Exhibit 10.2

 

AAR CORP.

 

Non-Qualified Stock Option Agreement

(“Agreement”)

 

Subject to the provisions set forth herein and the terms and conditions of the
AAR CORP. 2013 Stock Plan and the Long-Term Incentive Plan for Fiscal 2017
(together, the “Plan”), the terms of which are hereby incorporated by reference,
and in consideration of the agreements of the Grantee herein provided, AAR
CORP., a Delaware corporation (“Company”), hereby grants to the Grantee an
option, effective July 11, 2016 (“Date of Grant”) entitling the Grantee to
purchase from the Company common stock of the Company, par value $1.00 per share
(“Common Stock”), at an exercise price of $24.00, and in the number of shares
set forth in the Company’s notification of option grant letter to the Grantee
and incorporated herein by reference (“Option”), subject to the terms and
conditions set forth herein:

 

1.             Acceptance by Grantee.  The exercise of the Option is conditioned
upon the acceptance by the Grantee of the terms and conditions of the Option as
set forth in this Agreement.  The Grantee must confirm acceptance of the Option
and this Agreement on Morgan Stanley’s web site (www.stockplanconnect.com).  If
the Grantee does not accept the Option and this Agreement within 30 days from
the date of the notification of the Option, the Option grant referenced herein
shall expire unless the acceptance date is extended in writing signed by the
Company.

 

2.             Vesting Provisions.  Subject to the provisions of paragraph 3
below, the option shall vest 331/3% on each of July 31, 2017, July 31, 2018 and
July 31, 2019, except as follows:

 

(a)           In General.  If the Grantee’s employment with the Company and all
Subsidiaries of the Company is terminated for any reason other than for
Retirement, death, Disability or Cause, the unvested portion of the Grantee’s
Option shall expire on the date of such termination of employment and the vested
portion of the Grantee’s Option shall continue to be exercisable until the
earlier of (i) three months after such termination of employment or (ii) the
date the Option expires in accordance with its terms.

 

(b)           Retirement.  If the Grantee’s employment with the Company and all
Subsidiaries of the Company is terminated by reason of Retirement, the Option
shall continue to vest and become exercisable in accordance with its terms and
may be exercised by the retired Grantee in the same manner and to the same
extent as if the Grantee had continued employment during that period; provided,
however, that (i) if the Grantee dies within three months following Retirement
but before the Option expires, paragraph 2(c)(ii) shall apply and (ii) if the
Grantee dies later than three months following Retirement but before the Option
expires, the then unvested portion of the Option shall expire on the date of
such death and the vested portion of the Option shall continue to be exercisable
by the Grantee’s Successor until the date that the Option expires by its terms. 
For this purpose, “Retirement” means the Grantee’s voluntary termination of
employment, or his termination of employment by the Company or a Subsidiary
without Cause, when he has (i) attained age 65 or (ii) attained age 55 and his
age plus the number of his consecutive years of service with the Company and
Subsidiaries is at least 75.

 

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(c)           Death.  If (i) the Grantee’s employment with the Company and all
Subsidiaries of the Company is terminated by reason of death or (ii) the Grantee
dies within three months after the termination of employment with the Company
and all Subsidiaries for reasons other than Cause, the unvested portion of the
Option shall expire on the date of such death and the vested portion of the
Option shall continue to be exercisable until the earlier of (i) one year after
the Grantee’s death or (ii) the date the Option expires in accordance with its
terms.

 

(d)           Disability.  If the Grantee’s employment with the Company and all
Subsidiaries is terminated by reason of Disability, the Option shall continue to
vest and become exercisable until the earlier of (i) one year after such
termination of employment or (ii) the date the Option expires in accordance with
its terms, and during such period the Option may be exercised by the disabled
Grantee; provided, however, that if the Grantee dies after termination of
employment but prior to the date the Option expires, the unvested portion of the
Option shall expire on the date of such death and the vested portion of the
Option shall continue to be exercisable as described herein.  For this purpose,
“Disability” means the inability of the Grantee to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months.

