EXHIBIT 10.10
SEVERANCE AND CHANGE IN CONTROL AGREEMENT
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 Timothy J. Romenesko ("Employee").
WHEREAS, the Company currently employs Employee as an employee at will in
the capacity of Vice President-Controller, Chief Financial Officer and
Treasurer; 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.
3. 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 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.
4. NON-COMPETE; SEVERANCE.
(a) Employee agrees that during his 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 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
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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 6(b)(i) below) for
any reason other than Cause (as defined in 6(b)(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 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 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 4(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 or position from that held by Employee as Vice
President-Controller, Chief Financial Officer and Treasurer 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 4 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 4(a) shall become and be immediately amended to include only such
duration, scope or restriction and such event as shall be deemed reasonable and
enforceable by the court or other body having jurisdiction to enforce this
Agreement; and the parties hereto agree that the restrictions, as so amended,
shall be valid and binding as though the invalid or unenforceable portion had
not been involved herein.
(f) The Employee acknowledges and agrees that the Company would be
irreparably harmed by violations of Section 3 or Section 4(a) above, and in
recognition thereof, the Company shall be entitled to an injunction or other
decree of specific performance with respect to any violation thereof (without
any bond or other security being required) in addition to other available legal
and equitable remedies.
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5. TERMINATION OF EMPLOYMENT.
(a) Upon and after termination of employment howsoever arising, Employee
shall, upon request by Company:
(1) immediately return to the Company all correspondence, documents,
business calendars/diaries, or other property belonging to the Company which
is in his possession,
(2) immediately resign from any office Employee holds with the Company
or any Affiliated Company; and
(3) cooperate fully and in good faith with the Company in the resolution
of all matters Employee worked on or was involved in during Employee's
employment with the Company. Employee's cooperation will include reasonable
consultation by telephone. Further, in connection therewith, Employee will,
at Company's request upon reasonable advance notice and subject to
Employee's availability, make himself available to Company in person at
Company's premises, for testimony in court, or elsewhere; provided, however,
that in such event, Company shall reimburse all Employee's reasonable
expenses and pay Employee a reasonable per diem or hourly stipend.
6. CHANGE IN CONTROL.
(a) In the event (i) a Change in Control of AAR CORP. occurs and (ii) the
Company terminates Employee's employment for other than Cause or Disability, or
Employee terminates Employee's employment for Good Reason by written notice to
the Company setting forth the particulars thereof after having given the Company
notice and opportunity to be heard with respect thereto, and (iii) neither
incumbent in the positions of Chief Executive Officer or Chief Operating Officer
of the Company on the effective date hereof are Chief Executive Officer of the
Company at the time of such termination of employment,
(1) the Company shall promptly pay to Employee, in a lump sum, a cash
payment in an amount equal to three times Employee's average total
compensation (base salary plus cash bonus) for the last two fiscal years or
such lesser amount as Employee may elect to take, subject to applicable
withholding. Employee may agree to take payments of any amounts on a
schedule of his own choosing provided that such schedule shall be completed
no later than three years from the occurrence of the last triggering event.
(2) Employee shall continue to be covered by and receive the benefits,
in accordance with their terms, of all of the Company's medical, dental and
life insurance plans, for three years thereafter but at no less than the
levels he was receiving immediately prior to the Change in Control.
(3) Employee shall receive an additional retirement benefit, over and
above that which Employee would normally be entitled to under the Company's
retirement plans 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 the executive in a cash lump
sum payment at his normal retirement age. Employee may also elect to receive
such payment at his early retirement age, as provided for in the retirement
plans, with a corresponding actuarial reduction in the amount of such
payment based upon the earlier date of such payment.
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(b) For purposes of this Agreement
(i) "Change in Control" means the earliest of:
(1) the occurrence of any "Distribution Date", as such term is
defined in Section 3 of the Rights Agreement between the Company and The
First National Bank of Chicago, dated July 21, 1987, as amended;
(2) the effective time of a merger or consolidation of the Company
with one or more other corporations as a result of which the holders of
the outstanding common stock, $1.00 par value, of the Company immediately
prior to such merger or consolidation (other than those who are
affiliates of any such other corporation, as defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934)
hold less than 70% of the voting stock of the surviving or resulting
corporation or its parent;
(3) the effective time of a transfer of substantially all of the
assets of the Company other than to an entity of which the Company owns
at least 70% of the voting stock; or
(4) the election to the Board during any 3 year period, without the
recommendation or approval of the incumbent Board, of the lesser of (A)
three directors or (B) directors constituting a majority of the number of
directors of the Company then in office; or
(5) 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.
