Document:

exv10w1

Exhibit 10.1

Exhibit 10.1 Letter agreement regarding Terms of Employment dated January 26, 2010 by

and between FreightCar America, Inc. and Edward J. Whalen

FreightCar America, Inc.

Two North Riverside Plaza

Suite 1250

Chicago, Illinois 60606

January 26, 2010

Edward J. Whalen

c/o FreightCar America, Inc.

Two North Riverside Plaza

Suite 1250

Chicago, Illinois 60606

          Re: Terms of Employment

Dear Ed:

     This letter agreement (“letter”) sets forth the terms of your employment with
FreightCar America, Inc. (the “Company”). Commencing December 18, 2009, you will be
employed as the Company’s President and Chief Executive Officer, based at the Company’s offices in
Chicago, Illinois, and reporting to the Company’s Board of Directors (“Board”). You will
have all of the duties and responsibilities commensurate with such position under the Company’s
by-laws and consistent with the duties and responsibilities of chief executive officers of similar
businesses as the Company. During your employment, you will devote your full-time business
attention to the Company and will use your best efforts to discharge your responsibilities. You
may, however, engage in civic and charitable activities and, with the prior consent of the Board,
corporate boards, provided that these activities do not interfere with your duties to the Company.
During your employment, you also will serve as a member of the Board for no additional
compensation.

     This letter and your employment is for no specific term. Your employment may be terminated at
any time for any reason (or no reason), subject to the terms of this letter below, by the Company
or you upon notice to the other such party.

     1. Salary. Beginning January 1, 2010, you will receive an annual base salary in the
amount of $340,000 (“Salary”), paid in accordance with payroll practices applicable to
senior executives. Your Salary will be reviewed by the Company annually and may be increased (not
decreased without your written consent) in the Company’s discretion.

     2. Bonus. Beginning January 1, 2010, you will be entitled to participate in the
Company’s annual cash incentive plan applicable to senior executives (the “Bonus Plan”) and to earn
a bonus (“Bonus”) for each fiscal year of the Company ending during your employment. Your
target Bonus is 100% of your Salary, upon achievement of a target level of performance set forth in
the Bonus Plan, payable in cash or securities of the Company, as may be determined under the Bonus
Plan, within two and one-half months after the end of the fiscal year to which it relates. Your
maximum Bonus, to the extent earned under the Bonus Plan, may be as much as 200% of your Salary.
In the event of a termination of your employment by the Company without Cause, by you for Good
Reason, or due to your death or Disability (each such term as defined in the Company’s Executive
Severance Plan as in effect on the date hereof) or due to your

 

 

Mr. Edward J. Whalen

January 26, 2010

Page 2

Retirement (as defined under the corporate policy and/or relevant document of the Company (or
applicable affiliate)), you will be entitled to a pro rata portion of your Bonus for the fiscal
year of such termination, to the extent the applicable performance objectives for such year are
attained, based on the ratio of the number of days employed during such fiscal year to 365, which
will be payable when annual bonuses are paid to other senior executives for such year.

     3. Long-Term Incentive and Other Executive Compensation Plans. You will be eligible
to participate in all of the Company’s equity-based and cash-based long-term incentive and other
executive and deferred compensation plans on a basis no less favorable than other similarly
situated executives. Any awards under these plans may be made from time to time in the sole
discretion of the Compensation Committee of the Board or the Board.

     4. Sign-On Award. On the date you execute this letter, you will be granted a stock
option under the Company’s 2005 Long Term Incentive Plan exercisable for 200,000 shares of Company
common stock, having such terms and conditions as are set forth in the stock option agreement
attached to this letter as Exhibit A.

     5. Benefits; Business Expenses. During your employment, you will be entitled to
participate in each of the Company’s employee retirement, savings, welfare and fringe benefit
plans, and perquisites, offered to its senior executives, as in effect from time to time. You will
be entitled to paid annual vacation on a basis that is at least as favorable as that provided to
other similarly situated executives of the Company, but not less than 5 weeks per year, earned in
accordance with applicable Company policy. You will be reimbursed for all business, including
entertainment, expenses incurred by you in connection with your duties, subject to the Company’s
policy for substantiating such expenses. The Company will pay (on a non-taxable equivalent basis)
your professional fees incurred to negotiate and prepare this letter and all related agreements.

     6. Termination. Upon a termination of your employment for any reason, you will be
entitled to (i) your accrued Salary and accrued and unused vacation through the date of
termination, (ii) your prior fiscal year bonus, to the extent earned and unpaid, (iii) any accrued
and vested benefits and unreimbursed expenses incurred and unpaid on the date of termination in
accordance with Section 5 and (iv) any pro rata Bonus due you and payable as provided in Section 2.
You will not participate in or be entitled to any benefits under the Company’s Executive Severance
Plan or any other severance plan or policy applicable to Company employees.

