Document:

Exhibit 10.18

SECOND
AMENDMENT

TO

LEASE AGREEMENT

AAR
AIRCRAFT SERVICES, INC.

INDIANAPOLIS AIRPORT AUTHORITY

THIS SECOND AMENDMENT made and entered into the 19th day of May, 2006 by and between
the Indianapolis Airport Authority, (hereinafter referred to as Authority) and
AAR Aircraft Services, Inc. (hereinafter referred to as Tenant),

W I T N E S S E T H:

WHEREAS, Authority and Tenant entered into a Lease
Agreement dated June 17, 2004, providing for Tenant’s occupancy of a
portion of the Indianapolis Maintenance Center as the Leased Premises; and

WHEREAS, Authority and Tenant entered into Amendment No. 1
dated January 21, 2005 amending the Leased Premises described in Exhibit B,
revised the terms of Article XII, Financial Security and revised Exhibit K,
Operating Rules; and

WHEREAS, Authority and Tenant desire to amend the
Leased Premises described in Exhibit B, revise Activation Notice language
in Article II, revise rental language in Article VI, add language in Article II
and Article VI for the activation of On-Call Hangar Bays, and add language
in Article VI for training grant aid including an update to Exhibit G
and the addition of Exhibit L;

NOW THEREFORE, in consideration of the mutual
covenants and considerations contained herein, the parties agree that Exhibit B,
Leased Premises, Exhibit B-20, B-21, B-22, Exhibit G
Incentives, Article II, Lease of Leased Premises; Ownership of
Improvements and Equipment; Use of Leased Premises, Section 205. Possession
of Leased Premises; Activation (B), and Article VI, Rentals, Fees and
Records Section 601. Rental (A) Base Rent (3), (B) Additional
Rent (8) are hereby deleted and the following substituted and Article II,
Lease of Leased Premises; Ownership of Improvements and Equipment; Use of
Leased Premises, Section 207. On-Call Hangar Bay(s), Article VI,
Rentals, Fees and Records, Section 601. Rental (B) (9) and
Section 605. Authority Incentives, (E) Training Grant Payment
and Exhibit L are hereby added:

 

ARTICLE II

LEASE
OF LEASED PREMISES; OWNERSHIP OF IMPROVEMENTS

AND EQUIPMENT; USE OF LEASED PREMISES

Section 205.  Possession
of Leased Premises; Activation.

(B)  Not later
than ninety (90) days after the Effective Date of this Lease, Tenant shall send
the Authority an Activation Notice indicating which of the Bays and/or other
areas of the Leased Premises that Tenant desires for the Authority to first
Activate. Thereafter, during the Term of this Lease, as Tenant desires for
additional Bays and/or other areas of the Leased Premises to be Activated by
the Authority, Tenant shall provide an Activation Notice to the Authority, with
respect to those Bays and/or other areas of the Leased Premises, with each such
Activation Notice to specify the date by which Tenant needs that portion of the
Leased Premises to be Activated (the “Requested Activation Date”); provided,
however, that the Requested Activation Date may not be fewer than thirty (30)
days from the date that Tenant delivers its Activation Notice to the Authority.
However, the Authority acknowledges that, at the time Tenant provides its
Activation Notice to the Authority with respect to a particular portion of the
Leased Premises, Tenant may not know what Available Equipment it will need for
the Authority to furnish with respect to that portion of the Leased Premises. Consequently,
the Authority hereby agrees that Tenant may defer providing the Authority with
Tenant’s written list of requested Available Equipment for the Activation of
that portion of the Leased Premises until after the date on which Tenant
delivers its Activation Notice for that portion of the Leased Premises;
provided, however, that the Authority shall not be obligated to provide that
Available Equipment by the Requested Activation Date unless Tenant provides the
Authority with the list of Tenant’s requested Available Equipment for that
portion of the Leased Premises at least thirty (30) business days prior to the
Requested Activation Date for that portion of the Leased Premises.

Section 207.  On-Call
Hangar Bay(s).

(A) Tenant shall
have the right to designate two (2) Hangar Bays for on-call aircraft
maintenance and aircraft washing services at the rental as described in Article VI.
Tenant shall provide written notice to Authority stating which hangar bays will
be the On-Call Hangar Bays. Included in the written notice shall be the date
each Bay is required, however; under no circumstances shall the date be less
than thirty (30) days from the Authority’s receipt of written notice. Authority
shall have a minimum of thirty (30) days to prepare each On Call Hangar Bay for
Tenant’s use.

