Document:

exv10w2

 

Exhibit 10.2

AMENDMENT NO. 1

     THIS AMENDMENT No. 1 to that certain Employment Agreement dated as of the
15th day of March 2004, by and between CSX Corporation (the “Company”) and Tony
L. Ingram (the “Executive”) is entered into this 13th day of December 2004.

     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1. Section 14 of the Employment Agreement is hereby deleted and replaced
in its entirety by the following:

          14. WAIVER AND RELEASE WITH RESPECT TO PRIOR AGREEMENTS. In exchange for
the compensation and benefits promised herein, in the event of a Termination of
Employment, pursuant to section 5, the Executive hereby waives and releases the
Company and its affiliates from any and all claims he ever had or may have
arising from or in connection with Sections 6(a), (b), and (c), of the letter
agreement dated March 15, 2004, as the same may be amended to the date hereof
(“Prior Agreement”), between the Company and the Executive and the Executive
acknowledges that in the event of a Termination of Employment, pursuant to
section 5, this Agreement supersedes and renders null and void in all respects
Sections 6(a), (b), and (c) of the Prior Agreement. A copy of the Prior
Agreement is attached hereto as Exhibit “A”.

     IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on the
date first above written.

	 	 	 
	

	 	/s/ Tony L. Ingram
	

	 	

	

	 	Tony L. Ingram
	 
	 	 
	

	 	CSX CORPORATION
	 
	 	 
	

	 	/s/ Ellen M. Fitzsimmons
	

	 	

	

	 	By: Ellen M. Fitzsimmons
	

	 	Its: Senior Vice President

 

 

EXHIBIT A

PRIOR AGREEMENT

 

 

			
	
	 	500 Water St.

C900

Jacksonville, FL 32202

(904) 366-5603

Fax (904) 359-1859

  Robert J. Haulter

Senior Vice President – Human Resources

March 15, 2004

Mr. Tony L. Ingram

Three Commericial Place

Norfolk, VA 23510-9241

Dear Tony:

     To confirm our discussion, I am pleased to offer you the position of
Executive Vice President and Chief Operating Officer of CSX Transportation,
Inc. (“CSXT”) reporting to Michael J. Ward. All of us involved in discussions
with you believe you will be a valuable addition to the CSXT management team.

     The following is a summary of the principal elements of our offer to you:

	 	 	 	 	 
	Annual Base Salary
	 	$	450,000	 
	Target Annual Bonus Opportunity (90%)
	 	$	405,000	 
	Signing Bonus
	 	$	250,000	 
	Signing Restricted Stock Grant
	 	 	25,000 	shares

     The sign-on bonus will be payable as soon as reasonably practicable after
your Employment Date (defined as your first day of employment with CSXT). The
Restricted Stock Grant will vest in four years: 5,000 shares each on the
first, second and third anniversary dates of your Employment Date and 10,000
shares on the fourth anniversary Employment Date.

     Additional details are:

	1.	 	The Compensation Committee of the Board of Directors of CSX
Corporation (the “Compensation Committee”), has approved your
eligibility to participate in the 2004/2005 Long-Term Incentive
Program under which any award payable would be paid in 2006. Your
grant under this program is 90,000 units.
	 
	2.	 	To assist you in your move to Jacksonville, Florida, CSX
Corporation (hereinafter referred to as “CSX”) will provide you with
a full relocation program including movement of household goods and
a home purchase program. A copy of our relocation program is
included as Attachment A. Please contact Steve Frey, Director –
Executive Recruiting, to assist you in the relocation process. His
phone number is 904/359-2479. Attachment B will cover our agreement
on loss on home sale.

 

 

	3.	 	You will be eligible to participate in the CSX Perquisite
Program, included in Attachment C.
	 
	4.	 	You will be offered an employment agreement that would
provide you with certain benefits in the event of a change of
control of CSX (the “Employment Agreement”). Your agreement would
mirror that of your peer CSX executives. A copy of this agreement
is Attachment D.
	 
	5.	 	After the termination of your employment for any reason other
than Cause (as defined below), the Compensation Committee has
approved your eligibility to receive a nonqualified pension benefit
under the Special Retirement Plan of CSX Corporation and Affiliated
Corporations to be calculated as follows:

	(a)	 	Credited Service for purposes of eligibility
and benefit accrual (but not for purposes of determining
Average Compensation) shall include all months of service
with Norfolk Southern Corporation or its affiliates (“NS”)
and CSX. You will obtain written confirmation of your months
of service with NS as soon as reasonably practicable after
your Employment Date.
	 
	(b)	 	The Special Retirement Plan benefit shall be
calculated pursuant to Article IV of the CSX Pension Plan.
You may defer commencement of your benefit payments until you
attain age 60, at which time, in accordance with the terms of
the Special Retirement Plan, there would be no reduction for
early commencement.
	 
	(c)	 	For purposes of determining the accrued
benefit, Compensation will be determined in accordance with
Section 1.15 of the CSX Pension Plan and Average Compensation
will be determined in accordance with Section 1.10 of the CSX
Pension Plan.
	 