     7. Section 409A. Anything in this Agreement to the contrary notwithstanding, if any
payment(s) or benefit(s) under this Agreement would be subject to the provisions of Section 409A of
the Internal Revenue Code of 1986 (the “Code”) at the time they become payable or benefits
due you, to the extent required to comply with Section 409A of the Code any such payments or
benefits will be delayed for six (6) months or such other earliest day on which such payments could
be made or benefits provided in compliance with Section 409A of the Code and the regulations
thereunder (at which point all payments so delayed will be provided or

 

 

Mr. Edward J. Whalen

January 26, 2010

Page 3

reimbursed to you in one lump sum, without interest, within two and one-half months after the
date they then become so payable or due to you).

     8. Indemnification. The Company will enter into a separate written agreement with
you, which is substantially similar to the indemnification agreements entered into with the other
members of the Board.

     9. Miscellaneous.

          (a) Entire Agreement. Except as otherwise contemplated herein, this letter (including
Exhibit A) contains the entire agreement between you and the Company with respect to the subject
matter hereof. No amendment, modification or termination of this letter may be made orally, but
must be made in writing and signed by you and the Company. In the event of any inconsistency
between this letter (including Exhibit A) and any plan, program, practice or agreement of or with
the Company and you, this letter (including Exhibit A) shall control.

          (b) Survival. The provisions of Section 6 shall survive any termination of your
employment.

          (c) Successors; Assignment. Neither party hereto may assign any rights or delegate
any duties under this letter without the prior written consent of the other party; provided,
however, that (a) this letter will inure to the benefit of and be binding upon the successors and
assigns of the Company upon any sale of all or substantially all of the Company’s stock and/or
assets, or upon any merger, consolidation or reorganization of the Company with or into any other
corporation, all as though such successors and assigns of the Company and their respective
successors and assigns were the Company; and (b) this letter will inure to the benefit of and be
binding upon your heirs, assigns or designees to the extent of any payments due to them hereunder.

          (d) Governing Law. This letter will be governed by and construed in accordance with
the law of the State of Illinois, and not its choice of law rules, applicable to contracts made and
to be performed entirely within that State.

          (e) No Set-off or Mitigation. Your rights to payments under this letter will not be
affected by any set-off, counterclaim, recoupment or other right the Company may have against you
or anyone else. You do not need to seek other employment or take any other action to mitigate any
amounts owed to you under this letter, and those amounts will not be reduced if you do obtain other
employment.

          (f) Notices. All notices, requests, demands and other communications under this
letter must be in writing and will be deemed given (i) when hand-delivered, (ii) on the first
business day after the business day sent from within the United States, if delivered by a
nationally recognized overnight courier or (iii) on the third business day after the business day
sent if delivered by registered or certified mail, return receipt requested, in each case to the

 

 

Mr. Edward J. Whalen

January 26, 2010

Page 4

following address (or to such other address as may be specified by notice that conforms to
this Section 10(i)):

If to the Company, to:

FreightCar America, Inc.

Two North Riverside Plaza

Suite 1250

Chicago, Illinois 60606

Attention: Secretary

If to you, to your last address shown on the payroll records of the Company.

          (g) Counterparts. This letter may be executed in counterparts, each of which will
constitute an original and all of which, taken together, will constitute one and the same
instrument.

Very truly yours,

FreightCar America, Inc.

	 	 	 	 	 
	By:

	 	  

Chairman
of the Board of Directors
	 	 
	 
	 	 	 	 
	Accepted and agreed:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 

	 	Edward J. Whalen	 	 

 

 

EXHIBIT A

STOCK OPTION AWARD AGREEMENT

     THIS STOCK OPTION AWARD AGREEMENT (this “Agreement”) is made and entered into this
January ___, 2010 by between FreightCar America, Inc., a Delaware corporation (the
“Company”), and Edward J. Whalen (the “Option Holder”).

     WHEREAS, the Option Holder has been designated by the Compensation Committee of the Board of
Directors of the Company (the “Committee”) to participate in the 2005 Long Term Incentive
Plan (the “Plan”) (capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Plan);

     NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and
for other good and valuable consideration, the Company and the Option Holder agree as follows:

     1. Grant. Pursuant to the provisions of the Plan, all of the terms of which are
incorporated herein by reference unless otherwise provided herein, the Company hereby grants to the
Option Holder an option (the “Option”) to purchase 200,000 shares of the Company’s common
stock (the “Common Stock”). The Option is granted this January ___, 2010 (the “Date of
Grant”), and such grant is subject to all of the terms and conditions herein and to all of the
terms and the conditions of the Plan, except as provided herein. In the event of a conflict between
the Plan and this Agreement, the terms of this Agreement shall govern. The Option is intended to be
non-qualified, and is not intended to be an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.

     2. Exercise Price. The exercise price of the shares subject to the Option shall be
Fair Market Value on the Date of Grant, subject to adjustment as provided in the Plan.