 

(e)           Cause.  If the Grantee’s employment is terminated by the Company
or any Subsidiary of the Company for Cause, the Option shall expire immediately
upon such termination of employment and no portion of the Option shall be
exercisable thereafter.  For this purpose, “Cause” means (i) the Grantee’s
dishonesty, fraud or breach of trust, gross negligence or substantial misconduct
in the performance of, or substantial nonperformance of, his assigned duties or
willful violation of Company policy, (ii) any act or omission by the Grantee
that is a substantial cause for a regulatory body with jurisdiction over the
Company to request or recommend the suspension or removal of the participant or
to impose sanctions upon the Company or the Grantee, or (iii) a material breach
by the Grantee of any applicable employment agreement between him and the
Company.  The Company shall have the sole discretion to determine whether a
Grantee’s termination of employment is for Cause.

 

(f)            Restrictive Covenant.  If at any time prior to the expiration of
the Option, the Grantee, without the Company’s express written consent, directly
or indirectly, alone or as a member of a partnership, group or joint stock
venture or as an employee, officer, director, or greater than 1% stockholder of
any corporation, or in any capacity engages in any activity which is competitive
with any of the businesses conducted by the Company or its affiliated companies
any time during the Grantee’s term of employment, (i) the Option shall
immediately expire and become unexercisable, (ii) the Grantee shall forfeit and
return all shares of Common Stock acquired and then held by the Grantee pursuant
to the exercise of any portion of this Option, and (iii) the Grantee shall
immediately pay to the Company an amount equal to the appreciation realized on
any shares of Common Stock acquired and sold or otherwise disposed of in
connection with the exercise of this Option, as of the date sold.

 

3.             Change in Control.  In the event a Change in Control occurs, and
within two years following such Change in Control, either the Grantee’s
employment is terminated by the Company or a Subsidiary of the Company without
Cause, or the Grantee terminates his employment with the Company and all
Subsidiaries for Good Reason, then notwithstanding any

 

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conditions or restrictions contained in this Agreement, the outstanding Option
shall become immediately exercisable on the date of such termination of
employment with respect to all shares of Common Stock covered thereby, whether
vested or not and shall remain exercisable until the Option expires.  For this
purpose, (a) “Cause” shall have the meaning set forth in Section 2(e) above and
(b) “Good Reason” means (i) a material reduction in the nature or scope of the
Grantee’s duties, responsibilities, authority, power or functions from those
enjoyed by the Grantee immediately prior to the Change in Control, or a material
reduction in the Grantee’s compensation (including benefits), occurring at any
time during the two-year period immediately after the Change in Control, or
(ii) a relocation of the Grantee’s primary place of employment of at least 100
miles.

 

4.             Change in Outstanding Shares.  Any increase or decrease in the
number of outstanding shares of Common Stock of the Company occurring through
stock splits, stock dividends, stock consolidations, spin-offs, other
distributions of assets to stockholders or assumption or conversion of
outstanding Options due to an acquisition after the Date of Grant of the Option
shall be reflected proportionately in the number of shares of Common Stock
subject to the Option, and a proportionate reduction or increase, as applicable,
shall be made in the Option Price Per Share hereunder. Any fractional shares
resulting from such adjustment shall be eliminated. If changes in capitalization
other than those considered above shall occur, the Board shall make such
adjustment in the number or class of shares purchasable upon exercise of the
Option and in the Option Price Per Share as the Board in its discretion may
consider appropriate, and all such adjustments shall be conclusive upon all
persons.

 

5.             Exercise of Option.  Notice of an election to exercise any
portion of the Option, specifying the portion thereof being exercised and the
exercise date, shall be given by the Grantee, or the Grantee’s personal
representative in the event of the Grantee’s death or Disability necessitating a
Court approved personal representative, by notifying Morgan Stanley pursuant to
the on-line exercise procedures set forth on the AAR 2013 Stock Benefit Plan
online exercise web site (www.stockplanconnect.com).

 

6.             Payment of Exercise Price and Withholding.  Upon any exercise of
the Option, an amount necessary to pay the exercise price and to satisfy
applicable tax withholding requirements, including those arising under federal,
state and local income tax laws, will be due and payable at the time of exercise
prior to the issuance of any shares of Common Stock pursuant to such exercise. 
The Grantee may pay the exercise price and satisfy the minimum withholding
requirements by one or more of the following methods:  (a) in cash, (b) in cash
received from a broker-dealer to whom the Grantee has submitted an exercise
notice and irrevocable instructions to deliver the purchase price and amount of
tax withholding to the Company from the proceeds of the sale of shares of Common
Stock subject to the Option, (c) by delivery to the Company of other Common
Stock owned by the Grantee that is acceptable to the Company, valued at its fair
market value on the date of exercise, (d) by certifying to ownership by
attestation of such previously owned Common Stock, or (e) by having shares
withheld from the Common Stock otherwise distributable to the Grantee upon
exercise of the Option. A Grantee’s election pursuant to the preceding sentence
must be made at the time of exercise of such Option and must be irrevocable. 
Payment shall be made pursuant to the online procedures set forth on the AAR
2013 Stock Benefit Plan online website through Morgan Stanley
(www.stockplanconnect.com).