(ii) "Good Reason" means:
(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 occurring at any time
during the immediate two year period after the Change in Control; or
(2) a good faith determination by Employee that as the result of a
Change in Control and a material change in employment circumstances at
any time during the immediate two year period after the Change in
Control, he is unable to carry out his assigned duties and
responsibilities in a manner consistent with the practices, standards,
values or philosophy of the Company immediately prior to the Change in
Control; or
(3) a relocation of the primary place of employment of at least 100
miles.
(iii) "Disability" means:
(1) a physical or mental condition which has prevented Employee from
substantially performing his assigned duties for a period of 180
consecutive days and which is expected to continue to render Employee
unable to substantially perform his duties on a full-time basis and
otherwise meets the benefit eligibility requirements of the Company's
Long Term Disability Welfare Benefit Plan. The Company will make
reasonable accommodation for any handicap of Employee as may be required
by applicable law.
In the event of termination by the Company for Disability after a
Change in Control, a good faith determination of the existence of a
Disability shall be made by resolution of the Compensation Committee of
the Board of Directors of the Company, in
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its sole discretion, setting forth the particulars of the Disability
which shall be final and binding upon the Employee. The Company may
require the submission of such medical evidence as to the condition of
the Employee as it may deem necessary in order to arrive at its
determination of the occurrence of a Disability, and Employee will
cooperate in providing any such information. Employee will be provided
with reasonable opportunity to present additional medical evidence as to
the medical condition of Employee for consideration prior to the Board
making its determination of the occurrence of a Disability.
Upon termination of Employment by Company for Disability after a
Change in Control, Employee will receive Disability payments pursuant to
the Company's short and long term Disability welfare benefit plans then
in effect according to the terms of such plans and continue to be
eligible to participate in the Company's medical, dental and life
insurance programs then in effect and available to officers of the
Company in accordance with their terms for a period of 3 years from the
date of such termination of this Agreement.
(iv) "Cause" means:
(1) any material breach by Employee of any statutory or common law
duty of loyalty, or
(2) any material breach of this Agreement which, if curable, is not
cured within ten (10) days of notice thereof to Employee; provided,
however, termination of employment for unsatisfactory performance
(including failure to meet financial goals) shall not constitute
termination for Cause.
Termination for Cause shall be limited to a good faith finding by
resolution of the Compensation Committee of the Board of Directors of AAR
CORP. setting forth the particulars thereof. Any such action shall be
taken at a regular or specially called meeting of the Compensation
Committee of the Board, after a minimum 10 days notice thereof to
Employee, with termination of Employee's employment with the Company for
Cause listed as an agenda item. Employee will be given a reasonable
opportunity to be heard at such meeting with counsel present if Employee
desires. Any such resolution shall be final and binding.
Upon termination of employment by Company for Cause, no further
compensation or benefits shall accrue or be payable to Employee by
Company except for any compensation, bonus or other benefits which have
accrued to Employee prior to the date of any such termination.
Nothing herein shall be construed to prevent the Company from
terminating Employee's employment at any time for any reason or for no
reason.
(c) The Company will pay reasonable legal/attorney's fees incurred by
Employee in connection with enforcement of any right or benefit under this
Section 6.
7. CHANGES IN BUSINESS. The Company, acting through its Board of
Directors, will at all times have complete control over the Company's business
and retirement and other employee health and welfare benefit plans ("Plans").
Without limiting the generality of the foregoing, the Company may at any time or
times change or discontinue any or all of its present or future operations or
Plans (subject to their terms), may close or move any one or more of its
divisions or offices, may undertake any new servicing or sales operation, may
sell any one or more of its divisions or offices to any company not controlled,
directly or indirectly, by the Company or may take any and all other steps which
its Board of Directors, in its exclusive judgment, shall deem
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desirable, and Employee shall have no claim or recourse against the Company, its
officers, directors or employees by reason of such action except for enforcement
of the provisions of Sections 4 and 6 of this Agreement.
