The letter agreement further provides that Mr.Storch’s existing employment agreement with the Company dated as of April18, 2017 will terminate on May31, 2018, except for certain provisions, including covenants regarding confidential information and non-competition.

Post-Retirement Agreement

The Company also entered into a separate letter agreement with Mr.Storch regarding services to be rendered to the Company following his retirement. Under the terms of this letter agreement, Mr.Storch will become Non-Executive Chairman of the Board on June1, 2018. He will receive compensation in accordance with the Company’s annual director compensation program, as well as a separate annual retainer of $180,000 and reimbursement in an annual amount not to exceed $30,000 for an outside office for each year Mr.Storch serves as Non-Executive Chairman. The Company also will provide Mr.Storch with secretarial support through November30, 2018 and reimbursement after that date for secretarial support in connection with his duties as Non-Executive Chairman of the Board of Directors.

Further, as contemplated under Mr.Storch’s existing employment agreement, Mr.Storch will provide consulting services to the Company for the one-year period beginning June1, 2018 and ending May31, 2019. These services will include advising the new Chief Executive Officer, assisting with the development and implementation of the Company’s business strategy and capital allocation plans, representing the Company to customers, suppliers and industry partners, and other services as reasonably requested by the Board. For his consulting services, Mr.Storch will receive an annual retainer of $475,000, payable monthly, and reimbursement of business expenses. The consulting agreement may be renewed annually by mutual agreement.

The foregoing descriptions of the agreements are qualified in their entirety by reference to the full text of the agreements, copies of which are filed with this Current Report as Exhibits 10.2 and 10.3 incorporated herein by reference.

Amended and Restated Employment Agreement with Mr.Holmes

The Company entered into an amended and restated employment agreement with Mr.Holmes, its President and Chief Operating Officer. The agreement will become effective June1, 2018 and provides that Mr.Holmes will become President and Chief Executive Officer of the Company on that date. The agreement is for a three-year term through May31, 2021 and automatically renews thereafter for one-year periods unless either party gives 90 days advance written notice.

The amended and restated employment agreement increases Mr.Holmes’ base salary to $750,000 and provides that he will receive a $2.25 million target value of long-term stock awards for the fiscal year ending May31, 2019, with the type of stock awards to be determined by the Compensation Committee at its regularly scheduled July2018 meeting.

During the term of his employment, Mr.Holmes will continue to be entitled to specified fringe benefits, including reimbursement of travel and related expenses relating to membership in non-for-profit educational organizations, financial planning and tax preparation services, executive physical and payment of reasonable legal fees incurred to negotiate the agreement. Mr.Holmes will continue to be entitled to an annual matching contribution of up to 10% of base salary and bonus under the Company’s non-qualified retirement plan.

The agreement contains the following severance provisions:

If prior to a Change in Control (or later than 18 months following a Change in Control), either the Company terminates Mr.Holmes’ employment without Cause or Mr.Holmes terminates his employment for Good Reason, Mr.Holmes is entitled to:

(i) Continued payment of his base salary for 24 months; and

(ii) A lump sum payment equal to two times the average of the cash incentive bonus paid to him in the preceding two fiscal years of the Company.

If Mr.Holmes terminates his employment without Good Reason, or if the Company terminates Mr.Holmes’ employment for Cause, the Company may, but is not required to, pay the above-described severance benefits.

Payments cease upon a breach of the confidentiality and non-compete provisions set forth in the agreement (the non-compete provisions remain in effect for the two-year period following any such termination of employment).

If Mr.Holmes’ employment is terminated within 18 months following a Change in Control, either by the Company other than for Cause or Disability or by Mr.Holmes for Good Reason, he is entitled to:

(i) An immediate lump sum payment equal to the sum of (A)a pro rata portion of the bonus that would have been paid to him had he remained employed until the end of the fiscal year and all performance goals were met at target and (B)three times (up from two times under his prior agreement) his base salary and cash bonus for either the most recently completed fiscal year prior to the termination or the preceding fiscal year, whichever produces the higher amount;

(ii) Continued coverage for Mr.Holmes and his spouse under the Company’s welfare and fringe benefit plans for three years (up from two times under his prior agreement) following termination of employment (he and his spouse can elect continued medical and dental coverage to COBRA at the end of such two-year period);

(iii) Full vesting of all outstanding stock-based awards granted under the Company’s 2013 Stock Plan, with performance-based restricted stock shares awarded based on the higher of the target or actual Company performance through the employment termination date (outstanding stock-based awards granted under the Company’s Stock Plan (its prior stock plan) fully vest on a Change in Control, regardless of whether a termination of employment occurs); and

(iv) Reasonable legal fees incurred by Mr.Holmes in enforcing the agreement.

If Mr.Holmes’ employment terminates due to Disability, he will continue to receive coverage under the Company’s medical, dental and life insurance plans for two years following such termination.

Any payment under the agreement in connection with Mr.Holmes’ termination of employment that would be considered deferred compensation under Section409A of the Internal Revenue Code will be delayed six months following such termination to the extent necessary to comply with Section409A.

The terms Change in Control, Cause, Good Reason and Disability are defined in the agreement.

The foregoing description of the agreement is qualified in its entirety by reference to the full text of the agreement, a copy of which is filed with this Current Report as Exhibit10.4 and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

ExhibitIndex

AAR CORP Exhibit
EX-10.1 2 a18-14362_1ex10d1.htm EX-10.1 Exhibit 10.1   EXECUTION COPY   FIRST AMENDMENT TO PURCHASE AGREEMENT   This First Amendment to Purchase Agreement,…
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About AAR CORP. (NYSE:AIR)

AAR CORP. (AAR) is a provider of services and products to the commercial aviation and government and defense markets. The Company operates in two segments: Aviation Services, which consists of supply chain and maintenance, repair and overhaul (MRO) activities, and Expeditionary Services, which includes airlift and mobility activities. Its services and products include aviation supply chain and parts support programs; MRO of aircraft and landing gear; design and manufacture of specialized pallets, shelters and containers; expeditionary airlift services; aircraft modifications, and aircraft and engine sales and leasing. It serves commercial, defense and governmental aircraft fleet operators, original equipment manufacturers and independent service providers around the world. Its landing gear overhaul facility is in Miami, Florida, where it repairs and overhauls landing gear, brakes and actuators for various types of commercial and military aircraft.