     3. Term of Option. The Option may, subject to the vesting and termination of
employment provisions of Sections 4 and 6 below, be exercised only during the period commencing on
the Date of Grant and continuing until the close of business on tenth anniversary of the Date of
Grant (the “Option Period”). At the end of the Option Period, the Option shall terminate,
unless sooner terminated pursuant to Section 6 below.

     4. Vesting. The Option Holder’s right to purchase shares of Common Stock under the
Option shall be exercisable only to the extent that the Option has vested. Subject to Section 6
and Section 9 below, the Option shall vest and become exercisable upon the following schedule
(provided the Option Holder remains continuously employed by the Company until the applicable
vesting date, except as provided below):

          (a) one-half ( 1/2) of the shares subject to the Option vest on December
18, 2010; and

          (b) the other one-half ( 1/2) of the shares subject to the Option vest on
the December 18, 2011.

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     5. Restrictive Covenants. The Option Holder acknowledges that, as a key management
employee, the Option Holder will be involved, on a high level, in the development, implementation
and management of the Company’s strategies and plans, including those which involve the Company’s
finances, research, marketing, planning, operations, industrial relations and acquisitions, and
that he or she will have access to Confidential Information, as defined in Section 5(b) below. By
virtue of the Option Holder’s unique and sensitive position and special background, employment of
the Option Holder by a competitor of the Company represents a serious competitive danger to the
Company, and the use of the Option Holder’s talent and knowledge and information about the
Company’s business, strategies and plans can and would constitute a valuable competitive advantage
over the Company.

          (a) Covenant Not to Solicit Employees. The Option Holder agrees that, during
employment with the Company and for a period of one (1) year after termination of employment with
the Company, he or she shall not, without the prior written consent of the Company, solicit any
current employee of the Company or any of its subsidiaries, or any individual who becomes an
employee on or before the date of the Option Holder’s termination of employment from the Company,
to leave such employment and join or become affiliated with any business entity anywhere in North
America that is engaged in direct competition with any business of the Company on the date of the
Option Holder’s employment termination which had revenues of ten percent (10%) or more of the
Company’s consolidated revenues for the four (4) most completed fiscal quarters.

          (b) Covenant Not to Disclose or Use of Confidential Information. The Option Holder
recognizes that he or she will have access to confidential information, trade secrets, proprietary
methods and other data which are the property of and integral to the operations and success of the
Company (“Confidential Information”) and therefore agrees to be bound by the provisions of
this Section 5(b), which both the Company and the Option Holder agree and acknowledge to be
reasonable and to be necessary to the Company. In recognition of this fact, the Option Holder
agrees that the Option Holder will not disclose any Confidential Information (except (i)
information which becomes publicly available without violation of this Agreement, (ii) information
which the Option Holder did not know and should not have known was disclosed to the Option Holder
in violation of any other person’s confidentiality obligation and (iii) disclosure required in
connection with any legal process (after giving the Company the opportunity to dispute such
requirement)) to any person, firm, corporation, association or other entity, for any reason or
purpose whatsoever, nor shall the Option Holder make use of any such information for the benefit of
any person, firm, corporation or other entity except the Company. The Option Holder’s obligation to
keep all such information confidential shall be in effect during and for a period of two (2) years
after the termination of the Option Holder’s employment with the Company; provided, however, that
the Option Holder will keep confidential and will not disclose any trade secret or similar
information protected under law as intangible property (subject to the same exceptions set forth in
the parenthetical clause above) for so long as such protection under law is extended.

          (c) Judicial Modification. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 5 is invalid or unenforceable, the parties
agree that (i) the court making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or geographic area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or provision

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with a term or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision, (ii) the parties shall request
that the court exercise that power, and (iii) this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment or decision may be appealed.

          (d) Remedy for Breach. The Option Holder agrees that in the event of a breach or
threatened breach of any of the covenants contained in this Section 5, in addition to any other
penalties or restrictions that may apply under any employment agreement, state law, or otherwise,
the Option Holder shall forfeit the Option granted under this Agreement and, the Company shall also
have the right to recover from the Option Holder the excess of the fair market value of a Share on
date of each exercise of this Option over the exercise price, as stated in Section 2 above,
multiplied by number of Shares subject to each such exercise of the Option.

          (e) Survival. The forfeiture provisions of this Section 5 shall continue to apply, in
accordance with their terms, after the non-solicit and/or non-disclosure provisions of any
employment or other agreement between the Company and the Option Holder have lapsed.

