Document:

Exhibit 10.1

 

AAR CORP.

 

NON-QUALIFIED STOCK OPTION AGREEMENT

(“Agreement”)

 

Subject to the provisions set forth herein and the
terms and conditions of the AAR CORP. Stock Benefit Plan (“Plan”), the terms of
which are hereby incorporated by reference, and in consideration of the
agreements of the Grantee herein provided, AAR CORP., a Delaware corporation (“Company”),
hereby grants to the Grantee an option entitling the Grantee to purchase from
the Company common stock of the Company, par value $1.00 per share (“Common
Stock”), in the number of shares at the purchase price per share, and on the
schedule, set forth in the Company’s notification of option grant letter to
Grantee dated                     
and incorporated herein by reference (“Option”), subject to the terms and
conditions set forth herein:

 

1.                                       Acceptance by Grantee.  The
exercise of the Option is conditioned upon the acceptance by the Grantee of the
terms and conditions of the Option as set forth in this Agreement.  The Grantee must confirm acceptance of the Agreement
on Smith Barney’s web site (www.benefitaccess.com). If the Grantee does not
accept the Agreement within 30 days from the date of the notification of the
Agreement, the Option grant referenced herein shall expire unless the acceptance
date is extended in writing signed by the Company.

 

2.                                       Termination of Employment.

 

(a)                                  In General.  If
the Grantee’s employment with the Company and all subsidiaries of the Company
is terminated for any reason other than for Retirement, death, Disability or
Cause, the unvested portion of the Grantee’s Option shall expire on the date of
such termination of employment and the vested portion of the

 

 

Grantee’s Option shall continue to be exercisable
until the earlier of (i) three months after such termination of employment
or (ii) the date the Option expires in accordance with its terms.

 

(b)                                 Retirement.  If
the Grantee’s employment with the Company and all subsidiaries of the Company
is terminated by reason of Retirement, the Option shall continue to vest and
become exercisable in accordance with its terms and may be exercised by the
retired Grantee in the same manner and to the same extent as if the Grantee had
continued employment during that period; provided, however, that (i) if
the Grantee dies within three months following Retirement but before the Option
expires, paragraph 3(c)(ii) shall apply and (ii) if the Grantee dies
later than three months following Retirement but before the Option expires, the
then unvested portion of the Option shall expire on the date of such death and
the vested portion of the Option shall continue to be exercisable by the
Grantee’s Successor until the date that the Option expires by its terms.  For this purpose, “Retirement” means the Grantee’s
voluntary termination of employment, or his termination of employment by the
Company or a subsidiary without Cause, when he has (i) attained age 65 or (ii) attained
age 55 and his age plus the number of his consecutive years of service with the
Company and subsidiaries is at least 75.

 

(c)                                  Death.  If
(i) the Grantee’s employment with the Company and all subsidiaries of the
Company is terminated by reason of death or (ii) the Grantee dies within three
months after the termination of employment with the Company and all subsidiaries
for reasons other than Cause, the unvested portion of the Option shall expire
on the date of such death and the vested portion of the Option shall continue
to

 

2

 

be exercisable until the earlier of (i) one year
after the Grantee’s death or (ii) the date the Option expires in
accordance with its terms.

 

(d)                                 Disability.  If
the Grantee’s employment with the Company and all subsidiaries is terminated by
reason of Disability, the Option shall continue to vest and become exercisable
until the earlier of (i) one year after such termination of employment or (ii) the
date the Option expires in accordance with its terms, and during such period
the Option may be exercised by the disabled Grantee; provided, however, that if
the Grantee dies after termination of employment but prior to the date the
Option expires, the unvested portion of the Option shall expire on the date of
such death and the vested portion of the Option shall continue to be
exercisable until the Option expires as described herein.  For this purpose, “Disability” means the
inability of the Grantee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for
a continuous period of not less than 12 months.

 

(e)                                  Cause. 
If the Grantee’s employment is terminated by the Company or any
subsidiary of the Company for Cause, the Option shall expire immediately upon such
termination of employment and no portion of the Option shall be exercisable
thereafter.  For this purpose, “Cause”
means (i) the Grantee’s dishonesty, fraud or breach of trust, gross
negligence or substantial misconduct in the performance of, or substantial nonperformance
of, his assigned duties or willful violation of Company policy, (ii) any
act or omission by the Grantee that is a substantial cause for a regulatory
body with jurisdiction over the Company to request or recommend the suspension
or removal of the participant or to impose sanctions upon the Company or the Grantee,
or

 

3

 

(iii) a material breach by the Grantee of any
applicable employment agreement between him and the Company.  The Company shall have the sole discretion to
determine whether a Grantee’s termination of employment is for Cause.

