10

based upon the extent to which the Committee determines the Performance Target
or Minimum Target has been achieved as of the date of termination of employment,
retirement or death, the period of time remaining until the end of the
Performance Period and/or such other factors as the Committee may deem relevant.
If the Committee, in its discretion, determines that all or any part of the
performance unit shall be paid, payment shall be made to the awardee or the
estate of the awardee as promptly as practicable following such determination
and may be made in cash, in shares of Common Stock, or partly in cash and partly
in shares of Common Stock, as determined by the Committee at the time of
payment. For this purpose, performance units expressed in dollars shall be
converted to shares, and performance units expressed in shares shall be
converted to dollars, based on the fair market value of the Common Stock,
determined as provided in Section 5(I), as of the date the amount payable is
determined by the Committee.

                  Except as otherwise provided in Section 8(E), if the
employment of a grantee of an award of performance units terminates prior to the
close of the Performance Period for any reason other than voluntary termination
with the consent of the Corporation or a Subsidiary, retirement under any
retirement plan of the Corporation or a Subsidiary or death, the unearned
performance units shall be deemed not to have been earned and such unearned
units shall not be paid.

                  Whether termination of employment is a voluntary termination
with the consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee shall
be final and binding.

                  If an awardee of performance units (i) engages in the
operation or management of a business (whether as owner, partner, officer,
director, employee or otherwise and whether during or after termination of
employment) which is in competition with the Corporation or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(E) applies), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Corporation or any of its Subsidiaries to cease
doing business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii) solicits
any employee of the Corporation or any of its Subsidiaries to leave the
employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately cancel the award. Whether an awardee has engaged in any of the
activities referred to the preceding sentence which would cause the award of
performance units to be canceled shall be determined, in its discretion, by the
Committee, and any such determination by the Committee shall be final and
binding.

                  Performance unit awards shall be evidenced by a written
agreement in the form prescribed by the Committee which shall set forth the
amount or manner of determining the amount of the performance unit, the
Performance Period, the Performance Target and any Minimum Target and such other
terms and conditions as the Committee in its discretion deems appropriate.
Performance unit awards shall be effective only upon execution of the applicable
performance unit agreement on behalf of the Corporation by the Chief Executive
Officer (if other than the President), the President or any Vice President, and
by the awardee.


                                    SECTION 7
                      ADJUSTMENT AND SUBSTITUTION OF SHARES

                  If a dividend or other distribution shall be declared upon the
Common Stock payable in shares of the Common Stock, (i) the number of shares of
the Common Stock subject to any outstanding stock options or performance unit
awards, (ii) the number of shares of the Common Stock which may be issued or
delivered under the Plan but are not subject to outstanding stock options or
performance unit awards and (iii) the maximum number of shares as to which stock
options may be granted and as to



                                       10
<PAGE>   11

which shares may be awarded under the Plan to any employee under Section 4 on
the date fixed for determining the stockholders entitled to receive such stock
dividend or distribution shall be adjusted by adding thereto the number of
shares of the Common Stock which would have been distributable thereon if such
shares had been outstanding on such date. Shares of Common Stock so distributed
with respect to any restricted shares held in escrow shall also be held by the
Corporation in escrow and shall be subject to the same restrictions as are
applicable to the restricted shares on which they were distributed.

                  If the outstanding shares of Common Stock shall be changed
into or exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option or
performance unit award, for each share of the Common Stock which may be issued
or delivered under the Plan but which is not then subject to any outstanding
stock option or performance unit award and for the maximum number of shares as
to which stock options may be granted and as to which shares may be awarded
under the Plan to any employee under Section 4, the number and kind of shares of
stock or other securities into which each outstanding share of the Common Stock
shall be so changed or for which each such share shall be exchangeable. Unless
otherwise determined by the Committee, in its discretion, any such stock or
securities, as well as any cash or other property, into or for which any
restricted shares held in escrow shall be changed or exchangeable in any such
transaction shall also be held by the Corporation in escrow and shall be subject
to the same restrictions as are applicable to the restricted shares in respect
of which such stock, securities, cash or other property was issued or
distributed.