     6. Termination of Employment. If the employment of the Option Holder terminates for
any reason other than a Qualifying Termination (as defined below) during the Option Period, the
Option, to the extent vested, shall remain exercisable for ninety (90) days thereafter (but not
later than the date of expiration of the Option Period). If the employment of the Option Holder
terminates by reason of a Qualifying Termination during the Option Period, the Option shall become
immediately fully vested in the Option and the Option shall remain exercisable until the earlier of
(i) the third anniversary of the date of the Option Holder’s termination of employment or (ii) the
end of the Option Period. For purposes of this Agreement, the term “Qualifying Termination”
shall mean a termination of the Option Holder’s employment (x) by the Company without Cause, (y) by
the Option Holder for Good Reason, or (z) by reason of the Option Holder’s death, Disability or
Retirement. “Cause” and “Good Reason” shall each have the meaning set forth in the
Company’s Executive Severance Plan as in effect on the Date of Grant (except that references to
such Plan therein shall refer to this Agreement and to the letter agreement between the Option
Holder and the Company of even date herewith). “Disability” shall mean, in the written
opinion of a qualified physician selected by the Company, that the Option Holder is, by reason of
any medically determinable physical or mental impairment that can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months, either unable to engage
in any substantial gainful activity or receiving income replacement benefits for a period of not
less than 3 months under the Company’s disability plan. “Retirement” shall have the same
meaning ascribed to such term in the corporate policy and/or relevant document of the Company or
Affiliate that employs the Option Holder. The provisions of this Section 6 shall survive the
Option Holder’s termination of employment.

     7. Exercise of Option. In order to exercise the Option, the Option Holder shall submit
to the Secretary of the Company an instrument in writing specifying the number of shares of Common
Stock in respect of which the Option is being exercised, accompanied by payment, in a manner
acceptable to the Committee, of the exercise price of the shares in respect of which the Option is
being exercised. Shares shall then be issued by the Company and a share certificate delivered to
the Option Holder; provided, however, that the Company shall not be obligated to issue any Shares
hereunder if the issuance of such Shares would violate the provisions of any applicable law.

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     8. Conditions. The Option Holder will not have any of the rights of a shareholder with
respect to Shares until the Company has issued or transferred such Shares to the Option Holder
after the exercise of the Option. As a condition to the Company’s obligation to issue or transfer
Shares to the Option Holder after the exercise of the Option, the Option Holder shall have paid in
full for the Shares as to which he or she exercised the Option; provided, the Option Holder shall
have the option to exercise the Option via a broker-assisted cashless exercise program (that
satisfies applicable law, and rules and regulations thereunder, governing the Securities and
Exchange Commission and the U.S. Federal Reserve Bank), and the Company shall assure that such a
program, if not then existing, is established to permit such exercise by the Option Holder.

     9. Change of Control. In the event of a Change of Control (as defined in the Plan),
the Option shall become fully vested and exercisable.

     10. Non-Transferable. The Option may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of descent.

     11. No Obligation to Exercise. Neither the Option Holder nor any permissible
transferee is or will be obligated by the grant of the Option to exercise it.

     12. References. References herein to rights and obligations of the Option Holder shall
apply, where appropriate, to the Option Holder’s legal representative or guardian without regard to
whether specific reference to such legal representative or guardian is contained in a particular
provision of this Agreement or the Plan.

     13. Taxes. The Option Holder shall be responsible for all taxes required to be paid
under applicable tax laws with respect to the Option. The Company or any Affiliate, at the Option
Holder’s election, is authorized to withhold from any distribution of Shares, or any payroll or
other payment, to the Option Holder, amounts of withholding and other taxes due in connection with
the Option. The amount of the withholding shall not exceed the employer’s minimum statutory
withholding requirement.

     14. Entire Agreement. This Agreement contains all the understandings between the
parties hereto pertaining to the matters referred to herein, and supersedes all undertakings and
agreements, whether oral or in writing, previously entered into by them with respect thereto. The
Option Holder represents that, in executing this Agreement, he does not rely and has not relied
upon any representation or statement not set forth herein made by the Company with regard to the
subject matter, bases or effect of this Agreement or otherwise.

     15. Amendment or Modification, Waiver. The Committee may waive any conditions or
rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate, the Option,
prospectively or retrospectively; provided, however, that, without the consent of the Option
Holder, no amendment, alteration, suspension, discontinuation or termination of the Option may
materially and adversely affect the rights of the Option Holder under the Option. No waiver by any
party hereto of any breach by another party hereto of any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition
or provision at the same time, any prior time or any subsequent time.

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     16. Notices. Any notice to be given hereunder shall be in writing and shall be deemed
given hereunder when delivered personally, sent by courier or telecopy or registered or certified
mail, postage prepaid, return receipt requested, addressed to the party concerned at the address
indicated below or to such other address as such party may subsequently give notice of hereunder in
writing:

To Option Holder at his last address shown on the payroll records of the Company

To the Company at:

FreightCar America, Inc.

Two North Riverside Plaza

Suite 1250

Chicago, IL 60606

Attention: Secretary

Any notice delivered personally or by courier under this Section 16 shall be deemed given on the
date delivered and any notice sent by telecopy or registered or certified mail, postage prepaid,
return receipt requested, shall be deemed given on the date telecopied or mailed.

     17. Severability. If any provision of this Agreement or the application of any such
provision to any party or circumstances shall be determined by any court of competent jurisdiction
to be invalid and unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it is so determined to
be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be
validated and shall be enforced to the fullest extent permitted by law.