	(d)	 	Your monthly benefit under the Special
Retirement Plan shall be offset by (1) the amount of monthly
pension benefit (both qualified and nonqualified) that you
receive from NS; (2) any monthly benefit you receive under
the CSX Pension Plan (unless you elect to receive such
benefit in the form of a lump sum), and (3) a portion of any
monthly benefits you receive under the Federal Railroad
Retirement Act or the Social Security Act when you become
eligible for them in accordance with the provisions of
Article IV of the CSX Pension Plan. You represent that you
will elect to commence your pension benefits (both qualified
and nonqualified) from the NS plans either prior to or at the
same time that you elect to commence such benefits under the
CSX plans.

 

 

	6.	 	You will be offered the following benefits if CSX terminates
your employment (including a “Constructive Termination” as defined
below) other than as a result of Cause or Disability (as defined
below), or if you terminate your employment for “Good Reason” (as
defined below).

	(a)	 	If such termination occurs within two (2) years
of your Employment Date as defined above, CSX will pay you a
lump sum severance benefit, within thirty (30) days after the
date of termination, equal to two times the sum of (1) your
Annual Base Salary at the time of termination and (2) your
target Annual Bonus. Furthermore, following the end of the
year of termination, CSX will determine the amount of the
Annual Bonus to which you would actually have been entitled
had your employment not terminated, and if that amount
exceeds your target Annual Bonus for that year, CSX will pay
you an additional amount equal to two times such excess. In
addition, to the extent any of your restricted stock granted
at the commencement of your employment has not vested, such
shares will vest immediately as of the date of termination.
	 
	(b)	 	If such termination occurs more than two (2)
but less than five (5) years after your Employment Date, CSX
will pay you a lump sum severance benefit, within thirty (30)
days after the date of termination, equal to two times your
Annual Base Salary at the time of termination. In addition,
to the extent any of your restricted stock granted at the
commencement of your employment has not vested, such shares
will vest immediately as of the date of termination.
	 
	(c)	 	If such termination occurs more than five years
after your Employment Date, CSX will pay you a lump sum
severance benefit, within thirty (30) days after the date of
termination, equal to your Annual Base Salary at the time of
termination.
	 
	(d)	 	The preceding sections 6(a), (b) and (c) will
not apply in the event of any termination of employment that
occurs during the Employment Period (as defined in the
attached Employment Agreement), which will be governed
exclusively by that agreement. With respect to the bonus
calculations described in the preceding three paragraphs, no
reduction or enhancement will be made for individual
performance. The payments described in the preceding three
paragraphs will be made in lieu of any severance or other
benefit to which you might otherwise be entitled under any
severance plan, program or policy of CSX and its affiliates,
and you will be required to sign a waiver and release in
order to receive them.

 

 

	 	 	For these purposes,

	(i)	 	“Cause” means (a) your willful
and continued failure substantially to perform your
duties as an employee of CSX (other than as a result
of physical or mental illness or injury) after a
written demand for substantial performance has been
delivered to you by CSX; (b) your willful engagement
in illegal conduct or gross misconduct which is
materially and demonstrably injurious to CSX, provided
that for purposes of this provision, no act or failure
to act shall be considered “willful” unless it is done
or omitted to be done by you in bad faith or without
reasonable belief that your action or omission was in
the best interests of CSX; or (c) the determination by
the Board of Directors of CSX that you have violated
the CSX Code of Ethics, after you have had an
opportunity to present any documents or other evidence
that you deem necessary at a hearing at which you and
your counsel may be present.
	 
	(ii)	 	(ii) “Disability” means you are
unable to engage in any type of gainful employment for
which you are reasonably suited by education, training
and experience, in accordance with the definition
under the CSX Corporation Salary Continuance and
Long-Term Disability Plan;
	 
	(iii)	 	(iii) “Constructive Termination”
means (a) a material diminution of your duties or
responsibilities as Executive Vice President and Chief
Operating Officer, including your ceasing to report to
the Chief Executive Officer of CSX, but excluding for
this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by CSX promptly after receipt of written
notice thereof given by you; (b) a reduction in your
Annual Base Salary, target Annual Bonus or incentive
compensation under the 2004/2005 Long-Term Incentive
Program or subsequent incentive programs, employee
benefits or perquisites, unless your peer executives
suffer a comparable reduction; and
	 
	(iv)	 	“Good Reason” means (a) a
material diminution of your duties or responsibilities
as Executive Vice President and Chief Operating
Officer, including your ceasing to report to the Chief
Executive Officer of CSX, but excluding for this
purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by
CSX promptly after receipt of written notice thereof
given by you; (b) the failure by CSX to comply with
the provisions of this

 

 

	 	 	Agreement with respect to the amount of your Annual
Base Salary, target Annual Bonus, or incentive
compensation under the 2004/2005 Long-Term Incentive
Program or subsequent incentive programs, unless such
failure is remedied by CSX promptly after receipt of
written notice thereof given by you; or (c) a
direction by CSX to act in a manner which would cause
you to be in breach of your confidentiality and
non-solicitation agreement dated [date] with NS,
unless such direction is rescinded promptly after
receipt of written notice thereof given by you.