                  In case of any adjustment or substitution as provided for in
the first two paragraphs of this Section 7, the aggregate option price for all
shares subject to each then outstanding stock option prior to such adjustment or
substitution shall be the aggregate option price for all shares of stock or
other securities (including any fraction) to which such shares shall have been
adjusted or which shall have been substituted for such shares.

                  Any new option price per share shall be carried to at least
three decimal places with the last decimal place rounded upwards to the nearest
whole number.

                  If the outstanding shares of the Common Stock shall be changed
in value by reason of any spin-off, split-off or split-up, or dividend in
partial liquidation, dividend in property other than cash or extraordinary
distribution to holders of the Common Stock, (i) the Committee shall make any
adjustments to any then outstanding stock option which it determines are
equitably required to prevent dilution or enlargement of the rights of grantees
which would otherwise result from any such transaction, and (ii) unless
otherwise determined by the Committee, in its discretion, any stock, securities,
cash or other property distributed with respect to any restricted shares held in
escrow or for which any restricted shares held in escrow shall be exchanged in
any such transaction shall also be held by the Corporation in escrow and shall
be subject to the same restrictions as are applicable to the restricted shares
in respect of which such stock, securities, cash or other property was
distributed or exchanged.

                  No adjustment or substitution provided for in this Section 7
shall require the Corporation to issue or sell a fraction of a share or other
security. Accordingly, all fractional shares or other securities which result
from any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution. Owners of restricted
shares held in escrow shall be treated in the same manner as owners of Common
Stock not held in escrow with respect to fractional shares created by an
adjustment or substitution of shares, except that, unless otherwise determined
by the Committee, in its discretion, any cash or other property paid in lieu of
a fractional share shall be subject to restrictions similar to those applicable
to the restricted shares exchanged therefor.



                                       11
<PAGE>   12

                  If any adjustment or substitution provided for in this Section
7 requires the approval of stockholders in order to enable the Corporation to
grant incentive stock options or to comply with Section 162(m) of the Code, then
no such adjustment or substitution shall be made without the required
stockholder approval. Notwithstanding the foregoing, in the case of incentive
stock options, if the effect of any such adjustment or substitution would be to
cause the stock option to fail to continue to qualify as an incentive stock
option or to cause a modification, extension or renewal of such stock option
within the meaning of Section 424 of the Code, the Committee may elect that such
adjustment or substitution not be made but rather shall use reasonable efforts
to effect such other adjustment of each then outstanding stock option as the
Committee, in its discretion, shall deem equitable and which will not result in
any disqualification, modification, extension or renewal (within the meaning of
Section 424 of the Code) of the incentive stock option.

                  Except as provided in this Section 7, a grantee shall have no
rights by reason of any issue or delivery by the Corporation of stock of any
class or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class.


                                    SECTION 8
                       ADDITIONAL RIGHTS IN CERTAIN EVENTS


(A)      DEFINITIONS

                  For purposes of this Section 8, the following terms shall have
the following meanings:

                  (1) The term "Person" shall be used as that term is used in
Sections 13(d) and 14(d) of the 1934 Act as in effect on the effective date of
the Plan.

                  (2) "Beneficial Ownership" shall be determined as provided in
Rule 13d-3 under the 1934 Act as in effect on the effective date of the Plan.

                  (3) A specified percentage of "Voting Power" of a company
shall mean such number of the Voting Shares as shall enable the holders thereof
to cast such percentage of all the votes which could be cast in an annual
election of directors (without consideration of the rights of any class of stock
other than the common stock of the company to elect directors by a separate
class vote); and "Voting Shares" shall mean all securities of a company
entitling the holders thereof to vote in an annual election of directors
(without consideration of the rights of any class of stock other than the common
stock of the company to elect directors by a separate class vote).