     18. Governing Law. This Agreement will be governed by and construed in accordance with
the laws of the State of Delaware, without regard to its conflicts of laws principles.

     19. Jurisdiction and Venue. The Company and the Option Holder agree that the
jurisdiction and venue for any disputes arising under, or any action brought to enforce, or
otherwise relating to, this Agreement shall be exclusively in the courts in the State of Illinois,
Cook County, including the Federal Courts located therein (should Federal jurisdiction exist), and
the Company and the Option Holder hereby submit and consent to said jurisdiction and venue.

     20. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year set forth
above.

FreightCar America, Inc.

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By:

Title:

Name:

Option Holder

	 	 	 
	 
	 

Edward J. Whalen

	 	 

6exv10w1

Exhibit 10.1

PROGRESS SOFTWARE CORPORATION

1992 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN

SECTION 1. PURPOSE

     This 1992 Incentive and Nonqualified Stock Option Plan (the “Plan”) of Progress Software
Corporation, a Massachusetts corporation (the “Company”), is designed to provide additional
incentive to executives and other key employees of the Company, its parent and subsidiaries. The
Company intends that this purpose will be effected by the granting of incentive stock options
(“Incentive Stock Options”) as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”), and nonqualified stock options (“Nonqualified Options”) under the Plan which
afford such executives and key employees an opportunity to acquire or increase their proprietary
interest in the Company through the acquisition of shares of its Common Stock. The Company intends
that Incentive Stock Options issued under the Plan will qualify as “incentive stock options” as
defined in Section 422 of the Code and the terms of the Plan shall be interpreted in accordance
with this intention. The terms “parent” and “subsidiary” shall have the respective meanings set
forth in Section 425 of the Code.

 

 

SECTION 2. ADMINISTRATION

     2.1 The Plan shall be administered by a Committee (the “Committee”) consisting of at least
two members of the Company’s Board of Directors (the “Board”). None of the members of the
Committee shall be an officer or other employee of the Company, and none shall have been granted
any incentive stock option or nonqualified option under this Plan or any other stock option plan of
the Company within one year prior to service on the Committee. It is the intention of the Company
that the Plan shall be administered by “disinterested persons” within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, but the authority and validity of any act taken or not
taken by the Committee shall not be affected if any person administering the Plan is not a
disinterested person. Except as specifically reserved to the Board under the terms of the Plan,
the Committee shall have full and final authority to operate, manage and administer the Plan on
behalf of the Company. Action by the Committee shall require the affirmative vote of a majority of
all members thereof.

     2.2 Subject to the terms and conditions of the Plan, the Committee shall have the power:

     (a) To determine from time to time the persons
eligible to receive options and the options to be granted to
such persons under the Plan and to prescribe the terms,

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conditions, restrictions, if any, and provisions (which need not be identical) of each
option granted under the Plan to such persons;

     (b) To construe and interpret the Plan and options granted thereunder and to establish,
amend, and revoke rules and regulations for administration of the Plan. In this connection,
the Committee may correct any defect or supply any omission, or reconcile any inconsistency
in the Plan, or in any option agreement, in the manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective. All decisions and determinations by
the Committee in the exercise of this power shall be final and binding upon the Company and
optionees;

     (c) To make, in its sole discretion, any of the following changes to any
outstanding option granted under the Plan: (i) to reduce the exercise price, (ii) to
accelerate the vesting schedule or (iii) to extend the expiration date; and

     (d) Generally, to exercise such powers and to perform such acts as are deemed necessary
or expedient to promote the best interests of the Company with respect to the Plan.

SECTION 3. STOCK

     3.1 The stock subject to the options granted under the Plan shall be shares of the Company’s
authorized but unissued common stock, or shares of the Company’s common stock held in treasury,

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5.01 par value (the “Common Stock”). The total number of shares that may be issued pursuant to
options granted under the Plan shall not exceed an aggregate of 1,000,000 shares of Common Stock;
provided, however, that the class and aggregate number of shares which may be subject to options
granted under the Plan shall be subject to adjustment as provided in Section 8 hereof.

     3.2 Whenever any outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the unexercised
portion of such option may again be the subject of options under the Plan.

SECTION 4. ELIGIBILITY

     4.1 Incentive Stock Options under the Plan may be granted only to executives and other key
employees of the Company or its parent or subsidiaries. Nonqualified Options may be granted to
officers or other key employees of the Company or its parent or subsidiaries, and to members of the
Board and consultants or other persons who render services to the Company (regardless of whether
they are also employees), provided, however, that no such option may be granted to a person who is
a member of the Committee at the time of grant.