	7.	 	CSX will assist you in the selection of counsel and pay in
advance all your expenses (including counsel fees, expert witness
fees, costs of investigation, litigation and appeal and the like),
incurred in defending any civil action by NS against you which
claims a breach of your confidentiality and non-solicitation
agreement dated [date] with NS; provided, however, that if you are
adjudicated by a court of competent jurisdiction after exhaustion of
all of your appeal rights, to have deliberately and materially
breached such agreement, you will repay CSX Corporation such
expenses.

Tony, I am pleased to offer you this position and look forward to your
affirmative response. Please call me with any issues or questions.

	 	 	 
	

	 	Sincerely,
	 
	 	 
	

	 	/s/ Robert J. Haulter
	 
	 	 
	

	 	Robert J. Haulter
	 
	 	 
	cc: Michael J. Ward
	 	 
	 
	 	 
	Enclosures
	 	 

	 	 	 	 
	/s/ Tony L. Ingram
	3-12-04
	 
	

	Accepted 
 
 
 
 
 
 
 
 
 

	Dateexv10w3

 

Exhibit 10.3

ARGON ENGINEERING ASSOCIATES, INC.

STOCK PLAN

Amended and Restated as of October 27, 2003

Witnesseth this STOCK PLAN dated as of the 9th day of December of 1998, and
amended on the 17th day of September of 2001, the 20th day of December 2002 and
the 27th day of October, 2003 by ARGON ENGINEERING ASSOCIATES, INC., a Virginia
corporation:

     1.     PURPOSE
OF PLAN. 

		
	 	The purpose of this Stock Plan (Plan) is to further
      the success of the Company and its subsidiaries or affiliates by making
      stock of the Company available to employees of the Company through grants
      of Incentive Stock Options, non-qualified stock options and Restricted Stock.
      The Plan provides an incentive to such persons to continue in the service
      of the Company, to perform at and above targeted levels, and to give them
      a greater interest as stockholders in the success of the Company.

     2.     REFERENCES, CONSTRUCTION AND DEFINITIONS.

		
	 	Unless otherwise indicated, all references made in
      the Plan shall be to articles, sections and subsections of the Plan. The
      Plan shall be construed in accordance with the laws of the Commonwealth
      of Virginia. The headings and subheadings in the Plan have been inserted
      for convenience of reference only and are to be ignored in construction
      of the provisions of the Plan. In the construction of the Plan, the masculine
      shall include the feminine and the singular the plural wherever appropriate.
      If any provision of this Plan shall be held invalid for any reason, such
      illegality or invalidity shall not affect the remaining parts of this Plan
      and this Plan shall be construed and enforced as if such illegal and invalid
      provisions had never been included. The following terms (in alphabetical
      order) shall have the meanings set forth opposite such terms for purposes
      of the Plan:

 
	  (a) 	“Board” means the Board
        of Directors of the Company; 

      

		
	  (b)	“Business Day” means each Monday,
      Tuesday, Wednesday, Thursday and Friday on which the New York Stock Exchange
      is open for business;

		
	  (c)	“Change of Control” means (I)
      the accumulation (including through a merger, consolidation, share exchange,
      division or sale) by any individual, firm, corporation or other entity (other
      than current shareholders of the Company as of the date the Plan is adopted
      or last amended; the Company or any subsidiary; any profit-sharing, employee
      stock ownership, or other employee benefit plan of the Company or any subsidiary
      or any trustee of or fiduciary with respect to any such plan when acting
      in such capacity), separately or in combination with any affiliates or associates,
      of beneficial ownership of more than fifty-one percent (51%) of the outstanding
      shares of all classes of capital stock of the Company authorized to be issued
      from time to time under the Company’s Articles of Incorporation, or
      (II) the sale or disposition of the assets of the Company as a result
      of

		
	 	which current shareholders of the Company as of the date the Plan is
adopted or

 

		
	 	last amended, do not hold, immediately following such sale,
a majority of the voting power of each surviving, resulting or
acquiring corporation which, immediately following the transaction,
holds more than ten percent (10%) of the consolidated assets of the
Company immediately prior to the transaction; provided, however, that
it shall not include any such accumulation, sale or disposition which a
majority of the Board, acting at a meeting held not more than 60 days
after the date of such accumulation and at which a quorum of directors
sufficient to conduct business under Virginia law is present, declares,
for reasons in its sole discretion, not to be a “Change of Control” for
purposes of this Plan; and provided, further, that the date of a Change
of Control shall be deemed to be the actual date of accumulation, sale
or disposition or, if such date is not clearly determinable, the date
on which a majority of the Board members, meeting as described above,
shall determine was the date as of which the Company had reason to know
of the accumulation, sale or disposition.