 2
 

 

ARTICLE VI

RENTALS, FEES AND RECORDS

Section 601.  Rental

(A) Base Rent.

(3)          Notwithstanding
anything in this Lease to the contrary, however, and regardless of which (if
any) portions of the Leased Premises that Tenant elects to Activate and
regardless of which (if any) portions of the Leased Premises that Tenant is
Occupying or using from time to time, Tenant hereby agrees that commencing on
the earlier of (a) December 1, 2004 or (b) the first date that
any aircraft of Tenant’s customer(s) is located at the Leased Premises,
and continuing thereafter during the Term of this Lease, Tenant shall be
obligated to pay monthly Base Rent on at least two (2) Bays plus the
Hangar 4 Office Space (the “Minimum Base Rent”). Minimum Base Rent is subject
to increase as provided in Section 401(G) and Section 2105(A) (3) of
this Lease.

(B)  Additional
Rent.

(8)          Notwithstanding
anything in this Lease to the contrary, however, and regardless of which (if
any) portions of the Leased Premises that Tenant elects to Activate and
regardless of which (if any) portions of the Leased Premises that Tenant is
Occupying or using from time to time, Tenant hereby agrees that commencing on
the earlier of (a) December 1, 2004 or (b) the first date that
any aircraft of Tenant’s customer(s) is located at the Leased Premises,
and continuing thereafter during the Term of this Lease, Tenant shall be
obligated to pay monthly Additional Rent on at lease two (2) Bays (the “Minimum
Additional Rent” and, together with the Minimum Base Rent, the “Minimum Monthly
Rent”). Minimum Additional Rent is subject to increase, in the same manner and
at the same time as the Minimum Base Rent, as provided in Section 401(G) above
and Section 2105(A)(3) below.

(9)          Authority
and Tenant agree an Annual rental fee of fifty thousand dollars ($50,000) shall
be paid by Tenant for each of the On-Call Hangar Bays totaling one hundred
thousand dollars ($100,000). Authority and Tenant agree additional rental of
one thousand six hundred and eighty dollars ($1,680.00) per day per bay will be
charged for use of the On-Call Hangar Bays. Tenant agrees to report On-Call
Hangar Bay usage and payment on or before the fifteenth (15th) day of each calendar month
for the previous month’s use of one or both On-Call Hangar Bays.

Section 605.  Authority
Incentives.

(E)  Training
Grant Payment. Authority and Tenant agree in
exchange for reducing the Grant Amounts set forth in Exhibit G Incentives
from two hundred fifty thousand dollars ($250,000) to zero dollars ($0) for “9
Bays Occupied” and from two hundred fifty thousand dollars ($250,000) to zero
dollars ($0) for “10 Bays Occupied” as described in Exhibit G, the
Authority will make available a five hundred thousand dollar ($500,000)
Training Grant which may be drawn upon between January 1, 2006 through December 31,
2006. Upon receipt of the executed acceptance dated February 14, 2006,
attached as Exhibit L, the execution of this Second Amendment, and the
receipt, review and acceptance by Authority of certified costs paid for such
training expenses to include but not limited to payroll costs for technicians
to attend 

 3
 

 

training courses, the
Authority within thirty (30) days, will reimburse a five hundred thousand
dollar ($500,000) Training Grant to Tenant.

This Second Amendment shall become effective as to the
date first mentioned above and all other terms and conditions of the Lease
Agreement dated June 17, 2004 as amended shall remain the same.

 

 

Attachments:

Exhibit B:
Description of Portion of Facilities to be Leased to Tenant

Exhibit G:
Incentives

Exhibit L: Training Grant Acceptance Letter

 4
 

 

SIGNATURE PAGE

In witness whereof, the parties have caused this instrument to be
executed as of the date first above mentioned.

 

	
  

  	
  “AUTHORITY”

  
	
   

  	
   

  	
   

  
	
   

  	
  INDIANAPOLIS AIRPORT AUTHORITY

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Lacy M. Johnson

  
	
   

  	
   

  	
  Lacy M. Johnson, President

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ H. Patrick Callahan

  
	
   

  	
   

  	
  H. Patrick Callahan, Vice-President

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Alfred R. Bennett

  
	
   

  	
   

  	
  Alfred R. Bennett, Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ N. Stuart Grauel

  
	
   

  	
   

  	
  N. Stuart Grauel, Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Kelly J. Flynn

  
	
   

  	
   

  	
  Kelly J. Flynn, Member

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Shirley M. Haflich

  
	
   

  	
   

  	
  Shirley M. Haflich, Member

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Robert H. Voorhies

  
	
   

  	
   