 

(f)                                    Restrictive Covenant.  If
at any time prior to the expiration of the Option, the Grantee, without the
Company’s express written consent, directly or indirectly, alone or as a member
of a partnership, group or joint stock venture or as an employee, officer,
director, or greater than 1% stockholder of any corporation, or in any capacity
engages in any activity which is competitive with any of the businesses conducted
by the Company or its affiliated companies any time during the Grantee’s term
of employment, (i) the Option shall immediately expire and become
unexercisable, (ii) the Grantee shall forfeit and return all shares of
Common Stock acquired and then held by the Grantee pursuant to the exercise of
any portion of this Option, and (iii) the Grantee shall immediately pay to
the Company an amount equal to the appreciation realized on any shares of
Common Stock acquired and sold or otherwise disposed of in connection with the
exercise of this Option, as of the date sold.

 

3.                                       Change in Control. 
In the event a Change in Control occurs, whether or not such Change in
Control has the prior written approval of a majority of the Continuing
Directors, and notwithstanding any conditions or restrictions contained in this
Agreement, the outstanding Option shall become immediately exercisable on the
date of such Change in Control with respect to all shares of Common Stock
covered thereby, whether vested or not and shall remain exercisable until the
Option expires.

 

4.                                       Change in Outstanding Shares. 
Any increase or decrease in the number of outstanding shares of Common
Stock of the Company occurring through

 

4

 

stock splits, stock dividends, stock consolidations,
spin-offs, other distributions of assets to stockholders or assumption or
conversion of outstanding Options due to an acquisition after the Date of Grant
of the Option shall be reflected proportionately in the number of shares of
Common Stock subject to the Option, and a proportionate reduction or increase,
as applicable, shall be made in the Option Price Per Share hereunder. Any
fractional shares resulting from such adjustment shall be eliminated. If
changes in capitalization other than those considered above shall occur, the
Board shall make such adjustment in the number or class of shares purchasable
upon exercise of the Option and in the Option Price Per Share as the Board in
its discretion may consider appropriate, and all such adjustments shall be
conclusive upon all persons.

 

5.                                       Exercise of Option.  Notice
of an election to exercise any portion of the Option, specifying the portion
thereof being exercised and the exercise date, shall be given by the Grantee, or
the Grantee’s personal representative in the event of the Grantee’s death or Disability
necessitating a Court approved personal representative, by notifying Smith
Barney pursuant to the on-line exercise procedures set forth on the AAR Stock
Benefit Plan online exercise web site (www.benefitaccess.com).

 

6.                                       Payment of Exercise Price and Withholding. 
Upon any exercise of the Option, an amount necessary to pay the exercise
price and to satisfy applicable tax withholding requirements, including those
arising under federal, state and local income tax laws, will be due and payable
at the time of exercise prior to the issuance of any shares of Common Stock pursuant
to such exercise.

 

The Grantee may pay the exercise price and satisfy the
minimum withholding requirements by one or more of the following methods:  (i) in cash, (ii) in

 

5

 

cash received from a
broker-dealer to whom the Grantee has submitted an exercise notice and
irrevocable instructions to deliver the purchase price and amount of tax
withholding to the Company from the proceeds of the sale of shares of Common
Stock subject to the Option, (iii) by delivery to the Company of other
Common Stock owned by the Grantee that is acceptable to the Company, valued at
its fair market value on the date of exercise, (iv) by certifying to
ownership by attestation of such previously owned Common Stock, or (v) by having
shares withheld from the Common Stock otherwise distributable to the Grantee
upon exercise of the Option. A Grantee’s election pursuant to the preceding
sentence must be made at the time of exercise of such Option and must be
irrevocable.

 

7.                                       Option Not Transferable.  The
Option may be exercised only by the Grantee during the Grantee’s lifetime and
may not be transferred other than by will, the applicable laws of descent or
distribution, or an assignment subject to and meeting the requirements of Section 11
of the Plan and made in accordance with Company procedures in effect from time
to time for approval by the Company and consummation of the assignment (copies of
procedures and forms are available from the Corporate Secretary upon request).
The Option shall not otherwise be transferred, assigned, pledged or
hypothecated for any purpose whatsoever and is not subject, in whole or in
part, to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge or hypothecation or other disposition of the Option, other
than in accordance with the terms set forth herein, shall be void and of no
effect.