		
	 (d)	“Class A Common Stock” means the $0.01
      par value, voting common stock of the Company;

		
	 (e)	“Class B Common Stock” means the $0.01
      par value, nonvoting common stock of the Company;

		
	 (f)	“Code” means the Internal Revenue Code
      of 1986, as amended from time to time;

		
	 (g)	“Committee” means the Compensation Committee
      of the Board as constituted from time to time; provided, however, that if
      the Committee shall not be in existence, the term “Committee”
      shall mean the Board;

		
	 (h)	“Company” means Argon Engineering
      Associates, Inc., a Virginia corporation;

		
	 (i)	“Common Stock” means the Class A and
      Class B Common Stock of the Company;

		
	 (j)	“Date of Grant” means the date on which an option
      or award of Restricted Stock is granted under the Plan;

		
	 (k)	“Effective Date” means the latest of (I)
      9 December 1998, (II) the date on which the Plan is approved and
      adopted by the Board and approved by the shareholders of the Company within
      twelve (12) months of adoption by the Board, and (III) the date
      on which the Committee shall have been advised by legal counsel that all
      other applicable legal requirements have been met;

		
	 (l)	“Fair Market Value” means, for as long
      as neither class of Common Stock is readily tradable on an established securities
      market, the values determined for Class A and Class B Common Stock
      at least annually by the Committee in its sole discretion based on values
      either (I) determined by an “independent appraiser” as
      defined in regulations under Code Section 170(a)(1), or (II)
      as if determined for sales by holders of less than 10% of issued shares
      pursuant to Paragraph 4 of the Shareholders Buy-Sell Agreement attached
      hereto; provided, however, (A) if at any time either class of Common Stock
      does become traded on a reasonably active basis, but not listed on an established
      stock exchange, its Fair Market Value shall be based on the mean between
      the highest and lowest sales prices as reflected on the NASDAQ Interdealer
      Quotation System of the National Association of Securities Dealers, Inc.
      on the date in question or, (B) if it is listed on an established stock exchange, based on the mean between the
highest and 

2

 

		
	 	lowest sales prices on such exchange on the date in
question, and (C) in the case of Incentive Stock Options, Fair Market
Value may not be less than fair market value within the meaning of
Section 422 of the Code; and provided, further, that if, for any
reason, Fair Market Value otherwise cannot be ascertained or is
unavailable for a particular date, such value shall be determined as of
the nearest preceding date on which such value can be ascertained
pursuant to the applicable method described above;

		
	 (m)	“Incentive Stock Option” means any option
      granted with the intent of being an option as defined in Code Section 422
      and containing the terms necessary to meet the requirements of that section
      of the Code and related Code sections and regulations;

		
	 (n)	“Reorganization” means any statutory merger,
      statutory consolidation, sale of all or substantially all of the assets
      of the Company, or sale, pursuant to an agreement with the Company, of securities
      of the Company pursuant to which the Company is or becomes a wholly-owned
      subsidiary of another company after the effective date of the transaction;

		
	 (o)	“Reorganization Agreement” means a written
      plan or agreement regarding the terms and implementation of a Reorganization;

		
	 (p)	“Restricted Stock” means a share of Common
      Stock with time or performance conditions which must be satisfied before
      the holder of the share can exercise full ownership of it;

		
	 (q)	“10-Percent Shareholder” means any
      individual who owns more than ten percent (10%) of the total combined voting
      power of all classes of Common Stock as determined after applying the attribution
      rules under Code Section 424(d).

 3.     STOCK
  SUBJECT TO PLAN. 

		
	 	Subject to the provisions of Section 11, there
      shall be reserved for issuance or transfer upon the exercise of options
      or the satisfaction of conditions on Restricted Stock awards to be granted
      from time to time under the Plan an aggregate of 120,000 shares of Class A
      Common Stock and an aggregate of 3,000,000 shares of Class B
      Common Stock, which shares may be in whole or in part, as the Board
      shall from time to time determine, authorized and unissued shares of Common
      Stock or issued shares of Common Stock which shall have been reacquired
      by the Company. If any option or Restricted Stock award granted under the
      Plan shall expire, terminate or be canceled for any reason without having
      been exercised in full, the shares subject thereto shall again be available
      for the purposes of the Plan.

 4.     ADMINISTRATION.
  

		
	 (a)	The Plan shall be administered by the Committee. Actions
      by the Committee for purposes of the Plan shall be by not less than a majority
      of its members, or in the case of any action directly affecting one or more
      of the Committee members, by not less than a majority of those members not
      affected directly by the action. Any decision or determination reduced to
      writing and signed by all the members shall be fully as effective as if
      it had been made by a majority vote at a meeting duly called and held.

3

 

	 	The Committee, if other than the full
      Board, shall report all action taken by it to the Board.

		
	 (b)	In the granting of options or Restricted Stock Awards
      under the Plan and during the term of such awards, the Committee shall have
      authority in its discretion, but subject to the express provisions of the
      Plan

		
	 1.
	 to determine the employees to whom options or Restricted
      Stock awards shall be granted;

		
	  2.
	 to determine the time or times when options or Restricted
      Stock awards shall be granted;

		
	  3.
	 to determine whether an option shall be granted as an
      Incentive Stock Option or a non-qualified stock option;

		
	  4. 
	to determine the purchase price of the Common Stock
      covered by each option;

		
	  5. 
	to determine the number of shares to be subject to each
      option or Restricted Stock award, except that no option or award for fractional
      shares may be issued;

		
	    6. 
	to determine when an option can be exercised and
      whether in whole or in installments as the result of a vesting schedule
      triggered by the passage of time or the attainment of performance goals
      set by the Committee and approved by the Board;

		
	     7.
	 to determine the conditions that must be satisfied for
      restrictions to be removed from stock subject to Restricted Stock awards
      granted and the timing and manner by which those conditions must be satisfied;

		
	    8. 
	to prescribe, amend, and rescind rules and regulations
      relating to the Plan;

		
	     9.
	to determine any other terms and provisions and
      any related amendments of the individual option or Restricted Stock award
      agreements, which need not be identical for each employee, including such
      terms and provisions (and amendments) as shall be required in the judgment
      of the Committee to conform to any change in any law or regulation applicable
      thereto, and with particular regard to any changes in or effect of the Code
      and the regulations thereunder; and

		
	   10.
	 to make all other determinations deemed necessary or advisable
      for the administration of the Plan.

