EXHIBIT 10.18

ASTRONICS CORPORATION

SUPPLEMENTAL RETIREMENT PLAN, II

ARTICLE I

PURPOSE, DEFINITIONS, AND EFFECTIVE DATE

Section 1.1. Purpose of the Plan.

This Astronics Corporation Supplemental Retirement Plan, II (the “Plan”) is an
unfunded, nonqualified deferred compensation plan maintained for the purpose of
providing additional retirement benefits for a select group of management or
highly compensated employees of Astronics Corporation, and participation in the
Plan is limited consistent with that purpose.

Section 1.2. Effective Date.

The Effective Date of the Plan is March 6, 2012.

Section 1.3. Definitions.

For purposes of this Plan, the following terms have the meanings stated below
unless the context clearly indicates otherwise:

 

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

 

  (b). “Cause” means any act that is materially inimical to the best interests
of the Company and that constitutes, on the part of the Participant, intentional
or grievous wrong, including but not limited to, common law fraud, a felony, or
other gross malfeasance of duty.

 

  (c). “Change of Control” means the transfer, in one or more transactions
extending over a period of not more than 24 months, of Common Stock of the
Company possessing 25% or more of the total voting power of all shares of Common
Stock. A transfer shall be deemed to occur if shares of Common Stock are either
transferred or made the subject of options, warrants, or similar rights granting
a third party the opportunity to acquire ownership or voting control of such
Common Stock.

 

  (d). “Common Stock” means the Class A and Class B $.01 par value shares of the
capital stock of the Company, as well as all other securities with voting rights
or convertible into securities with voting rights.

 

  (e). “Code” means the Internal Revenue Code of 1986, as amended.

 

  (f). “Company” means Astronics Corporation and its wholly or partially owned
subsidiaries, as well as any of its or their successors or assigns, whether by
transfer, merger, consolidation, acquisition of all or substantially all of the
business assets, change in identity, or otherwise by operation of law.

 

  (g). “Compensation Committee” means the Executive Compensation Committee of
the Board, as it is constituted from time to time.

 

  (h). “Disability” means a “disability” as defined in the Qualified Retirement
Plan.

 

  (i). “Eligible Officer” means an officer of the Company, or an officer or
executive of an affiliate or subsidiary of the Company.

 

  (j). “409A Change in Control Event” means the occurrence of one of the
following events constituting a “change in control event” within the meaning of
Code Section 409A.

 

  1) Any one person, or more than one person acting as a group (“Group”),
acquires ownership of stock of the Company that, together with stock previously
held by the acquirer, constitutes more than 80% of the total fair market value
or total voting power of the Company’s stock. If any one person or Group is
considered to own more than 80% of the total fair market value or total voting
power of the Company’s stock, the acquisition of additional stock by the same
person or Group does not cause a change in ownership.

 

  2) A majority of Board members is replaced during any 12-month (or shorter)
period by directors whose appointment or election is not endorsed by a majority
of the members of the Board before the date of the appointment or election.

 

  (k). “Involuntary Termination” means a termination of a Participant’s
employment relationship with the Company, other than for death, Disability,
retirement, or Cause, (1) by or at the instigation of the Company, or (2) by or
at the instigation of the Participant where the Participant’s Pay has been
diminished or reduced to a greater extent than any diminution or reduction of
the Company’s officers generally.

 

  (l). “Participant” means an Eligible Officer who has been designated a
Participant in the Plan pursuant to Article III. The term “Participant” includes
a person who has ceased to actively participate in the Plan but who has not
received payment of all of his or her Plan Benefits.

--------------------------------------------------------------------------------

  (m). “Pay” means the base salary paid to an Eligible Officer for a calendar
year plus any bonus or incentive payments payable in cash and earned for or
attributable to that year, whether or not the base salary, bonus or incentive
payments are actually paid during that year.

