<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AAR CORP.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
HOWARD A. PULSIFER -- VICE PRESIDENT, SECRETARY
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
1111 NICHOLAS BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, OCTOBER 11, 1995
To the Stockholders of AAR CORP.:
The Annual Meeting of Stockholders of AAR CORP. for the year 1995 will be held
in the Shareholders' Room (21st Floor) of Bank of America Illinois, 231 S.
LaSalle Street, Chicago, Illinois, on Wednesday, October 11, 1995, at 3:00 P.M.
(Chicago time) for the purpose of considering and acting upon the following
proposals, all as described in the accompanying Proxy Statement:
1. To elect three Class II directors for a three-year term expiring at the 1998
Annual Meeting of Stockholders;
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on August 14, 1995, will be
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
Accompanying this notice and the Proxy Statement is a copy of the Annual Report
to Stockholders for the fiscal year ended May 31, 1995.
By Order of the Board of Directors
HOWARD A. PULSIFER,
SECRETARY
August 28, 1995
YOUR VOTE IS IMPORTANT
PLEASE DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE ENCLOSED
STAMPED, ADDRESSED ENVELOPE, SO THAT IF YOU ARE UNABLE TO ATTEND THE MEETING,
YOUR SHARES MAY NEVERTHELESS BE VOTED. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES.
<PAGE>
[AAR CORP LOGO]
1111 NICHOLAS BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
October 11, 1995
SOLICITATION
This Proxy Statement is furnished to stockholders of AAR CORP., a Delaware
corporation (the "Company" or "AAR"), in connection with the solicitation of
proxies by the Board of Directors of the Company to be used at the Annual
Meeting of Stockholders of the Company to be held in the Shareholders' Room
(21st Floor) of Bank of America Illinois, 231 S. LaSalle Street, Chicago,
Illinois, on Wednesday, October 11, 1995, at 3:00 P.M. (Chicago time), or any
adjournment thereof (the "Annual Meeting"). This Proxy Statement is first being
sent to stockholders on or about August 28, 1995.
Any proxy solicited herewith may be revoked by a stockholder at any time prior
to the voting thereof by sending written notice of revocation to the Secretary
of the Company, or by delivering a later-dated proxy, or by attending the Annual
Meeting and voting in person. Shares of Common Stock represented by proxies that
are properly executed and returned to the Company will be voted as specified
thereon at the Annual Meeting. If no choice is specified, such shares will be
voted FOR the election of the three nominees for director designated by the
Board of Directors, and upon any other matters that may properly come before the
Annual Meeting in the discretion of the named proxies in accordance with their
best judgment. In the event any nominee is unavailable for election, which is
not presently anticipated, shares represented by valid proxies will be voted for
such other person or persons in the named proxies in accordance with their best
judgment.
As provided in the Company's Automatic Dividend Reinvestment and Stock Purchase
Plan, shares held by the Dividend Reinvestment Agent for a participant will be
voted in accordance with the instructions on the proxy card received
representing such shares or otherwise as set forth above.
The cost of the solicitation of proxies will be borne by the Company and will
consist primarily of printing, postage and handling, including reimbursement to
banks, brokers, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred in forwarding proxy material to their respective
principals. The Company has engaged D. F. King & Co., 77 Water Street, New York,
New York, to aid in the solicitation of proxies at a total estimated cost of
$7,500.00. D. F. King & Co. may solicit proxies by mail, personally, or by
telephone or telegraph. In addition to the solicitation of proxies by D. F. King
& Co. and by use of the mails, certain officers, directors and employees of the
Company may solicit proxies personally, or by telephone or telegraph, without
additional compensation.
QUORUM AND VOTING RIGHTS
At the close of business on August 14, 1995, the record date for the
determination of stockholders entitled to vote at the meeting, there were
outstanding 15,964,300 shares of common stock of the Company, $1.00 par value
("Common Stock"). Each stockholder of record is entitled to one vote for every
share held on the record date. Shares cannot be voted at the Annual Meeting
unless the
1
<PAGE>
owner thereof is present in person or by proxy. A quorum of stockholders is
necessary to take action at the Annual Meeting. The holders of a majority of the
shares of Common Stock entitled to vote and present in person or represented by
proxy will constitute a quorum of stockholders at the Annual Meeting. Votes cast
in person or by proxy at the Annual Meeting will be tabulated by the inspectors
of election appointed for the Annual Meeting. The inspectors of election will
treat abstentions and broker non-votes as shares that are present and entitled
to vote for purposes of determining a quorum. Abstentions and broker non-votes
will be disregarded for purposes of determining whether a matter has been
approved.
PROPOSAL 1
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation and By-Laws of the Company provide
that the Board of Directors shall consist of between three and fifteen
directors, with the exact number of directors to be fixed from time to time by
the Board of Directors, and that the directors shall be divided into three
classes as nearly equal in number as possible. The Board of Directors has fixed
the number of directors on the Board at ten.
The ten members of the Board of Directors are divided into three classes: Class
I (3 directors), Class II (3 directors) and Class III (4 directors). Class II,
to be elected at this Annual Meeting, will consist of three directors who are to
serve for a three-year term until the 1998 Annual Meeting of Stockholders and
until their successors are duly elected and qualified. The Board of Directors
has designated Messrs. Edgar D. Jannotta, Lee B. Stern, and Richard D. Tabery as
the nominees for election as Class II directors. Each of the nominees is
currently a director of the Company. Under Delaware law, the three nominees for
director who receive the greatest number of votes shall be elected directors of
the Company.
NOMINEES AND CONTINUING DIRECTORS
The following sets forth certain information with respect to the nominees as
well as the other current and continuing directors:
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director
and Other Information Since
-------------------------------------------------------------------- --------
<S> <C>
NOMINEES:
CLASS II--DIRECTORS WHOSE TERMS EXPIRE AT THE 1995 ANNUAL MEETING:
EDGAR D. JANNOTTA, 64--Since January, 1995, Senior Partner of
William Blair & Company, an investment banking firm. From
September, 1977 to January, 1995, Managing Partner of William
Blair & Company.
