Document:

Exhibit 10.6

 

THIRD AMENDMENT TO

AAR CORP. AMENDED AND RESTATED

SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN

 

 

WHEREAS,

AAR CORP., a Delaware corporation (the “Company”) maintains the

AAR CORP. Supplemental Key Employee Retirement Plan as amended and

restated effective April 11, 2000 (the “Plan”); and

 

WHEREAS,

the Company has reserved the right to amend the Plan and now deems it desirable

to do so to permit distributions from a Participant’s supplemental accounts in

the Plan, in certain circumstances, prior to the Participant’s termination of

employment with the Company.

 

NOW,

THEREFORE, the Plan is hereby amended, effective

October 10, 2002, to add Sections 4.6(e), (f) and (g) to the Plan as

follows:

 

“(e)         Notwithstanding

any provision in the Plan to the contrary, a Participant may elect a

distribution of all or any portion of the amounts credited to his Supplemental

Salary Deferral Account, his Supplemental Company Account, and his Supplemental

Profit Sharing Account, including gains and losses credited to the date of

distribution in accordance with Section 4.5, at any time if (i) he

elects such distribution by written instrument delivered to the Committee at

least six months in advance of the date such distribution is received, or

(ii) the distribution is subject to a forfeiture penalty equal to 10% of

the amount of the distribution.  Such

distribution shall be made in a method determined pursuant to

Section 4.6(d).

 

(f)            Notwithstanding

any provision in the Plan to the contrary, in the event of a potential change

in control of the Company, as determined solely by the Board in its discretion,

all amounts credited to each Participant’s Supplemental Salary Deferral

Account, his Supplemental Company Account, and his Supplemental Profit Sharing

Account, including gains and losses credited to the date of distribution in

accordance with Section 4.5, shall be distributed to him in a lump sum as

soon as practicable following the date of such determination by the Board.

 

(g)           Notwithstanding

any provision in the Plan to the contrary, in the event that the credit rating

of the Company drops below Investment Grade, all amounts credited to each

Participant’s Supplemental Salary Deferral Account, his Supplemental Company

Account, and his Supplemental Profit Sharing Account, including gains and

losses credited in accordance with Section 4.5 to the date of

distribution, shall be distributed to him in a lump sum as soon as practicable

following the first to occur of:  (i) a

drop in the credit rating of the Company below S&P BB or Moody’s Ba; (ii) a

drop in the Company’s market capitalization below $75 million for five (5)

consecutive trading days; (iii) a drop in the aggregate of cash and existing

available bank lines of the Company below $35 million; and (iv) receipt of a

notice of material adverse change under any of the Company’s then existing debt

agreements.

 

 

IN

WITNESS WHEREOF, this First Amendment has been

executed on this 19th day of December, 2002.

 

	

   

  	

  AAR CORP.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ DAVID P. STORCH

  
	

   

  	

   

  	

  David P. Storch, President

  

 

2

 

FOURTH AMENDMENT TO THE

AAR CORP.

SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN

 

 

                WHEREAS, AAR

CORP. (“Company”) adopted the Amended and Restated AAR CORP. Supplemental Key

Employee Retirement Plan (“SKERP”), effective April 11, 2000; and

 

                WHEREAS,

the Company amended the SKERP effective October 10, 2001, April 10, 2002 and

October 10, 2002, and deems it appropriate to further amend the SKERP in

certain respects;

 

                NOW, THEREFORE, the SKERP is hereby further amended, as follows, effective December

18, 2002:

 

                               1.      ARTICLE IV, SUPPLEMENTAL CONTRIBUTIONS, is

hereby amended to add a new section 4.3.1 as follows:

 

4.3.1        The

Compensation Committee of the Board may at any time, in its discretion,

designate any Participant to receive the benefit of an Additional Supplemental

Company Contributions from time to time in amounts specified by resolution of

the Compensation Committee.

 

Any

Additional Supplemental Company Contributions to be made for the benefit of a

Participant shall be credited to a Supplemental Company Account maintained

under the Plan under the name of such Participant as and when specified in the

Compensation Committee resolution authorizing and directing the Additional

Supplemental Company Contributions. 

Such Additional Supplemental Company Contributions shall be held and

administered hereunder in the same manner as regular Supplemental

Contributions.

 

“Additional

Supplemental Company Contribution” means the contribution made by the Company

for the benefit of a Participant pursuant to this Section 4.3.1 of the

Plan  in any Plan Year.