 

  (n). “Qualified Retirement Plan” means the ATRO Companies Profit Sharing
Plan/401(k) Plan, or any successor tax qualified retirement plan maintained by
the Company, as in effect as of the date that a Benefit is calculated under the
Plan.

 

  (o). “Separation from Service” means a termination of a Participant’s
employment with the Company on account of retirement, death, Disability, or
other voluntary or involuntary separation from service, determined in accordance
with the provisions of Code Section 409A.

 

  (p). “Supplemental Benefit” or “Benefit” means the annual income or lump sum
payment, if any, payable to a Participant or Surviving Spouse pursuant to
Article IV of the Plan.

 

  (q). “Surviving Spouse” or “Spouse” means a surviving spouse who is a
beneficiary entitled to receive some or all of the benefits, directly or
indirectly, payable under the Qualified Retirement Plan upon the death of a
Participant.

 

  (r). “Termination on a Change of Control” means a termination of a
Participant’s employment relationship with the Company, other than for death,
Disability, retirement, or Cause, (1) by or at the instigation of the Company
within two years after a Change of Control, or (2) by or at the instigation of
the Participant within two years of the Change of Control in those circumstances
where the duties, responsibilities, status, base pay or perquisites of office
and employment have been diminished or downgraded, or substantially increased
(other than base pay and perquisites) without the Participant’s actual or
implied consent; provided, however, that a general decrease in base pay which is
approved by a majority of the affected Participants will be considered as having
been consented to for purposes of this Plan.

ARTICLE II

ADMINISTRATION AND AMENDMENT

Section 2.1. Administration.

The Plan is operated under the direction of the Compensation Committee, which
has all authority and powers necessary to administer the Plan and construe the
Plan terms, make factual determinations, resolve any ambiguities or
inconsistencies, determine eligibility for participation or benefits, and decide
all questions arising in the Plan administration, interpretation or application.
The Compensation Committee’s actions or decisions in all matters (other than
matters regarding a Participant upon or after the Participant’s Termination on a
Change of Control) shall be final and binding upon all Participants, Spouses or
other persons having or claiming an interest in this Plan.

Section 2.2. Amendment or Discontinuation.

While the Company expects to continue the Plan indefinitely, it reserves the
right to amend the Plan from time to time or to discontinue the Plan at any
time, by action of its Board. No amendment or discontinuance of the Plan shall
impair or adversely affect any Benefits accrued under the Plan as of the date of
such action, except with the consent of the Participant or Surviving Spouse
entitled to receive such Benefits. In the event of an amendment of the Plan
adversely affecting Benefits or discontinuance of the Plan, the amount of each
Participant’s Supplemental Benefits shall be determined under Article IV as if
each Participant had retired as of the date of such amendment or discontinuance,
except that the Participant will continue to vest in his or her Benefit in
accordance with Article III. Accordingly, the Participant will become vested in
and eligible to receive his or her Supplemental Benefits when the Participant
has satisfied the vesting requirements provided under Article III.

ARTICLE III

PARTICIPATION AND VESTING

Section 3.1. Participation.

An Eligible Officer becomes a Participant in the Plan on the date that the
Eligible Officer is designated as a Participant by the Board.

Section 3.2. Vesting.

Subject to Sections 3.3 and 3.4(b), a Participant is 100% fully vested in and
eligible to receive his or her Supplemental Benefits under the Plan if:

the Participant has at least ten continuous years of service with the Company;
and

the Participant has attained (1) age 65 or later, or (2) age 60 or later with a
combined total of age and years of service with the Company at least equal to
90.

 

2

--------------------------------------------------------------------------------

Section 3.3. Acceleration of Vesting.

In the event of a Participant’s termination of employment before vesting due to
a Disability, the Participant will become 100% vested in and eligible for a
Supplemental Benefit under Article IV of the Plan.

In the event of an Involuntary Termination or a Termination on a Change of
Control, a Participant who has at least ten years of continuous service with the
Company will become 100% vested in and eligible for a Supplemental Benefit under
this Plan.