 5.     ELIGIBILITY.
  

 
	   .
	Options and Restricted Stock may be granted
      under this Plan only to employees of the Company. A director of the Company
      or of a subsidiary or affiliate, who is not also an employee of the Company,
      will not be eligible to receive options or restricted stock under the Plan.
      In determining the persons to whom options or Restricted Stock awards shall
      be granted and the number of  shares to be covered by each option or
      award, the Committee may take into account the nature of the services rendered
      by the respective persons, their present and potential contributions to
      the Company’s success and such other factors as the Committee in its
      discretion shall deem relevant. Options and awards may be granted to persons
      who hold or have held options or awards under the Plan or any other previous
      or contemporaneous plans. 

 

 

4

 

6.     OPTION
  GRANTS AND LIMITS. 

		
	 (a) 	Nothing contained in the Plan or in any resolution
      adopted or to be adopted by the Board shall constitute the granting of any
      option hereunder. The granting of an option pursuant to the Plan shall take
      place only when a written option agreement shall have been duly executed
      and delivered by or on behalf of the Company and the individual (or his
      duly authorized attorney-in-fact) in whom such option is to be granted.

		
	 (b)	Anything herein to the contrary notwithstanding,
      but subject to Section 8(f), the aggregate Fair Market Value, determined
      on the Date of Grant, of the shares of common stock with respect to which
      Incentive Stock Options are exercisable for the first time by any employee
      during any calendar year (under the Plan or any other plan of the Company)
      shall not exceed $100,000.00.

		
	  (c)	During an employee’s lifetime, any option granted
      to him under the Plan shall be exercisable only by the employee or any guardian
      or legal representative of the employee, and the option shall not be transferable
      except, in case of the death of the employee, by will or the laws of descent
      and distribution, nor shall the option be subject to attachment, execution
      or other similar process. In the event of (I) any attempt by the
      employee to alienate, assign, pledge, hypothecate or otherwise dispose of
      the option, except as provided in the Plan, or (II) the levy of any
      attachment, execution or similar process upon the rights or interest conferred
      by the option, the Company may terminate the option by notice to the employee
      and upon such notice the option shall become null and void.

7.     OPTION
  PRICES. 

		
	 	The option price for Common Stock to be issued pursuant
      to any option granted hereunder may be at any price set by the Committee
      in its discretion; provided, however, the option price for any Incentive
      Stock Option issued under the Plan shall be not less than the Fair Market
      Value as of the date of grant of the option, which date shall be a Business
      Day; and further provided, the option price for any Incentive Stock Option
      issued under the Plan to any 10-Percent Shareholder shall be one hundred-ten
      percent (110%) of such Fair Market Value.

8.     EXERCISE
  OF OPTIONS. 

		
	  (a)
	An employee may exercise any option granted under
      the Plan with respect to all or any part of the number of shares then exercisable
      under the terms of his written option grant agreement by giving the Committee
      written notice of intent to exercise. The notice of exercise shall specify
      the number of shares to be purchased under the option and the date of exercise,
      which shall be at least five (5) days after the giving of such notice
      unless an earlier time shall have been mutually agreed upon by the employee
      and the Company.

		
	  (b) 
	Full payment of the option price
      for the shares purchased shall be made by the employee on or before the
      exercise date specified in the notice of exercise.

5

 

		
	 	 Payment of the purchase
      price of any shares with respect to which the option is being exercised shall be (I) cash, (II) certified check to the
order of the Company, or (III) shares of Common Stock of the
Company valued at the Fair Market Value on such Business Day as
the option or portion thereof is exercised.

		
	     (c) 
	The Company shall not be required to deliver certificates
      for such shares until full payment of the option price has been made. On
      or as soon as is practicable after the exercise date specified in an employee’s
      notice and upon full payment of the option price, the Company shall cause
      to be delivered to the employee a certificate or certificates for the shares
      then being purchased (out of previously unissued Common Stock or reacquired
      Common Stock, as the Company may elect). The exercise of the option and
      the resulting obligation of the Company to deliver Common Stock shall, however,
      be subject to the condition that the listing, registration, or qualification
      of the option or the shares upon any securities exchange or under any State
      or federal law, or the consent or approval of any governmental regulatory
      body shall have been effected or obtained free of any conditions not acceptable
      to the Committee, if at any time the Committee shall determine in its sole
      discretion that such listing, registration, qualification, consent or approval
      is necessary or desirable.