  	
  Robert H. Voorhies, Member

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Michael W. Wells

  
	
   

  	
   

  	
  Michael W. Wells, Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST

  	
  “TENANT”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AAR AIRCRAFT SERVICES, INC.,

  
	
   

  	
   

  	
  an Illinois corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Mark McDonald

  
	
   

  	
  Printed:

  	
  J. Mark McDonald

  
	
   

  	
  Title:

  	
  Vice President

  
						

 

 5
 

 

 

	
  STATE OF INDIANA

  	
  )

  	
   

  
	
   

  	
  )

  	
  SS:

  
	
  COUNTY OF MARION

  	
  )

  	
   

  

 

Before me, a Notary Public in and for said County and
State, personally appeared Lacy M. Johnson, President; H. Patrick Callahan,
Vice-President; Alfred R. Bennett, Secretary; N. Stuart Grauel, Treasurer;
Kelly J. Flynn, Member; Shirley M. Haflich, Member; Robert H. Voorhies, Member;
and Michael W. Wells, Member, respectively, of the Indianapolis Airport
Authority, and acknowledged the execution of the foregoing instrument as such
officers acting for and on behalf of the Indianapolis Airport Authority.

WITNESS my hand and Notarial Seal this 19th day of May, 2006.

	
  

  	
  /s/ Brenda S. Ford

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Brenda S. Ford

  
	
   

  	
  Printed 

  	
  Notary Public

  
	
   

  	
   

  	
   

  
	
  My Commission Expires:

  	
  My County of Residence:
  Marion

  

 

7-5-2007

	
  STATE OF MICHIGAN

  	
  )

  	
   

  
	
   

  	
  )

  	
  SS:

  
	
  COUNTY OF WEXFORD

  	
  )

  	
   

  

 

Before me, a Notary Public in and for said County and
State, personally appeared J. Mark McDonald, the Vice President of AAR Aircraft
Services, Inc., an Illinois corporation, and acknowledged the execution of
the foregoing instrument as such officer acting for and on behalf of said
entity.

WITNESS my hand and Notarial Seal the 1st day of May, 2006.

	
  

  	
  /s/ Celestine C. Miller

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Celestine C. Miller

  
	
   

  	
  Printed 

  	
  Notary Public

  
	
   

  	
   

  	
   

  
	
  My Commission Expires:

  	
  My County of Residence:

  
	
   

  	
   

  
	
  Nov 29, 2006

  	
  Wexford

  

 

 6
 

 

EXHIBIT B

DESCRIPTION OF PORTION OF FACILITIES TO BE LEASED TO TENANT

 

1.               Hangar 1 (consisting of “ground level” and “mezzanine
level” of Bays 1a and 1b, and associated office, storage and employee support
space), Hangar 2 (consisting of “ground level” and “mezzanine level” of Bays 2a
and 2b, and associated office, storage and employee support space), Hangar 3
(consisting of “ground level” and “mezzanine level” of Bays 3a and 3b, and
associated office, storage and employee support space), Hangar 5 (consisting of
“ground level” of Bays 5a and 5b, and associated office, storage and employee
support space), and Hangar 6 (consisting of “ground level” of Bay 6a and
associated office, storage and employee support space, and “ground level” and “mezzanine
level” of Bay 6b and associated office, storage and employee support space),
all as shown in more detail in the drawing attached hereto as Exhibit B-1 thru Exhibit B-34.

2.               Approximately 24,597 square feet of office
space designated as Hangar 4 service level as shown in more detail on the
drawing attached hereto as Exhibit B-21
(the “Hangar 4 Office Space”).

3.               Approximately 7,840 square feet of storage
space designated as Hangar 4 ground level as shown in more detail on Exhibit B-20 (the “Hangar 4 Ground Level Storage”).

4.               Total square footage for all hangar space and
support areas shown on Exhibit B-1
thru Exhibit B-34 is (exempting Hangar 4) office space
and ground level.

5.               The parties agree that designated smoking
areas shall be established outside of the facilities for Tenant’s employees and
Tenant shall be responsible for the maintenance and cleanup of the smoking
areas.

