Amendment No. 2
to Employment Agreement dated June 1, 1994
BY AND BETWEEN AAR CORP. AND XXXXX X. XXXXXX
THIS AMENDMENT NO. 2 made this 29 day of May, 1997, 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, as amended on October 9, 1996 ("Agreement"), and
WHEREAS, the Company and Employee desire to further amend the Agreement as
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties agree to amend the Agreement as follows:
1. The second paragraph of subparagraph (a) of paragraph 9 is amended to
read as follows:
The term "Cause" means:
(A) 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;
(B) Employee intentionally disobeys or disregards a lawful and proper
direction of the Board or the Company; or
(C) 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
specifying the nature of the breach and demanding the cure thereof. For
purposes of this clause (C), 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 the 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 employment of Employee for unsatisfactory performance
(including failure to meet financial goals).
Termination for Cause shall be limited to a good faith finding by
resolution of the Board, setting forth the particulars thereof. Any such
resolution shall be final and binding upon Employee.
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2. Subparagraph (a) of paragraph 12 is amended to read as follows:
(a) In the event:
(I) a Change in Control of the Company 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) all base salary earned through the
date of termination, (B) any cash bonus earned
by Employee for the fiscal year of the Company
most recently ended prior to the date of
termination to the extent unpaid on
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the date of termination, (C) a prorata portion
of the 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 (assuming all performance
targets have been met) 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.
(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 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, or such lesser amount as Employee
may elect to take, subject to applicable
withholding. Employee
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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
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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 at his normal retirement age, as
defined in the AAR CORP. Retirement Plan or any
successor plan. Alternatively, Employee may
elect to receive such payment at his early
retirement age, as defined in the AAR CORP.
Retirement Plan or any successor plan, with a
corresponding
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actuarial reduction in the amount of such
payment, based upon the earlier date of payment.
(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 months from
the date of Employee's termination of
employment; provided, however, that the cost of
such outplacement services shall not exceed 3.5%
of the cash payment due to Employee pursuant to
subparagraph 12(a)(2) above.
3. Paragraphs (c) and (d) of Section 12 are redesignated as paragraphs
(d) and (e) respectively, and paragraph (c) is added to Section 12 as follows:
(c) In the event that a Change in Control has occurred, both for
purposes of this Agreement and for purposes of the AAR CORP.
Stock Benefit Plan, as amended ("Plan"), whether or not such
Change in Control has the prior written approval of a majority of
the Continuing Directors (as defined in the Plan), and
notwithstanding
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any conditions or restrictions contained in any agreement between
the Company and Employee related to any Award granted to Employee
under the Plan, 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, all
performance shares to be awarded hereunder shall be immediately
awarded assuming targeted 100% achievement, and 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.
4. Subparagraph (d)(i) of paragraph 12 is amended to read as
follows:
(I) Change in Control means the earliest of:
(a) any person (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended ("Exchange
Act")), has acquired (other than directly from the 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;
(b) the commencement by an entity, person, or group (other than
the Company or a subsidiary of the Company) of a
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tender offer or an exchange offer for more than 20% of the
outstanding voting stock of the Company;
(c) 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;
(d) 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; or
(e) the occurrence of any arrangement or understanding relating
to the Company which would give rise to a filing requirement
with the Securities and Exchange Commission pursuant to Rule
14F.1 of the Exchange Act Rules under the Securities
Exchange Act of 1934.
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5. Subparagraph (d)(ii)(1) of paragraph 12 is amended to read as
follows:
(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
IN WITNESS WHEREOF, the Company has caused this Amendment No. 2 to be
executed in its name by its duly authorized officer, and Employee has hereunto
set his hand, on this 29 day of May, 1997.
AAR CORP.
By: /s/ Xxx X. Xxxxxxx
------------------------------------
Xxx X. Xxxxxxx, Chairman
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
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Amendment No. 3
to Employment Agreement dated June 1, 1994
BY AND BETWEEN AAR CORP. AND XXXXX X. XXXXXX
THIS AMENDMENT NO. 3 made effective as of the 14th day of July, 1997, 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, as amended on October 9, 1996 and May 29, 1997
("Agreement"), and
WHEREAS, the stockholders of the Company approved the performance goals
for Employee established by the Compensation Committee of the Board of
Directors as set forth in this Amendment at the October 8, 1997 Annual Meeting
of Stockholders; and
WHEREAS, the Company and Employee desire to further amend the Agreement as
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties agree to amend the Agreement as follows:
That Appendix (i) to Xxxxx X. Xxxxxx'x Employment Agreement be amended to
read as follows:
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 units (payable in performance restricted
stock in the manner described below) to be determined at the end of
the four year performance period based on achievement of the following
specified performance goals in four categories over the 4-year
performance period:
A. The Company's cumulative percentage Total Return to Shareholders
as compared to that of the S&P 500 Composite Index Total Return
to Shareholders; and
B. The Company's cumulative percentage Total Return to Shareholders
as compared to that of its Peer Group Composite Index Total
Return to Shareholders; and
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C. The Company's average Return on Capital as compared to that of
the S&P 500 Composite Index Average Return on Capital; and
D. The Company's average Return on Capital as compared to that of
the Company's Peer Group Composite Index Average Return on
Capital.
- Restricted shares will be awarded out of treasury shares
according to the performance unit matrix below upon completion of
the four year performance period ending July 9, 2000.
- One share of restricted stock will be awarded for each
performance unit earned subject to a maximum dollar value of
$12,690,000 based on the NYSE closing price for the Company's
Common Stock on July 9, 2000; provided, however, in the event Xx.
Xxxxxx'x Employment Agreement is terminated following a Change in
Control of the Company (as defined in Xx. Xxxxxx'x Employment
Agreement) occurring prior to July 9, 2000 pursuant to the Change
in Control provisions of Xx. Xxxxxx'x Employment Agreement, the
above stated dollar value limit will be removed and one share of
restricted stock will be awarded for each performance unit
earned.
- The performance restricted shares awarded at the end of the four
year performance period will be restricted for three years: 50%
of the shares will vest on the first anniversary of the award;
50% of the shares will vest on the third anniversary of the
award.
- 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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PERFORMANCE UNIT AWARD MATRIX*
% 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 calculated
by linear interpolation.
** With respect to Total Return to Shareholders goals, 100% achievement
will be the median of the S&P 500 and the 60th percentile of the Peer
Group; with respect to the Return on Capital goals, 100% achievement will
be 80% of the median of the S&P 500 and 60th percentile of the Peer Group.
--> 360,000 options awarded in accordance with the following schedule:
Issue Date # of Option Shares
---------------- ------------------
July 14, 1997 100,000
January 1, 1998 130,000
January 1, 1999 130,000
- All such options will vest at the end of the performance period on
July 9, 2000; provided, however, in the event the dollar value limit
on the performance restricted stock award is removed due to a Change
in Control of the Company as described above, options not yet granted
under the above schedule shall not be awarded and any such options
already awarded shall lapse. The exercise price of all such options
will be $35.25, the NYSE closing price on July 14, 1997, the date of
Compensation Committee approval of this performance stock program.
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
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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).
IN WITNESS WHEREOF, the Company has caused this Amendment No. 3 to be
executed in its name by its duly authorized officer, and Employee has hereunto
set his hand, on this 12th day of November, 1997.
AAR CORP.
By: /s/ Xxx X. Xxxxxxx
-----------------------------
Xxx X. Xxxxxxx, Chairman
/s/ Xxxxx X. Xxxxxx
-----------------------------
Xxxxx X. Xxxxxx
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