                  (4) "Tender Offer" shall mean a tender offer or exchange offer
to acquire securities of the Corporation (other than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved or opposed
by the Board.

                  (5) "Continuing Directors" shall mean a director of the
Corporation who either (a) was a director of the Corporation on the effective
date of the Plan or (b) is an individual whose election, or nomination for
election, as a director of the Corporation was approved by a vote of at least
two-thirds of the directors then still in office who were Continuing Directors
(other than an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of
directors of the Corporation which would be subject to Rule 14a-11 under the
1934 Act, or any successor Rule).

                   (6) "Designated Person" shall mean (a) the Westinghouse Air
Brake Company Employee Stock Ownership Plan and the Westinghouse Air Brake
Company Employee Stock



                                       12
<PAGE>   13

Ownership Trust (collectively, the "ESOP") and (b)any Person serving on the
Committee administering the ESOP, to the extent that such Person is deemed to
have Beneficial Ownership of shares of Common Stock held by the ESOP.

                  (7) "Section 8 Event" shall mean the date upon which any of
the following events occurs:

                  (a) The Corporation acquires actual knowledge that any Person,
         other than the Corporation, a Subsidiary, or any employee benefit
         plan(s) sponsored by the Corporation or a Subsidiary, or any Designated
         Person, has acquired the Beneficial Ownership, directly or indirectly,
         of securities of the Corporation entitling such Person to 30% or more
         of the Voting Power of the Corporation;

                  (b) A Tender Offer is made to acquire securities of the
         Corporation entitling the holders thereof to 30% or more of the Voting
         Power of the Corporation; or

                  (c) A solicitation subject to Rule 14a-11 under the 1934 Act
         (or any successor Rule) relating to the election or removal of 50% or
         more of the members of the Board or any class of the Board shall be
         made by any person other than the Corporation or less than 51% of the
         members of the Board (excluding vacant seats) shall be Continuing
         Directors; or

                  (d) The stockholders of the Corporation shall approve a
         merger, consolidation, share exchange, division or sale or other
         disposition of assets of the Corporation as a result of which the
         stockholders of the Corporation immediately prior to such transaction
         shall not hold, directly or indirectly, immediately following such
         transaction a majority of the Voting Power of (i) in the case of a
         merger or consolidation, the surviving or resulting corporation, (ii)
         in the case of a share exchange, the acquiring corporation or (iii) in
         the case of a division or a sale or other disposition of assets, each
         surviving, resulting or acquiring corporation which, immediately
         following the transaction, holds more than 30% of the consolidated
         assets of the Corporation immediately prior to the transaction;

provided, however, that (i) if securities beneficially owned by a grantee are
included in determining the Beneficial Ownership of a Person referred to in
paragraph 7(a) above, (ii) a grantee is required to be named pursuant to Item 2
of the Schedule 14D-1 (or any similar successor filing requirement) required to
be filed by the bidder making a Tender Offer referred to in paragraph 7(b) above
or (iii) if a grantee is a "participant" as defined in Instruction 3 to Item 4
of Schedule 14A under the 1934 Act (or any successor Rule) in a solicitation
(other than a solicitation by the Corporation) referred to in paragraph 7(c)
above, then no Section 8 Event with respect to such grantee shall be deemed to
have occurred by reason of such event.

(B) ACCELERATION OF THE EXERCISE DATE OF STOCK OPTIONS

                  Subject to the provisions of Section 4 in the case of
incentive stock options, unless the agreement referred to in Section 5(H), or an
amendment thereto, shall otherwise provide, notwithstanding any other provision
contained in the Plan, in case any "Section 8 Event" occurs all outstanding
stock options (other than those held by a person referred to in the proviso to
Section 8(A)(7)) shall become immediately and fully exercisable whether or not
otherwise exercisable by their terms.