 

8.                                       No Rights as a Stockholder.  Neither
the Grantee nor any other person entitled to exercise the Option under the
terms hereof shall be, or have any of

 

6

 

the rights or privileges of, a stockholder of the
Company in respect of any of the shares of Common Stock issuable on exercise of
the Option, unless and until such shares shall have been actually issued.

 

9.                                       Miscellaneous.

 

(a)                                  In the event the Option shall be
exercised in whole or in part, the number of Shares of Common Stock subject to
the Option shall be reduced accordingly.

 

(b)                                 When the Option expires, such expiration
shall occur at the Company’s close of business on the date of expiration.

 

(c)                                  Nothing in the Option shall confer on the
Grantee any right to be or to continue in the employ of the Company or any of
its subsidiaries or shall interfere in any way with the right of the Company or
any of its subsidiaries to terminate the employment of the Grantee at any time
for any reason or no reason.

 

(d)                                 The Option shall be exercised only in
accordance with such Company administrative procedures as may be in effect from
time to time.

 

(e)                                  The Option and this Agreement shall be
construed, administered and governed in all respects under and by the laws of
the State of Illinois.

 

(f)                                    This Agreement has been examined by the
parties hereto, and accordingly the rule of construction that ambiguities
be construed against a party which causes a document to be drafted shall have
no application in the construction or interpretation hereof. If any part of
this Agreement is held invalid for any reason, the remainder hereof shall
nevertheless remain in full force and effect.

 

7

 

(g)                                 This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and any prior
understanding or representation of any kind antedating this Agreement
concerning such subject matter shall not be binding upon either party except to
the extent incorporated herein. No consent, waiver, modification or amendment
hereof, or additional obligation assumed by either party in connection
herewith, shall be binding unless evidenced by a writing signed by both parties
and referring specifically hereto. No consent, waiver, modification or amendment
with respect hereto shall be construed as applicable to any past or future events
other than the one in respect of which it was specifically made.

 

(h)                                 This Agreement shall be construed
consistent with the provisions of the Plan and in the event of any conflict
between the terms of this Agreement and the terms of the Plan, the terms of the
Plan shall control and any terms of this Agreement which conflict with Plan
terms shall be void.

 

(i)                                     Capitalized terms used herein and not defined
herein will have the meaning set forth in the Plan or the notification of grant
letter.

 

Questions concerning the provisions of this
Agreement should be directed to the Company’s General Counsel: 630/227-2050;
fax 630/227-2059.

 

*                                                                                         *                                                                                         *

 

By accepting this Agreement, you irrevocably agree
to be bound by the terms hereof. To accept this Agreement, please follow the
acceptance procedures set forth below:

 

	
  Step
  1:

  	
   

  	
  View
  your Grant Summary (confirm that the number of shares granted matches that
  shown in the option grant letter you received from the Company).

  
	
   

  	
   

  	
   

  
	
  Step
  2:

  	
   

  	
  Read
  and review the documentation.

  

 

8

 

	
  Step
  3:

  	
   

  	
  Confirm
  the review/acceptance of this Agreement.

  
	
   

  	
   

  	
   

  
	
  Step
  4:

  	
   

  	
  Receive
  an online confirmation of your acceptance of this Agreement.

  

 

9Exhibit
10.2

 

AAR CORP.

 

Performance Restricted Stock
Agreement

(“Agreement”)

 

Subject to the provisions of the AAR CORP. Stock
Benefit Plan (“Plan”), the terms of which are hereby incorporated by reference
herein, and in consideration of the agreements of the Grantee herein provided,
AAR CORP., a Delaware corporation (“Company”), hereby grants to the Grantee a
performance restricted stock award (“Award”), effective                     
(“Date of Award”), in the number of shares of common stock (“Common Stock”) of
the Company, $1.00 par value (“Award Shares”) set forth in the Company’s
Long-Term Performance Restricted Stock Award Program for FY          
and the Company’s award letter to the Grantee dated                     ,
subject to the forfeiture and nontransferability provisions hereof and the
other terms and conditions set forth herein:

 

1.             Acceptance By Grantee.  The Award is
conditioned upon the acceptance by the Grantee of the terms and conditions of
the Award as set forth in this Agreement. 
The Grantee must confirm acceptance of the Agreement on Smith Barney’s
web site (www.benefitaccess.com). If the Grantee does not accept the Agreement
within 30 days from the date of the notification of the Agreement, the Award
referenced herein shall expire unless the acceptance date is extended in
writing signed by the Company.