 7
 

 

EXHIBIT G

INCENTIVES

 

	
  Threshold

  	
   

  	
  Grant Amount

  	
   

  	
  Credit Amount

  	
   

  
	
  30 days after
  Effective Date (number of Bays Occupied N/A)

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  0

  	
   

  
	
  30 days after
  Effective Date (number of Bays Occupied N/A)

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  0

  	
   

  
	
  105 days after
  Effective Date (number of Bays Occupied N/A)

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  0

  	
   

  
	
  3 Bays Occupied

  	
   

  	
  0

  	
   

  	
  750,000

  	
   

  
	
  4 Bays Occupied

  	
   

  	
  750,000

  	
   

  	
  750,000

  	
   

  
	
  5 Bays Occupied

  	
   

  	
  750,000

  	
   

  	
  750,000

  	
   

  
	
  6 Bays Occupied

  	
   

  	
  750,000

  	
   

  	
  500,000

  	
   

  
	
  7 Bays Occupied

  	
   

  	
  750,000

  	
   

  	
  500,000

  	
   

  
	
  8 Bays Occupied

  	
   

  	
  500,000

  	
   

  	
  500,000

  	
   

  
	
  9 Bays Occupied

  	
   

  	
  0

  	
   

  	
  250,000

  	
   

  
	
  10 Bays Occupied

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Commencement Date
  of 1st year of Extension Term (number of Bays Occupied N/A)

  	
   

  	
  250,000

  	
   

  	
  0

  	
   

  
	
  Commencement
  Date of 2nd year of Extension Term (number of Bays Occupied N/A)

  	
   

  	
  250,000

  	
   

  	
  0

  	
   

  
	
  Totals

  	
   

  	
  7,000,000

  	
   

  	
  4,000,000

  	
   

  
								

 

 

 8

 

Exhibit “B-22”

 

	
  Room #

  	
   

  	
  Room Location

  	
   

  	
  Room Level

  	
   

  	
         Room Type

  	
   

  	
  Room SQ.FT.

  	
   

  	
   

  
	
  Hangar
  4

  	
   

  	
  Ground
  Floor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H04-109

  	
   

  	
  Hangar 4

  	
   

  	
  Ground

  	
   

  	
  Parts Storage

  	
   

  	
   

  	
  7,840

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Subtotal Leasable Area

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  7,840

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hangar
  4

  	
   

  	
  Service
  Floor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H04-201

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Stair Well

  	
   

  	
   

  	
  240

  	
   

  	
   

  	
   

  
	
  H04-202

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Stair Well

  	
   

  	
   

  	
  235

  	
   

  	
   

  	
   

  
	
  H04-204

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Storage

  	
   

  	
   

  	
  104

  	
   

  	
   

  	
   

  
	
  H04-205

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Office

  	
   

  	
   

  	
  302

  	
   

  	
   

  	
   

  
	
  H04-207

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Conference Room

  	
   

  	
   

  	
  379

  	
   

  	
   

  	
   

  
	
  H04-210

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Jetway Mezzanine

  	
   

  	
   

  	
  467

  	
   

  	
   

  	
   

  
	
  H04-211

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  CDS Drop Point

  	
   

  	
   

  	
  257

  	
   

  	
   

  	
   

  
	
  H04-212

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Storage

  	
   

  	
   

  	
  104

  	
   

  	
   

  	
   

  
	
  H04-213

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Conference Room

  	
   

  	
   

  	
  303

  	
   

  	
   

  	
   

  
	
  H04-214

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Multi Purpose Room

  	
   

  	
   

  	
  397

  	
   

  	
   

  	
   

  
	
  H04-215

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Vending

  	
   

  	
   

  	
  204

  	
   

  	
   

  	
   

  
	
  H04-218

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Jetway Mezzanine

  	
   

  	
   

  	
  467

  	
   

  	
   

  	
   

  
	
  H04-219

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Open Office Area

  	
   

  	
   

  	
  16,923

  	
   

  	
   

  	
   

  
	
  H04-220

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Open Office Area

  	
   

  	
   

  	
  1,208

  	
   

  	
   

  	
   

  
	
  H04-221

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Office

  	
   

  	
   

  	
  190

  	
   

  	
   

  	
   

  
	
  H04-222

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Office

  	
   

  	
   

  	
  426

  	
   

  	
   

  	
   

  
	
  H04-223

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Conference Room

  	
   

  	
   

  	
  280

  	
   

  	
   

  	
   

  
	
  H04-224

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Office

  	
   

  	
   

  	
  280

  	
   

  	
   

  	
   

  
	
  H04-225

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Office

  	
   

  	
   

  	
  424

  	
   

  	
   

  	
   

  
	
  H04-226

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Office

  	
   

  	
   

  	
  190

  	
   

  	
   

  	
   

  
	
  H04-203

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  CDS Drop Point

  	
   

  	
   

  	
  257

  	
   

  	
   

  	
   

  
	
  H04-216

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  LAN Room

  	
   

  	
   

  	
  295

  	
   

  	
   