 

 

                IN WITNESS WHEREOF, this Fourth Amendment has been executed this 18th day of

December, 2002.

 

	

   

  	

  AAR CORP.

  
	

   

  	

   

  
	

   

  	

  By: 

  	

  /s/ DAVID P. STORCH

  
	

   

  	

  David P. Storch, PresidentExhibit

10.13

 

SECOND

AMENDMENT TO THE

AAR CORP. NONEMPLOYEE DIRECTORS’ DEFERRED COMPENSATION PLAN

 

 

WHEREAS, AAR CORP.

(“Company”) adopted the Amended and Restated AAR CORP. Nonemployee Directors’

Deferred Compensation Plan (“Plan”), effective April 8, 1997; and

 

WHEREAS, the

Company amended the Plan effective May 26, 2000, and deems it appropriate to

further amend the Plan in certain respects;

 

NOW, THEREFORE, the

Plan is hereby further amended, as follows, effective December 18, 2002:

 

1.             Amend

Section II – Plan Participants to read as follows:

 

“Each Nonemployee

Director shall become a Participant under the Plan by filing the written

Election Form described in Section III below with the Plan Administrator

appointed by the Compensation Committee of the Board (“Committee”) with respect

to (i) the annual Board retainer (“Retainer”) and (ii) the Committee retainer

and meeting fees (“Meeting Fees”) payable to the Nonemployee Director for his

services as a member of the Board.”

 

2.             Amend

Section III – Deferral Elections, subparagraphs (a)(ii) and (e)(ii), to read as

follows:

 

“(a)(ii)     If an election is not made pursuant to

clause (i) above, a Participant shall receive quarterly payment of the Retainer

in cash.”

 

“(e)(ii)     An election made by a Participant in the calendar

year in which he first becomes eligible to participate in the Plan, or

following an amendment to the Plan, may be made pursuant to an Election Form

delivered to the Plan Administrator within 30 days after the date on which he

initially becomes eligible to participate, or a Plan amendment becomes

effective, and such Election Form shall be effective with respect to Retainers

and Meeting Fees earned from and after the date such Election Form is delivered

to the Plan Administrator.”

 

3.             Add

the following new paragraphs (g) and (h) to Article V, Distribution of

Accounts:

 

 

(g)           Notwithstanding any provision in the

Plan to the contrary, a Participant may elect a distribution of all or any

portion of the amounts credited to his Stock Unit Account or Cash Account at

any time if (i) he elects such distribution by written instrument delivered to

the Plan Administrator at least six months in advance of the date of

distribution is received, or (ii) the distribution is subject to a forfeiture

penalty equal to 10% of the amount of distribution.  Such distribution shall be made pursuant to the provisions of the

Plan.

 

(h)           Notwithstanding any provision in the

Plan to the contrary, all amounts credited to a Participant’s Stock Unit

Account and Cash Account shall be distributed to him in a lump sum, if payable

in cash, or by issuance of shares of common stock, if payable in stock, as soon

as practicable following the first to occur of (i) a drop in the credit rating

of the Company below S&P BB or Moody’s Ba; (ii) a drop in the Company’s

market capitalization below $75 million for five (5) consecutive trading days;

(iii) a drop in the aggregate of cash and existing available bank lines of the

Company below $35 million; and (iv) receipt of a notice of material adverse change

under any of the Company’s then existing debt agreements.

 

 

IN WITNESS WHEREOF, this

Second Amendment has been executed this 18th day of December, 2002.

 

	

   

  	

  AAR CORP.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ DAVID P. STORCH

  	

   

  
	

   

  	

   

  	

  David P. Storch,

  President

  

 

2Exhibit

10.14

 

SEVERANCE

AND CHANGE IN CONTROL AGREEMENT

 

 

This Severance and

Change in Control Agreement (“Agreement”) made and entered into as of the 14th

day of January, 2000, by and between AAR CORP., a Delaware corporation

(“Company”), and James J. Clark (“Employee”).

 

 

WHEREAS, the Company

currently employs Employee as an employee at will in the capacity of Vice

President; and

 

WHEREAS, Employee desires

the Company to pay Employee certain severance payments upon a Change in Control

of AAR CORP. and upon termination of employment prior to a Change in Control;

and

 

WHEREAS, the Company is

willing to pay Employee severance payments under certain circumstances if

Employee agrees to confidentiality, non-compete and certain other covenants.