 

2.             Restrictions. The Grantee represents that he is accepting the
Award Shares without a view toward distribution of said Award Shares and that
he will not sell, assign, transfer, pledge or otherwise encumber the Award
Shares during the period commencing on the Date of Award and ending on the date
the restrictions

 

 

applicable to such Award Shares are released pursuant
to this Agreement (“Restrictive Period”).

 

3.             Release of Restrictions. Subject to the provisions of paragraph 4, the
restrictions described in paragraph 2 above shall be released with respect to     %
of the Award Shares on             ,
20    ,     % of the Award Shares on             ,
20     and the balance of the Award Shares on             ,
20    , except as follows (the first two releases to be
rounded down to the nearest whole share and the third release to include the
rounded down shares):

 

(a)           In General.  If the
Grantee’s employment with the Company and all subsidiaries of the Company
terminates prior to the last day of the Restrictive Period for any reason other
than death, Disability or Retirement, the Grantee shall forfeit to the Company
all Award Shares not previously released from the restrictions of paragraph 2
hereof.

 

(b)           Retirement.  If the
Grantee’s employment with the Company and all subsidiaries of the Company
terminates by reason of Retirement prior to the last day of the Restrictive
Period, the Restrictive Period shall terminate in accordance with the
restriction release schedule set forth above in the first clause of this
paragraph 3 as to the Award Shares not previously released; provided, however,
that if the Grantee dies after Retirement and prior to the last day of the
Restrictive Period, the Grantee’s date of death will be treated as the date on
which his employment with the Company and all subsidiaries of the Company has
terminated, and the provisions of paragraph 3(c) shall apply in
determining the release of restrictions as to the Award Shares not previously
released.  For this purpose, “Retirement”
means the Grantee’s voluntary termination of employment, or his termination of
employment by the Company or a

 

2

 

subsidiary without Cause (as defined in the Plan),
when he has (i) attained age 65 or (ii) attained age 55 and his age
plus the number of his consecutive years of service with the Company and
subsidiaries is at least 75.

 

(c)           Death or Disability.

 

(i)            If the Grantee’s employment with the Company and all
subsidiaries of the Company terminates by reason of death or Disability before
the third anniversary of the Date of Award, the Restrictive Period shall
terminate as to the difference between half of the total number of Award Shares
and those Award Shares previously released. The remaining Award Shares shall be
forfeited to the Company.  For this
purpose, “Disability” means the inability of the Grantee to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12
months.

 

(ii)           If the Grantee’s employment with the Company and all
subsidiaries of the Company terminates by reason of death or Disability after
the third anniversary of the Date of Award, the Restrictive Period shall
immediately terminate as to all of the Award Shares not previously released.

 

(d)           Restrictive Covenant.  If at any
time prior to the Award Shares’ release from restrictions hereunder, the
Grantee, without the Company’s express written consent, directly or indirectly,
alone or as a member of a partnership, group, or joint venture or as an
employee, officer, director, or greater than 1% stockholder of any corporation,
or in any capacity engages in any activity which is competitive with any of the
businesses conducted by the Company or its affiliated companies at any time
during the Grantee’s term of employment, the Grantee shall

 

3

 

forfeit to the Company all Award Shares not previously
released from the restrictions of paragraph 2 hereof.

 

4.             Change in Control. In the event of a Change in Control of the Company,
whether or not such change has the prior written approval of the Continuing
Directors, the Restrictive Period shall terminate as to all Award Shares not
previously released.

 

5.             Change in Outstanding Shares. In the event of any change in the
outstanding shares of Common Stock occurring through stock splits, stock
dividends, stock consolidations, spin-offs, other distributions of assets to
stockholders or assumption or conversion of outstanding Awards due to an
acquisition after the Date of Award, the Award Shares shall be treated in the
same manner in any such transaction as other shares of Common Stock. Any
additional shares of Common Stock received by the Grantee with respect to the
Award Shares in any such transaction shall be subject to the same restrictions
as are then applicable to those Award Shares for which the additional shares
have been issued.

 

6.             Rights of Grantee. As the holder of the Award Shares, the Grantee is
entitled to all of the rights of a stockholder of AAR CORP. with respect to any
of the Award Shares, when issued, including, but not limited to, the right to
receive dividends declared and payable since the Date of Award.