(C) EXTENSION OF THE EXPIRATION DATE OF STOCK OPTIONS

                  Subject to the provisions of Section 4 in the case of
incentive stock options, unless the agreement referred to in Section 5(H), or an
amendment thereto, shall otherwise provide,



                                       13
<PAGE>   14

notwithstanding any other provision contained in the Plan, all outstanding stock
options held by a grantee (other than a grantee referred to in the proviso to
Section 8(A)(7)) whose employment with the Corporation or a Subsidiary
terminates within one year of any Section 8 Event for any reason other than
voluntary termination with the consent of the Corporation or a Subsidiary,
retirement under any retirement plan of the Corporation or a Subsidiary or death
which are exercisable shall continue to be exercisable for a period of three
years from the date of such termination of employment, but in no event after the
expiration date of the stock option.


(D) LAPSE OF RESTRICTIONS ON RESTRICTED SHARE AWARDS

                  Unless the agreement referred to in Section 6(A), or an
amendment thereto, shall otherwise provide, notwithstanding any other provision
contained in the Plan, if any "Section 8 Event" occurs prior to the scheduled
lapse of all restrictions applicable to restricted share awards under the Plan
(other than those held by a person referred to in the proviso to Section
8(A)(7)), all such restrictions shall lapse upon the occurrence of any such
"Section 8 Event" regardless of the scheduled lapse of such restrictions.


(E) PAYMENT OF PERFORMANCE UNITS

                  Unless the agreement referred to in Section 6(B), or an
amendment thereto, shall otherwise provide, notwithstanding any other provision
contained in the Plan, if any "Section 8 Event" occurs prior to the end of any
Performance Period, all performance units (unless the awardee is a person
referred to in the proviso to Section 8(A)(7)) shall be deemed to have been
fully earned as of the date of the Section 8 Event, regardless of the attainment
or nonattainment of any Performance Target or any Minimum Target and shall be
paid to the awardee thereof as promptly as practicable after the Section 8
Event. If the performance unit is not expressed as a fixed amount in dollars or
shares, the Committee may provide in the performance unit agreement for the
amount to be paid in the case of Section 8 Event.


(F) TAX-RELATED CASH PAYMENTS

                  Unless the agreements referred to in Sections 5(H), 6(A) or
6(B), or an amendment thereto, shall otherwise provide, if the independent
auditors most recently selected by the Board determine that (i) any grant,
payment or transfer to or for the benefit of a grantee or awardee under the Plan
(whether granted, paid or payable or transferred or transferable pursuant to the
Plan or otherwise) (a "Payment") would be deemed to be an "excess parachute
payment" for Federal income tax purposes because of Section 280G of the Code, or
any successor provision ("Section 280G"), and (ii) any grant, payment or
transfer under the Plan to or for the benefit of a grantee or awardee within one
year of or following the occurrence of a Section 8 Event constitutes in whole or
in part a "parachute payment" under Section 280G (without regard to Section
280G(b)(4)) used in calculating such "excess parachute payment," the Payment
will be grossed up through the payment by the Corporation to the grantee or
awardee in cash of the amount of any excise tax under Section 4999 of the Code,
or any successor provision ("Section 4999"), on the "excess parachute payment"
and the amount of any excise tax under Section 4999 and applicable income tax on
the total amount of such gross up payment, so that the grantee or awardee will
receive the full amount of the Payment after the grantee or awardee has paid any
excise tax under Section 4999 of the Code on the "excess parachute payment" and
any excise tax under Section 4999 and applicable income tax on the amount of
such gross up payment. On the later of the date an "excess parachute payment" is
paid to or for the benefit of the grantee or awardee or the date on which it can
be first determined that a Payment would be deemed to be an "excess parachute
payment," the Corporation shall pay or distribute to or for the benefit of the
grantee or awardee the




                                       14
<PAGE>   15

gross up payment due to the grantee or awardee under this Section 8(F).