  	
   

  
	
  H04-217

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Electrical Room

  	
   

  	
   

  	
  186

  	
   

  	
   

  	
   

  
	
  H04-208

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  LAN Room

  	
   

  	
   

  	
  295

  	
   

  	
   

  	
   

  
	
  H04-209

  	
   

  	
  Hangar 4

  	
   

  	
  Service

  	
   

  	
  Electrical Room

  	
   

  	
   

  	
  184

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Subtotal Leasable Area

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  24,597

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Total Leasable Area

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  32,437

  

 

 

	
  Indianapolis Airport Authority

  	
  ·

  	
  Indianapolis
  International Airport

  
	
   

  	
  managed by BAA
  Indianapolis LLC

  
	
   

  	
   

  
	
  Patrick F. Dooley

  	
  2500 S. High School Road

  
	
  Airport Director

  	
  Indianapolis, IN 46241-4941

  
	
   

  	
  (317) 487-9594

  
	
   

  	
  www.indianapolisairport.com

  
				

 

February 14,
2006

AAR Aircraft Services, Inc.

201 Haynes Street

Cadillac,
MI 49601

Attn:
Mr. J. Mark McDonald

Re:
Modification of Lease Agreement and Training Grant

Dear
Mark:

Pursuant to our discussions, we understand that AAR Aircraft Services, Inc.
(“AAR”) has incurred substantial training expenses at the Indianapolis
Maintenance Center not originally contemplated in its business plan. To help
defray those expenses, the Indianapolis Airport Authority (the “Authority”)
offers the following to AAR:

In exchange for reducing the Grant Amounts from $250,000 to $0 for Bay
9 Occupied and from $250,000 to $0 for Bay 10 Occupied as described on Exhibit G
of our Lease Agreement dated June 14, 2004, as amended (the “Lease”), The
Authority will make available a $500,000 Training Grant which may be drawn upon
between January 1, 2006 and December 31, 2006 to help defray the
training expenses that AAR has incurred after June 1, 2005. The Training
Grant source of funds is derived from a combination of City of Indianapolis
(approximately 60% source of funds) and from the sale of excess assets of the
Indianapolis Maintenance Center (approximately 40% source of funds). Assets
sold were not assets defined in the Lease Agreement between the Authority and
AAR.

Exhibit “L”

 

Mr. Mark McDonald

February 14, 2006

Page 2

If you accept and agree to this offer, please acknowledge your
acceptance in the space provided below and return a copy of this letter to the
undersigned. Upon receipt of the signed acceptance, the Authority will
immediately allocate a $500,000 Training Grant to be paid to AAR upon
submission of certified costs paid for AAR’s training expenses to include AAR
payroll costs for technicians to attend training courses.

Unless otherwise defined herein, capitalized terms shall have their
meaning as set forth in the Lease.

Sincerely,

 

/s/ Patrick F. Dooley

 

Patrick
F. Dooley

Airport
Director

BAA
Indianapolis LLC

Managing agent for Indianapolis Airport Authority

Accepted and Agreed To:

	
  AAR
  AIRCRAFT SERVICES, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ J. Mark McDonald

  	
   

  	
   

  	
   

  
	
  Printed: J. Mark McDonald

  	
   

  	
   

  
	
  Title: Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  cc:

  	
   

  	
  Indianapolis Airport Authority Board

  
	
   

  	
   

  	
  Eric Anderson, IMC

  
	
   

  	
   

  	
  Jeannie WeissExhibit 10.24

Composite Form

of

SPLIT DOLLAR INSURANCE AGREEMENT

This Split Dollar Agreement (the “Agreement”) is made
and entered into as of the          day
of                               ,
by and between AAR CORP., a corporation duly organized and existing under the
laws of the State of Delaware (the “Corporation”) and
                                                                      
(the “Employee”).

W I T N E S S E T H

WHEREAS, the Employee presently is employed by the
Corporation, or an affiliated company, his services have contributed to the
successful operation of the Corporation, and the Corporation and its directors
determined that it is in the best interest of the Corporation to provide for
life insurance on the life of the Employee under a split-dollar arrangement and
entered into a Split Dollar Agreement dated                     
Setting forth the terms of the arrangement; and

WHEREAS, the Employee presently is the owner of the following insurance policy
insuring the life of the Employee (the “Policy”):

	
  Insurance Company

  	
   

  	
  Policy Number

  	
   

  	
  Face Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

and

WHEREAS, the Corporation and the Employee agree to make the
Policy subject to this Agreement;