 

NOW, THEREFORE, in

consideration of the mutual agreements herein set forth and other good and

valuable consideration, the parties hereto agree as follows:

 

1.                                       Employment.  Employee will continue employment with the

Company as an at will employee subject to the terms and conditions hereinafter

set forth.

 

2.                                       Duties.  During the continuation of his employment,

Employee shall:

 

(a)                                  well

and faithfully serve the Company and do and perform assigned duties and

responsibilities in the ordinary course of his employment and the business of

the Company (within such limits as the Company may from time to time

prescribe), professionally, faithfully and diligently.

 

(b)                                 devote

his full time, energy and skill to the business of the Company and his assigned

duties and responsibilities, and to the promotion of the best interests of the

Company; provided that Employee shall not (to the extent not inconsistent with

Section 4 below) be prevented from (a) serving as a director of any corporation

consented to in advance in writing by the Company, (b) engaging in charitable,

religious, civic or other non-profit community activities, or (c) investing his

personal assets in such form or manner as will not require any substantial

services on his part in the operation or affairs of the business in which such

investments are made or which would detract from or interfere or cause a

conflict of interest with performance of his duties hereunder.

 

 

(c)                                  observe

all policies and procedures of the Company in effect from time to time

applicable to employees of the Company including, without limitation, policies

with respect to employee loyalty and prohibited conflicts of interest.

 

2

 

3.                                       Confidential

Information, Assignment of Inventions.

 

(a)                                  Employee

acknowledges that the trade secrets, confidential information, secret processes

and know-how developed and acquired by AAR CORP. and its affiliates or

subsidiaries (together the “Affiliated Companies”) are among their most

valuable assets and that the value of such information may be destroyed by

unauthorized disclosure.  All such trade

secrets, confidential information, secret processes and know-how imparted to or

learned by Employee in the course of his employment with respect to the

business of the Affiliated Companies (whether acquired before or after the date

hereof) will be deemed to be confidential and will not be used or disclosed by

Employee, except to the extent necessary to perform his duties and, in no

event, disclosed to anyone outside the employ of the Affiliated Companies and

their authorized consultants and advisors, unless (i) such information is or

has been made generally available to the public, (ii) disclosure of such

information is required by law in the opinion of Employee’s counsel (provided

that written notice thereof is given to Company as soon as possible but not

less than 24 hours prior to such disclosure), or (iii) express written

authorization to use or disclose such information has been given by the

Company.  If Employee ceases to be employed

by the Company for any reason, he shall not take with him any electronically

stored data, documents or other papers containing or reflecting trade secrets,

confidential information, secret processes, know-how, or computer software

programs.  Employee acknowledges that

his employment hereunder will place him in a position of utmost confidence and

that he will have access to confidential information concerning the operation

of the business of the Affiliated Companies, including, but not limited to, manufacturing

methods, developments, secret processes, know-how, computer software programs,

costs, prices and pricing methods, sources of supply and customer names and

relations.  All such information is in

the nature of a trade secret and is the sole and exclusive property of the

Affiliated Companies and shall be deemed confidential information for the

purposes of this paragraph.

 

(b)                                 Employee

hereby assigns to the Company all rights that Employee may have as author,

designer, inventor or otherwise as creator of any written or graphic material,

design, invention, improvement, or any other idea or thing whatever that

Employee may write, draw, design, conceive, perfect, or reduce to practice

during employment with the Company or within 120 days after termination of such

employment, whether done during or outside of normal work hours, and whether

done alone or in conjunction with others (“Intellectual Property”), provided,

however, that 

 

3

 

Employee reserves

all rights in anything done or developed entirely by Employee on Employee’s own

personal time and without the use of any Company equipment, supplies,

facilities or information, or the participation of any other Company employee,

unless it relates to the Company’s business or reasonably anticipated business,

or grows out of any work performed by Employee for the Company.  Employee will promptly disclose all such

Intellectual Property developed by Employee to the Company, and fully cooperate

at the Company’s request and expense in any efforts by the Company or its

assignees to secure protection for such Intellectual Property by way of

domestic or foreign patent, copyright, trademark or service mark registration

or otherwise, including executing specific assignments or such other documents

or taking such further action as may be considered necessary to vest title in

Company or its assignees and obtain patents or copyrights in any and all

countries.

 

4.                                       Non-Compete;

Severance.

