Document:

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

  

 

3Exhibit
10.6

 

October 7, 2007

 

Personal
and Confidential

 

Jonathan A. Greenberg

1520 Heather Hill Lane

Hunt Valley, MD  21030

 

	
  Re:

  	
  Designation
  of Eligibility for Retention and Severance under the

  
	
   

  	
  AAI
  Corporation Change in Control Retention and Severance Plan

  

 

Dear Jonathan:

 

We are pleased
to inform you that AAI Corporation (the “Company”) has selected you to be
eligible to receive a Retention Payment and Severance Benefits, described
below, under the AAI Corporation Change in Control Retention and Severance Plan
(the “Plan”). All terms and conditions for payment of these benefits are
described in this letter agreement and the Plan (copy enclosed). The Severance
Benefits provided under the Plan are in lieu of any payments and/or benefits
provided under any severance or termination arrangement, plan, policy or
practice of the Company and its affiliates. Since this letter agreement and the
Plan memorialize your right to receive a Retention Payment and Severance
Benefits (assuming all conditions are satisfied), we encourage you to retain
these materials with your other important papers.

 

I.              Retention Payment Under the Plan.

 

(a)           Amount of 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.

 

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

 

(b)           Impact
of Separation from Service Prior to Payment Date.

 

If, after a Change in Control but prior to the Payment Date, 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.

 

II.            Severance
Benefits Under the Plan.

 

(a)           Severance
Benefits.

 

If, within 24 months following a Change in Control, you incur a
Separation from Service with the Company, either without Cause or by you for
Good Reason, you will be entitled to receive the Severance Benefits 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 for Severance
Benefits but your severance 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. You will not
be entitled to Severance Benefits 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.

 

2

 

Your Severance Benefits will consist of the following:

 

•      Severance Payment:  You will receive a lump sum Severance Payment
equal to your Base Salary in effect immediately prior to your separation for twelve
months,  less applicable taxes;

 

•      Continued Health Coverage
at Active Employee Rates:  Subject to your timely election of
continuation coverage under the Consolidated Budget Omnibus Reconciliation Act
of 1985, as amended (“COBRA”), and your continued co-payment of required
premiums at the same coverage level and cost to you as if you were an active
employee of the Company (excluding, for purposes of calculating cost, your
ability to pay premiums with pre-tax dollars), continued participation in the
Company’s group medical and dental (to the extent permitted under applicable
law and the terms of such plan) at the Company’s expense for twelve months, provided
that you are eligible and remain eligible for COBRA coverage, and if you
obtain other employment that offers health benefits, such continuation of
coverage by the Company shall immediately cease; and

 

•      All other employee benefits
awarded to you in the event of a change in control under your Letter Agreement
with the Company dated August 17, 2004, to the extent you qualify under the
terms of the plan.

 

Payment of your Severance Benefits is conditioned on your execution
(and non-revocation) of an Agreement and Release (as provided in Section 8.1 of
the Plan).

 

Payment of your Severance Benefits 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.

 

Severance Benefits payable under the Plan supersede all other severance
payable to you by the Company under any plan, policy or arrangement, including
an approved, executed agreement with the Company or any affiliate that has not
expired as of the date of your termination (“Individual Severance Agreement”). In
order to be eligible to receive Severance Benefits under the Plan, you must
consent (by signing this agreement in the space provided on the last page of
this letter agreement) to the foregoing waiver of any and all severance otherwise
payable to you under your Individual Severance Agreement upon your Separation
from Service on or after a Change in Control, as described in this letter
agreement and the Plan.

 

(b)           Timing
for Severance Payment.

 

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, your Severance Payment will not be paid until the date
that is six months after the date of your Separation from Service unless your
separation is due to Disability.

 

3

 

Following this delay period, the Severance Payment will be paid in a
single sum cash payment as soon as administratively feasible. If your severance
is payable in installments, your first payment will consist of the regular
installment amount plus all of the payments that were not permitted to be paid
to you during the delay period.

 

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 Severance Payment will be paid in a single sum cash payment
within 10 days after the date of your Separation from Service.

 

III.           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).

 

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, including but not limited to the waiver of any and all
severance payable to you under your Individual Severance Agreement upon a
Separation from Service on or after a Change in Control, as described herein;
and that you are signing this letter agreement voluntarily and of your own free
will.

 

4

 

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.

 

You have
thirty (30) days from the date of this letter in which to accept this offer,
after which it is withdrawn.

 

 

	
   

  	
  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, and, except as set forth in Section II(a), supersedes in its entirety
any and all prior agreements, understandings, offers or representations
relating to the subject matter hereof, whether oral or written, and that there
are no other terms, express or implied.

 

	
  Accepted and Agreed:

  
	
   

  
	
   

  
	
  /s/ Jonathan A. Greenberg

  	
   

  
	
  Jonathan A. Greenberg

  
	
   

  
	
  Dated: October 7, 2007

  

 

5

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