NOW, THEREFORE, in consideration of the premises, and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
Corporation and the Employee hereby mutually covenant and agree as follows:

 

ARTICLE I

Payment of Premiums

A.    Each
premium on the Policy shall be paid by the Corporation as it becomes due;
provided, however, that in the event of a “Change in Control” (defined in
paragraph B of this Article), the Corporation shall pay immediately into the
Policy (i) all premiums owed for all future periods as shown on the original
illustrations for the Policy, plus (ii) such additional sum as is required by
the Insurance Company (the “Insurer”) in order for the cash values and death
benefits to be at the level on the date of the Change in Control as was
originally illustrated for the Policy for that date, but based on then current
dividend and mortality assumptions. For each taxable year that this Agreement
is in force, the Employee shall have taxable income equal to the value of the
economic benefit (defined in paragraph B of this Article) of the life insurance
protection enjoyed by the Employee for that taxable year. In addition, for each
taxable year that this Agreement is in force, the Corporation shall pay to the
appropriate federal, state or local government revenue collection agency a cash
distribution equal to the sum of (i) the amount needed to pay applicable income
and Medicare taxes (“taxes”) on the economic benefit of the life insurance
protection which is taxed on the cash distribution under clause (i) of this sentence
and this clause (ii). The top income tax rate then in effect for single
individuals shall be used to calculate all distributions.

B.     For
purposes of this Agreement:

1.      The “economic
benefit” of the life insurance protection for each taxable year shall equal the
lower of the amount computed by MetLife or the lowest amount computed in
accordance with the alternative methods authorized under Revenue Ruling 64-328,
1964-2 C.B. 11, and Revenue Ruling 66-110, 1966-1 C.B. 12, or
under any subsequent modification of those rulings;

 2
 

 

2.      The
Corporation’s “premium contributions” shall equal the total premiums paid
hereunder by the Corporation for all premium periods; and

3.      A “Change
in Control” shall be deemed to occur on the earliest of:

(a)    any person
(as such term is used in Section 13(d) of the Securities Exchange Act of 1934,
as amended (“Exchange Act”)), has acquired (other than directly from the
Corporation) beneficial ownership (as that term is defined in Rule 13d-3
under the Exchange Act), of more than 20% of the outstanding capital stock of
the Corporation entitled to vote for the election of directors; or

(b)    the
effective time of (i) a merger or consolidation or other business combination
of the Corporation with one or more other corporations as a result of which the
holders of the outstanding voting stock of the Corporation immediately prior to
such business combination hold less than 60% of the voting stock of the
surviving or resulting corporation, or (ii) a transfer of substantially all of
the assets of the Corporation other than to an entity of which the Corporation
owns at least 80% of the voting stock; or

(c)    the
election over any period of time to the Board of Directors of the Corporation
without the recommendation or approval of the incumbent Board of Directors of
the Corporation, of the lesser of (i) three directors, or (ii) directors
constituting a majority of the number of directors of the Corporation then in
office.

ARTICLE II

Policy Ownership, Beneficiaries and Dividend
Application

A.    Except as
provided in paragraph B of this Article, the Employment shall be the sole and
exclusive owner of the Policy, and shall be entitled to exercise all 

 3
 

 

rights of
ownership thereof, except that such rights shall not impact the Corporation’s
ownership of any portion of the cash value of the Policy.

B.     Except as
provided in Article III of this Agreement, the Corporation shall own the cash
value of the Policy. In exchange for the Corporation’s agreement hereunder to
pay Policy premiums, the Employee shall assign to the Corporation, by an
instrument of collateral assignment in substantially the same form as the
instrument attached as Exhibit A to this Agreement (the “Assignment”), the
right to receive the amounts provided in Article III of this Agreement.

C.     All
dividends payable under the Policy shall be applied as provided in the Policy,
including the application therefor.

D.     The
Corporation agrees that it will not exercise its rights in the Policy in any
way that might impair or defeat the interest of the Employee or beneficiary of
the Policy, and will cooperate with the Employee in securing such additional
riders to the Policy as the Employee may request from time to time on such
terms as are mutually acceptable to the Corporation and the Employee. All
additional premiums for any rider that is added to the Policy shall be paid by
the Corporation. Unless the Corporation and the Employee otherwise agree and
provide written notice of the same to the Insurer, all riders shall inure to
the exclusive benefit of the Employee, its designee, or its beneficiary or
beneficiaries under the Policy.

