Exhibit 10.1


 


THIRD AMENDMENT


TO


AAR CORP. STOCK BENEFIT PLAN


 


WHEREAS, the
Company maintains the AAR CORP. Stock Benefit Plan, amended and restated
effective October 1, 2001 and further amended effective June 26, 2003 and April
11, 2005 (the “Plan”); and


 


WHEREAS, the
Company now desires to further amend the Plan to (i) eliminate the grant of
reload options, and (ii) permit the Committee, in its discretion, to grant
Restricted Stock Awards from time to time to Non-Employee Directors;


 


NOW
THEREFORE, the Company hereby amends the Plan as
follows, effective as of July 12, 2005:


 


1.             Section
8 of the Plan is deleted and intentionally left blank.


 


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


 


“Non-Employee Directors shall participate in
the Plan through discretionary grants of NSOs pursuant to Section 5 hereof and
Restricted Stock Awards pursuant to Section 9 hereof. 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. In making a determination concerning the granting of Awards, the
Committee may take into account the nature of services the Key Employee or
Non-Employee Director has rendered, or that the Committee expects he will
render, his present and potential contributions to the success of the business,
the number of years of effective service he is expected to have, and such other
factors as the Committee in its sole discretion shall deem relevant. The
Committee shall also determine, with respect to Awards to Key Employees and
Non-Employee Directors, the number of Shares to be subject to each Award, with
respect to Key Employees the type of Awards (Restricted Stock, Options or Stock
Appreciation Rights (SARs)); with respect to Non-Employee Directors the type of
Awards (Restricted Stock 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 Shares of Restricted Stock and any
other terms and conditions of such Awards.”


 


3.             The
title to Section 9 is amended to be “Restricted Stock Awards to Key Employees
and Non-Employee Directors.”


 


4.             Section
9.1 is amended to read as follows:


 

















 


9.1           Subject
to the terms of the Plan, the Committee may also grant to Key Employees and
Non-Employee Directors Restricted Stock Awards from time to time. Restricted
Stock may be granted to a Key Employee or a Non-Employee Director either
separately from, or in tandem with, the grant of an Option to the Key Employee
or Non-Employee Director. In the case of Restricted Stock granted in tandem
with the grant of an Option (a) the exercise of the Option shall cause the
forfeiture to the Company of the Restricted Stock related to the Option or
portion thereof that is exercised; and (b) the lapse of restrictions applicable
to such Restricted Stock shall cause the expiration of the unexercised Option,
or portion thereof, related to such Restricted Stock. Restricted Stock not
granted in tandem with the grant of an Option shall have no effect on, and
shall not be affected by, the exercise of any Option by the holder of such
Restricted Stock.


 


5.             Sections
9.5 through 9.7 are amended to read as follows:


 


9.5           At
the Committee’s option, the Restricted Stock Agreement may provide that any
Shares of Restricted Stock granted to a Key Employee or a 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 noncompetition, confidentiality or employment
agreement, any Company policy, or any other conditions set forth in the
Restricted Stock Agreement or in a separate document, (b) the Key Employee’s
employment with the Company, or the Non-Employee Director’s service on the
Board, terminates prior to the date or dates for expiration of the forfeiture
provisions set forth in the applicable Restricted Stock Agreement, which date
shall not be earlier than the first anniversary of such grant, (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
Agreement. A forfeiture of Restricted Stock pursuant to this Section 9.5 shall
occur immediately following the mailing of a written notice to the Key Employee
or Non-Employee Director. Thereafter, the Secretary of the Company shall
promptly cancel shares of Restricted Stock that are forfeited to the Company.


 


9.6           Notwithstanding
the foregoing, (a) if the Key Employee’s employment terminates or the
Non-Employee Director’s service on the Board terminates, or (b) upon a Change
in Control, any restrictions of this Section 9 or in any Restricted Stock
Agreement shall lapse as provided in Sections 12 and 13.


 


9.7           The
Committee may proscribe such other restrictions and conditions and other terms
applicable to the Shares of Restricted Stock 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 Agreement, including, without
limitation, terms providing for a lapse of the restrictions of this Section 9,
provided they are set forth in the applicable Restricted Stock 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 granted to a Key Employee or Non-Employee Director.


 


6.             Section
12.7 is amended to read as follows:


 


12.7         Pursuant
to subsections 9.5 and 9.6, a Restricted Stock Award shall be subject to such
restrictions in the event of the death, Disability, Retirement or other


 


2

















 


termination of employment, or termination of service on the Board, of
the Grantee as are set forth in the applicable Restricted Stock Agreement.


 


7.             Section
13.2 is amended to read as follows:


 


13.2         In
the event that a Non-Employee Director’s membership on the Board terminates
within one year following a Change in Control which does not have the prior
written approval of a majority of the Continuing Directors, any unexercised
NSOs granted to a Non-Employee Director shall become fully exercisable and all
restrictions applicable to a Restricted Stock Award granted to a Non-Employee
Director shall lapse.


 


Sections 2
through 7 of this Third Amendment are subject to approval at the annual meeting
of the Company’s stockholders to be held on October 19, 2005, by the
affirmative votes of the holders of a majority of the Company’s voting
securities present or represented and entitled to vote at such meeting. If such
approval is not obtained, such Sections of this Third Amendment shall be null
and void and of no effect.


 


IN WITNESS
WHEREOF, this Third Amendment has been executed as of
the 12th day of July, 2005.


 


 


	
   

  	
  AAR CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ HOWARD
  A. PULSIFER

  	
   

  
	
   

  	
   

  	
  Howard A.
  Pulsifer, Vice President

  



 


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