Other directorships: Aon Corporation, Bandag, Incorporated,
Commonwealth Edison Company, Molex Incorporated, New York Stock
Exchange, Inc., Oil-Dri Corporation of America, and
Safety-Kleen Corp. 1964
LEE B. STERN, 68--Since December, 1992, President of LBS Co., and
managing partner of LBS Limited Partnership, a member firm of the
Chicago Board of Trade and Futures Commission Merchant since 1992.
From 1967 to December, 1992, President and Chief Executive Officer
of Lee B. Stern & Company, Ltd., a Futures Commission Merchant.
Mr. Stern has been a member of the Chicago Board of Trade since
1949, a member of the Chicago Mercantile Exchange since 1963, and
an owner-director of the Chicago White Sox since 1976.
Other directorship: Anicom, Inc. 1982
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director
and Other Information Since
-------------------------------------------------------------------- --------
<S> <C>
RICHARD D. TABERY, 66--Since December, 1993, Aviation Business
Consultant. Since February 21, 1995, Chairman of HKS&A, Inc., an
aviation consulting company. From June, 1988, through November,
1993, Vice Chairman of AAR. From 1957 to 1988, Mr. Tabery held
various positions with United Airlines, Inc., most recently Senior
Vice President--Maintenance Operations. 1989
OTHER CURRENT AND CONTINUING DIRECTORS:
CLASS III--DIRECTORS WHOSE TERMS EXPIRE AT THE 1996 ANNUAL MEETING:
A. ROBERT ABBOUD, 66--Since 1984, President of A. Robert Abboud &
Co., a private investment business.
Other directorships: Inland Steel Company, Hartmarx Corporation,
and Alberto-Culver Company. 1987
HOWARD B. BERNICK, 43--Since November, 1994, President and Chief
Executive Officer of Alberto-Culver Company, a developer and
manufacturer of household and personal products. From 1988 to
November, 1994, President and Chief Operating Officer of
Alberto-Culver Company.
Other directorship: Alberto-Culver Company 1994
IRA A. EICHNER(1), 64--Since 1973, Chairman of the Board of AAR
CORP. Mr. Eichner is the founder of the Company and has been its
Chief Executive Officer since it was founded in 1955. 1955
ROBERT D. JUDSON, 70--Since 1984, Financial Consultant. Prior to
1980, Senior Vice President, The First National Bank of Chicago. 1979
CLASS I--DIRECTORS WHOSE TERMS EXPIRE AT THE 1997 ANNUAL MEETING:
ERWIN E. SCHULZE, 70--Since January, 1993, Chairman, Chicago Stock
Exchange (formerly Midwest Stock Exchange). Since January, 1991,
private investor. From 1981 to 1991, Chairman of the Board,
President and Chief Executive Officer of Ceco Industries, Inc., a
manufacturer of building products and provider of concrete forming
services for the construction industry.
Other directorship: The Interlake Corporation 1977
JOEL D. SPUNGIN, 57--Since March, 1995, Managing Partner, DMS
Enterprises, L.P., a consulting and management advisory
partnership. Since 1994, Chairman Emeritus, and from 1988 to
March, 1995, Chairman and Chief Executive Officer of United
Stationers Inc.
Other directorship: United Stationers Inc. 1992
DAVID P. STORCH(2), 42--Since 1989, President and Chief Operating
Officer of AAR. From 1988 to 1989, Vice President of AAR. 1989
</TABLE>
MEETINGS AND STANDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during the fiscal year ended May 31,
1995. All of the incumbent directors attended 75% or more of the aggregate
number of meetings of the Board and of the Committees on which they serve during
the fiscal year ended May 31, 1995.
The Board of Directors has an Audit Committee, an Executive Committee, a
Compensation Committee and a Nominating Committee.
----------
(1) Mr. Eichner is Mr. Storch's father-in-law.
(2) Mr. Storch is Mr. Eichner's son-in-law.
3
<PAGE>
AUDIT COMMITTEE
The Audit Committee is comprised entirely of independent, outside directors. Its
members are Edgar D. Jannotta (Chairman), Robert D. Judson, Erwin E. Schulze and
Joel D. Spungin. The functions of this committee include maintaining
communication between the Company's Board and its independent auditors,
monitoring performance of the independent auditors, reviewing audit scope and
results, reviewing the organization and performance of the Company's internal
systems of audit and financial controls, and recommending the retention or, when
appropriate, the replacement of independent auditors. The Audit Committee held
three meetings during the fiscal year ended May 31, 1995.
EXECUTIVE COMMITTEE
The Executive Committee is comprised of Ira A. Eichner (Chairman), Edgar D.
Jannotta, Erwin E. Schulze and David P. Storch. The Executive Committee is
authorized to meet between meetings of the Board of Directors and exercise the
powers of the Board, subject to limitations imposed by law and by the Board. The
Executive Committee held one meeting during the fiscal year ended May 31, 1995.
COMPENSATION COMMITTEE
The Compensation Committee is comprised entirely of independent, outside
directors. Its members are Erwin E. Schulze (Chairman), Edgar D. Jannotta,
Robert D. Judson, A. Robert Abboud and Lee B. Stern. The functions of this
committee include reviewing and approving compensation policies and practices
for all elected corporate officers and fixing the total compensation of the
Chief Executive Officer. The Compensation Committee also administers the
Long-Term Performance Incentive Plan and the AAR CORP. Stock Benefit Plan. The
Compensation Committee held five meetings during the fiscal year ended May 31,
1995.
NOMINATING COMMITTEE
The Nominating Committee is comprised of Robert D. Judson (Chairman), Ira A.