ARTICLE III

Termination of Agreement

A.    Except as
otherwise provided in paragraph E below, this Agreement shall terminate
automatically upon the first to occur of the following events: (i) termination
of employment of the Employee with the Corporation prior to the 10th anniversary date of this Agreement and
Employee’s death, Disability or Retirement; (ii) 

 4
 

 

surrender of the Policy by the Employee prior to
Retirement; (iii) surrender of the Policy after Retirement; (iv) bankruptcy,
receivership or dissolution of the Corporation; (v) termination of this
Agreement by mutual consent of the Employee and the Corporation; and (vi) the
death of the Employee. For purposes of this Agreement, “Retirement” means
retirement under the AAR CORP. Retirement Plan and “Disability” means the
inability of Employee to engage in any substantial performance of assigned
duties for a continuous period of 180 consecutive days due to a physical or
mental impairment which otherwise meets the eligibility requirements of the
Corporation’s Long Term Disability Welfare Plan.

B.     In the
event that this Agreement is terminated for the reason set forth in clauses (i)
or (ii) of Section II.A. above, the Corporation shall be entitled to receive
from the Employee, within sixty (60) days of the date of such termination, an
amount equal to the greater of (i) the cash value of the Policy, and (ii) the
sum of the Corporation’s premium contributions determined as of the date of
such termination.

C.     In the
event that this Agreement is terminated for any of the reasons set forth in
clauses (iii), (iv) or (v) of Section II.A. above, the Corporation shall be
entitled to receive from the Employee, within sixty (60) days of such termination,
an amount equal to the lesser of (i) the cash value of the Policy and (ii) the
sum of the Corporation’s premium contributions paid pursuant to Article I of
this Agreement, determined as of the date of such termination.

D.     In the
event that this Agreement is terminated by reason of the death of the Employee,
the Corporation shall have an interest in the proceeds of the Policy, which
interest shall be equal in value to the sum of the Corporation’s premium
contributions determined as of the date of such termination, and the
beneficiary or beneficiaries under the Policy shall receive the balance of
those proceeds. Upon the death of the Employee while this Agreement is in
force, the Corporation agrees to take 

 5
 

 

such action as may be necessary to obtain payment from
the Insurer of the death benefit to the beneficiaries, including, but not
limited to, providing the Insurer with an affidavit as to the amount to which
the Corporation is entitled under this Agreement.

E.     Upon the
Corporation’s receipt of the amounts described in III.B. and C. above from the
Employee within the referenced sixty (60) day period, the Corporation shall
release all of its rights and privileges under the Assignment. If the
Corporation does not receive payment of such amounts within such sixty (60) day
period, the Employee will be deemed in default, and the Corporation thereafter
may exercise all of its rights and privileges under the Assignment which shall
be its sole and exclusive remedy for such default.

F.     Notwithstanding
any other provisions of this Article III, this Agreement shall continue in
effect and not terminate in the event of a termination of the employment of
Employee, at any time, under circumstances which result in the triggering of
change in control benefits upon a termination of employment under any written
Employment or Severance and Change in Control Agreement executed between the
Employee and the Company, and then in effect.

G.     Until the
Corporation receives the amount to which it is entitled under this Article upon
the termination of this Agreement, the Corporation shall remain a collateral
assignee of the Policy as long as the Policy remains in force.

ARTICLE IV

Governing Law and Notices

A.    This
Agreement shall be governed by and construed in accordance with the laws of the
State of Illinois.

B.     All
notices hereunder shall be in writing and sent by first class mail with postage
prepaid to each party at the address set forth in Exhibit B hereto. For 

 6
 

 

purposes of this Agreement, a party may change its
address from time to time by written notice to the other party.

ARTICLE V

Not a Contract of Employment

This Agreement shall not be deemed to constitute a
contract of employment between the Employee and the Corporation, nor shall any
provision hereof restrict the right of the Corporation to discharge the
Employee or restrict the right of the Employee to terminate his employment with
the Corporation. This Agreement shall not be considered to be an amendment or
modification of the terms of any other agreement between the Employee and the
Corporation.

ARTICLE VI

Amendment and Successors

The following
provisions are part of this Agreement and are intended to meet the requirements
of the Employee Retirement Income Security Act of 1974:

A.    The named
fiduciary:         The Corporation.

B.     The
funding policy under this Agreement is that all premiums on the Policy be
remitted to the Insurer when due, except that in the event of a Change in
Control, the payment of premiums shall be accelerated as provided in Article I
of this Agreement.

C.     Direct
payment by the Insurer is the basis of payment of benefits under this
Agreement, with those benefits in turn being based on the payment of premiums
as provided in the Agreement.