In the event of a 409A Change in Control Event, a Participant who has at least
ten years of continuous service with the Company will become 100% vested in and
eligible for a Supplemental Benefit under this Plan.

In the event of a Participant’s death, a Surviving Spouse will become vested in
and eligible for a Supplemental Benefit under Article IV of the Plan.

Section 3.4. Forfeiture.

On a Participant’s Separation from Service, if the Participant’s Benefit is not
vested under Section 3.2 or 3.3, the Participant’s Supplemental Benefit will be
immediately forfeited and no Supplemental Benefit will be payable under the
Plan.

Notwithstanding any other provision in this Plan, in the event of a
Participant’s involuntary termination of employment by the Company for Cause,
the Participant’s Supplemental Benefit, whether vested or unvested, will be
immediately forfeited and no Supplemental Benefit will be payable under the
Plan.

ARTICLE IV

BENEFITS

Section 4.1. Supplemental Benefit.

A Participant with 25 or more years of service with the Company will receive a
Supplemental Benefit under the Plan equal to 50% of the average of the highest
consecutive three-year Pay paid to the Participant prior to retirement.

A Participant with 10-24 years of service will receive a Supplemental Benefit
under the Plan determined according to the following schedule:

 

Years of Service

   Percentage of Average
Highest Consecutive 3-Year Pay  

24

     49 % 

23

     48 % 

22

     47 % 

21

     46 % 

20

     45 % 

19

     44 % 

18

     43 % 

17

     42 % 

16

     41 % 

15

     40 % 

14

     39 % 

13

     38 % 

12

     37 % 

11

     36 % 

10

     35 % 

 

3

--------------------------------------------------------------------------------

Section 4.2. Early Retirement.

A Participant who retires from the service of the Company after attaining age
60, but before attaining age 65, and who possesses a combined total of age and
years of service with the Company at least equal to 90, will receive a
Supplemental Benefit adjusted as follows: The Supplemental Benefit payable under
this Plan shall be reduced by 0.5% for each full month by which the date of the
commencement of Benefits precedes the Participant’s attainment of age 65. For
example, assume a Participant with 25 years of service with the Company retires
on his 62nd birthday and that the average of his highest consecutive three-year
Pay prior to retirement is $200,000 per year. If the Participant were age 65 at
the date of his retirement, he would receive an annual Benefit of $100,000
($200,000 x 50%). However, because he must commence receiving his Benefit at age
62, the annual $100,000 Benefit will be reduced by 0.5% for each month by which
the date of commencement precedes his attainment of age 65. As a result, he
would receive an annual Benefit commencing at age 62 of $82,000
($100,000—$18,000 [$100,000 x 18% [36 months x 0.5%]] = $82,000).

Notwithstanding the foregoing, a Supplemental Benefit payable to a Participant
who terminates employment due to a Disability will not be subject to reduction
for early payment.

Section 4.3. Surviving Spouse.

 

(a). If a Participant dies after commencement of payment under Section 5.1, the
Participant’s Surviving Spouse, if any, will continue to receive for the life of
the Spouse an amount equal to 100% of the Participant’s monthly Supplemental
Benefit at the same time and in the same form as the Supplemental Benefit would
have been paid to the Participant had he or she lived.

 

(b). If the Participant dies before commencement of the Supplemental Benefit
payments, the Surviving Spouse will receive payment of 100% of the monthly
Supplemental Benefit that would have been payable to the Participant under the
benefit formula provided in Section 4.1 had the Participant lived.
Notwithstanding the previous sentence, if the Participant had not attained age
65 at the time of his or her death, the Supplemental Benefit payable to the
Surviving Spouse will be determined as if the Participant had attained age 65 on
the day before his or her death. Payment to the Surviving Spouse under this
Subsection will be made in equal monthly installments for the life of the
Spouse. Payment will commence on, or as soon as practicable after, the later of
the date of the Participant’s death or the date the Participant would have
attained age 60 had he or she lived. If payment of the Supplemental Benefit
commences before the date the Participant would have attained age 65, the
Benefit payable to the Surviving Spouse will be reduced by 0.5% for each full
month by which the date of commencement precedes the date the Participant would
have attained age 65.