 

(a)                                  Employee

agrees that during his continuation of employment with the Company and for one

(1) year thereafter so long as the Company makes severance payments to Employee

pursuant to subsections 4(b) or 4(c) below, he shall not, without the express

written consent of the Company, either alone or as a consultant to, or partner,

employee, officer, director, or stockholder of any organization, entity or

business, (i) take or convert for Employee’s personal gain or benefit or

for the benefit of any third party, any business opportunities which may be of

interest to the Company or any Affiliated Company which Employee becomes aware

of during the term of his employment; (ii) engage in direct or indirect

competition with the Company or any Affiliated Company within 100 miles of any

location within the United States of America or any other country where the

Company or any Affiliated Company does business from time to time during the

term hereof; (iii) solicit in connection with any activity which is

competitive with any of the businesses of the Company or any Affiliated

Company, any customers of the Company or any Affiliated Company; (iv) solicit

for employment any sales, marketing or management employee of Company or any

Affiliated Company or induce or attempt to induce any customer or supplier of

the Company or any Affiliated Company to terminate or materially change such

relationship.  Company and Employee

acknowledge the reasonableness of the foregoing covenants not to compete and

non-solicitation, including but not limited to the geographic area and duration

of time which are a part hereof, and further, that the restrictions stated in

this Section 4 are

 

4

 

reasonably

necessary for the protection of Employer’s legitimate proprietary

interests.  This covenant not to compete

may be enforced with respect to any geographic area in which the Company or any

Affiliated Company does business during the term hereof.  Nothing herein shall prohibit Employee from

being the legal or equitable holder, solely for investment purposes, of less

than 5% of the capital stock of any publicly held corporation which may be in

direct or indirect competition with the Company or any Affiliated Company.

 

(b)                                 The

Company will pay Employee, upon termination of Employee’s employment by the

Company prior to a Change in Control (as defined in 6(c)(i) below) for any

reason other than Cause (as defined in 6(c)(iv) below), severance each month

for 12 months, in an amount (subject to applicable withholding) equal to 1/12

of Employee’s base salary; and, further, if the Company pays discretionary

bonuses to its officers for the fiscal year in which Employee’s employment is

terminated, Employee will be paid a bonus in a lump sum at the time any such

bonuses are paid to other officers or at such time as the Severance Period is

complete, whichever is later (with interest at prime rate plus one percentage

point from the earlier of such dates), (1) for the completed fiscal year

preceding termination if such bonus has not been paid prior to termination, and

(2) for the fiscal year in which employment is terminated, prorata for the

period prior to termination of employment based on Employee’s performance

during such period; provided, however, that (i) all such monthly payment

obligations shall terminate immediately upon Employee obtaining full time

employment in a comparable position in terms of salary level, and (ii) all such

payment obligations shall terminate or lapse immediately upon any breach by

Employee of Section 3 or 4(a) of this Agreement or if Employee shall commence

any action or proceeding in any court or before any regulatory agency arising

out of or in connection with termination of his employment.

 

(c)                                  If

Employee terminates his employment or Employee’s employment is terminated by

the Company for Cause (as defined below), the Company may elect (but is not

required to), by written notice thereof to Employee, within five (5) days of

any such termination of Employee’s employment with the Company prior to a

Change in Control (as defined below), to pay Employee severance as provided in

and subject to the provisions of subsection 4(b) above.

 

(d)                                 Employee

may terminate this Severance and Change in Control Agreement effective

immediately upon notice thereof in writing to

 

5

 

Company at any

time while still employed within a sixty (60) calendar day period immediately

following the effective date of any reduction by Company in (i) Employee’s

level of responsibility or position from that held by Employee as Vice

President on the effective date of this Agreement, or (ii) Employee’s level of

compensation, including retirement benefits in effect immediately prior to any

such change.

 

(e)                                  If

at any time, any clause or portion of this Section 4 shall be deemed invalid or

unenforceable by the laws of the jurisdiction in which it is to be enforced by

reason of being vague or unreasonable as to duration, geographic scope, nature

of activities restricted, or for any other reason, this provision shall be

considered divisible as to such portions and the foregoing restrictions set

forth in 4(a) shall become and be immediately amended to include only such

duration, scope or restriction and such event as shall be deemed reasonable and

enforceable by the court or other body having jurisdiction to enforce this

Agreement; and the parties hereto agree that the restrictions, as so amended,

shall be valid and binding as though the invalid or unenforceable portion had

not been involved herein.