Eichner and Lee B. Stern. The functions of this committee include recommending
to the Board qualified candidates for election as directors, considering the
performance of incumbent directors to determine whether they should be
recommended to the Board for nomination for reelection. The Nominating Committee
will consider director candidates recommended by stockholders. Any stockholder
wishing to submit a recommendation to the Nominating Committee with respect to
the 1996 Annual Meeting of Stockholders, should send a signed letter of
recommendation to AAR CORP., 1111 Nicholas Boulevard, Elk Grove Village,
Illinois 60007, Attention: Howard A. Pulsifer, Secretary. To be considered,
recommendation letters must be received prior to May 1, 1996, must state the
reasons for the recommendation and contain the full name and address of each
proposed nominee, as well as a brief biographical history setting forth past and
present directorships, employment and occupations. The recommendation letter
must also include a statement indicating that such nominee has consented to
being named in the proxy statement and to serve if elected. The Nominating
Committee held one meeting during fiscal year ended May 31, 1995.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following tables show the shares of the Company's Common Stock beneficially
owned, as of July 31, 1995 with respect to management and as of the date of the
Form 13G filing for beneficial owners, (i) by each director and nominee for
election to the Board of Directors, by each of the five executive officers named
in the Summary Compensation Table, and by all directors and executive officers
as a group and (ii) by each beneficial owner of more than 5% of the Company's
Common Stock. To the Company's knowledge, no person beneficially owned more than
5% of the Company's outstanding Common Stock except as set forth below.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
Percent
of
Shares
Outstanding
if
Number of greater
Name Shares (1) than 1%
--------------------------------------------------------------------- ------------------ ---
<S> <C> <C>
A. Robert Abboud..................................................... 17,250
Howard B. Bernick.................................................... 3,500
Ira A. Eichner....................................................... 484,871 3.0%
Edgar D. Jannotta.................................................... 22,500
Robert D. Judson..................................................... 11,525
Howard A. Pulsifer................................................... 13,995
Timothy J. Romenesko................................................. 11,097
Erwin E. Schulze..................................................... 8,851
Philip C. Slapke..................................................... 28,392
Joel D. Spungin...................................................... 7,500
Lee B. Stern......................................................... 131,000
David P. Storch...................................................... 154,046(2)
Richard D. Tabery.................................................... 36,775
All directors and executive officers as a group
(13 persons)....................................................... 931,302(1)(2) 5.8%
<FN>
--------------
(1) Includes the following shares of the identified person that may be acquired through
the exercise of options as of July 31, 1995: Mr. Abboud, 7,500 shares; Mr. Bernick,
2,500 shares; Mr. Eichner, 44,800 shares; Mr. Jannotta, 7,500 shares; Mr. Judson,
7,500 shares; Mr. Pulsifer, 10,252 shares; Mr. Romenesko, 6,500 shares; Mr. Schulze,
7,500 shares; Mr. Slapke, 17,900 shares; Mr. Spungin, 5,000 shares; Mr. Stern, 7,500
shares; Mr. Storch, 44,580 shares; and Mr. Tabery, 18,300 shares; and all directors
and executive officers as a group (13 persons), 187,332 shares.
(2) Includes 18,880 shares beneficially owned by Mr. Storch's wife (12,540 shares) and
minor children (6,340 shares), as to which Mr. Storch disclaims beneficial ownership.
</TABLE>
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Name and Address Number of Percent of Shares
of Stockholder Shares Outstanding
------------------------------------------------------------------------ ------------ -----------------
<S> <C> <C>
The Capital Group Companies, Inc. (1)................................... 879,000(1) 5.53%
333 South Hope Street
Los Angeles, California 90071
John Hancock Mutual Life Insurance Company (2).......................... 1,438,700(2) 9.0%
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Norwest Corporation (3)................................................. 1,070,000(3) 6.7%
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
The Prudential Insurance Company of America (4)......................... 1,258,068(4) 7.9%
751 Broad Street
Newark, New Jersey 07102-3777
Scudder, Stevens & Clark, Inc. (5)...................................... 933,400(5) 5.9%
Two International Place
Boston, Massachusetts 02110-4103
<FN>
---------------
(1) In its Schedule 13G filing dated February 6, 1995, The Capital Group Companies, Inc. (formerly
known as the Capital Group, Inc.) disclaimed beneficial ownership of these shares and stated
the following:
(i) sole voting power: -0-
(ii) shared voting power: -0-
(iii) sole dispositive power: 879,000
(iv) shared dispositive power: -0-
(2) In their joint Schedule 13G filing dated January 19, 1995, John Hancock Mutual Life Insurance
Company, John Hancock Subsidiaries, Inc., The Berkley Financial Group ("TBFG"), and NM Capital
Management, Inc. ("NM"), stated the following:
NM beneficially owns 1,413,300 shares of common stock in various advisory accounts. In addition to
the shares owned by NM, TBFG beneficially owns 25,400 shares of common stock through its direct,
wholly-owned subsidiary, John Hancock Advisers, Inc. ("Advisers") which manages the JH Advisers
Special Value Fund under a management contract dated October 1, 1993.
(i) sole voting power: NM 253,567 shares; Advisers 25,400 shares
(ii) shared voting power: -0-
(iii) sole dispositive power: NM 1,413,300 shares; Advisers 25,400 shares
(iv) shared dispositive power: -0-
(3) In their joint Schedule 13G filing dated January 31, 1995, Norwest Corporation, and its
subsidiaries, Norwest Colorado, Inc. ("NCI") and Norwest Bank Colorado ("NBC"), stated the
following:
Norwest beneficially owns 1,070,000 shares of common stock, which includes 1,052,700 shares deemed to
be beneficially owned by NBC and, accordingly, NCI
(i) sole voting power: 998,200
(ii) shared voting power: 5,800
(iii) sole dispositive power: 1,068,500
(iv) shared dispositive power: -0-
(4) In its Schedule 13G filing dated February 21, 1995, The Prudential Insurance Company disclaimed
beneficial ownership of 1,253,068 of these shares and stated the following:
(i) sole voting power: 5,000 shares
(ii) shared voting power: 1,253,068 shares
(iii) sole dispositive power: 5,000 shares
(iv) shared dispositive power: 1,253,068 shares
(5) In their joint Schedule 13G filing dated April 13, 1995, Scudder, Stevens & Clark, Inc.