     4.2 Except as may otherwise be permitted by the Code or other applicable law or regulation, no
Incentive Stock Option shall be granted to an individual who, at the time the option is granted,
owns (including ownership attributed pursuant to Section

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425 of the Code) more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary (a “greater-than-ten-percent stockholder”),
unless such Incentive Stock Option provides that (i) the purchase price per share shall not be less
than one hundred ten percent (110%) of the fair market value of the Common Stock at the time such
option is granted, and (ii) that such option shall not be exercisable to any extent after the
expiration of five (5) years from the date it is granted.

     4.3 The aggregate fair market value (determined at the time the option is granted) of the
Common Stock with respect to which Incentive Stock Options are exercisable for the first time by
any optionee during any calendar year (under the Plan and any other plans of the Company or any
parent or subsidiary for the issuance of incentive stock options) shall not exceed $100,000 (or
such greater amount as may from time to time be permitted with respect to incentive stock options
by the Code or any other applicable law or regulation).

SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE

     5.1 Except as may be otherwise expressly provided herein, options shall terminate on the
earlier of:

     (i) the date of expiration thereof,

     (ii) the date of termination of the optionee’s employment with or services to the Company by
it for cause (as determined by the Company), or voluntarily by the optionee; or

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     (iii) ninety (90) days after the date of termination of the optionee’s employment with or
services to the Company by it without cause; provided, that Nonqualified Options granted to
persons who are not employees of the Company need not, unless the Committee determines otherwise,
be subject to the provisions set forth in clauses (ii) and (iii) above.

An employment relationship between the Company and the optionee shall be deemed to exist during any
period in which the optionee is employed by the Company or its parent or any subsidiary. Whether
authorized leave of absence, or absence on military or government service, shall constitute
termination of the employment relationship between the Company and the optionee shall be determined
by the Committee at the time thereof.

     As used herein, “cause” shall mean (x) any
material breach by the optionee of any agreement to which the optionee and the Company are both
parties, (y) any act or omission to act by the optionee which may have a material and adverse
effect on the Company’s business or on the optionee’s ability to perform services for the Company,
including, without limitation, the commission of any crime (other than ordinary traffic
violations), or (z) any material misconduct or material neglect of duties by the optionee in
connection with the business or affairs of the Company or any affiliate of the Company.

     5.2 In the event of the death or permanent and total disability of the holder of an option
that is subject to clause (ii) or (iii) of Section 5.1 above prior to termination of the

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optionee’s employment with or services to the Company and before the date of expiration of
such option, such option shall terminate on the earlier of such date of expiration or two years
following the date of such death or disability. After the death of the optionee, his/her
executors, administrators or any person or persons to whom his/her option may be transferred by
will or by the laws of descent and distribution, shall have the right, at any time prior to such
termination, to exercise the option to the extent the optionee was entitled to exercise such option
immediately prior to his/her death. An optionee is permanently and totally disabled if he/she is
unable to engage in any gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to last for a continuous period of not less than 12 months;
permanent and total disability shall be determined in accordance with Section 22(e)(3) of the Code
and the regulations issued thereunder.

SECTION 6. TERMS OF THE OPTION AGREEMENTS

     Each option agreement shall be in writing and shall contain such terms, conditions,
restrictions, if any, and provisions as the Committee shall from time to time deem appropriate.
Such provisions or conditions may include without limitation restrictions on transfer, repurchase
rights, or such other provisions as shall be determined by the Committee; provided that
such additional provisions shall not be inconsistent with any other term or condition of the
Plan and such additional

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provisions shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an incentive option within
the meaning of Section 422 of the Code. The shares of stock
issuable upon exercise of an option by any executive officer, director or beneficial owner of
more than ten percent of the Common Stock of the Company may not be sold or transferred
except that such shares may be issued upon exercise of such option) by such officer,
director or beneficial owner for a period of six months following the grant of such option.

     Option agreements need not be identical, but each option agreement by appropriate language
shall include the substance of all of the following provisions:

     6.1 Expiration. Notwithstanding any other provision of the Plan or of any option
agreement, each option shall expire on the date specified in the option agreement, which date shall
not, in the case of an Incentive Stock Option, be later than the tenth anniversary (fifth
anniversary in the case of a greater-than-ten-percent stockholder) of the date on which the option
was granted, or as specified in Section 5 of this Plan.

     6.2 Exercise. Each option may be exercised, so long as it is valid and outstanding,
from time to time in part or as a whole, subject to any limitations with respect to the number of
shares for which the option may be exercised at a particular time and to such other conditions as
the Committee in its discretion may specify upon granting the option.

     6.3 Purchase Price. The purchase price per share under

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each option shall be determined by the Committee at the time the option is granted; provided,
however, that the option price of any Incentive Stock Option shall not, unless otherwise permitted
by the Code or other applicable law or regulation, be less than the fair market value of the Common
Stock on the date the option is granted (110% of the fair market value in the case of a
greater-than-ten-percent stockholder). For the purpose of the Plan the fair market value of the
Common Stock shall be the closing price per share on the date of grant of the option as reported by
a nationally recognized stock exchange, or, if the Common Stock is not listed on such an exchange,
as reported by NASDAQ, or, if the Common Stock is not quoted on NASDAQ, the fair market value as
determined by the Committee.

