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Vice President-trading Group Severance Agreement

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This Severance and Change in Control Agreement ("Agreement") made and entered into as of the 24th day of February, 1995, by and between AAR CORP., a Delaware corporation ("Company"), and Philip C. Slapke ("Employee").

WHEREAS, the Company currently employs Employee as an employee at will in the capacity of Vice President-Trading Group; 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 his employment, Employee shall:

(a) well and faithfully serve the Company and do and perform assigned
duties and responsibilities in the ordinary course of his 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 his full time, energy and skill to the business of the
Company and his 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 4 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 his 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 his 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.


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


(a) Employee agrees that during his continuation of employment with the Company and for one (1) year thereafter so long as the Company makes the severance payments to Employee pursuant to subsections 4(b) or 4(c) below, he 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 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 4 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

2 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) Upon termination of Employee's employment by the Company prior to a Change in Control (as defined in 6(b)(i) below) for any reason other than Cause (as defined in 6(b)(iv) below), the Company will pay Employee severance each month for 12 months ("Severance Period"), in an amount (subject to applicable withholding) equal to 1/12 of Employee's base salary; and, further, the Company will pay Employee a PIP bonus award in accordance with and subject to the terms and conditions of Employee's PIP in a lump sum at the time any such PIP bonuses are payable under the PIP 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), for any PIP bonuses earned (1) in the completed fiscal year preceeding termination but not due and payable prior to termination, and (2) prorata for the period prior to termination of emloyment in any partial PIP fiscal year based on Employee's performance against Employee's PIP during such partial 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 3 or 4(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 his employment.

(c) If Employee terminates his employment or Employee's employment is terminated b
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