Exhibit 10.1

 

SEVENTH AMENDMENT TO THE
AAR CORP. STOCK BENEFIT PLAN

 

WHEREAS, AAR CORP. (the “Company”) maintains the AAR CORP. Stock Benefit Plan,
as amended and restated effective October 1, 2001 and further amended from time
to time (the “Plan”); and

 

WHEREAS, the Company has reserved the right to amend the Plan and now deems it
appropriate to do so.

 

NOW, THEREFORE, the Company hereby amends the Plan as follows, effective as of
July 11, 2011 or as otherwise specified:

 

1.             The second paragraph of Section 1 of the Plan is amended to read
as follows:

 

Key Employees and Non-Employee Directors who have been selected by the Committee
to receive an Award shall participate in the Plan.  The Committee shall
determine, within the limits of the express provisions of the Plan, those Key
Employees and Non-Employee Directors to whom, and the time or times at which,
Awards shall be granted.  The Committee shall also determine the number of
Shares to be subject to each Award, with respect to Key Employees the type of
Awards (Restricted Stock, Restricted Stock Units, Options or Stock Appreciation
Rights (SARs)); with respect to Non-Employee Directors the type of Awards
(Restricted Stock, Restricted Stock Units or Options); the type of Options for
Key Employees (ISO or NSO); the duration of each Option; the exercise price
under each Option, the time or times within which (during the Term of the
Option) all or portions of each Option may be exercised, whether cash, Shares,
Options or other property may be accepted in full or partial payment upon
exercise of an Option; the restrictions to be imposed on Awards and any other
terms and conditions of such Awards.

 

2.             The definition of “Award” in subsection 2.1 of the Plan is
amended to read as follows:

 

“Award” shall mean an Option, a Restricted Stock Award, a Restricted Stock Unit
or an SAR.

 

3.             Subsections 2.21 through 2.27 are renumbered as subsections 2.23
through 2.29, and new subsections 2.21 and 2.22 are added to read as follows:

 

2.21         “Restricted Stock Unit” means the grant, at the time or times fixed
by the Committee in accordance with the Plan, and subject to such other
limitations and restrictions as the Plan and the Committee may impose, of the
right to Shares or cash.

 

2.22         “Restricted Stock Unit Award Agreement” means a written agreement
issued in connection with the grant of a Restricted Stock Unit Award, as
specified in Section 12.

 

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4.             Section 3 of the Plan is amended, subject to stockholder approval
at the Company’s 2011 Annual Meeting of Stockholders, to add a new subsection
3.6 to read as follows:

 

3.6           The Committee may, in its discretion, provide that any Award
granted under the Plan shall be subject to the attainment of performance goals,
including those that qualify the Award as “performance-based compensation”
within the meaning of Section 162(m) of the Code.

 

(a)           Performance goals may be based on one or more business criteria,
including, but not limited to: earnings, earnings per share or earnings per
share growth; earnings before interest and taxes, or earnings before interest,
taxes, depreciation and/or amortization; Share price; total stockholder return,
return on assets; net asset turnover; inventory turnover; return on capital or
return on invested capital; return on equity; cash flow; net or pre-tax income;
profit margin; market share; expense management; revenue; revenue growth;
stockholder equity; leverage ratio; investment rating; and debt coverage. 
Performance goals may be absolute in their terms or measured against or in
relationship to the performance of other companies or indices selected by the
Committee, and may be particular to one or more lines of business or
Subsidiaries or may be based on the performance of the Company and its
Subsidiaries as a whole.  In addition, the Committee may adjust performance
goals for any events that occur during a performance period, including
significant acquisitions or dispositions of businesses or assets by the Company,
litigation, judgments or settlements; the effect of changes in tax laws,
accounting principles, or other laws or provisions affecting reported results;
any reorganization and restructuring programs; extraordinary items as described
in FASB Accounting Standards Codification Section 225-20-20; significant,
non-recurring charges or credits; and foreign exchange rates.

 

(b)           With respect to each performance period established by the
Committee, the Committee shall establish such performance goals relating to one
or more of the business criteria identified above, and shall establish targets
for Grantees for achievement of performance goals.  The performance goals and
performance targets established by the Committee may be identical for all
Grantees for a given performance period or, at the discretion of the Committee,
may differ among Grantees. Following the completion of each performance period,
the Committee shall determine the extent to which performance goals for that
performance period have been achieved and the related performance-based
restrictions shall lapse in accordance with the terms of the applicable Award
Agreement.