                                    SECTION 9
           EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER

                  Neither the adoption of the Plan nor any action of the Board
or the Committee pursuant to the Plan shall be deemed to give any employee any
right to be granted a stock option (with or without cash payment rights) or to
be awarded restricted shares or performance units under the Plan. Nothing in the
Plan, in any stock option or cash payment rights granted under the Plan or in
any award of restricted shares or performance units under the Plan or in any
agreement providing for any of the foregoing shall confer any right on any
employee to continue in the employ of the Corporation or any Subsidiary or
interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the employment of any employee at any time.


                                   SECTION 10
                                  WITHHOLDING

                  Income, excise or employment taxes may be required to be
withheld by the Corporation or a Subsidiary in connection with the grant or
exercise of a stock option, upon a "disqualifying disposition" of the shares
acquired upon exercise of an incentive stock option, at the time restricted
shares are granted or vest or performance units are earned or upon the receipt
by the grantee of cash in payment of cash payment rights or dividends on
restricted stock which has not vested. Any taxes required to be withheld by the
Corporation or any of its Subsidiaries upon the receipt by the grantee of cash
in payment of cash payment rights or dividends will be satisfied by the
Corporation by withholding the taxes required to be withheld from the cash the
grantee would otherwise receive. The Corporation will request that the grantee
pay any additional amount required to be withheld directly to the Corporation in
cash. If a grantee does not pay any taxes required to be withheld by the
Corporation or any of its Subsidiaries within ten days after a request for the
payment of such taxes, the Corporation or such Subsidiary may withhold such
taxes from any compensation to which the grantee is entitled.


                                   SECTION 11
                                   AMENDMENT

                  The right to alter and amend the Plan at any time to time and
the right to revoke or terminate the Plan are hereby specifically reserved to
the Board; provided that no such alteration or amendment of the Plan shall,
without stockholder approval, (i) modify the formulas to increase the number of
shares which may be issued or delivered under the Plan as set forth in Section
3, (ii) increase the maximum aggregate number of shares as to which incentive
stock options may be granted as set forth in Section 3, (iii) change the option
price permitted under Section 5(A) of the Plan, (iv) increase the maximum number
of shares as to which stock options may be granted and as to which shares may be
awarded under the Plan to any one employee as set forth in Section 4, (v) make
any changes in the class of employees eligible to receive options or awards
under the Plan, or (vi) be made if stockholder approval of the amendment is at
the time required for grants or awards under the Plan to qualify for the
exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3 or by the
rules of the New York Stock Exchange or any other stock exchange on which the
Common Stock may then be listed. No alteration, amendment, revocation or
termination of the Plan shall, without the written consent of the holder of an
outstanding grant or award under the Plan, adversely affect the rights of such
holder with respect to such outstanding grant or award.




                                       15
<PAGE>   16

                                   SECTION 12
                                   INTEGRATION

                  The Plan and any written agreements executed by employees and
the Corporation contain all of the understandings and representations between
the parties and supersede any prior understandings and agreements entered into
between them regarding the subject matter within. There are no representations,
agreements, arrangements or understandings, oral or written, between the parties
relating to the subject matter within which are not fully expressed in the Plan
and the agreements.





                                   SECTION 13
                       EFFECTIVE DATE AND DURATION OF PLAN

                  The effective date and date of adoption of the Plan shall be
January 24, 2000, the date of adoption of the Plan by the Board, and the
effective date of the amendments to the Plan adopted by the Board on March 22,
2000 shall be March 22, 2000, provided that such amendments are approved by
stockholders at a meeting duly called, convened and held on or prior to March
21, 2001, at which a quorum representing a majority of the outstanding voting
stock of the Corporation is, either in person or by proxy, present and voting on
the Plan. No stock option or cash payment rights may be granted and no
restricted shares or performance units payable in performance shares may be
awarded under the Plan subsequent to January 23, 2010.






                                       16