EXHIBIT 10.7
AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT DATED JUNE 1, 1994
BY AND BETWEEN AAR CORP. AND XXXXX X. XXXXXX
This Amendment No. 1 made this 9th day of October, 1996 by and between AAR
CORP., a Delaware corporation ("Company"), and Xxxxx X. Xxxxxx ("Employee").
WHEREAS, the Company and Employee entered into an Employment Agreement
dated as of June 1, 1994 ("Agreement"); and
WHEREAS, Employee was elected Chief Executive Officer of Company by the
Board of Directors of Company on July 9, 1996, effective October 9, 1996; and
WHEREAS, the Company and Employee desire to amend Agreement as set forth
herein to reflect certain mutually agreed to changes to the terms and conditions
thereof as a result of Employee's assumption of responsibilities as Chief
Executive Officer.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereto agree as follows:
1. Subparagraphs (a), (b), and (c) of paragraph 3 are amended to (i)
change the title "President and Chief Operating Officer" to read "President and
Chief Executive Officer" wherever it occurs and (ii) change the title "Chairman
and Chief Executive Officer" to read "Chairman of the Board" wherever it occurs.
2. Paragraph 4 is amended to change the Base Salary rate set forth
therein to "Five Hundred Thousand Dollars ($500,000) per fiscal year".
3. Subparagraph (b) of paragraph 5 is deleted and the following is
inserted in lieu thereof:
"(b) LONG TERM INCENTIVE BONUS AWARDS. Employee will receive
restricted stock awards, stock option grants and performance shares of
stock in the Company in accordance with appendix (i) hereto, which is
incorporated herein by reference."
4. Subparagraph (e) of paragraph 9 is amended to delete "Chief Executive
Officer" in the first sentence and insert "Chairman of the Board" in lieu
thereof.
5. Paragraph 12 is amended to add a new subparagraph 12(a)(4) to read as
follows:
"(4) All option grants and restricted stock awards provided for
hereunder which have not then become vested (including released restrictions) or
exercisable shall immediately become exercisable or vested as the case may be,
and all performance shares to be awarded hereunder shall be immediately awarded,
assuming targeted 100% achievement."
6. Subparagraph (c)(i) of paragraph 12 is deleted and the following
inserted in lieu thereof:
"(i) 'Change in Control' shall be deemed to have occurred on the
earliest of:
(a) the receipt by the Company of a Schedule 13D or other
statement filed under Section 13(d) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), indicating that any entity, person, or group
has acquired beneficial ownership, as that term is defined in rule 13d-3
under the Exchange Act, of more than twenty percent of the outstanding
capital stock of the Company entitled to vote for the election of
directors;
(b) the commencement by an entity, person, or group (other
than the Company or a subsidiary of the Company) of a tender offer or an
exchange offer for more than twenty percent of the outstanding voting stock
of the Company;
(c) the effective time of (i) a merger or consolidation 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
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such merger or consolidation hold less than 60% of the voting stock of the
surviving or resulting corporation, or (ii) a transfer of substantially all
of the property of the Company other than to an entity of which the Company
owns at least 80% of the voting stock; or
(d) the election 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.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to be
executed in its name by its duly authorized officer, and Employee has hereunto
set his hand on this 9th day of October, 1996.
AAR CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxx, Vice President
/s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx
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Appendix (i)
to Employment Agreement
dated June 1, 1994
AAR CORP.
CEO
LONG-TERM INCENTIVE COMPENSATION
RESPONSIBILITY AND AUTHORITY
The Compensation Committee of the Board of Directors will be responsible for the
administration of the CEO's long-term incentive compensation arrangements. Any
interpretation or adjustments will be by the Committee, whose decision is final.
OVERALL STRUCTURE OF THE PLAN
Long-term incentive compensation for the CEO will consist of:
-- 200,000 options awarded at the beginning of the 4-year performance
period from date of appointment as CEO (July 9, 1996), vesting at 25%
of the award on each of the 4 anniversary dates of the award. This
grant will be made at fair market value as of the grant date.
-- Up to 15,000 restricted shares in each of the 4 years of the
performance period with the initial grant at the beginning of the
4-year performance period and subsequent grant on the next three
successive anniversary dates of the CEO's appointment as CEO. Award
will be made at fair market value on the date of the grant with
vesting of 33% of the award on each of the 3 anniversary dates
following the award. The actual number of shares granted is at the
discretion of the Committee.
-- Up to 360,000 "performance" shares to be awarded without restriction
on the fourth anniversary date of the CEO's appointment subject to
achievement of specified performance goals in four categories over the
4-year period.
A. AAR's cumulative % Total Return to Shareholders as compared to
the S&P 500.
B. AAR's cumulative % Total Return to Shareholders as compared to
the Peer Group.
C. AAR's average Annual Return on Capital as compared to the S&P
500.
D. AAR's average Annual Return on Capital as compared to the Peer
Group.
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DEFINITIONS:
-- Total Return to Shareholders -- Cumulative price appreciation plus
dividends (reinvested).
-- Peer Group -- Selected companies used from time to time for performance
comparison in AAR proxy. Any deletions or additions to the peer group
during the performance period will cause measurement/calculation changes on
a prospective basis from the date of the change in the peer group
(beginning of the fiscal year in which the proxy is issued).
-- Return on Capital -- Earnings before interest and taxes (EBIT) divided by
total capital (debt plus equity minus cash).
PERFORMANCE SHARE AWARD SCHEDULE*
% of Target Achieved** Shares Award for Each of the Four Criteria
-------------------- ------------------------------------------
0-80 0
81 30,000
100 60,000
120 75,000
120+ 90,000
* Results between the amounts on the schedule will be computed by linear
interpolation.
** 100% achievement will be eighty percent (80%) of the median of the S&P 500
and the 60th percentile of the Peer Group.
ADDITIONAL CRITERIA FOR PERFORMANCE SHARE AWARDS
-- No shares will be awarded in any category of award in which the result
for AAR is negative.
-- Change of control (as elsewhere defined in this agreement) will cause
all options under this plan to become vested/exercisable, all
restricted stock to vest and performance shares to be awarded assuming
target (100%) achievement.
-- At the direction of the Compensation Committee, transactions which
significantly alter the capital structure of AAR may be excluded from
the measurement period (in whole or in part) in a manner determined by
the Committee.
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