("Scudder") and Scudder, Stevens & Clark of Canada Ltd. ("Scudder Canada"), stated the
following:
Scudder and Scudder Canada beneficially own 933,400 shares of common stock
(i) sole voting power: -0-
(ii) shared voting power: 874,900
(iii) sole dispositive power: 933,400
(iv) shared dispositive power: -0-
</TABLE>
6
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon a review of Securities and Exchange Commission Forms 3, 4 and
5 and upon related written representations furnished to the Company with respect
to its most recent fiscal year, no person who, at any time during the fiscal
year, was a director, officer or beneficial owner of more than ten percent of
any class of equity securities of the Company registered pursuant to Section 12
of the Securities Exchange Act of 1934 ("Exchange Act"), failed to file on a
timely basis, as disclosed in the above Forms, reports required by Section 16(a)
of the Exchange Act during the most recent fiscal year or prior fiscal years.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Company's executive compensation program is structured and administered by
the Compensation Committee of the Board of Directors (the "Committee"), which is
comprised of the five individuals listed below, all of whom are independent,
outside directors of the Company.
The executive compensation program is designed to enable the Company to attract,
motivate and retain talented executives capable of achieving strategic business
initiatives and to reward them for their achievement. It is intended to
complement the Company's short-term and long-term business objectives and to
focus executives' efforts on fulfilling these objectives. The program consists
of three elements: (i) base salaries which are generally set at approximately
the median salary level of comparable positions in similar companies, adjusted
up or down to reflect individual capabilities and responsibilities and
experience levels; (ii) annual variable incentive opportunities paid in cash and
stock based on individual contribution and performance; and (iii) long-term
incentive opportunities, which include a stock option/restricted stock plan.
Total compensation opportunities for each executive are intended to be
competitive with those offered by other companies competing for their talent in
the Company's employment market. In designing and administering the individual
elements of the executive compensation program for each executive, the Committee
strives to balance short- and long-term incentive objectives and employ prudent
judgment in establishing base salary levels and performance criteria, evaluating
performance and determining actual incentive payments. To ensure competitiveness
and reasonableness of the Committee's compensation decisions, independent
compensation consulting firms are retained periodically to advise the Committee
in connection with both the design and implementation of the various elements of
the program and the level of individual executive participation. Generally, as
an executive's level of responsibility increases, a greater percentage of total
compensation is based on performance, and the mix of total compensation shifts
toward stock, thereby aligning the long-term interest of senior executives with
those of stockholders. To encourage stock ownership in the Company by senior
executives, thereby aligning their long-term interest with stockholders, the
Company has also established guidelines for ownership of Company stock by senior
management equal in value to 75% of salary, to be voluntarily achieved over the
next several years. An executive's progress towards achieving these guidelines
will be used by the Committee in making incentive stock compensation decisions
for the executive in the future.
Base salary levels of all executives, including the Chief Executive Officer, are
reviewed annually and may be adjusted depending upon the executive's
responsibilities, assessed performance contribution, qualifications and tenure
in the Company and in the position held, and competitive salary considerations
relative to similar positions at selected companies in the employment market
from which the Company draws its executives.
The Chief Executive Officer has an annual performance-based incentive
opportunity of 0-80% of base salary with 10% of the incentive bonus opportunity
payable in restricted stock. The Chief
7
<PAGE>
Operating Officer has an annual performance-based incentive bonus opportunity of
up to 100% of base salary with that portion of the incentive bonus opportunity
in excess of 80% of base salary and 10% of the incentive bonus opportunity below
80% of base salary payable in restricted stock. The percentage opportunity for
other executive positions varies depending on their responsibility level, and
10% of any bonus paid is payable in restricted stock. As pertains to the Chief
Executive Officer and Chief Operating Officer, three-fourths of their incentive
opportunity is based upon operating profit results and the remainder is based on
asset management results. Performance objectives for other executives are
established annually and the incentive opportunity varies depending on position.
The long-term incentive program consists of stock option and/or restricted stock
awards granted under the Company's Stock Benefit Plan approved by stockholders
in 1992.
Stock option awards typically expire 10 years from the date of grant or earlier
upon termination of employment, become exercisable in five equal increments on
successive grant anniversary dates at the NYSE closing stock price on the date
of grant, and are accompanied by reload features and, for certain individuals,
stock rights exercisable in the event of a change in control of the Company. In
determining stock option and restricted stock awards, the Compensation Committee
considers the recipient's position and responsibilities in the Company,
performance and contributions made during the preceeding year, capabilities and
potential for future contribution to the Company, the number of options
previously granted to the recipient and, for senior management, their progress
toward achieving the Company's guidelines for stock ownership by senior
management.
Restrictions imposed on restricted stock awards vary and are designed, among
other things, to encourage executives to stay with the Company and to maintain a
focus on long-term objectives of the Company. Typically, restricted stock grants
vest over five (5) years (20% each anniversary) or over seven (7) years (25% on
4th anniversary, 25% on 6th anniversary and 50% on 7th anniversary); restricted
stock used in lieu of cash to pay earned bonuses vests over three (3) years (1/3
each anniversary). Typically, awards are subject to forfeiture if employment
terminates for any reason during the award cycle. During the award cycle the
participant receives dividends for the shares and also has the right to vote the
awarded shares.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary level of the Chief Executive Officer and founder of the Company
has been increased progressively since 1951 to reflect his performance,
leadership and responsibilities for increasingly complex and diversified
domestic and international operations as the Company has expanded into new
product lines and markets. Competitive compensation analyses by independent
consultants are used by the Committee to ensure that the Chief Executive
Officer's base salary is at an appropriate competitive level relative to base
salaries of chief executive officers at other companies in the relevant
employment market.
The Committee's action with respect to the Chief Executive Officer's total
fiscal year 1995 compensation reflects consideration of the base salary factors
discussed earlier, and the leadership role he played in the performance results
of the Company overall in a difficult environment and in maintaining the
financial strength and liquidity of the Company.
- The Chief Executive Officer's base salary was increased 3% on
January 1, 1995, as were management salaries generally.
- The Chief Executive Officer was awarded an incentive bonus
equal to 55.2% of his base salary reflecting achievement of (i)
a 35.2% incentive opportunity benefit for operating performance
based on a substantial improvement over the prior year in
consolidated net sales (up 10.7%) and in net income (up 10.2%),
and (ii) a 20% incentive opportunity benefit for asset
management based on improving the balance sheet performance.
8
<PAGE>
- The Chief Executive Officer and the other executive officers
named in the Summary Compensation Table below received the
stock options and restricted stock awards reflected in the
table. The number of shares covered by each grant reflects
individual contributions and performance, as well as
competitive industry practices, in the view of the Committee;
it also continues the Committee's emphasis on executive share
ownership and furthers the Company's objective of tying
incentive compensation to performance and aligning executives'
interests with the interests of the Company's stockholders.