		
	     (d) 
	If an employee fails to pay for any of the shares
      specified in such notice or fails to accept delivery of the shares, his
      right to purchase such shares may be terminated by the Company. The date
      specified in the employee’s notice as the date of exercise shall be
      deemed the date of exercise of the option, provided that payment in full
      for the shares to be purchased upon such exercise shall have been received
      by such date.

		
	     (e)
	In no event may an option be exercised within
      one year of its Date of Grant or after the date which is ten (10) years
      from the Date of Grant of such option (or five (5) years from the Date
      of Grant for any Incentive Stock Option issued under the Plan to any 10-Percent
      Shareholder) or such shorter period as is prescribed in Section 9.

		
	     (f)
	In the event of the Change of Control, dissolution
      or liquidation of the Company, any option granted under the Plan shall become
      fully exercisable as to all or any part of the shares covered thereby including
      shares as to which such option would not otherwise be exercisable by reason
      of an insufficient lapse of time. In such event, an employee may exercise
      his options for a period of not less than thirty (30) days prior to
      the closing of such Change of Control, dissolution, or liquidation, beginning
      as of a date to be fixed by the Committee, provided that not less than thirty
      (30) days’ written notice of the date so fixed shall be given
      to each employee. Only in the event of an exercise upon Change of Control,
      dissolution, or liquidation under this paragraph may an employee simultaneously
      exercise an option and sell the underlying stock so as to effect a “cashless”
      exercise of the option by using the cash proceeds from the sale of the underlying
      stock to exercise the option.

		
	     (g) 
	The holder of an option shall not have any of the
      rights of a stockholder with respect to the shares subject to the option
      until such shares shall be issued or transferred to him upon the exercise
      of his option.

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	     (h)
	 Notwithstanding the foregoing, any shares that may
      be purchased as of the Effective Date, pursuant to the terms of any option
      granted prior to the Effective Date, shall continue thereafter to be purchasable
      pursuant to the exercise of such option.

9.     OPTION
  PERIOD 

               The ability to exercise options under the Plan shall be conditioned as
follows:

		
	     (a) 
	Exercise During Employment. Unless otherwise
      provided in the terms of an option, an option may be exercised by an employee
      while he is an employee and has maintained since the date of the grant of
      the option continuous status as an employee. An option granted pursuant
      to the Plan may not be exercised following the termination of the employee’s
      employment with the Company or its subsidiaries for any reason other than
      (I) permanent disability described in subsection (c) below,
      or (II) death as described in subsection (d) below.

		
	      (b)
        
	Exercise Upon Retirement. Unless otherwise provided
      in the terms of an option, if an employee’s continuous employment shall
      terminate by reason of his retirement from the Company, a retired employee
      shall become one hundred percent (100%) vested in any option he has been
      granted under the Plan as of that date and he may exercise the otherwise
      exercisable option immediately prior to and upon his retirement date. For
      purposes of this Plan only, retirement shall mean the employee’s total
      cessation of activity in the profession practiced by the Company on or after
      he attains age sixty-two (62).

		
	      (c)

	Exercise Upon Permanent Disability. Unless otherwise
      provided in the terms of an option, if an employee’s continuous employment
      shall terminate by reason of a permanent disability (as determined by the
      employee’s establishing to the Committee his disability as defined
      in Code Section 22(e)(3), as amended from time to time), then the employee
      shall become one hundred percent (100%) vested in any option he has been
      granted under the Plan as of that date and he may exercise the otherwise
      exercisable option anytime within six (6) months of his termination
      of employment due to permanent disability.

		
	     (d)
	Exercise Upon Death. Unless otherwise
      provided in the terms of an option, if an employee’s continuous employment
      shall terminate by reason of his death, then the deceased employee shall
      become one hundred percent (100%) vested in any option he has been granted
      under the Plan as of that date and the person or persons (including his
      estate) to whom his rights under such option shall have passed by will or
      by laws of descent and distribution may exercise the otherwise exercisable
      option anytime within six (6) months of his death.

10.     RESTRICTED
  STOCK AWARD GRANTS AND LIMITS. 

		
	      (a)
	Nothing contained in the Plan or in any resolution
      adopted or to be adopted by the Board shall constitute the granting of any
      Restricted Stock award hereunder. The granting of an award pursuant to the
      Plan shall take place only when a written Restricted Stock
award agreement shall have been duly executed and delivered by or on behalf
of the 

7

 

		
	 	Company and the individual (or his duly authorized
attorney-in-fact) to whom such award is to be granted.

		
	(b) 	During an employee’s lifetime and at any time prior
      to the satisfaction of the conditions under the Restricted Stock award,
      a Restricted Stock award granted under the Plan shall not be transferable
      except, in case of the death of the employee, by will or the laws of descent
      and distribution, nor shall the award be subject to attachment, execution
      or other similar process. In the event of (I) any attempt by the
      employee to alienate, assign, pledge, hypothecate or otherwise dispose of
      the award, except as provided in the Plan, or (II) the levy of any
      attachment, execution or similar process upon the rights or interest conferred
      by the award, the Company may terminate the award by notice to the employee
      and upon such notice the award shall become null and void.