 

(f)                                    The

Employee acknowledges and agrees that the Company would be irreparably harmed

by violations of Section 3 or Section 4(a) above, and in recognition thereof,

the Company shall be entitled to an injunction or other decree of specific

performance with respect to any violation thereof (without any bond or other

security being required) in addition to other available legal and equitable

remedies.

 

5.                                       Termination

of Employment.

 

(a)                                  Upon

and after termination of employment howsoever arising, Employee shall, upon

request by Company:

 

(1)                                  immediately

return to the Company all correspondence, documents, business

calendars/diaries, or other property belonging to the Company which is in his

possession,

 

(2)                                  immediately

resign from any office Employee holds with the Company or any Affiliated Company;

and

 

(3)                                  cooperate

fully and in good faith with the Company in the resolution of all matters

Employee worked on or was involved in during Employee’s employment with the

Company.  Employee’s

 

6

 

cooperation will

include reasonable consultation by telephone. 

Further, in connection therewith, Employee will, at Company’s request

upon reasonable advance notice and subject to Employee’s availability, make

himself available to Company in person at Company’s premises, for testimony in

court, or elsewhere; provided, however, that in such event, Company shall

reimburse all Employee’s reasonable expenses and pay Employee a reasonable per

diem or hourly stipend.

 

6.                                       Change in

Control.

 

(a)                                  In

the event (i) a Change in Control of AAR CORP. occurs and (ii) (A) at any time

during the 24 month period commencing on the date of the Change in Control the

Company terminates Employee’s employment for other than Cause or Disability, or

Employee terminates his employment for Good Reason, in either case by written

notice to the other party (including the particulars thereof), and having given

the other party the opportunity to be heard with respect thereto, or (B)

Employee’s employment with the Company terminates for any reason other than

Disability or death during the 30 day period commencing on the expiration of

the aforementioned 24 month period, then:

 

(1)                                  The

Company shall promptly pay to Employee, in a lump sum, a cash payment in an

amount equal to the sum of (A) all base salary earned through the date of

termination, (B) any annual cash bonus earned by Employee for the fiscal year

of the Company most recently ended prior to the date of termination to the

extend unpaid on the date of termination, (C) a prorata portion of the annual

cash bonus, including the value of any restricted stock grant in lieu of annual

cash bonus, Employee would have earned had he been employed by the Company on

the last day of the fiscal year in which the date of termination occurs (as if

all performance targets have been met or, in the event the bonus is of the

“discretionary” type, the bonus shall be based on a percentage of base salary

which is not less than percentage of base salary received as bonus for the

preceding fiscal year) that is applicable to the period commencing on the first

day of such fiscal year and ending on the date of termination, and (D) any and

all other benefits and amounts earned by Employee prior to the date of

termination to the extent unpaid, all subject to applicable withholding.

 

7

 

(2)                                  The

Company shall promptly pay to Employee in a lump sum, a cash payment in an

amount equal to three times Employee’s total compensation (base salary plus

annual cash bonus) for either the fiscal year of the Company most recently

ended prior to the date of termination, or the preceding fiscal year, whichever

is the highest total compensation, subject to applicable withholding.  Employee may elect to take payment of any

amounts on a schedule of his own choosing; provided that such schedule shall be

completed no later than three years from the date of Employee’s termination of

employment.

 

(3)                                  Employee

and his dependents shall continue to be covered by, and receive benefits, in

accordance with the terms of, all of the Company’s medical, dental and life

insurance plans for three years following the date of termination, and at no

less than the levels he and his dependents were receiving immediately prior to

the Change in Control.  Employee’s

dependents shall be entitled to continued coverage pursuant to the preceding

sentence for the balance of such three year period in the event of Employee’s

death during such period.  The period

during which Employee and his dependents are entitled to continuation of group

health plan coverage pursuant to Section 4980B of the Internal Revenue Code of

1986, as amended, and Part 6 of Title I of the Employee Retirement Income

Security Act of 1974, as amended, shall commence on the date next following the

expiration of the aforementioned three year period.

 

(4)                                  Employee

shall receive an additional retirement benefit, over and above that which

Employee would normally be entitled to under the Company’s retirement plans or

programs applicable to Employee, equal to the actuarial equivalent of the

additional amount that Employee would have earned under such retirement plans

or programs had he accumulated three additional continuous years of

service.  Such amount shall be paid to

Employee in a cash lump sum payment on the Employee’s Retirement Date.