D.     For claims
procedure purposes, the “Claims Manager” shall be the Corporation.

 7
 

 

1.      If for
any reason a claim for benefits under this Agreement is denied by the
Corporation, the Claims Manager shall deliver to the claimant a written
explanation setting forth the specific reasons for the denial, pertinent
references to the section in this Agreement on which the denial is based, such
other data as may be pertinent and information on the procedures to be followed
by the claimant in obtaining a review of that claim, all written in a manner
calculated to be understood by the claimant. For this purpose:

(a)    The
claimant’s claim shall be deemed filed when presented orally or in writing to
the Claims Manager.

(b)    The Claims
Manager’s explanation shall be in writing delivered to the claimant within 30
days of the date the claim was filed.

2.      The
claimant shall have 60 days following the receipt of the denial of the claim to
file with the Claims Manager a written request for review of the denial. For
such review, the claimant or the claimant’s representative may submit pertinent
documents and written issues and comments.

3.      The
Claims Manager shall decide the issue on review and furnish the claimant with a
copy within 10 days of receipt of the claimant’s request for review of the
claim. The decision on review shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be understood by
the claimant, as well as specific references to pertinent provisions of the
Agreement on which the decision is based. If a copy of the decision is not so
furnished to the claimant within such 10 days, the claim shall be deemed denied
on review.

 8
 

 

IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the date first above written.

	
  CORPORATION:

  	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  

 

 9
 

 

EXHIBIT A

Assignment

This Assignment is made by the undersigned Owner
effective this          day of                     ,
20    .

Definitions:

A.             Assignee:       AAR CORP., a Delaware corporation

B.               Owner:                                                                                                                                                                                

C.               Insured:                                                                                                                                                                              

D.              Insurer:                                                                                                                                                                               

E.                Policy:                                                                                                                                                                                 

F.                Policy
Interest:   The Assignee’s Policy Interest shall be the amounts determined
under Article III of the Split Dollar Agreement. The Insurer shall be entitled
to rely on the Assignee’s certificate of the amount of its Policy Interest.

G.               Split
Dollar Agreement:   That certain agreement executed as of                     
between the Owner and the Assignee.

RECITALS:

A.             Under
the Split Dollar Agreement, the Assignee has agreed to assist the Owner in
payment of premiums on the Policy.

B.               In
consideration of such premium payments by the Assignee, the Owner here intends
to grant the Assignee certain limited interests in the Policy.

THEREFORE, for value received, it
is agreed:

1.                 Assignment
— The Owner hereby assigns, transfers and sets over to the Assignee, its
successors and assigns, the right to receive the amounts specified in Article III
of the Split Dollar Agreement. The Assignee shall own the cash value in the
Policy except as provided in Article III of the Split Dollar Agreement.

2.                 Retained
Rights — Except as expressly provided in Section 1, the Owner retains all
rights under the Policy without the consent of the Assignee, its successors and
assigns, including:

 10
 

 

(a)             The
right to change the owner, provided the Insurer consents to the change;

(b)            The
right to designate and change the beneficiary; and

(c)             The
right to further assign the policy or any remaining interest in it, provided
that any such further assignment shall be subject to this Assignment.

3.                 Insurer
— The Insurer is hereby authorized to recognize, and is fully protected in
recognizing the claims of the Assignee, its successors and assigns, to rights
hereunder, without investigating the reasons for such action by the Assignee,
its successors and assigns, or the validity or the amount of such claims, or
the existence of any default therein, or the application to be made by the
Assignee, its successors and assigns, of any amounts paid to the Assignee, its
successors and assigns. The signature of any authorized officer of the
Assignee, other than the Employee, its successors and assigns, shall be
sufficient for the exercise of its rights hereunder and the exercise of any
such right shall, to the extent thereof, operate to release or surrender the
interest of all parties, including successors and assigns, claiming any interest
in the Policy. The receipt by the Assignee, its successors and assigns, of all
amounts due under Article III of the Split Dollar Agreement shall be a full
discharge and release thereto to the Insurer.

4.                 Release
of Assignment — Upon payment to the Assignee, its successors and assigns, of
the amount due under Article III of the Split Dollar Agreement, the Assignee,
its successors and assigns shall execute a written release of this Agreement.

IN WITNESS WHEREOF, the Owner has executed this
Assignment as of the date first above written.

	
  

  	
   

  	
  OWNER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 11
 

 

EXHIBIT B

	
  Party

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
  AAR CORP.

  	
   

  	
  One AAR Place

  
	
   

  	
   

  	
  1100 N. Wood Dale Road

  
	
   

  	
   

  	
  Wood Dale, IL 60191

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 12

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