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Vice President Severance Agreement

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AMENDED AND RESTATED
SEVERANCE AND CHANGE IN CONTROL AGREEMENT


This Amended and Restated Severance and Change in Control
Agreement ("Agreement") made and entered into as of the 1st
day of August, 2000, by and between AAR CORP., a Delaware
corporation ("Company"), and Michael J. Sharp ("Employee").


WHEREAS, the Company currently employs Employee as an employee at will in the capacity of Vice President, Controller and Chief Accounting Officer; 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 Employee's employment, Employee shall:


(a) well and faithfully serve the Company and do and perform assigned
duties and responsibilities in the ordinary course of Employee's
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 Employee's full time, energy and skill to the business of the
Company and Employee's 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 5
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 Employee's 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 Employee's 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.


3. BENEFITS. Employee shall be entitled to participate, according to the
eligibility provisions of each, in such welfare plans (including but not
limited to medical, dental, life, accident and disability insurance
programs), vacation, retirement plans and other fringe benefits as may be
in effect from time to time and available to other officers of the Company
during Employee's employment term. Employee shall also be entitled to
participate in such additional executive fringe benefits as may be
authorized from time to time by the President and Chief Executive Officer
of the Company. Employee shall be eligible to participate in the Company's
Supplemental Key Employee Retirement Plan as an key employee participant.


4. 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 Employee's 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, Employee shall not take any
electronically stored data, documents or other papers containing or
reflecting trade secrets, confidential information, secret processes,
know-how, or computer software programs from Company. Employee
acknowledges that Employee's employment hereunder will place Employee
in a position of utmost confidence and that Employee 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


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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 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.


5. NON-COMPETE; SEVERANCE.


(a) Employee agrees that during Employee's 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 5(b) or
5(c) below, Employee 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


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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 5 are 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
7(c)(i) below) for any reason other than Cause (as defined in 7(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 4 or 5(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 Employee's employment.


(c) If Employee terminates Employee's 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 5(b) above.


(d) Employee may terminate this Severance and Change in Control Agreement
effective immediately upon notice thereof in writing to 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


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or position from that held by Employee as Vice President, Controller
and Chief Accounting Officer 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 5 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 5(a) shall
become and be immediately amended to include only such duration, sc
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