 

(5)                                  The

Company, at its expense, shall provide Employee with outplacement services of a

nationally recognized outplacement firm until the earlier of (a) the Employee’s

attainment of employment, or (b) the date eighteen (18) months from the date of

Employee’s termination of employment; provided, however, that

 

8

 

the cost of such

outplacement services shall not exceed 3.5% of the cash payment due to Employee

pursuant to subsection 6(a)(2) above.

 

(6)                                  The

amounts paid to Employee under this Change in Control provision applicable to

Employee shall be considered severance pay in consideration of past service

Employee has rendered to the Company and in consideration of Employee’s

continued service from the date hereof to entitlement of those payments.

 

(b)                                 In

the event that a Change in Control occurs, whether or not such Change in

Control has the prior written approval of a majority of the Continuing

Directors (as defined in the AAR CORP. Stock Benefit Plan), and notwithstanding

any conditions or restrictions contained in any agreement between the Company

and Employee related to any Award granted to Employee under the Plan, all

Options or Limited Rights, or both, granted to Employee under the Plan will

become immediately exercisable, and all restrictions on Restricted Stock

granted to Employee under the Plan will immediately lapse.

 

(c)                                  For

purposes of this Agreement

 

(i)                                     “Change

in Control” means the earliest of:

 

(1)                                  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

Company) 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 Company

entitled to vote for the election of directors; or

 

(2)                                  the

effective time of (i) a merger or consolidation or other business combination

of the Company with one or more other corporations as a result of which the

holders of the outstanding voting stock of the Company 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 Company other than to an entity of which the Company owns at

least 80% of the voting stock; or

 

9

 

(3)                                  the

election over any period of time to the Board of Directors of the Company

without the recommendation or approval of the incumbent Board of Directors of

the Company, of the lesser of (i) three directors, or (ii) directors

constituting a majority of the number of directors of the Company then in

office.

 

(ii)                                  “Good

Reason” means:

 

(1)                                  a

material reduction in the nature or scope of Employee’s duties,

responsibilities, authority, power or functions from those enjoyed by Employee

immediately prior to the Change in Control, or a material reduction in

Employee’s compensation (including benefits), occurring at any time during the

two-year period immediately after the Change in Control; or

 

(2)                                  if

the incumbent in the position of President and CEO of the Company on August 8,

1997 is not the President and CEO of the Company at the time of termination, a

good faith determination by Employee that as the result of a Change in Control

and a material change in employment circumstances at any time during the

immediate two year period after the Change in Control, he is unable to carry

out his assigned duties and responsibilities in a manner consistent with the

practices, standards, values or philosophy of the Company immediately prior to

the Change in Control; or

 

(3)                                  a

relocation of the primary place of employment of at least 100 miles.

 

(iii)                               “Disability” means:

 

(1)                                  a

physical or mental condition which has prevented Employee from substantially

performing his assigned duties for a period of 180 consecutive days and which

is expected to continue to render Employee unable to substantially perform his

duties on a full-time basis and otherwise meets the benefit eligibility

requirements of the Company’s Long Term Disability Welfare Benefit Plan.  The Company will make reasonable

accommodation for any

 

10

 

handicap of Employee as may be required by applicable

law.

 

In the event of

termination by the Company for Disability after a Change in Control, a good

faith determination of the existence of a Disability shall be made by

resolution of the Compensation Committee of the Board of Directors of the Company,

in its sole discretion, setting forth the particulars of the Disability which

shall be final and binding upon the Employee. 

The Company may require the submission of such medical evidence as to

the condition of the Employee as it may deem necessary in order to arrive at

its determination of the occurrence of a Disability, and Employee will

cooperate in providing any such information. 

Employee will be provided with reasonable opportunity to present

additional medical evidence as to the medical condition of Employee for

consideration prior to the Board making its determination of the occurrence of

a Disability.

 

Upon termination

of Employment by Company for Disability after a Change in Control, Employee

will receive Disability payments pursuant to the Company’s short and long term

Disability welfare benefit plans then in effect according to the terms of such

plans and continue to be eligible to participate in the Company’s medical,

dental and life insurance programs then in effect and available to officers of

the Company in accordance with their terms for a period of 3 years from the

date of such termination of this Agreement.