 

5.             Subsection 4.1 of the Plan is amended by revising the fourth
sentence and adding a new fifth sentence to read as follows:

 

Any Shares subject to issuance with respect to an Award but which are not issued
because of a lapse, expiration, cancellation or termination of any such Award,
or which have been issued in connection with Restricted Stock Awards that are
subsequently cancelled or forfeited, to the extent consistent with applicable
law,

 

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rules and regulations, shall once again be available for issuance pursuant to
subsequent Awards.  The number of Shares delivered by the Grantee or withheld by
the Company on the Grantee’s behalf as full or partial payment of an Option,
including the exercise price of an Option or of any required withholding taxes
with respect to the Option, shall once again be available for issuance pursuant
to subsequent Awards, but the number of Shares delivered by a Grantee as full or
partial payment of any withholding taxes with respect to a Restricted Stock
Award shall not again be available for issuance pursuant to subsequent Awards
and shall count against the aggregate number of Shares that may be issued under
the Plan.

 

6.             Section 4 of the Plan is amended by adding a new subsection 4.4
to read as follows:

 

4.4           Of the Shares authorized for issuance under the Plan, the maximum
number of Shares that may be used for Awards that are intended to qualify as
“performance based” in accordance with Section 162(m) of the Code that may be
granted to any Key Employee in any calendar year is 300,000, or, in the event
the Award is settled in cash, an amount equal to the Fair Market Value of such
number of Shares on the date on which the Award is settled.

 

7.             Subsection 5.3 of the Plan is amended by deleting “as provided in
Section 12” from subsections (c) and (d).

 

8.             Subsection 5.4 of the Plan is amended to read as follows:

 

Each Option shall become exercisable at the time, and for the number of Shares,
fixed by the Committee in the Option Agreement, provided that the Committee, in
its discretion, shall have the power at any time to accelerate the dates for
exercise of any or all Options, or any part thereof, granted to a Non-Employee
Director or a Key Employee under the Plan.

 

9.             Subsection 7.1 of the Plan is amended by deleting the second
sentence therefrom.

 

10.           Subsection 9.2 of the Plan is amended by deleting the second
sentence therefrom.

 

11.           Subsection 9.5(b) of the Plan is amended by deleting “, which date
shall not be earlier than the first anniversary of such grant” therefrom.

 

12.           Subsection 9.6 of the Plan is amended to read as follows:

 

Dividends paid on Restricted Stock Awards shall be subject to the following: 
(a) if the Restricted Stock Award is subject to performance-based restrictions
as described in subsection 3.6, the Company shall accumulate and hold such
amounts, and (b) if the Restricted Stock Award is subject to time-based
restrictions, the Committee shall have the discretion to cause the Company to
accumulate and hold such amounts.  To the extent dividends are held by the
Company, the accumulated amounts shall be paid to the Grantee only upon the
lapse of the restrictions to which the Restricted Stock Award is subject and any

 

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such amounts attributable to the portion of the Restricted Stock Award for which
the restrictions do not lapse shall be forfeited.

 

13.           Section 10 of the Plan is amended by (i) deleting the last
sentence of subsection 10.4(b) and (ii) deleting “pursuant to Section 12 below”
from subsection 10.5.

 

14.           Sections 11 through 28 of the Plan (and all references to such
Sections) are renumbered to be Sections 12 through 29, and a new Section 11 is
added to the Plan to read as follows:

 

11.           Restricted Stock Units

 

11.1         Subject to the terms of the Plan, the Committee may also grant to
Key Employees and Non-Employee Directors Restricted Stock Units from time to
time.  Each Restricted Stock Unit shall entitle the Key Employee or Non-Employee
Director to receive, on the date or upon the occurrence of an event (including
the attainment of performance goals) as described in the Restricted Stock Unit
Agreement, one Share or cash equal to the Fair Market Value of one Share on the
date of such event, as provided in the Restricted Stock Unit Agreement.

 

11.2         At the Committee’s option, the Restricted Stock Unit Agreement may
provide that the Restricted Stock Unit Award granted to a Key Employee or
Non-Employee Director pursuant to the Plan shall be forfeited to the Company if,
among other reasons, (a) the Key Employee or Non-Employee Director violates a
non-competition, confidentiality or employment agreement, any Company policy, or
any other conditions set forth in the Restricted Stock Unit Agreement or in a
separate document, (b) the Key Employee’s employment with the Company, or the
Non-Employee Director’s service on the Committee, terminates prior to the date
or dates for expiration of the forfeiture provisions set forth in the applicable
Restricted Stock Unit Agreement, (c) the Key Employee’s employment with the
Company terminates for Cause, or (d) there occurs a violation of any provisions
of the applicable Restricted Stock Unit Agreement.  A forfeiture pursuant to
this subsection 11.2 shall occur immediately following the mailing of written
notice to the Key Employee or Non-Employee Director.

 

11.3         The Committee may proscribe such other restrictions and conditions
and other terms applicable to the Restricted Stock Units issued to a Key
Employee or Non-Employee Director under the Plan that are neither inconsistent
with nor prohibited by the Plan or any Restricted Stock Unit Agreement,
including, without limitation, terms providing for a lapse of the restrictions
of this Section 11, provided they are set forth in the applicable Restricted
Stock Unit Agreement, in installments.  Further, the Committee, in its
discretion, shall have the power at any time to accelerate the dates the
restrictions lapse on any or all of the Restricted Stock Units granted to a Key
Employee or Non-Employee Director.