 

7.             Shares. In aid of the restrictions set forth in paragraph 2,
the Grantee will be required to execute a stock power in favor of the Company
which will be cancelled upon release of restrictions with respect to Award
Shares released.  Award Shares shall be
held by the Company in electronic book entry form on the records of the Company’s
Transfer Agent, together with the executed stock power, for the account of

 

4

 

the Grantee until such restrictions are released
pursuant to the terms hereof, or such Award Shares are forfeited to the Company
as provided by the Plan or this Agreement. The Grantee shall be entitled to the
Award Shares as to which such restrictions have been released, and the Company
agrees to issue such Award Shares in electronic form on the records of the
Transfer Agent. Upon request by the Grantee, the Transfer Agent will transfer
such released Award Shares in electronic form to the Grantee’s broker for the
Grantee’s account or issue certificates in the name of the Grantee representing
the Award Shares for which restrictions have been released.

 

8.             Legend. The Company may, in its discretion, place a legend
or legends on any electronic shares or certificates representing Award Shares
issued to the Grantee that the Company believes is required to comply with any
law or regulation.

 

9.             Committee Powers. The Committee may subject the Award Shares to such
conditions, limitations or restrictions as the Committee determines to be
necessary or desirable to comply with any law or regulation or with the
requirements of any securities exchange. At any time during the Restrictive
Period, the Committee may reduce or terminate the Restrictive Period otherwise
applicable to all or any portion of the Award Shares.

 

10.           Withholding Taxes. The Grantee shall pay to the Company an amount
sufficient to satisfy all minimum tax withholding requirements, including those
arising under federal, state and local income tax laws, prior to the delivery
of any Award Shares.  Payment of the
minimum withholding requirement may be made by one or more of the following
methods:  (i) in cash, (ii) in
cash received from a broker-dealer to whom the Grantee has submitted
irrevocable instructions to deliver the amount of withholding tax to the
Company from the proceeds of the sale of shares of Common

 

5

 

Stock subject to the Award, (iii) by delivery to
the Company of other Common Stock owned by the Grantee that is acceptable to
the Company, valued at its fair market value on the date of payment, (iv) by
certifying to ownership by attestation of such previously owned Common Stock,
or (v) by having shares of Common Stock withheld from the Award Shares
otherwise distributable to the Grantee. 
Payment shall be made pursuant to the on-line procedures set forth on
the AAR Stock Benefit Plan online web site through Smith Barney
(www.benefitacess.com).

 

11.           Miscellaneous.

 

(a)           Nothing in the Award shall confer on the Grantee any
right to be or to continue in the employ of the Company or any of its
subsidiaries or shall interfere in any way with the right of the Company or any
of its subsidiaries to terminate the employment of the Grantee at any time for
any reason or no reason.

 

(b)           The Award and this Agreement shall be construed,
administered and governed in all respects under and by the laws of the State of
Illinois.

 

(c)           This Agreement has been examined by the parties
hereto, and accordingly the rule of construction that ambiguities be
construed against a party which causes a document to be drafted shall have no
application in the construction or interpretation hereof. If any part of this
Agreement is held invalid for any reason, the remainder hereof shall
nevertheless remain in full force and effect.

 

(d)           This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and any prior
understanding or representation of any kind antedating this Agreement
concerning such subject matter shall not be binding upon either party except to
the extent incorporated herein. No consent, waiver, modification or amendment
hereof, or additional obligation assumed by

 

6

 

either party in connection herewith, shall be binding
unless evidenced by a writing signed by both parties and referring specifically
hereto. No consent, waiver, modification or amendment with respect hereto shall
be construed as applicable to any past or future events other than the one in
respect of which it was specifically made.

 

(e)           This Agreement shall be construed consistent with the
provisions of the Plan and in the event of any conflict between the terms of
this Agreement and the terms of the Plan, the terms of the Plan shall control
and any terms of this Agreement which conflict with Plan terms shall be void.

 

(f)            Capitalized terms used herein and not defined herein
will have the meaning set forth in the Plan.

 

Questions concerning the provisions of this
Agreement should be directed to the Company’s Corporate Secretary:
630/227-2050; fax 630/227-2059.

 

*              *              *

 

By accepting this Agreement, you irrevocably agree
to be bound by the terms hereof. To accept this Agreement, please follow the
procedures set forth below:

 

	
  Step
  1:

  	
   

  	
  View
  your Award Summary (confirm that the number of shares awarded matches that
  shown in the Award grant letter you received from the Company).

  
	
   

  	
   

  	
   

  
	
  Step
  2:

  	
   

  	
  Read
  and review the documentation.

  
	
   

  	
   

  	
   

  
	
  Step
  3:

  	
   

  	
  Confirm
  the review/acceptance of this Agreement.

  
	
   

  	
   

  	
   

  
	
  Step
  4:

  	
   

  	
  Receive
  an online confirmation of your acceptance of this Agreement.

  

 

7

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