		
	(c) 
	Unless otherwise provided in the terms of the award,
      if an employee’s continuous employment shall terminate by reason of
      his death or disability (as determined by the employee’s establishing
      to the Committee his disability as defined in Code Section 22(e)(3),
      as amended from time to time), then all conditions under the Restricted
      Stock award shall be considered satisfied and the employee (or his surviving
      beneficiary) shall become one hundred percent (100%) vested in full ownership
      rights in the Common Stock subject to the award as of that date.

		
	(d) 	If an employee’s continuous employment shall
      terminate for any reason other than his death or disability, then all Common
      Stock under the Restricted Stock award shall be forfeited immediately by
      the employee as of that date.

		
	(e)	In the event of a Change of Control, dissolution
      or liquidation of the Company, then all conditions under any outstanding
      Restricted Stock awards shall be deemed satisfied and the employees holding
      such awards shall become one hundred percent (100%) vested in full ownership
      rights in the Common Stock subject to the awards as of the date of such
      Change of Control, dissolution or liquidation.

		
	(f)	Notwithstanding anything to the contrary in this
      Section 10, if an employee’s employment terminates with cause,
      as determined by the Committee in its discretion, then all Common Stock
      under any Restricted Stock award held by the employee shall be forfeited
      by him immediately as of such termination.

		
	(g)	The Company shall not be required to deliver certificates
      for such shares until all conditions under the Restricted Stock award have
      been satisfied or deemed satisfied pursuant to paragraphs (c) or (e) above.
      On or as soon as is practicable after the conditions under the award have
      been satisfied, the Company shall cause to be delivered to the employee
      a certificate or certificates for the shares then being released (out of
      previously unissued Common Stock or reacquired Common Stock, as the Company
      may elect). The obligation of the Company to deliver Common Stock shall,
      however, be subject to the condition that the listing, registration, or
      qualification of the shares upon any securities exchange or under any State
      or federal law, or the consent or approval of any governmental regulatory
      body shall have been effected or obtained free of any conditions not acceptable
      to the Committee, if at any time the Committee shall determine
in its sole discretion that such listing, registration, qualification,
consent or approval is necessary or desirable.

8

 

 11.     ADJUSTMENTS.
  

		
	(a) 
	 In the event that the outstanding shares of Common
      Stock are hereafter increased or decreased or changed into or exchanged
      for a different number or kind of shares or other securities of the Company
      or of another corporation, by reason of a recapitalization, reclassification,
      stock split-up, combination of shares or dividend or other distribution
      payable in capital stock, appropriate adjustment shall be made by the Committee
      in the number and kind of shares for which options and Restricted Stock
      awards may be granted under the Plan. In addition, the Committee shall make
      appropriate adjustment in the number and kind of shares as to which outstanding
      grants, or portions thereof then unexercised or unsatisfied, shall be applicable,
      to the end that the proportionate interest of the holder of the grant shall,
      to the extent practicable without the existence of fractional shares, be
      maintained as before the occurrence of such event. Such adjustment in outstanding
      options shall be made without change in the total price applicable to the
      unexercised portion of the option, but with a corresponding adjustment in
      the option price per share. To the extent that fractional shares would have
      otherwise resulted from such adjustments, such fractional shares will be
      deemed forfeited from any option or Restricted Stock award, and appropriate
      adjustments shall be made to the option price of any effected option.

		
	(b) 
	In the event of a Reorganization in which the Company is
      not the surviving or acquiring company, or in which the Company is or becomes
      a wholly-owned subsidiary of another company after the effective date of
      the Reorganization, then

			
	 
	1. 
	if there is no Reorganization Agreement or if the
      Reorganization Agreement does not specifically provide for the change, conversion
      or exchange of the shares under outstanding options or Restricted Stock
      awards for securities of another corporation, then the Committee shall take
      such action, and the options shall terminate, as provided in subparagraph
      (f) of Section 8 and the conditions under all Restricted Stock
      awards shall be deemed to be fully satisfied as provided in Section 10(e),
      but

			
	 
	2. 
	if there is a Reorganization Agreement and if the
      Reorganization Agreement specifically provides for the change, conversion
      or exchange of the shares under outstanding options or Restricted Stock
      awards for securities of another corporation, then the Committee shall adjust
      the shares under the Plan, if the Reorganization Agreement makes specified
      provision for such adjustment, in a manner not inconsistent with the provisions
      of the Reorganization Agreement for the adjustment, change, conversion or
      exchange of such stock and such options.

		
	      (c) 	Adjustments and determinations under this Section 11
      shall be made by the Committee, whose decisions as to what adjustments or
      determinations shall be made, and the extent thereof, shall be final, binding
      and conclusive.

      

9

 

12.      AMENDMENT AND TERMINATION.
  

		
	 	Unless the Plan shall have been terminated earlier as hereinafter
      provided, it shall terminate upon, and no option or Restricted Stock award
      shall be granted under this Plan after, the tenth anniversary of the Effective
      Date. The Board may terminate the Plan or make such modifications or amendments
      thereof as it shall deem advisable, or to conform to any change in any law
      or regulation applicable thereto, including (a) increasing the maximum
      number of shares for which options and Restricted Stock awards may be granted
      under the Plan, subject to shareholder approval, (b) changing the class
      of employees eligible to receive such grants, subject to shareholder approval,
      (c) increasing the periods during which grants may be made or fulfilled,
      or (d) providing for the administration of the Plan other than by the
      Committee. No termination, modification or amendment of the Plan may, without
      the consent of any employee with rights under an outstanding grant under
      this Plan, adversely affect the rights of such employee.