 

(c). All rights to the Supplemental Benefit will terminate and no other
beneficiary will be entitled to payment of any amount under this Plan if (1) a
Participant is not survived by a Surviving Spouse at the time of his or her
death, or (2) payment has already commenced to a Surviving Spouse under this
Section and the Spouse dies.

Section 4.4. Involuntary Termination of Employment.

In the event of a Participant’s Separation from Service due to an Involuntary
Termination, a Participant with at least ten years of consecutive service with
the Company will receive a Supplemental Benefit determined as follows: The
Benefit will be determined under Section 4.1, based on the Participant’s years
of service as of the termination date and using the average of the highest
consecutive three-year Pay paid prior to the Involuntary Termination, instead of
the average for the Pay paid prior to retirement. For a Participant who has not
yet attained age 65 at the time of the Involuntary Termination, the Benefit will
be further adjusted by reducing the applicable percentage specified in
Section 4.1 by a percentage factor equal to the (a) the applicable percentage,
multiplied by (b) 1%, multiplied by (c) the difference between (i) age 65 and
(ii) the Participant’s age at the time of the Involuntary Termination. For
example, the Supplemental Benefit payable to a Participant who is age 45 and who
has 15 years of service with the Company at the time of the Involuntary
Termination would be calculated based on a percentage factor of 32% (40% [based
on 15 years of service] – 8% [40% x 1% x 20 [65 – 45]] = 32%). If a Benefit
payable under this Section commences before the date the Participant attains age
65, the Benefit will be reduced by 0.5% for each full month by which the date of
commencement precedes the Participant’s attainment of age 65.

Section 4.5. Termination on a Change of Control.

In the event of a Participant’s Separation from Service due to a Termination on
a Change of Control, a Participant with at least ten years of consecutive
service with the Company will receive a Supplemental Benefit determined as
follows: The Benefit will be determined under Section 4.1, based on the
Participant’s years of service as of the termination date and using the greater
of (a) the average of the highest consecutive three-year Pay paid prior to the
Change of Control, or (b) the average of the highest consecutive three-year Pay
paid prior to termination of employment. If payment of the Benefit commences
before the date the Participant attains age 65, the Benefit will be reduced by
0.5% for each full month by which the date of commencement precedes the
Participant’s attainment of age 65.

Section 4.6. 409A Change in Control Event.

On the occurrence of a 409A Change in Control Event, a Participant with at least
ten years of consecutive service with the Company will be entitled to a lump sum
payment of the present value of his or her Supplemental Benefit determined as of
the date of the 409A Change in Control Event. For a Participant who has not yet
commenced payment of his or her Supplemental Benefit, the Benefit will be
determined under Section 4.1, based on the Participant’s years of service as of
the 409A Change in Control Event and using the average of the highest
consecutive three-year Pay paid prior to the 409A Change in Control Event,
instead of the average for the Pay paid prior to retirement. A Participant who
has already commenced receiving payment of the Supplemental Benefit at the time
of the 409A Change in Control Event will be entitled to a lump sum payment of
the present value of the remaining Benefit determined as of the 409A Change in
Control Event. The present value of a Benefit payable under this Section will be
the actuarial present value of the accrued Supplemental Benefit as determined
using the mortality table prescribed by the Secretary of the Treasury under
Section 417(e)(3)(B) of the Code, as in effect for such period, and applicable
interest rate described by Section 417(e) of the Code in effect for the second
month preceding the month in which the 409A Change in Control Event occurs.