 

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7.             Option Not Transferable.  The Option may be exercised only by the
Grantee during the Grantee’s lifetime and may not be transferred other than by
will, the applicable laws of descent or distribution, or an assignment subject
to and meeting the requirements of the Plan and made in accordance with Company
procedures in effect from time to time for approval by the Company and
consummation of the assignment (copies of procedures and forms are available
from the Corporate Secretary upon request). The Option shall not otherwise be
transferred, assigned, pledged or hypothecated for any purpose whatsoever and is
not subject, in whole or in part, to execution, attachment, or similar process.
Any attempted assignment, transfer, pledge or hypothecation or other disposition
of the Option, other than in accordance with the terms set forth herein, shall
be void and of no effect.

 

8.             No Rights as a Stockholder.  Neither the Grantee nor any other
person entitled to exercise the Option under the terms hereof shall be, or have
any of the rights or privileges of, a stockholder of the Company in respect of
any of the shares of Common Stock issuable on exercise of the Option, unless and
until such shares shall have been actually issued.

 

9.             Recoupment.  Notwithstanding any other provision of this
Agreement, to the extent required by applicable law, including the Dodd-Frank
Wall Street Reform and Consumer Protection Act, or pursuant to the Company’s
policy as may be in effect, the Company shall have the right to seek recoupment
of all or any portion of an Option (including by forfeiture of the then
outstanding and unexercised portion of the Option (whether vested or unvested)
or by the Grantee’s remittance to the Company of Common Stock acquired on
exercise of the Option or of a cash payment for the value thereof).  The value
with respect to which such recoupment is sought shall be determined by the
Company.  The Company shall be entitled, as permitted by applicable law, to
deduct the amount of such payment from any amounts the Company may owe to the
Grantee.

 

10.          Miscellaneous.

 

(a)           In the event the Option shall be exercised in whole or in part,
the number of Shares of Common Stock subject to the Option shall be reduced
accordingly.

 

(b)           When the Option expires, such expiration shall occur at the
Company’s close of business on the date of expiration.

 

(c)           The Option shall be exercised only in accordance with such Company
administrative procedures as may be in effect from time to time.

 

(d)           The Option and this Agreement shall be construed, administered and
governed in all respects under and by the laws of the State of Illinois.

 

(e)           Capitalized terms used herein and not defined herein will have the
meanings set forth in the Plan or the notification of grant letter.

 

(f)            Nothing in the Option shall confer on the Grantee any right to be
or to continue in the employ of the Company or any of its Subsidiaries or shall
interfere in any way with the right of the Company or any of its Subsidiaries to
terminate the employment of the Grantee at any time for any reason or no reason.

 

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(g)           This Agreement has been examined by the parties hereto, and
accordingly the rule of construction that ambiguities be construed against a
party which causes a document to be drafted shall have no application in the
construction or interpretation hereof. If any part of this Agreement is held
invalid for any reason, the remainder hereof shall nevertheless remain in full
force and effect.

 

(h)           This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof and any prior understanding or
representation of any kind antedating this Agreement concerning such subject
matter shall not be binding upon either party except to the extent incorporated
herein; provided, however, that this Agreement, including paragraph 2, 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 shall supercede
any inconsistent or contrary provision of this Agreement.  No consent, waiver,
modification or amendment hereof, or additional obligation assumed by either
party in connection herewith, shall be binding unless evidenced by a writing
signed by both parties and referring specifically hereto. No consent, waiver,
modification or amendment with respect hereto shall be construed as applicable
to any past or future events other than the one in respect of which it was
specifically made.

 

(i)            This Agreement shall be construed consistent with the provisions
of the Plan and in the event of any conflict between the terms of this Agreement
and the terms of the Plan, the terms of the Plan shall control and any terms of
this Agreement which conflict with Plan terms shall be void.

 

Questions concerning the provisions of this Agreement should be directed to the
Company’s General Counsel: 630/227-2050; fax 630/227-2059.

 

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