 

11.4         A Grantee shall have no rights of a stockholder, including voting
or dividend or other distribution rights, with respect to any Restricted Stock
Units

 

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prior to the date they are settled in Shares. A Restricted Stock Unit Agreement
may provide that, until the Restricted Stock Units are settled in Shares or
cash, the Grantee shall receive, on each dividend or distribution payment date
applicable to the Shares, an amount equal to the dividends or distributions that
the Grantee would have received had the Restricted Stock Units held by the
Grantee as of the related record date been actual Shares. Notwithstanding the
preceding sentence, in the case of a Restricted Stock Unit Award that provides
for the right to receive amounts related to dividends or distributions: (a) if
such Restricted Stock Unit Award is subject to performance-based restrictions as
described in subsection 3.6, the Company shall accumulate and hold such amounts,
and (b) if such Restricted Stock Unit Award is subject to time-based
restrictions, the Committee shall have the discretion to cause the Company to
accumulate and hold such amounts.  To the extent such amounts are held by the
Company, the accumulated amounts shall be paid to the Grantee only upon the
lapse of the restrictions to which the Restricted Stock Unit Award is subject
and any such amounts attributable to the portion of a Restricted Stock Unit
Award for which the restrictions do not lapse shall be forfeited.

 

11.5         Upon settlement of Restricted Stock Units in Shares, the Company
shall issue, in the name of the Grantee, stock certificates representing a
number of Shares equal to the number of Restricted Stock Units being settled.

 

15.           Section 13 of the Plan (as renumbered pursuant to Item 14) is
amended by renumbering subsection 13.7 as 13.8 and adding a new subsection 13.7
to read as follows:

 

13.7         Notwithstanding the foregoing provisions of this Section 13, the
Option or SAR of a Grantee shall be subject to the provisions of any written
employment or severance agreement that has been or may be executed by the
Grantee and the Company, and the provisions in such employment or severance
agreement concerning the Option or SAR shall supercede any inconsistent or
contrary provision of this Agreement.

 

16.           Section 14 of the Plan (as renumbered pursuant to Item 14) is
amended by (i) revising the first sentence of subsection 14.1(a) to add “or
Restricted Stock Units” after the second parenthetical; (ii) revising
subsections 14.1(b) and 14.2 to add “and Restricted Stock Units” after each
reference to Restricted Stock or Restricted Stock Award and to add “restricted
stock units” after the reference to restricted stock.

 

17.           Section 15 of the Plan (as renumbered pursuant to Item 14) is
amended by adding new subsection 15.3 to read as follows:

 

15.3         Notwithstanding the foregoing provisions of the Plan, the Company,
in lieu of issuing stock certificates pursuant to an Award, may reflect the
issuance of Shares to a Grantee on a non—certificated basis, with the ownership
of such Shares by the Grantee evidenced solely by book entry in the records of
the Company’s transfer agent; provided, however, that upon the written request
of the Grantee, the Company shall issue, in the name of the Grantee, stock
certificates representing such shares.

 

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18.           The first paragraph of Section 20 of the Plan (as renumbered
pursuant to Item 14) is amended by adding a second and third sentence to read as
follows:

 

Notwithstanding the foregoing, there shall be no amendment to the Plan or any
outstanding Option Agreement that results in the repricing of Options without
stockholder approval.  For this purpose repricing includes a reduction in the
exercise price of the Option or the cancellation of an Option in exchange for
cash, Options with an exercise price of the cancelled Options, Stock Awards,
Restricted Stock Units or any other consideration provided by the Company but
does not include any adjustment described in subsection 4.2.

 

19.           Section 21 of the Plan (as renumbered pursuant to Item 14) is
amended by revising the third sentence to read as follows:

 

In lieu of making a cash payment to the Company, the Grantee may elect to
satisfy his or her tax withholding obligation incurred in connection with the
Taxable Date of an Award by (a) directing the Company to withhold a portion of
the Shares otherwise distributable to the Grantee, (b) by transferring to the
Company a certain number of Shares (either subject to such Award or previously
owned), such Shares being valued at Fair Market Value for the Shares on such
Taxable Date, (c) in cash from a broker-dealer to whom the Grantee has submitted
a notice together with instructions to deliver promptly to the Company the
amount of sales proceeds from the sale of Shares subject to the Award to pay the
withholding taxes, or (d) by any combination thereof.

 

20.           Section 27 of the Plan (as renumbered pursuant to Item 14) is
amended by deleting it in its entirety, and the following two Sections are
renumbered as 27 and 28.

 

IN WITNESS WHEREOF, this Seventh Amendment has been executed as of the 11th day
of July, 2011.

 

 

 

AAR CORP.

 

 

 

 

 

 

 

By:

/s/ Timothy O. Skelly

 

 

Vice President, Human Resources

 

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