 

4

--------------------------------------------------------------------------------

ARTICLE V

TIME AND FORM OF BENEFIT PAYMENT

Section 5.1. Time of Payment.

Upon a Participant’s Separation from Service for any reason other than Cause,
subject to Section 5.3, payment of the Supplemental Benefit will commence on, or
as soon as practicable after, the later of the Participant’s Separation from
Service or the date the Participant attains or would have attained age 60.
Payments made on the occurrence of a 409A Change in Control Event will be made
as soon as practicable but no later than 60 days following the 409A Change in
Control Event.

Section 5.2. Form of Payment.

Except for payments made on a 409A Change in Control Event, Supplemental
Benefits under the Plan will be paid to a Participant or a Participant’s
Surviving Spouse in equal monthly installments for the life of the Participant
or the Participant’s Surviving Spouse, as determined under Article IV. Benefits
payable to a Participant on a 409A Change in Control Event will be paid in a
single lump sum payment.

Section 5.3. Six-Month Delay.

Notwithstanding any other provision in this Plan to the contrary, to the extent
that (a) the Participant is determined to be a “specified employee” within the
meaning of Code Section 409A, and (b) any amounts payable under this Plan are
payable solely because of the Participant’s Separation from Service within the
meaning of Code Section 409A, then such amounts will not be payable to the
Participant before the date that is six months after the Participant’s
Separation from Service (or, if earlier, the date of death of the Participant).
Payments to which a Participant would otherwise be entitled during the first six
months following the Participant’s termination date will be accumulated and paid
on the day that is six months after the termination date. For this purpose, a
Benefit payable will be paid as the amount calculated at the time of Separation
from Service (without adjustment for delay in payment).

ARTICLE VI

AGREEMENT NOT TO COMPETE

Section 6.1. Agreement Not to Compete.

Payment of the Benefit under this Plan is contingent upon the Participant’s
agreement not to directly or indirectly engage in or compete with the business
of the Company, either as owner, partner or employee for a period of the later
to occur of the expiration of three years after retirement or the attainment of
65 years of age (the “Non-Compete Period”). In the event a Participant competes
with the business of the Company, payment of the Benefit under this Plan will be
suspended so long as the Participant engages in activity deemed to be in
competition with the business of the Company during the Non-Compete Period.
Notwithstanding the foregoing, this Article VI shall not apply to a Participant
after the Participant’s Termination on a Change of Control.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1. Funding.

This Plan is maintained as an unfunded Plan which is not intended to meet the
qualification requirements of Code Section 401. All rights of any Participant or
Surviving Spouse under this Plan shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
the Company for payment of any amounts due hereunder. No Participant or
Surviving Spouse shall have any interest in or any rights against any specific
assets of the Company, and a Participant or Surviving Spouse shall have only the
rights of a general unsecured creditor of the Company. It is intended that the
Plan is an unfunded nonqualified deferred compensation arrangement for income
tax purposes.

 

5

--------------------------------------------------------------------------------

Section 7.2. Withholding. The Company has the right to deduct or withhold from
the Supplemental Benefit paid under the Plan (or from other amounts payable to
the Participant, if necessary) all taxes that are required to be deducted or
withheld under any provision of law (including, but not limited to, Social
Security and Medicare taxes (FICA) and income tax withholding) now in effect or
that may become effective any time during the term of the Plan.

Section 7.3. Nonassignability.

No interest of any Participant or Surviving Spouse under this Plan, or any right
to receive any payment hereunder, shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind, nor may such interest or right to receive a payment be
taken, voluntarily or involuntarily, for the satisfaction of the obligations or
debts of, or other claims against such Participant or Surviving Spouse,
including, but not limited to, claims for alimony, support, separate
maintenance, and claims in bankruptcy proceedings.

Section 7.4. Nonguarantee of Employment.

This Plan shall not be construed as giving any Participant the right to be
retained in the employment of the Company.