8. SEVERANCE PAYMENT AS SOLE OBLIGATION. Except as expressly provided in
Sections 4 and 6 above, no further compensation, payments, liabilities or
benefits shall accrue or be payable to Employee upon or as a result of
termination of Employee's employment for any reason whatsoever except for any
compensation, bonus or other benefits which accrued to Employee prior to the
date of employment termination.
The amounts paid to the Employee under Section 4 and 6 of this Agreement
shall be considered severance pay in consideration of past services Employee has
rendered to the Company and in consideration of Employee's continued service
from the date hereof to entitlement to those payments.
9. NOTICES. Any notice or other instrument or thing required or permitted
to be given, served or delivered to any of the parties hereto shall be delivered
personally or deposited in the United States mail, with proper postage prepaid,
telegram, teletype, cable or facsimile transmission to the addresses listed
below:
(a) If to the Company, to:
AAR CORP.
1111 Nicholas Boulevard
Elk Grove Village, Illinois 60007
Attention: Chairman and Chief Executive Officer
With a copy to:
AAR CORP.
1111 Nicholas Boulevard
Elk Grove Village, Illinois 60007
Attention: General Counsel
(b) If to Employee, to:
Timothy J. Romenesko
1485 S. Lake Shore Drive
Barrington, IL 60010
or to such other address as either party may from time to time designate by
notice to the other. Each notice shall be effective when such notice and any
required copy are delivered to the applicable address.
10. NON-ASSIGNMENT.
(a) The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of Employee, and any attempted
unpermitted assignment shall be null and void and without further effect;
provided, however, that, upon the sale or transfer of all or substantially all
of the assets of the Company, or upon the merger by the Company into or the
combination with another corporation or other business entity, or upon the
liquidation or dissolution of the Company, this Agreement will inure to the
benefit of and be binding upon the person, firm or corporation purchasing such
assets, or the corporation surviving such merger or consolidation, or the
shareholder effecting such liquidation or dissolution, as the case may be. After
any such transaction, the term Company in this Agreement shall refer to the
entity which conducts the business now conducted by the Company. The provisions
of this Agreement shall be binding upon and inure to the benefit of the estate
and beneficiaries of Employee and upon and to the benefit of the permitted
successors and assigns of the parties hereto.
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(b) The Employee agrees on behalf of himself, his heirs, executors and
administrators, and any other person or person claiming any benefit under him by
virtue of this Agreement, that this Agreement and all rights, interests and
benefits hereunder shall not be assigned, transferred, pledged or hypothecated
in any way by the Employee or by any beneficiary, heir, executor, administrator
or other person claiming under the Employee by virtue of this Agreement and
shall not be subject to execution, attachment or similar process. Any attempted
assigned, transfer, pledge or hypothecation or any other disposition of this
Agreement or of such rights, interests and benefits contrary to the foregoing
provisions or the levy or any execution, attachment or similar process thereon
shall be null and void and without further effect.
11. SEVERABILITY. If any term, clause or provision contained herein is
declared or held invalid by any court of competent jurisdiction, such
declaration or holding shall not affect the validity of any other term, clause
or provision herein contained.
12. CONSTRUCTION. Careful scrutiny has been given to this Agreement by the
Company, Employee, and their respective legal counsel. Accordingly, the rule of
construction that the ambiguities of the contract shall be resolved against the
party which caused the contract to be drafted shall have no application in the
construction or interpretation of this Agreement or any clause or provision
hereof.
13. ENTIRE AGREEMENT. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties and supersede all prior
agreements, arrangements and communications, whether oral or written, pertaining
to the subject matter hereof.
14. WAIVER. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, modification, waiver or discharge is
agreed to in writing signed by Employee and an authorized officer of the
Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
15. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois without regard to its conflicts of law
principles.
16. EXECUTION. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and which shall constitute but one and
the same Agreement.
WITNESS the due execution of this Agreement by the parties hereto as of the
day and year first above written.
Employer:
AAR CORP.
By: /s/ David P. Storch
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Title: President
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Employee:
/s/ Timothy J. Romenesko
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Timothy J. Romenesko
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