The tables which follow and accompanying footnotes and narrative reflect the
decisions covered by the above discussion.
FEDERAL INCOME TAX CONSIDERATIONS
The Internal Revenue Code places a $1 million cap on the deductibility of
compensation, subject to certain exceptions, paid to certain executives of
publicly held corporations. Since the current levels of compensation subject to
the cap will not exceed $1 million for any executives of the Company, the
Committee did not take into consideration the deductibility of compensation for
federal income tax purposes in establishing compensation of the named executives
during the present review cycle.
The Committee will continue to review the deductibility of Compensation under
Section 162(m) and any regulations adopted under it, with the goal of assuring
that compensation paid is deductible by the Company to the extent that this can
be reasonably accomplished in a manner that provides adequate incentives and
allows the Company to attract and retain qualified executives.
INCORPORATION BY REFERENCE
This report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement into any
filing under the Securities Exchange Act of 1933 or under the Exchange Act
(collectively, the "Acts"), except to the extent that the Company specifically
incorporates this report by reference, and shall not otherwise be deemed filed
under such Acts.
COMPENSATION COMMITTEE
Erwin E. Schulze, Chairman
A. Robert Abboud
Edgar D. Jannotta
Robert D. Judson
Lee B. Stern
9
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending May 31, 1993, 1994, and
1995, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to each of the five most highly
compensated executive officers of the Company in all capacities in which they
served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------- ---------------------------
Awards
---------------------------
Other
Annual Securities
Compen- Restricted Underlying All Other
Bonus sation Stock Award(s) Options Compen-
Name and Principal Position Year Salary ($) ($)(1) ($) ($)(2) (#) sation ($)(3)
-------------------------------------- ---- ---------- ---------- ------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
EICHNER, IRA A. 1995 480,000 265,000 156,600(4) 206,250 30,000 3,600
CHAIRMAN AND CHIEF EXECUTIVE OFFICER 1994 474,200 240,000 -- -- 20,000 7,500
1993 460,400 92,080 -- -- 20,000 4,100
STORCH, DAVID P. 1995 336,000 224,000 -- 107,250 60,000 2,500
PRESIDENT AND CHIEF OPERATING OFFICER 1994 332,000 175,000 -- 102,988 30,400 3,200
1993 322,300 64,460 -- 83,038 24,700 4,200
SLAPKE, PHILIP C. 1995 214,600 215,900 -- 68,750 10,000 2,600
VICE PRESIDENT-TRADING GROUP 1994 208,400 174,100 -- -- 7,500 2,700
1993 205,900 161,600 -- 45,469 6,500 3,200
PULSIFER, HOWARD A. 1995 165,800 67,500 -- 41,250 6,000 3,100
VICE PRESIDENT, GENERAL COUNSEL AND 1994 163,900 57,500 -- -- 4,000 3,500
SECRETARY 1993 159,100 31,820 -- -- 3,500 2,300
ROMENESKO, TIMOTHY J. 1995 136,700 60,000 -- 41,250 6,000 1,800
VICE PRESIDENT-CONTROLLER, CHIEF 1994 117,000 35,000 -- -- 3,000 1,500
FINANCIAL OFFICER & TREASURER 1993 109,000 12,500 -- -- 2,500 1,300
<FN>
------------
(1) Fiscal 1995 bonus compensation was paid 90% in cash and 10% in restricted
stock based on NYSE May 31, 1995, closing price in accordance with the
Company's executive and key employee incentive bonus payment policy. The
restricted shares vest over a three year period (one-third each grant
anniversary date). Dividends are paid on all restricted shares to the
same extent as any other shares of the Company's Common Stock.
(2) As of May 31, 1995, fiscal year, the following restricted shares were
held by each named executive: Mr. Eichner, 15,000; Mr. Storch, 28,441;
Mr. Slapke, 7,250; Mr. Pulsifer, 3,000; Mr. Romenesko, 3,000. The May 31,
1995, market value of each named executive's restricted shares is as
follows: Mr. Eichner, $228,750; Mr. Storch, $433,725; Mr. Slapke,
$110,563; Mr. Pulsifer, $45,750; Mr. Romenesko, $45,750. Dividends are
paid on all restricted shares to the same extent as any other shares of
the Company's Common Stock.
(3) "All Other Compensation" includes the following: (i) contributions to the
Company's 401(k) Plan on behalf of each of the named executives as a 1%
match of 1995 pre-tax elective deferred contributions (Mr. Eichner
$1,300, Mr. Storch $1,500, Mr. Slapke, $1,800, Mr. Pulsifer $1,500 and
Mr. Romenesko, $1,600), (ii) premium payments for each of the named
executives under the Company's standard health plan (Mr. Eichner, $2,300,
Mr. Storch, $1,000, Mr. Slapke, $800, Mr. Pulsifer, $1,600, and Mr.
Romenesko $200).
(4) Represents a tax reimbursement to Mr. Eichner due to the Company's
funding of SERP retirement benefits.
</TABLE>
STOCK OPTIONS
The following table sets forth certain information regarding stock options
granted to the named executive officers in fiscal 1995 (the Company does not
grant stock appreciation rights). In addition, hypothetical gains or "option
spreads" that would exist for the respective options are shown based on assumed
rates of annual compound stock price appreciation of 0%, 5% and 10% required (in
the case of the 5% and 10% rates) by applicable regulations of the Securities
and Exchange Commission; these rates are for illustration purposes only and are
not a forecast of future
10
<PAGE>
appreciation. The Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula which will determine, with
reasonable accuracy, a present value based on future unknown or volatile
factors.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------- Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock
Securities Options Price Appreciation for Option
Underlying Granted to Exercise Term (3)
Options Employees in Price Expiration -----------------------------
Name Granted (#)(1) Fiscal Year ($/Sh) Date (2) 0% 5% ($) 10% ($)
------------------------------------ -------------- ------------ ------- ---------- --- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
I. A. Eichner....................... 30,000 12.0% $13.75 1/17/05 0 259,419 657,419
D. P. Storch........................ 60,000 24.0% 13.75 1/17/05 0 518,838 1,314,838
P. C. Slapke........................ 10,000 4.0% 13.75 1/17/05 0 86,473 219,140
H. A. Pulsifer...................... 6,000 2.4% 13.75 1/17/05 0 51,884 131,484
T. J. Romenesko..................... 6,000 2.4% 13.75 1/17/05 0 51,884 131,484
All Stockholders.................... N/A N/A N/A N/A 0 137,924,630 349,528,159
All Employee Optionees.............. 250,000 100% 13.74(4) 1/17/05 (5) 0 2,160,253 5,474,505
Total Optionee Gain as % of all
Stockholder Gain................... N/A N/A N/A N/A 0 1.6% 1.6%
<FN>
------------
(1) 10 year options subject to reload and rights provisions; 20% of option
shares become exercisable on the 1st, 2nd, 3rd, 4th and 5th anniversary
dates of the grant.
