Exhibit
10.5


 


October 7, 2007


 


Personal and Confidential


 


James H. Perry


8 Carolyn Ct


Owings Mills, MD 21117


 


	
  Re:

  	
  Designation
  of Eligibility for Retention Payment under the

  
	
   

  	
  AAI
  Corporation Change in Control Retention and Severance Plan

  



 


Dear Jim:


 


We are pleased
to inform you that AAI Corporation (the “Company”) has selected you to be
eligible to receive a Retention Payment, described below, under the AAI
Corporation Change in Control Retention and Severance Plan (the “Plan”). All
terms and conditions for payment of the Retention Payment are described in this
letter agreement and the Plan (copy enclosed). Since this letter agreement and
the Plan memorialize your right to receive the Retention Payment (assuming all
conditions are satisfied), we encourage you to retain these materials with your
other important papers.


 


Retention Payment.


 


If you have
been continuously employed by the Company or any affiliate from September 1, 2007
(the Plan’s effective date) until December 31, 2008 (“Payment Date”), the Company
will pay you a Retention Payment in a lump sum, less applicable taxes, in an amount
equal to (A÷36)xB, where:


 


•                  (A) equals your
maximum cash award at 1X target under the Company’s Long Term Incentive Plan (“LTIP”);
and


 


•                  (B) equals the
number of full and partial months (prorated on the basis of days in the
applicable partial month) between  the
date of the Change in Control and the Payment Date.


 


The Retention Payment will be paid to you in a single sum cash payment
within 15 days after the Payment Date.


 


Payment of your Retention Payment is also conditioned upon your
compliance with the Non-Competition Restriction described in Appendix C to the
Plan. Under this restriction, you


 

















 


will generally be prohibited from engaging in activities that compete with
the Company for a three month period following your Separation from Service.


 


Except as
described below, you must be employed by the Company to receive your Retention
Payment.


 


Impact of Separation from Service Prior to Payment Date.


 


If, after a Change in Control but prior to the date (or dates) your
Retention Payment is payable, you incur a Separation from Service with the
Company, either without Cause or by you for Good Reason, you will still be entitled
to receive the Retention Payment, as described below. If your Separation from
Service is due to “Disability” (as defined in the Company’s long-term
disability plan), you will still be eligible to receive your Retention Payment but
it will be offset (reduced), to the extent not otherwise offset against any
other amounts owed to you, by amounts payable to you under the Company’s short
or long-term disability plans. However, you will not be entitled to receive
a Retention Payment under the Plan if your Separation from Service is: (i) for
Cause, (ii) by you without Good Reason, or (iii) on account of your death.


 


If you are a “Specified Employee,” i.e., one of
the top 50 “officers” (which is broadly defined) of the Company and its
affiliates having annual compensation in excess of $145,000 for 2007 or as adjusted
thereafter, payment of your Retention Payment will be delayed for six months
after the date of your Separation from Service unless your separation is due to
Disability. As soon as administratively feasible following the end of the delay
period, the Retention Payment will be paid to you in a single sum cash payment.


 


If you are not a Specified Employee (or you are a Specified Employee
and your separation is due to Disability), the delay period will not apply to
you, and your Retention Payment will be paid to you in a single sum cash
payment within ten days after your Separation from Service.


 


Other Important Terms.


 


The Company is extending participation in the Plan to only selected
employees. For this reason, we ask and you agree that you will keep the terms
of the Plan and this letter agreement completely confidential.


 


This letter agreement is not an employment agreement or guarantee of
continued employment by the Company. In addition, the agreement is personal to
you: you may not assign this agreement or the benefits provided by it to anyone.


 


This letter agreement may not be amended, except in a writing signed by
you and the Company. This letter agreement will be construed and enforced in
accordance with the laws of the State of Maryland  (without
regard to the principles of conflicts of law).


 


2

















 


This letter agreement sets forth the whole agreement between you and
the Company concerning the subject matter described herein and supersedes any other
discussions, representations or agreements concerning the subject matter
described herein; provided, however, this letter agreement does not supersede,
alter or amend, in any manner, the terms and conditions of your Employment
Agreement with the Company dated March 3, 2000, and all amendments thereto or
your Success Bonus Agreement with the Company dated April 10, 2002, and all
amendments thereto and all such agreements shall continue in full force and
effect.


 


You are hereby advised by the Company to consult your own legal counsel
and/or your own personal financial or tax advisors before signing this letter
agreement. By signing below, you acknowledge that you have carefully read this
letter agreement in its entirety; that you have had an adequate opportunity to
consider it and to consult with any advisors of your choice about it; that you
understand the terms of this letter agreement and their significance; that you
knowingly and voluntarily assent to all the terms and conditions contained in
this agreement; and that you are signing this letter agreement voluntarily and
of your own free will.


 


Please indicate your agreement to the terms of this letter by signing
it in the space provided below and returning a hard copy to me confidentially. Please
do not hesitate to contact me if you have any questions.


 


 


	
   

  	
  Very truly yours

  
	
   

  	
   

  
	
   

  	
  AAI CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anna-Maria G. Palmer

  	
   

  
	
   

  	
  Name:  Anna-Maria G. Palmer

  
	
   

  	
  Title:  Vice President, Human
  Resources

  



 


The undersigned accepts the above letter agreement and agrees that it
contains the entire agreement of the parties relating to the subject matter
hereof.


 


	
  Accepted and Agreed:

  
	
   

  
	
   

  
	
  /s/ James H. Perry

  	
   

  
	
  James H. Perry

  
	
   

  
	
  Dated: October 7, 2007

  



 


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