Section 7.5. Death Benefits.

Except as provided in Section 4.3, there shall be no death benefit payable under
this Plan.

Section 7.6. Deferred Retirement.

In the event a Participant retires after age 65, the amount of the Supplemental
Benefit payable under this Plan shall be the Participant’s Benefit calculated at
the actual retirement date (rather than age 65) under the benefit formulas in
Article IV. The amount of the Benefit will not be further adjusted for the
period from age 65 to the actual retirement date to take into account the
delayed commencement date.

Section 7.7. Claims Procedures. If a Participant or Surviving Spouse (the
“Claimant”) does not receive the Supplemental Benefit to which the Claimant
believes he or she is entitled, the Claimant may file a claim in writing with
the Compensation Committee. The Compensation Committee will establish a claims
procedure with the following provisions:

 

  (a). Notification of Decision. If the claim is wholly or partially denied, the
Compensation Committee will notify the Claimant in writing within 90 days after
the claim has been received (unless special circumstances require an extension
of up to 90 additional days). The written notification must state the specific
reasons for the denial of the claim and the specific references to the Plan
provisions on which the denial is based. It must describe any additional
material the Claimant may need to submit to the Compensation Committee to have
the claim approved and must give the reasons the material is necessary. In
addition, the notice must explain the claim review procedure and be written in a
manner calculated to be understood by the Claimant.

 

  (b). Claim Review Procedure. If the Claimant receives a notice that the claim
has been denied, the Claimant, or his or her authorized representative, may
appeal to the Compensation Committee for a review of the claim. The Claimant
must submit a request for review in writing to the Compensation Committee no
later than 60 days after the date the written notice of the claim denial is
received. The Claimant, or his or her representative, may then review Plan
documents that pertain to the claim and may submit issues and comments in
writing to the Compensation Committee. The Compensation Committee must give the
claim for review a full and fair review and must deliver to the claimant a
written determination of the claim, including specific reasons for the decision,
not later than 60 days after the date the Compensation Committee received the
request for review (unless special circumstances require an extension of up to
60 additional days). The decision of the Compensation Committee will be final
and conclusive (other than matters regarding a Participant upon or after the
Participant’s Termination on a Change of Control).

 

6

--------------------------------------------------------------------------------

Section 7.8. Notice. Each notice and other communication concerning the Plan
must be in writing and is deemed given only when (a) delivered in hand,
(b) transmitted by telex or telecopier (provided that a copy is sent at
approximately the same time by registered or certified mail, return receipt
requested), or (c) received by the addressee, if sent by registered or certified
mail, return receipt requested, or by Express Mail, Federal Express or other
overnight delivery service. Notice must be given to the Company at its principal
office and to the Participant at his or her last known address (or to such other
address or telecopier number as a party may specify by notice given to the other
party in accordance with this Section).

Section 7.9. New York Law Controlling. The Plan will be construed in accordance
with the laws of the State of New York.

Section 7.10. Severability. Every provision of the Plan is intended to be
severable. If any provision of the Plan is illegal or invalid for any reason
whatsoever, the illegality or invalidity of that provision will not affect the
validity or legality of the remainder of the Plan, and the Plan will be
construed and enforced as if the illegal or invalid provision had never been
made part of the Plan.

Section 7.11. Binding on Successors. The Plan is binding upon the Participants
and the Company, their heirs, successors, legal representatives and assigns.

Section 7.12. Code Section 409A Compliance.

Benefits under the Plan are intended to comply with the rules of Code
Section 409A and will be construed accordingly. However, the Company will not be
liable to any Participant or Surviving Spouse with respect to any adverse tax
consequences arising under Section 409A or other provision of the Code. All
terms of the Plan that are undefined or ambiguous shall be interpreted in a
manner that is consistent with Code Section 409A if necessary to comply with
Code Section 409A.

 

      ASTRONICS CORPORATION Dated:         By:             Title

 

7