(2) These options are subject to earlier expiration in the event of
termination of employment.
(3) Data shows appreciation in value of stock from market value on the date
of option grant.
(4) Average exercise price.
(5) Options with respect to 10,000 shares expire 7/8/04, with respect to
2,500 shares expire 10/12/04; all others expire 1/17/05.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
The following table shows stock options exercised by named executive officers
during fiscal 1995, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of May 31, 1995. Also reported
are the number and value of "in-the-money" unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
Shares Acquired End (#) Fiscal Year End ($)(2)
on Value --------------------------- ---------------------------
Name Exercise (#)(1) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
--------------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
I. A. Eichner.................... 0 0 44,800 71,200 $154,700 $126,800
D. P. Storch..................... 0 0 44,580 111,520 $152,330 $207,532
P. C. Slapke..................... 0 0 17,900 25,850 $ 59,200 $ 45,425
H. A. Pulsifer................... 0 0 10,252 14,063 $ 40,323 $ 26,518
T. J. Romenesko.................. 0 0 6,500 11,750 $ 23,562 $ 20,375
<FN>
------------
(1) Value realized equals the fair market value on the date of exercise, less
the exercise price, times the number of shares acquired.
(2) Value of unexercised in-the-money options equals the fair market value of
the Company's Common Stock at May 31, 1995, less the exercise price,
times the number of option shares outstanding. The closing price of the
Company's Common Stock at May 31, 1995, was 15 1/4.
</TABLE>
11
<PAGE>
PENSION PLANS
The following table indicates a straight life annuity pension benefit (based on
thirty percent of an employee's final average compensation) payable annually
under the AAR CORP. Retirement Plan ("Retirement Plan") and Supplemental Key
Employee Retirement Plan ("SKERP") commencing at age 65 at various combinations
of average compensation and years of service.
PENSION BENEFIT TABLE
<TABLE>
<CAPTION>
Annual Benefit for
Years of Service
------------------
Final Average Compensation 15 20
---------------------------------------------------- -------- --------
<S> <C> <C>
$100,000............................................ $ 22,500 $ 30,000
125,000............................................ 28,100 37,500
150,000............................................ 33,750 45,000
175,000............................................ 39,400 52,500
200,000............................................ 45,000 60,000
225,000............................................ 50,600 67,500
250,000............................................ 56,250 75,000
275,000............................................ 61,900 83,500
300,000............................................ 67,500 90,000
350,000............................................ 78,750 105,000
400,000............................................ 90,000 120,000
450,000............................................ 101,250 135,000
500,000............................................ 112,500 150,000
</TABLE>
The Company's Retirement Plan covers all named executive officers. Benefits
under the Retirement Plan are determined pursuant to a formula set forth in the
Retirement Plan and take into consideration years of credited service, a
percentage of the participant's final average compensation (the five highest
consecutive calendar years of compensation out of the employee's last ten
calendar years of employment) and adjustments for social security "covered
compensation" which is an "offset" under the Retirement Plan. The term
"compensation" means cash compensation shown as income on an employee's Form
W-2, plus amounts contributed to the Profit Sharing Plan and reduced by certain
items specified in the Retirement Plan. Notwithstanding the preceding sentence,
compensation for purposes of the Retirement Plan is subject to an annual
$150,000 annual compensation limitation in accordance with applicable provisions
of the Internal Revenue Code.
The aggregate salary and bonus compensation shown for the executive officers
named in the Summary Compensation Table above is the compensation currently
included for purposes of determining benefits under the Retirement Plan and
SKERP described below. The number of years of credited service under the Plan
(effective maximum is 20 years), is as follows: Mr. Eichner, 20 years; Mr.
Storch, 17 years; Mr. Pulsifer, 8 years; Mr. Romenesko, 14 years; and Mr.
Slapke, 11 years. Benefits under the Retirement Plan may be limited by
applicable laws or regulations.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS
The Company also provides supplemental retirement benefits to certain executives
and key employees under a Supplemental Key Employee Retirement Plan ("SKERP").
All of the named executives are participants in the SKERP except that Mr.
Eichner's participation does not include supplemental retirement benefits. The
SKERP is designed to restore the approximate amount of employer-provided
benefits under the Company's Retirement Plan lost as a result of Internal
Revenue Code limitations, including those limiting compensation for purposes of
benefit calculations. Such lost benefits restored under the SKERP are determined
in the same manner, using the same compensation data and years of credited
service, as retirement benefits are determined under the Company's Retirement
Plan described above, subject to maximum compensation limits established by the
Company from time to time (presently $335,000 for key employee participants
12
<PAGE>
and $500,000 for executive officer participants). The SKERP also provides for
aggregate retirement benefits at fifty percent (50%) of final average
compensation (as defined in the Retirement Plan) for certain executive officers
designated by the Compensation Committee (including three of the named executive
officers), subject to maximum compensation limits established by the Company
from time to time and reduced by certain items specified in the Retirement Plan.
The SKERP is unfunded and supplemental retirement benefits thereunder are
forfeited if the participant violates a covenant not to compete set forth in the
SKERP or his or her employment is terminated for cause.