     6.4 Transferability of Options. Options shall not be transferable by the optionee
otherwise than by will or under the laws of descent and distribution, and shall be exercisable,
during his or her lifetime, only by him or her.

     6.5 Rights of Optionees. No optionee shall be deemed for any purpose to be the owner
of any shares of Common Stock subject to any option unless and until the option shall have been
exercised pursuant to the terms thereof, and the Company shall have issued and delivered the shares
to the optionee.

     6.6 Repurchase Right. The Committee may in its discretion provide upon the grant of
any option hereunder that the Company shall have an option to repurchase upon such terms and
conditions as determined by the Committee all or any number of shares

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purchased upon exercise of such option. The repurchase price per share payable by the
Company shall be such amount or be determined by such formula as is fixed by the Committee at the
time the option for the shares subject to repurchase is granted. In the event the Committee shall
grant options subject to the Company’s repurchase option, the certificates representing the shares
purchased pursuant to such option shall carry a legend satisfactory to counsel for the Company
referring to the Company’s repurchase option.

SECTION 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE

     7.1 Any option granted under the Plan may be exercised by the optionee by delivering to the
Company on any business day a written notice specifying the number of shares of Common Stock the
optionee then desires to purchase and specifying the address to which the certificates for such
shares are to be mailed (the “Notice”), accompanied by payment for such shares.

     7.2 Payment for the shares of Common Stock purchased pursuant to the exercise of an
option shall be made either by
(i) cash, certified check, bank draft or postal or express money order equal to the option price
for the number of shares specified in the Notice, or (ii) with the consent of the Committee, shares
of Common Stock of the Company having a fair market value equal to the option price of such shares,
or (iii) with the consent of the Committee, such other consideration which is acceptable to the
Committee and which has a fair market

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value equal to the option price of such shares, or (iv) with the consent of the Committee, a
combination of (i), (ii) and/or (iii). For the purpose of the preceding sentence, the fair market
value per share of Common Stock so delivered to the Company shall be determined in the manner
specified in Section 6.3. As promptly as practicable after receipt of the Notice and accompanying
payment, the Company shall deliver to the optionee certificates for the number of shares with
respect to which such option has been so exercised, issued in the optionee’s name; provided,
however, that such delivery shall be deemed effected for all purposes when the Company or a stock
transfer agent of the Company shall have deposited such certificates in the United States mail,
addressed to the optionee, at the address specified in the Notice.

SECTION 8. CHANGES IN COMPANY’S CAPITAL STRUCTURE

     8.1 Rights of Company. The existence of outstanding options shall not affect in
any way the right or power of the Company or its stockholders to make or authorize, without
limitation, any or all adjustments, recapitalizations, reorganizations or other changes in the
Company’s capital structure or its business, or any merger or consolidation of the Company, or any
issue of Common Stock, or any issue of bonds, debentures, preferred or prior preference stock or
other capital stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any

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sale or transfer of all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.

     8.2 Recapitalization, Stock Splits and Dividends. If the Company shall effect a
subdivision or consolidation of shares or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares of the Common Stock outstanding,
in any such case without receiving compensation therefor in money, services or property, then (i)
the number, class, and price per share of shares of stock subject to outstanding options hereunder
shall be appropriately adjusted in such a manner as to entitle an optionee to receive upon exercise
of an option, for the same aggregate cash consideration, the same total number and class of shares
as he or she would have received as a result of the event requiring the adjustment had he or she
exercised his or her option in full immediately prior to such event; and (ii) the number and class
of shares with respect to which options may be granted under the Plan shall be adjusted by
substituting for the total number of shares of Common Stock then reserved for issuance under the
Plan that number and class of shares of stock that the owner of an equal number of outstanding
shares of Common Stock would own as the result of the event requiring the adjustment.

     8.3 Merger without Change of Control. After a merger of one or more corporations into
the Company, or after a consolidation of the Company and one or more corporations in

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which (i) the Company shall be the surviving corporation, and (ii) the stockholders of the Company
immediately prior to such merger or consolidation own after such merger or consolidation shares
representing at least fifty percent (50%) of the voting power of the Company, each holder of an
outstanding option shall, at no additional cost, be entitled upon exercise of such option to
receive in lieu of the number of shares as to which such option shall then be so exercisable, the
number and class of shares of stock or other securities to which such holder would have been
entitled pursuant to the terms of the agreement of merger or consolidation if, immediately prior to
such merger or consolidation, such holder had been the holder of record of a number of shares of
Common Stock equal to the number of shares for which such option was exercisable.