13.     RESTRICTIONS
  ON ISSUING SHARES. 

		
	      (a)
	Each issuance of Common Stock shares as the result
      of the exercise of any option or satisfaction of the conditions under any
      Restricted Stock award shall be subject to the condition that if at any
      time the Company shall determine in its discretion that the satisfaction
      of withholding tax or other withholding liabilities, or that the listing,
      registration or qualification of any shares otherwise deliverable upon such
      exercise upon any securities exchange or under any state or federal law,
      or that the consent or approval of any regulatory body, is necessary or
      desirable as a condition of, or in connection with, such delivery or purchase
      of Common Stock shares, then in any such event, such option exercise or
      Restricted Stock grant satisfaction shall not be effective unless such withholding,
      listing, registration, qualification, consent or approval shall have been
      effected or obtained under conditions acceptable to the Company.

		
	     (b)
	Any employee of the Company who receives an option
      or Restricted Stock grant under this Plan, by the receipt of that grant
      shall agree to be subject to and bound by the provisions of the Shareholder’s
      Buy-Sell Agreement (a form of which is attached hereto), which is incorporated
      herein by this reference. Accordingly, the optionee furthermore agrees that
      he shall at no time during the existence of such Shareholder’s Buy-Sell
      Agreement, directly or indirectly, sell, assign, transfer, encumber, gift
      or otherwise deal with or dispose of all or any part of the Common Stock
      shares issued to him pursuant to any option or Restricted Stock grant under
      the Plan.

 14.     USE
  OF PROCEEDS. 

		
	 	The proceeds received from the sale of Common Stock
      pursuant to the exercise of options granted under the Plan shall be added
      to the Company’s general funds and are used for general corporate purposes.

     

10

 

15.      INDEMNIFICATION OF COMMITTEE.
  

		
	 	In addition to such other rights of indemnification
      as they may have as members of the Board or as members of the Committee,
      the members of the Committee shall be indemnified by the Company against
      all costs and expenses reasonably incurred by them in connection with any
      action, suit or proceeding to which they or any of them may be party be
      reason of any action taken or failure to act under or in connection with
      the Plan, or any option or Restricted Stock award granted hereunder, and
      against all amounts paid by them in settlement thereof (provided such settlement
      is approved by legal counsel selected by the Company) or paid by them in
      satisfaction or a judgment in any such action, suit or proceeding, except
      a judgment based upon a finding of bad faith. Upon the institution of any
      such action, suit or proceeding, a Committee member shall notify the Company
      in writing, giving an opportunity, at its own expense, to handle and defend
      the same before such Committee member undertakes to handle it on his own
      behalf.

 16.     EFFECTIVENESS
  OF THE PLAN. 

		
	 	The Plan shall become effective as of the Effective Date.
      Options and Restricted Stock awards may be granted to employees prior to
      such date, but the right of any employee to the issuance of Common Stock
      shares as the result of the exercise of any option or satisfaction of the
      conditions under any Restricted Stock award shall be conditioned upon such
      adoption and approval by the Board and shareholders of the Company as required
      in Section 2(k)(II).

 17.     MISCELLANEOUS.
  

		
	      (a)
        
	Employment Not Affected. Neither the granting of
      an option or Restricted Stock award, nor the exercise of the option or fulfillment
      of the conditions of an award shall be construed as granting to any employee
      any right with respect to continuance of his employment with the Company.
      Except as may otherwise be limited by a written agreement between the Company
      and an employee, the right of the Company to terminate at will the employee’s
      employment with it at any time (whether by dismissal, discharge, retirement
      or otherwise) is specifically reserved by the Company as the employer or
      on behalf of the employer (whichever the case may be), and acknowledged
      by the employee.

		
	     (b)
	Notice. Any notice to the Company provided
      for in this instrument shall be addressed to it in care of its Secretary
      at its principal office in the Commonwealth of Virginia, and any notice
      to an employee shall be addressed to the employee at the current address
      shown on the payroll records of the Company. Any notice shall be deemed
      to be duly given if and when properly addressed and posted by registered
      or certified mail, postage prepaid.

		
	     (c) 
	Waiver or Breach. No waiver of any breach
      of any covenant or provision of this Plan shall be deemed a waiver of any
      preceding or succeeding breach of the provisions of this Plan, or of any
      other covenant or provision herein contained. No extension of time for performance
      of any obligation or act shall be deemed an extension of the time for performance
      of any other obligation or act.

11

 

		
	     (d) 
	Binding Effect. This agreement shall be binding
      upon and shall inure to the benefit of the successors and permitted assigns
      of the parties hereto.

  	 	 	 
	COMPANY:	 	 
	 
	Argon Engineering Associates, Inc.	 	 
	 
	 	 	 (CORPORATE SEAL)
	 
	By:	 	 Attest:
	 
	 

         
  Vice President	 	  

12

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