The Chief Executive Officer is also the beneficiary of a Supplemental Executive
Retirement Plan ("SERP"). Annual retirement benefits under the SERP are equal to
60% of the Chief Executive Officer's aggregate average of annual salary, bonus
and long-term incentive cash payments ("cash compensation") for the three fiscal
years during the ten fiscal years preceding the date of his termination of
active employment during which his cash compensation was highest, subject to an
offset for benefits received under the Retirement Plan and certain reductions.
Based on the Chief Executive Officer's cash compensation history to date, it is
estimated that he would receive an annual retirement benefit of $403,145.96
under the SERP upon retirement at age 65. In the case of his "involuntary
retirement" prior to age 65, the Chief Executive Officer is entitled to receive
his base salary for the three years following termination and, thereafter, to
receive the retirement benefits described above. "Involuntary retirement" means
termination of the Chief Executive Officer's employment by action of the Company
(other than due to disability), or a voluntary termination of his employment
within two years following a takeover of the Company. The Company funds the
benefits through an irrevocable trust arrangement with a bank. The level of
funding is based on actuarial computations determined by an independent actuary.
The residual in the trust upon the death of the Chief Executive Officer will be
paid to the Chief Executive Officer's estate or designated beneficiaries.
STOCKHOLDER RETURN PERFORMANCE GRAPHS
The following graphs compare the five- and ten-year cumulative total stockholder
return (including reinvestment of dividends) of the Company, the S&P (Standard &
Poor's) Composite--500 Stock Index, and a peer group index selected by the
Company.
The S&P Composite--500 Stock Index is composed of domestic industry leaders in
four major sectors: Industrials, Financials, Utilities and Transportation, and
serves as a broad indicator of the performance of the U.S. equity market. The
peer group index selected by the Company is comprised of companies engaged in
trading, overhaul and/or manufacturing activities in support of the
aerospace/aviation aftermarket similar to those conducted by the Company. The
peer group selected by the Company is comprised of the following companies:
Aviall, Inc., Banner Aerospace, Inc., Greenwich Air Services, Inc., Hi-Shear
Industries, Inc., Sequa Corp., SPS Technologies Inc., UNC, Inc., and Wyman
Gordan Co.
These indices relate only to stock prices; they do not purport to afford a
direct comparison of the business or financial performance of the companies
comprising such indices with the Company nor with each other.
13
<PAGE>
COMPARISON OF 5 YEAR CUMULATIVE STOCKHOLDER
TOTAL RETURN (1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDEX 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
AAR CORP. 100 $ 68.91 $ 64.88 $ 70.74 $ 77.82 $ 85.57
S&P 500 100 111.79 122.81 137.06 142.90 171.75
PEER GROUP 100 75.93 58.94 49.78 54.36 50.20
</TABLE>
COMPARISON OF 10 YEAR CUMULATIVE STOCKHOLDER
TOTAL RETURN (1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDEX 1985 1986 1987 1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AAR CORP. $ 100 $ 193.36 $ 253.20 $ 319.85 $ 404.03 $ 279.11 $ 192.33 $ 181.10 $ 197.45
S&P 500 100 135.65 164.35 153.69 194.88 227.24 254.04 279.06 311.46
PEER GROUP 100 127.65 128.81 110.74 125.92 111.48 84.65 65.71 55.50
<CAPTION>
INDEX 1994 1995
<S> <C> <C>
AAR CORP. $ 217.20 $ 238.83
S&P 500 324.73 390.29
PEER GROUP 60.60 55.96
</TABLE>
----------
(1) Assumes $100 invested on June 1, 1990, and 1985 in 5 and 10 year graph,
respectively, and reinvestment of dividends in the Company's Common
Stock, S&P Composite--500 Stock Index and Companies comprising the Peer
Group.
14
<PAGE>
EMPLOYMENT AND OTHER AGREEMENTS
Mr. Eichner has an agreement with the Company providing for employment in his
present capacity at a base compensation of $488,000 per year, effective January
1, 1995, or such increased amount as the Board may determine, and for retirement
benefits following termination of his full-time employment with the Company
pursuant to the Retirement Plan and the SKERP described under "Pension Plans"
above. His term of employment is continuously extended so as to have a remaining
term of three years, but shall expire on the first to occur of his death,
disability, voluntary termination or attainment of age 68.
Upon Mr. Eichner's death, under certain circumstances, his designated
beneficiary is entitled to receive a death benefit equal to the present value of
the right of a 60 year old male to receive an annual annuity of $125,000,
subject to certain reductions.
The Company has entered into an irrevocable trust agreement with The Northern
Trust Company as trustee to fund at certain dates the Company's obligations to
Mr. Eichner and his widow or other beneficiary under his employment agreement.
The Company will pay bonuses to Mr. Eichner (or his widow or other beneficiary)
to provide for federal, state and local income taxes incurred as a result of
contributions to the trust and income earned by trust assets. Mr. Eichner's
estate or designated beneficiary(ies) will receive any residual amounts in the
trust after payment of all retirement, death benefit and other obligations under
the trust agreement.
The Company has entered into an employment agreement ("Employment Agreement")
with Mr. Storch designed to assure his continued services with the Company at a
base compensation of $341,000 per year, effective January 1, 1995, or such
increased amount as the Board may determine. Mr. Storch's term of employment is
continuously extended so as to have a remaining term of three years, but shall
expire upon his death, disability, retirement or termination by the Company or
Mr. Storch pursuant to the terms of the Employment Agreement.
The Employment Agreement sets forth the terms and conditions of Mr. Storch's
employment, including confidentiality and non-compete provisions, participation
in the Company's benefit plans, a severance payment upon termination of
employment by Company for other than cause (as defined in the Agreement) prior
to a change in control of the Company (as defined in the Employment Agreement)
equal to two times base salary then in effect, a severance payment equal to
three (3) times his average cash compensation (base salary plus cash bonus) for
the last two fiscal years of employment upon termination of employment under
certain circumstances in the event of a change in control of the Company, an
incentive bonus opportunity of up to 100% of base salary subject to annual
financial targets approved by the Compensation Committee, incentive stock bonus
awards to be granted over a three year period of 27,308 shares of five year
restricted common stock vesting 20%/year on successive grant date anniversaries
and stock options for 60,000 shares of Company common stock under the Company's
Stock Benefit Plan.