     8.4 Sale or Merger with Change of Control. If the Company is merged into or
consolidated with another corporation under circumstances where the Company is not the surviving
corporation, or if there is a merger or consolidation where the Company is the surviving
corporation but the stockholders of the Company immediately prior to such merger or consolidation
do not own after such merger or consolidation shares representing at least fifty percent (50%) of
the voting power of the Company, or if the Company is liquidated, or sells or otherwise disposes of
substantially all of its assets to another corporation while unexercised options remain outstanding
under the Plan, (i) subject to the provisions of clause (iii) below, after the

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effective date of such merger, consolidation, liquidation, sale or disposition, as
the case may be, each holder of an outstanding option shall be entitled, upon exercise of such
option, to receive, in lieu of shares of Common Stock, shares of such stock or other
securities, cash or property as the holders of shares of Common Stock received pursuant to
the terms of the merger, consolidation, liquidation, sale or disposition; (ii) the
Committee may accelerate the time for exercise of all unexercised and unexpired options to and
after a date prior to the effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, specified by the Committee; or (iii) all outstanding
options may be cancelled by the Committee as of the effective date of any such merger,
consolidation, liquidation, sale or disposition provided that (x) notice of such
cancellation shall be given to each holder of an option and (y) each holder of an option shall
have the right to exercise such option to the extent that the same is then exercisable or, if
the Committee shall have accelerated the time for exercise of all unexercised and unexpired
options, in full during the 30-day period preceding the effective date of such merger,
consolidation, liquidation, sale or disposition.

     8.5 Adjustments to Common Stock Subject to Options. Except as hereinbefore
expressly provided, the issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of

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rights or warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares of Common Stock then
subject to outstanding options.

     8.6 Miscellaneous. Adjustments under this Section 8 shall be determined by the
Committee, and such determinations shall be conclusive. No fractional shares of Common Stock shall
be issued under the Plan on account of any adjustment specified above.

SECTION 9. GENERAL RESTRICTIONS

     9.1 Investment Representations. The Company may require any person to whom an option
is granted, as a condition of exercising such option, to give written assurances in substance and
form satisfactory to the Company to the effect that such person is acquiring the Common Stock
subject to the option for his or her own account for investment and not with any present intention
of selling or otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state securities laws.

     9.2 Compliance with Securities Laws. The Company shall not be required to sell or
issue any shares under any option if the issuance of such shares shall constitute a violation by
the optionee or by the Company of any provisions of any law or regulation of any governmental
authority. In addition, in

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connection with the Securities Act of 1933, as now in effect or hereafter amended (the “Act”), upon
exercise of any option, the Company shall not be required to issue such shares unless the Committee
has received evidence satisfactory to it to the effect that the holder of such option will not
transfer such shares except pursuant to a registration statement in effect under such Act or unless
an opinion of counsel satisfactory to the Company has been received by the Company to the effect
that such registration is not required. Any determination in this connection by the Committee
shall be final, binding and conclusive. In the event the shares issuable on exercise of an option
are not registered under the Act, the Company may imprint upon any certificate representing shares
so issued the following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act and with applicable state securities laws:

The shares of stock represented by this certificate have not been registered under the
Securities Act of 1933 or under the securities laws of any State and may not be sold or
transferred except upon such registration or upon receipt by the Corporation of an
opinion of counsel satisfactory to the Corporation, in form and substance satisfactory
to the Corporation, that registration is not required for such sale or transfer.

     The Company may, but shall in no event be obligated to, register any securities covered hereby
pursuant to the Act; and in the event any shares are so registered the Company may remove any
legend on certificates representing such shares. The Company shall not be obligated to take any
other affirmative action in

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order to cause the exercise of an option or the issuance of shares pursuant thereto to comply with
any law or regulation of any governmental authority.

     9.3 Employment Obligation. The granting of any option shall not impose upon the
Company any obligation to employ or continue to employ any optionee; and the right of the Company
to terminate the employment of any officer or other employee shall not be diminished or affected by
reason of the fact that an option has been granted to him or her.

SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN

     The Board of Directors may modify, revise or terminate this Plan at any time and from time to
time, except that the class of persons eligible to receive options and the aggregate number of
shares issuable pursuant to this Plan shall not be changed or increased, other than by operation of
Section 8 hereof, without the consent of the stockholders of the Company.

SECTION 11. NONEXCLUSIVITY OF THE PLAN

     Neither the adoption of the Plan by the Board of Directors nor the submission of the Plan to
the stockholders of the Company for approval shall be construed as creating any limitations on the
power of the Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without

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limitation, the granting of stock options otherwise than under the Plan, and such arrangements may
be either applicable generally or only in specific cases.

SECTION 12. EFFECTIVE DATE AND DURATION OF PLAN

     The Plan shall become effective upon its adoption by the Board of Directors provided that the
stockholders of the Company shall have approved the Plan within twelve (12) months prior to or
following the adoption of the Plan by the Board. The Plan shall terminate (i) when the total
amount of the Stock with respect to which options may be granted shall have been issued upon the
exercise of options or (ii) by action of the Board of Directors pursuant to Section 10 hereof,
whichever shall first occur.

*  *  *  *  *  *  *  *

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