 

(iv)                              “Cause”

means:

 

(1)                                  Employee

engages, during the performance of his duties hereunder, in acts or omissions

constituting dishonesty, intentional breach of fiduciary obligation or

intentional wrongdoing or malfeasance;

 

(2)                                  Employee

intentionally disobeys or disregards a lawful and proper direction of the Board

or the Company; or

 

(3)                                  Employee

materially breaches the Agreement and such breach by its nature, is incapable

of being cured, or such breach remains uncured for more than 10 days following

receipt by Employee of written notice from the Company

 

11

 

specifying the

nature of the breach and demanding the cure thereof.  For purposes of his clause (3), a material breach of the

Agreement that involves inattention by Employee to his duties under the

Agreement shall be deemed a breach capable of cure.

 

Without limiting the generality of the foregoing, the

following shall not constitute Cause for the termination of employment of

Employee or the modification or diminution of any of his authority hereunder:

 

(1)           any

personal or policy disagreement between Employee and the Company or any member

of the Board; or

 

(2)           any

action taken by Employee in connection with his duties hereunder, or any

failure to act, if Employee acted or failed to act in good faith and in a

manner he reasonably believed to be in and not opposed to the best interest of

the Company and he had no reasonable cause to believe his conduct was unlawful;

or

 

(3)           termination

of Employee’s employment for overall unsatisfactory performance (including, but

not limited to, failure to meet financial goals).

 

Termination for

Cause shall be limited to a good faith finding by resolution of the

Compensation Committee of the Board,. setting forth the particulars

thereof.  Any such action shall be taken

at a regular or specially called meeting of the Compensation Committee of the

Board, after a minimum 10 days notice thereof to Employee, with termination of

Employee’s employment with the Company for Cause listed as an agenda item.  Employee will be given a reasonable

opportunity to be heard at such meeting with counsel present if Employee

desires.  Any such resolution shall be

final and binding.

 

Upon termination

of employment by Company for Cause, no further compensation or benefits shall

accrue or be payable to Employee by the Company, except for any compensation,

bonus or other benefits which have accrued to Employee prior to the date of any

such termination.

 

12

 

Nothing herein

shall be construed to prevent the Company from terminating Employee’s

employment at any time for any reason or for no reason.

 

(d)                                 The

Company will pay reasonable legal/attorney’s fees incurred by Employee in

connection with enforcement of any right or benefit under this Section 6.

 

(e)                                  The

Company shall promptly pay Employee a gross-up bonus in an amount equal to (i)

all excise taxes payable under Section 280G of the Internal Revenue Code on any

amounts constituting “golden parachute” payments, plus (ii) any federal, state,

and local income taxes and excise taxes (including FICA) payable by Employee on

such gross-up bonus in order to put Employee in the same position he would have

been in if the excise tax provision (Section 280G) did not apply.

 

7.                                       Changes

in Business.  The

Company, acting through its Board of Directors, will at all times have complete

control over the Company’s business and retirement and other employee health

and welfare benefit plans (“Plans”). 

Without limiting the generality of the foregoing, the Company may at any

time or times change or discontinue any or all of its present or future operations

or Plans (subject to their terms), may close or move any one or more of its

divisions or offices, may undertake any new servicing or sales operation, may

sell any one or more of its divisions or offices to any company not controlled,

directly or indirectly, by the Company or may take any and all other steps

which its Board of Directors, in its exclusive judgment, shall deem desirable,

and Employee shall have no claim or recourse against the Company, its officers,

directors or employees by reason of such action except for enforcement of the

provisions of Sections 4 and 6 of this Agreement.

 

8.                                       Severance

Payment as Sole Obligation. 

Except as expressly provided in Sections 4 and 6 above, no further

compensation, payments, liabilities or benefits shall accrue or be payable to

Employee upon or as a result of termination of Employee’s employment for any

reason whatsoever except for any compensation, bonus or other benefits which

accrued to Employee prior to the date of employment termination.

 

The amounts paid

to the Employee under Section 4 and 6 of this Agreement shall be considered

severance pay in consideration of past services Employee

 

13

 

has rendered to

the Company and in consideration of Employee’s continued service from the date

hereof to entitlement to those payments.

 

9.                                       Notices.  Any notice or other instrument or thing

required or permitted to be given, served or delivered to any of the parties

hereto shall be delivered personally or deposited in the United States

mail, with proper postage prepaid, telegram, teletype, cable or facsimile

transmission to the addresses listed below:

 

	

  (a)

  	

   

  	

  If to the Company, to:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  AAR

  CORP.

  
	

   

  	

   

  	

  1100

  N. Wood Dale Road

  
	

   

  	

   

  	

  Wood

  Dale, Illinois 60191

  
	

   

  	

   

  	

  Attention:  Chairman

  
	

   

  	

   

  	

   

  
	

  With a copy to:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  AAR

  CORP.