The Company has entered into severance agreements with certain key employees,
including all named executive officers other than Mr. Storch and Mr. Eichner.
The severance agreements are substantially identical, include confidentiality
and non-compete covenants, and provide for payment of compensation and certain
benefits in consideration thereof in the event of termination of employment for
other than cause, including a change in control of the Company.
Severance equal to one year base salary plus any earned incentive cash bonus
will be paid upon termination of employment for other than cause (as defined in
the severance agreement) prior to a change in control of the Company; severance
equal to three times average annual total compensation (base salary plus cash
bonus) for the last two fiscal years of employment will be paid upon termination
of employment under certain circumstances following a change in control of the
Company.
15
<PAGE>
DIRECTORS' COMPENSATION
Directors who are not officers or employees of the Company or any subsidiary
each receive an annual retainer of $22,000, a fee of $1,500 for attendance at
each meeting of the Board or of any Board committee and reimbursement of
expenses. The chairman of each committee receives an additional $1,500 annual
retainer. The Company also provides each of its outside directors with group
term life insurance coverage of $200,000. In addition, under the AAR CORP. Stock
Benefit Plan, each outside director, upon becoming a director, automatically
receives stock options for 10,000 shares of the Company's common stock which can
be exercised in 25% increments each anniversary grant date at the closing NYSE
price on the date of grant. Directors who are officers or employees of the
Company or any subsidiary receive no additional compensation for service on the
Board of Directors or any of its committees.
The Company also has a Directors' Retirement Plan for its outside directors. The
Plan provides for a benefit to outside directors upon retirement on or after age
65, provided they have completed at least five years of service as a director.
Benefits are payable as a quarterly annuity in an amount equal to 25% of the
annual retainer fee payable by the Company to an active outside director.
Payment of benefits commences upon retirement and continues for a period equal
to the total number of years of the retired director's service as a director to
a maximum of ten years or death, whichever first occurs. The Directors'
Retirement Plan is unfunded. As of May 31, 1995, one former director was
receiving benefits under the Directors' Retirement Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Jannotta, a director of the Company, is a Senior Partner of William Blair &
Company, which from time to time has rendered investment banking services to the
Company, for which it has received customary compensation.
Mr. Tabery, a director of the Company, provides consulting services to the
Company from time to time pursuant to a consultant services agreement for which
he receives consultant fees at customary rates; in fiscal 1995, he received
$74,800 in consulting fees.
OTHER MATTERS
Management knows of no other matters which are to be brought before this Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
it is intended that the persons voting the proxies will vote them in accordance
with their judgment on such other matters.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Board of Directors, upon recommendation of its Audit Committee,
has selected KPMG Peat Marwick as its independent public accountants for the
fiscal year ending May 31, 1996. Representatives of that firm are expected to be
present at the Annual Meeting, with the opportunity to make a statement if they
so desire and to be available to respond to appropriate questions.
16
<PAGE>
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Any stockholder who wishes to present a proposal for consideration at the Annual
Meeting of Stockholders to be held in 1996 must submit such proposal in
accordance with the rules promulgated by the Securities and Exchange Commission.
In order for a proposal to be eligible for inclusion in the Company's Proxy
Statement and form of proxy relating to the 1996 Annual Meeting, the stockholder
must submit such proposal to the Company, in writing, to be received by the
Secretary of the Company, AAR CORP., 1111 Nicholas Boulevard, Elk Grove Village,
Illinois 60007, no later than May 1, 1996.
By Order of the Board of Directors
Howard A. Pulsifer
SECRETARY
August 28, 1995
UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF COMMON
STOCK OF AAR CORP., THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE FISCAL YEAR ENDED MAY 31, 1995. REQUESTS SHOULD BE MADE TO MR. HOWARD A.
PULSIFER, SECRETARY, AAR CORP., 1111 NICHOLAS BOULEVARD, ELK GROVE VILLAGE,
ILLINOIS 60007, (708) 439-3939.
17
<PAGE>
PROXY
AAR CORP. PROXY
-------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE OCTOBER 11,
1995 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints IRA A. EICHNER, DAVID P. STORCH and HOWARD A.
PULSIFER, or any of them, with full power of substitution, as Proxies, and
hereby authorizes them to represent the undersigned at the 1995 Annual Meeting
of Stockholders of AAR CORP. to be held on October 11, 1995, or any adjournment
thereof, and to vote all shares of AAR CORP. Common Stock which the undersigned
would be entitled to vote if personally present.
1. Election of three Class II directors, nominees: Edgar D. Jannotta, Lee B.
Stern and Richard D. Tabery (see reverse side).
AS TO EACH ITEM SET FORTH ON THE REVERSE HEREOF, THIS PROXY WILL BE VOTED IN
THE MANNER DIRECTED ON THE REVERSE SIDE AND, IF NO DIRECTION IS GIVEN, WILL
BE VOTED FOR ITEM 1. As to any other business that may come before the Annual
Meeting, or any adjournment thereof, this Proxy will be voted in the
discretion of the proxies.
(Continued and to be dated and signed on reverse side.)
-------------------------------------------------------------------------------
FOLD AND DETACH HERE
[AAR LOGO]
"WE WILL BE THE BEST AT WHAT WE DO IN EACH OF THE RESPECTIVE MARKETS FOR THE
PRODUCTS AND SERVICES WE PROVIDE."
<PAGE>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE. 6019
-------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1
DESCRIBED IN THE PROXY STATEMENT:
-------------------------------------------------------------------------------
1. Election of three Class II directors
(nominees: Edgar D. Jannotta, Lee B. Stern, Richard D. Tabery).
FOR WITHHOLD AUTHORITY
ALL NOMINEES* TO VOTE FOR ALL NOMINEES
/ / / /
*(Instructions: to withhold authority to vote for any individual
nominee, write that nominee's name(s) in the space below)
-----------------------------
(Please sign as name appears above. Joint owners should all sign. Executors,
administrators, trustees, etc. should so indicate when signing. If signer is a
corporation, sign full corporate name by duly authorized officer who adds his or
her name and title.)
--------------------------------------------
--------------------------------------------
SIGNATURE(S) DATE
-------------------------------------------------------------------------------
FOLD AND DETACH HERE