  
	

   

  	

   

  	

  1100

  N. Wood Dale Road

  
	

   

  	

   

  	

  Wood

  Dale, Illinois 60191

  
	

   

  	

   

  	

  Attention:  General Counsel

  
	

   

  	

   

  	

   

  
	

  (b)

  	

   

  	

  If to Employee, to:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  James

  J. Clark

  
	

   

  	

   

  	

  Singel

  326, 1016 AE

  
	

   

  	

   

  	

  Amsterdam,

  The Netherlands

  

 

or to such other

address as either party may from time to time designate by notice to the

other.  Each notice shall be effective

when such notice and any required copy are delivered to the applicable address.

 

10.                                 Non-Assignment.

 

(a)                                  The

Company shall not assign this Agreement or any rights or obligations hereunder

without the prior written consent of Employee, and any attempted unpermitted

assignment shall be null and void and without further effect; provided,

however, that, upon the sale or transfer of all or substantially all of the

assets of the Company, or upon the merger by the Company into or the

combination with another corporation or other business entity, or upon the

liquidation or

 

14

 

dissolution of the

Company, this Agreement will inure to the benefit of and be binding upon the

person, firm or corporation purchasing such assets, or the corporation

surviving such merger or consolidation, or the shareholder effecting such

liquidation or dissolution, as the case may be.  After any such transaction, the term Company in this Agreement

shall refer to the entity which conducts the business now conducted by the

Company.  The provisions of this

Agreement shall be binding upon and inure to the benefit of the estate and

beneficiaries of Employee and upon and to the benefit of the permitted

successors and assigns of the parties hereto.

 

(b)                                 The

Employee agrees on behalf of himself, his heirs, executors and administrators,

and any other person or person claiming any benefit under him by virtue of this

Agreement, that this Agreement and all rights, interests and benefits hereunder

shall not be assigned, transferred, pledged or hypothecated in any way by the

Employee or by any beneficiary, heir, executor, administrator or other person claiming

under the Employee by virtue of this Agreement and shall not be subject to

execution, attachment or similar process. 

Any attempted assigned, transfer, pledge or hypothecation or any other

disposition of this Agreement or of such rights, interests and benefits

contrary to the foregoing provisions or the levy or any execution, attachment

or similar process thereon shall be null and void and without further effect.

 

11.                                 Severability.

If any term, clause or provision contained herein is declared or held invalid

by any court of competent jurisdiction, such declaration or holding shall not

affect the validity of any other term, clause or provision herein contained.

 

12.                                 Construction.

Careful scrutiny has been given to this Agreement by the Company, Employee, and

their respective legal counsel. 

Accordingly, the rule of construction that the ambiguities of the

contract shall be resolved against the party which caused the contract to be

drafted shall have no application in the construction or interpretation of this

Agreement or any clause or provision hereof.

 

13.                                 Entire

Agreement. This Agreement and the other agreements referred to

herein set forth the entire understanding of the parties and supersede all

prior agreements, arrangements and communications, whether oral or written,

pertaining to the subject matter hereof.

 

15

 

14.                                 Waiver.  No provision of this Agreement may be

amended, modified, waived or discharged unless such amendment, modification,

waiver or discharge is agreed to in writing signed by Employee and an

authorized officer of the Company.  No

waiver by either party hereto at any time of any breach by the other party

hereto of, or compliance with, any condition or provision of this Agreement to

be performed by such other party shall be deemed a waiver of similar or

dissimilar provisions or conditions at the same or at any prior or subsequent

time.

 

15.                                 Governing

Law. The validity, interpretation, construction and performance

of this Agreement shall be governed by and construed in accordance with the

laws of the State of Illinois without regard to its conflicts of law

principles.

 

16.                                 Execution.  This Agreement may be executed in multiple

counterparts, each of which shall be deemed an original and which shall

constitute but one and the same Agreement.

 

WITNESS the due execution

of this Agreement by the parties hereto as of the day and year first above

written.

 

Employer:

 

AAR CORP.

 

 

	

  By: 

  	

   /s/ HOWARD A. PULSIFER

  	

   

  
	

   

  
	

  Title:  Vice President

  
	

   

  
	

  Employee:

  
	

   

  
	

   

  
	

  /s/ JAMES J. CLARK

  	

   

  
	

   

  
	

  James J. Clark

  
				

 

 

16

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